BryanW. Shaw, Ph.D., Chairman Carlos Rubinstein, Commissioner Toby Baker, Commissioner ZaIc Coval', ExecutiveDirector , \,)' , I ,-:'



### TEXAS COMMISSION ON ENVIRONMENTAL QUALITY Protecting Texas byReducing 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 ofU.S. Environmental ProtectionAgency's (EPA) review ofrules submittedbythe Texas Commission on Environmental Quality (TCEQ or Commission) to address the 1997 eight-hour ozone NationalAmbientAir Quality Standard andNew Source Review Reform (NSRR) in 2006 and 2011, you requestedTCEQ 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 NSRRrules are approvable as revisions to the Texas State Implementation Plan (SIP). These rules were publishedin the March 9, 2012 edition ofthe Texas Registerand 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 ofFederal Regulations (CFR) Part 51, AppendixV. Second, we have prepared responses to the remaining issues for which rulemaking is not required. The TCEQ's responses to these issues are describedbelow. Compliance with Federal CleanAirAct CFCAA) § 110(1) Background EPA adopted its NSRRrules bypublication in the December 31, 2002 issue ofthe Federal Register.! Subsequently, the clean unit and pollution control permitportions ofthe NSRRrules were vacatedbythe D.C. Circuit Court ofAppeals. 2 After TCEQ adopted new and amended rules in January 2006 to implementthe three surviving NSRRprogram components and submitted those as revisions to the Texas SIP, EPAproposed disapproval in 2009,3 and then tookfinal action to disapprove the rules on September 15, 2010.4 InAugust 2010, TCEQ initiated rulemaking to address EPA's proposed disapproval; that rulemaking amended several, but not all, ofthe rules which were the subject ofthe 2006 rulemaking. Those changes were adopted in February 2011 and were submittedto EPAfor approval as part ofthe Texas SIPwith a request that EPA also considerthe rules amended and adoptedbythe Commission on January 11, 2006, effective on February 1, 2006.

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

, New York v. UnitedStates, 413 F.3d 3 (D.C. Cir. 2005). 374 Fed. Reg. 48467 (September 23, 2009). 475 Fed. Reg. 56424.

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This letter supplements those three rulemakings,5 and addresses EPA's concerns regarding compliancewith FCAA § 110(1) for the three basic program components ofNSRR: the revised baseline for determining pre-change emissions, the actual-to-projected actual testfor determining post-change increases, and the Plant-wide Applicability Limit (PAL). Although EPApreviously determined, as stated in the New Source Review (NSR) Supplemental Analysis dated November 2002, that the implementation ofthe federal NSRR rules wouldbe environmentallybeneficial, EPA requested that TCEQ provide an analysis ofhow 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 NSRSIP requirements, a State submitting a customized major NSRSIP revision must demonstrate why its program and definitions are at least as stringent as the revised major NSRbase program.? Moreover, because there is an existingTexas Major NSRSIP, the submitted changes to the major NSR SIP must meet the anti-backsliding provisions ofthe FCAAin § 193, and meet the requirements in § 110(1) which provides that EPA may not approve a SIP revision ifit 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 ofthe Act, andbe consistentwith applicable statutory and regulatory requirements. These can include, among otherthings, enforceability, compliance assurance, replicability ofan elementin the program, accountability, test methods, andwhetherthe submittedrules are vague. There are four fundamental principles for the relationship between the SIP and any majorNSRpermits that implementthe major NSRprogram. These four principles as applied to the review ofa major or minor NSRSIP revision include: (1) the baseline emissions from a permitted source be quantifiable; (2) the NSR programbe enforceableby 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 NSRprogram's measures be replicable byincluding sufficiently specific and objective provisions so thattwo independent entities applying the permitprogram's procedures would obtain the same result; and (4) the major NSRpermitprogrambe 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 snbmittedto and approved hy EPA in 2010). TCEQ also adopted rnles to implementthe 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 NSRRrules were promulgated on Deeember 31,2002 (67 Fed. Reg. 80186) and reeonsidered with changes on November 7,2003 (68 Fed. Reg. 63021). 767Fed. Reg. 80186, at 80241 (December 31,2002). 8 See EPA's Apl'il16, 1992, "General Preamble for the Implementation ofTitle I ofthe Clean AirActAmendments 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) of the FCAA The TCEQ's existing NSRR rules meet the applicable SIP regulatory requirements and the requirements for SIP elements in Section 110 ofthe FCAA, and are consistentwith 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 andtherefore has no historical data to perform a quantitative analysis ofemission reductions to supplementthe associated rulemaking. In addition to the SIP submittals provided to EPA in 2006 and 2011, andthe 2012 proposed rules and preamble, the following discussion is provided to support the TCEQ's position that its NSRRrules are approvable as revisions to the Texas NSRSIP. Change in which years can be usedto establish the baseline emissions (also known as "2 in 10") EPA's NSRRrules changed the calculation methodologyfor determining baseline actual emissions for use in majorNSR applicability determinations. NSRR allows the use ofthe highest actual emissions from any consecutive 24-month periodwithin the previous 10 years in place ofthe 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 atimely manner. TCEQ included EPA's baseline determination method in its rules.
The primarybenefit ofthe "2 in 10" rule is allowing applicants who want to use atwo-year period that is not the two-years immediatelyprior 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 documentationfor the average emissions for the two years prior to the start ofconstruction unless those were the representative years selectedbythe 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 ofNSRR. Air Quality PermitApplications (whether only for minor sources, orwhether major NSRis also triggered) are reviewed under the rules in effeet at the time ofapplieation submittal and, for major NSR, at permit issuance. Therefore, TCEQ has not requested the additional information since itwas not required atthe time ofthe review. Adoption andimplementation 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 ofthe FCAA. In addition, these rules do not change existing requirements for obtaining offsets for nonattainmentpermitting 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 ofair quality authorizations everyyear. 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 ofthese major sources are located in the Beaumont-PortArthur and Houston-Galveston-Brazoria areas and are subjectto the stringent SIP requirements for control ofvolatile organic compounds (VOC) and nitrogen oxides (NO,) underTitle 30 Texas Administrative Code (TAC) Chapters 115 and 117. In addition, sources undergoing construction or modification which are not subject to thebest 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 notbacksliding from control requirements for VOC and NO,.


### Use of actual toprojectedfuture actual testfornon-utility (as wellas utility) sources EPA's NSRRrules also allow the use ofthe projected future actual test for non-utility sources in determining NSR applicability. This option was previously allowedfor utility sources only. This change is a voluntary alternative to the actual-to-potential to emittest. Either option maybe used when determining project increases for use in determining the applicability ofmajor NSR requirements. TCEQ implemented the EPA rule.
An applicant utilizing the actual-to-projected-actual test would nothave submittedthe information for the actual to potential to emittest since the information wouldbe irrelevantto the review. TCEQ has no data currently available whichwould allow a comparison ofthe emission increases/decreases under the NSRRrules to whatthose emission changes wouldhave been in the absence ofNSRR. TCEQ is relying on EPAto provide guidance on how to properly projectfuture emissions, how those emissions shouldbe tracked, andwhich type offuture emissions canbe 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 ofthe FCAA. In addition, these rules do not change existing requirements for obtaining offsets for nonattainmentpermitting and considering all sources for PSD permitting.
In addition, sources undergoing construction or modificationwhich are not subjectto 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 ofimplementing NSRR shouldbe neutral with respect to reasonable further progress. 

### Plant-wideApplicabilityLimit The Plant-wide Applicability Limit sets a cap for a site's emissions ofa regulated pollutant. Changes made at the site are not subjectto major NSR review as long as the emissions ofthe regulated pollutant remain belowthe PAL cap. EPA's PAL rules are a voluntary option that provides "the ability to manage facility-wide emissions withouttriggering major NSRreview" which willfacilitate the ability ofcompanies "to respond rapidly to changing marketMr. 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 SupplementalAnalysis!3 provided EPA's technical background information used to support the rules; AppendixAto the SupplementalAnalysis is the report ofthe "Flexible Permit Pilot" permit. EPA concluded that, overall, the use ofemission 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, andthus be environmentallybeneficial in enforceable permits.!4
In addition, the monitoring, recordkeeping, and reporting (MRR) requirements required to demonstrate compliance with the PAL may have the addedbenefit ofoptimizing operations due to improved monitoring. Optimization ofoperations generally has an associated reduction in air emissions which could result in a modest contribution toward reasonable further progress. The characteristics ofPALs providebenefits to both the public and the regulated entities that utilize them. These characteristics include: use ofa cap for groups ofemission sources on a pollutantspecificbasis, operational flexibility, regulatory certainty, no circumvention ofmajor NSR, detailed MRR requirements, and environmental benefit. Texas has had a small number of sites take advantage ofthe PAL option under the federal NSRRrules, 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 ofthe number ofpermits currently authorized annually in Texas, which is typically more than 14,000 permits. Because TCEQ has issued only two PALpermits since the majority ofthe rules were adoptedbyTCEQ, no data exists to determine whether the PAL program could adversely affect air quality.
In addition, the PAL for a specific pollutant is based uponbaseline actual emissions for that pollutant. Any future construction or modifications under the PALwhich are not subjectto the BACT orlowest achievable emission reduction major NSR requirements must still complywith Texas' BACTrequirements in 30 TAC § 116.111(a)(2)(C). In some cases, controls beyond those accepted as BACT for minor NSR maybe required to meet the PAL cap. Sources under a PAL located inthe Beaumont-PortArthur and Houston-Galveston-Brazoria areas are also subjectto 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 ofimplementingthe PALportion of NSRR will be neutral in affectto air quality reasonable further progress.

w 67 Fed. Reg. 80186, 80189 (December 31, 2002).
11 EPA's use ofthe term "facility" is understood to mean the entire plantsite. In contrast, the Texas Clean AirAct defines "facility" very narrowly and it is analogous to the EPA term C(emissions unit."

12 Technical SUPPOlt Document for the Prevention ofSignificant Deterioration and NonattainmentArea New Source Review Regulations, United States Environmental-ProtectionAgency, Office ofAir QualityPlanning and Standards (November 2002). 13 New Source Review Improvements, SupplementalAnalysis 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 QuestionsRaisedbu EPA Region 6 Whether TCEQ's Plant-wideApplicabilityLimit (PAL) Permits are Practically Enforceable Apermitis practically enforceable ifpermit conditions establish clearlegal 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 characterizedthese requirements as addressing a number ofissues 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 permitprovisions specifyboth a technically accurate limitation as well as the portions ofthe source subjectto the limitation, the time period for the limitation, and the method to determine compliance, including appropriate MRR requirements. The TCEQ rules that satisfythe applicable federal PAL requirements, as established in EPA's rules, are as follows: Technically accurate limitation and identification of theportions of the source thatare subjectto the limitation. Texas established its PAL programbased on 30 TAC §§ 116.180, 116.182, 116.186(a), and 116.188. These rules satisfythe 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), andtherefore render the program, and PAL permits issued under the program, practically enforceable.
The timeperiodfor the limitation Texas rules state that the PALlimit mustbe met on a 12-month rolling average [30 TAC §§ 116.182(3) and 116.186(a)]. These rules meetthe federal requirements in 40 CFR51.165(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 underthe program, practically enforceable.
The methodto determine compliance, including appropriateMRR 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 CFR51.165(f)(13)-(14) and 51.166(w)(13)-(14), andtherefore render the program, and PAL permits issuedunder 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), and51.166(b)(47)(i)(a) and(ii)(a) with respect to inclusion ofmaljunction emissions.
A PAL permitlimit can be generally enforcedlike any otherpermit 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 ofwhether they have a PALpermit, 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 definedin 30 TAC § 101.1(107); therefore, they are unauthorized (non-compliant) emissions. Exceedances ofa PALlimit, such as emissions from malfunctions, are unauthorized emissions and subjectto enforcement. TCEQ represented to EPA Region 6 that unscheduled MSS activity emissions are functionally equivalentto EPA's definition ofmalfunction.16 Finally, PAL permits are incorporated in TCEQ's TitleVpermits by reference. Acitation for violating alimitin a PAL permit could be included in an enforcement case. The TCEQ does not "reward" non-compliance by inclusion. Exclusion ofthese emissions when the PAL is established means that TCEQ's rules are more stringentthan EPA's requirements. In addition, TCEQ does not include malfunction emissions as part ofthe calculation ofbaseline emissions orprojected actual emissions [as those terms are defined in 30 TAC §§ U6.12(3)(E) and (29)]. This means that TCEQ is atleast as stringent as or more stringentthan EPA's requirement. Furthermore, EPAhas approved similarrules 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 wasjustifiedbecause the South Carolina Department ofHealth and Environmental Control had never permitted malfunction emissions, and concluded that there was no advantage to including malfunction emissions in either calculation. EPAconcurred that omitting malfunctions does notlesscn the stringency ofSouth Carolina's NSRprogram.18 Similarly, the rules adopted bythe Florida Department ofEnvironmental Protection'9 do not require the inclusion ofemissions associated with malfunction. Instead, Florida relies only on quantifiable emissions that can be verified, for both projected actual emissions andbaseline 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 requiredby state orfederal law, EPA determined thatthis difference does not make Florida's program less stringentthan the federal program. 20 TCEQ's similar approach is therefore also more stringentthan the federal rules.


### Whether in/ormation generatedby a monitoring 

### system requiredby aPALpermitcondition can 

### meet the requirementsfor admissibility in 

### ajudicialproceeding Texas statutes and TCEQ rules adopted under those statutes which establish thejurisdiction 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 ofCompliance & Enforcementto 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 NSRR2012 Page 8

necessary to demonstrate compliance withthe 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 Chapter7 to initiate an action to enforce the statutes within thejurisdiction ofthe TCEQ, such as 30 TAC §§ 7.179, 7.180, and 7.181.
The TCEQ adopted the requirement that the Texas Rules ofEvidence, as applied in nonjury civil cases in the district courts ofthis state, be followed in all hearings. 21 The initial factor affecting admissibility is relevance, and the relevance ofoffered evidence

- evidence ofnon-compliance in an enforcement hearing

- will support admissibility. However, 

### ifthe data is not sufficientto support admissibility, oris 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 FCAAto prevent emission increases due to any relaxation in requirements. The major NSRpermitting programwill continue to serve its intended role ofassuring new and significantly modified sources are well controlled, as will the TCEQ's minor NSRprogram. And, although permitting is considered to be a control measure, NSRis not the primary control measure for attainment ofthe NAAQS. This backstop results in TCEQ's conclusion that changes to air quality as a result ofimplementing NSRR should be neutral with respect to attainment and maintenance ofthe NAAQS and reasonable further progress as required bythe FCAA.
I am confident that the proposed rule changes togetherwith the information submitted in this correspondence will ensure SIP approval ofthe rules adopted to implement NSRReform. Ifyou have any questions or need further information, please contact Steve Hagle, Deputy Directorfor TCEQ Office ofAir. Sincerely,

ak Covar Executive Director

cc: Richard Hyde, P.E., Deputy Executive Director Ramiro Garcia Jr., Deputy Director, Office ofCompliance and Enforcement Steve Hagle, P.E., Deputy Director, Office ofAir Caroline Sweeney, Deputy Director, Office ofLegal Services MikeWilson, P.E., Director, Air Permits Division, Office ofAir

2130 TAC § 80,127.