STATE OF TEXAS

OFFICE OF THE GOVERNOR

GEORGE W. BUSH

GOVERNOR

January 3, 2000

Mr. Gregg Cooke

Region VI Administrator

U.S. Environmental Protection Agency

1445 Ross Avenue

Dallas, TX 75202-2733

Dear Mr. Cooke:

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Enclosed are proposed revisions to Texas' State Implementation Plan (SIP) that the Texas

Natural Resource Conservation Commission (Commission) adopted on December 16, 1999.

The first package of adopted amendments to Chapters 101 and 116 implement the requirements

ofSenate Bill 7, 76th Legislature, 1999, concerning the emissions banking and trading of

allowances and the permitting of grandfathered electric generating facilities. The second

package of adopted amendments to Chapter 116 implements the new procedures for standard

permits authorized by Senate Bill 766, 76th Legislature, 1999.

The public hearing certification, complete record ofthe public hearing, and accompanying order

are also enclosed. I look forward to your expeditious approval ofthese revisions to the Texas

SIP.

W.BUSH

GWB/bb:pf

Enclosures

cc: Mr. Robert J. Huston, Chainnan, Texas Natural Resource Conservation Commission

Mr. Jeffrey A. Saitas, P.E., Executive Director, Texas Natural Resource Conservation Commission

POST OFFICE Box 12428 AUSTIN, TEXAS 78711 (512) 463-2000 (VOICE)/(512) 475-3165 (TDD)
-

Robert J. Huston, Chairman

R. B. "Ralph" Marquez, Commissioner

John M. Baker, Commissioner

Jeffrey A. Saitas, Executive Director

TEXAS NATURAL RESOURCE CONSERVATION COMMISSION

Protecting Texas by Reducing andPreventing Pollution

THE STATE OF TEXAS §

COUNTY OF TRAVIS §

This is to certify that the attached are true and correct copies of a revision to the Texas State

Implementation Plan, adopted on December 16, 1999, pursuant to 40 Code of Federal Regulations (CFR),

§51.104. Prior to the adoption ofthis revision, a public hearing was held pursuant to 40 CFR, §51.102(a),

and notice of this hearing was given which conformed to the requirements of 40 CFR, §51.102(d). I am

the custodian of the records of the Texas Natural Resource Conservation Commission (Commission).

To certify which, witness my hand and the seal of the Commission, this the 29th day of

December. 1999.

,-

LaDonna Castanuela

Chief Clerk

Texas Natural Resource Conservation Commission

P.O. Box 13087 • Austin, Texas 78711-3087 • 512/239-1000 • Internet address: www.tnrcc.state.tx.us in!
Texas Natural Resource

Conservation Commission

Public Hearings

October 1999

Concerning Revisions To

Chapters 101 and 116

Electric Industry Restructuring (SB 7)

Rule Log Number 99033-1l6-AI

Volume lof2

"
INTRODUCTION

The commission held public hearings in EI Paso and Lubbock on October 1, 1999, in Austin on October

4, 1999, in Irving on October 5, 1999, in Houston on October 7, 1999, and in Beaumont on October 7,

1999. The hearings were held to consider amendments to Chapters 101 and 116, which implement the

requirements of Senate Bill 7, concerning the permitting of grandfathered and electing electric generating

facilities.

Written comments were accepted through October 11, 1999. All testimony and comments have been

reviewed and seriously considered. This volume contains a complete record of the public hearing and is

divided into the following four sections:

o Public Notification and Proposal

o Written and Oral Testimony

o Evaluation of Testimony

o Staff Recommendations

Additional copies of this hearing record are maintained in the TNRCC central office at 12100 North

IH-35, Austin, Texas 78753. For further information, contact Beecher Cameron at (512) 239-1495.
PUBLIC

NOTIFICATION AND

PROPOSAL
PUBLIC NOTIFICATION

Notification to the public of the proposed revisions was conducted by the following procedures:

1. Publication of the notice of public hearing in the following newspapers on the dates listed:

Austin American-Statesman; August 27, 1999

Beaumont Enterprise; August 29, 1999

EI Paso Times; August 28, 1999

Fort Worth Star-Telegram; August 31, 1999

Houston Chronicle; August 26, 1999

Lubbock Avalanche-Journal; August 29, 1999

2. Publication of the public hearing notice in the Texas Register on September 24, 1999

(24 TexReg 8370), and proposed rules in the Texas Register on September 10, 1999 (24 TexReg 7137).

3. Correspondence forwarding the notice of public hearing to the following officials and agencies:

Speaker of the House

Lieutenant Governor

City of EI Paso

City of Victoria Planning Department

Dallas Department of Health and Human Services

EI Paso City-County Health District
Federal Highway Administration

Fort Worth Public Health Department

Galveston County Health District

Houston Department of Health and Human Services

Harris County Pollution Control Department

North Central Texas Council of Governments

Houston-Galveston Area Council

South East Texas Regional Planning Commission

Texas Department of Transportation

Texas Transportation Institute

Arkansas Department of Pollution Control and Ecology

Louisiana Department of Environmental Quality

New Mexico Air Quality Bureau

Oklahoma Department of Environmental Quality

U. S. Environmental Protection Agency
NOTICE OF PUBLIC HEARINGS· BY THE .~ ••;,

TEXAS NATURAL RESOURCE';r, CONSERVATION COMMISSiON'

ON PROPOSED REVISlONS· ,;~'

TO 30 T:~';~~~TS~:~~Ol '! ',~,<iE ' IMPLEMENTATION PLAN .•

The Texas Natural Resource Can·

servction Commission (commission) will conduct six public hear·

ings to receive testimonY concernIng revisions to 30 TAe Chapters

101 & 116 in Ihe Slale Implementa· tion Pion ($ IP) under the requirements of Texas Health and Safetv

Code, 4382.017; Texas Government

Code, Subchapter B, Chapter 2001;

and 40 Code of Federal Regula·

tians, 451.102 of the United states Environmental Protection Agency

regulations concerning SIP·s. The

revisions to Chapter 101 and Chapter 116 constitute revisions to 'the

SIP.

The proposed amendments t.e Chaoters 101 and 116 will Imple·

ment the requirements of Senate Bill (56) 7 concerning the permitting of grandfothered electric generating facilities (EGF). SB 7

amends Texas utilities Code, 439.26~, and reQuires that grandfathered EGFs aoplv for a oermlt bv

Seolember L 2000, and Ihat EGFs reduce emissions of nitrogen oxide

(NOx) bv 50% and, for cool·flred

EGFs. reduce sulfur dioxide bY

25%. The amendments allow these

reductions to be met by Installing

control technologv or trading allowances from other EGFs. Grandfathered facilities must be permltled bv Mav 1. 2003, or cease opera·

tion unless theY show good cause for an extension.

The commission will hold apublic

hearing on this proposal in EI Paso

on October L 1999, at 9:00 a.m. in the City of EI Po~ Council Chambers. located at 2 Civic center PlaIa. 2nd Floor. Additional hearings

will be held in Lubbock on Oelober

1 at 6:00 p.m. in the City of Lubbock Council Chambers, located at 1625 131h Sireel: in Austin on October 4 at 9:00 a.m. in Room 2015 of

Texas Natural Resource Conserva- tion Commission Building E.locat- ed 01 12100 Pork 35 Circle; In Ir·

ving on October S of 1:00, p.m. In

the City of Irving Central Library

Auditorium. located at BOl West Irving Boulevard: in Houston on OClober 7 01 9:00 a.m. in Ihe Citv of

Houston Pollution Control Building

Auditorium, located at 7411 Park

Place Boulevard: and in Beaumont

on October 7 01 6: 00 p.m. In the John Grav Institute. located ot 855 Florida Avenue. The hearings are

strudured for the receipt of oral or written comments by interested

persons. Individuals may present

oral statements when called upon

in order of registration. Open·dls.-

cussions will not be permitted dur- Ing the hearings; however, on

agency stoff member will be available to discuss the proposal 30 minutes prior fo the hearings and will answer questions before and after

the hearings.

written comments may be submit· led bv moil to Casev Vise, MC 205,

Office of Environmental Polley,

AnalysiS, and Assessment, Texas

Natural Resource Conservation

Commission, P.O. Box 13087. Au5--

tin, Texas 78711-3087, or bv tax to (512)239-4808. All comments should

reference Rule Log Number

99033-116·AI. Comments must be received bY 5:00 p.m., OCtober n, 1999. For further informotlon,

please contect Beecher Cameron. of the Policv and Regulations DIvI· sian. 01 (512) 239·1495. ~.,

Persons with disabilities who have

special communication or other ac· commodation needs who are pion·

n ing to attend the hearing should, conlact lhe agencv at (512)239·4900.

Requesls should be mode os tar In .

advence as possible.

Issued in Austir1, Texas. on AuSJust

25, 1999.

EXAMPLE OF

NEWSPAPER CLASSIFIED AD

Lubbock Avalanche-Journal

August 29, 1999
Robert J. Huston, Chairman

R. B. "Ralph" Marquez, Commissioner

John M. Baker, Commissioner

Jeffrey A. Saitas, Executive Director

TEXAS NATURAL RESOURCE CONSERVATION COMMISSION

Protecting Texas by Reducing and Preventing Pollution

NOTICE OF PUBLIC HEARINGS BY THE

TEXAS NATURAL RESOURCE CONSERVATION COMMISSION

ON PROPOSED REVISIONS TO

30 TAC CHAPTERS 101 AND 116 AND THE STATE IMPLEMENTATION PLAN

The Texas Natural Resource Conservation Commission (commission) will conduct six public hearings to

receive testimony concerning revisions to 30 TAC Chapters 101 and 116 and the State Implementation Plan

(SIP) under the requirements of Texas Health and Safety Code, §382.017; Texas Government Code,

Subchapter B, Chapter 2001; and 40 Code of Federal Regulations, §51.102 of the United States

Environmental Protection Agency regulations concerning SIPs. The revisions to Chapters 101 and 116

constitute revisions to the SIP.

The proposed amendments to Chapters 101 and 116 will implement the requirements of Senate Bill (SB)

7, concerning the permitting of grandfathered electric generating facilities (EGF). SB 7 amends Texas

Utilities Code, §39.264, and requires that grandfathered EGFs apply for a permit by September 1, 2000,

and that EGFs reduce emissions of nitrogen oxide (NOJ by 50% and, for coal-fired EGFs, reduce sulfur

dioxide by 25 %. The amendments allow these reductions to be met by installing control technology or

trading allowances from other EGFs. Grandfathered facilities must be permitted by May 1, 2003, or cease

operation unless they show good cause for an extension.

The commission will hold a public hearing on this proposal in EI Paso on October 1, 1999, at 9:00 a.m.

in the City of EI Paso Council Chambers, located at 2 Civic Center Plaza, 2nd Floor. Additional hearings

will be held in Lubbock on October 1 at 6:00 p.m. in the City of Lubbock Council Chambers, located at

1625 13th Street; in Austin on October 4 at 9:00 a.m. in Room 201S of Texas Natural Resource

Conservation Commission Building E, located at 12100 Park 35 Circle; in Irving on October 5 at 1:00 p.m.

in the City of Irving Central Library Auditorium, located at 801 West Irving Boulevard; in Houston on

October 7 at 9:00 a.m. in the City ofHouston Pollution Control Building Auditorium, located at 7411 Park

Place Boulevard; and in Beaumont on October 7 at 6:00 p.m. in the John Gray Institute, located at 855

Florida Avenue. The hearings are structured for the receipt of oral or written comments by interested

persons. Individuals may present oral statements when called upon in order of registration. Open

discussion will not be permitted during the hearings; however, an agency staff member will be available

to discuss the proposal 30 minutes prior to the hearings and will answer questions before and after the

hearings.

Written comments may be submitted by mail to Casey Vise,. MC 205, Office of Environmental Policy,

Analysis, and Assessment, Texas Natural Resource Conservation Commission, P.O. Box 13087, Austin,

Texas 78711-3087, or by fax to (512) 239-4808. All comments should reference Rule Log Number 99033-

116-AI. Comments must be received by 5:00 p.m., October 11, 1999. For further information, please

contact Beecher Cameron, of the Policy and Regulations Division, at (512) 239-1495.

P.O. Box 13087 • Austin, Texas 78711-3087 • 5121239-1000 • Internet address: www.tnrcc.state.tx.us
PAGE TWO

Persons with disabilities who have special communication or other accommodation needs who are planning

to attend the hearing should contact the agency at (512) 239-4900. Requests should be made as far in

advance as possible.

Issued in Austin, Texas, on August 25, 1999.
designer a consent order, the executive director, on the advice of

staff and legal counsel, may approve of such offer in lieu of formal

action by the board. The consent order may include the following

provisions:

ill the imposition of an administrative penalty in an

amount not to exceed $1.000;

@2 [WJ the imposition of directives that require the

interior designer to implement written policies within the interior

designer's practice that are reasonably designed to prevent subsequent

violations of the Architectural Barriers Act; and/or

iQ [~J the deferral of the case for a certain period

of no more than one year with the case being finally dismissed at the

end of the period if no new violations of law occur during the period.

(2) If the executive director approves of a proposed

consent order and the consent order provides for deferral of the case

for a certain period, the interior designer's professional registration

shall remain in good standing for the duration of the period as long

as the interior designer adheres to the terms of the consent order.

(3) If the executive director approves of a proposed

consent order and the interior designer fails to adhere to the terms

of the consent order, the executive director shall refer the case for

formal action by the board.

(4) If a consent order is proposed and either the interior

designer or the executive director fails to approve of the consent

order, the executive director shall refer the case for formal action by

the board.

(5) The executive director shall not approve of a consent

order if the conduct that is the subject of the consent order occurred

after either of the following:

(A) the executive director and the interior designer

approved of a consent order in connection with a different referral

from the Texas Department of Licensing and Regulation;

$) the board took action against the interior designer's professional registration based on a different referral from

the Texas Department of Licensing and Regulation.

(d)-(n) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's

legal authority to adopt.

Rled with the Office of the Secretary of State, on August 24,

1999.

TRD-9905382

Cathy L Hendricks, ASIDIJIDA

Executive Director

Texas Board 01 Architectural Examiners

Proposed date of adoption: October 15, 1999

For further information, please call: (512) 305·8535

• • •

TITLE 30. ENVIRONMENTAL QUALITY

Part 1. TEXAS NATURAL RESOURCE

CONSERVATION COMMISSION

Chapter 101. GENERAL RULES

Subchapter H. EMISSIONS BANKING AND

TRADING

Division 2. EMISSIONS BANKING AND

TRADING OF ALLOWANCES .. 30 TAC §§lOl.330-101.337

The Texas Natural Resource Conservation Commission

(TNRCC or commission) proposes new §101.330, concerning

Definitions; §101.331, concerning Applicability; §101.332,

concerning General Provisions; §101.333, concerning Allocation of Allowances; §101.334, concerning Allowance

Transfer; §101.335, concerning Allowance Banking; §101.336,

concerning Emission Monitoring, Compliance Demonstration,

and Reporting; and §101.337, concerning EI Paso Region.

The new sections would be placed into a new Division 2,

concerning Emissions Banking and Trading of Allowances,

of a new Subchapter H, concerning Emissions Banking and

Trading. The proposed rules would also be submitted as a

revision to the state implementation plan (SIP).

EXPLANATION OF PROPOSED RULES

Senate Bill (SB) 7, 76th Legislature, 1999, amended the Texas

Utilities Code, Trtle 2, Public Utility Regulatory Act, Subtitle B,

Electric Utilities, and created a new Chapter 39, Restructuring

of Electric Utility Industry. SB 7 requires the commission to

implement the permitting and allowance requirements of new

§39.264, concerning Emissions Reductions of "Grandfathered

Facilities.· S8 7 requires the commission to develop a mass cap

and trade system to distribute emission allowances for use by

electric generating facilities (EGF). Under S8 7, two categories

of EGFs are eligible to use the proposed trading system. The

first category consists of EGFs in existence on January 1,

1999, which were not subject to the requirement to obtain a

permit under Texas Clean Air Act (TCAA), §382.0518(g). These

facilities are commonly referred to as grandtathered facilities.

S8 7 also mandates that grandfathered EGFs apply for a permit

on or before September 1, 2000, and obtain a permit by or

cease operation after May 1, 2003. The second category of

EGFs consists of permitted EGFs that are not subject to the

permitting requirements of S8 7, yet elect to participate in the

allowance trading system.

These new sections are proposed concurrently with new sections in Chapter 116, concerning Control of Air Pollution by Permits for New Construction or Modification. Proposed new Chapter 116, Subchapter I, concerning Electric Generating Facility

Permits, will contain the requirements for permitting of EGFs.

The amendments to Chapter 116 are published in a separate

section of this edition of the Texas Register.

Texas Utilities Code, §39.264(g) and (h) requires the commission to allocate emission allowances to grandfathered EGFs

in defined regions of the state. As stated in §39.264(c), the

legislature intended that total annual emissions of nitrogen oxides (NO,) would not exceed 50% of the emissions during 1997

as reported to the commission, and that for coal-fired grandfathered EGFs, total annual emissions of sulfur dioxide (SO.)

would not exceed 75% of the emissions during 1997 as reported to the commission. To further this goal, Texas Utilities

Code, §39.264(h) provides emission rates to calculate specific

allowances.

As previously stated, Texas Utilities Code, §39.264(c) provides

that emission limitations may be met through an emissions

PROPOSED RULES September 10,1999 24 TexReg 7137
allocation and allowance transfer system. An allowance trading

program is a regulatory program which caps emissions over a

designated region to a level consistent with regulatory goals.

Each EGF must hold allowances equal to or greater than its

emissions to be in compliance with the program. For example,

if an EGF's emissions are 100 tons over the control period, then

the allowance account for this EGF should reflect a balance

equal to or greater than 100 tons of allowances. The program

encourages EGFs to determine the methods of control which

will allow the EGF to meet its allowances. Further, the program

allows for trading of allowances between EGFs in the same

region, thereby creating alternatives for control. For example,

if an EGF emitted 100 tons over the control period and has a

balance of 150 allowances in its compliance account, the EGF

may sell the unused portion 50 tons or allowances to another

EGF. This trading provision allows companies to determine

the most economical method of meeting the regulation, either

by purchasing surplus allowances created by another EGF's

reductions or by making their own reductions.

Consistent with Texas Utilities Code, §39.264(i), currently permitted EGFs may elect to participate in the permitting program

being proposed concurrently in Chapter 116, SUbchapter I. Permitted facilities electing to participate in the permitting program

under Chapter 116, Subchapter I are called electing EGFs. In

the concurrently proposed changes to Chapter 116, the commission proposes that the existing New Source Review (NSR)

permit would be consolidated with a permit issued under Chapter 116, Subchapter I. Participation in the permitting program

will allow electing EGFs to obtain allowances under the Emissions Banking and Trading of Allowances (EBTA). It may be

advantageous for a company to include all EGFs, regardless

of permitting status, in the permitting program to allow maximum flexibility in control strategies. Under §39.264(i)(2) and

(4), electing EGFs are given allowances equal to their actual

emissions reported in the commission's 1997 emission inventory unless a federal or state standard otherwise limits the 1997

emission rate.

The proposed new §101.330 contains the definitions to be used

in the EBTA. "Allowance" means the authorization to emit one

ton of NO, or SO, during the specified control period or any

specified control period thereafter. An "authorized account

representative" is the responsible person who is authorized,

in writing, to transfer and otherwise manage allowances. A

"banked allowance" means an allowance which is not used

to reconcile emissions in the designated year of allocation

but which is carried forward into next year and noted in the

compliance or broker account as "banked." Consistent with

Texas Utilities Code, §39.264(c), ·control period" means the 12-

month period beginning May 1 of each year and ending April

30 of the following year. Control periods begin May 1, 2003.

"Compliance account" means the account for an EGF or multiple

EGFs in which allowances are held.· "Broker Account" means

the account where allowances held by a person are recorded. A

broker is one who is participating in the EBTA for the purposes

of trading allowances and not to satisfy emission requirements

at an EGF. Allowances held in a broker account may not be used

to satisfy compliance reqUirements for this division. EGFs can

purchase allowances from brokers, however, the allowances are

not eligible to meet reduction requirements untit the ownership

of the allowances has been transferred and the allowances

reside in the purchaser's compliance account.

"East Texas Region" means all counties traversed by or east of

Interstate Highway 35 (IH-35) north of San Antonio, or traversed

by or east of Interstate Highway 37 (IH-3?) south of San Antonio,

and also including Bexar, Bosque, Coryell, Hood, Parker,

Somerville, and Wise counties. The commission is proposing to

modify the definition of "East Texas Region" from Texas Utilities

Code, §39.264(g) to clarify that counties east of IH-35 and west

of IH-37 are not included in this region. It is believed that

had the legislature intended for the definition to include these

counties, the definition would have simply referenced IH·35 and

not IH-37 also. Additionally, these counties (between IH-35 and

IH-37) have been excluded from commission plans involving

statewide air control strategies, and the commission believes

that the legislature was attempting to be consistent with current

commission planning structures. "EI Paso Region" means all of

EI Paso County. "West Texas Region" means all counties not

contained in the East Texas or EI Paso Regions.

An "electric generating facility," as defined in SB 7, is a

facility that generates electric energy for compensation and

is owned or operated by a person in this state, including a

municipal corporation, electric cooperative, or river authority.

The commission proposes to modify that definition to exclude

a facility that generates electric energy primarily for internal

use, but that during 1997 sold, to a utility power distribution

system, less than one-third of its potential electrical output

capacity. This exclusion eliminates cogeneration facilities that

were not intended to be included in this program. "Electing

EGF" is an EGF that is not subject to the requirements of

Texas Utilities Code, §39.264, that elects to comply with Chapter

116, Subchapter I. "Permitted EGP is an EGF permitted under

Chapter 116, Subchapter I, including electing EGFs. "Heat

input" is the heat derived from the combustion of any fuel at an

EGF. Heat input does not include the heat derived from reheated

combustion air, recirculated flue gas, or exhaust from other

sources. The commission proposes defining "NO, allowance"

as an authorization to emit NO., valid only for the purposes

for meeting the requirements of this division; and Chapter 116,

Subchapter I. "S02 allowance" is an authorization to emit S02'

valid only for the purposes for meeting the requirements of this

division and Chapter 116, Subchapter I.

The proposed new §101.331 establishes the applicability of

banking and trading allowances. EGFs subject to the concurrently proposed Chapter 116, Subchapter I or electing EGFs

would be required to comply with EBTA. The section also allows the opening of broker accounts for those not required to

participate in the EBTA.

The proposed new §101.332 contains the general provisions for

the EBTA. Compliance with the allowance system would begin

with the control period beginning May 1, 2003. Allowances

would only be valid for meeting the purposes of the EBTA.

Allowances cannot be used to meet or exceed the limitations of

a permit or applicable law, generate emission reduction credits,

or satisfy emission offset requirements under federal NSR.

Because allowances do not by themselves meet federal criteria

as creditable emission reductions, they may not be used to

satisfy other requirements of the Federal Clean Air Act (FCAA),

such as netting for Prevention of Significant Deterioration

(PSD), NSR, or offsets under a nonattainment NSR permit.

Neither a NO, allowance nor an SO, allowance constitutes

a security or property right. To meet the requirements of

Texas Utilities Code, §39264(e), this section would require

that on May 1 of each year, beginning in 2004, an EGF

24 TexReg 7138 September 10, 1999 Texas Register
shall hold in its compliance account a quantity of allowances

that is equal to or greater than the total emissions of that

air contaminant emitted during the prior control period. The

commission proposes that allowances be allocated, transferred,

or used as whole allowances. For simplicity, the number of

allowances will be rounded down for decimals less than 0.50

and rounded up for decimals of 0.50 or greater. This section

also proposes allowing only one compliance account for use

by multiple permitted EGFs located at the same property and

under common ownership or control. These limitations on

the number of compliance accounts will assist the commission

in the allocation of allowances and tracking of allowance

transfers. Proposed §101.3320) incorporates Texas Utilities

Code, §39.264(n), concerning the deduction of allowances from

cornpliance accounts where the EGF exceeded its allowances.

The proposed new §101.333 contains the methods by which

allowances for permitted EGFs are calculated and determined.

As specified in Texas Utilities Code, §39.264(h), the allowances

will be calculated by mUltiplying total heat input measured in millions of British thermal units (MMBtu) during 1997 by an emission rate expressed in pounds per MMBtu divided by 2,000. To

determine allowances, the commission proposes using information obtained from the United States Environmental Protection Agency's (EPA) Acid Rain Program's Emissions Scorecard

1997. This database is the only readily-available, consistentlyreported, and comprehensive source of 1997 heat input data for

EGFs. This database was the basis for determining the emission rates necessary to achieve the program's goals of a 50%

reduction in NOz emissions and 25% reduction in SO, emissions from 1997 levels. If information for an EGF concerning

heat input is not reported to the acid rain database, the executive director may approve a method for calculating heat input

for that EGF as long the method is consistent with the requirements of the acid rain database.

Texas Utilities Code, §39.264(h), specifies the emission rates

for the EI Paso, East Texas, and West Texas Regions. In the

East Texas Region the emission rate is 0.14 pounds of NOz

per MMBtu and 1.38 pounds of SO. per MMBtu. The emission

rate in the EI Paso Region is 0.195 pounds of NOz per MMBtu.

The West Texas Region's emission rates are identical to those

in the EI Paso Region. Consistent with Texas Utilities Code,

§39.264(i)(2), the allowances for electing EGFs are equal to

the EGPs emission in tons in 1997. Should a permitted coalfired EGF elect to participate in the permitting program under

Chapter 116, Subchapter I, the annual emissions of SO. from

1997 would be used to establish its allowances.

In addition to the 50% reduction expected from grandfathered

EGFs under SB 7 requirements, the commission anticipates

adopting additional requirements for EGFs in nonattainment areas to meet the ozone National Ambient Air Quality Standard

(NAAQS). For each nonattainment area, the amount of reductions for the SIP will be consistent with the SIP modeling efforts

for that area. At this time the point source reductions expected

in the DallaslFort Worth (DFW) area are 88%. Reductions in the

Beaumont/Port Arthur (BPA) area are expected to be 40-50%,

and reductions in the Houston/Galveston (HGA) are expected

to be 90%. The commission expects to propose the reductions

for BPA and DFW areas in December of 1999. For the HGA

area, proposal is expected in May of 2000. The commission expects to propose reductions in attainment counties of east and

central Texas not later than December of 1999. Future rulemaking addressing these reductions will affect the EBTA and

the allocation of future allowances. Since Texas Utilities Code,

§39.264(s) recognizes the current authority of the commission

to require additional reductions of NOz or SO.' as future SIP

rules are developed allowances will be reduced accordingly.

Allowances for grandfathered EGFs must be allocated by January 1, 2000, as required by Texas Utilities Code, §39264(h).

In order to meet this deadline, the commission intends to issue

an order this fall to allocate these allowances. The commission is aware of the needs of owners or operators of EGFs to

know as soon as possible the number of allowances that will

be allocated to each EGF. A draft of proposed allowances is

available from the commission on request and will be available

on the commission's Web Site. To meet the statutory deadline

to issue allowances by January 1, 2000, proposed §101.333(4)

provides that a commission order will be issued by that date

with the SB 7 allowances for the grandfathered EGFs. The allowances allocated for subsequent years will reflect the same

values issued in the initial allocation, provided no subsequent

state or federal regulations require additional reductions. To

allow EGFs to identify potential sellers of allowances, the commission shall maintain a publically available registry of the allowances in each compliance account. For each transfer, the

registry shall include the price paid per allowance. The registry shall not contain proprietary information. The commission

believes that public access to information regarding the price

and transfer of allowances will promote an open trading system. Consistent with Texas Utilities Code, §39.264(s), 30 TAC

§101.333(a)(3) permits the commission to reduce allowances

for the purposes of satisfying the SIP or other federal, state, or

local requirements.

Initial allowances for electing EGFs for the control period

beginning May 1, 2003 would be allocated by January 1, 2001.

Since the commission will not know which EGFs are electing to

participate in the permitting program until September 1, 2000,

it would be impossible to allocate those allowances on the

same schedule as the granclfathered allocations. This later

allocation schedule will allow companies to determine whether

to participate in the programs and which programs best suit

their individual business needs.

The proposed new §101.334 would establish requirements concerning the transfer of allowances. Allowances may be transferred at any time during a control period with documentation

received by the commission no later than June 30 following the

control period for which the allowances are used. The commission believes that 60 days to report all transfers will give owners

or operators ample time to finalize transfers for that control period. In addition to the annual report, notification of transfer of

allowance must occur within 30 days after the transfer of any

allowances to another party. This requirement will ensure that

the data kept on the commission's registry is accurate and current. Allowance transfers are prohibited prior to May 1. 2003.

The commission believes it is appropriate to set a beginning

date for the receipt of transfer notification. This restriction will

allow the commission to set up the appropriate tracking mechanisms prior to receipt of notifications. As required by Texas Utilities Code, §39.264(i)(3), allowances at electing EGFs resulting

from reduced utilization or shutdowns cannot be transferred.

Transfenable allowances for electing EGFs shall be calculated

using the heat input from 1997, the heat input from the control

period, and changed emission factors. The equations to determine transferable allowances from electing EGFs are in the rule

text.

PROPOSED RULES September 10, 1999 24 TexReg 7139
Consistent with Texas Utilities Code, §39.264{j), allowances

may only be transferred within the same region. Transfers from

broker accounts are restricted based on the location of the EGF

where the allowance was originally allocated.

SB 7 allows EGFs the flexibility to decide when and where to

make reductions or to add on controls. EGFs must consider local impacts of allowance transfers specifically on those counties

which are nonattainment and near nonattainment. For example, most near-nonattainment areas have EGFs that are in close

proximity to these areas. These EGFs emit significant amounts

of NO., which has been shown to heavily influence local ozone

levels. Other EGFs located a greater distance from these areas

have regional impacts on background ozone levels but do not

impact near-nonattainment areas to the extent the closer facilities can.

While the commission believes that the trading program will

result in emission reductions throughout the East Texas Region, emission reductions, rather than allowance transfers, at

the nearby facilities should be thoroughly considered before investments are made for emission control equipment at more

distant plants. In making these economic decisions, it is incumbent on businesses to weigh the environmental consequences of their actions. Prior to making an allowance transfer to a nonattainment or near-nonattainment area, EGFs must

be aware that such transfers might jeopardize the status of a

near-nonattainment area. For example, at this time the Tyler!

LongviewlMarshall area is operating under the terms of a Flexible Attainment Region (FAR). If numerous transfers occur into

that area, the conditions of the FAR may be compromised. The

FAR will expire in September 2001 and can be extended by

the parties. During the term of the FAR agreement, EPA will

treat the area under an approach similar to a maintenance plan

area. However, EPA may designate the area as nonattainment,

regardless of whether a FAR agreement is in place. Designation of nonattainment could result in additional reductions of NO

from EGFs in the Northeast Texas FAR area. Furthermore, a

nonattainment designation would require additional reductions

from industry sources and potential restrictions on trade into the

new nonattainment area. The commission encourages EGFs to

consider the long-term consequences of decisions to utilize allowances rather than the installation of controls at EGFs located

close to nonattainment areas and in near-nonattainment areas.

The proposed new §101.335 regulates the banking of allowances. As required by Texas Utilities Code, §39.264(i)(3),

allowances at electing EGFs resulting from reduced utilization

or shutdown cannot be banked. Allowances not used for compliance may be banked for use in subsequent years.

The proposed new §101.336 establishes compliance demonstration methods. All EGFs using the EBTA must comply with

§116.914, conceming Emissions Monitoring and Reporting Requirements. By June 1 of each year, EGFs participating in

the EBTA shall report to the commission the amount of emissions of each allocated air contaminant during the preceding

control period. Emission allowances equal to the amount of

emissions during that control period would be deducted from

the EGF's compliance account. Consistent with Texas Utilities Code, §S9.264(n), if the amount of emissions exceeds the

EGF's allowance, allowances in the amount of the excess shall

be deducted from the allowances for the next year. The proposed new §101.336 requires that at the end of each control

period, the owner or operator of an EGF report its emissions

to balance the emissions with the allowances in its compliance

account.

As authorized by Texas Utilities Code, §39.264(p), the proposed

new §101.337 would allow facilities in the EI Paso Region to

meet emission allowances using credits from the City of Juarez,

in the United States of Mexico. The reduction must be reviewed

and approved by the executive director and must be permanent,

quantifiable, enforceable by the commission, and not required

by other rule or law. Under Texas Utilities Code, §S9.264(q),

SO TAC §101.337 would also exempt the EI Paso Region

from the EBTA if either EPA or the commission determines

that reductions of NO, will increase ambient levels of ozone.

Currently, NO, reductions are not required for facilities in the EI

Paso nonattainment area because EPA has granted a waiver

under FCAA, §182(f) concerning NO. Requirements. Under

this waiver, NO. reductions are not required if the attainment

demonstration for compliance with the ozone NAAOS can be

made without a NO, control strategy. The basis for this waiver

does not satisfy §39.264(q) of the Texas Utilities Code because

it has not been demonstrated, under the §182(f) waiver or

otherwise, that NO reductions would increase ambient ozone

in EI Paso CountY. These EGFs would still be required to

obtain a permit under Chapter 116, Subchapter I regardless

of the determination that NO, reductions are counterproductive

in controlling ambient ozone levels in the EI Paso Region. The

commission believes that this requirement is appropriate since

Texas Utilities Code, §S9.264(e) provides that EGFs without a

permit may not operate after May 1, 2003, and Texas Utilities

Code, §39264(q) refers only to reduction requirements, not

permitting requirements.

FISCAL NOTE

Bob Orozco, a technical specialist in the Strategic Planning and

Appropriations Section, has determined that for the first fiveyear period the proposed amendments are in effect, there will

be no significant fiscal implications for the commission and other

units of state and local government as a result of administration

or enforcement of the proposed amendments. River authorities

and units of local govemment that own and operate EGFs

are affected by the proposed amendments. Although EGFs

of 25 megawatts or less owned by units of state and local

government may be excused from the permitting requirements,

some EGFs will be required to obtain a permit and reduce

emissions to continue operating. It is anticipated that the

proposed amendments which allow emission allowance banking

and trading for EGFs will provide flexibility and potential cost

savings in planning and determining the most economical mix of

the application of emission control technology with the-purchase

of otherfacilities' surplus allowances to meet emission reduction

requirements.

The proposed amendments to Chapter 101, concerning General Rules, would develop and implement the EBTA system for

grandfathered EGFs and other EGFs that elect to participate in

EBTA requirements. The provisions to establish such a system

are contained in:

Act of May 27, 1999, 76th Legislature, SB 7, Regular Session,

1999 (to be codified at Texas Utilities Code, §11.00S-16S.002).

SB 7 also requires grandfathered EGFs to apply for a permit

on or before September 1, 2000. A grandfathered EGF is a

facility that was exempt from permitting requirements by virtue

of existing or beginning construction, alteration, or modification

on or before August 31, 1971. An EGF that does not obtain a

24 TexReg 7140 September 10, 1999 Texas Register
permit by May 1, 2003, may not operate unless the commission

finds good cause for an extension.

The new sections in Chapter 101 are proposed concurrently

with new sections in Chapter 116. The purpose of the

rulemaking in these chapters is to implement permit and

emission control requirements, including EBTA procedures for

certain EGFs, and related permit application and public notice

procedures.

The proposed amendments establish an emission allowance

banking and trading program which caps emissions over a

designated region to a level consistent with SB 7. SB 7 requires

the commission to allocate allowances for grandfathered EGFs

by January 1, 2000. Each participating EGF must hold

allowances equal to or greater than its emissions to be in

compliance with the program. The program encourages EGFs

to determine the methods of emissions control which will allow

the EGF to meet its emission allowances. The EBTA program

allows for voluntary trading of allowances between EGFs in the

same region to provide EGFs with the flexibility to determine

the best mix of using control technologies to reduce their own

emissions ancl/or the purchase or trading of surplus allowances

from other facilities.

SB 7 also allows non-grandfathered EGFs to elect to participate

in the EBTA and permitting program. These electing facilities

will be given allowances equal to their actual emissions reported

in their 1997 emissions inventory unless a federal or state

standard otherwise limits the 1997 emission rate.

PUBLIC BENEFIT

Mr. Orozco has also determined that for each year of the first

five years the proposed amendments to Chapter 101 are in

effect, the public benefit anticipated from enforcement of and

compliance with the proposed amendments will be potentially

increased efficiency in the reduction of air contaminants emitted

from affected EGFs, and increased flexibility for affected EGFs

in planning and determining the most economical mix of control

technology altematives and trading of emission allowances to

meet SB 7 reduction requirements.

It is the intent of the legislature in SB 7 that, starting May 1,

2003, annual emissions of NO. from grandfathered EGFs not

exceed 50% of the levels emitted during 1997 as reported to

the commission. It is also required by SB 7 that emissions of

S0. from coal-fired power plants not exceed 75% of the levels

emitteo in 1997. It is anticipated that these emission reductions

may be met, in part or in whole, by the emissions trading

and allowance system which is the subject of this rulemaking.

Counties within Texas have been divided into three regions by

SB 7 East Texas, West Texas, and EI Paso for the purpose

of allocating emissions of NO. and SO. and for the trading of

emissions allowances, by region, among the EGFs. The East

Texas Region emission rate shall be 0.14 pounds of NO, and

1.38 pounds of SO. per MMBtu. The EI Paso Region and West

Texas Region emission rate shall be 0.195 pounds of NO. and

1.38 pounds of S0. per MMBtu.

The purpose of the proposed amendments is to create and

implement an EBTA program which caps emissions over a

designated area from grandfathered and other EGFs that elect

to participate in the EBTA program. Each EGF participating in

the EBTA program must hold allowances equal to or greater

than its emissions to be in compliance with the program. The

EBTA program allows for trading of allowances between EGFs

in the same region to prOVide EGFs with fleXibility in planning

and determining the most economical mix of control technology

alternatives to reduce its own emissions with the purchase or

trading of another facility's surplus allowances to meet emission

reduction requirements.

There are no significant additional costs anticipated to any person or business as a result of complying with the proposed

amendments to Chapter 101. The proposed amendments are

intended to provide increased flexibility in planning and determining the most economical alternatives to reducing emissions

by either applying control technologies or purchasing or trading

emission allowances with other EGFs.

SMAll BUSINESS AND MICRO-BUSINESS ANALYSES

Based on the expected revenues from the smallest generators

and the number of employees defined as a micro-business,

there are no known small businesses and micro-businesses

as defined in the Texas Govemment Code with EGFs which

would be affected by these proposed amendments to Chapter

101. There are no significant additional costs anticipated to any

person or business as a result of complying with the proposed

amendments to Chapter 101.

DRAFT REGULATORY IMPACT ANALYSIS

The commission has reviewed the proposed rulemaking in light

of the regulatory analysis requirements of Texas Government

Code, §2001 .0225, and has determined that the rulemaking

is not subject to §2001.0225 because it does not meet the

definition of a "major environmental rule" as defined in that

statute. "Major environmental rule" means a rule the specific

intent of which is to protect the environment or reduce risks

to human health from environmental exposure and that may

adversely affect in a material way the economy, a sector of

the economy, prOductivity, competition, jobs, the environment,

or the public health and safety of the state or a sector of the

state. Because the specific intent of the proposed rulemaking

is procedural in nature and specifies how and when emission

allowances can be banked and traded; makes the trading and!

or banking of emission allowances voluntary; and allows the

EGFs the flexibility to decide the extent of banking and trading

of allowances, the rulemaking does not meet the definition

of a "major environmental rule." The proposed amendments

would only apply to grandfathered EGFs and electing EGFs.

Finally, the proposed amendments do not meet any of the four

applicability requirements of a "major environmental rule." The

proposed amendments do not exceed a standard set by federal

law, exceed an express requirement of state law, or exceed

a requirement of a delegation agreement. In addition, the

proposed amendments are made specifically to comply with SB

7.

TAKINGS IMPACT ASSESSMENT

The commission has prepared a takings impact analysis under

Texas Govemment Code, 2007.043. The following is a summary of that analysis. While these amendments may result in

capital costs for some EGFs, the amendments do not affect

private property in a manner that restricts or limits an owner's

right to the property that would otherwise exist in the absence

of the governmental action. Consequently, this proposal does

not meet the definition of a takings under Texas Government

Code, §2007.002(5). These amendments implement the requirements of Texas Utilities Code, 39.264. EGFs are required

to reduce emissions of NO. by 50% and, if applicable, S0., by

PROPOSED RULES September 10, 1999 24 TexReg 7141
25%. Although EGFs are required to make specific emission

reductions, these facilities have alternatives available under the

proposed banking program that may allow the EGF to avoid installing add on controls. Further, allowances can be transferred

under the proposed banking program so that EGFs have opportunities to buy and sell allowances in order to respond to

business needs. This action is intended to reduce emissions of

NO, and SO•. The action significantly advances this purpose

by requiring substantial reductions in the emission of NO, and

SO. through a system of emission allowances. While requiring

these reductions, this rule allows the trading of emission allowances so that EGFs may transfer allowances providing flexibility for compliance with emission limits. This action is taken

in response to a real and substantial threat to public health and

safety and significantly advances the health and safety purpose

and imposes no greater burden than is necessary to achieve

the health and safety purpose.

COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW

The commission has determined that this rulemaking relates

to an action or actions subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources

Code, §§33.201 et seq.), and the commission's rules in 30

TAC Chapter 281, Subchapter B, concerning Consistency with

Texas Coastal Management Program. As required by 31 TAC

§SOS.11 (b){2) and 30 TAC §281.4S(a)(3), relating to actions and

rules subject to the CMp, commission rules governing air pollutant emissions must be consistent with the applicable goals and

policies of the CMP. The commission has reviewed this action

for consistency with the CMP goals and policies in accordance

with the regulations of the Coastal Coordination Council. For

the proposed new sections relating to the authorization of emission allowances and the banking and trading of allowances, the

commission has determined that the rules are consistent with

the applicable CMP goal expressed in 31 TAC §S01.12(1) of

protecting and preserving the quality and values of coastal natural resource areas, and the policy in 31 TAC §S01.14(q), which

requires that the commission protect air quality in coastal areas. This proposal is intended to reduce overall emissions of

NO, and SO. from EGFs. This action is consistent with Title

40 Code of Federal Regulations because it does not authorize

an emission rate in excess of that specified by federal requirements. Interested persons may submit comments during the

public comment period on the consistency of the proposed rule

with the CMP goals and policies.

PUBLIC HEARING

The commission will hold a public hearing on this proposal in

EI Paso on October 1, 1999, at 9:00 a.m. in the City of EI

Paso Council Chambers, located at 2 Civic Center Plaza, 2nd

Floor. Additional hearings will be held in Lubbock on October

1 at 6:00 p.m. in the City of Lubbock Council Chambers,

located at 1625 13th Street; in Austin on October 4 at 9:00

a.m. in Room 201S of Texas Natural Resource Conservation

Commission Building E, located at 12100 Park 35 Circle; in

Irving on October 5 at 1:00 p.m. in the City of Irving Central

library Auditorium, located at 801 West Irving Boulevard; in

Houston on October 7 at 9:00 a.m. in the City of Houston

Pollution Control Building Auditorium, located at 7411 Park

Place Boulevard; and in Beaumont on October 7 at 6:00 p.m.

in the John Gray Institute, located at 855 Florida Avenue.

The hearings are structured for the receipt of oral or written

comments by interested persons. Individuals may present oral

statements when called upon in order of registration. Open

discussion will not be permitted during the hearings; however,

an agency staff member will be available to discuss the proposal

30 minutes prior to the hearings and will answer questions

before and after the hearings.

SUBMITTAL OF COMMENTS

Comments may be submitted to Casey Vise, MC 205, Office of

Environmental Policy, Analysis, and Assessment, Texas Natural

Resource Conservation Commission, P.O. Box 13087, Austin,

Texas 78711-3087, or taxed to (S12) 239-4808. All comments

should reference Rule Log Number 99033- 116-AI. Comments

must be received by 5:00 p.m., October 11, 1999. For further

information, please contact Beecher Cameron, of the Policy and

Regulations Division, at (S12) 239-1495.

Persons with disabilities who have special communication or

other accommodation needs who are planning to attend the

hearing should contact the Office of Environmental Policy,

Analysis, and Assessment at (512) 239-4900. Requests should

be made as far in advance as possible.

STATUTORY AUTHORITY

These new sections are proposed under Texas Utilities Code,

§39.264. which authorizes the commission to develop rules for

the allocation of emission allowances to EGFs and to make

rules concerning the banking and trading of those allowances.

The new sections are also proposed under Texas Health and

Safety Code, TCM, §382.011. which authorizes the commission to administer the requirements of the TCAA; §382.012,

which provides the commission with the authority to develop a

comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy

and purposes of the TCAA; §382.023, which authorizes the

commission to issue orders; and §382.061, which authorizes

the commission to delegate permitting authority to the executive director; and Texas Water Code, §5.122, which authorizes

the commission to delegate uncontested matters to the executive director.

The proposed new sections implement Texas Utilities Code,

§39.264, concerning Emissions Reductions of uGrandfathered

Facilities·; and Texas Health and Safety Code, §382.011,

concerning General Powers and Duties; §382.012, concerning

State Air Control Plan; §382.017. concerning Rules; §382.023,

concerning Orders; and §382.061, concerning Delegation of

Powers and Duties; and Texas Water Code, §5.122, conceming

Delegation of Uncontested Matters to Executive Director.

§lO1.330. Definitions.

The followin!< words and tenns. when used in this division. shall have

the followin!< meanin!!:s. unless the context clearly indicates otherwise.

ill Allowance - The authorization to emit one ton of

nitrogen oxide (NO) or sulfur dioxide (SO~ during a control period.

ill Authorized account representative - The responsible

person who is authorized. in writing. to transfer and otherwise manage

allowances.

ill Banked allowance - An allowance which is not used

to reconcile emissions in the designated year of allocation but which

is canied forward into future years and noted in the compliance or

broker account as "banked."

24 TexReg 7142 September 10, 1999 Texas Register
ill Broker account - The account where allowances held

by a person are recorded. Allowances held in a broker account may

not be used to satisfy compliance requirements for this division.

ill Compliance account - The account for an electric

generating facility (EGA or multiple EGFs in which allowances are

held.

ill Control period - The 12 month period beginning May

I of each year and ending April 30 of the following year. Control

periods begin May 1, 2003.

ill East Texas Region - All counties traversed by or east

of Interstate Highway 35 north of San Antonio or traversed bv

or east of Interstate Highway 37 south of San Antonio. and also

including Bexar. Bosque. Coryell. Hood. Parker. Somerville. and Wise

Counties.

ill Electing EGF - An electric generating facility permitted under Chapter 116. Subchapter B of this title (relating to New

Source Review Pennits) which is not subject to the requirements of

Texas Utilities Code. §39.264 and elects to comply with Chapter 1I6.

Subchapter I of this title (relating to Electric Generating Facility Permits).

£22. Electric generating facility - A facility that generates

electric energy for compensation and is owned or operated by a person

in this state. including a municipal corporation. electric cooperative•.

or river authority. An EGF does not include a facility that generates

electric energy primarily for internal use but that durin!! 1997 sold. to

a utility power distribution system. less than one-third of its potential

electrical output capacity.

llQ2 EI Paso Region - All of El Paso County.

.ul2. Heat input - The heat derived from the combustion

of any fuel at an EGF. Heat input does not include the heat derived

from reheated combustion air. recirculated flue gas. or exhaust from

other sources.

(12) NO allowance - An authorization to emit NO.

A' NO allowance is valid only for the purposes of meeting the

requirements of:

® this division: or

@2 Chapter 116, Subchapter I of this title.

@ Pennitted EGF - An electric generating facility

permitted under Chapter 116. Subchapter I of this title. including

electing facilities.

(4) SO, Allowance - An authorization to emit SO. valid

only for the purposes for meeting the requirements of this dfvision

and Chapter 116. Subchapter I of this title.

@ West Texas Region - All counties not contained in

the East Texas Re£!ion or El Paso region.

*101.331. A.Dplicabiliry.

This division applies only to the following:

ill Electric generating facilities permitted under Chapter

116. Subchapter I ofthis title. (relating to Electric Generating Facility

Permits).

ill A person not required to participate in the requirements of this division may open a broker account under this division

for the purposes of banking and trading emissions allowances.

*101.332. General Provisions.

Allowances are valid only for the pwposes of meeting the

requirements of this division and cannot be used to meet or exceed

the limitations of a permit or any applicable rule or law.

ill On May 1 of each year. beginning in 2004. an electric

generating facility (EGA shall hold a quantity of allowances in

its compliance account that is equal to or greater than· the total

emissions of that air contaminant emitted during the prior control

period. Compliance with the allowance system will begin with the

control period beginning May 1. 2003.

(c) Emission reductions used to satisfy the requirements of

the Emissions Banking and Trading of Allowances (EBTA) cannot

be used to generate emission reduction credits or discrete emission

reduction credits.

(d) Allowances cannot be used for nenin£! requirements to

avoid the applicabilitv of federal and state new source review (NSR)

requirements.

Allowances cannot be used to satisfy offset requirements

for new or modified sources SUbject to federal nonattainment NSR

requirements.

ill An allowance does not constitute a security or a propertY

19l' All allowances will be allocated. transferred. or used as

whole allowances. To determine the number of whole allowances.

the number of allowances will be rounded down for decimals less

than 0.50 and rounded up for decimals of 0.50 or greater.

f!!2 One compliance account shall be used for multiple

permitted EGFs located at the same property and under common

ownership or control.

ill If emissions of nitrogen.oxides or. if applicable..sulfur

dioxide. exceed the amount of allowances for a given control period.

allowances for the next control period will be reduced in an amount

equal to the emissions exceeding the allowances in the compliance

§101.333. Allocation ofAllowances.

Allowances will be allocated according to the requirements of this

section.

ill Except as provided in paragraphs (2) and (3) of this

section. allowances will be calculated using the following equation:

Figure: 30 TAC §101.333(l)

(A) the acid rain database of the EPA: or

@2 an method approved by the executive director.

consistent with the emission reduction requirements of this division,

if the information is unavailable from the EPA acid rain database.

£Q In the East Texas region.

(i) 0.14 pound nitrogen oxides (NO) per MMBtu:

@ 1.38 pounds sulfur dioxide (SO.) per MMBtu:

(D) In the West Texas and EI Paso Re!!ions. 0.195

pound NO FMMBtu:

ill For electing electric generating facilities (EGF). the

amount of allowances is equal to the EGF's actual emissions in tons

in 1997 and shall not exceed anv of the following:

(A) the emission inventory reported for calendar year

PROPOSED RULES September 10, 1999 24 TexReg 7143
reduced.

Chapter 115. COI\T'fROL OF AIR POLLlITION

FROM VOLATILE ORGANIC COMPOUNDS

Subchapter C. VOLATll..E ORGANIC COMPOUND TRANSFER OPERATIONS

ill The emission reduction must be reviewed and approved by the executive director prior to converting the credits into

allowances under this program.

@ EGFs in the El Paso Region are exempt from the

requirements of this division if either EPA or the commission

determines that reductions of nitrogen oxide in the EI Paso Region

that would otherwise be required under this division would result in

an increased ambient ozone level in EI Paso County.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's

legal authority to adopt.

Filed with the Office of the Secretary of State on August 30,

1999.

TRD-9905501

Margaret Hoffman

Director, Environmental Law Division

Texas Natural Resource Conservation Commission

Proposed date of adoption: December 15, 1999

For further information, please call: (512) 239-1932

§101.336. Emission Monitoring. Compliance Demonstration, and

Reponing.

(a) Emission monitoring and reporting shall be conducted

in accordance with §1l6.914 of this title. (relating to Emissions

Monitoring and Reporting Requirements).

lli For each control period. electric generating facilities

(EGFs). must submit a report to the commission detailing the amount

of emissions of each allocated air contaminant during the preceding

control period. This report must be submitted bv June I of each year.

Emission allowances equaling the total emissions will be deducted

from the EGFs compliance account.

§101.337. El Paso Region.

An electric generating facilitv (EGF) in the El Paso

Region may meet the emissions allowances by using credits from

emissions reductions achieved in the City of Juarez. United States

of Mexico. Emission reductions under this section must meet the

following criteria.

ill The emission reduction must be:

® enforceable by the commission;

® pennanent. meaning that the emission reduction is

unchanging for the remaining life of the source:

{9 quantifiable. so that the emission reduction can be

measured or estimated with confidence using replicable techniques:

@ surplus. such that the emission reduction is not

otherwise required of a facility by a state or federal law. regulation

or agreed order. and;

@ a real reduction in which actual emissions are

• ••

£Q Allowances will be allocated by commission order.

The cOIIlJ?ission shall maintain a registry of the

allow~ces m each c~mpli~ce account For each transfer. the registry

shall mclude the pnce paId per allowance. The registry shall not

contain proprietary information.

§lOl.334. Allowance Transfer.

Allowances may be transferred at any time during the

control period.

ill. !?<'cumentation of all final transfers must be received by

the comnusSIon on or before June 30 following the control period for

which the allowances are to be used.

i£l Only authorized account representatives may transfer

allowances.

@ Notification of transfer of allowance must occur within 30

days after the transfer of any allowances to another pany. Allowance

transfers are prohibited prior to May l. 2003.

Allowances at electing electric generating facilities (EGF)

that result from reduced utilization or shutdo"'tls are ineligible for

transfer. The amount of allowances eligible for transfer from an

electing EGF will be calculated using the heat input from 1997 and

the changed emission factors as follows:

ill If the heat input for the control period exceeds the

heat input for 1997. the following equation will be used to calculate

the amount of transferrable allowances.

Figure: 30 TAC §101.334(e)(l)

ill If the heat input for the control period is less than the

heat input for 1997. the following equation will be used to calculate

the amount of transferrable allowances.

Figure: 30 TAC 101.334(e)(2)

ill Allowances may be transferred within the same region.

but not between regions.

192 Trading to and from a broker account must meet the

trading restrictions regarding the origin of the allowances and eligible

transfers in this division.

l$lOl.335. Allowance Banking.

Allowances at electing facilities that result from reduced

utilization or shutdown are ineligible for banking.

ill Allowances not used for compliance may be banked for

use in subsequent years.

@ the allowable emission rate in an existing permit;

£Q an applicable state or federal requirement.

ill The commission may increase or decrease the amount

of allowances.for any con~ol period in order to satisfy requirements

under a state lIIlplementanon plan or other federal, state. or local air

quality requirement.

ffi Allowances will be allocated:

® initially. by:

ill January l. 2000. for grandfathered EGFs:

@ January l. 200L for electing EGFs: and

@ subsequently. by May 1 of each year. beginning in

24 TexReg 7144 September 10, 1999 Texas Register
Subchapter A. DEFINITIONS

30 TAC §1l6.18

The Texas Natural Resource Conservation Commission

(TNRCC or commission) proposes new §116.18, concerning

Electric Generating Facility Permits Definitions; §116.910,

concerning Applicability; §116.911, concerning Electric Generating Facility Permit Application; §116.912, concerning Electric

Generating Facility Permit Application for Electing Electric

Generating Facilities; §116.913, concerning General and Special Conditions; §116.914, concerning Emissions Monitoring

and Reporting Requirements; §116.915, concerning Emission

Control Changes; §116 916, concerning Permits for Electric

Generating Facilities in EI Paso County; §116.920, concerning

Public Participation for Initial Issuance; §116.921, concerning

Notice and Comment Hearings for Initial Issuance; §116.922,

concerning Notice of Final Action; §116.930, concerning

Modifications; and §116.931, concerning Renewal. Sections

116.910-116.931 would be placed in a new Subchapter I,

concerning Electric Generating Facility Permits. These new

sections are also proposed as amendments to. the state

implementation plan (SIP).

EXPLANATION OF PROPOSED RULES

Senate Bill (SB) 7, 76th Legislature, 1999, amended Texas

Utilities Code, Title 2, concerning Public Utility Regulatory Act,

Subtitle B, concerning Electric Utilities, and created a new

Chapter 39, concerning Restructuring of Electric Utility Industry.

more than one facility is included in a single VERP application, the

applicant shall remit the highest of the applicable fees.

§116.860. Voluntary Emission Reduction Permit Renewal.

Voluntary emission reduction permits (VERP) shall be

renewed in accordance with Subchapter D of this chapter (relating to

Permit Renewals).

ill To renew a VERP with credits acquired under §116.812

ofthis title (relating to Project Emission Reduction Credi~) the owner

or operator of the facility shall have:

ill made equipment improvements or emission reductions necessary to meet the requirements of §116.811(3) of this title

(relating to Voluntary Emission Reduction Permit Application): or

(2) acquired additional credits under the program as

necessarv to meet the permit requirements of §116.811(3) of this

title.

§1l6.870. Delegation.

The commission may delegate to the executive director the authority

to take any action on a voluntary emission reduction pennit.

This agency hereby ceftifies that the proposal has been reviewed by legal counsel and found to be within the agency's

legal authority to adopt.

Filed with the Office of the Secretary of State, on August 30,

1999.

TRD-9905509

Margaret Hoffman

Director, Environmental Law Division

Texas Natural Resource Conservation Commission

Proposed date of adoption: December 15, 1999

For further information, please call: (512) 239-1932

!!:2. The commission will make an audio recording or written

transcript of the hearing available to the public.

ill Any person. including the applicant. who believes that

any condition of the draft permit is inappropriate or that the

preliminary decision to issue or deny the permit is inappropriate, shall

raise all issues and submit all arguments supporting that position by

the end of the public comment period.

.(gl Any supporting materials for comments submitted under

subsection (f) of this section must be included in full and may not

be incorporated by reference, unless the materials are one of the

following:

ill already part of the administrative record in the same

proceedings:

ill state or federal statutes and regulations:

ill EPA documents of general applicability; or

ill other generally available reference materials.

ill The commission will keep a record of all comments

received and issues raised in the hearing. This record will be available

to the public.

ill The draft permit may be changed based on comments

pertaining to whether the permit provides for compliance with the

requirements of this subchapter.

ill The commission will respond to comments consistent

with §116.842 of this title (relating to Notice of Final Action).

{$1l6.842. Notice ofFinal Action.

ill After the public comment period or the conclusion of

any notice and comment hearing. the commission will send notice by

first-class mail of the final action on the application to any person

who commented during the public comment period or at the hearing.

and to the applicant.

@ The notice must include the following:

ill the response to any comments submitted during the

public comment period:

ill identification of any change in the conditions of the

draft pennit and the reasons for the change; and

ill a statement that anv person affected by the decision

of the commission may petition for a rehearing under §50.119 of this

title (relating to :-lotice of Commission Action. Motion for Rehearing)

and may seek judicial review under TCAA. §382.032, relating to

Appeal of Commission Action.

§116.850. Voluntarv Emission Reduction Pennit Application Fee.

Any person who applies for a voluntary emission reduction permit

(VERP) shall remit a fee.

ill If the grandfathered facility will use a control method

at least as stringent as those defined in §1l6.81l(3)(A) or (B) of this

title (relating to Voluntary Emission Reduction Permit Application),

the application fee shall be $450.

ill If the grandfathered facility will defer emission

reductions under §116.81l(3)(C) of this title. or if the grandfathered

facility will use emission reduction credits under §116.811(3)(D) of

this title. the application fee shall be $1.000.

ill OnlY one of the applicable fees required in paragraphs

(1)-(2) C':'±is section shall be remitted with a single VERP application

which proposes to control more than one facility at an account. If

• • •

PROPOSED RULES September 10,1999 24 TexReg 7163
58 7 requires the commission to implement the permitting and

allowance requirements of new §39.264, concerning Emissions

Reductions of "Grandfathered Facilities." S8 7 requires electric

generating facilities (EGFs) existing on January 1, 1999, that

were not subject to the requirement to obtain a permit under

Texas Clean Air Act (TCAA), §382.0518(g) to obtain a permit

from the commission. These facilities are commonly referred

to as grandfathered EGFs. A grandfathered facility is one

that existed at the time the legislature amended the TCAA

in 1971. These facilities were not required to comply with

(i.e., grandfathered from) the then new requirement to obtain

permits for construction or modifications of facilities that emit

air contaminants.

These new sections are proposed concurrently with amendments and new sections in Chapter 101 of this title, concerning

General Rules. The proposed new Division 2, concerning Emission Banking and Trading of Allowances, in the new Subchapter

H, concerning Emissions Banking and Trading, in Chapter 101

sets out the allowance system to be used to assist EGFs in

meeting the emission reduction requirements of S8 7. The purpose of the rulemaking in these chapters is to implement permit

and emission control requirements, including emission banking

and trading of allowances (EBTA), for certain EGFs and related

permit application and public notice procedures. The permit application and public notice procedures are the subject of these

proposed amendments to Chapter 116. The amendments to

Chapters 101 and 117 are published in a separate section of

this edition of the Texas Register.

58 7 requires owners or operators of grandfathered EGFs to

apply for a permit to emit nitrogen oxide (NO,) and, for coalfired EGFs, sulfur dioxide (S0.). These applications are due

on or before September 1, 2000. An EGF that does not

obtain a permit may not operate after May 1, 2003, unless the

commission finds good cause for an extension. It is the intent of

SB 7 that for the 12-month period beginning May 1, 2003, and

for each 12·month period following, annual emissions of NO,

from grandfathered EGFs not exceed 50% of the NO, emissions

reported to the commission for 1997. Furthermore, it is the

intent of the legislation that emissions of SO. from coal-fired

EGFs not exceed 75% of the SO. emissions reported to the

commission in 1997. The described emission limitations may

be satisfied by using control technology or by participating in

the banking and trading of allowances.

Persons, municipal corporations, electric cooperatives, and river

authorities owning EGFs that are not grandfathered may elect

to become subject to the permitting requirements and emission

reductions. A municipal corporation, electric cooperative, or

river authority may exclude any grandfathered EGF with a

nameplate capacity of 25 megawatts or less from permitting

and emission reduction requirements. Texas Utilities Code,

§39.264(d) requires notice of the intent to exclude these EGFs

by January 1, 2000. The commission will make available a form

for this purpose, and requests that the form be returned to the

commission by November 1, 1999.

The proposed new §116.18 contains the following definitions.

An "electric generating facility," as defined in 58 7, is a

facility that generates electric energy for compensation and

is owned or operated by a person in this state, including a

municipal corporation, electric cooperative, or river authority.

The commission proposes to modify that definition to exclude

a facility that generates electric energy primarily for internal

use, but that during 1997 sold, to a utility power distribution

system, less than one-third of its potential electrical output

capacity. This exclusion eliminates cogeneration facilities that

were not intended to be included in this program. An "electing

electric generating facility" is an EGF permitted under Chapter

116, Subchapter B, concerning New Source Review Permits,

which is not subject to the requirements of Texas Utilities Code,

§39.264 and elects to comply with Chapter 116, Subchapter

I. An "allowance" is the authorization to emit one ton of NO

or, if applicable, SO.' during a specified control period or

any specified control period thereafter. "Coal" is all solid

fuels classified as anthracite, bituminous, subbituminous, or

lignite by the American Society for Testing and Materials

Designation ASTM D388 92 "Standard Classification of Coals

by Rank" (as incorporated by reference in Title 40 Code of

Federal RegUlations (CFR) §72.13). This definition of coal

is consistent with the definition found in 40 CFR Part 72,

concerning Acid Rain Program. The commission is defining

coal to clearly include lignite as coal, since these two fuels

are sometimes referenced separately. 'Combined permit" is a

permit that consolidates the existing new source review (NSR)

authorization with the requirements of an EGF permit. A

'compliance account" is an account for an EGF or multiple

EGFs in which allowances are held. Consistent with Texas

Utilities Code, §39.264(c), a "control period" is the 12-month

period beginning May 1 of each year and ending April 30 of

the following year. Control periods begin on May 1, 2003.

"Nameplate Capacity" means the maximum electrical output

(expressed in megawatts) that an EGF can sustain over a

specified period of time when not restricted by seasonal or other

deratings. This definition is consistent with the definition used

under the Federal Clean Air Act (FCAA) Amendments of 1990,

Acid Rain Program. The commission believes that using this

definition will reduce any confusion for EGFs potentially subject

to both the Acid Rain Program and the EBTA program proposed

under Chapter 101, Subchapter H, Division 2. A "peaking

unit" is an EGF that has: 1) an average capacity factor of no

more than 10% during the past three calendar years, and 2) a

capacity factor of no more than 20% in each of those calendar

years. "Capacity factor" is either: 1) the ratio of an EGPs

actual annual electric output (expressed in megawatt-hours) to

the EGPs nameplate capacity times 8,760 hours or 2) the ratio

of an EGPs annual heat input (in millions of British thermal units

(MMBtu» to the EGPs maximum design heat input (in MMBtu)

times 8,760 hours. Both terms, capacity factor and peaking

unit, are consistent with the same terms in the FCAA Acid Rain

Program.

Section 116.910 states that a permit under this new subchapter

would authorize emissions of NO, for any EGF and emissions

of S02 for coal-fired EGFs. Section 116.910 specifies that

the EGF owner or operator authorized to act for the owner

is responsible for complying with this subchapter. Consistent

with Texas Utilities Code, §39.264(d), a municipal corporation,

electric cooperative, or river authority may exclude any EGF

with a nameplate capacity of 25 megawatts or less from this

subchapter. The municipal corporation, electric cooperative, or

river authority must notify the commission by January 1, 2000,

of its intent to exclude those EGFs. The commission will make

available a form for this purpose and requests that the form be

returned to the commission by November 1, 1999.

SB 7 requires grandfathered EGFs to obtain a permit from the

commission that authorizes the emission of NO, and, for coalfired EGFs, 502. Other than NO, and SO.' EGFs also emit

products of combustion such as carbon monoxide, particulate

24 TexReg 7164 September 10, 1999 Texas Register
matter, and volatile organic compounds. At a coal-fired EGF,

the emissions may include mercury as well. The commission

believes that the SB 7 authorization was only intended to

authorize NO, and SO. (for coal-fired EGFs). The commission

also believes that the intent of SB 7 was to eliminate the

grandfathered status of EGFs. However, it is unclear how

SB 7 authorizes or requires the permitting of anything other

than NO, and SO. (for coal-fired EGFs). Furthermore, if the

commission were to permit these other air contaminants in an

electric generating facility permit (EGFP), it is unclear what

standards these air contaminants should be held to. Therefore,

the commission proposes to incorporate these emissions using

the emission control standards of the Voluntary Emissions

Reduction Permits (VERP) proposed concurrently in this edition

of the Texas Register under Chapter 116, Subchapter H,

concerning Voluntary Emission Reduction Permits. These other

air contaminants from the EGFs would be reviewed under the

requirements of the VERP program but would only go through

the public notice process one time.

The commission believes that it is appropriate to rely on the

control methods and health effects requirements of the VERP

program tor air contaminants other than NO, and, if applicable,

SO.. The VERP program provides control method options

depending on the location of a grandfathered facility. The VERP

proposal also describes the suggested methods for a health

effects review for grandfathered facilities. This proposal to rely

on the VERP control methods and health effects review will

provide a consistent basis of review for emissions besides NO,

and SO, from all grandfathered facilities. The commission does

not think it is appropriate to merely include other emissions

in a grandtathered EGPs permit without a review of control

methods and, if necessary, impacts. This is consistent with

the longstanding policy to not treat certain facilities as being

·permitted" simply because the facilities are consolidated into

an existing permit. For example, a facility that was originally

authorized by an exemption will continue to be authorized under

the exemption even though the exemption is consolidated with

an NSR permit during an amendment or at renewal. The

proposal does not require applicants to permit these other air

contaminants from EGFs.

Many power plants may have other grandfathered support

facilities such as fuel storage tanks or coal handling facilities that

are not electric generating facilities. Because SB 7 addresses

only those facilities which generate electricity, these support

facilities are not explicitly required to obtain a permit under

S8 7. To encourage the permitting of grandfathered support

facilities, the commission proposes that these facilities could

apply tor a VERP which would be consolidated with the EGFP.

This would enable all the grandfathered facilities and EGFs at

a site to go through a combined permitting process. Thus, all

grandfathered facilities and EGFs would only go through the

public notice process one time.

S8 7 does not provide procedures for the modification of an

EGFP. Therefore, the commission believes that the requirements of the TCAA concerning modifications of existing facilities

still apply. Any modifications to any facility in an EGFP remain

subject to the permitting requirements of the TCAA and the existing modification requirements in Chapter 116, Subchapter B.

To address electing EGFs, the commission proposes that the

existing NSR permit be consolidated with a permit under this

subchapter. The combined permit would continue to authorize

emissions of all air contaminants and would incorporate the

requirements of this subchapter into a single permit. This permit

would contain the general and special conditions for electing

EGFs. The unchanged, existing NSR permit conditions would

not be subject to public notice tor the combined permit; only the

conditions specific to the EGFs for NO, and, if applicable, SO"

would be subject to the public notice required by §116.920.

Consistent with existing application procedures of the commission, the proposed new §116.911 contains application procedures to obtain an EGFP. As specified by amended Texas Utilities Code, §39.264(e), the proposed new §116.911 would require that owners or operators of grandfathered and electing

EGFs apply for a permit on or before September 1, 2000. The

section also contains information concerning general content

of the permit application. An EGFP will include provisions for

measurement of emissions and a requirement to use control

technology sufficient to ensure that emissions do not exceed

an EGPs allowance. Although control technology is not explicitly required under SB 7, the control method language was

included in the proposal to ensure that control technology, if appropriate, used by these EGFs would be sufficient to meet the

limitations of the allowances. The removal of control technology

could also trigger federal NSR requirements, since this change

could constitute a modification under federal regUlations. EGFs

in nonattainment areas must comply with nonattainment review

and, if applicable, Prevention of Significant Deterioration (PSD)

review. Allowances cannot be used to avoid federal permitting requirements because the allowances do not constitute a

permanent, enforceable emission limit. EGFs that are affected

sources under FCAA, §112(g), concerning Modifications, must

comply with those requirements. Since grandfathered EGFs

must comply with federal requirements, if applicable, the commission believes that it is appropriate to ensure that these EGFs

are in compliance with those requirements. The applicant must

demonstrate how it will meet the requirements of §116.914.

Texas Utilities Code, §39.264(e) requires coal-fired EGFs to

comply with the opacity limits specified in commission rules.

Applicants must submit an application for an EGFP under the

seal of a Texas licensed professional engineer, consistent with

§116.110(e), concerning Applicability.

EGFs that are currently authorized under Chapter 116 may elect

to participate in the EBTA under Chapter 101, Subchapter H,

Division 2 by consolidating their existing NSR permit with an

EGFP. The proposed new §116.912 contains application requirements for electing EGFs that are in addition to those con- .

tained in the proposed §116.911. Since an existing NSR permit

may authorize multiple facilities, the permit application submitted under this subchapter should identify which EGFs are to be

included in the EGFP. Applications must contain documentation

of actual emissions as well as fuel consumption, fuel heating

values, and heat input in MMBtu for calendar year 1997. This

information will be used to calculate allowances for these EGFs

and provide the data needed to meet the "requirements of Texas

Utilities Code, §39.264(i)(3), which restricts the banking and

trading of allowances that result from reduced utilization and

shutdown. Conditions may be added to the combined permit

where appropriate to ensure compliance with state and federal

law. An electing EGF may opt out of the requirements of this

subchapter under certain conditions. The electing EGF must

notify the commission of its intent to opt out prior to the beginning of the next control period and may not opt out during a

control period. This requirement would prevent an EGF from

opting out in order to avoid being out of compliance with the re-·

quirement to not exceed their allowances. All allowances for the

PROPOSED RULES September 10, 1999 24 TexReg 7165
electing EGF will be voided by the commission and may not be

banked for subsequent use. Since the EGF would no longer be

subject to the restrictions of the EBTA, it would be inappropriate

to use those allowances at other EGFs, and no allowances will

be allocated for subsequent control periods. Once an EGF has

opted out, the EGF may not participate in the EBTA at any future date. Since SB 7 states that EGFs must elect to participate

prior to September 1, 2000. there is not a subsequent opportunity for those EGFs to re-elect. The commission believes that a

one-time election and a one-time opt out provide sufficient flexibility without undermining the program. The owner or operator

shall request an alteration to the combined permit to remove the

conditions pertaining to the EGFP and restore any conditions

that existed prior to the consolidation. This alteration would restore the NSR permit to its prior status.

The proposed new §116.913 contains general conditions applicable to every EGFP unless specified differently in the permit,

and authorizes the commission to include special conditions

in the permit. An EGFP would authorize NO, emissions from

EGFs, and S02 emissions from coal-fired EGFs. The EGF must

comply with the EBTA in Chapter 101, Subchapter H, Division 2.

The proposed provisions for the EBTA require EGFs to maintain

allowances in a compliance account. The EBTA in Chapter 101

contains all provisions for managing allowances. For emissions

of NO, and, where applicable, S02' the EGF shall hold in its account, on May 1 of each year, a quantity of allowances equal to

or greaterthan the amount of that air contaminant emitted since

May 1 of the previous year. Holders of EGFPs shall comply

with this requirement beginning May 1, 2004. Beginning May 1,

2004, holders of EGFPs must report annual actual emissions

of NO, and, if applicable. S02' since the previous May 1. This

report must be submitted by June 1 of each year. This report

will be used to determine compliance with the requirement that

the EGF hold allowances equal to or greaterthan the emissions

over a given control period. The proposed section implements

the requirement of Texas Utilities Code, §39.264(e) that requires

coal-fired EGFs comply with the opacity limits specified in commission rules. Section 116.913 states that the removal of or

failure to operate existing control technology is not permissible

under this subchapter. The commission believes that it is not

the intent of the EGFP to authorize removal or backsliding of

control technology. Also under §116.913, proposed language

would state that applicable requirements of New Source Performance Standards (NSPS), under 40 CFR Part 60, conceming

Standards of Performance for New Stationary Sources; 40 CFR

Part 61, conceming National Emission Standards for Hazardous

Air Pollutants; and 40 CFR Part 63, concerning National Emission Standards for Hazardous Air Pollutants for Source Categories, are also conditions of the permit. The issuance of an

EGFP does not modify or limit the applicability of these federal

programs.

The proposed new §116.914 specifies monitoring and reporting

requirements for EGFPs. The commission is required by Texas

Utilities Code, §39.264(k) to provide methods for use in determining compliance with permits and methods for monitoring and

reporting actual emissions of NO, and, if applicable, S02' Title

40 CFR Part 75, concerning Continuous Emission Monitoring

Under the Acid Rain Program (Acid Rain Program), contains

monitoring requirements for S02 for affected units under that

program. Since the acid rain program already requires extensive monitoring, the commission proposes to use that monitoring for EGFs that are subject to the acid rain program for compliance with this subchapter. EGFs not subject to the Acid Rain

Program would have three choices in monitoring. The EGF may

choose to meet either Part 75 monitoring requirements, or the

requirements of Title 40 CFR Part 60, or the EGF may provide

an altemative monitoring plan that would be incorporated into

the permit conditions. Part 60 requirements are proposed as

an alternative to Part 75 in order to be consistent with current

NSR practices. Since Part 60 monitoring is less accurate than

Part 75 monitoring, the proposal requires Part 60 monitored

data to have a relative accuracy of greater than 10% (i.e., measured values within 90-100% of the correct value). To account

for this inaccuracy, the monitored value must be multiplied by

a factor of 1.1. This factor has been included to account for

the inequity between the monitoring accuracy of Parts 75 and

60. The commission believes that this factor, proposed in the

Ozone Transport Commission's (OTC) Model Rule, is appropriate for the EBTA as well, based on the similarity of the OTC

requirements and the goals of Texas Utilities Code, 39.264. The

OTC Model Rule implements a NO, emission budget program

to reduce ambient ozone concentrations. Although Texas is not

required to participate in the OTC budget program, the commission believes that it is appropriate to model this budget rule

after the OTC model rule. Additionally, EGFs with a heat input of less than 100 MMBtulhr could use Appendix E of 40

CFR Part 75 to estimate NO, emissions. Appendix E relies on

stack testing of the facility to develop a relationship between

the emission rate and heat input. The commission proposes

to structure the monitoring requirements of this subchapter on

these existing requirements because many EGFs are currently

using Part 75 and Part 60 monitoring methods. Data collected

from these monitoring requirements would be used to calculate annual emissions reported to the commission for the purpose of demonstrating compliance with allowances. Proposed

§116.914 also specifies that data collected from the monitoring

of EGFs shall be detailed in an annual report as required under

116.913. The commission will develop a form, AR-1, specifying

the requirements of the report, which would be due on June 1

of each year.

The proposed new §116.915 would permit emission control

changes to EGFs as a result of pollution control projects initiated

underthe EGFP program that reduce emissions of NO, or, if applicable, S02' This section allows emission control changes to

EGFs provided the control change follows the criteria in this section which is similar to §116.617, concerning Standard Permits

for Pollution Control Projects. Any emission increases must be

a result of the emission control change only. For changes that

are not pollution control projects, if nonattainment NSR (NNSR),

PSD, or FCAA, §112(g) is applicable, then the emission control

change must be authorized under NSR. For any significant increase in emissions of a air contaminant for which a National

Ambient Air Quality Standard (NAAQS) exists, the applicant

must demonstrate that the project will not lead to a violation

of the NAAQS or cause or contribute to a violation of a PSD

increment or PSD visibility limitation. Netting is not reqUired

when determining whether this demonstration must be made

for the proposed project; however, increases or decreases in

emissions must be included in any future netting. This section

references 30 TAC §116.12, concerning Nonattainment Review

Definitions, or Title 40 CFR §52.21(b)(23), concerning Prevention of significant deterioration of air quality, to determine what

constitutes a significant increase in an air contaminant. Consistent with existing standard permit registration requirements under Chapter 116, Subchapter F, concerning Standard Permits,

permit holders must submit a PI-1UR registration for emission

24 TexReg 7166 September 10, 1999 Texas Register
control changes. The emission control change may be implemented any time after receipt of written notification from the

executive director that there are no objections, or 45 days after

receipt by the executive director of the registration, whichever

occurs first.

Consistent with the current review process for registrations for

standard permits for pollution control projects, the emission

control change will not be authorized by the executive director

if t~er~ are significant health effects concerning the increase in

emISSIOns of any air contaminant other than those for which

a NAAQS has been established. Until those concerns are

addressed by the applicant to the satisfaction of the executive

director, the registration will not be approved. Excluding

changes authorized under §116.915(a), increased emissions

of any air contaminant, including NO, or, if applicable, SO,

must obtain preconstruction authorization under Subchapter B

of this chapter if nonattainment, PSD, or FCAA, §112(g) are

applicable. Since SB 7 does not authorize emissions which

triggerfederal permitting requirements, the commission believes

that ar: EGF is still subject to preconstruction requirements for

federal l:)ermits. Likewise, modifications that would trigger state

NSR 'J\:ould need appropriate authorization under Chapter 116,

Subchapter B.

Consistent with Texas Utilities Code, §39.264(q), the proposed

new §116.915 would exempt EGFs in EI Paso County from NO

allowance requirements if the commission or United States En:

vironmental Protection Agency (EPA) determines that reductions in NO, emissions would lead to increased ambient levels

o!. ?z~~e. Currently: NO, reductions are not required for faCilities ;n the EI Paso nonattainment area because EPA has

grante? a waiver under FCAA, §182(f). Under this waiver, NO

reductions are not required if the attainment demonstration to;

compliance with the ozone NAAQS can be made without a NO

control strategy. The existence of this waiver is not consistent

~ith t~.-: provisions of Texas Utilities Code, §39.264(q) because

It has root been demonstrated, under the §182(f) waiver or otherwise, that NO, reductions would increase ambient ozone in EI

Paso County. These EGFs would still be required to obtain a

permit under Chapter 116, Subchapter I regardless of the deter-

'!lination.that NO, reductions are counterproductive in controlhng ambient ozone levels in the EI Paso Region. The commissi~~. believes that this requirement is appropriate, since Texas

Utilities Code, §39264(e) provides that EGFs without a permit

may not operate after May 1, 2003, and Texas Utilities Code,

§39.?64(q) refers only to reduction requirements, not permitting

reqUlr~ments. Regardless of this determination, grandfathered

EGFs In EI Paso County would still be required to obtain a permit under this SUbchapter.

The proposed new §116.920 would require applicants for initial

Issuance of an EGFP to publish notice of intent to obtain a

permit in accordance with Chapter 39, concerning Public Notice,

SUb,?hCil?ter K of this title, concerning Public Notice of Air Quality

Apphcatlons. Subchapter K implements the new requirements

of TCAA.. §382.056, as a~ended by the 76th Legislature by

House Bill 801, an act relating to Public Participation in Certain

Environmental Permitting Procedures of the TNRCC. SB 7

provides that public participation for initial issuance of an EGFP

will be done in the manner of §382.0561, concerning Federal

Operati.n~ Permit; Hearing; and §382.0562, concerning Notice

of DeciSIon. These sections allow for notice and comment

hearings instead of contested case hearings under Texas

Government Code, Chapter 2001, concerning Administrative

Procedure, and require the commiSSIon to send notice 01

fina.l action t~ persons who comment during the commen1

penod or durrng a hearing. The proposed requirements 01

§§116.920, 116.921, and 116.922 are based on the sections

in 30.TAC Chapter 122, concerning Federal Operating Permits,

that Implement the requirements of TCAA, §382.0561 and

§382.0562. Section 116.920 provides that any person who

may be affected by emissions from the EGF may request a

notice and comment hearing on an EGFP application within 30

days after the publication of Notice of Receipt of Application

and In.tent to Ob~in Permit ynder §39.418 of this title, relating

to Notice of Receipt of Application and Intent to Obtain Permit.

Grandfathered support facilities that elect to obtain a VERP and

ha~e it consolidated with an EGFP may publish a combined

notice. The unchanged. existing NSR permit conditions would

not be subject to public notice for the combined permit; only

the conditions specific to the EGFs for NO, and. if applicable,

SO.' would be subject to the public notice required by §116.920.

Persons affected by a decision of the commission to issue or

deny an EGFP will be entitled to petition for a rehearing under

30 TAC §50.119 of this title, concerning Notice of Commission

Action, Motion for Rehearing, and may seek judicial review

under TCAA, §382.032, concerning Appeal of Commission

Action.

The proposed new §116.921 contains the hearing requirements

for the initial issuance of EGFPs. The proposed rule would

allow the commission to decide Whether .to hold a hearing

based on the reasonableness of a request. The commission

is not required to hold a hearing if the basis of the request

by a person who may be affected by emissions from the

facility is determined to be unreasonable. If a hearing is

requested by a person who may be affected by emissions

from the EGF, and that request is reasonable, the commission

will ~old a hearing. The section would require that notice of

heanng on a draft permit be published in the public notice

section ~f. on: issue of a newspaper of general circulation in

!he mUniCIpality or the nearest municipality where the EGF

IS. located. ~e notice must be published at least 30 days

prror to a heanng. The notice is published at the applicanfs

expense and the rule specifies the content of the notice. The

proposed rule provides the procedures for the submittal of

comments at a hearing and specifically states that the period

for submitting written comments extends to the close of the

hearing and may be extended beyond the close of the hearing.

Any person, including the applicant, may submit comments on

whether the draft permit contains inappropriate conditions or

~hether ~e preliminary decision to issue or deny the EGFP is

rnappropnate. Commenters shall raise all issues and submit

all comments supporting their position by the end of the public

comment period. This requirement will assist the commission

in developing its response to comments as required by· new

§116.922. To ensure a complete record of the comments,

the rule. propose~ prohibiting the incorporation by reference of

supportrng matenals for comments unless the materials meet

the criteria in §116.921 (g). The commission is required to keep

a record of all comments submitted or raised at a hearing and to

have a~ aUdi~ recording or written transcript of the hearing. The

record IS available to the public. Draft permits may be revised

based on comments pertaining to whether the permit provides

for compliance with the requirements for an EGFP.

Th: proposed new §116.922 would require the commission to

rndl~ldualJy notify persons who commented, either during the

public comment period or at a permit hearing, of the final action

PROPOSED RULES September 10, 1999 24 TexReg 7167
of the commission. The notice must be sent by first-class mail to

the commenters and to the applicant. The notice must include

the response to comments, the identification of any changes

in the permit, and a statement that any person affected by the

decision of the commission may petition for rehearing under 30

TAC §50.119, and for judicial review under TCAA, §382.032.

The EGFP establishes the conditions under which emissions of

NO, and S02 are regulated. Emissions of air contaminants other

than NO, and if applicable, SO.' may be permitted under the

VERP proposed in a concurrent rulemaking in other sections of

this edition of the Texas Register. Additionally, the public notice

requirements of the VERP and EGFP may be combined under

§116.920.

Consistent with Texas Utilities Code, §39.264(r), the proposed

new §116.931 would require EGFPs to be renewed under the

requirements of Chapter 116, Subchapter D, concerning Permit

Renewals.

FISCAL NOTE

Bob Orozco, a technical specialist in the Strategic Planning and

Appropriations Section, has determined that for the first fiveyear period the proposed amendments are in effect there will

be no significant fiscal implications for the commission and most

units of state and local government as a result of administration

or enforcement of the proposed amendments. River authorities

and units of local government that own and operate EGFs

having a capacity of greater than 25 megawatts will be required

to obtain a permit from the commission to continue operating.

The fiscal implications for units of state and local government

with EGFs will be addressed in the Public Benefit portion of this

preamble.

The proposed amendments to Chapter 116 would implement

the permit requirements for grandfathered EGF provisions

contained in:

Act of May 27, 1999, SB 7, 76th Legislature, 1999, (to be

codified in part at Texas Utilities Code, §§11.003-163.002).

In addition, the proposed amendments refer to public notice

and public participation provisions incorporated in proposed

changes to Chapter 39, Public Notice and specified in:

Act of May 13,1999, HB 801, 76th Legislature, HB 801,1999,

(to be codified in Texas Water Code, Chapter 5, Subchapter M,

and Texas Health and Safety Code. §361.088 and §382.056).

The proposed amendments require grandfathered EGFs to

apply for a permit before September 1, 2000. A grandfathered

EGF is an EGF that was exempt from permitting requirements

by virtue of existing or beginning construction, alteration, or

modification on or before August 31, 1971. An EGF that does

not obtain a permit by May 1, 2003, may not operate unless the

commission finds good cause for an extension.

The proposed amendments would establish requirements, procedures, deadlines, and responsibilities for electriC generating

facility permit (EGFP) applications for facilities that were formerly exempt from the agency's permit requirements.

PUBLIC BENEFIT

Mr. Orozco has also determined that for each year of the first

five years the proposed amendments to Chapter 116 are in effect, the public benefit anticipated from enforcement of and compliance with the proposed amendments will be a reduction of

air contaminants emitted from affected electric generating facilities, and the opportunity for public participation and comment

in the permitting procedures for formerly grandfathered EGFs

and other participating EGFs.

The purpose of the proposed amendments is to create and implement a permit and emission control program, including an

EBTA program for certain EGFs, and to implement related permit application and public notice procedures. EGF applicants

must apply for a permit to emit air contaminants on or before

September 1, 2000. An EGF that does not obtain a permit may

not operate after May 1, 2003, unless the commission finds

good cause for an extension.

The EGFP will also require measurement of emissions, prohibition of removal or failure to operate control technology. and a

requirement to use control technology sufficient to ensure that

emissions do not exceed an EGPs allowance. Emissions of

air contaminants other than NO, or SO. from EGFs may be

included in the EGFP. If included, these emissions would be

reviewed under the requirements of the concurrently proposed

Voluntary Emissions Reduction Permit (VERP) in Chapter 116,

Subchapter H. Support facilities for EGFs may be concurrently

permitted under the VERP and the permit may be consolidated

with an EGFP.

It is the intent of the legislature in SB 7 that, starting May 1,

2003, annual emissions of NO, from grandfathered EGFs not

exceed 50% of the levels emitted during 1997 as reported to

the commission. SB 7 also requires that emissions of SO. from

coal-fired power plants not exceed 75% of the levels emitted

in 1997 as reported to the commission. These reductions

may be met by the emissions trading and allowance system

which is the subject of related and concurrent rulemaking in

Chapter 101. Counties within Texas have been divided into

three regions by SB 7 East Texas. West Texas, and EI Paso for

the purpose of allocating emissions of NO, and SO. and for the

trading of emissions allowances, by region, among the EGFs:

The East Texas Region emission rate shall be 0.14 Ib of NO,

and 1.38 lbs of SO. per MMBtu. The EI Paso and West Texas

Regions emission rates shall be 0.195 Ib of NO,. The allowance

calculation is specified in the concurrently proposed Chapter

101, Subchapter H, Division 2, concerning Emissions Banking

and Trading of Allowances. The permit under this chapter would

require compliance with the allowance system calculated under

the EBTA.

For the purposes of this fiscal note, the estimated total annualized cost to EGFs of implementing the provisions of the proposed amendments consists of the cost of publishing notice

of intent to obtain an air permit, and the cost of installing and

operating the control technology sufficient to ensure that emission allowances are not exceeded. Each of these costs are

addressed in turn.

SB 7 requires that applicants publish notice of intent to obtain a

permit in accordance with TCAA, §382.056. concerning Notice

of Intent to Obtain Permit or Permit Review; Hearing. The public

notice requirements for these permits are contained in Chapter

39, conceming Public Notice. The cost of publishing notice is

estimated to be in the range of $380 to $3,600, inclusive of one

display notice, one legal notice, and one alternative language

notice. Costs vary significantly depending on the location of

the EGF and its proximity to large metropolitan areas. The

alternative language notice is not always required. Small town!

city newspapers generally charge much less for publication of

a public notice.

24 TexReg 7168 September 10, 1999 Texas Register
In February 1999, the Public Utility Commission of Texas

(PUCT) and the commission published a report entitled, "Electric Restructuring and Air Quality: A Preliminary Analysis of

Reductions and Costs of Nitrogen Oxides Controls from Electric

Utility Boilers in Texas.· The PUCT and the commission used

information collected from generation-owning utilities in Texas

to assess the potential costs of NO, emission reductions that

could be required from existing utility power plants. Costs were

estimated at an emission rate of 0.15 Ib MMBtu which is close

to the 0.14 Ib MMBtu specified in the proposed amendments

to Chapter 101. The average annual cost estimated by the

utilities of applying a control technology to attain this level of

reductions was approximately $4,000 per ton of emissions reduced. This average annual cost per ton of emissions reduced

includes annualized capital costs plus the additional annual operating costs associated with the applied technology. The study

states that the "NO, control costs developed in this analysis are

only estimates, and that a change in anyone of a number of

critical assumptions will cause these cost estimates to change

significantly." Generic reduction and cost factors were used in

the study but individual companies and specific units will most

likely have different costs. This variability in cost depends on

the types of emissions reduced, the amount of emission reductions, the specific processes involved, the size of the facility, and

control methodologies employed for emission reductions. The

data also indicates that EGFs with the largest required emission reductions have the lowest cost per ton of emission reduced. In general, the annualized cost for emission reductions

is inversely proportional to the amount of emissions required

because when larger emission reductions are required, the average cost is spread over more tons reduced.

The data also indicates that it would be more economical for

some of the affected EGFs which require small reductions and

large capital costs to use the banking and trading provisions

to offset some or all of the costs of reducing emissions to the

required level. It is anticipated that emission reduction requirements will be met as the economics of emission allowances,

emission reduction costs, the emission banking and trading system, and other factors of individual facilities dictate. It is also anticipated that costs for using the EBTA system will be less than

the cost of actual emission reduction in most cases. The PUCTt

commission study states that "a subcommittee of the Ozone

Transport Assessment Group (OTAG) has analyzed marketbased emission trading options, estimating potential savings

of as much as 50 percent, compared to the costs of unit-byunit compliance." The scope of the variability in the amounts

and types of emission reductions that are possible and the

methodologies available for reduction is such that costs of emission reduction for the EGFP program are impossible to predict

with certainty. However, an average annual cost of approximately $4,000 per ton of emissions reduced would appear to

be an acceptable industry-wide estimate of the cost of installing

and operating the control technology sufficient to ensure that

emission allowances are not exceeded. For EGFs requiring an

emission reduction of 100 to 1,000 tons annually, the total annualized costs are estimated to be in the range of $400,000

to $4,000,000. These estimated costs are inclusive of annualized capital costs and annual operating costs averaging approximately $4,000 per ton of emissions reduced plus the public

notice costs.

Costs associated with authoriZing emissions other than NO, or,

if applicable, SO" using the review process of the VERP are

detailed in the concurrent proposed Chapter 116, Subchapter

H. The VERP fee would not apply to these emissions and

the public notice requirements would be satisfied under the

EGFP. Costs associated with permitting support facilities under

the VERP include the permit application fee as detailed in

the concurrently proposed Chapter 116, Subchapter H. The

public notice requirements for the VERP and the EGFP may

be combined into one notice process.

A municipal corporation, electric cooperative, or river authority

may exclude any electric generating facilities of 25 megawatts

or less from the requirements to obtain an EGFP. These

entities must inform the commission by January 1, 2000, of

their intent to exclude facilities from permitting requirements.

River authorities and units of local government that own and

operate EGFs having a capacity greater than 25 megawatts

will be required to obtain a permit from the commission to

continue operating. These entities include the cities of Austin,

Brownsville, Bryan, Denton, Garland, Greenville, Lubbock, San

Antonio, the Texas Municipal Power Agency, Brazos Electric

Power Cooperative, San Miguel Electric Cooperative, and the

Lower Colorado River Authority. It is anticipated that the

total annualized cost of emission reductions will be similar

to those of the industry at large for similar sizes and types

of facilities, and types of emissions. It is also anticipated

that emission reductions will be made as the economics of

emission allowances, the banking and trading system, and

other factors of individual facilities dictate. The scope of the

variability in the amounts and types of emission reductions that

are possible and the methodologies available for reduction is

such that costs of emission reduction for the EGFP program

are impossible to predict with certainty for this segment of

the industry. However, the estimated annualized cost that

was used for the industry at large for installing and operating

the control technology of approximately $4,000 per ton of

emissions reduced would appear to be an acceptable estimate

for municipal corporations, electric cooperatives, and river

authorities. The cost of publishing notice will also be similar

to those for the industry at large.

SMALL BUSINESS AND MICRO-BUSINESS ANALYSES

Based on the expected revenues from the smallest generators

and the number of employees defined as a micro-business,

there are no known small businesses or micro-businesses as

defined in the Texas Government Code with EGFs which would

be affected by these proposed amendments to Chapter 116.

If there are affected small businesses or micro-businesses,

the estimated annualized cost that was used for the industry

at large for installing and operating the control technology

of approximately $4,000 per ton of emissions reduced would

appear to be an acceptable estimate. The cost of publishing

notice will also be similar to those for the industry at large.

DRAFT REGULATORY IMPACT ANALYSIS

The commission has reviewed the proposed rulemaking in light

of the regulatory analysis requirements of Texas Government

Code, §2001.0225, and has determined that the rulemaking

meets the definition of a "major environmental rule" as defined

in that statute. "Major environmental rule" means a rule

the specific intent of which is to protect the environment or

reduce risks to human health from environmental exposure,

and that may adversely affect in a material way the economy,

a sector of the economy, productivity, competition, jobs, the

environment, or the public health and safety of the state or

a sector of the state. However, the proposed amendments

PROPOSED RULES September 10,1999 24 TexReg 7169
to Chapter 116 are intended to protect the environment or

reduce risks to human health from environmental exposure

and may have adverse effects on grandfathered and electing

EGFs which could be considered a sector of the economy.

However, the analysis required by §2001.0225(c) does not apply

because the proposed amendments do not meet any of the

four applicability requirements of a major environmental rule.

The proposed amendments do not exceed a standard set by

federal law, exceed an express requirement of state law, or

exceed a requirement of a delegation agreement, and they are

not proposed solely under the general powers of the agency.

The amendments to Chapter 116 are proposed specifically to

comply with SB 7. SB 7 requires grandfathered EGFs apply for

a permit by September 1, 2000, and obtain a permit by May

1, 2003, or cease operating, absent a showing of good cause

to continue operating. The proposed amendments allow the

permitting of air contaminants other than NO, or S02 for EGFs

using the VERP process. Support facilities may be permitted

under a VERP which will be consolidated with an EGFP. There

is no federal law or delegation agreement with a federal agency

that requires the permitting of grandfathered EGFs.

TAKINGS IMPACT ASSESSMENT

The commission has completed a takings impact assessment

for the proposed rules. The following is a summary of that

assessment. These amendments implement the requirements

of Texas Utilities Code, §39.264. This section requires owners

or operators of grandfathered EGFs to apply for a permit on

or before September 1, 2000, and obtain a permit or cease

operation by May 1, 2003. It is the intent of SB 7 that for

the 12-month period beginning May 1, 2003, and for each

12- month period following, annual emissions of NO, from

grandfathered EGFs not exceed 50% of the NO, emissions

reported to the commission for 1997. Furthermore, it is the

intent of the legislation that emissions of S02 from coal-fired

EGFs not exceed 75% of the S02 emissions reported to the

commission in 1997. NO, and S02 allowances will be allocated

to EGFs by January 1, 2000. To assist EGFs in meeting

the reduction requirements, a banking and trading program is

proposed concurrently in Chapter 101 of this title. Although

EGFs are required to make specific emission reductions, these

facilities have alternatives available under the proposed banking

program that may allow the EGF to avoid installing add-on

controls. Further, allowances can be transferred under the

proposed banking program so that EGFs have opportunities

to buy and sell allowances in order to respond to business

needs. The amendments do not affect private property in a

manner that restricts or limits an owner's right to the property

that would otherwise exist in the absence of the governmental

action. Consequently, this proposal does not meet the definition

of a takings under Texas Government Code, §2007.002(5). The

reductions obtained from the issuance of EGFPs will assist in

the efforts of the commission to attain the NAAOS. This action is

taken in response to a real and substantial threat to public health

and safety and significantly advances the health and safety

purpose and imposes no greater burden than is necessary to

achieve the health and safety purpose.

COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW

The commission has determined that this rulemaking relates

to an action or actions subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources

Code, §§33.201 et seq.), and the commission's rules in 30

TAC Chapter 281, Subchapter B, relating to Consistency with

Texas Coastal Management Program. As required by 31 TAC

§505.11 (b)(2) and 30 TAC §281.45(a)(3), relating to actions and

rules subject to the CMp, commission rules governing air pollutant emissions must be consistent with the applicable goals and

policies of the CMP. The commission has reviewed this action

for consistency with the CMP goals and policies in accordance

with the regulations of the Coastal Coordination Council. For the

proposed new sections related to the authorization of EGFPs,

the commission has determined that the rules are consistent

with the applicable CMP goal expressed in 31 TAC §501.12(1)

of protecting and preserving the quality and values of coastal

natural resource areas, and the policy in 31 TAC §501.14(q),

which requires that the commission protect air quality in coastal

areas. This proposal is intended to reduce overall emissions of

NO, and S02 from EGFs. This action is consistent with 40 CFR

because it does not authorize an emission rate in excess of

that specified by federal requirements. Interested persons may

submit comments during the public comment period on the consistency of the proposed rule with CMP goals and policies.

PUBLIC HEARING

The commission will hold a public hearing on this proposal in

EI Paso on October 1, 1999, at 9:00 a.m. in the City of EI

Paso Council Chambers, located at 2 Civic Center Plaza, 2nd

Floor. Additional hearings will be held in Lubbock on October

1 at 6:00 p.m. in the City of Lubbock Council Chambers,

located at 1625 13th Street; in Austin on October 4 at 9:00

a.m. in Room 5108 of Texas Natural Resource Conservation

Commission Building F, located at 12100 Park 35 Circle; in

Irving on October 5 at 1:00 p.m. in the City of Irving Central

Library Auditorium, located at 801 West Irving Boulevard; in

Houston on October 7 at 9:00 a.m. in the City of Houston

Pollution Control Building Auditorium, located at 7411 Park

Place Boulevard; and in Beaumont on October 7 at 6:00 p.m.

in the John Gray Institute, located at 855 Florida Avenue.

The hearings are structured for the receipt of oral or written

comments by interested persons. Individuals may present oral

statements when called upon in order of registration. Open

discussion will not be permitted during the hearings; however,

an agency staff member will be available to discuss the proposal

30 minutes prior to the hearings and will answer questions

before and after the hearings.

SUBMITTAL OF COMMENTS

Comments may be submitted to Casey Vise, MC 205, Office of

Environmental Policy, Analysis, and Assessment, Texas Natural

Resource Conservation Commission, P.O. Box 13087, Austin,

Texas 78711-3087, or faxed to (512) 239-4808. All comments

should reference Rule Log Number 99033- 116-AI. Comments

must be received by 5:00 p.m., October 11, 1999. For further

information, please contact Beecher Cameron, of the Policy and

Regulations Division, at (512) 239-1495.

Persons with disabilities who have special communication or

other accommodation needs who are planning to attend the

hearing should contact the Office of Environmental Policy,

Analysis, and Assessment at (512) 239-4900. Requests should

be made as far in advance as possible.

STATUTORY AUTHORITY

The new section is proposed under Texas Utilities Code,

§39.264, which authorizes the commission to develop rules

24 TexReg 7170 September 10, 1999 Texas Register
Subchapter 1: ELECTRIC GENERATING FACILITY PERMITS

30 TAC §§116.910-116.916, 116.920-116.922, 116.930,

116.931

STATUTORY AUTHORITY

The new section is proposed under Texas Utilities Code,

§39.264, which authorizes the commission to develop rules

for the permitting of electric generating facilities; and Texas

ill Coal - All solid fuels classified as anthracite. bituminous. subbituminous. or lignite by the American Society for Testing

and Materials Designation ASTM D388 92 "Standard Oassification

of Coals by Rank" (as incorporated by reference in TItle 40 Code of

Federal Regulations. §72.13 (effective June 25. 1999».

ill Combined permit - A permit that consolidates the

existing new source review authorizations with the requirements of

an EGF permit.

ill Compliance account - The account for an EGF or

multiple EGFs in which allowances are held.

@ Control period - The 12 month period bel!inning May

1 of each year and ending April 30 of the following year. Control

periods begin May 1. 2003.

ill Electing electric generating facility (EGF2 - An EGF

permitted under Chapter 116. Subchapter B of this title (relating; to

New Source Review Permits) which is not subject to the requirements

of Texas Utilities Code. §39.264 and elects to comply with Chapter

116. Subchapter I of this title (relating to Electric Generating Facility

Permits).

ill Electric generatinl! facility (EGF2 - A facility that

generates electric energy for compensation and is owned or operated

by a person in this state. including a municipal corporation. electric

cooperative. or river authority. An EGF does not include a facility

that generates electric energy primarily for internal use but that during;

1997 sold. to a utility power distribution system. less than one-third

of its potential electrical output capacity.

£22 Nameplate Capacity - The maximum electrical output

(expressed in meg;awans) that an EGF can sustain over a specified

period of time when not restricted by seasonal or other deratings.

£.!.Q} Peaking unit - An EGF that has:

ftJ An average capacity factor of no more than 10%

during the past three calendar years; and

@ A capacity factor of no more than 20% in each of

those calendar Years.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's

legal authority to adopt.

Filed with the Office of the Secretary of State, on August 30,

1999.

TRD-9905502

Margaret Hoffman

Director, Environmental Law Division

Texas Natural Resource Conservation Commission

Proposed date of adoption: December 15. 1999

For further information, please call: (512) 239-1932

for the permitting of electric generating facilities; and Texas

Health and Safety Code, TCAA, §382.Q11, which authorizes

the commission to administer the requirements of the TCAA;

§382.012, which provides the commission the authority to develop a comprehensive plan for the state's air; §382.017, which

authorizes the commission to adopt rules consistent with the

policy and purposes of the TCAA; §382.051, which authorizes

the commission to issue permits; §382.0513, which authorizes

the commission to establish and enforce permit conditions consistent with the TCAA; §382.0515, which reqUires applicants

to provide information that assures compliance with state and

federal laws and regulations; §382.0518, which authorizes the

commission to issue permits for new construction and modifications; §382.0519, which authorizes the commission to issue

voluntary emission reduction permits, §382.05191, which authorizes public notice for voluntary emission reduction permits;

§382.05193, which authorizes permits through emissions reductions, §382.055, which authorizes the commission to establish procedures for review or renewal of a permit; §382.056,

which authorizes the commission to require public notice of

certain permit applications and procedures for requesting hearings and responding to comments; §382.0561, which authorizes

hearing procedures for federal operating permi~; §382.0562,

which requires notices of decision; and §382.061, which authorizes the commission to delegate permitting authority to the

executive director; and Texas Water Code, §5.122, which authorizes the commission to delegate uncontested matters to the

executive director.

The proposed new section implements Texas Utilities Code,

§39.264, relating to Emissions Reductions of "Grandfathered

Facilities"; Texas Health and Safety Code, §382.011, relating

to General Powers and Duties; §382.012, relating to State Air

Control Plan; §382.017, relating to Rules; §382.051, relating

to Permitting Authority of Board; Rules; §382.0513, relating to

Permit Conditions; §382.0515, relating to Application for Permit;

§382.0519, relating to Voluntary Emissions Reduction Permit,

§382.05191, relating to Voluntary Emissions Reduction Permit:

Notice and Hearing; §382.05193, relating to Emissions Permits

through Emissions Reductions; §382.0518, relating to Preconstruction Permit; §382.055, relating to Review and Renewal of

Preconstruction Permit; §382.056, relating to Notice of Intent

to Obtain Permit or Permit Review; Hearing; §382.0561, relating to Federal Operating Permit: Hearing; §382.0562, relating

to Notice of Decision; and §382.061, relating to Delegation of

Powers and Duties; and Texas Water Code, §5.122, relating to

Delegation of Uncontested Matters to Executive Director.

§116.18. Electric Generating Facility Permits De(znitions.

The following words and terms. when used in Subchapter I of this

chapter (relating to Electric Generating Facility Pennits) shall have

the following; meanings. unless the context clearly indicates otherwise.

ill Allowance - The authorization to emit one ton of

nitrogen oxide (NO) or sulfur dioxide (SO) during a control period. - - @ Capacity factor - Either:

W the ratio of an electric generating; facility's (EGF2

actual annual electric output (expressed in megawatt-hours) to the

EGFs nameplate capacitvtimes 8.760 hours: or

(B) the ratio of an EGF's annual heat input (in millions

ofBritish thermal units (MMBtu» to the EGFs maximum design heat

input (in MMBtu) times 8.760 hours.

• • •

PROPOSED RULES September 10, 1999 24'TexReg 7171
Health and Safety Code, TCAA, §382.Q12, which provides the

commission the authority to develop a comprehensive plan for

the state's air; §382.017, which authorizes the commission

to adopt rules consistent with the policy and purposes of the

TCAA; §382.0513, which authorizes the commission to estabfish and enforce permit conditions consistent with the TCAA;

§382.051, which authorizes the commission to issue permits;

§382.0518, which authorizes the commission to issue permits

for new construction and modifications; §382.0519, which authorizes the commission to issue voluntary emission reduction

permits, §382.05191, which authorizes pUblic notice for voluntary emission reduction permits; §382.05193. which authorizes

permits through emissions reductions, §382.055, which authorizes the commission to establish procedures for review or renewal of a permit; §382.056, which authorizes the commission

to require public notice of certain permit applications and procedures for requesting hearings and responding to comments;

§382.0561, which authorizes hearing procedures for federal operating permits; §382.0562, which requires notices of decision;

and §382.061, which authorizes the commission to delegate

permitting authority to the executive director; and Texas Water

Code, §5.122, which authorizes the commission to delegate uncontested matters to the executive director.

The proposed new section implements Texas Utilities Code,

§39.264, relating to Emissions Reductions of "Grandfathered

Facilities"; Texas Health and Safety Code, §382.Q12, relating to State Air Control Plan; §382.017, relating to Rules;

§382.0513, relating to Permit Conditions; §382.051, relating

to Permitting Authority of Board; Rules; §382.0519, relating

to Voluntary Emissions Reduction Permit, §382.05191, relating to Voluntary Emissions Reduction Permit: Notice and Hearing; §382.05193, relating to Emissions Permits through Emissions Reductions; §382.0518, relating to Preconstruction Permit; §382.055, relating to Review and Renewal of Preconstruction Permit; §382.0561. relating to Federal Operating Permit: Hearing; §382.0562, relating to Notice of Decision; and

§382.061, relating to Delegation of Powers and Duties; and

Texas Water Code, §5.122, relating to Delegation of Uncontested Matters to Executive Director.

§1l6.910. Applicability.

The owner or operator of a grandfathered electric generating facilitv <EGF) shall apply for a pennit to operate that facility

under this subchapter.

ill Electing EGFs opting to obtain a permit under this

subchapter shall submit a permit application to consolidate existing

New Source Review (NSR) authorizations with a permit to authorize

nitrogen oxide (NO ) emissions and. if applicable. sulfur dioxide (SO,)

emissions under tills subchapter. -

The owner. or the operator who is authorized to act for the

owner. of an EGF is responsible for complying with this subchapter.

@ A municipal corporation. electric cooperative. or river

authority may exclude any EGF with a nameplate capacity of 25

megawatts or less from this subchapter. The municipal corporation,

electric cooperative. or river authority must notify the commission bv

January 1. 2000. of its intent to exclude those EGFs.

Emissions of NO shall be permitted under this subchapter

for any EGF. Emissions of SO. shall be permitted under this

subchapter only for coal-fired EGFs. Emissions of other air

contaminants from EGFs may be permitted under this subchapter

provided the grandfathered facilities meet the requirements ofChapter

116. Subchapter H of this title (relating to Voluntary Emission

Reduction Permits).

.ill Owners or operators of grandfathered facilities as defined

in §116.10 of this title (relating to General Definitions) at sites with

EGFs subject to this subchapter may include those grandfathered facilities in a permit issued under this subchapter. provided the grandfathered facilities meet the requirements of Chapter 116. Subchapter

H of this title.

§116.911. Electric Generating FaciliTY Pennit Application.

Any application for an electric generating facility permit

(EGFP) must include a completed Fonn PI-loU. General Application.

The Form PI-loU must be signed by an authorized representative

of the applicant. The Form PI-loU specifies additional support

information which must be provided before the application is deemed

complete. In order to be granted an EGFP. the owner or operator of

the electric generating facility <EGF) shall submit information to the

commission which demonstrates that all of the following are met:

ill Measurement of emissions and perfonnance demonstration. Measurement of emissions and demonstration of performance shall be conducted consistent with §1l6.914 of this title (relating to Emissions Monitoring and Reporting Requirements).

ill Control method. EGFs shall use control technology

sufficient to ensure that actual emissions from the facility do not

exceed the amount of allowances in an EGF's compliance account.

ill Nonattainment review. If the EGF is located in a

nonattainment area. the owner or operator of the EGF shall comply

with all applicable requirements under Chapter 116, Subchapter B.

Division 5 of this title (relating to Nonattainment Review).

ill Prevention of Si!mificant Deterioration (P$D) review.

If the EGF is located in an attainment area the owner or operator of

the EGF shall comply with all applicable requirements under Chapter

116. Subchapter B. Division 6 of this title (relating to Prevention of

Significant Deterioration Review).

(5) Federal standards of review for constructed or reconstructed niTor sources of hazardous air pollutants. If the EGF is an

affected source (as defined in §116.15(1) of this title (relating to Section 112(g) Definitions». the affected source shall comply with all

applicable requirements under Chapter 116, Subchapter C of this title

(relating to Hazardous Air Pollutants: Regulations Governing Constructed or Reconstructed Major Sources (FCAA, § 112(g), 40 CFR

Part 63».

(6) Air dispersion modeling or ambient monitoring for

pollution control projects under §116.915(b)(2) of this title (relating

to Emission Control Changes). Computerized air dispersion modeling

and/or ambient monitoring may be required by the commission's

New Source Review Permits Section where there is an increase in

emissions to determine the air quality impacts from the EGF.

ill Opacity Limitations for coal-fired EGFs. The coalfired EGFs must meet the opacity limitations of §I 11.111 of this title

(relating to Requirements for Specified Sources).

(b) Applications must be submitted on or before September

1. 2000.

i£l All applications for an EGFP shall be submitted under

the seal of a Texas licensed professional engineer in compliance with

§I16.I10(e) of this title (relating to Applicability).

§116.912. Electric Generating Facility Pennit Application for Electing Electric Generating Facilities.

24 TexReg 7172 September 10,1999 Texas Register
le2 Electing Electric Generating Facilities (EGF) seeking to

consolidate existing New Source Review (NSR) authorizations Vvith a

pennit under this subchapter shall submit an application to authorize

nitrogen oxide (NO) emissions and. if applicable.. sulfur dioxide

(SO.) emissions. The application shall meet the requirements of

§116.911 of this title (relating to Electric Generating Facility Pennit

Application) as well as the following.

ill The permit application shall contain the following

information for the purposes for managing allowances:

® Documentation of the actual emissions of that

EGF for calendar year 1997.

@ Documentation of fuel conswnption. fuel heating

values. and heat input in MMBtu for calendar year 1997.

ill The permit application shall identify which EGFs are

to be included.

ill Conditions in the electing EGF's NSR permit necessary to ensure compliance with state or federal law Vvill be included

in the combined permit.

ill The combined pennit shall include the conditions of

the NSR authorization as well as the conditions of the EGFP.

!Q2. An electing EGF may opt out of the requirements of this

subchapter under the following conditions:

ill The electing EGF must notify the commission of its

intent to opt out prior to the beginning of the next control period.

ill The electing EGF may not opt out during a control

ill All allowances for the electing EGF wi be voided by

the commission and may not be banked for subsequent use.

ill No allowances will be allocated forsubsequent control

ill Once an EGF has opted out the EGF may not

partIcIpate in the emissions banking and trading of allowances at

any future date.

@ The owner or operatorshall request an alteration to the

combined permit to remove the conditions pertaining to the EGFP and

restore any conditions that existed prior to the consolidation.

§116.913. General and Special Conditions.

le2 The following general conditions shall be applicable to

every electric generating facility pennit (EGFP) unless otherwise

specified in the pennit.

ill A pennit issued under this subchapter authorizes the

following.

® !iQ. emissions from all electric generating facilities (EGf).

m.2 SO. emissions from coal-fired EGFs.

{9 Emissions of all other air contaminants from EGFs

meeting the requirements of Chapter 116. Subchapter H of this title

(relating to Voluntary Emissions Reduction Permits).

ill Owners or operators of ~dfathered facilities may

consolidate a permit issued under the requirements of Q1aPter 116.

Subchapter H of this title. .

ill The EGF must comply Vvith Chapter 101. Subchapter

H. Division 2 of this title (relating to Emissions Banking and Trading

of Allowances) including the requirement to maintain allowances in

a compliance account. Allowances may be transferred in accordance

with §1Ol.335 of this title (relating to Allowance Banking).

ill Mass emission monitoring and reporting shall be

conducted in accordance with §116.914 of this title (relating to

Emissions Monitoring and Reporting Requirements).

ill On May 1 of each year after May 1. 2003. an EGF

subject to this subchapter shall hold a quantity of allowances for

emissions of NO and. where applicable. SO.. in its compliance

account that is equal to or greater than the toral emissions of that

air contaminant emitted during the prior control period.

@ RepOrts of annual actual emissions for NO and. where

applicable. SO.• during the control period shall be submitted to the

New Source Review Permits Section by June 1 of each year.

m Coal-fired EGFs must meet the opacity limitations of

§111.111 of this title (relating to Requirements for Specified Sources).

ill Removal of or failure to operate existing control

technology is not permissible under this subchapter.

122 New Source Performance Standards (NSPS). The

emissions from each affected facility as defined in 40 Code of Federal

Regulations (CPR). Part 60 will meet at least the requirements of any

applicable NSPS as listed under Title 40 CFR Part 60. promulgated

by the EPA under authority granted under FCAA. §lll. as amended.

D.Q2 National Emission Standards for Hazardous Air Pollutants (NESHAPS). The emissions from each facility as defined in

40 CPR Part 61 Vvill meet at least the requirements of any applicable

NESHAPS. as listed under 40 CPR Part 61. promulgated by EPA

under authority granted under the FCAA. §1l2. as amended.

ll!2 NESHAPS for source categories. The emissions

from each affected facilitY shall meet at least the requirements of

any applicable maximum achievable control technology standard as

listed under 4Q CPR Part 63. promulgated by EPA under FCAA §112

or as listed under Chapter 113. SUbchapter C of this title (relating to

National Emissions Standards for Hazardous Air Pollutants for Source

Categories (FCAA §112. 40 CPR Part 63).

lli Special conditions mav be included in the EGFP.

§116.914. Emissions Monitoring and Reporting Requirements.

le2 The EGF shall comply Vvith the following requirements:

ill For EGFs subject to the requirements of 40 Code

of Federal Regulations (CFR) Part 75 (effective June 25. 1999).

relating to Continuous Emission Monitoring. all monitoring systems

must comply Vvith the initial performance testing and periodic

calibration. accuracy testing. and quality assurance/qUality control

testing specified in 40 CPR Part 75. EGFs not subject to 40 CPR Part

75 may choose to comply with the initial performance testing and

periodic calibration. accuracy testing. and quality assurance/qUality

control testing specified in 40 CFR Part 75 or those same requirements

in 40 CPR Part 60 (relating to New Source Performance Standards).

@ During a period when valid data is not being recorded

bv monitoring devices approved for use to demonstrate compliance

with this subchapter. missing or invalid data shall be replaced with

representative default data in accordance with the provisions of

40 CPR Part 75. Subpart D. relating to Missing Data Substitution

Procedures.

lli For EGFs subject to 40 CPR Part 75. a certified monitoring system under 40 CPR Part 75 shall be used to demonstrate

compliance with this subchapter.

PROPOSED RULES September 10, 1999 24 TexReg 7173
ill If the EGF has a flow monitor ceItified under 40 CFR

Part 75. nitrogen oxide (NO) emissions in pounds per hour shall

be determined using a NO continuous emission monitoring system

(CEMS) and the flow monitor.

ill If the EGF does not have a certified flow monitor. but

does have a NO CEMS. NO emissions in pounds per hour shall be

determined by multiplying pOunds of NO per million British thermal

units QbslMMBtu) times heat input in MMBtu per hour (MMBtui

hr). Procedures found in 40 CFR Pan 75. Appendix F. concerning

Conversion Procedures. Section 3. shall be used to convert the

measured concentration of NO and a diluent (carbon dioxide (CO,)

or oxygen (0,» into an emissIon rate in IbslMMBtu. Procedures

found in 40 CFR Part 75. Appendix F. Section 5. shall be used to

determine the hourly heat input in MMBtuIhr. These two values Qbsl

MMBtu and MMBtuIhr) shall be multiplied together to determine

NO emissions in Ibslhr.

ill The procedures in 40 CFR Part 75. Appendix E.

relating to Optional NO Emissions Estimation Protocol for Gas-fired

Peaking Units and Oil-fired Peaking Units. may be used to estimate

the NO emission rate.

if2 For EGFs not subject to 40 CPR Pan 75. a certified

monitoring SYStem under 40 CFR §60.13. Subpart A; Appendix B

Performance Specifications 2 and 3; and Appendix F. §5.1 or 40 CFR

Part 75 shall be used to demonstrate compliance with this subchapter.

For all CEMS exceeding 10% relative accuracy. actual emissions must

be determined by multiplying the CEMS data by 1.1.

ill Emissions in pounds per hour shall be determined

using the NO CEMS and one of the following methods:

itJ The owner or operator may elect to comply with

subsection (b)(l) or (2) of this section.

@ The EGF may use a flow monitor ceItified under

40 CFR Pan 60 to determine emissions in pounds per hour.

i9 NO emissions in pounds per hour may be determined bv mUltiplying the IbslMMBtu times the heat input in MMBtuI

hr. Procedures found in 40 CFR Part 60. Appendix A. Method 19

shall be used to convert the measured concentration of NO and a

diluent (CO. or 0,) into emission rates in IbsIMMBtu. ProCedures

found in 4O-CFR 'Part 75. Section 5. Appendix F shall be used to

determine the hourly heat input in MMBtuIhr. These two values (lbsl

MMBtu and MMBtuIhr) shall be multiplied together to determine

NO emissions in lbslhr.

ill For EGFs with a heat input of less than 100 MMBtui

hr and for peaking units emissions in pounds per hour may be

determined using the procedures in Appendix E of 40 CFR Part 75

to estimate the NO emission rate.

@ In lieu of the monitoring required bv subsection (c) ofthis

section. the EGFP may authorize alternative monitoring to calculate

mass emissions under this section. The permit applicant must submit

the following for review of an alternative monitoring proposal:

ill a description of the monitoring approach to be used:

ill a description of the major components of the monitoring system. including the manufacturer. serial number of the component. the measurement span of the component. and documentation

to demonstrate that the measurement span of each component is appropriate to measure all of the expected values:

ill an estimate of the accuracy of the system and documentation to demonstrate how the estimate of accuracy was determined;

ffi a description of the tests that will be used for initial

certification. initial quality assurance. periodic quality assurance. and

relative accuracy; and

@ additional information may be requested before approving a request for alternative monitoring. Alternative monitoring

shall be incorporated into the EGF permit

W Data collected from monitoring of EGFs shall be used to

calculate the actual emissions over a control period. ror each control

period. EGFs SUbject to this subchapter must submit a report to the

commission detailing the amount of emissions of each allocated air

contaminant during the preceding control period. This report must

be submitted by June 1 of each Year. At a minimum. the report shall

contain the following information:

ill A description of the monitoring protocol;

m A completed Fonn AR-l. Emissions Monitoring Data

ill Other information as needed.

§116.915. Emission Control Changes.

(a) Emission control changes resulting from pollution control

projects designed to reduce emissions of nitrogen oxides (NO) or. if

applicable. sulfur dioxide (SO,). are authorized for EGFs provided

that the following conditions are met.

ill Any emission increase of an air contaminant must

occur solely as a result of the installation of control equipment or

implementation of a control technique authorized under the permit

issued under this subchapter.

m If the project. without consideration of any other

increases or decreases not related to the project. will result in a

significant net increase in emissions of any criteria pollutant. the

applicant shall submit information sufficient to demonstrate that

the increase will meet the conditions of subparagraph (A) of this

paragraph.

® The net emission increase may not:

ill considering the emission reductions that will

result from the project. cause or contribute to a violation of any

national ambient air quality standard (NAAQS);

@ cause or contribute to a violation of any Prevention of Significant Deterioration (pSD) increment: or

iliil. cause or contribute to a violation of a PSD

visibility limitation.

@ For the purposes of this section. "significant net

increase" means those emissions increases. resulting sOlely from

the installation of control equipment or implementation of control

techniques. that are equal to or greater than:

ill the major modification threshold listed in

§1l6.12 of this title (relating to Nonattainment Review Definitions).

Table 1 for air contaminants for which the area is designated as

nonattainment. or for precursors to these air contaminants; or

@ significant as defined in 40 CFR §522l(b)(23)

(effective July 20. 1993) (relating to Prevention of Significant

Deterioration of Air Quality) for air contaminants for which the area

is designated attainment or unclassifiable. or for precursors for air

contaminants.

!9. Netting is not required when detennining whether

this demonstration must be made for the proposed project. The

increases and decreases in emissions resulting from the project must

24 TexReg 7174 September 10, 1999 Texas Register
be included in any future netting calculation if they are determined

to be otherwise creditable.

@. Permit holders must submit a PI-IUR registration for

emission control changes. The emission control change may be

implemented any time after receipt of written notification from the

executive director that there are no objections. or 45 days after receipt

by the executive director of the registration. whichever occurs first.

i£2. The ernission control change will not be authorized by the

executive director if there are significant health effects concerning

the increase in emissions of any air contaminant other than those

for which a NAAQS has been established until those concerns are

addressed by the registrant to the satisfaction ofthe executive director.

@ Increased emissions of any air contaminant. including

NO or. if applicable. SO•• other than increases authorized under subsection (a) of this section must obtain preconstruction authorization

under Chapter 116, Subchapter B of this title (relating to New Source

Review Permits) if nonattainment. PSD. or FCAA. §112(g). relating

to Modifications. are applicable.

§116.916. Permits for Electric Generating Facilities in El Paso

County.

Electric generating facilities in EI Paso County are not required to

meet nitrogen oxide allowance requirements if the commission or

EPA determines that reductions in nitrogen oxide emissions in the El

Paso Region otherwise required by this subchapter would result in

increased ambient ozone levels in EI Paso County.

§116.920. Public Participation for Initiallssuance.

An applicant for an electric generating facility permit

CEGFP) shall publish notice of intent to obtain the permit in

accordance with Chapter 39 of this title (relating to Public Notice).

@. Public Dotice for an EGFP may be combined with the

public notice for a voluntarv emission reduction permit. under Chapter

116. Subchapter H of this title (relating to Voluntary Emission

Reduction Permits.)

i£2. Electing EGFs are subject to public notice for emissions

of nitrogen oxides (NO) and, if applicable. sulfur dioxide (SO,). - - @ Any person who may be affected bv emissions from an

EGF may request the commission to hold a notice and comment

hearing on the EGFP application. The public comment period shall

end 30 days after the publication of Notice of Receipt of Application

and Intent to Obtain Permit under §39.4l8 of this title (relating to

Notice of Receipt of Application and Intent to Obtain Permit). Any

hearing request must be made in writing during the 3D-day public

conunent period.

Any hearing regarding initial issuance of an EGFP shall

be conducted under the procedures in §116.921 of this subchapter

(relating to Notice and Comment Hearings for Initial Issuance) and

not under the APA.

ill Responses to public comments and the notice of the

commission's decision to issue or deny an EGFP shall be conducted

under the procedures in §1l6.922 of this title (relating to Notice of

Final Action).

f.g2 A person affected by a decision of the commission to

issue or deny an EGFP may move for rehearing under §50.119 of this

title (relating to Notice ofCommission Action. Motion for Rehearing)

and is entitled to judicial review under TCAA. §382.032 (relating to

Appeal of Commission Action).

§1l6.921. Notice and Commerl1 Hearings for Initial Issuance.

The notice and comment hearing requirements apply only

to the initial issuance of a electric generating facility permit CEGFP).

ill The commission shall decide whether to hold a hearing.

The commission is not required to hold a hearing if the basis of

the request by a person who may be affected by emissions from an

EGF is determined to be unreasonable. If a hearing is requested by

a person who may be affected by emissions from lID EGF. and that

request is reasonable. the commission shall hold a hearing.

i£l At the applicant's expense. notice of a hearing on a draft

pennit must be published in the public notice section of one issue of

a newspaper of general ci,rcuIation in the municipality in which the

EGF is located. or in the municipality Dearest to the location of the

facility. The notice must be published at least 30 days before the date

set for the hearing. The notice must include the following:

ill the time. place. and nature of the hearing:

@ a brief description of the purpose of the hearing: and

ill the name and phone number of the commission office

to be contacted to verify that a hearing will be held.

@ Any person. including the applicant. may submit oral or

written statements and data concerning the draft permit.

ill Reasonable time limits may be set for oral statements.

and the submission of statements in writing may be required.

@ The period for submitting written comments is automatically extended to the close of any hearing.

ill At the hearing. the period for submitting Mitten

comments may be extended beyond the close of the hearing.

A tape recording or written transcript of the hearing must

be made available to the public.

ill Any person. including the applicant. who believes that any

condition of the draft permit is inappropriate or that the preliminary

decision to issue or deny the permit is inappropriate. shall raise all

issues and submit all arguments supporting that position by the end

of the public comment period.

ig2 Any supporting materials for comments submitted under

subsection (f) of this section must be included in full and may not

be incorporated by reference, unless the materials are one of the

following:

ill already part of the administrative record in the same

proceedings:

@ state or federal statutes and regulations:

ill EPA documents of general applicability: or

ffi other generally available reference materials.

ill The commission shall keep a record of all conunents

received and issues raised in the hearing. This record is available

to the public.

ill. The draft permit may be changed based on conunents

pertaining to whether the permit provides for compliance with the

requirements of this subchapter.

ill The commission shall respond to comments consistent

with ~116.922 of this title (relating to Notice of Fmal Action).

§116.922. Notice ofFinal Action.

After the public comment period or the conclusion of

any notice and comment hearing. the commission shall send notice

by first-class mail of the final action on the application to any person

PROPOSED RULES September 10, 1999 24 TexReg 7175
Chapter 335. INDUSTRIAL SOLID WASlE

AND MUNICIPAL HAZARDOUS WASTE

Subchapter J. HAZARDOUS WASTE GENERATION, FACll.JTY AND DISPOSAL FEE

SYSTEM

30 TAC §335.324

The Texas Natural Resource Conservation Commission (commission) proposes amendments to §335.324, concerning Facility Fee Assessment.

EXPLANATION OF PROPOSED RULE

The purpose of this rule is to modify existing rule language

to address the need to lower the annual facility fee for facilities

which are permitted to manage Class 1 industrial solid waste or

hazardous waste, and which are wholly unbuilt. This rulemaking

does not propose elimination of the facility fee for unbuilt

facilities, but rather proposes the assessment of the minimum

fees under existing §335.324(d). The new fees will be applicable

until any physical construction of the facility commences, at

which time the fee structure currently set forth in §335.324{i} will

apply. This rule change is also proposed to retroactively apply

who commented during the public comment period or at the hearing.

and to the applicant

ill The notice must include the following:

ill the response to any comments submitted during the

public comment period:

ill identification of any change in the conditions of the

draft permit and the reasons for the change:

Q2 a statement that any person affected by the decision of

the commission may petition for rehearing under §50.119 ofthis title

(relating to Notice of Commission Action. Motion for Rehearing) and

may seek judicial review under TCAA. §382.032 (relating to Appeal

of Commission Action).

§1l6.930. Modifications.

The owner or operator planning a modification of a facility permitted

under this subchapter must comply with Subch<pter B of this Chapter

(relating to New Source Review Permits) before work is begun on

the constIUction of the modification.

§116.931. Renewal.

Electric generating facility permits (EGFP) shall be renewed in

accordance with Chapter 116. Subchapter D of this title (relating

to Permit Renewals).

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's

legal authority to adopt.

Filed with the Office of the Secretary of State, on August 30,

1999.

TRD-9905503

Margaret Hoffman

Director, Environmental Law Division

Texas Natural Resource Conservation Commission

Proposed date of adoption: December 15,1999

For further information, please call: (512) 239-1932

• • •

to wholly unbuilt facilities tor which facility fees were due during

the four years prior to the effective date of this rule change.

Credit toward future fees will be given, in lieu of a refund, in

cases where a fee has been paid in excess of the proposed

fees.

On July 30, 1998, the commission considered a Petition for

Rulemaking by American Fnvirotech, Inc., to amend §335.324.

The commission decided to initiate rulemaking to propose the

prospective assessment of a minimum facility fee for wholly

unbuilt facilities which would apply until the commencement

of any facility construction. Upon further consideration, it

was decided that the facility fee rule in §335.324 should be

changed and that the change should be applied prospectively

and retroactively. The proposed rule change is intended to

reform §335.324 of commission rules to make it consistent with

the Texas Health and Safety Code, §361.139. Section §361.139

requires an equitable fee structure and assessment of fees

based, in part, upon consideration of the nature and extent of

the regulated activities and the variation in the cost of regulating

different types of facilities. Currently, §335.324 provides for

the assessment of fees up to a maximum of $25,000 even for

hazardous waste facilities where no construction has begun.

The cost to the commission of regulating a wholly unbuilt facility

differs markedly from the cost of regulating a facility where

construction has begun. Inspections of wholly unbuilt facilities

are required merely to confirm that the facility remains wholly

unbuilt. This is in contrast with facilities under construction or

in operation which require regular and detailed inspections to

ensure that facility construction and operation continues to meet

the requirements of commission rules and permits. Section

335.324 does not currently take into account the lesser costs

to the commission of regulating wholly unbuilt facilities. The

proposed change to §335.324 will correct this mistake of law

and lower the annual facility fee for wholly unbuilt facilities.

Section 335.324{d) is proposed to be modified to lower the

annual fee for wholly unbuilt Class 1 industrial solid waste

facilities from $5,000 {maximum} to $500 and for Wholly unbuilt

hazardous waste facilities from $25,000 {maximum} to $2,500.

Section 335.324(a) defines a wholly unbuilt facility to be a

permitted Class 1 industrial solid waste or hazardous waste

facility that has not initiated any physical construction; it does

not mean unbuilt storage, processing or disposal units within an

existing facility. Physical construction is defined as excavation,

movement of earth, erection of forms or structures, or similar

activity to prepare a facility to accept industrial solid waste or

hazardous waste. This definition of physical construction tracks

the language of Title 40, Code of Federal Regulations §270.2,

the federal definition of "physical construction" which applies

to hazardous waste facilities. Section 335.324(d) explains

that a permittee shall be responsible for fees as required by

§335.324(i} when physical construction is initiated.

FISCAL NOTE

Matthew Johnson, Financial Administration Division, has determined that there will be fiscal implications as a result of administration and enforcement of the amended section. For the

first five-year period the section as proposed is in effect there

will be a small revenue loss to state government as a result of

administration or enforcement of these sections. No change in

state government operating cost is expected. The proposed

rule would reduce annual waste facility fee assessments for

permitted wholly unbuilt hazardous waste facilities from the cur24 TexReg 7176 September 10, 1999 Texas Register
Notice of Water Quality Applications

The following notices were issued during the period of September 8,

1999 through September 14, 1999.

The following require the applicants to publish notice in the newspaper. The public comment period, requests for public meetings, or

requests for a contested case hearing may be submitted to the Office

of the Chief Clerk, Mail Code 105, POBox 13087, Austin Texas

78711-3087, WITHIN 30 DAYS OF THE DATE OF NEWSPAPER·

PUBLICATION OF TInS NOTICE.

and 40 Code of Federal Regulations, §51.102 of the United States

Environmental Protection Agency regulations concerning SIPs. The

revisions to Chapters 101 and 116 constitute revisions to the SIP.

The proposed amendments to Chapters 101 and 116 will implement

the requirements of Senate Bill (SB) 7, concerning the permitting of

grandfathered electric generating facilities (EGF). SB 7 amends Texas

Utilities Code, §39.264, and requires that grandfathered EGFs apply

for a permit by September 1,2000, and that EGFs reduce emissions

of nitrogen oxide (NOx) by 50% and, for coal- fired EGFs, reduce

sulfur dioxide by 25%. The amendments allow these reductions to be

met by installing control technology or trading allowances from other

EGFs. Grandfathered facilities must be permitted by May I, 2003,

or cease operation unless they show good cause for an extension.

The commission will hold a public hearing on this proposal in EI

Paso on October I, 1999, at 9:00 a.m. in the City of EI Paso Council

Chambers, located at 2 Civic Center Plaza, 2nd Floor. Additional

hearings will be held in Lubbock on October 1 at 6:00 p.m. in the

City of Lubbock Council Chambers, located at 1625 13th Street; in

Austin on October 4 at 9:00 a.m. in Room 201S of Texas Natural

Resource Conservation Commission Building E, located at 12100

Park 35 Circle; in Irving on October 5 at 1:00 p.m. in the City

of Irving Central Library Auditorium, located at 801 West Irving

Boulevard; in Houston on October 7 at 9:00 a.m. in the City of

Houston Pollution Control Building Auditorium, located at 7411 Park

Place Boulevard; and in Beaumont on October 7 at 6:00 p.m. in the

John Gray Institute, located at 855 Florida Avenue. The hearings are

structured for the receipt of oral or written comments by interested

persons. Individuals may present oral statements when called upon

in order of registration. Open discussion will not be permitted during

the hearings; however, an agency staff member will be available to

discuss the proposal 30 minutes prior to the hearings and will answer

questions before and after the hearings.

Written comments may be submitted by mail to Casey Vise, MC

205, Office of Environmental Policy, Analysis, and Assessment, Texas

Natural Resource Conservation Commission, P.O. Box 13087, Austin,

Texas 78711-3087, or by fax to (512) 239-4808. All comments

should reference Rule Log Number 99033-116-AI. Comments must

be received by 5:00 p.m., October II, 1999. For further information,

please contact Beecher Cameron, of the Policy and Regulations

Division, at (512) 239-1495.

Persons with disabilities who have special communication or other

accommodation needs who are planning to attend the hearing should

contact the agency at (512) 239-4900. Requests should be made as

far in advance as possible.

TRD-9905842

Margaret Hoffman

Director, Environmental Law Division

Texas Natural Resource Conservation Commission

Filed: September 10, 1999

§382.017; Texas Go~rnment Code, Subchapter B, Chapter 2001;

and 40 Code of Federal Regulations, §51.102 of the United States

Environmental Protection Agency regulations concerning SIPs. The

revisions to Chapter 116 constitute revisions to the SIP. The changes

revise the commission's procedural rules for notice, comment, and

hearings.

The proposed amendments and new sections constitute the first phase

ofthe implementation of Senate Bill (SB) 766. Included in this action

are procedures for obtaining a voluntary emission reduction permit

(VERP) and the new procedures to create standard permits. A VERP

will allow grandfathered facilities to apply for permits using a variety

of options, including the acquisition of credits, to reduce or offset

emissions. VERP requirements would be in a new Subchapter H in

Chapter 116, concerning Control ofAir Pollution by Permits for New

Construction or Modification. A second phase of rulemaking related

to SB 766 will address exemptions from permitting, permits by rule,

multiple plant permits, and de minimis criteria, and is scheduled for

proposal in November 1999.

The commission will hold the first public hearing on this proposal

in EI Paso on October 1, 1999, at 12:00 p.m. in the City of EI

Paso Council Chambers, located at 2 Civic Center Plaza, 2nd Floor.

Additional hearings will be held in Lubbock on October 1 at 9:00

p.m. in the City of Lubbock Council Chambers, located at 1625

13th Street; in Austin on October 4 at 12:00 p.m. in Room 201S

of Texas Natural Resource Conservation Commission Building E,

located at 12100 Park 35 Circle; in Irving on October 5 at 4:00 p.m.

in the City ofIrving Central Library Auditorium, located at 801 West

Irving Boulevard; in Houston on October 7 at 12:00 p.rn. in the City

of Houston Pollution Control Building Auditorium, located at 7411

Park Place Boulevard; and in Beaumont on October 7 at 9:00 p.m. in

the John Gray Institute, located at 855 Florida Avenue. The hearings

are structured for the receipt of oral or written comments by interested

persons. Individuals may present oral statements when called upon

in order ofregistration. Open discussion will not be permitted during

the hearings; however, an agency staff member will be available to

discuss the proposal 30 minutes prior to the hearings and will answer

questions before and after the hearings.

Written comments may be submitted by mail to Casey Vise, MC

205, Office ofEnvironmental Policy, Analysis, and Assessment, Texas

Natural Resource Conservation Commission, P.O. J30x 13087..Austin,

Texas 78711-3087, or by fax to (512) 239-4808. All comments should

reference Rule Log Number 99029A-116-AI. Comments must be

received by 5:00 p.m., October II, 1999. For further information,

please contact Beecher Cameron, of the Policy and Regulations

Division, at (512) 239-1495.

Persons with disabilities who have special communication or other

accommodation needs who are planning to attend the hearing should

contact the agency at (512) 239-4900. Requests should be made as

far in advance as possible.

TRD-9905841

Margaret Hoffman

Director, Environmental Law Division

Texas Natural Resource Conservation Commission

Filed: September 10, 1999

• • •

V The Texas Natural Resource Conservation Commission (commission)

will conduct six public hearings to receive testimony concerning revisions to 30 TAC Chapters 101 and 116 and the State Implementation

Plan (SIP) under the requirements of Texas Health and Safety Code,

§382.017; Texas Government Code, Subchapter B, Chapter 2001;

• • •

24 TexReg 8370 September 24, 1999 Texas Register
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The Texas Natural Resource Conservation Commission (TNRCC or commission) proposes new

Page 1

§101.330, concerning Definitions; §101.331, concerning Applicability; §101.332, concerning General

Provisions; §101.333, concerning Allocation of Allowances; §101.334, concerning Allowance

Transfer; §101.335, concerning Allowance Banking; §101.336, concerning Emission Monitoring,

Compliance Demonstration, and Reporting; and §101.337, concerning El Paso Region. The new

sections would be placed into a new Division 2, concerning Emissions Banking and Trading of

Allowances, of a new Subchapter H, concerning Emissions Banking and Trading. The proposed rules

would also be submitted as a revision to the state implementation plan (SIP).

EXPLANATION OF PROPOSED RULES

Senate Bill (SB) 7, 76th Legislature, 1999, amended the Texas Utilities Code, Title 2, Public Utility

Regulatory Act, Subtitle B, Electric Utilities, and created a new Chapter 39, Restructuring of Electric

Utility Industry. SB 7 requires the commission to implement the permitting and allowance requirements

of new §39.264, concerning Emissions Reductions of "Grandfathered Facilities." SB 7 requires the

commission to develop a mass cap and trade system to distribute emission allowances for use by

electric generating facilities (EGF). Under SB 7, two categories of EGFs are eligible to use the

proposed trading system. The first category consists of EGFs in existence on January 1, 1999, which

were not subject to the requirement to obtain a permit under Texas Clean Air Act (TCAA),

§382.0518(g). These facilities are commonly referred to as grandfathered facilities. SB 7 also

mandates that grandfathered EGFs apply for a permit on or before September 1, 2000, and obtain a

permit by or cease operation after May 1, 2003. The second category of EGFs consists of permitted
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EGFs that are not subject to the permitting requirements of SB 7, yet elect to participate in the

allowance trading system.

Page 2

These new sections are proposed concurrently with new sections in Chapter 116, concerning Control of

Air Pollution by Permits for New Construction or Modification. Proposed new Chapter 116,

Subchapter I, concerning Electric Generating Facility Pennits, will contain the requirements for'

permitting of EGFs. The amendments to Chapter 116 are published in a separate section of this edition

of the Texas Register.

Texas Utilities Code, §39.264(g) and (h) requires the commission to allocate emission allowances to

grandfathered EGFs in defmed regions of the state. As stated in §39.264(c), the legislature intended

that total annual emissions of nitrogen oxides (NOx) would not exceed 50% of the emissions during

1997 as reported to the commission, and that for coal-fired grandfathered EGFs, total annual emissions

of sulfur dioxide (S02) would not exceed 75 % of the emissions during 1997 as reported to the

commission. To further this goal, Texas Utilities Code, §39.264(h) provides emission rates to calculate

specific allowances.

As previously stated, Texas Utilities Code, §39.264(c) provides that emission limitations may be met

through an emissions allocation and allowance transfer system. An allowance trading program is a

regulatory program which caps emissions over a designated region to a level consistent with regulatory

goals. Each EGF must hold allowances equal to or greater than its emissions to be in compliance with

the program. For example, if an EGF's emissions are 100 tons over the control period, then the
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allowance account for this EGF should reflect a balance equal to or greater than 100 tons of

Page 3

allowances. The program encourages EGFs to determine the methods of control which will allow the

EGF to meet its allowances. Further, the program allows for trading of allowances between EGFs in

the same region, thereby creating alternatives for control. For example, if an EGF emitted 100 tons

over the control period and has a balance of 150 allowances in its compliance account, the EGF may

sell the unused portion-50 tons or allowances-to another EGF. This trading provision allows

companies to determine the most economical method of meeting the regulation, either by purchasing

surplus allowances created by another EGF's reductions or by making their own reductions.

Consistent with Texas Utilities Code, §39.264(i), currently permitted EGFs may elect to participate in

the permitting program being proposed concurrently in Chapter 116, Subchapter I. Permitted facilities

electing to participate in the permitting program under Chapter 116, Subchapter I are called electing

EGFs. In the concurrently proposed changes to Chapter 116, the commission proposes that the existing

New Source Review (NSR) permit would be consolidated with a permit issued under Chapter 116,

Subchapter I. Participation in the permitting program will allow electing EGFs to obtain allowances

under the Emissions Banking and Trading of Allowances (EBTA). It may be advantageous for a

company to include all EGFs, regardless of permitting status, in the permitting program to allow

maximum flexibility in control strategies. Under §39.264(i)(2) and (4), electing EGFs are given

allowances equal to their actual emissions reported in the commissionIs 1997 emission inventory unless

a federal or state standard otherwise limits the 1997 emission rate.
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Page 4

The proposed new §101.330 contains the definitions to be used in the EBTA. "Allowance" means the

authorization to emit one ton of NOx or S02 during the specified control period or any specified control

period thereafter. An "authorized account representative" is the responsible person who is authorized,

in writing, to transfer and otherwise manage allowances. A "banked allowance" means an allowance

which is not used to reconcile emissions in the designated year of allocation but which is carried

forward into next year and noted in the compliance or broker account as "banked." Consistent with

Texas Utilities Code, §39.264(c), "control period" means the 12-month period beginning May 1 of

each year and ending April 30 of the following year. Control periods begin May 1, 2003.

"Compliance account" means the account for an EGF or multiple EGFs in which allowances are held.

"Broker Account" means the account where allowances held by a person are recorded. A broker is one

who is participating in the EBTA for the purposes of trading allowances and not to satisfy emission

requirements at an EGF. Allowances held in a broker account may not be used to satisfy compliance

requirements for this division. EGFs can purchase allowances from brokers, however, the allowances

are not eligible to meet reduction requirements until the ownership of the allowances has been

transferred and the allowances reside in the purchaser's compliance account.

"East Texas Region" means all counties traversed by or east of Interstate Highway 35 (IH-35) north of

San Antonio, or traversed by or east of Interstate Highway 37 (IH-37) south of San Antonio, and also

including Bexar, Bosque, Coryell, Hood, Parker, Somerville, and Wise counties. The commission is

proposing to modify the definition of "East Texas Region" from Texas Utilities Code, §39.264(g) to

clarify that counties east of IH-35 and west of IH-37 are not included in this region. It is believed that

had the legislature intended for the definition to include these counties, the definition would have
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Page 5

simply referenced IH-35 and not IH-37 also. Additionally, these counties (between IH-35 and IH-37)

have been excluded from commission plans involving statewide air control strategies, and the

commission believes that the legislature was attempting to be consistent with current commission

planning structures. "El Paso Region" means all of El Paso County. :'West Texas Region" means all

counties not contained in the East Texas or El Paso Regions.

An "electric generating facility," as defmed in SB 7, is a facility that generates electric energy for

compensation and is owned or operated by a person in this state, including a municipal corporation,

electric cooperative, or river authority. The commission proposes to modify that defmition to exclude

a facility that generates electric energy primarily for internal use, but that during 1997 sold, to a utility

power distribution system, less than one-third of its potential electrical output capacity. This exclusion

eliminates cogeneration facilities that were not intended to be included in this program. "Electing

EGF" is an EGF that is not subject to the requirements of Texas Utilities Code, §39.264, that elects to

comply with Chapter 116, Subchapter I. "Pennitted EGF" is an EGF pennitted under Chapter 116,

Subchapter I, including electing EGFs. "Heat input" is the heat derived from the combustion of any

fuel at an EGF. Heat input does not include the heat derived from reheated combustion air,

recirculated flue gas, or exhaust from other sources. The commission proposes defining "NOx

allowance" as an authorization to emit NOx , valid only for the purposes for meeting the requirements of

this division; and Chapter 116, Subchapter I. "S02 allowance" is an authorization to emit S02' valid

only for the purposes for meeting the requirements of this division and Chapter 116, Subchapter I.
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Page 6

The proposed new §101.331 establishes the applicability of banking and trading allowances. EGFs

subject to the concurrently proposed Chapter 116, Subchapter I or electing EGFs would be required to

comply with EBTA. The section also allows the opening of broker accounts for those not required to

participate in the EBTA.

The proposed new §101.332 contains the general provisions for the EBTA. Compliance with the

allowance system would begin with the control period beginning May 1, 2003. Allowances would only

be valid for meeting the purposes of the EBTA. Allowances cannot be used to meet or exceed the

limitations of a permit or applicable law, generate emission reduction credits, or satisfy emission offset

requirements under federal NSR. Because allowances do not by themselves meet federal criteria as

creditable emission reductions, they may not be used to satisfy other requirements of the Federal Clean

Air Act (FCAA), such as netting for Prevention of Significant Deterioration (PSD), NSR, or offsets

under a nonattainment NSR permit. Neither a NO. allowance nor an 502 allowance constitutes a

security or property right. To meet the requirements of Texas Utilities Code, §39.264(e), this section

would require that on May 1 of each year, beginning in 2004, an EGF shall hold in its compliance

account a quantity of allowances that is equal to or greater than the total emissions of that air

contaminant emitted during the prior control period. The commission proposes that allowances be

allocated, transferred, or used as whole allowances. For simplicity, the number of allowances will be

rounded down for decimals less than 0.50 and rounded up for decimals of0.50 or greater. This section

also proposes allowing only one compliance account for use by multiple permitted EGFs located at the

same property and under common ownership or control. These limitations on the number of

compliance accounts will assist the commission in the allocation of allowances and tracking of
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Page 7

allowance transfers. Proposed §101.332U) incorporates Texas Utilities Code, §39.264(n), concerning

the deduction of allowances from compliance accounts where the EGF exceeded its allowances.

The proposed new §101.333 contains the methods by which allowances for permitted EGFs are

calculated and determined. As specified in Texas Utilities Code, §39.264(h), the allowances will be

calculated by multiplying total heat input measured in millions of British thermal units (MMBtu) during

1997 by an emission rate expressed in pounds per MMBtu divided by 2,000. To determine allowances,

the commission proposes using information obtained from the United States Environmental Protection

Agency's (EPA) Acid Rain Program's Emissions Scorecard 1997. This database is the only

readily-available, consistently-reported, and comprehensive source of 1997 heat input data for EGFs.

This database was the basis for determining the emission rates necessary to achieve the program's goals

of a 50% reduction in NOx emissions and 25% reduction in S02 emissions from 1997 levels. If

information for an EGF concerning heat input is not reported to the acid rain database, the executive

director may approve a method for calculating heat input for that EGF as long the method is consistent

with the requirements of the acid rain database.

Texas Utilities Code, §39.264(h), specifies the emission rates for the EI Paso, East Texas, and West

Texas Regions. In the East Texas Region the emission rate is 0.14 pounds of NOx per MMBtu and

1.38 pounds of S02 per MMBtu. The emission rate in the EI Paso Region is 0.195 pounds of NOx per

MMBtu. The West Texas Region's emission rates are identical to those in the EI Paso Region.

Consistent with Texas Utilities Code, §39.264(i)(2), the allowances for electing EGFs are equal to the

EGF's emission in tons in 1997. Should a permitted coal-fired EGF elect to participate in the
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Page 8

pennitting program under Chapter 116, Subchapter I, the annual emissions of S02 from 1997 would be

used to establish its allowances.

In addition to the 50% reduction expected from grandfathered EGFs under SB 7 requirements, the

commission anticipates adopting additional requirements for EGFs in nonattainment areas to meet the

ozone National Ambient Air Quality Standard (NAAQS). For each nonattainment area, the amount of

reductions for the SIP will be consistent with the SIP modeling efforts for that area. At this time the

point source reductions expected in the Dallas/Fort Worth (DFW) area are 88 %. Reductions in the

Beaumont/Port Arthur (BPA) area are expected to be 40-50%, and reductions in the Houston/Galveston

(HGA) are expected to be 90%. The commission expects to propose the reductions for BPA and DFW

areas in December of 1999. For the HGA area, proposal is expected in May of 2000. The

commission expects to propose reductions in attairunent counties of east and central Texas not later than

December of 1999. Future rulemaking addressing these reductions will affect the EBTA and the

allocation of future allowances. Since Texas Utilities Code, §39.264(s) recognizes the current authority

of the commission to require additional reductions of NOx or S02' as future SIP rules are developed

allowances will be reduced accordingly.

Allowances for grandfathered EGFs must be allocated by January 1, 2000, as required by Texas

Utilities Code, §39.264(h). In order to meet this deadline, the commission intends to issue an order

this fall to allocate these allowances. The commission is aware of the needs of owners or operators of

EGFs to know as soon as possible the number of allowances that will be allocated to each EGF. A

draft of proposed allowances is available from the commission on request and will be available on the
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commission's Web Site. To meet the statutory deadline to. issue allowances by January 1,2000,

proposed §I01.333(4) provides that a commission order will be issued by that date with the SB 7

Page 9

allowances for the grandfathered EGFs. The allowances allocated for subsequent years will reflect the

same values issued in the initial allocation, provided no subsequent state or federal regulations require

additional reductions. To allow EGFs to identify potential sellers of allowances, the commission shall

maintain a publically available registry of the allowances in each compliance account. For each

transfer, the registry shall include the price paid per allowance. The registry shall not contain

proprietary information. The commission believes that public access to information regarding the price

and transfer of allowances will promote an open trading system. Consistent with Texas Utilities Code,

§39.264(s), 30 TAC §I01.333(a)(3) permits the commission to reduce allowances for the purposes of

satisfying the SIP or other federal, state, or local requirements.

Initial allowances for electing EGFs for the control period beginning May 1, 2003 would be allocated

by January 1, 2001. Since the commission will not know which EGFs are electing to participate in the

permitting program until September 1, 2000, it would be impossible to allocate those allowances on the

same schedule as the grandfathered allocations. This later allocation schedule will allow companies to

determine whether to participate in the programs and which programs best suit their individual business

needs.

The proposed new §I01.334 would establish requirements concerning the transfer of allowances.

Allowances may be transferred at any time during a control period with documentation received by the

commission no later than June 30 following the control period for which the allowances are used. The
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Page 10

commission believes that 60 days to report all transfers will give owners or operators ample time to

finalize transfers for that control period. In addition to the annual report, notification of transfer of

allowance must occur within 30 days after the transfer of any allowances to another party. This

requirement will ensure that the data kept on the commission's registry is accurate and current.

Allowance transfers are prohibited prior to May 1,2003. The commission believes it is appropriate to

set a beginning date for the receipt of transfer notification. This restriction will allow the commission

to set up the appropriate tracking mechanisms prior to receipt of notifications. As required by Texas

Utilities Code, §39.264(i)(3), allowances at electing EGFs resulting from reduced utilization or

shutdowns cannot be transferred. Transferrable allowances for electing EGFs shall be calculated using

the heat input from 1997, the heat input from the control period, and changed emission factors. The

equations to determine transferable allowances from electing EGFs are in the rule text.

Consistent with Texas Utilities Code, §39.264(j), allowances may only be transferred within the same

region. Transfers from broker accounts are restricted based on the location of the EGF where the

allowance was originally allocated.

SB 7 allows EGFs the flexibility to decide when and where to make reductions or to add on controls.

EGFs must consider local impacts of allowance transfers specifically on those counties which are

nonattainment and near nonattainment. For example, most near-nonattainment areas have EGFs that

are in close proximity to these areas. These EGFs emit significant amounts of NOx, which has been

shown to heavily influence local ozone levels. Other EGFs located a greater distance from these areas
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Page 11

have regional impacts on background ozone levels but do not impact near-nonattainrnent areas to the

extent the closer facilities can.

While the commission believes that the trading program will result in emission reductions throughout

the East Texas Region, emission reductions, rather than allowance transfers, at the nearby facilities

should be thoroughly considered before investments are made for emission control equipment at more

distant plants. In making these economic decisions, it is incumbent on businesses to weigh the

environmental consequences of their actions. Prior to making an allowance transfer to a nonattainment

or near-nonattainment area, EGFs must be aware that such transfers might jeopardize the status of a

near-nonattainment area. For example, at this time the Tyler/Longview/Marshall area is operating

under the terms of a Flexible Attainment Region (FAR). If numerous transfers occur into that area, the

conditions of the FAR may be compromised. The FAR will expire in September 2001 and can be

extended by the parties. During the term of the FAR agreement, EPA will treat the area under an

approach similar to a maintenance plan area. However, EPA may designate the area as nonattainment,

regardless of whether a FAR agreement is in place. Designation of nonattainment could result in

additional reductions of NOx from EGFs in the Northeast Texas FAR area. Furthermore, a

nonattainment designation would require additional reductions from industry sources and potential

restrictions on trade into the new nonattainment area. The commission encourages EGFs to consider

the long-term consequences of decisions to utilize allowances rather than the installation of controls at

EGFs located close to nonattainment areas and in near-nonattainment areas.
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Page 12

The proposed new §101.335 regulates the banking of allowances. As required by Texas Utilities Code,

§39.264(i)(3), allowances at electing EGFs resulting from reduced utilization or shutdown cannot be

banked. Allowances not used for compliance may be banked for use in subsequent years.

The proposed new §101.336 establishes compliance demonstration methods. All EGFs using the EBTA

must comply with §116.914, concerning Emissions Monitoring and Reporting Requirements. By June

1 of each year, EGFs participating in the EBTA shall report to the commission the amount of emissions

of each allocated air contaminant during the preceding control period. Emission allowances equal to

the amount of emissions during that control period would be deducted from the EGF's compliance

account. Consistent with Texas Utilities Code, §39.264(n), if the amount of emissions exceeds the

EGF's allowance, allowances in the amount of the excess shall be deducted from the allowances for the

next year. The proposed new §101.336 requires that at the end of each control period, the owner or

operator of an EGF report its emissions to balance the emissions with the allowances in its compliance

account.

As authorized by Texas Utilities Code, §39.264(p), the proposed new §lO1.337 would allow facilities

in the EI Paso Region to meet emission allowances using credits from the City of Juarez, in the United

States of Mexico. The reduction must be reviewed and approved by the executive director and must be

)

permanent, quantifiable, enforceable by the commission, and not required by other rule or law. Under

Texas Utilities Code, §39.264(q), 30 TAC §101.337 would also exempt the EI Paso Region from the

EBTA if either EPA or the commission determines that reductions of NOx will increase ambient levels

of ozone. Currently, NOx reductions are not required for facilities in the EI Paso nonattainment area
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because EPA has granted a waiver under FCAA, §182(t) concerning NOx Requirements. Under this

waiver, NOx reductions are not required if the attainment demonstration for compliance with the ozone

NAAQS can be made without a NOx control strategy. The basis for this waiver does not satisfy

§39.264(q) of the Texas Utilities Code because it has not been demonstrated, under the §182(t) waiver

or otherwise, that NOx reductions would increase ambient ozone in EI Paso County. These EGFs

would still be required to obtain a permit under Chapter 116, Subchapter I regardless of the

determination that NOx reductions are counterproductive in controlling ambient ozone levels in the EI

Paso Region. The commission believes that this requirement is appropriate since Texas Utilities Code,

§39.264(e) provides that EGFs without a permit may not operate after May 1,2003, and Texas Utilities

Code, §39.264(q) refers only to reduction requirements, not permitting requirements.

FISCAL NOTE

Bob Orozco, a technical specialist in the Strategic Planning and Appropriations Section, has determined

that for the first five-year period the proposed amendments are in effect, there will be no significant

fiscal implications for the commission and other units of state and local government as a result of

administration or enforcement of the proposed amendments. River authorities and units of local

government that own and operate EGFs are affected by the proposed amendments. Although EGFs of

25 megawatts or less owned by units of state and local government may be excused from the permitting

requirements, some EGFs will be required to obtain a permit and reduce emissions to continue

operating. It is anticipated that the proposed amendments which allow emission allowance banking and

trading for EGFs will provide flexibility and potential cost savings in planning and determining the
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most economical mix of the application of emission control technology with the purchase of other

facilities' surplus allowances to meet emission reduction requirements.

The proposed amendments to Chapter 101, concerning General Rules, would develop and implement

the EBTA system for grandfathered EGFs and other EGFs that elect to participate in EBTA

requirements. The provisions to establish such a system are contained in:

Act of May 27, 1999, 76th Legislature, SB 7, Regular Session, 1999 (to be codified at

Texas Utilities Code, §11.003-163.002).

SB 7 also requires grandfathered EGFs to apply for a permit on or before September 1, 2000. A

grandfathered EGF is a facility that was exempt from permitting requirements by virtue of existing or

beginning construction, alteration, or modification on or before August 31, 1971. An EGF that does

not obtain a permit by May 1, 2003, may not operate unless the commission finds good cause for an

extension.

The new sections in Chapter 101 are proposed concurrently with new sections in Chapter 116. The

purpose of the rulemaking in these chapters is to implement permit and emission control requirements,

including EBTA procedures for certain EGFs, and related permit application and public notice

procedures.
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The proposed amendments establish an emission allowance banking and trading program which caps

emissions over a designated region to a level consistent with SB 7. SB 7 requires the conunission to

allocate allowances for grandfathered EGFs by January 1,2000. Each participating EGF must hold

allowances equal to or greater than its emissions to be in compliance with the program. The program

encourages EGFs to determine the methods of emissions control which will allow the EGF to meet its

emission allowances. The EBTA program allows for voluntary trading of allowances between EGFs in

the same region to provide EGFs with the flexibility to determine the best mix of using control

technologies to reduce their own emissions and/or the purchase or trading of surplus allowances from

other facilities.

SB 7 also allows non-grandfathered EGFs to elect to participate in the EBTA and permitting program.

These electing facilities will be given allowances equal to their actual emissions reported in their 1997

emissions inventory unless a federal or state standard otherwise limits the 1997 emission rate.

PUBLIC BENEFIT

Mr. Orozco has also determined that for each year of the first five years the proposed amendments to

Chapter 101 are in effect, the public benefit anticipated from enforcement of and compliance with the

proposed amendments will be potentially increased efficiency in the reduction of air contaminants

emitted from affected EGFs, and increased flexibility for affected EGFs in planning and determining

the most economical mix of control technology alternatives and trading of emission allowances to meet

SB 7 reduction requirements.
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It is the intent of the legislature in SB 7 that, starting May 1,2003, annual emissions of NO. from

grandfathered EGFs not exceed 50% of the levels emitted during 1997 as reported to the commission.

It is also required by SB 7 that emissions of S02 from coal-fired power plants not exceed 75 % of the

levels emitted in 1997. It is anticipated that these emission reductions may be met, in part or in whole,

by the emissions trading and allowance system which is the subject of this rulemaking. Counties within

Texas have been divided into three regions by SB 7-East Texas, West Texas, and El Paso-for the

purpose of allocating emissions of NO. and S02 and for the trading of emissions allowances, by region,

among the EGFs. The East Texas Region emission rate shall be 0.14 pounds of NOx and 1.38 pounds

of 502per MMBtu. The EI Paso Region and West Texas Region emission rate shall be 0.195 pounds

of NO. and 1.38 pounds of 502per MMBtu.

The purpose of the proposed amendments is to create and implement an EBTA program which caps

emissions over a designated area from grandfathered and other EGFs that elect to participate in the

EBTA program. Each EGF participating in the EBTA program must hold allowances equal to or

greater than its emissions to be in compliance with the program. The EBTA program allows for

trading of allowances between EGFs in the same region to provide EGFs with flexibility in planning

and determining the most economical mix of control technology alternatives to reduce its own

emissions with the purchase or trading of another facility's surplus allowances to meet emission

reduction requirements.

There are no significant additional costs anticipated to any person or business as a result of complying

with the proposed amendments to Chapter 101. The proposed amendments are intended to provide
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increased flexibility in planning and determining the most economical alternatives to reducing emissions

by either applying control technologies or purchasing or trading emission allowances with other EGFs.

SMALL BUSINESS AND MICRO-BUSINESS ANALYSES

Based on the expected revenues from the smallest generators and the number of employees defined as a

micro-business, there are no known small businesses and micro-businesses as defined in the Texas

Government Code with EGFs which would be affected by these proposed amendments to Chapter 101.

There are no significant additional costs anticipated to any person or business as a result of complying

with the proposed amendments to Chapter 101.

DRAFT REGULATORY IMPACT ANALYSIS

The commission has reviewed the proposed rulemaking in light of the regulatory analysis requirements

of Texas Government Code, §2001.0225, and has determined that the rulemaking is not subject to

§2001.0225 because it does not meet the definition of a "major environmental rule" as defmed in that

statute. "Major environmental rule" means a rule the specific intent of which is to protect the

environment or reduce risks to human health from environmental exposure and that may adversely

affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the

environment, or the public health and safety of the state or a sector of the state. Because the specific

intent of the proposed rulemaking is procedural in nature and specifies how and when emission

allowances can be banked and traded; makes the trading and/or banking of emission allowances

voluntary; and allows the EGFs the flexibility to decide the extent of banking and trading of

allowances, the rulemaking does not meet the defmition of a "major environmental rule." The
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proposed amendments would only apply to grandfathered EGFs and electing EGFs. Finally, the

proposed amendments do not meet any of the four applicability requirements of a "major environmental

rule." The proposed amendments do not exceed a standard set by federal law, exceed an express

requirement of state law, or exceed a requirement of a delegation agreement. In addition, the proposed

amendments are made specifically to comply with SB 7.

TAKINGS IMPACT ASSESSMENT

The commission has prepared a takings impact analysis under Texas Government Code, §2007.043.

The following is a summary of that analysis. While these amendments may result in capital costs for

some EGFs, the amendments do not affect private property in a manner that restricts or limits an

owner's right to the property that would otherwise exist in the absence of the governmental action.

Consequently, this proposal does not meet the defmition of a takings under Texas Government Code,

§2007.002(5). These amendments implement the requirements of Texas Utilities Code, §39.264.

EGFs are required to reduce emissions of NO. by 50% and, if applicable, S02' by 25 %. Although

EGFs are required to make specific emission reductions, these facilities have alternatives available

under the proposed banking program that may allow the EGF to avoid installing add on controls.

Further, allowances can be transferred under the proposed banking program so that EGFs have

opportunities to buy and sell allowances in order to respond to business needs. This action is intended

to reduce emissions of NOx "and S02' The action significantly advances this purpose by requiring

substantial reductions in the emission of NO. and S02 through a system of emission allowances. While

requiring these reductions, this rule allows the trading of emission allowances so that EGFs may

transfer allowances providing flexibility for compliance with emission limits. This action is taken in
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response to a real and substantial threat to public health and safety and significantly advances the health

and safety purpose and imposes no greater burden than is necessary to achieve the health and safety

purpose.

COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW

The commission has detennined that this rulemaking relates to an action or actions subject to the Texas

Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as

amended (Texas Natural Resources Code, §§33.201 et seq.), and the commission's rules in 30 TAC

Chapter 281, Subchapter B, concerning Consistency with Texas Coastal Management Program. As

required by 31 TAC §505.11(b)(2) and 30 TAC §281.45(a)(3), relating to actions and rules subject to

the CMP, commission rules governing air pollutant emissions must be consistent with the applicable

goals and policies of the CMP. The commission has reviewed this action for consistency with the CMP

goals and policies in accordance with the regulations of the Coastal Coordination Council. For the

proposed new sections relating to the authorization of emission allowances and the banking and trading

of allowances, the commission has detennined that the rules are consistent with the applicable CMP

goal expressed in 31 TAC §501.12(1) of protecting and preserving the quality and values of coastal

natural resource areas, and the policy in 31 TAC §501.14(q), which requires that the commission

protect air quality in coastal areas. This proposal is intended to reduce overall emissions of NOx and

S02 from EGFs. This action is consistent with Title 40 Code of Federal Regulations because it does

not authorize an emission rate in excess of that specified by federal requirements. Interested persons

may submit comments during the public comment period on the consistency of the proposed rule with

the CMP goals and policies.
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PUBLIC HEARING

Page 20

The commission will hold a public hearing on this proposal in EI Paso on October 1, 1999, at 9:00

a.m. in the City of EI Paso Council Chambers, located at 2 Civic Center Plaza, 2nd Floor. Additional

hearings will be held in Lubbock on October 1 at 6:00 p.m. in the City of Lubbock Council Chambers,

located at 1625 13th Street; in Austin on October 4 at 9:00 a.m. in Room 201S of Texas Natural

Resource Conservation Commission Building E, located at 12100 Park 35 Circle; in Irving on October

5 at 1:00 p.m. in the City of Irving Central Library Auditorium, located at 801 West Irving Boulevard;

in Houston on October 7 at 9:00 a.m. in the City of Houston Pollution Control Building AUditorium,

located at 7411 Park Place Boulevard; and in Beaumont on October 7 at 6:00 p.m. in the John Gray

Institute, located at 855 Florida Avenue. The hearings are structured for the receipt of oral or written

comments by interested persons. Individuals may present oral statements when called upon in order of

registration. Open discussion will not be permitted during the hearings; however, an agency staff

member will be available to discuss the proposal 30 minutes prior to the hearings and will answer

questions before and after the hearings.

SUBMITTAL OF COMMENTS

Comments may be submitted to Casey Vise, MC 205, Office of Environmental Policy, Analysis, and

Assessment, Texas Natural Resource Conservation Commission, P.O. Box 13087, Austin, Texas

78711-3087, or faxed to (512) 239-4808. All comments should reference Rule Log Number 99033-

116-AI. Comments must be received by 5:00 p.m., October 11, 1999. For further information, please

contact Beecher Cameron, of the Policy and Regulations Division, at (512) 239-1495.
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Persons with disabilities who have special communication or other accommodation needs who are

planning to attend the hearing should contact the Office of Environmental Policy, Analysis, and

Assessment at (512) 239-4900. Requests should be made as far in advance as possible.

STATUTORY AUTHORITY

These new sections are proposed under Texas Utilities Code, §39.264, which authorizes the

commission to develop rules for the allocation of emission allowances to EGFs and to make rules

concerning the banking and trading of those allowances. The new sections are also proposed under

Texas Health and Safety Code, TCAA, §382.011, which authorizes the commission to administer the

requirements of the TCAA; §382.012, which provides the commission with the authority to develop a

comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules

consistent with the policy and purposes of the TCAA; §382.023, which authorizes the commission to

issue orders; and §382.061, which authorizes the commission to delegate permitting authority to the

executive director; and Texas Water Code, §5.122, which authorizes the commission to delegate

uncontested matters to the executive director.

The proposed new sections implement Texas Utilities Code, §39.264, concerning Emissions Reductions

of "Grandfathered Facilities"; and Texas Health and Safety Code, §382.011, concerning General

Powers and Duties; §382.012, concerning State Air Control Plan; §382.017, concerning Rules;

§382.023, concerning Orders; and §382.061, concerning Delegation of Powers and Duties; and Texas

Water Code, §5.122, concerning Delegation of Uncontested Matters to Executive Director.
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SUBCHAPTER H : EMISSIONS BANKING AND TRADING

DIVISION 2 : EMISSIONS BANKING AND TRADING OF ALLOWANCES

§§lO1.330-101.337

§lO1.330. DefInitions.

Page 22

The following words and tenns. when used in this division. shall have the following meanings.

unless the context clearly indicates otherwise.

(1) Allowance - The authorization to emit one ton of nitrogen oxide (NOx) or sulfur

dioxide (S02) during a control period.

(2) Authorized account representative - The responsible person who is authorized. in

writing. to transfer and otherwise manage allowances.

(3) Banked allowance - An allowance which is not used to reconcile emissions in the

designated year of allocation but which is carried forward into future years and noted in the compliance

or broker account as "banked. II

(4) Broker account - The account where allowances held by a person are recorded.

Allowances held in a broker account may not be used to satisfy compliance requirements for this

division.
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(5) Compliance account - The account for an electric generating facility (BGF) or

multiple EGFs in which allowances are held.

(6) Control period - The 12 month period beginning May 1 of each year and ending

April 30 of the following year. Control periods begin May 1, 2003.

(7) East Texas Reeion - All counties traversed by or east of Interstate Highway 35

north of San Antonio or traversed by or east of Interstate Highway 37 south of San Antonio, and also

including Bexar, Bosque, CoryelL Hood, Parker. Somerville, and Wise Counties.

(8) Electin~ EGF - An electric generating facility permitted under Chapter 116,

Subchapter B of this title (relating to New Source Review Permits) which is not subject to the

requirements of Texas Utilities Code, §39.264 and elects to comply with Chapter 116, Subchapter I of

this title (relating to Electric Generating Facility Permits).

(9) Electric ~eneratin~ facility - A facility that generates electric energy for

compensation and is owned or operated by a person in this state, including a municipal cor:poration,

electric cooperative, or river authority. An EGF does not include a facility that generates electric

energy primarily for internal use but that during 1997 sold, to a utility power distribution system, less

than one-third of its potential electrical output capacity.

(10) EI Paso Reeion - All of BI Paso County.
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(11) Heat input - The heat derived from the combustion of any fuel at an EGF. Heat

input does not include the heat derived from reheated combustion air, recirculated flue gas, or exhaust

from other sources.

(12) NOx allowance - An authorization to emit NOx• A NOx allowance is valid only

for the purposes of meeting the requirements of:

(A) this division: or

(B) Chapter 116, Subchapter I of this title.

(13) Permitted EGF - An electric generating facility permitted under Chapter 116,

Subchapter I of this title, including electing facilities.

(14) S02 Allowance - An authorization to emit S02 valid only for the purposes for

meeting the requirements of this division and Chapter 116, Subchapter I of this title.

(15) West Texas Region - All counties not contained in the East Texas Region or EI

Paso region.
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§101.331. Applicability.

This division applies only to the following:

Page 25

(1) Electric generating facilities permitted under Chapter 116, Subchapter I of this

title, (relating to Electric Generating Facility Permits).

(2) A person not required to participate in the requirements of this division may open a

broker account under this division for the purposes of banking and trading emissions allowances.

§101.332. General Provisions.

(a) Allowances are valid only for the purposes of meeting the requirements of this division

and cannot be used to meet or exceed the limitations of a permit or any applicable rule or law.

(b) On May 1 of each year, beginning in 2004, an electric generating facility (EGF) shall hold

a quantity of allowances in its compliance account that is equal to or greater than the total emissions of

that air contaminant emitted during the prior control period. Compliance with the allowance system

will begin with the control period beginning May 1. 2003.
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(c) Emission reductions used to satisfy the requirements of the Emissions Banking and Trading

of Allowances (EBTA) cannot be used to generate emission reduction credits or discrete emission

reduction credits.

Cd) Allowances cannot be used for netting requirements to avoid the applicability of federal

and state new source review (NSR) requirements.

(e) Allowances cannot be used to satisfy offset requirements for new or modified sources

subject to federal nonattainment NSR requirements.

(f) An allowance does not constitute a security or a property right.

(g) All allowances will be allocated, transferred, or used as whole allowances. To determine

the number of whole allowances, the number of allowances will be rounded down for decimals less

than 0.50 and rounded up for decimals of 0.50 or greater.

(h) One compliance account shall be used for multiple permitted EGFs located at the same

property and under common ownership or control.

(i) If emissions of nitrogen oxides or, if applicable, sulfur dioxide, exceed the amount of

allowances for a given control period, allowances for the next control period will be reduced in an

amount equal to the emissions exceeding the allowances in the compliance account.
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§101.333. Allocation of Allowances.

Allowances will be allocated according to the requirements of this section.

Page 27

(1) Except as provided in paragraphs (2) and (3) of this section. allowances will be

calculated using the following equation:

ER*HI A=--------

2000 Ib / allowance

Where:

A =

HI =

ER =

Number of allowances

Total heat input (million British thermal units (MMBtu)) during 1997,

determined by subparagraphs (A) or (B) of this paragraph.

Emission rate, as defined in subparagraphs (0 - (E) of this paragraph;

(A) the acid rain database of the EPA; or

(B) an method approved by the executive director. consistent with the emission \.

reduction requirements of this division. if the information is unavailable from the EPA acid rain

database.

(0 In the East Texas region.

0) 0.14 pound nitrogen oxides (NO.) per MMBtu; and
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(ii) 1.38 pounds sulfur dioxide ($°2) per MMBtu:

Page 28

(D) In the West Texas and EI Paso Regions. 0.195 pound NO. per MMBtu;

(2) For electing electric generating facilities fEGF), the amount of allowances is equal

to the EGF's actual emissions in tons in 1997 and shall not exceed any of the following:

(A) the emission inventory reported for calendar year 1997:

(B) the allowable emission rate in an existing permit: and

(C) an applicable state or federal requirement.

(3) The commission may increase or decrease the amount of allowances for any

control period in order to satisfy requirements under a state implementation plan or other federal. state,

or local air quality requirement.

(4) Allowances will be allocated:

(A) initially. by:

0) January 1, 2000. for grandfathered EGFs;
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(ii) January 1, 2001, for electing EGFs: and

(B) subsequently. by May 1 of each year. beginning in 2004.

(C) Allowances will be allocated by commission order.

Page 29

(5) The commission shall maintain a registry of the allowances in each compliance

account. For each transfer, the registry shall include the price paid per allowance. The registry shall

not contain proprietary information.

§lOl.334. Allowance Transfer.

(a) Allowances may be transferred at any time during the control period.

(b) Documentation of all final transfers must be received by the commission on or before June

30 following the control period for which the allowances are to be used.

(c) Only authorized account representatives may transfer allowances.

(d) Notification of transfer of allowance must occur within 30 days after the transfer of any

allowances to another party. Allowance transfers are prohibited prior to May 1, 2003.
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(e) Allowances at electing electric generating facilities (EGF) that result from reduced .

utilization or shutdowns are ineligible for transfer. The amount of allowances eligible for transfer from

an electing EGF will be calculated using the heat input from 1997 and the changed emission factors as

follows:

(1) If the heat input for the control period exceeds the heat input for 1997, the

following equation will be used to calculate the amount of transferrable allowances.

Ill1997 * EF1997 - Illcp * EFcp

2000 lbs/ allowance

Where:

=

=

=

=

Heat input from 1997.

The emission factor for 1997 in terms of pounds per million British

thermal units Obs/MMBtu).

Heat input for the control period.

The emission factor for the control period in terms of Ibs/MMBtu.

(2) If the heat input for the control period is less than the heat input for 1997, the

following equation will be used to calculate the amount of transferrable allowances.

IllI997 * EFI997 - HI1997 * EFcp

2000 lbs/ allowance

Where:

HI 1997

EF1997

=

=

Heat input from 1997

The emission factor for 1997 in terms of IbsIMMBtu.
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EFcp = The emission factor for the control period in terms of Ibs/MMBtu.

(f) Allowances may be transferred within the same region, but not between regions.

(g) Trading to and from a broker account must meet the trading restrictions regarding the

origin of the allowances and eligible transfers in this division.

§101.335. Allowance Banking.

(a) Allowances at electing facilities that result from reduced utilization or shutdown are

ineligible for banking.

(b) Allowances not used for compliance may be banked for use in subsequent years.

§101.336. Emission Monitoring, Compliance Demonstration, and Reporting.

(a) Emission monitoring and reporting shall be conducted in accordance with §116.914 of this

title, (relating to Emissions Monitoring and Reporting Requirements).

(b) For each control period, electric generating facilities (EGFs), must submit a report to the

commission detailing the amount of emissions of each allocated air contaminant during the preceding
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control period. This report must be submitted by June 1 of each year. Emission allowances equaling

the total emissions will be deducted from the EGF's compliance account.

§101.337. EI Paso Region.

(a) An electric generating facility CEGF) in the EI Paso Region may meet the emissions

allowances by using credits from emissions reductions achieved in the City of Juarez, United States of

Mexico. Emission reductions under this section must meet the following criteria.

(1) The emission reduction must be:

(A) enforceable by the commission:

(B) permanent, meaning that the emission reduction is unchanging for the

remaining life of the source;

(C) quantifiable, so that the emission reduction can be measured or estimated

with confidence using replicable techniques;

(0) sUIplus, such that the emission reduction is not otherwise required of a

facility by a state or federal law, regulation or agreed order, and;
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(E) a real reduction in which actual emissions are reduced.

Page 33

(2) The emission reduction must be reviewed and approved by the executive director

prior to converting the credits into allowances under this program.

(b) EGFs in the EI Paso Region are exempt from the requirements of this division if either

EPA or the commission determines that reductions of nitrogen oxide in the EI Paso Region that would

otherwise be required under this division would result in an increased ambient ozone level in EI Paso

County.
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The Texas Natural Resource Conservation Commission (TNRCC or commission) proposes new

§116.18, concerning Electric Generating Facility Permits Definitions; §116.91O, concerning

Page 34

Applicability; .§116.911,.. conceming_Electric..Generating Facility. Permit Application;· §H 6,912, .

concerning Electric Generating Facility Permit Application for Electing Electric Generating Facilities;

§116.913, concerning General and Special Conditions; §116.914, concerning Emissions Monitoring

and Reporting Requirements; §116.915, concerning Emission Control Changes; §116 916, concerning

Permits for Electric Generating Facilities in El Paso County; §116.920, concerning Public Participation

for Initial Issuance; §116.921, concerning Notice and Comment Hearings for Initial Issuance;

§116.922, concerning Notice of Final Action; §116.930, concerning Modifications; and §116.931,

concerning Renewal. Sections 116.910-116.931 would be placed in a new Subchapter I, concerning

Electric Generating Facility Permits. These new sections are also proposed as amendments to the state

implementation plan (SIP).

EXPLANATION OF PROPOSED RULES

Senate Bill (SB) 7, 76th Legislature, 1999, amended Texas Utilities Code, Title 2, concerning Public

Utility Regulatory Act, Subtitle B, concerning Electric Utilities, and created a new Chapter 39,

concerning Restructuring of Electric Utility Industry. SB 7 requires the commission to implement the

permitting and allowance requirements of new §39.264, concerning Emissions Reductions of

"Grandfathered Facilities." SB 7 requires electric generating facilities (EGFs) existing on January 1,

1999, that were not subject to the requirement to obtain a permit under Texas Clean Air Act (TCAA),

§382.0518(g) to obtain a permit from the commission. These facilities are commonly referred to as
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grandfathered EGFs. A grandfathered facility is one that existed at the time the legislature amended

the TCAA in 1971. These facilities were not required to comply with (Le., grandfathered from) the

then new requirement to obtain pennits for construction or modifications of facilities that emit air

contaminants.

These new sections are proposed concurrently with amendments and new sections in Chapter 101 of

this title, concerning General Rules. The proposed new Division 2, concerning Emission Banking and

Trading of Allowances, in the new Subchapter H, concerning Emissions Banking and Trading, in

Chapter 101 sets out the allowance system to be used to assist EGFs in meeting the emission reduction

requirements of SB 7. The purpose of the rulemaking in these chapters is to implement pennit and

emission control requirements, including emission banking and trading of allowances (EBTA), for

certain EGFs and related pennit application and public notice procedures. The permit application and

public notice procedures are the subject of these proposed amendments to Chapter 116. The

amendments to Chapters 101 and 117 are published in a separate section of this edition of the Texas

Register.

SB 7 requires owners or operators of grandfathered EGFs to apply for a pennit to emit nitrogen oxide

(NOx) and, for coal-fired EGFs, sulfur dioxide (SO:z). These applications are due on or before

September 1, 2000. An EGF that does not obtain a permit may not operate after May 1,2003, unless

the commission fmds good cause for an extension. It is the intent of SB 7 that for the 12-month period

beginning May 1, 2003, and for each 12-month period following, annual emissions of NOx from
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grandfathered EGFs not exceed 50% of the NOx emissions reported to the commission for 1997.

Furthermore, it is the intent of the legislation that emissions of S02 from coal-fired EGFs not exceed

75 % of.the.SO:-emissions. reportecito~the coInIIlission..in.1997....-The describedemission·limitafions may

be satisfied by using control technology or by participating in the banking and trading of allowances.

Persons, municipal corporations, electric cooperatives, and river authorities owning EGFs that are not

grandfathered may elect to become subject to the permitting requirements and emission reductions. A

municipal corporation, electric cooperative, or river authority may exclude any grandfathered EGF

with a nameplate capacity of 25 megawatts or less from permitting and emission reduction

requirements. Texas Utilities Code, §39.264(d) requires notice of the intent to exclude these EGFs by

January 1, 2000. The commission will make available a form for this purpose, and requests that the

form be returned to the commission by November 1, 1999.

The proposed new §116.18 contains the following defmitions. An "electric generating facility," as

defmed in SB 7, is a facility that generates electric energy for compensation and is owned or operated

by a person in this state, including a municipal corporation, electric cooperative, or river authority.

The commission proposes to modify that definition to exclude a facility that generates electric energy

primarily for internal use, but that during 1997 sold, to a utility power distribution system, less than

one-third of its potential electrical output capacity. This exclusion eliminates cogeneration facilities that

were not intended to be included in this program. An "electing electric generating facility" is an EGF

permitted under Chapter 116, Subchapter B, concerning New Source Review Permits, which is not
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subject to the requirements of Texas Utilities Code, §39.264 and elects to comply with Chapter 116,

Subchapter 1. An "allowance" is the authorization to emit one ton of NOx or, if applicable, S02' during

a specified control period or any specified control period thereafter. "Coal" is all solid fuels classified

as anthracite, bituminous, subbituminous, or lignite by the American Society for Testing and Materials

Designation ASTM D388-92 "Standard Classification of Coals by Rank" (as incorporated by

reference in Title 40 Code of Federal Regulations (CFR) §72.13). This definition of coal is consistent

with the defmition found in 40 CFR Part 72, concerning Acid Rain Program. The commission is

defining coal to clearly include lignite as coal, since these two fuels are sometimes referenced

separately. "Combined permit" is a permit that consolidates the existing new source review (NSR)

authorization with the requirements of an EGF permit. A "compliance account" is an account for an

EGF or multiple EGFs in which allowances are held. Consistent with Texas Utilities Code,

§39.264(c), a "control period" is the 12-month period beginning May 1 of each year and ending April

30 of the following year. Control periods begin on May 1,2003. "Nameplate Capacity" means the

maximum electrical output (expressed in megawatts) that an EGF can sustain over a specified period of

time when not restricted by seasonal or other deratings. This defmition is consistent with the defmition

\.r~d under the Federal Clean Air Act (FCAA) Amendments of 1990, Acid Rain Program. The

commission believes that using this defmition will reduce any confusion for EGFs potentially subject to

both the Acid Rain Program and the EBTA program proposed under Chapter 101, Subchapter H,

Division 2. A "peaking unit" is an EGF that has: 1) an average capacity factor of no more than 10%

during the past three calendar years, and 2) a capacity factor of no more than 20% in each of those

calendar years. "Capacity factor" is either: 1) the ratio of an EGF's actual annual electric output
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(expressed in megawatt-hours) to the EGF's nameplate capacity times 8,760 hours or 2) the ratio of an

EGF's annual heat input (in millions of British thermal units (MMBtu» to the EGF's maximum design

heat input..(inMMBtu) times..8,160hours~ Both terms, capacity factor and peaking, unit, are consistent

with the same terms in the FCAA Acid Rain Program.

Section 116.910 states that a permit under this new subchapter would authorize emissio'ns of NOx for

any EGF and emissions of 502 for coal-fired EGFs. Section 116.910 specifies that the EGF owner or

operator authorized to act for the owner is responsible for complying with this subchapter. Consistent

with Texas Utilities Code, §39.264(d), a municipal corporation, electric cooperative, or river authority

may exclude any EGF with a nameplate capacity of 25 megawatts or less from this subchapter. The

municipal corporation, electric cooperative, or river authority must notify the commission by January

1, 2000, of its intent to exclude those EGFs. The commission will make available a form for this

purpose and requests that the form be returned to the commission by November 1, 1999.

SB 7 requires grandfathered EGFs to obtain a permit from the commission that authorizes the emission

of NOx and, for coal-fired EGFs, 502' Other than NOx and 502' EGFs also emit products of

combustion such as carbon monoxide, particulate matter, and volatile organic compounds. At a coalfired EGF, the emissions may include mercury as well. The commission believes that the SB 7

authorization was only intended to authorize NOx and 502 (for coal-fired EGFs). The commission also

believes that the intent of SB 7 was to eliminate the grandfathered status of EGFs. However, it is

unclear how SB 7 authorizes or requires the permitting of anything other than NOx and 502 (for coal-
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fired EGFs). Furthermore, if the commission were to permit these other air contaminants in an electric

generating facility permit (EGFP), it is unclear what standards these air contaminants should be held to.

Therefor~, the commission proposes to incorporate these emissions using the emission control standards

of the Voluntary Emissions Reduction Permits (VERP) proposed concurrently in this edition of the

Texas Register under Chapter 116, Subchapter H, concerning Voluntary Emission Reduction Permits.

These other air contaminants from the EGFs would be reviewed under the requirements of the VERP

program but would only go through the public notice process one time.

The commission believes that it is appropriate to rely on the control methods and health effects

requirements of the VERP program for air contaminants other than NOx and, if applicable, S02' The

VERP program provides control method options depending on the location of a grandfathered facility.

The VERP proposal also describes the suggested methods for a health effects review for grandfathered

facilities. This proposal to rely on the VERP control methods and health effects review will provide a

consistent basis of review for emissions besides NOx and S02 from all grandfathered facilities. The

commission does not think it is appropriate to merely include other emissions in a grandfathered EGF's

permit without a review of control methods and, if necessary, impacts. This is consistent with the

longstanding policy to not treat certain facilities as being "permitted" simply because the facilities are

consolidated into an existing permit. For example, a facility that was originally authorized by an

exemption will continue to be authorized under the exemption even though the exemption is

consolidated with an NSR permit during an amendment or at renewal. The proposal does not require

applicants to permit these other air contaminants from EGFs.
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Many power plants may have other grandfathered support facilities such as fuel storage tanks or coal

handling facilities that are not electric generating facilities. Because SB 7 addresses only those facilities

which.generate ..electricity,.these.support facilities are- not explicitly required -to obtain a· permit under

SB 7. To encourage the pennitting of grandfathered support facilities, the commission proposes that

these facilities could apply for a VERP which would be consolidated with the EGFP. This would

enable all the grandfathered facilities and EGFs at a site to go through a combined permitting process.

Thus, all grandfathered facilities and EGFs would only go through the public notice process one time.

SB 7 does not provide procedures for the modification of an EGFP. Therefore, the commission

believes that the requirements of the TCAA concerning modifications of existing facilities still apply.

Any modifications to any facility in an EGFP remain subject to the permitting requirements of the

TCAA and the existing modification requirements in Chapter 116, Subchapter B.

To address electing EGFs, the commission proposes that the existing NSR permit be consolidated with

a permit under this subchapter. The combined permit would continue to authorize emissions of all air

contaminants and would incorporate the requirements of this subchapter into a single permit. This

pennit would contain the general and special conditions for electing EOFs. The unchanged, existing

NSR permit conditions would not be subject to public notice for the combined permit; only the

conditions specific to the EGFs for NOx and, if applicable, S02' would be subject to the public notice

required by §116.920.
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Consistent with existing application procedures of the commission, the proposed new §116.911 contains

application procedures to obtain an EGFP; As specified by amended Texas Utilities Code, §39.264(e),

the proposed new §116.911 would require that owners or operators of grandfathered and electing EGFs

apply for a pennit on or before September 1, 2000. The section also contains infonnation concerning

general content of the pennit application. An EGFP will include provisions for measurement of

emissions and a requirement to use control technology sufficient to ensure that emissions do not exceed

an EGF's allowance. Although control technology is not explicitly required under SB 7, the control

method language was included in the proposal to ensure that control technology, if appropriate, used by

these EGFs would be sufficient to meet the limitations of the allowances. The removal of control

technology could also trigger federal NSR requirements, since this change could constitute a

modification under federal regulations. EGFs in nonattainment areas must comply with nonattainment

review and, if applicable, Prevention of Significant Deterioration (PSD) review. Allowances cannot be

used to avoid federal pennitting requirements because the allowances do not constitute a pennanent,

enforceable emission limit. EGFs that are affected sources under FCAA, §112(g), concerning

Modifications, must comply with those requirements. Since grandfathered EGFs must comply with

federal requirements, if applicable, the commission believes that it is appropriate to ensure that these

EGFs are in compliance with those requirements. The applicant must demonstrate how it will meet the

requirements of §116.914. Texas Utilities Code, §39.264(e) requires coal-fired EGFs to comply with

the opacity limits specified in commission rules. Applicants must submit an application for an EGFP

under the seal of a Texas licensed professional engineer, consistent with §116.110(e), concerning

Applicability.
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EGFs that are currently authorized under Chapter 116 may elect to participate in the EBTA under

Chapter 101, Subchapter H, Division 2 by consolidating their existing NSR permit with an EGFP. The

propose.d.new §116.912 contains..applicationxequir.ements.for electing.EGFs that-are in addition·to .

those contained in the proposed §116.911. Since an existing NSR permit may authorize multiple

facilities, the permit application submitted under this subchapter should identify which EGFs are to be

included in the EGFP. Applications must contain documentation of actual emissions as well as fuel

consumption, fuel heating values, and heat input in MMBtu for calendar year 1997. This information

will be used to calculate allowances for these EGFs and provide the data needed to meet the

requirements of Texas Utilities Code, §39.264(i)(3), which restricts the banking and trading of

allowances that result from reduced utilization and shutdown. Conditions may be added to the

combined permit where appropriate to ensure compliance with state and federal law. An electing EGF

may opt out of the requirements of this subchapter under certain conditions. The electing EGF must

notify the commission of its intent to opt out prior to the beginning of the next control period and may

not opt out during a control period. This requirement would prevent an EGF from opting out in order

to avoid being out of compliance with the requirement to not exceed their allowances. All allowances

for the electing EGF will be voided by the commission and may not be banked for subsequent use.

Since the EGF would no longer be subject to the restrictions of the EBTA, it would be inappropriate to

use those allowances at other EGFs, and no allowances will be allocated for subsequent control

periods. Once an EGF has opted out, the EGF may not participate in the EBTA at any future date.

Since SB 7 states that EGFs must elect to participate prior to September 1, 2000, there is not a

subsequent opportunity for those EGFs to re-elect. The commission believes that a one-time election
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and a one-time opt out provide sufficient flexibility without undermining the program. The owner or

operator shall request an alteration to the combined permit to remove the conditions pertaining to the

EGFP and restore any conditions that existed prior to the consolidation. This alteration would restore

the NSR permit to its prior status.

The proposed new §116.913 contains general conditions applicable to every EGFP unless specified

differently in the permit, and authorizes the commission to include special conditions in the permit. An

EGFP would authorize NOx emissions from EGFs, and S02 emissions from coal-fired EGFs. The EGF

must comply with the EBTA in Chapter 101, Subchapter H, Division 2. The proposed provisions for

the EBTA require EGFs to maintain allowances in a compliance account. The EBTA in Chapter 101

contains all provisions for managing allowances. For emissions of NOx and, where applicable, S02'

the EGF shall hold in its account, on May 1 of each year, a quantity of allowances equal to or greater

than the amount of that air contaminant emitted since May 1 of the previous year. Holders of EGFPs

shall comply with this requirement beginning May 1, 2004. Beginning May 1, 2004, holders of EGFPs

must report annual actual emissions of NOx and, if applicable, S02' since the previous May 1. This

report must be submitted by June 1 of each year. This report will be used to determine compliance

with the requirement that the EGF hold allowances equal to or greater than the emissions over a given

control period. The proposed section implements the requirement of Texas Utilities Code, §39.264(e)

that requires coal-fired EGFs comply with the opacity limits specified in commission rules. Section

116.913 states that the removal of or failure to operate existing control technology is not permissible

under this subchapter. The commission believes that it is not the intent of the EGFP to authorize
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removal or backsliding of control technology. Also under §116.913, proposed language would state

that applicable requirements of New Source Performance Standards (NSPS), under 40 CFR Part 60,

concerning.Standards of Performance·for New Stationary Sourcesi 40 CFRPart 61-, concerning'

National Emission Standards for Hazardous Air Pollutants; and 40 CFR Part 63, concerning National

Emission Standards for Hazardous Air Pollutants for Source Categories, are also conditions of the

permit. The issuance of an EGFP does not modify or limit the applicability of these federal programs.

The proposed new §1l6.914 specifies monitoring and reporting requirements for EGFPs. The

commission is required by Texas Utilities Code, §39.264(k) to provide methods for use in detennining

compliance with permits and methods for monitoring and reporting actual emissions of NOx and, if

applicable, S02' Title 40 CFR Part 75, concerning Continuous Emission Monitoring Under the Acid

Rain Program (Acid Rain Program), contains monitoring requirements for S02 for affected units under

that program. Since the acid rain program already requires extensive monitoring, the commission

proposes to use that monitoring for EGFs that are subject to the acid rain program for compliance with

this subchapter. EGFs not subject to the Acid Rain Program would have three choices in monitoring.

The EGF may choose to meet either Part 75 monitoring requirements, or the requirements of Title 40

CFR Part 60, or the EGF may provide an alternative monitoring plan that would be incorporated into

the permit conditions. Part 60 requirements are proposed as an alternative to Part 75 in order to be

consistent with current NSR practices. Since Part 60 monitoring is less accurate than Part 75

monitoring, the proposal requires Part 60 monitored data to have a relative accuracy of greater than

10% (Le., measured values within 90-100% of the correct value). To account for this inaccuracy, the
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monitored value must be multiplied by a factor of 1.1. This factor has been included to account for the

inequity between the monitoring accuracy of Parts 75 and 60. The commission believes that this

factor, proposed in the Ozone Transport Commission's (OTC) Model Rule, is appropriate for the

EBTA as well, based on the similarity of the OTC requirements and the goals of Texas Utilities Code,

§39.264. The OTC Model Rule implements a NOx emission budget program to reduce ambient ozone

concentrations. Although Texas is not required to participate in the OTC budget program, the

commission believes that it is appropriate to model this budget rule after the OTC model rule.

Additionally, EGFs with a heat input of less than 100 MMBtulhr could use Appendix E of 40 CFR Part

75 to estimate NOx emissions. Appendix E relies on stack testing of the facility to develop a

relationship between the emission rate and heat input. The commission proposes to structure the

monitoring requirements of this subchapter on these existing requirements because many EGFs are

currently using Part 75 and Part 60 monitoring methods. Data collected from these monitoring

requirements would be used to calculate annual emissions reported to the commission for the purpose

of demonstrating compliance with allowances. Proposed §116.914 also specifies that data collected

from the monitoring of EGFs shall be detailed in an annual report as required under §116.913. The

commission will develop a form, AR-l, specifying the requirements of the report, which would be due

on June 1 of each year.

The proposed new §116.915 would permit emission control changes to EGFs as a result of pollution

control projects initiated under the EGFP program that reduce emissions of NOx or, if applicable, 502,

This section allows emission control changes to EGFs provided the control change follows the criteria
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in this section which is similar to §116.617, concerning Standard Permits for Pollution Control

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Projects. Any emission increases must be a result of the emission control change only. For changes

that are not pollution.control.projects,-ifnonattainment NSR (NNSR}, PSD,.orFCAA, §112(g) is

applicable, then the emission control change must be authorized under NSR. For any significant

increase in emissions of a air contaminant for which a National Ambient Air Quality Standard

(NAAQS) exists, the applicant must demonstrate that the project will not lead to a violation of the

NAAQS or cause or contribute to a violation of a PSD increment or PSD visibility limitation. Netting

is not required when determining whether this demonstration must be made for the proposed project;

however, increases or decreases in emissions must be included in any future netting. This section

references 30 TAC §116.12, concerning Nonattainment Review Definitions, or Title 40 CFR

§52.21(b)(23), concerning Prevention of significant deterioration of air quality, to determine what

constitutes a significant increase in an air contaminant. Consistent with existing standard permit

registration requirements under Chapter 116, Subchapter F, concerning Standard Permits, permit

holders must submit a PI-lUR registration for emission control changes. The emission control change

may be implemented any time after receipt of written notification from the executive director that there

are no objections, or 45 days after receipt by the executive director of the registration, whichever

occurs first.

Consistent with the current review process for registrations for standard permits for pollution control

projects, the emission control change will not be authorized by the executive director if there are .

significant health effects concerning the increase in emissions of any air contaminant other than those
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for which a NAAQS has been established. Until those concerns are addressed by the applicant to the

satisfaction of the executive director, the registration will not be approved. Excluding changes

authorized under §116.915(a), increased emissions of any air contaminant, including NOx or, if

applicable, S02' must obtain preconstruction authorization under Subchapter B of this chapter if

nonattainment, PSD, or FCAA, §112(g) are applicable. Since SB 7 does not authorize emissions which

trigger federal permitting requirements, the commission believes that an EGF is still subject to

preconstruction requirements for federal permits. Likewise, modifications that would trigger state NSR

would need appropriate authorization under Chapter 116, Subchapter B.

Consistent with Texas Utilities Code, §39.264(q), the proposed new §116.915 would exempt EGFs in

EI Paso County from NOx allowance requirements if the commission or United States Environmental

Protection Agency (EPA) determines that reductions in NOx emissions would lead to increased ambient

levels of ozone. Currently, NOx reductions are not required for facilities in the El Paso nonattainment

area because EPA has granted a waiver under FCAA, §182(f). Under this waiver, NOx reductions are

not required if the attainment demonstration for compliance with the ozone NAAQS can be made

without a NOx control strategy. The existence of this waiver is not consistent with the provisions of

Texas Utilities Code, §39.264(q) because it has not been demonstrated, under the §182(f) waiver or

otherwise, that NOx reductions would increase ambient ozone in EI Paso County. These EGFs would

still be required to obtain a permit under Chapter 116, Subchapter I regardless of the determination that

NOx reductions are counterproductive in controlling ambient ozone levels in the EI Paso Region. The

commission believes that this requirement is appropriate, since Texas Utilities Code, §39.264(e)
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provides that EGFs without a permit may not operate after May 1, 2003, and Texas Utilities Code,

§39.264(q) refers only to reduction requirements, not permitting requirements. Regardless of this

determination, grandfathered EGFs inElPaso County would still be'required to" obtain a"permit under

this subchapter.

The proposed new §116.920 would require applicants for initial issuance of an EGFP to publish notice

of intent to obtain a permit in accordance with Chapter 39, concerning Public Notice, Subchapter K of

this title, concerning Public Notice of Air Quality Applications. Subchapter K implements the new

requirements of TCAA, §382.056, as amended by the 76th Legislature by House Bill 801, an act

relating to Public Participation in Certain Environmental Permitting Procedures of the TNRCC. SB 7

provides that public participation for initial issuance of an EGFP will be done in the manner of

§382.0561, concerning Federal Operating Permit; Hearing; and §382.0562, concerning Notice of

Decision. These sections allow for notice and comment hearings instead of contested case hearings

under Texas Government Code, Chapter 2001, concerning Administrative Procedure, and require the

commission to send notice of final action to persons who comment during the comment period or

during a hearing. The proposed requirements of §§116.920, 116.921, and 116.922 are based on the

sections in 30 TAC Chapter 122, concerning Federal Operating Permits, that implement the

requirements of TCAA, §382.0561 and §382.0562. Section 116.920 provides that any person who

may be affected by emissions from the EGF may request a notice and comment hearing on an EGFP

application within 30 days after the publication of Notice of Receipt of Application and Intent to Obtain

Permit under §39.418 of this title, relating to Notice of Receipt of Application and Intent to Obtain
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Permit. Grandfathered support facilities that elect to obtain a VERP and have it consolidated with an

EGFP may publish a combined notice. The unchanged, existing NSR permit conditions would not be

subject to public notice for the combined permit; only the conditions specific to the EGFs for NOx and,

if applicable, S02' would be subject to the public notice required by §116.920. Persons affected by a

decision of the commission to issue or deny an EGFP will be entitled to petition for a rehearing under

30 TAC §50.119 of this title, concerning Notice of Commission Action, Motion for Rehearing, and

may seek judicial review under TCAA, §382.032, concerning Appeal of Commission Action.

The proposed new §116.921 contains the hearing requirements for the initial issuance of EGFPs. The

proposed rule would allow the commission to decide whether to hold a hearing based On the

reasonableness of a request. The commission is not required to hold a hearing if the basis of the

request by a person who may be affected by emissions from the facility is determined to be

unreasonable. If a hearing is requested by a person who may be affected by emissions from the EGF,

and that request is reasonable, the commission will hold a hearing. The section would require that

notice of hearing On a draft permit be published in the public notice section of One issue of a newspaper

of general circulation in the municipality or the nearest municipality where the EGF is located. The

notice must be published at least 30 days prior to a hearing. The notice is published at the applicant's

expense and the rule specifies the content of the notice. The proposed rule provides the procedures for

the submittal of comments at a hearing and specifically states that the period for submitting written

comments extends to the close of the hearing and may be extended beyond the close of the hearing.

Any person, including the applicant, may submit comments on whether the draft permit contains
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inappropriate conditions or whether the preliminary decision to issue or deny the EGFP is

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inappropriate. Commenters shall raise all issues and submit all comments supporting their position by

the end of the public comment period, This requirement will"assist the commission in developing its

response to comments as required by new §1l6.922. To ensure a complete record of the comments,

the rule proposes prohibiting the incorporation by reference of supporting materials for comments

unless the materials meet the criteria in §116.921(g). The commission is required to keep a record of

all comments submitted or raised at a hearing and to have an audio recording or written transcript of

the hearing. The record is available to the public. Draft pennits may be revised based on comments

pertaining to whether the pennit provides for compliance with the requirements for an EGFP.

The proposed new §116.922 would require the commission to individually notify persons who

commented, either during the public comment period or at a pennit hearing, of the fmal action of the

commission. The notice must be sent by first-class mail to the commenters and to the applicant. The

notice must include the response to comments, the identification of any changes in the permit, and a

statement that any person affected by the decision of the commission may petition for rehearing under

30 TAC §50.119, and for judicial review under TCAA, §382.03~.

The EGFP establishes the conditions under which emissions of NO, and 502 are regulated. Emissions

of air contaminants other than NO, and if applicable, 502' may be pennitted under the VERP proposed

in a concurrent rulemaking in other sections of this edition of the Texas Register. Additionally, the

public notice requirements of the VERP and EGFP may be combined under §1l6.920.
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Consistent with Texas Utilities Code, §39.264(r), the proposed new §1l6.931 would require EGFPs to

be renewed under the requirements of Chapter 116, Subchapter 0, concerning Pennit Renewals.

FISCAL NOTE

Bob Orozco, a technical specialist in the Strategic Planning and Appropriations Section, has determined

that for the first five-year period the proposed amendments are in effect there will be no significant

fiscal implications for the commission and most units of state and local government as a result of

administration or enforcement of the proposed amendments. River authorities and units of local

government that own and operate EGFs having a capacity of greater than 25 megawatts will be

required to obtain a pennit from the commission to continue operating. The fiscal implications for

units of state and local government with EGFs will be addressed in the Public Benefit portion of this

preamble.

The proposed amendments to Chapter 116 would implement the pennit requirements for grandfathered

EGF provisions contained in:

Act of May 27, 1999, SB 7, 76th Legislature, 1999, (to be codified in part at Texas

Utilities Code, §§11.003-163.002).

In addition, the proposed amendments refer to public notice and public participation provisions

incorporated in proposed changes to Chapter 39, Public Notice and specified in:
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Act of May 13, 1999, HB 801, 76th Legislature, HB 801, 1999, (to be codified in

Texas Water Code, Chapter 5, Subchapter M, and Texas Health and Safety Code,

§361.088 and §382.056).

Page 52

The proposed amendments require grandfathered EGFs to apply for a permit before September I,

2000. A grandfathered EGF is an EGF that was exempt from permitting requirements by virtue of

existing or beginning construction, alteration, or modification on or before August 31, 1971. An EGF

that does not obtain a pennit by May 1, 2003, may not operate unless the commission finds good cause

for an extension.

The proposed amendments would establish requirements, procedures, deadlines, and responsibilities for

electric generating facility permit (EGFP) applications for facilities that were formerly exempt from the

agency's pennit requirements.

PUBLIC BENEFIT

Mr. Orozco has also determined that for each year of the first five years the proposed amendments to

Chapter 116 are in effect, the public benefit anticipated from enforcement of and compliance with the

proposed amendments will be a reduction of air contaminants emitted from affected electric generating

facilities, and the opportunity for public participation and comment in the permitting procedures for

formerly grandfathered EGFs and other participating EGFs.
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The purpose of the proposed amendments is to create and implement a permit and emission control

program, including an EBTA program for certain EGFs, and to implement related permit application

and public notice procedures. EGF applicants must apply. for .a permit to emit air contaminants on or

before September 1, 2000. An EGF that does not obtain a permit may not operate after May 1,2003,

unless the commission finds good cause for an extension.

The EGFP will also require measurement of emissions, prohibition of removal or failure to operate

control technology, and a requirement to use control technology sufficient to ensure that emissions do

not exceed an EGF's allowance. Emissions of air contaminants other than NO. or S02 from EGFs may

be included in the EGFP. If included, these emissions would be reviewed under the requirements of

the concurrently proposed Voluntary Emissions Reduction Permit (VERP) in Chapter 116, Subchapter

H. Support facilities for EGFs may be concurrently permitted under the VERP and the permit may be

consolidated with an EGFP.

It is the intent of the legislature in SB 7 that, starting May 1, 2003, annual emissions of NO. from

grandfathered EGFs not exceed 50% of the levels emitted during 1997 as reported to the commission.

SB 7 also requires that emissions of S02 from coal-fired power plants not exceed 75 % of the levels

emitted in 1997 as reported to the commission. These reductions may be met by the emissions trading

and allowance system which is the subject of related and concurrent rulemaking in Chapter 101.

Counties within Texas have been divided into three regions by SB 7-East Texas, West Texas, and EI

Paser-for the purpose of allocating emissions of NO. and S02 and for the trading of emissions
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allowances, by region, among the EGFs. The East Texas Region emission rate shall be 0.14 lb of NOx

and 1.38 lbs of S02 per MMBtu. The EI Paso and West Texas Regions emission rates shall be 0.195 lb

of NOx • The allowance calculation is·specified in the 'concurrently proposed Chapter 101; Subchapter

H, Division 2, concerning Emissions Banking and Trading of Allowances. The permit under this

chapter would require compliance with the allowance system calculated under the EBTA.

For the purposes of this fiscal note, the estimated total annualized cost to EGFs of implementing the

provisions of the proposed amendments consists of the cost of publishing notice of intent to obtain an

air permit, and the cost of installing and operating the control technology sufficient to ensure that

emission allowances are not exceeded. Each of these costs are addressed in tum.

SB 7 requires that applicants publish notice of intent to obtain a permit in accordance with TCAA,

§382.056, concerning Notice of Intent to Obtain Permit or Permit Review; Hearing. The public notice

requirements for these permits are contained in Chapter 39, concerning Public Notice. The cost of

publishing notice is estimated to be in the range of $380 to $3,600, inclusive of one display notice, one

legal notice, and one alternative language notice.. Costs vary significantly depending on the location of

the EGF and its proximity to large metropolitan areas. The alternative language notice is not always

required. Small tOWn/city newspapers generally charge much less for publication of a public notice.

In February 1999, the Public Utility Commission of Texas (PUCT) and the commission published a

report entitled, "Electric Restructuring and Air Quality: A Preliminary Analysis of Reductions and
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Costs of Nitrogen Oxides Controls from Electric Utility Boilers in Texas." The PUCT and the

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commission used infonnation collected from generation-owning utilities in Texas to assess the potential

costs of NO, emission reductions that could be required from existing utility power plants. Costs were

estimated at an emission rate of 0.15 lb MMBtu which is close to the 0.14 Ib MMBtu specified in the

proposed amendments to Chapter 101. The average annual cost estimated by the utilities of applying a

control technology to attain this level of reductions was approximately $4,000 per ton of emissions

reduced. This average annual cost per ton of emissions reduced includes annualized capital costs plus

the additional annual operating costs associated with the applied technology. The study states that the

"NO, control costs developed in this analysis are only estimates, and that a change in anyone of a

number of critical assumptions will cause these cost estimates to change significantly." Generic

reduction and cost factors were used in the study but individual companies and specific units will most

likely have different costs. This variability in cost depends on the types of emissions reduced, the

amount of emission reductions, the specific processes involved, the size of the facility, and control

methodologies employed for emission reductions. The data also indicates that EGFs with the largest

required emission reductions have the lowest cost per ton of emission reduced. In general, the

annualized cost for emission reductions is inversely proportional to the amount of emissions required

because when larger emission reductions are required, the average cost is spread over more tons

reduced.

The data also indicates that it would be more economical for some of the affected EGFs which require

small reductions and large capital costs to use the banking and trading provisions to offset some or all
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of the costs of reducing emissions to the required level. It is anticipated that emission reduction

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requirements will be met as the economics of emission allowances, emission reduction costs, the

emission banking and trading system, and other factors of individual facilities dictate. It is also

anticipated that costs for using the EBTA system will be less than the cost of actual emission reduction

in most cases. The PUeT/commission study states that "a subcommittee of the Ozone Transport

Assessment Group (OTAG) has analyzed market-based emission trading options, estimating potential

savings of as much as 50 percent, compared to the costs of unit-by-unit compliance." The scope of the

variability in the amounts and types of emission reductions that are possible and the methodologies

available for reduction is such that costs of emission reduction for the EGFP program are impossible to

predict with certainty. However, an average annual cost of approximately $4,000 per ton of emissions

reduced would appear to be an acceptable industry-wide estimate of the-cost of installing and operating

the control technology sufficient to ensure that emission allowances are not exceeded. For EGFs

requiring an emission reduction of 100 to 1,000 tons annually, the total annualized costs are estimated

to be in the range of $400,000 to $4,000,000. These estimated costs are inclusive of annualized capital

costs and annual operating costs averaging approximately $4,000 per ton of emissions reduced plus the

public notice costs.

Costs associated with authorizing emissions other than NO. or, if applicable, S02' using the review

process of the VERP are detailed in the concurrent proposed Chapter 116, Subchapter H. The VERP

fee would not apply to these emissions and the public notice requirements would be satisfied under the

EGFP. Costs associated with permitting support facilities under the VERP include the permit
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!

application fee as detailed in the concurrently proposed Chapter 116, Subchapter H. The public notice

requirements for the VERP and the EGFP may be combined into one notice process.

A municipal corporation, electric cooperative, or river authority may exclude any electric generating

facilities of 25 megawatts or less from the requirements to obtain an EGFP. These entities must inform

the commission by January 1, 2000, of their intent to exclude facilities from permitting requirements.

River authorities and units of local goverrunent that own and operate EGFs having a capacity greater

than 25 megawatts will be required to obtain a permit from the commission to continue operating.

These entities include the cities of Austin, Brownsville, Bryan, Denton, Garland, Greenville, Lubbock,

San Antonio, the Texas Municipal Power Agency, Brazos Electric Power Cooperative, San Miguel

Electric Cooperative, and the Lower Colorado River Authority. It is anticipated that the total

annualized cost of emission reductions will be similar to those of the industry at large for similar sizes

and types of facilities, and types of emissions. It is also anticipated that emission reductions will be

made as the economics of emission allowances, the banking and trading system, and other factors of

individual facilities dictate. The scope of the variability in the amounts and types of emission reductions

that are possible and the methodologies available for reduction is such that costs of emission reduction

for the EGFP program are impossible to predict with certainty for this segment of the industry.

However, the estimated annualized cost that was used for the industry at large for installing and

operating the control technology of approximately $4,000 per ton of emissions reduced would appear to

be an acceptable estimate for municipal corporations, electric cooperatives, and river authorities. The

cost of publishing notice will also be similar to those for the industry at large.
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SMALL BUSINESS AND MICRO-BUSINESS ANALYSES

Page 58

Based on the expected revenues from the smallest generators and the number of employees defined as a

micro-business, there are no known small businesses or micro-businesses as defined in the Texas

Government Code with EGFs which would be affected by these proposed amendments to Chapter 116.

If there are affected small businesses or micro-businesses, the estimated annualized cost that was used

for the industry at large for installing and operating the control technology of approximately $4,000 per

ton of emissions reduced would appear to be an acceptable estimate. The cost of publishing notice will

also be similar to those for the industry at large.

DRAFT REGULATORY IMPACT ANALYSIS

The commission has reviewed the proposed rulemaking in light of the regulatory analysis requirements

of Texas Government Code, §2001.0225, and has determined that the rulemaking meets the definition

of a "major environmental rule" as defined in that statute. "Major environmental rule" means a rule

the specific intent of which is to protect the environment or reduce risks to human health from

environmental exposure, and that may adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, or the public health and safety of the state

or a sector of the state. However, the proposed amendments to Chapter 116 are intended to protect the

environment or reduce risks to human health from environmental exposure and may have adverse

effects on grandfathered and electing EGFs which could be considered a sector of the economy.

However, the analysis required by §2001.0225(c) does not apply because the proposed amendments do

not meet any of the four applicability requirements of a major environmental rule. The proposed
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amendments do not exceed a standard set by federal law, exceed an express requirement of state law,

or exceed a requirement of a delegation agreement, and they are not proposed solely under the general

powers of the agency. The amendments to Chapter 116 are proposed specifically to comply with SB

7. SB 7 requires grandfathered EGFs apply for a permit by September 1. 2000. and obtain a permit by

May 1, 2003, or cease operating, absent a showing of good cause to continue operating. The proposed

amendments allow the permitting of ~ir contaminants other than NOx or S02 for EGFs using the VERP

process. Support facilities may be permitted under a VERP which will be consolidated with an EGFP.

There is no federal law or delegation agreement with a federal agency that requires the permitting of

grandfathered EGFs.

TAKINGS IMPACT ASSESSMENT

The commission has completed a takings impact assessment for the proposed rules. The following is a

summary of that assessment. These amendments implement the requirements of Texas Utilities Code,

§39.264. This section requires owners or operators of grandfathered EGFs to apply for a permiton or

before September 1, 2000, and obtain a permit or cease operation by May 1,2003. It is the intent of

SB 7 that for the 12-month period beginning May 1, 2003, and for each 12-month period following,

annual emissions of NO. from grandfathered EGFs not exceed 50% of the NOx emissions reported to

the commission for 1997. Furthermore, it is the intent of the legislation that emissions of S02 from

coal-fired EGFs not exceed 75 % of the S02 emissions reported to the commission in 1997. NOx and

S02 allowances will be allocated to EGFs by January 1, 2000. To assist EGFs in meeting the reduction

requirements, a banking and trading program is proposed concurrently in Chapter 101 of this title.
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Although EGFs are required to make specific emission reductions, these facilities have alternatives

available under the proposed banking program that may allow the EGF to avoid installing add-on

controls. Further, allowances can be transferred under the proposed banking program so that EGFs

have opportunities to buy and sell allowances in order to respond to business needs. The amendments

do not affect private property in a manner that restricts or limits an owner's right to the property that

would otherwise exist in the absence of the governmental action. Consequently, this proposal does not

meet the definition of a takings under Texas Government Code, §2007.002(5). The reductions

obtained from the issuance of EGFPs will assist in the efforts of the commission to attain the NAAQS.

This action is taken in response to a real and substantial threat to public health and safety and

significantly advances the health and safety purpose and imposes no greater burden than is necessary to

achieve the health and safety purpose.

COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW

The commission has determined that this rulemaking relates to an action or actions subject to the Texas

Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as

amended (Texas Natural Resources Code, §§33.201 et seq.), and the commission's rules in 30 TAC

Chapter 281, Subchapter B, relating to Consistency with Texas Coastal Management Program. As

required by 31 TAC §505.11(b)(2) and 30 TAC §281.45(a)(3), relating to actions and rules subject to

the CMP, commission rules governing air pollutant emissions must be consistent with the applicable

goals and policies of the CMP. The commission has reviewed this action for consistency with the CMP

goals and policies in accordance with the regulations of the Coastal Coordination Council. For the
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proposed new sections related to the authorization of EGFPs, the commission has determined that the

rules are consistent with the applicable CMP goal expressed in 31 TAC §501.12(l) of protecting and

preserving the quality and values of coastal natural resource areas, and the policy in 31 TAC

§501.14(q), which requires that the commission protect air quality in coastal areas. This proposal is

intended to reduce overall emissions of NO, and S02 from EGFs. This action is consistent with 40

CFR because it does not authorize an emission rate in excess of that specified by federal requirements.

Interested persons may submit comments during the public comment period on the consistency of the

proposed rule with CMP goals and policies.

PUBLIC HEARING

The commission will hold a public hearing on this proposal in El Paso on October I, 1999, at 9:00

a.m. in the City of EI Paso Council Chambers, located at 2 Civic Center Plaza, 2nd Floor. Additional

hearings will be held in Lubbock on October 1 at 6:00 p.m. in the City of Lubbock Council Chambers,

located at 1625 13th Street; in Austin on October 4 at 9:00 a.m. in Room 5108 of Texas Natural

Resource Conservation Commission Building F, located at 12100 Park 35 Circle; in Irving on October

5 at 1:00 p.m. in the City of Irving Central Library Auditorium, located at 801 West Irving Boulevard;

in Houston on October 7 at 9:00 a.m. in the City of Houston Pollution Control Building Auditorium,

located at 7411 Park Place Boulevard; and in Beaumont on October 7 at 6:00 p.m. in the John Gray

Institute, located at 855 Florida Avenue. The hearings are structured for the receipt of oral or written

comments by interested persons. Individuals may present oral statements when called upon in order of

registration. Open discussion will not be permitted during the hearings; however, an agency staff
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member will be available to discuss the proposal 30 minutes prior to the hearings and will answer

questions before and after the hearings.

SUBMITTAL OF COMMENTS

Comments may be submitted to Casey Vise, MC 205, Office of Environmental Policy, Analysis, and

Assessment, Texas Natural Resource Conservation Commission, P.O. Box 13087, Austin, Texas

78711-3087, or faxed to (512) 239-4808. All comments should reference Rule Log Number 99033-

116-AI. Comments must be received by 5:00 p.m., October 11. 1999. For further information, please

contact Beecher Cameron, of the Policy and Regulations Division, at (512) 239-1495.

Persons with disabilities who have special communication or other accommodation needs who are

planning to attend the hearing should contact the Office of Environmental Policy, Analysis, and

Assessment at (512) 239-4900. Requests should be made as far in advance as possible.

STATUTORY AUTHORITY

The new section is proposed under Texas Utilities Code, §39.264, which authorizes the commission to

develop rules for the permitting of electric generating facilities; and Texas Health and Safety Code,

TCAA, §382.011, which authorizes the commission to administer the requirements of the TCAA;

§382.012, which provides the commission the authority to develop a comprehensive plan for the state's

air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes

of the TCAA; §382.051, which authorizes the commission to issue permits; §382.0513, which
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authorizes the commission to establish and enforce permit conditions consistent with the TCAA;

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§382.0515, which requires applicants to provide information that assures compliance with state and

federal laws and regulations; §382.0518, which authorizes the commission to issue permits for new

construction and modifications; §382.0519, which authorizes the commission to issue voluntary

emission reduction permits, §382.05191, which authorizes public notice for voluntary emission

reduction permits; §382.05193, which authorizes permits through emissions reductions, §382.055,

which authorizes the commission to establish procedures for review or renewal of a permit; §382.056,

which authorizes the commission to require public notice of certain permit applications and procedures

for requesting hearings and responding to comments; §382.0561, which authorizes hearing procedures

for federal operating permits; §382.0562, which requires notices of decision; and §382.061, which

authorizes the commission to delegate permitting authority to the executive director; and Texas Water

Code, §5.122, which authorizes the commission to delegate uncontested matters to the executive

director.

The proposed new section implements Texas Utilities Code, §39.264, relating to Emissions Reductions

of "Grandfathered Facilities"; Texas Health and Safety Code, §382.011, relating to General Powers

and Duties; §382.012, relating to State Air Control Plan; §382.017, relating to Rules; §382.051,

relating to Permitting Authority of Board; Rules; §382.0513, relating to Permit Conditions; §382.0515,

relating to Application for Permit; §382.0519, relating to Voluntary Emissions Reduction Permit,

§382.05191, relating to Voluntary Emissions Reduction Permit: Notice and Hearing; §382.05193,

relating to Emissions Permits through Emissions Reductions; §382.0518, relating to Preconstruction
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Pennit; §382.055, relating to Review and Renewal of Preconstruction Pennit; §382.056, relating to

Notice of Intent to Obtain Permit or Permit Review; Hearing; §382.0561, relating to Federal Operating

Pennit: Hearing; §382.0562, relating to Notice of Decision; and §382.061, relating to Delegation of

Powers and Duties; and Texas Water Code, §5.l22, relating to Delegation of Uncontested Matters to

Executive Director.
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SUBCHAPTER A : DEFINITIONS

§1l6.18

§1l6.18. Electric Generatin2 Facility Permits Definitions.

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The following words and terms, when used in Subchapter I of this chapter (relating to Electric

Generating Facility Permits) shall have the following meanings, unless the context clearly indicates

otherwise.

(1) Allowance - The authorization to emit one ton of nitrogen oxide (NO.) or sulfur

dioxide (502) during a control period.

(2) Capacity factor - Either:

(A) the ratio of an electric generating facility's (EGF) actual annual electric

oumut (expressed in megawatt-hours) to the EGF's nameplate capacity times 8,760 hours; or

(B) the ratio of an EGF's annual heat input (in millions of British thermal units

(MMBtu» to the EGF's maximum design heat input (in MMBtu) times 8,760 hours.
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(3) Coal - All solid fuels classified as anthracite. bituminous. subbituminous. or lignite

by the American Society for Testing and Materials Designation ASTM D388-92 "Standard

Classification of Coals by Rank" (as incorporated by reference in Title 40 Code of Federal

Regulations. §72.13 (effective June 25. 1999».

(4) Combined pennit - A permit that consolidates the existing new source review

authorizations with the reguirements of an EGF permit.

(5) Compliance account - The account for an EGF or multiple EGFs in which

allowances are held.

(6) Control period - The 12 month period beginning May 1 of each year and ending

April 30 of the following year. Control periods begin May 1. 2003.

(7) Electing electric generating facility <EGFl - An EGF permitted under Chapter

116. Subchapter B of this title (relating to New Source Review Permits) which is not subject to the

reguirements of Texas Utilities Code. §39.264 and elects to comply with Chapter 116. Subchapter I of

this title (relating to Electric Generating Facility Permits).

(8) Electric generating facility <EGF> - A facility that generates electric energy for

compensation and is owned or operated by a person in this state. including a municipal cor:poration.
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electric cooperative, or river authority. An EGF does not include a facility that generates electric

energy primarily for internal use but that during 1997 sold, to a utility power distribution system, less

than one-third of its potential electrical output capacity.

(9) Nameplate Capacity - The maximum electrical output (expressed in megawatts)

that an EGF can sustain over a specified period of time when not restricted by seasonal or other

deratings.

(10) Peaking unit - An EGF that has:

(A) An average capacity factor of no more than 10% during the past three

calendar years: and

(B) A capacity factor of no more than 20% in each of those calendar years.
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SUBCHAPTER I : ELECTRIC GENERATING FACILITY PERMITS

§§116.910-116.916, 116.920-116.922, 116.930, 116.931

STATUTORY AUTHORITY

Page 68

The new section is proposed under Texas Utilities Code, §39.264, which authorizes the commission to

develop rules for the permitting of electric generating facilities; and Texas Health and Safety Code,

TCAA, §382.012, which provides the commission the authority to develop a comprehensive plan for

the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and

purposes of the TCAA; §382.0513, which authorizes the commission to establish and enforce permit

conditions consistent with the TCAA; §382.051, which authorizes the commission to issue ryermits;

§382.0518, which authorizes the commission to issue permits for new construction and modifications;

§382.05l9, which authorizes the commission to issue voluntary emission reduction permits,

§382.05l9l, which authorizes public notice for voluntary emission reduction permits; §382.05l93,

which authorizes permits through emissions reductions, §382.055, which authorizes the commission to

establish procedures for review or renewal of a permit; §382.056, which authorizes the commission to

require public notice of certain permit applications and procedures for requesting hearings and

responding to comments; §382.0561, which authorizes hearing procedures for federal operating

permits; §382.0562, which requires notices of decision; and §382.061, which authorizes the

commission to delegate permitting authority to the executive director; and Texas Water Code, §5.122,

which authorizes the commission to delegate uncontested matters to the executive director.
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The proposed new section implements Texas Utilities Code, §39.264, relating to Emissions Reductions

of "Grandfathered Facilities"; Texas Health and Safety Code, §382.0l2, relating to State Air Control

Plan; §382.017, relating to Rules; §382.0513, relating to Permit Conditions; §382.051, relating to

Permitting Authority of Board; Rules; §382.0519, relating to Voluntary Emissions Reductio~ Permit.

§382.0519l, relating to Voluntary Emissions Reduction Permit: Notice and Hearing; §382.05193,

relating to Emissions Permits through Emissions Reductions; §382.05l8, relating to Preconstruction

Permit; §382.055, relating to Review and Renewal of Preconstruction Permit; §382.056l, relating to

Federal Operating Permit: Hearing; §382.0562, relating to Notice of Decision; and §382.061, relating

to Delegation of Powers and Duties; and Texas Water Code, §5.122, relating to Delegation of

Uncontested Matters to Executive Director.

§116.910. Applicability.

(a) The owner or operator of a grandfathered electric generating facility (EGF) shall apply for

a permit to operate that facility under this subchapter.

(b) Electing EGFs opting to obtain a permit under this subchapter shall submit a permit

application to consolidate existing New Source Review (NSR) authorizations with a permit to authorize

nitrogen oxide (NO.) emissions and. if applicable. sulfur dioxide (S02) emissions under this subchapter.
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(c) The owner. or the operator who is authorized to act for the owner. of an EGF is

responsible for complying with this subchapter.

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(d) A municipal corporation. electric cooperative, or river authority may exclude any EGF

with a nameplate capacity of 25 megawatts or less from this subchapter. The municipal corporation.

electric cooperative, or river authority must notify the commission by January 1. 2000, of its intent to

exclude those EGFs.

(e) Emissions of NO. shall be permitted under this subchapter for any EGF. Emissions of S02

shall be permitted under this subchapter only for coal-fired EGFs. Emissions of other air contaminants

from EGFs may be permitted under this subchapter provided the grandfathered facilities meet the

requirements of Chapter 116, Subchapter H of this title (relating to Voluntary Emission Reduction

Permits).

(f) Owners or operators of grandfathered facilities as defined in §116.10 of this title (relating

to General Definitions) at sites with EGFs subject to this subchapter may include those grandfathered

facilities in a permit issued under this subchapter. provided the grandfathered facilities meet the

requirements of Chapter 116. Subchapter H of this title,
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&116.911. Electric Generatin& Facility Pennit Application.

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(a) Any application for an electric generating facility permit (EGFP) must include a completed

Form PI-I-V, General Application. The Form PI-I-V must be signed by an authorized representative

of the applicant. The Form PI-I-V specifies additional support information which must be provided

before the application is deemed complete. In order to be granted an EGFP, the owner or operator of

the electric generating facility (EGF) shall submit information to the commission which demonstrates

that all of the following are met:

(1) Measurement of emissions and performance demonstration. Measurement of

emissions and demonstration of performance shall be conducted consistent with § 116.914 of this title

(relating to Emissions Monitoring and Reporting Reguirements).

(2) Control method. EGFs shall use control technology sufficient to ensure that actual

emissions from the facility do not exceed the amount of allowances in an EGF's compliance account.

(3) Nonattainrnent review. If the EGF is located in a nonattainrnent area, the owner or

operator of the EGF shall comply with all applicable reguirements under Chapter 116, Subchapter B,

Division 5 of this title (relating to Nonattainrnent Review).
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(4) Prevention of Significant Deterioration (PSm review. If the EGF is located in an

attainment area, the owner or operator of the EGF shall comply with all applicable requirements under

Chapter 116, Subchapter B, Division 6 of this title (relating to Prevention of Significant Deterioration

Review).

(5) Federal standards of review for constructed or reconstructed major sources of

hazardous air pollutants. If the EGF is an affected source (as defined in § 116.15(1) of this title

(relating to Section 112(g) Definitions», the affected source shall comply with all applicable

requirements under Chapter 116, Subchapter C of this title (relating to Hazardous Air Pollutants:

Regulations Governing Constructed or Reconstructed Major Sources (FCAA, §1l2(g), 40 CFR Part

(6) Air dispersion modeling or ambient monitoring for pollution control projects under

§116.915(b)(2) of this title (relating to Emission Control Changes). Computerized air dispersion

modeling and/or ambient monitoring may be required by the commission's New Source Review

Permits Section where there is an increase in emissions to determine the air quality impacts from the

(7) Opacity Limitations for coal-fired EGFs. The coal-fired EGFs must meet the

opacity limitations of §111.111 of this title (relating to Requirements for Specified Sources).
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Cb) Applications must be submitted on or before September 1, 2000.

(c) All applications for an EGFP shall be submitted under the seal of a Texas licensed

professional engineer in compliance with §116.11O(e) of this title (relating to Applicability).

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§1l6.912. Electric Generatine Facility Pennit Application for Electine Electric Generatine

Facilities.

(a) Electing Electric Generating Facilities (EGF) seeking to consolidate existing New Source

Review (NSR) authorizations with a permit under this subchapter shall submit an application to

authorize nitrogen oxide (NO.) emissions and, if applicable. sulfur dioxide (S02) emissions. The

application shall meet the reguirements of § 116.911 of this title (relating to Electric Generating Facility

Permit Application) as well as the following.

(1) The permit application shall contain the following information for the purposes for

managing allowances:

(A) Documentation of the actual emissions of that EGF for calendar year
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(B) Documentation of fuel consumption. fuel heating values. and heat input in

MMBtu for calendar year 1997.

(2) The permit application shall identify which EGFs are to be included.

(3) Conditions in the electing EGF's NSR permit necessary to ensure compliance with

state or federal law will be included in the combined permit.

(4) The combined permit shall include the conditions of the NSR authorization as well

as the conditions of the EGFP.

(b) An electing EGF may opt out of the requirements of this subchapter under the following

conditions:

(1) The electing EGF must notify the commission of its intent to opt out prior to the

beginning of the next control period.

(2) The electing EGF may not opt out during a control period.

(3) All allowances for the electing EGF will be voided by the commission and may not

be banked for subsequent use.
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(4) No allowances will be allocated for subsequent control periods.

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(5) Once an EGF has opted out, the EGF may not participate in the emissions banking

and trading of allowances at any future date.

(6) The owner or operator shall request an alteration to the combined permit to remove

the conditions pertaining to the EGFP and restore any conditions that existed prior to the consolidation.

§116.913. General and Special Conditions.

(a) The following general conditions shall be applicable to every electric generating facility

permit (EGFP) unless otherwise specified in the permit.

(1) A permit issued under this subchapter authorizes the following.

(A) NO. emissions from all electric generating facilities (EGF).

(B) S02 emissions from coal-fired EGFs.
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(0 Emissions of all other air contaminants from EGFs meeting the

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requirements of Chapter 116, Subchapter H of this title (relating to Voluntary Emissions Reduction

Permits).

(2) Owners or operators of grandfathered facilities may consolidate a permit issued

under the requirements of Chapter 116, Subchapter H of this title.

(3) The EGF must comply with Chapter 101, Subchapter H, Division 2 of this title

(relating to Emissions Banking and Trading of Allowances) including the requirement to maintain

allowances in a compliance account. Allowances may be transferred in accordance with §101.335 of

this title (relating to Allowance Banking).

(4) Mass emission monitoring and reporting shall be conducted in accordance with

§116.914 of this title (relating to Emissions Monitoring and Reporting Requirements).

(5) On May 1 of each year after May 1. 2003, an EGF subject to this subchapter shall

hold a quantity of allowances for emissions of NO. and, where applicable, S02' in its compliance

account that is equal to or greater than the total emissions of that air contaminant emitted during the

prior control period.
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(6) Reports of annual actual emissions for NO. and, where applicable, S02' during the

control period shall be submitted to the New Source Review Permits Section by June 1 of each year.

(7) Coal-fired EGFs must meet the opacity limitations of § 111.111 of this title (relating

to Requirements for Specified Sources).

(8) Removal of or failure to operate existing control technology is not permissible

under this subchapter.

(9) New Source Performance Standards (NSPS). The emissions from each affected

facility as defined in 40 Code of Federal Regulations (CFR), Part 60 will meet at least the requirements

of any applicable NSPS as listed under Title 40 CFR Part 60, promulgated by the EPA under authority

granted under FCAA, §111. as amended.

(10) National Emission Standards for Hazardous Air Pollutants (NESHAPS). The

emissions from each facility as defined in 40 CFR Part 61 will meet at least the requirements of any

applicable NESHAPS, as listed under 40 CFR Part 61, promulgated by EPA under authority granted

under the FCAA, §112, as amended.

(11) NESHAPS for source categories. The emissions from each affected facility shall

meet at least the requirements of any applicable maximum achievable control technology standard as
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listed under 40 CFR Part 63, promulgated by EPA under FCAA, &112 or as listed under Chapter 113,

Subchapter C of this title (relating to National Emissions Standards for Hazardous Air Pollutants for

Source Categories (FCAA &112, 40 CFR Part 63)).

(b) Special conditions may be included in the EGFP.

§1l6.914. Emissions Monitoring and Reporting Requirements.

Ca) The EGF shall comply with the following requirements:

(1) For EGFs subject to the requirements of 40 Code of Federal Regulations (CFR)

Part 75 (effective June 25, 1999), relating to Continuous Emission Monitoring, all monitoring systems

must comply with the initial performance testing and periodic calibration, accuracy testing, and quality

assurance/quality control testing specified in 40 CFR Part 75. EGFs not subject to 40 CFR Part 75

may choose to comply with the initial performance testing and periodic calibration, accuracy testing,

and quality assurance/quality control testing specified in 40 CFR Part 75 or those same requirements in

40 CFR Part 60 (relating to New Source Performance Standards).

(2) During a period when valid data is not being recorded by monitoring devices

approved for use to demonstrate compliance with this subchapter. missing or invalid data shall be
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replaced with representative default data in accordance with the provisions of 40 CFR Part 75, Subpart

D, relating to Missing Data Substitution Procedures.

(b) For EGFs subject to 40 CFR Part 75, a certified monitoring system under 40 CFR Part 75

shall be used to demonstrate compliance with this subchapter.

(1) If the EGF has a flow monitor certified under 40 CFR Part 75, nitrogen oxide

(NO,) emissions in pounds per hour shall be determined using a NO, continuous emission monitoring

system (CEMS) and the flow monitor.

(2) If the EGF does not have a certified flow monitor, but does have a NO, CEMS,

NO, emissions in pounds per hour shall be determined by multiplying pounds of NO, per million

British thermal units Obs/MMBtu) times heat input in MMBtu per hour (MMBtu/hr). Procedures found

in 40 CFR Part 75, Appendix F, concerning Conversion Procedures, Section 3, shall be used to

convert the measured concentration of NO, and a diluent (carbon dioxide (C02) or oxygen (02»into an

emission rate in Ibs/MMBtu. Procedures found in 40 CFR Part 75, Appendix F, Section 5, shall be

used to determine the hourly heat input in MMBtu/hr. These two values Obs/MMBtu and MMBtu/hr)

shall be multiplied together to determine NO, emissions in lbs/hr.
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(3) The procedures in 40 CFR Part 75, Appendix E, relating to Optional NO.

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Emissions Estimation Protocol for Gas-fired Peaking Units and Oil-fired Peaking Units, may be used to

estimate the NO. emission rate.

(c) For EGFs not subject to 40 CFR Part 75, a certified monitoring system under 40 CFR

§60.13, Subpart A; Appendix B Performance Specifications 2 and 3; and Appendix F, §5.1 or 40 CFR

Part 75 shall be used to demonstrate compliance with this subchapter. For all CEMS exceeding 10%

relative accuracy, actual emissions must be determined by multiplying the CEMS data by 1.1.

(1) Emissions in pounds per hour shall be detennined using the NO. CEMS and one of

the following methods:

(A) The owner or operator may elect to comply with subsection (b)(1) or (2) of

this section.

(B) The EGF may use a flow monitor certified under 40 CFR Part 60 to

detennine emissions in pounds per hour.

(0 NO. emissions in pounds per hour may be detennined by multiplying the

Ibs/MMBtu times the heat input in MMBtu/hr. Procedures found in 40 CFR Part 60, Appendix A,

Method 19 shall be used to convert the measured concentration of NO. and a diluent (C02 or O2) into
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emission rates in Ibs/MMBtu. Procedures found in 40 CFR Part 75. Section 5, Appendix F shall be

used to determine the hourly heat input in MMBtu/hr. These two values (Jbs/MMBtu and MMBtu/hr)

shall be multiplied together to determine NO. emissions in lbs/hr.

(2) For EGFs with a heat input of less than 100 MMBtu/hr and for peaking units

emissions in pounds per hour may be determined using the procedures in Appendix E of 40 CFR Part

75 to estimate the NO. emission rate.

(d) In lieu of the monitoring required by subsection (c) of this section, the EGFP may

authorize alternative monitoring to calculate mass emissions under this section. The permit applicant

must submit the following for review of an alternative monitoring proposal:

(1) a description of the monitoring approach to be used;

(2) a description of the major components of the monitoring system, including the

manufacturer, serial number of the component. the measurement span of the component, and

documentation to demonstrate that the measurement span of each component is appropriate to measure

all of the expected values;

(3) an estimate of the accuracy of the system and documentation to demonstrate how

the estimate of accuracy was determined;
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(4) a description of the tests that will be used for initial certification, initial quality

assurance, periodic quality assurance, and relative accuracy: and

(5) additional information may be requested before approving a request for alternative

monitoring. Alternative monitoring shall be incomorated into the EGF permit.

(e) Data collected from monitoring of EGFs shall be used to calculate the actual emissions over

a control period. For each control period. EGFs subject to this subchapter must submit a report to the

commission detailing the amount of emissions of each allocated air contaminant during the preceding

control period. This report must be submitted by June 1 of each year. At a minimum. the report shall

contain the following information:

(1) A description of the monitoring protocol:

(2) A completed Form AR-l, Emissions Monitoring Data Form:

(3) Other information as needed.
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&116.915. Emission Control Changes.

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(a) Emission control changes resulting from pollution control projects designed to reduce

emissions of nitrogen oxides (NO.) or, if applicable, sulfur dioxide (S0:), are authorized for EGFs

provided that the following conditions are met.

(1) Any emission increase of an air contaminant must occur solely as a result of the

installation of control equipment or implementation of a control technique authorized under the permit

issued under this subchapter.

(2) If the project. without consideration of any other increases or decreases not related

to the project. will result in a significant net increase in emissions of any criteria pollutant. the applicant

shall submit information sufficient to demonstrate that the increase will meet the conditions of

subparagraph (A) of this paragraph.

(A) The net emission increase may not:

(i) considering the emission reductions that will result from the project.

cause or contribute to a violation of any national ambient air quality standard (NAAOS);
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ni) cause or contribute to a violation of any Prevention of Significant

Deterioration (PSD) increment; or

(iii) cause or contribute to a violation of a PSD visibility limitation.

(B) For the purnoses of this section, "significant net increase" means those

emissions increases, resulting solely from the installation of control equipment or implementation of

control techniques, that are equal to or greater than:

(i) the major modification threshold listed in § 116.12 of this title

(relating to Nonattairunent Review Definitions), Table I. for air contaminants for which the area is

designated as nonattairunent. or for precursors to these air contaminants; or

(ii) significant as defined in 40 CFR §52.2l(b)(23) (effective July 20,

1993) (relating to Prevention of Significant Deterioration of Air Quality) for air contaminants for which

the area is designated attainment or unclassifiable, or for precursors for air contaminants.

(0 Netting is not required when determining whether this demonstration must

be made for the proposed project. The increases and decreases in emissions resulting from the project

must be included in any future netting calculation if they are determined to be otherwise creditable.
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(b) Permit holders must submit a PI-lOR registration for emission control changes. The

emission control change may be implemented any time after receipt of written notification from the

executive director that there are no objections, or 45 days after receipt by the executive director of the

registration, whichever occurs first.

(c) The emission control change will not be authorized by the executive director if there are

significant health effects concerning the increase in emissions of any air contaminant other than those

for which a NAAOS has been established until those concerns are addressed by the registrant to the

satisfaction of the executive director.

(d) Increased emissions of any air contaminant, including NO. or, if applicable, S02' other

than increases authorized under subsection (a) of this section must obtain preconstruction authorization

under Chapter 116, Subchapter B of this title (relating to New Source Review Permits) if

nonattainment, PSD, or FCAA, §1l2(g), relating to Modifications, are applicable.

§116.916. Permits for Electric Generating Facilities in EI Paso County.

Electric generating facilities in EI Paso County are not required to meet nitrogen oxide

allowance requirements if the commission or EPA determines that reductions in nitrogen oxide

emissions in the EI Paso Region otherwise required by this subchapter would result in increased

ambient ozone levels in EI Paso County.
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§1l6.920. Public Participation for Initial Issuance.

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(a) An applicant for an electric generating facility permit (EGFP) shall publish notice of intent

[0 obtain the permit in accordance with Chapter 39 of this title (relating to Public Notice).

(b) Public notice for an EGFP may be combined with the public notice for a voluntary

emission reduction permit, under Chapter 116, Subchapter H of this title (relating to Voluntary

Emission Reduction Permits.)

(c) Electing EGFs are subject to public notice for emissions of nitrogen oxides (NO.) and, if

applicable, sulfur dioxide (S0.1.

(d) Any person who may be affected by emissions from an EGF may request the commission

to hold a notice and comment hearing on the EGFP application. The public comment period shall end

30 days after the publication of Notice of Receipt of Application and Intent to Obtain Permit under

§39.418 of this title (relating to Notice of Receipt of Application and Intent to Obtain Permit). Any

hearing request must be made in writing during the 30-day public comment period.

(e) Any hearing regarding initial issuance of an EGFP shall be conducted under the procedures

in §116.921 of this subchapter (relating to Notice and Comment Hearings for Initial Issuance) and not

under the APA.
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m Responses to public comments and the notice of the commission's decision to issue or deny

an EGFP shall be conducted under the procedures in §116.922 of this title (relating to Notice of Final

Action).

(g) A person affected by a decision of the commission to issue or deny an EGFP may move for

rehearing under §50.119 of this title (relating to Notice of Commission Action. Motion for Rehearing)

and is entitled to judicial review under TCAA. §382.032 (relating to Appeal of Commission Action).

§1l6.921. Notice and Comment Hearings for Initial Issuance.

(a) The notice and comment hearing requirements apply only to the initial issuance of a

electric generating facility permit (EGFP).

(b) The commission shall decide whether to hold a hearing. The commission is not required to

hold a hearing if the basis of the request by a person who may be affected by emissions from an EGF is

determined to be unreasonable. If a hearing is requested by a person who may be affected by

emissions from an EGF. and that request is reasonable. the commission shall hold a hearing.

(c) At the applicant's expense, notice of a hearing on a draft permit must be published in the

public notice section of one issue of a newspaper of general circulation in the municipality in which the
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EGF is located. or in the municipality nearest to the location of the facility. The notice must be

Page 88

published at least 30 days before the date set for the hearing. The notice must include the following:

(1) the time. place. and nature of the hearing:

(2) a brief description of the purpose of the hearing: and

(3) the name and phone number of the commission office to be contacted to verify that

a hearing will be held.

(d) Any person. including the applicant. may submit oral or written statements and data

concerning the draft permit.

(1) Reasonable time limits may be set for oral statements. and the submission of

statements in writing may be required.

(2) The period for submitting written comments is automatically extended to the close

of any hearing.

(3) At the hearing. the period for submitting written comments may be extended

beyond the close of the hearing.
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(e) A tape recording or written transcript of the hearing must be made available to the public.

(f) Any person. including the applicant. who believes that any condition of the draft permit is

inappropriate or that the preliminary decision to issue or deny the pennit is inappropriate. shall raise all

issues and submit all arguments supporting that position by the end of the public comment period.

(g) Any supporting materials for comments submitted under subsection (f) of this section must

be included in full and may not be incomorated by reference. unless the materials are one of the

following:

(1) already part of the administrative record in the same proceedings:

(2) state or federal statutes and regulations:

(3) EPA documents of general applicability; or

(4) other generally available reference materials.

(h) The commission shall keep a record of all comments received and issues raised in the

hearing. This record is available to the public.
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(0 The draft pennit may be changed based on comments pertaining to whether the permit

provides for compliance with the requirements of this subchapter.

(j) The commission shall respond to comments consistent with §116.922 of this title (relating to

Notice of Final Action).

§116.922. Notice of Final Action.

(a) After the public comment period or the conclusion of any notice and comment hearing. the

commission shall send notice by first-class mail of the final action on the application to any person who

commented during the public comment period or at the hearing. and to the applicant.

(b) The notice must include the following:

(1) the response to any comments submitted during the public comment period:

(2) identification of any change in the conditions of the draft permit and the reasons for

the change:

(3) a statement that any person affected by the decision of the commission may petition

for rehearing under §50.119 of this title (relating to Notice of Commission Action, Motion for
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Rehearing) and may seek judicial review under TCAA, §382.032 (relating to Appeal of Commission

Action).

§116.930. Modifications.

The owner or operator planning a modification of a facility permi£ted under this subchapter

must comply with Subchapter B of this Chapter (relating to New Source Review Permits) before work

is begun on the construction of the modification.

§116.931. Renewal.

Electric generating facility permits <EGFP) shall be renewed in accordance with Chapter 116,

Subchapter 0 of this title (relating to Permit Renewals).