Response to Comment Document for EPA's Supplemental Notice of Proposed Rulemaking
EPA

- R09

- OAR

- 2010

- 1078

Revision to the South Coast Portion of the California State Implementation Plan, CPV Sentinel Energy Project AB 1318 Tracking System

Prepared by:

Ann Lyons and Laura Yannayon

Air Division, Permits Office United States Environmental Protection Agency, Region IX San Francisco, California

November 1 , 20121 EPA published a Notice of Supplemental Proposed Rule on August 23, 2012, at 77 FR 50973, providing for a 30

- day public comment period. EPA received detailed substantive comments
from three organizations: the South Coast Air Quality Management District, Sentinel Energy LLC and jointly California Communities Against Toxics and Communities for a Better
Environment

. We also receive d comments from 20 individuals and a copy of a petition containing signatures of people opposed t o the construction and operation of the CPV Sentinel Energy Project (“Sentinel”).

 Letter from the South Coast Air Quality Management District (“SCAQMD” or “District”)

Comment 1: The District states that it agrees with EPA’s quantification and surplus adjustment
of the offsets listed in EPA’s Attachment A to the Technical Support Document

– sp ecifically
that the District transferred 124, 797 pounds of PM 10 and 25,178 pounds of SO
x offsets to the AB
1318 Trac king System. The District states that the amount of offsets it transferred signific antly exceeds the amount that it needed to transfer to allow Sentinel to operate, which was 118,120 pounds of PM 10 and 13,928 pounds of SO
x . Response 1: EPA agrees with the District that the amount of offsets listed in Attachment A
exceeds the amount of o ffsets that is needed by Sentinel to operate. EPA also agrees the offsets listed in Attachment A to the Technical Support Document (TSD) for our Supplemental proposal, specifically 124, 797 pounds of PM 10 and 25,178 pounds of SO
x , are properly quantified and surplus adjusted. EPA agrees with the District that the offsets listed in Attachment A meet
all the federal requirements. Indeed, these numbers probably understate that actual amount of
offsets that the District is transferrin g because of the conservative quantification approach, as discussed below

. As also explained below in response to CCAT’s comments on quantification, in order to provide the most conservative quantification of offsets, we are reducing the amount of
PM 10 off sets in Attachment A by 306 pounds and of SO
x offsets by 2 pounds. This slight revision
does not affect our conclusion that the offsets listed in Attachment A exceed the amount needed to allow operation of Sentinel.

Comment 2: The District states: “To the extent that there are excess offsets in the AB 1318 Tracking System that are not needed for the Sentinel project, they will be retired for the benefit
of the environment.” Comment Letter at pg. 2.

Response 2: EPA commends the District for committing to retire the offsets in the AB 1318 Tracking System that go beyond the amount needed to allow Sentinel to operate (i.e. 118,120 pounds of PM 10 and 13,928 pounds of SO
x ) for the benefit of the environment. EPA interprets
this statement to mean that the Distri ct will retire all remaining offsets it transferred into the AB 1318 Tracking System including those offsets not listed in Attachment A. Because EPA is finding that the District transferred more than enough offsets and is retiring all of the remaining
offs ets, a minor difference in the exact quantification of offsets for a particular facility would not change our final decision to approve this SIP revision.

Comment 3: The District states that it agrees with EPA’s Supplemental proposal to find that the
2003 A ir Quality Management Plan (“A QMP ”) is appropriate for determining the base

- year requirement in 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). The District sta tes: “PM 10 and PM 2.5 are different pollutants with separate National Ambient Air Quality Standards, requiring separate2 inventories and attainment demonstrations. See 71 Fed. Reg. 61,144 (Oct. 17, 2006).” Comment Letter at pg 2.

Response 3: EPA agrees with the Distr ict that it is appropriate to use the 2003 AQMP to
establish the base

- year for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ) because the 2003 AQMP is the most recently approved plan and attainment demonstration for PM 10

. The 2003 AQMP contains plans for t he South Coast Air Basin and the Coachella Valley. We will refer to them jointly in this document as the 2003 AQMP.

Comment 4: The District states that its own rules treat PM 10 and PM 2.5 differently for purposes
of new source review.

Response 4: EPA not es that because this rule is a source

- specific S tate I mplementation P lan (“SIP”) revision, the offsets are not subject to the other provis ions in the District’s Regulation
XIII. EPA, however, agrees that Rule 1315 applies to PM 10 and not PM 2.5

. EPA also ag rees that the District adopted Rule 1325 to apply specifically to PM 2.5

.

Comment 5: The District states that the 2003 AQMP for PM 10 uses a 1997 base

- year and that “[n]one of the offsets transferred into the AB1318 Tracking System for use by Sentinel ha ve a shutdown date earlier than 1999 .” Comment Letter at pg 3

. The District concludes that all of the offsets listed in Attachment A to EPA’s Technical Support Document meet federal requirements.

Response 5: EPA agrees with the District that the 2003 AQMP h as a 1997 base

- year for both

t he South Coast and the Coachella Valley Air Basins. EPA also agrees that all of the offsets
listed in Attachment A were shutdown after the base

- year date of 1997.

Comment 6: The District states that the 2007 AQMP for PM 2.5 ha s explicitly included pre

- base

year offsets in accounting for growth.

Response 6: EPA agrees with the SCAQMD that additional pre

- base

- year offsets have been
added into the 2007 PM 2.5 attainment demonstration. As discussed in more detail in the Respondent’ s Answering Brief that the United States Department of Justice filed on behalf of EPA in the 9 th Circuit on January 18, 2012, Table 2

- 8 in Appendix III, Chapter 2 of the 2007 AQMP shows how many tons per day of additional PM 2.5 emissions the District inclu ded in th e future year emissio ns data in the 2007 PM 2.5 AQMP. Responde nt’s Answering Brief at 37

- 41.
The briefs filed in the 9 th Circuit litigation are included in the record supporting our final
determination.

 Letter on behalf of CPV Sentinel, LLC

Comment 1: CPV Sentinel LLC (“Sentinel”) states that it supports the Supplemental proposal’s use of the SCAQMD’s 2003 AQMP to establish the base

- year for the SIP planning process for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). Sentinel states that although the 2007 AQMP would also be appropriate, “the 2003 AQMP is a valid selection because it is the most recent attainment demonstration that specifically addresses PM 10 .” Comment Letter at p g 2.

Response 1: EPA agrees with Sentin el that the 2003 AQMP is appropriate to establish the base

year for the SIP planning process for PM 10

. As EPA stated in its Supplemental proposal, “[t]he reason for relying on the 2003 AQMPs is that the offsets the District transferred to the AB 13183 Track ing System are for PM 10 , not PM 2.5

. The District has approved the PM 10 AQMPs for both the South Coast Air Basin and the Coachella Valley that were adopted in 2003.” 77 FR at 50977.

Comment 2: After noting that California Communities Against Toxics and Com munities for a
Better Environment (jointly “CCAT”) argued in their brief filed with the 9 th Circuit Court of Appeals that the 2003 AQMP would not be appropriate because it is not “valid,” Sentinel states that there is no requirement for the 2003 AQMP to be “valid.” Sentinel cites to EPA’s regulations, its 1989 promulgation of 40 CFR Part 51, Appendix S and the decision of the United States Court of Appeals for the District of Columbia in NRDC v. EPA, 571 F.3d 1245 (D.C. Cir 2009).

Response 2: EPA agrees wi th Sentinel that the standard for determining whether the 2003 AQMP is appropriate for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ) is whether the attainment demonstration has been approved. EPA agrees with Sentinel that our regulations do not refer to a “valid” attainment demonstration and that our 1989 rulemaking states that “if the State lacks an approved attainment plan, the absence of an emissions inventory means that EPA has no assurance that use of prior shutdown offset credits for an indefinite per iod of time, without further review by EPA, would be consistent with further SIP planning for attainment.” 54 FR 27286, 27294 (Jun e 28, 1989). EPA also agrees with Sentinel that the DC Circuit C ourt held that EPA should ensure that there is an “approved” a ttainment demonstration for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). NRDC, 571 F.3d at 1267.

Comment 3: Sentinel disagrees with statements in the brief filed by CCAT in the 9 th Circuit that the 2003 AQMP is invalid because it failed to attain the PM 10 NAAQS and in CCAT’s opinion cannot serve the purpose of an app roved attainment demonstration. Sentinel attached to its comment letter a copy of a letter from the California Air Resources Board dated March 23, 2010 submitting a “Request for PM 10 Redesign ation and Maintenance Plan for the Coachella Valley.”

Response 3: EPA agrees with Sentinel that there have not been any regulatory actions that would have the effect of invalidating the 2003 AQMP and that the 2003 AQMP continues to be the approved attainm ent demonstration for PM 10 in the Coachella Valley and South Coast Air
Basin s. EPA also agrees that the California Air Resources Board has submitted requests to EPA

to re

- designate both the Coachella Valley and the South Coast Air Basins to attainment for the
24

- hour PM 10 NAAQS

. EPA revoked the annual PM 10 NAAQS in 2006. 71 FR 61144 (October 17, 2006).

Comment 4: Sentinel states that arguments CCAT made in its 9 th Circuit briefs that EPA could only rely on an attainment demonstration that led to re

- designa tion would be nonsensical and make the EPA’s offsetting requirements meaningless. Sentinel states: “If only a ‘valid’ attainment demonstration plan (i.e., a plan that has led to successful attainment of the pertinent NAAQS) can be used to satisfy the base

- year requirement, then emission offsets would not even be necessary because the area would be attainment.” Comment Letter at p g 4.

Response 4: EPA agrees with Sentinel regarding the practical implications of the argument

.

Comment 5: On October 26, 2012, Sentinel submitted a late comment letter in which it requested EPA to use the good cause exception set forth in section 553(d)(3) of the Administrative Procedures Act, 5 U.S.C. 553(d)(3) to make th e final rule effective immediately4 upon public ation in the Federal Register. Sentinel stated that the purpose of the usual 30

- day delay for rule effectiveness is to allow the regulated entity an opportunity to make any changes necessary to be in compliance with the rule. Sentinel stated that it has been aware of what would be required of it as a resu lt of this rule for 18 months. Sentinel anticipates begin ning its
commission ing period in November 2012. Sentinel added that i f the power plant is on

- line next summer, it will help the region avoid any potential electr icity shortfalls.

Response 5: EPA has discretion to accept late comments and will accept the c omment submitted by Sentinel. EPA agrees with Sentinel that it has demonstrated good cause for EPA to
issue this final rule wit h an immediate effective date. Sentinel has been under constructi on for the past 12 to 18 months in anticipation of beginning its commissi oning period in November
2012. Sentinel and the District provided information regarding the potential effects of delaying commissioning and operation s beyond this date in the briefs submitted in the 9 th Circuit. Sentinel has indicated that it will not be harmed by the immediate effective date. Therefore, t he final rule will become effective upon publication.

 Letter from California Communities Against T oxics and Communities for a Better Environment (collect ively herein “CCAT”)

Comment 1: CCAT’s introductory paragraph states that CCAT is incorporating all of its prior comments as well as all of the arguments it presented to the 9 th Circuit.

Response 1: In this RTC, EPA is responding to comments regarding our interpretation of the
CAA , our regulations and guidance. EPA is including our prior responses to comments from our April 20, 2011 final rule, except to the extent we have made changes thro ugh this su pplemental proposal. EPA is also including as responses to the proposal and supplemental proposal the arguments contained in the docket which were made by the United States in the briefs filed with the 9 th Circuit in the litigation leading t o the remand of the final rule. These documents, including the record for our final rule in April 2011 and the litigation, provide EPA’s justification for finalizing our approval of the source

- specific SIP revision.

• CCAT Heading I. “EPA’s ‘Supplemental Proposed Rule’”

C omment 1 : In this initial portion of the comment letter, CCAT contends that EPA committed a procedural error by publishing a Supplemental p roposed r ule rather than publishing a new proposed rule following the judicial remand of the rule to EPA. CCAT asser ts that the rule EPA proposed on January 13, 2011 and finalized on April 20, 2011, no longer exists because the 9 th Circuit Court of Appeals stated the final rule was invalid and, therefore, EPA must adopt a new
rule

. CCAT also states that it is EPA’s “practice” to re

- propose a new rule after a court has remanded a rulemaking without vacating it, citing as an example EPA’s national Clean Air
Interstate Rule (CAIR)

. Response 1 : EP A disagrees with the comment. The 9 th Circuit remanded the final rule to allow
EPA to provide additional justification on two discrete issues (quantification and surplus adjustment) and to change our reasoning on a third issue (the appropriate AQMP to establish the
base

- year for PM 10 ). EPA pu blished our Supplemental proposal following the 9 th Circuit ’s
decision in California Communities Against Toxics v. United States Environmental Protection Agency , 688 F.3d 989 (9 th Cir. 2012)

. Our S upplemental proposal referred back to our January5 13, 2011 proposal, and then provided additional justification and changed our reasoning by indicating that the District’s 2003 PM 10 AQMP was appropriate to establish the base

- year for SIP planning purposes in 40 CFR 51.165(a)(3)(ii)(C)( 1)(ii). 1

Almost one year befo re the 9 th Circuit issued its opinion, EPA had acknowledged that we had made limited substantive errors when we finalized the rule in April 201 1 , and we requested the Court to remand the final rule in September 2011. See EPA’s Motion for Voluntary Remand o f the Record, To Vacate the Briefing Schedule, and to Stay the Proceedings During Remand, dated September 14, 2011 (stating: “EPA now believes the better interpretation of 40 CFR § 51.165(a)(3)(ii)(C)( 1 )( ii ) is that the base year should be evaluated by ref erence to the base year used in the most recently approved attainment demonstration. The most recently approved
attainment demonstration for PM 10 for this area was submitted in 2003 and approved by EPA in
2005. [citation omitted]”). Based on CCAT’s opposit ion to our Motion, we later briefed the merits of the case. In our merits brief, EPA again acknowledged the same limited errors regarding quantification and surplus adjustment of some offsets. We also advised the Court (consistent with our Motion) that we had changed our reasoning regarding the appropriate AQMP for determining the correct base

- year for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). Based on EPA’s acknowledged errors, the Court stated the final rule was invalid and remanded it on July 26, 20 12. The Court did not vacate the rule.

Our federal approval of a SIP revision is a rulemaking action under the Administrative Procedures Act (“APA”). The APA prescribes the requirements for federal agencies to follow during rulemaking in Section 553. 5 U. S.C. § 553. Section 553(b) provides that agencies must publish a notice of proposed rulemaking in the Federal Register and Section 553(c) requires a period for public comments and the agency’s consideration of those comments. EPA published its proposed ap proval of the AB 1318 Tracking System in the Federal Register on January 13,
2011. 76 FR at 2294. EPA provided an adequate opportunity for public comment, during which CCAT submitted comments. EPA considered the comments on our proposal and finalized our

p roposed approval on April 20, 2011. 76 FR at 22038.

When CCAT petitioned for judicial review and presented its arguments for the first time to EPA and the 9 th Circuit in its Opening Brief, EPA acknowledged making some errors in finalizing the proposed approval. As noted above, EPA filed a Motion with the 9 th Circuit requesting it to remand the rule, which CCAT opposed

. Because the Appellate Commissioner summar ily denied our Motion for Voluntary Remand, we repeated these statements in Respondent’s Answering Brief and continued to request a remand without vacatur. Our position was consistent at oral argument.

The 9 th Circuit issued its decision on July 26, 2012, remanding but not vacating EPA’s final rule from April 201 1 . Nothing in the Court’s ruling states (or even suggests) that EPA is required to

re

- propose a new approval of the source

- specific SIP revision. Nothing in the Court’s opinion
indicates that it inv alidated or took any action concerning EPA’s proposed approval in January 2011. Although CCAT claims categorically that “[t]his rule does not supplement the prior rule

-

1 40 CFR Part 51, Appendix S contains an identical provision at IV.(C)(3)(i)(2). Alt hough neither regulation directly applies to the offset package in this source

- specific SIP revision, EPA is properly looking to these provisions to interpret what requirements in general govern offsets. In the remainder of this document, we refer only to 40 CFR 51.165(a)(3)(ii)(C)( 1)(ii) which includes a reference to Appendix S as well.6 the prior rule no longer exists[]” (Comment Letter at pg. 1), there is no language in th e 9 th Circuit opinion to support that conclusion. The 9 th Circuit opinion discusses EPA’s final rule, not our proposal.

The APA does not contain any provisions regarding the agency’s actions after it has proposed and finalized a rule that is subsequently r emanded, with or without vacatur. Agencies frequently supplement their proposed rules with additional information and explanation. See e.g., “Supplemental Proposal for the Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Proposed Rule,’’ (69 FR 32684). T he fact that the Court found the final rule was invalid (based on EPA’s acknowledged substantive errors) in no way limits the procedure by which we can elect to correct our errors. In fact, agencies have b road discretion in how to fashion a rulemaking provided we observe the prescriptions in Section 553 in the APA to allow the public an opportunity to comment and that we consider those comments.

For this particular rulemaking, EPA determined that it would promote administrative efficiency to supplement our January 2011 proposal with the additional information we added to our record regarding the quantification and surplus adjustment of the offsets. We also supplemented the January 2011 proposal by explainin g our new reasoning regarding the appropriate AQMP for establishing the base

- year. The fact that we intended to add additional ju stification on quantification and surplus adjustment

, and change our reasoning on the appropriate AQMP was also known by the pu blic in general, and CCAT in particular, beginning with our Motion for Voluntary Remand in September 2011.

Our Supplemental proposal on August 23, 2012 was fully consistent with the APA. EPA provided adequate and meaningful notice to the public that we wou ld be relying on our January 2011 proposal in conjunction with the additional information concerning quantification and surplus adjustment along with our changed reasoning regarding the appropriate base

- year provided in the Supplemental proposal. CCAT does not provide any basis beyond its unsupported conclusory statements for asserting that EPA cannot supplement our January 2011 proposal. 2 In addition, CCAT has not provided any evidence that it or any member of the public was harmed by our decision to suppl ement our January 2011 proposal rather then re

- propose a new rule.

CCAT contends that it is EPA’s “practice” to re

- propose rules if the original rule was remanded but not vacated, citing EPA’s Clean Air Interstate Rule (CAIR) , which was remanded to the

age ncy without vacatur in 2008

. EPA’s decision to propose a new rule to replace CAIR neither established a general agency “practice,” nor limit s the procedural options available to EPA in this rulemaking. Moreover, CAIR and the Cross

- State Air Pollution Rule (Cross

- State Rule) that EPA promulgated to replace CAIR, 3 not only are unrelated to this action, but also were actions of a very different na ture. CAIR addressed complex issues relating to the transport of pollution across state lines and created a methodology to quantify the pollution from upwind states that must be eliminated to avoid impermissible downwind impacts. Unlike this rule, it was a lso

2 CCAT states: “Since the rule is invalid, EPA must adopt a new rule

– this time in full compliance the procedural and substantive provisions of federal law.” Comment Let ter at pg 1. But the comment does not provide any support or reasoning for the proposition.

3 The D.C. Circuit subsequently issued a decision to vacate the Cross

- State Rule and leave CAIR in place pending promulgation of a valid replacement rule. See EME Homer City Generation v. EPA , No. 11

- 1302 (D.C. Cir. Aug. 21, 2011).7 subject to the procedural requirements established in section 307(d) of the Clean Air Act. 42 U.S.C. §7607(d). The U.S. Court of Appeals for the D.C. Circuit issued a decision finding CAIR “fundamentally flawed” and vacating the rule. North Carolina v. EPA , 531 F.3d 896, 929 (D.C. Cir. 2008). The court explained “[w]e must vacate CAIR because very little will ‘survive[ ] remand in anything approaching recognizable form.” Id. (citation omitted). Subsequently, on rehearing, the court modified its original order to remand the rule without vacatur in order to “at least temporarily preserve the environmental values covered by CAIR.” North Carolina v. EPA

, 550 F.3d 1176, 1178. EPA ’s decision to propose a new rule to completely replace CAIR under
these circumst ances does n ot compel the Agency to follow the same procedure for this source

specific SIP revision affecting the offset package for a single stationary source whe n we supplemented the proposal less than one month after the Court remanded the final rule an d we continue to rely in part on the original proposal. As noted above, the Agency has also, as here, exercised its discretion to supplement proposed rule s when it was appropriate. Although CCAT’s comments appear to suggest that there may be a different pr ocedure EPA is required to follow
when a final rule is remanded without vacatur, CCAT had not provided and EPA is not aware of any support for that conclusion.

In summary, CCAT’s comment does not provide any reasoning or citation to support its conclusory assertion that EPA was not allowed to supplement its January 2011 proposed rulemaking. It is within EPA’s discretion to determine that supplementing the proposal is administratively efficient provided we comply with the APA

. This is a very limited rulemak ing, applying only to the offset package for one power plant permit. The SIP revision itself is unchanged and EPA’s proposed action to approv e the source

- specific SIP revision is unchanged. EPA only added information on two discrete issues while changing o ur reasoning on one issue. EPA clearly explained in the Supplemental proposal what procedure we were following as well as what information we were adding and the reasoning we were changing. We provided an adequate and meaningful opportunity for public comm ent during which we
received comments . CCAT’s comment has not changed EPA’s decision to proceed with a Supplemental proposal.

• CCAT Heading II. “The Planning Year for the Failed 2003 AQMP Cannot be the Base
Year for Valid Offsets : In the Absence of an App roved Attainment Demonstration for
PM 10 , Only Replacement Cap acity Can Offset New Emissions”

This section of CCAT’s comment letter contains several arguments to conclude that new source growth, such as Sentinel in the South Coast and Coachella Valley Air B asins is prohibited unless that growth is replacing existing capacity that is shutting down or being curtailed . This portion of EPA’s Response to Comments also responds to the arguments under CCAT’s Heading II.B “EPA Cannot Rely on the Failed Supersed ed 20 03 AQMP for a Base Year.” Therefore, the following responses respond to the comments found on pages 2, 4 and 5. Both sections of the comment letter appear to relate to whether the 2003 PM 10 AQMP is appropriate to establish the
base

- year for purposes of 40 CR 51.165(a)(3)(ii)(C)( 1)(ii)

. We consolidate our response to that
issue below.

Comment 1: CCAT argues that the 2003 AQMP cannot be used to establish the base

- year of 1997 because the 2003 AQMP is no longer “valid.” CCAT asserts the 2003 AQMP is invalid
because the South Coast and Coachella Valley Air Basins failed to attain the PM 10 NAAQS in8 the attainment year of 2006. From this premise, CCAT concludes that new emissions of PM 10 are only allowed in the area if those emissions are replacing existing capacity that is shutting down, citing 40 CFR 51.165(a)(3)(C)( 1 )( ii ).

Response 1: EPA disagrees with CCAT’s assertion that the 2003 PM 10 AQMP is not “valid”
because it failed to demonstrate att ainment in 2006. (As discussed below, EPA also disagrees that a “valid” AQMP is required by the regulations).

The CAA sets out a process according to which the States undertake the primary work of determining what is included in its “applicable implementat ion plan” to attain the NAAQS by a given attainment year

. CAA Section 110(a)(1) establishes the requirement for a State to submit an implementation plan (i.e. SIP) containing its choice of control measures and other strategies
that wil l result in timely at tainment. Section 110(a)(2) sets forth specific requirements for implementation plans. The CAA defines the term “applicable implementation plan” in relevant part as follows: “For purposes of this chapter, the term ‘applicable implementation plan’ means
the portion (or portions) of the implementation plan, or most recent revision thereof, which has
been approved under section 7410 of this title, . . .” CAA 302(q) (emphasis added) . CAA Section 172 establishes the general requirements for nonattainment area SI Ps. CAA s ections 188

- 190 contain additional provisions for particulate matter non

- attainment area SIPs.

In 2005, EPA approved the SCAQMD’s 2003 PM 10 AQMP as meeting all of these requirements. See 70 FR 43663 (July 28, 2005)(Proposed Rule) and 70 FR 6908 1 (Nov. 14, 2005)(Final Rule). Specifically, EPA stated: “We are approving the 2003 plan amendments to the 2002 SIPs for the South Coast and Coachella Valley serious nonattainment areas, as the plan amendments pertain to CAA provisions applicable to attain ment SIPs for the 24

- hour and annual PM 10 NAAQS. Specifically, we are approving under section 110(k)(3) the PM 10 portions of the 2003 South Coast AQMP and the 2003 Coachella Valley Plan with respect to the CAA requirements for
emissions inventories under s ection 172(c)(3); control measures, as meeting the requirements of section 110(a), 188(e) and 189(b)(1)(B); reasonable further progress under section 189(c)(1); contingency measures under section 172(c)(9); demonstration of attainment under section 189(b)( 1)(A) and motor vehicle emissions budge ts under section 176(c)(2)(A).” 70 FR at 69083. Consequently, the 2003 AQMP is the most recent approved “applicable implementation plan”
for PM 10 for the South Coast and Coachella Valley Air Basins. 4

An area’s failure to attain a NAAQS by the attainment date does not result in the attainment demonstration no longer being valid, as asserted by CCAT. Section 189(b)(1)(A) requires “A demonstration (including modeling)

– (i) that the plan provides for attainment of the PM 10 national ambient air quality standard by the applicable attainment date, . . .”. The statute then contains a specific provision concerning the failure of a PM 10 SIP to attain. Section 189(d) provides “[i]n the case of a Serious PM 10 nonattainment area i n which the PM 10 standard is not attained by the applicable attainment date, the State in which such area is located shall, after notice and opportunity for public comment, submit within 12 months after the applicable attainment date, plan revisions which provide for attainment of the PM 10 air quality standard and, from the date of such submission until attainment, for an annual reduction in PM 10 or PM 10 precursor emissions within the area of not less than 5 percent of the amount of such emissions as report ed in the most recent inventory prepared for such area.” Before this provision applies,

4 As discussed in detail below, the District has not submitted any subsequent SIP revisions for PM 10
.9 however, CAA s ection 179(c) establishes that EPA shall make, through notice and comment rulemaking, a finding of failure to attain six months after the attainment date has passed. Although the attainment date for PM 10 has passed, EPA has not made any finding that the South Coast or Coachella Valley Air Basins failed to attain the PM 10 NAAQS. 5

If EPA had made such a finding of failure to attain (after notice and comment) , the provisions of
CAA s ections 189(d) and179(d) would apply and would allow additional time for the SCAQMD
to submit a SIP revision with additional control measures and new attainment dates. These very specific statutory remedies are the consequences for an area’s failure t o attain. Nothing in the

statut e or regulations supports CCAT’s assertion that the SCAQMD’s failure to attain the PM 10 NAAQS by the attainment date invalidated the 2003 approved attainment demonstration.

The 2003 PM 10 AQMP remains in e ffect and the control measures and other strategies to reduce emissions that make up the 2003 AQMP remain enforceable. The attainment demonstration also remains in effect, including the determination of the base

- year for purposes of 40 CFR 51.165(a)(3)(ii) (C)( 1 )( ii ). The base year for the 2003 AQMP is 1997. Therefore, any offsets resulting from sources shutting down after 1997 may be used to offset new PM 10 source growth. 6

To reiterate, there is nothing in the CAA or EPA’s regulations leading to “invalidation” of the 2003 AQMP. Pursuant to Section 179(c), the consequences of failing to attain are not automatically triggered; instead they are only triggered when EPA makes a finding of failure to
attain. 7 Pursuant to CAA s ections 189(d) and 179(d), EPA’s finding of a failure to attain does not invalidate the AQMP but leads to further control measures and planning requirements. Congress set forth the process and the process does not result in limiting new source growth to replacement capacity.

In addi tion, CCAT’s characterization of EPA’s regulation at 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ) is
incorrect. The regulation states that offsets from a shutdown or curtailment “may be generally
credited for offsets” if “ ( ii ) [t]he shutdown or curtailment occurred a fter the last day of the base year for the SIP planning process.” The regulations do not further provide that the SIP planning process must result in a re

- designation to attainment. CCAT’s mischaracterization of the holding
in NRDC v. EPA is discussed belo w in Response to Comment 5 and in response to the comments submitted on behalf of the CPV Sentinel Energy Project.

Comment 2: CCAT’s comment letter asserts that SCAQMD’s 2003 AQMP is “expired and supplanted” because it failed to bring the Region into attainment and therefore using the 2003 AQMP would violate the CAA and the regulations implementing it.

5 As discussed later in this Response to Comments, the District included information in its 2007 AQMP for PM 2.5 indicating that monitored levels of PM 10 in the South Coast and Coachella Valley were below the federal PM 10 NAAQS. The SCAQMD has also submitted requests for re

- designation of the areas on which EP A had not taken any action.

6 CCAT’s Comment Letter states: “The SIP must have a valid attainment demonstration if its post

- base year emissions reductions are to serve as offsets. The reasoning behind this rule is that if emission reductions have not
been relied upon in assessing a current attainment strategy, the re

- release of those reductions as new pollution should not threaten progress toward attainment.” Comment Letter at pg. 2. EPA does not understand this statement.

7 EPA has not provided any notification to the SCAQMD that its 2003 PM10 AQMP is inadequate and has not published a Federal Register notice with a finding of failure to attain. Therefore, the SCAQMD continues to implement the 2003 AQMP as required and the a ttainment demonstration base

- year of 1997 is applicable for purposes of allowing PM10 offsets from shutdown sources to be used.10 Response 2: The 2003 AQMP is neither expired nor supplanted. For the reasons discussed above in response to Comment 1, an AQMP does not “expire” if the area fails to attain but is not yet re

- designated to attainment. Even when areas are re

- designated to attainment, the local agency may retain its AQMPs as part of its maintenance planning obligations. CAA s ectio n 175A. As discussed above, the CAA has a specific process that applies to an area that has failed to attain a NAAQS by the attainment date. CCAT’s conclusory statements that the 2003 AQMP is expired or supplanted or invalid are not supported by the CAA. A n approved AQMP’s failure to attain has no effect on the base year provision in 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ).

Comment 3: In footnote number 4, CCAT contends that ev en if the 2003 AQMP was the appropriate plan and attainment demonstration to use , the base

- year for the Coachella Valley is
2000 rather than 1997 which would result in eliminati ng of 11,644 pounds of PM and 932 pounds of SO
x from the AB 1318 Tracking System. Specifically, CCAT quotes the following language: “Base year (1995 and 2000) and fu ture baseline (years 2003, 2006) PM 10 emissions inventories (c.f. Tables 2

- 2 through 2

- 5).” Comment Letter at pg. 2. The only citation provided for the quoted language is a hyper

- link to the entire 40 page 2003 Final Coachella Valley AQMP.

Response 3: CCAT has not provided a specific citation to the quotation in its footnote and further fails to provide the context for the statement to explain how this supports its contention. CCAT is responsible for raising its comments with sufficient specificity for EPA to respond. As the Supreme Court stated: “[A]dministrative proceedings should not be a game or a forum to engage in unjustified obstructionism by making cryptic and obscure reference to matters that ‘ought to be ’ considered and then, after failing to do mo re to bring the matter to the agency’s attention, seeking to have that agency determination vacated on the ground that the agency failed to consider matters ‘forcefully presented.’” Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 553

- 54 (1978).

I n any event, the Coachella Valley AQMP relies on a 1997 base

- year. In describing the stationary source inventory for the Coachella Valley, the District states: “The 2003 CVSIP incorporates those updated emission factors and/ or recent activity data for sour ce categories such as entrained paved and unpaved road dust, construction, windblown dust, and farming operations. As in the 2003 AQMP, these emission estimates use 1997 as the base year. The greatest chang e was in the estimation of wind blown agricultural dust; new emission factors dramatically reduced annual emission estimates. [Peak 24

- hour windblown dust estimates have not changed and are the overwhelming contributor to peak 24

- hour PM 10 days. ] ” 2003 Final
Coachell a Valley AQMP at p g . 2

- 1 to 2

- 2 (emphasis added)

. Accordingly, EPA continues to find that the appropriate base

- year for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ) is 1997.

Comment 4 : CCAT asserts that because the 2003 AQMP failed to attain, it is no longer a roadmap for attainment a nd that there is no further progress to make towards the 2006 attainment
deadline. CCAT then repeats that the demonstrably failed 2003 attainment demonstration is not the approved attainment demonstration required by law. CCAT also repeats that the 2003 AQ MP has been superceded by the 2007 AQMP.

Response 4 : EPA disagrees with the se comments. EPA’s regulations, as interpreted by the
Court in NRDC v. EPA , require an area to have an approved attainment demonstration to
establish the base

- year for purposes of allowing offsets from shutdown sources under 40 CFR11 51.165(a)(3)(ii)(C)( 1 )( ii ). There is no additional requirement that the area has been re

- designate d to attainment or that the AQMP remai ns a road map for attainment. CCAT has not cited any authority and has not provided any reasoning why the fact that “there is no further progress to make towards the 2006 attainment deadline” should lead to only allowi ng replacement capacity for new source growth. There is no support under the CAA that Congress intended to limit new source growth in nonattainment areas at the moment that an area’s attainment date passed. Indeed, such an interpretation would result in a de facto construction ban, which Congress intentionally changed in the 1990 CAA Amendments. General Preamble, 57 FR 13498, 13552 (Apr. 16, 1992)

Comment 5 : CCAT makes numerous points about its interpretation of the NRDC v. EPA decision by the D.C. Court of Appeals

. CCAT contends the case holds that pre

- base year offsets are only allowed when there is a valid attainment demonstration. CCAT repeats that if there is no valid attainment demonstration, new emissions must be offset with replacement capacity. CC AT repeats that based on the Court’s holding the threshold question “is whether there is a valid attainment demonstration that actually demonstrates attainment.” Comment Letter at pg. 4. In addition, CCAT states that the Court in NRDC v. EPA found the requ irement to limit new source growth to the amount that is replacement capacity was “necessary both to assure RFP and to guarantee that a new source does not cause or contribute to a violation of the NAAQS.” Id. Finally CCAT contends that requiring the more stringent “replacement rule” for an area without a valid attainment demonstration is necessary “because a nonattainment area with no valid
attainment demonstration is in a dire situation indeed: no plan exists to reduce the unhealthy air quality inhaled on a daily basis by its residents , with particular implications for sensitive populations such as children and the elderly .” Comment Letter at pg. 5.

Response 5: EPA disagrees. To begin, the “replacement rule” only applies to offsets from
facilities or sour ces that shutdown prior to the base

- year. For the District’s AB 1318 Tracking System, all of the offsets resulted from facilities or sources that shutdown after the 1997 base

year in the District’s 2003 AQMP for the South Coast and the Coachella Valley Air Basins. Therefore, the “replacement rule” is not at issue here. Even if the “replacement rule” was at issue, the NRDC v. EPA case is properly read to allow pre

- base

- year offsets to be explicitly added back into an approved attainment demonstration to allo w for offsetting new source growth. EPA also interprets its regulations to limit new source growth to replacement capacity if
there is no approved attainment demonstration and offsets generated prior to the base

- year date have not been explicitly added back into an approved attainment demonstration. EPA interprets 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ) to require an approved attainment demonstration to establish
the base

- year. Finally, CCAT does not explain how EPA’s reasonable determination that the SCAQMD 2 003 AQMP is the appropriate attainment demonstration to establish the base

- year does not assure reasonable further progress or that a new source will not cause or contribute to a violation of the NAAQS. In fact, here the “Air Quality Demonstration: SIP Rev ision for CPV Sentinel Energy Project” modeling demonstration , which is part of EPA’s record on our proposed rulemaking, show s that the emissions from this source will not cause or contribute to a
violation of the PM 10 NAAQS. EPA also disagrees with CCAT’s statement that an area that has
not been re

- designated to attainment is a “dire situation.” With respect to the annual PM 10 standard, EPA revoked it in 2006 “because available evidence generally does not suggest a link between long

- term exposures to curre nt levels of coarse particles and heal th problems.” Fact Sheet: Final Revisions to the National Ambient Air Quality Standards for Particle Pollution12 (Particulate Matter). With respect to the 24

- hour standard, the District’s 2007 AQMP indicates
that area mo nitors show that the air quality is better than the federal 24

- hour PM 10 standard requires. The District is continuing to require offsets for new source PM 10 emissions because
EPA has not re

- designated that area to attainment.

Comment 6 : CCAT states that there is no evidence in the record that Sentinel is replacement capacity for pre

- 2007 base

- year offsets from shutdown power plants. CCAT also states that even if Sentinel was replacement capacity for all of the power plant offsets in the tracking system,
S entinel would need an additional 60,000 pounds

. Response 6 : EPA agrees with CCAT’s first statement that Sentinel is not being evaluated as replacement capacity. EPA continues to respond that there is no requirement to demonstrate that Sentinel is replacem ent capacity because all of the offsets in the AB 1318 Tracking System are the result of facilities or sources that shutdown after the 1997 base

- year. EPA neither agrees nor disagrees with CCAT’s second statement contending the AB 1318 Tracking System shou ld include an additional 60,000 pounds of PM 10 offsets

. We find the statement irrelevant because Sentinel purchased adequate offsets from the District to offset it s maximum expected emissions. The District calculated that Sentinel would need 118,120 pounds of PM 10 and 13,928 pounds of
SO
x . Sentinel purchased and the District transferred at least 124, 491 pounds of PM 10 and 25,17 5 pounds of SO
x that EPA has determined meet all of the federal credi tability requirements based on the most conservative approach for quantification

. See Revised Attachment A to EPA’s Technical Support Document for the Supplemental proposal. In addition, the District has
committed to retire all of the remaining offsets it transferred into the AB 1318 Tracking System
for the benefit of the environment

.

• CCAT Heading II. A. “ The 2007 AQMP Applies to PM 10 as well as PM 2.5 , and was an Approved Attainment Demonstration at all times Relevant to this Rulemaking ”

Comment 1 : CCAT’s comment letter concludes that the base

- year should be determined by the SCAQMD’s 2007 AQMP because the 2007 AQMP applies to PM 10 as well as PM 2.5

. CCAT draws this conclusion from a statement by the District that the there are “linkages” in the 2007 AQMP to PM 10 in the 2003 AQMP. CCAT’s comment letter quotes from Appendix V of the 2007 AQMP, but cites only to Appendix V (which is hundreds of pages) wi thout providing a specific page number.

Response 1 : EPA disagrees with CCAT’s conclusion that the 2007 AQMP is applicable for purposes of establishing the PM 10 base

- year for 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii )

. EPA’s regulations require that an area have an approved attainment demonstration in order to use offsets from pre

- base

- year shutdowns to allow new growth in the area. The 2007 AQMP was submitted and is approved under federal law only for purposes of attaining the NAAQS for PM 2.5 and 8

- hour ozone. The SCAQMD letter submitting the 2007 AQMP to CARB states: “The 2007 AMQP, as approved, is submitted as a single integrated plan for PM 2.5 and 8

- hour ozone
attainment.” Letter from Barry Wallerstein, PH.D. to Catherine Witherspoon dated June 6, 2007.
The Board Approval to adopt and submit the 2007 AQMP to EPA is also clear that the AQMP is only being submitted to EPA for demonstrating attainment of the federal PM 2.5 (and 8

- hour ozone) NAAQS. The approval document states: “Specifically, the 2007 AQMP revision is designed to satisfy: SIP submittal requirements of the federal CAA to demonstrate attainment of
the new 8

- hour ozone and PM 2.5 ambient air quality standards, the California CAA triennial13 update requirements, and fulfill the District’s obligation to update transportation emission budgets based on the latest approved motor vehicle emissions model and planning assumptions. Unclassifiable regions for PM 2.5 , such as the Coachella Valley Planning Area do not require a planning demonstration for the federal stand ard and are not addressed in this document.” Board Meeting Date: June 1, 2007, Agenda No. 37 at 2.

The 2003 AQMP is the only approved attainment demonstration for PM 10 for the South Coast and Coachella Valley Air Basins. Even though the 2007 AQMP includes some references to and provisions regarding PM 10 , it is not the appropriate AQMP for demonstrating attainment with the
PM 10 NAAQS. CCAT itself acknowledges that EPA’s Federal Register Notice approving the
2007 PM 2.5 AQMP only approved it for purposes of meeting requirements for attaining the PM 2.5 NAAQS. See 76 FR 69928 (Nov. 9, 2011). In contrast, EPA’s approval of the 2003 AQMP

states: “We are approving the 2003 plan amendments to the 2002 SIPs for the South Coast and Coachella Valley serious nonattainment areas, as the amendments pertain to CAA provisions applicable to attainment SIP s for the 24

- hour and annual PM 10 NAAQS.” 70 FR at 69083. 8

EPA is aware that there is some information concerning PM 10 in the 2007 PM 2.5 AQMP. The SCAQMD Board Approval indicates that the AQMP includes information to comply with California Clean Air Act triennial update requirements. See CH&SC 40925. The District’s AQMPs typically address multiple pollutants because there may be co

- bene fits. Further, as discussed in more detail below, the AQMP indicates the SCAQMD was trying to ensure that the
area would continue to monitor PM 10 levels below the federal PM 10 24

- hr average NAAQS to allow for maintenance and re

- designation

. But including t his information does not convert an AQMP that is regulating a separate pollutant

– PM 2.5

– into an attainment demonstration for
PM 10

. EPA notes that CBE submitted comments on the 2007 AQMP, and the comments seem to indicate that CBE only viewed the 2007 A QMP to be relevant to attaining the PM 2.5 standard. See Comment Letter from Coalition for Clean Air, Communities for a Better Environment, Endangered Habitats League, Environmental Defense, Environment Now and Natural Resources
Defense Council dated Decemb er 1, 2006.

With respect to the quotation from Appendix V concerning “linkages” between the 2007 PM 2.5 AQMP and the 2003 PM 10 AQMP, EPA notes that it is incumbent on the commenter to structure their participation in the rulemaking process in a way that is meaningful. See, e.g., Vermont Yankee v. EPA, 435 U.S. at 553

- 554. EPA has attempted to respond to this comment despite the vagueness and lack of citation for the quote to a specific page in Appendix V.

Comment 2 : CCAT points out that the 2007 AQMP in Appendix V models PM 10

. Response 2 : Chapter 3 of Appendix V in the SCAQMD’s 2007 AQMP is entitled “Federal 24

- hour PM 10 Attainment Plan and Visibility Assessment.” The title is misleading. The text of Chapter 3 make s it clear that SCAQMD was not supplanting or superceding the 2003 AQMP or
its attainment demonstration for PM 10

. In 2006, EPA revoked the annual NAAQS for PM 10

8 EPA’s approval also states: “The South Coast AQMP is the first South Coast Plan to address PM 2.5 . We have previously acted on numerous South Coast air quality plans for ozone, PM 10 , carbon monoxide, and NO 2 , such as the 1997/1999 AQMP.” This language shows that EPA considered the previous 2003 AQMP to be the approved plan
for PM 10
.14 because available data did not demonstrate a link between long term exposure to course particul ate matter ( PM 10 ) and health problems. (Fact Sheet Final Revisions to the National Ambient Air Quality Standards for Particle Pollution (Particulate Matter)). EPA retained the 24

- hour NAAQS for PM 10 of 150 micrograms per cubic meter to protect public healt h from short term exposure to course particulate matter.

Monitoring data that the District cites in Appendix V of the 2007 PM 2.5 AQMP shows that the South Coast is not recording emissions levels in excess of the federal 24

- hour PM 10 standard of 150 microgr ams per cubic meter

. 2007 AQMP at V

- 3

- 2. According to the SCAQMD, the area is
modeled to exceed the State standard by 122 percent in 2015. Id. The 2007 AQMP indicates that the area was meeting the federal 24

- hour standard, stating: “The Basin currently mee ts the 24

- hour average federal standard

. (The only days that exceed the standard are associated with high winds natural events of exceptio nal events due to wildfires.)” Appendix V at V

- 3

- 1. The 2007 AQMP notes that the highest concentrations of PM 10 genera lly occur at the Riverside Rubidoux monitor but “[t]he 2005 design value at Rubidoux is 86% of the federal standard. The standard attainment demonstration is conducted to assure that the Basin will continue to be in compliance in future years.” Id. In regard to the annual PM 10 standard, the 2007 AQMP states: “The Final AQMP does not provide an updated regional attainment demonstration to show compliance with
the revoked annual PM 10 standard.” Id. Appendix V’s discussion indicates that the SCAQMD
will continue to reduce PM 10 emissions to be lower than the revoked annual standard. Id. at V

- 3

- 2. The 2007 AQMP then states: “As part of the 2003 AQMP, the District proposed a comprehensive program to examine the local emissions profile and potential for miti gation actions that could be taken to bring PM 10 concentrations at Rubidoux within the annual
standard.” Id. at V

- 3

- 2

. The District included in the 2007 AQMP one control measure and a commitment to greater compliance efforts for two measures in the 2003 A QMP to maintain
lower concentrations of PM 10 at that one monitor. 9 These measures are discussed below.

EPA does not interpret the SCAQMD’s inclusion of this additional information on PM 10 in the 2007 AQMP to make it a replacement for or revision of the 20 03 PM 10 attainment demonstration and EPA never approved it as such. EPA considers the 2003 AQMP to be the only approved
attainment demonstration for PM 10

. The 2007 AQMP is the approved attainment demonstration
for PM 2.5

.

Comment 3 : CCAT states that Chapt er 4 of the 2007 AQMP includes PM 10 in its Control Strategies.

Response 3 : CCAT’s observation that PM 10 is included in Chapter 4 of the 2007 AQMP does not support its conclusion that the 2007 AQMP establishes the base

- year for 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). The introductory text for Chapter 4 of the 2003 AQMP compared to the same text for Chapter 4 of the 2007 AQMP leads to the opposite conclusion. The text makes it clear that the 2003 AQMP was submitted

– and approved by EPA

– to demonstrate attainmen t with the federal PM 10 standards (before the annual PM 10 standard was revoked in 2006) while

9 The 2007 AQMP states that SCAQMD will be requesting re

- designation to attainment for PM 10 from EPA, and states: “Regardless, the Final 2007 AQMP will provide an updated attainment demonstration for 24

- hour PM 10 to serve as the basis for a future maintenance plan.” Providing updated information t o serve as the basis for a future maintenance plan is different from submitting an attainment demonstration for approval of showing attainment.15 the 2007 AQMP was submitted and approved to demonstrate attainment with the federal PM 2.5 standard.

Chapter 4 includes 2 control measures, BCM

- 02 and MCS

- 04, 10 whi ch regulate PM 10 emissions. The SCAQMD’s inclusion of two control measures regulating PM 10 in what is otherwise a complete AQMP, including an attainment demonstration, for PM 2.5 is incidental or intended to comply with California Clean Air Act requirements

. EPA does not interpret including this limited information to make the 2007 AQMP an approved attainment demonstration for PM 10

. EPA continues to find that the 2003 AQMP is the most recent approved attainment
demonstration for PM 10

.

Comment 4 : CCAT states that Appendix III emission inventories treat PM 2.5 and PM 10 identically. CCAT points out that the 2007 AQMP states “ PM 10 in the NSR program is treated
the same as PM 2.5 .”

Response 4 : EPA does not agree or disagree with CCAT’s first statement that the SCAQMD in its Appendix III emissions inventories treats PM 10 and PM 2.5 emissions identically

. CCAT has not provided sufficient information in this comment for EPA to understand its position on this
matter. We do not con sider the statement to be dispositive or persuasive regarding whether the 2003 AQMP is the appropriate attainment demonstration for purposes of establishing the base

year for 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). As to CCAT’s second statement, EPA does not

co nsider this District’s statement regarding its NSR program to somehow make the 2007
attainment demonstration for PM 2.5 into the approved attainment demonstration for PM 10

. EPA continues to interpret the 2003 AQMP as the approved attainment demonstration fo r PM 10

. EPA notes that the District submitted a comment letter indicating its understanding that PM 10 and
PM 2.5 are different pollutants which are treated separately under its own new source review rules through Rule 1315 (which has been approved by EPA) a nd Rule 1325 (which has not yet been approved by EPA). Again, CCAT has not provided enough information for EPA to understand
how this statement in the 2007 PM 2.5 AQMP transforms it into an approved attainment
demonstration for PM 10 through the statement qu oted above concerning NSR.

Comment 5 : The 2007 AQMP updates the emissions baseline from the 2003 AQMP.

Response 5 : EPA disagrees with this statement. CCAT has also failed to provide sufficient explanation regarding this statement for EPA to understand wh at it means. The 2003 AQMP remains the approved attainment demonstration for PM 10 , and consequently establishes 1997 as the appropriate base

- year for 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). The 2007 AQMP establishes the
base

- year for PM 2.5

.

10 EPA notes that CCATs’ comment states only “[the 2007 AQMP] includes PM 10 in its Control Strategies (Chapter
4 )” without identifying specific measures. The majority of the control strategies apply only to PM 2.5 emissions. The Supreme Court has stated that “administrative proceedings should not be a game or a forum to engage in unjustified obstructionism by making cryptic and obscure references to matters that ‘ought to be’ considered and then after failing to do more to bring the matter to the agency’s attention, seeking to have that agency determination vacated on the ground the agency failed to consider matters ‘forcefully presented.’” Vermont Yankee v. EPA, 435 U.S. at
553

- 54. CCAT’s cursory references to portions of the 2007 AQMP do not provide sufficient information to later argue these matters were adequately presented.16 Comment 6 : CCAT states: “A conclusion by EPA that the 2007 AQMP omits PM 10 , or that the 2003 AQMP is the sole or most recent PM 10 SIP would be arbitrary and capricious, and simply wrong.”

Response 6 : EPA has not concluded that “the 2007 AQMP omits PM 10 ”. However, the relatively incidental inclusion of PM 10 measures and additional information in the 2007 AQMP does not make the 2007 AQMP into an approved attainment demonstration for PM 10

. The SCAQMD’s inclusion of limited PM 10 information in the 2007 PM 2.5 AQMP does not alter the fact that the 2003 AQMP is the approved PM 10 plan and attainment demons tration. Therefore,
the 2003 PM 10 AQMP establishes the base

- year for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1 )( ii ). EPA is reasonably concluding that the 2003 AQMP is the appropriate
PM 10 attainment demonstration for establishing the base

- year. The base

- year in the 2003 AQMP
is 1997.

In today’s rule EPA is finalizing our reasoning in the supplemental proposal to find that the 2003
PM 10 AQMP is the appropriate implementation plan and attainment demonstration for PM 10

. EPA disagrees with CCAT’s argument that including limited information concerning PM 10 in a subsequent implementation plan for a separate pollutant makes that plan the “most recent SIP”. The plain meaning of the word “approved” in the context of implementation plans signifies that EPA considered whether the plan was sufficient for its proposed purposes an d found it to be satisfactory. The 2003 PM 10 AQMP was proposed to demonstration attai nment with PM 10 and i t was approved by EPA as such. The 2007 PM 2.5 AQMP did not propose to demonstrate
attainment for PM 10 and was not approved as such. The 2007 PM 2.5 AQMP cannot be an EPA approved attainment demonstration for PM 10 when EPA did not appr ov e it as such. Moreover, EPA believes that it would make air quality planning unworkable to interpret SIPs for separate pollutants to overlap in the manner suggested by CCAT. We note that the 2007 AQMP also
includes some information about CO and SO
x . This d oes not mean that it is the most recent CO

or SO
x attainment demonstration. Neither the public nor the regulated industry would know what rules control under such an interpretation. EPA interprets the 2003 PM 10 AQMP to be the appropriate, approved AQMP for PM 10 , meeting the requirements of CAA Sections 110, 172, 188 and 189 , and establishing a base

- year of 1997 for PM 10 for purposes of 40 CFR 51.165(a)(3)(ii)(C)( 1)(ii)

.

Comment 7 : CCAT states that more than 50% of the offsets in the AB 1318 Tracking System

pre

- date the 2007 AQMP base

- year of 2002.

Response 7 : EPA disagrees. Because EPA is finding in this final rule that the 2003 AQMP is the appropriate attainment demonstration, the base

- year is 1997. However, EPA continues to agree with SCAQMD that the 2007 AQMP has explicitly added offsets as growth to the 2007 AQMP so that if the AB1318 Tracking System had transferred offsets for PM 2.5 emissions , pre

base year offsets might be available.

Comment 8

. CCAT claims that the 2007 AQMP was final “at all rel evant times” and that the
date that the District transferred the offsets does not matter.

Response 8 : EPA does not consider this comment relevant to our final action because we are finalizing our approval of this source

- specific SIP revision based on dete rmining that the 200317 AQMP is appropriate for establishing the base

- year for PM 10 offsets. EPA approved the 2003 AQMP in 2005, in advance of the transfer of PM 10 offsets into the AB 1318 Tracking System.

Comment 9 : CCAT states in footnote 11 that SCAQMD still has not complied with all AB1318 requirements. CCAT also states that SCAQMD made more submissions to EPA after the
transfer. Finally, CCAT contends that if state law mattered, the relevant date would be when the 2007 AQMP became state law (June 1, 20 07

– before transferring the offsets).

Response 9 : CCAT’s footnote 11 is confusing and does not demonstrate or explain how any of the purported facts are relevant to EPA’s Supplemental or January 2011 proposed approval of the AB 1318 Tracking System

. For example, CCAT states: “Further, were state law actions the basis for evaluating applicable law, the question would be when the 2007 AQMP because state law.” Comment Letter at p g 3, N. 11. CCAT does not explain how the District is not complying with
AB 1318 or how that fact would be relevant to EPA’s approval. To the extent this footnote is relevant to the timing of EPA SIP approval and the approval of the 2007 AQMP, it may be irrelevant because the appropriate AQMP for establishing the base

- year for 40 CFR 51.165(a)(3)(ii)(C)( 1)(ii) is the District’s 2003 AQMP for PM 10

. EPA acknowledges that SCAQMD made more information available to EPA, and that information is in EPA’s docket for our Supplemental proposal. The addition of this information has not harmed or impaired the public’s right to comment. EPA does not understand CCAT’s last statement. EPA interprets its regulations to establish the base

- year according to the most recent approved attainment demonstration for the particular pollutant being offset.

• CCAT Heading II. B. “ EPA Cannot Rely on the Failed, Super seded 2003 AQMP for a
Base Year ”

EPA’s responses to the arguments in this portion of the comment letter are contained above.

• CCAT Heading III. “The Offsets Transferred into the 1318 Track ing System are Not Quantifiable ”

CCAT argues that EPA cannot approve the AB 1318 Tracking System because the offsets have not been properly quantified. CCAT makes several assertions concerning the purported improper quantification.

Comment 1 : EPA finds the first p aragraph of this portion of the comment letter confusing. EPA believes CCAT is contending that quantification of offsets must be strictly based on precisely two years of data under the CAA. This means that CCAT does not agree EPA has discretion to
allow an alternative to having precisely two years of complete actual data. EPA is interpreting CCAT to argue that under the Clean Air Act if any source shuts down with only one year of
available data then no offsets can be issued and used. CCAT states: “Further A ppendix S does not apply here, but even if it did, it clearly calls for calculations based upon ‘actual annual operating hours for the previous [period]’. The EPA has not analyzed the ‘actual annual operating hours’ for any of the facilities included in th ese dockets nor can it since there is no
such data in this docket.” Comment Letter at pg 6.

Response 1 : EPA does not agree with CCAT’s interpretation of how we quantify offsets for 40 CFR Part 51, Appendix S and 40 CFR 51.165(a)(3) (ii) (C)( 1 )( i ). EPA also does not agree that we18 are required to determine whether Appendix S allows the use of a single year of data. Neither the CAA nor its implementing regulations requires the use of two years of data to quantify offsets.
As EPA discussed in its Brief filed in California Communities Against Toxic s v. EPA

, 688 F.3d 989 (9 th Cir. 2012)

, CCAT’s reference to the definition of “actual emissions” in 40 CFR 51.165(a)(1)(x ii ) is not determinative for quantifying offsets. See Answering Brief at 30

- 31.

It is also worth noting that the District is generally quantifying offsets that are resulting from “orphan” shutdowns in this source

- specific SIP revision. An orphan shutdown occurs when a facility or source of emissions quits operating (and thus emitting) and cease s to pay its emissions fees to the SCAQMD. The SCAQMD becomes aware the facility or source has quit emitting when it fails to file its Annual Emission Report (AER). AERs contain the estimated emissions going into the air for the 12

- month period between Jul y and June of each year. When a facility or source does not file its AER, the District provides a few months to come into compliance or submit an application for Emission Reduction Credits that can be traded on the open market. The
data on which the Distri ct relies to quantify the offsets is the last two years of AERs, however in some limited instances the AERs were missing data for some period of the year or an entire year.

Because the facility or source has shutdown, the District cannot obtain additional emissions
information. We are finalizing our proposal to find that the SCAQMD’s method of quantifying offsets where one year or part of a year of data is missing is permissible because the SCAQMD
has used a conservative approach by assuming there were zer o emissions when data was missing ; this makes the quantification conservative (i.e., results in a lower amount of offsets)

. Offsets are generally required during the new source review permitting process in a nonattainment area rather than through a source

- specific SIP revision. Therefore, EPA can reasonably look to the new source review permitting process for guidance on this question. During the permitting process, the permitting authority is frequently called upon to exercise
discretion to balance the nee d to promote new source growth and protect air quality. In 1979, EPA promulgated Appendix S to guide permit issuance where there was no approved new source
review SIP for a nonattainment area. EPA can reasonably look to CAA Section 173, 40 CFR Part 51, App endix S

, along with 40 CFR 51.165 to provide the agency’s views on offsets.

EPA considers it within the permitting authority’s discretion to require more offsets than are necessary to offset a new source’s emissions. If it is within a permitting authority’ s discretion, we interpret this discretion to extend to allowing the SCAQMD to transfer more offsets into the

source

- specific SIP revision for the AB 1318 Tracking System.

It is also reasonable for SCAQMD to use (and EPA to approve use of) a conservative approach when data for one year

– or part of one year

– is missing, provided the conservative approach results in at least as many offsets being provided as are needed. The SCAQMD’s method of applying a zero emissions assumption to missing dat a meets that requirement for this source

specific SIP revision.

Notably, the largest group of facilities providing offsets in the AB 1318 Tracking System had 2 years of data. In Section I.A. of Attachment A to the Technical Support Document for the Supplem ental proposal, for PM 10 there are 59,208 pounds of offsets with 2 years of data. Section I.B. lists 57,384 pounds of offsets also with 2 years of data. The total amount of offsets with 2 years of data is 116,592 pounds, or 98.7% of the total PM 10 offsets needed by Sentinel.19 Section II.A. of Attachment A lists offsets that are missing Year 1 data. These offsets total 7,593 pounds of PM 10

. Adding these to I.A and I.B. brings the total to 124,185 pounds of PM 10 off se ts

– approximately 6 ,000 pounds more than is needed for Sentinel. When Year 1 data was missing, SCAQMD assumed that the emissions from the missing year were zero and then averaged the
Year 2 data , which had the effect of reducing the reported emissions by half. For example, AES High g rove LLC had 3 44 pounds of PM 10 emissions in Year 2

. Because the data for Year 1 was missing, SCAQMD treated Year 1 emissions as zero and calculated the offsets as 172 pounds for
PM 10

.

EPA reasonably approved the SCAQMD’s exercise of discretion to assume that using zer o emissions is a conservative approach for the missing Year 1 data. There is no way that a facility can emit less than zero pounds of PM 10

. Therefore, including zero pounds of PM 10 as the Year 1 data and averaging it with the Year 2 data can only result in the offsets providing “an equal or greater reduction” than is required. The District appropriately used a conservative method of using 2 years of actual emissions data to quantify the offsets.

CCAT’s comment that EPA must review “actual annual operating h ours” to quantify offsets is based on a very selective quotation of the complete provision. The full relevant text of the provision in Appendix S termed “Baseline for determining credit for emission and air quality
offsets” states: “Emission offsets genera lly should be made on a pounds per hour basis when all facilities involved in the emission offset calculations are operating at their maximum expected or allowed production rate. The reviewing agency should specify other averaging periods (e.g. tons

per ye ar) in addition to the pounds per hour basis if necessary to carry out the intent of this Ruling. When offsets are calculated on a tons per year basis, the baseline emissions for existing sources providing the offsets should be calculated using the actual annual operating hours for the previous one or two year period (or other appropriate period if warranted by cyclical business conditions).” Appendix S at IV.C. The language in Appendix S supports EPA’s interpretation that the permitting authority has discr etion in quantifying emissions and can use a conservative approach for missing data.

As noted above, SCAQMD relies on it s AERs t o quantify offsets. The AERs report emissions in pounds per year, which for PM 10 are generally calculated by multiplying throughput information by a specified e mission f actor. Multiplying throughput by an e mission f actor will calculate the emissions in either tons per year or pounds per day, and the District has chosen to express the amount in pounds per day. This unit i s consistent with other provisions in SCAQMD’s permitting rules and Appendix S.

Although CCAT makes numerous assertions about the SCAQMD’s AERs, CCAT has not provided any information suggesting that the AERs are inaccu rate or result in fewer offsets than are required. Therefore, SCAQMD properly relied on the AERs, and also used the most
conservative approach (zero emissions) when Year 1 data was missing. EPA reasonably approved the SCAQMD quantification of these offsets

.

Comment 2 : CCAT also challenges EPA’s explanation for approving SCAQMD’s quantification methodology for the facilities in Section II.B of Attachment A (i.e. missing Year 2 data).20 Response 2 : EPA is finalizing our approval of the very limited number of offsets in Section II.B of Attachment A to the TSD, which is only 612 pounds of PM 10 offsets, on the same rationale that we applied above to the facilities missing Year 1 data. That means that were are finalizing our approval of the rule by filling in the missing Year 2 data with a zero. We are averaging the emissions from Year 1 with zero emissions for Year 2, resulting in half of the emissions from
Year 1. As discussed above, this method is a reasonable way for SCAQMD and EPA to comply with quantifying t he offset amount based on two years of data. Because the missing year of data could never be less than zero, this method of quantification will always result in providing equal or greater offsets than the amount needed to allow the new source emissions gro wth from
Sentinel

. Based on the altered quantification for the offsets listed in Section II.B (i.e. missing the Year 2 data) the total balance of offsets in the Revised Attachment A from the subset of facilities and
sources listed in the AB 1318 Tracking S ystem is lowered by 306 pounds of PM 10

. This bring s the sum of offsets in Revised Attachment A that EPA is approving a s meeting all federal integrity criteria to 124,4 91 pounds of PM 10 offsets rather than the 124,797 pounds proposed

. The amount of offsets needed to offset the new PM 10 emissions being added by the Se ntinel Energy Project is 118, 120 pounds per year, showing that there is still an excess of 6,3 71 pounds

. For SO
x emissions, this adjustment lowers the total quantity EPA pro posed to approve by 2 pounds. This means that the District is retiring almost twice as many SO
x offsets as are needed
for Sentinel.

In summary, the conservative quantification method that we are approving is a reasonable approach for missing data

. The SCA QMD’s method of quantifying the amount of offsets when data was missing, and our approval of that method, used zero emissions. This method results in a conservative quantification. The source could not have emitted less than zero and the quantification wil l result in equal or greater offsets.

Comment 3: CCAT contends that EPA must explain why any facility failed to provide two years of data.

Response 3: EPA disagrees with this comment. If we quantify the missing year of data as zero,
the reason that dat a is missing is immaterial to quantifying the offsets. CCAT has not explained how knowing the reason would matter.

Comment 4: CCAT states that 33 facilities listed as PM 10 offset facilities reported emissions in Years 1 & 2 that vary by more than 50%. Spe cifically, CCAT observed that Mountainview Generation Station’s utility boilers reported emissions changed by 1,192% and 1,634%; AAA Glass Corps furnaces reported emissions changed by 633%; and RRI Energy Etiwanda’s utility boilers reported emissions chang ed by 221%, 356% and 347%. CCAT then asserts that “It is not possible to assert reasonably that when there is such a large difference between the two years, tan [sic] average of the two years

— absent any other information

— represents a true picture of these facilities emissions over time.” Comment Letter at p g 7. Based on this, CCAT calls upon “EPA to explain how emissions can vary so dramatically from one year to the next” and to review more data “to ensure that the 2 year average truly is a fair representat ion of actual emissions from these facilities and [not] why another period of accounting is not ‘warranted by cyclical business
conditions.’” Comment Letter at pg. 7.21 Response 4: EPA agrees with CCAT’s observation that some of the shutdown sources evaluat ed had significant differences in their reported year

- to

- year annual emissions. A change in emission rates often occurs prior to a facility shutting down because the facility may taper off production prior to shutting down. If this happens before the end o f the AER annual reporting period (i.e.
June 30 th ), the emissions during that last year of operation (i.e. Year 1 data) will be less because the source did not operate all 12 months of the reporting period. EPA’s acid rain monitoring data shows fuel usage by quarter. For the Mountainview facility, the data shows that the units burned significantly less fuel during the 01/02 reporting period compared to the 00/01 reporting period (Unit 1 shows 83,843 to 1,100,099 cubic feet). In this case, we can view fuel u sage data by calendar quarter, and can see that no fuel was burned during the first and second quarter of 2002. A shutdown of the emission units during the reporting period is the most common ca u se of significant changes in emission r ates from one year to another. In calculating the average annual emissions for these shutdown facilities, the District used the most recent reporting period for which emission data was available, even if that period did not represent a complete 12 month period (i.e., for some m onths zero emissions were reported)

. CCAT does not explain why a variation in emissions between the two years is significant or materially affects the accuracy of the quantifications.

Comment 5: CCAT asks how it is possible for a source with two boilers (C BS) to have the exact amount of emission reductions from both units for two years in a row.

Response 5: In this case, the AER reflects fuel usage rates and emissions for two boilers at the facility. Since both boilers were shutdown at the same time, it is not necessary to determine the
exact amount of emissions attributable to each individual boiler. The emissions from the boilers are directly proportional to fuel usage. Therefore, the important value is the total fuel usage, not
how much one or the other used. Based on this fact, the fuel usage (and consequently the amount of offsets) from both boilers were allocated equally between each boiler. The offsets from shutting down both boilers at CBS, Inc. are accurately quantified.

Comment 6: CCAT identifies several issues related to the quantification of the offsets for KMC Wheel Company. CCAT asserts that “the CAA requires two years of documentation” and EPA has provided no explanation for why two years of documentation does not exist. CCAT views
the absenc e of two years of emissions data even more problematic when EPA asserts that at a single given facility some equipment has multiple years of data, but other pieces of equipment do not. This comment continues by detailing the emission data for the two Alumi num Furnace Reverb units (App. Nos. 400235 & 400236) as presented in Attachment A of the TSD. They note that unit #400236 only obtained its permit on June 14, 2002, which means it could have only operated for a few weeks in Year 2 (the 01/02 reporting peri od), but that EPA verified 3,644 pounds of PM 10 offsets for this period and 4,597 pounds for Year 1 (the 02/03 reporting period). CCAT asks what the operations profile is for this equipment that would allow for such emission
levels.

Response 6: Based on CCATs comments and concerns, EPA reviewed the documentation for KMC Wheel Co. and requested SCAQMD to provide additional documentation which we are adding to our record in response to this comment. The additional documents demonstrate that while App. Nos. 400235 & 400236 were the most recent application numbers for the units that were shutdown, these application numbers were issued for modifications to existing units and not
for new equipment with no operating history. (Both modifications were to replace th e existing22 furnace burners.) These two furnaces were first permitted on July 10, 1995, as App. Nos. 302346 and 302347. (See Facility Equipment List Report included in existing support documentation.) Thus while the furnaces identified as App. Nos. 400236 a nd 400235 only received modified permits on June 14, 2002 and October 11, 2002, respectively, the furnaces had been operating during the 01/02 reporting period as App. Nos. 302346 and 302347 respectively. The furnaces, therefore, had operated during the ye ar prior to the modification. In EPA’s experience, a modification to replace a burner could occur in a reasonably short period of time and would not require the unit to be out of service for an extended time. For KMC Wheel, the District had two years of op erating data prior to shutdown for App No. 400236, but only one year was available for App. No. 400235. Therefore the District conservatively assumed the emissions for Year 1 were zero when calculating a two year average for App. No. 400235

. In regards to the use of different two year reporting periods for each furnace, EPA notes that KMC Wheel Co informed the District in a letter dated October 23, 2003 that Permits for App

. Nos. 400236 (Aluminum reverb furnace) and 302844 (heat treating furnace) were no l onger in service. Thus, the last two years of operation for these units were 02/03 (Year 1) and 01/02 (Year 2). The last two years of operation for the other three units (App

. Nos. 400235, 302846 and 348664) were 03/04 (Year 1) and 02/03 (Year 2). KMC Whee l Co did not submit an AER for the 03/04 reporting period , however, and the District conservatively assumed the emissions for this period for these three units were zero when calculating a two year average for these units. CCAT does not explain why it is p roblematic for the company to shut equipment down over a two

- year period rather than simultaneously. In EPA’s experience, shutting down equipment over time is not unusual or suspicious.

If the District had used the AER data for reporting years 02/03 and 01 / 02 for all five units of shutdown equipment which was permitted and operating during 01/02, (rather than assuming zero emissions for partial operation during reporting period 03/04), the net result of this change
would be an increase in PM 10 offsets of 7,006 pounds /yr. (See EPA spreadsheet entitled “KMC
Wheel

– Offset Calculations ” added to docket .) Instead, as noted above, the District used a conservative estimation method by assuming emissions for the reporting year 03/04 were zero for the equipmen t that still had a valid permit to operate.

Comment 7: CCAT states that the other Aluminum reverb furnace operated by KMC Wheel (App. No. 400235) may have only operated for 9 months during the 03/04 reporting period, but
that this fact is uncertain since the facility was not inspected until 2009. CCAT then states that “EPA purports to have ‘ verified ’ 7,719 pounds of PM from FRA #400235 for that period

— meaning for that year, the total PM emissions for these two pieces of equipment would have been 12,316 po unds of PM, while emitting only 34 pounds of SO
x (and FRA #400235 emitted
the same amount of SO
x regardless of whether its PM emissions were 4,597 pounds one year and 3,644 pounds ).” Finally CCAT asks “What is the operations profile that allows the EPA’s

e missions assertions to conform with the data provided in the docket?” Comment Letter at p g 8.

Response 7: EPA finds this comment confusing. EPA notes that Appendix A

— Section II.A
shows that no PM 10 emissions were reported for the 03/04 reporting period fo r KMC Wheel, contrary to CCAT ’ s statement in their comment. Therefore how many months the furnace operated during this period is irrelevant. We note that the 7,719 pounds of PM referenced in the comment were actually the amount of PM 10 reported for FY 02/0 3 for the process and natural gas
emissions combined.23 CCAT’s comment suggests that assuming zero emissions for a period with no emission records does not “represent[] a true picture of these facilities’ emissions over time.” 11 To the extent that
KMC Wheel actually emitted PM 10 or SO
x during a reporting period, for which no reductions are counted, CCAT is correct that this is not a true picture

— instead it is a conservative picture. When zero emissions are counted for equipment that operated at least a portio n of a reporting period, then fewer emissions are included in the balance of available offsets. It is essentially an
underestimation of the actual emission reductions that have occurred. If additional operating data
had been available and used to determine actual average emissions over two years, the amount of offsets transferred into the AB 1318 Tracking System would be greater than the amount that the District transferred because there would be fewer periods of zero emissions reported. 12

CCAT makes many s tatements suggesting the quantity of offsets credited is not representative of
the actual emissions from these facilities. Because many of these facilities were shutting down, the last year of operation is often not representative of normal operations, but instead represent s a conservative quantification of the actual emissions emitted by the source prior to shutdown. CCAT does not explain how EPA’s approval of SCAQMD’s conservative approach harms CCAT or the environment. EPA has determined that it is reasonable to approve SCAQMD’s conservative quantification of the offsets because it will ensure greater environmental p rotection. In addition, the District has committed to retiring for the benefit of the environment any remaining offsets in the AB 1318 Tracking System in excess of those needed to offset the new emissions (i.e. 118,120 pounds of PM 10 and 13,928 pounds of S O
x ) from the operation of
Sentinel.

CCAT’s comment adds the 02/03 PM 10 emissions from both aluminum furnaces (i.e. 7,719 pounds for App. No. 400235 and 4,597 for App. No. 400236) for a total of 12,316 pounds of
PM 10 offsets. 13 During 02/03 the SO
x offsets f rom the two furnaces totaled 34 pounds. There is nothing unusual or suspicious about this result. T he supporting documentation in the record

11 Although CCAT’s comment quotes “war ranted by cyclical business conditions”, it does not provide a citation and EPA cannot ascertain the context for this comment. CCAT also fails to provide any support for its apparent contention that the legal standard for offsets is that they represent “a fair representation” of the way the business operated.. CAA Section 173, 40 CFR Part 51, Appendix S and 40 CFR 51.165(a)(3)(ii)(C)( 1)(i) requires offsets to be “surplus, permanent, quantifiable and federally enforceable.” Id.

12 The District may have u sed a “more representative” approach earlier in this process that resulted in quantification of a greater quantity of offsets for more representative periods. SCAQMD filed a brief in the challenge to the offsets from CCAT at the California Energy Commissio n in 2010. In that brief, SCAQMD states: “The District initially filed with the Commission a list of offsets to be provided under AB 1318 on March 2, 2010. Appendix N to the Addendum, Tables A & B. On May 12, 2010, it filed a revised list that replaced the initial list. The primary
difference between Tables A and B in the March 2 nd version and the May 12 th revised Addendum is that the revised
list makes more conservative assumptions about the offsets associated with emissions reduction from equipment which have ceased operation. In particular, in the May 12 th Revised Addendum the District used the average from the last two years of operation of the equipment rather than t he highest two out of the last five years of operation
which was used in the March 2 nd Addendum, to calculate offsets. Because this more conservative assumption used in the May 12 th Revised Addendum resulted in a smaller amount of emission offsets from the shutdown sources, it was necessary to include additional offsets in the AB 1318 Tracking System to ensure there would be adequate offsets available to meet Sentinel’s offset needs.” SCAQMD Brief filed in CEC proceedings, dated June 31, 2010.

13 EPA does n ot understand why CCAT concludes this discussion by stating that the 2 furnaces “emitted that same
amount of SO

x regardless of whether its PM emissions were 4,597 pounds in one year and 3,644 pounds).” The first part of the sentence refers to having the sa me amount of SO

x offsets when comparing the same

- year emissions from the two different furnaces while the second part of the sentence refers to two different years of emissions from one
furnace.24 shows that the total amount of natural gas used for all five of the emission units at KMC Wheel for reporting perio ds 02/03 and 01/02 was 60.35 and 59.83 mmcf respectively, and the amount of material processed was 2,794 and 4,983 tons for the same periods. (See AER’s for reporting periods 02/03 and 01/02) The SO
x emissions for this facility were due to the amount of na tural gas combusted and not the amount of material processed in the aluminum furnaces. Typically a reverberatory furnace operates on a continuous basis at some minimum temperature to keep the aluminum in the charging well in a molten state. Since the furna ce burners are operated at all times, there is not a direct correlation between fuel usage and the amount of material processed. This explains why there may be significant differences in the amount of PM 10 reported from year to year (due to quantity of mat erial processed), but little difference in the amount of SO
x emissions (due to natural gas combustion). Finally, because some of the equipment was shutdown in 2003 and some in 2004, different 2 year reporting periods were used to calculate average annual e missions, which explain why the emission profiles are not similar. Moreover, CCAT fails to explain how the difference matters.

Comment 8: CCAT states that their examples regarding quantification issues points to a broader issue that they believe EPA faile d to consider, namely “EPA’s apparent failure to address the inherent difficultly of this emissions reconstruction effort.” CCAT states that “[T]his is important because the CAA does not allow for guessing and close

- enough, but requires
emission reductions to be actual, and quantifiable.” Finally CCAT asserts that “[T]he documentation in this docket does not meet the requirements of the CAA and therefore, EPA adoption of this proposed rule would be arbitrary and capricious.” Comment Letter at pg 8.
CCAT com pletes this comment by calling on EPA to revisit each of the entrees in the AB1318 tracking system to ensure that each reduction is truly verifiable and to provide clear explanations of these particular irregularities.

Response 8: EPA agrees that a great deal of the work that SCAQMD and EPA are required to do to implement the CAA is difficult. EPA considers it preferable for the District to have a systematic approach to crediting and debiting its bank of offsets, such as the approach adopted in
Rule 1315. However, EPA had not approved Rule 1315 at the time California AB 1318 legislation instructed the SCAQMD to provide offsets to the AB 1318 Tracking System. In addition, Sentinel is not one of the types of facilities allowed to obtain offsets from the SCAQ MD under Rule 1315. Accordingly, SCAQMD proceeded with a source

- specific SIP revision. EPA agrees that the CAA requires emission reductions to be surplus, permanent, quantifiable and federally enforceable. See Appendix S and 40 CFR 51. 16 5 (a)(3)(ii)(C)( 1)(i ) . In the case of quantifying offsets, we must ensure that the amount of offsets credited does not exceed the amount of emissions that were previously being emitted into the atmosphere by the facility or source that has shut down (i.e. actual emissions)

. There is nothing in the CAA or EPA’s regulations prohibiting us from allowing the SCAQMD to utilize a conservative approach to account for missing data when quantifying offsets. EPA uses this approach for missing data in some of our programs, such as the A cid Rain program. When data is not recorded by a facility’s continuous emissions monitoring system because the system is not operating properly, EPA uses a default figure representing what EPA considers is likely to be
the worst

- case scenario. The SCAQMD h as also used a reasonable approach in quantifying the
offsets here. Because these offsets are the result of orphan shutdowns, missing data may occur. Thus, where AER data is missing, SCAQMD either substituted a zero or used data from the25 RECLAIM program or the Acid Rain program. See Attachment A, Sections I.B and II.A & B. EPA is finalizing our proposed and supplemental approval of this SIP revision because the subset
of facilities listed in Attachment A from the AB 1318 Tracking System were properly quanti fied based on finding SCAQMD ’s reasonable exercise of discretion to use zero emissions, Acid Rain
or RECLAIM data to provide a conservative approach to account for missing data. 14

• CCAT Heading IV. “ The Offsets Are Not Surplus ”

Comment 1: CCAT notes that South Coast Rule 1315

– Federal New Source Review Tracking System governs the District’s internal accounts and since the Sentinel offsets were transferred from the District’s internal accounts into the AB 1318 Tracking System, these offsets must comply wit h the approach to surplus requirements outlined in Rule 1315.

Response 1: EPA disagrees. If Rule 1315 applied to these offsets, then the District would have simply transferred the necessary amount of offsets out of the District accounts with no additional review of whether the offsets met the federal offset criteria, since Rule 1315 establishes a system

to ensure these criteria have been met. Rule 1315 requires a surplus adjustment be made in the aggregate for the annual balance of credits remaining in the District offset accounts. See 77 FR 31200 (May 25, 2012) The Sentinel offsets were not transferred out of the District offset accounts in the aggregate; rather each individual shutdown action was removed and evaluated to verify that the reductions meet th e offset integrity criteria of being surplus, permanent, quantifiable, and federally enforceable . 40 CFR 51.165 (a)(3)(ii)(C)( 1 )( i ) EPA also notes that if Rule 1315 were applicable to the offsets contained in the AB1318 tracking system, then
reductions fro m the shutdown of the Seagull Sanitation pit burner would not have needed to be
BACT

- adjusted prior to deposit, thus significantly increasing the amount of offsets

.

Comment 2: CCAT states that EPA must analyze each piece of equipment from the time of

per mit issuance to the time of quantifying the offset to ensure proper surplus adjustment of the
offsets . CCAT states tha t rather than properly analyzing the many rules that have been adopted since the different units were installed; the proposed rule analyze s only two rules, Rules 1156
and 1157.

Response 2: EPA disagrees on two counts. First, CCAT is incorrect that in order to surplus adjust an offset in the AB 1318 Tracking System SCAQMD and EPA must review of all rules adopted since the time the permit was issued. During the time a facility is operating, it is required to operate in compliance with all applicable District rules. Accordingly, at the time a facility ceases operating its allowable emissions have already been reduced to be in compliance with al l rules adopted by SCAQMD during its operation. Instead, the SCAQMD must ensure that at the time the offset is used (in this case when the construction permit was issued), that no portion of the offset should be further reduced because of new rules adopted since the facility shutdown. As part of our review of the offsets transferred to the AB 1318 tracking system, EPA reviewed both South Coast rules and federal regulations to determine if any new applicable requirements applied to the operations being evalu ated. We found that only two new rules, Rules 1156 and

14 EPA notes that in almost every context other than offset qu antification, it would not be reasonable to assume there are zero emissions when data is missing. But offset quantification is the inverse of the usual cases of emissions quantification under the CAA where we are determining how much credit to give for th e amount of emissions that were going into the atmosphere. In offset quantification, assuming zero emissions were emitted is the worst case.26 1157 required any surplus adjustment for the shutdown units and facilities. As CCAT notes, EPA analyzed what surplus adjustment was required by those rules. From that analysis, EPA surplus adjusted 4 p ieces of equipment and reduced the creditable emissions by 5,960 pounds. Therefore, the surplus adjustments discussed in our proposal and s upplemental proposal are correct.

• CCAT Heading IV.A. “ Rule 1315, Which EPA Did Not Apply, Dictates How the Surplus A djustment after Deposit Occurs ”

Comment 1: CCAT’s comment describes the Rule 1315 requirements for annually surplus adjusting the offset account balance contained in the District Offset Accounts. CCAT asserts that while Rule 1315 is subject to a legal challenge, EPA is bound to apply the Rule 1315 method for discounting to surplus in the approval of the AB 1318 Tracking System. CCAT asserts that EPA’s reliance on a different approach renders the current rulemaking unlawful.

Response 1: EPA disagrees. There are no provisions in Rule 1315 that requi re the surplus adjustment methodology required by the rule to be used on offsets that are transferred from District’s Rule 1315 Offset Account to a separate Offset Account such as the AB1318 Tracking System. The surplus adjustment methodology in Rule 1315 only applies to the remaining balance
of credits after the District has reconciled its use of debits and credits. Th e methodology in Rule
1315

— surplus adjusting in the aggregate

— was developed to reduce the administrative burden required to surplus adjust e ach individual offset

– as the District has done here. For credits deposited into the Rule 1315 Offset Accounts, we approved a systematic approach. For the AB1318 Tracking System, instead of transferring a specific amount of offsets in the aggregate
from R ule 1315, which was not SIP approved at the time of the transfer, the District transferred the specific facility offsets as listed in Table A and B of the SIP submittal (a subset of which are
listed in EPA’s TSD Attachment A) for 137,799 pounds /yr of PM 10 and 25,346 pounds /yr of SO
x and evaluated each shutdown or emission reduction project to ensure the offsets met the federal offset criteria of being surplus, quantifiable, permanent and federally enforceable. (See TSD
dated Dec. 29, 2010 , regarding these c riteria.) It is not necessary or required that both methods
be used.

• CCAT Heading IV.B. “ If Rule 1315 Were Not Applicable, EPA’s Analysis Is Entirely
Inc omplete”

Comment 1: CCAT states that EPA did not ensure that the emission reductions are surplus and not required under the CAA. CCAT asserts that an emission reduction must be surplus adjusted both at the time of banking and at the time of use.

Response 1: EPA regulations require all offsets to be surplus to any other emission reduction requirement at the time offsets are used. EPA’s terminology for this is “surplus adjusted at the time of use.” Many air agencies choose to surplus adjust emission reductions at the time of creation (e.g. when a facility shuts down) because it is easier to quantify the of fsets at that time. But the only federal CAA requirement is to ensure offsets are surplus adjusted at the time of use, which means the offsets must be evaluated again at the time the offsets are used. EPA has reasonably determined that the SCAQMD properly surplus adjusted all of the offsets listed in Attachment A to EPA’s Technical Support Document for this Supplemental proposal.27 Comment 2: CCAT provides a brief summary of the Emission Reduction Credits (ERCs) as generated from the shutdown of the Seagull S anitation facility. CCAT notes that the facility operated a continuous

- feed incinerator until it shutdown in 2001 and that the District awarded the source private

- market ERCs as provided in SCAQMD Rule 1309

– Emission Reduction
Credits in 2002. CCAT state s that “the District applied a novel notion of BACT to an incinerator,” and that the Seagull Sanitation example “highlights the across

- the

- board misapplication of the surplus requirement in this rulemaking.” CCAT claims that since
incinerators like the one used by Seagull Sanitation are prohibited in California under a state program, the 8,030 pounds /yr of PM 10 and 13,870 pounds /yr of SO
x credits that were approved under this rulemaking should have been discounted to zero at the time of banking. Alternative ly, CCAT states that if these emission reductions were bankable, they would still need to undergo an annual subsequent discount to ensure they are surplus at “time of use,” and reduce the offsets as required by the adoption of new federal new performance s tandards for these facilities, otherwise this rulemaking is again unlawful.

Response 2: Seagull Sanitation is the only source of offsets in the AB1318 Tracking System where the owner submitted an application for ERCs pursuant to Rule 1309. Rule 1309 is t he District’s SIP approved rule for evaluating the granting of ERCs when the owner of a source applies to obtain offsets which it can trade on the private market. The rule requires adjustments to the amount of creditable ERCs that go beyond what is require d by the federal CAA. For example, the rule requires ERCs to be adjusted to levels considered to be Best Available Control Technology (BACT) at time of creation in lieu of being surplus adjusted at time of use. This
means that the amount of creditable ERC’ s is reduced to reflect the level of control that would be achieved if the shutdown unit had been utilizing current day BACT. The rule also requires the source to payback any offsets (“payback amount”) to the District that had been loaned to the
source und er the older pre

- October 1990 District offset tracking system. This payback amount is what was deposited into the District’s Rule 1315 Offset Accounts and transferred to the AB 1318 Tracking System. These particular offsets, because they went through the R ule 1309 ERC review process, were BACT adjusted before any deposit to ensure they meet the federal offset criteria of being surplus, therefore no additional adjustments of these credits is required prior to use by
Sentinel.

CCAT’s comment does not provide any support for its statement that “incinerators like the one used by Seagull Sanitation are prohibited in California under a state program designed to improve air quality.” EPA is not aware of any such prohibition. EPA does note from the
District’s evalu ation that they considered whether California Health &Safety Code section 41810 applied for the purposes of BACT discounting. The District determined section 41810 only applied to open burning and that as a pit burner, the Seagull Sanitation operation was not subject to those requirements.

In regards to what CCAT characterized as a “novel notion of BACT to an incinerator,” EPA notes that while the applicant proposed that the existing operation constituted current BACT because they could find no other BACT determinations for a pit burner, the District’s evaluation determined that “current BACT” would require a multi

- chamber incinerator. Thus the emission
factor for a multi

- chamber incinerator was used to BACT

- adjust the amount of offsets available
for bankin g as private market ERCs. Only after all the adjustments required to ensure that the emission reductions met the offset criterion for surplus adjustment did the District then reduce28 this amount by the payback amount (i.e. the amount of credits that were ow ed back to the District). The offsets that were deposited into the District’s Rule 1315 Offset Accounts and then transferred into the AB 1318 tracking system had already met all of the requirements to be
considered federal offsets.

Comment 3: CCAT states that EPA only analyzed two District rules; Rules 1156 and 1157 in regards to the need to surplus adjust the credits in the AB1318 Tracking System. CCAT disagrees with EPA’s analysis and asserts that “...the cement rule [1156], by its plain language, applie s to more than the two facilities. It would not have identified already

- shut facilities, such as Elsinore Ready

- Mix, but would still establish a new standard to which emission from relevant
facilities would be reduced.”

Response 3: EPA disagrees. Rule 1156, applies to facilities that manufacture cement ( SIC
3241 ), not to facilities that use cement to manufacture concrete, such as Elsinore Ready

- Mix. The North American Industry Classification System classifies Cement Manufacturing un der NAICS 327310, with the following definition: This industry comprises establishments primarily engaged in manufacturing portland, natural, masonry, pozzolanic, and other hydraulic cements. Cement manufacturing establishments may calcine earths or mine, quarry, manufacture, or purchase lime. The NAICS code for Ready

- mix Concrete Manufacturing is 327320, with the following definition: This industry comprises establishments, such as batch plants or mix plants, primarily engaged in manufacturing concrete del ivered to a purchaser in a plastic and unhardened state. Ready

- mix concrete manufacturing establishments may mine, quarry, or purchase sand and gravel. Rule 1156, Section (b) Applicability states that the “rule applies to all operations, materials handling , and transport at a cement manufacturing facility . The rule also defines a cement manufacturing facility as “any facility that engages in, or has been engaged in prior to November 4, 2005, producing portland cement or associated products, as defined in th e Standard Industrial Classification Manual as Industry No. 3241, Portland Cement Manufacturing.” Therefore, EPA and the SCAQMD properly determined that Rule 1156 does not apply to Elsinore Ready

- Mix.

Comment 4: CCAT states that they believe the following rules also apply to sources that are included in the AB1318 Tracking System, and therefore require surplus adjustment: 1137

– PM 10 Emission Reductions from Woodworking Operations, 1155

– Particular Matter Control Devices,
481

– Spray Coating Operations, R eg IX Subpart CC

– Standard of Performance for Glass Manufacturing Plants, SCAQMD BACT guidelines, 433 Natural Gas Fuel Specifications and 403 Fugitive Dust. CCAT also states that the “record is not sufficient to determine when the permit to construct or t he permit to operate was issued for each piece of equipment; therefore it is possible that older District rules apply as well.” Finally CCAT asserts that “EPA has the duty, when assessing whether the emissions were in fact reduced to be surplus, to answer the question:
what rules have been adopted since each piece of equipment was originally permitted? Having identified the rules, it must then apply a discount reflecting each rule to each piece of equipment.”

Response 4: EPA disagrees. First, while it is not necessary to determine when a permit was issued in order to ensure an offset has been properly surplus adjusted, that information is in the record for each source. (See the Facility Equipment List Report included in the supporting
documentation for eac h action.) 40 CFR 51.165(a)(3)(ii)(G) states that “ Credit for an emissions29 reduction can be claimed to the extent that ...the State has not relied on it in demonstration attainment or reasonable further progress.” This generally means that amount of offset credit granted can be no higher than what would be allowed if the source was subject to a rule or requirement of the attainment plan that exists at the time the offset is used. This is done by comparing the emission rate or emission factor for each emissi on unit with any new lower emission limits that may apply to the equipment due to new rules that were adopted between the
time the source shutdown and the time the offsets are used.

Although CCAT’s comments list a number of rules, it has not provided any information showing that these rules apply to any of the facilities or sources listed in Attachment A. As we have noted before, the Supreme Court has stated that “administrative proceedings should not be a game or a forum to engage in unjustified obstructi onism by making cryptic and obscure reference to matters that ‘ought to be’ considered and then, after failing to do more to bring the matter to the agency’s attention, seeking to have that agency determination vacated on the ground that the agency failed to consider matters ‘forcefully presented.’” Vermont Yankee , 435 U.S. at 553

- 54. With respect to the list of rules CCAT presents, the commenter must at least try to explain why those rules would apply to any of the facilities or sources listed in Attachmen t A. For example, the purpose of Rule 481 is to control VOC emissions from s pray c oating operations , not PM 10 or SO
x . While these VOC control requirements may also reduce PM 10 emissions, no emission
reduction credit is taken in the PM 10 attainment plan. Therefore the PM 10 emission reductions due to the shutdown of the source are surplus.

• CCAT Heading V . “What is the status of the offsets not addressed here?”

Comment 1 : CCAT notes that our supplemental proposal stated that EPA was not taking any action on the offsets in the AB 1318 Tracking System that were not listed in EPA’s Attachment A. CCAT then poses a series of interrogative statements to illustrate that it would be problematic for EPA not to take any action on the offsets contained in the AB 1318 Tracking System but not
included in Attachment A.

Response 1 : In the Comment Letter the District submitted regarding our supplemental proposal,
the Executive Officer st ated: “To the extent that there are excess offsets in the AB 1318 Tracking System that are not needed for the Sentinel project, they will be retired for the benefit of the
environment.” Based on the District’s commitment to retire all of the offsets listed in the AB 1318 Tracking System, i.e., those offsets not listed in Attachment A and any amount listed in Attachment A that exceed the 118,120 pounds of PM 10 and 13,928 pounds of SO
x required for the Sentinel project, EPA is satisfied that none of the hypot hetical scenarios posited in CCAT’s interrogative statements will occur. The offsets will not be distributed to another facility, they will not be placed into the District Rule 1315 Offset Accounts, and they will not be “ relied upon
to offset emission redu ctions [sic] in the South Coast Air Basin. ” Comment Letter at pg 11. EPA views the District’s commitment to retire excess offsets as a benefit to air quality.

In addition, EPA notes that the District has recently released a list of its recommendations for funding projects exceeding $50 million to reduce emissions in the Coachella Valley. The funds for these projects come from $53.3 million that Sentinel paid to the District for the offsets. These projects will also result in air quality improvements. The Di strict’s announcement of its recommendations is placed in the docket for this final rule.30 • CCAT Heading VI. “ Coachella Valley Truly a Downwind Basin?”

Comment 1: Citing an incident that occurred when the wind direction blew odors from the Salton Sea towar ds the South Coast Air Basin, CCAT questions whether Coachella Valley is truly downwind from the South Coast Air Basin. CCAT cites District Rule 1309 as the basis for this requirement.

Response 1: Rule 1309 does not apply to this source

- specific SIP revi sion. But there is also no basis for one incident of the wind blowing from the non

- prevailing direction to conclude that the long

- standing determination of air quality experts is incorrect. CCAT must provide more than a single incident to throw into questi on the basis for air quality planning in the region for the past 40 years. See Final Coachella Valley 2003 AQMP at p g . 3

- 2, Table 3

- 1.

 Letter s from Citizens living in Coachella Valley

EPA received 20 comment letters from citizens living in or near the Coa chella Valley. Many of these comment letters voiced opposition to the construction and operation of the CPV Sentinel Energy Plant, but did not contain substantive comments regarding EPA’s proposed action to approve the AB1318 Tracking System as source

- spe cific SIP revision.

Comment 1 : Several of these commentors expressed concerns about Sentinels impacts on local public health, global warming, suggested that renewable energy should be used to produce the needed electricity, and questioned why pristine Mission Springs water will be used for cooling.

Response 1: The scope of EPA’s proposed approval of the District’s submittal of the AB1318 Tracking System is limited to determining whether a sufficient number of offsets met the CAA requirements for offsets. None of these comment relate to whether the emission reduction credits in the AB1318 Tracking System comply with federal CAA requirements for offsets. Therefore, although EPA appreciates the comments and concerns, the issues raised are beyond the scope of this rulemaking. E PA also notes that the District has recently recommended a number of proje cts for the Coachella Valley that will be funded through the money the District received from transferring the offsets to CPV Sentinel.