Bryan W. Shaw, Ph.D., Chairman

Carlos Rubinstein, Commissioner

Toby Baker, Commissioner

ZaIc Coval', Executive Director

, \,)',

I

,-:'

TEXAS COMMISSION ON ENVIRONMENTAL QUALITY

Protecting Texas by Reducing andPreventing Pollution

May 3, 2012

Mr. Carl Edlund, P.E.

Director, Multimedia Planning and Permitting Division

United States Environmental Protection Agency, Region 6

1445 Ross Avenue, Suite 1200

Dallas, Texas 75202-2733

Dear Mr. Edlund:

As part of U.S. Environmental Protection Agency's (EPA) review of rules submitted by the Texas

Commission on Environmental Quality (TCEQ or Commission) to address the 1997 eight-hour

ozone National Ambient Air Quality Standard and New Source Review Reform (NSRR) in 2006

and 2011, you requested TCEQ address several issues. The TCEQ responds to your request in

two ways. First, on February 22, 2012, the Commission proposed rulemaking to amend five

rules to ensure that TCEQ's NSRR rules are approvable as revisions to the Texas State

Implementation Plan (SIP). These rules were published in the March 9, 2012 edition of the

Texas Register and the Commission has received comments on the proposed rules. To expedite

federal approval, the TCEQ requests that EPA "parallel process" these revisions to the Texas SIP

in accordance with 40 Code of Federal Regulations (CFR) Part 51, Appendix V.

Second, we have prepared responses to the remaining issues for which rulemaking is not

required. The TCEQ's responses to these issues are described below.

Compliance with Federal Clean AirAct CFCAA) § 110(1)

Background

EPA adopted its NSRR rules by publication in the December 31, 2002 issue ofthe Federal

Register.! Subsequently, the clean unit and pollution control permit portions of the NSRR rules

were vacated by the D.C. Circuit Court ofAppeals. 2 After TCEQ adopted new and amended rules

in January 2006 to implement the three surviving NSRR program components and submitted

those as revisions to the Texas SIP, EPA proposed disapproval in 2009,3 and then took final

action to disapprove the rules on September 15, 2010.4 In August 2010, TCEQ initiated

rulemaking to address EPA's proposed disapproval; that rulemaking amended several, but not

all, of the rules which were the subject ofthe 2006 rulemaking. Those changes were adopted in

February 2011 and were submitted to EPA for approval as part ofthe Texas SIP with a request

that EPA also consider the rules amended and adopted by the Commission on January 11, 2006,

effective on February 1, 2006.

'67 Fed. Reg. 80186 (December 31,2002).

, New York v. United States, 413 F.3d 3 (D.C. Cir. 2005).

374 Fed. Reg. 48467 (September 23, 2009).

475 Fed. Reg. 56424.

P.O. Box 13087 • Austin, Texas 78711-3087 • 512-239-1000 • tceq.texas.gov

How is our customerservice? tceq.texas.gov/customersurvey

I" 11,1 ,.,. i "I' ,,-, I"~ I, ,.1 1'.'1" ,,' 1"'111'.1 v. -'I"" .-d,l, ,.. I,.. ;··...... i II II
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Page 2

This letter supplements those three rulemakings,5 and addresses EPA's concerns regarding

compliance with FCAA § 110(1) for the three basic program components of NSRR: the revised

baseline for determining pre-change emissions, the actual-to-projected actual test for

determining post-change increases, and the Plant-wide Applicability Limit (PAL). Although

EPA previously determined, as stated in the New Source Review (NSR) Supplemental Analysis

dated November 2002, that the implementation ofthe federal NSRR rules would be

environmentally beneficial, EPA requested that TCEQ provide an analysis of how TCEQ's

rulemakings that implement these changes meet the FCAA § 110(1).

When EPA adopted its NSRR rules, 6 it expanded its demonstration requirements to include not

just different definitions but also different programs in the EPA's revised major NSR

regulations. Therefore, to be approved as meeting the 2002 revised major NSR SIP

requirements, a State submitting a customized major NSR SIP revision must demonstrate why

its program and definitions are at least as stringent as the revised major NSR base program.?

Moreover, because there is an existing Texas Major NSR SIP, the submitted changes to the

major NSR SIP must meet the anti-backsliding provisions of the FCAA in § 193, and meet the

requirements in § 110(1) which provides that EPA may not approve a SIP revision if it will

interfere with any applicable requirement concerning attainment and reasonable further

progress or any other applicable requirement ofthe Act. Furthermore, any submitted SIP

revision must meet the applicable SIP regulatory requirements and the requirements for SIP

elements in Section 110 of the Act, and be consistent with applicable statutory and regulatory

requirements. These can include, among other things, enforceability, compliance assurance,

replicability of an element in the program, accountability, test methods, and whether the

submitted rules are vague. There are four fundamental principles for the relationship between

the SIP and any major NSR permits that implement the major NSR program. These four

principles as applied to the review of a major or minor NSR SIP revision include: (1) the baseline

emissions from a permitted source be quantifiable; (2) the NSR program be enforceable by

specifying clear, unambiguous, and measurable requirements, including a legal means for

ensuring the sources are in compliance with the NSR program, and providing means to

determine compliance; (3) the NSR program's measures be replicable by including sufficiently

specific and objective provisions so that two independent entities applying the permit program's

procedures would obtain the same result; and (4) the major NSR permit program be

accountable, including means to track emissions at sources resulting from the issuance of

permits and permit amendments. 8

I) In response, TCEQ provided comments regarding EPA's proposed disapproval in 2009, and subsequently adopted

changes to 30 TAC § 116.160(which were snbmitted to and approved hy EPA in 2010). TCEQ also adopted rnles to

implement the 1997 8-hour ozone National Ambient Air Quality Standard (NAAQS) in 2005, which EPA included in

its ~009 and 2010 disapproval actions. TCEQ responded by amending rules and submitting them to EPA in 2011;

EPA approved most ofthese changes on Deeember 28,2011 (76 Fed. Reg. 81371). Changes to 30 TAC § 116.150

remain for EPA review as part ofthe NSRR rulemaldngs.

6 EPA's NSRR rules were promulgated on Deeember 31,2002 (67 Fed. Reg. 80186) and reeonsidered with changes

on November 7,2003 (68 Fed. Reg. 63021).

767 Fed. Reg. 80186, at 80241 (December 31,2002).

8 See EPA's Apl'il16, 1992, "General Preamble for the Implementation of Title I ofthe Clean Air Act Amendments of

1990" (57 Fed. Reg. 13498) (General Preamble).
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Page 3

TCEQ Rules Comply with the § 110(1) ofthe FCAA

The TCEQ's existing NSRR rules meet the applicable SIP regulatory requirements and the

requirements for SIP elements in Section 110 of the FCAA, and are consistent with applicable

statutory and regulatory" requirements; the sections for which rule amendments were proposed

on February 22, 2012 also meet these requirements. Therefore, TCEQ has demonstrated in the

submitted and proposed rulemakings that TCEQ's major NSR SIP meets all requirements and is

approvable as a revision to the SIP.

However, given the changes in the rules, via three rulemakings noted above, TCEQ has not

accumulated data for permits issued under the final version ofthe rules and therefore has no

historical data to perform a quantitative analysis of emission reductions to supplement the

associated rulemaking. In addition to the SIP submittals provided to EPA in 2006 and 2011,

and the 2012 proposed rules and preamble, the following discussion is provided to support the

TCEQ's position that its NSRR rules are approvable as revisions to the Texas NSR SIP.

Change in which years can be used to establish the baseline emissions (also known as "2 in 10")

EPA's NSRR rules changed the calculation methodology for determining baseline actual

emissions for use in major NSR applicability determinations. NSRR allows the use of the

highest actual emissions from any consecutive 24-month period within the previous 10 years in

place of the actual emissions for the two years prior to start-of-construction when establishing

baseline emissions. This change accounts for normal business cycles which produce periods of

lower emissions while allowing facilities to pursue operational and physical changes in a timely

manner. TCEQ included EPA's baseline determination method in its rules.

The primary benefit ofthe "2 in 10" rule is allowing applicants who want to use a two-year

period that is not the two-years immediately prior to the submittal ofthe application. An

applicant submitting a permit application under the "2 in 10" baseline provisions is required to

submit emissions documentation for the 24 month period selected as representative; however,

there is no requirement to submit documentation for the average emissions for the two years

prior to the start of construction unless those were the representative years selected by the

applicant. Therefore, TCEQ has no data currently available which would allow a comparison of

the emission increases/decreases under the NSRR rules to what those emission changes would

have bcen in the absence of NSRR. Air Quality Permit Applications (whether only for minor

sources, or whether major NSR is also triggered) are reviewed under the rules in effeet at the

time of applieation submittal and, for major NSR, at permit issuance. Therefore, TCEQ has not

requested the additional information since it was not required at the time of the review.

Adoption and implementation ofthe "2 in 10" baseline provisions is not expected to interfere

with any applicable requirement concerning attainment and reasonable further progress or any

other applicable requirement of the FCAA. In addition, these rules do not change existing

requirements for obtaining offsets for nonattainment permitting and considering all sources for

prevention ofsignificant deterioration (PSD) permitting.

9 TCEQ excluded malfunction emissions from baseline calculations or projected actual emissions (as those terms are

defined in 30 TAC § 116.12(3)(E) and (29), and in compliance determinations as required by § 116.186(a), both of

which are more stringent than EPA's major NSR program.
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Page 4

In addition, the TCEQ processes thousands of air quality authorizations every year. A

substantial number ofthese actions occur at sites that are major sources which used the "2 in

10" baseline provisions to determine major NSR applicability. A significant number of these

major sources are located in the Beaumont-Port Arthur and Houston-Galveston-Brazoria areas

and are subject to the stringent SIP requirements for control of volatile organic compounds

(VOC) and nitrogen oxides (NO,) under Title 30 Texas Administrative Code (TAC) Chapters 115

and 117. In addition, sources undergoing construction or modification which are not subject to

the best available control technology (BACT) or lowest achievable emission rate (LAER) major

NSR requirements must still comply with Texas' BACT requirements in 30 TAC

§ 116.111(a)(2)(C). These additional limitations assist in ensuring that there is not backsliding

from control requirements for VOC and NO,.

Use ofactual to projectedfuture actual testfor non-utility (as well as utility) sources

EPA's NSRR rules also allow the use of the projected future actual test for non-utility sources in

determining NSR applicability. This option was previously allowed for utility sources only. This

change is a voluntary alternative to the actual-to-potential to emit test. Either option may be

used when determining project increases for use in determining the applicability of major NSR

requirements. TCEQ implemented the EPA rule.

An applicant utilizing the actual-to-projected-actual test would not have submitted the

information for the actual to potential to emit test since the information would be irrelevant to

the review. TCEQ has no data currently available which would allow a comparison ofthe

emission increases/decreases under the NSRR rules to what those emission changes would have

been in the absence of NSRR. TCEQ is relying on EPA to provide guidance on how to properly

project future emissions, how those emissions should be tracked, and which type offuture

emissions can be excluded for any project.

Adoption and implementation ofthe actual-to-projected-actual test is not expected to interfere

with any applicable requirement concerning attainment and reasonable further progress or any

other applicable requirement of the FCAA. In addition, these rules do not change existing

requirements for obtaining offsets for nonattainment permitting and considering all sources for

PSD permitting.

In addition, sources undergoing construction or modification which are not subject to the BACT

or LAER major NSR requirements must still comply with Texas' BACT requirements in

SIP-approved 30 TAC § 116.111(a)(2)(C). This backstop results in TCEQ's conclusion that

changes to air quality as a result of implementing NSRR should be neutral with respect to

reasonable further progress.

Plant-wide Applicability Limit

The Plant-wide Applicability Limit sets a cap for a site's emissions of a regulated pollutant.

Changes made at the site are not subject to major NSR review as long as the emissions of the

regulated pollutant remain below the PAL cap. EPA's PAL rules are a voluntary option that

provides "the ability to manage facility-wide emissions without triggering major NSR review"

which will facilitate the ability of companies "to respond rapidly to changing market
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Pages

conditions."10 EPA specifically stated that the PAL allows avoidance ofthe major NSR

permitting process when a company makes "alterations to the facility or individual emission

units."l1 When EPA adopted its PAL rules, both its Technical Support Document" and its

Supplemental Analysis!3 provided EPA's technical background information used to support the

rules; Appendix A to the Supplemental Analysis is the report ofthe "Flexible Permit Pilot"

permit. EPA concluded that, overall, the use of emission caps in PAL-type permits would

actually reduce emissions in various industrial categories for various pollutants, based on the

real VOC reductions achieved from three specific industrial categories, and thus be

environmentally beneficial in enforceable permits.!4

In addition, the monitoring, recordkeeping, and reporting (MRR) requirements required to

demonstrate compliance with the PAL may have the added benefit of optimizing operations due

to improved monitoring. Optimization of operations generally has an associated reduction in air

emissions which could result in a modest contribution toward reasonable further progress.

The characteristics of PALs provide benefits to both the public and the regulated entities that

utilize them. These characteristics include: use of a cap for groups of emission sources on a

pollutantspecific basis, operational flexibility, regulatory certainty, no circumvention of major

NSR, detailed MRR requirements, and environmental benefit. Texas has had a small number of

sites take advantage ofthe PAL option under the federal NSRR rules, and only two were issued

after the TCEQ adopted the rule amendments in 2011, one in Harris County and one in Jefferson

County. This is an insignificant percentage of the number of permits currently authorized

annually in Texas, which is typically more than 14,000 permits. Because TCEQ has issued only

two PAL permits since the majority ofthe rules were adopted by TCEQ, no data exists to

determine whether the PAL program could adversely affect air quality.

In addition, the PAL for a specific pollutant is based upon baseline actual emissions for that

pollutant. Any future construction or modifications under the PAL which are not subject to the

BACT or lowest achievable emission reduction major NSR requirements must still comply with

Texas' BACT requirements in 30 TAC § 116.111(a)(2)(C). In some cases, controls beyond those

accepted as BACT for minor NSR may be required to meet the PAL cap. Sources under a PAL

located in the Beaumont-Port Arthur and Houston-Galveston-Brazoria areas are also subject to

the stringent SIP requirements under 30 TAC Chapters 115 and 117. This backstop results in

TCEQ's conclusion that changes to air quality as a result of implementing the PAL portion of

NSRR will be neutral in affect to air quality reasonable further progress.

w 67 Fed. Reg. 80186, 80189 (December 31, 2002).

11 EPA's use of the term "facility" is understood to mean the entire plant site. In contrast, the Texas Clean Air Act

defines "facility" very narrowly and it is analogous to the EPA term C(emissions unit."

12 Technical SUPPOlt Document for the Prevention of Significant Deterioration and Nonattainment Area New Source

Review Regulations, United States Environmental-Protection Agency, Office ofAir Quality Planning and Standards

(November 2002).

13 New Source Review Improvements, Supplemental Analysis ofthe Environmental Impact ofthe 2002 Final NSR

Improvement Rules, United States Environmental Protection Agency (November 21, 2002),

14 Id" pp. 2, and 6-8, and Appendix A, Executive Summary, page 4.
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Page 6

Specific Questions Raised bu EPA Region 6

Whether TCEQ's Plant-wide Applicability Limit (PAL) Permits are Practically Enforceable

A permit is practically enforceable if permit conditions establish clear legal obligations and allow

compliance with those obligations to be verified. In its final rule adopting the PAL rules, EPA's

notice discusses the MRR requirements for a PAL permit, and EPA characterized these

requirements as addressing a number of issues associated with practical enforceability of

PALs.'s EPA requested TCEQ demonstrate that the TCEQ's PAL rules will result in PAL permits

that are practically enforceable, because the permit provisions specify both a technically

accurate limitation as well as the portions of the source subject to the limitation, the time period

for the limitation, and the method to determine compliance, including appropriate MRR

requirements. The TCEQ rules that satisfy the applicable federal PAL requirements, as

established in EPA's rules, are as follows:

Technically accurate limitation and identification ofthe portions ofthe source that are

subject to the limitation.

Texas established its PAL program based on 30 TAC §§ 116.180, 116.182, 116.186(a), and

116.188. These rules satisfy the Federal requirements in 40 CFR 51.165(t)(3)(i), (f)(4)(i)(A) &

(E), & (f)(6)(1) and 51.166(w)(3)(i), (w)(4)(i)(a) & (e), & (W)(6)(1), and therefore render the

program, and PAL permits issued under the program, practically enforceable.

The time periodfor the limitation

Texas rules state that the PAL limit must be met on a 12-month rolling average [30 TAC §§

116.182(3) and 116.186(a)]. These rules meet the federal requirements in 40 CFR 51.165(f)(3)(i)

and (f)(4)(i)(A) & (E) and 51.166(w)(3)(i) and (w)(4)(i)(a) & (e), and therefore render the

program, and PAL permits issued under the program, practically enforceable.

The method to determine compliance, including appropriate MRR

Detailed MRR that is consistent with the Federal PAL requirements, and also meet the

requirement for practical enforceability is found in 30 TAC § 116.186. Specifically, the

requirements in §§ 116.186(b)(4), (b)(6), (b)(8), (b)(9) and (c) meet 40 CFR 51.165(f)(13)-(14)

and 51.166(w)(13)-(14), and therefore render the program, and PAL permits issued under the

program, practically enforceable.

Whether the TCEQ rules meet 40 CFR 51.166(w)(7)(iv), 51.165(a)(1)(xxxv)(A)(2) and (B)(l),

and 51.166(b)(47)(i)(a) and (ii)(a) with respect to inclusion ofmaljunction emissions.

A PAL permit limit can be generally enforced like any other permit limit, and the TCEQ has

authority to enforce all permit requirements; this authority is found in Tex. Water Code,

Chapter 7, and Tex. Health & Safety Code §§ 382.011, 382.015, 382.016, 382.0515, 382.0516,

382.022,382.023, and 382.085, as well as in certain rules found in 30 TAC Chapter 101,

Subchapters A and F. In addition, TCEQ rule 30 TAC § 101.201 requires regulated entities,

15 See 67 Fed. Reg. 80186, at 80211-80214 (December 3',2002).
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Page 7

regardless of whether they have a PAL permit, to record (and in some cases report) emissions

events, which includes unscheduled maintenance, startup, and shutdown (MSS) activity

emissions. Emissions from malfunctions are unauthorized emissions as defined in 30 TAC

§ 101.1(107); therefore, they are unauthorized (non-compliant) emissions. Exceedances of a

PAL limit, such as emissions from malfunctions, are unauthorized emissions and subject to

enforcement. TCEQ represented to EPA Region 6 that unscheduled MSS activity emissions are

functionally equivalent to EPA's definition of malfunction.16 Finally, PAL permits are

incorporated in TCEQ's Title V permits by reference. A citation for violating a limit in a PAL

permit could be included in an enforcement case.

The TCEQ does not "reward" non-compliance by inclusion. Exclusion of these emissions when

the PAL is established means that TCEQ's rules are more stringent than EPA's requirements. In

addition, TCEQ does not include malfunction emissions as part of the calculation of baseline

emissions or projected actual emissions [as those terms are defined in 30 TAC §§ U6.12(3)(E)

and (29)]. This means that TCEQ is at least as stringent as or more stringent than EPA's

requirement.

Furthermore, EPA has approved similar rules in other states. For example, South Carolina

omitted the word "malfunction" from its definitions of "baseline actual emissions" and

"projected actual emissions."17 In its adoption ofthese definitions, the state said this omission

was justified because the South Carolina Department of Health and Environmental Control had

never permitted malfunction emissions, and concluded that there was no advantage to including

malfunction emissions in either calculation. EPA concurred that omitting malfunctions does

not lesscn the stringency of South Carolina's NSR program.18

Similarly, the rules adopted by the Florida Department of Environmental Protection'9 do not

require the inclusion of emissions associated with malfunction. Instead, Florida relies only on

quantifiable emissions that can be verified, for both projected actual emissions and baseline

actual cmissions. Since this approach will not prevent malfunctions from being exceedances of

applicable standards, and does not affect obligations regarding excess emissions related

notifications required by state or federal law, EPA determined that this difference does not make

Florida's program less stringent than the federal program. 20 TCEQ's similar approach is

therefore also more stringent than the federal rules.

Whether in/ormation generated by a monitoring system required by a PAL permit condition

can meet the requirementsfor admissibility in a judicial proceeding

Texas statutes and TCEQ rules adopted under those statutes which establish the jurisdiction of

the TCEQ, as well as permit conditions, require owners and operators offacilities that may emit

air contaminants, which are authorized for construction and operation, to maintain data

16 Letter from John Steib, Deputy Director, TCEQ Office of Compliance & Enforcement to John Blevins, Director,

Compliance Assurance and Enforcement Division, USEPA, Region-6 Dallas, April!?, 2007.

17 South Carolina Code Section R,61-62.1, Standard 7(b)(4) and (b)(4)(i)(a), and (b)(41) and (b)(41)(ii)(b), and

Standard 7.1(b)(z) and (b)(2)(B)(i)(a), and (b)(l1) and (b)(l1)(B)(ii).

18 Proposed approval 72 FR 5203',52035 (Sept. 12, 2007); final approval 73 FR 31368 (June 2, 2008).

'9 Florida Administrative Code §62-21O.200(36) and (244).

'0 Proposal approval 73 Fed. Reg. 18466, 18470-71 (Apri14, 2008); approval 73 Fed. Reg. 36435 (June 27, 2008).
Mr. Carl Edlund, P.E.

EPA R6 for NSRR 2012

Page 8

necessary to demonstrate compliance with the terms and conditions oftheir authorizations.

That authority is found in Tex. Health & Safety Code §§ 382.011, 382.012, 382.014, 382.016,

382.051,382.0513,382.0514, and 382.0515; Tex. Water Code §§ 5.013(a)(11), 7.179, 7.180, and

7.181; and TCEQ rules 30 TAC §§ 116.111, 116.115 (which are, for the most part, SIP approved)

and §§ 116.711 and 116.715. Additionally, the Texas Legislature has provided the TCEQ with the

enforcement authority in Tex. Water Code Chapter 7 to initiate an action to enforce the statutes

within the jurisdiction ofthe TCEQ, such as 30 TAC §§ 7.179, 7.180, and 7.181.

The TCEQ adopted the requirement that the Texas Rules of Evidence, as applied in nonjury civil

cases in the district courts of this state, be followed in all hearings. 21 The initial factor affecting

admissibility is relevance, and the relevance of offered evidence - evidence of non-compliance in

an enforcement hearing - will support admissibility. However, ifthe data is not sufficient to

support admissibility, or is non-existent, then the executive director may pursue an enforcement

action for failing to maintain the data necessary to demonstrate compliance.

Conclusion

TCEQ remains obligated under its SIP and the FCAA to prevent emission increases due to any

relaxation in requirements. The major NSR permitting program will continue to serve its

intended role of assuring new and significantly modified sources are well controlled, as will the

TCEQ's minor NSR program. And, although permitting is considered to be a control measure,

NSR is not the primary control measure for attainment of the NAAQS. This backstop results in

TCEQ's conclusion that changes to air quality as a result of implementing NSRR should be

neutral with respect to attainment and maintenance of the NAAQS and reasonable further

progress as required by the FCAA.

I am confident that the proposed rule changes together with the information submitted in this

correspondence will ensure SIP approval of the rules adopted to implement NSR Reform. Ifyou

have any questions or need further information, please contact Steve Hagle, Deputy Director for

TCEQ Office ofAir.

Sincerely,

ak Covar

Executive Director

cc: Richard Hyde, P.E., Deputy Executive Director

Ramiro Garcia Jr., Deputy Director, Office of Compliance and Enforcement

Steve Hagle, P.E., Deputy Director, Office ofAir

Caroline Sweeney, Deputy Director, Office of Legal Services

Mike Wilson, P.E., Director, Air Permits Division, Office ofAir

2130 TAC § 80,127.