1 

TECHNICAL SUPPORT DOCUMENT 

30 TAC CHAPTER 101, SUBCHAPTER H, DIVISION 5 

System Cap Trading 

§§101.380, 101.382, 101.383, 101.385

 

November 18, 2010 

FOR FURTHER INFORMATION CONTACT: Ms. Adina Wiley, United States Environmental 

Protection Agency Region 6, Air Permits Section (6PD-R), 1445 Ross Avenue, Dallas, Texas 75202-

2733, (214) 665-2115. 
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Subject: Review of Revisions to the State Implementation Plan – Texas Administrative 

Code Title 30, Chapter 101, Subchapter H, Division 5 – System Cap Trading: 

§ 101.380 – Definitions 

§ 101.382 – Applicability 

§ 101.383 – General Provisions 

§ 101.385 – Recordkeeping and Reporting 

Contents: 

I. Executive Summary 

II. Summary of State Submittal 

III. Summary of the SCT Program 

IV. Technical Review of the SCT Program 

V. Conclusion 
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I. Executive Summary 

What actions are evaluated in this Technical Support Document?

This Technical Support Document (TSD) reviews portions of two revisions to the Texas State 

Implementation Plan (SIP) that involve the Texas System Cap Trading (SCT) Program. This 

review will determine if the original submission of the SCT Program and the subsequent 

amendments will improve air quality, comply with the Clean Air Act and EPA regulations, and 

be consistent with EPA’s policies. 

May 1, 2001

• On March 21, 2001, the Texas Natural Resource Conservation Commission (predecessor 

agency to the Texas Commission on Environmental Quality (TCEQ) and referred to as the 

TCEQ elsewhere in this document) adopted provisions creating the SCT Program at 30 TAC 

Sections 101.380, 101.382, 101.383, and 101.385 on March 21, 2001. The SCT Program 

establishes an emissions averaging program for system caps established in 30 TAC Chapter 

117. Governor Rick Perry submitted these provisions as a SIP revision in a letter dated May 

1, 2001, for rule project number 2000-046-101-AI. 

• On March 21, 2001, TCEQ also adopted revisions to Chapter 117 (Control of Air Pollution 

from Nitrogen Compounds) at 30 TAC sections 117.109, 117.110, and 117.139. These 

revisions were also submitted to EPA on May 1, 2001, as part of rule project number 2000-

046-101-AI. EPA has taken separate action on the Chapter 117 provisions; therefore this 

TSD will not review the 2001 Chapter 117 revisions (see 73 FR 73562 on December 3, 

2008). 

August 16, 2007

• On July 25, 2007, the TCEQ adopted revisions to the SCT program to address the 

recodification of the nitrogen oxide (NOX) rules at 30 TAC Chapter 117. The Chairman of 

the TCEQ, Ms. Kathleen Hartnett White, submitted these provisions as a SIP revision in a 

letter dated August 16, 2007, for rule project number 2006-053-101-PR. 

• At the same time that TCEQ adopted revisions to the SCT program on July 25, 2007, TCEQ 

also adopted revisions to the general air quality rules, the Emission Credit Banking and 

Trading Program (referred to as the Emission Reduction Credit (ERC) program), the Mass 

Emissions Cap and Trade (MECT) program, and the Discrete Emission Credit Banking and 

Trading Program (referred to as the Discrete Emission Reduction Credit (DERC) Program). 

These revisions were also submitted to EPA on August 16, 2007, as part of rule project 

number 2006-053-101-PR. EPA is taking separate action on the severable general air quality 

rules; therefore this TSD will not review the 2007 revisions to the general air quality rules. 

EPA has taken separate action to approve the ERC, MECT, and DERC program revisions; 

therefore this TSD will not further review or discuss these program revisions. See 75 FR 

27647 on May 15, 2010; 74 FR 34503 on July 16, 2009; and 75 FR 27644 on May 15, 2010, 

respectively. 
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II. Background of Texas Emissions Banking and Trading Programs 

What is Air Emissions Trading?

Air emissions trading programs are designed to promote flexibility and innovation in complying 

with State and Federal emission requirements. Air emissions trading programs create a 

marketplace for emission reductions implemented by source 1 and needed by source 2. For 

example, source 1 creates a marketable emissions reduction by reducing its emissions below the 

level it is required to meet, and below the level it has been meeting. Source 1 then sells or trades 

these reductions as credits to another source that is then allowed to release emissions above its 

required levels. In return for this flexibility, source 2 must purchase additional credits beyond 

those needed to comply, therefore reducing overall emissions. Emissions trading uses market 

forces to reduce the overall cost of compliance for sources, while maintaining emission 

reductions and environmental benefits. 

 

What is an Economic Incentive Program?

An EIP is a regulatory program that achieves an air quality objective by providing market-based 

incentives or information to emission sources. A uniform emission reduction requirement, based 

for instance on installation of a required emission control technology, does not take account of 

variations in processes, operations, and control costs across sources even of the same type, such 

as electric utilities, or petroleum refiners. By providing flexibility in how sources meet an 

emission reduction target, an EIP empowers sources to find the means that are most suitable and 

most cost-effective for their particular circumstances. 

 

In addition, an EIP can create incentives for sources to go beyond an emission reduction target. 

By setting a price on pollution and pollution reductions through a fee-based approach or a 

trading program, some sources can realize an economic gain or avoid additional costs by selling 

excess emission reductions, or making the reductions for less than the cost imposed by a fee. 

Because of the improved efficiency, EIPs may also lead to achieving air quality goals more 

quickly. 

What is the status of EIP programs in Texas?

TCEQ has adopted six EIP programs into state regulations. The regulations are found in 

Divisions 1 through 6 of 30 TAC Chapter 101, Subchapter H. The six EIP programs in Texas 

are summarized in Table II - 1. Additionally, TCEQ has adopted one federal trading program 

into state regulation, found in Division 7 of 30 TAC Chapter 101, Subchapter H.
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Table II – 1 

TCEQ EIP Trading Programs and Regional Applicability 

TCEQ 

Trading 

Program 

Geographical / Ozone Non-attainment Regions 

DFW HGB BPA El Paso East and 

Central Texas 

West Texas 

ERC Optional Optional Optional n/a n/a n/a 

EBTA n/a n/a n/a Mandatory Mandatory Mandatory 

MECT n/a Mandatory n/a n/a n/a n/a 

DERC Optional Optional Optional Optional Optional Optional 

SCT Optional Optional Optional n/a Optional n/a 

HECT n/a Mandatory n/a n/a n/a n/a 

CAIR Federally Mandated Trading Program 

Mandatory means that sources in the region must participate in the EIP program. 

Optional means that sources in the region have the option to participate in the EIP program. 

n/a - The EIP does not apply to the geographical region. 

DFW - Dallas Ft Worth ozone nonattainment area for both 1-hour and 8-hour ozone standard. 

HGB - Houston/Galveston/Brazoria ozone nonattainment area for both 1-hour and 8-hour ozone standard. 

BPA - Beaumont/Port Arthur ozone nonattainment area for both 1-hour and 8-hour ozone standard. 

El Paso - El Paso ozone nonattainment area for 1-hour ozone standard. El Paso is maintenance for 8-hour ozone standard. 

East and Central Texas - Those counties east of Interstate Highway 35. 

West Texas - Those counties west of the counties in the East and Central Texas area, excluding El Paso. 

The TCEQ EIP regulations are summarized below: 

1. Emission Credit Banking and Trading (ERCs) (30 TAC Chapter 101, Subchapter H, 

Division 1) 

The Emission Credit Banking and Trading EIP or Emission Reduction Credit (ERC) 

program for VOC and NOX in ozone nonattainment areas was first adopted by Texas at 

30 TAC § 101.29 on December 23, 1997. Effective January 18, 2001, § 101.29 was 

repealed and Chapter 101, Subchapter H, Divisions 1, 3, and 4 were created. This action 

created separate divisions for the ERC, MECT, and DERC programs. The submittal 

effective April 14, 2002, amended §101.302. The submittal effective January 17, 2003, 

completely reorganized the ERC and DERC program rules into more standardized 

formats parallel to each other, with a rule structure which followed a process of 

recognizing, quantifying, and certifying reductions as credits while explaining the 

guidelines for trading and using creditable reductions. The 2003 submittal amended 

§§101.300, 101.301, 101.302, 101.303, 101.304, 101.306, 101.309, and 101.311. The 

December 6, 2004, submittal amended §§101.300, 101.302, 101.303, 101.304, and 

101.311. Our final approval on September 6, 2006, acted on the original submission of 

the ERC program and all subsequent revisions through the December 6, 2004 submittal. 
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Division 1 defines emission credits (ECs) in terms of a rate (tons per year). Emission 

credits can be generated and banked from stationary sources as emission reduction credits 

(ERCs) or generated and banked from mobile sources as mobile emission reduction 

credits (MERCs). The ERCs from the bank have traditionally been used as offsets for 

permitting major new or modified facilities. ERCs have also been banked and traded for 

alternative compliance with Reasonably Available Control Technology (RACT) 

requirements. MERCs have not been banked or traded under the program to date. On 

December 6, 2004, TCEQ submitted revisions to the SIP that expanded the ERC program 

to cover reductions of criteria pollutants (excluding lead) or precursors of criteria 

pollutants for which an area is designated nonattainment. EPA published a final approval 

of the ERC program on September 6, 2006, 71 FR 52698. 

After EPA’s final approval on September 6, 2006, TCEQ revised the ERC program to 

address the commitments of the DERC conditional approval. Additionally, the TCEQ 

adopted revisions to the ERC program consistent with the requirements of Senate Bill 

784, adopted during regular session, 2005, of the 79th Texas Legislature. Senate Bill 784 

allows for greater flexibility in the generation and use of international emission 

reductions. These revisions were adopted by the TCEQ on October 4, 2006, and became 

effective on October 26, 2006. The adopted regulations were submitted to EPA as a SIP 

revision on October 24, 2006. TCEQ also promulgated revisions to the ERC program 

that update the cross-references to the new numbering structure in 30 TAC Chapter 117. 

These revisions were adopted on July 25, 2007, and became effective on August 16, 

2007. The adopted regulations were submitted to EPA as a SIP revision on August 16, 

2007. EPA fully approved the 2006 and 2007 revisions to the ERC program on April 30, 

2010. See 75 FR 27647, May 15, 2010. 

2. Emissions Banking and Trading of Allowances (EBTA) (30 TAC Chapter 101, 

Subchapter H, Division 2) 

The TCEQ created the EBTA Program to implement the requirements of Senate Bill (SB) 

7, from the 76th Legislature, 1999, which deregulated the electric utility industry. Under 

SB 7, TCEQ was required to develop a permitting system and a mass cap and trade 

system to distribute allowances for use by electric generating facilities. The TCEQ 

created the EBTA Program to establish an emission reduction cap which provides for a 

50% reduction in NOX emissions from EGFs and a 25 % reduction in SO2 emissions 

from solid fuel EGFs. The permitting system required under SB 7 and established at 30 

TAC Chapter 116, Subchapter I, is the subject of a separate rulemaking review and action 

by EPA (see Docket EPA-R06-OAR-2005-TX-0031). The EBTA program began 

operation in 2003. Allowances for NOX and SO2 are deposited into each EGFs 

compliance account annually. The EGFs will be allowed to purchase, bank or sell 

allowances to meet operational demands. The EBTA program is divided into three 

regions; East and West Texas as divided by Interstate Highway 35 and the El Paso region 

(consisting of El Paso County; Juarez, Mexico; and Sunland Park, New Mexico). 

The first SIP submittal to EPA on January 3, 2000, established the details of the emission 

trading program, including the establishment of the trading regions, the allowance 

allocation formula, and the banking provisions for unused allowances. This submittal 
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established new §§ 101.330-101.337 and was contained in rule log number 99033-101-

AI. The second SIP submittal (rule log number 1999-029B-116-AI) sent to EPA on 

September 9, 2001, amended the Allocation of Allowances at § 101.333. The third 

revision to the EBTA was submitted to EPA on July 15, 2002, and established new § 

101.338, which provided for the use of emission reductions from outside the United 

States to be used in lieu of EBTA allowances. Section 101.338 was added to the EBTA 

in response to SB 1561 which allows surplus emission reductions achieved outside the 

United States to satisfy emission reduction requirements in Texas by allowing reductions 

in one air contaminant to substitute for reductions in another criteria pollutant. This 

submittal was part of rule log number 2001-063-101-AI. The final revision to the EBTA 

was submitted to the EPA on October 24, 2006, for rule project number 2005-054-101-

PR. The 2006 amendments to the EPA repealed and replaced the international provisions 

in section 101.338 and created section 101.339 for program audits and reports. 

EPA approved the EBTA program through direct final action on November 16, 2010 (see 

75 FR 69884). 

3. Mass Emissions Cap and Trade (MECT) Program (30 TAC Chapter 101, Subchapter H, 

Division 3)

The MECT program was adopted as a State regulation on December 6, 2000. This 

program is mandatory for stationary facilities that emit NOX in the HGB ozone 

nonattainment area which are subject to emission specifications in the TCEQ NOX rules 

at 30 TAC Chapter 117.310, 117.1210, and 117.2010; and which are located as a site 

where they collectively have an uncontrolled design capacity to emit 10 tons per year or 

more of NOX. The program set a cap on NOX emissions beginning January 1, 2002, with 

a final reduction to the cap occurring in 2007. Facilities are required to meet NOX

allowances on an annual basis. Facilities may purchase, bank, or sell their allowances. 

The program has a provision to allow a facility to use credit generated through the 

Division 1 EIP (ERCs) to permanently increase the allowances for the individual facility 

in the MECT if the credits were generated for NOX in the HGB area before December 1, 

2000. The program also has a provision to allow a facility to use credits generated 

through the Division 4 EIP (DERCs) in lieu of allowances if they are generated in the 

HGB area. EPA published a final rule approving the MECT program (except for the use 

of DERCs in the MECT, which we deferred acting on until our action on the DERC rule) 

on November 14, 2001 (66 FR 57252). Texas subsequently revised the MECT program 

in SIP submittals dated January 31, 2003 and December 6, 2004. EPA published a final 

approval of the MECT program revisions on September 6, 2006 (71 FR 52698), 

including revisions to the MECT necessary to accomplish the shift in attainment strategy 

from 90 percent control of industrial NOX sources to 80 percent control in the HGB area. 

The approved revisions also approved the use of discrete emissions credits generated 

from stationary sources (DERCs) or mobile sources (MDERCs) in lieu of MECT 

allowances. Since our 2006 final approval, TCEQ has promulgated revisions to the 

MECT to update the cross-references to the Chapter 117 NOX rules. EPA subsequently 

approved the revisions to the MECT through a direct final action on July 16, 2009 (see 74 

FR 34503). 
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4. Discrete Emission Credit Banking and Trading (DERCs) (30 TAC Chapter 101, 

Subchapter H, Division 4) 

The DERC program was first adopted by the state at 30 TAC § 101.29 on December 23, 

1997. Effective January 18, 2001, § 101.29 was repealed and Chapter 101, Subchapter 

H, Divisions 1, 3, and 4 were created. This action created separate divisions for the ERC, 

MECT, and DERC programs. Discrete emission credits (DECs) are quantified, banked 

and traded in terms of mass (tons), not a rate as is the case with ECs. DECs may be 

generated from stationary sources and banked as discrete emission reduction credits 

(DERCs) or may be generated from mobile sources and banked as mobile discrete 

emission reduction credits (MDERCs). DECs may be generated and used statewide and 

can apply to all criteria pollutants, with the exception of lead. Traditionally DECs have 

been used for RACT compliance for VOCs and NOx. Amendments to the MECT 

program were adopted on October 18, 2001; these amendments also included changes 

made primarily for clarification to §§ 101.370, 101.372, and 101.373 in the DERC 

program. The DERC program was amended again effective April 14, 2002, to include 

the provisions in Texas Senate Bill 1561 for air emissions trading across international 

boundaries. The submittal effective January 17, 2003, completely reorganized the ERC 

and DERC program rules into more standardized formats parallel to each other, with a 

rule structure which followed a process of recognizing, quantifying, and certifying 

reductions as credits while explaining the guidelines for trading and using creditable 

reductions. The December 6, 2004 submittal amended §§ 101.370, 101.373, 101.374, 

and 101.376. Our final conditional approval on September 6, 2006, acted on the original 

submission of the DERC program and all subsequent revisions through the December 6, 

2004, submittal (71 FR 52703). Our conditional approval is contingent upon TCEQ 

satisfactorily addressing the terms of their September 8, 2005, commitment letter. 

After EPA’s final conditional approval on September 6, 2006, TCEQ revised the DERC 

program to address the commitments of the conditional approval. Additionally, the 

TCEQ adopted revisions to the DERC program consistent with the requirements of 

Senate Bill 784, adopted during regular session, 2005, of the 79th Texas Legislature. 

Senate Bill 784 allows for greater flexibility in the generation and use of international 

emission reductions. These revisions were adopted by the TCEQ on October 4, 2006, 

and became effective on October 26, 2006. The adopted regulations were submitted to 

EPA as a SIP revision on October 24, 2006. TCEQ also promulgated revisions to the 

DERC program that update the cross-references to the new numbering structure in 30 

TAC Chapter 117. These revisions were adopted on July 25, 2007, and became effective 

on August 16, 2007. The adopted regulations were submitted to EPA as a SIP revision 

on August 16, 2007. EPA fully approved the 2006 and 2007 revisions to the DERC 

program on April 30, 2010. See 75 FR 27644, May 18, 2010. 

5. System Cap Trading (SCT) (30 TAC Chapter 101, Subchapter H, Division 5) 

The TCEQ adopted system caps for electric generating facilities operating in the BPA, 

DFW, and HGB ozone nonattainment areas and the attainment counties of east and 

central Texas at 30 TAC § 117.138 on September 26, 2001, effective October 18, 2001. 
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EPA approved the system caps on November 14, 2001 (66 FR 57244). The System Cap 

Trading (SCT) program adopted by TCEQ on March 21, 2001, and submitted to EPA as 

a revision to the SIP in Rule Log Number 2000-046-101-AI, provides flexibility for the 

electric industry in achieving the NOX emissions reductions necessary to achieve ozone 

attainment in the BPA, DFW, and HGB ozone nonattainment area and the attainment 

counties of east and central Texas while maintaining reliability of service. Individual 

sources under common ownership or control may be voluntarily grouped together in a 

system with a system cap on total emissions from the sources in the system, established 

under 30 TAC Chapter 117 emissions limitations. Emission allowables may be 

transferred from source to source within the system, provided the cap is not exceeded. 

The SCT provides a mechanism that streamlines the steps necessary for daily emission 

trading by allowing the increase of system caps from corresponding system cap emission 

reductions in the same nonattainment or attainment area. The system cap may be 

increased daily using a daily surplus, or on a 30-day rolling average using a 30-day 

rolling average surplus for the same time period. TCEQ has promulgated revisions to the 

SCT program to update the cross-references to the Chapter 117 NOX rules. 

6. Highly-Reactive Volatile Organic Compound Emission Cap and Trade (HECT) Program 

(30 TAC Chapter 101, Subchapter H, Division 6)

The HECT program was adopted as a State regulation on December 1, 2004. This 

program is mandatory for covered facilities including vent gas streams, flares, and 

cooling tower heat exchange systems that emit highly-reactive VOCs, as defined in 

§ 115.10, and that are located at a site subject to Chapter 115, Subchapter H. Facilities 

are required to meet HRVOC allowances on an annual basis. Facilities may purchase, 

bank or sell their allowances for use in the following control period. The program has a 

provision to allow a facility to use credits of less-reactive VOCs generated through the 

Division 1 EIP (ERCs) in lieu of allowances if they are generated in the HGB area. EPA 

published final approval of the HECT program on September 6, 2006. (see 71 FR 52659) 

7. Clean Air Interstate Rule (CAIR) Program (30 TAC Chapter 101, Subchapter H, Division 

7) 

The Texas CAIR program was adopted as a State regulation on July 12, 2006, and 

submitted as a SIP revision on August 4, 2006. The Division 7 regulations incorporate 

by reference the CAIR NOX Annual and SO2 trading programs as adopted by EPA on 

May 12, 2005 (70 FR 25162). Additionally, the Texas CAIR program establishes a NOX

allocation methodology and provisions for the compliance supplement pool to replace the 

provisions at subpart EE of 40 CFR part 97, the CAIR Federal Implementation Plan. 

EPA published a direct final approval of the Texas CAIR NOX Abbreviated SIP for the 

Phase I allocation methodology on July 30, 2007 (72 FR 41453). TCEQ adopted 

revisions to the CAIR program on February 10, 2010, to update the NOX allocation 

methodology and the incorporation by reference dates for the NOX annual and SO2

trading programs. These revisions were submitted to EPA as a SIP revision on March 4, 

2010. 
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What has EPA considered in reviewing and evaluating the TCEQ EBTA EIP SIP submittal?

“Improving Air Quality with Economic Incentive Programs” (EPA-452/R-01-001, January 2001) 

is the EPA guidance document for reviewing and approving discretionary EIP submittals. The 

EIP Guidance applies to the establishment of a discretionary EIP for attaining or maintaining the 

national ambient air quality standards (NAAQS) for criteria pollutants. The EIP Guidance takes 

precedence over the discretionary EIP guidance provided in prior documents such as the 1994 

EIP (See 59 FR 16690; and 40 CFR part 51, subpart U) and the guidance in the emission trading 

policy statement (ETPS) (December 4, 1986, 51 FR 43813). The January 2001 EIP Guidance is 

the most recent statement of agency policy and it supersedes prior statements of agency policy. 

The above documents and other material considered will be included in the administrative record 

for the proposed rule.

What does EPA mean by guidance?

The EIP Guidance applies to discretionary EIPs, but it does not represent EPA’s final action 

regarding discretionary EIPs. Final action on any particular discretionary EIP, such as the EBTA 

Program, occurs when EPA has approved or disapproved the EIP submitted as a SIP revision. 

The EIP Guidance describes elements of various types of discretionary EIPs, and phrases these 

elements in the imperative– that is, using the terms “must” or “shall.” This is done only to 

signify that EPA would propose to approve a SIP submittal of a program containing the indicated 

elements on grounds that under section 110(l) of the Clean Air Act (CAA), the SIP revision does 

not interfere with any applicable requirement concerning attainment, reasonable further progress, 

or any other applicable requirement.

How will EPA act on an EIP SIP submittal?

Once an EIP SIP revision is submitted, EPA will take action through notice-and-comment 

rulemaking to determine if the statutory requirements have been met. Only action taken after the 

conclusion of that rulemaking would constitute final Agency action. EPA would take steps to 

expedite its proposed approval in the case of SIP revisions containing programs that contain the 

elements of the EIP guidance. 

If a program that does not contain the elements of the EIP guidance for the type of program that 

is submitted, EPA will still seek to determine whether the applicable CAA requirements were 

met, and if so EPA would approve the submission. EPA would make the determination through 

notice-and-comment rulemaking. 
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III. Summary of the System Cap Trading Program 

What is a System Cap Trading Program? 

The SCT Program provides an additional layer of flexibility to the currently SIP-approved 

system caps at 30 TAC Chapter 117. The Chapter 117 system caps are emission averaging 

programs. In Houston, the system caps are mandatory for EGUs and industrial sources. EGUs 

in BPA, DFW, and East/Central Texas have the option to participate in system caps. 

The Chapter 117 system cap program groups all sources with common ownership under one cap. 

For example, under the HGB EGU system cap, all EGUs owned by Reliant Energy would be 

under one system cap. Participation in the system cap is an all-or-nothing approach; either every 

unit with common ownership is included or none are. Within a given system cap, sources are 

allowed to average their emissions over a given time period. If the system cap is for 24-hours, 

then during a given 24-hour period unit A would increase while unit B decreases – the net result 

is that the emission increase and decrease average to no net increase. The emission averaging for 

the system caps must occur over the same time period and be within the same system cap. 

To provide additional flexibility to system cap participants, TCEQ developed the SCT program. 

In this program, system caps in the same nonattainment area or attainment area can trade surplus 

emission allowable. So, in HGB, if a source in the Reliant Energy system cap needs to increase 

but can find no offsetting decrease within its own system cap, the Reliant Energy unit can 

coordinate its increase with a contemporaneous decrease by a unit in the NRG system cap. 

The traded quantity in the SCT is called a surplus emission allowable – the difference between a 

source’s allowable emissions in the Chapter 117 system cap emission limit and the actual 

emissions. The SCT program also streamlined the reporting requirements for participating 

sources by only requiring notification to the TCEQ after the trades of surplus emission allowable 

between system caps were completed. 

The SCT Program has not been used by any source since the program was established in March 

2001. 
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IV. Technical Review of the SCT Program 

This technical review of the SCT program will review the two separate SIP submittals with 

respect to the SIP completeness requirements of 40 CFR Part 51 to determine whether each 

submittal satisfies the requirements for preparation, adoption, and submittal of a SIP revision. 

Then, recognizing that the two SIP submittals have built upon each other, this technical review 

will analyze the entirety of the SCT program, using the most current regulatory language for 

each section, with respect to the requirements of 40 CFR Part 51 and section 110(l) of the CAA. 

Finally, this holistic view of the SCT Program will be used to analyze the program in comparison 

to the EIP Guidance. 

These analyses produce a written evaluation that will be used to make a determination of 

whether or not the SCT Program submissions from May 1, 2001 and August 16, 2007 are in 

agreement with the CAA, other EPA policies, or guidance. 

A. Evaluation of the May 1, 2001 SIP Submittal with respect to the Part 51, Appendix V 

Completeness Determination 

B. Evaluation of the August 16, 2007 SIP Submittal with respect to the Part 51, Appendix V 

Completeness Determination 

C. Evaluation of the SCT Program with respect to 40 CFR Part 51 

D. Evaluation of the SCT Program with respect to the EIP Guidance 

E. Evaluation of the EBTA Program with respect to Section 110(l) of CAA
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IV.A. Evaluation of the May 1, 2001, SIP Submittal with respect to the Part 51, Appendix 

V Completeness Checklists 

The criteria for completeness determination is Appendix V to Part 51 - Criteria for determining 

the completeness of plan submissions and is outlined below: 

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a 

State implementation plan submitted for consideration by EPA is an official submission 

for purposes of review under § 51.103. 

1.1 The EPA shall return to the submitting official any plan or revision thereof which fails to 

meet the criteria set forth in this appendix V, and request corrective action, identifying 

the component(s) absent or insufficient to perform a review of the submitted plan. 

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the 

requirements of this appendix V within 60 days of EPA's receipt of the submittal, but no 

later than 6 months after the date which the State was required to submit the plan or 

revision. If a completeness determination is not made by 6 months from receipt of a 

submittal, the submittal shall be deemed complete by operation of law on the date 6 

months from receipt. A determination of completeness under this paragraph means that 

the submission is an official submission for purposes of § 51.103. 

The attached checklist outlines the basic criteria included under 2.1 and 2.2 of Appendix V. 

Section 2.3 of Appendix V describes the "parallel process procedure" which EPA had previously 

adopted to expedite the review of plans. This feature, however, is being deleted from the next 

revised CFR on completeness. Therefore, it is not included in the checklist. 
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SIP Completeness Checklist for the May 1, 2001 SIP Submittal

Rule Log No: 2000-046-101-AI 

When preparing a SIP revision request, the SIP reviewer should go through this list to help 

identify that the package submitted to EPA is complete. States can use the check list to assure 

SIP submittals meet Appendix V criteria. 

Administrative Materials (2.1) 

1. The package is sent with a formal submittal letter from the Governor or his or her 

designee requesting EPA's approval of the revision. 

The SIP revision was submitted by a letter from Governor Rick Perry dated May 1, 2001. 

2. Evidence is included that the State has adopted the revision in the State code or body of 

regulations, or that the State has issued the permit, order, consent agreement (hereafter 

document) in final form. This evidence would include the date of adoption or final 

issuance and the effective date of revision, if different from adoption/issuance date. 

The revisions were adopted by the Texas Natural Resource Conservation Commission on 

March 21, 2001, and became effective April 12, 2001. 

3. Evidence is included that the State has necessary legal authority under State law to adopt 

and implement the revision, e.g., a citation of the appropriate State authority. 

The authority for promulgating changes to the Texas State Implementation Plan, Chapter 

101, Subchapter H, Division 5, Sections 101.380, 101.382, 101.383, and 101.385 is found 

in Chapter 382 of the Texas Health and Safety Code. 

4. A copy is included of the actual regulation or document submitted for approval and 

incorporation by reference into the SIP including an indication of the changes made to the 

existing approved plan where applicable. The submittal shall be a copy of the official 

State regulation document signed, stamped, and dated by the appropriate State official 

indicating that it is fully enforceable by the State. The effective date of the regulation 

document shall, whenever possible, be indicated in the document itself. 

 

The May 1, 2001, submittal included a copy of the official State regulation document, 

signed, stamped, and dated by Robert J. Huston, Chairman of the Texas Natural 

Resource Conservation Commission. 

5. Evidence is included that the State followed all the procedural requirements of its laws 

and/or its constitution in the conducting and completing the adoption/issuance of the 

plan. 
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A certification signed by LaDonna Castanuela, Chief Clerk of the Texas Natural 

Resource Conservation Commission was included that demonstrated the SIP submittal 

was developed pursuant to 40 CFR § 51.104. 

6. Evidence is included that public notice was given of the proposed changes consistent 

with the procedures approved by EPA, including the date of publication of such notice, 

(e.g., notarized or certified copies of any public notices published in newspapers). (The 

notice should be at least 30 days prior to the public hearing(s). 

Notices of public hearing were published on November 22, 2000, in the Austin American 

Statesman and the Fort Worth Star-Telegram, and on November 26, 2000, in the San 

Antonio Express-News. Public hearings were held in Irving, Texas on January 3, 2001, 

and in Austin, Texas on January 4, 2001. 

7. A certification is included indicating that public hearing(s) was/were held in accordance 

with the information provided in the public notice(s) and the State's laws and 

constitution, if applicable. 

A certification signed by LaDonna Castanuela, Chief Clerk, Texas Natural Resource 

Conservation Commission was included. This certification states that the public hearing 

was held pursuant to 40 CFR § 51.102(a) and that notice of the hearing was given which 

conformed to 40 CFR § 51.102(d). 

8. A compilation of public comments and the State's response is included. 

The SIP submittal package did include a compilation of public comments and the State’s 

responses. Eight commenters submitted comments during the public comment period. 

Technical Support (2.2) 

The State should include the following technical information in its SIP revision request package. 

1. Identification of all regulated pollutants affected by the revision is included. 

This SIP revision regulates emissions of nitrogen oxides. However, §§ 101.380, 382, 

383, and 385 do not establish the requirements for NOx emissions. These limits are 

established in the revisions to Chapter 117 that are not being reviewed in this TSD. 

2. Identification of the locations of affected sources including the EPA 

attainment/nonattainment designation of the locations and the status of the attainment 

plan for the affected area(s) is included. 

 

Sources affected by this SIP revision are located in the Beaumont/Port Arthur, 

Dallas/Fort Worth, or Houston/Galveston/Brazoria nonattainment areas. Affected 

facilities can also be located in East and Central Texas. (§ 101.382) 
16 

3. Quantification of the changes in SIP allowable emissions from the affected sources is 

included. (Examples include estimates of changes in current actual emissions from 

affected sources and/or, where appropriate, quantification of changes in actual emissions 

from affected sources through calculations of the differences between certain baseline 

levels and allowable emissions anticipated if the revisions were approved.) 

§ 101.383 establishes how the system cap limits established in Chapter 117 can be 

exceeded using the Division 5 trading program. 

4. Demonstration is included that the NAAQS/PSD increments/RFP demonstration and 

visibility as applicable would be protected if the revision were approved and 

implemented. 

The system cap limits established in Chapter 117 (not under review in this TSD) provide 

the necessary protection. 

5. FOR REDESIGNATIONS: 

 a. Is there a fully approved maintenance plan for the primary ambient air quality 

standards for at least 10 years as required by § 175A of the Clean Air Act? 

 Not applicable. 

 b. Are contingency measures included? 

 Not applicable. 

6. Modeling information, if applicable, is required to support the propose revision. 

Not applicable. 

7. Evidence is included where necessary, that emission limitations are based on continuous 

emission reduction technology (e.g., add-on controls, industrial/process equipment 

designs, reformulated materials, etc.). 

Reporting requirements in § 101.385 do not specify how the emissions are calculated for 

compliance with the daily, 30-day, or annual cap. This specification is provided in 

Chapter 117 (not under review in this SIP). 

8. Evidence is included indicating that a SIP revision contains emission limitations, work 

practice standards, and recordkeeping/reporting requirements to ensure stated emission 

levels. 
17 

Section 101.385 specifies the recordkeeping and reporting requirements for the SCT 

Program. 

9. Compliance/enforcement strategies including how compliance will be determined in 

practice (including at what frequency). 

Compliance with the Division 5 SCT is based on the recordkeeping and reporting 

requirements in § 101.385. 

10. As appropriate, special economic and technological justifications are included per 

applicable EPA policies or an explanation why such justifications are not necessary 

should be included. For example, requests for alternative RACT may require such 

justification. 

 Not applicable to the Division 5 SCT. 

The SIP submittal of Rule Log No.: 2000-046-101-AI meets the completeness criteria. 
18 

IV.B. Evaluation of the August 16, 2007, SIP submittal with respect to the Part 51, 

Appendix V Completeness Checklist

Part 51, Appendix V Completeness Checklists 

The criteria for completeness determination is Appendix V to Part 51 - Criteria for determining 

the completeness of plan submissions and is outlined below: 

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a 

State implementation plan submitted for consideration by EPA is an official submission 

for purposes of review under § 51.103. 

1.1 The EPA shall return to the submitting official any plan or revision thereof which fails to 

meet the criteria set forth in this appendix V, and request corrective action, identifying 

the component(s) absent or insufficient to perform a review of the submitted plan. 

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the 

requirements of this appendix V within 60 days of EPA's receipt of the submittal, but no 

later than 6 months after the date which the State was required to submit the plan or 

revision. If a completeness determination is not made by 6 months from receipt of a 

submittal, the submittal shall be deemed complete by operation of law on the date 6 

months from receipt. A determination of completeness under this paragraph means that 

the submission is an official submission for purposes of § 51.103. 

The attached checklist outlines the basic criteria included under 2.1 and 2.2 of Appendix V. 

Section 2.3 of Appendix V describes the "parallel process procedure" which EPA had previously 

adopted to expedite the review of plans. This feature, however, is being deleted from the next 

revised CFR on completeness. Therefore, it is not included in the checklist. 
19 

SIP Completeness Checklist for the August 16, 2007 SIP Submittal

Rule Log No: 2006-053-101-PR

When preparing a SIP revision request, the SIP reviewer should go through this list to help 

identify that the package submitted to EPA is complete. States can use the check list to assure 

SIP submittals meet Appendix V criteria. 

Administrative Materials (2.1) 

1. The package is sent with a formal submittal letter from the Governor or his or her 

designee requesting EPA's approval of the revision. 

The SIP revision was submitted by a letter from Kathleen Hartnett White, Chairman of 

the Texas Commission on Environmental Quality, dated August 16, 2007. Governor Rick 

Perry designated that the Chairman of the Texas Commission on Environmental Quality 

would be his designee for SIP submittals in a letter dated May 21, 2002. 

2. Evidence is included that the State has adopted the revision in the State code or body of 

regulations, or that the State has issued the permit, order, consent agreement (hereafter 

document) in final form. This evidence would include the date of adoption or final 

issuance and the effective date of revision, if different from adoption/issuance date. 

The revisions were adopted by the Texas Commission on Environmental Quality on July 

25, 2007, and became effective August 10, 2007. 

3. Evidence is included that the State has necessary legal authority under State law to adopt 

and implement the revision, e.g., a citation of the appropriate State authority. 

The authority for promulgating changes to the Texas State Implementation Plan, Chapter 

101, Subchapter A – General Rules; Subchapter H – Emissions Banking and Trading is 

found in Chapter 382 of the Texas Health and Safety Code. 

4. A copy is included of the actual regulation or document submitted for approval and 

incorporation by reference into the SIP including an indication of the changes made to the 

existing approved plan where applicable. The submittal shall be a copy of the official 

State regulation document signed, stamped, and dated by the appropriate State official 

indicating that it is fully enforceable by the State. The effective date of the regulation 

document shall, whenever possible, be indicated in the document itself. 

 

The August 16, 2007, submittal included a copy of the official State regulation document, 

signed, stamped, and dated by Kathleen Hartnett White, Chairman of the Texas Natural 

Resource Conservation Commission. 
20 

5. Evidence is included that the State followed all the procedural requirements of its laws 

and/or its constitution in the conducting and completing the adoption/issuance of the 

plan. 

The authority for promulgating changes to the Texas State Implementation Plan is found 

in the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code. 

6. Evidence is included that public notice was given of the proposed changes consistent 

with the procedures approved by EPA, including the date of publication of such notice, 

(e.g., notarized or certified copies of any public notices published in newspapers). (The 

notice should be at least 30 days prior to the public hearing(s). 

Notices of public hearing were published on February 12, 2007, in the Austin American 

Statesman, the Fort Worth Star-Telegram, and the Houston Chronicle. 

7. A certification is included indicating that public hearing(s) was/were held in accordance 

with the information provided in the public notice(s) and the State's laws and 

constitution, if applicable. 

The order adopting the new, amended, and repealed sections to 30 TAC Chapter 101 

provided evidence that the public hearing was conducted pursuant to Texas Health and 

Safety Code § 382.017 and 40 CFR § 51.102. 

8. A compilation of public comments and the State's response is included. 

The SIP submittal package did include a compilation of public comments and the State’s 

responses. The TCEQ received written comments from EPA Region 6 and Michelle 

Bonilla, a public citizen with Eternal Springs Wellness. 

Technical Support (2.2) 

The State should include the following technical information in its SIP revision request package. 

1. Identification of all regulated pollutants affected by the revision is included. 

This SIP revision repeals an effective date established in Chapter 101, Subchapter A. 

This section has no applicable regulated pollutants. 

Chapter 101, Subchapter H, Division 1 (ERC Program) applies to criteria pollutants, 

and precursors, for which an area is designated nonattainment with the exception of 

lead. Chapter 101, Subchapter H, Division 3 (MECT Program) applies to NOX

emissions. Chapter 101, Subchapter H, Division 4 (DERC Program) applies to criteria 

pollutants, and precursors, with the exception of lead. Chapter 101, Subchapter H, 

Division 5 (SCT Program) applies to NOX emissions. However, the SIP revision under 

review does not change the applicability of these programs and therefore does not need 
21 

to restate the list of regulated pollutants that were submitted as part of the original SIP 

submittals establishing each program. 

2. Identification of the locations of affected sources including the EPA 

attainment/nonattainment designation of the locations and the status of the attainment 

plan for the affected area(s) is included. 

The revisions to Chapter 101, Subchapter A apply statewide. 

The revisions to the ERC program at Chapter 101, Subchapter H, Division 1 apply to all 

nonattainment areas statewide. 

The revisions to the MECT program at Chapter 101, Subchapter H, Division 3 apply only 

to facilities in the Houston/Galveston/Brazoria ozone nonattainment area. 

The revisions to the DERC program at Chapter 101, Subchapter H, Division 4 apply 

statewide. 

The revisions to the SCT program at Chapter 101, Subchapter H, Division 5 apply to 

nonattainment areas statewide and areas with unique emission limits established in 

Chapter 117. 

3. Quantification of the changes in SIP allowable emissions from the affected sources is 

included. (Examples include estimates of changes in current actual emissions from 

affected sources and/or, where appropriate, quantification of changes in actual emissions 

from affected sources through calculations of the differences between certain baseline 

levels and allowable emissions anticipated if the revisions were approved.) 

Quantification of the changes in SIP allowable emissions from the affected sources is not 

applicable to this SIP revision. 

4. Demonstration is included that the NAAQS/PSD increments/RFP demonstration and 

visibility as applicable would be protected if the revision were approved and 

implemented. 

The SIP submittal does not include revisions to the PSD and NSR permitting programs. 

5. FOR REDESIGNATIONS: 

 a. Is there a fully approved maintenance plan for the primary ambient air quality 

standards for at least 10 years as required by §175A of the Clean Air Act? 

 Not applicable. 

 b. Are contingency measures included? 

 Not applicable. 

7. Modeling information, if applicable, is required to support the propose revision. 
22 

Modeling information is not necessary to support the SIP revision. 

7. Evidence is included where necessary, that emission limitations are based on continuous 

emission reduction technology (e.g., add-on controls, industrial/process equipment 

designs, reformulated materials, etc.). 

Evidence of emission limitations based on CEM technology is not applicable. 

8. Evidence is included indicating that a SIP revision contains emission limitations, work 

practice standards, and recordkeeping/reporting requirements to ensure stated emission 

levels. 

Not applicable. Enforceability is determined on case-by-case basis in each individual 

permit. 

9. Compliance/enforcement strategies including how compliance will be determined in 

practice (including at what frequency). 

Not applicable. Determination of compliance is specified on case-by-case basis in each 

individual permit. 

10. As appropriate, special economic and technological justifications are included per 

applicable EPA policies or an explanation why such justifications are not necessary 

should be included. For example, requests for alternative RACT may require such 

justification. 

 These justifications are not necessary for this SIP revision. 

The SIP submittal of Rule Log No.: 2006-053-101-AI meets the completeness criteria. 
23 

IV.C. Evaluation of the SCT Program with respect to respect to 40 CFR 51 

Requirements for the preparation, adoption, and submittal of implementation plans can be found 

in 40 CFR Part 51. EPA is taking action on the entirety of the SCT program as submitted 

originally on May 1, 2001, and revised on August 16, 2007. Therefore, the evaluation of the 

applicability of the requirements in 40 CFR part 51 is conducted against the entirety of the 

program. This analysis is included in Table IV.C.1 below. 

The analysis of these two SIP submittals with respect to 40 CFR part 51 is specific to the SCT 

program. Because EPA has taken, or will take separate action, on the other, unrelated SIP 

revisions submitted at the same time as the SCT program amendments, we defer our analysis of 

the part 51 applicability to those specific rulemaking actions. 

Table IV.C.1: Analysis of the SCT and 40 CFR part 51 Requirements 

Part 51 – Requirements for Preparation, 

Adoption, and Submittal of Implementation 

Plans 

SCT Program Revisions 

30 TAC §§101.380, 101.382, 101.383, 101.385

Subpart A – Emission Inventory Reporting 

Requirements 

The SCT Program is a discretionary EIP for 

voluntary participation. The program does not affect 

the current TX SIP requirements for Emission 

Inventory Reporting. 

Emission reporting requirements specific to the SCT 

program are contained in 30 TAC § 101.385. 

Subparts B – E [Reserved] Not applicable. 

Subpart F – Procedural Requirements Subpart F – Procedural Requirements 

§ 51.100 Definitions § 51.100 is not applicable to the 2 SIP submittals 

under review in this TSD. 

§ 51.101 Stipulations § 51.101 is not applicable to the 2 SIP submittals 

under review in this TSD. 

§ 51.102 Public Hearings 

• States must conduct one or more public 

hearings 

• Public hearings will only be held after 

reasonable notice, given at least 30 days prior 

to the date of the hearing 

• The state must submit with the revision a 

certification that the hearing was held in 

accordance with this section 

• TCEQ held public hearings for each of the 2 

SIP submittals under review. 

• The public hearings were held after reasonable 

notice was given. TCEQ published notice of 

the public hearing widely-circulated 

newspapers. 

• TCEQ submitted a certification with each SIP 

submittal that the public hearings were held in 

accordance with § 51.102. 

• Section IV.A and B of this TSD for the Part 

51, Appendix V Completeness Checklist for 

each of the 2 SIP submittals. This checklist 

provides the names of the newspapers and 

dates on which notice of public hearings were 

provided, as well as the dates of each public 

hearing. 

§ 51.103 Submission of plans, preliminary review 

of plans 

• The state makes an official plan submission to 

Please see section IV.A and B of this TSD for the 

evaluation of the 2 SIP submittals with respect to 

the Part 51, Appendix V Checklist. 
24 

EPA only when the submission conforms to the 

requirements of Part 51, Appendix V. 

• The state delivers 5 copies of the plan with a 

letter giving notice of the action to the EPA 

regional office. 

The 2 SIP submissions meet the requirements for 

completeness. 

§ 51.104 Revisions 

• States may revise the plan from time to time 

• EPA will approve revisions only after 

appropriate public hearing requirements have 

been met 

• Revisions must be submitted in accordance 

with 51.103 

TCEQ originally submitted the SCT program on 

May 1, 2001, and submitted revisions to the SCT 

Program on August 16, 2007. These SIP revisions, 

as demonstrated previously in this table and section 

IV.A and B of this document, have satisfied the 

public hearing requirements of § 51.102 and the 

requirements of § 51.103. 

Subpart G – Control Strategy Subpart G – Control Strategy 

§ 51.110 Attainment and Maintenance of National 

Standards 

Requirements found in § 51.110 are not applicable 

to the 2 SIP submittals under review in this 

document. 

The SCT program does not create an attainment 

demonstration strategy for any area of Texas. The 

SCT Program provides compliance flexibility and 

does not generate reductions that can be applied 

towards attainment strategies. 

§ 51.111 Description of Control Measures Requirements found in § 51.110 are not applicable 

to the 2 SIP submittals under review in this 

document. The SCT program does not establish 

control strategies for Texas, but rather provides a 

layer of compliance flexibility to the SIP-approved 

Chapter 117 control strategies. 

§ 51.112 Demonstration of Adequacy Requirements found in § 51.112 are not applicable 

to the 2 SIP submittals under review in this 

document. Since the SCT program is not an integral 

piece of an attainment strategy, it is not necessary 

that the SCT program demonstrate adequacy for 

maintaining a national standard. 

§ 51.113 Reserved Not applicable. 

§ 51.114 Emissions Data and Projections Requirements found in § 51.114 are not applicable 

to the 2 SIP submittals under review in this 

document, that establish and revise the SCT 

program. The SCT Program is not an integral piece 

of attainment strategy and does not provide 

emission reductions that can be relied on for 

attainment. The SCT Program is a compliance 

flexibility program for the SIP-approved control 

strategies in Chapter 117. 

§ 51.115 Air Quality Data and Projections Requirements found in § 51.115 are not applicable 

to the 2 SIP submittals under review in this 

document, that establish and revise the SCT 

program. The SCT Program is not an integral piece 

of attainment strategy and does not provide 

emission reductions that can be relied on for 

attainment. The SCT Program is a compliance 

flexibility program for the SIP-approved control 

strategies in Chapter 117. The SCT Program 

therefore does not need to provide air quality data or 

projections for the attainment demonstration 

modeling. 
25 

§ 51.116 Data Availability 

The State must make available to the public all data 

and calculations used in the preparation of each plan 

or plan revision. 

Each plan must provide for public availability of 

emission data reported by source owners or 

operators. 

Requirements found in § 51.116 are applicable to 

the 2 SIP submittals establishing and revising the 

SCT program. 

The TCEQ provided the public the opportunity to 

participate in stakeholder meetings, in the 

rulemaking development process, and the public 

received comment periods on the proposed plan. 

The Texas Clean Air Act, Texas Health and Safety 

Code at Section 382.040 requires that all 

information submitted to the TCEQ for compliance 

purposes be made available to the public, unless a 

written request for nondisclosure is approved. 

§ 51.117 Additional provisions for lead Requirements found in § 51.117 are not applicable 

to the SIP submittal under review in this document. 

The SCT program only applies to emissions of 

NOx. 

§ 51.118 Stack Height Provisions Requirements found in § 51.118 are not applicable 

to the SIP submittal under review in this document. 

The SCT program is a discretionary trading 

program for sources participating in a Chapter 117 

system cap and does not revise or interact with the 

good engineering stack height provisions of 51.118. 

§ 51.119 Intermittent Control Systems Requirements found in § 51.119 are not applicable 

to the 2 SIP submittals under review in this 

document. The SCT program is a discretionary 

program for sources participating in a Chapter 117 

system cap and does not require intermittent control 

systems. 

§ 51.120 Requirements for State Implementation 

Plan Revisions relating to Motor Vehicles 

Requirements found in § 51.120 are not applicable 

to the SCT program. The SCT does not cover 

mobile sources. 

§ 51.121 Findings and requirements for submission 

of State Implementation Plan Revisions relating to 

emissions of oxides of nitrogen 

Requirements found in § 51.121 are not applicable 

to the 2 SIP submittals under review in this 

document. § 51.121 establishes the requirements 

for the NOX SIP Call; Texas was not subject to the 

NOX SIP Call. 

§ 51.122 Emissions reporting requirements for SIP 

revisions relating to budgets for NOX emissions. 

Requirements found in § 51.122 are not applicable 

to the 2 SIP submittals under review in this 

document. § 51.122 establishes the emission 

reporting requirements for the NOX SIP Call; Texas 

was not subject to the NOX SIP Call. 

§ 51.123 Findings and requirements for submission 

of State Implementation Plan Revisions relating to 

Emissions of Oxides of Nitrogen pursuant to the 

Clean Air Interstate Rule 

Requirements found in § 51.123 are not applicable 

to the 2 SIP submittals under review in this 

document. § 51.123 establishes the requirements 

for the NOX Annual and Ozone season programs for 

the Clean Air Interstate Rule (CAIR). 

§ 51.124 Findings and requirements for submission 

of State Implementation Plan Revisions relating to 

Emissions of Sulfur Dioxide pursuant to the Clean 

Air Interstate Rule 

Requirements found in § 51.124 are not applicable 

to the 2 SIP submittals under review in this 

document. § 51.124 establishes the program 

requirements for the CAIR SO2 Programs. 

§ 51.125 Emissions reporting requirements for SIP 

revisions relating to budgets for SO2 and NOX

emissions. 

Requirements found in § 51.125 are not applicable 

to the 2 SIP submittals under review in this 

document. § 51.125 establishes the emission 
26 

reporting requirements for the CAIR NOX and SO2

trading programs. 

Subpart H – Prevention of Air Pollution Emergency 

Episodes 

Requirements found in 51, Subpart H are not 

applicable to the 2 SIP submittals under review in 

this document. The SCT program is a discretionary 

program and is not part of the Texas air pollution 

emergency episode plan. 

Subpart I – Review of New Sources and 

Modifications 

Requirements found in 51, Subpart I are not 

applicable to the SCT program. The SCT program 

surplus emission allowables can only be used in the 

SCT program. 

Subpart J – Ambient Air Quality Surveillance Requirements found in 51, Subpart J are not 

applicable to the 2 SIP submittals under review in 

this document. Ambient air quality surveillance is 

not part of the SCT program. 

Subpart K – Source Surveillance Subpart K – Source Surveillance 

§ 51.210 Each plan must provide for monitoring the 

status of compliance with rules and regulations that 

set forth any portion of the control strategy. 

The Texas SCT program was developed and 

submitted in accordance with the Texas Health and 

Safety Code. Texas enforcement provisions are not 

typically in the State’s individual rules but are 

separately codified. Texas Water Code Chapter 7 

contains the State’s statutory provisions for 

enforcement of programs developed according to 

the Texas Health and Safety Code; i.e., the Texas 

ERC program. Section 382.111 of the Texas Health 

and Safety Code provides the ability to enter and 

periodically inspect stationary sources. Section 

382.021 establishes that the Texas Commission on 

Environmental Quality can determine the necessary 

sampling and detection methods used to 

demonstrate compliance with an emission 

limitation. 

§ 51.211 The plan must provide for legally 

enforceable procedures for requiring stationary 

sources to maintain records and report the following 

to the State: 

• Information on the nature and amount of 

emissions from the stationary source; and 

• Other information as necessary for the State to 

determine whether the sources are in 

compliance. 

§ 51.212 The plan must provide for periodic testing 

and inspection of stationary sources. Additionally, 

the plan must establish a system for detecting 

violations and include enforceable test methods. 

§ 51.213 The plan must contain procedures for 

obtaining and maintaining data on actual emissions 

reductions achieved as a result of implementing 

transportation control measures. 

§ 51.213 is not applicable to the SCT program 

because it does not cover mobile sources. 

§ 51.214 The plan must contain legally enforceable 

procedures to require stationary sources subject to 

emission standards as part of the applicable plan to 

install, calibrate, maintain, and operate continuous 

emission monitoring systems. 

The SCT Program is a compliance flexibility 

program. Participating sources must be part of a 

SIP-approved system cap under 30 TAC Chapter 

117. The legally enforceable requirements for 

emission standards, etc are included in Chapter 117. 

Subpart L – Legal Authority Subpart L – Legal Authority 

§ 51.230 Each plan must show that the State has the 

necessary legal authority to carry out the plan, 

including the authority to adopt emission standards 

and limitations necessary for attainment of the 

NAAQS, enforce applicable laws and regulations 

and seek injunctive relief. 

The SCT program was developed and submitted in 

accordance with the Texas Clean Air Act, Chapter 

382 of the Texas Health and Safety Code. The 

Texas Health and Safety Code and the enforcement 

provisions in the Texas Water Code provide TCEQ 

the necessary legal authority to implement the SIP. 

A more detailed discussion immediately follows this 

table. 

§ 51.231 The provision of law or regulation which 

the State determines provides the authorities 

required must be specifically identified and copies 

Texas identified in the 2 submittal packages that the 

SIP revision was developed in accordance with the 

Texas Health and Safety Code. EPA Region 6 does 
27 

must be submitted with the plan. not require the State to submit copies of laws and 

regulations that have been submitted for prior SIP 

submittals. 

§ 51.232 A state government agency other than the 

State air pollution control agency may be assigned 

responsibility for carrying out a portion of the plan. 

The 2 SIP revisions identified the TCEQ as the 

agency responsible for implementing the SIP. 

Subpart M – Intergovernmental Consultation 

Each plan must identify organizations by title that 

will participate in the development, implementation, 

and enforcement of the plan. 

The 2 SIP revisions identified the TCEQ as the 

agency responsible for developing, implementing, 

and enforcing the SIP. 

Subpart N – Compliance Schedule The SCT program establishes a compliance 

flexibility trading program for sources subject to the 

Chapter 117 system cap requirements. This 

program does not establish a compliance schedule 

for any NAAQS, and therefore does not need to 

address the requirements of 40 CFR part 51, subpart 

N. 

Subpart O – Miscellaneous Plan Content 

Requirements 

The 2 SIP revisions identified that no fiscal 

implications are anticipated for TCEQ or any other 

state/local government through the implementation 

of these rules. Additionally, it was estimated that 

the public benefit as a result of implementing these 

revisions would be a continued reduction in air 

contaminants. 

Subpart P – Protection of Visibility The SCT program is not submitted as part of 

Texas’s plan to protect visibility. 

Subpart Q – Reports The SCT program SIP revisions do not revise the 

existing reporting requirements for the emission 

inventory in the Texas SIP. EPA approved the 

emission inventory requirements at 30 TAC § 

101.10 on August 26, 1994 (59 FR 44036). 

Subpart R – Extensions Requirements found in 51, Subpart R are not 

applicable to the 2 SIP submittals under review in 

this document. The SCT program is not a request 

for an 18-month extension. 

Subpart S – Inspection/Maintenance Program 

Requirements 

Requirements found in 51, Subpart S are not 

applicable to the 2 SIP submittals under review in 

this document. The SCT program establishes a 

discretionary compliance flexibility economic 

incentive program and is not related to an 

inspection/maintenance program. 

Subpart T – Conformity to State or Federal 

Implementation Plans of Transportation Plans, 

Programs, and Projects Developed, Funded, or 

Approved Under Title 23 U.S.C or the Federal 

Transit Laws 

The SCT program is not applicable to mobile 

sources and therefore does not interfere with the 

transportation conformity budgets developed for 

each nonattainment and maintenance area pursuant 

to subpart T. 

Subpart U – Economic Incentive Programs 40 CFR part 51, subpart U establishes requirements 

for statutorily mandated economic incentive 

programs under sections 182(g)(3), 182(g)(5), 

187(d)(3), or 187(g) of the CAA. The SCT program 

is a discretionary economic incentive program, and 

therefore not subject to the requirements of subpart 

U. 
28 

Subpart W – Determining Conformity of General 

Federal Actions to State or Federal Implementation 

Plans 

The SCT program does not interfere with the 

requirements for general conformity in subpart W. 

Mobile sources cannot participate in the SCT 

program. 

Subpart X – Provisions for Implementation of 8-hr 

Ozone NAAQS 

Requirements found in 51, Subpart X are for the 

implementation of the 8-hour ozone NAAQS. The 

SCT Program is a compliance flexibility trading 

program that does operate in attainment and 

nonattainment areas, but the nature of the program 

does not establish any provisions for implementing 

the 8-hour ozone NAAQS. 

Subpart Y – Mitigation Requirements The SCT program does not create procedures by 

which Texas could exclude air quality data due to 

exceptional events. 

Subpart Z – Provisions for Implementation of 

PM2.5 National Ambient Air Quality Standards 

Requirements found in 51, Subpart X are for the 

implementation of the PM2.5 NAAQS. The SCT 

program revisions do not establish procedures for 

implementing the PM2.5 NAAQS. 

Does TCEQ have the necessary legal authority to implement the revisions to 30 TAC Sections 

101.380, 101.382, 101.383, and 101.385 as part of the SIP? 

Texas enforcement provisions are not typically in the State’s individual rules but are separately 

codified. Texas Water Code Chapter 7 contains the State’s statutory provisions for enforcement 

of the Texas SCT program. In particular, TWC § 7.051 provides for the assessment of 

administrative penalties by the TCEQ, and § 7.032 provides for injunctive relief by the TCEQ. 

The TCEQ enforcement rule at 30 TAC § 70.5 incorporates remedies found in the state statutes 

(Texas Water Code and the Texas Health and Safety Code), and permits referrals to EPA for 

civil, judicial or administrative action. It is our conclusion that TCEQ has adequate legal 

authority to enforce the SCT program revisions as part of the SIP. If we approve the revisions to 

the SCT program into the SIP, EPA will be able to enforce it under section 113 of the Clean Air 

Act. 

The 40 CFR part 70 / CAA Title V operating permits program and the 40 CFR part 63, National 

Emission Standards for Hazardous Air Pollutants (NESHAPs) have been reviewed and found to 

have sufficient enforcement provisions. These same enforcement provisions will apply to the 

SCT Program. The Office of the Attorney General of the State of Texas has provided written 

opinions for these programs (included in the docket for this rulemaking). The opinions state that 

TCEQ has the necessary legal authority to implement and enforce the programs. TCEQ has the 

authority to have reasonable requirements for measuring and monitoring air emissions and to 

require owners and operators of sources to make and maintain records of the emissions. 

The Office of the Attorney General of the State of Texas cited State laws and regulations that 

regulate, at a minimum, the same sources as the Clean Air Act and do so with standards that are 

no less stringent than those specified by the CAA. The cited laws and regulations are: Texas 

Health and Safety Code Ann. sections 382.016 (Monitoring Requirements, Examination of 

Records), 382.021 (Sampling Methods and Procedures), 382.0514 (Sampling, Monitoring and 
29 

Certification); 30 TAC sections 122.132 (Application and Required Information for Initial 

Permit Issuance, Reopening, Renewal, or General Operating Permits), 122.134 (Complete 

Application), 122.136 (Application Deficiencies), 122.142 (Permit Content Requirements), 

122.143 (General Terms and Conditions), 122.144 (Recordkeeping Terms and Conditions), 

122.145 (Reporting Terms and Conditions), 122.146 (Compliance Certification Terms and 

Conditions), 122.165 (Certification by Responsible Official); 30 TAC sections 101.8 (Sampling), 

101.9 (Sampling Ports). The opinions of the Texas Attorney General indicate that TCEQ has the 

necessary legal authority to implement and enforce the SCT program in accordance with the 

requirements of the Clean Air Act. 
30 

IV.D. Analysis of the SCT Program with respect to the EIP Guidance 

This portion of the SCT Program technical review consists of a section-by-section analysis of the 

EIP Guidance document and relevant CAA requirements, and the corresponding section(s) in the 

EBTA Program. 

 

The EIP guidance is divided into 16 chapters, which are categorized into four segments. 

The first segment, Selecting and Approving EIPs, consists of Chapter 1.0 (General), Chapter 2.0 

(Defining an EIP), and Chapter 3.0 (Selecting Your EIP Type). 

The second segment, Elements of All EIPs, consists of Chapter 4.0 (Fundamental Principles of 

All EIPs), Chapter 5.0 (Common Elements of All EIPs), Chapter 6.0 (Elements of All Trading 

EIPs), Chapter 7.0 (Elements of Specific Trading EIPs), Chapter 8.0 (Elements of Financial 

Mechanism EIPs), Chapter 9.0 (Elements of Clean Air Investment Funds), and Chapter 10.0 

(Elements of Public Information EIPs). 

The third segment, Other Requirements for EIPs, consists of Chapter 11.0 (Getting Your EIP 

Approved) and Chapter 12.0 (Running Your Approved EIP). 

The fourth segment, Other Important Information You Need to Know, consists of Chapter 13.0 

(Additional Guidance That Applies to EIPs), Chapter 14.0 (Mobile Source Guidance You May 

Use Instead of This Guidance), Chapter 15.0 (Special Terms You Need to Know), and Chapter 

16.0 (Appendices). 

 

This TSD will address elements in the pertinent Chapters of the EIP Guidance. This TSD will 

not delve into Chapter 3.0 (Selecting Your EIP Type) because the TCEQ has already selected the 

EIP type which is evaluated in this TSD. The EIP type is an Emissions Averaging Program. 

There are seven main types of EIPs - Emission Averaging Program, Source Specific Emission 

Caps, Multi-Source Cap-and-Trade EIPs, Open Market Trading EIPs, Financial Mechanism 

EIPs, Clean Air Investment Funds, and Public Information EIPs - each with type-specific 

requirements. Chapter 7.0 - Elements of Specific Trading EIPs, outlines the specific 

requirements for an SSEC program. Chapter 8.0 - Elements of Financial Mechanism EIPs, 

Chapter 9.0 - Elements of Clean Air Investment Funds, and Chapter 10.0 - Elements of Public 

Information EIPs do not apply to the TCEQ SCT program and will not be addressed in this TSD. 

Specific appendices in Chapter 16.0 have requirements germane to the TCEQ SCT program.

 

Selecting and Approving EIPs

Chapter 1 - General

 

Chapter 1 covers general information items for EIPs. The relevant items of the EIP guidance that 

apply to the SCT submittals are tabulated in Table IV.D.1. Corresponding sections of the TCEQ 

submittals are provided for each guidance item.
31 

Table IV.D.1 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

Chapter 1 – General

EPA EIP Guidance Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

1.1 EPA guidance is for discretionary EIPs The TCEQ SCT Program is discretionary. Its development is 

not required by CAA sections 182(g)(3), 182(g)(5), 182(d)(3), 

or 187(g). 

1.3 Discretionary EIPs are to increase flexibility, stimulate 

the use of less costly, innovative emission reduction 

measures, and provide greater incentives for developing and 

implementing pollution prevention strategies, possibly with 

fewer resources. 

The SCT Program is intended as an emissions averaging 

program to help facilities meet regulatory requirements for 

reducing emissions. 

Chapter 2 - Defining an EIP

 

Chapter 2 is titled “Defining an EIP” and is summarized in Table IV.D.2. The SCT Program 

defines the sources and pollutants included in the program, as well as the objective of the EIP. 

Table IV.D.2 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 2 - Defining an EIP

EPA EIP Guidance Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

2.2 Pollutants covered: Any criteria pollutant or precursor, 

except for lead. 

NOx is the only pollutant covered by the SCT. The 

applicability of the SCT, at § 101.382, references unique 

emission limitations established at 30 TAC Chapter 117 – 

Control of Air Pollution from Nitrogen Compounds. 

2.3 Sources included in EIP § 101.382 – Trades of emission allowable under the SCT are 

limited to sources located within a single nonattainment area or 

within another single area with unique emission limitations 

under 30 TAC Chapter 117. 

The SCT Program does not clearly identify the sources that can 

participate in the trading program. The rule language includes 

an incorrect citation at 30 TAC 101.380(2) and the 

applicability provision at 30 TAC 101.382 broadly references 

all of Chapter 117. The public and regulated entities are left to 

determine program applicability on their own and guess to 

what system caps are still viable. 

2.4 Objectives of the EIP The SCT program meets the definition of a compliance 

flexibility EIP because it provides facilities with compliance 

flexibility to meet existing SIP requirements, and allows 

sources flexibility in complying with their emission limits.

Elements of All EIPs

Chapter 4 - Fundamental Principles of All EIPs

Three fundamental principles apply to all EIPs: integrity, equity, and environmental benefit. 

Four elements make up the integrity principle: surplus, quantifiable, enforceable, and permanent. 
32 

These four elements, which apply to all EIPs, are further defined with regard to programmatic 

integrity and source-specific integrity. The equity principle consists of two elements: general 

equity and environmental justice. The environmental benefit principle is not further divided. 

Because the programmatic and source-specific requirements of EIPs are different, the integrity 

elements do not apply to the two program levels in the same manner. In addition, depending on 

the nature of the EIP or the type of sources participating in the EIP, certain elements may only 

apply partially, if at all. The source-specific requirements contain general requirements and EIPspecific requirements. 

How must my EIP meet the integrity principle?

 

Table IV.D.3 tabulates the requirements described in Chapter 4 of the EIP guidance pertaining to 

the integrity principle. 

 

Table IV.D.3 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principles of All EIPs 4.1

EPA EIP GUIDANCE expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

4.1(a) PROGRAMMATIC INTEGRITY ELEMENTS

SURPLUS - Emission reductions used to meet air quality 

attainment requirements are surplus as long as they are not 

otherwise relied on in your SIP, SIP-related requirements, 

other State air quality programs adopted but not in your SIP, 

a consent decree, or Federal rules that focus on reducing 

criteria pollutants or their precursors. In the event that your 

EIP’s programmatic emission reductions are relied on to 

meet air quality-related program requirements, they are no 

longer surplus. 

SSEC Specific - If the program is claiming reductions, in 

addition to the general definition you must show that your 

EIP results in more reductions than would have occurred 

without the program. 

The SCT Program does not satisfy the programmatic integrity 

element of surplus. 

The SCT program does not clearly identify the participating 

sources; therefore there is no way to clearly identify the 

emission reductions under the program are surplus. 

ENFORCEABLE - emission reductions are enforceable if: 

• They are independently verifiable. 

• Program violations are defined. 

• Those liable can be identified (see 6.1(a)). 

• Citizens have access to all emissions-related 

information obtained from source. 

• The state & EPA can apply penalties & obtain 

corrective action. 

• Emission reductions meet EPA guidance on practicable 

enforceability. 

• Citizens can file suits against sources for violations. 

• They are practicably enforceable in accordance with 

other EPA guidance on practicable enforceability. 

The SCT Program does not satisfy the programmatic integrity 

element of enforceable. The SCT Program does not identify 

violations, liable parties, or penalties. 

QUANTIFIABLE - Emissions and emission reductions are It is unclear that the SCT Program satisfies the programmatic 
33 

Table IV.D.3 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principles of All EIPs 4.1

EPA EIP GUIDANCE expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

quantifiable if they can reliably and replicably be measured 

/determined. 

element of quantifiable. Because the program does not clearly 

identify the subject sources and by extension the emission 

reductions, it will be difficult to demonstrate that the 

reductions are reliably and replicably quantifiable. However, 

because the sources that would participate in the program must 

base trades on the Chapter 117 SIP-approved monitoring and 

recordkeeping strategies, it is possible that the program would 

be quantifiable if there was more specificity in the subject 

sources. 

PERMANENT - For compliance flexibility EIPs, the 

emission reductions are permanent if the state is able to 

ensure that no emission increases (compared to emissions if 

there were no EIP) occur over the time defined in the SIP. 

The SCT program by design should satisfy the programmatic 

element of permanent. The program only allows for an 

increase in emissions with a corresponding contemporaneous 

decrease. 

EPA has concerns about the absence of a requirement that 

TCEQ verify that the trading program operates as designed.

4.1(b) SOURCE-SPECIFIC INTEGRITY ELEMENTS

SURPLUS - GENERAL 

The creation of emission reductions is surplus if the 

reductions are not presently relied upon in your current air 

quality-related programs defined in section 4.1(a) for the 

time that the reductions occur, and if they are not required 

by a consent decree. 

Generally, source-specific emission reductions of a criteria 

pollutant resulting from a non-criteria pollutant program are 

surplus if they are not relied upon in your air quality-related 

program requirements for that criteria pollutant. 

Emission reductions measured by sources on a prospective 

basis are surplus if the projected baseline emissions from the 

source or group of sources are properly accounted for in the 

applicable inventory (point and area sources) or by using an 

acceptable baseline (mobile sources). 

Emission reductions measured by sources on a retrospective 

basis are surplus if the source’s actual emissions are below 

its baseline allowable or historical actual emissions - 

whichever is lower - and your retrospective inventories 

reflect actual emission information as appropriate. 

General surplus expectations are addressed earlier in this table. 

The SCT Program does not satisfy the source-specific integrity 

element of surplus. 

Because the SCT Program does not clearly identify subject 

sources, the TCEQ is unable to demonstrate that the emission 

reductions subject to the program are not relied upon for other 

purposes. 

ENFORCEABLE - GENERAL 

Actions, emission reductions or emission limits specified by 

the EIP are enforceable if a source may be held liable; the 

liable party is identifiable; and TCEQ, the public, and EPA 

can independently verify compliance. (see § 6.1(a)) 

The SCT Program does not satisfy the source-specific integrity 

element of enforceable because the program does not identify 

liable parties, violations or penalties. 

QUANTIFIABLE - GENERAL 

The creation and use of emission reductions are quantifiable 

if the source or group of sources can reliably calculate the 

amount of emissions and/or emission reductions occurring 

during implementation of the program, and replicate the 

calculations; generally, sources cannot include fugitive 

emissions when quantifying emissions associated with an 

EIP. 

The programmatic requirements for integrity elements for 

quantifiable are covered earlier in this table. 

The SCT Program relies on participating sources calculating 

the emission increase and requisite contemporaneous decrease 

using SIP-approved Chapter 117 emission monitoring 

requirements. These methodologies will satisfy the sourcespecific element of quantifiable. 
34 

When quantifying results, sources must use the same 

methodology used to measure baseline emissions unless 

there are good technical reasons of why this is not 

appropriate and supporting documentation can be provided. 

 

PERMANENT - GENERAL 

Emission reductions are permanent if the source commits to 

achieve or achieves reductions for a future period of time as 

defined in the EIP. 

The SCT program by design should satisfy the source-specific 

element of permanent. The program only allows for an 

increase in emissions with a corresponding contemporaneous 

decrease. 

EPA has concerns about the absence of a requirement that 

TCEQ verify that the trading program operates as designed.
35 

How must my EIP meet the equity and environmental benefit principles?

 

Table IV.D.4 tabulates the requirements described in Chapter 4 of the EIP guidance pertaining to 

the equity and environmental benefit principles.

Table IV.D.4 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference 

CHAPTER 4 - Fundamental Principles of All EIPs 4.2 - 4.3

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

4.2 EIP EQUITY ELEMENTS

4.2(a) & Table 4.3(a) GENERAL EQUITY 

• all segments of the population are protected from public 

health problems 

• no segment of the population receives a disproportionate 

share of a program’s disbenefits 

Local stakeholder involvement and public participation are 

important barometers to measure protection from 

disproportionate impacts. 

Sources participating in the SCT Program must be in the 

same nonattainment or attainment area. The program 

requires a contemporaneous decrease for each emission 

increase; therefore there is no net impact on the general 

population. 

4.2(b) ENVIRONMENTAL JUSTICE 

EPA is committed to assuring that all persons: 

• have an opportunity to participate meaningfully in 

environmental decision making 

• live in a safe and healthful environment 

The environmental justice element applies if the EIP 

• covers VOCs, and

• could disproportionately impact communities populated by 

racial minorities, people with low incomes, and/or Tribes 

To address environmental justice, the EIP should include 

provisions to protect communities of concern. 

The Environmental Justice requirements do not 

specifically apply to the SCT program because the SCT 

program is only for emission increases and decreases of 

NOx emissions. 

4.3 ENVIRONMENTAL BENEFIT

All EIPS must demonstrate environmental benefit. 

This demonstration can show: 

• faster attainment than would have occurred without the EIP 

• more rapid emission reductions than would have happened 

without the EIP 

• more emission reductions (of HAPs or criteria pollutants) 

than would have happened without the EIP 

The SCT Program does not satisfy the environmental 

benefit requirement. The program purely provides 

compliance flexibility and does not encourage faster 

attainment or rapid emission reductions. 

See also Table IV.D.5. 
36 

Chapter 5 - Common Elements of All EIPs

 

Many program elements are common to trading EIPs, financial mechanism EIPs, CAIFs, and 

public information EIPs. These elements include provisions requiring incorporation into an EIP 

SIP, provisions for quantifying EIP results (i.e., emission impacts), and the features requiring 

inclusion in an EIP rule to measure and track results. Section 5.1 of the guidance includes 

provisions required of an EIP for incorporation into the SIP, Section 5.2 includes requirements to 

quantify EIP results; and Section 5.3 includes requirements to measure and track EIP results. 

Table IV.D.5 tabulates the comparison of the SCT program with the elements of Chapter 5.1 of 

the EIP guidance.

Table IV.D. 5 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIPs 5.1

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

5.1 EIP SIP PROVISIONS

5.1(a) Environmental Benefit Provisions 

Flexibility EIPs generally demonstrate an environmental 

benefit by reducing the amount of surplus emission 

reductions generated for use in the EIP by at least 10 percent. 

The SCT Program does not provide an environmental benefit. 

The SCT Program provides compliance flexibility and does 

not encourage faster attainment or rapid emission reductions. 

See also Table IV.D.4. 

5.1(b) Localized Impacts of Hazardous Air Pollutants 

(HAPs) 

Many VOC emissions contain HAPs which are toxic air 

pollutants. EPA believes that localized impacts of HAP 

emissions must be addressed for certain EIPs that affect VOC 

emissions. If your EIP is a trading program that allows VOC 

HAPs to be shifted from one facility to another then your EIP 

must follow the HAP framework found in section 16.2. 

Your EIP must also meet public participation requirements. 

Sections 16.2 and 16.5 contain guidance on how your EIP can 

meet the public participation requirements. 

Appendix 16.2 VOC EIPs involving HAPs 

“HAP framework” 

Not applicable to the SCT Program because the SCT Program 

is only for NOx emission increases and decreases.

5.1(c) Penalty provisions; Violation defined; Determine 

violation magnitude; Set potential penalties; Ability to 

impose maximum penalty of at least $10,000/day 

EIP rule must contains provisions to assess: 

• Monetary penalty if gaining economic benefit of $5,000 

• Additional penalties to deter future violations 

• Penalties for violations of compliance measures, i.e. 

monitoring recordkeeping etc 

• Statement that “Nothing herein restricts independent 

The SCT Program does not satisfy the penalty provisions 

requirements because no penalties are identified. 

See also Table IV.D.3.
37 

Table IV.D. 5 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIPs 5.1

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

enforcement authorities under CAA by other parties.” 

Also see EIP 6.1 

5.1(d) Public Disclosure provisions 

• EIP participants disclose violations in annual 

certification of compliance. 

• Violating source notify affected community. 

• Annual report on emissions and violations. 

• Submit report to EPA and the public. 

Appendix 16.5 Ensuring Adequate Public Participation 

• Public Notices 

• Public Hearings 

• Notices of availability of technical information 

Participating sources are required to notify the TCEQ when 

the Chapter 117 system caps are violated as a result of 

participation in the SCT Program, see 30 TAC 101.385. 

The SCT Program does not require an annual certification of 

compliance. 

5.1(e) Provisions for Federal Land Manager (FLM) 

notification in Class I areas 

Appendix 16.6 FLM Notification Requirements 

The FLM Notification Requirements under Appendix 16.6 

are not applicable to the SCT Trading Program because the 

subject areas are not within 100 km of a Class I area. 

5.1(f) Area-wide RACT provisions 

EIP may allow sources subject to RACT to avoid direct 

application of RACT technology by: 

• trading with other sources subject to RACT 

• trading with sources not subject to RACT 

Appendix 16.7 Area-wide RACT provisions 

EIP must ensure that the level of emission reductions 

resulting from implementation of the EIP will be equal to 

those reductions expected from the direct application of 

RACT 

The SCT Program is a compliance flexibility program to 

assist sources in satisfying the SIP-approved RACT 

requirements in Chapter 117. 

Section 5.2 includes requirements to quantify EIP results. Table IV.D.6 tabulates the 

comparison of the SCT Program with the elements of Chapter 5.2 of the EIP guidance.

 

Table IV.D.6 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIPs 5.2

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

5.2 QUANTIFY EIP RESULTS

5.2(a) Predicting EIP results 

Projected results must show that the EIP will not interfere or 

be inconsistent with SIP or SIP-related requirements. 

The SCT Program does not include provisions to predict 

results from the program. 

EPA is concerned that the lack of an audit provision prevents 

the TCEQ from analyzing the impacts of the SCT program on 

the attainment demonstrations. 
38 

Table IV.D.6 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIPs 5.2

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

5.2(b) Addressing uncertainty 

• determine uncertainty level. 

• provide a range of attributable emission reduction 

estimates. 

• determine if EIP will interfere with State air quality 

planning. 

• determine if uncertainty level is acceptable 

• include the documentation in SIP submittal. 

• adjust emission projections, attainment demonstrations, 

and RFP/ROP plans to reflect the uncertainty. 

• demonstrate that EIP will not interfere with attainment or 

maintenance of any NAAQS. 

• evaluate results of EIP as per 5.3(b), & 

• reconcile any problems as per 5.3(c). 

Because the SCT Program does not include an audit 

mechanism or the requirement for annual reporting, the 

TCEQ cannot demonstrate that the SCT Program will not 

interfere with attainment demonstrations. 

5.2(c) Quantification protocols - EIP SIP submittal includes: 

• all protocols with the EIP for EPA approval or 

• provide for EPA approval after EIP is SIP approved. 

Sources participating in the SCT program must use SIPapproved Chapter 117 emission monitoring provisions to 

identify the emission increases and decreases, see 30 TAC § 

101.385. 

5.2(d) Emission quantification methods. 

Recommended hierarchy for selecting emission measurement 

protocols: 

• CEMS data on unit generating emissions. 

• CEMS data on unit generating emissions not at 

generation time, but at representative conditions. 

• Multiple emission tests at affected unit(s) at 

representative conditions. 

• Emission test at affected unit(s) at representative 

conditions. 

• Emission test at maximum load or stack tests at identical 

unit. 

• Emission factor (if allowed) or material balance. 

30 TAC 101.385 requires sources to use SIP-approved 

emission quantification methodologies under Chapter 117. 

Note that EPA has concerns that the SCT Program does not 

address the requirements for emissions monitoring, reporting 

and recordkeeping as discussed in Table IV.D.7. 
39 

Section 5.3 includes requirements to measure and track EIP results. Table IV.D.7 tabulates the 

comparison of the SCT Program with the elements of Chapter 5.3 of the EIP guidance.

Table IV.D.7 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIPs 5.3

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

5.3 EIP FEATURES to MEASURE & TRACK RESULTS

5.3(a) Procedures for monitoring, record keeping & reporting 

(MRR). 

Examples of MRR: 

• Continuous or periodic monitoring of emissions, 

production, activity levels, or emission control 

equipment operation. 

• Measurement devices to verify emission rate and 

operating condition. 

• Measurement of mass emissions or emission rates using 

the EPA-approved reference test methods. 

• Operating and maintenance procedures or other work 

practices. 

• Record keeping of material usage, inventories, or 

throughput. 

The SCT Program requires participating sources to use SIPapproved Chapter 117 emission monitoring methods – 

however there is no demonstration that this requirement is 

sufficient to satisfy the EIP Guidance requirements. 

The SCT Program does not require recordkeeping throughout 

the subject trades. 

5.3(b) EIP evaluation procedures 

At a minimum conduct program evaluation every 3 years. 

The SCT Program does not require an audit/program 

evaluation. 

The program evaluation must occur every 3 years at a 

minimum and must provide the TCEQ the ability to correct 

any issues identified.

The program evaluation must also identify impacts of the 

SCT Program on the state’s ozone attainment demonstrations 

since the program functions in attainment and nonattainment 

areas. 

5.3(c) EIP Reconciliation procedures 

A list of possible forms of corrections includes: 

• Amend EIP to address problem in the future. 

• Amend another SIP program to address emission 

shortfall. 

• Add another program to SIP to address emission 

shortfall. 

• Adjust SIP emissions to account for actual emission 

profiles. 

• Suspend EIP until problems remedied. 

• Removing the EIP from SIP. 

• Use insurance fund of unused emission reductions 

(establish before a problem discovered) to make up the 

shortfall. 

The SCT Program does not include reconciliation procedures. 

The TCEQ has no ability to identify issues with the operation 

of the program or correct issues when they arise. 
40 

Chapter 6 - Elements of All Trading EIPs

Chapter 6 introduces elements that are common to all trading EIPs. These elements include 

enforcement provisions, addressing specific pollutant effects, preventing interference with other 

air quality programs, addressing uncertainty, and a few other provisions such as elements for 

demonstrating environmental benefits. The elements described in Chapter 6 apply in addition to 

those in Chapter 5. Each of the four main types of trading EIPs has its own unique 

characteristics and requirements. Section 6.1 includes enforcement requirements that all EIPs 

must contain, Section 6.2 contains provisions in a trading EIP to address specific pollutant 

effects, Section 6.3 describes elements to ensure that the trading EIP does not interfere with other 

programs, Section 6.4 contains provisions to address uncertainty, and Section 6.5 describes other 

provisions needed in a trading EIP. Table IV.D.8 tabulates the comparison of the SCT Program 

with the elements of Sections 6.1 and 6.2 of the EIP guidance. 

Table IV.D.8 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs §§ 6.1-6.5

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

6.1 Enforcement elements of all trading EIPs

6.1(a) Provisions for assessing liability. 

• All parties liable for truth & accuracy of 

information they provide 

• 3rd party not liable if using approved emission 

protocol. 

• User liable for making up shortfalls due to 

disapproved protocols 

The requirements for most of this element are covered in Table 

IV.D.3 for Monitoring and Reporting. 

The SCT Program does not identify liable parties. 

6.1(b) Penalty & corrective action provisions 

The trading EIP must include mechanisms that enable 

TCEQ to assess monetary penalties and impose 

corrective actions against the sources participating in the 

EIP. These mechanisms must include: 

• Making up any emission shortfall (e.g., purchase 

reductions by source that is “short”). 

• Pay monetary penalty based on statutory penalties 

for source noncompliance. 

• Surrender additional punitive amount of emission 

reductions. 

• Implementing corrective actions to ensure non 

occurrence in future and compensate for 

environmental damage caused by emissions 

violation such as: 

 - Better monitors. 

 - More effective controls. 

 - More frequent monitoring & reporting. 

 - Better monitoring procedures. 

The requirements for most of this element are covered in Tables 

IV.D.3 and IV.D.5.

The SCT Program does not identify program penalties or 

corrective actions.

6.1(c) Sources with Title V permits 

If your EIP covers sources with Title V operating 

Because the SCT Program is fundamentally flawed as described in 

previous tables, EPA has not analyzed the inclusion of the 

program into the Texas Title V permit structure.
41 

Table IV.D.8 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs §§ 6.1-6.5

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

permits your EIP must meet the requirements in Section 

16.8. 

6.2 Specific pollutant effect provisions 

Comply with provision in Appendices 16.11 

Appendix 16.11 Provisions for localized increase of 

criteria pollutant and precursor emissions 

The SCT Program does not address the requirements at 6.2 or 

Appendix 16.11. 

The SCT Program requires a contemporaneous decrease for any 

emission increase. 

Section 6.3 describes elements to ensure that the trading EIP does not interfere with other 

programs. Table IV.D.9 tabulates the comparison of the SCT Program with the elements of 

Chapter 6.3 of the EIP guidance.

 

Table IV.D.9 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.3

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

6.3 Interference with other programs 

6.3(a) Ensure consistency with transportation conformity 

If your EIP covers mobile sources then you must meet the 

requirement in section 16.10. 

Appendix 16.10 Provisions to ensure consistency with 

transportation conformity - notify Metropolitan Planning 

Organization (MPO) 

The SCT Program does not cover mobile sources. 

6.3(b) Provision for inter-credit trading 

Inter-credit trading is the acquisition and use of an emission 

reduction generated under one EIP to meet the requirements 

of another EIP. If your EIP includes inter-credit trading 

your EIP must meet the provisions in section 16.12. 

Inter-credit trading is not a feature of the SCT Program. 

6.3(c) Provisions for EIPs that include RACT sources 

If your trading EIP covers RACT sources, you must include 

provisions contained in section 16.13. 

Appendix 16.13 Provisions for EIPs that include RACT 

sources 

RACT is an independent requirement that must be met by 

sources subject to the SCT Program in addition to complying 

with the trading program. 
42 

Table IV.D.9 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.3

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

6.3(d) Provisions for new source review and trading 

If you choose to allow emission reductions generated by 

your EIP to be used for NSR purposes then your EIP must 

meet the requirements in section 16.14. 

Appendix 16.14 Provisions for new source review and 

trading: 

• Sources are not exempted from any NSR or PSD 

requirement because of EIP. 

• A major source or major modification may not avoid 

NSR review by using an EIP 

• Ozone non-attainment areas credits used comply with 

the NSR offset requirement allowed if, all Federal NSR 

provisions met 

• Emission reduction generated or used to comply with 

any other CAA requirement may not be used as an NSR 

offset or vice versa. 

• Be federally enforceable. 

• Obtain offsets for the life of the source needing the 

credit. 

The SCT Program is not used for new source review purposes.

6.3(e) Limitations on emission reduction uses - use 

prohibitions: 

• VOC ERCs outside NA not allowed unless EIP 6.5(b) 

met. 

• NOx ERCs generated outside modeling domain unless 

EIP 6.5(b) met. 

• Emission reductions to meet NSPS, BACT, LAER, 

NSR offset requirements, Acid Rain, and any CAA 

§ 112 air toxic requirement, MACT NESHAP 

requirements, requirements in urban air toxics program. 

• Emission reductions for statutory mobile source 

requirements. 

• Emission reductions for netting to avoid major source 

NSR requirements. (see EIP 6.3(d)). 

• Emission reductions to meet the mobile source sulfur in 

fuel reduction Tier II program. 

• Municipal waste combustor rule Emission reductions. 

The SCT Program only applies to emission increases and 

decreases in NOx emissions. 

The SCT Program does not provide that any of the prohibitions 

are allowed under the program. 

6.3(f) Provisions for banking emission reductions. 

If you choose for your trading EIP to contain banking, then 

the EIP must meet the requirements in section 16.15. 

The SCT Program does not provide for banking emission 

reductions. 
43 

Section 6.4 contains provisions to address uncertainty in a trading EIP and Section 6.5 describes 

other provisions needed in a trading EIP. Table IV.D.10 tabulates the comparison of the SCT 

Program with the elements of Chapter 6.4 and Chapter 6.5 of the EIP guidance. 

Table IV.D.10 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.4 & 6.5

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

6.4 Provisions to address uncertainty

6.4(a) Emissions bank uncertainty - follow requirements in 

Appendix 16.15 

The SCT Program does not provide for emissions banking. 

6.4(b) Seasonal trading - Not allow non-ozone season 

emission reductions to be used in ozone season. 

The SCT Program does not provide for emissions banking. 

Because an emission increase must be accompanied by a 

contemporaneous emission decrease there is no concern about 

seasonal trading. 

6.4(c) Emissions measurement - Account for uncertainty in 

emission quantification methods: 

• Use conservative estimates 

• Include monitoring/testing 

• Exclude certain source types 

• Limit trades to similar sources 

The SCT Program does not provide a source the ability to 

account for uncertainty in emission quantification methods. 

6.5 General Provisions for Trading EIPs

6.5(a) Demonstration of Environmental Benefit - Trading 

EIPs 

• Improved administrative mechanisms 

• Reduced administrative burdens 

• Improved emissions inventories 

The requirements for environmental benefit are covered in 

Table IV.D.4. 

The SCT Program does not address environmental benefit. 

6.5(b) Provisions for geographic trading across 

jurisdictional boundaries. 

Appendix 16.16 Provisions for geographic trading across 

jurisdictional boundaries 

The SCT Program allows for contemporaneous trading within 

the same attainment area or nonattainment area identified in 

Chapter 117. 

6.5(c) Provisions for FLM notification in Class I areas. FLM notification in Class I areas is covered in Table IV.D.5. 

The FLM Notification Requirements under Appendix 16.6 are 

not applicable to the SCT Program. 

6.5(d) Provisions for tracking systems and market 

clearinghouses 

• Track generation / use of emission reductions 

• Target enforcement resources 

• Conduct EIP performance audits 

The SCT Program does not satisfy the requirements for 

tracking systems. 30 TAC Section 101.385 requires 

participating sources to notify the TCEQ only after trades have 

occurred. Because the TCEQ is not aware of trades until after 

the fact they cannot adequately monitor the functionality of the 

program and anticipate or respond to issues resulting from 

trading. 

6.5(e) Provisions concerning multi-claimants. 

Define the owner of the reduction. 

The SCT Program does not identify liable parties. 
44 

Table IV.D.10 

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.4 & 6.5

EPA EIP GUIDANCE Expectation 

EPA-452/R-01-001

System Cap Trading (SCT) 

§§101.380, 101.382, 101.383, 101.385

6.5(f) Provisions for emission reductions that occur prior to 

EIP approval 

Appendix 16.17 Safeguards for EIPs that allow the use of 

old emission reduction 

The SCT Program only provides for the use of 

contemporaneous emission increases and decreases. The SCT 

Program does not provide for the use of “old” reductions that 

occurred before the adoption of the EIP. 

 6.5(g) Provisions for compliance margin. 

 Your trading EIP must include provisions to account for 

compliance margin when sources participating in an EIP are 

initially complying with an emission limit. 

Allowing a source to calculate emission reductions for an 

EIP without accounting for a compliance margin is 

acceptable when the source’s historical actual emissions are 

lower than its allowable emissions and historical actual 

emissions are used to calculate emission reductions for an 

EIP. 

The SCT Program does not provide for compliance margins in 

the calculation of compliance with the Chapter 117 system 

caps. 

6.5(h) Restricting use of Alternate Emission limits (AELs), 

Waivers, exemptions, extensions etc prohibited. 

The SCT Program cannot be used to satisfy requirements of 

other state or federal programs. Thus, the SCT Program does 

not need to restrict the use of AELs. 

Chapter 7 - Elements of Specific Trading EIPs

 

Chapter 7 introduces the different types of EIPs and the implementation requirements for each. 

There are four main types of emission trading programs: emission averaging, source specific 

emission caps, multi-source emission cap-and-trade, and open market trading. 

Because EPA has already determined that the SCT Program does not satisfy the general 

requirements for a trading program, this TSD will not further review why it does not satisfy the 

requirements for emissions averaging programs.
45 

IV.G. Evaluation of the SCT Program with respect to CAA 110(l) 

Section 110(l) of the Clean Air Act states: 

Each revision to an implementation plan submitted by a State under this Act shall be 

adopted by such State after reasonable notice and public hearing. The Administrator 

shall not approve a revision of a plan if the revision would interfere with any applicable 

requirement concerning attainment and reasonable further progress (as defined in 

section 171), or any other applicable requirement of this Act. 

Thus, under section 110(l), these two SIP revisions creating and amending the SCT Program 

must not interfere with attainment or reasonable further progress or any other applicable 

requirement of the Act. 

As a general matter, the satisfaction of the environmental benefit principle and the other integrity 

principles applicable to trading programs will tend to demonstrate that a trading program will do 

no worse than maintain existing air quality. Accordingly, EPA has determined that discretionary 

EIPs that are consistent with the EIP Guidance are consistent with section 110(l): 

Congress did not address specific requirements for EIPs in the CAA. Consistent with our 

mandate, the EPA has interpreted what an EIP should contain in order to meet the 

requirements of the CAA. This document is a guidance document that sets forth EPA’s 

non-binding policy for EIPs. This document does not represent final EPA action on the 

requirements for EIPs. Rather, this document identifies several different types of 

economic incentive programs, and proposes elements for each type that, if met, EPA 

currently believes would assure that the program would meet the applicable CAA 

provisions. The guidance phrases these elements in the imperative – that is, using the 

terms “must” or “shall”. This is done only to signify that EPA would propose to 

approve a SIP submittal of a program containing the indicated elements on grounds that 

under section 110(l) of the CAA, the SIP revision does not interfere with any applicable 

requirement concerning attainment, reasonable further progress, or any other applicable 

requirement. (EIP Guidance, section 1.9). 

Thus, if the SCT Program is consistent with the EIP Guidance it will satisfy section 110(l). 

As explained throughout this document, we have determined that the SCT program is not 

consistent with the EIP Guidance and therefore does not satisfy section 110(l). More 

specifically, the SCT Program does not include any provisions to assess the impact of the 

program on attainment, reasonable further progress, or any other applicable requirement of the 

Act. 
46 

V. Conclusion 

The technical analysis provided in the preceding sections has compared the applicable sections 

of the CAA, 40 CFR Part 51, and EPA’s EIP Guidance to TCEQ’s May 1, 2001, revisions to the 

Texas SIP establishing the SCT Program. This technical analysis also reviewed the subsequent 

revisions to the SCT Program adopted and submitted as SIP revisions August 16, 2007. 

This analysis found that the SCT Program in its entirety is not consistent with the EIP Guidance. 

Specifically, EPA finds that the SCT Program fails to: 

• satisfy the fundamental element of Surplus at 4.1(a) and (b) of the EIP Guidance because 

the participating sources are not clearly identified, and therefore EPA and the public are 

unable to determine that all emission reductions under the SCT program are surplus. It is 

essential that a trading program have a clearly identified group of participating sources to 

ensure that the reductions from these sources are surplus to all federal and state 

requirements, and to facilitate trading among participating sources to promote a robust 

market. Therefore, the SCT Program must clearly identify sources subject to the 

program. Currently, 30 TAC section 101.380(2) includes an incorrect citation and 30 

TAC section 101.382 broadly references all of 30 TAC Chapter 117 instead of 

identifying the subject sections. 

• satisfy the fundamental element of Enforceability at 4.1(a) and (b) of the EIP Guidance 

because the SCT Program does not clearly identify violations and outline the penalties for 

the participating sources as described in Sections 5.1(c) and 6.1 of the EIP Guidance. 

Currently 30 TAC section 101.385 requires a source owner or operator to notify the 

TCEQ when a Chapter 117 system cap emission limit is exceeded as a result of 

participating in the SCT Program. However, there are no penalty provisions or other 

mechanisms to provide a disincentive for violating the emission limits. 

• provide an environmental benefit as described in Sections 5.1(a) and 6.5 of the EIP 

Guidance. 

• provide a program evaluation as described in Section 5.3(b) of the EIP Guidance. Such a 

program evaluation must occur every 3 years and provide remedies if the trading program 

does not have the intended results, per Section 5.3(c) of the EIP Guidance. A program 

evaluation or audit is an essential feature of a trading program because it provides the 

TCEQ the time and authority to review the functionality of the program and suggest 

remedies. Additionally, EPA has SIP-approved audit provisions in the ERC, Mass 

Emissions Cap and Trade (MECT), and DERC programs that specifically require the 

TCEQ to evaluate the impact of the program on the state’s ozone attainment 

demonstrations and authorizes the TCEQ to suspend trading in whole or in part if 

problems are identified. Because the SCT Program operates in attainment and 

nonattainment areas, we find that analysis of the program impacts on the state’s ozone 

attainment demonstrations is an essential feature that must be included. 

• address requirements for monitoring, recordkeeping, and reporting consistent with 

Section 5.3(a) of the EIP Guidance. 

• provide TCEQ visibility of the trading process or establish reliable tracking mechanism 

for emissions trading consistent with Section 6.5(d) of the EIP Guidance. Participating 

sources in the SCT Program only notify the TCEQ after the trades between system caps 
47 

occur. The TCEQ must have knowledge and visibility of the trading under this program 

to anticipate and respond to issues that result from trading between system caps. 

It is recommended that EPA publish a proposed disapproval of the SCT Program.