STATE OF TEXAS OFFICE OF THE GOVERNOR GEORGE W. BUSH GOVERNOR 

### January 3, 2000 Mr. Gregg Cooke RegionVIAdministrator U.S. EnvironmentalProtectionAgency 1445 Ross Avenue Dallas, TX 75202-2733 DearMr. Cooke: ....**,I-:~**

...:0..._ (.:-,**"-~.:.: ;-T~**  :::-



# - Enclosed areproposedrevisions to Texas' State ImplementationPlan (SIP) thattheTexas NaturalResource ConservationCommission (Commission) adoptedonDecember 16, 1999. The firstpackageofadopted amendmentsto Chapters 101 and 116implementtherequirements ofSenateBill 7, 76th 

### Legislature, 1999, concerningthe emissions banking andtrading of allowances andthepermitting ofgrandfathered electric generating facilities. The second package ofadopted amendments to Chapter 116implements the newprocedures for standard permits authorizedby SenateBill 766, 76th

### Legislature, 1999. Thepublic hearing certification, completerecord ofthepublic hearing, and accompanying order are also enclosed. I lookforward to yourexpeditious approval oftheserevisions to theTexas SIP.

W.BUSH GWB/bb:pf Enclosures
cc: Mr. RobertJ. Huston, Chainnan, Texas NaturalResource Conservation Commission Mr. Jeffrey A. 

### Saitas, P.E., ExecutiveDirector, TexasNatural Resource ConservationCommission

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

# - RobertJ. 

### Huston, 

### Chairman R. B. 

### "Ralph" Marquez, 

### Commissioner JohnM. Baker, 

### Commissioner JeffreyA. 

### Saitas,

### ExecutiveDirector 

# TEXAS NATURAL RESOURCE CONSERVATION COMMISSION Protecting Texas by

### ReducingandPreventingPollution



### THE STATE OFTEXAS § COUNTY OFTRAVIS §

This is to certify that the attached are true and correct copies ofa revision to the Texas State ImplementationPlan, adoptedonDecember 16, 1999,pursuantto40CodeofFederalRegulations (CFR), §51.104. Priortotheadoptionofthisrevision, apublichearingwasheldpursuantto40CFR, §51.102(a), and notice ofthis hearing was givenwhichconformedto the requirements of40 CFR, §51.102(d). I am the custodian ofthe records ofthe Texas Natural Resource Conservation Commission (Commission).

To certify which, witness my hand and the seal ofthe Commission, this the 

### 29th day of December. 1999.

,- 

### LaDonnaCastanuela ChiefClerk Texas Natural Resource Conservation Commission

P.O. Box 13087 • Austin, Texas 78711-3087 • 512/239-1000 • Internetaddress: 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 commissionheldpublic 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 ofSenate Bill 7, concerningthepermitting ofgrandfathered 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 acomplete record ofthe public hearing and is divided into the following four sections:

o Public Notification and Proposal
o Written and Oral Testimony
o Evaluation ofTestimony
o StaffRecommendations

Additional copies ofthis 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 ofthe proposed revisions was conductedby the following procedures:

1. Publication ofthe notice ofpublic 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 FortWorth Star-Telegram; August 31, 1999 Houston Chronicle; August 26, 1999 LubbockAvalanche-Journal; August 29, 1999

2. Publication ofthe public hearing notice in the 

### TexasRegisteron September 24, 1999 (24 TexReg 8370), and proposed rules in the 

### TexasRegisteron September 10, 1999 (24 TexReg 7137).

3. Correspondence forwarding the notice ofpublic hearing to the following officials and agencies:
Speaker ofthe House Lieutenant Governor City ofEI Paso City ofVictoria Planning Department Dallas DepartmentofHealth and Human Services EI Paso City-County Health District

### Federal Highway Administration Fort Worth Public Health Department Galveston County Health District Houston Department ofHealth and Human Services Harris County Pollution Control Department North Central Texas Council ofGovernments Houston-Galveston Area Council South East Texas Regional Planning Commission Texas DepartmentofTransportation Texas TransportationInstitute Arkansas Department ofPollution Control and Ecology Louisiana DepartmentofEnvironmental Quality New Mexico Air Quality Bureau Oklahoma DepartmentofEnvironmental Quality U. S. Environmental Protection AgencyNOTICE 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 oermltbv 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 ceaseopera· 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, locatedat 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 oforal 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 otherac· commodation needs who are pion· ning to attend the hearing should, conlactlhe agencvat (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

### RobertJ. Huston, Chairman 

### R. B. "Ralph" Marquez, Commissioner 

### JohnM. Baker, Commissioner 

### JeffreyA. Saitas, ExecutiveDirector 

# TEXAS NATURAL RESOURCE CONSERVATION COMMISSION Protecting Texas byReducingandPreventingPollution 

### NOTICE OFPUBLIC HEARINGS BYTHE TEXAS NATURAL RESOURCE CONSERVATION COMMISSION ONPROPOSED REVISIONS TO 30 TAC CHAPTERS 101 AND 116 AND THE STATE IMPLEMENTATIONPLAN
The Texas Natural Resource Conservation Commission (commission) will conduct sixpublic hearings to receivetestimonyconcerningrevisionsto

### 30TACChapters 101 and 116andtheStateImplementationPlan (SIP) under the requirements ofTexas 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 implementthe requirements ofSenate Bill (SB) 7, concerning the permitting ofgrandfathered electric generating facilities (EGF). SB 7 amends Texas Utilities Code, §39.264, and requires thatgrandfathered EGFs apply for apermitby September 1, 2000, and thatEGFs reduce emissions ofnitrogen oxide (NOJ by 50% and, for coal-firedEGFs, reduce sulfur dioxide by 25

### %. The amendments allow these reductions to be met by installing control technology or trading allowancesfromotherEGFs. GrandfatheredfacilitiesmustbepermittedbyMay 1, 2003, orcease operation unless they show good cause for an extension. The commission will 

### hold apublic hearing on this proposal in EI Paso on October 1, 1999, at 9:00 a.m. in the CityofEI Paso CouncilChambers, locatedat2CivicCenterPlaza, 2ndFloor. Additionalhearings will be held in Lubbock on October 1 at 6:00p.m. in the City ofLubbockCouncil Chambers, located at 1625 13th Street; in Austin on October 4 at 9:00 a.m. in Room 201S 

### of Texas Natural Resource ConservationCommissionBuildingE, locatedat 12100Park35 Circle; inIrvingonOctober5 at 1:00p.m. in the City ofIrving Central Library Auditorium, located at 801 West Irving Boulevard; in Houston on October7 at9:00a.m. intheCityofHoustonPollutionControlBuildingAuditorium, locatedat7411 Park Place Boulevard; and in Beaumont on October7 at 6:00 p.m. in the John Gray Institute, located at 855 Florida Avenue. The hearings are structured for the receipt oforal or written comments by interested persons. Individuals may present oral statements when called upon in order of registration. Open discussion will notbe permittedduring the hearings; however, an agency staffmemberwill 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, andAssessment, Texas Natural Resource ConservationCommission, P.O. Box 13087, Austin, Texas78711-3087, orbyfax to (512)239-4808. AllcommentsshouldreferenceRuleLogNumber99033- 116-AI. Comments must be received by 5:00 p.m., October 11, 1999. For further information, please contactBeecher Cameron, ofthe Policy and Regulations Division, at (512) 239-1495.

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

### PAGE TWO
Personswithdisabilitieswhohavespecialcommunicationorotheraccommodationneedswhoareplanning to attend the hearing should contact the agency at (512) 239-4900. Requests should be made as far in advance as possible. Issued inAustin, Texas, on August25, 1999.designer a consent order, the executive director, on the advice of staffand legal counsel, may approve ofsuch offerin lieu offormal action by the board. The consent order may include the following provisions: 

### ill the imposition ofan administrative penalty in an amount not to exceed $1.000; @2 

### [WJ the imposition ofdirectives that require the interior designer to implement written policies within the interior designer'spracticethatarereasonablydesignedtopreventsubsequent violations ofthe Architectural Barriers Act; and/or 

### iQ**[~J** the deferral ofthe case for a certain period ofno more than one yearwith the casebeing finally dismissed atthe endoftheperiod ifno new violations oflaw occurduringtheperiod. (2) If the executive director approves of a proposed consent order andthe consentorderprovides for deferral ofthe case for a certain period, the interior designer's professional registration shall remain in good standing for the duration ofthe period as long as the interiordesigner adheres to the terms ofthe consent order. (3) If the executive director approves of a proposed consent order and the interior designer fails to adhere to the terms ofthe 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 referthe case for formal action by the board.(5) The executive director shall notapprove ofa consent order ifthe conductthatis the subject ofthe consent orderoccurred after eitherofthe following: (A) the executive director and the interior designer approved ofa consent order in connection with a different referral from the Texas Department ofLicensing and Regulation; $) the board took action against the interior designer's professional registration based on a different referral from the Texas DepartmentofLicensing 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 Forfurther information, please call: (512) 305·8535 

# • • 

# • TITLE 30. ENVIRONMENTAL QUALITY 

## Part 1. TEXAS NATURAL RESOURCE CONSERVATION COMMISSION Chapter 101. GENERAL RULES SubchapterH. EMISSIONS BANKING AND TRADING Division 2. EMISSIONS BANKING AND TRADING OFALLOWANCES

.. 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 requiresthe 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 underTexas Clean AirAct (TCAA), §382.0518(g). These facilities are commonly referred to as grandtathered facilities. S8 7 also mandatesthat grandfathered EGFsapplyfora 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 ofAir Pollution by Permitsfor NewConstruction orModification. Proposed newChapter 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% ofthe 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


## PROPOSEDRULES September 10,1999 24

## TexReg 7137allocation and allowance transfersystem. 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. Forexample, ifan EGF's emissions are 100tons overthe control period, then the allowance account for this EGF should reflect a balance equal to or greaterthan 100 tons of allowances. The program encourages EGFs to determine the methods of control which will allowthe EGFto 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) permitwould be consolidated with a permit issued underChapter 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 afederal orstate standard otherwise limitsthe 1997 emission rate. The proposed new§101.330 containsthe definitionsto 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" meansthe 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" meanstheaccountforan EGFormultiple EGFs in which allowances are held.· "Broker Account" means the accountwhere allowances held bya person are recorded. A broker is one who is participating in the EBTAforthe purposes oftrading allowances and not to satisfy emission requirements atan EGF. Allowances held in a brokeraccountmay notbe used to satisfy compliance reqUirements for this division. EGFs can purchaseallowancesfrom 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. "EastTexas Region" means all counties traversed by oreast of Interstate Highway35 (IH-35) north ofSan Antonio, ortraversed byoreast of Interstate Highway37 (IH-3?) south ofSanAntonio, and also including Bexar, Bosque, Coryell, Hood, Parker, Somerville, and Wise counties. The commission is proposing to modifythe definition of "EastTexas Region" from Texas Utilities Code, §39.264(g) to clarifythat 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 thatthe 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 UtilitiesCode, §39.264, thatelectstocomplywith 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 inputdoes notincludethe heatderivedfrom 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 ofthis division; and Chapter 116, Subchapter I. "S02 allowance" is an authorization to emit S02' valid onlyfor the purposes for meeting the requirements ofthis 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 §101.332contains 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 orexceed the limitations of a permit orapplicable law, generate emission reduction credits, or satisfy emission offset requirements under federal NSR. Because allowances do not by themselves meetfederal criteria as creditable emission reductions, they may not be used to satisfy other requirements ofthe Federal Clean AirAct (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 Registershall 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 proposesthatallowances 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 ofallowancesfrom 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 bymUltiplyingtotal heatinput 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 datafor 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 forthat EGF as long the method is consistent with the requirements ofthe 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 nonattainmentareas to meet the ozone National Ambient Air Quality Standard (NAAQS). For each nonattainment area, the amount of reductions forthe SIP will be consistent with the SIP modeling efforts forthat area. At this time the point source reductions expected in the DallaslFortWorth (DFW) area are 88%. Reductions inthe 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 Mayof2000. 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 ofthe 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 orderto meetthis deadline, the commission intendsto 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 meetthe statutory deadline to issue allowances byJanuary 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 forthe purposes of satisfying the SIP or otherfederal, state, or local requirements. Initial allowances for electing EGFs for the control period beginning May 1, 2003 would be allocated byJanuary 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§101.334would 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 laterthan June 30 following the control period forwhich the allowances are used. The commission believesthat60 daysto reportall transfers will give owners or operators ample time to finalize transfers forthat 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 allowthe commission to set up the appropriate tracking mechanisms priorto receiptof notifications. As required byTexas 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 7139Consistent with Texas Utilities Code, §39.264{j), allowances may only be transferred within the same region. Transfers from brokeraccounts are restricted based on the location ofthe EGF where the allowance was originally allocated. SB 7 allows EGFs the flexibility to decide when and where to make reductions orto add on controls. EGFs must consider local impacts ofallowance transfersspecificallyon those counties which are nonattainment and near nonattainment. For example, most near-nonattainmentareas have EGFsthatare in close proximityto these areas. These EGFs emit significant amounts of NO., which has been shown to heavily influence local ozone levels. OtherEGFs located a greaterdistancefrom these areas have regional impacts on background ozone levels but do not impact near-nonattainment areas to the extentthe closerfacilities 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. Priorto making an allowance transferto a nonattainment or near-nonattainment area, EGFs must be aware that such transfers mightjeopardize the status of a near-nonattainment area. For example, at this time the Tyler! LongviewlMarshall area is operating underthe terms ofa Flexible Attainment Region (FAR). If numerous transfers occur into that area, the conditions ofthe 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 treatthe area underan approach similarto a maintenance plan area. However, EPA may designate the areaas nonattainment, regardless of whether a FAR agreement is in place. Designation ofnonattainmentcould resultin additional reductions of NO from EGFs in the Northeast Texas FAR area. Furthermore, 

# a nonattainment designation would require additional reductions from industrysources and potential restrictions on trade intothe new nonattainmentarea. The commission encourages EGFsto consider the long-term consequences of decisions to utilize allowances ratherthan the installation of controls at EGFs located close to nonattainment areas and in near-nonattainmentareas. 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 ofthe 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 byTexas Utilities Code, §39.264(p), the proposed new §101.337 would allow facilities in the EI Paso Region to meetemission allowances using credits from the City ofJuarez, in the United States ofMexico. The reduction must be reviewed and approved bythe executivedirectorand 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 notsatisfy§39.264(q) ofthe 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 ofthe 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, atechnical 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 nosignificantfiscal implicationsforthe commission and other units ofstate and local governmentas a result of administration orenforcement ofthe 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 amendmentswhich allowemission allowance banking and trading for EGFs will provide flexibility and potential cost savings in planning and determiningthe mosteconomical mixof the application ofemission control technologywiththe-purchase ofotherfacilities' surplus allowancesto meet emission reduction requirements. The proposed amendments to Chapter 101, concerning General Rules, would develop and implementthe EBTA system for grandfathered EGFs and other EGFsthat electto 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 Registerpermit byMay 1, 2003, may notoperate unlessthe 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 consistentwith SB7. 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 forvoluntary 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/orthe purchase ortrading of surplus allowances from otherfacilities. SB 7 also allows non-grandfathered EGFsto electto participate in the EBTA and permitting program. These electing facilities will be given allowances equal totheiractual 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 ofaircontaminants emitted from affected EGFs, and increased flexibility for affected EGFs in planning and determining the mosteconomical 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 thatthese 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 ofanotherfacility's surplus allowances to meetemission 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 eitherapplying control technologies or purchasing ortrading 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 significantadditional costs anticipated to any person or business as a result of complying with the proposed amendments to Chapter 101. DRAFT REGULATORY IMPACTANALYSIS 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 notexceed a standard set byfederal law, exceed an express requirement of state law, or exceed a requirement of a delegation agreement. In addition, the proposed amendments are made specificallyto complywith SB 

### 7. TAKINGS IMPACTASSESSMENT 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


## PROPOSEDRULES September 10, 1999 24 

## TexReg 714125%. Although EGFs are required to make specific emission reductions, these facilities have alternatives available underthe proposed banking program that may allow the EGFto avoid installing add on controls. Further, allowances can betransferred 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 transferallowances providing flexibility for compliance with emission limits. This action is taken in response to a real and substantial threatto public health and safetyand significantlyadvances 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 30TAC §281.4S(a)(3), relating to actions and rules subject tothe CMp, commission rules governing airpollutantemissions must be consistentwith 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 ofallowances, 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, andthe 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 ofthe 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 201 S 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 agencystaffmemberwill beavailabletodiscussthe proposal 30 minutes prior to the hearings and will answer questions before and afterthe 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, ortaxed 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. Forfurther information, pleasecontact BeecherCameron, ofthe Policyand 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. STATUTORYAUTHORITY 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 forthe 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 WaterCode, §5.122, conceming Delegation of Uncontested Matters to Executive Director. §lO1.330. Definitions. Thefollowin!< words andtenns. when used in this division. shallhave thefollowin!< meanin!!:s. unlessthecontextclearlyindicates otherwise. 

### ill Allowance

- The authorization to emit one ton of nitrogen oxide (NO) or sulfurdioxide**(SO~** during a control period. 

### ill Authorized account representative

- The responsible personwho isauthorized. inwriting. totransferandotherwisemanage allowances. 

### ill Banked allowance

- An allowance which is not used to reconcile emissions in the designated yearofallocation butwhich 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 ofeach 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 includingBexar. Bosque. Coryell. Hood. Parker. Somerville. andWise Counties.

### ill Electing EGF

- An electric generating facility permitted under Chapter 116. Subchapter B ofthis 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. SubchapterI ofthis title (relating to Electric GeneratingFacility Permits). 

### £22. Electric generating facility - A facility that generates electricenergyforcompensationandis ownedoroperatedby aperson in this state. including a municipal corporation. electric cooperative•. orriver authority. An EGF does not include a facility that generates electric energy primarily forinternal use butthat durin!! 1997 sold. to a utility powerdistribution system. less than one-third ofits potential electrical output capacity. 

### llQ2 EI Paso Region

- All ofEl Paso County. 

### .ul2. Heat input

- The heat derived from the combustion ofany 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, SubchapterI ofthis 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 ofthis dfvision and Chapter 116. SubchapterI ofthis 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. SubchapterI ofthis title. (relatingto Electric Generating Facility Permits). 

### ill A person not required to participate in the requirements ofthis division may open a broker account underthis division for the purposes ofbanking and trading emissions allowances. *101.332. General Provisions. Allowances are validonly forthe pwposes ofmeetingthe requirements ofthis division and cannot be used to meet or exceed the limitations ofa 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 offederal 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 ora 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 of0.50 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 amountofallowances 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 of Allowances. Allowances will be allocated according to the requirements ofthis section. 

### ill Except as provided in paragraphs (2) and (3) ofthis section. allowances will be calculated using the following equation: Figure: 30 TAC §101.333(l) (A) the acid rain database ofthe EPA: or @2 an method approved by the executive director. consistent with the emission reduction requirements ofthis division, ifthe 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 ofallowances is equal to the EGF's actual emissions in tons in 1997 and shall not exceed anv ofthe following: (A) the emission inventory reported for calendar year



## PROPOSEDRULES September10, 1999 24 

## TexReg 7143reduced.



### 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 ofnitrogen 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 Forfurther 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 submitareportto the commissiondetailing the amount ofemissions ofeach allocated air contaminant during the preceding control period. Thisreportmust be submittedbvJune I ofeach year. Emission allowances equaling the total emissions will be deducted from the EGFs compliance account. §101.337. ElPaso 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 ofJuarez. 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 ofthe 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 ofa facility by a state or federal law. regulation or agreed order. and; @ a real reduction in which actual emissions are



# •• • £Q Allowanceswillbeallocatedbycommissionorder.

The cOIIlJ?ission shall maintain a registry of the**allow~ces** meach**c~mpli~ce** account Foreachtransfer. theregistry 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 ofall final transfers must be received by the comnusSIon on orbeforeJune 30following the control periodfor which the allowances are to be used. 

### i£l Only authorized account representatives may transfer allowances. @ Notification oftransferofallowance mustoccurwithin30 days afterthe transferofany allowances to anotherpany. Allowance transfers 

### are prohibited prior to May l. 2003. Allowances atelecting electric generatingfacilities (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 oftransferrable allowances. Figure: 30 TAC §101.334(e)(l) 

## ill Ifthe heat input forthe control period is less than the heat input for 1997. the following equation will be used to calculate the amount oftransferrable 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 ofthe allowances and eligible transfers in this division. l$lOl.335. AllowanceBanking. 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 Thecommissionmay increaseordecrease the amount ofallowances.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 ofeachyear. beginning in



## 24TexReg 

## 7144 September10, 

## 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 Chapter39, concerning Restructuring of Electric Utility Industry. more than one facility is included in a single VERP application, the applicant shall remit the highest ofthe applicable fees. §116.860. Voluntary Emission Reduction PermitRenewal. Voluntary emission reduction permits (VERP) shall be renewed in accordance with SubchapterD ofthis chapter (relating to Permit Renewals). 

### ill To renew a VERP with credits acquired under §116.812 ofthis title (relating toProjectEmissionReduction**Credi~)** theowner or operator ofthe facility shall have: 

### ill made equipment improvements or emission reductions necessary to meet the requirements of §116.811(3) ofthis 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 directorthe 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 authorityto 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 Forfurther information, please call: (512) 239-1932 

## !!:2. The commission will make an audio recording orwritten transcript ofthe 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 preliminarydecisionto issue ordeny the permitis inappropriate, shall raise all issues and submit all arguments supporting that position by the end ofthe public comment period. .(gl Any supporting materials forcomments submitted under subsection (f) ofthis section must be included in full and may not be incorporated by reference, unless the materials are one of the following:

### ill already part ofthe administrative record in the same proceedings: 

### ill state or federal statutes and regulations: 

## ill EPA documents ofgeneral applicability; or 

### ill other generally available reference materials. 

### ill The commission will keep a record of all comments received and issuesraisedinthehearing. Thisrecordwill beavailable to the public. 

### ill The draft permit may be changed based on comments pertaining to whether the permit provides for compliance with the requirements ofthis subchapter. 

### ill The commission will respond to comments consistent with §116.842 ofthis title (relating to Notice ofFinal Action). {$1l6.842. Notice ofFinalAction. 

### ill After the public comment period or the conclusion of any noticeand comment hearing. the commissionwill send notice by first-class mail ofthe final action on the application to any person who commented during the public commentperiod orat the hearing. and to the applicant. @ The notice must include the following: 

### ill the response to any comments submitted during the public commentperiod: 

### ill identification ofany change in the conditions ofthe draft pennit and the reasons for the change; and 

## ill a statement that anv person affected by the decision ofthe commission may petition for a rehearing under §50.119 ofthis title (relating to :-lotice ofCommissionAction. MotionforRehearing) and may seek judicial review under TCAA. §382.032, relating to Appeal ofCommission Action. §116.850. Voluntarv Emission Reduction PennitApplication Fee. Any person who applies for a voluntary emission reduction permit (VERP) shall remit a fee. 

### ill Ifthe grandfatheredfacility will use acontrol method at least as stringentas those defined in §1l6.81l(3)(A) or (B) ofthis 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) ofthis title. or ifthe 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 oftheapplicablefees requiredinparagraphs (1)-(2) C':'±issectionshall beremitted withasingleVERPapplication which proposes to control more than one facility at an account. If 

# • • 

# •

PROPOSEDRULES September10,1999 24 

## TexReg 716358 7 requires the commission to implementthe 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 requirementto obtain permits for construction or modifications of facilities that emit air contaminants. These new sections are proposed concurrently with amendments and newsections in Chapter 101 ofthis title, concerning General Rules. The proposed new Division 2, concerning Emission Banking andTrading ofAllowances, 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 meetingthe emission reduction requirements of S8 7. The purpose ofthe rulemaking inthese chapters isto implement permit and emission control requirements, including emission banking and trading of allowances (EBTA), forcertain 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 causeforan extension. Itisthe intentof SB 7 that forthe 12-month period beginning May 1, 2003, and for each 12·month period following, annual emissions of NO, from grandfathered EGFs notexceed 50% ofthe 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, electriccooperatives, and river authorities owning EGFs that are not grandfathered may elect to become subjectto 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 ofthe intent to exclude these EGFs byJanuary 1, 2000. The commission will make available aform forthis 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 notsubjecttothe requirements ofTexas 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 periodoftimewhen not restricted byseasonal orother deratings. This definition is consistent with the definition used underthe 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 boththe Acid Rain Program and the EBTAprogram 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 capacitytimes 8,760 hours or 2) the ratio of an EGPs annual heatinput (in millionsof 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 consistentwith the same terms in the FCAA Acid Rain Program. Section 116.910states that a permit underthis newsubchapter 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 notifythe commission by January 1, 2000, of its intent to exclude those EGFs. The commission will make available aform forthis 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


## 24TexReg 

## 7164 September 10, 

## 1999 Texas Registermatter, 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 aircontaminants 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 underthe 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 onthe location ofa grandfatheredfacility. 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 byan exemption will continueto 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 facilitiessuch asfuel storagetanks orcoal handlingfacilitiesthat 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 applytor a VERP which would be consolidated with the EGFP. This would enable all the grandfathered facilities and EGFs at a site to go through 

# acombined 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 requirementsoftheTCAA concerning modificationsof existingfacilities still apply. Any modifications to any facility in an EGFP remain subject tothe permitting requirements ofthe TCAA and the existing modification requirements in Chapter 116, SubchapterB. 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 ofthissubchapterintoa single permit. This permit would contain the general and special conditions for electing EGFs. The unchanged, existing NSR permit conditions would notbe subjectto public notice torthe combined permit; onlythe conditions specific to the EGFs for NO, and, if applicable, SO" would be subjectto 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 ofthe allowances. The removal ofcontrol technology could also triggerfederal NSR requirements, since this change could constitute a modification underfederal 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 believesthat it is appropriateto ensurethatthese 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. EGFsthatare currentlyauthorized underChapter 116 mayelect 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 underthis subchaptershould 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 forthese EGFs and provide the data needed to meetthe "requirements ofTexas 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 priorto 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 orderto avoid being out of compliance with the re-· quirementto notexceed theirallowances. All allowancesforthe


## PROPOSEDRULES September10, 1999 24 

## TexReg 7165electing EGFwill be voided by the commission and may not be banked forsubsequent use. Since the EGFwould no longerbe subjecttothe restrictions ofthe EBTA, itwould 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 SB7 statesthat EGFs must electto participate priorto September 1, 2000. there is not a subsequent opportunityforthose EGFsto re-elect. The commission believes that a one-time election and a one-time opt out provide sufficientflexibilitywithout undermining the program. The owner or operator shall requestan alteration tothe combined permitto remove the conditions pertaining to the EGFP and restore any conditions that existed priorto the consolidation. This alteration would restore the NSR permitto 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 complywith the EBTAin Chapter 101, SubchapterH, Division 2. The proposed provisionsforthe EBTA require EGFsto maintain allowances in a compliance account. The EBTA in Chapter 101 contains all provisions formanaging allowances. Foremissions 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 orgreaterthan the amount ofthataircontaminant 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 orgreaterthan the emissions over a given control period. The proposed section implements the requirementofTexas Utilities Code, §39.264(e) that requires coal-fired EGFs complywith 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 Standardsof Performance for New Stationary Sources; 40 CFR Part61, conceming National Emission Standardsfor 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 requirementsfor EGFPs. The commission is required by Texas Utilities Code, §39.264(k) to provide methods for use in determining compliancewith permitsand methodsformonitoring 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 subjectto the Acid Rain Program would havethree choices in monitoring. The EGF may choose to meet either Part 75 monitoring requirements, orthe requirements of Title 40 CFR Part 60, orthe 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 greaterthan 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 forthe EBTA as well, based on the similarity ofthe OTC requirementsandthe goals ofTexas 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 aform, 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 changesto EGFsasa resultofpollution control projects initiated underthe EGFP program that reduce emissions of NO, or, ifapplicable, S02' This section allows emission control changes to EGFs provided the control changefollows the criteria in thissection which is similarto §116.617, concerning Standard Permits for Pollution Control Projects. Any emission increases mustbe a result of the emission control change only. For changes that are not pollution control projects, if nonattainment 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 asignificant increase in an aircontaminant. 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


## 24TexReg 7166 

## September 10, 1999 

## Texas Registercontrol changes. The emission control change may be implemented any time after receipt of written notification from the executive director that there are no objections, or45 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, modificationsthat would triggerstate NSR 'J\:ould need appropriate authorization under Chapter 116, Subchapter B. Consistent with Texas Utilities Code, §39.264(q), the proposed new§116.915would exempt EGFs in EI Paso Countyfrom NO allowance requirements ifthe 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). Underthis 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 ofTexas Utilities Code, §39.264(q) because It has root been demonstrated, underthe §182(f) waiver or otherwise, that NO, reductionswould increase ambient ozone in EI Paso County. These EGFs would still be required to obtain a permit underChapter 116, SubchapterI regardless ofthe deter- '!lination.that NO, reductions are counterproductive in controlhng ambient ozone levels in the EI Paso Region. The commis**si~~.** 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 onlyto reduction requirements, not permitting**reqUlr~ments.** Regardless of this determination, grandfathered EGFs In EI Paso County would still be required to obtain a permit underthis SUbchapter. The proposed new §116.920would require applicants for initial Issuance of an EGFP to publish notice of intent to obtain a permit in accordancewith Chapter39, concerning PublicNotice, SUb,?hCil?terKofthistitle, concerning Public Notice ofAirQuality 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 providesthat 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.tentto**Ob~in** Permitynder §39.418 of this title, relating to Notice of Receipt of Application and Intentto Obtain Permit. Grandfathered supportfacilitiesthat electto 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 besubjectto 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 containsthe 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 ofthe 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 ofall comments submitted orraised ata hearing andto have**a~ aUdi~**  recording orwritten transcriptofthe 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 orat a permit hearing, ofthe final action


## PROPOSEDRULES September10, 1999 24

## TexReg 7167ofthe commission. The notice mustbesentbyfirst-class mailto 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 ofthe commission maypetition for rehearing under30 TAC §50.119, and forjudicial review underTCAA, §382.032. The EGFP establishes the conditions underwhich emissions of NO, and S02 are regulated. Emissionsofaircontaminants other than NO, and if applicable, SO.' may be permitted under the VERP proposed in aconcurrent rulemaking in othersections of this edition ofthe 

### TexasRegister. 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, atechnical specialist inthe Strategic Planning and Appropriations Section, has determined that for the first fiveyear period the proposed amendments are in effect there will be nosignificantfiscal implicationsforthe commission and most units ofstate and local governmentas a result of administration orenforcement ofthe proposed amendments. River authorities and units of local government that own and operate EGFs having a capacity of greaterthan 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 Benefitportion ofthis 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 atTexas 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 inTexasWaterCode, Chapter5, SubchapterM, 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 notobtain a permit by May 1, 2003, may not operate unlessthe 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 publicbenefitanticipatedfrom enforcementofand compliance with the proposed amendments will be a reduction of aircontaminants 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 ofthe proposed amendments isto 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 EGFthat 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 orfailure 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 underthe requirements of the concurrently proposed Voluntary Emissions Reduction Permit (VERP) in Chapter 116, Subchapter H. Support facilities for EGFs may be concurrently permitted underthe VERP and the permit maybe 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 EastTexas. WestTexas, and EI Paso for the purpose of allocating emissions of NO, and SO. and forthe 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 ratesshall be0.195 Ibof NO,. The allowance calculation is specified in the concurrently proposed Chapter 101, Subchapter H, Division 2, concerning Emissions Banking andTrading ofAllowances. The permit underthischapterwould 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 intentto obtain a permit in accordance with TCAA, §382.056. concerning Notice of Intentto Obtain Permit or Permit Review; Hearing. The public notice requirements forthese permits are contained in Chapter 39, conceming Public Notice. The cost of publishing notice is estimated tobe 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.


## 24TexReg 7168 

## September10, 1999 

## Texas RegisterIn 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 Reductionsand Costs of Nitrogen Oxides Controlsfrom 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 powerplants. 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 perton of emissions reduced. This average annual cost perton of emissions reduced includes annualized capital costs plus the additional annual operating costs associated with the applied technology. The study states thatthe "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 ofthefacility, 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 andtrading system, and otherfactors ofindividual facilities dictate. It isalso anticipated that costs for using the EBTA system will be less than the costofactual emission reduction in mostcases. 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 issuch thatcosts ofemission 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 ofthe 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 perton of emissions reduced plusthe public notice costs. Costs associated with authoriZing emissions otherthan 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 appearto be an acceptable estimate for municipal corporations, electric cooperatives, and river authorities. The cost of publishing notice will also be similar to those forthe 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 GovernmentCode with EGFswhich 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 similarto those forthe industry at large. DRAFT REGULATORY IMPACTANALYSIS 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 September10,1999 24 

## TexReg 7169to 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, theanalysis required by§2001.0225(c) does notapply 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 complywith SB 7. SB 7 requires grandfathered EGFs applyfor 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 otherthan 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 nofederal law ordelegation agreementwith afederal agency that requires the permitting of grandfathered EGFs. TAKINGS IMPACTASSESSMENT 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 havealternativesavailable underthe 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 mannerthat 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 meetthe definition ofa takings underTexas GovernmentCode, §2007.002(5). The reductions obtained from the issuance of EGFPs will assist in the efforts ofthe commission toattainthe NAAOS. Thisaction is taken in responsetoa real and substantialthreatto publichealth 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 30TAC§281.45(a)(3), relating to actions and rules subjectto the CMp, commission rules governing airpollutant emissions mustbe consistentwith the applicable goals and policies of the CMP. The commission has reviewed this action for consistencywith the CMP goals and policies in accordance withthe regulations ofthe 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 requiresthatthe commission protect airquality in coastal areas. This proposal is intended to reduce overall emissions of NO, and S02 from EGFs. This action is consistentwith 40 CFR because it does not authorize an emission rate in excess of that specified by federal requirements. Interested persons may submitcomments duringthe publiccommentperiod 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 agencystaffmemberwill beavailable to discussthe proposal 30 minutes prior to the hearings and will answer questions before and afterthe 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, orfaxed 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, pleasecontact BeecherCameron, ofthe Policyand 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 STATUTORYAUTHORITY 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. orlignite by the American Society for Testing and Materials Designation ASTM D388 92 "Standard Oassification ofCoals 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 ofeach year and ending April 30 ofthe following year. Control periods begin May 1. 2003. 

### ill Electing electric generating facility (EGF2

- An EGF permitted under Chapter 116. Subchapter B ofthis title (relating; to New SourceReview Permits) which is not subjecttotherequirements ofTexas Utilities Code. §39.264 and elects to comply with Chapter 116. SubchapterIofthis title (relating to Electric Generating Facility Permits). 

### ill Electric generatinl! facility (EGF2 - A facility that generates electric energy for compensation and is owned oroperated by a person in this state. including a municipal corporation. electric cooperative. or river authority. An EGF does not include a facility thatgenerateselectric energyprimarilyforinternaluse butthatduring; 1997 sold. to autility power distribution system. less than one-third ofits potential electrical output capacity. 

## £22 Nameplate Capacity

- The maximum electrical output (expressed in meg;awans) that an EGF can sustain over a specified period oftime when not restricted by seasonal or other deratings. £.!.Q} Peaking unit

- An EGF that has: 

### ftJ An average capacity factor ofno more than 10% during the pastthree calendaryears; and @ A capacityfactor ofno more than 20% in eachof 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 Forfurther 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 forthe 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 proceduresfor requesting hearingsand responding tocomments; §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 authorizesthe commission to delegate uncontested matterstothe 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 toApplication 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 ofthis chapter (relating to Electric Generating Facility Pennits) shall have thefollowing; meanings. unlessthe contextclearlyindicatesotherwise. 

### ill Allowance

- The authorization to emit one ton of nitrogen oxide (NO) or sulfurdioxide (SO) during a control period.



## - - @ Capacity factor

- Either: 

## W the ratio ofan electric generating; facility's (EGF2 actual annual electric output (expressed in megawatt-hours) to the EGFs nameplate capacitvtimes 8.760 hours: or (B) theratioofanEGF's annualheatinput(inmillions ofBritishthermalunits (MMBtu» totheEGFsmaximumdesignheat input (in MMBtu) times 8.760 hours. 

# • 

# • •

PROPOSEDRULES September10, 1999 

## 24'TexReg7171Health 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 forfederal 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 authorizesthe commissionto 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 ofa 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 permitto authorize nitrogenoxide (NO ) emissionsand. ifapplicable. sulfurdioxide (SO,) emissions under tills subchapter.

- Theowner. orthe operatorwho is authorized to actforthe owner. ofan 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. orriver authority mustnotify the commission bv January 1. 2000. ofits intent to exclude those EGFs. Emissions ofNO shall bepermittedunderthis 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 providedthe grandfatheredfacilities meettherequirements ofChapter 116. Subchapter H of this title (relating to Voluntary Emission Reduction Permits). 

### .ill Owners or operators ofgrandfathered facilities as defined in §116.10 ofthis title (relating to General Definitions) at sites with EGFs subject to this subchapter may include those grandfathered facilities in a permit issued underthis subchapter. provided the grandfathered facilities meet the requirements ofChapter 116. Subchapter H ofthis title. §116.911. Electric Generating FaciliTYPennitApplication. Any application for an electric generating facility permit (EGFP) mustinclude acompletedFonn 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 informationwhich must be provided before the application is deemed complete. In order to be granted an EGFP. the owner or operatorof the electric generating facility <EGF) shall submit information to the commission which demonstrates that all ofthe following are met: 

### ill Measurement ofemissions and perfonnance demonstration. Measurement ofemissions and demonstration of performance shall be conducted consistent with §1l6.914 ofthis 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 ofallowances in an EGF's compliance account. 

## ill Nonattainment review. If the EGF is located in a nonattainment area. the owner or operator ofthe EGF shall comply with all applicable requirements under Chapter 116, Subchapter B. Division 5 ofthis title (relating to Nonattainment Review). 

### ill Prevention ofSi!mificant Deterioration (P$D) review. Ifthe EGFis located in an attainment

### area the owner oroperatorof the EGFshall comply withall applicable requirements underChapter 116. SubchapterB. Division 6 ofthis title (relating to Prevention of SignificantDeterioration Review). (5) Federal standards ofreview for constructed or reconstructed niTor sources ofhazardous air pollutants. Ifthe EGF is an affected source (as defined in §116.15(1) ofthis title (relating to Section 112(g) Definitions». the affected source shall comply with all applicablerequirements underChapter 116, SubchapterC ofthis 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) ofthis title (relating toEmissionControl Changes). Computerizedairdispersion 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 meetthe opacity limitations of§I 11.111 ofthis 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 ofaTexas licensed professional engineer in compliance with §I16.I10(e) ofthis title (relating to Applicability). §116.912. Electric Generating FacilityPennitApplicationforElecting Electric Generating Facilities.


## 24TexReg 7172 

## September 10,1999 Texas Register

### le2 Electing Electric Generating Facilities (EGF) seeking to consolidate existing New SourceReview (NSR) authorizations Vvitha pennit underthis subchapter shall submitan application to authorize nitrogen oxide (NO) emissions and. if applicable.. sulfur dioxide (SO.) emissions. The application shall meet the requirements of §116.911 ofthis 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 offuel conswnption. fuel heating values. and heatinput in MMBtu for calendaryear 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 ofthe EGFP. 

### !Q2. An electing EGF may optoutoftherequirements ofthis subchapter under the following conditions: 

### ill The electing EGF must notify the commission ofits intentto opt out priorto the beginning ofthe next control period. 

## ill The electing EGF may not opt out during a control 

### ill All allowances fortheelecting EGF

### wi be voided by the commission and may not be banked for subsequent use. 

### ill Noallowanceswill beallocatedforsubsequentcontrol 

### ill Once an EGF has opted out the EGF may not partIcIpate in the emissions banking and trading of allowances at any future date. @ Theowneroroperatorshall requestan alterationtothe combinedpermittoremovetheconditions pertainingtotheEGFPand restore any conditions that existed prior to the consolidation. §116.913. General andSpecial 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 ofallotheraircontaminants from EGFs meeting the requirements ofChapter 116. Subchapter H ofthis 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. SubchapterH ofthis title.
. 

### ill The EGF must comply Vvith Chapter 101. Subchapter H. Division 2 ofthis title (relatingtoEmissions Banking andTrading ofAllowances) including the requirement to maintain allowances in a compliance account. Allowances may be transferred in accordance with §1Ol.335 ofthis 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 ofeach 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 aircontaminant emitted during the priorcontrol period. @ RepOrts ofannual actual emissionsfor NO and. where applicable. SO.• during the control period shall be submitted to the New Source Review Permits Section by June 1 ofeach year. 

# m Coal-fired EGFs must meet the opacity limitations of §111.111 ofthistitle(relatingtoRequirementsforSpecifiedSources). 

### ill Removal of or failure to operate existing control technology is not permissible under this subchapter. 

### 122 New Source Performance Standards (NSPS). The emissions fromeachaffectedfacility as definedin40 Code ofFederal Regulations (CPR). Part 60 will meetat leastthe requirements ofany applicable NSPS as listed under Title 40 CFR Part 60. promulgated bythe EPA underauthority granted underFCAA. §lll. as amended. 

### D.Q2 National Emission Standards for Hazardous AirPollutants (NESHAPS). The emissions from each facility as defined in 40 CPR

### Part 61 Vvill meet at leastthe requirements ofany 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 under4QCPRPart63. promulgatedbyEPAunderFCAA §112 or as listed underChapter 113. SUbchapter C ofthis title (relating to National Emissions StandardsforHazardous AirPollutantsforSource Categories (FCAA §112. 40 CPR Part 63). 

### lli Special conditions mav be included in the EGFP. §116.914. EmissionsMonitoring andReporting 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 specifiedin40 CPR Part 75. EGFs not subjectto 40 CPR

### Part 75 may choose to comply with the initial performance testing and periodic calibration. accuracy testing. and quality assurance/qUality controltesting specifiedin40CFRPart75 orthosesamerequirements in 40 CPR Part 60 (relating to New Source Performance Standards). @ During aperiod when validdatais notbeing 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 September10, 

## 1999 24 TexReg 7173

### ill Ifthe EGFhas a flow monitorceItified under40 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 Ifthe 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 ofNO permillionBritishthermal 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 ofNO 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 heatinputin 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 Protocolfor 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 or40CFR Part 75 shall be usedto demonstrate compliance with this subchapter. Forall CEMS exceeding 10% relativeaccuracy. actual emissions must be determined by multiplying the CEMS databy 1.1. 

### ill Emissions in pounds per hour shall be determined using the NO CEMS and one ofthe following methods: 

### itJ The owner or operator may elect to comply with subsection (b)(l) or (2) ofthis 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 determinedbvmUltiplyingtheIbslMMBtutimesthe heatinputinMMBtuI 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 heatinputin 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 ofless than 100 MMBtui hr and for peaking units emissions in pounds per hour may be determined using the procedures in Appendix E of40 CFR Part 75 to estimate the NO emission rate. @ Inlieu ofthemonitoring required bv subsection (c) ofthis section. the EGFP may authorize alternative monitoring to calculate mass emissions underthis section. The permit applicantmust submit the following forreview ofan alternative monitoring proposal: 

### ill a description ofthe monitoring approach to be used: 

### ill a description of the major components ofthe monitoring system. including the manufacturer. serial numberofthe component. the measurement span ofthe component. and documentation to demonstrate that the measurement span ofeach component is appropriate to measure all ofthe expected values: 

### ill an estimate ofthe accuracy ofthe system and documentation to demonstrate how the estimate of accuracy was determined; 

### ffi a description ofthe 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 ofEGFs shall be used to calculatethe actual emissions overa controlperiod. roreach control period. EGFs SUbject to this subchapter must submit a report to the commission detailing the amount ofemissions ofeach allocated air contaminant during the preceding control period. This report must be submittedby June 1 ofeach 

### Year. At a minimum. thereport shall contain the following information: 

## ill A description ofthe monitoring protocol; 

# m A completed Fonn AR-l. Emissions Monitoring Data 

### ill Other information as needed. §116.915. Emission Control Changes. (a) Emissioncontrol changesresulting frompollutioncontrol projects designed to reduce emissions ofnitrogen 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 ofSignificant 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 ofthis 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 ofAir 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 Registerbe 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 ofwritten notification from the executive directorthatthere areno objections. or45 days afterreceipt by the executive director ofthe registration. whichever occurs first. 

## i£2. Theernission control change will not beauthorizedby 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 addressedbytheregistranttothe satisfactionofthe executive director. @ Increased emissions of any air contaminant. including NO or. ifapplicable. SO•• otherthanincreases authorized under subsection (a) ofthis section must obtain preconstruction authorization underChapter 116, SubchapterB ofthis title (relating to New Source Review Permits) ifnonattainment. 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. PublicParticipationforInitiallssuance. An applicant for an electric generating facility permit CEGFP) shall publish notice of intent to obtain the permit in accordance with Chapter 39 ofthis title (relating to Public Notice). @. Public Dotice for an EGFP may be combined with the publicnoticeforavoluntarvemissionreductionpermit. underChapter 116. Subchapter H of this title (relating to Voluntary Emission Reduction Permits.) 

## i£2. Electing EGFs are subject to public notice for emissions ofnitrogen oxides (NO) and, ifapplicable. 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 30days after the publication ofNotice ofReceipt ofApplication and Intent to Obtain Permit under §39.4l8 ofthis title (relating to Notice ofReceipt ofApplication and Intent to Obtain Permit). Any hearing request must be made in writing during the 3D-day public conunentperiod. Any hearing regarding initial issuance ofan EGFP shall be conducted under the procedures in §116.921 ofthis subchapter (relating to Notice and Comment Hearings for Initial Issuance) and not underthe 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 ofthis title (relating to Notice of Final Action). f.g2 A person affected by a decision of the commission to issue ordeny an EGFPmay move forrehearing under§50.119 ofthis title (relating toNoticeofCommissionAction. MotionforRehearing) and is entitled to judicial review underTCAA. §382.032 (relating to Appeal ofCommission Action). §1l6.921. Notice andCommerl1 HearingsforInitialIssuance. The noticeand commenthearing requirements apply only to the initial issuance ofa 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 ofa hearing on a draft pennit must be published 

### in the public noticesection ofone 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 ofthe facility. The notice must be published at least 30days before the date set for the hearing. The notice must include the following: 

### ill the time. place. and nature ofthe hearing: @ a briefdescription ofthe purpose ofthe hearing: and 

### ill the name and phone number ofthe 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 setfororal statements. and the submission ofstatements in writing may be required. @ The period for submitting written comments is automatically extended to the close ofany hearing. 

### ill At the hearing. the period for submitting Mitten comments may be extended beyond the close ofthe hearing. A tape recording orwritten transcriptofthe hearing must be made available to the public. 

### ill Any person. including the applicant. who believesthatany condition ofthe 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 ofthe public comment period. ig2 Any supporting materials for comments submitted under subsection (f) ofthis section must be included in full and may not be incorporated by reference, unless the materials are one of the following:

### ill already part ofthe administrative record in the same proceedings: @ state orfederal statutes and regulations: 

### ill EPA documents ofgeneral 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 ofthis subchapter. 

### ill The commission shall respond to comments consistent with**~116.922** ofthis title (relating to Notice ofFmal Action). §116.922. Notice ofFinalAction. After the public comment period or the conclusion of any notice and comment hearing. the commission shall send notice by first-class mail ofthe final action on the application to any person 

## PROPOSED RULES September10, 1999 24 

## TexReg 7175

### Chapter 335. INDUSTRIAL SOLID WASlE AND MUNICIPAL HAZARDOUS WASTE SubchapterJ. 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 lowerthe annual facility fee forfacilities which are permitted to manage Class 1 industrial solid waste or hazardouswaste, and which arewholly unbuilt. This rulemaking does not propose elimination of the facility fee for unbuilt facilities, but rather proposes the assessment of the minimum fees underexisting §335.324(d). The newfeeswill be applicable until any physical construction of the facility commences, at which timethe feestructure currentlysetforth in §335.324{i} will apply. This rule change is also proposed to retroactively apply who commented during the public commentperiod 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 commentperiod: 

## ill identification of any change in the conditions of the draft permit and the reasons for the change: Q2 a statementthatany person affectedby thedecision of the commissionmay petition for rehearing under §50.119 ofthis title (relatingto Notice ofCommission Action. MotionforRehearing) and may seekjudicial review underTCAA. §382.032 (relating to Appeal ofCommission Action). §1l6.930. Modifications. The owneroroperatorplanning a modification ofa facility permitted underthis subchaptermustcomply with Subch<pterB ofthis Chapter (relating to New Source Review Permits) before work is begun on the constIUction ofthe modification. §116.931. Renewal. Electric generating facility permits (EGFP) shall be renewed in accordance with Chapter 116. Subchapter D of this title (relating to PermitRenewals). 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 dateofadoption: December 15,1999 Forfurther information, please call: (512) 239-1932 

# • • 

# • to wholly unbuilt facilities torwhich 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 theTexas Health and SafetyCode, §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 thevariation in the costof 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 costtothe commission of regulating a wholly unbuiltfacility 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 ensurethatfacility construction and operation continuesto 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 lowerthe annual facility fee forwholly 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 unbuiltstorage, processing ordisposal 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 cur
## 24 TexReg 7176 

## September 10, 1999 

## Texas Register

### Notice ofWater Quality Applications The following notices were issued during the period ofSeptember8, 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 ofthe ChiefClerk, Mail Code 105, POBox 13087, Austin Texas 78711-3087, WITHIN 30 DAYS OFTHE DATE OFNEWSPAPER· PUBLICATION OFTInS NOTICE. and 40 Code of Federal Regulations, §51.102 ofthe 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 ofSenate Bill (SB) 7, concerning the permitting of grandfatheredelectric generatingfacilities (EGF). SB 7 amendsTexas Utilities Code, §39.264, and requires that grandfathered EGFs apply for apermitby September 1,2000, and that EGFs reduce emissions ofnitrogen oxide (NOx) by 50% and, for coal- fired EGFs, reduce sulfurdioxideby 25%. The amendments allow thesereductions to be metbyinstalling control technologyortrading allowancesfrom 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, at9:00 a.m. in the City ofEIPaso 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 ofLubbock Council Chambers, located at 1625 13th Street; in Austin on October 4 at 9:00 a.m. in Room 201S ofTexas 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 HoustonPollutionControlBuildingAuditorium, locatedat7411 Park Place Boulevard; and in Beaumonton October7 at 6:00 p.m. in the John Gray Institute, located at 855 Florida Avenue. The hearings are structured for the receipt oforal or written comments by interested persons. Individuals may present oral statements when called upon in orderofregistration. Open discussion will notbe permittedduring the hearings; however, an agency staffmember will be available to discuss theproposal 30minutes priorto the hearings and will answer questions before and afterthe hearings. Written comments may be submitted by mail to Casey Vise, MC 205, OfficeofEnvironmentalPolicy, Analysis, andAssessment, Texas Natural ResourceConservationCommission, 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. Forfurtherinformation, 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 ofFederal Regulations, §51.102 ofthe 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. Theproposed amendments and new sections constitutethe firstphase ofthe implementationofSenateBill (SB)766. Includedinthis action are procedures for obtaining a voluntary emission reduction permit (VERP) and the new procedures to create standardpermits. A VERP will allow grandfatheredfacilities to apply forpermitsusing avariety ofoptions, including the acquisition ofcredits, to reduce or offset emissions. VERP requirements would be in a new Subchapter H in Chapter 116, concerning Control ofAirPollutionby Permits forNew Construction or Modification. A second phase ofrulemaking 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 CenterPlaza, 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 ofTexas Natural Resource Conservation Commission Building E, located at 12100 Park 35 Circle; in Irving on October5 at4:00 p.m. inthe City ofIrving CentralLibraryAuditorium, located at801 West Irving Boulevard; in Houston on October7 at 12:00p.rn. in the City ofHouston Pollution Control Building Auditorium, located at 7411 ParkPlaceBoulevard; and inBeaumonton October7 at9:00p.m. in theJohn Gray Institute, located at 855 Florida Avenue. The hearings are structuredforthereceiptoforalorwrittencommentsbyinterested persons. Individuals may present oral statements when called upon in orderofregistration. Open discussion will notbe permittedduring the hearings; however, an agency staffmember 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, OfficeofEnvironmentalPolicy, Analysis, andAssessment, Texas NaturalResourceConservationCommission,P.O. J30x 13087
..Austin, Texas78711-3087, orbyfax to (512) 239-4808. Allcomments 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 TheTexas NaturalResourceConservationCommission (commission) will conductsixpublic hearings toreceive testimony concerningrevisions to 30TAC Chapters 101 and 116 and the State Implementation Plan (SIP) underthe requirements ofTexas Health and Safety Code, §382.017; Texas Government Code, Subchapter B, Chapter 2001; 

# • • •

24TexReg8370 September24, 1999 

## Texas Register

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI

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 ofAllowances; §101.334, concerning Allowance Transfer; §101.335, concerning Allowance Banking; §101.336, concerning EmissionMonitoring, Compliance Demonstration, and Reporting; and §101.337, concerning El Paso Region. The new sections wouldbe placed into a new Division 2, concerning Emissions Banking and Trading of Allowances, ofanew Subchapter H, concerning Emissions Banking and Trading. The proposed rules would alsobe submitted as arevision to the state implementationplan (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 ofElectric Utility Industry. SB 7 requires the commission to implement the permitting and allowance requirements ofnew §39.264, concerning Emissions Reductions of "Grandfathered Facilities." SB 7 requires the commissionto develop amass cap and trade systemto distribute emission allowances for use by electric generating facilities (EGF). Under SB 7, two categories ofEGFs are eligible to use the proposed trading system. The first category consists ofEGFs in existence onJanuary 1, 1999, which
were not subjectto the requirement to obtain a permitunder 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 orbefore September 1, 2000, and obtain a permitby orcease operation afterMay 1, 2003. The second category ofEGFs consists ofpermitted

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI

EGFs that are not subjectto the permitting requirements ofSB 7, yet electto participate in the allowance trading system. Page 2

These new sections are proposed concurrently with new sections in Chapter 116, concerning Control of Air Pollutionby Permits for New Construction or Modification. Proposed new Chapter 116, SubchapterI, concerning Electric Generating Facility Pennits, will containthe requirements for' permitting ofEGFs. The amendments to Chapter 116 are published in a separate section ofthis edition ofthe 

## TexasRegister.

Texas Utilities Code, §39.264(g) and (h) requires the commissionto allocate emission allowances to grandfathered EGFs in defmed regions ofthe state. As stated in §39.264(c), the legislature intended thattotal annual emissions ofnitrogen oxides (NOx) 

### would notexceed 50% ofthe emissions during 1997 as reported to the commission, and that for coal-fired grandfathered EGFs, total annual emissions ofsulfur dioxide (S02) 

### would not exceed 75% ofthe 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 emissionlimitations may be met through an emissions allocation and allowance transfer system. An 

### allowancetrading program is a regulatory program which caps emissions over a designatedregion to a level consistentwith regulatory goals. EachEGF musthold allowances equal to or greaterthan its emissions tobe in compliance with the program. For example, ifan EGF's emissions are 100tons overthe controlperiod, then the

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI

allowance account for this EGF should reflect abalance equal to orgreater than 100 tons of Page 3

allowances. The program encourages EGFs to determine the methods ofcontrol which will allow the EGFto meet its allowances. Further, the program allows for trading ofallowances between EGFs in the same region, thereby creating alternatives for control. For example, ifan EGF emitted 100 tons
overthe control period and has a balance of 150 allowances inits compliance account, the EGF may sell the unusedportion-50 tons or allowances-to another EGF. This trading provision allows companies to determine the most economical method ofmeeting the regulation, eitherby purchasing surplus allowances created by another EGF's reductions orby making their own reductions.

Consistentwith Texas Utilities Code, §39.264(i), currently permitted EGFs may electto participate in the permitting program being proposed concurrently in Chapter 116, Subchapter I. 

### Permitted facilities electing to participate in the permitting programunder Chapter 116, SubchapterI are called electing EGFs. In the concurrently proposed changes to Chapter 116, the commissionproposes that the existing New Source Review (NSR) permit wouldbe consolidated with apermitissued under Chapter 116, Subchapter I. 

### Participation in the permitting programwill allow electing EGFs to obtain allowances underthe Emissions Banking and Trading ofAllowances (EBTA). Itmay be advantageous for a company to include all EGFs, regardless ofpermitting status, inthe permitting programto allow maximum flexibility in control strategies. Under §39.264(i)(2) and (4), electing EGFs are given allowances equal to their actual emissions reported inthe commission I

### s 1997 emissioninventory unless
a federal or state standard otherwise limits the 1997 emissionrate.

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 4

The proposed new §101.330 contains the definitions to be used 

### in the EBTA. "Allowance" means the authorization to emitone tonofNOx

### or S02 during the specified control period or any specified control period thereafter. An "authorizedaccount 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 ofallocationbutwhich is carried forward into nextyear and noted in the compliance orbroker account as "banked." Consistentwith Texas Utilities Code, §39.264(c), "controlperiod" means the 12-monthperiodbeginning May 1 of each year and ending April 30 ofthe following year. Control periods beginMay 1, 2003. "Compliance account" means the account for an EGF or multiple EGFs inwhich allowances are held. "BrokerAccount" means the account where allowances held by aperson are recorded. A broker is one who is participating inthe EBTAfor the purposes oftrading allowances and not to satisfy emission requirements at an EGF. Allowances held in a broker accountmay notbe used to satisfy compliance requirements for this division. EGFs canpurchase allowances from brokers, however, the allowances
are not eligible to meet reduction requirements until the ownership ofthe allowances has been transferred and the allowances reside in the purchaser's compliance account.

"EastTexas Region" means all counties traversedby oreast ofInterstate Highway 35 (IH-35) north of SanAntonio, ortraversedby oreastofInterstate Highway 37 (IH-37) south ofSanAntonio, and also including Bexar, Bosque, Coryell, Hood, Parker, Somerville, andWise counties. The commissionis proposing to modify the definition of"EastTexas Region" from Texas Utilities Code, §39.264(g) to clarify thatcounties eastofIH-35 and west ofIH-37 are not included 

### inthis region. It is believedthat had the legislature intendedfor the definition to include these counties, the definition would have

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 5

simply referenced IH-35 and not IH-37 also. Additionally, these counties (betweenIH-35 and IH-37) have been excluded from commissionplans involving statewide air control strategies, and the commissionbelieves thatthe legislature was attempting to be consistentwith current commission planning structures. "El Paso Region" means all ofEl Paso County. :'WestTexas Region" means all counties not contained in the East Texas or El Paso Regions.

An 

### "electric generating facility," as defmed in SB 7, is afacility that generates electric energy for compensation and is owned or operatedby aperson in this state, including a municipal corporation, electric cooperative, orriver authority. The commissionproposes to modify that defmition to exclude
a facility that generates electric energy primarily for internal use, butthatduring 1997 sold, to autility power distribution system, less than one-third ofits potential electrical output capacity. This exclusion eliminates cogenerationfacilities that were not intended to be included in this program. "Electing EGF" is an EGF that is not subject to the requirements ofTexas Utilities Code, §39.264, thatelects to comply with Chapter 116, Subchapter I. 

### "PennittedEGF" is an EGFpennitted under Chapter 116, Subchapter I, including electing EGFs. "Heat input" is the heatderived from the combustion ofany fuel at an EGF. Heat inputdoes not include the heatderived from reheated combustion air, recirculatedflue gas, orexhaust from other sources. The commissionproposes defining "NOx 

### allowance" as an authorizationto 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 ofthis division and Chapter 116, Subchapter I.

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI Page 6

The proposed new §101.331 establishes the applicability ofbanking and trading allowances. EGFs subject to the concurrently proposed Chapter 116, SubchapterI orelecting EGFs would be required to comply withEBTA. The section also allows the opening ofbrokeraccounts for those not required to participate inthe EBTA.

The proposed new §101.332 contains the general provisions for the EBTA. Compliance with the allowance system wouldbegin with the control periodbeginning May 1, 2003. Allowances would only be valid for meeting the purposes ofthe EBTA. Allowances cannotbe used to meet or exceed the limitations ofapermit or applicable law, generate emissionreductioncredits, or satisfy emission offset requirements under federal NSR. Because allowances do notby themselves meetfederal criteria as creditable emission reductions, they may notbe used to satisfy otherrequirements ofthe Federal Clean Air Act (FCAA), such as netting for Prevention ofSignificantDeterioration (PSD), NSR, oroffsets under a nonattainment NSRpermit. Neither a NO. allowance nor an 

### 502 

### allowance constitutes a security orproperty right. To meet the requirements ofTexas Utilities Code, §39.264(e), this section would require that onMay 1 ofeachyear, beginning in 2004, an EGF shall hold in its compliance account a quantity ofallowances that is equal to or greaterthanthe total emissions ofthat air contaminant emittedduring the prior control period. The commissionproposes thatallowances be allocated, transferred, orused as whole allowances. For simplicity, the numberofallowances 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 useby multiple permitted EGFs located atthe
same property and under common ownership or control. These limitations onthe numberof compliance accounts will assistthe commission inthe allocationofallowances and tracking of

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI Page 7

allowance transfers. Proposed §101.332U) incorporates Texas Utilities Code, §39.264(n), concerning the deduction ofallowances from compliance accounts where the EGF exceeded its allowances.

The proposednew §101.333 contains the methods by which allowances for permitted EGFs are calculated and determined. As specified inTexas Utilities Code, §39.264(h), the allowances will be calculated by multiplying total heat input measured inmillions ofBritish thermal units (MMBtu) during 1997 by an emissionrate expressed inpounds per MMBtu dividedby 2,000. To determine allowances, the commissionproposes using informationobtained 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 inputdata for EGFs. This database was the basis for determining the emissionrates necessary to achieve the program's goals ofa 50% reduction in NOx

### emissions and 25% reduction in S02 emissions from 1997 levels. If informationfor an EGF concerning heat input is not reported to the acid rain database, the executive directormay approve amethodfor calculating heat input for that EGF as long the method is consistent with the requirements ofthe acid raindatabase.

Texas Utilities Code, §39.264(h), specifies the emission rates for the EI Paso, East Texas, and West Texas Regions. Inthe EastTexas Regionthe emissionrate is 0.14 pounds ofNOx 

### per MMBtu and 1.38pounds ofS02 per MMBtu. The emission rate inthe EI Paso Region is 0.195 pounds ofNOx 

### per MMBtu. The WestTexas Region's emissionrates are identical to those in the EI Paso Region. Consistentwith Texas Utilities Code, §39.264(i)(2), the allowances for electing EGFs are equal to the EGF's emissionin tons in 1997. Should apermitted coal-fired EGF electto participate in the

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI Page 8

pennitting programunder Chapter 116, SubchapterI, the annual emissions ofS02 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 meetthe
ozone National Ambient Air Quality Standard (NAAQS). For each nonattainment area, the amount of reductions for the SIP will be consistent with the SIPmodeling efforts for that area. At this time the point source reductions expected in the Dallas/FortWorth (DFW) area are 88%. Reductions in the Beaumont/PortArthur (BPA) area are expectedto be 40-50%, and reductions in the Houston/Galveston (HGA) are expectedtobe 90%. The commissionexpects to propose the reductions for BPA and DFW
areas in Decemberof 1999. For the HGA area, proposal is expected inMay of2000. The commissionexpects topropose reductions inattairunent counties ofeast and central Texas not later than Decemberof 1999. Future rulemaking addressing these reductions will affectthe EBTA and the allocation offuture allowances. Since Texas Utilities Code, §39.264(s) recognizes the current authority ofthe commission to require additional reductions ofNOx

### or S02' as future SIP rules are developed allowances will be reduced accordingly.

Allowances for grandfathered EGFs mustbe allocatedby January 1, 2000, as requiredby Texas Utilities Code, §39.264(h). In orderto meetthis deadline, the commission intends to issue anorder this fall to allocate these allowances. The commission is aware ofthe needs ofowners oroperators of EGFs to know as soon as possible the numberofallowances that will be allocated to each EGF. A draft ofproposed allowances is available from the commission on request and will be available onthe

### Texas Natural Resource Conservation Commission Chapter 101

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commission's Web Site. To meetthe statutory deadline to. issue allowances by January 1,2000, proposed §I01.333(4) provides that a commission orderwill be issuedby that date with the SB 7Page 9

allowances for the grandfathered EGFs. The allowances allocated for subsequentyears will reflectthe
same values issued in the initial allocation, provided no subsequent state or federal regulations require additional reductions. To allow EGFs to identify potential sellers ofallowances, the commission shall maintain a publically available registry ofthe 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 commissionbelieves thatpublic access to information regarding the price and transfer ofallowances willpromote an open trading system. Consistentwith Texas Utilities Code, §39.264(s), 30 TAC §I01.333(a)(3) permits the commissionto 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 programuntil September 1, 2000, it wouldbe impossible to allocate those allowances on the
same schedule as the grandfathered allocations. This later allocation schedule will allow companies to determine whetherto participate inthe programs and whichprograms best suittheir individual business needs.

The proposed new §I01.334 would establish requirements concerning the transfer ofallowances. Allowances may be transferred at any time during acontrol period withdocumentation receivedby the commission no later thanJune 30 following the control period for which the allowances are used. The

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 10

commissionbelieves that 60 days to report all transfers will give owners oroperators ample time to finalize transfers for thatcontrol period. In additionto the annual report, notification oftransfer of allowance must occurwithin 30 days afterthe transfer ofany allowances to anotherparty. This requirement will ensure thatthe data kept on the commission's registry is accurate and current. Allowance transfers are prohibitedpriorto May 1,2003. The commissionbelieves it is appropriate to set abeginning date for the receipt oftransfernotification. This restriction will allow the commission to setup the appropriate tracking mechanisms priorto receipt ofnotifications. As required by Texas Utilities Code, §39.264(i)(3), allowances atelecting EGFs resulting from reduced utilization or shutdowns cannotbe transferred. Transferrable allowances for electing EGFs shall be calculatedusing the heat inputfrom 1997, the heat inputfrom 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 frombroker accounts are restricted based on the location ofthe EGF where the allowance was originally allocated.

SB 7 allows EGFs the flexibility to decide when and where to make reductions orto add on controls. EGFs must considerlocal impacts ofallowance transfers specifically onthose counties which are nonattainment and nearnonattainment. Forexample, most near-nonattainment areas have EGFs that
are inclose proximity to these areas. These EGFs emit significantamounts ofNOx, 

### whichhas been shown to heavily influence local ozone levels. Other EGFs located a greaterdistance from these areas

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 11

have regional impacts onbackground ozone levels butdo not impact near-nonattainrnent areas to the extent the closerfacilities can.

While the commissionbelieves thatthe trading program will result in emission reductions throughout the EastTexas Region, emission reductions, ratherthan allowance transfers, at the nearby facilities shouldbe thoroughly consideredbefore investments are made for emission control equipment atmore distantplants. In making these economic decisions, it is incumbent onbusinesses to weigh the environmental consequences oftheir actions. Prior to making an allowance transferto a nonattainment
or near-nonattainmentarea, EGFs mustbe aware that suchtransfers mightjeopardize the status ofa near-nonattainment area. For example, atthis time the Tyler/Longview/Marshall area is operating under the terms ofaFlexible AttainmentRegion (FAR). Ifnumerous transfers occur into that area, the conditions ofthe FARmay be compromised. The FAR will expire in September 2001 and canbe extendedby the parties. During the term ofthe FAR agreement, EPA will treat the areaunder an approach similarto amaintenance plan area. However, EPA may designate the area as nonattainment, regardless ofwhether aFAR agreement is inplace. Designation ofnonattainment could result in additional reductions ofNOx 

### from EGFs inthe Northeast Texas FAR area. Furthermore, a nonattainment designation wouldrequire additional reductions from industry sources andpotential restrictions ontrade into the new nonattainment area. The commissionencourages EGFs to consider the long-term consequences ofdecisions to utilize allowances ratherthan the installation ofcontrols at EGFs locatedclose to nonattainment areas and innear-nonattainmentareas.

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 12

The proposed new §101.335 regulates the banking ofallowances. As requiredby Texas Utilities Code, §39.264(i)(3), allowances at electing EGFs resulting from reducedutilizationor shutdown cannotbe banked. Allowances notused for compliance may be banked for use in subsequentyears.

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 ofeachyear, EGFs participating in the EBTA shall reportto the commissionthe amount ofemissions ofeach allocated air contaminantduring the preceding control period. Emission allowances equal to the amount ofemissions during thatcontrol period wouldbe deducted from the EGF's compliance account. Consistent withTexas Utilities Code, §39.264(n), ifthe amount ofemissions exceeds the EGF's allowance, allowances in the amount ofthe excess shall be deducted from the allowances for the nextyear. The proposed new §101.336 requires that at the end ofeach control period, the owneror operator ofan EGF report its emissions to balance the emissions with the allowances in its compliance account.

As authorizedby Texas Utilities Code, §39.264(p), the proposed new §lO1.337 would allow facilities in the EI Paso Regionto meetemissionallowances using credits from the City ofJuarez, 

### inthe United States ofMexico. The reductionmustbe reviewed and approvedby the executive director andmustbe

) 

### permanent, quantifiable, enforceableby the commission, and not requiredby otherrule orlaw. Under Texas Utilities Code, §39.264(q), 30 TAC §101.337 would also exemptthe EI Paso Regionfromthe EBTA ifeither EPA orthe commission determines that reductions ofNOx

### will increase ambientlevels ofozone. Currently, NOx

### reductions are not required for facilities 

### in the EI Paso nonattainment area

### Texas Natural Resource Conservation Commission Chapter 101

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because EPA has granted a waiverunder FCAA, §182(t) concerning NOx

### Requirements. Underthis waiver, NOx

### reductions are not required ifthe attainment demonstration for compliance with the ozone NAAQS canbe made without a NOx 

### control strategy. The basis for this waiver does not satisfy §39.264(q) ofthe Texas Utilities Code because ithas notbeen 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 apermitunder Chapter 116, SubchapterIregardless ofthe determination that NOx 

### reductions are counterproductive in controlling ambient ozone levels in the EI Paso Region. The commissionbelieves that this requirement is appropriate since Texas Utilities Code, §39.264(e) provides that EGFs without apermitmay not operate after May 1,2003, and Texas Utilities Code, §39.264(q) refers only to reduction requirements, notpermitting requirements.

FISCAL NOTE Bob Orozco, a technical specialist in the Strategic Planning and Appropriations Section, has determined that for the first five-year periodthe proposed amendments are in effect, there will be no significant fiscal implications for the commission and otherunits ofstate and local government as a result of administration or enforcement ofthe proposed amendments. River authorities and units oflocal governmentthat own and operate EGFs are affected by the proposed amendments. AlthoughEGFs of 25 megawatts or less ownedby units ofstate and local government may be excused from the permitting requirements, some EGFs will be required to obtain apermit and reduce emissions to continue operating. It is anticipated thatthe proposed amendments which allow emission allowance banking and trading for EGFs will provide flexibility andpotential cost savings inplanning and determining the

### Texas Natural Resource Conservation Commission Chapter 101

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most economical mix ofthe application ofemission control technology with the purchase ofother facilities' surplus allowances to meet emissionreduction requirements.

The proposed amendments to Chapter 101, concerning General Rules, would develop and implement the EBTA system for grandfathered EGFs and other EGFs thatelectto participate in EBTA requirements. The provisions to establish such a system are contained in:

Act ofMay 27, 1999, 76thLegislature, 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 permiton orbefore September 1, 2000. A grandfathered EGF is a facility that was exempt from permitting requirements by virtue ofexisting or beginning construction, alteration, ormodification on orbefore August 31, 1971. An 

### EGF that does not obtain apermitby May 1, 2003, may not operate unless the commissionfinds good cause for an extension.

The new sections inChapter 101 are proposed concurrently with new sections in Chapter 116. The purpose ofthe rulemaking inthese chapters is to implementpermitand emission control requirements, including EBTAprocedures for certainEGFs, and relatedpermitapplicationandpublic notice procedures.

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-1l6-AI Page 15

The proposed amendments establish an emission allowance banking and trading program which caps emissions over adesignated region to a level consistent with SB 7. SB 7 requires the conunission to allocate allowances for grandfathered EGFs by January 1,2000. Eachparticipating EGF musthold allowances equal to or greaterthan its emissions to be in compliance with the program. The program encourages EGFs to determine the methods ofemissions control which will allow the EGF to meet its emissionallowances. The EBTA program allows for voluntary trading ofallowances between EGFs in the same region to provide EGFs with the flexibility to determine the bestmix ofusing control technologies to reduce their own emissions and/or the purchase or trading ofsurplus 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 afederal or state standard otherwise limits the 1997 emission rate.

PUBLIC BENEFIT Mr. Orozco has also determined that for each year ofthe first five years the proposed amendments to Chapter 101 are in effect, the publicbenefitanticipated from enforcementofand compliance with the proposed amendments will bepotentially increased efficiency in the reduction ofair contaminants emitted from affected EGFs, and increased flexibility for affected EGFs inplanning and determining the most economical mix 

### ofcontrol technology alternatives and trading ofemission allowances to meet SB 7 reduction requirements.

### Texas Natural Resource Conservation Commission Chapter 101

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It is the intent ofthe legislature in SB 7 that, starting May 1,2003, annual emissions ofNO. from grandfathered EGFs notexceed 50% ofthe levels emitted during 1997 as reported to the commission. It is also requiredby SB 7 that emissions ofS02 from coal-firedpowerplants not exceed 75% ofthe levels emitted in 1997. It is anticipated thatthese emission reductions may be met, inpart or in whole, by the emissions trading and allowance system which is the subject ofthis rulemaking. Counties within Texas have beendivided into three regions by SB 7-EastTexas, West Texas, and El Paso-forthe purpose ofallocating emissions ofNO. and S02 and for the trading ofemissions allowances, by region, among the EGFs. The EastTexas Region emission rate shall be 0.14 pounds ofNOx

### and 1.38 pounds of502per MMBtu. The EI Paso Region andWestTexas Region emissionrate shall be 0.195 pounds ofNO. and 1.38 pounds of502per MMBtu.

The purpose oftheproposed amendments is to create and implementan EBTAprogramwhich caps emissions over adesignated area from grandfathered and otherEGFs that electto participate in the EBTAprogram. Each EGFparticipating in the EBTA program must hold allowances equal to or greaterthan its emissions to be in compliance with the program. The EBTA program allows for trading ofallowances betweenEGFs in the same region to provide EGFs with flexibility inplanning and determining the most economical mix ofcontrol technology alternatives to reduce its own emissions with thepurchase or trading ofanother facility's surplus allowances to meet emission reduction requirements.

There are no significant additional costs anticipated to any person orbusiness as a result ofcomplying with the proposed amendments to Chapter 101. The proposed amendments are intendedto provide

### Texas Natural Resource Conservation Commission Chapter 101

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increased flexibility inplanning 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 ofemployees 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 affectedby these proposed amendments to Chapter 101. There are no significant additional costs anticipatedto any person orbusiness as aresult ofcomplying with the proposed amendments to Chapter 101.

DRAFT REGULATORY IMPACT ANALYSIS The commissionhas reviewed the proposed rulemaking in lightofthe regulatory analysis requirements ofTexas Government Code, §2001.0225, and has determined thatthe rulemaking is not subjectto §2001.0225 because itdoes notmeet the definition ofa "majorenvironmental rule" as defmed in that statute. "Majorenvironmental rule" means a rule the specific intentofwhich is to protect the environment or reduce risks to human health from environmental exposure and thatmay adversely affect in a material way the economy, a sector ofthe economy, productivity, competition,jobs, the environment, orthe public health and safety ofthe state or a sectorofthe state. Becausethe specific intent ofthe proposed rulemaking is procedural in nature and specifies how and whenemission allowances canbe banked and traded; makes the trading and/orbanking ofemission allowances voluntary; and allows the EGFs the flexibility to decide the extentofbanking andtrading of allowances, the rulemaking does notmeetthe defmition ofa "majorenvironmental rule." The

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 18

proposed amendments would only apply to grandfathered EGFs and electing EGFs. Finally, the proposed amendments do notmeet any ofthe four applicability requirements ofa "majorenvironmental rule." The proposed amendments do notexceed a standard setby federal law, exceed an express requirement ofstate law, or exceed arequirement ofadelegation agreement. In addition, the proposed amendments are made specifically to comply with SB 7.

TAKINGS IMPACT ASSESSMENT The commissionhas prepared atakings impact analysis underTexas Government Code, §2007.043. The following is a summary ofthat analysis. While these amendments may result in capital costs for
some EGFs, the amendments do not affectprivate property inamannerthat restricts or limits an owner's rightto the property that would otherwise exist in the absence ofthe governmental action. Consequently, this proposal does not meetthe defmitionofatakings underTexas Government Code, §2007.002(5). These amendments implementthe requirements ofTexas Utilities Code, §39.264. EGFs are required to reduce emissions ofNO. by 50% and, ifapplicable, S02' by 25%. Although EGFs are required to make specific emissionreductions, these facilities have alternatives available underthe proposed bankingprogramthatmay allow the EGF to avoid installing add on controls. Further, allowances canbe transferred undertheproposed banking program so that EGFs have opportunities to buy and sell allowances inorderto respond to business needs. This action is intended to reduce emissions ofNOx"

### and S02' The action significantly advances this purpose by requiring substantial reductions in the emissionofNO. and S02 through a system ofemissionallowances. While requiring these reductions, this rule allows the trading ofemission 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 areal and substantial threat to public health and safety and significantly advances the health and safety purpose and imposes no greaterburdenthan is necessary to achieve the health and safety purpose.

COASTALMANAGEMENT PROGRAM CONSISTENCY REVIEW The commissionhas detennined thatthis rulemaking relates to an action or actions subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal CoordinationAct 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 requiredby 31 TAC §505.11(b)(2) and 30 TAC §281.45(a)(3), relating to actions and rules subject to the CMP, commissionrules governing airpollutantemissions mustbe consistent with the applicable goals and policies ofthe CMP. The commissionhas reviewed this action for consistency with the CMP goals and policies in accordance with the regulations ofthe Coastal Coordination Council. For the proposed new sections relating to the authorization ofemission allowances and the banking and trading ofallowances, the commissionhas detennined that the rules are consistentwith the applicable CMP goal expressed in 31 TAC §501.12(1) ofprotecting and preserving the quality and values ofcoastal natural resource areas, and the policy in 31 TAC §501.14(q), which requires thatthe commission protectair quality in coastal areas. This proposal is intendedto reduce overall emissions ofNOx

### and S02 from EGFs. This action is consistentwith Title 40 Code ofFederal Regulations because it does not authorize an emissionrate in excess ofthat specified by federal requirements. Interested persons may submitcomments during the public commentperiod on the consistency ofthe proposed rule with the CMP goals and policies.

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI

PUBLIC HEARING Page 20

The commissionwill hold apublic hearing on this proposal in EI Paso on October 1, 1999, at 9:00
a.m. inthe City ofEI Paso Council Chambers, located at 2 Civic Center Plaza, 2nd Floor. Additional hearings will be held in Lubbockon October 1 at 6:00 p.m. in the City ofLubbockCouncil Chambers, located at 1625 13th Street; in Austin on October4 at 9:00 a.m. in Room 201S ofTexas Natural Resource Conservation CommissionBuilding E, located at 12100 Park 35 Circle; in Irving on October 5 at 1:00p.m. inthe City ofIrving Central Library Auditorium, located at 801 WestIrving Boulevard; inHouston on October 7 at 9:00 a.m. inthe City ofHouston Pollution Control Building AUditorium, located at 7411 ParkPlace Boulevard; and in Beaumonton October 7 at 6:00p.m. in the John Gray Institute, located at 855 Florida Avenue. The hearings are structured for the receipt oforal orwritten comments by interested persons. Individuals may present oral statements whencalledupon inorderof registration. Opendiscussionwill notbepermittedduring the hearings; however, an agency staff memberwill be available to discuss the proposal 30 minutes priorto the hearings and will answer questions before and after the hearings.

SUBMITTAL OF COMMENTS Comments may be submittedto Casey Vise, MC 205, Office ofEnvironmental 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 Number99033- 116-AI. Comments mustbe receivedby 5:00p.m., October 11, 1999. Forfurther information, please contactBeecher Cameron, ofthe Policy and Regulations Division, at (512) 239-1495.

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI Page 21

Persons with disabilities who have special communication or otheraccommodation needs who are planning to attendthe hearing should contactthe Office ofEnvironmental 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 commissionto develop rules for the allocation ofemission allowances to EGFs and to make rules concerning the banking and trading ofthose allowances. The new sections are also proposedunder Texas Health and Safety Code, TCAA, §382.011, which authorizes the commissionto administerthe requirements ofthe TCAA; §382.012, whichprovides the commission with the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commissionto adopt rules consistent with the policy and purposes ofthe TCAA; §382.023, which authorizes the commissionto issue orders; and §382.061, which authorizes the commissionto delegate permitting authority to the executive director; and Texas Water Code, §5.122, which authorizes the commissionto delegate uncontested matters to the executive director.

The proposed new sections implementTexas 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 DelegationofPowers and Duties; and Texas Water Code, §5.122, concerning Delegation ofUncontestedMatters to Executive Director.

### Texas Natural Resource Conservation Commission Chapter 101 - General Rules Rule Log No. 99033-116-AI

SUBCHAPTERH : EMISSIONS BANKING AND TRADING DIVISION2 : EMISSIONS BANKINGAND TRADINGOF ALLOWANCES 

### §§lO1.330-101.337
§lO1.330. DefInitions. Page 22

The following words and tenns. whenused in this division. shall have the following meanings. unless the context clearly indicates otherwise.

(1) 

### Allowance

- The authorization to emit one ton ofnitrogen oxide (NOx) 

### or sulfur dioxide (S02) 

### during a controlperiod.
(2) 

### Authorizedaccountrepresentative

- The responsible person who is authorized. in writing. to transfer and otherwise manage allowances.
(3) 

### Banked allowance

- An allowance which is notused to reconcile emissions in the designated year ofallocationbutwhich is carried forward into future years and noted in the compliance
or broker account as "banked. II


### (4) Brokeraccount
- The accountwhere allowances heldby a person are recorded. Allowances held in abroker accountmay notbe 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 periodbeginning May 1 ofeach year and ending April 30 ofthe following year. Control periods beginMay 1, 

### 2003.

(7) 

### EastTexas Reeion

- All counties traversed by or east ofInterstate Highway 35 north ofSan Antonio ortraversed by or east ofInterstate Highway 37 south ofSan Antonio, and also including Bexar, Bosque, CoryelL Hood, Parker. Somerville, and Wise Counties.
(8)**Electin~** 

### EGF

- An electric generating facility permittedunder Chapter 116, SubchapterB ofthis title (relating to New Source Review Permits) which is not subjectto the requirements ofTexas Utilities Code, §39.264 and elects to comply with Chapter 116, SubchapterI 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 operatedby 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 butthat during 1997 sold, to autility powerdistribution system, less than one-third ofits potential electrical output capacity.
(10) 

### EI Paso Reeion

- All ofBI Paso County.

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- General Rules Rule Log No. 99033-116-AI Page 

### 24

(11) 

### Heatinput

- The heatderived from the combustion ofany fuel at an EGF. Heat inputdoes not include the heatderived from reheated combustion air, recirculated flue gas, orexhaust from other sources.


### (12) NOx

### allowance

- An authorizationto emit NOx• 

### A NOx

### allowance is valid only for the purposes ofmeeting the requirements of:
(A) this division: or
(B) Chapter 116, SubchapterI ofthis title.


### (13) PermittedEGF

- An electric generating facility permittedunder Chapter 116, SubchapterI ofthis title, including electing facilities.


### (14) S02 

### Allowance

- An authorization to emit S02 valid only for the purposes for meeting the requirements ofthis division and Chapter 116, SubchapterI ofthis title.


### (15) West

### Texas Region

- All counties not contained inthe East Texas Region or EI Paso region.

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI


### §101.331. Applicability.

This division applies only to the following: Page 25

(1) 

### Electric generating facilities permitted under Chapter 116, Subchapter I ofthis title, (relating to Electric Generating Facility Permits).

(2) 

### Aperson not required to participate inthe requirements ofthis division may open a broker accountunder this division for the purposes ofbanking and trading emissions allowances.


### §101.332. General Provisions.
(a) Allowances are valid only for the purposes ofmeeting the requirements ofthis division and cannotbe used to meet orexceed the limitations ofapermitor any applicable rule or law.

(b) 

### On May 1 ofeach year, beginning in 2004, an electric generating facility (EGF) shall hold
a quantity ofallowances in its compliance account that is equal to or greaterthanthe total emissions of that air contaminant emitted during the prior control period. Compliance with the allowance system will begin with the control periodbeginning May 

### 1. 2003.

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(c) Emission reductions used to satisfy the requirements ofthe Emissions Banking and Trading ofAllowances (EBTA) cannotbe used to generate emission reduction credits ordiscrete emission reduction credits.
Cd) Allowances cannotbe used for netting requirements to avoid the applicability offederal and state new source review (NSR) requirements.
(e) Allowances cannot be used to satisfy offsetrequirements for new or modified sources subjectto federal nonattainment NSR requirements.

(f) 

### An allowance does not constitute asecurity or aproperty right.
(g) All allowances will be allocated, transferred, or used as whole allowances. To determine the number ofwhole allowances, the number ofallowances will be rounded down for decimals less than0.50 and rounded up for decimals of0.50 or greater.

(h) 

### One compliance account shallbe used for multiple permitted EGFs located atthe same property and under common ownership orcontrol.
(i) If

### emissions ofnitrogen oxides or, ifapplicable, sulfur dioxide, exceedthe amount of allowances for a givencontrol period, allowances for the next control period will be reduced in an amountequal to the emissions exceeding the allowances inthe compliance account.

### Texas Natural Resource Conservation Commission Chapter 101

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### §101.333. Allocation ofAllowances.

Allowances will be allocated according to the requirements ofthis section. Page 27

(1) 

### Except as provided in paragraphs (2) 

### and (3) ofthis section. allowances will be calculated using the following equation:


## ER*HI A=-------- 

## 2000 Ib/allowance Where: A = 

### HI = 

### ER = 

### Number ofallowances Total heat input (million British thermal units (MMBtu)) during 1997, determined by subparagraphs (A) or (B) 

### ofthis paragraph. Emission rate, as defined in subparagraphs 

## (0 - (E) ofthis paragraph; (A) the acid rain database ofthe EPA; or

(B) 

### anmethod approved by the executive director. consistentwith the emission \. 

### reduction requirements ofthis division. ifthe information is unavailable from the EPA acid rain database. 

## (0 In the EastTexas region.
0) 0.14 pound nitrogen oxides (NO.) per MMBtu; and

### Texas Natural Resource Conservation Commission Chapter 101

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(ii) 1.38 pounds sulfurdioxide ($°2) 

### per MMBtu: Page 28

(D) In the WestTexas and EI Paso Regions. 0.195 pound NO. per MMBtu;
(2) For electing electric generating facilities fEGF), the amount ofallowances is equal to the EGF's actual emissions in tons in 1997 and shall not exceed any ofthe following:
(A) the emission inventory reported for calendaryear 1997:

(B) 

### the allowable emission rate in an existing permit: and

(C) 

### an applicable state orfederal requirement.
(3) The commission may increase ordecrease the amount ofallowances for any control period in orderto satisfy requirements under a state implementationplan orother federal. state,
or local air quality requirement.
(4) Allowances will be allocated:
(A) initially. by:
0) January 1, 2000. for grandfathered EGFs;

### Texas Natural Resource Conservation Commission Chapter 101

- General Rules Rule Log No. 99033-116-AI
(ii) January 1, 

### 2001, for electing EGFs: and

(B) 

### subsequently. by May 1 ofeach year. beginning in 2004.

(C) 

### Allowances will be allocated by commission order. Page 29

(5) The commission shall maintain aregistry ofthe allowances in each compliance account. For each transfer, the registry shall include the price paidper allowance. The registry shall notcontainproprietary information.


### §lOl.334. Allowance Transfer.
(a) Allowances may be transferred at any time during the control period.

(b) 

### Documentation ofall final transfers mustbe receivedby the commission on orbefore June 30 following the control period for which the allowances are to be used.
(c) Only authorized account representatives may transfer allowances.
(d) Notification oftransfer ofallowance must occur within 30 days afterthe transfer ofany allowances to anotherparty. Allowance transfers are prohibitedpriorto 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 ofallowances eligible for transfer from
an electing EGF will be calculatedusing the heat inputfrom 1997 and the changed emission factors as follows:

(1) 

### Ifthe heat inputfor the control period exceeds the heat input for 1997, the following equation will be used to calculate the amount oftransferrable allowances.



## Ill1997 

# * EF1997

- Illcp 

# * EFcp 

## 2000 lbs/allowance Where:

=
=

=
= 

### Heat input from 1997. The emission factor for 1997 in terms ofpounds permillion British thermal units Obs/MMBtu). Heat inputfor the control period. The emission factor for the control period in terms ofIbs/MMBtu. (2) Ifthe heat input for the control period is less than the heat input for 1997, the following equation will be used to calculate the amount oftransferrable allowances.



## IllI997 

# * EFI997

- HI1997 

# * EFcp 

## 2000 lbs/allowance Where: HI1997 

### EF1997 

# =
= 

### Heat input from 1997 The emission factor for 1997 in terms ofIbsIMMBtu.

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EFcp = 

### The emission factor for the control period in terms ofIbs/MMBtu.
(f) 

### Allowances may be transferred within the same region, but notbetween regions.
(g) Trading to and from abroker account must meet the trading restrictions regarding the origin ofthe 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) Emissionmonitoring and reporting shall be conducted in accordance with §116.914 ofthis title, (relating to Emissions Monitoring and Reporting Requirements).

(b) 

### For each control period, electric generating facilities (EGFs), must submit a report to the commissiondetailing the amount ofemissions ofeach allocated air contaminantduring the preceding

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control period. This report must be submitted by June 1 ofeachyear. Emission allowances equaling the total emissions will be deducted from the EGF's compliance account.


### §101.337. EIPaso 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 ofJuarez, United States of Mexico. Emission reductions under this sectionmust meetthe following criteria.

(1) 

### The emission reduction mustbe:
(A) enforceable by the commission:
(B) permanent, meaning thatthe emissionreduction is unchanging for the remaining life ofthe source;
(C) 

### quantifiable, so thatthe emission reductioncanbe measured or estimated with confidenceusing replicable techniques;

(0) 

### sUIplus, such that the emissionreduction is not otherwise required ofa facility by a state or federal law, regulation oragreed order, and;

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(E) a real reduction in which actual emissions are reduced. Page 33

(2) The emission reductionmustbe reviewed and approvedby 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 ofthis division ifeither EPA or the commission determines that reductions ofnitrogen oxide inthe 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 orcommission) proposes new §116.18, concerning Electric Generating Facility Permits Definitions; §116.91O, concerning Page 34

Applicability;.§116.911,..conceming_Electric
..Generating Facility.PermitApplication;· §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 CommentHearings for Initial Issuance; §116.922, concerning Notice ofFinal Action; §116.930, concerning Modifications; and §116.931, concerning Renewal. Sections 116.910-116.931 would be placed in a new SubchapterI, concerning Electric Generating Facility Permits. These new sections are also proposed as amendments to the state implementationplan (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 ofElectric Utility Industry. SB 7 requires the commission to implementthe permitting and allowance requirements ofnew §39.264, concerning Emissions Reductions of "Grandfathered Facilities." SB 7 requires electric generating facilities (EGFs) existing onJanuary 1, 1999, that were not subjectto the requirement to obtain apermitunder Texas Clean Air Act (TCAA), §382.0518(g) to obtain apermit 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 offacilities 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 ofAllowances, inthe new Subchapter H, concerning Emissions Banking and Trading, in Chapter 101 sets outthe allowance systemto be used to assist EGFs in meeting the emission reduction requirements ofSB 7. The purpose ofthe rulemaking in these chapters is to implementpennit and emissioncontrol requirements, including emission banking and trading ofallowances (EBTA), for certain EGFs and related pennit application and public notice procedures. The permit application and public notice procedures are the subject ofthese proposed amendments to Chapter 116. The amendments to Chapters 101 and 117 are published in a separate section ofthis edition ofthe 

### Texas Register.

SB 7 requires owners or operators ofgrandfathered EGFs to apply for a pennitto emitnitrogen oxide (NOx ) 

### and, for coal-fired EGFs, sulfur dioxide (SO:z). These applications are due on orbefore September 1, 2000. An EGF that does not obtain a permitmay not operate after May 1,2003, unless the commissionfmds good cause for an extension. It is the intent ofSB 7 that for the 12-monthperiod beginning May 1, 2003, and for each 12-monthperiod following, annual emissions ofNOx

### from

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grandfathered EGFs not exceed 50% ofthe NOx 

### emissions reported to the commissionfor 1997. Furthermore, it is the intentofthe legislation thatemissions ofS02 

### from coal-fired EGFs notexceed 75

## % of.the.SO:-emissions.**reportecito~the** 

### coInIIlission..in.1997
....-Thedescribedemission·limitafions may be satisfied by using control technology or by participating in the banking and trading ofallowances.

Persons, municipal corporations, electric cooperatives, andriver authorities owning EGFs that are not grandfathered may electto become subject to the permitting requirements and emission reductions. A municipal corporation, electric cooperative, or river authoritymay exclude any grandfathered EGF with a nameplate capacity of25 megawatts or less from permitting and emission reduction requirements. Texas Utilities Code, §39.264(d) requires notice ofthe intentto exclude these EGFs by January 1, 2000. The commission will make available a form for this purpose, and requests thatthe form be returned to the commissionby 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 aperson in 

### this state, including a municipal corporation, electric cooperative, or river authority. The commissionproposes to modify that definitionto exclude afacility thatgenerates electric energy primarily for internal use, butthat during 1997 sold, to a utilitypowerdistribution system, less than one-third ofits potential electrical output capacity. This exclusion eliminates cogeneration facilities that
were not intendedto 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 ofTexas Utilities Code, §39.264 and elects to comply with Chapter 116, Subchapter 1. 

### An "allowance" is the authorizationto emit one ton ofNOx 

### or, ifapplicable, S02' during
a specified controlperiod or any specified control period thereafter. "Coal" is all solid fuels classified
as anthracite, bituminous, subbituminous, or ligniteby the American Society for Testing and Materials Designation ASTM D388-92 "Standard ClassificationofCoals by Rank" (as incorporated by reference inTitle40 Code ofFederal Regulations (CFR) §72.13). This definition ofcoal is consistent with the defmition found in40 CFR Part72, concerning Acid Rain Program. The commission is defining coal to clearly include lignite as coal, since these two fuels are sometimes referenced separately. "Combinedpermit" is apermitthatconsolidates the existing new source review (NSR) authorization with the requirements ofan EGFpermit. A "compliance account" is an account for an EGF or multiple EGFs in which allowances are held. Consistentwith Texas Utilities Code, §39.264(c), a "control period" is the 12-monthperiodbeginning May 1 ofeachyear and ending April 30 ofthe following year. Control periods begin onMay 1,2003. "Nameplate Capacity" means the maximum electrical output (expressed inmegawatts) that an EGF can sustain over a specified period of time when not restrictedby seasonal orotherderatings. This defmition is consistent with the defmition**\.r~d** 

### under the Federal Clean Air Act (FCAA) Amendments of 1990, Acid Rain Program. The commissionbelieves that using this defmition will reduce any confusionfor EGFs potentially subject to boththe Acid Rain Program and the EBTAprogramproposedunderChapter 101, SubchapterH, Division 2. A "peaking unit" is an EGFthathas: 1) an average capacity factor ofno more than 10% during the pastthree calendaryears, and 2) a capacity factor ofno more than20% in each ofthose calendar years. "Capacity factor" is either: 1) the ratio ofan 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 ofan EGF's annual heat input (inmillions ofBritishthermal units (MMBtu» to the EGF's maximumdesign heat input..(inMMBtu)**times..8,160hours~** 

### Bothterms, capacity factor and peaking,unit, are consistent with the same terms in the FCAA Acid Rain Program.

Section 116.910 states that apermitunderthis new subchapter would authorize emissio'ns ofNOx 

### for any EGF and emissions of

### 502

### for coal-fired EGFs. Section 116.910 specifies that the EGF owner or operator authorized to actfor the owner is responsible for complying with this subchapter. Consistent with Texas Utilities Code, §39.264(d), amunicipal corporation, electric cooperative, or river authority may exclude any EGF with a nameplate capacity of25 megawatts or less from this subchapter. The municipal corporation, electric cooperative, or river authority must notify the commissionby January 1, 2000, ofits intentto exclude those EGFs. The commission will make available a form for this purpose and requests thatthe form be returned to the commissionby November 1, 1999.

SB 7 requires grandfatheredEGFs to obtainapermit from the commission that authorizes the emission ofNOx 

### and, for coal-fired EGFs, 

### 502' Other than NOx 

### and 

### 502' EGFs also emitproducts of combustion suchas carbonmonoxide, particulate matter, and volatile organic compounds. At acoalfired EGF, the emissions may include mercury as well. The commissionbelieves thatthe SB 7 authorization was only intendedto authorize NOx

### and 

### 502 

### (for coal-fired EGFs). The commission also believes thatthe intentofSB 7 was to eliminate the grandfathered status ofEGFs. However, it is unclearhow SB 7 authorizes or requires the permitting ofanything otherthan NOx

### and 

### 502 (for coal-

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fired EGFs). Furthermore, ifthe 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 commissionproposes to incorporate these emissions using the emission control standards ofthe Voluntary Emissions Reduction Permits (VERP) proposed concurrently inthis edition ofthe 

### Texas Registerunder Chapter 116, Subchapter H, concerning Voluntary Emission Reduction Permits. These other air contaminants from the EGFs would be reviewed underthe requirements ofthe VERP programbut would only go through the public notice process one time.

The commissionbelieves that it is appropriate to rely on the control methods and health effects requirements ofthe VERP programfor air contaminants other than NOx

### and, ifapplicable, S02' 

### The VERP programprovides control method options depending on the location ofa grandfathered facility. The VERP proposal also describes the suggested methods for ahealth effects review for grandfathered facilities. This proposal to rely on the VERP control methods and health effects review will provide a consistentbasis ofreview for emissions besides NOx 

### and S02 

### from all grandfathered facilities. The commission does notthink it is appropriate to merely include other emissions in a grandfathered EGF's permit without a review ofcontrol methods and, ifnecessary, impacts. This is consistent with the longstanding policy to nottreat certainfacilities as being "permitted" simply because the facilities are consolidated into an existing permit. For example, a facility that was originally authorizedby an exemption will continue to be authorized under the exemption eventhough the exemption is consolidated with an NSRpermitduring an amendmentor atrenewal. The proposal does not require applicants to permit these other air contaminants from EGFs.

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Many powerplants may have othergrandfathered support facilities such as fuel storage tanks or coal handling facilities that are notelectric generating facilities. Because SB 7 addresses only those facilities which.generate..electricity,.these.supportfacilities are-notexplicitly required-to obtain a·permitunder SB 7. To encourage the pennitting ofgrandfathered support facilities, the commissionproposes that these facilities could apply for aVERP 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 notprovide procedures for the modification ofan EGFP. Therefore, the commission believes that the requirements ofthe TCAA concerning modifications ofexisting facilities still apply. Any modifications to any facility in an EGFP remain subjectto the permitting requirements ofthe TCAA and the existing modification requirements in Chapter 116, SubchapterB.

To address electing EGFs, the commissionproposes that the existing NSRpermitbe consolidated with
a permitunderthis subchapter. The combinedpermit would continue to authorize emissions ofall air contaminants and would incorporate the requirements ofthis subchapter into a single permit. This pennitwould containthe general and special conditions for electing EOFs. The unchanged, existing NSRpermit conditions would notbe subjectto public notice for the combinedpermit; only the conditions specific to the EGFs for NOx 

### and, ifapplicable, S02' wouldbe subject to the public notice requiredby §116.920.

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Consistentwith existing applicationprocedures ofthe commission, the proposed new §116.911 contains applicationprocedures 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 ofgrandfathered andelecting EGFs apply for apennitonorbefore September 1, 2000. The section also contains infonnation concerning general content ofthe pennit application. An EGFP will include provisions for measurement of emissions and arequirement 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 thatcontrol technology, ifappropriate, used by these EGFs would be sufficientto meetthe limitations ofthe allowances. The removal ofcontrol technology could also triggerfederal NSR requirements, since this change could constitute a modificationunderfederal regulations. EGFs in nonattainment areas must comply with nonattainment review and, ifapplicable, Prevention ofSignificantDeterioration (PSD) review. Allowances cannotbe used to avoid federal pennitting requirements because the allowances do not constitute a pennanent, enforceable emissionlimit. EGFs that are affected sources under FCAA, §112(g), concerning Modifications, mustcomply withthose requirements. Since grandfathered EGFs must comply with federal requirements, ifapplicable, the commissionbelieves that it is appropriate to ensure that these EGFs are incompliance with those requirements. The applicantmust demonstrate how it will meetthe 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 ofaTexas licensedprofessional engineer, consistent with §116.110(e), concerning Applicability
.

### Texas Natural Resource Conservation Commission Chapter 116

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EGFs that are currently authorized under Chapter 116 may electto participate inthe EBTA under Chapter 101, Subchapter H, Division 2 by consolidating their existing NSRpermit with an EGFP. The propose.d.new §116.912 contains..applicationxequir.ements.for electing.EGFs that-arein 

### addition·to
. those contained in the proposed §116.911. Since an existing NSRpermitmay authorize multiple facilities, the permit application submitted under this subchapter should identify which EGFs are to be included inthe EGFP. Applications must contain documentation ofactual emissions as well as fuel consumption, fuel heating values, and heat input 

### in MMBtu for calendaryear 1997. This information will be used to calculate allowances for these EGFs and provide the data needed to meetthe requirements ofTexas Utilities Code, §39.264(i)(3), which restricts the banking and trading of allowances that result from reduced utilization and shutdown. Conditions maybe added to the combinedpermit where appropriate to ensure compliance with state and federal law. An electing EGF may opt out ofthe requirements ofthis subchapterunder certain conditions. The electing EGF must notify the commission ofits intent to opt out priorto the beginning ofthe next control period and may not opt out during a control period. This requirement would prevent an EGF from opting out inorder to avoid being out ofcompliance with the requirement to not exceed theirallowances. All allowances for the electing EGF will be voided by the commission and may notbe banked for subsequentuse. Since the EGF would no longerbe subject to the restrictions ofthe EBTA, it would be inappropriate to
use those allowances at other EGFs, and no allowances will be allocated for subsequent control periods. Once anEGF has opted out, the EGF may notparticipate in the EBTA at any future date. Since SB 7 states that EGFs must electto participate priorto 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 aone-time opt outprovide sufficient flexibility withoutundermining the program. The owner or operator shall request an alterationto the combinedpermitto remove the conditions pertaining to the EGFP and restore any conditions that existedprior to the consolidation. This alteration would restore the NSRpermitto its prior status.

The proposed new §116.913 contains general conditions applicable to every EGFP unless specified differently in the permit, and authorizes the commissionto include special conditions in the permit. An EGFP would authorize NOx 

### emissions from EGFs, and S02 

### emissions from coal-fired EGFs. The EGF mustcomply with the EBTA in Chapter 101, Subchapter H, Division2. The proposedprovisions for the EBTA require EGFs to maintain allowances in acompliance account. The EBTA in Chapter 101 contains all provisions for managing allowances. Foremissions ofNOx 

### and, where applicable, S02' 

### the EGF shall hold in its account, on May 1 ofeach year, aquantity ofallowances equal to or greater thanthe amount ofthat air contaminantemitted since May 1 oftheprevious year. Holders ofEGFPs shall comply with this requirement beginning May 1, 2004. Beginning May 1, 2004, holders ofEGFPs must report annual actual emissions ofNOx 

### and, ifapplicable, S02' 

### since the previous May 1. This reportmustbe submittedbyJune 1 ofeach year. This report will be used to determine compliance withthe requirementthat the EGFhold allowances equal to orgreaterthan the emissions over a given control period. The proposed section implements the requirement ofTexas Utilities Code, §39.264(e) that requires coal-fired EGFs comply withthe opacity limits specified in commission rules. Section 116.913 states thatthe removal ofor failure to operate existing control technology is notpermissible underthis subchapter. The commissionbelieves that it is notthe intentofthe EGFP to authorize

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removal orbacksliding ofcontrol technology. Also under §116.913, proposed language would state that applicable requirements ofNew Source Performance Standards (NSPS), under40 CFR Part 60, concerning.Standards ofPerformance·for New StationarySourcesi 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 ofthe permit. The issuance ofanEGFP does notmodify or limit the applicability ofthese federal programs.

The proposed new §1l6.914 specifies monitoring and reporting requirements for EGFPs. The commission is requiredby Texas Utilities Code, §39.264(k) to provide methods for use in detennining compliance with permits and methods for monitoring and reporting actual emissions ofNOx 

### and, if applicable, S02' Title 40 CFR Part 75, concerning Continuous EmissionMonitoring Under the Acid RainProgram (Acid Rain Program), contains monitoring requirements for S02 for affected units under thatprogram. Since the acid rainprogram already requires extensive monitoring, the commission proposes to use that monitoring for EGFs that are subjectto the acid rainprogram for compliance with this subchapter. EGFs not subjectto the Acid Rain Programwouldhave three choices in monitoring. The EGF may choose to meeteitherPart75 monitoring requirements, orthe requirements ofTitle 40 CFR Part 60, orthe EGF may provide an alternative monitoring plan that wouldbe incorporated into the permit conditions. Part 60 requirements are proposed as an alternative to Part75 in ordertobe consistent with current NSRpractices. Since Part 60 monitoring is less accurate than Part75 monitoring, the proposal requires Part 60monitored datato have a relative accuracy ofgreaterthan 10% (Le., measured values within 90-100% ofthe correctvalue). To accountfor this inaccuracy, the

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monitored value mustbe multiplied by a factor of 1.1. This factor has been included to account for the inequity betweenthe monitoring accuracy ofParts 75 and 60. The commissionbelieves thatthis factor, proposed in the Ozone TransportCommission's (OTC) Model Rule, is appropriate for the EBTA as well, based on the similarity ofthe OTC requirements and the goals ofTexas Utilities Code, §39.264. The OTC Model Rule implements a NOx

### emissionbudgetprogramto reduce ambient ozone concentrations. Although Texas is not required to participate in the OTC budgetprogram, the commissionbelieves that it is appropriate to model this budget rule after the OTC model rule. Additionally, EGFs with aheat input ofless than 100 MMBtulhr could use Appendix E of40 CFRPart 75 to estimate NOx

### emissions. Appendix E relies on stacktesting ofthe facility to develop a relationship betweenthe emissionrate and heat input. The commissionproposes to structure the monitoring requirements ofthis subchapteron these existing requirements because many EGFs are currently using Part 75 and Part 60 monitoring methods. Data collected from these monitoring requirements wouldbe used to calculate annual emissions reported to the commission for the purpose ofdemonstrating compliance with allowances. Proposed §116.914 also specifies that data collected from the monitoring ofEGFs shall be detailed in an annual report as required under §116.913. The commission will develop aform, AR-l, specifying the requirements ofthe report, which wouldbe due
onJune 1 ofeachyear.

The proposed new §116.915 would permitemission control changes to EGFs as aresult ofpollution control projects initiatedunderthe EGFPprogramthat reduce emissions ofNOx

### or, ifapplicable, 

### 502, 

### This section allows emission control changes to EGFs providedthe control change follows the criteria

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in this section which is similarto §116.617, concerning Standard Permits for Pollution Control Page 46

Projects. Any emission increases mustbe a result ofthe emission control change only. For changes that are notpollution.control.projects,-ifnonattainmentNSR(NNSR}, PSD,.orFCAA, §112(g) is applicable, then the emission control change mustbe authorizedunder NSR. For any significant increase in emissions ofa air contaminant for which a National Ambient Air Quality Standard (NAAQS) exists, the applicantmustdemonstrate thatthe project will not lead to aviolation ofthe NAAQS or cause or contribute to a violation ofa PSD increment orPSD visibility limitation. Netting is not required whendetermining whetherthis demonstration mustbe made for the proposedproject; however, increases ordecreases in emissions mustbe included in any future netting. This section references 30 TAC §116.12, concerning NonattainmentReview Definitions, orTitle40 CFR §52.21(b)(23), concerning Prevention ofsignificant deterioration ofair quality, to determine what constitutes a significant increase in an air contaminant. Consistent with existing standardpermit registration requirements under Chapter 116, SubchapterF, 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 ofwritten notification from the executive directorthat there
are no objections, or45 days after receiptby the executive director ofthe registration, whichever
occurs first.

Consistent with the currentreview process for registrations for standardpermits for pollution control projects, the emission control change will notbe authorizedby the executive directorifthere are . significanthealth effects concerning the increase in emissions ofany air contaminantotherthan those

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for which a NAAQS has been established. Until those concerns are addressedby the applicant to the satisfaction ofthe executivedirector, the registration will notbe approved. Excluding changes authorized under §116.915(a), increased emissions ofany air contaminant,including NOx 

### or, if applicable, S02' must obtainpreconstruction authorizationunder Subchapter Bofthis chapter if nonattainment, PSD, or FCAA, §112(g) are applicable. Since SB 7 does not authorize emissions which trigger federal permitting requirements, the commissionbelieves 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, SubchapterB.

Consistent with Texas Utilities Code, §39.264(q), the proposed new §116.915 would exempt EGFs in EI Paso County from NOx 

### allowance requirements ifthe commission or United States Environmental ProtectionAgency (EPA) determines that reductions in NOx

### emissions would lead to increased ambient levels ofozone. Currently, NOx

### reductions are not required for facilities inthe El Paso nonattainment
area because EPA has granted a waiverunder FCAA, §182(f). Underthis waiver, NOx

### reductions are not required ifthe attainment demonstrationfor compliance with the ozone NAAQS canbe made without a NOx 

### control strategy. The existence ofthis waiver is notconsistentwiththe provisions of Texas Utilities Code, §39.264(q) because ithas notbeendemonstrated, underthe §182(f) waiveror otherwise, that NOx

### reductions would increase ambient ozone inEI Paso County. These EGFs would still be required to obtain a permitunder Chapter 116, SubchapterIregardless ofthe determination that NOx

### reductions are counterproductive in 

### controlling ambient ozone levels inthe EI Paso Region. The commissionbelieves thatthis requirement is appropriate, since Texas Utilities Code, §39.264(e)

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provides that EGFs withouta permitmay notoperate after May 1, 2003, and Texas Utilities Code, §39.264(q) refers only to reduction requirements, notpermitting requirements. Regardless ofthis determination, grandfathered EGFs inElPaso County would still be'required to"obtain a"permitunder this subchapter.

The proposed new §116.920 would require applicants for initial issuance ofan EGFP to publish notice ofintent to obtain apermit in accordance with Chapter 39, concerning Public Notice, Subchapter K of this title, concerning Public Notice ofAir Quality Applications. Subchapter K implements the new requirements ofTCAA, §382.056, as amendedby the 76th Legislature by House Bill 801, an act relating to Public Participation in CertainEnvironmental Permitting Procedures ofthe TNRCC. SB 7 provides thatpublic participationfor initial issuance ofan 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 commenthearings instead ofcontested case hearings under Texas Government Code, Chapter2001, concerning Administrative Procedure, and require the commissionto send notice offinal actionto persons who commentduring the commentperiod or during ahearing. The proposedrequirements 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 ofTCAA, §382.0561 and §382.0562. Section 116.920provides that any personwho may be affected by emissions from the EGFmay request a notice and commenthearing onan EGFP application within 30 days afterthe publication ofNotice ofReceipt ofApplication and Intentto Obtain Permit under §39.418 ofthis title, relating to Notice ofReceipt ofApplication and Intentto Obtain

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Permit. Grandfathered support facilities thatelect to obtain a VERP and have it consolidated with an EGFPmay publisha combined notice. The unchanged, existing NSRpermit conditions would notbe subjectto public notice for the combinedpermit; only the conditions specific to the EGFs for NOx 

### and, ifapplicable, S02' 

### would be subject to the public notice required by §116.920. Persons affected by a decision ofthe commission to issue or deny an EGFP will be entitledto petitionfor a rehearing under 30 TAC §50.119 ofthis title, concerning Notice ofCommission Action, Motion for Rehearing, and may seekjudicial review under TCAA, §382.032, concerning Appeal ofCommission Action.

The proposed new §116.921 contains the hearing requirements for the initial issuance ofEGFPs. The proposed rule would allow the commissionto decide whether to hold a hearing based On the reasonableness ofa request. The commission is not required to hold a hearing ifthe basis ofthe requestby a person who maybe affectedby emissions from the facility is determined to be unreasonable. Ifahearing is requested by aperson who may be affected by emissions from the EGF, and that request is reasonable, the commission will hold ahearing. The section would require that notice ofhearing On adraftpermitbe published in the public notice sectionofOne issue ofa newspaper ofgeneral circulation in the municipality or the nearestmunicipality 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 contentofthe notice. The proposed rule provides the procedures for the submittal ofcomments at ahearing and specifically states thatthe period for submitting written comments extends to the close ofthe hearing and may be extendedbeyondthe close ofthe hearing. Any person, including the applicant, may submitcomments on whetherthe draftpermit contains

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inappropriate conditions or whetherthe preliminary decision to issue or deny the EGFP is Page 50

inappropriate. Commenters shall raise all issues and submitall comments supporting theirpositionby the end ofthe public commentperiod, This requirement will"assist the commission in developing its response to comments as requiredby new §1l6.922. To ensure acomplete record ofthe comments, the rule proposes prohibiting the incorporationby reference ofsupporting materials for comments unless the materials meetthe criteria in §116.921(g). The commission is required to keep arecord of all comments submittedorraised at ahearing and to have an audio recording orwrittentranscriptof the hearing. The record is available to the public. Draftpennits may be revised based oncomments pertaining to whetherthe pennitprovides 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 commentperiod or at apennithearing, ofthe fmal action ofthe commission. The notice must be sentby first-class mail to the commenters and to the applicant. The notice must include the response to comments, the identificationofany changes in the permit, and a statementthat any personaffectedby the decision ofthe commissionmay petitionfor rehearing under 30 TAC §50.119, and forjudicial review under TCAA,**§382.03~.**



### The EGFP establishes the conditions under which emissions of

### NO, and 

### 502 

### are regulated. Emissions ofair contaminants otherthan 

### NO, and ifapplicable, 

### 502' may bepennittedunderthe VERPproposed in a concurrentrulemaking in other sections ofthis edition ofthe Texas Register. Additionally, the public notice requirements ofthe VERP and EGFPmay be combinedunder §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 ofChapter 116, Subchapter0, concerning Pennit Renewals.

FISCAL NOTE Bob Orozco, atechnical specialistinthe Strategic Planning and Appropriations Section, has determined that for the first five-yearperiod the proposed amendments are in effectthere will be no significant fiscal implications for the commission and mostunits ofstate and local government as a result of administration or enforcement ofthe proposed amendments. River authorities and units oflocal government that own and operate EGFs having a capacity ofgreater than 25 megawatts will be required to obtain apennit from the commission to continue operating. The fiscal implications for units ofstate and local government with EGFs will be addressed inthe Public Benefitportion ofthis preamble.

The proposed amendments to Chapter 116 would implementthe pennitrequirements for grandfathered EGFprovisions contained in:

Act ofMay 27, 1999, SB 7, 76thLegislature, 1999, (to be codified inpart at Texas Utilities Code, §§11.003-163.002).

In addition, the proposed amendments referto public notice and public participationprovisions incorporated in proposed changes to Chapter 39, Public Notice and specified in:

### Texas Natural Resource Conservation Commission Chapter 116

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ActofMay 13, 1999, HB 801, 76th Legislature, HB 801, 1999, (to be codified in Texas WaterCode, Chapter5, SubchapterM, and Texas Health and Safety Code, §361.088 and §382.056). Page 52

The proposed amendments require grandfathered EGFs to apply for apermitbefore September I, 2000. A grandfathered EGF is an EGF that was exempt from permitting requirements by virtue of existing orbeginning construction, alteration, ormodification on orbefore August 31, 1971. An 

### EGF that does notobtain apennitby 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 pennitrequirements.

PUBLIC BENEFIT Mr. Orozco has also determined thatfor eachyear ofthe first five years the proposed amendments to Chapter 116 are in effect, the public benefitanticipated from enforcement ofand compliance with the proposed amendments 

### will be a reduction ofaircontaminants emitted from affected electric generating facilities, and the opportunity for public participation and comment in the permitting procedures for formerly grandfatheredEGFs and otherparticipating EGFs.

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The purpose ofthe proposed amendments is to create and implement a permit and emission control program, including an EBTAprogramfor certain EGFs, and to implementrelatedpermit application and public notice procedures. EGF applicants must apply.for.apermitto emitaircontaminants on or before September 1, 2000. An EGF that does not obtain a permit may not operate afterMay 1,2003, unless the commission finds good cause for an extension.

The EGFP will also require measurementofemissions, prohibition ofremoval or failure to operate control technology, and a requirement to use control technology sufficient to ensure thatemissions do not exceed an EGF's allowance. Emissions ofair contaminants other than NO. or S02 from EGFs may be included in the EGFP. Ifincluded, these emissions would be reviewed underthe 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 ofthe legislature in SB 7 that, starting May 1, 2003, annual emissions ofNO. from grandfathered EGFs not exceed 50% ofthe levels emitted during 1997 as reported to the commission. SB 7 also requires thatemissions ofS02 from coal-fired powerplants not exceed 75% ofthe levels emitted in 1997 as reported to the commission. These reductions may be metby the emissions trading and allowance system which is the subject ofrelated and concurrentrulemaking in Chapter 101. Counties withinTexas have beendivided into three regions by SB 7-EastTexas, WestTexas, and EI Paser-forthe purpose ofallocating emissions ofNO. and S02 and for the trading ofemissions

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allowances, by region, among the EGFs. The EastTexas Region emission rate shall be 0.14 lb ofNOx 

### and 1.38 lbs ofS02 perMMBtu. The EI Paso and WestTexas Regions emission rates shall be 0.195 lb ofNOx• 

### The allowance calculation is·specified inthe'concurrently proposed Chapter 101; 

### Subchapter H, Division2, concerning Emissions Banking and Trading ofAllowances. The permitunderthis chapter would require compliance with the allowance systemcalculated underthe EBTA.



### Forthe purposes ofthis fiscal note, the estimated total annualized costto EGFs ofimplementing the provisions ofthe proposed amendments consists ofthe costofpublishing notice ofintent to obtain an airpermit, and the costofinstalling and operating the control technology sufficientto ensure that emission allowances are not exceeded. Each ofthese costs are addressed intum.

SB 7 requires that applicants publish notice ofintent to obtain apermit in accordance with TCAA, §382.056, concerning Notice ofIntent to Obtain Permitor Permit Review; Hearing. The public notice requirements for these permits are contained in Chapter 39, concerning Public Notice. The costof publishing notice is estimated to be in the range of$380 to $3,600, inclusive ofone display notice, one legal notice, and one alternative language notice
.. Costs vary significantly depending onthe 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 ofapublic notice.

In February 1999, the Public Utility Commission ofTexas (PUCT) andthe commissionpublished a report entitled, "Electric Restructuring and Air Quality: A Preliminary Analysis ofReductions and

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Costs ofNitrogen Oxides Controls from Electric Utility Boilers in Texas." The PUCT and the Page 55

commissionused infonnation collected from generation-owning utilities in Texas to assess the potential costs ofNO, emission reductions that could be required from existing utility powerplants. Costs were estimated at an emission rate of0.15 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 ofapplying a control technology to attain this level ofreductions was approximately $4,000 per ton ofemissions reduced. This average annual cost per ton ofemissions 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 ofa number ofcritical 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 ofemissions reduced, the amount ofemission reductions, the specific processes involved, the size ofthe facility, and control methodologies employed for emission reductions. The data also indicates that EGFs with the largest required emission reductions have the lowest cost perton ofemission reduced. In general, the annualized cost for emission reductions is inversely proportional to the amount ofemissions required because when largeremission reductions are required, the average cost is spread over more tons reduced.

The data also indicates that it would be more economical for some ofthe 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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ofthe costs ofreducing emissions to the required level. It is anticipated that emission reductionPage 56

requirements will be met as the economics ofemission allowances, emission reduction costs, the emission banking and trading system, and other factors ofindividual facilities dictate. It is also anticipated that costs for using the EBTA system will be less than the cost ofactual emission reduction in most cases. The PUeT/commission study states that "a subcommittee ofthe Ozone Transport Assessment Group (OTAG) has analyzed market-based emissiontrading options, estimating potential savings ofas much as 50 percent, compared to the costs ofunit-by-unit compliance." The scope ofthe variability in the amounts and types ofemission reductions that are possible and the methodologies available for reduction is such that costs ofemission reduction for the EGFP program are impossible to predict with certainty. However, an average annual cost ofapproximately $4,000 per ton ofemissions reduced would appear to be an acceptable industry-wide estimate ofthe-cost ofinstalling 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 ofannualized capital costs and annual operating costs averaging approximately $4,000 per ton ofemissions reduced plus the public notice costs.

Costs associated with authorizing emissions other than NO. or, ifapplicable, S02' using the review process ofthe VERP are detailed in the concurrentproposed Chapter 116, Subchapter H. The VERP fee would not apply to these emissions and the public notice requirements wouldbe 

### satisfiedunder 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.

Amunicipal corporation, electric cooperative, or river authority may exclude any electric generating facilities of25 megawatts or less from the requirements to obtain an EGFP. These entities must inform the commission by January 1, 2000, oftheir intent to exclude facilities from permitting requirements. River authorities and units oflocal goverrunent that own and operate EGFs having a capacity greater than 25 megawatts will be required to obtain a permit from the commissionto continue operating. These entities include the cities ofAustin, 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 ofemission reductions will be similar to those ofthe industry at large for similar sizes and types offacilities, and types ofemissions. It is also anticipated that emission reductions will be made as the economics ofemission allowances, the banking and trading system, and other factors of individual facilities dictate. The scope ofthe variability in the amounts and types ofemission reductions that are possible and the methodologies available for reduction is such that costs ofemission reduction for the EGFP program are impossible to predict with certainty for this segment ofthe industry. However, the estimated annualized cost that was used for the industry at large for installing and operating the control technology ofapproximately $4,000 per ton ofemissions reduced would appearto be an acceptable estimate for municipal corporations, electric cooperatives, and river authorities. The cost ofpublishing 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 ofemployees 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. Ifthere 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 ofapproximately $4,000 per ton ofemissions reduced would appear to be an acceptable estimate. The cost ofpublishing 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 ofthe regulatory analysis requirements ofTexas Government Code, §2001.0225, and has determined that the rulemaking meets the definition ofa "majorenvironmental rule" as defined in that statute. "Major environmental rule" means a rule the specific intent ofwhich is to protectthe environment or reduce risks to human health from environmental exposure, and that may adversely affect in a material way the economy, a sector ofthe economy, productivity, competition,jobs, the environment, or the public health and safety ofthe state
or a sector ofthe state. However, the proposed amendments to Chapter 116 are intendedto 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 ofthe economy. However, the analysis required by §2001.0225(c) does not apply because the proposed amendments do not meet any ofthe four applicability requirements ofa major environmental rule. The proposed

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amendments do not exceed a standard set by federal law, exceed an express requirement ofstate law,
or exceed a requirement ofadelegation agreement, and they are notproposed solely under the general powers ofthe agency. The amendments to Chapter 116 are proposed specifically to comply with SB 7. SB 7 requires grandfathered EGFs apply for apermitby September 1. 2000. and obtain a permit by May 1, 

### 2003, or cease operating, absent a showing ofgood 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 atakings impact assessment for the proposed rules. The following is a summary ofthat assessment. These amendments implement the requirements ofTexas Utilities Code, §39.264. This section requires owners or operators ofgrandfathered EGFs to apply for a permiton or before September 1, 2000, and obtain apermit or cease operationby May 1,2003. It is the intent of SB 7 that for the 12-monthperiodbeginning May 1, 2003, and for each 12-monthperiod following, annual emissions ofNO. from grandfathered EGFs not exceed 50% ofthe NOx

### emissions reported to the commissionfor 1997. Furthermore, it is the intent ofthe legislationthatemissions ofS02 from coal-fired EGFs notexceed 75% ofthe S02 emissions reported to the commission in 1997. NOx 

### and S02 allowances will be allocatedto EGFs by January 1, 2000. To assist EGFs in meeting the reduction requirements, abanking and trading program is proposed concurrently in Chapter 101 ofthis 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 affectprivate property in a manner that restricts or limits an owner's right to the property that would otherwise exist in the absence ofthe governmental action. Consequently, this proposal does not meet the definition ofa takings under Texas Government Code, §2007.002(5). The reductions obtained from the issuance ofEGFPs will assist in the efforts ofthe commission to attainthe 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 subjectto the CMP, commission rules governing airpollutant emissions must be consistent with the applicable goals and policies ofthe CMP. The commissionhas reviewed this action for consistency with the CMP goals and policies in accordance with the regulations ofthe Coastal Coordination Council. Forthe

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proposed new sections related to the authorization ofEGFPs, the commission has determined that the rules are consistent with the applicable CMP goal expressed in 31 TAC §501.12(l) ofprotecting and preserving the quality and values ofcoastal 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 ofNO, and S02 from EGFs. This action is consistent with 40 CFR because it does not authorize an emission rate in excess ofthat specified by federal requirements. Interested persons may submit comments during the public comment period on the consistency ofthe 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 ofEI 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 ofLubbockCouncil Chambers, located at 1625 13th Street; in Austin on October 4 at 9:00 a.m. in Room 5108 ofTexas 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 ofIrving 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 ParkPlace 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 oforal orwritten comments by interested persons. Individuals may presentoral statements when calledupon 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 ofEnvironmental 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, ofthe Policy and Regulations Division, at (512) 239-1495.

Persons with disabilities who have special communication orother accommodation needs who are planning to attend the hearing should contact the Office ofEnvironmental 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 ofelectric generating facilities; and Texas Health and Safety Code, TCAA, §382.011, which authorizes the commissionto administer the requirements ofthe TCAA; §382.012, which provides the commissionthe 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 ofthe TCAA; §382.051, which authorizes the commissionto issue permits; §382.0513, which

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authorizes the commission to establish and enforce permit conditions consistent with the TCAA;Page 63

§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 ofapermit; §382.056, which authorizes the commission to require public notice ofcertain 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 ofdecision; 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 ofBoard; 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 ofPreconstruction Pennit; §382.056, relating to Notice ofIntentto Obtain Permit or Permit Review; Hearing; §382.0561, relating to 

### Federal Operating Pennit: Hearing; §382.0562, relating to Notice ofDecision; and §382.061, relating to Delegation of Powers and Duties; and Texas Water Code, §5.l22, relating to Delegation ofUncontested Matters to Executive Director.

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SUBCHAPTERA : DEFINITIONS 

### §1l6.18
§1l6.18. Electric Generatin2 Facility Permits Definitions. Page 65

The following words and terms, when used in Subchapter I ofthis 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 ofnitrogen oxide (NO.) or sulfur dioxide (502) 

### during a control period.
(2) 

### Capacity factor

- Either:
(A) the ratio ofan 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 ofan EGF's annual heat 

### input (in millions ofBritish 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 ofCoals by Rank" (as incorporated by reference in Title 40 Code ofFederal Regulations. §72.13 (effective June 25. 1999».
(4) 

### Combined pennit

- A permit that consolidates the existing new source review authorizations with the reguirements ofan 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 ofeach year and ending April 30 ofthe following year. Control periods begin May 1. 2003.

(7) 

### Electing electric generating facility <EGFl

- An EGF permitted under Chapter 116. Subchapter B ofthis title (relating to New Source Review Permits) which is not subject to the reguirements ofTexas 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> - Afacility that generates electric energy for compensation and is owned or operatedby a person inthis 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 ofits potential electrical output capacity.
(9) Nameplate Capacity

- 

### The maximum electrical output (expressed in megawatts) that an EGF can sustain over a specified period oftime when not restricted by seasonal or other deratings.
(10) Peaking 

### unit

- 

### An EGF that has:
(A) An average capacity factor ofno more than 10% during the past three calendar years: and
(B) Acapacity factor ofno more than 20% in each ofthose 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 ofelectric 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 ofthe 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 commissionto 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 reductionpermits; §382.05l93, which authorizes permits through emissions reductions, §382.055, which authorizes the commission to establishprocedures for review or renewal ofapermit; §382.056, which authorizes the commission to require public notice ofcertainpermit 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 ofdecision; and §382.061, which authorizes the commission to delegate permitting authority to the executive director; and Texas Water Code, §5.122, which authorizes the commissionto 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 ofBoard; 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 ofPreconstruction Permit; §382.056l, relating to Federal Operating Permit: Hearing; §382.0562, relating to Notice ofDecision; and §382.061, relating to Delegation ofPowers 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 ofa grandfathered electric generating facility (EGF) shall apply for
apermitto operate that facility under this subchapter.
(b) Electing EGFs opting to obtain a permitunder this subchapter shall submit a permit application to consolidate existing New Source Review (NSR) authorizations with apermit to authorize nitrogen oxide (NO.) emissions and. ifapplicable. 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. ofan EGF is responsible for complying with this subchapter. Page 70

(d) A municipal corporation. electric cooperative, or river authority may exclude any EGF with a nameplate capacity of25 megawatts or less from this subchapter. The municipal corporation. electric cooperative, or river authority must notify the commission by January 1. 2000, ofits intent to exclude those EGFs.
(e) Emissions ofNO. shall be permittedunder this subchapter for any EGF. Emissions ofS02 shall be permitted under this subchapter only for coal-fired EGFs. Emissions ofother air contaminants from EGFs may be permitted under this subchapter provided the grandfathered facilities meet the requirements ofChapter 116, Subchapter H ofthis title (relating to Voluntary Emission Reduction Permits).

(f) 

### Owners or operators ofgrandfathered facilities as defined in §116.10 ofthis title (relating to General Definitions) at sites with EGFs subject to this subchaptermay include those grandfathered facilities in a permit issued under this subchapter. provided the grandfathered facilities meet the requirements ofChapter 116. Subchapter H ofthis title,

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&116.911. 

### Electric Generatin& Facility PennitApplication. Page 71

(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 ofthe 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 ofthe following are met:

(1) 

### Measurement ofemissions and performance demonstration. Measurementof emissions and demonstration ofperformance shall be conducted consistent with §

### 116.914 ofthis 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 ofallowances in an EGF's compliance account.
(3) Nonattainrnent review. Ifthe EGF is located in a nonattainrnent area, the owner or operator ofthe EGF shall comply with all applicable reguirements under Chapter 116, Subchapter B, Division 5 ofthis title (relating to Nonattainrnent Review).

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(4) Prevention ofSignificant Deterioration (PSm review. Ifthe EGF is located in an attainment area, the owner or operatorofthe EGF shall comply with all applicable requirements under Chapter 116, Subchapter B, Division 6 ofthis title (relating to Prevention ofSignificant Deterioration Review).
(5) Federal standards ofreview for constructed or reconstructed major sources of hazardous airpollutants. Ifthe EGF is an affected source (as defined in §

### 116.15(1) ofthis title (relating to Section 112(g) Definitions», the affected source shall comply with all applicable requirements under Chapter 116, Subchapter C ofthis 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) ofthis title (relating to Emission Control Changes). Computerized air dispersion modeling and/or ambient monitoring may be requiredby the commission's New Source Review Permits Section where there is an increase in emissions to determine the airquality impacts from the

(7) 

### Opacity Limitations for coal-fired EGFs. The coal-fired EGFs must meet the opacity limitations of§111.111 ofthis 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 ofa Texas licensed professional engineer in compliance with §116.11O(e) ofthis title (relating to Applicability). Page 73



### §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 permitunderthis subchapter shall submit an application to authorize nitrogen oxide (NO.) emissions and, ifapplicable. sulfurdioxide (S02) emissions. The application shall meet the reguirements of §

### 116.911 ofthis 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 ofthe actual emissions ofthat EGF for calendar year

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(B) Documentation offuel 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 ofthe NSR authorization as well
as the conditions ofthe EGFP.
(b) An electing EGF may opt outofthe requirements ofthis subchapter under the following conditions:

(1) 

### The electing EGF mustnotify the commissionofits intentto opt outprior to the beginning ofthe next control period.
(2) The electing EGF may not opt outduring a control period.

(3) 

### All allowances for the electing EGF will be voided by the commission and may not be banked for subsequentuse.

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(4) No allowances will be allocated for subsequent control periods. Page 75

(5) Once an EGF has opted out, the EGF may not participate in the emissions banking and trading ofallowances 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 ofall other air contaminants from EGFs meeting the Page 76

requirements ofChapter 116, Subchapter H ofthis title (relating to Voluntary Emissions Reduction Permits).

(2) 

### Owners or operators ofgrandfathered facilities may consolidate apermit issued under the requirements ofChapter 116, Subchapter H ofthis title.
(3) The EGF must comply with Chapter 101, Subchapter H, 

### Division 2 ofthis title (relating to Emissions Banking and Trading ofAllowances) 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 ofthis title (relating to Emissions Monitoring and Reporting Requirements).
(5) On May 1 ofeach year after May 

### 1. 2003, an EGF subject to this subchapter shall hold a quantity ofallowances for emissions ofNO. and, where applicable, S02' in its compliance account that is equal to or greaterthan the total emissions ofthat air contaminant emitted during the prior control period.

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(6) Reports ofannual 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 ofeach year.

(7) 

### Coal-fired EGFs must meet the opacity limitations of §

### 111.111 ofthis title (relating to Requirements for Specified Sources).
(8) Removal ofor 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 ofFederal Regulations (CFR), Part 60 will meet at least the requirements ofany 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 in40 CFR Part 61 will meet at least the requirements ofany applicable NESHAPS, as listed under40 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 ofany 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 ofthis 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 of40 Code ofFederal 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 subjectto 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 in40 CFR Part 75 orthose same requirements in 40 CFR Part 60 (relating to New Source Performance Standards).
(2) During a period whenvalid 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 of40 

### CFR Part 75, Subpart D, relating to Missing Data Substitution Procedures.
(b) For EGFs subject to 40 

### CFR Part 75, a certified monitoring system under40 

### CFR Part 75 shall be used to demonstrate compliance with this subchapter.

(1) 

### Ifthe 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) Ifthe 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 ofNO, per million Britishthermal 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 ofNO, 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. Page 80

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 under40 CFR §60.13, Subpart A; Appendix B Performance Specifications 2 and 3; and Appendix F, §5.1 or40 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 operatormay electto comply with subsection (b)(1) or (2) of this section.
(B) The EGF may use a flow monitorcertifiedunder40 CFR Part 60 to detennine emissions inpounds 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 ofNO. and adiluent (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 ofless than 100 MMBtu/hr and for peaking units emissions in pounds per hour may be determined using the procedures in Appendix E of40 CFR Part 75 to estimate the NO. emission rate.
(d) In lieu ofthe monitoring required by subsection (c) ofthis section, the EGFP may authorize alternative monitoring to calculate mass emissions underthis section. The permit applicant must submit the following for review ofan alternative monitoring proposal:

(1) 

### adescription ofthe monitoring approach to be used;
(2) adescription ofthe major components ofthe monitoring system, including the manufacturer, serial number ofthe component. the measurement span ofthe component, and documentation to demonstrate that the measurement span ofeach component is appropriate to measure all ofthe expected values;

(3) 

### an estimate ofthe accuracy ofthe system and documentation to demonstrate how the estimate ofaccuracy was determined;

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(4) a description ofthe 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 ofEGFs 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 ofemissions ofeach allocated air contaminant during the preceding control period. This report mustbe submitted by June 1 ofeach year. At a minimum. the report shall contain the following information:

(1) 

### A description ofthe 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. 

### Page 83

(a) Emission control changes resulting from pollution control projects designed to reduce emissions ofnitrogen oxides (NO.) 

### or, ifapplicable, sulfur dioxide (S0:), are authorized for EGFs provided that the following conditions are met.
(1) Any emission increase ofan air contaminant must occur solely as a result ofthe installation ofcontrol equipment or implementation ofa control technique authorized under the permit issued under this subchapter.
(2) Ifthe project. without consideration ofany other increases or decreases not related to the project. will result in a significant net increase in emissions ofany criteriapollutant. the applicant shall submit information sufficientto demonstrate that the increase will meet the conditions of subparagraph (A) ofthis paragraph.
(A) The net emission increase may not:

(i) 

### considering the emission reductions that will result from the project.
cause or contribute to aviolation ofany national ambient air quality standard (NAAOS);

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ni) cause or contribute to aviolation ofany Prevention ofSignificant Deterioration (PSD) increment; or

(iii) 

### cause or contribute to aviolation ofa PSD visibility limitation.
(B) For the purnoses ofthis section, "significant net increase" means those emissions increases, resulting solely from the installation ofcontrol equipment or implementation of control techniques, that are equal to or greaterthan:
(i) the major modification threshold listed in § 

### 116.12 ofthis 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 in40 CFR §52.2l(b)(23) (effectiveJuly 20, 1993) (relating to Prevention ofSignificantDeterioration ofAir Quality) for aircontaminants for which the area is designated attainment or unclassifiable, or for precursors for air contaminants. 

## (0 Netting is not required whendetermining whetherthis demonstration must be made for the proposed project. The increases and decreases in emissions resulting from the project mustbe included in any future netting calculation ifthey 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 ofwritten notification from the executive director that there are no objections, or45 days after receipt by the executive director ofthe registration, whichever occurs first.
(c) The emission control change will not be authorized by the executive director ifthere are significant health effects concerning the increase in emissions ofany air contaminant other than those for which a NAAOS has been established until those concerns are addressed by the registrant to the satisfaction ofthe executive director.
(d) Increased emissions ofany air contaminant, including NO. or, ifapplicable, S02' other than increases authorized under subsection (a) ofthis section must obtain preconstruction authorization under Chapter 116, Subchapter B ofthis 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 ifthe 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. Page 86

(a) An applicant for an electric generating facility permit (EGFP) shall publish notice ofintent
[0 

### obtain the permit in accordance with Chapter 39 ofthis title (relating to Public Notice).
(b) Public notice for an EGFPmay be combined with the public notice for a voluntary emission reduction permit, under Chapter 116, Subchapter H ofthis title (relating to Voluntary Emission Reduction Permits.)
(c) Electing EGFs are subject to public notice for emissions ofnitrogen 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 commentperiod shall end 30 days after the publication ofNotice ofReceipt ofApplication and Intent to Obtain Permit under §39.418 ofthis title (relating to Notice ofReceipt ofApplication and Intent to Obtain Permit). Any hearing request mustbe made in writing during the 30-day public comment period.
(e) Any hearing regarding initial issuance ofan EGFP shall be conductedunderthe procedures in §116.921 ofthis 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 ofthe commission's decision to issue or deny
an EGFP shall be conducted underthe procedures in §116.922 ofthis title (relating to Notice ofFinal Action).
(g) Aperson affected by a decision ofthe commission to issue or deny an EGFP may move for rehearing under §50.119 ofthis title (relating to Notice ofCommission Action. Motion for Rehearing) and is entitled to judicial review under TCAA. §382.032 (relating to Appeal ofCommission Action).


### §1l6.921. Notice and Comment Hearings for Initial Issuance.
(a) The notice and comment hearing requirements apply only to the initial issuance ofa electric generating facility permit (EGFP).
(b) The commission shall decide whether to hold ahearing. The commission is not required to hold a hearing ifthe basis ofthe requestby a person who may be affectedby emissions from an EGF is determined to be unreasonable. If

### a hearing is requested by a person who may be affectedby emissions from an EGF. and that request is reasonable. the commission shall hold a hearing.
(c) At the applicant's expense, notice ofahearing on adraftpermit mustbe published in the public notice section ofone issue ofa newspaper ofgeneral circulation in the municipality in which the

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EGF is located. or in the municipality nearest to the location ofthe 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 ofthe hearing:
(2) abriefdescription ofthe purpose ofthe hearing: and
(3) the name and phone number ofthe commission office to be contacted to verify that
ahearing 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 ofany hearing.
(3) Atthe hearing. the period for submitting written comments may be extended beyond the close ofthe hearing.

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(e) 

### A tape recording or written transcript ofthe hearing must be made available to the public.

(f) 

### Any person. including the applicant. who believes that any condition ofthe draft permit is inappropriate or that the preliminary decision to issue ordeny the pennit is inappropriate. shall raise all issues and submit all arguments supporting that position by the end ofthe public comment period.
(g) Any supporting materials for comments submitted under subsection (f) 

### ofthis section must be included in full and may not be incomorated by reference. unless the materials are one ofthe following:

(1) 

### already part ofthe administrative record in the same proceedings:
(2) state or federal statutes and regulations:
(3) EPA documents ofgeneral applicability; or
(4) other generally available reference materials.
(h) The commission shall keep a record ofall 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 ofthis subchapter.

(j) 

### The commission shall respond to comments consistent with §116.922 ofthis title (relating to 

### Notice ofFinal Action).


### §116.922. Notice ofFinal 

### Action.
(a) Afterthe public commentperiod or the conclusion ofany notice and commenthearing. the commission shall send notice by first-class mail ofthe final action on the application to any person who commented during the public commentperiod 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 commentperiod:
(2) identification ofany change in the conditions ofthe draftpermit and the reasons for the change:
(3) a statementthat any person affectedby the decision ofthe commission may petition for rehearing under §50.119 ofthis title (relating to Notice ofCommission Action, Motion for

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Rehearing) and may seek judicial review under TCAA, §382.032 (relating to Appeal ofCommission Action).


### §116.930. Modifications.

The owner or operator planning a modification ofa facility permi£ted under this subchapter must comply with Subchapter B ofthis Chapter (relating to New Source Review Permits) before work is begun on the construction ofthe modification.


### §116.931. Renewal.

Electric generating facility permits <EGFP) shall be renewed in accordance with Chapter 116, Subchapter 

### 0 ofthis title (relating to Permit Renewals).