TECHNICAL SUPPORT DOCUMENT

30 TAC Chapter 101, Subchapter H, Division 1

Emission Credit Banking and Trading 

§§ 101.302, 101.305, 101.306

Rule Project Number: 2005-054-101-PR

Rule Project Number: 2006-053-101-PR

March 16, 2010

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

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

75202-2733, (214) 665-2115.
Subject: Review of Proposed Revisions to the Emission Credit Banking and Trading 

Program, submitted October 24, 2006 (Rule Project Number 2005-054-101-

PR) and August 16, 2007 (Rule Project Number 2006-053-101-PR)

Contents:

I. Executive Summary

II. Background

III. Summary of State Submittals

IV. Technical Review of State Submittal

V. Conclusion

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I. Executive Summary

What actions are evaluated in this Technical Support Document?

This technical support document (TSD) reviews two proposed revisions to the Texas State 

Implementation Plan (SIP) concerning the Emission Credit Banking and Trading Program, 

referred to elsewhere in this document as the Emission Reduction Credit (ERC) program. This 

review will determine if the ERC program revisions are consistent with the requirements of the 

Clean Air Act and EPA’s policy and guidance.

October 24, 2006

 On October 4, 2006, the Texas Commission on Environmental Quality (TCEQ) adopted 

revisions to the ERC program to address the conditions of EPA’s final conditional approval of 

the DERC Program, September 6, 2006 (71 FR 52703). Additionally, the TCEQ adopted 

revisions to the ERC program mandated by Texas Senate Bill (SB) 784. The Chairman of the 

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

dated October 24, 2006, for rule project number 2005-054-101-PR. 

 On October 4, 2006, TCEQ also adopted revisions to the Discrete Emission Credit Banking 

and Trading Program, referred to elsewhere in this document as the Discrete Emission 

Reduction Credit (DERC) program, and the Emissions Banking and Trading of Allowances 

(EBTA) Program. These revisions were also submitted to EPA on October 24, 2006, as part 

of rule project number 2005-054-101-PR. EPA is taking separate action on the DERC 

program revisions in a separate rulemaking; therefore this TSD will not review the 2006 

revisions to the DERC program. EPA is also taking separate action on the EBTA at a later 

date and in a separate rulemaking; therefore this TSD will not review the 2006 revisions to the 

EBTA program.

August 16, 2007

 On July 25, 2007, the TCEQ adopted revisions to the ERC program to address the 

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

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

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

 At the same time that TCEQ adopted revisions to the ERC program on July 25, 2007, TCEQ 

also adopted revisions to the general air quality rules, the Mass Emissions Cap and Trade 

(MECT) program, the DERC Program, and the System Cap and Trade (SCT) Program. 

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

number 2006-053-101-PR. EPA is taking separate action on the DERC program revisions in 

a separate rulemaking; therefore this TSD will not review the 2007 revisions to the DERC 

program. EPA is also taking separate action on the SCT program at a later date and in a 

separate rulemaking; therefore this TSD will not review the 2007 revisions to the SCT 

program. EPA approved the 2007 revisions to the MECT program through a direct final 

action on July 16, 2009 (74 FR 34503).

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What action has EPA taken on the ERC Programs?

On September 6, 2006, EPA promulgated a final approval of the ERC program (71 FR 52698). 

Also on September 6, 2006, EPA promulgated a final conditional approval of the DERC program 

(71 FR 52703). Our conditional approval of the DERC program is contingent upon TCEQ 

satisfactorily addressing the terms of their September 8, 2005, commitment letter (available in the 

FDMS docket for this action), which included two provisions addressing the ERC program. 

Because EPA fully approved the ERC program on September 6, 2006, the ERC provisions in the 

September 8, 2005, commitment letter can be decoupled from EPA’s action on the DERC 

conditional approval. Accordingly, this TSD will review the 2006 and 2007 revisions to the ERC 

program to determine if the revisions comply with the Clean Air Act and EPA regulations, and are

consistent with EPA’s policies.

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II. Background of the State Submittal

What is Air Emissions Trading?

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

complying with State and Federal emission requirements. Air emissions trading programs 

create a marketplace for emission reductions implemented by source 1 and needed by 

source 2. For example, source 1 creates a marketable emissions reduction by reducing its 

emissions below the level it is required to meet, and below the level it has been meeting. 

Source 1 then sells or trades these reductions as credits to another source that is then 

allowed to release emissions above its required levels. In return for this flexibility, source 

2 must purchase additional credits beyond those needed to comply, therefore reducing 

overall emissions. Emissions trading uses market forces to reduce the overall cost of 

compliance for sources, while maintaining emission reductions and environmental benefits.

What is an Economic Incentive Program (EIP)?

An EIP is a regulatory program that achieves an air quality objective by providing marketbased incentives or information to emission sources. A uniform emission reduction 

requirement, based for instance on installation of a required emission control technology, 

does not take account of variations in processes, operations, and control costs across 

sources even of the same type, such as electric utilities, or petroleum refiners. By 

providing flexibility in how sources meet an emission reduction target, an EIP empowers 

sources to find the means that are most suitable and most cost-effective for their particular 

circumstances.

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

target. By setting a price on pollution and pollution reductions through a fee-based 

approach or a trading program, some sources can realize an economic gain or avoid 

additional costs by selling excess emission reductions, or making the reductions for less 

than the cost imposed by a fee. Because of the improved efficiency, EIPs may also lead to 

achieving air quality goals more quickly.

What is the status of EIP programs in Texas?

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

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

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

trading program into state regulation, found in Divisions 7 of 30 TAC Chapter 101, 

Subchapter H.

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Table II - 1

TCEQ EIP Trading Programs and Regional Applicability

TCEQ

Trading 

Program

Geographical / Ozone Non-attainment Regions

DFW HGB BPA El Paso East and 

Central Texas

West Texas

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

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

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

DERC Optional Optional Optional Optional Optional Optional

SCT Optional Optional Optional n/a Optional n/a

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

CAIR Federally Mandated Trading Program

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

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

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

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

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

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

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

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

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

The TCEQ EIP regulations are summarized below:

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

H, Division 1)

The Emission Credit Banking and Trading EIP or Emission Reduction Credit 

(ERC) program for VOC and NOX in ozone nonattainment areas was first adopted 

by Texas at 30 TAC § 101.29 on December 23, 1997. Effective January 18, 2001, 

§ 101.29 was repealed and Chapter 101, Subchapter H, Divisions 1, 3, and 4 were 

created. This action created separate divisions for the ERC, MECT, and DERC 

programs. The submittal effective April 14, 2002, amended §101.302. The 

submittal effective January 17, 2003, completely reorganized the ERC and DERC 

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

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

reductions as credits while explaining the guidelines for trading and using 

creditable reductions. The 2003 submittal amended §§101.300, 101.301, 101.302, 

101.303, 101.304, 101.306, 101.309, and 101.311. The December 6, 2004, 

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submittal amended §§101.300, 101.302, 101.303, 101.304, and 101.311. Our 

final approval on September 6, 2006, acted on the original submission of the ERC 

program and all subsequent revisions through the December 6, 2004 submittal. 

Division 1 defines emission credits (ECs) in terms of a rate (tons per year). 

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

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

emission reduction credits (MERCs). The ERCs from the bank have traditionally 

been used as offsets for permitting major new or modified facilities. ERCs have 

also been banked and traded for alternative compliance with Reasonably Available 

Control Technology (RACT) requirements. MERCs have not been banked or 

traded under the program to date. On December 6, 2004, TCEQ submitted 

revisions to the SIP that expanded the ERC program to cover reductions of criteria 

pollutants (excluding lead) or precursors of criteria pollutants for which an area is 

designated nonattainment. EPA published a final approval of the ERC program on 

September 6, 2006, 71 FR 52698. 

Since our final approval, TCEQ has revised the ERC program to address the 

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

revisions to the ERC program consistent with the requirements of Senate Bill 784, 

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

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

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

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

EPA as a SIP revision on October 24, 2006. TCEQ has also promulgated 

revisions to the ERC program that update the cross-references to the new 

numbering structure in 30 TAC Chapter 117. These revisions were adopted on 

July 25, 2007, and became effective on August 16, 2007. The adopted regulations 

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

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

Subchapter H, Division 2)

The Texas legislature passed Senate Bill 7 (SB7) in 1999 to deregulate electric 

utilities. SB 7 provided for a cap and trade program for grandfathered electric 

generating facilities (EGFs). The EBTA program provides for an emission 

reduction cap which provides for a 50% reduction in NOX emissions from EGFs 

and a 25 % reduction in SO2 emissions from solid fuel EGFs. The EBTA program 

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

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

or sell allowances to meet operational demands. The EBTA program is divided 

into three regions; East and West Texas as divided by Interstate Highway 35 and 

the El Paso region (consisting of El Paso County; Juarez, Mexico; and Sunland 

Park, New Mexico). The TCEQ has revised the EBTA to restructure the 

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international trading provisions to parallel those found in the Division 1 and 4 

programs, and to add an audit mechanism. EPA has taken no action on the EBTA 

program to date.

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

Subchapter H, Division 3)

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

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

ozone nonattainment area which are subject to emission specifications in the 

TCEQ NOX rules at 30 TAC Chapter 117.310, 117.1210, and 117.2010; and 

which are located as a site where they collectively have an uncontrolled design 

capacity to emit 10 tons per year or more of NOX. The program set a cap on NOX

emissions beginning January 1, 2002, with a final reduction to the cap occurring in 

2007. Facilities are required to meet NOX allowances on an annual basis. 

Facilities may purchase, bank, or sell their allowances. The program has a 

provision to allow a facility to use credit generated through the Division 1 EIP 

(ERCs) to permanently increase the allowances for the individual facility in the 

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

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

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

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

for the use of DERCs in the MECT, which we deferred acting on until our action 

on the DERC rule) on November 14, 2001 (66 FR 57252). Texas subsequently 

revised the MECT program in SIP submittals dated January 31, 2003 and 

December 6, 2004. EPA published a final approval of the MECT program 

revisions on September 6, 2006 (71 FR 52698), including revisions to the MECT 

necessary to accomplish the shift in attainment strategy from 90 percent control of 

industrial NOX sources to 80 percent control in the HGB area. The approved 

revisions also approved the use of discrete emissions credits generated from 

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

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

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

subsequently approved the revisions to the MECT through a direct final action on 

July 16, 2009 (see 74 FR 34503).

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

Subchapter H, Division 4)

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

December 23, 1997. Effective January 18, 2001, § 101.29 was repealed and 

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

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

emission credits (DECs) are quantified, banked and traded in terms of mass (tons), 

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not a rate as is the case with ECs. DECs may be generated from stationary 

sources and banked as discrete emission reduction credits (DERCs) or may be 

generated from mobile sources and banked as mobile discrete emission reduction 

credits (MDERCs). DECs may be generated and used statewide and can apply to 

all criteria pollutants, with the exception of lead. Traditionally DECs have been 

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

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

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

the DERC program. The DERC program was amended again effective April 14, 

2002, to include the provisions in Texas Senate Bill 1561 for air emissions trading 

across international boundaries. The submittal effective January 17, 2003, 

completely reorganized the ERC and DERC program rules into more standardized 

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

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

guidelines for trading and using creditable reductions. The December 6, 2004

submittal amended §§ 101.370, 101.373, 101.374, and 101.376. Our final 

conditional approval on September 6, 2006, acted on the original submission of the 

DERC program and all subsequent revisions through the December 6, 2004, 

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

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

Since our conditional approval, TCEQ has revised the DERC program to address 

the commitments of the conditional approval. Additionally, the TCEQ adopted 

revisions to the DERC program consistent with the requirements of Senate Bill 

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

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

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

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

submitted to EPA as a SIP revision on October 24, 2006. TCEQ has also 

promulgated revisions to the DERC program that update the cross-references to 

the new numbering structure in 30 TAC Chapter 117. These revisions were 

adopted on July 25, 2007, and became effective on August 16, 2007. The adopted 

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

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

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

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

east and central Texas at 30 TAC § 117.138 on September 26, 2001, effective 

October 18, 2001. EPA approved the system caps on November 14, 2001 (66 FR 

57244). The System Cap Trading (SCT) program adopted by TCEQ on March 

21, 2001, and submitted to EPA as a revision to the SIP in Rule Log Number 2000-

046-101-AI, provides flexibility for the electric industry in achieving the NOX

emissions reductions necessary to achieve ozone attainment in the BPA, DFW, and 

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HGB ozone nonattainment area and the attainment counties of east and central 

Texas while maintaining reliability of service. Individual sources under common 

ownership or control may be voluntarily grouped together in a system with a 

system cap on total emissions from the sources in the system, established under 30 

TAC Chapter 117 emissions limitations. Emission allowables may be transferred 

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

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

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

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

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

30-day rolling average surplus for the same time period. TCEQ has promulgated

revisions to the SCT program to update the cross-references to the Chapter 117 

NOX rules. EPA has taken no action on the SCT program to date.

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

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

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

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

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

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

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

may purchase, bank or sell their allowances for use in the following control period. 

The program has a provision to allow a facility to use credits of less-reactive 

VOCs generated through the Division 1 EIP (ERCs) in lieu of allowances if they 

are generated in the HGB area. EPA published final approval of the HECT 

program on September 6, 2006.

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

Division 7)

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

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

incorporate by reference the CAIR NOX Annual and SO2 trading programs as 

adopted by EPA on May 12, 2005 (70 FR 25162). Additionally, the Texas CAIR 

program establishes a NOX allocation methodology and provisions for the 

compliance supplement pool to replace the provisions at subpart EE of 40 CFR 

part 97, the CAIR Federal Implementation Plan. EPA published a direct final

approval of the Texas CAIR NOX Abbreviated SIP for the Phase I allocation 

methodology on July 30, 2007 (72 FR 41453). TCEQ adopted revisions to the 

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

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

programs. These revisions will be submitted to EPA as a SIP revision.

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What has EPA considered in reviewing and evaluating the October 24, 2006 and 

August 16, 2007 ERC SIP revisions submittals?

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

2001) is the EPA guidance document for reviewing and approving discretionary EIP 

submittals. The EIP Guidance applies to the establishment of a discretionary EIP for 

attaining or maintaining the national ambient air quality standards (NAAQS) for criteria 

pollutants. The EIP Guidance takes precedence over the discretionary EIP guidance 

provided in prior documents such as the 1994 EIP (April 7, 1994, 59 FR 16690, 40 CFR 

part 51, subpart U) and the guidance in the emission trading policy statement (ETPS) 

(December 4, 1986, 51 FR 43813). In addition, the Guidance represents EPA’s final 

action on the Open Market Trading Rule (August 3, 1995, 60 FR 39668 and August 25, 

1995, 60 FR 44290). The January 2001 EIP Guidance is the most recent statement of 

agency policy and it supercedes prior statements of agency policy. The EIP Guidance and 

other material considered will be included in the administrative record for the proposed 

rule.

What does EPA mean by guidance?

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

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

as the ERC rule, occurs when EPA has approved or disapproved the EIP submitted as a 

SIP revision. The EIP Guidance describes elements of various types of discretionary 

EIPs, and phrases these elements in the imperative– that is, using the terms “must” or 

“shall.” This is done only to signify that EPA would propose to approve a SIP submittal

of a program containing the indicated elements on grounds that under section 110(l) of the 

Clean Air Act (CAA), the SIP revision does not interfere with any applicable requirement 

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

How will EPA act on an EIP SIP submittal?

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

rule-making to determine if the statutory requirements have been met. Only action taken 

after the conclusion of that rule-making would constitute final Agency action. EPA would 

take steps to expedite its proposed approval in the case of SIP revisions containing 

programs that contain the elements of the EIP Guidance.

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

program that is submitted, EPA will still seek to determine whether the applicable CAA 

requirements were met, and if so EPA would approve the submission. EPA would make 

the determination through notice-and-comment rule-making.

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III. Summary of the State Program

A complete section-by-section summary of the ERC program can be found in the ERC 

TSD dated September 23, 2005, included in the docket for this action. EPA developed 

this original ERC TSD for our initial approval action for the ERC program. This TSD will 

only evaluate the revisions to the ERC program as submitted on October 24, 2006 and 

August 16, 2007 by TCEQ.

October 24, 2006

30 TAC Chapter 101, Subchapter H, Division 1

The proposed SIP revision removes all references to international emission reductions 

from section 101.302 and relocates these requirements to new section 101.305. The 

proposed SIP revision also revises section 101.302 to clarify the procedures for the use of 

an emission protocol as specified in the September 8, 2005, commitment letter from 

TCEQ to EPA.

The proposed SIP revision creates new section 101.305 to contain all requirements for 

international emission reductions. TCEQ has created a separate section for optional 

reductions to allow for separate federal rulemaking action as necessary.

The proposed SIP revision amends section 101.306 to update the list of approved uses of 

ERCs to include the use of ERCs as allowances in the Highly-Reactive Volatile Organic 

Compound Emission Cap and Trade program.

The TCEQ received four comment letters, one from EPA submitted on May 30, 2006.

August 16, 2007

30 TAC Chapter 101, Subchapter H, Division 1

The proposed SIP revision amends sections 101.302 and 101.306 to adopt the references 

to the newly renumbered 30 TAC Chapter 117 sections.

The TCEQ received two comment letters for this rulemaking, one from EPA submitted on 

March 23, 2007.

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IV. Technical Review of State Submittal

This technical review of the October 24, 2006 revisions to the ERC program at sections

101.302, 101.305, and 101.306 and the August 16, 2007 revisions to the ERC program at 

sections 101.302 and 101.306 consists of a comparison between the relevant CAA 

requirements and the corresponding sections in the SIP submittal. Each SIP submittal is 

separately reviewed for completeness as a SIP submittal under Part 51, Appendix V. 

Next, a section-by-section review of the submittal in comparison to 40 CFR Part 51 is 

presented to determine whether the submittal satisfies the requirements for preparation, 

adoption, and submittal of a SIP revision. Then the proposed SIP revisions are analyzed 

with respect to the current SIP-approved ERC program language and the EIP Guidance. 

A comparison of the proposed SIP revisions with section 110(l) of the CAA is presented 

to determine whether the proposed revisions interfere with any applicable CAA 

provisions. These analyses produce a written evaluation that will be used to make a 

determination of whether or not the ERC program revisions in the October 24, 2006 and 

July 25, 2007 SIP submittals are in agreement with the CAA, other EPA policies or 

guidance.

A. October 24, 2006 SIP Submittal

1. Part 51, Appendix V Completeness Determination

2. Review with respect to Part 51

3. Review with respect to the current SIP-approved ERC Program and the 

EIP Guidance

4. Review with respect to Section 110(l) of CAA

B. August 16, 2007 SIP Submittal

1. Part 51, Appendix V Completeness Determination

2. Review with respect to Part 51

3. Review with respect to the current SIP-approved ERC Program and the 

EIP Guidance

4. Review with respect to Section 110(l) of CAA

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IV.A. Evaluation of the October 24, 2006 SIP Submittal

1. Evaluation of the October 24, 2006 SIP Submittal with respect to Appendix 

V to Part 51

The criteria for completeness determination are found in Appendix V to Part 51 - Criteria 

for determining the completeness of plan submissions and are outlined below: 

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

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

submission for purposes of review under § 51.103. 

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

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

identifying the component(s) absent or insufficient to perform a review of the 

submitted plan.

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

meets the requirements of this appendix V within 60 days of EPA's receipt of the 

submittal, but no later than 6 months after the date which the State was required to 

submit the plan or revision. If a completeness determination is not made by 6 

months from receipt of a submittal, the submittal shall be deemed complete by 

operation of law on the date 6 months from receipt. A determination of

completeness under this paragraph means that the submission is an official 

submission for purposes of §51.103.

The attached checklist outlines the basic criteria included under 2.1, 2.2, and 2.3 of

Appendix V. 

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SIP Completeness Checklist for the October 24, 2006 SIP Submittal

Rule Log No: 2005-054-101-PR

Administrative Materials (2.1)

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

designee requesting EPA's approval of the revision.

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

Chairman of the Texas Commission on Environmental Quality, dated October 24, 

2006. The SIP submittal was received by EPA Region 6 External Affairs on 

October 31, 2006. Governor Rick Perry designated that the Chairman of the 

Texas Commission on Environmental Quality would be his designee for SIP 

submittals in a letter dated May 21, 2002.

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

body of regulations, or that the State has issued the permit, order, consent 

agreement (hereafter document) in final form. This evidence would include the 

date of adoption or final issuance and the effective date of revision, if different 

from adoption/issuance date.

The revisions were adopted by the Texas Commission on Environmental Quality

on October 4, 2006, and became effective October 26, 2006. 

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

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

authority.

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

Chapter 101 §§ 101.30 101.306, 101.372, 101.373, 101.376, and 101.378; the 

repeal of §§ 101.338; and new §§ 101.305, 101.338, 101.339, and 101.375 is 

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

Code.

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

and incorporation by reference into the SIP including an indication of the changes 

made to the existing approved plan where applicable. The submittal shall be a 

copy of the official State regulation document signed, stamped, and dated by the 

appropriate State official indicating that it is fully enforceable by the State. The 

effective date of the regulation document shall, whenever possible, be indicated in 

the document itself.

The October 24, 2006, submittal included a copy of the official State regulation 

document, signed, stamped, and dated by Kathleen Hartnett White, Chairman of 

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the Texas Commission on Environmental Quality.

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

laws and/or its constitution in the conducting and completing the 

adoption/issuance of the plan. 

The SIP submittal package included a certification signed by Kevin McCalla,

Director of the Texas Commission on Environmental Quality General Law

Division, that demonstrated the SIP submittal was developed pursuant to 40 CFR 

51.104. 

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

consistent with the procedures approved by EPA, including the date of publication 

of such notice, (e.g., notarized or certified copies of any public notices published in 

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

Notices of public hearings were published in the following newspapers on the date 

listed:

 Austin American Statesman: April 19, 2006

 Beaumont Enterprise: April 17, 2006

 Fort Worth Star Telegram: April 17, 2006

 Houston Chronicle: April 17, 2006. 

A public hearing was held in Austin, Texas, on May 22, 2006.

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

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

laws and constitution, if applicable.

An order adopting revisions to the SIP signed by Kathleen Hartnett White, 

Chairman of the Texas Commission on Environmental Quality was included. 

This order states that the public hearing was conducted pursuant to Texas Health 

and Safety Code § 382.017, Texas Government Code Chapter 2001, and 40 CFR 

§ 51.102.

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

The SIP submittal package did include a compilation of comments. TCEQ 

received written testimony from four parties during the comment period, 

including EPA Region 6, and did not receive oral testimony.

Technical Support (2.2)

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

16
package.

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

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

pollutants, and precursors, for which an area is designated nonattainment 

with the exception of lead. However, the SIP revision under review does 

not change this applicability and therefore does not need to restate the list 

of regulated pollutants.

 Chapter 101, Subchapter H, Division 2 (EBTA Program) applies to NOX

and SO2. This SIP submittal amends a previously submitted SIP package 

for the EBTA program, in which the pollutants are identified.

 Chapter 101, Subchapter H, Division 4 (DERC Program) applies to 

criteria pollutants, and precursors, with the exception of lead. The SIP 

revision under review does not change this applicability and therefore 

does not need to restate the list of regulated pollutants.

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

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

attainment plan for the affected area(s) is included.

The SIP submittal, covering the ERC, EBTA, and DERC Rules, amend existing 

regulations for statewide trading programs. Additionally, each rule does contain 

an international trading component.

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

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

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

actual emissions from affected sources through calculations of the differences 

between certain baseline levels and allowable emissions anticipated if the revisions 

were approved.)

The SIP submittal, covering the ERC, EBTA, and DERC rules, amend existing 

regulations for statewide trading programs. The ERC and DERC programs 

establish economic incentive programs for voluntary generation and use of 

emission reductions. Each program includes provisions for quantifying 

creditable emission reductions and increases. The EBTA program is mandated 

by Texas SB 7; which established reduction requirements of 50% from baseline 

NOX emission levels and 25% from baseline SO2 emission levels. 

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

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

implemented.

17
The SIP submittal amends existing trading programs. While these trading 

programs are part of the attainment demonstrations developed within the State, 

they are not the sole method of attaining or maintaining the NAAQS, PSD, RFP 

or visibility programs. Attainment demonstrations for each area using these 

programs must account for the emissions attributed to the banking and trading 

programs.

5. FOR REDESIGNATIONS:

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

quality standards for at least 10 years as required by §175A of the Clean 

Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

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

Modeling information is not necessary to support this SIP revision. Modeling is 

provided with attainment demonstrations accounting for the generation and use 

of emission reductions under the ERC, EBTA, and DERC programs.

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

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

equipment designs, reformulated materials, etc.).

This SIP submittal amends existing trading programs; it does not establish 

emission limitations.

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

work practice standards, and recordkeeping/reporting requirements to ensure 

stated emission levels.

This SIP submittal amends existing trading programs and does not contain or 

revise emission limitations or workplace standards. Recordkeeping and reporting 

requirements for the trading programs have previously been submitted to EPA. 

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

in practice (including at what frequency).

The SIP submittal amends existing trading programs. The compliance strategies 

18
for each program were previously submitted to EPA. Additionally, each source 

participating in banking and trading programs must abide by the conditions of its 

respective permit. 

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

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

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

justification.

These justifications are not necessary for this SIP revision.

The October 24, 2006 SIP submittal (Rule Project No. 2005-054-101-PR) meets the 

completeness criteria established in 40 CFR part 51, Appendix V.

19
IV.A. Evaluation of the October 24, 2006 SIP Submittal

2. Evaluation of the October 24, 2006 ERC revisions with respect to 40 CFR 51

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

found in 40 CFR Part 51. The October 24, 2006, proposed ERC revisions were evaluated 

against the applicable requirements in Part 51. This analysis is included in Table IV-A2

below. The revisions to the DERC and EBTA program also submitted on October 24, 

2006, as revisions to the SIP are not included in the analysis below. The DERC revisions 

and EBTA program will be acted on separately by EPA at a later date. 

Table IV-A2: Analysis of Part 51 Requirements

Part 51 – Requirements for Preparation, 

Adoption, and Submittal of Implementation 

Plans

ERC Program Revisions

30 TAC §§ 101.302, 101.305, 101.306

Subpart A – Emission Inventory Reporting 

Requirements

The ERC Program is a discretionary EIP for 

voluntary participation. The program does not 

affect the current TX SIP requirements for 

Emission Inventory Reporting.

Emission reporting requirements specific to the 

ERC program are contained in 30 TAC 101.309 

and were approved by EPA in our September 6, 

2006 final approval.

Subparts B – E [Reserved] Not applicable.

Subpart F – Procedural Requirements Subpart F – Procedural Requirements

§ 51.100 Definitions § 51.100 is not applicable to the SIP submittal 

under review in this TSD.

§ 51.101 Stipulations § 51.101 is not applicable to the SIP submittal 

under review in this TSD. 

§ 51.102 Public Hearings

 States must conduct one or more public 

hearings

 Public hearings will only be held after 

reasonable notice, given at least 30 days prior 

to the date of the hearing

 The state must submit with the revision a 

certification that the hearing was held in 

accordance with this section

 TCEQ held a public hearing on May 22, 

2006, in Austin, Texas.

 The public hearing was held after reasonable 

notice was given. TCEQ published notice of 

the public hearing in the following 

newspapers on the dates listed below:

 April 17, 2006 in the Beaumont 

Enterprise;

 April 17, 2006 in the Fort Worth StarTelegram;

 April 17, 2006 in the Houston Chronicle;

 April 19, 2006 in the Austin American 

Statesman.

 TCEQ submitted a certification that the public 

hearings were held in accordance with § 

51.102.

20
§ 51.103 Submission of plans, preliminary review 

of plans

 The state makes an official plan submission to 

EPA only when the submission conforms to the 

requirements of Part 51, Appendix V.

 The state delivers 5 copies of the plan with a 

letter giving notice of the action to the EPA 

regional office.

Please see section IV.A of this TSD for the 

evaluation of this SIP revision with respect to the 

Part 51, Appendix V Checklist.

The SIP submission meets the requirements for 

completeness.

§ 51.104 Revisions

 States may revise the plan from time to time

 EPA will approve revisions only after 

appropriate public hearing requirements have 

been met

 Revisions must be submitted in accordance 

with 51.103

TCEQ submitted the revisions to the ERC and 

Program on October 24, 2006. This SIP revision,

as demonstrated previously in this table and section 

IV.A of this document, has satisfied the public 

hearing requirements of § 51.102 and the 

requirements of § 51.103.

Subpart G – Control Strategy Subpart G – Control Strategy

§ 51.110 Attainment and Maintenance of National 

Standards

Requirements found in § 51.110 are not applicable 

to the SIP submittal under review in this document. 

The ERC program is a discretionary EIP that 

provides for the voluntary generation and use of 

emission reduction credits. The ERC program is

not an integral control strategy in any of the Texas 

Attainment Demonstrations. However, EPA 

expects the TCEQ to account for the generation 

and use of ECs in all attainment demonstrations.

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

to the SIP submittal under review in this document. 

The ERC program does not establish control 

strategies for Texas, rather the program provides 

for the voluntary generation and use of ECs.

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

to the SIP submittal under review in this document. 

Since the ERC program is not an integral piece of 

an attainment strategy, it is not necessary that the 

ERC program demonstrate adequacy for

maintaining a national standard.

§ 51.113 Reserved Not applicable.

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

to the SIP submittal under review in this document. 

As the ERC program is not part of an attainment 

demonstration, the ERC program SIP revision does 

not need to provide a detailed emission inventory

and summary of projected emission levels after the 

implementation of control strategies.

However, the ERC program does require that 

generators and users submit applications to the 

TCEQ that estimate and verify the emission 

reductions that are generated and/or used.

21
§ 51.115 Air Quality Data and Projections Requirements found in § 51.115 are not applicable 

to the SIP submittal under review in this document. 

The ERC program is not part of an attainment 

plan, therefore it is not necessary that this SIP 

submittal includes data on existing air quality or 

summarize expected air quality impacts from the 

implementation of control strategies.

§ 51.116 Data Availability

The State must make available to the public all data 

and calculations used in the preparation of each 

plan or plan revision.

Each plan must provide for public availability of 

emission data reported by source owners or 

operators.

Requirements found in § 51.116 are applicable to 

the ERC program SIP revisions.

The TCEQ provided the public the opportunity to 

participate in stakeholder meetings in the 

rulemaking development process, and the public 

received comment periods on the proposed plan.

The Texas Clean Air Act, Texas Health and Safety

Code at Section 382.040 requires that all 

information submitted to the TCEQ for compliance 

purposes be made available to the public, unless a 

written request for nondisclosure is approved. 

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

to the SIP submittal under review in this document. 

The ERC program at § 101.302(a) specifically 

excludes lead as an applicable pollutant of the 

program. 

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

to the SIP submittal under review in this document. 

The ERC program is a discretionary program for 

voluntary generation and use of ECs and does not 

involve good engineering practices for stack 

heights.

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

to the SIP submittal under review in this document. 

The ERC program is a discretionary program for 

voluntary generation and use of ECs and does not 

require intermittent control systems.

§ 51.120 Requirements for State Implementation 

Plan Revisions relating to Motor Vehicles

Requirements found in § 51.120 are not applicable 

to the SIP submittal under review in this document. 

The ERC program does provide for the generation 

and use of mobile emission reductions, but that is 

not related to the part 51 requirements for SIP 

revisions relating to motor vehicles.

§ 51.121 Findings and requirements for 

submission of State Implementation Plan Revisions 

relating to emissions of oxides of nitrogen

Requirements found in § 51.121 are not applicable 

to the SIP submittal under review in this document. 

§ 51.121 establishes the requirements for the NOX

SIP Call; Texas was not subject to the NOX SIP 

Call.

§ 51.122 Emissions reporting requirements for SIP 

revisions relating to budgets for NOX emissions.

Requirements found in § 51.122 are not applicable 

to the SIP submittal under review in this document. 

§ 51.122 establishes the emission reporting 

requirements for the NOX SIP Call; Texas was not 

subject to the NOX SIP Call.

22
§ 51.123 Findings and requirements for 

submission of State Implementation Plan Revisions 

relating to Emissions of Oxides of Nitrogen 

pursuant to the Clean Air Interstate Rule

Requirements found in § 51.123 are not applicable 

to the SIP submittal under review in this document. 

§ 51.123 establishes the requirements for the NOX

Annual and Ozone season programs for the Clean 

Air Interstate Rule (CAIR).

§ 51.124 Findings and requirements for 

submission of State Implementation Plan Revisions 

relating to Emissions of Sulfur Dioxide pursuant to 

the Clean Air Interstate Rule

Requirements found in § 51.124 are not applicable 

to the SIP submittal under review in this document. 

§ 51.124 establishes the program requirements for 

the CAIR SO2 Programs.

§ 51.125 Emissions reporting requirements for SIP 

revisions relating to budgets for SO2 and NOX

emissions.

Requirements found in § 51.125 are not applicable 

to the SIP submittal under review in this document. 

§ 51.125 establishes the emission reporting 

requirements for the CAIR NOX and SO2 trading 

programs.

Subpart H – Prevention of Air Pollution Emergency

Episodes

Requirements found in 51, Subpart H are not 

applicable to the SIP submittal under review in this 

document. The ERC program is a discretionary

program for the generation and use of ECs and is

not part of the Texas air pollution emergency

episode plan.

Subpart I – Review of New Sources and 

Modifications

§ 101.306(a)(1) provides that ECs can be used as 

NSR permit offsets.

§ 101.306(a)(4) provides that ECs may be used for 

NSR netting by the original applicant if not used, 

sold, reserved for use, or otherwise relied upon as 

provided in § 116.150.

EPA reviewed the use of ERCs and MERCs as 

NSR offsets and netting as part of our approval of 

the program, and found these provisions of the 

ERC program to meet the NSR offset requirements 

of section 173 of the CAA and 51.165. The 

revisions to the ERC program submitted in this SIP 

submittal do not revise § 101.306(a)(1) or (a)(4).

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

applicable to the SIP submittal under review in this 

document. Ambient air quality surveillance is not 

part of the ERC program.

Subpart K – Source Surveillance Subpart K – Source Surveillance

§ 51.210 Each plan must provide for monitoring 

the status of compliance with rules and regulations 

that set forth any portion of the control strategy.

The Texas ERC program was developed and 

submitted in accordance with the Texas Health and 

Safety Code. Texas enforcement provisions are not 

typically in the State’s individual rules but are 

separately codified. Texas Water Code Chapter 7 

contains the State’s statutory provisions for 

enforcement of programs developed according to 

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

ERC program. Section 382.111 of the Texas 

Health and Safety Code provides the ability to enter 

and periodically inspect stationary sources. Section 

382.021 establishes that the Texas Commission on 

Environmental Quality can determine the necessary

sampling and detection methods used to 

demonstrate compliance with an emission 

limitation. 

§ 51.211 The plan must provide for legally

enforceable procedures for requiring stationary

sources to maintain records and report the 

following to the State:

 Information on the nature and amount of 

emissions from the stationary source; and

 Other information as necessary for the State to 

determine whether the sources are in 

compliance.

23
§ 51.212 The plan must provide for periodic testing 

and inspection of stationary sources. Additionally, 

the plan must establish a system for detecting 

violations and include enforceable test methods.

§ 51.213 The plan must contain procedures for 

obtaining and maintaining data on actual emissions 

reductions achieved as a result of implementing 

transportation control measures.

§ 51.213 is not applicable to the ERC program. 

While the ERC program does provide for the 

generation and use of mobile emission reductions, 

these reductions must be surplus to transportation 

control measures in the SIP.

§ 51.214 The plan must contain legally enforceable 

procedures to require stationary sources subject to 

emission standards as part of the applicable plan to 

install, calibrate, maintain, and operate continuous 

emission monitoring systems.

The ERC program does not establish emission 

standards under the Texas SIP that would mandate 

the installation or use of continuous emission 

monitoring systems. However, section 

101.302(d)(2) provides the quantification 

procedures for ECs, and continuous monitoring 

data is an acceptable data source for actual 

emissions data in the event that the SIP approved 

testing and monitoring methods in Chapter 115 

and Chapter 117 are not available.

Subpart L – Legal Authority Subpart L – Legal Authority

§ 51.230 Each plan must show that the State has 

the necessary legal authority to carry out the plan, 

including the authority to adopt emission standards 

and limitations necessary for attainment of the 

NAAQS, enforce applicable laws and regulations 

and seek injunctive relief.

The ERC program was developed and submitted in 

accordance with the Texas Clean Air Act, Chapter 

382 of the Texas Health and Safety Code. The 

Texas Health and Safety Code and the enforcement 

provisions in the Texas Water Code provide TCEQ 

the necessary legal authority to implement the SIP. 

A more detailed discussion immediately follows 

this table.

§ 51.231 The provision of law or regulation which 

the State determines provides the authorities 

required must be specifically identified and copies 

must be submitted with the plan. 

Texas identified in the submittal package that the 

SIP revision was developed in accordance with the 

Texas Health and Safety Code. EPA Region 6 does 

not require the State to submit copies of laws and 

regulations that have been submitted for prior SIP 

submittals. 

§ 51.232 A state government agency other than the 

State air pollution control agency may be assigned 

responsibility for carrying out a portion of the plan.

The ERC Program SIP revisions identified the 

TCEQ as the agency responsible for implementing 

the SIP.

Subpart M – Intergovernmental Consultation

Each plan must identify organizations by title that 

will participate in the development, 

implementation, and enforcement of the plan.

The ERC Program SIP revision identified the 

TCEQ as the agency responsible for developing, 

implementing, and enforcing the SIP.

24
Subpart N – Compliance Schedule The ERC program establishes an economic 

incentive program for the voluntary generation and 

use of ECs. This program does not establish a 

compliance schedule for any NAAQS, and 

therefore do not need to address the requirements 

of 40 CFR part 51, subpart N. 

However, the ERC program provides mechanisms 

by which users of ECs must demonstrate they have 

enough credits to cover their use obligations, see 

section 101.306. Section 101.309 provides for 

program audits and reporting through which the 

TCEQ will demonstrate to EPA and the public that 

the ERC program is operating effectively. 

Subpart O – Miscellaneous Plan Content 

Requirements

The ERC program SIP revision identified that no 

fiscal implications are anticipated for TCEQ or any

other state/local government through the 

implementation of these rules. Additionally, it was 

estimated that the public benefit as a result of 

implementing these revisions would be a continued 

reduction in air contaminants.

Subpart P – Protection of Visibility The ERC program SIP revision is not submitted as 

part of Texas’s plan to protect visibility. 

Subpart Q – Reports The ERC program SIP revision does not revise the 

existing reporting requirements for the emission 

inventory in the Texas SIP. EPA approved the 

emission inventory requirements at 30 TAC §

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

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

applicable to the SIP submittal under review in this 

document. The ERC program SIP revision

submittal is not a request for an 18-month 

extension.

Subpart S – Inspection/Maintenance Program 

Requirements

Requirements found in 51, Subpart S are not 

applicable to the SIP submittal under review in this 

document. The ERC program establishes a

discretionary economic incentive program and is

not related to an inspection/maintenance program.

Subpart T – Conformity to State or Federal 

Implementation Plans of Transportation Plans, 

Programs, and Projects Developed, Funded, or 

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

Transit Laws

The ERC program does not interfere with the 

transportation conformity budgets developed for 

each nonattainment and maintenance area pursuant 

to subpart T. The ERC program provides that 

mobile sources can generate mobile emission 

reduction credits, but these credits most be surplus 

to the baseline emissions in the SIP (section

101.304(b)).

25
Subpart U – Economic Incentive Programs 40 CFR part 51, subpart U establishes requirements 

for statutorily mandated economic incentive 

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

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

program is a discretionary economic incentive 

program, and therefore not subject to the 

requirements of subpart U.

Subpart W – Determining Conformity of General 

Federal Actions to State or Federal Implementation 

Plans

The ERC program does not interfere with the 

requirements for general conformity in subpart W. 

All emission reductions, whether from stationary or 

mobile sources, must be surplus to the baseline 

emissions in the SIP.

Subpart X – Provisions for Implementation of 8-hr 

Ozone NAAQS

Requirements found in 51, Subpart X are for the 

implementation of the 8-hour ozone NAAQS. 

While ECs can be generated and used in 8-hour 

nonattainment areas, the ERC program is not part 

of the implementation of the 8-hour ozone 

standard. EPA expects that the TCEQ will account

for the generation and use of ECs in all 8-hour 

attainment demonstrations.

Subpart Y – Mitigation Requirements The Chapter 101 revisions do not create procedures 

by which Texas could exclude air quality data due 

to exceptional events.

Subpart Z – Provisions for Implementation of 

PM2.5 National Ambient Air Quality Standards

Requirements found in 51, Subpart X are for the 

implementation of the PM2.5 NAAQS. The 

Chapter 101 revisions do not establish procedures 

for implementing the PM2.5 NAAQS.

26
Does TCEQ have the necessary legal authority to implement the revisions to 30 TAC 

Sections 101.302, 101.305, 101.306 as part of the SIP?

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

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

for enforcement of the Texas ERC program. In particular, TWC § 7.051 provides for the 

assessment of administrative penalties by the TCEQ, and § 7.032 provides for injunctive 

relief by the TCEQ. The TCEQ enforcement rule at 30 TAC § 70.5 incorporates remedies 

found in the state statutes (Texas Water Code and the Texas Health and Safety Code), and 

permits referrals to EPA for civil, judicial or administrative action. It is our conclusion 

that TCEQ has adequate legal authority to enforce the ERC program revisions as part of 

the SIP. Once we approve the revisions to the ERC program into the SIP, EPA will be 

able to enforce it under section 113 of the Clean Air Act.

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

National Emission Standards for Hazardous Air Pollutants (NESHAPs) have been 

reviewed and found to have sufficient enforcement provisions. These same enforcement 

provisions will apply to the ERC Program. The Office of the Attorney General of the State 

of Texas has provided written opinions for these programs. The opinions state that TCEQ 

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

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

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

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

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

standards that are no less stringent than those specified by the CAA. The cited laws and 

regulations are: Texas Health and Safety Code Ann. sections 382.016 (Monitoring 

Requirements, Examination of Records), 382.021 (Sampling Methods and Procedures), 

382.0514 (Sampling, Monitoring and Certification); 30 TAC sections 122.132 

(Application and Required Information for Initial Permit Issuance, Reopening, Renewal, 

or General Operating Permits), 122.134 (Complete Application), 122.136 (Application 

Deficiencies), 122.142 (Permit Content Requirements), 122.143 (General Terms and 

Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms 

and Conditions), 122.146 (Compliance Certification Terms and Conditions), 122.165 

(Certification by Responsible Official; 30 TAC sections 101.8 (Sampling), 101.9 

(Sampling Ports).

Recordkeeping requirements specific to the ERC rule are set forth at § 101.302(g). The 

Attorney General has determined that TCEQ is allowed to prescribe sampling methods 

and procedures to be used to determine violations of and compliance with the TCEQ rules 

and orders. The ERC rule provides that any use of monitoring protocols other than those 

specified in Chapter 115 and Chapter 117 will be approved by EPA (§ 101.302(d)(1)). 

The rule also specifies procedures in the event that monitoring and testing data are 

unavailable at § 101.302(d). The opinions of the Texas Attorney General indicate that 

27
TCEQ has the necessary legal authority to implement and enforce the ERC program in 

accordance with the requirements of the Clean Air Act. 

EPA’s guidance on practicable enforceability (provided in the FDMS docket for this 

action) is a series of agency memos on limiting potential to emit. While this guidance is 

not directly applicable to an emissions trading program, the requirements for sufficient 

monitoring do apply to the ERC program. The sources generating and certifying emission 

reductions as ECs must be able to quantify the emission reduction over time. The ERC 

EIPs meets EPA’s expectations on practicable enforceability by requiring sites to calculate 

emission reductions using an EPA approved protocol. Facilities subject to the control 

specifications in Chapters 115 and 117 must use the testing and monitoring methodologies 

identified to show compliance with the emission standards. If this monitoring or testing 

data is unavailable or does not exist, the facility may report actual emissions for that 

period of time using the methods listed below in the following order of preference:

1. Continuous monitoring data;

2. Periodic monitoring data;

3. Testing data;

4. Manufacturer’s data;

5. Material balance.

A facility must submit justification to the TCEQ when not using the monitoring and testing 

protocols in Chapters 115 and 117.

For the above reasons EPA has concluded that the ERC program meets the Clean Air Act 

requirements and EPA EIP Guidance expectations for penalties, corrective action, and 

practicable enforceability in the integrity element of enforceable.

28
IV.A. Evaluation of the October 24, 2006 SIP Submittal

3. Evaluation of the October 24, 2006 Revisions to the Texas ERC Program

with respect to the existing SIP-approved language and the EIP Guidance

The evaluation of the ERC program with respect to the EIP Guidance was conducted with 

our proposed approval on October 5, 2005 (70 FR 58146) and final approval on 

September 6, 2006 (71 FR 52698). The October 24, 2006, rule package currently under 

review in this TSD does not change the type of program or functionality of the ERC 

trading program with respect to the EIP Guidance. Therefore, the evaluation of the 

revisions to the ERC program at sections 101.302, 101.305, and 101.306 will include a

line item comparison of the federally approved ERC program and the State’s adopted 

revisions to determine approvability. Approvability of each revision will be based on the 

EIP Guidance and whether the measure strengthens the SIP. Note that this analysis will 

not reevaluate the portions of the ERC program that have not been revised since our final 

actions on September 6, 2006.

Table IV-A3.1: Revisions to § 101.302 – General Provisions

Federally Approved Version

September 6, 2006

71 FR 52698

Adopted State Language

October 4, 2006

Rule Project Number 2005-054-101-PR

(a) Applicable pollutants. Reductions of criteria 

pollutants, excluding lead, or precursors of 

criteria pollutants for which an area is 

designated nonattainment, may qualify as

emission credits. Reductions of one pollutant 

may not be used to meet the requirements for 

another pollutant, unless:

(a) Applicable pollutants. Reductions of criteria 

pollutants, excluding lead, or precursors of 

criteria pollutants for which an area is 

designated nonattainment, may qualify as

emission credits. Reductions of one 

pollutant may not be used to meet the 

requirements for another pollutant, unless

urban airshed modeling demonstrates that 

one ozone precursor may be substituted for 

another, subject to executive director and the 

United States Environmental Protection 

Agency (EPA) approval.

(1) urban airshed modeling demonstrates that 

one ozone precursor may be substituted for 

another subject to executive director and 

United States Environmental Protection 

Agency (EPA) approval; or

Moved to 101.302(a)

(2) the facility generating the emission 

reductions is located outside the United 

States and:

International trading provisions have been moved 

to 101.305, see discussion below.

(A) the substitution: International trading provisions have been moved 

to 101.305, see discussion below.

(i) results in a greater health benefit 

and is of equal or greater benefit to 

the overall air quality of the area, 

as determined by the executive 

director;

International trading provisions have been moved 

to 101.305, see discussion below.

29
(ii) is from the reduction of an air 

contaminant for which the area 

has been designated as 

nonattainment or which leads to 

the formation of a criteria 

pollutant for which an area has 

been designated as nonattainment; 

and

International trading provisions have been moved 

to 101.305, see discussion below.

(iii) is for any air contaminant for 

which the area has been 

designated as nonattainment or 

leads to the formation of a criteria 

pollutant for which the area has 

been designated as nonattainment; 

and

International trading provisions have been moved 

to 101.305, see discussion below.

(B) the user: International trading provisions have been moved 

to 101.305, see discussion below.

(i) demonstrates that the use of the 

reduction does not cause localized 

health impacts, as determined by

the executive director;

International trading provisions have been moved 

to 101.305, see discussion below.

(ii) submits all supporting information 

for calculations and modeling, and 

any additional information 

requested by the executive 

director; and

International trading provisions have been moved 

to 101.305, see discussion below.

(iii) is located within 100 kilometers of 

the Texas - Mexico border.

International trading provisions have been moved 

to 101.305, see discussion below.

(b) Eligible generator categories. The following 

categories are eligible to generate emission 

credits:

No change

(1) facilities, including area sources; No change

(2) mobile sources; and No change

(3) any facility, including area sources, or 

mobile source associated with actions by 

federal agencies under §101.30 of this title 

(relating to Conformity of General Federal 

Actions to State Implementation Plans).

No change

(c) Emission credit requirements. No change

(1) Emission reduction credits are certified 

reductions that meet the following 

requirements:

No change

(A) reductions must be enforceable, 

permanent, quantifiable, real and 

surplus;

No change

(B) the certified reduction must be 

surplus at the time it is created, as 

well as when it is used;

No change

30
(C) in order to become certified, the

reduction must have occurred after 

the most recent year of emissions 

inventory used in the state 

implementation plan (SIP); and

No change

(D) the facility's annual emissions prior 

to the reduction strategy must have 

been reported or represented in the 

emissions inventory used for the SIP.

No change

(2) Mobile emission reduction credits are 

certified reductions that meet the following 

requirements:

No change

(A) reductions must be enforceable, 

permanent, quantifiable, real and 

surplus;

No change

(B) the certified reduction must be 

surplus at the time it is created, as 

well as when it is used;

No change

(C) in order to become certified, the

reduction must have occurred after 

the most recent year of emissions 

inventory used in SIP; and

No change

(D) the mobile source’s annual 

emissions prior to the emission 

credit application must have been 

represented in the emissions 

inventory used for the SIP; and

No change

(E) the mobile sources must have been 

included in the attainment 

demonstration baseline emissions 

inventory. 

No change

(3) Emission reductions from a facility or 

mobile source that are certified as emission 

credits under this division cannot be 

recertified in whole or in part as emission 

credits under another division within this 

subchapter.

No change

(d) Protocol. No change

(1) All generators or users of emission credits 

shall use a protocol which has been 

submitted by the executive director to the 

EPA for approval, if existing for the 

applicable facility or mobile source, to 

measure and calculate baseline emissions. 

If the generator or user wishes to deviate 

from a protocol submitted by the executive 

director, EPA approval is required before 

the protocol can be used. Protocols shall be 

used as follows.

No change

31
(A) Facilities subject to the emission 

specifications under §§117.106, 

117.206, or 117.475 of this title 

(relating to Emission Specifications 

for Attainment Demonstrations; and 

Emission Specifications) shall 

quantify reductions in 

NOX emissions using the testing and 

monitoring methodologies identified 

to show compliance with the 

emission specification.

No change

(B) Facilities subject to the requirements 

under §§115.112, 115.121, 115.122, 

115.162, 115.211, 115.212, 115.352, 

115.421, 115.541, or 115.542 

(relating to Emission Specifications; 

and Control Requirements) shall 

quantify VOC reductions using the 

testing and monitoring 

methodologies identified to show 

compliance with the emission 

specifications or the requirements.

No Change

(C) If the executive director has not 

submitted a protocol for the 

applicable facility or mobile source 

to the EPA for approval, the 

following applies:

No Change

(i) the amount of emission credits 

from a facility or mobile source, 

in tons per year, will be 

determined and certified based 

on quantification methodologies 

at least as stringent as the 

methods used to demonstrate 

compliance with any applicable 

requirements for the facility or 

mobile source;

No Change

(ii) the generator shall collect 

relevant data sufficient to 

characterize the facility’s or 

mobile source’s emissions of the 

affected pollutant and the 

facility’s or mobile source’s 

activity level for all 

representative phases of 

operation in order to 

characterize the facility’s or 

mobile source’s baseline 

emissions;

No Change

32
(iii) facilities with continuous 

emissions monitoring systems or 

predictive emissions monitoring 

systems in place shall use this 

data in quantifying actual 

emissions;

No Change

(iv) the chosen quantification 

protocol must be made available 

for public comment for a period 

of 30 days and must be viewable 

on the commission’s Web site;

No Change

(v) the chosen quantification 

protocol and any comments 

received during the public 

comment period shall be 

submitted to the EPA for a 45-

day adequacy review; and

No Change

(vi) quantification protocols shall 

not be accepted for use with this 

division after a proposed 

disapproval of the protocol by 

the EPA in the Federal 

Register.

(vi) quantification protocols shall not be 

accepted for use with this division if the 

executive director receives a letter 

objecting to the use of the protocol from 

the EPA during the 45-day adequacy 

review or the EPA proposes disapproval 

of the protocol in the Federal Register 

after a proposed disapproval of the 

protocol by the EPA in the Federal 

Register.

(2) In the event that the monitoring and testing 

data required under paragraph (1) of this 

subsection is missing or unavailable, the 

facility may report actual emissions for that 

period of time using these listed methods in 

the following order of preference to 

determine actual emissions:

No Change

(A) continuous monitoring data; No Change

(B) periodic monitoring data; No Change

(C) testing data; No Change

(D) manufacturer’s data; No Change

(E) EPA Compilation of Air Pollution 

Emission Factors (AP-42), 

September 2000; or

No Change

(F) material balance. No Change

(3) When quantifying actual emissions in 

accordance with paragraph (2) of this 

subsection, the generator shall use the most 

conservative method for replacing the 

missing data, submit the justification for 

not using the methods in paragraph (1) of 

this subsection, and submit the justification 

for the method used.

No Change

(e) Credit certification. No Change

33
(1) The amount of emission credits in tons per 

year will be determined and certified, to the 

nearest tenth of a ton per year.

No Change

(2) Applications for certification will be 

reviewed in order to determine the 

credibility of the reductions. Reductions 

determined to be creditable will be certified 

by the executive director.

No Change

(3) The applicant will be notified in writing if 

the executive director denies the emission 

credit application. The applicant may

submit a revised application in accordance 

with the requirements of this division.

No Change

(4) If a facility’s or mobile source’s actual 

emissions exceed its allowable emission 

limit, reductions of emissions exceeding the 

limit may not be certified as emission 

credits.

No Change

(5) Applications for certification of emission 

credit from reductions quantified under 

subsection (d)(1)(C) of this section may 

only be approved upon completion of the 

public comment period.

No Change

(f) Geographic scope. Except as provided in 

paragraph (3) of this subsection, only emission 

reductions generated in nonattainment areas 

can be certified. An emission credit must be 

used in the nonattainment area in which it is 

generated unless the user has obtained prior 

written approval of the executive director and 

the EPA; and:

(f) Geographic scope. Except as provided in §

101.305 of this title (relating to Emission 

Reductions Achieved Outside the United 

States) paragraph (3) of this subsection, only

emission reductions generated in 

nonattainment areas can be certified. An 

emission credit must be used in the 

nonattainment area in which it is generated 

unless the user has obtained prior written 

approval of the executive director and the 

EPA; and

(1) a demonstration has been made and 

approved by the executive director and the 

EPA to show that the emission reductions 

achieved in another country, state, or 

nation provide an improvement to the air 

quality in the county of use; or

No Change

(2) the emission credit was generated in a 

nonattainment area that has an equal or 

higher nonattainment classification than 

the nonattainment area of use, and a 

demonstration has been made and approved 

by the executive director and the EPA to 

show that the emissions from the 

nonattainment area where the emission 

credit is generated contribute to a violation 

of the national ambient air quality standard 

in the nonattainment area of use; or

(2) the emission credit was generated in a 

nonattainment area that has an equal or 

higher nonattainment classification than 

the nonattainment area of use, and a 

demonstration has been made and 

approved by the executive director and 

the EPA to show that the emissions from 

the nonattainment area where the 

emission credit is generated contribute to 

a violation of the national ambient air 

quality standard in the nonattainment 

area of use. ; or

34
(3) a facility is using emission reductions 

generated outside the United States that 

have been determined by the executive 

director to be real, permanent, enforceable, 

quantifiable, and surplus to any applicable 

international, federal, state, or local law 

and the result would provide a greater 

health benefit to the area as determined by

the executive director; and the facility:

International trading provisions have been moved 

to 101.305, see discussion below.

(A) demonstrates that the use of the 

reduction does not cause localized 

health impacts, as determined by the 

executive director;

International trading provisions have been moved 

to 101.305, see discussion below.

(B) submits all supporting information 

for calculations and modeling, and 

any additional information requested 

by the executive director; and

International trading provisions have been moved 

to 101.305, see discussion below.

(C) be located within 100 kilometers of 

the Texas - Mexico border.

International trading provisions have been moved 

to 101.305, see discussion below.

(g) Recordkeeping. The generator shall maintain a 

copy of all notices and backup information 

submitted to the registry for a minimum of five 

years. The user shall maintain a copy of all 

notices and backup information submitted to the 

credit registry from the beginning of the use 

period and for at least five years after. The user 

shall also make such records available upon 

request to representatives of the executive 

director, EPA, and any local enforcement 

agency. The records must include, but not 

necessarily be limited to:

No Change

(1) the name, emission point number, and 

facility identification number of each 

facility or any other identifying number for 

each mobile source using emission credits;

No Change

(2) the amount of emission credits being used 

by each facility or mobile source; and

No Change

(3) the specific number, name, or other 

identification of emission credits used for 

each facility or mobile source.

No Change

35
(h) Public information. All information submitted 

with notices, reports, and trades regarding the 

nature, quantity, and sales price of emissions 

associated with the use, generation, and transfer 

of an emission credit is public information and 

may not be submitted as confidential. Any

claim of confidentiality for this type of 

information, or failure to submit all information 

may result in the rejection of the emission credit 

application. All nonconfidential notices and 

information regarding the generation, 

availability, use, and transfer of emission 

credits shall be immediately made available to 

the public.

No Change

(i) Authorization to emit. An emission credit 

created under this division is a limited 

authorization to emit the pollutants identified in 

subsection (a) of this section, unless otherwise 

defined, in accordance with the provisions of 

this section, 42 USC §§ 7401, the Texas Health 

and Safety Code Chapter 382, as well as 

regulations promulgated thereunder. An 

emission credit does not constitute a property

right. Nothing in this division may be 

construed to limit the authority of the 

commission or the EPA to terminate or limit 

such authorization.

No Change

(j) Program participation. The executive director 

has the authority to prohibit an organization 

from participating in emission credit trading 

either as a generator or user, if the executive 

director determines that the organization has 

violated the requirements of the program or 

abused the privileges provided by the program.

No Change

(k) Compliance burden and enforcement. Users 

may not transfer their compliance burden and 

legal responsibilities to a third-party

participant. Third-party participants may only

act in an advisory capacity to the user.

No Change

(l) Credit ownership. The owner of the initial 

emission credit certificate shall be the owner or 

operator of the facility or mobile source creating 

the emission reduction. The executive director 

may approve a deviation from this subsection 

considering factors such as, but not limited to:

No Change

(1) whether an entity other than the owner or 

operator of the facility or mobile source 

incurred the cost of the emission reduction 

strategy; or

No Change

(2) whether the owner or operator of the 

facility or mobile source lacks the potential 

to generate 1/10 ton of credit.

No Change

36
TCEQ revised section 101.302 by moving the international trading provisions to new 

section 101.305 in response to EPA’s September 6, 2006 conditional approval of the 

DERC program; in our conditional approval we recommended restructuring the rules to 

more clearly identify the international provisions. The revisions to the protocol provisions 

at 101.302(d)(1)(C)(vi) were also made in response to EPA’s conditional approval of the 

DERC program; in our conditional approval we recommended revisions to more clearly 

align the Texas ERC program with the EIP Guidance Section 5.2(c). The revisions to 

101.302 are approvable.

Table IV-A3.2: New § 101.305 – Emission Reductions Achieved Outside the United 

States

Adopted State Language

October 4, 2006

Rule Project Number 2005-054-101-PR

(a) A facility may use reductions achieved outside the United States of criteria pollutants or precursors of 

criteria pollutants if the facility meets the requirements of subsection (c) of this section.

(b) A facility may use reductions achieved outside the United States of criteria pollutants or precursors of 

criteria pollutants and substitute these reductions for reductions in other criteria pollutants or 

precursors of criteria pollutants if the facility meets the requirements of subsection (c) of this section; 

and

(1) the reduction is substituted for the reduction of another criteria pollutant and the substitution 

results in a greater health benefit and is of equal or greater benefit to the overall air quality of the 

area; or

(2) a reduction of an air contaminant for which the area in which the facility is located has been 

designated as nonattainment or which leads to the formation of a criteria pollutant for which an 

area has been designated as nonattainment is substituted for any air contaminant for which the 

area has been designated as nonattainment or leads to the formation of any criteria pollutant for 

which the area has been designated as nonattainment.

(c) The use of reductions outside the United States must be approved by the executive director and the 

United States Environmental Protection Agency (EPA), and the user of the emission reduction must:

(1) demonstrate to the executive director and EPA that the reduction is real, permanent, enforceable, 

quantifiable, and surplus to any applicable Mexican, federal, state, or local law;

(2) demonstrate that the use of the reduction does not cause localized health impacts, as determined 

by the executive director and EPA;

(3) submit all supporting information for calculations and modeling, and any additional information 

requested by the executive director and EPA; and

(4) be located within 100 kilometers of the Texas-Mexico border.

(d) This section does not apply to reductions in emissions of lead.

TCEQ created new section 101.305 in response to EPA’s conditional approval of the 

DERC rule in which we requested more clarity that EPA approval is required for the 

international trading provisions. EPA approved international reduction language on 

September 6, 2006 in our original ERC approval. At that time, section 101.302(a)(2) 

established requirements for substituting one pollutant for another and section 101.302(f)

provided the geographic restrictions for using international emission reductions. The 

37
October 24, 2006 revisions to the ERC program moved the international provisions to 

new section 101.305 and changed an “and” statement to an “or” statement. While EPA 

supports the new section for international trading provisions, the revised language has the 

potential to change the underlying basis of the ERC program and the original intent of 

EPA’s approval.

New section 101.305 does not provide that a reduction in Mexico will be certified as an 

ERC in the TCEQ Emissions Bank, instead the reductions in Mexico would be used by a 

Texas source in lieu of an ERC. Revised section 101.302(f) states that, with the exception 

of the reductions under section 101.305, the reductions certified as ERCs must be used in 

the nonattainment area of generation or receive prior approval by the TCEQ and EPA. 

Section 101.305 does not include any restriction that requires the reduction from Mexico 

to be used in a nonattainment area. Rather, section 101.305(c)(4) only requires the US 

facility to be within 100 kilometers of the Texas-Mexico border. Therefore, Mexican 

reductions that are not certifiable as ERCs can be used anywhere within 100km of the 

border regardless of the attainment status in the United States. The previous international 

emissions reduction language approved by EPA on September 6, 2006 (71 FR 52698), 

limited the use of international reductions to Texas nonattainment areas within 100km of 

the border – at the time of our approval, the El Paso area was the only nonattainment area. 

Limiting the use of ERCs or international reductions in lieu of ERCs to nonattainment 

areas was in keeping with the intent of our original ERC approval which was to provide 

flexibility to sources in nonattainment areas. 

EPA commented on May 30, 2006, that this new section 101.305 appeared to expand the 

ERC rule beyond its intended scope and could pose section 110(l) concerns because it was 

outside of our original approval of the ERC program. TCEQ’s response to comments on 

this rulemaking states “If as expected, El Paso is reclassified as an attainment area, the 

adopted rule change will allow beneficial emission reduction substitutions to continue as a 

result of reductions achieved in Ciudad Juarez without relating those emission reductions 

to the attainment status of El Paso.”

EPA finds that new section 101.305 has expanded the scope of our original ERC program 

approval because it does allow the use of international reductions in lieu of ERCs to occur 

in attainment areas within 100-km of the Texas-Mexico border. However the continued 

requirement at section 101.305 for EPA approval before any such use is consistent with 

the intent of our ERC program approval on September 6, 2006. EPA approval continues 

to be through a case-specific SIP revision that must clearly demonstrate through a detailed 

110(l) analysis that the use of such international reductions will not jeopardize attainment 

or maintenance of the NAAQS or any other applicable standards. As noted in our 

September 6, 2006, final approval of the ERC Program “...international trades present an 

especially difficult case. For instance, currently there is no approvable mechanism for 

demonstrating that reductions made in another country are surplus or enforceable. 

Nonetheless, emission reductions in other countries could potentially offer substantial air 

quality benefits in the United States.” See 71 FR 52698, 52699. In approving this revision 

38
to the ERC program, EPA is continuing to recognize “the concept of international trading 

and describing a framework (i.e., the submission of a SIP revision demonstrating among 

other things the validity and enforceability of foreign reductions) for such trading, in the 

event that a suitable and approvable mechanism is ever developed for resolving concerns 

including enforceability and surplus. Until such a mechanism is developed and approved 

by EPA, however, EPA will not approve international trades under the ERC rule.” See 71 

FR 52698, 52699. Further, it is important to note, that even though we are approving the 

use of international reductions in lieu of ERCs along the Texas-Mexico border, the use of 

these reductions must still meet the requirements of the CAA. Therefore, the international 

reductions are not available for use as federal NSR offsets since section 173(c)(1) of the 

CAA requires that offset reductions come from the same nonattainment area as the 

proposed source or modification or another nonattainment area with an equal or higher 

nonattainment classification.

In addition to the expansion of scope concern highlighted previously, EPA also made 

several other comments regarding new section 101.305 in our May 30, 2006, comment

letter. These additional comments suggested alternate wording and requested clarification 

from TCEQ. The TCEQ adequately addressed these comments and revised the proposed

section accordingly.

The provisions at new section 101.305 are approvable with the caveats specified above for 

EPA approval of any trades involving international emission reductions.

Table IV-A3.3: Revisions to § 101.306 – Emission Credit Use

Federally Approved Version

September 6, 2006

71 FR 52698

Adopted State Language

October 4, 2006

Rule Project Number 2005-054-101-PR

(a) Uses for emission credits. Unless precluded by 

a commission order or a condition or conditions 

within an authorization under the same 

commission account number, emission credits 

may be used as the following:

No change

(1) offsets for a new source, as defined in § 

101.1 of this title or major modification to 

an existing source;

No change

(2) mitigation offsets for action by federal 

agencies under § 101.30 of this title;

No change

(3) an alternative means of compliance with 

VOC and NOX reduction requirements to 

the extent allowed in Chapters 114, 115, 

and 117 of this title;

No change

39
(4) reductions certified as emission credits may

be used in netting by the original applicant, 

if not used, sold, reserved for use, or 

otherwise relied upon, as provided in § 

116.150 of this title;

No change

(5) an annual allocation of allowances as 

provided in § 101.356 of this title;

(5) an annual allocation of allowances as 

provided in § 101.356 and § 101.399 of 

this title;

(6) compliance with motor vehicle fleet 

requirements to the extent allowed by § 

114.201 of this title;

No change

(7) compliance with other requirements as 

allowable within the guidelines of local, 

state, and federal laws.

No change

(b) Credit use calculation. No change

(1) The number of emission credits needed by

the user for offsets shall be determined as 

provided in § 116.150 of this title.

No change

(2) For emission credits used in compliance 

with Chapter 114, 115, or 117 of this title, 

the number of emission credits needed 

should be determined according to the 

following equation plus an additional 10% 

to be retired as an environmental 

contribution.

Figure: 30 TAC § 101.306(b)(2)

No change

(3) For emission credits used to comply with 

§§ 117.108, 117.210, or 117.223 of this 

title, the number of emission credits needed 

for increasing the 30-day rolling average 

cap or maximum daily cap should be 

determined according to the following 

equation plus an additional 10% to be 

retired as an environmental contribution.

Figure: 30 TAC § 101.306(b)(3)

No change

(4) Emission credits used for compliance with 

any other applicable program should be 

determined in accordance with the 

requirements of that program and must 

contain at least 10% extra to be retired as 

an environmental contribution, unless 

otherwise specified by that program.

No change

(c) Notice of intent to use emission credits. No change

40
(1) For emission credits which are to be used 

as offsets in a New Source Review permit 

in accordance with Chapter 116 of this 

title, the emission credits must be identified 

prior to permit issuance. Prior to 

construction, the offsets must be provided 

through submittal of a completed EC-3 

Form, Notice of Intent to Use Emission 

Credits, along with the original emission 

credit certificate.

No change

(2) For emission credits that are to be used for 

compliance with the requirements of 

Chapter 114, 115, or 117 of this title or 

other programs, the user must submit a 

completed EC-3 Form along with the 

original emission credit certificate, at least 

90 days prior to the planned use of the 

emission credit. Emission credits may be 

used only after the executive director grants 

approval of the notice of intent to use. The 

user must also keep a copy of the emission 

credit certificate, the notice, and all backup 

in accordance with § 101.302(g) of this 

title.

No change

(3) If the executive director denies the facility

or mobile source’s use of emission credits, 

any affected person by the executive 

director’s decision may file a motion for 

reconsideration within 60 days of the 

denial. Notwithstanding the applicability

provisions of § 50.31(c)(7) of this title, the 

requirements of § 50.39 of this title shall 

apply. Only an affected person may file a 

motion for reconsideration.

No change

The revisions to section 101.306(a)(5) update the list of acceptable ERC uses to include 

ERCs for use in the Highly-Reactive Volatile Organic Compound Emissions Cap and 

Trade Program at 30 TAC Chapter 101, Subchapter H, Division 6, Section 101.399, per 

TCEQ’s commitments in the September 8, 2005, letter to EPA. The revisions to section 

101.306 are approvable.

41
IV.A. Evaluation of the October 24, 2006 SIP Submittal

4. Evaluation of the October 24, 2006 SIP Submittal with respect to section 

110(l) of the CAA

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

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

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

Administrator shall not approve a revision of a plan if the revision would 

interfere with any applicable requirement concerning attainment and reasonable 

further progress (as defined in section 171), or any other applicable requirement 

of this Act. 

Thus, under section 110(l), this SIP revision must not interfere with attainment or 

reasonable further progress or any other applicable requirement of the Act. 

Because this analysis only focuses on the revisions to sections 101.302, 101.305 and 

101.306 of the ERC program, this 110(l) analysis will also only focus on these pieces of 

the October 24, 2006 SIP revision. The revisions to section 101.302 will not interfere 

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

Act because the revisions removed optional provisions for international reductions and 

clarified the already SIP-approved procedure to use an emission quantification protocol. 

The revisions to section 101.306 will also not interfere with attainment, reasonable further 

progress or any other applicable requirement of the Act because this section has been 

revised to update the ERC usage list to include the SIP-approved option of using ERCs as 

allowances in the HECT program. The revisions to section 101.305 could possibly 

interfere with attainment, reasonable further progress or any other applicable requirement 

of the Act because these revisions expand the use of international reductions to any 

location within 100-km of the Texas-Mexico border, rather than consolidating the use of 

international reductions to nonattainment areas within 100-km of the Texas-Mexico 

border. However, any use of international reductions in lieu of ERCs as specified in 

section 101.305 is subject to EPA approval. Our approval will be through a case-specific 

SIP revision and based on a thorough section 110(l) demonstration from the TCEQ or the 

source that demonstrates the use of international reductions does not interfere with 

attainment, reasonable further progress, or any other applicable requirement of the Act.

42
IV.B. Evaluation of the August 16, 2007 SIP Submittal

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

Appendix V Completeness Checklist

Part 51, Appendix V Completeness Checklists

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

determining the completeness of plan submissions and is outlined below: 

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

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

submission for purposes of review under § 51.103. 

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

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

identifying the component(s) absent or insufficient to perform a review of the 

submitted plan.

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

meets the requirements of this appendix V within 60 days of EPA's receipt of the 

submittal, but no later than 6 months after the date which the State was required to 

submit the plan or revision. If a completeness determination is not made by 6 

months from receipt of a submittal, the submittal shall be deemed complete by 

operation of law on the date 6 months from receipt. A determination of

completeness under this paragraph means that the submission is an official 

submission for purposes of §51.103.

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

V. 

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

previously adopted to expedite the review of plans. This feature, however, is being 

deleted from the next revised CFR on completeness. Therefore, it is not included in the 

checklist.

43
SIP Completeness Checklist for the August 16, 2007 SIP Submittal

Rule Log No: 2006-053-101-PR

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

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

to assure SIP submittals meet Appendix V criteria.

Administrative Materials (2.1)

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

designee requesting EPA's approval of the revision.

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

Chairman of the Texas Commission on Environmental Quality, dated August 16, 

2007. Governor Rick Perry designated that the Chairman of the Texas 

Commission on Environmental Quality would be his designee for SIP submittals 

in a letter dated May 21, 2002.

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

body of regulations, or that the State has issued the permit, order, consent 

agreement (hereafter document) in final form. This evidence would include the 

date of adoption or final issuance and the effective date of revision, if different 

from adoption/issuance date.

The revisions were adopted by the Texas Commission on Environmental Quality 

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

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

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

authority.

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

Chapter 101, Subchapter A – General Rules; Subchapter H – Emissions Banking 

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

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

and incorporation by reference into the SIP including an indication of the changes 

made to the existing approved plan where applicable. The submittal shall be a 

copy of the official State regulation document signed, stamped, and dated by the 

appropriate State official indicating that it is fully enforceable by the State. The 

effective date of the regulation document shall, whenever possible, be indicated in 

the document itself.

44
The August 16, 2007, submittal included a copy of the official State regulation 

document, signed, stamped, and dated by Kathleen Hartnett White, Chairman of 

the Texas Natural Resource Conservation Commission.

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

laws and/or its constitution in the conducting and completing the 

adoption/issuance of the plan. 

The authority for promulgating changes to the Texas State Implementation Plan 

is found in the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety 

Code.

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

consistent with the procedures approved by EPA, including the date of publication 

of such notice, (e.g., notarized or certified copies of any public notices published in 

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

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

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

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

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

laws and constitution, if applicable.

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

101 provided evidence that the public hearing was conducted pursuant to Texas 

Health and Safety Code § 382.017 and 40 CFR § 51.102.

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

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

State’s responses. The TCEQ received written comments from EPA Region 6 and 

Michelle Bonilla, a public citizen with Eternal Springs Wellness.

Technical Support (2.2)

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

package.

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

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

Subchapter A. This section has no applicable regulated pollutants.

45
Chapter 101, Subchapter H, Division 1 (ERC Program) applies to criteria 

pollutants, and precursors, for which an area is designated nonattianment with 

the exception of lead. Chapter 101, Subchapter H, Division 3 (MECT Program) 

applies to NOX emissions. Chapter 101, Subchapter H, Division 4 (DERC 

Program) applies to criteria pollutants, and precursors, with the exception of 

lead. Chapter 101, Subchapter H, Division 5 (SCT Program) applies to NOX

emissions. However, the SIP revision under review does not change the 

applicability of these programs and therefore does not need to restate the list of 

regulated pollutants that were submitted as part of the original SIP submittals 

establishing each program.

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

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

attainment plan for the affected area(s) is included.

The revisions to Chapter 101, Subchapter A apply statewide. 

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

apply to all nonattainment areas statewide.

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

apply only to facilities in the Houston/Galveston/Brazoria ozone nonattainment 

area.

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

apply statewide.

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

apply to nonattainment areas statewide and areas with unique emission limits 

established in Chapter 117.

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

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

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

actual emissions from affected sources through calculations of the differences 

between certain baseline levels and allowable emissions anticipated if the revisions 

were approved.)

Quantification of the changes in SIP allowable emissions from the affected 

sources is not applicable to this SIP revision. 

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

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

implemented.

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

programs. 

46
5. FOR REDESIGNATIONS:

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

quality standards for at least 10 years as required by §175A of the Clean 

Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

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

Modeling information is not necessary to support the SIP revision.

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

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

equipment designs, reformulated materials, etc.).

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

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

work practice standards, and recordkeeping/reporting requirements to ensure 

stated emission levels.

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

individual permit. 

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

in practice (including at what frequency).

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

in each individual permit. 

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

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

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

justification.

These justifications are not necessary for this SIP revision.

47
The SIP submittal of Rule Log No.: 2006-053-101-AI meets the completeness 

criteria.

48
IV.B. Evaluation of the August 16, 2007 SIP Submittal

2. Evaluation of the August 16, 2007, SIP submittal with respect to the 

requirements of 40 CFR Part 51

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

found in 40 CFR Part 51. The August 16, 2007 proposed ERC revisions were evaluated 

against the applicable requirements in Part 51. This analysis is included in Table IV-B2

below. The revisions to the DERC and SCT program also submitted on August 16, 2007, 

as revisions to the SIP are not included in the analysis below. The DERC and SCT 

program revisions will be acted on separately by EPA at a later date. The revisions to the 

General Air Quality Rules and the MECT program were evaluated in EPA’s July 16, 2009 

direct final approval (see 74 FR 34503).

Table IV-B2: Analysis of Part 51 Requirements

Part 51 – Requirements for Preparation, 

Adoption, and Submittal of Implementation 

Plans

ERC Program Revisions

30 TAC §§ 101.302 and 101.306

Subpart A – Emission Inventory Reporting 

Requirements

The revisions to sections 101.302 and 101.306 

update cross-references in the ERC program and 

are not concerned with emissions inventory

reporting, nor do they modify current emissions 

inventory reporting requirements for TCEQ.

Subparts B – E [Reserved] Not applicable.

Subpart F – Procedural Requirements Subpart F – Procedural Requirements

§ 51.100 Definitions § 51.100 is not applicable to the Chapter 101 

sections under review in this TSD. 51.100 

establishes definitions used elsewhere in 40 CFR 

Part 51.

§ 51.101 Stipulations § 51.101 is not applicable to the Chapter 101 

sections under review in this TSD. 51.101 

establishes the stipulations that govern the 

use/intent of 40 CFR Part 51.

49
§ 51.102 Public Hearings

 States must conduct one or more public 

hearings

 Public hearings will only be held after 

reasonable notice, given at least 30 days 

prior to the date of the hearing

 The state must submit with the revision a 

certification that the hearing was held in 

accordance with this section.

Rule Log Number 2006-053-101-PR

 TCEQ held a public hearing on this rule 

package in Austin, Texas on March 20, 2007.

 The public hearing was held after reasonable 

notice was given. TCEQ published notice of 

the public hearing in the following 

newspapers on the dates listed below for this 

rule package:

 Austin American Statesman – February 12, 

2007;

 Fort Worth Star Telegram – February 12, 

2007;

 Houston Chronicle – February 12, 2007.

 The SIP submittal included certification that 

the public hearing was held in accordance 

with Texas Health and Safety Code § 382.017 

and 40 CFR 51.102.

§ 51.103 Submission of plans, preliminary review 

of plans

 The state makes an official plan 

submission to EPA only when the 

submission conforms to the requirements 

of Part 51, Appendix V.

 The state delivers 5 copies of the plan with 

a letter giving notice of the action to the 

EPA regional office.

Please see Section IV.B.1. of this document for the 

completed Appendix V checklists for the rule 

package.

The rule package meets the requirements for 

completeness.

§ 51.104 Revisions

 States may revise the plan from time to 

time

 EPA will approve revisions only after 

appropriate public hearing requirements 

have been met

 Revisions must be submitted in accordance 

with 51.103

Kathleen Hartnett White submitted the Chapter 101 

revisions as SIP revisions on August 16, 2007.

Subpart G – Control Strategy Subpart G – Control Strategy

§ 51.110 Attainment and Maintenance of National 

Standards

Requirements found in § 51.110 are not applicable 

to the SIP submittal under review in this document. 

The revisions to sections 101.302 and 101.306 

update the ERC program to appropriately crossreference the recodification of the Chapter 117 

requirements and do not change the functionality of 

the ERC program.

The ERC program is a discretionary EIP that 

provides for the voluntary generation and use of 

emission reduction credits. The ERC program is 

not an integral control strategy in any of the Texas 

Attainment Demonstrations. However, EPA 

expects the TCEQ to account for the generation 

and use of ECs in all attainment demonstrations.

50
§ 51.111 Description of Control Measures Requirements found in § 51.110 are not applicable 

to the SIP submittal under review in this document. 

The ERC program does not establish control 

strategies for Texas, rather the program provides 

for the voluntary generation and use of ECs.

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

to the SIP submittal under review in this document. 

Since the ERC program is not an integral piece of 

an attainment strategy, it is not necessary that the 

ERC program demonstrate adequacy for 

maintaining a national standard.

§ 51.113 Reserved Not applicable.

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

to the SIP submittal under review in this document. 

As the ERC program is not part of an attainment 

demonstration, the ERC program SIP revision does 

not need to provide a detailed emission inventory

and summary of projected emission levels after the 

implementation of control strategies.

However, the ERC program does require that 

generators and users submit applications to the 

TCEQ that estimate and verify the emission 

reductions that are generated and/or used.

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

to the SIP submittal under review in this document. 

The ERC program is not part of an attainment 

plan, therefore it is not necessary that the ERC a 

revision SIP submittal includes data on existing air 

quality or summarize expected air quality impacts 

from the implementation of control strategies.

§ 51.116 Data Availability

The State must make available to the public all data 

and calculations used in the preparation of each 

plan or plan revision.

Each plan must provide for public availability of 

emission data reported by source owners or 

operators.

The TCEQ provided the public the opportunity to 

participate in stakeholder meetings in the 

rulemaking development process, and the public 

received comment periods on the proposed plan.

The Texas Clean Air Act, Texas Health and Safety

Code at Section 382.040 requires that all 

information submitted to the TCEQ for compliance 

purposes be made available to the public, unless a 

written request for nondisclosure is approved. 

§ 51.117 Additional provisions for lead Lead requirements found in § 51.117 are not 

applicable to the ERC program. The ERC program 

does not apply to lead emissions.

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

to the SIP submittal under review in this document. 

The ERC program is a discretionary program for 

voluntary generation and use of ECs and does not 

involve good engineering practices for stack 

heights.

51
§ 51.119 Intermittent Control Systems Requirements found in § 51.119 are not applicable 

to the SIP submittal under review in this document. 

The ERC program is a discretionary program for 

voluntary generation and use of ECs and does not 

require intermittent control systems.

§ 51.120 Requirements for State Implementation 

Plan Revisions relating to Motor Vehicles

Requirements found in § 51.120 are not applicable 

to the SIP submittal under review in this document. 

The ERC program does provide for the generation 

and use of mobile emission reductions, but that is 

not related to the part 51 requirements for SIP 

revisions relating to motor vehicles.

§ 51.121 Findings and requirements for 

submission of State Implementation Plan Revisions 

relating to emissions of oxides of nitrogen

Requirements found in § 51.121 are not applicable 

to the SIP submittal under review in this document. 

§ 51.121 establishes the requirements for the NOX

SIP Call; Texas was not subject to the NOX SIP 

Call.

§ 51.122 Emissions reporting requirements for SIP 

revisions relating to budgets for NOX emissions.

Requirements found in § 51.122 are not applicable 

to the SIP submittal under review in this document. 

§ 51.122 establishes the emission reporting 

requirements for the NOX SIP Call; Texas was not 

subject to the NOX SIP Call.

§ 51.123 Findings and requirements for 

submission of State Implementation Plan Revisions 

relating to Emissions of Oxides of Nitrogen 

pursuant to the Clean Air Interstate Rule

Requirements found in § 51.123 are not applicable 

to the SIP submittal under review in this document. 

§ 51.123 establishes the requirements for the NOX

Annual and Ozone season programs for the Clean 

Air Interstate Rule (CAIR).

§ 51.124 Findings and requirements for 

submission of State Implementation Plan Revisions 

relating to Emissions of Sulfur Dioxide pursuant to 

the Clean Air Interstate Rule

Requirements found in § 51.124 are not applicable 

to the SIP submittal under review in this document. 

§ 51.124 establishes the program requirements for 

the CAIR SO2 Programs.

§ 51.125 Emissions reporting requirements for SIP 

revisions relating to budgets for SO2 and NOX

emissions.

Requirements found in § 51.125 are not applicable 

to the SIP submittal under review in this document. 

§ 51.125 establishes the emission reporting 

requirements for the CAIR NOX and SO2 trading 

programs.

Subpart H – Prevention of Air Pollution Emergency

Episodes

Requirements found in 51, Subpart H are not 

applicable to the SIP submittal under review in this 

document. The ERC program is a discretionary

program for the generation and use of ECs and is 

not part of the Texas air pollution emergency

episode plan.

52
Subpart I – Review of New Sources and 

Modifications

§ 101.306(a)(1) provides that ECs can be used as 

NSR permit offsets.

§ 101.306(a)(4) provides that ECs may be used for 

NSR netting by the original applicant if not used, 

sold, reserved for use, or otherwise relied upon as 

provided in § 116.150.

EPA reviewed the use of ERCs and MERCs as 

NSR offsets and netting as part of our approval of 

the program, and found these provisions of the 

ERC program to meet the NSR offset requirements 

of section 173 of the CAA and 51.165. The 

revisions to the ERC program submitted in this SIP 

submittal do not revise § 101.306(a)(1) or (a)(4). 

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

applicable to the SIP submittal under review in this 

document. Ambient air quality surveillance is not 

part of the ERC program.

Subpart K – Source Surveillance Subpart K – Source Surveillance

§ 51.210 Each plan must provide for monitoring 

the status of compliance with rules and regulations 

that set forth any portion of the control strategy.

The Texas ERC program was developed and 

submitted in accordance with the Texas Health and 

Safety Code. Texas enforcement provisions are not 

typically in the State’s individual rules but are 

separately codified. Texas Water Code Chapter 7 

contains the State’s statutory provisions for 

enforcement of programs developed according to 

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

ERC program. Section 382.111 of the Texas 

Health and Safety Code provides the ability to enter 

and periodically inspect stationary sources. Section 

382.021 establishes that the Texas Commission on 

Environmental Quality can determine the necessary

sampling and detection methods used to 

demonstrate compliance with an emission 

limitation. 

§ 51.211 The plan must provide for legally

enforceable procedures for requiring stationary

sources to maintain records and report the 

following to the State:

 Information on the nature and amount of 

emissions from the stationary source; and

 Other information as necessary for the State to 

determine whether the sources are in 

compliance.

§ 51.212 The plan must provide for periodic testing 

and inspection of stationary sources. Additionally, 

the plan must establish a system for detecting 

violations and include enforceable test methods.

§ 51.213 The plan must contain procedures for 

obtaining and maintaining data on actual emissions 

reductions achieved as a result of implementing 

transportation control measures.

§ 51.213 is not applicable to the ERC program. 

While the ERC program does provide for the 

generation and use of mobile emission reductions, 

these reductions must be surplus to transportation 

control measures in the SIP.

§ 51.214 The plan must contain legally enforceable 

procedures to require stationary sources subject to 

emission standards as part of the applicable plan to 

install, calibrate, maintain, and operate continuous 

emission monitoring systems.

The ERC program does not establish emission 

standards under the Texas SIP that would mandate 

the installation or use of continuous emission 

monitoring systems. However, section 

101.302(d)(2) provides the quantification 

procedures for ECs, and continuous monitoring 

data is an acceptable data source for actual 

emissions data in the event that the SIP approved 

testing and monitoring methods in Chapter 115 

and Chapter 117 are not available.

Subpart L – Legal Authority Subpart L – Legal Authority

53
§ 51.230 Each plan must show that the State has 

the necessary legal authority to carry out the plan, 

including the authority to adopt emission standards 

and limitations necessary for attainment of the 

NAAQS, enforce applicable laws and regulations 

and seek injunctive relief.

The ERC program was developed and submitted in 

accordance with the Texas Clean Air Act, Chapter 

382 of the Texas Health and Safety Code. The 

Texas Health and Safety Code and the enforcement 

provisions in the Texas Water Code provide TCEQ 

the necessary legal authority to implement the SIP. 

A more detailed discussion immediately follows 

this table.

§ 51.231 The provision of law or regulation which 

the State determines provides the authorities 

required must be specifically identified and copies 

must be submitted with the plan. 

Texas identified in the submittal package that the 

SIP revision was developed in accordance with the 

Texas Health and Safety Code. EPA Region 6 does 

not require the State to submit copies of laws and 

regulations that have been submitted for prior SIP 

submittals. 

§ 51.232 A state government agency other than the 

State air pollution control agency may be assigned 

responsibility for carrying out a portion of the plan.

The Chapter 101 revisions identified the TCEQ as 

the agency responsible for implementing the SIP.

Subpart M – Intergovernmental Consultation The Chapter 101 revisions identified the TCEQ as 

the agency responsible for developing, 

implementing, and enforcing the SIP.

Subpart N – Compliance Schedule The ERC program establishes an economic 

incentive program for the voluntary generation and 

use of ECs. This program does not establish a 

compliance schedule for any NAAQS, and 

therefore do not need to address the requirements 

of 40 CFR part 51, subpart N. 

However, the ERC program provides mechanisms 

by which users of ECs must demonstrate they have 

enough credits to cover their use obligations, see 

section 101.306. Section 101.309 provides for 

program audits and reporting through which the 

TCEQ will demonstrate to EPA and the public that 

the ERC program is operating effectively. 

54
Subpart O – Miscellaneous Plan Content 

Requirements

 Each plan must include a description of 

resources available to the State at the date of 

the submittal of the plan and during the next 5-

years.

 Copies of all rules and regulations that are 

necessary to attain and maintain the NAAQS 

must be submitted.

 Each plan must provide for public notification 

when a standard has been violated

 During the development of the Chapter 101 

SIP revisions, the TCEQ determined that their 

fiscal and manpower resources are adequate 

and will not be adversely affected through the 

implementation of the revisions to the General 

Air Quality Rules. This analysis is 

documented in the preamble to the proposed 

and final rulemakings. 

 The revisions to Chapter 101 do not establish 

new emission limits or control strategies, 

therefore it is not necessary that a copy of all 

rules and regulations related to attaining or 

maintaining the NAAQS be submitted. 

 The Chapter 101 the revisions do not revise the 

public notice aspects of the Texas permit 

programs. Therefore it is not necessary for this 

SIP submittal to establish procedures whereby 

the public will be notified of NAAQS 

violations.

Subpart P – Protection of Visibility The Chapter 101 revisions are not submitted as part 

of Texas’s plan to protect visibility. 

Subpart Q – Reports The Chapter 101 revisions do not revise the 

existing reporting requirements for the emission 

inventory in the Texas SIP. EPA approved the 

emission inventory requirements at 30 TAC 101.10 

on August 26, 1994 (59 FR 44036).

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

applicable to the SIP submittal under review in this 

document. The Chapter 101 revisions submittal is 

not a request for an 18-month extension.

Subpart S – Inspection/Maintenance Program 

Requirements

Requirements found in 51, Subpart S are not 

applicable to the SIP submittal under review in this 

document. The Chapter 101 revisions are not 

related to an inspection/maintenance program.

Subpart T – Conformity to State or Federal 

Implementation Plans of Transportation Plans, 

Programs, and Projects Developed, Funded, or 

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

Transit Laws

The Chapter 101 revisions do not interfere with or 

change the transportation conformity budgets 

developed for each nonattainment and maintenance 

area pursuant to subpart T. 

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

for statutorily mandated economic incentive 

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

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

program is a discretionary economic incentive 

program, and therefore not subject to the 

requirements of subpart U.

Subpart W – Determining Conformity of General 

Federal Actions to State or Federal Implementation 

Plans

The Chapter 101 revisions do not change or modify

the Texas procedures used to determine conformity

of federal actions, consistent with subpart W. 

55
Subpart X – Provisions for Implementation of 8-hr 

Ozone NAAQS

Requirements found in 51, Subpart X are for the 

implementation of the 8-hour ozone NAAQS. The 

Chapter 101 revisions, while updating air quality

rules for use in ozone nonattainment areas, do not 

establish the measures by which an area will 

achieve attainment of the 8-hr ozone NAAQS.

Subpart Y – Mitigation Requirements The Chapter 101 revisions do not create procedures 

by which Texas could exclude air quality data due 

to exceptional events.

Subpart Z – Provisions for Implementation of 

PM2.5 National Ambient Air Quality Standards

Requirements found in 51, Subpart X are for the 

implementation of the PM2.5 NAAQS. The 

Chapter 101 revisions do not establish procedures 

for implementing the PM2.5 NAAQS.

56
Does TCEQ have the necessary legal authority to implement the revisions to 30 TAC 

Sections 101.302 and 101.306 as part of the SIP?

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

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

for enforcement of the Texas ERC program. In particular, TWC § 7.051 provides for the 

assessment of administrative penalties by the TCEQ, and § 7.032 provides for injunctive 

relief by the TCEQ. The TCEQ enforcement rule at 30 TAC § 70.5 incorporates remedies 

found in the state statutes (Texas Water Code and the Texas Health and Safety Code), and 

permits referrals to EPA for civil, judicial or administrative action. It is our conclusion 

that TCEQ has adequate legal authority to enforce the ERC program revisions as part of 

the SIP. Once we approve the revisions to the ERC program into the SIP, EPA will be 

able to enforce it under section 113 of the Clean Air Act.

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

National Emission Standards for Hazardous Air Pollutants (NESHAPs) have been 

reviewed and found to have sufficient enforcement provisions. These same enforcement 

provisions will apply to the ERC Program. The Office of the Attorney General of the State 

of Texas has provided written opinions for these programs. The opinions state that TCEQ 

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

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

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

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

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

standards that are no less stringent than those specified by the CAA. The cited laws and 

regulations are: Texas Health and Safety Code Ann. sections 382.016 (Monitoring 

Requirements, Examination of Records), 382.021 (Sampling Methods and Procedures), 

382.0514 (Sampling, Monitoring and Certification); 30 TAC sections 122.132 

(Application and Required Information for Initial Permit Issuance, Reopening, Renewal, 

or General Operating Permits), 122.134 (Complete Application), 122.136 (Application 

Deficiencies), 122.142 (Permit Content Requirements), 122.143 (General Terms and 

Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms 

and Conditions), 122.146 (Compliance Certification Terms and Conditions), 122.165 

(Certification by Responsible Official; 30 TAC sections 101.8 (Sampling), 101.9 

(Sampling Ports).

Recordkeeping requirements specific to the ERC rule are set forth at § 101.302(g). The 

Attorney General has determined that TCEQ is allowed to prescribe sampling methods 

and procedures to be used to determine violations of and compliance with the TCEQ rules 

and orders. The ERC rule provides that any use of monitoring protocols other than those 

specified in Chapter 115 and Chapter 117 will be approved by EPA (§101.302(d)(1)). 

The rule also specifies procedures in the event that monitoring and testing data are 

unavailable at § 101.302(d). The opinions of the Texas Attorney General indicate that 

57
TCEQ has the necessary legal authority to implement and enforce the ERC program in 

accordance with the requirements of the Clean Air Act. 

EPA’s guidance on practicable enforceability (provided in the FDMS docket for this 

action) is a series of agency memos on limiting potential to emit. While this guidance is 

not directly applicable to an emissions trading program, the requirements for sufficient 

monitoring do apply to the ERC program. The sources generating and certifying emission 

reductions as ECs must be able to quantify the emission reduction over time. The ERC 

program meets EPA’s expectations on practicable enforceability by requiring sites to 

calculate emission reductions using an EPA approved protocol. Facilities subject to the 

control specifications in Chapters 115 and 117 must use the testing and monitoring 

methodologies identified to show compliance with the emission standards. If this 

monitoring or testing data is unavailable or does not exist, the facility may report actual 

emissions for that period of time using the methods listed below in the following order of 

preference:

1. Continuous monitoring data;

2. Periodic monitoring data;

3. Testing data;

4. Manufacturer’s data;

5. Material balance.

A facility must submit justification to the TCEQ when not using the monitoring and testing 

protocols in Chapters 115 and 117.

For the above reasons EPA has concluded that the ERC program meets the Clean Air Act 

requirements and EPA EIP Guidance expectations for penalties, corrective action, and 

practicable enforceability in the integrity element of enforceable.

58
IV.B. Evaluation of the August 16, 2007 SIP Submittal

3. Evaluation of the August 16, 2007 Revisions to the Texas ERC Program with 

respect to the existing SIP-approved language and the EIP Guidance

The evaluation of the ERC program with respect to the EIP Guidance was conducted with 

our proposed approval on October 5, 2005 (70 FR 58146) and final approval on 

September 6, 2006 (71 FR 52698). The August 16, 2007, rule package currently under 

review in this TSD does not change the type of program or functionality of the ERC 

trading program with respect to the EIP Guidance. Therefore, the evaluation of the 

revisions to the ERC and program at sections 101.302and 101.306 will include a line item 

comparison of the federally approved ERC program and the State’s adopted revisions to 

determine approvability. Approvability of each revision will be based on the EIP 

Guidance and whether the measure strengthens the SIP. Note that this analysis will not 

reevaluate the portions of the ERC program that have not been revised since our final 

actions on September 6, 2006.

Table IV-B3.1: Revisions to § 101.302 – General Provisions

Federally Approved Version

September 6, 2006

71 FR 52698

Adopted State Language

October 4, 2006

Rule Project Number 2005-054-

101-PR

Adopted State Language

July 25, 2007

Rule Project Number 2006-053-

101-PR

(a) Applicable pollutants. 

Reductions of criteria 

pollutants, excluding lead, or 

precursors of criteria 

pollutants for which an area 

is designated nonattainment, 

may qualify as emission 

credits. Reductions of one 

pollutant may not be used to 

meet the requirements for 

another pollutant, unless:

(a) Applicable pollutants. 

Reductions of criteria 

pollutants, excluding lead, or 

precursors of criteria 

pollutants for which an area 

is designated nonattainment, 

may qualify as emission 

credits. Reductions of one 

pollutant may not be used to 

meet the requirements for 

another pollutant, unless 

urban airshed modeling 

demonstrates that one ozone 

precursor may be substituted 

for another, subject to 

executive director and the 

United States Environmental 

Protection Agency (EPA) 

approval.

No Change

59
(1) urban airshed modeling 

demonstrates that one 

ozone precursor may be 

substituted for another 

subject to executive 

director and United 

States Environmental 

Protection Agency 

(EPA) approval; or

Moved to 101.302(a) No Change

(2) the facility generating 

the emission reductions 

is located outside the 

United States and:

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(A) the 

substitution:

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(i) results in a greater 

health benefit and is 

of equal or greater 

benefit to the 

overall air quality of 

the area, as 

determined by the 

executive director;

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(ii) is from the 

reduction of an air 

contaminant for 

which the area has 

been designated as 

nonattainment or 

which leads to the 

formation of a 

criteria pollutant for 

which an area has 

been designated as 

nonattainment; and

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(iii)is for any air 

contaminant for 

which the area has 

been designated as 

nonattainment or 

leads to the 

formation of a 

criteria pollutant for 

which the area has 

been designated as 

nonattainment; and

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(B) the user: International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

60
(i) demonstrates that 

the use of the 

reduction does not 

cause localized 

health impacts, as 

determined by the 

executive director;

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(ii) submits all 

supporting 

information for 

calculations and 

modeling, and any

additional 

information 

requested by the 

executive director; 

and

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(iii) is located within 

100 kilometers of 

the Texas - Mexico 

border.

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(b) Eligible generator 

categories. The following 

categories are eligible to 

generate emission credits:

No change No Change

(1) facilities, including area 

sources;

No change No Change

(2) mobile sources; and No change No Change

(3) any facility, including 

area sources, or mobile 

source associated with 

actions by federal 

agencies under §101.30 

of this title (relating to 

Conformity of General 

Federal Actions to State 

Implementation Plans).

No change No Change

(c) Emission credit 

requirements.

No change No Change

(1) Emission reduction 

credits are certified 

reductions that meet the 

following requirements:

No change No Change

(A) reductions must be 

enforceable, 

permanent, 

quantifiable, real 

and surplus;

No change No Change

61
(B) the certified 

reduction must be 

surplus at the time 

it is created, as well 

as when it is used;

No change No Change

(C) in order to become 

certified, the 

reduction must have 

occurred after the 

most recent year of 

emissions inventory

used in the state 

implementation 

plan (SIP); and

No change No Change

(D) the facility's annual 

emissions prior to 

the reduction 

strategy must have 

been reported or 

represented in the 

emissions inventory

used for the SIP.

No change No Change

(2) Mobile emission 

reduction credits are 

certified reductions that 

meet the following 

requirements:

No change No Change

(A) reductions must be 

enforceable, 

permanent, 

quantifiable, real 

and surplus;

No change No Change

(B) the certified 

reduction must be 

surplus at the time 

it is created, as well 

as when it is used;

No change No Change

(C) in order to become 

certified, the 

reduction must have 

occurred after the 

most recent year of 

emissions inventory

used in SIP; and

No change No Change

62
(D) the mobile source

’s 

annual emissions 

prior to the 

emission credit 

application must 

have been 

represented in the 

emissions inventory

used for the SIP; 

and

No change No Change

(E) the mobile sources 

must have been 

included in the 

attainment 

demonstration 

baseline emissions 

inventory. 

No change No Change

(3) Emission reductions 

from a facility or mobile 

source that are certified 

as emission credits 

under this division 

cannot be recertified in 

whole or in part as 

emission credits under 

another division within 

this subchapter.

No change No Change

(d) Protocol. No change No Change

(1) All generators or users 

of emission credits shall 

use a protocol which has 

been submitted by the 

executive director to the 

EPA for approval, if 

existing for the 

applicable facility or 

mobile source, to 

measure and calculate 

baseline emissions. If 

the generator or user 

wishes to deviate from a 

protocol submitted by 

the executive director, 

EPA approval is 

required before the 

protocol can be used. 

Protocols shall be used 

as follows.

No change No Change

63
(A) Facilities subject to 

the emission 

specifications under 

§§117.106, 

117.206, or 117.475 

of this title (relating 

to Emission 

Specifications for 

Attainment 

Demonstrations; 

and Emission 

Specifications) shall 

quantify reductions 

in NOX emissions 

using the testing 

and monitoring 

methodologies 

identified to show 

compliance with the 

emission 

specification.

No change (A) Facilities subject to the 

emission specifications 

under §§ 117.110, 

117.210, 117.310, 

117.410, 117.1010, 

117.1110, 117.1210, 

117.1310, 117.2010, 

117.2110 §§117.106, 

117.206, or 117.475 of 

this title (relating to 

Emission 

Specifications for 

Attainment 

Demonstration

Demonstrations; 

Emission 

Specifications for 

Eight-Hour Attainment 

Demonstration; and 

Emission 

Specifications) shall 

quantify reductions in 

NOX emissions using 

the testing and 

monitoring 

methodologies 

identified to show 

compliance with the 

emission specification.

(B) Facilities subject to 

the requirements 

under §§115.112, 

115.121, 115.122, 

115.162, 115.211, 

115.212, 115.352, 

115.421, 115.541, 

or 115.542 (relating 

to Emission 

Specifications; and 

Control 

Requirements) shall 

quantify VOC 

reductions using the 

testing and 

monitoring 

methodologies 

identified to show 

compliance with the 

emission 

specifications or the 

requirements.

No Change No Change

64
(C) If the executive 

director has not 

submitted a protocol 

for the applicable 

facility or mobile 

source to the EPA 

for approval, the 

following applies:

No Change No Change

(i) the amount of 

emission 

credits from a 

facility or 

mobile source, 

in tons per 

year, will be 

determined and 

certified based 

on 

quantification 

methodologies 

at least as 

stringent as the 

methods used 

to demonstrate 

compliance 

with any

applicable 

requirements 

for the facility

or mobile 

source;

No Change No Change

65
(ii) the generator 

shall collect 

relevant data 

sufficient to 

characterize the 

facility’s or 

mobile source’s 

emissions of 

the affected 

pollutant and 

the facility’s or 

mobile source’s 

activity level 

for all 

representative 

phases of 

operation in 

order to 

characterize the 

facility’s or 

mobile source’s 

baseline 

emissions;

No Change No Change

(iii) facilities with 

continuous 

emissions 

monitoring 

systems or 

predictive 

emissions 

monitoring 

systems in 

place shall use 

this data in 

quantifying 

actual 

emissions;

No Change No Change

(iv) the chosen 

quantification 

protocol must 

be made 

available for 

public 

comment for a

period of 30 

days and must 

be viewable on 

the 

commission’s 

Web site;

No Change No Change

66
(v) the chosen 

quantification 

protocol and 

any comments 

received during 

the public 

comment 

period shall be 

submitted to 

the EPA for a 

45-day

adequacy 

review; and

No Change No Change

(vi) quantification 

protocols shall 

not be accepted 

for use with 

this division 

after a 

proposed 

disapproval of 

the protocol by 

the EPA in the 

Federal 

Register.

(vi) quantification protocols 

shall not be accepted for 

use with this division if 

the executive director 

receives a letter 

objecting to the use of 

the protocol from the 

EPA during the 45-day

adequacy review or the 

EPA proposes 

disapproval of the 

protocol in the Federal 

Register after a 

proposed disapproval of 

the protocol by the EPA 

in the Federal Register.

No Change

(2) In the event that the 

monitoring and testing 

data required under 

paragraph (1) of this 

subsection is missing or 

unavailable, the facility

may report actual 

emissions for that period 

of time using these 

listed methods in the 

following order of 

preference to determine 

actual emissions:

No Change No Change

(A) continuous 

monitoring data;

No Change No Change

(B) periodic monitoring 

data;

No Change No Change

(C) testing data; No Change No Change

(D) manufacturer’s 

data;

No Change No Change

67
(E) EPA Compilation of 

Air Pollution 

Emission 

Factors (AP-42), 

September 2000; or

No Change No Change

(F) material balance. No Change No Change

(3) When quantifying actual 

emissions in accordance 

with paragraph (2) of 

this subsection, the 

generator shall use the 

most conservative 

method for replacing the 

missing data, submit the 

justification for not 

using the methods in 

paragraph (1) of this 

subsection, and submit 

the justification for the 

method used.

No Change No Change

(e) Credit certification. No Change No Change

(1) The amount of emission 

credits in tons per year 

will be determined and 

certified, to the nearest 

tenth of a ton per year.

No Change No Change

(2) Applications for 

certification will be 

reviewed in order to 

determine the credibility

of the reductions. 

Reductions determined 

to be creditable will be 

certified by the 

executive director.

No Change No Change

(3) The applicant will be 

notified in writing if the 

executive director denies 

the emission credit 

application. The 

applicant may submit a 

revised application in 

accordance with the 

requirements of this 

division.

No Change No Change

68
(4) If a facility’s or mobile 

source’s actual 

emissions exceed its 

allowable emission 

limit, reductions of 

emissions exceeding the 

limit may not be 

certified as emission 

credits.

No Change No Change

(5) Applications for 

certification of emission 

credit from reductions 

quantified under 

subsection (d)(1)(C) of 

this section may only be 

approved upon 

completion of the public 

comment period.

No Change No Change

(f) Geographic scope. Except 

as provided in paragraph (3) 

of this subsection, only 

emission reductions 

generated in nonattainment 

areas can be certified. An 

emission credit must be used 

in the nonattainment area in 

which it is generated unless 

the user has obtained prior 

written approval of the 

executive director and the 

EPA; and:

(f) Geographic scope. Except 

as provided in § 101.305 of 

this title (relating to 

Emission Reductions 

Achieved Outside the 

United States) paragraph 

(3) of this subsection, only

emission reductions 

generated in nonattainment 

areas can be certified. An 

emission credit must be 

used in the nonattainment 

area in which it is 

generated unless the user 

has obtained prior written 

approval of the executive 

director and the EPA; and

No Change

(1) a demonstration has 

been made and approved 

by the executive director 

and the EPA to show 

that the emission 

reductions achieved in 

another country, state, 

or nation provide an 

improvement to the air 

quality in the county of 

use; or

No Change No Change

69
(2) the emission credit was 

generated in a 

nonattainment area that 

has an equal or higher 

nonattainment 

classification than the 

nonattainment area of 

use, and a 

demonstration has been 

made and approved by

the executive director 

and the EPA to show 

that the emissions from 

the nonattainment area 

where the emission 

credit is generated 

contribute to a violation 

of the national ambient 

air quality standard in 

the nonattainment area 

of use; or

(2) the emission credit was 

generated in a 

nonattainment area that 

has an equal or higher 

nonattainment 

classification than the 

nonattainment area of 

use, and a demonstration 

has been made and 

approved by the 

executive director and 

the EPA to show that the 

emissions from the 

nonattainment area 

where the emission credit 

is generated contribute to 

a violation of the 

national ambient air 

quality standard in the 

nonattainment area of 

use. ; or

No Change

(3) a facility is using 

emission reductions 

generated outside the 

United States that have 

been determined by the 

executive director to be 

real, permanent, 

enforceable, 

quantifiable, and surplus 

to any applicable 

international, federal, 

state, or local law and 

the result would provide 

a greater health benefit 

to the area as 

determined by the 

executive director; and 

the facility:

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(A) demonstrates that 

the use of the 

reduction does not 

cause localized 

health impacts, as 

determined by the 

executive director;

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

70
(B) submits all 

supporting 

information for 

calculations and 

modeling, and any

additional 

information 

requested by the 

executive director; 

and

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(C) be located within 

100 kilometers of 

the Texas - Mexico 

border.

International trading provisions 

have been moved to 101.305, see 

discussion below.

No Change

(g) Recordkeeping. The 

generator shall maintain a 

copy of all notices and 

backup information 

submitted to the registry for 

a minimum of five years. 

The user shall maintain a 

copy of all notices and 

backup information 

submitted to the credit 

registry from the beginning 

of the use period and for at 

least five years after. The 

user shall also make such 

records available upon 

request to representatives of 

the executive director, EPA, 

and any local enforcement 

agency. The records must 

include, but not necessarily

be limited to:

No Change No Change

(1) the name, emission 

point number, and 

facility identification 

number of each facility

or any other identifying 

number for each mobile 

source using emission 

credits;

No Change No Change

(2) the amount of emission 

credits being used by 

each facility or mobile 

source; and

No Change No Change

71
(3) the specific number, 

name, or other 

identification of 

emission credits used for 

each facility or mobile 

source.

No Change No Change

(h) Public information. All 

information submitted with 

notices, reports, and trades 

regarding the nature, 

quantity, and sales price of 

emissions associated with 

the use, generation, and 

transfer of an emission credit 

is public information and 

may not be submitted as 

confidential. Any claim of 

confidentiality for this type 

of information, or failure to 

submit all information may

result in the rejection of the 

emission credit application. 

All nonconfidential notices 

and information regarding 

the generation, availability, 

use, and transfer of emission 

credits shall be immediately

made available to the public.

No Change No Change

(i) Authorization to emit. An 

emission credit created 

under this division is a 

limited authorization to emit 

the pollutants identified in 

subsection (a) of this section, 

unless otherwise defined, in 

accordance with the 

provisions of this section, 42 

USC §§ 7401, the Texas 

Health and Safety Code 

Chapter 382, as well as 

regulations promulgated 

thereunder. An emission 

credit does not constitute a 

property right. Nothing in 

this division may be 

construed to limit the 

authority of the commission 

or the EPA to terminate or 

limit such authorization.

No Change No Change

72
(j) Program participation. The 

executive director has the 

authority to prohibit an 

organization from 

participating in emission 

credit trading either as a 

generator or user, if the 

executive director 

determines that the 

organization has violated the 

requirements of the program 

or abused the privileges 

provided by the program.

No Change No Change

(k) Compliance burden and 

enforcement. Users may not 

transfer their compliance 

burden and legal 

responsibilities to a thirdparty participant. Thirdparty participants may only

act in an advisory capacity to 

the user.

No Change No Change

(l) Credit ownership. The 

owner of the initial emission 

credit certificate shall be the 

owner or operator of the 

facility or mobile source 

creating the emission 

reduction. The executive 

director may approve a 

deviation from this 

subsection considering 

factors such as, but not 

limited to:

No Change No Change

(1) whether an entity other 

than the owner or 

operator of the facility

or mobile source 

incurred the cost of the 

emission reduction 

strategy; or

No Change No Change

(2) whether the owner or 

operator of the facility

or mobile source lacks 

the potential to generate 

1/10 ton of credit.

No Change No Change

The revisions to section 101.302 submitted on October 24, 2006, are approvable as 

discussed in Section IV.A of this TSD. The revisions to section 101.302 submitted on 

August 16, 2007 update the cross-references to the recodified Chapter 117. EPA 

proposed approval of the Chapter 117 recodification on July 11, 2008 (73 FR 39900) and 

73
finalized approval of the recodification on December 3, 2008 (73 FR 73562). The 

following table details the cross-reference change from the SIP-approved language to the 

newly recodified Chapter 117 sections. This analysis shows that the cross-references have 

been updated correctly and no previously SIP-approved sections have been overlooked in 

the recodification. In our March 23, 2007, comment letter EPA noted that the proposed 

revisions to § 101.302(d)(1)(A) incorrectly included a citation to § 117.3310. 

The TCEQ agreed with our comment and removed the cross-referenced citation prior to 

adoption. The revisions to section 101.302 submitted on August 16, 2007 are approvable.

Table IV-B3.2: Cross-References between Section 101.302 and Chapter 117

SIP-Approved References in § 101.302 Recodified Chapter 117 References in the 

August 16, 2007 SIP Submittal of Section 

101.302

§ 117.106 – Emission Specifications for

Attainment Demonstrations for Utility Electric 

Generation in Ozone Nonattainment Areas

§ 117.1010 – Emission Specifications for 

Attainment Demonstration at Major Utility Electric 

Generation Sources in the Beaumont-Port Arthur 

Ozone Nonattainment Area

§ 117.1110 – Emission Specifications for 

Attainment Demonstration at Major Utility Electric 

Generation Sources in the Dallas-Fort Worth 

Ozone Nonattainment Area

§117.1210 – Emission Specifications for 

Attainment Demonstration at Major Utility Electric 

Generation Sources in the HGB Ozone 

Nonattainment Area

§ 117.1310 –Emission Specifications for 

Attainment Demonstration at Major Utility Electric 

Generation Sources in the Dallas-Fort Worth 8-

Hour Ozone Nonattainment Area

74
§ 117.206 – Emission Specifications for 

Attainment Demonstrations for Industrial, 

Commercial, and Institutional Combustion Sources 

in Ozone Nonattainment Areas

§ 117.110 – Emission Specifications for 

Attainment Demonstration for Combustion Control 

at Major Industrial, Commercial, and Institutional 

Sources in the Beaumont-Port Arthur Ozone 

Nonattainment Area

§ 117.210 – Emission Specifications for 

Attainment Demonstration for Combustion Control 

at Major Industrial, Commercial, and Institutional 

Sources in the Dallas-Fort Worth Ozone 

Nonattainment Area

§117.310 – Emission Specifications for Attainment 

Demonstration for Combustion Control at Major 

Industrial, Commercial, and Institutional Sources 

in the Houston-Galveston-Brazoria Ozone 

Nonattainment Area

§ 117.410 – Emission Specifications for

Attainment Demonstration for Combustion Control 

at Major Industrial, Commercial, and Institutional 

Sources in the Dallas-Forth Worth 8-Hour Ozone 

Nonattainment Area

§ 117.475 – Emission Specifications for Boilers, 

Process Heaters, and Stationary Engines and Gas 

Turbines at Minor Sources

§117.2010 – Emission Specifications for 

Combustion Control at Minor Sources in the 

Houston-Galveston-Brazoria Ozone Nonattainment 

Area

§ 117.2110 – Emission Specifications for 

Combustion Control at Minor Sources in the DallasFort Worth 8-Hour Ozone Nonattainment Area

Table IV-B3.3: Revisions to Section 101.306

Federally Approved Version

September 6, 2006

71 FR 52698

Adopted State Language

October 4, 2006

Rule Project Number 2005-054-

101-PR

Adopted State Language 

July 25, 2007

Rule Project Number 2006-053-

101-PR

(a) Uses for emission credits. 

Unless precluded by a 

commission order or a 

condition or conditions 

within an authorization 

under the same commission 

account number, emission 

credits may be used as the 

following:

No change No change

75
(1) offsets for a new source, 

as defined in § 101.1 of 

this title or major 

modification to an 

existing source;

No change No change

(2) mitigation offsets for 

action by federal 

agencies under § 101.30 

of this title;

No change No change

(3) an alternative means of 

compliance with VOC 

and NOx reduction 

requirements to the 

extent allowed in 

Chapters 114, 115, and 

117 of this title;

No change No change

(4) reductions certified as 

emission credits may be 

used in netting by the 

original applicant, if not 

used, sold, reserved for 

use, or otherwise relied 

upon, as provided in § 

116.150 of this title;

No change No change

(5) an annual allocation of 

allowances as provided 

in § 101.356 of this 

title;

(5) an annual allocation of 

allowances as provided 

in § 101.356 and § 

101.399 of this title;

No change

(6) compliance with motor 

vehicle fleet 

requirements to the 

extent allowed by § 

114.201 of this title;

No change No change

(7) compliance with other 

requirements as 

allowable within the 

guidelines of local, state, 

and federal laws.

No change No change

(b) Credit use calculation. No change No change

(1) The number of emission 

credits needed by the 

user for offsets shall be 

determined as provided 

in § 116.150 of this title.

No change No change

76
(2) For emission credits 

used in compliance with 

Chapter 114, 115, or 

117 of this title, the 

number of emission 

credits needed should be 

determined according to 

the following equation 

plus an additional 10% 

to be retired as an 

environmental 

contribution.

Figure: 30 TAC § 

101.306(b)(2)

No change No change

(3) For emission credits 

used to comply with §§ 

117.108, 117.210, or 

117.223 of this title 

(relating to System Cap; 

and Source Cap), the 

number of emission 

credits needed for 

increasing the 30-day

rolling average cap or 

maximum daily cap 

should be determined 

according to the 

following equation plus 

an additional 10% to be 

retired as an 

environmental 

contribution.

Figure: 30 TAC § 

101.306(b)(3)

No change (3) For emission credits used 

to comply with §§

117.123, 117.223, 

117.320, 117.323, 

117.423, 117.1020, 

117.1120, or 117.1220 §§

117.108, 117.210, or 

117.223 of this title 

(relating to System Cap; 

and Source Cap and

System Cap, the number 

of emission credits needed 

for increasing the 30-day

rolling average emission 

cap or maximum daily

cap should be determined 

according to the following 

equation plus an 

additional 10% to be 

retired as an 

environmental 

contribution.

Figure: 30 TAC § 101.306(b)(3)

(see below for changes to this 

figure)

77
(4) Emission credits used 

for compliance with any

other applicable 

program should be 

determined in 

accordance with the 

requirements of that 

program and must 

contain at least 10% 

extra to be retired as an 

environmental 

contribution, unless 

otherwise specified by 

that program.

No change No change

(c) Notice of intent to use 

emission credits.

No change No change

(1) For emission credits 

which are to be used as 

offsets in a New Source 

Review permit in 

accordance with 

Chapter 116 of this title, 

the emission credits 

must be identified prior 

to permit issuance. 

Prior to construction, 

the offsets must be 

provided through 

submittal of a completed 

EC-3 Form, Notice of 

Intent to Use Emission 

Credits, along with the 

original emission credit 

certificate.

No change No change

78
(2) For emission credits that 

are to be used for 

compliance with the 

requirements of Chapter 

114, 115, or 117 of this 

title or other programs, 

the user must submit a 

completed EC-3 Form 

along with the original 

emission credit 

certificate, at least 90 

days prior to the 

planned use of the 

emission credit. 

Emission credits may be 

used only after the 

executive director grants 

approval of the notice of 

intent to use. The user 

must also keep a copy of 

the emission credit 

certificate, the notice, 

and all backup in 

accordance with § 

101.302(g) of this title.

No change No change

(3) If the executive director 

denies the facility or 

mobile source’s use of 

emission credits, any

affected person by the 

executive director’s 

decision may file a 

motion for 

reconsideration within 

60 days of the denial. 

Notwithstanding the 

applicability provisions 

of § 50.31(c)(7) of this 

title, the requirements of 

§ 50.39 of this title shall 

apply. Only an affected 

person may file a 

motion for 

reconsideration.

No change No change

79
On July 25, 2007, the TCEQ also adopted revisions to Figure: 30 TAC § 101.306(b)(3) as 

detailed below:

Calculation of Emission Reductions Needed for System Cap or Source Cap

    

2000

365

1 1

   

 

N

i

N

i

ECs n RH RH ii

Where:

N = the total number of emission units in the source cap

i = each emission unit in the source cap

Hi = actual daily heat input, in million British thermal units (MMBtu) per 

day, as calculated according to §117.108(c)(1), §117.210(c)(1), or 

§117.223(b)(1) of this title §§ 117.123(b)(1) or (2), 117.223(b)(1) or (2), 

117.320(c)(1) – (3), 117.323(b)(1) or (2), 117.423(b)(1) or (2), 

117.1020(c)(1) or (2), 117.1120(c)(1) or (2), or 117.1220(c)(1) or (2) of

this title

Ri = the facility’s emission factor, in pounds (lb)/MMBtu, is defined as in 

§117.108(c)(1), §117.210(c)(1), or §117.223(b)(1) §§ 117.123(b)(1) or 

(2), 117.223(b)(1) or (2), 117.320(c)(1) – (3), 117.323(b)(1) or (2), 

117.423(b)(1) or (2), 117.1020(c)(1) or (2), 117.1120(c)(1) or (2), or 

117.1220(c)(1) or (2) of this title

Hn = the maximum daily heat input, in MMBtu per day, expected for an 

emission unit during the use period

Rn = the maximum emission factor, in lb/MMBtu, expected for an emission 

unit during the use period

The revisions to section 101.306 submitted on October 24, 2006, are approvable as 

discussed in Section IV.A of this TSD. The revisions to section 101.306 and Figure 30 

TAC § 101.306(b)(3) submitted on August 16, 2007 update the cross-references to the 

recodified Chapter 117. EPA proposed approval of the Chapter 117 recodification on 

July 11, 2008 (73 FR 39900) and finalized approval of the recodification on December 3, 

2008 (73 FR 73562). The following table details the cross-reference change from the SIPapproved language to the newly recodified Chapter 117 sections. This analysis shows that 

the cross-references have been updated correctly and no previously SIP-approved sections 

have been overlooked in the recodification. In our March 23, 2007, comment letter EPA 

noted that the proposed revisions to § 101.306(b)(3) included a reference to § 117.3123 

but that Figure 30 TAC § 101.306(b)(3) did not include a corresponding reference to § 

117.3123. The TCEQ agreed with our comment and removed the cross-referenced 

citation at § 101.306(b)(3) prior to adoption. The revisions to section 101.306 submitted 

on August 16, 2007 are approvable.

Table IV-B3.4: Cross-References between Section 101.306 and Chapter 117

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SIP-Approved References in § 101.306 Recodified Chapter 117 References in the 

August 16, 2007 SIP Submittal of Section 

101.306

§117.108 – System Cap for Utility Electric 

Generation in Ozone Nonattainment Areas

§117.1020 – System Cap for Utility Electric 

Generation Sources in Beaumont-Port Arthur

Ozone Nonattainment Area

§117.1120 – System Cap for Utility Electric 

Generation Sources in Dallas-Fort Worth Ozone 

Nonattainment Area

§117.1220 – System Cap for Utility Electric 

Generation Sources in Houston-Galveston-Brazoria

Ozone Nonattainment Area

§ 117.210 – System Cap for Industrial, 

Commercial, and Institutional Combustion Sources 

in Ozone Nonattainment Areas

§117.320 – System Cap for Industrial, Commercial, 

and Institutional Sources in Houston-GalvestonBrazoria Ozone Nonattainment Area

§117.223 – Source Cap for Industrial, Commercial, 

and Institutional Combustion Sources in Ozone 

Nonattainment Areas

§117.123 – Source Cap for Industrial, Commercial, 

and Institutional Sources in Beaumont-Port Arthur 

Ozone Nonattainment Area

§117.223 – Source Cap for Industrial, Commercial, 

and Institutional Sources in Dallas-Fort Worth 

Ozone Nonattainment Area

§117.323 – Source Cap for Industrial, Commercial, 

and Institutional Sources in Houston-GalvestonBrazoria Ozone Nonattainment Area

§117.423 – Source Cap for Industrial, Commercial, 

and Institutional Sources in Dallas-Fort Worth 8-

HR Ozone Nonattainment Area

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IV.B. Evalution of the August 16, 2007 SIP Submittal

4. Evaluation of the August 16, 2007, SIP submittal with respect to section 

110(l) of the Clean Air Act?

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

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

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

Administrator shall not approve a revision of a plan if the revision would 

interfere with any applicable requirement concerning attainment and reasonable 

further progress (as defined in section 171), or any other applicable requirement 

of this Act. 

Thus, under section 110(l), this SIP revision must not interfere with attainment or 

reasonable further progress or any other applicable requirement of the Act. 

Because this analysis only focuses on the revisions to sections 101.302 and 101.306 of the 

ERC program, the 110(l) analysis will also only focus on these pieces of the August 16, 

2007 SIP revision. The August 16, 2007, updates to the ERC program will not interfere 

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

Act because the revisions update references to the newly recodified Chapter 117 sections. 

These revisions are nonsubstantive and will not interfere with the SIP-approved 

functionality of the ERC program, which has already been demonstrated to be consistent 

with 110(l) through our 2006 approval. 

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V. Conclusion

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

sections of the CAA and 40 CFR Part 51 to TCEQ’s October 24, 2006, proposed 

revisions to the SIP, enacted at 30 TAC Chapter 101, Sections 101.302, 101.305, 

101.306, 101.338, 101.339, 101.372, 101.373, 101.375, 101.376, and 101.378. The 

technical analysis also reviewed TCEQ’s August 16, 2007, proposed revisions to the SIP, 

enacted at 30 TAC Chapter 101, Sections 101.1, 101.22, 101.302, 101.306, 101.350, 

101.351, 101.353, 101.354, 101.360, 101.372, 101.376, 101.383, and 101.385. 

This analysis found that the adoption of the revisions to sections 101.302, 101.305, and 

101.306 submitted on October 24, 2006, is consistent with the CAA and 40 CFR Part 51. 

EPA also finds that the adoption of the revisions to sections 101.302 and 101.306 

submitted on August 16, 2007, is consistent with the CAA and 40 CFR Part 51. 

Therefore, it is recommended that a proposed approval of these sections be published. 

The revisions to sections 101.338 and 101.339 submitted on October 24, 2006 remain 

available for EPA review and action at a later date. Likewise, the revisions to sections 

101.1, 101.383, and 101.385 submitted on August 16, 2007, remain available for EPA 

review and action at a later date. 

In a concurrent, but separate rulemaking, EPA is proposing approval of the DERC 

program revisions at sections 101.372, 101.373, 101.375, 101.376, and 101.378 

submitted October 24, 2006, and sections 101.372 and 101.376 submitted August 16, 

2007. 

EPA has already finally approved the August 16, 2007, revisions to sections 101.350, 

101.351, 101.353, and 101.354.

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