1 United States Environmental Protection Agency, Region IX

Air Division

Technical Support Document

for

EPA's Notice of Proposed Rulemaking

for the

California State Implementation Plan

Placer County Air Pollution Control District

Rule 502 New Source Review



### Laura Yannayon

May 6 , 2011

Reviewed by

Gerardo RiosTable of Contents

Section Page

Introduction 1

NSR Program SIP Revision Submittal s 1

Background 4

Rule Summar y 3

Rule Evaluation 6 General New Source Review (NSR) Requirements

New Source Review Reforms

California Clean Air Act

– New Source Review Program NSR Reform Program Requirements Impacts of Fed eral NSR Reforms on California NSR Permitting Programs

Section 110(l) of the Act 31

Section 193 of the Act 61

Recommendations 67

Attachment s 741



### Introduction

Part C of title I of the Clean Air Act (CAA or Act) contains the provisions for the Prevention of Significant Deterioration (PSD) of air quality in areas designated as “attainment” or “unclassifiable” for the national ambient air quality standards (NAAQS). Part D of title I of the Act contains the requirements for areas designated “nonattainment” for any of the NAAQS. Both parts C and D of the Act require pre

- construction permit programs for certain new or modified stationary sources of pollutants. The r equirements under part C, referred to as “PSD New Source Review” (PSD) apply to certain new or modified sources that would be located within attainment areas, and apply to all regulated pollutants, except those pollutants for which an area has been designa ted as “nonattainment.” The requirements under part D, referred to as “Nonattainment NSR,” (NSR) apply to certain new or modified sources of nonattainment pollutants in nonattainment areas. Collectively, the pre

- construction permit requirements related

t o PSD and Nonattainment NSR are commonly referred to simply as “NSR.” Both of these programs apply to “major” stationary sources and “major modifications” as those terms are defined in 40 CFR Part 51, Subpart I. In addition to the regulation of major sta tionary sources, states are also required to adopt a program to provide for the regulation of the construction and modification of minor stationary sources and minor modifications at major sources, to assure that the NAAQS are achieved and/or maintained. These pre

- construction requirements are commonly referred to as “minor NSR.” (See 40 CFR 51.160

- 164)



### NSR Program SIP Revision Submittal s

Rule 502

–

New Source Review (NSR) was adopted by the Placer County Air Pollution Control District ( PCAPC D or District) on February 11 , 2010 and submitted to EPA via the California Air Resources Board (ARB) by a letter dated July 20 , 2010. ARB is the governor’s designee for submitting official revisions of the California State Implementation Plan (SIP) to EP A. There is

not a current version of th is specific rule in the SIP, but there are older rules in the approved SIP

for certain air basin portions of the District , which will be replaced in the SIP by new Rule 50 2

. See the Background section of this document for further discussion of the air basins located

within the P CAPCD.



### Background

The current SIP contains old NSR rules which only apply to specific air basins within the

District. PCAPCD consists of portions of three separate air basins: Sacramento Valley (S V AB), Mountain Counties (MAB) and Lake Tahoe (LTAB). The District has decided to simplify its regulatory program by writing a single set of rules which apply to the entire District, and where

necessary, include s specific provisions for each air basin within these rules. Upon approval into the SIP, Rule 502

– New Source Review will replace Rule 508

– New Source Review , which has been SIP approved for the LTAB and MCAB. (See 47 FR 27065 (6/23/82) and 46 F R 27115 (5/18/81))2

In 2002, EPA promulgated changes to the NSR regulations for both the approval and promulgation of implementation plans and requirements for preparation, adoption, and submittal of implementation plans governing the NSR programs mandated by parts C and D of title I of the Act. These changes to the major NSR program, commonly referred to as “NSR Reform,” obligate states to develop and submit to EPA new NSR regulations for nonattainment areas, as

well as attainment areas for states that elect to implement the PSD program. In response to NSR

Reform and EPA’s reclassification of the Placer County portion of the Sacramento Metro Air Basin to a severe ozone nonattainment area (See 75 FR 24409, May 5, 2010)

, PCAPCD has

submitted Rule 50 2 to fulfill these program requirements. This TSD contains EPA’s evaluation

of new Rule 502

–

New Source Review

.

The CAA defines “nonattainment areas” as air quality planning areas that exceed the primary or secondary NAAQS for the given criteria pollutan t (or that contribute to ambient air quality in a nearby area that does not meet the NAAQS). The S V AB is currently designated as

nonattainment for the 8 hour ozone (severe) and PM 2.5 NAAQS . The MCAB is currently designated as nonattainment for the 8 hour ozone (severe) NAAQS . The LTAB is currently designated as attainment for all pollutants. Therefore Rule 502 specifically applies to VOC,

NO

x , PM 2.5 and SO

x emissions (VOC, NO

x and SO

x are included as precursors to ozone or

PM 2.5 ) in the S V AB, and VOC an d NO

x emissions in the MCAB. PCAPCD does not take any credit in its attainment plans for any emission reductions achieved as part of these NSR regulations.



### Rule Summar y

Rule 502 contains the substantial requirements of the NSR program and is comprised of six

sections: Section 100

– General, Section 200

– Definitions, Section 300

– Standards, Section 400

– Application Processing, Section 500

– Additional Provisions for Power Plants, and Section 600

– Monitoring and Records . Section 100 include s provisions that outline the purpose and applicability of the rule, and public notice thresholds. Section 200 contains 5 4 definitions, and clarifies which other rules may be used to provide definitions if a term is not defined within this

section. Secti on 300 contains the standards that apply to projects that undergo new source review, including Best Available Control Technology (BACT) and emission offset requirements

, as well as the calculation methodologies to be used to make various determinations thr oughout

the rule . Section 400 contains the application processing requirements, includ ing provisions for determining when an application is complete, what is required to make a preliminary decision, what air quality models must be used, public notice requ irements, requirements for a final action, and other administrative provisions. Section 500 contains specific requirements for power plant applications and Section 600 contains recordkeeping requirements for emergency engines, and portable and temporary e quipment.



### Rule Evaluation3

For this Technical Support Document (TSD) , we have reviewed Rule 502 to ensure it meet s the requi rements of section 110 and part D of title I of the Act and implementing regulations at 40 CFR 51.160 through 51.16 5 . We also relied on the following materials in our review: General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990 (see 57 FR 13498, April 16, 1992), EPA’s Emission Offset Interpretive Ruling (40 CFR part 51, Appendix S) , and EPA’s policy document entitled, “Improving Air Quality with Economic Incentive Programs” that was published in January 2001. EPA has condensed the approval criteria
contained in these various materials in this TSD, which describes reasons for our pr oposed action

on the Rule 50 2 submittal.

General Nonattainment NSR Requirements The Act requires all States with nonattainment areas to submit a NSR program that contains the following nonattainment NSR provisions. To demonstrate that PCAPCD has met each provision, EPA identifies the section(s) of Rule 50 2 , or other rules which satisfy the listed requirement. Where necessary, a detailed discussion accompanies deficiencies in the rules that have been identified through this review.

1. Provisions to assu re that calculation of emissions offsets, as required by section 173(a)(1)(A), are based on the same emissions baseline used in the demonstration of reasonable further progress.

First we note that the emissions inventories that have been prepared for the Ozone

nonattainment plan and the demonstration of reasonable further progress (RFP) are based on

actual emissions. An attainment plan for PM 2

. 5 is not due until December 14, 2012. For new or modified major sources of VOC, NO x , SO x and PM 2.5 , Rule 502 Sec tion 30 3.1 requires offsets to be provided when emission increases exceed specified thresholds. Rule 5 04

– Emission Reduction Credits (ERCs) is used to provide emission reductions that satisfy the emission offset requirements. Rule 5 04 requires ERCs to b e based on “actual” emission reductions. Thus, the basis for the demonstration of RFP and the calculation of NSR emissions offsets is the same (i.e., actual emissions).

Second, regarding the amount of offsets that is necessary to show noninterference w ith RFP, EPA presumes that so long as a new source obtains offsets in an amount equal to or greater than the amount specified in the applicable offset ratio (or, where the statute does not specify an offset ratio, in an amount equal or greater than 1:1), t he new source will not interfere with

RFP. Rule 502 Section 303 .3 provides the ratios for federal offsets purposes, which are equal to or greater than 1:1 fo r the nonattainment pollutants. These offset ratio requirements ensure that the program for permitting of new or modified major sources will not interfere with RFP.

These provisions satisfy the statutory requirement.

2. Provisions to assure, pursuant to section 173(c)(1), that any emissions offsets obtained in conjunction with the issuance of a permit to a new or modified source must be enforceable by the time of issuance of the permit, and in effect by the time the new or modified source commences ope ration.4 Rule 502 Section 303.4.1 requires that all offsets be enforceable and Section 303.4.3 requires

that all offsets be surrendered prior to initial startup of the new or modified source. These provisions satisfy the statutory requirement.

3. Provi sions to assure that emissions increases from new or modified major stationary sources are offset by real reductions in actual emissions as required by section 173(c)(1).

Rule 502 Section 303.4.1 requires that all offsets be real reductions. Section 202 defines Actual Emission Reductions as the decrease of actual emissions, which are required to be real reductions. These provisions ensure that emissions increases from new or modified major stationary sources are offset by real reductions in actual emissi ons as required by section 173(c)(1).

4. Provisions, pursuant to section 173(c)(2), to prevent emissions reductions otherwise required by the Act from being credited for purposes of satisfying the part D offset requirements.

Rule 502 Section 303.4. 2 requ ires that all offsets for major sources and modifications be surplus when the reductions are surrendered to the District. Section 252 defines s urplus as reductions that are not otherwise required by federal, state or local law and not relied upon to

meet any SIP requirement. These provisions prevent emissions reductions otherwise required by the Act from being credited for purposes of satisfying the part D offset requirements as required by section 173(c)( 2 ).

5. Provisions, pursuant to section 173(a)(5 ), that, as a prerequisite to issuing any part D permit, require an analysis of alternative sites, sizes, production processes, and environmental control techniques for proposed sources that demonstrates that the benefits of the proposed source significant ly outweigh the environmental and social costs imposed as a result of its location, construction, or modification.

Rule 502 Section 304.1 requires an applicant for a major source or major modification to prepare such an analysis consistent with the requirements of CAA section 173(a)(5) , by requiring the applica nt to prepare an analysis functionally equivalent to the requirements of

Division 13 of the Public Resources Code (CEQA). This section also requires the District to

make the necessary findings prior to issuance of an Authority to Construct . This provision
satisfies the section 173(a)(5) requirement.

6. Definition of “stationary source” that certain internal combustion engines must be subject to control under State programs (i.e., those not used for transportation purposes), but excluding the category of “nonroad engines.” [See section 302(z) of the Act.]

Rule 502 defines Station ary Source PTE as the sum of the PTE for each emission unit which has been issued a Permit of Operate, Authority to Construct or for which an application has

been submitted. SIP approved Article 2

– Application for Building Permit

, Section 12 provides5 exe mption s from permitting requirements for various types of emission units. Section s 12(a) and (b) provide broad exemptions for vehicles as defined by the state vehicle code and vehicles used to transport passengers or freight

. Section 1 2 (3) exempts all piston type internal combustion engines. This current SIP exemption would not meet the requirements of requirements of Section 302(z) of the Act, therefore the District has also submitted for SIP approval for Rule 501, which contains the same exemptio n for motor vehicles, but limits the exemption for internal combustion engines to those rated at 50 bhp or less. We find that the exclusion of these small stationary engines from the permitting program to be approvable.

7. Provisions, pursuant to section 173(a)(3), to assure that owners or operators of each proposed new or modified major stationary source demonstrate that all other major stationary sources under the same ownership in the State are in compliance with the

Act.

Rule 502 Section 304 .2 requir es an applicant for a major source or major modification to submit a certification that all existing major sources owned by the applicant in California which are subject to emission limitations are in compliance or on an expeditious schedule for compliance , with all applicable emissions limitations and standards. This provision satisfies the section 173(a)( 3 ) requirement.

8. Definitions which contain language which is either identical or equivalent to that found in CAA Section 171, 40 CFR 51.100, and 51.1 65(a)(1).

In most cases, the definitions in Section 200 are either identical or equivalent to EPA’s language in the CAA and /or CFR. In some instances , the definitions do not match the federal definitions as closely, but we have determined that they sat isfy the federal criteria. These specific definitions are discussed below. All section references are to 40 CFR Part 51, unless

otherwise noted. Also see Section 8.b. below for a discussion of specific definitions affected by i mplementation of the NSR R eform requirements , and see Section 8c below for a discussion of the deficiencies pertaining to the required definitions

.

Actual Emissions Rule 502 defines this term as real emissions verified by source testing. In Section 206, the rule uses the term “Baseline Actual Emissions (BAE)” to provide the same definition as 51. 165
for the term “actual emissions

. ” The rule defines the term BAE as a ctual emissions for the existing emissions unit averaged over the consecutive two (2) year period immediately preceding the date of the application. If the last two years are unrepresentative of normal source operations as determined by the APCO, then any other 2 consecutive year period during the last five years which the APCO determines represents normal source operations may be used. This is the same as the section 165 definition of actual emissions and term BAE is used throughout the rule in place of a ctual emissions, therefore this substitution is acceptable.

Construction6 Rule 502 does not provide a definition for this term, but EPA believes the common usage definition of this term is adequate for the purposes of determining the requirements of Rule

502.

Lowest A chievable E

mission R ate (LAER)
Rule 502 does not provide a definition for this term. Instead the rule provides a definition for the term “Best Available Control Technology (BACT),” which incorporates the defin ition of LAER, by specifying that BACT is the most stringent of 1) applied in practic e technology ( analogous to LAER standard) or 2) the technology that is technically feasible and cost

effective (BACT standard). This is an acceptable substitution.

Major Modification
Section 165 (a)(1)(v) defines a major modification as a physical chan ge in or change in the method of operation of a major stationary source that would result in both a significant emission increase and a significant net emissions increase for a regulated NSR pollutant. The definition of “significant,” which provides speci fic thresholds for each pollutant, is provided in

s ection 165 (a)(1)(x). Rule 502 defines th e term “major modification” as a modification of a source that results in a significant emission increase of a pollutant for which the source is
classified as a ma jor source. The definition of the term “modification” in Section 229 is sufficiently similar to the language used to describe the physical changes or changes in the method of operation as the term “major modification” in section 165. The “major” aspect o f the section 165 definition is covered by the requirement that the source must already be a major
source for the nonattainment pollutant that has a “significant emissions increase.” We note that this definition does not require the project to also result in a significant net emissions increase, but believe this difference is acceptable because it is more stringent than the 51.16 5 requirements. See also the discussion in the section entitled “NSR Reforms”.

Major Stationary Source Rule 502 provides two separate definitions for this term in Sections 226 and 227 , one applicable to sources located in the S V AB and one for sources located in the MCAB. The definitions are specific to the nonattainment classifications for each area, and include the appropriate major source thresholds for each pollutant within the definition. While not defined exactly the same as in section 165, thes e definitions appropriately limit the definition to the

nonattainment air basins , for the applicable nonattainment pollutants, and include the appropriate major source emission thresholds. Therefore this definition is acceptable.

Net Emission Increase
Rule 502 does not include this term because sources are not allowed to perform a net emissions increase analysis to determine whether a project will result in a major modification. Instead, only a significant emission increase test is used. Since Rule 502 does not use this test, it is not necessary to define this term.

Project Rule 502 does not provide a definition for this term, but EPA believes the common usage definition of this term is adequate for the purposes of determining the requirements of Rule

502.7 Regulated NSR P ollutant
Rule 502 does not provide a definition for this term, but instead uses the term “ NSR Regulated

Pollutant ” and defines it as any pollutant or precursor for which the District has been designated nonattainment by EPA or the state of California. While the section 165 definition is broader, for the purposes of Rule 502 as a nonattainment NSR regulation, the rule is only required to apply to nonattainment pollutants, which this definition does . Therefore this

definition is a cceptable.

Secondary Emissions
Rule 502 does not provide a definition for this term. The only place in section 165 that this term is used is within the definition of Potential to Emit (PTE), to clarify that secondary emissions are not included when calculating PTE. While Rul e 502 does not provide this clarification by using this term, and thus does not define the term, EPA believes that since this definition only provides clarification, its exclusion does not raise to a disapproval issue. We do

recommend however that Placer include this clarification the next time Rule 502 is open for

revision.

Temporary clean coal technology demonstration project, Clean coal technology, and Clean coal technology demonstration project
The above terms related to coal

- fired facilities are not included in Rule 502

. These terms are only used in section 165 within the definition of Major Modification, where it states that the installation of such projects does not constitute a major modification. R ule 502 does not include such an exclusion from its definition of the term modification, thus there is no need to

define these terms in Rule 502.

Volatile organic compounds (VOC)
Rule 502 provide s a definition for the term “Reactive Organic Compound” wh ich is defined the
same as the term VOC i s defined in SIP approved Rule 10 2

– Definitions. This definition is consistent with the federal definition provided in 40 CFR 51.100(s) for this term.

8b. Definitions which contain language which are not either id entical or equivalent to that found in 51.165(a)(1), related to implementation of the NSR Reform requirements.

This section provides a detailed discussion of specific definitions affected by the District ’ s exclusion of the NSR Reform requirements. Please see the section of this TSD entitled “New Source Review Reforms” for a discussion of why we believe it is acceptable to approve Rule 502 without the following NSR Reform related terms or terms that match the section 165
definitions for these terms: Baseline actual emissions, Begin actual construction, Electric utility steam generating unit, Emission unit

, Net emission increase , Projected actual emissions, Replacement unit, Significant, Significant emissions increase, and Significant net emissions

inc rease.

8.c Definitions which EPA has determined are deficient, in that they are not either identical or equivalent to that found in CAA Section 171, 40 CFR 51.100, and 51.165(a)(1). The absence of these definitions has been noted in the Federal Register8 notice proposing action on this submittal, as a requirement that must be added or addressed for full approval.

Federally enforceable
Rule 502 does not define this term. This term and the term “practically enforceable” are used throughout the rule to desc ribe the type of enforceability required for permit conditions. The
use of this term creates a program deficiency since it does not ensure the legal enforceability element that is required if the term “federally enforceable” is not used. To correct this deficiency, PCAPCD must either 1) define the term federally enforceable and use it throughout the rule as appropriate, or 2) use a term that ensures legal as well as practical enforceability of specified provisions throughout the rule.

Com mence, Begin actual construction and Necessary preconstruction approvals or permits
Rule 502 does not define or use any of these interrelated term s

. The term Commence is key to correctly applying the provisions of 51.165(a)(5)(ii). (See item 13) Since w e identified the lack of this provision as a deficiency, when the District adds such a provision to correct the deficiency, it will also need to add definitions for each of these terms.

9. Provisions, pursuant to 40 CFR 51.161 that require opportunity f or public comment, as well as the consideration of any comments received during this period in the final permit determination. These provisions must also ensure the availability of all information relevant to the proposed permit during the comment period, and allow for a public hearing upon request.

Sections 406, Publication and Public Comment, and 407, Public Inspection, ensure that the requirements of 40 CFR 51.161 are met. These sections require the District to provide a 30 day public notice for each proposed permit and an opportunity to request a public hearing, and make available for inspection all related materials.

10. For districts which have submitted a minor source NSR permitting program: provisions, pursuant to 40 CFR 51, sections 160 through 164, which contain substantive requirements for minor sources. These requirements include public notice, opportunity for

– and consideration of

– public comment, and the demonstration that a minor source will not contribute to a violation of any natio nal standard or the area control strategy for attainment.

As noted above, the provisions of Sections 406 and 407 ensure the public notice provisions of 161 are met for all sources required to provide offsets pursuant to Section 303

– Offset Requirements. Thus public notice requirements apply to any source with a PTE of more than 10 tpy of VOC or NO x , 15 tpy of PM 10 or PM 2.5 , 27.5 tpy of SO X and 99 tpy of CO . T hese thresholds are well below the major source thresholds for these pollutants. In addition, Section 305.2 requires that all projects be evaluated to ensure they will not prevent or interfere with the attainment or maintenance of any applicable air quality standard, including minor source projects. These provisions satisfy the minor source progra m requirements.9

11. Provisions, pursuant to 40 CFR 51.118(a), to assure that the degree of emission limitation required of any source for control of any air pollutant must not be affected by so much of any source's stack height that exceeds good engineeri ng practice.

Section 403, Air Quality Models, states that “Credit shall not be given for stacks higher than that dictated by good engineering practice.” This provision satisfies the regulatory requirement.

12. Provisions, pursuant to 40 CFR 51.165(a)(3) (ii)(C), which limit “prior shutdown” emission reduction credits (ERCs), i.e., ERCs that are generated by facilities that have already ceased operation. While these credits can be allowed, the regulations prohibit such credits in two cases: (1) if the att ainment plan has been disapproved, or, (2) if an attainment plan or other part D required submission is delinquent.

At present, PCAPCD has submitted all plan revisions currently required under part D of title I of the Act, and all of these plan revisions have been found to be complete (or have been deemed complete by operation of law). Therefore credit for prior shutdown is allowed so long as the other requirements in 40 CFR 51.165(a)(3)(ii)(C) are met. Rule 5 04

– Emission Reduction Credits (ERCs) require s ERCs to be based on actual emission reductions and that such reductions, including those from source shutdowns, meet the basic requirements of being surplus, permanent, quantifiable, and federally enforceable. In addition, S ection 303.8 of Rule

502 restricts the use of emission reductions from shutdown operations in such a manner to ensure that the use of such reductions remains consistent with the District’s attainment plan. Thus, credit for prior shutdowns under Rule 502 is acceptable.

13. Provi sions, pursuant to 40 CFR 51.165(a)(5)(ii), which require new source review for a source or modification which becomes major due to a relaxation in a federally

enforceable limit. Such sources and modifications are subject to new source review “as though c onstruction had not yet commenced.”

Rule 502 does not contain such a provision. This omission is a deficiency. To correct this deficiency, the District must submit a revised version of Rule 502 for SIP approval that contains such a provision. In additi on, the District will need to include new definitions for the terms “Commence,” “Begin actual construction” and “ Necessary preconstruction approvals or permits” which are embedded within this provision.

14. Provisions, pursuant to 40 CFR 51.307(b)(2), wh ich identifies additional requirements for NSR for any new major source or major modification, proposing to locate in a nonattainment area, that may have an impact on visibility in any mandatory Class I Federal Area.

Rule 502 does not contain such a provi sion. However a Federal Implementation Plan, pursuant to 40 CFR 52.281(d) already ensures this provision is applicable for all new and modified major sources. For clarity, EPA recommends that the District provide language in Rule 502 to identify the nece ssary additional requirements pursuant to 40 CFR 51.307(b)(2).10

15. Provisions, pursuant to 40 CFR 51.165(a)(1)(iv)(C), which require that fugitive emissions be included in the major source applicability determination if the source belongs to one of the source categories listed in this section. Otherwise, fugitives may be excluded from the applicability determination.

The definition s of “ potential to emit (PTE) ” in S ection 2 36 and “stationary source PTE” in

S ection 251 of Rule 502 state that fugitive emission s must be counted when determining the potential to emit of both a project and the facility, and provide no exemptions to this requirement

. Therefore the rule requires all sources to include their fugitive emissions when determining major source a pplicability , which is more stringent that the Section 165 requirements . This provision satisfies the statutory requirement.

16. Provisions, pursuant to section 173(a)(2), which require LAER, for a major source or major modification.

Section 20 7 defin es BACT as the most stringent of several options. Section 20 7 .1 requires the

most stringent emission limit or control technique which has been used for the specific type of equipment

. This is consistent with the definition of LAER as defined in 40 CFR 51 .165 (a)(1)(xiii). Section 30 2 requires any new or modified stationary source with an emission increase and a potential to emit for the project above specified thresholds (all of which are below the NSR significance levels for the same pollutants) to appl y BACT

. These provisions satisfy the statutory requirement.



### New Source Review Reforms

California Clean Air Act

– New Source Review Program The air quality in California has historically been some of the worst in the nation. In light of this fact, California has always been at the forefront in implementing strict air quality regulations to address the state’s serious air quality problems.

In 1959, the State passed its first air quality standards for total suspended particulates, photochemical oxidants, sulfur dioxide, nitrogen dioxide, and carbon monoxide. These state standards were amended in 1969 by the Air Resources Board. At that time , the California ambient air quality standard for ozone was lower than the federal standard, thus most of California was exceeding the state standard for Ozone. As a result, most California Air Pollution control agencies had developed permitting programs that contained nonattainment new source review requirements such as Lowest Achievable Emissions Rate (LAER) and offsets.

In 1988, California adopted the California Clean Air Act of 1988 (California CAA). This legislation established new preconstruction review requirements for new and modified sources. It established uniform emission thresholds that trigger control and offset requirements for ozone (VOC and NO

x ), carbon monoxide (CO), sulfur dioxide (SO 2 ) and nitrogen dioxide (NO 2 ) at levels significant ly lower than the federal thresholds in effect at the time of adoption. These thresholds are even lower than the thresholds established two years later by the federal Clean Air11

Act Amendments of 1990 (federal CAA).

Under both state and federal requirem ents, all ozone nonattainment areas were classified according to the severity of the ozone violations measured for each area. Instead of a single major source threshold for all areas, the federal CAA set new major source and major

modification thresholds of 100 and 40 tons per year ( tpy ) respectively, for areas classified as moderate or marginal; 50 and 25 tpy respectively, for areas classified as serious; 25 and 25 tpy respectively, for areas classified as severe; and 10 and 0 tpy respectively, for areas classified as extreme. These thresholds are used to determine when a proposed project requires the application of LAER and emission offsets.

In comparison, the California CAA set thresholds for when project emissions trigger the application of Californ ia ’s version of Best Available Control Technology (BACT) and offsets. (Note that CA BACT is defined in such a manner as to be equivalent to federal LAER requirements.) The application of CA BACT is triggered for emission increases of 25 lb/day in

areas c lassified as moderate and 10 lbs/day in areas classified as serious, severe or extreme. In addition, some California Districts have adopted even lower CA BACT thresholds of two and zero lb/day. The requirement to provide offsets is triggered for all emis sion increases, once a facility’s emissions exceed 25 tpy in areas classified as moderate; 15 tpy in areas classified as serious; and 10 tpy in areas classified as severe or extreme.



### California and Federal BACT/LAER and Offset Thresholds for 1

- hr Ozone

CA Ozone Classification
(ppm) Marginal Moderate

(0.09

- ≤0.12) Serious

(0.13

- ≤0.15) Severe

(0.16

- ≤0.20) Extreme

(>0.20)

CA BACT 1 (tpy) [lb/day] NA 4.6 [25] 1.8 [10] 1.8 [10] 1.8 [10]

CA Offset 1 (tpy) NA 25 15 10 10

EPA Ozone Classification

( ppm) Marginal

(0.121

- <0.138) Moderate

(0.138

- ≤0.160) Serious

(0.160

- ≤0.180) Severe

(0.180

- ≤0.280) Extreme

(>0.28) Federal Major Source (tpy)
(Triggers both LAER & Offsets) 100 100 50 25 10

Federal Major Mods (tpy)
(Triggers both LAER & Offsets) 40 40 25 25 0

Note: California design values are lower than federal values for the same classification.

NSR Reform Program Requirements On December 30, 2002, EPA published a final rulemaking action to provide additional flexibility

in the permitting of modified sources subject to the federal major source NSR and PSD programs. EPA’s intent was to allow existing sources additional flexibility in the NSR/PSD permitting process that would encourage facilities to make process improvements or un dertake energy efficiency projects that would provide additional environmental benefits by reducing emissions on a capacity basis. In 2005, a court vacated two key NSR Reform provisions 2 , but also upheld the three key remaining provisions. These provisio ns all pertain to how emission

1 California Health & Safety Code §§ 40918, 40919, 40920 and 40920.5

2 The United States Court of Appeals for the District of Columbia Circuit in State of New York, et al., v. U.S. Environmental Protection Agency, et al., 413 F.3d 3 (D.C. Cir. 2005)12

increases from proposed modifications of existing sources are calculated.

One provision allows an existing facility to set a Plantwide Applicability Limit (PAL), which in effect is a facility

- wide emissions cap for a speci fic pollutant. Once the PAL is determined, a facility can make any physical modification or change in the method of operation, which might otherwise trigger a major modification, without obtaining a NSR permit, as long as the plantwide

emissions remain be low the PAL level. For certain types of industries that need significant operational flexibility to make quick changes in response to changing market conditions

, the ability to make changes without having to wait for the issuance of construction permits i s worth the additional work to ensure emissions from all operations remain below the PAL and maintain the additional records needed to verify compliance with the plant

- wide emission limits.

Another provision changed the allowable time frame to be used to determine baseline actual emissions. Baseline emissions are generally considered to be the pre

- project emissions from the facility or emission units proposed to be modified. Prior to implementing the NSR Reforms, EPA required a source to use the actual e missions emitted during the two year period immediately preceding the application date for the new project. Sources were allowed to use a different two year period within the five year period immediately preceding the application date if they could demons trate that the alternative two year period was more representative of normal operations. The NSR Reforms revised the allowable time frame to be any 24 month period during the 10 year period immediately preceding the application date. EPA believes that th e use of a 10 year period allows a source to look back to a period from a more representative business cycle, i.e., 10 years vs. five years, and that significant resources are conserved by allowing the source to choose the 24 month period used to establish baseline actual emissions, rather than spend time and resources determining what period most represents “normal operations.” While going back further in time means a source may be able to choose a period with higher average emissions, the NSR Reforms als o added requirements to ensure the baseline period is adjusted for any excess emissions or any additional emission reductions required by new regulations which have become effective since the baseline period.

The third provision upheld by the court chan ged how post

- project emissions are determined. Prior to implementing the NSR Reforms, EPA required a source to use the worst case potential to emit (PTE) assumptions (i.e., operating at 100% capacity, 24 hrs/day, 7 days a week), unless the applicant agree d to practically enforceable permit conditions to limit operation of the emission unit (i.e. fuel usage limits or limits on hours of operation). In this “actual to potential”
test, often the difference between the baseline actual emissions and the PTE of an operation would be greater than the major modification significance thresholds. As a result, many modifications were treated as major modifications, even when the actual emissions would decrease, not change, or the actual increase in emissions would no t be significant. T he NSR

Reforms also changed the post

- project emission calculation methodology to allow a source to use the highest actual emission rate projected to occur over the next 5 or 10 years and to subtract

emissions the emission units could ha ve accommodated prior to the project, that were unrelated to the project, in order to determine the emission increase from the proposed project.

It is important to note that none of these revisions changed the major modification significance thresholds for triggering control technology and offset requirements. They only changed the13

calculation to determine if the major modification threshold i s tr iggered.

Impacts of Federal NSR Reforms on California NSR Permitting Programs By not adopting the NSR Reforms, the NSR program in California Districts would not include the three program elements described earlier: use of PALs, a 10 year look back perio d for baseline actual emissions and projected actual emissions. The use of two of these three provisions (baseline actual emissions and projected actual emissions) is required under 40 CFR 51.165(a)(2). The requirement to adopt a NSR program that allows the use of PALs is found in 40 CFR 51.165 (f).

Section 116 of the CAA 3 provides that nothing in the Act shall preclude the rights of States to adopt air pollution regulations that are more stringent than those contained in the CAA or implementing regulati ons. As noted above, the California CAA of 1988 adopted lower emission thresholds for triggering emission control (BACT/LAER) and offset requirements for new and modified sources as part of its NSR program. Consistent with this concept, when EPA adopted new calculation methods to implement the NSR reforms in 40 CFR 51.165 (a)(2), we also stated that each plan must use the specific applicability provisions specified unless the State specifically demonstrates that the submitted plan provisions “are more str ingent than or at least as stringent” in all respects as the specified paragraphs. These applicability provisions specify the use of baseline actual emissions and projected actual emissions, two of the new NSR Reform provisions, but also retain the option for a source to use the actual to potential emission test.

Several air d istricts in California have argued that their NSR permit programs are inherently more stringent than the required federal program because the applicability thresholds to apply

CA B ACT and offsets are significantly lower than those in the federal CAA. In addition, for modifications, a source does not need to be a major source, as it does for federal purposes, before these lower applicability thresholds apply to a proposed project. The Districts also point out that if a District adopted the NSR Reform calculation methods, and a project using these methods

was no t classified as a major modification, it would no t be subject to Federal LAER and offsets requirements ; but the project woul d still have to apply CA BACT and provide offsets in accordance with the CA CAA requirements. These lower state emission thresholds are already in almost all Districts’ portion of the California SIP, making these requirements enforceable

under both state and federal law.

As a result, CA Districts have argued that the regulatory framework found in other states, where adopting the NSR Reforms provide additional permitting flexibility and environmental benefits, do not exist in California because adoption of the reform requirements would have no e ffect on the application of control technology or offset requirements. This claim is based on the more

3 Section 116: of the CAA: Except as otherwise provided in sections 119 (c), (e), and (f) (as in effect before the date of the enactment of the Clean Air Act Amendments of 1977), 209, 211(c)(4), and 233 (preempting certain State regulation of moving sources) nothing in this Act shall preclude or deny the right of any State or political subdivision thereof to adopt or enforce (1) any standard or limitation respecting emissions of air pollutants or (2) any requirement respecting control or ab atement of air pollution; except that if an emission standard or limitation is in effect under an applicable implementation plan or under section 111 or 112, such State or political subdivision may not adopt or enforce any emission standard or limitation w hich is less stringent than the standard or limitation under such plan or section.14

aggressive CA CAA program requirements not only for new and modified sources, but existing

sources as well. F or example, whereas the federal CAA requires States to apply at least Reasonably Available Control Technology (RACT) for all major source categories located in a nonattainment area, the CA CAA requires the application of Best Available Retrofit Control

Tec hnology (BARCT ) 4 5 for all source categories where it is economically feasible to do so. Thus even if an existing source is not proposing any physical or operational modifications, it must still reduce emissions periodically as part of an area’s attainment plan by applying stringent control technologies. The Districts contend that this requirement leaves little room for additional voluntary emission reduction projects and eliminates any practical benefits of obtaining a PAL.

EPA has reviewed the Distric ts’ claims and considered how the CA CAA provisions a ffect the effectiveness of the NSR Reforms to provide the intended regulatory relief, and we agree that the application of CA BACT and offsets at significantly lower thresholds means that the federal

NSR Reform provisions do not provide any of EPA’s intended additional flexibility to proposed projects that may otherwise trigger federal major modification requirements. If the State adopts these provisions, a new project will have to complete two different sets of emission calculations ; and even if the federal requirements are not applicable, the source will still have to comply with the CA BACT control and offset requirements if they are triggered. In light of these facts, EPA is proposing to find that it is acceptable for PCAPCD to not incorporate the NSR Reform provisions into their SIP approved NSR programs, since the same level of control will be required for modified sources, with or without inclusion of these provisions in the SIP, and their

progr am s will not be any less stringent than the federal program.



### Section 110( l ) of the Act

Section 110( l ) of the Act prohibits EPA from approving any revision of a SIP if the revision would interfere with any applicable requirement concerning attainment a nd reasonable further progress, or any other applicable requirement of the Act. In nonattainment areas we may approve SIP relaxations so long as they would not interfere with any applicable requirement concerning attainment and reasonable further progress , or any other applicable requirement of

the Act. The requirements cont ained in the new rule submittal w er e compared with the contents and requirements of the existing SIP rules to evaluate compliance with the 110(l) requirements.

Rule 502

–

New Source Review

In Placer County, SIP Rule 508

– New Source Review was approved into the SIP for the Lake Tahoe (LTAB) and Mountain Counties Air Basins (MCAB) portions of the county (See 47 FR 27065 (6/23/82) and 46 FR 27115 (5/18/81)). Rule 502 is a new SIP sub mittal for all of Placer County and will replace both of the SIP Rule 508

– New Source Review versions currently

4 BARCT must meet the same evaluation criteria as BACT, except as it applies to existing, rather than new or

modified sources.

5 California Health and Safety Code Section 41 010(b) and California Code of Regulations Title 17, Division 3, Chapter 1.5, Article 6, Section 7060115

approved into the SIP for the LTAB and MCAB

. SIP approved Rule 508 for both air basins are identical and contain the provisions for all major and minor source permitting actions

.

For Rule 502 , the most significant differences between the two NSR programs (SIP approved versus the NSR SIP submittal) are the emission thresholds at which an emission unit triggers

Best Av ailable Control Technology (BACT) 6 and offset requirements. SIP approved Rule 508

, Section s A.2. and C.1. , requires a stationary source to apply BACT when emissions of any criteria pollutant, except carbon monoxide ( CO ) , exceed 2 50 lbs/day ( 45.6 ton per y ear (tpy)).

F or CO BACT must be applied when the Air Pollution Control Officer (APCO) determines that the CO emissions would cause a NAAQS violation at the point of maximum ground level impact. New Rule 502 , Section 302 , requires each emission unit to ap ply BACT when emissions exceed 10 lbs/day (1.8 tpy) of volatile organic compounds (VOC) or nitrogen oxides (NO

x ), 80 lbs/day (14.6 tpy) of sulfur oxides (SO

x ), PM10, or PM2.5, 550 lb/day (100.4 tpy) for CO , and 3.3 lb/day (0.6 tpy) of lead. These changes represent a strengthening of the SIP, since BACT must now be applied at a significantly lower threshold than the existing SIP rule requirements.

In a similar manner, SIP approved Rule 508

, Sections A.2. and C.3., requires emission increases to be offset when the facility’s emissions of any criteria pollutant, except carbon monoxide (CO), for which a NAAQS was exceeded within the three years prior to the application submittal date, exceed 250 lbs/day (45.6 ton per year (tpy)). Section C.3. also provides that offsets are not required if the applicant can demonstrate through modeling that the project will not cause a new NA A QS violation. New Rule 502

, S ection 30 3.1 , requires emission increases at new major sources to be offset when the facility’s emissions exceed 10 tpy of VOC

or NO

x , 27.5 tpy of SO

x , 15 tpy of PM 10 or PM 2.5 , and 99 tpy of CO . This change represents a strengthening of the SIP, since offsets must now be applied at sig nificantly lower threshold s than the existing SIP rule requirements.



### Section 193 of the Act

Section 193 of the Act, which was added by the Clean Air Act Amendments of 1990, includes a savings clause which provides, in pertinent part: “ No control requir ement in effect, or required to be adopted by an order, settlement agreement, or plan in effect before November 15, 1990, in any area which is a nonattainment area for any air pollutant may be modified after November 15, 1990, in any manner unless the modi fication insures equivalent or greater emission reductions of such air pollutant. ”

The application of this provision of the savings clause to revisions in a SIP

- approved NSR program is not straightforward. Soon after the Clean Air Act Amendments (CAAA) were

6 Rule 502 defines BACT as the most stringent of the following two options: 1) The most effective emission control device, emission limit, or techniq ue, singly or in combination, which has been required or used for the type of equipment comprising such an emissions unit unless the applicant demonstrates to the satisfaction of the Air Pollution Control Officer that such limitations required on other sou rces have not been demonstrated to be achievable in practice (Federal LAER definition), and 2) Any alternative basic equipment, fuel, process, emission control device or technique, singly or in combination, determined to be technologically feasible and co st

- effective by the Air Pollution Control Officer (Federal BACT definition). Thus BACT is the defined as the most stringent of the two control requirements.16

enacted (November 15, 1990), EPA published a notice providing the Agency’s inter pretation of the effect of the 1990 CAAA, including newly enacted section 193, on a court order requiring EPA to promulgate FIPs for two CO nonattainment areas in Arizona. See 56 FR 826 (January 9, 1991). In the 1991 notice, we concluded that the savings clause in section 193 constitutes an

“anti

- backsliding” provision that is intended to preserve specific, adopted measures (or pre

CAAA obligations to adopt such measures) with identifiable emission reductions against which to measure the equivalency of an y proposed substitution. Under this reading of the savings clause, “control requirement” would not apply to NSR revisions because NSR is a program under which general principles of air pollution control, such as BACT or LAER, are converted into specific c ontrol requirements for different types of stationary source proposals on an individual permit

- by

- permit basis. In other words, NSR does not represent a control requirement itself but rather a program that is used to identify control requirements.

NSR program revisions are inherently difficult to evaluate with respect to changes in emissions reductions because NSR covers all types of stationary sources and provides for application of different emissions limitations to different types of sources dependin g upon what is considered BACT or LAER for a particular source. In the context of the PCAPCD NSR SIP submittal, a determination of whether the SIP submittal would provide for equivalent or greater emission reductions relative to the existing SIP NSR progr am can be made by reviewing two parameters that most closely link to relative changes in emissions reductions from new or modified stationary sources: control technology review and for nonattainment NSR, the requirements for offsets including offset thresh olds.

Control Technology Requirements . As noted above in the section of this TSD entitled “Section 110(l) of the Act,” submitted Rule 502 contains a much lower emission threshold for the application of BACT for each pollutant, except for CO and lead, whi ch are attainment pollutants and therefore not subject to the provisions of Section 193. Therefore in this regard, new Rule

502 satisfies the Section 193 requirements.

Offsets requirements . As noted above in the section of this TSD entitled “Section 1 10(l) of the Act,” submitted Rule 502 requires that offsets be provided at the same or lower threshold for all pollutants except CO and lead, which are attainment pollutants and therefore not subject to the provisions of Section 193. Therefore in this reg ard, new Rule 502 satisfies the Section 193 requirements.

Conclusion . For the reasons set forth above, we can approve the submitted Rule 502

– Federal

NSR under section 193 of the Act.



### Recommendations
Pursuant to section 110(k)(3) of the Act, we reco mmend a limited approval / limited disapproval

of the submitted NSR rule. We recommend limited approval based on our determination that the rule compl ies with applicable statutory and regulatory provisions requiring regulation of stationary sources in gen eral and requiring permit programs for major stationary sources in particular, including section 110(a)(2)(C) and part D of title I of the Act. In support of this17

recommendation, we have concluded that our approval of Rule 502 (and thereby replacement of the existing SIP NSR Rule 508), complies with section s 110(l) and 193 of the Act because the new rule does not relax control technology and offset requirements and therefore would not interfere with the strategy for attainment o f the Ozone or PM 10 NAAQS in PCAPCD or the continued attainment of the other NAAQS in PCAPCD

. We recommend limited disapproval to

correct the deficiencies listed below. If we finalize this action as proposed, our action would be codified through revisions to 40 CFR 52. 220 (identification of plan)

.

Deficiencies as listed in TSD under section entitled “ General Nonattainment NSR Requirements (Rule 502 ).”

1. Add definitions for the terms “commence,” “begin actual construction,” “federally

enforceable” and “necessary preconstruction approvals or permits.” (See item 8c and 13 )

2. Add a provision, pursuant to 40 CFR 51.165(a)(5)(ii), which requires new source review for a source or modification which becomes major due to a relaxation in a federally

enforceable l imit. Such sources and modifications shall be subject to new source review “as though construction had not yet commenced.” (See item 13)



### Attachments

1. PCAPCD Lake Tahoe Air Basin Rule 508, New Source Review , SIP

- Approved on June
23, 1982.

2. PCAPCD Mountai n County Air Basin Rule 508, New Source Review, SIP

- Approved on May 18, 1981.

3. PCAPCD Submitted Rule 502, New Source Review (NSR), adopted February 11, 2010.

4. EPA’s reclassification of the Placer County portion of the Sacramento Metro Air Basin, (75 FR 24409 , May 5, 2010)

.