[Federal Register Volume 74, Number 183 (Wednesday, September 23, 2009)]
[Proposed Rules]
[Pages 48480-48495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-22808]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R06-OAR-2005-TX-0032; FRL-8958-6]


Approval and Promulgation of Implementation Plans; Texas; 
Revisions to the New Source Review (NSR) State Implementation Plan 
(SIP); Flexible Permits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing disapproval of submittals from the State of 
Texas, through the Texas Commission on Environmental Quality (TCEQ) to 
revise the Texas SIP to include a new type of NSR permitting program, 
Flexible Permits (the Texas Flexible Permits State Program or the 
Program). EPA proposes disapproval of the Texas Flexible Permits State 
Program because it does not meet the Minor NSR SIP requirements nor 
does it meet the NSR SIP requirements for a substitute Major NSR SIP 
revision. We are proposing action under section 110, part C, and part 
D, of the Federal Clean Air Act (the Act or CAA). EPA is taking 
comments on this proposal and intends to take a final action.

DATES: Any comments must arrive by November 23, 2009.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R06-
OAR-2005-TX-0032 by one of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the on-line instructions for submitting comments.
    <bullet> U.S. EPA Region 6 ``Contact Us'' Web site: http://epa.gov/region6/r6coment.htm. Please click on ``6PD'' (Multimedia) and select 
``Air'' before submitting comments.
    <bullet> E-mail: Mr. Stanley M. Spruiell at 
<a href="/cdn-cgi/l/email-protection#26555654534f434a4a08555247484a435f6643564708414950"><span class="__cf_email__" data-cfemail="1c6f6c6e6975797070326f687d727079655c796c7d327b736a">[email protected]</span></a>.
    <bullet> Fax: Mr. Stanley M. Spruiell, Air Permits Section (6PD-R), 
at fax number 214-665-7263.
    <bullet> Mail: Mr. Stanley M. Spruiell, Air Permits Section (6PD-
R), Environmental Protection Agency, 1445 Ross Avenue, Suite 1200, 
Dallas, Texas 75202-2733.
    <bullet> Hand or Courier Delivery: Stanley M. Spruiell, Air Permits 
Section (6PD-R), Environmental Protection Agency,

[[Page 48481]]

1445 Ross Avenue, Suite 1200, Dallas, Texas 75202-2733. Such deliveries 
are accepted only between the hours of 8 a.m. and 4 p.m. weekdays 
except for legal holidays. Special arrangements should be made for 
deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R06-OAR-
2005-TX-0032. EPA's policy is that all comments received will be 
included in the public docket without change and may be made available 
online at http://www.regulations.gov, including any personal 
information provided, unless the comment includes information claimed 
to be Confidential Business Information (CBI) or other information 
whose disclosure is restricted by statute. Do not submit information 
that you consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site 
is an ``anonymous access'' system, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through http://www.regulations.gov your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses.
    Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in http://www.regulations.gov or in hard copy at the Air Permits 
Section (6PD-R), Environmental Protection Agency, 1445 Ross Avenue, 
Suite 700, Dallas, Texas 75202-2733. The file will be made available by 
appointment for public inspection in the Region 6 FOIA Review Room 
between the hours of 8:30 a.m. and 4:30 p.m. weekdays except for legal 
holidays. Contact the person listed in the FOR FURTHER INFORMATION 
CONTACT paragraph below to make an appointment. If possible, please 
make the appointment at least two working days in advance of your 
visit. There will be a 15 cent per page fee for making photocopies of 
documents. On the day of the visit, please check in at the EPA Region 6 
reception area at 1445 Ross Avenue, Suite 700, Dallas, Texas.
    The State submittals, which are also part of the EPA docket, are 
also available for public inspection at the State Air Agency during 
official business hours by appointment: Texas Commission on 
Environmental Quality, Office of Air Quality, 12124 Park 35 Circle, 
Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: Mr. Stanley M. Spruiell, Air Permits 
Section (6PD-R), Environmental Protection Agency, Region 6, 1445 Ross 
Avenue, Suite 700, Dallas, Texas 75202-2733, telephone (214) 665-7212; 
fax number (214) 665-7263; e-mail address <a href="/cdn-cgi/l/email-protection#a3d0d3d1d6cac6cfcf8dd0d7c2cdcfc6dae3c6d3c28dc4ccd5"><span class="__cf_email__" data-cfemail="483b383a3d212d2424663b3c2926242d31082d3829662f273e">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: Throughout this document, the following 
terms have the meanings described below:
    <bullet> ``We,'' ``us,'' and ``our'' refer to EPA.
    <bullet> ``Act'' and ``CAA'' mean the Clean Air Act.
    <bullet> ``40 CFR'' means Title 40 of the Code of Federal 
Regulations--Protection of the Environment.
    <bullet> ``SIP'' means State Implementation Plan established under 
section 110 of the Act.
    <bullet> ``NSR'' means new source review, a phrase intended to 
encompass the statutory and regulatory programs that regulate the 
construction and modification of stationary sources as provided under 
CAA section 110(a)(2)(C), CAA Title I, parts C and D, and 40 CFR 51.160 
through 51.166.
    <bullet> ``Minor NSR'' means NSR established under section 110 of 
the Act and 40 CFR 51.160.
    <bullet> ``NNSR'' means nonattainment NSR established under Title 
I, section 110 and part D of the Act and 40 CFR 51.165.
    <bullet> ``PSD'' means prevention of significant deterioration of 
air quality established under Title I, section 110 and part C of the 
Act and 40 CFR 51.166.
    <bullet> ``Major NSR'' means any new or modified source that is 
subject to NNSR and/or PSD.
    <bullet> ``Program'' means the SIP revision submittals from the 
TCEQ concerning the Texas Flexible Permits State Program.
    <bullet> ``TSD'' means the Technical Support Document for this 
action.
    <bullet> ``NAAQS'' means any national ambient air quality standard 
established under 40 CFR part 50.

Table of Contents

I. What Action Is EPA Proposing?
II. What Are the Other Relevant Proposed Actions on the Texas 
Permitting SIP Revision Submittals?
III. What Has the State Submitted?
IV. Is the Texas Flexible Permits State Program a Submittal for a 
Major or Minor NSR SIP Revision?
    A. Description of the Submitted Program
    B. Is the Submitted Program Clearly a Minor NSR SIP Revision?
V. What Is EPA's Evaluation of the Submitted Texas Flexible Permits 
State Program as a Substitute Major NSR SIP Revision?
    A. What Are the Requirements for EPA's Review of a Submitted 
Major NSR SIP Revision?
    B. Does the Submitted Program Prohibit Circumvention of Major 
NSR?
    C. Does the Submitted Program Meet the Major NSR SIP 
Requirements for Applicability Determinations?
    D. Does the Submitted Program Meet the CAA and Major NSR 
Applicability Determination Criteria?
    E. Does the Submitted Program Meet the Major NSR SIP 
Requirements for Enforceability?
    F. Does the Submitted Program Meet the Major NSR SIP Public 
Participation Requirements?
    G. Does the Submitted Program Meet Section 110(l) of the Act for 
a Major NSR SIP Revision?
    H. What Is EPA Summary of Whether the Submitted Program Meets 
the Requirements for a Substitute Major NSR SIP Program?
VI. What Is EPA's Evaluation of the Submitted Texas Flexible Permits 
State Program as a Minor NSR SIP Revision?
    A. Is the Submitted Program Clearly a Minor NSR SIP Revision?
    B. Does the Submitted Program Meet the Minor NSR SIP 
Requirements for Establishing the Emissions Cap?
    C. Does the Submitted Program Meet the Minor NSR SIP Enforcement 
Requirements?
    D. Does the Submitted Program Meet the Minor NSR SIP 
Requirements for Revision of Existing Major NSR Permits?
    E. Does the Submitted Program Meet the Minor NSR SIP Public 
Participation Requirements?
    F. Does the Submitted Program Meet Section 110(l) of the Act for 
a Minor NSR SIP Revision?
    G. What Is EPA Summary of Whether the Submitted Program Meets 
the Requirements for a Minor NSR SIP Program?
VII. Proposed Action
VIII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing?

    We are proposing to disapprove the Texas Flexible Permits State 
Program, as

[[Page 48482]]

submitted by Texas in Title 30 of the Texas Administrative Code (30 
TAC) at 30 TAC Chapter 116--Control of Air Pollution by Permits for New 
Construction or Modification, because it does not meet certain 
provisions of the Act and EPA's NSR regulations. This includes the 
following regulations under Chapter 116: 30 TAC 116.110(a)(3), 30 TAC 
Subchapter G--Flexible Permits, the definitions in 30 TAC 116.13, 
Flexible Permits, and the definition in 30 TAC 116.10(11)(F) of 
``modification of existing facility.'' It is EPA's position that none 
of these identified elements is severable from each other.
    We are proposing to disapprove the submitted Texas Flexible Permits 
State Program as not meeting the requirements for a substitute Major 
NSR SIP revision. Our grounds for proposing disapproval as a substitute 
Major NSR SIP revision include the following:
    <bullet> It is not clearly limited to Minor NSR thereby allowing 
new major stationary sources to construct without a Major NSR permit;
    <bullet> It has no regulatory provisions clearly prohibiting the 
use of this Program from circumventing the Major NSR SIP requirements 
thereby allowing sources to use a Flexible Permit to avoid the 
requirement to obtain preconstruction permit authorizations for 
projects that would otherwise require a Major NSR preconstruction 
permit;
    <bullet> It does not require that first an applicability 
determination be made whether the construction or modification is 
subject to Major NSR thereby exempting new major stationary sources and 
major modifications from the EPA Major NSR SIP requirements;
    <bullet> It does not include a demonstration from the TCEQ showing 
how the use of ``modification'' is at least as stringent as the 
definition of ``modification'' in the EPA Major NSR SIP program;
    <bullet> It does not include the requirement to make Major NSR 
applicability determinations based on actual emissions and on emissions 
increases and decreases (netting) that occur within a major stationary 
source;
    <bullet> It fails to meet the statutory and regulatory requirements 
for a SIP revision;
    <bullet> It is not consistent with applicable statutory and 
regulatory requirements as interpreted in EPA policy and guidance on 
SIP revisions; and
    <bullet> It fails to include, among other things, adequate 
accountability provisions, compliance determination procedures, 
replicable implementation procedures, sufficient monitoring, 
recordkeeping, and reporting requirements so that issued permits 
incorporate emission limitations and other requirements of the Texas 
SIP that ensure protection of the national ambient air quality 
standards (NAAQS), and noninterference with the Texas SIP control 
strategies and reasonable further progress (RFP).
    We are proposing to disapprove the submitted Program as not meeting 
the Minor NSR SIP requirements. It is not clearly limited to Minor NSR. 
It has no regulatory provisions clearly prohibiting the use of this 
Program from circumventing the Major NSR SIP requirements. This Program 
does not require that first an applicability determination be made 
whether the construction or modification is subject to Major NSR. The 
Program does not ensure that a Major NSR permit's requirements are 
retained.
    In addition to the failures to protect Major NSR SIP requirements, 
EPA cannot find that the submitted Program, as a Minor NSR SIP program, 
will ensure protection of the NAAQS, and noninterference with the Texas 
SIP control strategies and RFP. We are proposing to disapprove this 
Program as a Minor NSR SIP revision because it does not meet certain 
provisions of the Act and EPA's Minor NSR SIP requirements. Our grounds 
for proposing disapproval as a Minor NSR SIP revision include the 
following:
    <bullet> It is not clearly limited to Minor NSR thereby allowing 
new major stationary sources to construct without a Major NSR permit;
    <bullet> It has no regulatory provisions clearly prohibiting the 
use of this Program from circumventing the Major NSR SIP requirements 
thereby allowing sources to use a Flexible Permit to avoid the 
requirement to obtain preconstruction permit authorizations for 
projects that would otherwise require a Major NSR preconstruction 
permit;
    <bullet> It does not require that first an applicability 
determination be made whether the construction or modification is 
subject to Major NSR thereby exempting new major stationary sources and 
major modifications from the EPA Major NSR SIP requirements;
    <bullet> It fails to meet the statutory and regulatory requirements 
for a SIP revision;
    <bullet> It is not consistent with applicable statutory and 
regulatory requirements as interpreted in EPA policy and guidance on 
SIP revisions;
    <bullet> It lacks replicable, specific, established implementation 
procedures for establishing the emission cap in a Minor NSR Flexible 
Permit;
    <bullet> It is not an enforceable Minor NSR permitting program;
    <bullet> It allows the issuance of Flexible Permits that do not 
incorporate emission limitations and other requirements of the Texas 
SIP; and
    <bullet> It lacks the necessary more specialized monitoring, 
recordkeeping, and reporting (MRR) requirements required for this type 
of Minor NSR program, as selected by Texas, to ensure accountability 
and provide a means to determine compliance.
    We have evaluated the submitted Texas Flexible Permits State 
Program, submitted in a series of packages dating back to 1994. Based 
upon our evaluation, EPA has concluded that the portions of the 
submitted SIP revisions specifically applicable to the Program do not 
meet the requirements of the Act and 40 CFR part 51. All these portions 
of the submittals for the Program are not severable and therefore are 
not approvable. As authorized in sections 110(k)(3) and 301(a) of the 
Act, where portions of the State submittals are severable, EPA may 
approve the portions of the submittals that meet the requirements of 
the Act, take no action on certain portions of the submittals, and 
disapprove the portions of the submittals that do not meet the 
requirements of the Act. When the deficient provisions are not 
severable from all of the submitted provisions, EPA must propose 
disapproval of the submittals, consistent with sections 301(a) and 
110(k)(3) of the Act. The submitted provisions work together to form 
the Texas Flexible Permits State Program and are not severable from 
each other. Therefore, EPA is proposing disapproval of the submitted 
Program.
    Under section 179(a) of the CAA, final disapproval of a submittal 
that addresses a mandatory requirement of the Act starts a sanctions 
clock and a Federal Implementation Plan (FIP) clock. The provisions in 
these submittals relating to the Texas Flexible Permits State Program 
were not submitted to meet a mandatory requirement of the Act. 
Therefore, if EPA takes final action to disapprove this submitted 
Program, no sanctions and FIP clocks will be triggered.

II. What Are the Other Relevant Proposed Actions on the Texas 
Permitting SIP Revision Submittals?

    This proposed action should be read in conjunction with two other 
proposed actions appearing elsewhere in today's Federal Register, (1) 
proposed action on the Texas NSR SIP, including PSD, NNSR for the 1997 
8-Hour Ozone Standard, NSR Reform, and a Minor NSR Standard Permit (NSR 
SIP), and (2)

[[Page 48483]]

proposed action on the Texas NSR SIP, the Qualified Facilities Program 
and the General Definitions.\1\ On November 26, 2008, EPA proposed 
limited approval/limited disapproval of the Texas submittals relating 
to public participation for air permits of new and modified facilities 
(73 FR 72001). EPA believes these actions should be read in conjunction 
with each other because the permits issued under these State programs 
are the vehicles for regulating a significant universe of the air 
emissions from sources in Texas and thus directly impact the ability of 
the State to achieve and maintain attainment of the NAAQS and to 
protect the health of the communities where these sources are located. 
Our proposal is based upon our interpretation of the Texas 
preconstruction permitting program which is outlined in each notice and 
accompanying technical support document (TSD). Those interested in any 
one of these actions are encouraged to review and comment on the other 
proposed actions as well.
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    \1\ In that proposed action, the submitted definition of BACT is 
not severable from the proposed action on the PSD SIP revision 
submittals. EPA may choose to take final action on the definition of 
BACT in the NSR SIP final action rather than in the final action on 
the Qualified Facilities and the General Definitions. EPA is 
obligated to take final action on the submitted definitions in the 
General Definitions for those identified as part of the Texas 
Qualified Facilities State Program, the Texas Flexible Permits State 
Program, Public Participation, Permit Renewals (there will be a 
proposed action published at a later date), and this BACT definition 
as part of the NSR SIP.
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    EPA intends to take final action on the State's Public 
Participation SIP revision submittals in November 2009. EPA intends to 
take final action on the submitted Texas Qualified Facilities State 
Program by March 31, 2010, the submitted Texas Flexible Permits State 
Program by June 30, 2010, and the NSR SIP on August 31, 2010. These 
dates are expected to be mandated under a Consent Decree (see, Notice 
of Proposed Consent Decree and Proposed Settlement Agreement, 74 FR 
38015, July 30, 2009).

III. What Has the State Submitted?

    This notice provides a summary of our evaluation of Texas' November 
29, 1994 SIP revision submittal, as revised by severable portions in 
the March 13, 1996, SIP revision submittal, and severable portions of 
the July 22, 1998 SIP revision submittal that repealed and replaced 
portions of, as well as revised, the 1994 submittal and repealed and 
replaced all of the 1996 submittal; and as revised by severable 
portions in the October 25, 1999, September 11, 2000, April 12, 2001, 
September 4, 2002, October 4, 2002, and September 25, 2003, SIP 
revision submittals. We provide our reasoning in general terms in this 
preamble, but provide a more detailed analysis in the TSD that has been 
prepared for this proposed rulemaking. Because we are proposing to 
disapprove this submitted Program based on the inconsistencies and 
deficiencies discussed herein, we have not attempted to review and 
discuss all of the issues that would need to be addressed for approval 
of this submitted Program as a Major NSR SIP revision.
    On November 29, 1994, Texas submitted revisions adding a new 
Subchapter G--Flexible Permits, to 30 TAC Chapter 116--Control of Air 
Pollution by Permits for New Construction or Modification, adding a new 
30 TAC 116.13, Flexible Permit Definitions, to Subchapter A, 
Definitions, and a revision to Subchapter B, New Source Review Permits, 
Division 1, Permit Applications at 30 TAC 116.110(a), authorizing the 
use of a Flexible Permit for construction of any new facility and 
modification of any existing facility. Texas submitted on March 13, 
1996, a severable revision to Subchapter A, Definitions, in 30 TAC 
116.10, General Definitions, which included, among other things, a 
definition for ``modification of existing facility,'' at (F) in 30 TAC 
116.10 addressing modifications under Flexible Permits. On July 22, 
1998, Texas submitted severable revisions that included the repeal of 
the contents of the 1996 submittal and some of the contents of the 1994 
submittal. Among other things, the 1998 submittal included a new 30 TAC 
116.13, Flexible Permit Definitions, a new 30 TAC 116.10, General 
Definitions, ``modification of existing facility,'' at (9)(F), and a 
new 30 TAC 116.110 (a). In the September 4, 2002, SIP submittal, Texas 
submitted a redesignation of 30 TAC 116.10(9)(F) to 30 TAC 
116.10(11)(F). Texas submitted revisions to Subchapter G--Flexible 
Permits--in a severable portion of the July 22, 1998 SIP revision 
submittal, and more revisions to Subchapter G in SIP revision 
submittals on October 25, 1999; September 11, 2000; April 12, 2001; 
September 4, 2002; October 4, 2002; and September 25, 2003.
    Tables 1 and 2 below summarize the changes that are in the SIP 
revision submittals. A summary of EPA's evaluation of each section and 
the basis for this proposal is discussed in sections V, VI, and VII of 
this preamble. The TSD includes a detailed evaluation of the 
submittals.

                     Table 1--Summary of Each SIP Submittal That Is Affected by This Action
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                                             Date submitted   Date of state
           Title of SIP submittal                to EPA         adoption             Regulations affected
----------------------------------------------------------------------------------------------------------------
Flexible Permits...........................      11/29/1994      11/16/1994  Revision to 30 TAC 116.110.
                                                                             Adoption of New 30 TAC 116.13 and
                                                                              New Subchapter G, 30 TAC 116.710,
                                                                              116.711, 116.714, 116.715,
                                                                              116.716, 116.717, 116.718,
                                                                              116.720, 116.721, 116.722,
                                                                              115.730, 116.740, 116.750, and
                                                                              116.760.
Qualified Facilities and Modifications to         3/13/1996       2/14/1996  Revision of 30 TAC 116.10 to add
 Existing Facilities.                                                         new definition of ``modification
                                                                              of existing facility'' at (F).
NSR Rule Revisions; section 112(g) Rule           7/22/1998       6/17/1998  Repeal and new 30 TAC 116.10 (9)
 Review for Chapter 116.                                                      (F), 116.13 and 116.110(a)(3)
                                                                              adopted.
                                                                             Revisions to Subchapter G, 30 TAC
                                                                              116.710, 116.711, 116.714,
                                                                              116.715, 116.721, 116.730, and
                                                                              116.750.
Public Participation (HB 801)..............      10/25/1999        9/2/1999  Revision to Subchapter G, 30 TAC
                                                                              116.740.
Air Permits (SB-766)--Phase II.............       9/11/2000        8/9/2000  Revisions to Subchapter G, 30 TAC
                                                                              116.710, 116.715, 116.721,
                                                                              116.722, and 116.750.
Emissions Banking and Trading..............       4/12/2001        3/7/2001  Revisions to Subchapter G, 30 TAC
                                                                              116.711 and 116.715.
House Bill 3040: Shipyard Facilities and           9/4/2002       8/21/2002  Revision to 30 TAC 116.10,
 NSR Maintenance Emissions.                                                   redesignating 30 TAC 116.10(9)(F)
                                                                              to 116.10(11)(F).
                                                                             Revisions to Subchapter G, 30 TAC
                                                                              116.711 and 116.715.
Air Fees...................................       10/4/2002       9/25/2002  Revisions to Subchapter G, 30 TAC
                                                                              116.750.

[[Page 48484]]

 
Offset Certification, New Source Review           9/25/2003       8/20/2003  Revision to Subchapter G, 30 TAC
 Permitting Processes and Extensions for                                      116.715.
 Construction.
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                       Table 2--Summary of Each Regulation That Is Affected by This Action
----------------------------------------------------------------------------------------------------------------
                                                                         Date adopted
             Section                      Title         Date submitted     by state             Comments
----------------------------------------------------------------------------------------------------------------
              Chapter 116--Control of Air Pollution by Permits for New Construction or Modification
                                            Subchapter A--Definitions
----------------------------------------------------------------------------------------------------------------
Section 116.10(11)(F)............  General Definitions       3/13/1996       2/14/1996  Revised to add new
                                                                                         definition of
                                                                                         ``modification of
                                                                                         existing facility.''
                                                             7/22/1998       6/17/1998  Repealed and Adopted new
                                                                                         30 TAC 116.10(9)(F).
                                                             9/04/2002       8/21/2002  Redesignated 30 TAC
                                                                                         116.10(11(F).
Section 116.13...................  Flexible Permit          11/29/1994      11/16/1994  Initial Adoption.
                                    Definitions.
                                                             7/22/1998       6/17/1998  Repealed and Adopted new
                                                                                         30 TAC 116.13.
----------------------------------------------------------------------------------------------------------------
                                     Subchapter B--New Source Review Permits
                                         Division 1--Permit Application
----------------------------------------------------------------------------------------------------------------
Section 116.110..................  Applicability......      11/29/1994      11/16/1994  Revised (a) to add
                                                                                         reference to Flexible
                                                                                         Permits.
                                                             7/22/1998       6/17/1998  Repealed and adopted a
                                                                                         new 30 TAC 116.110.
                                                                                        Included reference to
                                                                                         Flexible Permits in new
                                                                                         30 TAC 116.110(a)(3).
----------------------------------------------------------------------------------------------------------------
                                         Subchapter G--Flexible Permits
----------------------------------------------------------------------------------------------------------------
Section 116.710..................  Applicability......      11/29/1994      11/16/1994  Initial adoption.
                                                             7/22/1998       6/17/1998  Revised subsection (a).
                                                        ..............  ..............  Removed subsection (b)
                                                                                         and
                                                        ..............  ..............  Redesignated existing
                                                                                         subsections (c)-(e) to
                                                                                         subsections (b)-(d).
                                                        ..............  ..............  Revised subsections (b)-
                                                                                         (d) as redesignated.
                                                             9/11/2000       8/09/2000  Revised subsection (b).
Section 116.711..................  Flexible Permit          11/29/1994      11/16/1994  Initial adoption.
                                    Application.
                                                             7/22/1998       6/17/1998  Revised introductory
                                                                                         paragraph and
                                                                                         paragraphs (1)-(5);
                                                        ..............  ..............  Added new paragraphs (6)
                                                                                         and (11):
                                                        ..............  ..............  Redesignated existing
                                                                                         paragraphs (6)-(9) to
                                                                                         paragraphs (7)-(10) and
                                                                                         existing paragraphs
                                                                                         (10)-(11) to paragraphs
                                                                                         (12)-(13); and
                                                        ..............  ..............  Revised paragraphs (8)-
                                                                                         (10) as redesignated.
                                                             4/12/2001       3/07/2001  Added new paragraph
                                                                                         (12); and
                                                                                        Redesignated existing
                                                                                         paragraphs (12)-(13) to
                                                                                         paragraphs (13)-(14).
                                                              9/4/2002       8/21/2002  Designated existing as
                                                                                         subsection (a);
                                                                                        Added new subsection
                                                                                         (b); and
                                                                                        Revised paragraphs
                                                                                         (a)(8)-(11) as
                                                                                         redesignated.
Section 116.714..................  Application Review       11/29/1994      11/16/1994  Initial adoption.
                                    Schedule.
                                                             7/22/1998       6/17/1998  Revised introductory
                                                                                         paragraph.
Section 116.715..................  General and Special      11/29/1994      11/16/1994  Initial adoption.
                                    Conditions.
                                                             7/22/1998       6/17/1998  Revised subsection (a),
                                                                                         and paragraphs (c)(3)-
                                                                                         (6), and (9)-(10).
                                                             9/11/2000        8/9/2000  Revised subsection (a).
                                                             4/12/2001        3/7/2001  Revised paragraph
                                                                                         (c)(3).
                                                              9/4/2002       8/21/2002  Revised paragraph
                                                                                         (c)(9).
                                                             9/25/2003       8/20/2003  Revised paragraphs
                                                                                         (c)(1) and (c)(9).
Section 116.716..................  Emission Caps and        11/29/1994      11/16/1994  Initial adoption.
                                    Individual
                                    Limitations.
Section 116.717..................  Implementation           11/29/1994      11/16/1994  Initial adoption.
                                    Schedule for
                                    Addition Controls.
Section 116.718..................  Significant              11/29/1994      11/16/1994  Initial adoption.
                                    Emission Increase.
Section 116.720..................  Limitation on            11/29/1994      11/16/1994  Initial adoption.
                                    Physical and
                                    Operational
                                    Changes.

[[Page 48485]]

 
Section 116.721..................  Amendments and           11/29/1994      11/16/1994  Initial adoption.
                                    Alterations.
                                                             7/22/1998       6/17/1998  Revised paragraphs
                                                                                         (b)(2) and (d)(1)-(2).
                                                             9/11/2000        8/9/2000  Revised subsection (d)
                                                                                         and paragraph (d)(1).
Section 116.722..................  Distance                 11/29/1994      11/16/1994  Initial adoption.
                                    Limitations.
                                                             9/11/2000        8/9/2000  Revised introductory
                                                                                         paragraph.
Section 116.730..................  Compliance History.      11/29/1994      11/16/1994  Initial adoption.
                                                             7/22/1998       6/17/1998  Revised introductory
                                                                                         paragraph.
Section 116.740..................  Public Notice and        11/29/1994      11/16/1994  Initial adoption.
                                    Comment.
                                                             7/22/1998       6/17/1998  Designated existing text
                                                                                         as subsection (a); and
                                                                                        Added new subsection
                                                                                         (b).
                                                            10/25/1999        9/2/1999  Revised subsections (a)-
                                                                                         (b).
Section 116.750..................  Flexible Permit Fee      11/29/1994      11/16/1994  Initial adoption.
                                                             7/22/1998       6/17/1998  Revised subsections (b)-
                                                                                         (d).
                                                             9/11/2000        8/9/2000  Revised subsection (d).
                                                             10/4/2002       9/25/2002  Revised subsections (b)-
                                                                                         (c).
Section 116.760..................  Flexible Permit          11/29/1994      11/16/1994  Initial adoption.
                                    Renewal.
----------------------------------------------------------------------------------------------------------------

IV. Is the Texas Flexible Permits State Program Submittal for a Major 
or Minor NSR SIP Revision?

A. Description of the Submitted Program

    This part of today's action describes the Program submitted by 
Texas to EPA for approval into the State's SIP. The submitted Program 
adds a new permit option under State law for any person who plans to 
construct any new facility or to engage in the modification of any 
existing facility, which may emit air contaminants into the air. See 
submitted 30 TAC 116.110(a)(3). Under the program submitted by Texas, 
any person planning the construction of a new facility or a 
modification to an existing facility may satisfy the conditions of 30 
TAC Subchapter G--Flexible Permits, rather than obtaining a NSR SIP 
case-by-case permit or satisfying the conditions for a minor NSR SIP 
Standard Permit or Permit by Rule.\2\ See submitted 30 TAC 
116.110(a)(3). The submitted Program is one component of Texas' current 
preconstruction permit program, but the Program is not a part of the 
federally approved Texas SIP.
---------------------------------------------------------------------------

    \2\ The Texas NSR SIP provides for three types of NSR permits 
for construction of new minor sources and for minor modifications of 
existing major stationary sources and minor sources: A case-by-case 
minor NSR SIP permit (30 TAC 116.110(a)(1)), satisfying the 
conditions for a minor NSR SIP standard permit (30 TAC 
116.110(a)(2)), and satisfying the conditions for a minor NSR SIP 
permit by rule (30 TAC 116.110(a)(4)). There are two types of 
permits available for minor modifications to existing permitted 
major stationary sources and minor facilities, a case-by-case minor 
NSR SIP permit amendment (30 TAC 116.110(b)) and 30 TAC 116.116(b)) 
and a minor NSR SIP permit by rule (30 TAC 116.116(d)). A case-by-
case minor NSR SIP permit alteration (30 TAC 116.116(c)) or a minor 
NSR SIP permit by rule (30 TAC 116.116(d)) are allowed for changes 
among which includes a decrease in allowable emissions. See SIP rule 
30 TAC 116.116(c)(1)(A) -(B) for the changes that may be authorized 
by a minor NSR SIP permit amendment/minor NSR SIP permit by rule. 
The SIP requires that any issued permit is subject for review every 
ten years after the date of issuance. See 30 TAC 116.311(c).
---------------------------------------------------------------------------

    Under the submitted Program, a Flexible Permit allows for 
flexibility in managing operations by staying under an overall emission 
cap or individual unit specific emission limitation. 30 TAC 116.716. 
Texas adopted the use of Flexible Permits for construction of new 
facilities, modifications of existing facilities, and grandfathered 
facilities.\3\ When Texas adopted its Program in 1994, the State did 
not have the statutory authority to impose controls on or require 
permits for grandfathered facilities. In particular, the State expected 
this new Program to provide a mechanism for placing controls on 
grandfathered refinery and petrochemical sites. The Program did result 
in grandfathered facilities voluntarily imposing emission controls and 
limiting their emissions using a Flexible Permit. However, the current 
regulatory structure does not fit neatly within the parameters of the 
Texas minor NSR SIP and the Texas major NSR SIP or within the Federal 
minor or major NSR SIP requirements.
---------------------------------------------------------------------------

    \3\ Grandfathered facilities are facilities that were once 
exempt from most State air permitting requirements because the 
facilities predated the 1971 Texas Clean Air Act that required 
preconstruction review and operating permits for construction of any 
new source and modification of any existing source that may emit air 
contaminants into the atmosphere of the State.
---------------------------------------------------------------------------

    The following discussion provides a summary of some of the specific 
components of Texas' Flexible Permits State Program. For more 
information about the Program, please see the SIP revisions submitted 
by Texas and the TSD for this proposed action, which are available in 
the docket for this action.
    Pursuant to the submitted Program, only one Flexible Permit may be 
issued at an account site.\4\ See submitted 30 TAC 116.710(a)(1). 
Therefore, a Flexible Permit cannot cover sources at more than one 
account site. See submitted 30 TAC 116.710(a)(4). A person may qualify 
for a Flexible Permit for construction of a new facility \5\ at the 
account site. 30 TAC 116.110(a)(3) and 30 TAC 116.710(a)(1). A person 
may qualify for a Flexible Permit for a modification of an existing 
facility at the account site. 30 TAC 116.110(a)(3) and 116.710(a)(1).
---------------------------------------------------------------------------

    \4\ ``Account'' for NSR purposes is defined at 30 TAC 101.1(1), 
second sentence, as ``any combination of sources under common 
ownership or control and located on one or more contiguous 
properties, or properties contiguous except for intervening roads, 
railroads, rights-of-way, waterways, or similar divisions.'' This 
definition is approved as part of the Texas SIP (March 30, 2005 (70 
FR 16129)).
    \5\ ``Facility'' is defined in the SIP approved 30 TAC 116.10(6) 
as ``a discrete or identifiable structure, device, item, equipment, 
or enclosure that constitutes or contains a stationary source, 
including appurtenances other than emission control equipment.''
---------------------------------------------------------------------------

    If a person has a Flexible Permit and wishes to make a change, he 
can obtain a minor or major NSR SIP case-by-case permit amendment 
(codified in the SIP at 30 TAC 116.116(b)) or qualify for a Flexible 
Permit amendment. See submitted 30 TAC 116.710(a)(2). In lieu of either 
of these two options, the holder of the Flexible Permit making the 
change may qualify for a minor NSR SIP permit by rule, codified in the 
SIP at 30 TAC 116.116(d).

[[Page 48486]]

    If a person does not have a Flexible Permit and wishes to make a 
change but have only the change covered under a Flexible Permit, he can 
obtain a minor or major NSR SIP case-by-case permit amendment or 
qualify for a Flexible Permit. In lieu of either of these two options, 
he may qualify for a minor NSR SIP permit by rule.
    If the holder of a Flexible Permit wishes to construct a new 
facility, he may qualify for a Flexible Permit amendment. See submitted 
30 TAC 116.710(a)(3). This is analogous to the minor and major NSR SIP 
process of using a minor NSR SIP Permit by Rule or a minor NSR SIP 
permit, for authorization to construct a new facility on the site. See 
footnote 1 for further explanation.
    Under the approved Texas NSR SIP, a change to an existing facility 
is defined as one that would cause a change in the method of control of 
emissions; a change in the character of the emissions; or an increase 
in the emission rate of any air contaminant. 30 TAC 116.116(b)(1). Such 
a change is required under the SIP to be authorized under a minor or 
major NSR SIP permit amendment or a minor NSR SIP permit by rule. 30 
TAC 116.116(b) and (d). If the change is a decrease in allowable 
emissions; or any change from a representation in an application, 
general condition, or special condition in a permit that does not cause 
a change in the method of control of emissions; a change in the 
character of emissions; or an increase in the emission rate of any air 
contaminant (30 TAC 116.116(c)(1)), the change must be authorized by a 
minor or major NSR SIP permit alteration or a minor NSR SIP permit by 
rule. 30 TAC 116.116(c) and (d). The submitted Program at 30 TAC 
116.721(a) has the same first two definitions for a change to an 
existing facility: one that would cause a change in the method of 
control of emissions; a change in the character of the emissions. It, 
however, has a different definition for the third type of change. 
Rather than the change being ``an increase in the emission rate,'' it 
is a change that is a ``significant increase in emissions.'' Submitted 
30 TAC 116.718 defines a ``significant increase in emissions.'' First, 
the increase in emissions must come from a facility with a Flexible 
Permit and second, there is no significant increase if the increase 
does not exceed either the emission cap or individual emission 
limitation.
    The submitted Subchapter G establishes an aggregated emission 
limit, based upon the application of minor NSR SIP BACT \6\ at expected 
maximum capacity (or the application of a more stringent required 
control) for each covered facility, i.e., an emission cap. The cap for 
a specific criteria pollutant includes each covered facility with its 
individually calculated emission rates. The total sum of the covered 
facilities' calculated emission rates is the emission cap. In other 
words, the emission cap is a limit on the potential to emit (PTE).
---------------------------------------------------------------------------

    \6\ Texas adopted a revised NSR State rule on July 27, 1972, to 
add the requirement that a proposed new facility and proposed 
modification utilize at least best available control technology 
(BACT), with consideration to the technical practicability and 
economical reasonableness of reducing or eliminating the emissions 
from the facility. EPA approved the revised 603.16 into the Texas 
SIP, presently codified in the Texas SIP at 30 TAC 116.111(a)(2)(C). 
For more information, please see the Federal Register published 
today concerning the Texas Qualified Facilities State Program and 
the General Definitions. The Federal definition for PSD BACT is part 
of the Texas SIP as codified in the SIP at 30 TAC 116.160(a). (This 
current SIP rule citation was adopted by the State on October 10, 
2001, and EPA approved this recodified SIP rule citation on July 22, 
2004 (69 FR 43752).) EPA approved the Texas PSD program SIP revision 
submittals, including the State's incorporation by reference of the 
Federal definition of BACT, in 1992. See proposal and final approval 
of the Texas PSD SIP at 54 FR 52823 (December 22, 1989) and 57 FR 
28093 (June 24, 1992). EPA specifically found that the SIP BACT 
requirement (now codified in the Texas SIP at 30 TAC 
116.111(a)(2)(C)) did not meet the Federal PSD BACT definition. To 
meet the PSD SIP Federal requirements, Texas chose to incorporate by 
reference, the Federal PSD BACT definition, and submit it for 
approval by EPA as part of the Texas PSD SIP. Upon EPA's approval of 
the Texas PSD SIP submittals, both EPA and Texas interpreted the SIP 
BACT provision now codified in the SIP at 30 TAC 116.111(a)(2)(C) as 
being a minor NSR SIP requirement for minor NSR permits.
---------------------------------------------------------------------------

    An emission cap established in a Flexible Permit enables the holder 
to operate facilities with less technical and administrative effort 
than would be required under the minor and major NSR SIP Permits, minor 
NSR SIP Standard Permits, and minor NSR SIP Permits by Rule, which 
impose unit-specific mass emission limits. See submitted 30 TAC 
116.716. Under the submitted 30 TAC 116.716(a), Texas may establish an 
emission cap for a specific pollutant by calculating the total 
emissions for all of the facilities covered by a Flexible Permit, using 
the application of minor NSR SIP BACT at expected maximum capacity for 
each covered facility. Nevertheless, where the existing control for a 
facility is more stringent than the application of minor NSR SIP BACT, 
e.g., NSPS, NESHAPS, control strategy rule, then that level of control 
for that facility is used in the calculation methodologies. See 
submitted 30 TAC 116.715(c)(9) and (10). Alternatively, Texas will set 
an individual emission limitation in the same Flexible Permit for each 
pollutant not covered by an emission cap for the covered facilities. 
See submitted 30 TAC 116.716(b). In some cases, a single unit may be 
required by a state or federal rule to meet an emissions limitation, 
which does not allow flexibility under the cap. In these cases, 
individual emission limitations are set. See submitted 30 TAC 
116.716(b), second sentence. Moreover, in the calculation methodologies 
for the cap and the individual emission limitations, an ``Insignificant 
Emissions Factor'' (of up to nine percent) may be included in the 
summation. See submitted 30 TAC 116.716(d).
    Under the submitted Program, a pollutant's cap must be readjusted 
downward if one of the facilities under the Flexible Permit shuts down 
for longer than 12 months. See submitted 30 TAC 116.716(c), first 
sentence. If a new facility is brought into the Flexible Permit, the 
cap must be readjusted to accommodate its calculated emission rates. 
See submitted 30 TAC 116.716(c), second sentence. The cap must be 
readjusted downward for any facility covered by a Flexible Permit if 
that facility becomes subject to any new State or Federal regulation. 
See submitted 30 TAC 116.716(e), first sentence. A readjustment of the 
cap required by any new State or Federal regulation must be made either 
at the time the Flexible Permit is amended or altered. 30 TAC 
116.716(e), second sentence. If an amendment to a Flexible Permit is 
not required to meet the new regulation, the permittee must submit a 
request for a permit alteration within sixty days of making the change, 
describing how compliance with the new requirement will be 
demonstrated. See submitted 30 TAC 116.716(e), third sentence.
    Under submitted 30 TAC 116.717, a Flexible Permit may include an 
implementation schedule for the installation of additional controls to 
meet an emissions cap for a pollutant. Submitted 30 TAC 116.715(c)(8) 
provides that if a schedule to install additional controls is included 
in the Flexible Permit and a facility subject to such a schedule is 
taken out of service, the emission cap contained in the Flexible Permit 
will be readjusted downward for the period the unit is out of service. 
Unless a special provision in the Flexible Permit specifies the method 
of readjustment of the emission cap, the facility must obtain a permit 
amendment.

B. Is the Submitted Program Clearly a Minor NSR SIP Revision?

    Our evaluation of Texas' submitted SIP revisions is guided by 
whether the

[[Page 48487]]

submitted Flexible Permits State Program applies to major NSR or minor 
NSR, or both. In correspondence and other materials, Texas has 
expressed an intent that its submitted Flexible Permits State Program 
applies only to construction of minor sources, existing grandfathered 
sources, and to minor modifications. See e.g., 19 Tex. Reg. 7336 
(September 20, 1994), 19 Tex. Reg 9366 (November 25, 1994), the Texas 
Clean Air Act (TCAA) Section 382.003(9), introductory paragraph and 
(A)-(G), January 2001 ``Flexible Permit Application Guidance'' by the 
Air Permits Division of the TCEQ (see in particular, NOTE on page 4), 
Interoffice Memorandum dated December 31, 1998, from Victoria Hsu, 
P.E., Division Director, NSR Permits, to New Source Review (NSR) Permit 
Engineers, entitled ``Flexible Permits and the Plantwide Applicability 
Limit (PAL)'' (see in particular the last paragraph in ``Federal 
Enforceability Policy for Flexible Permits'', immediately preceding 
``Plantwide Applicability Limit (PAL),'' and Interoffice Memorandum 
dated March 17, 1999, from Johnny Vermillion, P.E., Technical 
Specialist, NSRPD Chemical Section and David Howell, P.E., Team Leader, 
NSRPD Core Section to NSRPD Permit Engineers, entitled ``Permit 
Renewals during Flexible Permit Reviews'' (see in particular the first 
sentence in the second paragraph). We find, however, that Texas State 
law and the regulatory text submitted by the State is inconsistent with 
this expressed intent.
    The Texas statutory definition for ``modification of existing 
facility'' at Section 382.003, Health and Safety Code, was revised by 
the legislature in 1995 to add, among other things, subsection (F) 
addressing modification of an existing facility through a Flexible 
Permit. It provides that increases in emissions are not modifications 
if they are authorized by a Flexible Permit. This statutory definition 
for ``modification of existing facility'' on its face, however, does 
not prohibit the use of a Flexible Permit for a major modification as 
defined by the CAA and EPA's major NSR SIP regulations. It has never 
been explicitly revised to prohibit major modifications. Furthermore, 
in contrast to the statutory prohibition against the use of a Permit by 
Rule for the construction of a major stationary source added in 1999, 
there are no statutory prohibitions against the use of a Flexible 
Permit for construction of a major stationary source. See TCAA section 
382.05196. Finally, Texas State law does not contain any explicit 
prohibition against using a Flexible Permit for major modifications, 
notwithstanding provisions prohibiting the use of an Exemption or 
Permit by Rule or a Standard Permit for major modifications, as added 
in 1999. See TCAA Section 382.057. There are no statutory provisions in 
the TCAA that clearly limit modifications under the submitted Program 
to minor sources and/or minor modifications and construction of new 
sources to minor sources and/or minor modifications.
    Similarly, the regulatory provisions submitted by Texas also do not 
prohibit the use of the submitted Program for construction of new major 
stationary sources and major modifications of existing major stationary 
sources and minor sources. The submitted rules do not limit the use of 
the submitted Program to minor NSR. For example, the title for the 
submitted Subchapter G is ``Flexible Permits,'' not ``Minor NSR 
Flexible Permits, and Flexible Permits for Grandfathered Facilities.'' 
The submitted Subchapter G does not contain any emissions limitations, 
applicability statement, or regulatory provision restricting the 
construction to minor sources and minor modifications as do the Texas 
minor NSR SIP rules for Permits by Rule in Chapter 106 and Standard 
Permits in Chapter 116, Subchapter F. Moreover, unlike the minor NSR 
SIP rules for Standard Permits in 30 TAC 116.610(b) and Permits by Rule 
in 30 TAC 106.4(a)(3) and (4), the submitted rules do not require that 
construction of a major stationary source or a major modification, as 
defined in the Major NSR SIP regulations, must meet the Major NSR 
permitting requirements.
    If Texas truly intends for the submitted Flexible Permits State 
Program to apply only to minor NSR, at a minimum Texas must amend 
Subchapter G to include additional provisions that clearly limit its 
applicability to minor NSR as it did in the Texas minor NSR SIP at 30 
TAC Chapter 106 for Permits by Rule and 30 TAC Chapter 116 Subchapter F 
for Standard Permits.
    Without a clear statement of the applicability of the Program, the 
Program as submitted is confusing to the public, regulated sources, 
government entities, or a court, because it can be interpreted as an 
alternative to evaluating the new source or modification as a new major 
stationary source or major modification under Major NSR. The submitted 
Program fails to limit clearly the use of it to only the Texas minor 
NSR SIP requirements. Because of the overly broad nature of the 
regulatory language in the State's SIP revision submittal and the lack 
of any Texas statutory prohibitions, we propose to find that the State 
has failed to limit the submitted Program only to minor NSR.
    Consequently, we are compelled to evaluate this submitted Program 
as being a substitute for the Texas Major NSR SIP. Accordingly, as 
discussed below in Section V, we evaluated whether the submitted 
Program meets the requirements for a Major NSR SIP revision, the 
general requirements for regulating construction of any stationary 
sources contained in Section 110(a)(2)(C) of the CAA, and the 
applicable statutory and regulatory requirements for an approvable SIP 
revision. Below is a summary of our evaluation of the submitted Program 
as a Substitute Major NSR SIP revision submittal. Section VI contains a 
summary of our evaluation of the submitted Program as a Minor NSR SIP 
revision submittal.

V. What Is EPA's Evaluation of the Submitted Texas Flexible Permits 
State Program as a Substitute Major NSR SIP Revision?

A. What Are the Requirements for EPA's Review of a Submitted Major NSR 
SIP Revision?

    Before EPA's 1980 revised Major NSR SIP regulations, 45 FR 52676 
(August 7, 1980), States were required to adopt and submit a Major NSR 
SIP revision where the State's provisions and definitions were 
identical to or individually more stringent than the Federal rules. 
Under EPA's 1980 revised Major NSR SIP regulations, States could submit 
provisions in a Major NSR SIP revision different from those in EPA's 
Major NSR rules, as long as the State provision was equivalent to a 
rule identified by EPA as appropriate for a ``different but 
equivalent'' State rule. If a State chose to submit definitions that 
were not verbatim to the Federal definitions, the State was required to 
demonstrate any different definition has the effect of being as least 
as stringent. (Emphasis added.) See 45 FR 52676, at 52687. The 
demonstration requirement was expanded to explicitly include not just 
different definitions but also different programs in the EPA's revised 
Major NSR regulations, as promulgated on December 31, 2002 (67 FR 
80186) and reconsidered with minor changes on November 7, 2003 (68 FR 
63021). Therefore, to be approved as meeting the 2002 revised Major NSR 
SIP requirements, a State submitting a customized Major NSR SIP 
revision must demonstrate why its program and definitions are in fact 
at least as stringent as the Major NSR revised base

[[Page 48488]]

program. (Emphasis added). See 67 FR 80186, at 80241.
    Moreover, because there is an existing Texas Major NSR SIP, the 
submitted Program must meet the anti-backsliding provisions of the Act 
in section 193 and meet the requirements in section 110(l) where EPA 
may not approve a SIP revision if it will interfere with any applicable 
requirement concerning attainment and reasonable further progress or 
any other applicable requirement of the Act. Furthermore, any submitted 
SIP revision must meet the applicable SIP regulatory requirements and 
the requirements for SIP elements in section 110 of the Act, and be 
consistent applicable statutory and regulatory requirements as 
interpreted in EPA SIP policy and guidance. These can include, among 
other things, enforceability, compliance assurance, accountability, 
test methods, a program element's replicability, and whether the 
submitted rules are vague. There are four fundamental principles for 
the relationship between the SIP and any implementing instruments, 
e.g., Major NSR permits. These four principles as applied to the review 
of a major or minor NSR SIP revision include: (1) The baseline 
emissions from a permitted source be quantifiable; (2) the NSR program 
be enforceable by specifying clear, unambiguous, and measurable 
requirements, including a legal means for ensuring the sources are in 
compliance with the NSR program, and providing means to determine 
compliance; (3) the NSR program's measures be replicable by including 
sufficiently specific and objective provisions so that two independent 
entities applying the permit program's procedures would obtain the same 
result; and (4) the Major NSR permit program be accountable, including 
means to track emissions at sources resulting from the issuance of 
permits and permit amendments. See EPA's April 16, 1992, ``General 
Preamble for the Implementation of Title I of the Clean Air Act 
Amendments of 1990'' (57 FR 13498) (``General Preamble''). In 
particular, there is a specific discussion illustrating the principles 
and elements of SIPs that apply to sources in implementing a SIP's 
control strategies beginning on page 13567 of the General Preamble.

B. Does the Submitted Program Prohibit Circumvention of Major NSR?

    There is no express provision in the submitted Subchapter G similar 
to the Texas minor NSR SIP provisions for minor NSR SIP Permits by Rule 
and minor NSR SIP Standard Permits that prohibit circumvention of the 
Major NSR requirements. See 30 TAC 106.4(b) and 30 TAC 116.610(c). Both 
the SIP-codified Chapter 106, Subchapter A for Permits by Rule and the 
SIP-codified Chapter 116, Subchapter F for Standard Permits \7\ contain 
clear regulatory applicability requirements limiting their use to minor 
NSR, clear regulatory requirements prohibiting their use for any 
project that constitutes a new major stationary source or major 
modification subject to Major NSR, and clear regulatory provisions 
prohibiting the use of these minor NSR permits from circumventing Major 
NSR. There are no similar regulatory applicability requirements 
prohibiting the use for Major NSR, and no regulatory provisions 
prohibiting circumvention of Major NSR in the submitted Chapter 116, 
Subchapter G, for Flexible Permits.
---------------------------------------------------------------------------

    \7\ The Texas SIP does not include the State Pollution Control 
Project Standard Permit. In a separate action in today's Federal 
Register, EPA is proposing action upon this individual Standard 
Permit. Please see the proposal notice concerning the Texas NSR SIP 
submittals for PSD, NNSR for the 1997 8-hour ozone NAAQS, NSR 
Reform, and a Standard Permit. Those interested in this other action 
are encouraged to review and comment on it as well.
---------------------------------------------------------------------------

    There is no express provision clearly requiring that this submitted 
Program cannot be used to circumvent the requirements of major NSR. We 
are proposing to find that the State failed to demonstrate that the 
submitted Program prevents the circumvention of major NSR. Therefore, 
we are proposing to disapprove the Program as not meeting the major NSR 
SIP requirements to prevent circumvention of Major NSR.

C. Does the Submitted Program Meet the Major NSR Applicability 
Determination Criteria?

    Because there is no express provision in the TCAA and/or in the 
submitted Program clearly limiting this Program to minor NSR, and there 
is no explicit provision prohibiting circumvention of the Major NSR SIP 
requirements, we must evaluate the submitted Program with respect to 
the criteria for Major stationary source NSR applicability 
determinations. This includes the absence of a requirement to evaluate 
if a project triggers Major NSR pursuant to the applicability criteria 
of the applicable regulations.
    We do not find any provisions in the submitted Program that require 
a Major NSR applicability determination for the changes prior to 
construction and modification. The submitted Program's rules and 
definitions are not clear on their face that first one must determine 
the threshold question of whether the construction or change is a major 
stationary source or a major modification subject to Major NSR. The 
construction and modifications that would be authorized under the 
submitted Subchapter G can include new major stationary sources or 
major modifications. The change that could be a major modification or 
be a major stationary source could bypass the Major NSR SIP 
requirements, including the application of PSD BACT or NNSR LAER 
control requirements, in the absence of an express requirement to 
perform the Major NSR SIP applicability review.
    The submitted Program fails to require that the applicability of 
the Major NSR requirements be evaluated prior to considering whether 
the construction of a new source or making a change can be authorized 
under a Flexible Permit. We are proposing to find that the State failed 
to demonstrate that the Program requires an evaluation of Major source 
NSR applicability based on the currently approved SIP provisions or 
upon the current federal rules. Therefore, we are proposing to 
disapprove the Program as not meeting the Major NSR SIP requirements 
that require the Major NSR applicability requirements be met.

D. Does the Submitted Program Meet the CAA and Major NSR SIP 
Requirements for a Major Modification?

    In evaluating Major NSR SIP revision submittals impacting ``major 
modifications,'' that differ from EPA's, our review is primarily guided 
by section 111(a)(4) of the Act that describes when a ``source'' is to 
be considered modified: ``The term `modification' means any physical 
change in, or change in the method of operation of, a stationary source 
which increases the amount of any air pollutant emitted by such source 
or which results in the emission of any air pollutant not previously 
emitted.'' Texas did not submit any demonstration showing how its use 
of the definition ``modification'' was at least as stringent as the 
definition of ``modification'' in EPA's Major NSR SIP rules.
    In conducting our review, we particularly were mindful of the 
United States Court of Appeals for the District of Columbia Circuit 
regarding the scope and requirements of Section 111(a)(4) for 
determining whether a change is a ``major modification.'' See e.g., New 
York v. EPA, 413 F.3d 3 (D.C. Cir. 2005) (``New York I'') (evaluating 
EPA's 2002 revised major NSR rules and interpreting Section 111(a)(4)). 
As discussed below, there are a number of principles associated with 
Section 111(a)(4) that the Program appears to violate. Moreover, the 
State failed to

[[Page 48489]]

submit a demonstration showing how its use of ``modification'' is at 
least as stringent as the definition of ``modification'' in EPA's Major 
NSR SIP rules.
1. Does the Submitted Program require an evaluation of Emission 
Increases from the Major Stationary Source?
    As noted above, Section 111(a) (4) requires an evaluation of 
whether a project has resulted in an increase in emissions from ``such 
source.'' Under this requirement, an evaluation of whether a physical 
change has resulted in an emission increase must be evaluated based on 
whether the project resulted in an emission increase across the major 
stationary source, not by an evaluation of increases outside the major 
stationary source or a subset of units at the major stationary source. 
See Alabama Power v. Costle, 636 F.2d 323, 401-403 (D.C. Cir. 1980) 
(holding that Agency appropriately allowed consideration of emission 
increases across the stationary source); Asarco v. EPA, 578 F.2d 320 
(D.C. Cir. 1978) (holding that EPA inappropriately allowed a 
determination if a modification had occurred based on emission 
decreases from outside of the facility).\8\ We are concerned that the 
submitted Program in certain circumstances, may allow an emission 
increase to be avoided by taking into account emission decreases 
outside of the major stationary source and, in other circumstances, 
allow an evaluation of emissions of a subset of units at a major 
stationary source.
---------------------------------------------------------------------------

    \8\ While the court's analysis regarding the scope of what 
constitutes a source in these two cases was rejected by the Supreme 
Court in Chevron that decision did not call into question the 
holding that once the EPA has defined what constitutes a ``source'' 
(facility for Major Stationary Source) that this is the unit of 
analysis for applicability. See Chevron U.S.A. Inc. v. NRDC, 467 
U.S. 837 (1984).
    Given the plain language of Section 111, EPA agrees that the 
appropriate unit of analysis for determining if there is an emission 
increase is the ``source'' as section 111(a)(4) provides that a 
modification occurs if the project ``increases the amount * * * 
emitted by such source.''
---------------------------------------------------------------------------

    First, we are concerned that the submitted Program violates the 
requirements of the Act and the Major NSR SIP rules, because 
applicability can be determined based on decreases outside of the major 
stationary source. This submitted Program establishes an emissions cap 
over a group of one or more emissions points located at an ``account'' 
site. 30 TAC 101.1(1). In this way and as discussed above in B and C, 
the submitted Flexible Permits State Program allows facilities to avoid 
triggering Major NSR requirements. The Texas SIP defines an ``account'' 
to include an entire company site, which could include more than one 
plant and certainly more than one major stationary source. SIP rule 30 
TAC 101.1(1), second sentence. Accordingly, under a Flexible Permit, a 
single emissions limitation in the emission cap could apply to multiple 
major stationary sources,\9\ and if emissions remain below the 
emissions limitations in the emission cap, Major NSR preconstruction 
review is not triggered.
---------------------------------------------------------------------------

    \9\ The Federal regulations define a stationary source as, among 
other things, all of the pollutant emitting activities that belong 
to the same industrial grouping. An industrial grouping is defined 
based on the Standard Industrial Classification (SIC code). See, 
e.g. 40 CFR 51.166(b)(5) and (6). If a stationary source has the 
potential to emit or actually emits at certain specified levels then 
the stationary source is a ``major stationary source'' for purposes 
of major NSR applicability. See Id. at 166(b)(1). By not limiting an 
``account'' to pollutant-emitting activities within the same SIC 
code, an account can include pollutant-emitting activity that 
includes one or more major stationary sources. While under certain 
circumstances it may be appropriate to lump units/facilities from 
differing SIC codes into a single stationary source, this is 
generally based on an interdependence of the various units. Texas's 
rule does not require such interdependence.
---------------------------------------------------------------------------

    By allowing an emission cap to be established for an account, which 
can include multiple major stationary sources, the submitted SIP 
revisions may allow a major stationary source to net a significant 
emissions increase against a decrease occurring outside the major 
stationary source, from facilities on the account's site that are 
covered under the Flexible Permit. This approach is not consistent with 
the Court's findings in Alabama Power and Asarco, and it does not meet 
the CAA's definition of modification and the Major NSR SIP 
requirements.
    Second, we are concerned that the submitted Program may allow an 
emission increase to be determined based on an evaluation of a subset 
of facilities within a major stationary source. There are no regulatory 
provisions addressing how one meets the applicable major NSR netting 
requirements at a site when some of the units are under a Flexible 
Permit and others are not. Under the submitted Program, not all 
emission points, units, facilities, major stationary sources, minor 
modifications to an existing major stationary source, and so forth, at 
a site are required to be included in the site's Flexible Permit. The 
submitted regulations state, ``A person may obtain a flexible permit * 
* * for a facility, a group of facilities, or account * * *'' See 
submitted 30 TAC 116.710(a). Although such a requirement is not 
necessarily per se inconsistent with the CAA and EPA's Major NSR SIP 
requirements, we propose to find that the submitted Program lacks the 
necessary accountability and replicability required for an approvable 
SIP revision under the Act and EPA's interpretations of it, because the 
submitted regulations and the supporting record from the State fail to 
explain how physical and operational changes that occur under a 
Flexible Permit emission cap, which may cause emissions changes outside 
of the emission cap, are evaluated for Major NSR applicability. 
Likewise, the submitted regulations and supporting record fail to 
explain how physical or operational changes that occur outside an 
emission cap, that cause emissions changes within the emission cap, are 
evaluated for Major NSR applicability. In essence, neither the 
submitted regulations nor the supporting documentation from Texas 
explain how emissions increases are calculated (both the significant 
emissions increase from a project, and a significant net emissions 
increase over the contemporaneous period) for the entire major 
stationary source if the major stationary source is subject to two 
different permitting regulations, the Flexible Permit regulations and 
the Major NSR SIP regulations. As a result, the regulated community may 
apply these regulations inconsistently and in a way that fails to 
evaluate emissions changes at the entire major stationary source 
correctly as required by the Major NSR SIP regulations. This approach 
is not consistent with the Court's finding in Alabama Power, and it 
does not meet the CAA's definition of modification and the Major NSR 
SIP requirements.
    Therefore, we propose to find that the State has failed to 
demonstrate the approaches are consistent with the Court's findings in 
Alabama Power and Asarco, meet the Act, and include the necessary 
replicability and accountability for approval as a SIP revision. 
Therefore, we are proposing to disapprove the submitted Program as not 
meeting the Major NSR SIP requirements that require an evaluation of 
emission increases from the major stationary source.
2. Does the Submitted Program require the Use of Actual Emissions, 
rather than Allowables?
    Under Section 111(a)(4) of the Act since the 1977 CAA Amendments, a 
comparison of existing actual emissions before the change and projected 
actual (or potential emissions) after the change in question is 
required. See New York I at 38-40. Therefore, to determine whether a 
change at a unit will be subject to Major NSR requires an evaluation 
that, after netting, an actual

[[Page 48490]]

to projected actual test or an actual to potential emissions test (or 
alternatively a PAL based on actual emissions) be used. See 40 CFR 
51.165(f) and 51.166(w). EPA lacks the authority to approve any 
submitted Program that does not meet this statutory requirement. We 
therefore are proposing disapproval because the submitted Program would 
authorize existing allowable, rather than actual emissions to be used 
to determine applicability in violation of the Act and the Major NSR 
SIP requirements.
    Our concerns arise because the submitted Program fails to show how 
the Flexible Permit program procedures, which use expected maximum 
capacity as a component in establishing the level of control for each 
covered facility's emission limit, assure that a Flexible Permit's 
emission cap is set at a level that is equivalent to or more stringent 
than one based on existing actual emissions. As discussed previously in 
section IV. A, the cap is essentially a combined PTE for the emissions 
units covered by the cap. Subchapter G establishes an aggregated 
emission limit, based upon the application of minor NSR SIP BACT at 
expected maximum capacity (or the application of the required control 
that is more stringent than minor NSR SIP BACT; see submitted 30 TAC 
116.711(3)) for each covered facility, i.e., an emission cap. This 
means the cap is set at a level not based on actual emissions. 
Additionally, there is nothing in the submitted Program that prevents a 
proposed change at a major stationary source with a Flexible Permit to 
use allowable, rather than actual emissions, as a baseline to calculate 
the project's proposed emissions increase. Thereby the change could 
circumvent the major modification applicability requirements under the 
Major NSR rules, rules that are based upon using actual emissions to 
calculate baseline emissions.
    We propose to find that the State's procedures for establishing a 
Flexible Permit emission cap do not meet the CAA and EPA's Major NSR 
SIP requirements that emissions increases from facility changes must be 
measured in terms of changes from existing baseline actual emissions 
and, rather than source-specific allowable emissions.

E. Does the Submitted Program Meet the Major NSR SIP Requirements for 
Enforceability?

    Any SIP revision to be approved must have adequate recordkeeping, 
reporting, testing, and monitoring requirements to assure there can be 
compliance with the submitted plan and to ensure the plan is 
enforceable, as well as to ensure each affected entity can be easily 
identified and there are means to determine its compliance. The more 
intricate a plan, the greater the need for detailed requirements. See 
New York I, 413 F.3d at 33-36 (remanding EPA's recordkeeping and 
reporting requirements since they did not provide adequate assurances 
that the Major Source NSR modification requirements were complied 
with). There is the CAA's requirement in section 110(a)(2)(A) that a 
SIP revision submittal must include enforceable emission limitations 
and control measures. There is further discussion in the General 
Preamble about EPA's interpretation of the Act's requirements for 
enforceability and that submitted rules must ``specify clear, 
unambiguous, and measurable requirements.'' 57 FR at 13567. The SIPs 
must contain means to track emission changes at sources and provide for 
corrective action if they do not achieve the emissions reductions. 
There must be legal means for ensuring compliance with the control 
measures. These principles are consistent with the required ability of 
both EPA and citizens to enforce against violations of both major and 
minor NSR SIP requirements because absent such requirements, compliance 
cannot be determined.
    We are concerned with the adequacy of the recordkeeping, reporting, 
tracking, and monitoring requirements in the submitted Program.\10\ 
This submitted Program is an intricate program and therefore, for 
approvability as a Major NSR SIP revision, there is a greater need for 
detailed recordkeeping, reporting, tracking, and monitoring 
requirements whether to ensure that a project triggering the Major NSR 
SIP requirements is covered under Major NSR or to ensure that there are 
adequate means for ensuring compliance of each affected entity. These 
are needed additionally to ensure that the issuance of the Flexible 
Permits does not cause or contribute to a NAAQS violation, violate PSD 
increments or the Texas control strategy, or violate any other CAA 
requirement. For example, due to the lack of a program requirement for 
records with detailed crosswalks and of tracking and reporting 
requirements, one cannot determine which grandfathered units on a site 
are covered or not by a Flexible Permit, or which pre-existing minor 
NSR permitted units are covered or not by a Flexible Permit, much less 
which permit terms, limits, and conditions are covered, are not 
covered, are retained, or not.
---------------------------------------------------------------------------

    \10\ EPA's letter of March 12, 2008, on pages 12 to 13 of the 
Enclosure provides some examples of, and concepts on how to 
establish replicable recordkeeping, reporting, tracking, and 
monitoring requirements up-front in a NSR program without requiring 
every director discretion decision to be adopted and submitted to 
EPA for approval as a source-specific SIP revision.
---------------------------------------------------------------------------

    A Texas Flexible Permit may apply to hundreds of dissimilar units. 
These covered emissions units can vary in size and type of operations 
as well as having widely different regulatory requirements and 
different applicable testing requirements. Yet for this submitted 
intricate Program, there are no program requirements for the tracking 
of existing SIP permits' major and minor NSR terms, limits, and 
conditions, and whether such requirements are incorporated into a 
Flexible Permit or they remain outside the coverage of the Flexible 
Permit. Minor and Major NSR SIP permits, as well as minor NSR SIP 
Permits by Rule and Standard Permits, can be incorporated into a 
Flexible Permit without any program requirement in place that ensures 
the SIP permits' terms, limits, and conditions are included in the 
Flexible Permit. There are no program requirements in the submitted 
intricate Program for specific recordkeeping and monitoring that 
ensures a holder of a Flexible Permit maintains sufficient records and 
performs sufficient monitoring such that each term, limitation, and 
condition in an existing SIP permit that is incorporated into the 
Flexible Permit and the rationale for removing any such term, 
limitation, or condition from the contents of the Flexible Permit is 
available.
    EPA therefore is proposing to disapprove this Program as a Major 
NSR SIP revision because it does not meet the Act's requirements for an 
enforceable program.

F. Does the Submitted Program meet the Major NSR SIP Public 
Participation Requirements?

    On November 26, 2008 (73 FR 72001), EPA proposed limited approval 
and limited disapproval of the Chapter 39 public participation rules, 
including 30 TAC 39.403(b)(8)(A) and (B) for Flexible Permits. 30 TAC 
39.403(b)(8)(A) and (B) formed the part of the basis for the proposed 
limited disapproval. See 73 FR 72008 and 72013. We intend to take final 
action on the Chapter 39 rules prior to final action on this submitted 
Program.
    In the November 2008 proposal, we also took no action on submitted 
30 TAC 116.740, Public Notice. This section is in the submitted 
Subchapter G and relates to the public participation requirements for 
the submitted SIP revisions for Flexible Permits. We

[[Page 48491]]

proposed no action in the November 2008 proposal on submitted 30 TAC 
116.740 because we were still reviewing the submitted Program, 
including 30 TAC 116.740. We stated in the November 2008 proposal that 
we would address the submitted 30 TAC 116.740 in a separate action on 
the submitted Texas Flexible Permits State Program.
    Today, we propose to address 30 TAC 116.740. Because this submitted 
rule relates to the public participation requirements of the submitted 
Program, this rule is not severable from the Program. Because we are 
proposing to disapprove the Program, we propose likewise to disapprove 
30 TAC 116.740, Public Notice, for the Program.

G. Does the Submitted Program Meet Section 110(l) of the Act for a 
Major NSR SIP Revision?

    Section 110(l) of the Act prohibits EPA from approving any revision 
of a SIP if the revision would interfere with any applicable 
requirement concerning attainment and reasonable further progress, or 
any other applicable requirement of the Act.
    The State did not provide any demonstration showing how the 
submitted SIP revision would not interfere with any applicable 
requirement concerning attainment and reasonable further progress, or 
any other CAA requirement.

H. What is EPA's Summary of whether the Submitted Program Meets the 
Requirements for a Substitute Major NSR SIP Revision?

    The submitted Program does not require that first one must 
determine whether a change is subject to major NSR and that actual 
emissions be used as the baseline for determining whether a change is 
subject to Major NSR. It does not prevent circumvention of the Major 
NSR SIP requirements. The submitted Program allows emission decreases 
from outside a major stationary source to count in complying with a cap 
in a Flexible Permit, as well as allowing emission decreases from 
within a subset of units within the major stationary source. Yet the 
submitted Program lacks any regulatory provisions ensuring that netting 
for Major NSR applicability purposes is conducted only within the major 
stationary source and across the entire major stationary source. The 
Program is an extremely complex permitting program that lacks 
specialized regulatory provisions that include monitoring, testing, 
recordkeeping, and reporting requirements specifically to ensure that 
compliance can be determined, and that triggering of Major NSR can be 
easily identified and applicable Major NSR requirements are met. The 
Program does not include any assurances that the NAAQS, control 
strategies, reasonable further progress, and the PSD increments will 
not be violated.
    These are requirements of the Act and EPA's Major NSR SIP 
requirements that the submitted Program does not meet. Furthermore, 
there is no information to determine whether the Program would not 
interfere with any applicable requirement concerning attainment and 
RFP, or any other requirement of the Act, thus violating section 110(l) 
of the Act. Consequently, EPA is proposing to find that the Program 
does not meet the requirements for a substitute Major NSR SIP revision.

VI. What is EPA's Evaluation of the Submitted Texas Flexible Permits 
State Program as a Minor NSR SIP Revision?

    We evaluated the submitted Program using the federal regulations 
under CAA section 110(a)(2)(C), which require each State to include a 
minor NSR program in its SIP. EPA regulations require that a plan 
include ``legally enforceable procedures that enable'' the permitting 
agency to determine whether a minor source will cause or contribute to 
violations of applicable portions of the control strategy, 40 CFR 
51.160(a)(1), or ``interference with a national ambient air quality 
standard,'' 40 CFR 51.160(a)(2), and to prevent the source from doing 
so. 40 CFR 51.160(b). The procedures must ``discuss the basis for 
determining which facilities will be subject to review,'' 40 CFR 
51.160(e), and ``discuss the air quality data and the dispersion or 
other air quality modeling used'' to assess a source. 40 CFR 51.160(f). 
Generally, SIPs must be enforceable (see section 110(a) of the Act) and 
must not relax existing SIP requirements (see section 110(l) of the 
Act). Additionally, we reviewed and compared the Program with any other 
applicable SIP statutory and regulatory requirement.

A. Is the Submitted Program Clearly a Minor NSR SIP Revision?

    There are no statutory and/or regulatory provisions that clearly 
prohibit the use of the Program for major stationary sources and major 
modifications. Nor are there any statutory and/or regulatory provisions 
clearly limiting the use of the Program to minor sources and/or minor 
modifications. There are no provisions that prohibit the use of the 
Program for construction of new major stationary sources and major 
modifications of existing major stationary sources and minor sources. 
There are no regulatory applicability requirements limiting use of the 
Program to minor NSR and no regulatory requirements prohibiting the 
using it for Major NSR, in the submitted Chapter 116, Subchapter G--
Flexible Permits. There is no express provision in the submitted 
Subchapter G requiring that this submitted Program cannot be used to 
circumvent the requirements of Major NSR. There are no statutory and/or 
regulatory provisions clearly prohibiting circumvention of Major NSR. 
The Program further fails to require that the applicability of the 
Major NSR requirements be evaluated prior to considering whether the 
construction of a new source or making a change can be authorized under 
a minor NSR Flexible Permit. The regulatory provisions in the submitted 
Program fail to require that first one must determine the threshold 
question of whether the construction or change is a major stationary 
source or a major modification subject to Major NSR, based upon an 
actual emissions baseline. See section V and the TSD for additional 
discussion and information.

B. Does the Submitted Program Meet the Minor NSR SIP Requirements for 
Establishing the Emission Cap?

    The submitted Program addresses how the cap is calculated. It, 
however, does not describe in sufficient detail the calculation 
methodologies and underlying technical analyses used to determine a 
cap. There are not specific, established, replicable procedures 
providing available means to determine independently, and for different 
scenarios, how the State will calculate a Flexible Permit's cap and/or 
individual emissions limitations for a company's site, plants on the 
site, major stationary sources on the site, a facility within a major 
stationary source on the site, facilities on the site, a group of units 
on the site, for one pollutant but not another, etc.
    While facilities are limited to one Flexible Permit per site 
account, applicants can choose which facilities to include under a 
Flexible Permit. To be approvable, the submitted Program must include 
legally enforceable procedures for ensuring that both the permit 
application and the State's permitting processes (i.e., the State's 
review, supporting technical information, the public notice and comment 
process, the record, and most importantly the structuring of each 
Flexible Permit in such a manner as to be clear) will clearly inform 
the public, other governmental agencies, or a court, which facilities 
are included under the permit and cap, and which are included

[[Page 48492]]

under the permit but subject to individual limitations.
    The submitted Program's legally enforceable procedures must ensure 
adequate enforcement of all applicable limitations for sources under an 
emission cap and for sources with individual emissions limits under a 
Flexible Permit. Since a Flexible Permit may contain an overall 
emission cap for all sources per pollutant, combination of multiple 
emission caps that cover groups of facilities, and/or individual 
emission limitations for individual facilities, the submitted Program 
also must contain enforceable procedures for determining what limits 
each facility is subject to, as well as enforcing each source's 
obligations regarding each limit applicable to that source, under the 
cap, multiple caps, and/or an individual limitation, for each pollutant 
in a Flexible Permit. Because applicants can choose to establish caps 
or individual emission limitations for just certain pollutants rather 
than for all pollutants emitted from the source(s) included in the 
Flexible Permit, the submitted Program also must contain legally 
enforceable procedures for determining both the cap and individual 
emissions limitations for each relevant pollutant for each source and 
address how sources or pollutants not included in the Flexible Permit 
will be regulated.
    Finally, applicants may choose to combine grandfathered, existing 
permitted, and newer facilities to maximize flexibility at the site in 
a Flexible Permit. This requires that the submitted Program must 
contain legally enforceable procedures to ensure that both the permit 
application and the State's permitting processes (i.e., the State's 
review, supporting technical information, the public notice and comment 
process, the record, and most importantly the structuring of each 
Flexible Permit in such a manner as to be clear) clearly identify each 
covered point of emissions, which existing permits and their types 
(e.g., minor NSR SIP permit, minor NSR standard permit) and which of 
their permitted terms, limits, conditions and representations in the 
permit application, are moved into the Flexible Permit. The legally 
enforceable procedures must also ensure it is clear which existing 
permits and their types and terms, limits, conditions and 
representations in the permit application, are not being moved into the 
Flexible Permit.
    In sum, the submittal lacks specific, established, replicable 
procedures providing available means to determine independently how the 
source or the State will calculate an emission cap, determine the 
coverage of a Flexible Permit, establish individual emissions 
limitations for each site, a facility on the site, a group of units on 
the site, or for one pollutant but not another. It also is not clear to 
EPA what the process is and how the emission cap is adjusted for the 
addition of new facilities. See submitted 30 TAC 116.716(c). 
Furthermore, the submitted regulations include a term, ``multiple 
emission caps,'' with an ambiguous meaning. See submitted 30 TAC 
116.715(b). It is not clear whether this term means multiple emission 
caps because there is one cap for each pollutant, or whether there can 
be more than one cap for one pollutant.

C. Does the Submitted Program Meet the Minor NSR SIP Enforcement 
Requirements?

    Section 110(a)(2)(A)--(C) of the Act requires that SIP revision 
submittals be enforceable. The September 23, 1987, Memorandum from J. 
Craig Potter, Assistant Administrator for Air and Radiation, and Thomas 
L. Adams Jr., Assistant Administrator for Enforcement and Compliance 
Monitoring, entitled ``Review of State Implementation Plans and 
Revisions for Enforceability and Legal Sufficiency'' provides EPA's 
guidance for interpreting this provision in the Act. See also the 
General Preamble. Submitted rules that are clearly worded, clear as to 
who must comply, and explicit in their applicability to regulated 
sources are appropriate means for achieving the statutory enforcement 
requirement. Specific, objective, and replicable criteria are to be set 
forth for determining whether this new type of NSR permit will be truly 
equivalent to the other minor NSR SIP permits in terms of being 
consistent with the levels specified in the control strategies, 
including air quality impacts, etc. Appropriate testing, recordkeeping, 
reporting, and monitoring provisions are necessary to establish how 
compliance will be determined and be sufficient to ensure that the 
NAAQS and PSD increments are protected.
    Under this Program as selected by Texas, there is an option to 
select which new facilities and/or new modifications to include under 
the umbrella of a Flexible Permit. Without the appropriate specialized 
MRR requirements, there is no way to determine for instance, which 
emission points are covered, which modifications of existing non-
covered emission points are covered, etc. Texas also chose to allow 
both a cap and an individual emission limitation to apply to selected 
units, or just the cap, or just the individual emission limitation. 
Without the appropriate MRR requirements, there is no way to determine 
if a covered unit is subject to the cap or an individual emission 
limitation, if a unit is subject to both the cap and a limitation, or 
whether a cap or a limitation applies at what time. Further, there can 
be existing units on the site not covered under the Flexible Permit cap 
that may be modified, and use the provisions of the Flexible Permit 
program for the modification. Without replicable implementation 
procedures for establishing the emission cap and sufficient monitoring, 
recordkeeping, and reporting requirements, EPA cannot find that the 
submitted Program, as a minor NSR SIP program, will ensure protection 
of the NAAQS, and noninterference with the Texas SIP control strategies 
and RFP.
    EPA proposes to find that the Program does not meet the 
requirements of section 110(a)(2)(A)-(C), which require that SIP 
revision submittals be enforceable.\11\ There are no specific up-front 
methodologies in the submitted Program to be able to determine 
compliance. Nor did EPA find the testing, recordkeeping, reporting, and 
monitoring provisions necessary to establish how compliance will be 
determined and to ensure that the NAAQS are protected. For example, the 
Program could allow hundreds of unrelated emission sources to be 
subject to one emission cap and/or individual emission limitations. Yet 
the submitted Program contains no time period for the cap (e.g., 
hourly, monthly, and/or annual limits such as rolling limits). 
Submitted 116.117(7) is an illustration of our concerns. It states that 
initial compliance testing with ongoing compliance by engineering 
calculations ``may be required.'' This means that under the Program, 
compliance testing may not be required at all and provides no guidance 
for when monitoring will be required.
---------------------------------------------------------------------------

    \11\ Section 116.117(2) of the submitted Program provides that 
emissions will be measured ``as determined by the executive 
director.'' This broad discretion lacks accountability, 
replicability and fails to provide for a full evaluation of the 
enforceability of permits issued under the Program.
---------------------------------------------------------------------------

    Emission units can vary in size and type or operation, as well as 
having widely different regulatory monitoring, and compliance 
requirements. Demonstrating compliance with a cap covering multiple 
emission points requires more detailed information than point-by-point 
compliance. To demonstrate compliance with a unit-by-unit emission 
limit, a source can often establish a parameter that if not met 
indicates the unit is out of compliance. For example, emissions from an 
incinerator may be shown to be in

[[Page 48493]]

compliance if the temperature stays above a certain level indicating 
thorough combustion. Under a cap program, it is necessary to know the 
actual emission rate from each unit so that the emission unit can be 
totaled to show compliance with the cap.
    The submitted Program lacks provisions explicitly addressing the 
type of monitoring requirements that are necessary to ensure that all 
of the movement of emissions between the emission points, units, 
facilities, plants, etc., still meet the cap for the pollutant, still 
meet the individual emissions limitations, and still meet any other 
applicable state or federal requirement. In addition, there are no 
limits on the types of sources that can be included in the cap. It is 
also difficult to quantify emissions from some units, such as tanks, 
fugitive emissions from leaking valves, or wastewater emissions points 
that can be included in a Flexible Permit under this Program.
    Because of the use of the Program to permit grandfathered 
facilities in the past and the continued use for new construction and 
modifications, as well as allowing a meticulous selection of which 
facilities and changes to include in a Flexible Permit, EPA is 
concerned with the enforceability of an emissions cap for each 
pollutant (combined with individual emissions limitations or not). Each 
pollutant's cap and individual emissions limitations may apply to a 
very large number of selective emission sources, with ongoing 
construction and modifications being selectively. Although the 
submitted Program requires the same monitoring, recordkeeping, 
reporting, and testing requirements at 30 TAC 116.711(2) and 
116.715(c)(4)--(6), as do the SIP rules codified in Subchapter B of 
Chapter 116, the underpinnings of the submitted Program are so complex 
that EPA believes that even for a minor NSR SIP program, there should 
be more detailed MRR requirements to ensure that the emission cap and/
or individual emissions limitations in the issued Flexible Permits are 
enforceable.
    Without specialized testing, monitoring, recordkeeping and 
reporting requirements, it is difficult for EPA, Texas or the public to 
determine which units are covered by a flexible permit, which 
modifications to non-covered units are covered by a flexible permit, 
whether a covered unit is subject to the emission cap or an individual 
emission limitation, whether a unit is subject to both the cap and a 
limitation, or whether a cap or a limitation applies and at what time.
    Finally, there are not sufficient provisions requiring the holder 
of a Flexible Permit to maintain recordkeeping sufficient to ensure 
that all terms and conditions of existing permits (including 
representations in the applications for such permits) that are 
incorporated into the Flexible Permit continue to be met. The submitted 
Program lacks adequate program requirements for the tracking of 
existing SIP permits' major and minor NSR terms, limits and conditions, 
and whether such requirements are incorporated into a Flexible Permit 
or they remain outside the coverage of the Flexible Permit. Minor and 
Major NSR permits, as well as minor NSR SIP Permits by Rule and 
Standard Permits, can be incorporated into a Flexible Permit without 
any program requirement in place that ensures the SIP permits' terms 
and conditions are included in the Flexible Permit.

D. Does the Submitted Program Meet the Minor NSR SIP Requirements for 
Revision of Existing Major NSR SIP Permits?

    We also are proposing to disapprove the submitted Program because 
it would allow holders of a Flexible Permit to make de facto amendments 
of existing SIP permits, including changes in the terms and conditions 
(such as throughput, fuel type, hours of operation) of minor and major 
NSR permits, without a preconstruction review by Texas. While we have 
recognized that under certain circumstances changes to PSD permits may 
be appropriate, such changes are generally not allowed without a review 
of the new circumstances by the permitting authority. As EPA has 
explained, any time a change to a permit limit founded in BACT is being 
considered, a corresponding reevaluation (or reopening) of the original 
BACT determination may be necessary. See, ``Request for Determination 
on Best Available Control Technology (BACT) Issues--Ogden Martin Tulsa 
Municipal Waste Incinerator Facility,'' from Gary McCutchen, Chief of 
OAQPS NSR Section (Nov. 19, 1987).

E. Does the Submitted Program Meet the Minor NSR SIP Public 
Participation Requirements?

    On November 26, 2008 (73 FR 72001), EPA proposed limited approval 
and limited disapproval of the Chapter 39 public participation rules, 
including 30 TAC 39.403(b)(8)(A) and (B) for Flexible Permits. 30 TAC 
39.403(b)(8)(A) and (B) formed a part of the basis for limited 
disapproval. We intend to take final action on the Chapter 39 rules 
prior to final action on this submitted Program.
    We also noted in the November 2008 proposal that Texas submitted 30 
TAC 116.740--Public Notice. This rule was submitted November 29, 1994, 
as part of the Texas Flexible Permits State Program under 30 TAC 
Chapter 116, Subchapter G. Revisions were submitted July 22, 1998; and 
October 25, 1999. This submitted rule provides that any person who 
applies for a Flexible Permit shall comply with the provisions in 
Chapter 39, which relates to Public Notice. In the November 2008 
proposal, we stated that we were reviewing the November 29, 1994, and 
July 22, 1998, submittals of 30 TAC 116.740 and would address these in 
a separate action. 73 FR 72015. We also indicated that we were taking 
no action on 30 TAC 116.740 as submitted October 24, 1999. 74 FR 72006.
    In the November 2008 proposal, we stated that we would address 30 
TAC 116.740 in a separate action. Because this new rule is not 
severable from the Texas Flexible Permits State Program, we are 
proposing to disapprove the submitted 30 TAC 116.740.

F. Does the Submitted Program Meet Section 110(l) of the Act for a 
Minor NSR SIP Revision?

    Section 110(l) of the Act prohibits EPA from approving any revision 
of a SIP if the revision would interfere with any applicable 
requirement concerning attainment and reasonable further progress, or 
any other applicable requirement of the Act.
    The State did not provide any demonstration showing how the 
submitted SIP revision would not interfere with any applicable 
requirement concerning attainment and reasonable further progress, or 
any other CAA requirement.

G. What is EPA's Summary of Whether the Submitted Program Meets the 
Requirements for a Minor NSR SIP Revision?

    The submitted Program is not clearly limited to minor NSR and does 
not prevent circumvention of the Major NSR SIP requirements. The 
submitted Program does not require that first one must determine 
whether a change is subject to Major NSR and actual emissions are used 
as a baseline for determining whether a change is subject to Major NSR. 
It fails to meet the enforceability requirements as a program or of an 
affected entity, and it cannot assure compliance with the program or of 
the affected entity. It is an extremely complex permitting program but 
lacks specialized regulatory provisions tailoring monitoring, testing, 
recordkeeping, and reporting

[[Page 48494]]

requirements specifically to ensure that compliance can be determined, 
enforcement can be taken, and that triggering of minor (and major) NSR 
is easily identified and that the preconstruction requirements of the 
Act are met. The Program lacks requirements necessary for enforcement 
and assurance of compliance. Moreover, it does not ensure that existing 
and future minor NSR SIP permits' terms and conditions are retained. 
The methodologies for establishing the caps in the Flexible Permits 
provide too much director discretion and lack replicable procedures. 
Overall, the submitted Program fails to include sufficient enforceable 
safeguards to ensure that the NAAQS and control strategies are 
protected. Furthermore, there is no information to determine whether 
the submitted Program is as stringent as the existing Texas minor NSR 
SIP, and whether the revisions would not violate the NAAQS, PSD 
increments, the State's control strategies, interfere with reasonable 
further progress, or otherwise meet any other requirement of the Act, 
thus violating section 110(l) of the Act. Therefore, we are proposing 
to find that the submitted Texas Flexible Permits State Program does 
not meet the requirements for a minor NSR SIP revision.

VII. Proposed Action

    EPA is proposing disapproval of the Texas Flexible Permits State 
Program submitted in a series of SIP revisions, identified in the 
Tables in section III of this preamble. These affected provisions are 
addressed in Texas' November 29, 1994, SIP revision submittal, as 
revised by severable portions in the March 13, 1996, SIP revision 
submittal, and severable portions of the July 22, 1998, SIP revision 
submittal that repealed and replaced portions of, as well as revised, 
the 1994 submittal and repealed and replaced all of the 1996 submittal; 
and as revised by severable portions in the October 25, 1999, September 
11, 2000, April 12, 2001, September 4, 2002, October 4, 2002, and 
September 25, 2003, SIP revision submittals.
    EPA is proposing disapproval of the submitted Texas Flexible 
Permits State Program, as a substitute Major NSR SIP revision, because 
it does not meet the Act and EPA's regulations and is not consistent 
with applicable statutory and regulatory requirements as interpreted in 
EPA guidance and policy. We also are proposing disapproval of the 
submitted Texas Flexible Permits State Program as a Minor NSR SIP 
revision because it does not meet the Act and EPA's regulations and is 
not consistent with applicable statutory and regulatory requirements as 
interpreted in EPA guidance and policy.
    We will accept comments on this proposal for the next 60 days. 
After review of public comment, we will take final action on the SIP 
revision submittals that are identified herein.
    EPA intends to take final action on the State's Public 
Participation SIP revision submittal in November 2009. EPA intends to 
take final action on the submitted Texas Qualified Facilities State 
Program by March 31, 2010, the submitted Texas Flexible Permits State 
Program by June 30, 2010, and the NSR SIP by August 31, 2010. These 
dates are expected to be mandated under a Consent Decree (see, Notice 
of Proposed Consent Decree and Proposed Settlement Agreement, 74 FR 
38015, July 30, 2009). Sources are reminded that they remain subject to 
the requirements of the Federally-approved Texas SIP and subject to 
potential enforcement for violations of the SIP (See EPA's Revised 
Guidance on Enforcement During Pending SIP Revisions, dated March 1, 
1991).

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the 
terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is 
therefore not subject to review under the Executive Order.

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., 
because this proposed SIP disapproval under section 110 and subchapter 
I, part D of the Clean Air Act will not in-and-of itself create any new 
information collection burdens but simply disapproves certain State 
requirements for inclusion into the SIP. Burden is defined at 5 CFR 
1320.3(b).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. For purposes of assessing the impacts of today's rule on 
small entities, small entity is defined as: (1) A small business as 
defined by the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    After considering the economic impacts of today's proposed rule on 
small entities, I certify that this action will not have a significant 
impact on a substantial number of small entities. This rule does not 
impose any requirements or create impacts on small entities. This 
proposed SIP disapproval under section 110 and subchapter I, part D of 
the Clean Air Act will not in-and-of itself create any new requirements 
but simply disapproves certain State requirements for inclusion into 
the SIP. Accordingly, it affords no opportunity for EPA to fashion for 
small entities less burdensome compliance or reporting requirements or 
timetables or exemptions from all or part of the rule. The fact that 
the Clean Air Act prescribes that various consequences (e.g., higher 
offset requirements) may or will flow from this disapproval does not 
mean that EPA either can or must conduct a regulatory flexibility 
analysis for this action. Therefore, this action will not have a 
significant economic impact on a substantial number of small entities.
    We continue to be interested in the potential impacts of this 
proposed rule on small entities and welcome comments on issues related 
to such impacts.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 
1531-1538 ``for State, local, or tribal governments or the private 
sector.'' EPA has determined that the proposed disapproval action does 
not include a Federal mandate that may result in estimated costs of 
$100 million or more to either State, local, or tribal governments in 
the aggregate, or to the private sector. This action proposes to 
disapprove pre-existing requirements under State or local law, and 
imposes no new requirements. Accordingly, no additional costs to State, 
local, or tribal governments, or to the private sector, result from 
this action.

[[Page 48495]]

E. Executive Order 13132, Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This action does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132, because it merely disapproves 
certain State requirements for inclusion into the SIP and does not 
alter the relationship or the distribution of power and 
responsibilities established in the Clean Air Act. Thus, Executive 
Order 13132 does not apply to this action.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    This action does not have tribal implications, as specified in 
Executive Order 13175 (59 FR 22951, November 9, 2000), because the SIP 
EPA is proposing to disapprove would not apply in Indian country 
located in the State, and EPA notes that it will not impose substantial 
direct costs on tribal governments or preempt tribal law. Thus, 
Executive Order 13175 does not apply to this action.

G. Executive Order 13045, Protection of Children From Environmental 
Health Risks and Safety Risks

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) 
as applying only to those regulatory actions that concern health or 
safety risks, such that the analysis required under section 5-501 of 
the Executive Order has the potential to influence the regulation. This 
action is not subject to Executive Order 13045 because it is not an 
economically significant regulatory action based on health or safety 
risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997). 
This proposed SIP disapproval under section 110 and subchapter I, part 
D of the Clean Air Act will not in-and-of itself create any new 
regulations but simply disapproves certain State requirements for 
inclusion into the SIP.

H. Executive Order 13211, Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This proposed rule is not subject to Executive Order 13211 (66 FR 
28355, May 22, 2001) because it is not a significant regulatory action 
under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 104-113, section 12(d) (15 
U.S.C. 272 note) directs EPA to use voluntary consensus standards in 
its regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. NTTAA directs EPA to 
provide Congress, through OMB, explanations when the Agency decides not 
to use available and applicable voluntary consensus standards.
    The EPA believes that this action is not subject to requirements of 
Section 12(d) of NTTAA because application of those requirements would 
be inconsistent with the Clean Air Act.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA lacks the discretionary authority to address environmental 
justice in this proposed action. In reviewing SIP submissions, EPA's 
role is to approve or disapprove state choices, based on the criteria 
of the Clean Air Act. Accordingly, this action merely proposes to 
disapprove certain State requirements for inclusion into the SIP under 
section 110 and subchapter I, part D of the Clean Air Act and will not 
in-and-of itself create any new requirements. Accordingly, it does not 
provide EPA with the discretionary authority to address, as 
appropriate, disproportionate human health or environmental effects, 
using practicable and legally permissible methods, under Executive 
Order 12898.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide, 
Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate 
matter, Reporting and recordkeeping requirements, Sulfur oxides, 
Volatile organic compounds.

    Authority:  42 U.S.C. 7401 et seq.

    Dated: September 8, 2009.
Lawrence E. Starfield,
Acting Regional Administrator, Region 6.
[FR Doc. E9-22808 Filed 9-22-09; 8:45 am]
BILLING CODE 6560-50-P


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