Linda 3. Adarns Secretarv for 

# Air Resources Board Mary D. Nichols, Chairman

1001 1 Street P.O. Box 2815 Sacramento, California 95812 www.arb.ca.gov 

# RE
~nvironrnental~~rotection 

### SEP 

## 102008
September 3,2008 Air Division,AIR

## - 3 U.S. EPA, REGION9

Air Pollution Control Officers Air Pollution Control Districts
RE: Implementation of Permit Provisionsof Senate Bill 700 Dear Air Pollution Control Officers: The purpose of this letter is to requestthat you updateyour permit rules as they apply to agricultural sources of air pollution in accordance with the requirements of Health and Safety Code section 42301.16, a provisionof SB 700 (Stats. 2003, ch. 479). The amended rule should be forwarded to the Air Resources Board (ARB) so that we may submit it to the United States Envirorlmental Protection Agency (U.S. EPA) for inclusion into the State Implementation Plan (SIP). This will ensure not only compliance with SB 700, which became effective January I, 2004, but will also harmonize District rule requirements with SIP requirements, facilitate consistency among Districts, and provide greater clarity and assurance to the agriculturalcornmunity and the general public. U.S. EPA is very supportive of this effort. Our recent examination of the permit provisions in the SIP, which upon approval by U.S. EPA become federal law, indicates a checkerboard of permit requirements as they pertainto agricult~~ral sources. Many District permit rules were submitted for inclusion into the SIP as early as 1972, and their treatment of agl-iculturalsources ranges from explicitly exempting them from permit requirements, in accordance with state law at that time, to no mention of these sources at all, leaving open the question of permit rule applicability. This confusion needsto be corrected quickly, and for most Districts this can be easily accomplished. Historically, Califorr~ia agl-iculturehadfew restrictions with regard to air pollution control. Until 2004, permits could not be required for "[alny equipment used in agricultural operations in the growing of crops or the raising of fowl or animals

. . ." (See former Health 

### & Saf. Code,

## 5 42310(e)). After manyyears of discussion and negotiation, Senator Florez introduced SB 700, which eliminatedthe permit exemption from state law and also imposed numerous substantive control requirements upon both agriculture and regulatory agencies to ensure the reduction of err~issions from agl-iculturalsources. SB 700 was signed bythe Governor on September22,2003, and become effective January 1,2004.

The energy challenge facing California is real. Every Californian needs to take immediate action to reduce energy consumption For a list of simple waysyou can reduce demand andcutyour energy costs, see our website: http://www.arb.ca.qov. California Environmental Protection Agency

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The Health and Safety code' defines "agricultural source" as a source or group of sources of air pollution "used in the production of crops or the raising of fowl or animals that is located on contiguous property under common ownership or control" and that is either a confined animal facility, an internal combustion engine used in agricultural operations (except an engine used to propel implements of husbandry), a Title 

### V source, or "a source that is otherwise subject to regulation by a district pursuantto this division [26 of the Health and Safety Code] or the federal Clean Air Act

. 

### . 

### . ." 

### (§ 3901 I .5(a).) The specific permit provisions are set forth in section 42301.16, as follows: (a) In addition to complying with the requirements of this chapter, a permit system established by a district pursuant to Section 42300 shall ensure that any agricultural source that is required to obtain a permit pursuantto Title 

### 1 (42 U.S.C. Sec. 7401 et seq.) or Title 

### V (42 U.S.C. Sec. 7661 et seq.) of the federal Clean Air Act is required by district regulationto obtain a permit in a manner that is consistent with the federal requirements. (b) Except as provided in subdivision (c), a district shall require an agl-iculturalsource of air pollution to obtain a permit unless it makes all of the following findings in a public hearing: (1) The source is subject to a permit requirement pursuant to section 40724.6. (2) A permit is not necessary to impose or enforce reductions of emissions of air pollutants that the district show[s] cause or contribute to the violation of [a] state or federal ambient air quality standard. (3) The requirementfor the source or category of sources to obtain a permit would impose a burden on those sources that is significantly more burdensome than permits required for other similar sources of air pollution. (c) Prior to requiring a permit for an agricultural source of air pollution with actual emissions that are less than one-half of any applicable emissions threshold for a major source in the district, for any air contaminant, but excluding fugitive dust, a district shall, in a public hearing, make all of the following findings:

1 All references are to the California Health and Safety Code, unless otherwise indicated.

### Air Pollution Control Officers Septerr~ber 3, 2008 Page 3
(1) The source is not subject to a permit requirement pursuant to Section 40724.6. (2) A permit is necessaryto imposeor enforce reductions of emission[s] of air pollutants that the district show[s] cause or contribute to a violation of a state or federal ambient air quality standard. (3) The requirement for a source or category of sources to obtain a permit would not impose a burden on those sources that is significantly more burdensome than permits requiredfor other similar sources of air pollution.
ARB interprets this statute to have set up three categories of permits for agricultural sources. First, new and modified sourcesthat are considered to be "major sources" under Title I or Title V of the federal CleanAir Act must be required by every Districtto obtain a permit. As you know, Title I permit programs are required pursuant to section 11 O(a)(Z)(C) and Parts C (Prevention of Significant Deterioration) and D (Plan Requirementsfor Nonattainment Areas) of the Clean Air Act, and are reviewed and approved by U.S. EPA as part of the SIP. It is these permit rules that require immediate attention to ensure that your District SIP rule complies with federal law and is updated in response to SB 700. Both federal and state law require "best available control technology" (BACT) and offsets for these sources. Any exemption for major sources from permit requirements that can arguably beconsideredto be in your District's rule and inthe SIP must be removed. We urge you to do this as soon as possible, and no laterthan December 31, 2008. The second permit category is comprised of all agricl-~ltural sources that emit one-half or more of "any applicable emissions threshold for a major source" inyour District, except for large confinedanimalfacilities (CAF),which have their own permit and substantive requirements. (Please note that any CAFs that are "major sources" underthefederal Clean Air Act must get permits as required by that Act.) The applicable emissions threshold varies by District, depending upon attainment status. Also, in accordance with section 42301.18, an agric~~~ltural source that existed beforeJanuary I, 2004, and becomes subject to a District rulethat was adopted priorto that date isto be permitted as an existing source, i.e., it needs a permit to operate, but not an authorityto construct, based upon its potential to emit as of the effectivedate of SB 700.
The third permit category is for smaller sources that emit less than one-half of the District's major source threshold. A District may require these sourcesto obtain permits only if the District affirmatively finds that such permits are necessaryto control criteriaAir Pollution Control Officers September 3, 2008 Page 4

pollutants and that a permit requirement would not be more burdensomefor agricult~~ral sourcesthanfor similar nonmajor sources. (§ 42301.16(c).) ARB encourages, but is not currently requiring, Districts to consider treating these smaller agricultural sources the same way they treat other small sources, depending upon the air quality benefits that might result in your District. Agricultural sources that are requiredto have permits must be permitted in accordance with the California Clean Air Act requirementsthat pertain to BACT and "no net increase" (offsets), set forth in sections 40918, 40919, 40920, and 40920.5. With regard to offsets, 

### SB 700 provides that "a district may not requirean agricultural source to obtain emissions offsets for criteria pollutants for that source if ernissions reductions from that source would not meet the criteria for real, permanent, quantifiable, and enforceable emission reductions". (§42301.18(c).)
This limited exemption from the offset requirement means that agricultural sources that are not amenable to District prohibitory rules or control measures that would qualify for SIP credit-or that are unableto generate emission reductions that would qualify as offsets-because they fail to meet one or more of the basic criteria for a creditable rule or for offset credit cannot be requiredto provide offsets.
We believe this exemption is based upon considerations of equity. If a source cannot get credit for its emission reductions inthe SIP or cannot qualify its surplus emission reductions for banking and later use as offsets, it should not be required to provide offsets. This exemption should be narrowly applied, and, inany event, cannot be used to exempt major federal sources from offset requirements. Permit provisions for sources considered "major sources" under federal law must be included in the SIP. While California law does not specifically requirethe o.ther pern-lit provisions to be included in the SIP, we encourage you to do so in order to gainfederal enforceability-just as most Districts are currently doing for other types of sources. Amending your permit rules in a timely fashion will enhance California's ability to meet our air quality goals and will irr~plement California and federal law. ARB is aware that a handful of air districts face a special situation with regard to their SIPs. Our staff will work with these and other Districts, upon request,to amend their permit rules and SIPs, as necessaryto complywith SB 700 andwith federal CleanAir Act requirements.Air Pollution Control Officers September 3, 2008 Page 5

Ifyou have any questions or desire assistance, please do not hesitate to call Mr. Robert Fletcher, Chief, Stationary Source Division, at (916) 324-8167 for technical issues, or Ms. Leslie Krinsk, Senior Staff Counsel, at (805) 473-7325 for legal questions. Please review your permit rules; we are committed to expedite SIP amendments that are submitted in responseto this request. We appreciate your immediate attention to this important matter.



### ( kxecutiveOfficer



# wcc: Ms. Deborah Jordan

# / United States Enviror~mental Protection Agency Region 9 75 Hawthorne Street San Francisco, California 94105
Mr. Robert Fletcher, CI-lief Stationary Source Division
Ms. Leslie Krinsk Senior Staff Counsel Office of Legal Affairs