## r
Department ofEnvironmental Quality 

# regon 811 SW SixthAvenue Portland, OR 97204-1390 Theodore R. Kulongoski, Governor 

### : r' 

## tJl(/ J 503-229-5696 December 22, 2005 TTY 503-229-6993 

### {{ 

### /(117 Mr. L. Michael Bogert Regional Administrator

## ~eived RECEIVED U. S. Environmental Protection Agency 1200 Sixth Avenue 

## DEC 

# 29**20~** 

## DECi?Z005 Seattle, WA 98101 ;ice OfAir, Waste Office Of The Executive tl,nd Toxics Dear Mr. Bogert:
EPA promulgated the federal New Source Review (NSR) Reform rules in December 2002. The rules primarily addressed NSR applicability, including: Plantwide Applicability Limits; baseline (2 in 10 years); Pollution Control Project exemption; Clean Unit exemption; and Baseline Actual to Future Actual applicability test. These rules also require all states with State Implementation Plan (SIP) approved major NSR programs to submit any changes to the SIP that would be required to keep the state program at least as stringent as the federal rules. The SIP changes were required to be submitted within three years offederal rule promulgation, orJanuary 2, 2006.
Because Oregon's existing SIP-approved NSR program is equivalent to the NSR reform rules, we have prepared the attached equivalency demonstration in lieu ofa SIP revision. The major elements ofthe federal NSR Reform rules have been addressed and information is provided to show how they are handled under our program. We also supply an overview of our program and include an appendix with a number of examples to demonstrate how our program works in different situations.
As you know, two elements ofthe NSR Reform rules

- the pollution control project exemption and the clean unit exemption

- were vacated by the D.C. Court ofAppeals last June. Oregon's program does not include the Clean Unit Exemption, but our program does include the Pollution Control Project exemption. To maintain equivalency with the federal program, Oregon DEQ has adopted an Internal Management Directive (attached) that discontinues use ofthe Pollution Control Project exemption. We will change the rule in the future to remove this exemption, but in the interim the Directive will suffice to make Oregon's program equivalent to the federal program.
Ifyou need any clarification orwant to discuss any issues, please contact David Kauth of my staff at 503-229-5655. Thank you for your consideration.

# 6.'HI.~**~n** rew Ginsburg 

## 1 Air Quality Division Administrator Oregon Department of Environmental Quality
Cc Rick Albright, Director, USEPA Region 10 Debra Suzuki, USEPA Region 10 Roylene Cunningham, USEPA Region 10

DEQ-l Si cerely,

### Oregon's New Source Review equivalency demonstration December22, 2005


### Introduction This report will demonstrate that Oregon's majorNew Source Review (NSR) program is equivalent to the requirements ofthe 2002 federal NSR Reform rules. Four significant factors clearly demonstrate equivalency and will be detailed inthis report: 1) Oregon's Plant Site Emission Limit (PSEL) provides the same incentives and flexibility as the federal Plant-wide Applicability Limit (PAL); 2) Oregon's PSEL mirrors the federal PAL except that it is required for all permitted sources whereas thePAL is optional underthe federal rules; 3) Addressing otherreform concepts is unnecessarybecausethey are not applicable to sources operating under a PAL; 4) Oregon'sprogram is well established and has consistentlyprovided a means to attain and maintain the NAAQS standards.
The Oregon Department ofEnvironmental Quality (ODEQ) maintains a well established and long-standing MajorNew Source Review (NSR) and Prevention ofSignificant Deterioration (PSD) permittingprogram. TheNSR and PSD provisions are part ofOregon's approved State Implementation Plan (SIP), aplanthat is sufficient to control emissions andprovide incentives for facility upgrades that improve air quality. The Oregon Major NSRlPSD program was established inthe early 1980's and, due to it's success, was used as one ofthe models to support the development ofthe federal NSR reform rules. In particular, Oregon's Plant Site Emission Limit (PSEL) was a model for the federal PlantwideApplicability Limit (PAL).


### FederalNSR Reform The NSR Reform adoptedby EPA inDecember2002 has five majorcomponents orconcepts that affect how NSR applicability is determined. The five major concepts are: 1) Plant-wide Applicability Limit (PAL); 2) Baseline (2 in 10 years); 3) Pollution Control Project (PCP) exemption; 4) Clean Unit exemption and; 5) Baseline Actual to Projected FutureActual enusslOns.
ThePCP and Clean Unit exemptions were vacated bythe D.C Court ofAppeals, so they are no longerpart ofthe NSRreform package. The othermajor concepts ofNSR Reform do not apply to sources coveredby a PAL. While the Baseline is used to set the PAL, but is not used to determineNSR applicability after the PAL is set. Future emissions can not exceed the PAL without triggering majorNSR review.


### How the Oregon Major NSRJPSD program works: The Oregon NSR/PSD program applies to new and modified sources that increase emissions bya significant emission rate. This requires an airquality impact analysis for all significant increases in emissions, notjustchanges at federal major sources.
A fixed baseline period of 1977 or 1978 (or a year prior ifmore representative ofnormal operation) has been established in the Oregon rules [OAR 340-200-0020(14)]. The Baseline Emission Rate is defined as actual emissions during the baselineperiod [OAR 340-200­ 0020(13)]. TheNetting Basis is established as the Baseline Emission Rate minus anyrule required reductions, minus any credits transferred offsite, minus any unassigned emissions reductions due to decreased capacity [OAR 340-222-0045(5)], plus any increases approved through a majorNSRlPSD action. The projected emissions (this would bethe PSEL inthe Developedbythe Oregon Department of Environmental Quality 1212212005 Page 1of6**~**

### . pennit) at a new ormodified source are compared to the Netting Basis [OAR 340-200­ 0020(71)]. Ifthe difference between the PSEL and the Netting Basis is greater than a Significant Emissions Rate, further analysis is required depending on the designation ofthe
area and the size ofthe new ormodified source [OAR 340-200-0020(124)].
Within a designated Nonattainment orMaintenance area [defined by OAR 340-204­ 0030 and 340-204-0040, respectively], ifa significant increase in emissions overthe Netting Basis is due to a new source, or a physical change or change in method of operation ofan existing source, NSR [defined by OAR 340-224-0050 or 340-224-0060] applies (including control technology, ambient air quality analysis and net air quality benefit). Ifthe increase is due to use ofexisting capacity (increased hours of operation), control technology is notrequired but the otherrequirements still apply.
Within an attainment orunclassifiable area, only ambient air quality analysis is required unless the source is also a federal major source (100 tpy for sources in a listed category or250 tpy ifnot listed). Federal major sources are required to implement the full PSD requirements ofourrules including control technology and ambient impact analysis. Sources that are located outside nonattainment ormaintenance areas are not allowed to have an effect greater than the significant impact level (OAR 340-200-0020(123)] on any nonattainment ormaintenance areas. Offsets maybeused to demonstrate reductions in impact levels. [OAR 340-224-0070] Oregon's program accumulates all increase and decreases in emissions since the baseline year when evaluating ifa source is subject to major NSRlPSD. Any source that did not exist during the baseline period has a zero baseline and Netting Basis unless the source goes through full NSRlPSD and establishes a Netting Basis through construction approval.
Baseline and Netting Basis are set and adjusted using the best data available. Ifa better emission factor or emission estimation method is established, the Baseline and Netting Basis,
as well as the PSEL, are adjusted based on this better infonnation. The Nettingbasis and PSEL are also reduced ifthe PSEL exceeds a source's emission capacityby more than a significant emission rate (OAR 340-222-0045). Once established, the PSEL limits a source's Potential To Emit (PTE).

Oregon PSEL and Federal PAL EPA states in document titled New Source Review (NSR) Improvements Supplemental Analysis ofEnvironmental Impacts ofthe 2002 Final NSR Improvement Rules that "The EPA expects that the adoption ofPALprovisions will result in net environmental benefit". The Oregon PSEL provides the same net environmental benefit.
Both the Oregon PSEL and the Federal PAL allow the flexibility for a source to make needed changes without triggering NSR as long as theyremainbelow the limit. The Oregon PSEL and the federal PAL are very similar in the incentives they provide and the way NSR applicability is detennined.
Developedby the Oregon Department of Environmental Quality 1212212005 Page 2 of6I · .,.
The federal PAL is setby adding the SER to the highest actual annual emissions over any two year period inthe previous ten years. An increase in a PALrequires the source to demonstrate that the increase is necessarywhen considering BACT level controls on all equipmentcovered bythe PAL. Increasingthe PALis a NSR action that requires control technology and air quality analysis.
The Oregon PSEL is set at the maximum level ofexpected emissions from the source, and is compared to the Netting Basis (adjusted Baseline) to determine ifa significant increase will occur. Increases in the PSEL are set the same way as the initial PSEL and again compared to the Netting Basis to determine level ofincreases. Ifaccumulated increases inthe PSEL, over the Netting Basis, are equal to orgreater than the SER, air quality analysis and control technology requirements are evaluatedbased on the cause ofthe increases. Increases in emissions, greaterthan the SER over the Netting Basis, using baseline existing capacity are subject to air quality analysis, but not control technology unless they cause orcontribute to an exceedance ofa NAAQS or PSD increment, orcause a visibility impact. A full NSR review includingAQ and control technology is conducted when the accumulated increases are greater than the SER over the Netting Basis and are due to physical changes or changes in the method ofoperation

.. Both the PSEL and PAL allow for the flexibility ofmaking changes that increase emissions without triggering further analysis as long as the increase canbe accommodated within the established emissions cap. This allows sources the flexibility to make process changes within the caps and provides an incentive to reduce emissions to allow room for expansion ofa process without triggeringNSRreview. The PSEL and PALbothhaveprovisions to be reduced ifemission reductions at the sources occurand make the caps excessivelyhigh. Emissionreductions may occur when a device orprocess is shutdown orproduction is switched to a less polluting productionmethod, and not offsetbyan increase in production. Summary
A review ofthe five components or concepts ofthe 2002 federal NSR Reform rules shows that the Oregon Department ofEnvironmental Quality's NSR program is equivalent. The PCP exemption and the Clean Unit exemption were vacatedbythe D. C. Court ofAppeals no they are no longer applicable. As discussed above, the Oregon PSEL is equivalent to the PAL in establishing applicability for NSR and inproviding incentives and flexibility. Since the other two components Baseline (2 in 10 years) and Baseline Actual to Projected Future Actual

- do not applyunder a PAL, and the PAUPSELis mandatory for all permitted sources in Oregon, these two components do not apply in Oregon.

1212212005 Developedby the Oregon Department of Environmental Quality Page 3 of6Appendix Examples ofBaseline and Netting Basis
The following examples demonstrate how the PSEL, Baseline Emission Rate and Nettingbasis work together in Oregon's NSR/PSD program. Example 1:
• Electric Power Steam Generating unit greater than 250 million Btu/hr existing and operating in 1978 with actual emissions ofNOx equal to 150 tons per year(tpy). (Note: this is a Federal Major source at 100 tpy ofany criteria pollutantbecause it is a listed source). Actual emissions inbaselineyear establish theBaseline Emission Rate and initiallytheNetting Basis.
• In 1990 the source ownerproposes a physical modification that increases the NOx PSEL to 180 tpy (a 30tpyincrease in theNOx PSEL). This increase is allowed becausethe PSEL is less than one SER over the NettingBasis.
• In 2004 the source ownerproposes a physical modification that increases the NOx PSEL to 200 tpy (a 20 tpy increase in the NOx PSEL). This increase triggers NSR/PSD because the difference between the proposed PSEL and the Netting Basis (50 typ increase in NOx) is greaterthan the SER, and the increases are due to physical changes at the facility.
• Owneris responsible for installing control technology, includingretrofit controls onthe 1990 modification, as well as evaluating the ambient air quality impacts on class I and II areas. • Once all aspects oftheNSRlPSD requirements are met, theNetting Basis is adjusted to the level ofapproved emissions from the source. Example 2:
• Wood Products Particle Board Plant existing and operating in an attainment area in 1978 with actual emissions ofNOx equal to 150 tons peryear(tpy). (Note: this is not a Federal Major sourcebecause it is less than 250 tpy and is not a listed source assume NOx is the highest emitted pollutant). Actual emissions inbaseline year establish the Baseline Emission Rate and initiallythe Netting Basis.
• In 1990 the source ownerproposes a physical modification that increases the NOx PSELto 230 tpy (a 80 tpy increase in the NOx PSEL). This increase would trigger therequirements for AQ analysis underthe PSELrules, but would not triggerNSR/PSDbecause the source is still not a Federal Major..
• In 2004 the source ownerproposes a physical modification that increasesthe NOx PSEL to 260 tpy (a 30 tpy increase in the NOxPSEL). This increase triggers NSR/PSD because this increase causes the source to become a Federal Major, the difference between the proposed PSEL and theNettingBasis (110 typ increase in NOx) is greaterthan the SER, and the increases are due to physical changes at the facility.
• Owneris responsible for installing control technology, includingretrofit controls onthe 1990 modification, as well as evaluating the ambient airquality impacts on class I and II areas.

Developedby the Oregon Department of Environmental Quality 1212212005 Page4 of6• Once all aspects oftheNSRJPSD requirements are met, the Netting Basis is adjusted to the level ofapproved emissions from the source. Example 3:
• Wood Products Particle Board Plant existing and operating in 1978 with actual emissions ofCO equal to 500 tons peryear (tpy). (Note: this is a Federal Major
sourcebecause it is has morethan 250 tpy ofa criteriapollutant. Actual emissions inbaseline year establish the Baseline Emission Rate and initially the Netting Basis.
• In 1990 the source ownermakes a physical modification that decreases the potential emissions ofCO to 250 tpy. The new PSEL would be set at 250 tpy and the remaining 250 tpy ofCO wouldbe listed as Unassigned Emissions.
• Beginning July 2007, and each permitrenewal thereafter, unassigned emissions will bereduced to not more than one SER. Theunassigned emissions maybe used to net proposed modifications that increase CO emissions without further analysis. Once the unassigned emissions are reduced, the Netting Basis is also reduced bythat same amount and the emissions are no longer available for netting actions.
• In July 2007 no changes inpotential emissionhave occurred so the Netting Basis is reduced to the source'spotential CO emissions(250 tpy) plus one SER (100 tpy). The Netting Basis is now 350tpy.
• In 2008 the source ownerproposes a physical modification that increases the CO PSEL to 500tpy (a 250 tpy increase inthe CO PSEL). This increase triggers NSRJPSD becausethe differencebetween the Netting Basis and the PSEL exceeds the SER and the source is a Federal Major.
• Owneris responsible for installing control technology as well as evaluatingthe ambient air quality impacts onclass I and II areas. • Once all aspects ofthe NSRJPSD requirements are met, the Netting Basis is adjusted to the level ofapproved emissions from the source (theNetting Basis and PSEL for CO wouldbethe same again 500 tpy). Example4:
• New manufacturingplant built in an attainment area in 1995. Theinitial Netting Basis for this source is zero because it was not in existence in 1977178 and has nottriggered construction approval under PSD. VOC is the only significant pollutant and is emitted at 175 tons peryear. This is not a "Federal Major" source, so it was not subject to PSD for the initial construction and the Netting Basis remains at zero and the PSEL is set at 175 tons per year. • In 2000 the facility adds a production line which increases VOC emissions by 60 tons peryear. AnAir Quality analysis is triggered, butPSD is not triggered becausethe sourceis still not a "Federal Major" source. The NettingBasis remains at zero and the PSEL increases to 235 tons per year. • In 2005 the sourceproposes the addition ofanotherproductionlinewhich increases VOC emissions by 30 tons per year. The source is now a "Federal Major" and subject to PSD for all changes at the facility that increased emissions over the Netting Basis.

Developedby the Oregon Department of Environmental Quality 1212212005 Page 5 of6• A BACT analysis will need to include all changes at the facility includingthe initial construction, the 2000 change and the proposed 2005 change. The initial construction and the 2000 change will beevaluated based on available retrofit technology and the proposed change will be evaluatedbased onnew source technology. Retrofittechnology assumes the equipmentis already in place and
can include the costto retrofitting controls to existing equipment. New source technology assumes the equipment is not installed yet. • Once all ofthe requirements ofPSD are met, the VOC Netting Basis is set considering the BACT level ofcontrol and future changes will be compared to this new higher level to determine PSD applicability. The PSEL and Netting Basis for VOC would bethe same again.

Example 5:
• Wood Products Sawmill, located in an attainment area, withboilers existing and operating in 1978 with actual emissions ofNOx equal to 200 tons peryear(tpy) operating 16hr/day. Actual emissions in baseline year establish the Baseline Emission Rate and initially the Netting Basis.
• In 1990 the source ownerproposes a change inthe operating schedule from 16 to 24 hours perday. This causes an increase in the NOx PSELto 300 tpy (a 100 tpy increase in the NOx PSEL due to increased hours ofoperation). This increase would triggerthe requirements for AQ analysis under the PSELrules, butwould nottriggermajorNSRlPSD becausethe there was no physical change at the facility.
• In 2004 the source ownerproposes a physical modification (50 tpy NOx source) and controls on otherequipment so the PSELdoes not increase from the 1990 leveL The 2004 PSELwould remain at 300 tpy, but since the difference from Netting Basis (300-200 

### = 100 tpy) is greater than the SER, the emissions increase due to the physical modification (50 tpy) is greaterthan the SER, and the source isnow a Federal Major (>250 tpy), NSRlPSD is triggered.
• Owner is responsible for installing control technology onthe device(s) that were physically modified or added that contributed to the emission increase.
• Anevaluation ofthe ambient air quality impacts onclass I and II areas would be required to ensureprotection oftheNAAQS, PSD increment and AQRV's.
• Once all aspects ofthe NSRlPSD requirements are met, the Netting Basis is adjusted to the level ofthe Baselineplus the approved increase dueto the physical change. In this example, Netting Basis would be set at 250tpy. The Netting Basis is not adjusted to the 300tpybecause changes that do not trigger NSRlPSD (e.g., increases in hours ofoperation) do not reset the Netting Basis.

Developedby the Oregon Department of Environmental Quality 1212212005 Page 6 of6