TECHNICAL SUPPORT DOCUMENT

30 TAC CHAPTER 101, SUBCHAPTER H, DIVISION 2

EMISSIONS BANKING AND TRADING OF ALLOWANCES

§§101.330 -101.336,101.338,101.339

October 28, 2010

FOR FURTHER INFORMAnON CONTACT: Ms. Adina Wiley, United States Environmental

Protection Agency Region 6, Air Permits Section (6PD-R), 1445 Ross Avenue, Dallas, Texas 75202-

2733, (214) 665-2115.
Subject:

Contents:

Review ofRevisions to the State Implementation Plan - Texas Administrative

Code Title 30, Chapter 10 I, Subchapter H, Division 2 - Emissions Banking and

Trading ofAllowances:

§ 101.330 - Definitions

§ 101.33 I - Applicability

§ 101.332 - General Provisions

§ 101.333 - Allocation ofAllowances

§ 101.334 - Allowance Deductions

§ 101.335 - Allowance Banking and Trading

§ 101.336 - Emission Monitoring, Compliance Demonstration, and Reporting

§ 101.338 - Emission Reductions Achieved Outside the United States

§ 101.339 - Program Audits and Reports

I. Executive Summary

II. History of State Submittals

III. Summary of State Submittal

IV. Summary ofthe EBTA Program

V. Technical Review ofthe EBTA Program

VI. Conclusion

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I. Executive Summary

What actions are evaluated in this Technical Support Document?

This Technical Support Document (TSD) reviews portions of 4 revisions to the Texas State

Implementation Plan (SIP) that involve the Texas Emissions Banking and Trading ofAllowances

(EBTA) Program. The EBTA Program was first adopted by the state at 30 TAC Sections

101.330-101.337 on December 16, 1999, and was submitted to EPA in a letter dated January 3,

2000. The EBTA Program establishes a cap and trade program to reduce emissions of oxides of

nitrogen (NOx) and sulfur dioxide (S02) from participating electric generating facilities. Since

the original adoption, TCEQ has submitted SIP revisions for the EBTA Program on September

11,2000; July 15,2002; and October 24,2006. This review will determine ifthe original

submission ofthe EBTA Program and all subsequent amendments, will improve air quality,

comply with the Clean Air Act and EPA regulations, and be consistent with EPA's policies.

This TSD will not review the other SIP revisions to 30 TAC Chapter 101, Subchapter H,

Emissions Banking and Trading or Chapter 116, Control ofAir Pollution by Permits for New

Construction or Modification that were submitted at the same time as the EBTA Program

submissions. These other SIP revisions have been or will be the subject ofseparate rulemaking

actions by EPA.

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II. History of State SIP Submittals

The TCEQ has submitted four SIP revisions concerning the EBTA Program. Below is an

itemized listing of each ofthese submittals which details all sections submitted for EPA review

and any rulemaking actions taken to date on these submissions.

January 3, 2000

• On December 16, 1999, the Texas Natural Resource Conservation Commission (TNRCC)

adopted new provisions establishing the EBTA program, pursuant to Senate Bill 7, 76ili

Legislature, 1999. These new provisions created Title 30 Texas Administrative Code,

Chapter 101, Subchapter H, Division 2, Sections 101.330-101.337. Governor George W.

Bush submitted these provisions as a SIP revision in a letter dated January 3, 2000, for rule

log number 99033-116-Al.

• On December 16, 1999, TNRCC also adopted new provisions at 30 TAC Chapter 116,

Sections 116.18, 116.910 - 116.914, 116.916, 116.920 - 116.922, 116.930, and 116.931

concerning the permitting of grandfathered electric generating facilities, also pursuant to

Senate Bill 7. These provisions were also submitted to EPA on January 3, 2000, as part of

rule project number 99033-116-AI.

• EPA is taking separate action on the provisions for the permitting of grandfathered electric

generating facilities at 30 TAC Chapter 116, Sections 116.18, 116.910 - 116.914, 116.916,

116.920 - 116.922, 116.930, and 116.931; therefore this TSD will not review the portion of

the 2000 SIP revision establishing this permit program.

September 11, 2000

• On August 9, 2000, the TNRCC adopted amendments to the EBTA program at 30 TAC

Chapter 101, Subchapter H, Division 2, Section 101.333. Governor George W. Bush

submitted these amendments as a SlP revision in a letter dated September 11, 2000, for rule

log number 1999-029B-116-AI.

• On August 9, 2000, TNRCC also adopted amendments to 30 TAC Chapter 101, Subchapter

A, Section 101.27 for revised emission fees calculations. The TNRCC also adopted

amendments to 30 TAC Chapter 116, Sections 116.10, 116.110, 116.116, 116.603, 116.620,

116.621,116.710,116.715,116.721,116.722 and 116.750 pursuant to Senate Bill 766, 76ili

Legislature, 1999. All ofthese provisions were submitted to EPA on September 11,2000, as

part ofrule log number 1999-029B-116-Al.

• On December 28, 2009, EPA returned the submittal of 30 TAC 101.27 to the Texas

Commission on Environmental Quality (TCEQ) as part ofthe Title V Operating Permit

Program rather than a Title I program that is implemented through the SIP. TCEQ submitted

a letter on January 14, 2010, concurring with our assessment and withdrawing 30 TAC

101.27 from consideration as a SIP submittal.

• On November 14,2003, EPA approved the amendments to 30 TAC Sections 116.110,

116.116, and 116.603. See68FR64548.

• On April14, 2010, EPA approved the amendments to 30 TAC Section 116.10(6) submitted

on September 11, 2000. Also in this action EPA disapproved the amendments to 30 TAC

Section 116.10(2) and took no action on 30 TAC Section 116.10(5)(F). See 75 FR 19468.

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• On June 30, 2010, EPA issued a final disapproval ofthe Texas Flexible Permits Program,

including disapproval 000 TAC Sections 116.71, 116.715, 116.721, 116.722, and 116.750

submitted on September 11,2000. See (75 FR 41312, July 15,2010).

• The amendments to 30 TAC Section 116.620 remain open for review and action by EPA at a

later date. EPA is under a consent decree deadline to take final action no later than October

31,2011.

• The amendments to 30 TAC Section 116.621 were repealed by the TCEQ on March 1,2006,

as part ofRule Project Number 2003-066-116-PR. No further action is needed by EPA on

this section.

July 15. 2002

• On March 13,2002, the TNRCC adopted new provisions in the EBTA Program for emission

reductions achieved outside the United States at 30 TAC Chapter 101, Subchapter H,

Division 2, Section 101.338. The Chairman ofthe TNRCC, Mr. Robert J. Huston, submitted

this section as a SIP revision in a letter dated July 15,2002, for rule project number 2001-

063-101-AI.

• On March 13, 2002, the TNRCC also adopted revisions to the Emission Credit Banking and

Trading Program (referred to elsewhere in this document as the Emission Reduction Credit

(ERC) Program) at 30 TAC Chapter 101, Subchapter H, Division I, Section 101.302; the

Mass Emissions Cap and Trade (MECT) Program at 30 TAC Chapter 101, Subchapter H,

Division 3, Section 101.357, and the Discrete Emission Credit Banking and Trading Program

(referred to elsewhere in this document as the Discrete Emission Reduction Credit (DERC)

Program) at 30 TAC Chapter 101, Subchapter H, Division 4, Section 101.372. The TNRCC

also adopted new Section 117.571. All ofthese provisions were also submitted to EPA on

July 15, 2002, as part ofrule project number 2001-063-1 Ol-AI.

• EPA fully approved the amendments to section 101.302 on September 6,2006. See 71 FR

52698.

• EPA conditionally approved the amendments to section 101.372 on September 6, 2006. See

71 FR 52703. The conditional approval ofthe DERC Program was converted to a full

approval on May 18,2010. See 75 FR 27644.

• EPA has taken no action to date on new section 101.357. This section is severable from our

analysis and action on the EBTA program because the MECT Program, is a separate, standalone cap and trade program specific to the Houston-Galveston-Brazoria (HGB) ozone

nonattainment area. This action remains open for review and action at a later date by EPA.

• EPA has taken no action to date on new section 117.571. This section is severable from our

analysis and action on the EBTA program because section 117.571 establishes provisions to

allow the substitution of emissions reductions achieved under the Texas Emission Reduction

Program (TERP) for NOX emission reductions required in the HGB and DallaslFort Worth

ozone nonattainment areas. This section remains open for review and action at a later date

by EPA.

October 24, 2006

• On October 4, 2006, the Texas Commission on Environmental Quality (TCEQ) adopted the

repeal 000 TAC Section 101.338 and new 30 TAC Sections 101.338 and 101.339. The

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Chainnan ofthe TCEQ, Ms. Kathleen Hartnett White, submitted these provisions as a SIP

revision in a letter dated October 24,2006, for rule project number 2005-054-101-PR. In this

SIP submittal cover letter, Chainnan White requested that EPA take no federal action on 30

TAC Section 101.337 submitted on January 3, 2000; section 101.337 establishes

requirements unique to the EI Paso Region which will be state only requirements.

• On October 4, 2006, TCEQ also adopted revisions to the ERC program at 30 TAC Chapter

101, Sections 101.302, 101.305 and 101.306 to address the mandates ofTexas Senate Bill

784 and the conditions of EPA's final conditional approval ofthe DERC Program,

September 6, 2006. See 71 FR 52703. Also at this time, the TCEQ adopted revisions to the

DERC Program at 30 TAC Chapter 101, Sections 101.372, 101.373, 101.375, 101.376, and

101.378 to address the mandates of Texas SB 784 and the conditions of EPA's final

conditional approval ofthe DERC Program, September 6, 2006. All ofthese revisions were

submitted to EPA on October 24,2006, as part ofrule project number 2005-054-101-PR.

• On April 30, 2010, EPA fully approved the amendments to the ERC and DERC Programs at

30 TAC Chapter 101, Sections 101.302, 101.305, 101.306, 101.372, 101.373, 101.375,

101.376, and 101.378. See 75 FR 27644 and 75 27647, May 18,2010.

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III. Background of Texas Emissions Banking and Trading Programs

What is Air Emissions Trading?

Air emissions trading programs are designed to promote flexibility and innovation in complying

with State and Federal emission requirements. Air emissions trading programs create a

marketplace for emission reductions implemented by source I and needed by source 2. For

example, source I creates a marketable emissions reduction by reducing its emissions below the

level it is required to meet, and below the level it has been meeting. Source I then sells or trades

these reductions as credits to another source that is then allowed to release emissions above its

required levels. In return for this flexibility, source 2 must purchase additional credits beyond

those needed to comply, therefore reducing overall emissions. Emissions trading uses market

forces to reduce the overall cost of compliance for sources, while maintaining emission

reductions and environmental benefits.

What is an Economic Incentive Program?

An EIP is a regulatory program that achieves an air quality objective by providing market-based

incentives or information to emission sources. A uniform emission reduction requirement, based

for instance on installation of a required emission control technology, does not take account of

variations in processes, operations, and control costs across sources even ofthe same type, such

as electric utilities, or petroleum refiners. By providing flexibility in how sources meet an

emission reduction target, an EIP empowers sources to find the means that are most suitable and

most cost-effective for their particular circumstances.

In addition, an EIP can create incentives for sources to go beyond an emission reduction target.

By setting a price on pollution and pollution reductions through a fee-based approach or a

trading program, some sources can realize an economic gain or avoid additional costs by selling

excess emission reductions, or making the reductions for less than the cost imposed by a fee.

Because ofthe improved efficiency, EIPs may also lead to achieving air quality goals more

quickly.

What is the status ofEIPprograms in Texas?

TCEQ has adopted six EIP programs into state regulations. The regulations are found in

Divisions I through 6 000 TAC Chapter 101, Subchapter H.The six EIP programs in Texas

are summarized in Table II - I. Additionally, TCEQ has adopted one federal trading program

into state regulation, found in Divisions 7 000 TAC Chapter 101, Subchapter H.

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Table II - I

TCEQ EIP Trading Programs and Regional Applicability

TCEQ Geographical/Ozone Non-attainment Regions

Trading DFW HGB BPA EI Paso East and West Texas Program Central Texas

ERC Optional Optional Optional nla nla nla

EBTA nla nla nla Mandatory Mandatory Mandatory

MECT nla Mandatory nla nla nla nla

DERC Optional Optional Optional Optional Optional Optional

SCT Optional Optional Optional nla Optional nla

HECT nla Mandatory nla nla nla nla

CAIR Federally Mandated Trading Program

Mandatory means that sources in the region must participate in the EIP program.

Optional means that sources in the region have the option to participate in the EIP program.

nla - The EIP does not apply to the geographical region.

DFW - Dallas Ft Worth ozone nonattainment area for both I-hour and 8-hour ozone standard.

HOB - Houston/GalvestonIBrazoria ozone nonattainment area for both I-hour and 8-hour ozone standard.

BPA - BeaumonUPort Arthur ozone nonattainment area for both I-hour and 8-hour ozone standard.

El Paso - EI Paso ozone nonattainment area for I-hour ozone standard. EI Paso is maintenance for 8-hour ozone standard.

East and Central Texas· Those counties east ofInterstate Highway 35.

West Texas - Those counties west of the counties in the East and Central Texas area, excluding El Paso.

The TCEQ EIP regulations are summarized below:

I. Emission Credit Banking and Trading (ERCs) (30 TAC Chapter 101, Subchapter H,

Division I)

The Emission Credit Banking and Trading EIP or Emission Reduction Credit (ERC)

program for VOC and NOx in ozone nonattainment areas was first adopted by Texas at

30 TAC § 101.29 on December 23, 1997. Effective January 18,2001, § 101.29 was

repealed and Chapter 101, Subchapter H, Divisions 1, 3, and 4 were created. This action

created separate divisions for the ERC, MECT, and DERC programs. The submittal

effective April 14, 2002, amended §101.302. The submittal effective January 17,2003,

completely reorganized the ERC and DERC program rules into more standardized

formats parallel to each other, with a rule structure which followed a process of

recognizing, quantifying, and certifying reductions as credits while explaining the

guidelines for trading and using creditable reductions. The 2003 submittal amended

§§101.300, 101.301, 101.302,101.303,101.304,101.306,101.309, and 101.311. The

December 6, 2004, submittal amended §§ 101.300, 101.302, 101.303, 101.304, and

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101.311. Our final approval on September 6, 2006, acted on the original submission of

the ERC program and all subsequent revisions through the December 6, 2004 submittal.

Division I defines emission credits (ECs) in terms of a rate (tons per year). Emission

credits can be generated and banked from stationary sources as emission reduction credits

(ERCs) or generated and banked from mobile sources as mobile emission reduction

credits (MERCs). The ERCs from the bank have traditionally been used as offsets for

permitting major new or modified facilities. ERCs have also been banked and traded for

alternative compliance with Reasonably Available Control Technology (RACT)

requirements. MERCs have not been banked or traded under the program to date. On

December 6, 2004, TCEQ submitted revisions to the SIP that expanded the ERC program

to cover reductions of criteria pollutants (excluding lead) or precursors of criteria

pollutants for which an area is designated nonattainment. EPA published a final approval

ofthe ERC program on September 6, 2006, 71 FR 52698.

After EPA's final approval on September 6, 2006, TCEQ revised the ERC program to

address the commitments ofthe DERC conditional approval. Additionally, the TCEQ

adopted revisions to the ERC program consistent with the requirements of Senate Bill

784, adopted during regular session, 2005, ofthe 79th Texas Legislature. Senate Bill 784

allows for greater flexibility in the generation and use of international emission

reductions. These revisions were adopted by the TCEQ on October 4, 2006, and became

effective on October 26,2006. The adopted regulations were submitted to EPA as a SIP

revision on October 24, 2006. TCEQ also promulgated revisions to the ERC program

that update the cross-references to the new numbering structure in 30 TAC Chapter 117.

These revisions were adopted on July 25,2007, and became effective on August 16,

2007. The adopted regulations were submitted to EPA as a SIP revision on August 16,

2007. EPA fully approved the 2006 and 2007 revisions to the ERC program on April 30,

2010. See 75 FR 27647, May 18, 2010.

2. Emissions Banking and Trading ofAllowances (EBTA) (30 TAC Chapter 101,

Subchapter H, Division 2)

The TCEQ created the EBTA Program to implement the requirements of Senate Bill (SB)

7, from the 76th Legislature, 1999, which deregulated the electric utility industry. Under

SB 7, TCEQ was required to develop a permitting system and a mass cap and trade

system to distribute allowances for use by electric generating facilities. The TCEQ

created the EBTA Program to establish an emission reduction cap which provides for a

50% reduction in NOx emissions from EGFs and a 25 % reduction in S02 emissions

from solid fuel EGFs. The permitting system required under SB 7 and established at 30

TAC Chapter 116, Subchapter I, is the subject of a separate rulemaking review and action

by EPA (see Docket EPA-R06-0AR-2005-TX-0031). The EBTA program began

operation in 2003. Allowances for NOx and S02 are deposited into each EGFs

compliance account annually. The EGFs will be allowed to purchase, bank or sell

allowances to meet operational demands. The EBTA program is divided into three

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regions; East and West Texas as divided by Interstate Highway 35 and the EI Paso region

(consisting ofEI Paso County; Juarez, Mexico; and Sunland Park, New Mexico).

The first SIP submittal to EPA on January 3, 2000, established the details ofthe emission

trading program, including the establishment ofthe trading regions, the allowance

allocation formula, and the banking provisions for unused allowances. This submittal

established new §§ 101.330-101.337 and was contained in rule log number 99033-101-

AI. The second SIP submittal (rule log number 1999-029B-116-AI) sent to EPA on

September 9,2001, amended the Allocation ofAllowances at § 101.333. The third

revision to the EBTA was submitted to EPA on July 15,2002, and established new §

101.338, which provided for the use of emission reductions from outside the United

States to be used in lieu ofEBTA allowances. Section 101.338 was added to the EBTA

in response to SB 1561 which allows surplus emission reductions achieved outside the

United States to satisfy emission reduction requirements in Texas by allowing reductions

in one air contaminant to substitute for reductions in another criteria pollutant. This

submittal was part ofrule log number 2001-063-10 I-AI. The final revision to the EBTA

was submitted to the EPA on October 24,2006, for rule project number 2005-054-101-

PRo The 2006 amendments to the EPA repealed and replaced the international provisions

in section 101.338 and created section 101.339 for program audits and reports.

3. Mass Emissions Cap and Trade (MECT) Program (30 TAC Chapter 101, Subchapter H,

Division 3)

The MECT program was adopted as a State regulation on December 6, 2000. This

program is mandatory for stationary facilities that emit NOx in the HGB ozone

nonattainment area which are subject to emission specifications in the TCEQ NOx rules

at 30 TAC Chapter 117.310, 117.1210, and 117.2010; and which are located as a site

where they collectively have an uncontrolled design capacity to emit 10 tons per year or

more ofNOx. The program set a cap on NOx emissions beginning January 1,2002, with

a [mal reduction to the cap occurring in 2007. Facilities are required to meet NOx

allowances on an armual basis. Facilities may purchase, bank, or sell their allowances.

The program has a provision to allow a facility to use credit generated through the

Division I EIP (ERCs) to permanently increase the allowances for the individual facility

in the MECT ifthe credits were generated for NOx in the HGB area before December I,

2000. The program also has a provision to allow a facility to use credits generated

through the Division 4 EIP (DERCs) in lieu of allowances ifthey are generated in the

HGB area. EPA published a final rule approving the MECT program (except for the use

ofDERCs in the MECT, which we deferred acting on until our action on the DERC rule)

on November 14, 2001 (66 FR 57252). Texas subsequently revised the MECT program

in SIP submittals dated January 31, 2003 and December 6, 2004. EPA published a final

approval ofthe MECT program revisions on September 6,2006 (71 FR 52698),

including revisions to the MECT necessary to accomplish the shift in attainment strategy

from 90 percent control ofindustrial NOx sources to 80 percent control in the HGB area.

The approved revisions also approved the use of discrete emissions credits generated

from stationary sources (DERCs) or mobile sources (MDERCs) in lieu ofMECT

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allowances. Since our 2006 final approval, TCEQ has promulgated revisions to the

MECT to update the cross-references to the Chapter 117 NOx rules. EPA subsequently

approved the revisions to the MECT through a direct final action on July 16, 2009 (see 74

FR 34503).

4. Discrete Emission Credit Banking and Trading (DERCs) (30 TAC Chapter 101,

Subchapter H, Division 4)

The DERC program was first adopted by the state at 30 TAC § 101.29 on December 23,

1997. Effective January 18, 2001, § 101.29 was repealed and Chapter 101, Subchapter

H, Divisions I, 3, and 4 were created. This action created separate divisions for the ERC,

MECT, and DERC programs. Discrete emission credits (DECs) are quantified, banked

and traded in terms of mass (tons), not a rate as is the case with ECs. DECs may be

generated from stationary sources and banked as discrete emission reduction credits

(DERCs) or may be generated from mobile sources and banked as mobile discrete

emission reduction credits (MDERCs). DECs may be generated and used statewide and

can apply to all criteria pollutants, with the exception oflead. Traditionally DECs have

been used for RACT compliance for VOCs and NOx. Amendments to the MECT

program were adopted on October 18, 2001; these amendments also included changes

made primarily for clarification to §§ 101.370, 101.372, and 101.373 in the DERC

program. The DERC program was amended again effective April 14, 2002, to include

the provisions in Texas Senate Bill 1561 for air emissions trading across international

boundaries. The submittal effective January 17,2003, completely reorganized the ERC

and DERC program rules into more standardized formats parallel to each other, with a

rule structure which followed a process ofrecognizing, quantifying, and certifying

reductions as credits while explaining the guidelines for trading and using creditable

reductions. The December 6,2004 submittal amended §§ 101.370, 101.373, 101.374,

and 101.376. Our final conditional approval on September 6, 2006, acted on the original

submission ofthe DERC program and all subsequent revisions through the December 6,

2004, submittal (71 FR 52703). Our conditional approval is contingent upon TCEQ

satisfactorily addressing the terms oftheir September 8, 2005, commitment letter.

After EPA's final conditional approval on September 6, 2006, TCEQ revised the DERC

program to address the commitments ofthe conditional approval. Additionally, the

TCEQ adopted revisions to the DERC program consistent with the requirements of

Senate Bill 784, adopted during regular session, 2005, ofthe 79th Texas Legislature.

Senate Bill 784 allows for greater flexibility in the generation and use of international

emission reductions. These revisions were adopted by the TCEQ on October 4, 2006,

and became effective on October 26, 2006. The adopted regulations were submitted to

EPA as a SIP revision on October 24, 2006. TCEQ also promulgated revisions to the

DERC program that update the cross-references to the new numbering structure in 30

TAC Chapter 117. These revisions were adopted on July 25, 2007, and became effective

on August 16, 2007. The adopted regulations were submitted to EPA as a SIP revision

on August 16, 2007. EPA fully approved the 2006 and 2007 revisions to the DERC

program on April 30, 2010. See 75 FR 27644, May 18, 2010.

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5. System Cap Trading (SCT) (30 TAC Chapter 101, Subchapter H, Division 5)

The TCEQ adopted system caps for electric generating facilities operating in the BPA,

DFW, and HGB ozone nonattainment areas and the attainment counties of east and

central Texas at 30 TAC § 117.138 on September 26, 200 I, effective October 18, 2001.

EPA approved the system caps on November 14,2001 (66 FR 57244). The System Cap

Trading (SCT) program adopted by TCEQ on March 21, 2001, and submitted to EPA as

a revision to the SIP in Rule Log Number 2000-046-10 I-AI, provides flexibility for the

electric industry in achieving the NOx emissions reductions necessary to achieve ozone

attainment in the BPA, DFW, and HGB ozone nonattainment area and the attainment

counties of east and central Texas while maintaining reliability ofservice. Individual

sources under common ownership or control may be voluntarily grouped together in a

system with a system cap on total emissions from the sources in the system, established

under 30 TAC Chapter 117 emissions limitations. Emission allowables may be

transferred from source to source within the system, provided the cap is not exceeded.

The SCT provides a mechanism that streamlines the steps necessary for daily emission

trading by allowing the increase ofsystem caps from corresponding system cap emission

reductions in the same nonattainment or attainment area. The system cap may be

increased daily using a daily surplus, or on a 30-day rolling average using a 30-day

rolling average surplus for the same time period. TCEQ has promulgated revisions to the

SCT program to update the cross-references to the Chapter 117 NOx rules. EPA has

taken no action on the SCT program to date.

6. Highly-Reactive Volatile Organic Compound Emission Cap and Trade (HECT) Program

(30 TAC Chapter 101, Subchapter H, Division 6)

The HECT program was adopted as a State regulation on December I, 2004. This

program is mandatory for covered facilities including vent gas streams, flares, and

cooling tower heat exchange systems that emit highly-reactive VOCs, as defined in

§ 115.10, and that are located at a site subject to Chapter liS, Subchapter H. Facilities

are required to meet HRVOC allowances on an annual basis. Facilities may purchase,

bank or sell their allowances for use in the following control period. The program has a

provision to allow a facility to use credits ofless-reactive VOCs generated through the

Division I EIP (ERCs) in lieu of allowances ifthey are generated in the HGB area. EPA

published final approval ofthe HECT program on September 6,2006.

7. Clean Air Interstate Rule (CAIR) Program (30 TAC Chapter 101, Subchapter H, Division

7)

The Texas CAIR program was adopted as a State regulation on July 12, 2006, and

submitted as a SIP revision on August 4, 2006. The Division 7 regulations incorporate

by reference the CAIR NOx Annual and S02 trading programs as adopted by EPA on

May 12,2005 (70 FR 25162). Additionally, the Texas CAIR program establishes a NOx

allocation methodology and provisions for the compliance supplement pool to replace the

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provisions at subpart EE of 40 CFR part 97, the CAIR Federal Implementation Plan.

EPA published a direct final approval ofthe Texas CAIR NOx Abbreviated SIP for the

Phase I allocation methodology on July 30, 2007 (72 FR 41453). TCEQ adopted

revisions to the CAIR program on February 10, 20 I0, to update the NOx allocation

methodology and the incorporation by reference dates for the NOx annual and S02

trading programs. These revisions were submitted to EPA as a SIP revision on March 4,

2010.

What has EPA considered in reviewing and evaluating the TCEQ EBTA EIP SIP submittal?

"Improving Air Quality with Economic Incentive Programs" (EPA-4521R-OI-00I, January 2001)

is the EPA guidance document for reviewing and approving discretionary EIP submittals. The

EIP Guidance applies to the establishment of a discretionary EIP for attaining or maintaining the

national ambient air quality standards (NAAQS) for criteria pollutants. The EIP Guidance takes

precedence over the discretionary EIP guidance provided in prior documents such as the 1994

EIP (59 Federal Register (FR) 16690,40 CFR part 51, subpart U) and the guidance in the

emission trading policy statement (ETPS) (December 4, 1986,51 FR 43813). The January 2001

EIP Guidance is the most recent statement of agency policy and it supercedes prior statements of

agency policy.

The above documents and other material considered will be included in the administrative record

for the proposed rule.

What does EPA mean by guidance?

The EIP Guidance applies to discretionary EIPs, but it does not represent EPA's final action

regarding discretionary EIPs. Final action on any particular discretionary EIP, such as the EBTA

Program, occurs when EPA has approved or disapproved the EIP submitted as a SIP revision.

The EIP Guidance describes elements of various types of discretionary EIPs, and phrases these

elements in the imperative-- that is, using the terms "must" or "shall." This is done only to

signify that EPA would propose to approve a SIP submittal of a program containing the indicated

elements on grounds that under section 110(1) ofthe Clean Air Act (CAA), the SIP revision does

not interfere with any applicable requirement concerning attainment, reasonable further progress,

or any other applicable requirement.

How will EPA act on an EIP SIP submittal?

Once an EIP SIP revision is submitted, EPA will take action through notice-and-comment

rulemaking to determine ifthe statutory requirements have been met. Only action taken after the

conclusion ofthat rulemaking would constitute final Agency action. EPA would take steps to

expedite its proposed approval in the case of SIP revisions containing programs that contain the

elements ofthe EIP guidance.

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If a program that does not contain the elements ofthe EIP guidance for that type of program is

submitted, EPA will still seek to determine whether the applicable CAA requirements were met,

and ifso EPA would approve the submission. EPA would make the determination through

notice-and-comment rulemaking.

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IV. Summary oftbe EBTA Program

What is an Emissions Banking and Trading ofAllowances Program?

The TCEQ Emissions Banking and Trading of Allowances Program (EBTA Program) is similar

to the Source Specific Emissions Cap as described in the EIP Guidance. A source specific

emissions cap (SSEC) allows a limited group ofsources that are subject to a rate-based emission

limit to meet that requirement by accepting a mass-based emission limit, or cap, rather than

complying directly with a rate-based limit. Some attributes that characterize a successful SSEC

include a well-defined group ofsources, little potential for emissions to shift from included

sources to excluded sources, and a relatively low level of uncertainty associated with the

program. In the EBTA Program, the participating sources are limited to grandfathered and

electing electric generating facilities (EGFs). An EGF is generally defined at § 101.330(12) as a

facility that generates electric energy for compensation and is owned or operated by a person in

the state ofTexas, including a municipal corporation, electric cooperative or river authority. A

grandfathered EGF is defined in § 101.330(14) as an EGF that is not subject to the requirement

to obtain a permit under the Texas Clean Air Act (TCAA), § 382.0518(g). An electing EGF is

defined at § 101.330(11) as an EGF permitted under 30 TAC Chapter 116, Subchapter B (New

Source Review Permits) which is not subject to the requirements ofTexas Utility Code, § 39.264

and elects to comply with Chapter 116, Subchapter I (Electric Generating Facility Permits).

The EBTA divides Texas into three regions - East Texas, West Texas, and El Paso. The East

Texas Region includes all counties traversed by or east ofInterstate highway 35 north of San

Antonio or traversed by or east of Highway 37 south of San Antonio, also including Bexar,

Bosque, Coryell, Hood, Parker, Somervell, and Wise Counties. The West Texas Region includes

all counties not contained in the East Texas or El Paso Regions. The EI Paso Region includes all

ofEI Paso County, Texas; Ciudad Juarez, Mexico; and Sunland Park, New Mexico. l

To achieve the reductions of 50% NOx emissions and 25% S02 emissions, the TCEQ

established emission caps for each region. The caps consist of allowances allocated by the

TCEQ to each facility in the EBTA initially by January 1,2000, for grandfathered EGFs and by

January 1,2001, for electing EGFs. Beginning in 2004, the TCEQ will allocate the allowances

to all facilities in the EBTA by May 1 of each year. The TCEQ will deposit the same amount of

allowances into each grandfathered or electing EGFs compliance account at the beginning of

each control period, with the exception that the allocation for electing EGFs may be adjusted to

reflect new state or federal requirements. An allowance is the authorization to emit one ton of

NOx or S02 during a control period and does not constitute a security or property right. All

allowances will be allocated, transferred, or used as whole allowances. To determine the number

ofwhole allowances, the number of allowances will be rounded down for decimals less than 0.50

and rounded up for decimals of 0.50 or greater. The control period for the EBTA is the 12-

I In a letter dated October 24, 2006, Ms. Kathleen Hartnett White, Chainnan ofthe TCEQ, requested that EPA take

no federal action on 30 TAC Section 101.337 because the requirements ofthe El Paso Region will be state only

requirements.

15
month period beginning May I of each year and ending April 30 ofthe following year. The

initial EBTA control period began May 1,2003.

A facility can choose to operate at, above, or below its allowance budget. A source operating

below its allowance budget can bank or trade its allowances for use in subsequent control

periods. A source operating above its allowance budget must purchase excess allowances from

another source to demonstrate compliance with the cap. Beginning June I, 2004, and no later

than June I following the end of every control period, each facility must hold a quantity of

allowances in its compliance account that is equal to or greater than the total emissions of air

contaminant emitted during the control period just ending. Compliance under the EBTA began

with the initial control period beginning May 1,2003. If a facility's actual emissions of air

contaminant during a control period exceed the amount of allowances held in the compliance

account on June I, allowances for the next control period will be reduced by an amount equal to

the emissions exceeding the allowances in the compliance account. This deduction does not

preclude any additional enforcement action by the TCEQ.

How will the allowances be allocated underthe EBTA?

TCEQ will allocate allowances for grandfathered EGFs according to the following equation:

ERxHI

A= -,------:-:----:--,-----

2000lb/allowance

Where:

A = Number ofAllowances

HI = Total heat input (million British thermal units (MMBTU)) as listed in

the 1997 EPA Acid Rain Program Emissions Scorecard, or if not listed in

the 1997 Emissions Scorecard, by a method approved by the TCEQ

Executive Director, consistent with the emission reduction requirements of

theEBTA.

ER = Emission Rate

The Emission Rate is specific to the applicable EBTA Region. In the East

Texas Region, the ER is 0.14 pound NOx per MMBtu or 1.38 pounds S02

per MMBtu. The S02 ER only applies to coal-fired grandfathered EGFs.

In the West Texas and EI Paso Regions, the ER is 0.195 pounds NOx per

MMBtu.

For electing EGFs, the amount of allowances is equal to the emissions listed in the 1997 Acid

Rain Program Scorecard. Ifthere is not a listing in the 1997 Scorecard, the TCEQ Executive

Director will approve a method consistent with the emission reduction requirements ofthe

EBTA. In either case, the electing EGFs allowances cannot exceed any annual emission

limitation authorized under 30 TAC Chapter 116, Subchapter B (New Source Review Permits) or

16
an applicable state or federal requirement. The TCEQ may invalidate allowances allocated to an

electing EGF that authorize emissions in excess of applicable state or federal requirements.

EBTA allowances are valid only for the purposes ofmeeting the requirements ofthis program

and Chapter 116, Subchapter I. EBTA allowances cannot be used to meet or exceed the

limitations of any annual emission limitation authorized under Chapter 116, Subchapter B.

Additionally, allowances cannot be used for netting requirements to avoid the applicability of

federal and state new source review (NSR) requirements or to satisfy offset requirements for new

or modified sources subject to federal nonattainrnent NSR requirements.

How will the allowances be deducted under the EBTA?

The TCEQ will deduct allowances from a grandfathered or electing EGFs compliance accounts

according to the three circumstances developed in § 101.335:

1. For grandfathered EGFs; electing EGFs whose heat input for the control period is equal

to or greater than its heat input for 1997; and electing EGFs whose heat input for the

control period is less than its heat input for 1997 where the reduced utilization or

shutdown has been replaced by another EGF permitted under 30 TAC Chapter 116,

Subchapter I, allowances will be deducted in an amount equal to the number oftons of air

contaminant emitted during the control period.

2. For electing EGFs whose heat input for the control period is less than the heat input for

1997 and whose reduced utilization or shutdown has not been replaced by another EGF,

allowances will be deducted from the compliance account according to:

HI1997 x EFcp A= =-::-:-:-'::-'-':--,-,---"'--

20001b/allowance

Where:

A = Allowances to be subtracted from the compliance account

HIl997 = Heat Input from 1997

EFcp = The emission factor for the control period in terms ofibslMMBtu,

or if an emission factor for the control period is not available, the most

recently available emission factor for that EGF.

3. For electing EGFs whose heat input for the control period is less than the heat input for

1997 and whose reduced utilization or shutdown has been replaced by another EGF is not

permitted under 30 TAC Chapter 116, Subchapter I, allowances will be deducted from

the compliance account according to:

(Hlcp x EFcp)+ [(HI1997 - HIcp)xEFnewl A= ..:...-=---..,.:::..::....,....,:..:..,...~.:...----""..:....-----::=

20001b/allowance

17
Where:

A = Allowances to be subtracted from the compliance account

HIcp = Heat Input for the control period

EFcp = The emission factor for the control period in terms ofIbs/MMBtu

HIl99? = Heat Input from 1997

EFnew = The emission factor in terms ofIbs/MMBtu for the EGF that

replaced the thermal energy from the reduced utilization or shutdown. If

the specific EGF that replaced the thermal energy is not identifiable, the

emission factor shall be equal to the average emission factor for all EGFs

in the state as listed in the 1997 Acid Rain Program Scorecard.

Deduction mechanism (I) allows only surplus allowances not used by grandfathered EGFs and

any surplus allowances not created by reduced utilization or shutdowns from electing EGFs to be

banked or traded. Mechanism (2) ensures that surplus allowances resulting from reduced

utilization or shutdowns from electing EGFs cannot be banked or transferred. Mechanism (3)

allows surplus allowances to be banked and traded ifthey were generated from reduced

utilization or shutdown and the EGF can document that the reduced utilization or shutdown has

been replaced by another EGF.

How are allowances banked and traded in the EBTA?

Facilities subject to the EBTA can choose to operate at their allocation budget, below their

allocation budget, or above their allocation budget. Facilities which operate below their

allocation budget can bank or trade the excess allowances for use in the control period for which

they were allocated or subsequent control periods. Allowances may only be used within the

same region where they were originally allocated.

Allowances may be traded at any time during the control period. Only authorized account

representatives - defined at § 101.330(2) as the responsible person who is authorized in writing

to transfer and otherwise manage allowances - may trade allowances. The TCEQ must be

notified within 30 days following the trade. Allowance trading began with the first control

period, May I, 2003. Traded allowances held in compliance accounts must have originated from

EGFs in the same region.

What reporting is required in the EBTA Program?

Facilities subject to the EBTA must submit a report to the TCEQ by June 30 of each year

following the completed control period. This report must include the amount of emissions of

each allocated air contaminant and a summary of all final trades for the preceding control period.

Additionally, facilities subject to the EBTA will quantify and report emissions using the

monitoring and reporting requirements of § 116.914 (See EPA's separate rulemaking action on

the SB 7 permitting program at Docket EPA-R06-0AR-2005-TX-0031).

Is there flexibility in compliance with the EBTA?

18
A grandfathered or electing EGF may use emission reductions achieved from Mexico in lieu of

allowances for compliance with the ESTA. The emission reductions may be criteria pollutants

or precursors of criteria pollutants, with the exception oflead emissions. The reductions may be

used in lieu ofthe same pollutant requirement (i.e., NOx reductions from Mexico are substituted

for NOx requirements in Texas). Or, the reductions of criteria pollutants or their precursors may

be substituted for emission reduction requirements for other criteria pollutants (i.e., reductions in

CO emissions could be substituted for NOx or S02 emission requirements). In the event the

Mexican reduction is being substituted for a criteria pollutant requirement (CO for NOx or S02),

the substitution must result in greater health benefits and must be of equal or greater benefit to

the overall air quality ofthe area; or the substitution occurs between criteria pollutants for which

the area has been designated nonattainment.

Generally, the use ofreductions from outside the United States must be approved by the TCEQ

executive director and the EPA, and the user ofthe emission reduction must:

I. demonstrate to the TCEQ executive director and the EPA that the reduction is real,

permanent, enforceable, quantifiable and surplus to any applicable Mexican, federal,

state, or local law;

2. demonstrate that the use ofthe reduction does not cause localized health impacts, as

determined by the TCEQ executive director and EPA;

3. submit all supporting information for calculations and modeling, and any additional

information requested by the TCEQ executive director and EPA; and

4. be located within 100 kilometers ofthe Texas - Mexico border.

Will the EBTA be audited?

Sources subject to the EBTA submit an annual compliance report to the TCEQ by June 30 of

each year. This report details the amount of emissions of each allocated air contaminant and a

summary of all final trades for the preceding control period. Through review ofthese reports,

the TCEQ is able to determine which facilities are in compliance with the program.

The TCEQ executive director will also develop a report no later than September 30th following

each control period that includes the number of allowances allocated to each compliance

account; the total number of allowances allocated under the EBTA program; the number of

actual NOx and S02 allowances subtracted from each compliance account based on the actual

NOx and S02 emissions from the site; and a summary of all trades completed under the EBTA

program.

Additionally, the TCEQ executive director will audit the program no later than three years after

the effective date ofthe EBTA program, and every three years thereafter. The audit will evaluate

the impact ofthe program on the state's ozone attainment demonstration, the availability and

cost of allowances, compliance by the participants, and any other elements the executive director

deems necessary. If any problems are identified, the executive director will recommend

19
remedies, including the discontinuation oftrading in whole or part. This audit will be submitted

to the EPA and made available for public inspection within six months after the audit begins.

20
v. Technical Review of the EBTA Program

This technical review ofthe EBTA program will review the four separate SIP submittals with

respect to the SIP completeness requirements of 40 CFR Part 5I to determine whether each

submittal satisfies the requirements for preparation, adoption, and submittal of a SIP revision.

Then, recognizing that the four SIP submittals have built upon each other, this technical review

will analyze the entirety ofthe EBTA program, using the most current regulatory language for

each section, with respect to the requirements of 40 CFR Part 51 and section 110(1) ofthe CAA.

Finally, this holistic view ofthe EBTA will be used to analyze the program in comparison to the

EIP Guidance.

These analyses produce a written evaluation that will be used to make a determination of

whether or not the EBTA Program submissions from January 3, 2000; September 11, 2000; July

15,2002; and October 24,2006 are in agreement with the CAA, other EPA policies or guidance.

A. Evaluation ofthe January 3, 2000 SIP Submittal with respect to the Part 51, Appendix V

Completeness Determination

B. Evaluation ofthe September 11,2000 SIP Submittal with respect to the Part 51,

Appendix V Completeness Determination

C. Evaluation ofthe July 15,2002 SIP Submittal with respect to the Part 51, Appendix V

Completeness Determination

D. Evaluation ofthe October 24, 2006 SIP Submittal with respect to the Part 51, Appendix

V Completeness Determination

E. Evaluation ofthe EBTA Program with respect to 40 CFR Part 51

F. Evaluation ofthe EBTA Program with respect to the EIP Guidance

G. Evaluation ofthe EBTA Program with respect to Section 110(1) ofCAA

21
V.A. Evaluation of the January 3, 2000 SIP Submittal with respect to the Part 51,

Appendix V Completeness Determination

The criteria for completeness determination are found in Appendix V to Part 51 - Criteria for

determining the completeness of plan submissions and are outlined below:

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a

State implementation plan submitted for consideration by EPA is an official submission

for purposes ofreview under § 51.103.

1.1 The EPA shall return to the submitting official any plan or revision thereof which fails to

meet the criteria set forth in this appendix V, and request corrective action, identifying

the component(s) absent or insufficient to perform a review ofthe submitted plan.

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the

requirements ofthis appendix V within 60 days of EPA's receipt ofthe submittal, but no

later than 6 months after the date which the State was required to submit the plan or

revision. If a completeness determination is not made by 6 months from receipt of a

submittal, the submittal shall be deemed complete by operation of law on the date 6

months from receipt. A determination of completeness under this paragraph means that

the submission is an official submission for purposes of §5l.l 03.

The attached checklist outlines the basic criteria included under 2.1, 2.2, and 2.3 ofAppendix V.

22
SIP Completeness Checklist for the January 3, 2000 SIP Submittal

Rule Log No: 99033-116-AI

Administrative Materials (2.1)

1. The package is sent with a formal submittal letter from the Governor or his or her

designee requesting EPA's approval ofthe revision.

The SIP revision was submitted by a letterfrom George W Bush, Governor ofTexas,

dated January 3, 2000. The SIP submittal was received by EPA Region 6 Air Planning

Section on January 19, 2000.

2. Evidence is included that the State has adopted the revision in the State code or body of

regulations, or that the State has issued the permit, order, consent agreement (hereafter

document) in final form. This evidence would include the date of adoption or final

issuance and the effective date ofrevision, if different from adoption/issuance date.

The revisions were adopted by the Texas Natural Resource Conservation Commission on

December 22, 1999, and became effective January 11, 2000.

3. Evidence is included that the State has necessary legal authority under State law to adopt

and implement the revision, e.g., a citation ofthe appropriate State authority.

The authorityfor promulgating changes to the Texas State Implementation Plan, Chapter

101 §§ 101.330 -101.337 and Chapter 116, §§ 116.18, 116.910 -116.914, 116.916,

1l6. 920 -1l6.922, 1l6.930, and 1l6.931 isfound in the Texas Clean Air Act, Chapter

382 ofthe Texas Health and Safety Code.

4. A copy is included ofthe actual regulation or document submitted for approval and

incorporation by reference into the SIP including an indication ofthe changes made to the

existing approved plan where applicable. The submittal shall be a copy ofthe official

State regulation document signed, stamped, and dated by the appropriate State official

indicating that it is fully enforceable by the State. The effective date ofthe regulation

document shall, whenever possible, be indicated in the document itself.

The January 3, 2000, submittal included a copy ofthe official State regulation document,

signed, stamped, and dated by Robert J. Huston, Chairman ofthe Texas Natural

Resource Conservation Commission.

5. Evidence is included that the State followed all the procedural requirements of its laws

and/or its constitution in the conducting and completing the adoption/issuance ofthe

plan.

23
The SIP submittal package included a certification signed by LaDonna Castanuela, Chief

Clerk ofthe Texas Natural Resource Conservation Commission, that demonstrated the

SIP submittal was developed pursuant to 40 CFR 51. 104.

6. Evidence is included that public notice was given ofthe proposed changes consistent

with the procedures approved by EPA, including the date of publication ofsuch notice,

(e.g., notarized or certified copies of any public notices published in newspapers). (The

notice should be at least 30 days prior to the public hearing(s).

Notices ofpublic hearings were published in the following newspapers on the date listed:

• Austin American Statesman: August 27, 1999

• Beaumont Enterprise: August 29, 1999

• El Paso Times: August 28, 1999

• Fort Worth Star Telegram: August 31, 1999

• Houston Chronicle: August 26, 1999

• LubbockAvalanche-lournal: August 29,1999.

Public hearings were held in El Paso and Lubbock, Texas on October I, 1999; in Austin,

Texas on October 4, 1999; in Irving, Texas on October 5, 1999, and in Houston and

Beaumont, Texas on October 7, 1999.

7. A certification is included indicating that public hearing(s) was/were held in accordance

with the information provided in the public notice(s) and the State's laws and

constitution, if applicable.

An order adopting revisions to the SIP signed by Robert J Huston, Chairman ofthe

Texas Natural Resource Conservation Commission was included. This order states that

the public hearing was conductedpursuant to Texas Health and Safety Code § 382.017,

Texas Government Code Chapter 2001, and 40 CFR § 51.102.

8. A compilation of public comments and the State's response is included.

The SIP submittal package did include a compilation ofcomments. TNRCC received 28

written comment letters on SB 7, a letterfrom EPA Region 6 among them. TNRCC

received 3 7 general comment letters. Oral testimony was receivedfrom 36 individuals at

the 6 different public hearings.

24
Technical Support (2.2)

The State should include the following technical infonnation in its SIP revision request package.

I. Identification of all regulated pollutants affected by the revision is included.

• Chapter 101, Subchapter H, Division 2 (EBTA Program) applies to NOxand S02.

This SIP submittal amends a previously submitted SIP package for the EBTA

program, in which the pollutants are identified.

• Chapter 116, Sections 116.18, 116.910-116.914, 116.916, 116.920 -116.922,

116.930, and 116.931 establish the permitting programfor grandfathered EGFs

participating in the EBTA program. Therefore, the Chapter 116 sections apply to

NOxand S02 statewide.

2. Identification ofthe locations of affected sources including the EPA

attainmentJnonattainment designation ofthe locations and the status ofthe attainment

plan for the affected area(s) is included.

The SIP submittal creates a statewide permitting and trading program for grandfathered

EGFs.

3. Quantification ofthe changes in SIP allowable emissions from the affected sources is

included. (Examples include estimates of changes in current actual emissions from

affected sources and/or, where appropriate, quantification of changes in actual emissions

from affected sources through calculations ofthe differences between certain baseline

levels and allowable emissions anticipated ifthe revisions were approved.)

The SIP submittal establishes a statewide permitting and trading program for

grandfathered EGFs. These programs are mandated by Texas SB 7; which established

reduction requirements of50% from baseline NOx emission levels and 25%from

baseline S02 emission levels.

4. Demonstration is included that the NAAQS/PSD increments/RFP demonstration and

visibility as applicable would be protected ifthe revision were approved and

implemented.

The SIP submittal establishes a permitting and trading program for grandfathered EGFs.

While these programs are part ofthe attainment demonstrations developed within the

State, they are not the sole method ofattaining or maintaining the NAAQS, PSD, RFP or

visibility programs. Attainment demonstrationsfor each area using these programs must

accountfor the emissions attributed to the banking and trading program under this

program.

25
5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality

standards for at least 10 years as required by §175A ofthe Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

6. Modeling information, if applicable, is required to support the proposed revision.

Modeling information is not necessary to support this SIP revision. Modeling is provided

with attainment demonstrations accountingfor the generation and use ofemission

reductions under the EBTAprogram.

7. Evidence is included where necessary, that emission limitations are based on continuous

emission reduction technology (e.g., add-on controls, industrial/process equipment

designs, reformulated materials, etc.).

The EBTA program does not establish emission limitations. The Chapter 116permit

program for grandfathered EGFs does establish emission limitations.

8. Evidence is included indicating that a SIP revision contains emission limitations, work

practice standards, and recordkeeping/reporting requirements to ensure stated emission

levels.

The EBTA program is a trading program, which by nature, will not establish emission

limitations. The EBTA does provide recordkeeping/reporting requirements to

demonstrate compliance. Emission limitations and associated recordkeeping/reporting

requirements are established under the Chapter 116permit program. (See EPA's

separate rulemaking action on the Chapter I I 6 permit program at EPA-R06-0AR-2005-

TX-003I).

9. Compliance/enforcement strategies including how compliance will be determined in

practice (including at what frequency).

Each source participating in the EBTA program by the conditions ofits respective permit

under Chapter 116.

26
10. As appropriate, special economic and technological justifications are included per

applicable EPA policies or an explanation why such justifications are not necessary

should be included. For example, requests for alternative RACT may require such

justification.

These justifications are not necessary for this SIP revision.

The January 3, 2000 SIP submittal (Rule Project No. 99033-1l6-AI) meets the completeness

criteria established in 40 CFR part 51, Appendix V.

27
V.B. Evaluation of the September 11, 2000 SIP Submittal with respect to the Part 51,

Appendix V Completeness Determination

The criteria for completeness determination are found in Appendix V to Part 51 - Criteria for

determining the completeness of plan submissions and are outlined below:

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a

State implementation plan submitted for consideration by EPA is an official submission

for purposes ofreview under § 51.1 03.

1.1 The EPA shall return to the submitting official any plan or revision thereof which fails to

meet the criteria set forth in this appendix V, and request corrective action, identifying

the component(s) absent or insufficient to perform a review ofthe submitted plan.

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the

requirements ofthis appendix V within 60 days of EPA's receipt ofthe submittal, but no

later than 6 months after the date which the State was required to submit the plan or

revision. If a completeness determination is not made by 6 months from receipt of a

submittal, the submittal shall be deemed complete by operation of law on the date 6

months from receipt. A determination of completeness under this paragraph means that

the submission is an official submission for purposes of §51.103.

The attached checklist outlines the basic criteria included under 2.1, 2.2, and 2.3 ofAppendix V.

28
SIP Completeness Checklist for the September 11, 2000 SIP Submittal

Rule Log No: 1999-29B-116-AI

Administrative Materials (2.1)

I. The package is sent with a formal submittal letter from the Governor or his or her

designee requesting EPA's approval ofthe revision.

The SIP revision was submitted by a letterfrom George W Bush, Governor ofTexas,

dated September I I, 2000. The SIP submittal was received by EPA Region 6 Air Permits

Section on September 22, 2000.

2. Evidence is included that the State has adopted the revision in the State code or body of

regulations, or that the State has issued the permit, order, consent agreement (hereafter

document) in final form. This evidence would include the date of adoption or final

issuance and the effective date ofrevision, ifdifferent from adoption/issuance date.

The revisions were adopted by the Texas Natural Resource Conservation Commission on

August 9, 2000, and became effective September 4, 2000.

3. Evidence is included that the State has necessary legal authority under State law to adopt

and implement the revision, e.g., a citation ofthe appropriate State authority.

The authority for promulgating changes to the Texas State Implementation Plan, Chapter

101 §§ 101.27,101.333 and Chapter II6 §§ II 6. 10, II6.IIO, II6.II6, II 6. 603,

116.620, 116.621, 116.710, 116.715, 116.721, 116.722 and 116.750 isfound in the Texas

Clean Air Act, Chapter 382 ofthe Texas Health and Safety Code.

4. A copy is included ofthe actual regulation or document submitted for approval and

incorporation by reference into the SIP including an indication ofthe changes made to the

existing approved plan where applicable. The submittal shall be a copy ofthe official

State regulation document signed, stamped, and dated by the appropriate State official

indicating that it is fully enforceable by the State. The effective date ofthe regulation

document shall, whenever possible, be indicated in the document itself.

The September I I, 2000, submittal included a copy ofthe official State regulation

document, signed, stamped, and dated by Robert 1. Huston, Chairman ofthe Texas

Natural Resource Conservation Commission.

5. Evidence is included that the State followed all the procedural requirements ofits laws

and/or its constitution in the conducting and completing the adoption/issuance ofthe

plan.

29
The SIP submittal package included a certification signed by LaDonna Castanuela, Chief

Clerk ofthe Texas Natural Resource Conservation Commision, that demonstrated the SIP

submittal was developed pursuant to 40 CFR 51.104.

6. Evidence is included that public notice was given ofthe proposed changes consistent

with the procedures approved by EPA, including the date of publication ofsuch notice,

(e.g., notarized or certified copies of any public notices published in newspapers). (The

notice should be at least 30 days prior to the public hearing(s).

Notices ofpublic hearings were published in the following newspapers on the date listed:

• Austin American Statesman: March 26, 2000

• Fort Worth Star Telegram: March 29, 2000

• Houston Chronicle: March 28, 2000.

A public hearing was held in Austin, Texas, on May 4, 2000.

7. A certification is included indicating that public hearing(s) was/were held in accordance

with the information provided in the public notice(s) and the State's laws and

constitution, if applicable.

An order adopting revisions to the SIP signed by Robert J. Huston, Chairman ofthe

Texas Natural Resource Conservation Commission was included This order states that

the public hearing was conductedpursuant to Texas Health and Safety Code § 382.017,

Texas Government Code Chapter 2001, and 40 CFR § 51.102.

8. A compilation of public comments and the State's response is included.

The SIP submittal package did include a compilation ofcomments. TCEQ received

written testimony from four parties during the comment period and did not receive oral

testimony.

Technical Support (2.2)

The State should include the following technical information in its SIP revision request package.

1. Identification of all regulated pollutants affected by the revision is included.

• Chapter 101, Subchapter H, Division 2 (EBTA Program) applies to NOxand S02.

This SIP submittal amends a previously submitted SIP package for the EBTA

program, in which the pollutants are identified

2. Identification ofthe locations of affected sources including the EPA

attainmentlnonattainment designation ofthe locations and the status ofthe attainment

plan for the affected area(s) is included.

30
The SIP submittal amendments to the EBTA program, revise existing regulationsfor a

statewide trading program. Additionally, the EBTA does contain an international

trading component.

3. Quantification ofthe changes in SIP allowable emissions from the affected sources is

included. (Examples include estimates of changes in current actual emissions from

affected sources and/or, where appropriate, quantification of changes in actual emissions

from affected sources through calculations ofthe differences between certain baseline

levels and allowable emissions anticipated ifthe revisions were approved.)

The SIP submittal amendments to the EBTA program revise existing regulationsfor a

statewide trading program. The EBTA program is mandated by Texas SB 7; which

established reduction requirements of50% from baseline NOx emission levels and 25%

from baseline S02 emission levels.

4. Demonstration is included that the NAAQS/PSD incrementslRFP demonstration and

visibility as applicable would be protected ifthe revision were approved and

implemented.

The SIP submittal amends an existing trading program. While the EBTA program is part

ofthe attainment demonstrations developed within the State, it is not the sole method of

attaining or maintaining the NAAQS, PSD, RFP or visibility programs. Attainment

demonstrationsfor each area using the EBTA program must accountfor the emissions

attributed to the banking and trading pursuant to this program.

5. FORREDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality

standards for at least 10 years as required by §l75A ofthe Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

7. Modeling information, if applicable, is required to support the proposed revision.

Modeling iriformation is not necessary to support this SIP revision. Modeling is provided

with attainment demonstrations accountingfor the generation and use ofemission

reductions under the EBTA program.

31
7. Evidence is included where necessary, that emission limitations are based on continuous

emission reduction technology (e.g., add-on controls, industrial/process equipment

designs, reformulated materials, etc.).

This SIP submittal amends an existing trading program; it does not establish emission

limitations.

8. Evidence is included indicating that a SIP revision contains emission limitations, work

practice standards, and recordkeepinglreporting requirements to ensure stated emission

levels.

This SIP submittal amends an existing trading program and does not contain or revise

emission limitations or workplace standards. Recordkeeping and reporting requirements

for the trading programs have previously been submitted to EPA.

9. Compliance/enforcement strategies including how compliance will be determined in

practice (including at what frequency).

The SIP submittal amends an existing trading program. The compliance strategyfor the

EBTA program was previously submitted to EPA. Additionally, each source

participating in the EBTA program must abide by the conditions ofits respective permit.

10. As appropriate, special economic and technological justifications are included per

applicable EPA policies or aiJ. explanation why such justifications are not necessary

should be included. For example, requests for alternative RACT may require such

justification.

These justifications are not necessaryfor this SIP revision.

The September 3, 2000 SIP submittal (Rule Project No. 1999-29B-116-AI) meets the

completeness criteria established in 40 CFR part 51, Appendix V.

32
V.c. Evaluation ofthe July 15, 2002 SIP Submittal with respect to the Part 51, Appendix

V Completeness Determination

The criteria for completeness determination are found in Appendix V to Part 51 - Criteria for

determining the completeness ofplan submissions and are outlined below:

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a

State implementation plan submitted for consideration by EPA is an official submission

for purposes ofreview under § 51.103.

1.1 The EPA shall return to the submitting official any plan or revision thereof which fails to

meet the criteria set forth in this appendix V, and request corrective action, identifying

the component(s) absent or insufficient to perform a review ofthe submitted plan.

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the

requirements ofthis appendix V within 60 days of EPA's receipt ofthe submittal, but no

later than 6 months after the date which the State was required to submit the plan or

revision. If a completeness determination is not made by 6 months from receipt of a

submittal, the submittal shall be deemed complete by operation of law on the date 6

months from receipt. A determination of completeness under this paragraph means that

the submission is an official submission for purposes of §51.103.

The attached checklist outlines the basic criteria included under 2.1,2.2, and 2.3 ofAppendix V.

33
SIP Completeness Checklist for the July 15,2002 SIP Submittal

Rule Log No: 2001-063-101-AI

Administrative Materials (2.1)

1. The package is sent with a formal submittal letter from the Governor or his or her

designee requesting EPA's approval ofthe revision.

The SIP revision was submitted by a letterfrom Robert J. Huston, Chairman ofthe Texas

Natural Resource Conservation Commission, dated July 15, 2002. The SIP submittal

was received by EPA Region 6 Air Planning Section on July 22, 2002. Governor Rick

Perry designated that the Chairman ofthe Texas Natural Resource Conservation

Commission would be his designee for SIP submittals in a letter dated May 21, 2002.

2. Evidence is included that the State has adopted the revision in the State code or body of

regulations, or that the State has issued the permit, order, consent agreement (hereafter

document) in final form. This evidence would include the date of adoption or final

issuance and the effective date ofrevision, if different from adoption/issuance date.

The revisions were adopted by the Texas Natural Resource Conservation Commission on

March 13, 2002, and became effective April 4, 2002.

3. Evidence is included that the State has necessary legal authority under State law to adopt

and implement the revision, e.g., a citation ofthe appropriate State authority.

The authorityfor promulgating changes to the Texas State Implementation Plan, Chapter

101 §§ 101.302 and 101.372; new §§ 101.338 and 101.357; and new Chapter 117 §

117.571 isfound in the Texas Clean Air Act, Chapter 382 ofthe Texas Health and Safety

Code.

4. A copy is included ofthe actual regulation or document submitted for approval and

incorporation by reference into the SIP including an indication ofthe changes made to the

existing approved plan where applicable. The submittal shall be a copy ofthe official

State regulation document signed, stamped, and dated by the appropriate State official

indicating that it is fully enforceable by the State. The effective date ofthe regulation

document shall, whenever possible, be indicated in the document itself.

The July 15, 2002, submittal included a copy ofthe official State regulation document,

signed, stamped, and dated by Robert J. Huston, Chairman ofthe Texas Natural

Resource Conservation Commission.

5. Evidence is included that the State followed all the procedural requirements ofits laws

and/or its constitution in the conducting and completing the adoption/issuance ofthe

plan.

34
The SIP submittal package included a certification signed by LaDonna Castanueal, Chief

Clerk ofthe Texas Natural Resource Conservation Commission. that demonstrated the

SIP submittal was developedpursuant to 40 CFR 51. 104.

6. Evidence is included that public notice was given ofthe proposed changes consistent

with the procedures approved by EPA, including the date of publication ofsuch notice,

(e.g., notarized or certified copies of any public notices published in newspapers). (The

notice should be at least 30 days prior to the public hearing(s).

Notices ofpublic hearings were published in the following newspapers on the date listed:

• El Paso Times: November 14, 2001

• Houston Chronicle: November I I, 2001.

Public hearings were held in El Paso and Houston, Texas on December 17 and 18,2001,

respectively.

7. A certification is included indicating that public hearing(s) was/were held in accordance

with the information provided in the public notice(s) and the State's laws and

constitution, if applicable.

An order adopting revisions to the SIP signed by Robert J Huston, Chairman ofthe

Texas Natural Resource Conservation Commission was included This order states that

the public hearing was conductedpursuant to Texas Health and Safety Code § 382.017,

Texas Government Code Chapter 2001, and 40 CFR § 51.102.

8. A compilation of public comments and the State's response is included.

The SIP submittal package did include a compilation ofcomments. TCEQ received

written testimony from 6 parties during the comment period, including EPA Region 6,

and received oral testimony from one individual.

Technical Support (2.2)

The State should include the following technical information in its SIP revision request package.

1. Identification of all regulated pollutants affected by the revision is included.

• Chapter 101, Subchapter H, Division I (ERC Program) applies to criteria

pollutants, andprecursors, for which an area is designated nonattainment with

the exception oflead However, the SIP revision under review does not change

this applicability and therefore does not need to restate the list ofregulated

pollutants.

35
• Chapter 101, Subchapter H, Division 2 (EBTA Program) applies to NOxand S02.

This SIP submittal amends a previously submitted SIP package for the EBTA

program, in which the pollutants are identified.

• Chapter 101, Subchapter H, Division 3 (MECT Program) applies to NOx

emissions in the HOB nonattainment area. The SIP revision under review does

not change this applicability and therefore does not need to restate the list of

regulated pollutants.

• Chapter 101, Subchapter H, Division 4 (DERC Program) applies to criteria

pollutants, andprecursors, with the exception oflead. The SIP revision under

review does not change this applicability and therefore does not need to restate

the list ofregulated pollutants.

• Chapter 117 applies to emissions ofNOx.

2. Identification ofthe locations of affected sources including the EPA

attainmentlnonattainment designation ofthe locations and the status ofthe attainment

plan for the affected area(s) is included.

The SIP submittal, covering the ERe, EBTA, and DERC trading programs, amend

existing regulationsfor statewide trading programs. The MECT trading program is

applicable only to the HOB ozone nonattainment area. The revision to Chapter 117, §

117.571 applies to the DFWand HOB ozone nonattainment areas.

3. Quantification ofthe changes in SIP allowable emissions from the affected sources is

included. (Examples include estimates of changes in current actual emissions from

affected sources and/or, where appropriate, quantification of changes in actual emissions

from affected sources through calculations ofthe differences between certain baseline

levels and allowable emissions anticipated ifthe revisions were approved.)

The SIP submittal, covering the ERC, EBTA,MECT and DERCprograms, amend existing

regulations. The ERC and DERCprograms establish economic incentive programsfor

voluntary generation and use ofemission reductions. Each program includes provisions

for quantifYing creditable emission reductions and increases. The EBTA program is

mandated by Texas SB 7; which established reduction requirements of50%from baseline

NOx emission levels and 25%from baseline S02 emission levels. The MECT program

establishes a cap-and-trade programfor NOx emissions in the HOB ozone nonattainment

area to assist the area in reducing NOx emissions 80% from the baseline. The revisions

to Chapter 117, Section 117.571 provide compliance flexibility and are not an emission

reduction strategy.

4. Demonstration is included that the NAAQSIPSD incrementslRFP demonstration and

visibility as applicable would be protected ifthe revision were approved and

implemented.

36
The SIP submittal amends existing trading programs andpromotes compliance

flexibility. While these trading programs are part ofthe attainment demonstrations

developed within the State, they are not the sole method ofattaining or maintaining the

NAAQS, PSD, RFP or visibility programs. Attainment demonstrationsfor each area

using these programs must accountfor the emissions attributed to the banking and

trading programs.

5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality

standards for at least 10 years as required by §175A ofthe Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

8. Modeling information, if applicable, is required to support the proposed revision.

Modeling information is not necessary to support this SIP revision. Modeling is provided

with attainment demonstrations accounting for the generation and use ofemission

reductions under the ERC, EBTA, MECT, and DERCprograms.

7. Evidence is included where necessary, that emission limitations are based on continuous

emission reduction technology (e.g., add-on controls, industrial/process equipment

designs, reformulated materials, etc.).

This SIP submittal amends existing trading programs; it does not establish emission

limitations.

8. Evidence is included indicating that a SIP revision contains emission limitations, work

practice standards, and recordkeeping/reporting requirements to ensure stated emission

levels.

This SIP submittal amends existing trading programs and does not contain or revise

emission limitations or workplace standards. Recordkeeping and reporting requirements

for the trading programs have previously been submitted to EPA. EPA has approved the

recordkeeping and reporting requirementsfor the ERC, MECT and DERCprograms in

separate actions. The EBTA recordkeeping reporting requirements were submitted in the

January 3, 2000, SIP submittal and are the subject ofthis rulemaking action.

9. Compliance/enforcement strategies including how compliance will be determined in

practice (including at what frequency).

37
The SIP submittal amends existing trading programs. The compliance strategiesfor each

program were previously submitted to EPA. Additionally, each source participating in

banking and trading programs must abide by the conditions ofits respective permit.

10. As appropriate, special economic and technological justifications are included per

applicable EPA policies or an explanation why such justifications are not necessary

should be included. For example, requests for alternative RACT may require such

justification.

These justifications are not necessaryfor this SIP revision.

The July 15, 2002, SIP submittal (Rule Project No. 2001-063-101-AI) meets the

completeness criteria established in 40 CFR part 51, Appendix V.

38
V.D. Evaluation of the October 24, 2006 SIP Submittal with respect to Appendix V to

PartS!

The criteria for completeness determination are found in Appendix V to Part 51 - Criteria for

determining the completeness of plan submissions and are outlined below:

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a

State implementation plan submitted for consideration by EPA is an official submission

for purposes ofreview under § 51.103.

1.1 The EPA shall return to the submitting official any plan or revision thereof which fails to

meet the criteria set forth in this appendix V, and request corrective action, identifYing

the component(s) absent or insufficient to perform a review ofthe submitted plan.

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the

requirements of this appendix V within 60 days of EPA's receipt ofthe submittal, but no

later than 6 months after the date which the State was required to submit the plan or

revision. If a completeness determination is not made by 6 months from receipt of a

submittal, the submittal shall be deemed complete by operation of law on the date 6

months from receipt. A determination of completeness under this paragraph means that

the submission is an official submission for purposes of §51.103.

The attached checklist outlines the basic criteria included under 2.1, 2.2, and 2.3 ofAppendix V.

39
SIP Completeness Checklist for the Octoher 24, 2006 SIP Suhmittal

Rule Log No: 2005-054-101-PR

Administrative Materials (2.1)

I. The package is sent with a formal submittal letter from the Governor or his or her

designee requesting EPA's approval ofthe revision.

The SIP revision was submitted by a letterfrom Kathleen Hartnett White, Chairman of

the Texas Commission on Environmental Quality, dated October 24, 2006. The SIP

submittal was received by EPA Region 6 External Affairs on October 31, 2006.

Governor Rick Perry designated that the Chairman ofthe Texas Commission on

Environmental Quality would be his designee for SIP submittals in a letter dated May 21,

2002.

2. Evidence is included that the State has adopted the revision in the State code or body of

regulations, or that the State has issued the permit, order, consent agreement (hereafter

document) in final form. This evidence would include the date of adoption or final

issuance and the effective date ofrevision, if different from adoption/issuance date.

The revisions were adopted by the Texas Commission on Environmental Quality on

October 4, 2006, and became effective October 26, 2006.

3. Evidence is included that the State has necessary legal authority under State law to adopt

and implement the revision, e.g., a citation ofthe appropriate State authority.

The authorityfor promulgating changes to the Texas State Implementation Plan, Chapter

101 §§ 101.30 101.306, 101.372, 101.373, 101.376, and 101.378; the repeal of§§

101.338; and new §§ 101.305, 101.338, 101.339, and 101.375 isfound in the Texas

Clean Air Act, Chapter 382 ofthe Texas Health and Safety Code.

4. A copy is included ofthe actual regulation or document submitted for approval and

incorporation by reference into the SIP including an indication ofthe changes made to the

existing approved plan where applicable. The submittal shall be a copy ofthe official

State regulation document signed, stamped, and dated by the appropriate State official

indicating that it is fully enforceable by the State. The effective date ofthe regulation

document shall, whenever possible, be indicated in the document itself.

The October 24, 2006, submittal included a copy ofthe official State regulation

document, signed, stamped, and dated by Kathleen Hartnett White, Chairman ofthe

Texas Commission on Environmental Quality.

40
5. Evidence is included that the State followed all the procedural requirements ofits laws

and/or its constitution in the conducting and completing the adoption/issuance ofthe

plan.

The SIP submittal package included a certification signed by Kevin McCalla, Director of

the Texas Commission on Environmental Quality General Law Division, that

demonstrated the SIP submittal was developedpursuant to 40 CFR 51.104.

6. Evidence is included that public notice was given ofthe proposed changes consistent

with the procedures approved by EPA, including the date of publication ofsuch notice,

(e.g., notarized or certified copies of any public notices published in newspapers). (The

notice should be at least 30 days prior to the public hearing(s).

Notices ofpublic hearings were published in the following newspapers on the date listed:

• Austin American Statesman: April 19, 2006

• Beaumont Enterprise: April 17, 2006

• Fort Worth Star Telegram: April 17, 2006

• Houston Chronicle: April 17, 2006.

A public hearing was held in Austin, Texas, on May 22, 2006.

7. A certification is included indicating that public hearing(s) was/were held in accordance

with the information provided in the public notice(s) and the State's laws and

constitution, if applicable.

An order adopting revisions to the SIP signed by Kathleen Hartnett White, Chairman of

the Texas Commission on Environmental Quality was included. This order states that the

public hearing was conductedpursuant to Texas Health and Safety Code § 382.017,

Texas Government Code Chapter 2001, and 40 CFR § 51.102.

8. A compilation of public comments and the State's response is included.

The SIP submittal package did include a compilation ofcomments. TCEQ received

written testimony from four parties during the comment period, including EPA Region 6,

and did not receive oral testimony.

Technical Support (2.2)

The State should include the following technical information in its SIP revision request package.

I. Identification of all regulated pollutants affected by the revision is included.

• Chapter 101, Subchapter H, Division 1 (ERC Program) applies to criteria

pollutants, andprecursors, for which an area is designated nonattainment with

41
the exception oflead. However, the SIP revision under review does not change

this applicability and therefore does not need to restate the list ofregulated

pollutants.

• Chapter 101, Subchapter H, Division 2 (EBTA Program) applies to NOxand S02.

This SIP submittal amends a previously submitted SIP package for the EBTA

program, in which the pollutants are identified.

• Chapter 101, Subchapter H, Division 4 (DERC Program) applies to criteria

pollutants, andprecursors, with the exception oflead. The SIP revision under

review does not change this applicability and therefore does not need to restate

the list ofregulatedpollutants.

2. Identification ofthe locations of affected sources including the EPA

attainmentlnonattainment designation ofthe locations and the status ofthe attainment

plan for the affected area(s) is included.

The SIP submittal, covering the ERC, EBTA, and DERC Rules, amend existing

regulationsfor statewide trading programs. Additionally, each rule does contain an

international trading component.

3. Quantification ofthe changes in SIP allowable emissions from the affected sources is

included. (Examples include estimates of changes in current actual emissions from

affected sources and/or, where appropriate, quantification of changes in actual emissions

from affected sources through calculations ofthe differences between certain baseline

levels and allowable emissions anticipated ifthe revisions were approved.)

The SIP submittal, covering the ERC, EBTA, and DERC rules, amend existing

regulationsfor statewide trading programs. The ERC and DERCprograms establish

economic incentive programsfor voluntary generation and use ofemission reductions.

Each program includes provisionsfor quantifYing creditable emission reductions and

increases. The EBTA program is mandated by Texas SB 7; which established reduction

requirements of50% from baseline NOx emission levels and 25%from baseline S02

emission levels.

4. Demonstration is included that the NAAQSIPSD incrementslRFP demonstration and

visibility as applicable would be protected ifthe revision were approved and

implemented.

The SIP submittal amends existing trading programs. While these trading programs are

part ofthe attainment demonstrations developed within the State, they are not the sole

method ofattaining or maintaining the NAAQS, PSD, RFP or visibility programs.

Attainment demonstrationsfor each area using these programs must accountfor the

emissions attributed to the banking and trading programs.

42
5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality

standards for at least 10 years as required by §175A ofthe Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

9. Modeling information, if applicable, is required to support the proposed revision.

Modeling information is not necessary to support this SIP revision. Modeling is provided

with attainment demonstrations accounting for the generation and use ofemission

reductions under the ERC, EBTA, and DERCprograms.

7. Evidence is included where necessary, that emission limitations are based on continuous

emission reduction technology (e.g., add-on controls, industrial/process equipment

designs, reformulated materials, etc.).

This SIP submittal amends existing trading programs; it does not establish emission

limitations.

8. Evidence is included indicating that a SIP revision contains emission limitations, work

practice standards, and recordkeeping/reporting requirements to ensure stated emission

levels.

This SIP submittal amends existing trading programs and does not contain or revise

emission limitations or workplace standards. Recordkeeping and reporting requirements

for the trading programs have previously been submitted to EPA.

9. Compliance/enforcement strategies including how compliance will be determined in

practice (including at what frequency).

The SIP submittal amends existing trading programs. The compliance strategiesfor each

program were previously submitted to EPA. Additionally, each source participating in

banking and trading programs must abide by the conditions ofits respective permit.

43
10. As appropriate, special economic and technological justifications are included per

applicable EPA policies or an explanation why such justifications are not necessary

should be included. For example, requests for alternative RAeT may require such

justification.

These justifications are not necessary for this SIP revision.

The October 24, 2006 SIP submittal (Rule Project No. 2005-054-101-PR) meets the

completeness criteria established in 40 CFR part 51, Appendix V.

44
V.E. Evaluation of the EBTA Program with respect to 40 CFR 51

Requirements for the preparation, adoption, and submittal ofimplementation plans can be found

in 40 CFR Part 51. EPA is taking action on the entirety ofthe EBTA program as submitted

originally on January 3, 2000, and revised on September 11,2000; July 15,2002; and October

24, 2006. Therefore, the evaluation ofthe applicability ofthe requirements in 40 CFR part 51 is

conducted against the entirety ofthe program. This analysis is included in Table V.E.I below.

The analysis ofthese four SIP submittals with respect to 40 CFR part 51 is specific to the EBTA

program. Because EPA has taken, or will take separate action, on the other, unrelated SIP

revisions submitted at the same time as the EBTA program amendments, we defer our anaiysis

ofthe part 51 applicability to those specific rulemaking actions.

Table V.E.l: Analysis of the EBTA and 40 CFR part 51 Requirements

Part 51 - Requirements for Preparation, EBTA Program Revisions

Adoption, and Submittal of Implementation 30 TAC §§101.330 -101.336,101.338,101.339

Plans

Subpart A - Emission Inventory Reporting The EBTA Program is a discretionary EIP for

Requirements voluntary participation. The program does not affect

the current TX SIP requirements for Emission

Inventory Reporting.

Emission reporting requirements specific to the

EBTA program are contained in 30 TAC 101.336.

EPA has taken no action on any ofthe 4 SIP

submittals that create the EBTA program

Subparts B - E [Reserved] Not applicable.

Subpart F - Procedural Requirements Subpart F - Procedural Requirements

§ 51.1 00 Definitions § 51.100 is not applicable to the 4 SIP submittals

under review in this TSD.

§ 51.101 Stipulations § 51.10 I is not applicable to the 4 SIP submittals

under review in this TSD.

§ 51.102 Public Hearings • TCEQ held public hearings for each ofthe 4

• States must conduct one or more public SIP submittals under review.

hearings • The public hearings were held after reasonable

• Public hearings will only be held after notice was given. TCEQ published notice of

reasonable notice, given at least 30 days prior the public hearing widely-circulated

to the date ofthe hearing newspapers.

• The state must submit with the revision a • TCEQ submitted a certification with each SIP

certification that the hearing was held in submittal that the public hearings were held in

accordance with this section accordance with § 51.102.

• Section V.A - D ofthis TSD provides the Part

51, Appendix V Completeness Checklist for

each ofthe 4 SIP submittals. This checklist

provides the names ofthe newspapers and

dates on which notice of public hearings were

provided, as well as the dates of each public

hearin~.

§ 51.103 Submission of plans, preliminarv review Please see section V.A - D ofthis TSD for the

45
of plans evaluation ofthe 4 SIP submittals with respect to

• The state makes an official plan submission to the Part 51, Appendix V Checklist.

EPA only when the submission conforms to the

requirements of Part 51, Appendix V. The 4 SIP submissions meet the requirements for

• The state delivers 5 copies ofthe plan with a completeness.

letter giving notice ofthe action to the EPA

regional office.

§ 51.104 Revisions TCEQ originally submitted the EBTA program on

• States may revise the plan from time to time January 3, 2000, and submitted revisions to the

• EPA will approve revisions only after EBTA Program on September II, 2000; July 15,

appropriate public hearing requirements have 2002; and October 24, 2006. These SIP revisions,

been met as demonstrated previously in this table and section

• Revisions must be submitted in accordance V.A - D ofthis document, have satisfied the public

with 51.103 hearing requirements of § 51.102 and the

requirements of § 51.103.

Subpart G - Control Strategv Subpart G - Control Strategy

§ 51.110 Attainment and Maintenance ofNational Requirements found in § 51.110 are not applicable

Standards to the 4 SIP submittals under review in this

document.

The EBTA program does not create an attainment

demonstration strategy for any area of Texas.

However, the reductions resulting from the EBTA

program caps are expected to be accounted for in

attainment demonstration modeling.

§ 51.111 Description ofControl Measures Requirements found in § 51.110 are not applicable

to the 4 SIP submittals under review in this

document. The EBTA program does not establish

control strategies for Texas. However, the EBTA

program has provisions for compliance

demonstration with the program at § 101.336

§ 51.112 Demonstration ofAdequacy Requirements found in § 51.112 are not applicable

to the 4 SIP submittals under review in this

document. Since the EBTA program is not an

integral piece of an attainment strategy, it is not

necessary that the EBTA program demonstrate

adeQuacv for maintaining a national standard.

§51.113 Reserved Not applicable.

§51.114 Emissions Data and Projections Requirements found in § 51.114 are not applicable

to the 4 SIP submittals under review in this

document, that establish and revise the EBTA

program. The EBTA program is the mechanism for

achieving the reductions mandated by Texas Senate

Bill 7, which are heavily relied upon in attainment

demonstrations in Texas. Each attainment

demonstration that relies on EBTA program

reductions must provide a detailed emission

inventory and summary of emission levels after the

implementation of control strategies.

The EBTA program also requires that generators

and users submit applications to the TCEQ that

estimate and verify the emission reductions that are

generated and/or used.

§ 51.115 Air Quality Data and Projections Requirements found in § 51.115 are not applicable

46
to the 4 SIP submittals under review in this

document, that establish and revise the EBTA

program. The EBTA program is the mechanism for

achieving the reductions mandated by Texas Senate

Bill 7, which are heavily relied upon in attainment

demonstrations in Texas. Each attainment

demonstration that relies on EBTA program

reductions must provide data on existing air quality

or summarize expected air quality impacts

associated with the program.

Additionally, through the program audit

mechanisms at 101.339, the TCEQ will periodically

review the impact ofthe EBTA on ozone attainment

throughout the state.

§ 51.116 Data Availability Requirements found in § 51.116 are applicable to

the 4 SIP submittals establishing and revising the

The State must make available to the public all data EBTA program.

and calculations used in the preparation of eaeh plan

or plan revision. The TCEQ provided the public the opportunity to

partieipate in stakeholder meetings, in the

Each plan must provide for public availability of rulemaking development process, and the public

emission data reported by source owners or received comment periods on the proposed plan.

operators.

The Texas Clean Air Act, Texas Health and Safety

Code at Section 382.040 requires that all

information submitted to the TCEQ for compliance

purposes be made available to the public, unless a

written request for nondisclosure is approved.

§ 51.1 17 Additional provisions for lead Requirements found in § 5I.117 are not applicable

to the SIP submittal under review in this document.

The EBTA program only applies to emissions of

NOxandS02.

§ 51.II 8 Stack Height Provisions Requirements found in § 51.118 are not applicable

to the SIP submittal under review in this document.

The EBTA program is a discretionary trading

program for grandfathered EGFs and does not

revise or interact with the good engineering stack

height provisions of 51. 118.

§ 51.119 Intermittent Control Systems Requirements found in § 51.119 are not applicable

to the 4 SIP submittals under review in this

document. The EBTA program is a discretionary

program grandfathered EGFs and does not require

intermittent control systems.

§ 51.120 Requirements for State Implementation Requirements found in § 51.120 are not applicable

Plan Revisions relating to Motor Vehicles to the EBTA program. The EBTA does not cover

mobile sources.

§ 51.121 Findings and requirements for submission Requirements found in § 51.121 are not applicable

of State Implementation Plan Revisions relating to to the 4 SIP submittals under review in this

emissions of oxides of nitrogen document. § 51.121 establishes the requirements

for the NOx SIP Call; Texas was not subject to the

NOx SIP Call.

§ 51.122 Emissions reporting requirements for SIP Requirements found in § 51.122 are not applicable

revisions relating to budl';ets for NOx emissions. to the 4 SIP submittals under review in this

47
§ 51.123 Findings and requirements for submission

of State Implementation Plan Revisions relating to

Emissions ofOxides ofNitrogen pursuant to the

Clean Air Interstate Rule

§ 51.124 Findings and requirements for submission

of State Implementation Plan Revisions relating to

Emissions of Sulfur Dioxide pursuant to the Clean

Air Interstate Rule

§ 51.125 Emissions reporting requirements for SIP

revisions relating to budgets for SO, and NOx

emissions.

Subpart H - Prevention of Air Pollution Emergency

Episodes

Subpart I - Review ofNew Sources and

Modifications

Subpart J - Ambient Air Quality Surveillance

document. § 51.122 establishes the emission

reporting requirements for the NOx SIP Call; Texas

was not subiect to the NOx SIP Call.

Requirements found in § 51.123 are not applicable

to the 4 SIP submittals under review in this

document. § 51.123 establishes the requirements

for the NOx Annual and Ozone season programs for

the Clean Air Interstate Rule (CAIR).

Requirements found in § 51.124 are not applicable

to the 4 SIP submittals under review in this

document. § 51.124 establishes the program

requirements for the CAIR SO, Programs.

Requirements found in § 51.125 are not applicable

to the 4 SIP submittals under review in this

document. § 51.125 establishes the emission

reporting requirements for the CAIR NOx and SO,

trading programs.

Requirements found in 51, Subpart H are not

applicable to the 4 SIP submittals under review in

this document. The EBTA program is a

discretionary program and is not part ofthe Texas

air pollution emergencv episode DIan.

Requirements found in 51, Subpart I are not

applicable to the EBTA program. The EBTA

allowances can only be used for compliance with

the EBTA and cannot be used for NSR purposes.

Requirements found in 51, Subpart J are not

applicable to the 4 SIP submittals under review in

this document. Ambient air quality surveillance is

not part ofthe EBTA program.

Subpart K - Source Surveillance Suboart K - Source Surveillance

§ 51.210 Each plan must provide for monitoring the The Texas EBTA program was developed and

status of compliance with rules and regulations that submitted in accordance with the Texas Health and

f-'::se:::t:..:D",o",rt;::h:-,a"n:.;YI';5 P(o:::rtc:i:::o::;n:..:o:.:f:..:th=e-=c.::o.::ntr=o,-I=;str=:a:::t=e"'!-l(Y"'---,----;,---1 Safety Code. Texas enforcement provisions are not

§ 51.211 The plan must provide for legally typically in the State's individual rules but are

enforceable procedures for requiring stationary separately codified. Texas Water Code Chapter 7

sources to maintain records and report the following contains the State's statutory provisions for

to the State: enforcement of programs developed according to

• Information on the nature and amount of the Texas Health and Safety Code; i.e, the Texas

emissions from the stationary source; and ERC program. Section 382.111 ofthe Texas Health

• Other information as necessary for the State to and Safety Code provides the ability to enter and

determine whether the sources are in periodically inspect stationary sources. Section

compliance. 382.021 establishes that the Texas Commission on

1--::§--;5'"'1-';.2"'1;;:2"'ThO?'ee:p~l:=-an-m-u-s'--t p-r-o-v"-id"-e--;D"-o-r-p-er-:-io-d""i-c-'-te-s--;tin-g---1 Environmental Quality can determine the necessary

and inspection ofstationary sources. Additionally, sampling and detection methods used to

the plan must establish a system for detecting demonstrate compliance with an emission

violations and include enforceable test methods. limitation.

§ 51.213 The plan mllst contain procedures for

obtaining and maintaining data on actual emissions

reductions achieved as a result ofimplementing

transportation control measures.

§ 51.214 The plan must contain legally enforceable

§ 51.213 is not applicable to the EBTA program

because it does not cover mobile sources.

The Chapter I 16 permit program for grandfathered

48
procedures to require stationary sources subject to EGFs, which as explained previously in this TSD is

emission standards as part ofthe applicable plan to the companion program to the EBTA, establishes

install, calibrate, maintain, and operate continuous emission standards and use of emission monitoring

emission monitoring systems. systems. This permit program is the subject of

separate action by EPA at EPA-R06-0AR-2005-

TX-0031. The EBTA program provides compliance

flexibility to sources in the Chapter 116 permit

program and therefore does not by itselfrequire

emission monitoring systems. However, Section

101.336 requires that emission monitoring and

reporting be conducted in accordance with the

grandfathered EGF permit program at 116.914.

Subpart L - Legal Authority Subpart L - Legal Authority

§ 51.230 Each plan must show that the State has the The EBTA program was developed and submitted

necessary legal authority to carry out the plan, in accordance with the Texas Clean Air Act,

including the authority to adopt emission standards Chapter 382 ofthe Texas Health and Safety Code.

and limitations necessary for attainment ofthe The Texas Health and Safety Code and the

NAAQS, enforce applicable laws and regulations enforcement provisions in the Texas Water Code

and seek injunctive relief. provide TCEQ the necessary legal authority to

implement the SIP. A more detailed discussion

immediately follows this table.

§ 51.231 The provision oflaw or regulation which Texas identified in the 4 submittal package that the

the State determines provides the authorities SI P revision was developed in accordance with the

required must be specifically identified and copies Texas Health and Safety Code. EPA Region 6 does

must be submitted with the plan. not require the State to submit copies oflaws and

regulations that have been submitted for prior SIP

submittals.

§ 51.232 A state government agency other than the The 4 SIP revisions identified the TCEQ as the

State air pollution control agency may be assigned agency responsible for implementing the SIP.

responsibility for carrYing out a portion ofthe plan.

Subpart M - Intergovernmental Consultation The 4 SIP revisions identified the TCEQ as the

agency responsible for developing, implementing,

Each plan must identify organizations by title that and enforcing the SIP.

will participate in the development, implementation,

and enforcement ofthe plan.

Subpart N - Compliance Schedule The EBTA program establishes an economic

incentive program for grandfathered EGFs. This

program does not establish a compliance schedule

for any NAAQS, and therefore do not need to

address the requirements of 40 CFR part 51, subpart

N.

However, the EBTA program provides mechanisms

by which users ofEBTA allowances must

demonstrate they have enough allowances to cover

their use obligations, see sections 101.334 -

101.336. Section 101.339 provides for program

audits and reporting through which the TCEQ will

demonstrate to EPA and the public that the EBTA

program is operatin~ effectively.

Subpart 0 - Miscellaneous Plan Content The 4 SIP revisions identified that no fiscal

49
Requirements implications are anticipated for TCEQ or any other

state/local government through the implementation

ofthese rules. Additionally, it was estimated that

the public benefit as a result of implementing these

revisions would be a continued reduction in air

contaminants.

Subpart P - Protection ofVisibility The EBTA program is not submitted as part of

Texas's plan to protect visibility.

Subpart Q - Reports The EBTA program SIP revision does not revise the

existing reporting requirements for the emission

inventory in the Texas SIP. EPA approved the

emission inventory requirements at 30 TAC §

101.10 on August 26, 1994 (59 FR 44036).

Subpart R - Extensions Requirements found in 51, Subpart R are not

applicable to the 4 SIP submittals under review in

this document. The EBTA program is not a request

for an 18-month extension.

Subpart S - Inspection/Maintenance Program Requirements found in 51, Subpart S are not

Requirements applicable to the 4 SIP submittal sunder review in

this document. The EBTA program establishes a

discretionary economic incentive program and is not

related to an insnectionlmaintenance nrOlITam.

Subpart T - Confonnity to State or Federal The EBTA program is not applicable to mobile

Implementation Plans ofTransportation Plans, sources and therefore does not interfere with the

Programs, and Projects Developed, Funded, or transportation confonnity budgets developed for

Approved Under Title 23 U.S.C or the Federal each nonattainment and maintenance area pursuant

Transit Laws to subpart T.

Subpart U - Economic Incentive Programs 40 CFR part 51, subpart U establishes requirements

for statutorily mandated economic incentive

programs under sections 182(g)(3), 182(g)(5),

I87(d)(3), or 187(g) ofthe CAA. The EBTA

program is a discretionary economic incentive

program, and therefore not subject to the

reauirements ofsubnart U.

Subpart W - Detennining Confonnity of General The EBTA program does not interfere with the

Federal Actions to State or Federal Implementation requirements for general confonnity in subpart W.

Plans Mobile sources cannot narticinate in the EBTA.

Subpart X - Provisions for Implementation of 8-hr Requirements found in 51, Subpart X are for the

OzoneNAAQS implementation ofthe 8-hour ozone NAAQS.

While the EBTA program is operated statewide,

including in 8-hour ozone nonattainment areas, it is

not part ofthe implementation ofthe 8-hour ozone

standard. EPA expects that the TCEQ will account

for the generation and use ofEBTA program

allowances in all 8-hour attainment demonstrations.

Subpart Y - Mitigation Requirements The EBTA program does not create procedures by

which Texas could exclude air quality data due to

exceutional events.

Subpart Z - Provisions for Implementation of Requirements found in 51, Subpart X are for the

PM2.5 National Ambient Air Quality Standards implementation ofthe PM2.5 NAAQS. The EBTA

program revisions do not establish procedures for

imolementing the PM2.5 NAAQS.

50
Does TCEQ have the necessary legal authority to implement the revisions to 30 TAC Sections

101.330 -101.336, 101.338, and 101.339 as part ofthe SIP?

Texas enforcement provisions are not typically in the State's individual rules but are separately

codified. Texas Water Code Chapter 7 contains the State's statutory provisions for enforcement

ofthe Texas EBTA program. In particular, TWC § 7.051 provides for the assessment of

administrative penalties by the TCEQ, and § 7.032 provides for injunctive relief by the TCEQ.

The TCEQ enforcement rule at 30 TAC § 70.5 incorporates remedies found in the state statutes

(Texas Water Code and the Texas Health and Safety Code), and permits referrals to EPA for

civil, judicial or administrative action. It is our conclusion that TCEQ has adequate legal

authority to enforce the EBTA program revisions as part ofthe SIP. Once we approve the

revisions to the EBTA program into the SIP, EPA will be able to enforce it under section 113 of

the Clean Air Act.

The 40 CFR part 70 / CAA Title V operating permits program and the 40 CFR part 63, National

Emission Standards for Hazardous Air Pollutants (NESHAPs) have been reviewed and found to

have sufficient enforcement provisions. These same enforcement provisions will apply to the

EBTA Program. The Office ofthe Attorney General ofthe State of Texas has provided written

opinions for these programs (included in the docket for this rulemaking). The opinions state that

TCEQ has the necessary legal authority to implement and enforce the programs. TCEQ has the

authority to have reasonable requirements for measuring and monitoring air emissions and to

require owners and operators ofsources to make and maintain records ofthe emissions.

The Office ofthe Attorney General ofthe State of Texas cited State laws and regulations that

regulate, at a minimum, the same sources as the Clean Air Act and do so with standards that are

no less stringent than those specified by the CAA. The cited laws and regulations are: Texas

Health and Safety Code Ann. sections 382.016 (Monitoring Requirements, Examination of

Records), 382.021 (Sampling Methods and Procedures), 382.0514 (Sampling, Monitoring and

Certification); 30 TAC sections 122.132 (Application and Required Information for Initial

Permit Issuance, Reopening, Renewal, or General Operating Permits), 122.134 (Complete

Application), 122.136 (Application Deficiencies), 122.142 (Permit Content Requirements),

122.143 (General Terms and Conditions), 122.144 (Recordkeeping Terms and Conditions),

122.145 (Reporting Terms and Conditions), 122.146 (Compliance Certification Terms and

Conditions), 122.165 (Certification by Responsible Official; 30 TAC sections 1Ol.8 (Sampling),

101.9 (Sampling Ports).

Recordkeeping requirements specific to the EBTA rule are set forth at § 101.336. The Attorney

General has determined that TCEQ is allowed to prescribe sampling methods and procedures to

be used to determine violations of and compliance with the TCEQ rules and orders. The EBTA

program provides emission monitoring and reporting shall be conducted in accordance with 30

51
TAC 116.914, which specifies the use of 40 CFR Part 75 monitoring procedures.2 The opinions

ofthe Texas Attorney General indicate that TCEQ has the necessary legal authority to implement

and enforce the EBTA program in accordance with the requirements ofthe Clean Air Act.

2 EPA is proposing approval ono TAC Section 116.914 in a separate rulemaking. See EPA-R06-0AR-2005-TX0031 Docket for additional information.

52
V.F. Analysis of the EBTA Program with respect to the EIP Guidance

This portion ofthe EBTA Program technical review consists of a section-by-section analysis of

the EIP Guidance document and relevant CAA requirements, and the corresponding section(s) in

the EBTA Program.

The EIP guidance is divided into 16 chapters, which are categorized into four segments.

The first segment, Selecting and Approving EIPs, consists ofChapter 1.0 (General), Chapter

2.0(Defining an EIP), and Chapter 3.0 (Selecting Your ElP Type).

The second segment, Elements ofAll EIPs, consists ofChapter 4.0 (Fundamental Principles of

All EIPs), Chapter 5.0 (Common Elements ofAll EIPs), Chapter 6.0(Elements ofAll Trading

EIPs), Chapter 7.0 (Elements of Specific Trading ElPs), Chapter 8.0 (Elements of Financial

Mechanism EIPs), Chapter 9.0 (Elements ofClean Air Investment Funds), and Chapter 10.0

(Elements ofPublic Information ElPs).

The third segment, Other Requirements for ElPs, consists ofChapter 11.0 (Getting Your EIP

Approved) and Chapter 12.0 (Running Your Approved EIP).

The fourth segment, Other Important Information You Need to Know, consists ofChapter 13.0

(Additional Guidance That Applies to EIPs), Chapter 14.0 (Mobile Source Guidance You May

Use Instead ofThis Guidance), Chapter 15.0 (Special Terms You Need to Know), and Chapter

16.0 (Appendices).

This TSD will address elements in the pertinent Chapters ofthe EIP Guidance. This TSD will

not delve into Chapter 3.0 (Selecting Your EIP Type) because the TCEQ has already selected the

EIP type which is evaluated in this TSD. The EIP type is a Source-Specific Emissions Cap

(SSEC) program. There are seven main types ofEIPs - Emission Averaging Program, Source

Specific Emission Caps, Multi-Source Cap-and-Trade ElPs, Open Market Trading ElPs,

Financial Mechanism ElPs, Clean Air Investment Funds, and Public Information EIPs - each

with type-specific requirements. Chapter 7.0 - Elements of Specific Trading ElPs, outlines the

specific requirements for an SSEC program. Chapter 8.0 - Elements of Financial Mechanism

EIPs, Chapter 9.0 - Elements ofClean Air Investment Funds, and Chapter 10.0 - Elements of

Public Information EIPs do not apply to the TCEQ EBTA program and will not be addressed in

this TSD. Specific appendices in Chapter 16.0 have requirements germane to the TCEQ EBTA

program.

Selecting andApproving EIPs

Chapter 1 - General

Chapter I covers general information items for EIPs. The relevant items ofthe EIP guidance that

apply to the EBTA submittal are tabulated in Table V.F.I. Corresponding sections ofthe TCEQ

submittals are provided for each guidance item.

53
Table V.F.I

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

Chapter 1 - General

EPA EIP Guidance Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-4S2IR-OI-OOI §§101.330 -101.336, 101.338, 101.339

1.1 EPA guidance is for discretionary EIPs The TCEQ EBTA Program is discretionary. It's development

is not required by CAA sections 182(g)(3), 182(g)(5),

182(d)(3), 187(g).

1.3 Discretionary EIPs are to increase flexibility, stimulate The EBTA EIP is intended as a source specific emission cap

the use of less costly, innovative emission reduction program to help facilities meet regulatory requirements for

measures, and provide greater incentives for developing and reducing emissions, and to create a financial incentive for

implementing pollution prevention strategies, possibly with sources to make early reductions or exceed control

fewer resourees. requirements.

Chapter 2 - Defining an EIP

Chapter 2 is titled "Defining an EIP" and is summarized in Table V.F.2. The EBTA Program

defines the sources and pollutants included in the program, as well as the objective ofthe EIP.

Table V.F.2

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 2 - Defining an EIP

EPA EIP Guidance Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-4S21R-01-OOI §§101.330 -101.336, 101.338, 101.339

2.2 Pollutants covered: Any criteria pollutant or precursor, Pollutants covered by the EBTA are emissions ofNOx and

except for lead. SO,

2.3 Sources ineluded in EJP § 101.331 The EBTA applies only to:

(I) EGFs pennittcd under Chapter 116, Subchapter I; and

(2) brokers

An EGF is defined at § 101.330(12) as a facility that generates

electrie energy for compensation and is owned or operated by a

person in Texas, including a municipal corporation, electrie

cooperative, or river authority.

The EGFs covered by the EBTA include electing EGFs and

grandfathered EGFs.

• § 101.330(11) Electing EGF - an EGF pennittcd under

Chapter 116, Subchapter B which is not subject to the

requirements ofTexas Utility Code, § 39.264 and elects

to comply with Chapter 116, Subchapter I.

• § 101.330(14) Grandfathered EGF - a facility that is not

subject to the requirement to obtain a permit under

TCAA, § 382.0518(g), and that generates electric energy

for compensation and is owned or operated by a person in

Texas, including a municipal corporation, electric

cooperative, or river authority.

A broker is defined at § 101.330(4) as a person not required to

participate in the requirements ofthis division who opens an

54
Table V.F.2

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 2 - Defining an EIP

account under this division for the purpose of banking and

trading emissions allowances.

Note: 30 TAC Chapter 116 of the Texas General Air Quality

Rules is being proposed concurrently. All documents related

to Chapter 116 may be viewed at Docket EPA-R06-0AR2005-TX-0031.

2.4 Objectives oflbe EIP The EBTA Rule meets the definition of a compliance

flexibility EIP because it provides facilities with compliance

flexibility to meet existing SIP requirements, and allows

sources flexibilitv in comDlvinQ: with their emission limits.

Elements ofAll EIPs

Chapter 4 - Fundamental Principles ofAll EIPs

Three fundamental principles apply to all EIPs: integrity, equity, and environmental benefit.

Four elements make up the integrity principle: surplus, quantifiable, enforceable, and pennanent.

These four elements, which apply to all EIPs, are further defined with regard to programmatic

integrity and source-specific integrity. The equity principle consists oftwo elements: general

equity and environmental justice. The environmental benefit principle is not further divided.

Because the programmatic and source-specific requirements of EIPs are different, the integrity

elements do not apply to the two program levels in the same manner. In addition, depending on

the nature ofthe EIP or the type ofsources participating in the EIP, certain elements may only

apply partially, if at all. The source-specific requirements contain general requirements and EIPspecific requirements.

How must my EIP meet the integrity principle?

Table V.F.3 tabulates the requirements described in Chapter 4 ofthe EIP guidance pertaining to

the integrity principle.

Table V.F.3

EPA EIP Guidance and TCEQ SIP Submittal Cruss Reference

CHAPTER 4 - Fundamental Principles of All EIPs 4.1

EPA EIP GUIDANCE expectatiun Emissions Banking and Trading of Allowances (EBTA)

EPA-452/R-01-OOI §§101.330 -101.336, 101.338, 101.339

4.I{a) PROGRAMMATIC INTEGRITY ELEMENTS

SURPLUS - Emission reductions used to meet air quality The EBTA satisfies the integrity element ofsurplus because

attainment requirements are surplus as long as they are not the allowances used to demonstrate compliance with the EBTA

otherwise relied on in your SIP, SIP·related requirements, (and the emissions authorized by the holding of an allowance)

other State air quality programs adopted but not in your SIP, are not used by any other programs.

a consent decree, or Federal rules that focus on reducing The EBTA program was created through Texas Senate Bill 7. criteria pollutants or their precursors. In the event that your

EIP's Drogrammatic emission reductions are relied on to

which mandated a 50% reduction in NOx and a 25% reduction

55
Table V.F.3

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principles ofAll EIPs 4.1

EPA EIP GUIDANCE expectation

EPA-452IR-OI-OO1

meet air quality-related program requirements, they are no

longer surplus.

SSEC Specific - Ifthe program is claiming reductions, in

addition to the general definition you must show that your

EIP results in more reductions than would have occurred

without the program.

ENFORCEABLE emission reductions are enforceable if:

• They are independently verifiable.

• Program violations are defined.

• Those liable can be identified (see 6. 1(a)).

• Citizens have access to all emissions-related

information obtained from source.

• The state & EPA can apply penalties & obtain

corrective action.

• Emission reductions meet EPA guidance on practicable

enforceability.

• Citizens can file suits against sources for violations.

• They are practicably enforceable in accordance with

other EPA guidance on practicable enforceability.

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336, 101.338, 101.339

in S02 emissions from the 1997 base line year. While the SIP

attainment demonstration emission inventories rely on this

overall reduction in actual NOx and S02 emissions mandated

by Texas Senate Bill 7, the EBTA program or its allowances

are not relied upon to reach attainment.

EBTA allowances (the authorization to emit one ton ofNOx or

S02 during a control period) cannot be

• used to meet or exceed the limitations of any annual

emission limitation authorized under Chapter 116,

Subcbapter S, § 101.332(a)

• used for netting requirements to avoid the applicability of

federal and state new source review requirements, §

101.332(d)

• used to satisfy offset requirements for new or modified

sources subject to federal nonattainment NSR., §

101.332(e)

Emission reductions used to satisfy the requirements ofthe

EBTA cannot be used to generate emission reduction credits or

discrete emission reduction credits. § 101.332(c).

Emission reductions for the EBTA are independently verifiable

because § I01.336(a) specifies that emission monitoring and

reporting shall be conducted in accordance with 30 TAC §

116.914. The 40 CFR part 75 monitoring requirements

established in § 116.914 are adequate for independent

demonstration and verification ofthe emission reductions.

Compliance with the EBTA is determined on JWle 1 following

each control period. The owner or operator of a facility subject

to the EBTA must possess enough allowances to cover its

emissions ofregulated pollutants during the control period just

ending. If emissions ofNOx or S02 exceed the amount of

allowances for a given control period, allowances for the next

control period will be reduced in an amount equal to the

emissions exceeding the allowances in the compliance account.

Those liable under the EBTA are the owners or operators of

facilities. It is their responisbility to ensure that the allowances

in the compliance account cover the facility's emissions.

In accordance witb § 101.333(7), tbe TCEQ maintains a

registry ofthe allowances in each compliance account and the

price paid for per allowance. This information is available

upon request or on the TCEQ website.

Although the application of penalties or obtaining corrective

action, citizen filing of lawsuits, and practicable enforceability

are not addressed in the EBTA rules, Tcxas enforcement

provisions are not typically in individual rules but are

separately codified. Texas Water Code Chapter 7 contains the

statutory nrovisions for enforcement ofthe EBTA nrOl!ram. In

S6
Table V.F.3

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4· Fundamental Principle' of All EIP, 4.1

EPA EIP GUIDANCE expectation

EPA-452IR-oI·OOI

QUANTIFIABLE - Emissions and emission reductions are

quantifiable ifthey can reliably and replicably be measured

/detennined.

PERMANENT - For compliance flexibility EIPs, the

emission reductions are pennanent ifthe state is able to

ensure that no emission increases (compared to emissions if

there were no EIP) occur over the time defined in the SIP.

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336, 101.338, 101.339

particular, TWC § 7.051 provides for the assessment of

administrative penalties, and § 7.032 provides for injunctive

relief. The TCEQ enforcement rule at 30 TAC §70.5

incorporates remedies found in the state statutes (Texas Water

Code and the Texas Health and Safety Code), and permits

referrals to EPA for civil, judicial or administrative action.

EPA has previously approved SIP revisions with penalty

provisions located in statutes outside the submitted rules.

Further discussion ofthe EBTA SIP submittal and EIP

guidance expectations for the enforceable element and related

eAA requirements are addressed after this table. Onee the rule

is approved into the SIP, EPA will be able to enforce it under

section 113 ofthe Clean Air Act.

The EBTA program at § 101.336 requires that emissions are

monitored and quantified consistent with the requirements of

30 TAC Chapter 116.914, which in tum requires sources

participating in the EBTA to monitor consistent with 40 CFR

part 75. Part 75 monitoring provisions are used to reliably and

replicably quantify NOx and S02 emissions for power plants

subject to the Acid Rain Program and CAIR.

Grandfathered and electing EFGs, subject to 40 CFR part 75,

use EPA approved methods. Those not subject to 40 CFR part

75, or users wanting to use quantification protocols alternate to

30 TAC Chapter 75, must follow the quantification

requirements at 30 TAC Section I 16.914(b)(3), which also

refer to EPA approved protocols under 40 CFR part 75.

Allowances are allocated according to § 101.333(1) and (2)

and are based on the emissions listed in the 1997 Emissions

Scorecard from EPA's Acid Rain Program.

Allowances are deducted according to 30 TAC § 101.334(1)

and (2). These deduction fonnulas rely on the emissions

reported in the compliance report from the monitoring

established in § 116.914.

The EBTA satisfies the pennanent requirements for

compliance flexibility EIPs.

§ 101.333, Allocation ofAllowances, describes the EBTA

Allocation ofAllowances procedures to ensure that the

emissions arc capped and pennanent, ensuring that there arc no

increases in emissions over the time described during the

reduction period.

§ 101.334, Allowance Deductions and § 101.335, Allowance

Banking and Trading describe the EBTA Allowance

accounting procedures, per Region, to ensure the allowances

are contained and pennanent within the pennanent capped

Allowance account for that Region.

§ 101.333(3) specifically prevents the use of allowances by

57
Table V.F.3

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principles of All EIPs 4.1

EPA EIP GUIDANCE expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-452/R-OI-OOI §§10I.330 -101.336,101.338,101.339

electing EGFs to exceed applicable state or federal emission

requirements, through invalidation of any allowances allocated

to them that exceed those emission reQuirements.

4.I(b) SOURCE-SPECIFIC INTEGRITY ELEMENTS

SURPLUS - GENERAL Please refer to the discussion ofthe programmatic integrity

element ofsurplus for additional infonnation about the EBTA

The creation of emission reductions is surplus ifthe allowanceslreductions being surplus to the SIP.

reductions are not presently relied upon in your current air

quality-related programs defined in section 4. 1(a) for the The EBTA meets the SSEC specifie requirements for surplus.

time that the reductions occur, and ifthey are not required

by a consent decree. • The reductions used to meet the EBTA are generated

from reductions of 50% ofNOx and 25% of S02

Generally, source-specific emission reductions of a criteria emissions from 1997 heat input data. The baseline for

pollutant resulting from a non-criteria pollutant program are the development ofthe EBTA is specified in Senate Bill

surplus if they are not relied upon in your air quality-related 7, sect. 39.264(e); the baseline for EBTA generation of

program requirements for that criteria pollutant. NOx and S02 from grandfathered and electing EGFs is

from the 1997 Emissions Scorecard from EPA's Acid

Emission reductions measured by sources on a prospective Rain Program. Emissions ofNOx from these facilities

basis are surplus ifthe projected baseline emissions from the may not exceed levels equal to 500,!o ofthe quantity of

source or group ofsources are properly accounted for in the emissions reported in the most recent year of emissions

applicable inventory (point and area sources) or by using an inventory used in the SIP, compared to 1997 reports.

acceptable baseline (mobile sources). The baseline for S02 from coal-fired facilities subject to

the EBTA may not exceed the levels equal to 75% of the

Emission reductions measured by sources on a retrospective quantity of emissions reported in the most recent year of

basis are surplus if the source's actual emissions are below emissions inventory used in the SIP, compared to the

its baseline allowable or historical actual emissions - total emissions ofthat pollutant during 1997.

whichever is lower - and your retrospective inventories • The development ofthe EBTA was not through

reflect actual emission infonnation as appropriate. compliance with any requirement of the CAA and

reductions used to satisfy the EBTA must be surplus.

SURPLUS - SSEC EIP [EIP Guidance Table 4.2b] • The allowanee allocation fonnulas in § 101.333 account

In addition to the general definition: for shutdowns and curtailments.

• the reductions are not prospectively relied upon in the • The sources subject to the EBTA are counted in the

SIP or SIP-related requirements; inventory at their capped emis~ions levels.

• the reductions are not generated through compliance

with any requirement of the CAA;

• the reductions resulting from shutdowns and

curtailments are surplus only if the shutdowns or

curtailed source is included in the source-specific cap

program; and

• the source must be included in the prospective

inventory at its capped emissions level.

ENFORCEABLE-GENERAL General Enforceability conditions are addressed earlier in Actions, emission reductions or emission limits specified by

the EIP are enforceable if a souree may be held liable; the Table V.F.3.

liable party is identifiable; and TCEQ, the public, and EPA The EBTA program provides for liability for owners/operators ean independently verify compliance. (see § 6.1(a)) ofsources at § 101.333(4). If emissions of NOx or S02

ENFORCEABLE - SSEC EIP [EIP Guidance Table 4.2b] exceed the amount of allowances for a given control period,

allowances for the next control period will be reduced in an In addition to the general definition: amount equal to the emissions exceeding the allowances in the

• Owners/Operators ofsources generating emission compliance account.

reductions are liable meeting their emission limits, and

58
•

for the truth and accuracy ofstatements regarding

actions they take to generate emission reductions.

Owners/Operators ofsources using emission reductions

are liable for meeting their emission limit as it is

modified through trading, and for the validity ofthe

emission reductions it uses.

EGFs may be subject to administrative penalties under general

TCEQ enforcement authority (described below) for failure to

comply with certification and other applicable requirements.

Infonnation to be made available to the public is addressed

under the General Enforceability conditions earlier in Table

V.F.3.

Owners/Operators ofEGFs or elected EGFS, under the EBTA

rules have Monitoring and Reporting obligations, which must

meet the requirements of § 101.336 (Emission Monitoring,

Compliance Demonstration and Reporting).

QUANTIFIABLE - GENERAL

The creation and use of emission reductions are quantifiable

ifthe source or group ofsources can reliably ealculate the

amount of emissions and/or emission reduetions occurring

during implementation ofthe program, and replieate the

caleulations; generally, sources cannot include fugitive

emissions when quantifying emissions associated with an

EIP.

When quantifying results, sources must use the same

methodology used to measure baseline emissions unless

there are good technical reasons of why this is not

appropriate and supporting doeumentation ean be provided.

QUANTIFIABLE SSEC EIP [EIP Guidance Table 4.2b]

• sourees must quantify total emissions per unit oftimc.

General Quantifiable expectations are addressed earlier in

Table V.F.3.

Caleulations for EBTA baseline alloeations, by Region, are in

§ 101.333(1) for grandfathered EGFs and § 101.333(2) for

electing EGFs. All the ealculations listed within these seetions

incorporate the use ofNOX and S02 from EGFs and eleeting

EGFs from the 1997 Emissions Scorecard from EPA's Acid

Rain Program. Eaeh EGF in each Region is apportioned an

annual allocation of allowanees that pennit emissions of the

contaminants from the faeility in that year. An allowance

authorizes the emission of one ton ofNOx or one ton of S02.

The allowanee caleulation for grandfathered EGFs is a

function of an apportionment of the total 1997 Emissions

Scoreeard from EPA's Aeid Rain Program for the total

participating facilities, between each ofthe partieipating

facilities. Eaeh Allowance is equal to the emissions rate

measured in pounds per million British thennal units divided

by 2,000 and multiplied by the facilitiy's total heat input in

tenns ofMMBtu during 1997. The Regions provide for

speeific calculations concerning coal-fired grandfathered

EGFs, with the East Texas emissions rate at 0.14 pounds per

MMBtu for NOx and 1.38 pounds per MMBlu for SO,. For

West Texas, the emissions rate is 0.195 pounds per MMBtu

forNOx..

Eleeting EGFs have Allowances equal to emissions as listed in

the Emissions Scorecard from EPA's Aeid Rain Program. or if

not listed in the 1997 Emissions Scorecard, by a method

approved by the executive director, consistent with the

emission reduction requirements ofthe Division, but not to

exceed any annual emission limitation authorized under

Chapter 116, Subchapter B, or any applicable state or federal

requirement. This ensures that the EBTA participants quantify

their emissions before and during implementation for the

reduction strategy.

The EBTA satisfies the SSEC specific quantifiable expectation

by requiring sources to complete an annual complianee report

that details the emissions of each regulated pollutant during the

preceding control period, § 101.336!b).

59
PE~ENT-GENERAL

Emission reductions are permanent ifthe souree commits to

achieve or achieves reductions for a future period of time as

defined in the EIP.

The programmatic requirements for the integrity element of

permanent are covered earlier in Table V.F.3.

§ 101.333, Allocation of Allowances, describes the EBTA

Allocation of Allowances procedures to ensure that the

emissions are capped and permanent, ensuring that there were

no increases in emissions over the time described during the

reduction period.

§ 101.334, Allowance Deductions and § 10 1.335, Allowance

Banking and Trading describe the EBrA Allowance

accounting procedures, per Region, to ensure the allowances

are contained and pennanent within the pennanent capped

Allowance account for that Region.

Does the EBTA EIP submittal meet the EPA EIP guidance expectationsfor enforceability,

and related eAA requirements?

The owners/operators ofsources subject to the EBTA are liable for ensuring that the compliance

account of each facility has enough allowances to cover the facility's emissions in the given

control period. Information to be made available to the public and citizens is addressed through

§ 101.333(7), as the maintenance of a registry oftrades. While not a compliance point, as a

precautionary move, the EBTA program does provide in § 101.333(3) for the commission to

invalidate any allowances allocated to an elected EGF that authorize emissions in excess of

applicable state or federal requirements. As a compliance point, in § 101.333(4), if emissions of

NOx or, if applicable, S02 exceed the amount ofallowances for EGFs or electing EFGs over a

given control period, allowances for the next control period will be reduced by that amount of

the exceedance.

Although, with the exception ofthis one group of penalties, the general application of penalties

or obtaining corrective action, and citizen filing oflawsuits are not addressed in the EBTA rules,

Texas enforcement provisions are not typically in individual rules but are separately codified.

Texas Water Code Chapter 7 contains the statutory provisions for enforcement ofthe EBTA EIP

regulation. In particular, TWC § 7.051 provides for the assessment of administrative penalties,

and § 7.032 provides for injunctive relief. The TCEQ enforcement rule at 30 TAC § 70.5

incorporates remedies found in the state statutes (Texas Water Code and the Texas Health and

Safety Code), and permits referrals to EPA for civil, judicial or administrative action. EPA has

previously approved SIP revisions with penalty provisions located in statutes outside the

submitted rules. Once the rule is approved into the SIP, EPA will be able to enforce it under

section 113 ofthe Clean Air Act.

General Provisions ofthe EBTAprogram under § 101.332(a) and (c) through (e) limits the scope

ofthe EBTA program to all applicable rules or laws, including those under Chapter 116,

Subchapter I and Suchapter B (relating to EFG permits and New Source Review Permits), and

limit the use ofEBTA allowances from satisfying other requirements under Emissions Banking

and Trading programs or other federal and state requirements. The Office ofthe Attorney

General ofthe State ofTexas cited State laws and regulations that regulate, at a minimum, the

60
same sources as the Clean Air Act and do so with standards that are no less stringent than those

specified by the CAA.

The cited laws and regulations are: Texas Health and Safety Code Ann. sections 382.016

(Monitoring Requirements, Examination ofRecords), 382.021 (Sampling Methods and

Procedures), 382.0514 (Sampling, Monitoring and Certification); 30 TAC sections 122.132

(Application and Required Information for Initial Permit Issuance, Reopening, Renewal, or

General Operating Permits), 122.134 (Complete Application), 122.136 (Application

Deficiencies), 122.142 (Permit Content Requirements), 122.143 (General Terms and

Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms and

Conditions), 122.146 (Compliance Certification Terms and Conditions), 122.165 (Certification

by Responsible Official; 30 TAC sections 101.8 (Sampling), 101.9 (Sampling Ports).

Other TCEQ programs requiring enforcement provisions consistent with the Clean Air Act have

not been found deficient by EPA. The 40 CFR part 70, I CAA Title V operating permits program

and the 40 CFR part 63, National Emission Standards for Hazardous Air Pollutants (NESHAPs)

are two such programs. The Office ofthe Attorney General ofthe State ofTexas has provided

written opinions for these programs. The opinions state that TCEQ has the necessary legal

authority to implement and enforce the programs. TCEQ has the authority to have reasonable

requirements for measuring and monitoring air emissions and to require owners and operators of

sources to make and maintain records ofthe emissions.

Recordkeeping requirements specific to the EBTA rule are set forth at § 101.333(7), with the

maintenance ofthe Allowance Registry, and § 101.336, Emissions Monitoring and Compliance

Reporting. The Attorney General has determined that TCEQ is allowed to prescribe sampling

methods and procedures to be used to determine violations of and compliance with the TCEQ

rules and orders. TCEQ, under 30 TAC § 116.914(d) provides for the use oftesting and

monitoring equipment for EGFs and electing EGFs, subject to the requirements of 40 CFR part

75 and/or 40 CFR part 60. For those facilities not certified under 40 CFR part 75 or 40 CFR part

60,30 TAC 116.914(b)(3) provides alternate monitoring requirements to be met to meet state

and federal requirements for approval. Monitoring and reporting requirements provisions related

to the EBTA rule are set forth in § 101.336(a), per 30 TAC Chapter 116.914.

The opinions ofthe Texas Attorney General indicate that TCEQ has the necessary legal authority

to implement and enforce the programs in accordance with the requirements ofthe Clean Air

Act.

EPA's guidance on practicable enforceability (provided in the docket for this action) is a series

of agency memos on limiting potential to emit. While this guidance is not directly applicable to

a SSEC program, the requirements for sufficient monitoring do apply to the EBTA. The sources

subject to an annual cap-and-trade program must be able to measure their emissions of and

quantify their total mass of emissions annually. The EBTA meets EPA's expectations on

practicable enforceability by requiring sites to demonstrate compliance with the cap through the

monitoring and testing protocols in §116.914.

61
For the above reasons EPA has concluded that the EBTA ElP meets the Clean Air Act

requirements and ElP Guidance expectations for penalties and corrective action and practicable

enforceability in the integrity element of enforceable.

62
How must my EIP meet the equity and environmental benefitprinciples?

Table V.FA tabulates the requirements described in Chapter 4 ofthe EIP guidance pertaining to

the equity and environmental benefit principles.

Table V.F.4

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principle, of All EIP, 4.2 - 4.3

EPA EIP GUIDANCE Expectation

EPA-4521R-01-U0I

4.2 EIP EQUITY ELEMENTS

4.2(a) & Table 4.3(a) GENERAL EQUITY

• all segments ofthe population are protected from public

health problems

• no segment ofthe population receives a disproportionate

share ofa program's disbenefits

SSEC - specific

Ifthe program allows trading among different properties, ELP

submittal should protect communities from disproportionate

impaets from emission shifts and foregone emission reductions

Local stakeholder involvement and public participation are

important barometers to measure protection from

disproportionate impacts.

63

Emissions Banking and Trading of Allowances

(EBTA)

§§101.330 -101.336, 101.338, 101.339

• § 101.332(a),(e), and (d) ensures that all emission

reductions will meet all applicable rules and laws

and will not be used to generate emission reductions

for other state and federal programs, controls, or

requirements, including those associated with the

protection of public health, under the eligibility

requirements cited above.

• § 101.332(e)EBTA allowances cannot be used to

satisfy offset requirements for new or modified

sources subject to federal nonattainment NSR

requirements.

• § 101.333(3) the commission may invalidate any

allowances allocated to an electing EGF that

authorize emissions in excess of applicable state or

federal requirements. This will ensure that public

health is protected and disproportionate impacts are

avoided.

• § 101.333(3) allowances can be reduced by an

equal amount ofthe exceedance, for any

exceedances of allocated allowances of NOx or S02

during a specified control period. This will ensure

that public health is proteeted and disproportionate

impacts are avoided.

The EBTA rule includes public partieipation

requirements:

• § 101.333(7) requires a registry of allowances to be

maintained, which is available upon request from

the TCEQ or on the agency's website.

• § 101.336 requires monitoring and reporting

requirements detailing emissions data and summary

of trades for publication on the TCEQ website.

• Information available to the public for review on

notices, trades, quantity, availability, needs, and the

information needed to participate in a trade is

available upon request from the TCEQ or on the

agency's website.

• Public hearing and submission of public comment

for coverage under the EBTA program shall be in

accordance with the same opportunities afforded

under Sections 382.056 I and 382.0562, Health and

Safety Code. ocr Senate Bill 7. Section 39.264(r\.
Table V.F.4

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principles of All EIPs 4.2 - 4.3

EPA EIP GUIDANCE Expectation

EPA-452IR-oI-OOI

4.2(b) ENVIRONMENTAL JUSTICE

EPA is committed to assuring that all persons:

• have an opportunity to participate meaningfully in

environmental decision making

• live in a safe and healthful environment

The environmental justice element applies ifthe EIP

• covers VOCs, and

• could disproportionately impact communities populated by

racial minorities, people with low incomes, and/or Tribes

To address environmental justice, the ElP should include

provisions to protect eommunities of concern.

SSECEIP

• Ifthe program is limited to one property, the EIP will

probably not cause EJ concerns.

• Ifthe program allows trading among different properties, the

ElP submittal should protect communities of concern from

disproportionate high and adverse impacts from emission

shifts and foregone emission reductions

4.3 ENVIRONMENTAL BENEFIT

All EIPS must demonstrate environmental" benefit.

This demonstration ean show:

• faster attainment than would have occWTed without the EIP

• more rapid emission reduetions than would have happened

without the ElP

• more emission reductions (of HAPs or criteria pollutants)

than would have happened without the EIP

SSEC Specific Requirements:

To demonstrate environmental benefit, your SSEC must:

• result in emissions that are at least 10 % lower than what

would have occurrcd without the ElP

• have other provisions that demonstrate environmental

benefit (if allowed)

64

Emissions Banking and Trading of Allowances

(EBTA)

§§101.330 -101.336, 101.338, 101.339

The EBTA rule includes public participation

requirements:

• § 101.333(7) requires a registry of allowances to be

maintained, which is available is available upon

request from the TCEQ or on the ageney's website.

• § 101.336 requires monitoring and reporting

requirements detailing emissions data and summary

oftrades for publication on the Web.

• Information available to the public for review on

notices, trades, quantity, availability, needs, and the

infonnation needed to participate in a trade is

available upon request from the TCEQ or on the

agency's website.

• Public hearing and submission of publie comment

for coverage under the EBTA program shall be in

accordance with the same opportunities afforded

under Sections 382.0561 and 382.0562, Health and

Safely Code, per Senate Bill 7, Section 39.264(r).

While the environmental justice elemcnt does not appear

to specifically apply to the EBTA program, as the EBTA

does not eover VOCs, it docs providc for protection to

human health by adverse impacts of emission shifts and

foregone emission reductions, as cited in Table V.F.4,

above.

Refer to the previous section in Table V.F.4 concerning

the General EQuity reQuirements for SSEC Drograrns.

The EBTA was developed as a rcsult of Senate Bill 7.

Senate Bill 7, Sect. 39.264(c) specifies that the baseline

for EBTA generation of NOx and S02 from grandfathered

EGFs and electing EGFs is from the 1997 Emissions

Scorecard from EPA's Acid Rain Program. Emissions of

NOx from thcse facilities may not exceed levels equal to

50% the quantity of emission reported in the most recent

year ofcmissions inventory used in the SIP, compared to

1997 rcports. The baseline for S02 from coal-fired

facilities subject to the EBTA may not exceed levels

equal to 75% the quantity of cmissions reported in the

most recent year of emissions inventory used in the SIP,

compared to the total emissions ofthat pollutant during

1997. The cmission reductions for both NOx and S02

are at least 10% lower than what would have oeeurred

without the EBTA program.
Chapter 5 - Common Elements ofAll EIPs

Many program elements are common to trading EIPs, financial mechanism EIPs, CAlFs, and

public information EIPs. These elements include provisions needing incorporation into an EIP

SIP, provisions for quantifYing EIP results (i.e., emission impacts), and the features needing

inclusion in an EIP rule to measure and track results. Section 5.1 ofthe guidance includes

provisions required of an EIP for incorporation into the SIP, Section 5.2 includes requirements to

quantifY EIP results; and Section 5.3 includes requirements to measure and track EIP results.

Table V.F.5 tabulates the comparison ofthe EBTA rules with the elements ofChapter 5.1 ofthe

EIP guidance.

Table V.F. 5

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS ofALL EIP, 5.1

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-4521R~1-00 I §§101.330 -101.336, 101.338, 101.339

5.1 EIP SIP PROVISIONS

5.1(a) Environmental Benefit Provisions See also Table V.FA.

Programmatic reduction EIPs generally demonstrate an The EBTA EIP is a compliance flexibility EIP:

environmental benefit by showing increased or equivalent

emission reductions more rapidly. The EBTA EIP sets a cap on emissions reductions 50% lower

than what would have occurred without the EBTA EIP for

Flexibility EIPs generally demonstrate an environmental NOx• and 25% lower than what would have occurred without

benefit by reducing the amount ofsurplus emission the EBTA EIP for SO,. The EIP resulted in a cap on reductions generated for use in the EIP by at least IO percent. emissions for EGFs and electing EGFs pennitted through the

30 TAC Chapter 116 requirements.

The cap, adopted Dec. 16, 1999, effective Jan. 1I, 2000, and

regulatorily required May I, 2003, had the effect ofa rapid or

equivalent emissions reductions.

EBTAs must be retired as an environmental benefit:

§ 101.333(4) has user penalties that require reductions equal

to emission exceedances over allowances for a given control

period, for either EGFs or elected EGFs, that are imposed

over the next control oeriod.

65
5.I(b) Localized Impacts ofHazardous Air Pollutants

(HAPs)

Many VOC emissions contain HAPs which are toxic air

pollutants. EPA believes that localized impacts of HAP

emissions must be addressed for certain EIPs that affeet VOC

emissions. Jfyour EIP is a trading program that allows VOC

HAPs to be shifted from one facility to another then your EIP

must follow the HAP framework found in section 16.2.

Your ElP must also meet public participation requirements.

Sections 16.2 and 16.5 eontain guidance on how your EIP can

meet the public participation requirements.

Appendix 16.2 VOC EIPs involving HAPs

"HAP framework"

5.I(c) Penalty provisions; Violation defined; Determine

violation magnitude; Set potential penalties; Ability to

impose maximum penalty of at least SIO,OOO/day

EIP rule must contains provisions to assess:

• Monetary penalty if gaining economic benefit of $5,000

• Additional penalties to deter future violations

• Penalties for violations of compliance measures, i.e.

monitoring recordkeeping etc

• Statement that "Nothing herein restricts independent

enforcement authorities under CAA by other parties."

Also see EIP 6.1

See also Table V.FA, 4.2(b) for a discussion of General

Equity and Environmental Justice concerns and how Public

Participation is addressed in the EBTA EIP.

Compliance with HAP framework elements:

As part ofthe EBTA EIP, an allowance ofNOx and SO, may

qualify as emissions banking and trading allowances, as

appropriate. VOC emissions are not included, and therefore

HAPs are not applicable. Compliance with the HAP

framework elements for the EBTA EIP is not applicable.

The requirements for this element are also covered in Table

V.F.3.

The commission determined the penalties to be administrative

in the EBTA EIP as:

§ 101.333(4) has user penalties that require reductions equal

to emission exceedances over allowances for a given control

period, for either EGFs or elected EGFs, that are imposed

over the next control period.

66
5.I(d) Public Disclosure provisions Some of the requirements for this element (5.1 (d» are also

0 EIP participants disclose violations in annual covered in Table V.F.4, 4.2(b).

certification of compliance. 0 § 101.332(b) includes provisions for EGFs and electing

0 Violating sourcc notify atIected community. EGFs to hold emission allowances in compliance

0 Annual report on emissions and violations. accounts.

0 Submit report to EPA and the public. 0 § 101.333(7) has a requirement for thc commission to

maintain a registry of allowances in each compliance

Appendix 16.5 Ensuring Adequate Public Participation account. For each transfer, the registry includes the

0 Public Notices price paid per allowance, and the registry does not

0 Public Hearings contain proprietary information, so it is open to public

0 Notices of availability of technical information inspection, via the TCEQ website.

0 § 101.336(a) requires Emission Monitoring and

Reporting to be conducted in aecordance with 30 TAC §

116.914.

0 § 101.336(b) requires grandfalhered EGFs and electing

EGFs to submit a report every control period, detailing

the amount of emissions of each allocated air

contaminant during the preceding control period, and a

summary of all final trades for the preceding control

period.

One condition of rule approval is that the TCEQ has

committed to revise the EBTA to inelude provisions for a

periodic program evaluation. These audit results will be

available to the public upon request or on the agency's

website.

Ensuring Adequate Public Participation (Appendix 16.5)·

The EBTA rule includes publie participation requirements:

The requirements for this element (5.I(d» are also covered in

Table V.F.4, 4.2(b).

The TCEQ conducts notification of proposed SIP revisions

through publieation in the Texas Register of proposed

rulemaking and public hearing notices. Notification of public

hearings for the 4 SIP revisions that comprise the EBTA also

oeeurred in newspapers in six major metropolitan areas in

Texas: Austin American Statesman, Beaumont Enterprise, El

Paso Times, Houston Chroniele, Fort Worth Star Telegram,

and Lubbock-Avalanche Journal.

The TCEQ also has an extensive stakeholder list that contains

approximately 150 contacts that receive copies of all TCEQ

rulemaking actions for comment and participation in

development.

5.I(e) Provisions for Federal Land Manager (FLM) There are no grandfathered EGFs or electing EGFs under the

notifieation in Class I areas EBTA program within 100 kIn of a Class] area in the Eastern

or Western Regions ofTexas. Therefore, the FLM

Appendix 16.6 FLM Notification Requirements Notifieation Requirements under Appendix 16.6 are not

applicable to the EBTA EIP.

67
5.1(t) Area·wide RACT provisions

EIP may allow sources subject to RAeT to avoid direet

application ofRACT technology by:

• trading with other sources subject to RACT

• trading with sources not subject to RACT

Appendix 16.7 Area-wide RACT provisions

EIP must ensure that the level of emission reductions

resulting from implementation ofthe EIP will be equal to

those reductions expected from the direct application of

RACT

RACT is an independent requirement that must be met by

sources subject to the EBTA in addition to complying with

the trading program. EBTA allowances cannot be used to

satisfy RACT.

§ 101.332(a) Allows EBTAs to be used to comply ooly witb

the requirements ofDivision 2 and 30 TAC Chapter 116,

Subehapter I, relating to EGF Permits. They cannot be used

to meet or exceed the limitations of any annual emission

limitation authorized under Chapter 116, Subchapter B (NSR

Permits) or any applicable rule or law.

Section 5.2 includes requirements to quantify Erp results. Table V.F. 6 tabulates the comparison

ofthe EBTA rules with the elements of Chapter 5.2 ofthe EIP guidance.

Table V.F.6

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 • COMMON ELEMENTS ofALL EIP, 5.2

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA·452ni-oI~1 §§101.330 ·101.336, 101.338, 101.339

5.2 QUANTIFY EIP RESULTS

5.2(a) Predicting EIP results The requirements for this element are covered in Table V.FA,

Projected results must show that the ElP will not interfere or Environmental Benefits, for section 4.3 ofthe EIP guidance.

be inconsistent with SIP or SIP-related requirements. In addition, the EBTA EIP can create incentives for sources

to go beyond an emission reduction target. By setting a price

on pollution and pollution reductions through this trading

program, some sources can realize an economic gain or avoid

additional costs by selling excess emission reductions.

Because ofthe improved efficiency, the EIP has already

established the mechanism to achieve air quality goals

quickly, and provides the mechanism for continuing to meet

those goals in the future.

5.2(b) Addressing uncertainty The requirements for this element are partially eovered in

• determine uncertainty level. Table V.F.4 and will be eovered more fully in Table V.F. IO.

• provide a range of attributable emission reduetion

estimates.

• determine ifEIP will interfere with State air quality

planning.

• detennine if uncertainty level is acceptable

• include the documentation in SIP submittal.

• adjust emission projections, attainment demonstrations,

and RFPIROP plans to reflect the uncertainty.

• demonstrate that ElP will not interfere with attainment or

maintenance of any NAAQS.

• evaluate results ofEIP as per 5.3(b), &

• reconcile any problems as per 5.3(c).

68
Table V.F.6

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIP, 5.2

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-452/R-OI-OOI §§101.330 -101.336,101.338, 101.339

5.2(c) Quantification protocols - EIP SIP submittal includes: § 101.336 specifically requires monitoring and reporting

• all protocols with the EIP for EPA approval or under the requirements of30 TAC Chapter 116.914 EBTA

• provide for EPA approval after EIP is SIP approved. protocols.

The 30 TAC Chapter 116 monitoring requirements are

reliable and replicable, subject to 40 CFR § 75 and 40 CFR §

60, which use EPA approved methods.

30 TAC Chapter 116.914(b)(3), grandfathered EGFs and

electing EGFs wanting to use quantification protocols

alternate to 30 TAC Chapter 116.914(a) and (b)(I)-(2) or with

no approved emission quantification protocol must follow

authorized protocols and quantification requirements, which . also refer to EPA approved protocols under 40 CFR § 75.

5.2(d) Emission quantification methods. § 101.336(a) requirements for monitoring per 30 TAC

Recommended hierarchy for selecting emission measurement Chapter 116.914.

protocols:

• CEMS data on unit generating emissions. § 116.914 establishes a hierarchy for selecting emission

• CEMS data on unit generating emissions not at measurement protocols in following order of preference to

generation time. but at representative conditions. detennine actual emissions:

• Multiple emission tests at affected unites) at A) CEMS data under 40 CFR Part 75;

representative conditions. B) CEMS date under 40 CFR Part 60 with an adjustment

• Emission test at affected unites) at representative factor

conditions. C) CEMS data using alternate methods under 30 TAC

• Emission test at maximum load Or stack tests at identical Chapter 116.914(b)(3)

unit. D) Estimated data, per Appendix E of 40 CFR Part 75 for

• Emission factor (if allowed) or material balance. EGFs with a heat input ofless than 100 MMBtu!hr and for

peaking units emissions in pounds per he.

E) Representative default data for missing data, per 40 CFR

Part 75, Subpart D.

Section 5.3 includes requirements to measure and track ElP results. Table V.F.7 tabulates the

comparison ofthe EBTA rules with the elements ofChapter 5.3 ofthe EIP guidance.

Table V.F.7

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIP, 5.3

EPA EIP GUIDANCE Expectation Emission. Banking and Trading of Allowance. (EBTA)

EPA-452/R-OI-OOI §§101.330 -101.336, 101.338, 101.339

5.3 EIP FEATURES to MEASURE & TRACK RESULTS

69
Table V.F.7

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS of ALL EIPs 5.3

EPA EIP GUIDANCE Expectation

EPA-4521R~1-(H)J

5.3(a) Procedures for monitoring, record keeping & reporting

(MRR).

Examples ofMRR:

• Continuous or periodic monitoring of emissions,

production, activity levels, or emission control

equipment operation.

• Measurement devices to verify emission Tate and

operating condition.

• Measurement ofmass emissions or emission rates using

the EPA-approved reference test methods.

• Operating and maintenance procedures or other work

practiees.

• Record keeping ofmaterial usage, inventories, or

throughput.

5.3(b) EIP evaluation procedures

At a minimum conduct program evaluation every 3 years.

5.3(c) EIP Reconciliation procedures

A list of possible fOnTIS of corrections includes:

• Amend EIP to address problem in the future.

• Amend another SIP program to address emission

shortfall.

• Add another program to SIP to address emission

shortfall.

• Adjust SIP emissions to account for actual emission

profiles.

• Suspend EIP until problems remedied.

• Removing the EIP from SIP.

• Use insurance fund of unused emission reductions

(establish before a problem discovered) to make up the

shortfall.

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336, 101.338, 101.339

§ 101.336(a) includes requirements for monitoring and

reporting per 30 TAC Chapter 116.914.

§ 101.336(b) requires that for each control period,

participating EGFs must provide a compliance report to

TCEQ detailing the amount of emissions of each allocated air

contaminant during the preceding control period and a

summary of all final trades for the preceding control period.

See Table V.F.3, 4.1(b), Quantification, for further detail on

MRR requirements in the EBTA Program.

Pursuant to § 101.336, sources subject to the EBTA submit an

annual compliance report to the TCEQ by June 30 of each

year. This report details the amount of emissions of each

allocated air contaminant and a summary of all final trades

for the preceding control period. Through review ofthese

reports, the TCEQ is able to detennine which facilities are in

compliance with the program.

Additionally, TCEQ will conduct an audit ofthe EBTA

program every three years under § 101.339. The audit will

evaluate the impact ofthe program on the state's ozone

attainment demonstration, the availability and cost of

allowances, compliance by the participants, and any other

elements the executive director may choose to include. The

executive director will recommend measures to remedy any

problems identified in the audit. The trading of allowances

may be discontinued in whole or in part as a remedy for the

identified problems.

Under § 101.339, the TCEQ will conduct an audit ofthe

EBTA program every three years. The audit will evaluate the

impact ofthe program on the state's ozone attainment

demonstration, the availability and cost of allowances,

compliance by the participants, and any other elements the

executive director may choose to include. The executive

director will recommend measures to remedy any problems

identified in the audit. The trading of allowances may be

discontinued in whole or in part as a remedy for the identified

problems.

70
Chapter 6 - Elements ofAll Trading EIPs

Chapter 6 introduces elements that are common to all trading EIPs. These elements include

enforcement provisions, addressing specific pollutant effects, preventing interference with other

air quality programs, addressing uncertainty, and a few other provisions such as elements for

demonstrating environmental benefits. The elements described in Chapter 6 apply in addition to

those in Chapter 5. Each ofthe four main types oftrading EIPs has its own unique

characteristics and requirements. Section 6.1 includes enforcement requirements that all EIPs

must contain, Section 6.2 contains provisions in a trading EIP to address specific pollutant

effects, Section 6.3 describes elements to ensure that the trading EIP does not interfere with

other programs, Section 6.4 contains provisions to address uncertainty, and Section 6.5 describes

other provisions needed in a trading EIP. Table V.F.8 tabulates the comparison ofthe EBTA

rules with the elements of Sections 6.1 and 6.2 ofthe EIP guidance.

Table V.F.8

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS ofALL TRADING EIPs §§ 6.1-6.5

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-4521R~I-001 §§101.330 -101.336, 101.338, 101.339

6.1 Enforcement elements of all trading EIPs

6.1(a) Provisions for assessing liability. The requirements for most of this element are covered in Table

• All parties liable for truth & accuracy of V.F. 3 for Monitoring and Reporting.

information they provide

• 3rd party not liable if using approved emission § 101.335 provides the legal responsibilities assoeiated with the

protocol. trading mechanism.

• User liable for making up shortfalls due to § 101.335(b)(I) note only authorized representatives may trade

disapproved protocols allowanees, providing them as the only liable parties under the

EBTAEIP

§ 101.331(1) provides the EBTA program applies to EGFs only,

permitted under Chapter 116, Subchapter 1 ofthe title, and

§ 101.331(2) provides the EBTA EIP applies to brokers only.

71
Table V.F.8

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIP, §§6.I-M

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EDTA)

EPA-4521R-0I-OOI §§101.330 -101.336,101.338,101.339

6.1(b) Penalty & corrective action provisions The requirements for most ofthis element are covered in Tables

The trading EIP must include mechanisms that enable V.F.3 and V.F.5.

TCEQ to assess monetary penalties and impose

corrective actions against the sources partieipating in the Emission reductions already in effect should not produce emission

EIP. These mechanisms must include: shortfalls for the scope ofthe eap and trade program under the

• Making up any emission shortfall (e.g., purchase EBTA program.

reductions by source that is "'short").

• Pay monetary penalty based on statutory penalties Emission allowance exceedances have corrective procedures

for source noncompliance. within the EBTA, as administrative:

• Surrender additional punitive amount of emission § 101.333(4) has user penalties that require reductions equal to

reductions. emission exceedances over allowances for a given control period,

• Implementing corrcctive actions to ensure non for either EGFs or elected EGFs, that are imposed over the next

occurrence in future and compensate for control period.

environmental damage caused by emissions

violation such as:

- Better monitors.

- More cffective controls.

- More frequent monitoring & reporting.

Better monitoring procedures.

72
Table V.F.8

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs §§ 6.1~.5

EPA EIP GUIDANCE Expectation

EPA-452/R-01-OOI

6.1(c) Sources with Title V pennits

Ifyour EIP covers sources with Title V operating

pennits your EIP must meet the requirements in Section

16.8.

Appendix 16.8 Provisions for sources with Title V

pennits.

Title V program requirements, such as pennit

modification requirements, may not be subsumed,

overriden, or otherwise affected by requirements of a

discretionary EIP approved into a SIP. If a facility that

has a Title V operating penni! wishes to participate in an

approved EIP, you must modify the facility's operating

pennit to include the detailed compliance provisions

necessary to assure compliance with the EIP.

The pennit must identify the following, at a minimum:

• Specifie emissions units subject to EIP

• Pollutants addressed by the EIP

• Identification of the SIP requirements for which the

EIP serves as an alternative method of compliance,

and a statement that compliance with those SIP

requirements will be detennined using EIP

compliance provisions

• Detailed compliance requirements - emission

quantification protocols

• Specific Title V requirements applying to each unit

• Baseline emissions levels

• Requirements for submittal of notices of credit

generation and use and credit tracking infonnation

• Penalty and corrective action provisions

• Procedures for public disclosure of infonnation

• FLM notification in Class I areas

6.2 Specific pollutant effect provisions

Comply with provision in Appendices 16.11

Appendix 16.11 Provisions for localized increase of

criteria pollutant and precursor emissions

Provisions for a trading EIP that allows sources to

significantly increase annual emissions (40 CFR

51.166(b)

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336,101.338,101.339

TCEQ has supplied the Title V Federal Operating Pennit template

with the EBTA program requirements. This template has been

included in the EBTA rulemaking file and is available in the

docket. TCEQ's pennit language meets the first, second and

fourth requirement described for Appendix 16.8 and requires

compliance with conditions outlined in thc Division 2 EBTA rule.

Compliance requirements, emission quantification protocols,

penalty and correetive aetion requirements are eovered in Tables

V.F.3, V.F.5, and V.F.6, and also in this table (V.F.8).

Submittal of notices of EBTA allocation of allowances, trades, and

tracking provisions are covered in Tables V.FA. V.F.5, and also in

table V.F.9.

§ 101.332(b) Define EBTAs yearly baseline emission allowance

allocations.

§ 101.336(b)(l) and (2) Requirements for a report to the

Commission each year on the amount of emissions of each

allocated air contaminant during the preceding control period and

a summary of all final trades for the preceding control period.

Procedures for public disclosure of infonnation are covered in

Tables V.FA and V.F.5.

FLM notification in Class I areas is covered in Table V.F.5. This

is not applicable for this EBTA program, as there are no

grandfathered EGFs or electing EGFs under the EBTA program

within 100 km ofa Class I area in the Eastern or Western Regions

of Texas. Therefore, the FLM Notification Requirements under

Appendix 16.6 are not applicable to the EBTA EIP.

Because of the use restrictions found at § 101.332 it is Wllikely

that sources will be allowed to significantly increase annual

emissions through the use ofEBTAs. Allowances are valid only

for meeting the purposes of the EBTA Division, and cannot be

used to meet or exceed the limitations of any annual emission

limitation authorized under Chapter 116, Subchapter B, relating to

NSR permits.

Section 6.3 describes elements to ensure that the trading EIP does not interfere with other

programs. Table V.F.9 tabulates the comparison ofthe EBTA rules with the elements ofChapter

6.3 ofthe ErP guidance.

73
Table V.F.9

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CIIAPTER 6 - ELEMENTS of ALL TRADING EIP, 6.3

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-452/R-OI-00I §§101.330 -101.336, 101.338, 101.339

6.3 Interference with other programs

6.3(a) Ensure consistency with transportation confonnity The EBTA rules do not include mobile sources in the scope of

applicablility under § 101.331.

If your EIP covers mobile sources then you must meet the

requirement in section 16.10.

Appendix 16.10 Provisions to ensure consistency with

transportation confonnity - notify Metropolitan Planning

Organization (MPO)

6.3(b) Provision for inter-credit trading Inter-eredit trading is not a feature ofthe EBTA.

Inter-credit trading is the acquisition and use of an emission

reduction generated under one EIP to meet the requirements EBTA allowances cannot be used to satisfy other programs:

of another EIP. Ifyour EIP includes inter-credit trading • § 101.332(a) Allows EBTAs to be used to comply only

your EIP must meet the provisions in section 16.12. with the requirements of Division 2 and Chapter 116,

SUbchapter I, relating to EGF Permits. They cannot be

Appendix 16.12 Provision for inter-credit trading used to meet or exceed the limitations of any annual

• emission reductions must meet the more stringent emission limitation authorized under Chapter 116,

requirements ofthe multiple programs, Subchapter B (NSR Permits )

• adopt the MRR procedures and quantifieation protocols • § 101.332(c) Allowances cannot be used to generate

from the more stringent EIP, so that accuracy and emission reduction credits or discrete emission reduction

enforceability are not compromised, credits.

• prevent double-counting of emission reductions, and • § 101.332(d) prohibits EBTA usefor netting to avoid the

• maintain the level of emissions measurement accuracy applicability of federal and state NSR requirements.

required ofeach program. • § 101.332(e) prohibits EBTA allowances for use as NSR

offsets.

6.3(c) Provisions for EIPs that include RACT sources RACT is an independent requirement that must be met by

Ifyour trading EIP covers RACT sources, you must include sources subject to the EBTA in addition to complying with the

provisions contained in section 16.13. trading program. EBTA allowances cannot be used to satisfy

RACT.

Appendix 16.13 Provisions for EIPs that include RACT

sources § 101.332(a) Allows EBTAs to be used to comply only with

the requirements of Division 2 and 30 TAC Chapter 116,

Subchapter 1, relating to EGF Permits. They cannot be used to

meet or exceed the limitations of any annual emission

limitation authorized under Chapter 116, Subchapter B (NSR

Pennits) or any applicable rule or law.

74
Table V.F.9

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.3

EPA EIP GUIDANCE Expectation

EPA-452/R-0I-OOI

6.3(d) Provisions for new source review and trading

If you choose to allow emission reductions generated by

your EIP to be used for NSR purposes then your EIP must

meet the requirements in section 16.14.

Appendix 16.14 Provisions for new source review and

trading:

• Sources are not exempted from any NSR or PSD

requirement because ofEIP.

• A major source or major modification may not avoid

NSR review by using an EIP

• Ozone non-attainment areas credits used comply with

the NSR offset requirement allowed if, all Federal NSR

provisions met

• Emission reduction generated or used to comply with

any other CAA requirement may not be used as an NSR

offset or vice versa.

• Be federally enforceable.

• Obtain offsets for the life ofthe source needing the

credit.

6.3(e) Limitations on emission reduction uses - use

prohibitions:

• VOC ERCs outside NA not allowed unless EIP 6.5(b)

met.

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336, 101.338, 101.339

Emission reductions and allowances in the EBTA cannot be

used to satisfy netting requirements or for offsets for

nonattainment NSR.

§ 101.332(a) Allows EBTAs to be used to comply only with

the requirements ofDivision 2 and 30 TAC Chapter 116,

Subchapter I, relating to EGF Pennits. They cannot be used to

meet or exceed the limitations of any annual emission

limitation authorized under Chapter 116, Subchapter B (NSR

Permtis) or any applicable rule or law.

§ 101.332(d) prohibits EBTA use for netting to avoid the

applicability of federal and state NSR requirements.

§ 101.332(e) Allowances cannot be used to satisfy offset

requirements for new or modified sources subject to federal

nonattainment NSR requirements.

The requirements for most of the applicable elements related to

prohibitions associated with the EBTA EIP are covered in

Table V.F.9, 6.3(b)

•

•

•

•

•

•

NOx ERCs generated outside modeling domain unless

EIP 6.5(b) met.

Emission reductions to meet NSPS, BACT, LAER,

NSR offset requirements, Acid Rain, and any CAA

§ 112 air toxic requirement. MACT NESHAP

requirements, requirements in urban air toxics program.

Emission reductions for statutory mobile source

requirements.

Emission reductions for netting to avoid major source

NSR requirements. (see EIP 6.3(d».

Emission reductions to meet the mobile source sulfur in

fuel reduction Tier II program.

Municipal waste combustor rule Emission reductions.

The EBTA program subdivides state coverage into Regions,

and the EIP under consideration covers East and West Texas.

Regional considerations in allowances allocations are in

§ 101.333(1)(A) and (B) and are detailed in Table V.F.3,

4.I(b), Quantifiable.

75
Table V.F.9

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIP. 6.3

EPA EIP GUIDANCE Expectation

EPA-452IR-OI-00I

6.3(f) Provisions for banking emission reductions.

Ifyou choose for your trading EIP to contain banking, then

the EIP must meet the requirements in section 16.15.

Appendix 16.15 Provisions for banking emission

reductions:

• Meet safeguards for EIPs with banking provisions

against "spiking"

• Demonstrate that withdrawals won't be concentrated at

times that would interfere with attainment

• Lifetime of banked emission reductions - EPA supports

unlimited, but requires safeguards

• Tracking banked emission reductions

• Adjustments to banked emission reductions

• Minimizing uncertainty

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336, 101.338, 101.339

The EBTA defines a "banked allowance" as, an allowance

which is not used to reconcile emissions in the designated year

of allocation, but which is carried forward into future years and

noted in the compliance or broker account as "banked".

• § 101.335 ofthe EBTA program sets forth the limitations

and requirements related specifically to the banking and

trading of allocations of emissions.

• § 101.335 (a) restricts the use of banked aUowances to the

Region that the allocation was assigned.

• § 101.335 (c) prohihited trades before May I, 2003.

• § 101.335 (d) and (e) restricts the trading of banked

allowances to EGFs within the Region where they were

generated.

• § 101.332 Allows EBTA allowances to be used to comply

only with the requirements ofDivision 2 and 30 TAC

Chapter 116, Suhchapter I ofthe title, relating to EGF

Permits. They cannot be used to meet or exceed the

limitations of any annual emission limitation authorized

under Chapter 116, Suhchapter B (NSR Permts) or any

applicable rule or law.

Further restrictions to support provisions covered under

Appendix 16.15 are covered under Table V.F.4 - EIP Sections

4.2(a) & 4.3(a) General Equity.

• Tracking banked emission reductions is covered under the

provisions of § 101.333(7) with the requirement for the

Commission to maintain a registry of allowances in each

compliance account, and for each transfer, include the

price paid per allowance.

• Adjustments for environmental benefit requirements is

covered in Table V.F. 4

• Requirements to minimize uncertainty will be covered in

Tahle V.F.I O.

Section 6.4 contains provisions to address uncertainty in a trading EIP and Section 6.5 describes

other provisions needed in a trading EIP. Table V.F.lO tabulates the comparison ofthe EBTA

rules with the elements ofChapter 6.4 and Chapter 6.5 ofthe EIP guidance.

Table V.F.IO

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.4 & 6.5

EPA EW GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-4521R-0I-OOI §§101.330 -101.336, 101.338, 101.339

6.4 Provisions to address uncertainty

76
Table V.F.IO

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CIIAPTER 6· ELEMENTS of ALL TRADING EIPs 6.4 & 6.5

EPA EIP GUIDANCE Expectation

EPA-452IR-OI-OOI

6.4(a) Emissions bank uncertainty - follow requirements in

Appendix 16.15

6.4(b) Seasonal trading Not allow non-ozone season

emission reductions to be used in ozone season.

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336,101.338,101.339

The EBTA program sets provisions for an SSEC mass-based

emission reduction banking program. The EBTA program is a

flexibility EIP:

• The EBTA EIP has already set a cap on emissions

reductions 50% lower than what would have occurred

witbout tbc EBTA EIP for NOx. and 25% lower tban

what would have occurred without the EBTA EIP for

SOl' The EIP resulted in a eap on emissions for EGFs

and electing EGFs pennilted tbrough the 30 TAC Chapter

116 requirements.

• The cap. adopted Dec. 16. 1999, effective Jan. I 1,2000,

and regulatorily required May 1, 2003, had the effect of

rapid or equivalent emissions reductions.

Safeguards for banking provisions:

• § lOl.335(a) provides for allowances that are not used for

complianee during a control period to be banked and may

be used in subsequent control periods, with the

restrictions listed in Table V.F. 9, 6.3(1).

• § 101.333(4) has user penalties that require reductions

equal to emission exeeedances over allowances for a

given control period, for either EGFs or elected EGFs,

that are imposed over the next control period.

• § 101.333(3) prevents the use of allowances by electing

EGFs to exceed applicable state or federal emission

requirements.

• Allowances are set by reductions from the 1997

Emissions Scorecard from EPA's Acid Rain Program.

EBTA allowances are the authorization to emit one ton of

either NOx or S02 during a given control period. The control

period runs May 1 through April 30. Seasonal trading is not

addressed under the EBTA because the allowances are the

authorization to emit over an entire year.

Sources subject to the EBTA located in a nonattainment area

or in the East & Central Texas region have applicable SIP

required emission limits targeting the reduction of ozone.

These SIP required emission limits override any EBTA

allowance limitation.

77
Table V.F.IO

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIP, 6.4 &6.5

EPA EIP GUIDANCE Expectatioo Emissions Banking and Trading of Allowances (EBTA)

EPA-452IR-ol-OO1 §§101.330 -101.336, 101.338, 101.339

6.4(e) Emissions measurement - Account for uneertainty in Conservative estimates requirement met through

emission quantification methods: environmental benefit requirements:

• Use conservative estimates • The EBTA EIP has already set a cap on emissions

• Include monitoring/testing reductions 50% lower than what would have occurred

• Exclude certain source types without the EBTA EIP for NOx, and 25% lower than

• Limit trades to similar sources what would have occurred without the EBTA EIP for

SOl' The ElP resulted in a cap on emissions for EGFs

aod electing EGFs pennitted througb the 30 TAC Chapter

116 requiremcnts.

• See Table V.F.4, 5.1(a) for general environmental

benefits.

Thc requirements for monitoring and testing are covered in

Tables V.F. 3, V.F.6, aod V.F.7 (especially the requirements

covering 5.3(a) of the EIP guidaoce).

6.5 General Provisions for Trading EIPs

6.5(a) Demonstration ofEnvironmental Benefit - Trading The requirements for environmental bencfit are covered in

EIPs Table V.F.4.

• Improved administrative mechanisms

• Reduced administrative burdens

• Improved emissions inventories

6.5(b) Provisions for geographic trading across § 101.335(d) Specifies traded allowaoces held in eompliaoce

jurisdictional boundaries. accounts must havc originated from EGFs in the same Region.

Cross Region trading is not allowed under this EIP.

Appendix 16.16 Provisions for geographic trading across

jurisdictional boundaries Thc three region approach to thc EBTA was mandated by the

TCEQ Legislature in SB7. The three region trading approach

is a common sense approach to Texas' air pollution problem.

The East Texas and West Texas regions were created based on

the concentration of industrial sources in east Texas and the

prevailing wind patterns out of the SE. It is not anticipated

that the few sources in west Tcxas will impact nonattainment

areas in East Texas. EI Paso is widely recognized to be in a

separate airshed from the rest of the State based on geography.

Again, TCEQ has committed to implementing an audit of the

EBTA program every three years. The program will be

reviewed to ensure the reductions are achieved and that trading

does not negatively impact attainment.

6.5(c) Provisions for FLM notification in Class I areas. FLM notification in Class I areas is covered in Table V.F.5.

This is not applicable for this EBTA EIP, as there are no

graodfathered EGFs or electing EGFs under the EBTA

program within 100 Ian of a Class I area in the Eastern or

Western Regions ofTexas. Therefore, the FLM Notification

Requirements under Appendix 16.6 are not applicable to the

EBTAEIP.

78
Table V.F.IO

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS ofALL TRADING EIP, 6.4 & 6.S

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-4S2IR-OI-00I §§101.330 -101.336, 101.338, 101.339

6.5(d) Provisions for tracking systems and market The requirements for traeking systems are covered in Tables

clearinghouses V.F. 7 (especially the requirements covering 5.3(c) ofthe EIP

• Track generation I use of emission reductions guidance) and V.F. 8 (especially the requirements covering

• Target enforcement resources 6.I(c) of the EIP guidance)

• Conduct EIP perfonnance audits

6.5(e) Provisions concerning multi-claimants. § 10 1.330(8) Addresses the concept of a compliance account

and notes that they may cover EGFs under common ownership

Define the owner ofthe reduction. or control or have individual accounts for those under

individual ownership.

§ ]01.332 (h) notes that one compliance account can be used

for multiple EGFs pennitted under 30 TAC Chapter 116,

Subchapter I, located at the same property and under common

ownership or control.

Liability is defined by ownership or representation of

ownership under § 101.331.

An individual allowance, defined under § 101.330 (I) is the

marketable trading unit. and must be allocated, transferred, or

used as whole allowances under § 101.332 (g). As such, they

are traded under the provisions of § 101.335, reported as traded

under § 101.336(b)(2), and tracked in a registry maintained by

the Commission under § 101.333(7). This progression will

ensure there are no double claimants to an allowance.

6.5(f) Provisions for emission reductions that occur prior to The EBTA does not provide for the use of "old" reductions

EIP approval that occurred before the adoption of the ElP.

Appendix 16.17 Safeguards for EIPs that allow the use of The EBTA was designed to achieve reductions of 50% ofNOx

old emission reductions and 25% of S02 emissions, from 1997 heat input data.

The first control period for the EBTA was May I. 2003

through April 30. 2004. Sources subject to the EBTA were

prohibited at § 101.335(c) from trading allowances prior to

May 1,2003. This ensures that old reductions would not be

brought into the program.

6.5(g) Provisions for complianee margin. The compliance margin requirement does not apply to the

Your trading ElP must include provisions to account for EBTA.

eompliance margin when sources participating in an EIP are

initially complying with an emission limit. The EBTA EIP allowances arc detennined from historical

actual mass emissions. The TCEQ will make allocations that

Allowing a source to calculate emission reductions for an achieve a 50% reduction in NOx levels and a 25% reduction in

EIP without accounting for a compliance.margin is S02 levels from the historical baseline.

acceptable when the source's historical actual emissions are

lower than its allowable emissions and historical actual

emissions are used to calculate emission reductions for an

EIP.

79
Table V.F.IO

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS of ALL TRADING EIPs 6.4 &6.5

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-452IR-OI-00I §§IOI.330 -101.336,101.338,101.339

6.5(h) Restricting use of Alternate Emission limits (AELs), EBTA allowances cannot be used to satisfy requirements of

Waivers, exemptions, extensions etc prohibited. other state or federal programs. Thus, the EBTA does not need

to restrict the use ofAELs.

Chapter 7 - Elements ofSpecific Trading EIPs

Chapter 7 introduces the different types of EIPs and the implementation requirements for each.

There are four main types of emission trading programs: emission averaging, source specific

emission caps, multi-source emission cap-and-trade, and open market trading. Section 7.1

identifies the characteristics ofthe 4 main program types. Section 7.2 discusses provisions

specific to emission averaging programs. Section 7.3 outlines the necessary elements ofsourcespecific emission cap programs. Section 7.4 discusses the requirements for multi-source

emission cap-and-trade programs. Section 7.5 contains the provisions for open-market trading.

As discussed earlier in Section III., Summary ofthe State Submittal, the EBTA EIP is a source

specific emissions cap trading program (SSEC). Table V.F.II tabulates the comparison ofthe

TCEQ EBTA with the elements of Sections 7.1 and 7.3.

.

Table V.F.ll

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

Cbapter 7 - ELEMENTS OF SPECIFIC TRADING EIPs 7.1 & 7.3

EPA EIP GUIDANCE Expectation Emissions Banking and Trading of Allowances (EBTA)

EPA-452IR-OI-OOI §§10I.330 -101.336, 101.338, 101.339

7.1 How do I select the appropriate trading EIP?

Source specific emissions cap (SSEC) trading is based on: The EBTA meets the main characteristics of a SSEC:

• Trading units are Mass/time • Allowances are the authorization to emit one ton of

• Main purpose is to provide flexibility for defined source, either NOx or S02 for a given control period

while limiting emissions • The EBTA was designed to provide flexibility to EGFs

• Shutdown reductions can be included at the discretion of in obtaining the reductions ofNOx and S02 mandated

the state by Texas Senate Bill 7

• The most common generating source types are units • The EBTA does allow reductions from shutdowns to

within major stationary sources enter into the program. The allocation methodology

• Generation ofreductions contemporaneously with use, accounts for this.

unless allowance banking is allowed • The EBTA covers grandfathcred and electing electric

generating facilities.

• The EBTA allows banking and meets the requirements

of Section 6.3(1) ofthe EIP Guidance

7.3 What additional provisions do I need for my sourcespecific emission cap EIP?

80
Table V.F.ll

EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

Cbapter 7 - ELEMENTS OF SPECIFIC TRADING EIPs 7.1 & 7.3

EPA EIP GUIDANCE Expectation

EPA-452/R-0I-OOl

7.3(0) Fundamental Integrity Elements

The terms surplus, quantifiable, enforceable, and permanent

are the fundamental integrity elements that apply to all

emission reductions that qualify for inclusion in an EIP.

Table V.F.3 summarizes the general application ofthese four

elements for all EIPs.

Generally the cap applies to one facility, but can apply to

more than one facility with more than one owner, so long as

the geographic limitations contained in 6.5(b) are met.

The source·specific fundamental elements ofsurplus,

enforceable, and quantifiable, as used with reference to the

actions of the individual sources participating in the SSEC

EIP have special meanings:

• Surplus - The general definition ofsurplus associated

with the programmatic fundamental element, is to

demonstrate the EIP has resulted in more reductions than

would have occurred without the program.

o The reductions are not prospectively relied upon in

the air quality-related programs requirements

defined in section 4.2 ofthe EPA Guidance.

o The reductions are not generated through

compliance with any requirements ofthe CAA.

o The reductions resulting from shutdowns and

curtailments are surplus only ifthe shutdown or

curtailed sourced is included in the SSEC program.

o The source must be included in the inventory at its

capped emissions level

• Enforceable - The general definition applies.

• Quantifiable - The general definition applies.

• Pennanent - The general definition applies.

Emissions Banking and Trading of Allowances (EBTA)

§§101.330 -101.336, 101.338, 101.339

Table V.F.3 summarizes the general and source-specific

applications for the Fundamental Integrity Elements, Surplus,

Enforceable, Quantifiable, Permanent.

81
7.3(b) Additional Compliance provisions that must be

included in SSEC EIPs include the following:

• Source emissions are less than or equal to their cap

• Source may not emit more than the cap

• Emission reductions from another EIP outside the cap

may not be used as emission reductions for the source or

sources in the SSEC

7.3(c) Provisions to address shifting demand

Sources within the cap and trade program cannot shift

production to a source outside the cap through shutdowns or

curtailment of activity levels, even within the same area.

The potential for shifting activity can be determined by:

• Set eligibility requirements that prevent outside sources

from picking up production from sources within the cap,

or

• Include a mechanism to reduce the cap by the amount of

emission reduction resulting from shifting production or

activities to sources outside the cap.

Ifthe emission reduction is generated by a source owned by

one person and the user is owned by another then:

• Each user is liable for:

o The sum of its emissions plus reductions obtained

from other sourees not exceeding its source specific

cap

o The validity of reductions it uses

• Each source is liable for emitting less than its soureespecific cap as reduced by the amount it has transferred

to other sources

The EIP resulted in a cap on emissions for EGFs and electing

EGFs permitted through the 30 TAC Chapter 116

requirements. These reductions were required on May I,

2003, prior to the EIP approval.

• § 101.333 sets up the caleulation ofthe individual

allocation of allowance for each grandfathered EGF and

eleeting EGF.

• § 101.333(5) sets the allocation of allowances on a

yearly basis under the cap

Safeguards on future growth or exceedances ofthe cap:

• The EBTA is an SSEC EIP with explicitly defined

emissions allocations under § 101.333, Allocation of

Allowances, based on the initial cap structure, as

described above.

• Rectification oftrades, penalties, and reported emissions

are noted under § 101.333 and § 101.334, in accordance

with the monitoring and reporting requirements of §

101.336 and 30 TAC Chapter 116, Subchapter!,

§116.914.

• Trades are tracked by means of a registry under the

requirements of § 101.333(7), which is made public

through the TCEQ web page, to ensure the explicitly

defined overall cap for a Region is not exceeded.

• § 101.330(1) an allowance will be expressed as the

authorization to emit one ton ofNOx or S02 during a

control period.

Further restrietions and safeguards for banked allowances are

covered in Table V.F.9, 6.3(1) and 6.4(a).

The requirements of the EBTA SSEC description and

eligibility and liability are covered in Tables V.F.I, V.F.2,

V.F.3, and V.FA, specifically under 4.3, Environmental

Benefit.

Region to Region trading is prohibited by § 101.335(d) and

(e) to prevent shifting trade outside a Regional cap.

Speeific liability and banking procedures to track transference

of allowances to other sources is eovered in Table V.FA, 4.3

and Table V.F.9,6.3(1)

Procedures for public disclosure of information are covered in

Tables V.F.4 and V.F.5.

82
7.3(d) Other provisions

• Major sources must have a title V operating permit that:

o limits a source's emissions to the capped amount

decreased by emission reductions transferred to

other sources and inereased by emissions

received for other sources.

o contains references to relevant emission

quantification protocols, and

o defines from which other sources the source can

obtain emissions

• Emission limit is expressed as a given amount, plus any

valid emission reductions from other sources, minus any

valid reductions sold to other sources.

• Emission reductions are surplus

• Emission reduction has not been used by another party

• Emission reduction banking is allowed under the

provisions of 6.3(1)

• The number of violations is the product of the number of

days the cap is violated and the number of emission units

covered under the cap

• Ifthe emission reduction is generated by a source owned

by one person and the user is oMled by another pcrson

then:

o each source is liable for the sum of its emissions

and reductions obtained from other sources not

exceeding its source-specific cap, the validity of

the reductions used, and

o each source is liable for emitting less than its

source-specific cap as reduced by the amount it

has transferred to other sources

After the cap is in place, it must be adjusted to reflect lower

emissions per reductions to reflect other CAA and State

requirements or sell NSR offsets to a source not covered by

the EIP cap

Sources not originally covered under the program may opt

into the program, and can generate reductions from

shutdowns ifthey have been in the program for at least 2

years, the amount of reductions resulting from the shutdoMl

is limited to 1 year at historical emission levels, and those

emissions are still contained in the applicable emissions

inventory.

Provisions for sources subject to Title V are covered in Table

V.F.8.

Table V.F.3 discusses how the EBTA meets the surplus

criteria

Banking of emission reductions is covered in Table V.F.9.

Enforcement provisions are covered in Table V.F.3.

Further liability and penalty provisions, quantification and

reporting protocols are covered in Tables V.F. 4 and V.F.6,

5.2(c)

Procedures for public disclosure of information are covered in

Tables V.F. 4 and V.F.5.

The opt-in and opt-out provisions ofthe EBTA ensure that

the integrity ofthe program will not be violated. The EBTA

is structured such that non-grandfathered EGFs could choose

to be permitted and comply with the requirements of Chapter

116, Subchapter L Once receiving this permit, these EGFs

are considered electing EGFs and are subject to the

requirements ofthe EBTA program. The deadline for an

EGF to opt-into the EBTA is September I, 2000, according to

§ 116.911(c). The opt-out mechanism for the electing EGFs

is under § 116.912. The electing EGF must notify the

commission of its intent to opt out prior to the beginning of

thc ncxt control period. The electing EGF may not opt out

during a control period. Once the electing EGF has opted

ou~ all of the following apply:

• all allowances for the electing EGF will be voided by

TCEQ and may not be banked for subsequent use;

• no allowances will be allocated for subsequent control

periods;

• the electing EGF may not participate in the EBTA at any

future date;

• and the owner or operator shall request an alteration to

the cxisting NSR permit to remove the conditions

referencing the EGF permit.

The EBTA allocation method accounts for shutdowns from

both grandfathered and electing EGFs.

83
V.G. Evaluation of the EBTA Program with respect to CAA 110(1)

Section 110(1) ofthe Clean Air Act states:

Each revision to an implementation plan submitted by a State under this Actshall be

adopted by such State after reasonable notice andpublic hearing. The Administrator

shall not approve a revision ofa plan ifthe revision would interfere with any applicable

requirement concerning attainment and reasonable further progress (as defined in

section 171), or any other applicable requirement ofthis Act.

Thus, under section 110(1), these 4 SIP revisions creating and amending the EBTA program must

not interfere with attainment or reasonable further progress or any other applicable requirement

ofthe Act.

As a general matter, the satisfaction ofthe environmental benefit principle and the other integrity

principles applicable to trading programs will tend to demonstrate that a trading program will do

no worse than maintain existing air quality. Accordingly, EPA has determined that discretionary

EIPs that are consistent with the EIP Guidance are consistent with section 110(1):

Congress did not address specific requirementsfor EIPs in the CAA. Consistent with our

mandate, the EPA has interpreted what an EIP should contain in order to meet the

requirements ofthe CAA. This document is a guidance document that setsforth EPA's

non-bindingpolicyfor EIPs. This document does not representfinal EPA action on the

requirementsfor EIPs. Rather, this document identifies several different types of

economic incentive programs, andproposes elementsfor each type that, ifmet, EPA

currently believes would assure that the program would meet the applicable CAA

provisions. The guidance phrases these elements in the imperative - that is, using the

terms "must" or "shall". This is done only to signifY that EPA would propose to

approve a SIP submittal ofa program containing the indicated elements on grounds that

under section 110(/) ofthe CAA, the SIP revision does not interfere with any applicable

requirement concerning attainment, reasonable further progress, or any other applicable

requirement. (ElP Guidance, section 1.9).

Thus, ifthe EBTA program is consistent with the EIP Guidance it will satisfY section 110(1). As

explained throughout this document, we have determined that the EBTA program is consistent

with the ElP Guidance. To further support this determination, we will discuss the program in

connection with specific locations.

As a preliminary matter we note that by design, the EBTA program is mandated by the Texas

Legislature to implement the requirements of Texas SB 7, from the 76th Legislature, 1999, which

deregulated the electric utility industry. Under SB 7, TCEQ was required to develop a

permitting system and a mass cap and trade system to distribute allowances for use by electric

generating facilities. The TCEQ created the EBTA Program to establish an emission reduction

cap which provides for a 50% reduction in NOx emissions from EGFs and a 25 % reduction in

S02 emissions from solid fuel EGFs. The following tables summarize the EBTA program NOx

and S02 allowances and the actual emissions reported for each control period over the life ofthe

84
program, from 2003 to 2009.3 It is evident that in each control period the number of allowances

allocated exceeds the actual emissions for both NOx and 802 emissions. The EBTA has been

successful in driving reductions in Texas, but other federal and state programs have also assisted

in driving emission reductions (for example new NOx RACT requirements, CAIR, the Acid Rain

Program, and the MECT in HGB). Because ofthese more stringent federal and state programs

that have been promulgated since 2003, the EBTA actual emissions are not expected to increase

into the future. Rather the actual emission trend is expected to continue decreasing. Therefore,

we conclude that the EBTA program is functioning as designed and provides significant NOx

and 802 emission reductions to Texas.

A IE' . Ta e bl V G 1 C- ompansonofEBTANOx Allowances to ctua miSSIOns

Control 2003 2004 2005 2006 2007 2008 2009

Period

EBTA 103937 103937 103666 103666 103666 103666 103666

Allowances

EBTA 69041 60275 61433 61724 56070 54113 52566

Actual

Emissions

T bl VG2 C fEBTA 80 All t AtulE .. a e - omparlson 0 2 owances 0 c a miSSIOns

Control 2003 2004 2005 2006 2007 2008 2009

Period

EBTA 273953 273953 273953 273953 273953 273953 273953

Allowances

EBTA 268635 255914 272454 272284 241807 220358 213764

Actual

Emissions

The EBTA program divides Texas into 3 regions - East Texas, West Texas, and the El Paso

Region. 4 Because participating EGFs are allowed to trade with any other participating EGF in

the same region, we must review whether the trading program in general violates section 110(1)

by region.

East Texas Region

The EBTA program has been in operation since 2003. During this time, participating EGFs in

the East Texas Region have had the opportunity to freely trade NOx and 802 EBTA allowances

under the program, including from nonattainment areas to attainment areas and attainment areas

into nonattainment areas. Analysis ofthe trading history in the East Texas region shows minimal

trading activity overall. Ofthe 93 total EBTA trades logged during the 2003 through 2009

control periods, 50 trades ofNOx allowances occurred in the East Texas Region, accounting for

'TCEQ provided the raw data used in Ihis seclion 110(1) analysis via email onSeplember28.2010.This data is

available for review in Ihe rulemaking dockel for this aclion.

4 As noled previously. Ihe EI Paso Region is nol part ofIhis rulemaking aclion and will nol be further analyzed for

seclion 110(1) compliance.

85
a total of 68,057 tons ofNOx. Also despite the flexibility built into the EBTA program, none of

the NOx trades occurred from attainment areas into nonattainment areas. The trades occurred

either within the same nonattainment area or from attainment county to attainment county. S02

trading in the East Texas Region is even less robust. Only 10 trades have occurred during the

2003 through 2009 control periods, accounting for 186,836 tons of S02. Additionally during this

time, no counties in the East Texas Region have been designated nonattainment for S02.

Therefore, EPA concludes that trading in the East Texas region pursuant to the requirements of

the EBTA program does not interfere with attainment or reasonable progress or any other

applicable requirement ofthe Act.

West Texas Region

Since the EBTA program commenced operation in 2003, participating EGFs in the West Texas

Region have had the opportunity to freely trade NOx EBTA allowances under the program.

Analysis ofthe trading history in the West Texas region shows minimal trading activity. Ofthe

93 total EBTA trades logged during the 2003 through 2009 control periods, only 33 trades

occurred in the West Texas Region, accounting for a total of 7,920 tons of NOx. Additionally,

during the time that the EBTA program has been operating no areas in the West Texas region

have become nonattainment areas for either ozone or N02. Therefore, EPA concludes that

trading in the West Texas region pursuant to the requirements of the EBTA program does not

interfere with attainment or reasonable progress or any other applicable requirement ofthe Act.

General Program Safeguards

The TCEQ also has built an audit mechanism into the EBTA program to provide a safeguard

against the EBTA program interfering with attainment. The audit evaluates the impact ofthe

EBTA program on the state's ozone attainment demonstration. If any problems are identified,

the TCEQ Executive Director will take prompt action to remedy the situation, including

suspending trading in whole or part.

86
VI. Conclusion

The technical analysis provided in the preceding sections has compared the applicable sections

ofthe CAA, 40 CFR Part 51, and EPA's EIP Guidance to TCEQ's January 3, 2000 revisions to

the Texas SIP establishing the EBTA program. This technical analysis also reviewed the

subsequent revisions to the EBTA program adopted and submitted as SIP revisions on

September II, 2000; July IS, 2002; and October 24, 2006.

This analysis found thatthe adoption ofsections 101.330 - 101.336, submitted on January 3,

2000, is consistent with the CAA, 40 CFR Part 51, and the EIP Guidance. The revisions to

101.333 submitted on September II, 2000, new section 101.338 submitted on July 15,2002, and

the revision to 101.338 and new section 101.339 submitted on October 24, 2006, are also shown

to be consistent with the CAA, 40 CFR Part 51, and the EIP Guidance. This review did not

address 101.337 at the request ofTCEQ.

It is recommended that a direct final approval ofthese sections be published. Direct final

approvals are appropriate for non-controversial rulemakings. EPA feels that the EBTA program

is non-controversial because it has been in effect and operational since 2003, without any

negative impact to attainment or maintenance in Texas.

87