# 'JUL 19 2005

Mr. Cory Chism AirPermits Division (MC-163) Texas Commission on Environmental Quality 

### P.G.Box 13087 Austin, TX 78711
DearMr. Chism:
Afterreview ofthe rules and discussions with the Texas Commission on Environmental Quality (TCEQ) staff, the Environmental Protection Agency (EPA) believes a conditional approval is appropriate for the Emissions Banking and Trading ofAllowances (EBTA) rule. To allow this approach, it is necessary that TCEQ provide a commitment letter explaining how and by when TCEQ will address areas ofconcern with the EBTA rule. We will need this letter before we canpropose approval. We are prepared to propose conditional approval by the end of August 2005. We are requesting this letterbe prepared and submitted to EPA by August 1,2005, for inclusion in the rule docket and to facilitate drafting ofthe Federal Register. Region 6 would also like to offerour support in drafting and reviewing the commitment letterto ensure it meets our mutual goals.
The letter must include the commitment that TCEQ will revise the EBTA rule and procedures so that the following items are addressed:
1. The TCEQ should commit to revise 

### § 101.338 to make clearthat EPA review and approval is required for all uses ofemission reductions achieved outside the United States in substitution ofallowances for purposes ofcompliance with the Division 2, EBTA Program. This condition for EPA review and approval will be the mechanism by which EPA ensures that inappropriate trades do not take place. Inparticular, EPA requires a further State Implementation Plan (SIP) revisionbefore approving any trades that involve reductions generated outside the United States.
2. The TCEQ should commit to revise the EBTA rules to include a provision for auditing the EBTA Program. This condition for an audit provision ensures
Wiley/aw:6PD-R:x2115/7/18/05\Conditions List for EBTA for TCEQ

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### OU3_05.wpd(Wiley# I Disk)

### 2 that the EBTA accomplishes the reduction goals assumed in SIP. At a minimum, the program evaluation procedures should address the concerns outlined in Section 5.3(b) ofthe Economic Incentive Program Guidance. 3. The EPA is unable to approve the portions ofthe EBTA programreferring to the El Paso Region (defined as El Paso County, CiudadJuarez, Mexico, and SunlandPark, New Mexico). The TCEQ should eithercommit to removing the El Paso portions ofthe rule or shouldrequest no Federal action on these portions ofthe rule. Ifpossible, TCEQ should also committo further revising the rule language to reflect that the El Paso rule language would onlybe a State requirement. The commitment letter should explain how each ofthe above issues will be addressed and provide a specific date for achieving each ofthe changes. The date can be no laterthan one year after ourfinal conditional approval, currently scheduled for December 2005. Although we have discussed the commitments required for approval with otherEPA offices, we will also need to review the language ofthe commitment letterwith them, and therefore, please send the draft letterto me before submitting itto TCEQ management for final signature. We appreciate your continuing assistance. Ifyou have any questions, please call Ms. AdinaWiley ofmy staffat (214) 665-2115. Sincerelyyours, Originally Signed

by David Neleigh 

### David Neleigh Chief AirPermits Section