### 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. AdinaWiley, 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 10I, Subchapter H, Division 2 - Emissions Banking and Trading ofAllowances: § 101.330

- Definitions § 101.33I - 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 ofState Submittals 

### III. Summary ofState Submittal IV. Summary ofthe EBTA Program V. Technical Review ofthe EBTA Program VI. Conclusion

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### I. Executive Summary What actions are evaluatedin this TechnicalSupportDocument? This Technical Support Document (TSD) reviews portions of4 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 ofoxides of nitrogen (NOx) and sulfurdioxide (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 October24,2006. This review will determine ifthe original submission ofthe EBTA Program and all subsequent amendments, will improve airquality, comply with the Clean AirAct 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 forNew Construction or Modification that were submitted atthe same time as the EBTA Program submissions. These other SIP revisions have been or will be the subjectofseparate rulemaking actions by EPA.

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### II. History ofState SIP Submittals The TCEQ has submitted four SIP revisions concerning the EBTA Program. Below is an itemized listing ofeach 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, pursuantto 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. GovernorGeorge 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 ofgrandfathered electric generating facilities, also pursuant to Senate Bill 7. These provisions were also submitted to EPA on January 3, 2000, as part of rule projectnumber 99033-116-AI.

• EPA is taking separate action onthe provisions for the permitting ofgrandfathered 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 permitprogram. September 11, 2000

• OnAugust 9, 2000, the TNRCC adopted amendments to the EBTA program at 30 TAC Chapter 101, SubchapterH, 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 December28, 2009, EPA returnedthe submittal of30 TAC 101.27 to the Texas Commissionon Environmental Quality (TCEQ) as part ofthe Title V Operating Permit Program rather than aTitle Iprogram that is implementedthrough the SIP. TCEQ submitted a letteronJanuary 14, 2010, concurring with our assessment and withdrawing 30 TAC 101.27 from consideration as a SIP submittal.

• OnNovember 14,2003, EPA approved the amendments to 30 TAC Sections 116.110, 116.116, and 116.603. See68FR64548.

• OnApril14, 2010, EPA approved the amendments to 30 TAC Section 116.10(6) submitted on September 11, 2000. Also inthis action EPA disapproved the amendments to 30 TAC Section 116.10(2) andtookno action on 30 TAC Section 116.10(5)(F). See 75 FR 19468. 

### 4• OnJune 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 laterdate. EPA is under a consent decree deadline to take final action no laterthan October 31,2011.

• The amendments to 30 TAC Section 116.621 were repealed by the TCEQ on March 1,2006, as part ofRule ProjectNumber 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 projectnumber 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 convertedto 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 ofemissions reductions achieved underthe Texas Emission Reduction Program (TERP) forNOX emissionreductions required in the HGB and DallaslFort Worth ozone nonattainment areas. This sectionremains open for review and action at a later date by EPA. October 24, 2006

• On October4, 2006, the Texas Commission onEnvironmental Quality (TCEQ) adopted the repeal 000 TAC Section 101.338 and new 30 TAC Sections 101.338 and 101.339. The 5Chainnan ofthe TCEQ, Ms. Kathleen Hartnett White, submitted these provisions as a SIP revision in a letterdated October 24,2006, for rule projectnumber 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 submittedon 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 ofEPA's final conditional approval ofthe DERC Program, September 6, 2006. See 71 FR 52703. Also atthis 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 ofTexas SB 784 and the conditions ofEPA's final conditional approval ofthe DERC Program, September 6, 2006. All ofthese revisions were submitted to EPA on October24,2006, as part ofrule projectnumber 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 ofTexas Emissions Banking and Trading Programs 

### What isAirEmissions 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 amarketable emissions reduction by reducing its emissions below the level it is requiredto meet, and belowthe level ithas been meeting. Source I then sells ortrades 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 costofcompliance for sources, while maintaining emission reductions and environmental benefits. 

### What is an EconomicIncentiveProgram? An 

### EIP is a regulatory programthat achieves an airquality objective by providing market-based incentives or information to emission sources. A uniform emission reduction requirement, based for instance on installation ofa required emissioncontrol technology, does nottake accountof variations inprocesses, operations, and control costs across sources even ofthe same type, such as electric utilities, orpetroleumrefiners. By providing flexibility in how sources meet an emission reduction target, anEIP empowers sources to find the means that are most suitable and mostcost-effective for theirparticular circumstances. In addition, an EIP can create incentives for sources to go beyond an emissionreduction target. By setting aprice onpollution andpollutionreductions through a fee-based approach or a trading program, some sources canrealize an economic gain or avoid additional costs by selling excess emission reductions, ormaking the reductions for less than the cost imposed by a fee. Because ofthe improved efficiency, EIPs may also leadto achieving airquality goals more quickly. 

### What is thestatus of EIPprograms 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.



### 7Table 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 Mandatorymeans that sources in the region mustparticipate in the EIP program. Optional means thatsources 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-hourozone standard. HOB - Houston/GalvestonIBrazoria ozone nonattainment areafor both I-hour and 8-hour ozone standard. BPA - BeaumonUPort Arthur ozone nonattainment areafor both I-hour and 8-hour ozone standard. El Paso - EI Paso ozone nonattainment areafor I-hourozone 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 ofthe 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 onDecember 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 reorganizedthe ERC and DERC programrules into more standardized formats parallel to each other, with arule structure which followed aprocess 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 subsequentrevisions through the December 6, 2004 submittal. Division I defines emission credits (ECs) interms ofa 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 emissionreduction credits (MERCs). The ERCs from the bankhave traditionally been used as offsets for permitting majornew ormodified facilities. ERCs have also beenbanked and traded for alternative compliance with Reasonably Available Control Technology (RACT) requirements. MERCs have notbeenbanked or traded underthe programto date. On December 6, 2004, TCEQ submitted revisions to the SIP thatexpandedthe ERC program to coverreductions ofcriteriapollutants (excluding lead) or precursors ofcriteria 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 revisedthe ERC program to address the commitments ofthe DERC conditional approval. Additionally, the TCEQ adopted revisions to the ERC program consistentwiththe requirements ofSenate Bill 784, adopted during regular session, 2005, ofthe 79th 

### Texas Legislature. Senate Bill 784 allows for greater flexibility inthe generation and use ofinternational emission reductions. These revisions were adopted by the TCEQ on October4, 2006, and became effective on October26,2006. The adopted regulations were submittedto EPA as a SIP revision on October24, 2006. TCEQ also promulgated revisions to the ERC program thatupdate 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 submittedto 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 createdthe EBTA Programto implementthe requirements ofSenate Bill (SB) 7, from the 76th 

### Legislature, 1999, which deregulatedthe electric utility industry. Under SB 7, TCEQ was requiredto develop apermitting system and a mass cap andtrade system to distribute allowances for use by electric generating facilities. The TCEQ created the EBTA Programto establish an emissionreduction cap which provides for a 50% reduction inNOx emissions from EGFs and a 25 % reduction in S02 emissions from solid fuel EGFs. The permitting systemrequired under SB 7 and established at 30 TAC Chapter 116, Subchapter I, 

### is the subject ofa separate rulemaking review and action by EPA (see DocketEPA-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 allowedto purchase, bank or sell allowances to meet operational demands. The EBTA program is divided into three 9

### regions; Eastand 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, andthe 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) sentto 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, whichprovided for the use ofemission 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 contaminantto substitute for reductions in another criteriapollutant. This submittal was part ofrule log number 2001-063-10I-AI. The final revision to the EBTA was submittedto the EPA on October24,2006, for rule project number 2005-054-101- PRo The 2006 amendments to the EPA repealed and replacedthe 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 emitNOx inthe HGB ozone nonattainment areawhich 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 onNOx emissions beginning January 1,2002, 

### with a [mal reduction to the cap occurring in 2007. Facilities are required to meetNOx allowances on an armual basis. Facilities may purchase, bank, or sell their allowances. The program has aprovision 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 forNOx in the HGB areabefore December I, 2000. The program also has a provision to allow a facility to use credits generated through the Division4 EIP (DERCs) in lieu ofallowances ifthey are generated inthe 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 ouraction onthe DERC rule) onNovember 14, 2001 (66 FR 57252). Texas subsequently revisedthe 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 accomplishthe shift in attainment strategy from 90 percent control ofindustrial NOx sources to 80 percent control inthe HGB area. The approvedrevisions also approved the use ofdiscrete emissions credits generated from stationary sources (DERCs) or mobile sources (MDERCs) in lieu ofMECT 10

### 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, SubchapterH, 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 emissioncredits (DECs) are quantified, banked andtraded interms ofmass (tons), not a rate as is the case with ECs. DECs may be generated from stationary sources and banked as discrete emissionreduction credits (DERCs) ormay 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 criteriapollutants, withthe exception oflead. Traditionally DECs have beenused 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 clarificationto §§ 101.370, 101.372, and 101.373 inthe 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 onthe original submission ofthe DERC program and all subsequentrevisions through the December 6, 2004, submittal (71 FR 52703). Ourconditional approval is contingent upon TCEQ satisfactorily addressing the terms oftheir September 8, 2005, commitment letter. AfterEPA's final conditional approval on September 6, 2006, TCEQ revisedthe DERC programto address the commitments ofthe conditional approval. Additionally, the TCEQ adopted revisions to the DERC program consistentwith 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 ofinternational emissionreductions. These revisions were adopted by the TCEQ on October4, 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 onAugust 16, 2007. The adopted regulations were submittedto EPA as a SIP revision on August 16, 2007. EPA fully approvedthe 2006 and 2007 revisions to the DERC program on April 30, 2010. See 75 FR 27644, May 18, 2010. 11

### 5. System Cap Trading (SCT) (30 TAC Chapter 101, Subchapter H, Division 5) The TCEQ adopted system caps for electric generating facilities operating inthe BPA, DFW, and HGB ozone nonattainment areas and the attainment counties ofeast and central Texas at 30 TAC § 117.138 on September 26, 200I, effective October 18, 2001. EPA approvedthe system caps onNovember 14,2001 (66 FR 57244). The System Cap Trading (SCT) program adopted by TCEQ on March 21, 2001, and submitted to EPA as arevision to the SIP in Rule Log Number 2000-046-10I-AI, provides flexibility for the electric industry in achieving the NOx emissions reductions necessary to achieve ozone attainment inthe BPA, DFW, and HGB ozone nonattainment area andthe attainment counties ofeastand 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 ontotal emissions from the sources inthe system, established under 30 TAC Chapter 117 emissions limitations. Emission allowables may be transferred from source to source withinthe system, provided the cap is not exceeded. The SCTprovides a mechanism that streamlines the steps necessary for daily emission trading by allowing the increase ofsystem caps from corresponding system cap emission reductions inthe same nonattainment orattainment area. The system cap may be increased daily using adaily 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 programto update the cross-references to the Chapter 117 NOx rules. EPA has taken no action on the SCT programto date. 6. Highly-Reactive Volatile Organic Compound Emission Cap and Trade (HECT) Program (30 TAC Chapter 101, Subchapter H, Division 6) The HECTprogram 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 emithighly-reactive VOCs, as defined in § 115.10, and that are located at a site subjectto Chapter liS, Subchapter H. Facilities are requiredto meetHRVOC allowances on an annual basis. Facilities may purchase, bank or sell their allowances for use in the following control period. The program has a provisionto allow a facility to use credits ofless-reactive VOCs generated through the Division I EIP (ERCs) in lieu ofallowances ifthey are generated inthe HGB area. EPA publishedfinal 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 CAIRprogram was adopted as a State regulation onJuly 12, 2006, and submitted as a SIP revision on August 4, 2006. The Division 7 regulations incorporate by reference the CAIRNOx Annual and S02 trading programs as adopted by EPA on May 12,2005 (70 FR25162). Additionally, the Texas CAIRprogram establishes aNOx allocation methodology and provisions for the compliance supplementpool to replace the 12provisions at subpart EE of40 CFRpart 97, the CAIRFederal Implementation Plan. EPA published a direct final approval ofthe Texas CAIRNOx Abbreviated SIP for the Phase I allocation methodology on July 30, 2007 (72 FR 41453). TCEQ adopted revisions to the CAIRprogram on February 10, 20I0, to update the NOx allocation methodology and the incorporation by reference dates for the NOx annual and S02 trading programs. These revisions were submittedto EPA as a SIP revision on March 4, 2010.


### WhathasEPA consideredin reviewing andevaluating the TCEQ EBTA EIPSIPsubmittal? "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 ofa discretionary EIP for attaining or maintaining the national ambient air quality standards (NAAQS) for criteriapollutants. The EIP Guidance takes precedence overthe discretionary EIP guidance provided inprior documents such as the 1994 EIP (59 Federal Register (FR) 16690,40 CFRpart 51, subpart U) and the guidance in the emissiontrading policy statement (ETPS) (December 4, 1986,51 FR43813). The January 2001 EIP Guidance is the most recent statement ofagency policy and it supercedes prior statements of agency policy. The above documents and othermaterial considered will be included in the administrative record for the proposed rule. 

### Whatdoes EPA mean byguidance? The EIP Guidance applies to discretionary EIPs, but it does notrepresent 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 ofvarious types ofdiscretionary EIPs, andphrases 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(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 willEPA acton an EIPSIPsubmittal? 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 ofthatrulemaking would constitute final Agency action. EPA would take steps to expedite its proposed approval in the case ofSIP revisions containing programs that contain the elements ofthe EIP guidance.

13Ifa program that does not containthe elements ofthe EIP guidance for that type ofprogram is submitted, EPA will still seekto determine whether the applicable CAA requirements were met, and ifso EPA would approve the submission. EPA would make the determination through notice-and-commentrulemaking.

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### IV. Summary oftbe EBTA 

### Program What is an Emissions Banking and Trading of AllowancesProgram? The TCEQ Emissions Banking and Trading ofAllowances Program (EBTA Program) is similar to the Source Specific Emissions Cap as described inthe EIP Guidance. A source specific emissions cap (SSEC) allows a limited group ofsources that are subjectto a rate-based emission limitto meetthat requirement by accepting amass-based emission limit, orcap, ratherthan complying directly with a rate-based limit. Some attributes that characterize a successful SSEC include awell-defined group ofsources, little potential for emissions to shift from included sources to excluded sources, and a relatively low level ofuncertainty associated withthe program. Inthe 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 aperson in the state ofTexas, including a municipal corporation, electric cooperative orriver authority. A grandfathered EGF is defined in § 

### 101.330(14) as anEGF that is not subjectto the requirement to obtain apermitunderthe Texas Clean Air Act (TCAA), § 

### 382.0518(g). An electing EGF is defined at § 

### 101.330(11) as an EGF permittedunder 30 TAC Chapter 116, SubchapterB (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, andEl Paso. The East Texas Region includes all counties traversed by or east ofInterstate highway 35 north ofSan Antonio ortraversed by oreast ofHighway 37 south ofSan Antonio, also including Bexar, Bosque, Coryell, Hood, Parker, Somervell, and Wise Counties. The WestTexas 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 of50% NOx emissions and 25% S02 emissions, the TCEQ established emission caps for eachregion. The caps consist ofallowances 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 inthe EBTA by May 1 ofeach year. The TCEQ will deposit the same amount of allowances into each grandfathered or electing EGFs compliance account at the beginning of each controlperiod, with the exception thatthe allocation for electing EGFs may be adjusted to reflectnew state or federal requirements. An allowance is the authorizationto emit one ton of NOx or S02 during a control period and does not constitute a security orproperty right. All allowances will be allocated, transferred, orused as whole allowances. To determine the number ofwhole allowances, the number ofallowances will be rounded down for decimals less than 0.50 and rounded up for decimals of0.50 or greater. The control period for the EBTA is the 12-

I In a letter dated October24, 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

### monthperiod beginning May I ofeach year and ending April 30 ofthe following year. The initial EBTA control period began May 1,2003. A facility can chooseto 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 mustpurchase excess allowances from another source to demonstrate compliance withthe cap. Beginning June I, 2004, and no later than June I following the end ofevery control period, each facility must hold a quantity of allowances in its compliance account that is equal to or greater than the total emissions ofair contaminant emitted during the control periodjustending. Compliance underthe EBTA began withthe initial control period beginning May 1,2003. Ifa facility's actual emissions ofair contaminant during a control period exceed the amount ofallowances held inthe 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 willthe allowances be allocatedunderthe 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 Britishthermal units (MMBTU)) as 

### listed in the 1997 EPA Acid Rain Program Emissions Scorecard, or ifnot listed in the 1997 Emissions Scorecard, by a method approved by the TCEQ Executive Director, consistent with the emissionreduction requirements of theEBTA. ER = 

### EmissionRate The EmissionRate is specific to the applicable EBTA Region. Inthe 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. Inthe West Texas and EI Paso Regions, the ER is 0.195 pounds NOx per MMBtu. For electing EGFs, the amount ofallowances is equal to the emissions listed inthe 1997 Acid Rain Program Scorecard. Ifthere is not a listing in the 1997 Scorecard, the TCEQ Executive Directorwill approve amethod consistent with the emissionreduction 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 allocatedto an electing EGF that authorize emissions in excess ofapplicable 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 exceedthe limitations ofany annual emission limitation authorized under Chapter 116, SubchapterB. Additionally, allowances cannotbe used for netting requirements to avoidthe applicability of federal and state new source review (NSR) requirements orto satisfy offsetrequirements for new ormodified sources subjectto federal nonattainrnentNSRrequirements. 

### How willthe allowances be deductedunderthe 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 greaterthan 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 shutdownhas been replaced by another EGF permitted under 30 TAC Chapter 116, SubchapterI, allowances will be deducted in an amountequal to the number oftons ofair 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 notbeen 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 EF

### cp = 

### The emission factor for the control period interms ofibslMMBtu, or ifan 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 shutdownhas beenreplaced by another EGF is not permitted under 30 TAC Chapter 116, SubchapterI, allowances will be deducted from the compliance account according to: (Hl

### cp x EFcp)+ 

### [(HI1997- 

### HIcp)xEFnewl A

### =**..:...-=---..,.:::..::....,....,:..:..,...~.:...----""..:....-----::=** 

### 20001b/allowance
17Where: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 thatreplaced 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 notcreatedby reduced utilization or shutdowns from electing EGFs to be banked ortraded. Mechanism (2) ensures that surplus allowances resulting from reduced utilization or shutdowns from electing EGFs cannot be banked ortransferred. Mechanism (3) allows surplus allowances to be banked and traded ifthey were generated from reduced utilization or shutdown and the EGF can document thatthe reduced utilization or shutdownhas been replacedby another EGF. How are allowances bankedandtradedin the EBTA? Facilities subjectto the EBTA can choose to operate at their allocationbudget, below their allocation budget, or above their allocationbudget. Facilities which operate below their allocation budget can bank ortrade 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 mustbe 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. Whatreporting is requiredin the EBTA Program? Facilities subjectto the EBTA must submit a reportto the TCEQ by June 30 ofeach year following the completed control period. This report must include the amount ofemissions of each allocated air contaminantand a summary ofall final trades for the preceding control period. Additionally, facilities subjectto 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 

### thereflexibility in compliance with the EBTA? 18A grandfathered or electing EGF may use emissionreductions achieved from Mexico in lieu of allowances for compliance with the ESTA. The emission reductions may be criteria pollutants orprecursors ofcriteriapollutants, with the exception oflead emissions. The reductions may be used in lieu ofthe same pollutant requirement (i.e., NOx reductions from Mexico are substituted forNOx requirements in Texas). Or, the reductions ofcriteriapollutants ortheirprecursors may be substituted for emission reductionrequirements for othercriteria pollutants (i.e., reductions in CO emissions couldbe substituted forNOx or S02 emission requirements). In the event the Mexican reduction is being substituted for a criteria pollutant requirement (CO for NOx or S02), the substitutionmustresult in greater health benefits and must be ofequal or greaterbenefitto the overall airquality ofthe area; orthe 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 emissionreduction must: I. demonstrate to the TCEQ executive director and the EPA thatthe reduction is real, permanent, enforceable, quantifiable and surplus to any applicable Mexican, federal, state, or local law; 2. demonstrate thatthe use ofthe reduction does not cause localizedhealth impacts, as determined by the TCEQ executive director and EPA; 3. submit all supporting information for calculations and modeling, and any additional informationrequested by the TCEQ executive director and EPA; and 4. be located within 100 kilometers ofthe Texas

- Mexico border. 

### Willthe EBTA be audited? Sources subjectto the EBTA submit an annual compliance report to the TCEQ by June 30 of each year. This report details the amount ofemissions ofeach allocated air contaminant and a summary ofall 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 laterthan September 30th following each control periodthat includes the numberofallowances allocatedto each compliance account; the total number ofallowances allocated underthe EBTA program; the number of actual NOx and S02 allowances subtracted from each compliance account based onthe actual NOx and S02 emissions from the site; and a summary ofall trades completed underthe EBTA program. Additionally, the TCEQ executive director will auditthe program no laterthan three years after the effective date ofthe EBTAprogram, and every three years thereafter. The audit will evaluate the impact ofthe program onthe state's ozone attainmentdemonstration, the availability and costofallowances, compliance by the participants, and any other elements the executive director deems necessary. Ifany problems are identified, the executive director will recommend

19

### remedies, including the discontinuation oftrading in whole orpart. This audit will be submitted to the EPA andmade available for public inspection within six months afterthe auditbegins.



### 20

# v. Technical Review ofthe EBTA Program 

### This technical review ofthe EBTA program will review the four separate SIP submittals with respectto the SIP completeness requirements of40 CFR Part 5I to determine whether each submittal satisfies the requirements for preparation, adoption, and submittal ofa SIP revision. Then, recognizing thatthe four SIP submittals have builtupon each other, this technical review will analyze the entirety ofthe EBTA program, using the most currentregulatory language for each section, with respectto the requirements of40 CFR Part 51 and section 110(1) ofthe CAA. Finally, this holistic view ofthe EBTA will be usedto 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 ornot the EBTA Program submissions from January 3, 2000; September 11, 2000; July 15,2002; and October24,2006 are in agreement with the CAA, otherEPA policies or guidance. A. 

### Evaluation ofthe January 3, 2000 SIP Submittal with respectto 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 respectto the Part 51, Appendix V Completeness Determination D. Evaluation ofthe October24, 2006 SIP Submittal with respectto the Part 51, Appendix V Completeness Determination E. Evaluation ofthe EBTA Program with respect to 40 CFR Part 51 F. Evaluationofthe EBTA Program with respect to the EIP Guidance G. Evaluation ofthe EBTA Program with respect to Section 110(1) ofCAA

21

### V.A. Evaluation oftheJanuary 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 ofplan submissions and are outlinedbelow: 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 thereofwhich fails to meet the criteria set forth in this appendix V, 

### and request corrective action, identifying the component(s) absent or insufficientto 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 ofEPA'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 ofcompleteness under this paragraph means that the submission is an official submission for purposes of§5l.l03. The attached checklist outlines the basic criteriaincluded under 2.1, 2.2, and 2.3 ofAppendix V.

22

### SIP Completeness Checklistfor 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 orhis orher designee requesting EPA's approval ofthe revision. 

### The SIP revision was submittedbya letter from George W Bush, Governor of Texas, datedJanuary 3, 

### 2000. The SIP submittalwas receivedbyEPA Region 6

### AirPlanning Section onJanuary 19, 

### 2000. 2. Evidence is included thatthe State has adopted the revision in the State code orbody of regulations, orthatthe State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date ofadoption or final issuance and the effective date ofrevision, ifdifferent from adoption/issuance date. 

### The revisions were adoptedby the Texas NaturalResource Conservation Commission on December 22, 1999, 

### andbecame effective January 11, 

### 2000. 3. Evidence is included thatthe State has necessary legal authority under State law to adopt and implementthe revision, e.g., a citation ofthe appropriate State authority. 

### The authority forpromulgating changes to the Texas State Implementation Plan, Chapter 101 

### §§ 101.330-101.337andChapter 116, 

### §§ 116.18, 

### 116.910-116.914, 116.916, 

### 1l6.

### 920 -1l6.922, 1l6.930, and1l6.931 isfoundin the Texas CleanAirAct, Chapter 382 of the Texas Health andSafety Code. 4. A copy is included ofthe actual regulation or document submitted for approval and incorporationby 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 includeda copy of the officialState regulation document, signed, stamped, anddatedbyRobertJ. 

### Huston, Chairman of the Texas Natural Resource Conservation Commission. 5. Evidence is included thatthe State followed all the procedural requirements ofits laws and/orits constitution in the conducting and completing the adoption/issuance ofthe plan.



### 23

### The SIP submittalpackage includeda certification signedbyLaDonna Castanuela, Chief Clerkof the Texas NaturalResource Conservation Commission, that demonstratedthe SIP submittalwas developedpursuantto 40 CFR 51. 104. 

### 6. Evidence is includedthat public notice was given ofthe proposed changes consistent with the procedures approved by EPA, including the date ofpublication ofsuch notice, (e.g., notarized orcertified copies ofany public notices published in newspapers). (The notice should be at least 30 days priorto the public hearing(s). Notices of public hearingswerepublishedin thefollowing newspapers on the date listed:

• AustinAmericanStatesman: August27, 

### 1999

• BeaumontEnterprise: August29, 

### 1999 • ElPaso Times: August28, 

### 1999

• Fort Worth Star Telegram: August 31, 

### 1999

• Houston Chronicle: August26, 

### 1999

• LubbockAvalanche-lournal: August29,1999. Public hearings were heldin ElPaso andLubbock, Texas on October I, 1999; inAustin, Texas on October 4, 

### 1999; in Irving, Texas on October 5, 

### 1999, andin Houston and Beaumont, Texas on October 

### 7, 1999. 

### 7. A certification is included indicatingthat public hearing(s) was/were held in accordance withthe information provided inthe public notice(s) and the State's laws and constitution, ifapplicable. An orderadopting revisions to the SIP signedbyRobertJ 

### Huston, Chairman of the Texas NaturalResource Conservation Commission was included. This orderstates that thepublic hearing was conductedpursuant to Texas Health andSafety Code 

### § 382.017, Texas Government Code Chapter 2001, and40 CFR 

### § 51.102. 

### 8. A compilation ofpublic comments and the State's response is included. The SIP submittalpackage did include a compilation of comments. TNRCCreceived28 written comment letters on SB 

### 7, a letter from EPA Region 

### 6 among them. TNRCC received3 7

### general comment letters. Oral testimony was received from 36 

### individuals at the 

### 6 differentpublic hearings.



### 24

### Technical Support (2.2) The State should include the following technical infonnation in its SIP revision requestpackage. I. Identification ofall regulated pollutants affected by the revision is included.

• Chapter 

### 101, Subchapter H, 

### Division 

### 2 (EBTA Program) applies to NOxandS02. This SIP submittalamends apreviously submittedSIPpackagefor the EBT A program, in which thepollutants are identified.

• Chapter 116, Sections 116.18, 

### 116.910-116.914, 116.916, 

### 116.920-116.922, 116.930, and 116.931 establish thepermittingprogramforgrandfatheredEGFs participating in the EBT Aprogram. Therefore, the Chapter 116sections apply to NOxandS02 statewide. 2. Identification ofthe locations ofaffected sources including the EPA attainmentJnonattainment designation ofthe locations andthe status ofthe attainment plan for the affected area(s) is included. The SIP submittalcreates a statewidepermitting andtradingprogramfor grandfathered EGFs. 3. Quantification ofthe changes in SIP allowable emissions from the affected sources is included. (Examples include estimates ofchanges in current actual emissions from affected sources and/or, where appropriate, quantification ofchanges in actual emissions from affected sources through calculations ofthe differences between certainbaseline levels and allowable emissions anticipated ifthe revisions were approved.) The SIP submittalestablishes a statewidepermitting andtradingprogramfor grandfatheredEGFs. Theseprograms are mandatedby Texas SB 7; 

### which established reduction requirements of 50%from baselineNOx emission levels and25%

### from baseline S02 emission levels. 4. Demonstration is included thatthe NAAQS/PSD increments/RFP demonstration and visibility as applicable would be protected ifthe revision were approved and implemented. The SIP submittal establishes apermitting andtradingprogramfor grandfatheredEGFs. While theseprograms arepartof the attainmentdemonstrations developedwithin the State, they are notthe sole methodof attaining ormaintaining the NAAQS, PSD, RFP or visibilityprograms. Attainmentdemonstrationsfor each area using theseprograms must account for the emissions attributedto the banking andtradingprogram under this program.

25

### 5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality standards for atleast 10 years as required by §

### 175A ofthe CleanAir Act? Notapplicable. 

### b. Are contingency measures included? Notapplicable. 

### 6. Modeling information, ifapplicable, is required to support the proposed revision. Modeling information is notnecessary to support this SIP revision. Modeling isprovided with attainmentdemonstrations accounting for the generation anduse of emission reductions under the EBTAprogram. 

### 7. Evidence is included where necessary, that emission limitations are based oncontinuous emission reductiontechnology (e.g., add-on controls, industrial/process equipment designs, reformulated materials, etc.). The EBTAprogram does notestablish emission limitations. The Chapter 116permit programfor grandfatheredEGFs 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 EBTAprogram is a tradingprogram, which by nature, will notestablish emission limitations. The EBTA doesprovide recordkeeping/reporting requirements to demonstrate compliance. Emission limitations andassociatedrecordkeeping/reporting requirements are establishedunder the Chapter 116permitprogram. (See EPA's separate rulemaking action on the Chapter I I

### 6permitprogram atEP A-R06-0AR-2005- TX-003I). 

### 9. Compliance/enforcement strategies including how compliance will be determined in practice (including at what frequency). Each sourceparticipating in the EBTAprogram by the conditions of its respectivepermit under Chapter 116.



### 26

### 10. As appropriate, special economic and technologicaljustifications are included per applicable EPApolicies or an explanation why suchjustifications are notnecessary should be included. For example, requests for alternative RACT may require such justification. Thesejustifications are notnecessaryfor this SIP revision. 

### TheJanuary 3, 2000 SIP submittal (Rule Project No. 99033-1l6-AI) meets the completeness criteria established in 40 CFRpart 51, Appendix V.

27

### V.B. Evaluation ofthe September 11, 2000 SIP Submittal with respect to the Part 51, Appendix V Completeness Determination 

### The criteriafor completeness determination are found in Appendix Vto Part 51

- Criteriafor 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 § 

### 51.1 03. 1.1 The EPA shall return to the submitting official any plan or revision thereofwhich fails to meet the criteria set forth in this appendix V, and request corrective action, identifying the component(s) absent or insufficientto perform areview 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 ofEPA'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 ofcompleteness under this paragraph means that the submission is an official submission for purposes of§51.103. The attached checklist outlines the basic criteriaincluded under 2.1, 2.2, and 2.3 ofAppendix V.



### 28

### SIP Completeness Checklistfor 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 orhis orher designee requesting EPA's approval ofthe revision. The SIP revision was submittedby a letter from George W Bush, Governor of Texas, datedSeptember II, 2000. The SIP submittalwas receivedbyEPA Region 6AirPermits Section on September 22, 

### 2000. 

### 2. Evidence is included that the State has adoptedthe revision inthe State code orbody of regulations, orthat the State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date ofadoption orfinal issuance and the effective date ofrevision, ifdifferent from adoption/issuance date. The revisions were adoptedby the Texas NaturalResource Conservation Commission on August 9, 

### 2000, andbecame effective September 4, 

### 2000. 

### 3. Evidence is included that the State has necessary legal authority under State law to adopt and implementthe revision, e.g., a citation ofthe appropriate State authority. The authorityforpromulgating changes to the Texas State Implementation Plan, Chapter 101 

### §§ 101.27,101.333 andChapter II6 

### §§ II6. 10, II6.IIO, II6.II6, II6.603, 116.620, 116.621, 116.710, 116.715, 116.721, 116.722 and116.750 isfoundin the Texas CleanAirAct, Chapter 382 

### of the Texas Health andSafety Code. 

### 4. A copy is included ofthe actual regulation ordocument submitted for approval and incorporation byreference into the SIP including an indication ofthe changes made to the existing approvedplanwhere applicable. The submittal shall be a copy ofthe official State regulation document signed, stamped, and dated by the appropriate State official indicatingthat it is fully enforceable bythe State. The effective date ofthe regulation document shall, wheneverpossible, be indicated inthe document itself. The September II, 2000, submittal includeda copy of the officialState regulation document, signed, stamped, anddatedbyRobert

### 1. Huston, Chairman of the Texas NaturalResource Conservation Commission. 

### 5. Evidence is includedthat the State followed all the procedural requirements ofits laws and/or its constitution inthe conducting and completingthe adoption/issuance ofthe plan.



### 29The SIP submittalpackage includeda certification signedbyLaDonna Castanuela, Chief Clerk of the TexasNatural Resource Conservation Commision, thatdemonstratedthe SIP submittalwas developedpursuantto 40 CFR 51.104. 

### 6. Evidence is includedthat public notice was given ofthe proposed changes consistent withthe procedures approved by EPA, including the date ofpublication ofsuchnotice, (e.g., notarized or certified copies ofany public notices published in newspapers). (The notice should be at least 30 days priorto the public hearing(s). Notices of public hearings werepublishedin thefollowing newspapers on the date listed:

• AustinAmerican Statesman: March 26, 2000

• Fort Worth Star Telegram: March 29, 2000

• Houston Chronicle: March 28, 2000. A public hearing was heldinAustin, Texas, on May 4, 2000. 

### 7. A certification is included indicatingthat public hearing(s) was/were held in accordance withthe informationprovided inthe public notice(s) and the State's laws and constitution, ifapplicable. An orderadopting revisions to the SIP signedbyRobertJ. Huston, Chairman of the Texas Natural Resource Conservation Commission was included This order states that thepublic hearing was conductedpursuant to Texas Health andSafety Code 

### § 382.017, Texas Government Code Chapter2001, and40 CFR 

### § 51.102. 

### 8. A compilation ofpublic comments and the State's response is included. The SIP submittalpackage didinclude a compilation of comments. TCEQ received written testimony fromfourparties during the commentperiodanddidnotreceive oral testimony. 

### Technical Support (2.2) The State should include the following technical information in its SIP revisionrequest package. 1. Identification ofall regulated pollutants affected by the revision is included.

• Chapter 101, Subchapter

### H, Division 

### 2 (EBTA Program) applies to NOxandS02. This SIPsubmittal amends apreviously submittedSIPpackagefor the EBTA program, in which thepollutants are identified 

### 2. Identification ofthe locations ofaffected sources including the EPA attainmentlnonattainment designation ofthe locations and the status ofthe attainment plan forthe affected area(s) is included. 30The SIP submittalamendments to the EBTAprogram, revise existing regulationsfor a statewide tradingprogram. 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 ofchanges in current actual emissions from affected sources and/or, where appropriate, quantification ofchanges in actual emissions from affected sources through calculations ofthe differences betweencertainbaseline levels and allowable emissions anticipated ifthe revisions were approved.) The SIP submittalamendments to the EBTAprogram revise existing regulations for a statewide tradingprogram. The EBTAprogram is mandatedby Texas SB 7; which establishedreduction requirements of 50%from baseline NO x emission levels and25% 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 submittalamends an existingtradingprogram. While the EBTAprogram ispart of the attainment demonstrations developedwithin the State, it is notthe sole methodof attaining ormaintaining the NAAQS, PSD, RFP orvisibilityprograms. Attainment demonstrationsfor each area using the EBTAprogram mustaccount for the emissions attributedto the banking andtradingpursuantto thisprogram. 

### 5. FORREDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient airquality 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, ifapplicable, is required to supportthe proposed revision. Modeling iriformation is notnecessary to support this SIP revision. Modeling isprovided with attainmentdemonstrations accountingfor the generation anduse of emission reductions underthe EBTAprogram.



### 31

### 7. Evidence is included where necessary, that emission limitations are based on continuous emission reductiontechnology (e.g., add-on controls, industrial/process equipment designs, reformulated materials, etc.). This SIP submittalamends an existing tradingprogram; itdoes not establish emission limitations. 

### 8. Evidence is included indicatingthat a SIP revision contains emission limitations, work practice standards, and recordkeepinglreporting requirements to ensure stated emission levels. This SIP submittalamends an existing tradingprogram anddoes not contain or revise emission limitations orworkplace standards. Recordkeeping andreporting requirements for the tradingprograms havepreviously been submittedto EPA. 

### 9. Compliance/enforcement strategies including how compliance will be determined in practice (including atwhat frequency). The SIP submittalamends an existing tradingprogram. The compliance strategy for the EBTAprogram waspreviously submittedto EPA. Additionally, each source participating in the EBTAprogram mustabide by the conditions of its respectivepermit. 

### 10. As appropriate, special economic and technologicaljustifications are included per applicable EPA policies or aiJ. 

### explanation why suchjustifications are notnecessary should be included. For example, requests for alternative RACT may require such justification. Thesejustifications are notnecessary for 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 criteriafor completeness determination are found in Appendix V to Part 51

- Criteriafor 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 thereofwhich fails to meet the criteria set forth in this appendix V, and request corrective action, identifying the component(s) absent orinsufficientto perform areview 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 ofEPA's receipt ofthe submittal, but no later than 6 months after the date which the State was required to submit the plan or revision. Ifa 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 ofcompleteness under this paragraph means that the submission is an official submission for purposes of§51.103. The attached checklist outlines the basic criteria included under2.1,2.2, 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 orhis orher designee requesting EPA's approval ofthe revision. 

### The SIP revision was submittedbya letter from RobertJ. 

### Huston, Chairman of the Texas NaturalResource Conservation Commission, datedJuly 15, 

### 2002. The SIP submittal was receivedbyEPA Region 6

### AirPlanning Section onJuly 22, 

### 2002. Governor Rick Perry designatedthat the Chairman of the Texas NaturalResource Conservation Commission wouldbe his designeefor SIP submittals in a letterdatedMay 21, 

### 2002. 2. Evidence is included that the State has adopted the revision inthe State code orbody of regulations, orthat the State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date ofadoption orfinal issuance and the effective date ofrevision, ifdifferent from adoption/issuance date. 

### The revisions were adoptedby the Texas Natural Resource Conservation Commission on March 13, 

### 2002, andbecame effectiveApril 4, 

### 2002. 3. Evidence is included that the State has necessary legal authority under State law to adopt and implementthe revision, e.g., a citation ofthe appropriate State authority. 

### The authority forpromulgating changes to the Texas State Implementation Plan, Chapter 101 

### §§ 101.302 and 101.372; new 

### §§ 101.338and 101.357; andnew Chapter 117 

### § 117.571 isfoundin the Texas CleanAirAct, Chapter 382 

### of the Texas Health andSafety Code. 4. A copy is included ofthe actual regulation ordocument submitted for approval and incorporation byreference into the SIP including an indication ofthe changes made to the existing approvedplan 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, wheneverpossible, be indicated inthe document itself. 

### The July 15, 

### 2002, submittal includeda copy of the officialState regulation document, signed, stamped, anddatedby RobertJ. 

### Huston, Chairman of the Texas Natural Resource Conservation Commission. 5. Evidence is included that the State followed all the procedural requirements ofits laws and/or its constitution inthe conducting and completing the adoption/issuance ofthe plan. 34

### The SIP submittalpackage includeda certification signedbyLaDonna Castanueal, Chief Clerkof the Texas NaturalResource Conservation Commission. that demonstratedthe SIP submittalwas developedpursuant to 40 CFR 51. 104. 6. Evidence is included that public notice was given ofthe proposed changes consistent withthe procedures approved by EPA, including the date ofpublication ofsuch notice, (e.g., notarized or certified copies ofany public notices published in newspapers). (The notice should be at least 30 days priorto the public hearing(s). 

### Notices of public hearings werepublishedin thefollowing newspapers on the date listed:

• ElPaso Times: November 14, 

### 2001

• Houston Chronicle: November II, 2001. Public hearings were heldin ElPaso andHouston, Texas on December 17

### and18,2001, respectively. 7. A certification is included indicating that public hearing(s) was/were held in accordance withthe informationprovided inthe public notice(s) and the State's laws and constitution, ifapplicable. 

### An orderadopting revisions to the SIP signedbyRobertJ 

### Huston, Chairman of the Texas NaturalResource Conservation Commission was included This orderstates that thepublic hearing was conducted pursuant to Texas Health andSafety Code 

### § 382.017, Texas Government Code Chapter2001, and40 CFR 

### § 51.102. 8. A compilation ofpublic comments and the State's response is included. 

### The SIP submittalpackage didinclude a compilation of comments. TCEQ received written testimonyfrom 6parties during the commentperiod, including EPA Region 6, andreceivedoral testimony from one individual. Technical Support (2.2) The State should include the following technical information in its SIP revision requestpackage. 1. Identification ofall regulated pollutants affected by the revision is included.



### • Chapter 101, Subchapter H, 

### Division I (ERCProgram) applies to criteria pollutants, and precursors,for which an area is designatednonattainmentwith the exception of lead However, the SIP revision under review does notchange this applicabilityandtherefore does notneedto restate the list of regulated pollutants.
35

### • Chapter 101, Subchapter

### H, Division 2 

### (EBTA Program) applies to NOxandS02. This SIP submittal amends apreviously submittedSIPpackagefor the EBTA program, in which thepollutants are identified.

• Chapter 101, Subchapter

### H, Division 

### 3 (MECTProgram) applies to NOx emissions in the HOB nonattainmentarea. The SIP revision underreview does not change this applicability andtherefore does notneedto restate the listof regulatedpollutants.

• Chapter 101, Subchapter

### H, Division 

### 4 (DERCProgram) applies to criteria pollutants, andprecursors, with the exception of lead. The SIP revision under review does notchange this applicabilityandtherefore does notneedto restate the listof regulatedpollutants.

• Chapter 117 

### applies to emissions ofNOx. 2. Identification ofthe locations ofaffected 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, andDERC tradingprograms, amend existing regulationsfor statewide tradingprograms. The MECTtradingprogram is applicable only to the HOB ozone nonattainmentarea. The revision to Chapter 117, 

### § 117.571 applies to the DFWandHOB ozone nonattainmentareas. 3. Quantification ofthe changes in SIP allowable emissions from the affected sources is included. (Examples include estimates ofchanges in current actual emissions from affected sources and/or, where appropriate, quantification ofchanges 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,MECTandDERCprograms, amendexisting regulations. The ERCandDERCprograms establish economic incentiveprogramsfor voluntarygeneration anduse of emission reductions. Eachprogram includesprovisions for quantifYing creditable emission reductions andincreases. The EBTAprogram is mandatedby Texas SB 7; 

### which establishedreduction requirements of50%from baseline NO x emission levels and25%

### from baseline S02 emission levels. The MECTprogram establishes a cap-and-tradeprogramfor NOx emissions in the HOB ozone nonattainment area to assistthe area in reducingNOx emissions 80%from the baseline. The revisions to Chapter 117, 

### Section 117.571 

### provide complianceflexibility andare notan emission reduction strategy. 4. Demonstrationis included that the NAAQSIPSD incrementslRFP demonstration and visibility as applicable would be protected ifthe revision were approved and implemented.

36

### The SIP submittalamends existing tradingprograms andpromotes compliance flexibility. While these tradingprograms arepart of the attainmentdemonstrations developedwithin the State, they are not the sole methodof attaining or maintaining the NAAQS, PSD, RFP or visibilityprograms. Attainmentdemonstrationsfor each area using theseprograms mustaccount for the emissions attributedto the banking and tradingprograms. 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? 

### Notapplicable. b. Are contingency measures included? 

### Notapplicable. 8. Modeling information, ifapplicable, is required to supportthe proposed revision. 

### Modeling information is 

### notnecessary to support this SIP revision. Modeling is

### provided with attainmentdemonstrations accountingfor the generation anduse of emission reductions under the ERC, EBTA, MECT, andDERCprograms. 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 submittalamends existing tradingprograms; it

### does notestablish 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 submittalamends existing tradingprograms anddoes notcontain orrevise emission limitations orworkplace standards. Recordkeeping andreporting requirements for the tradingprograms havepreviously been submittedto EPA. EPA has approvedthe recordkeeping andreporting requirementsfor the ERC, MECTandDERCprograms in separate actions. The EBTA recordkeeping reporting requirements were submittedin the January 3, 

### 2000, SIP submittal andare the subject of this rulemaking action. 9. Compliance/enforcement strategies including how compliance will be determined in practice (including at what frequency). 37

### The SIP submittal amends existing tradingprograms. The compliance strategiesfor each program werepreviously submittedto EPA. Additionally, each sourceparticipating in banking andtradingprograms mustabide by the conditions of its respectivepermit. 

### 10. As appropriate, special economic and technologicaljustifications are included per applicable EPApolicies or an explanation why suchjustifications are not necessary shouldbe included. For example, requests for alternative RACT may require such justification. 

### Thesejustifications are notnecessary for 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 ofthe October24, 2006 SIP Submittalwith respect to Appendix V to PartS!
The criteriafor completeness determination are found in Appendix V to Part 51

- Criteriafor 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 revisionthereofwhich fails to meet the criteria set forth in this appendix V, and request corrective action, identifYing the component(s) absent orinsufficientto perform areview 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 ofEPA'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 ofa submittal, the submittal shall be deemed complete by operation of law on the date 6 months from receipt. A determination ofcompleteness under this paragraph means that the submission is an official submission for purposes of§51.103. The attached checklist outlines the basic criteriaincluded under 2.1, 2.2, and 2.3 ofAppendix V.

39

### SIP Completeness Checklistfor 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 letterfrom the Governor orhis orher designee requesting EPA's approval ofthe revision. The SIP revision was submittedby a letter from Kathleen Hartnett White, Chairman of the Texas Commission on Environmental Quality, dated October 24, 

### 2006. The SIP submittalwas receivedbyEPA Region 6 

### ExternalAffairs on October 31, 

### 2006. GovernorRickPerry designatedthatthe Chairman of the Texas Commission on Environmental Quality wouldbe his designeefor SIP submittals in a letterdatedMay 21, 2002. 

### 2. Evidence is includedthatthe State has adoptedthe revision inthe State code orbody of regulations, orthatthe State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date ofadoption orfinal issuance andthe effective date ofrevision, ifdifferent from adoption/issuance date. The revisions were adoptedby the Texas Commission on Environmental Quality on October 4, 

### 2006, andbecame effective October 26, 

### 2006. 

### 3. Evidence is includedthatthe State has necessary legal authority under State law to adopt and implementthe revision, e.g., a citation ofthe appropriate State authority. The authority forpromulgating 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; andnew 

### §§ 101.305, 101.338, 101.339, and101.375 isfoundin the Texas CleanAirAct, Chapter 382 

### of the Texas Health andSafety Code. 

### 4. A copy is included ofthe actual regulation or document submitted for approval and incorporationby reference into the SIP including an indication ofthe changes made to the existing approvedplanwhere 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, wheneverpossible, be indicated inthe document itself. The October 24, 

### 2006, submittal includeda copy of the officialState regulation document, signed, stamped, anddatedbyKathleen Hartnett White, Chairman of the Texas Commission on Environmental Quality.



### 40

### 5. Evidence is included that the State followed all the procedural requirements ofits laws and/or its constitution inthe conducting and completing the adoption/issuance ofthe plan. The SIP submittalpackage includeda certification signedbyKevin McCalla, Directorof the Texas Commission on Environmental Quality GeneralLaw Division, that demonstratedthe SIP submittalwas developedpursuantto 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 ofpublication ofsuch notice, (e.g., notarized or certified copies ofany public notices published in newspapers). (The notice should be at least 30 days priorto the public hearing(s). Notices of public hearings werepublishedin thefollowing newspapers on the date listed:

• AustinAmericanStatesman: April 19, 

### 2006

• BeaumontEnterprise: April 17, 

### 2006

• Fort Worth Star Telegram: April 17, 

### 2006

• Houston Chronicle: April 17, 

### 2006. Apublic hearing was heldinAustin, Texas, on May 22, 

### 2006. 

### 7. Acertification is included indicating that public hearing(s) was/were held in accordance with the information provided inthe public notice(s) and the State's laws and constitution, ifapplicable. An orderadopting revisions to the SIP signedby Kathleen Hartnett White, Chairman of the Texas Commission on Environmental Quality was included. This orderstates that the public hearing was conducted pursuant to Texas Health andSafety Code 

### § 382.017, Texas Government Code Chapter 2001, and40 CFR 

### § 51.102. 

### 8. Acompilation ofpublic comments and the State's response is included. The SIP submittalpackage didinclude a compilation of comments. TCEQ received written testimony fromfourparties during the commentperiod, including EPA Region 6, anddidnotreceive oraltestimony. 

### Technical Support (2.2) The State should include the following technical information in its SIP revision requestpackage. I. Identification ofall regulated pollutants affected bythe revision is included.

• Chapter 101, Subchapter

### H, Division 

### 1 (ERCProgram) applies to criteria pollutants, and precursors,for which an area is designatednonattainmentwith 41

### the exception of lead. However, the SIP revision underreview does not change this applicability andtherefore does notneedto restate the list of regulated pollutants.

• Chapter 101, Subchapter H, 

### Division 

### 2 (EBTA Program) applies to NOxandS02. This SIP submittalamends apreviously submittedSIPpackagefor the EBTA program, in which thepollutants are identified.

• Chapter 101, Subchapter H, 

### Division 4 

### (DERCProgram) applies to criteria pollutants, andprecursors, with the exception of lead. The SIP revision under review does not change this applicability andtherefore does notneedto restate the list of regulated pollutants. 2. Identification ofthe locations ofaffected sources including the EPA attainmentlnonattainment designation ofthe locations and the status ofthe attainment planfor the affected area(s) is included. 

### The SIPsubmittal, covering the ERC, EBTA, andDERCRules, amendexisting regulationsfor statewide tradingprograms. 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 ofchanges in current actual emissions from affected sources and/or, where appropriate, quantification ofchanges 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, andDERCrules, amendexisting regulationsfor statewide tradingprograms. The ERCandDERCprograms establish economic incentiveprograms for voluntary generation anduse of emission reductions. Eachprogram includesprovisions for quantifYing creditable emission reductions and increases. The EBTAprogram is mandatedby Texas SB 7; 

### which establishedreduction requirements of 50%

### from baseline NO x emission levels and25% 

### from baseline S02 emission levels. 4. Demonstration is included thatthe NAAQSIPSD incrementslRFP demonstration and visibility as applicable would be protected ifthe revision were approved and implemented. 

### The SIP submittalamends existing tradingprograms. While these tradingprograms are part of the attainmentdemonstrations developedwithin the State, they are not the sole methodof attaining ormaintaining the NAAQS, PSD, RFP orvisibilityprograms. Attainmentdemonstrationsfor each area using theseprograms mustaccount for the emissions attributedto the banking andtradingprograms.

42

### 5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient airquality standards for at least 10 years as required by §175A ofthe Clean AirAct? Notapplicable. 

### b. Are contingency measures included? Notapplicable. 

### 9. Modeling information, ifapplicable, is required to support theproposed revision. Modeling information is notnecessary to support this SIP revision. Modeling isprovided with attainmentdemonstrations accountingfor the generation anduse of emission reductions under the ERC, EBTA, andDERCprograms. 

### 7. Evidence is included where necessary, that emission limitations are based oncontinuous emission reductiontechnology (e.g., add-on controls, industrial/process equipment designs, reformulated materials, etc.). This SIP submittal amends existing tradingprograms; itdoes notestablish 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 submittalamends existing tradingprograms anddoes notcontain orrevise emission limitations orworkplace standards. Recordkeepingandreporting requirements for the tradingprograms havepreviouslybeen submittedto EPA. 

### 9. Compliance/enforcement strategies including how compliance will be determined in practice (including atwhat frequency). The SIP submittalamends existing tradingprograms. The compliance strategiesfor each program werepreviously submittedto EPA. Additionally, each sourceparticipating in banking andtradingprograms mustabide by the conditions of its respectivepermit.



### 43

### 10. As appropriate, special economic andtechnologicaljustifications are included per applicable EPA policies or an explanationwhy suchjustifications are not necessary should be included. For example, requests for alternative RAeT 

### may require such justification. Thesejustifications are not necessaryfor this SIP revision. 

### The October24, 2006 SIP submittal (Rule Project No. 2005-054-101-PR) meets the completeness criteria established in 40 CFRpart 51, Appendix V.

44

### V.E. Evaluation ofthe EBTA Program with respect to 40 CFR 51 Requirements forthe preparation, adoption, and submittal ofimplementationplans can be found in 40 CFR Part 51. EPA is taking action onthe 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 CFRpart 51 is conducted againstthe entirety ofthe program. This analysis is included in Table V.E.I below. The analysis ofthese four SIP submittals with respectto 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 atthe 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 ofthe EBTA and 40 CFR part 51 Requirements
Part 51

- Requirements for Preparation, EBTA Program Revisions Adoption, and Submittal ofImplementation 30 TAC §§101.330 -101.336,101.338,101.339 Plans SubpartA - Emission Inventory Reporting The EBTA Program is a discretionary EIP for Requirements voluntary participation. The program does not affect the current TX SIPrequirements 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. SubpartF

- Procedural Requirements SubpartF - Procedural Requirements § 51.1 00 Definitions § 51.100 is not applicable to the 4 SIP submittals underreview in this TSD. § 51.101 Stipulations § 51.10 I is not applicable to the 4 SIP submittals underreview in this TSD. § 51.102 Public Hearings 

## • TCEQ held public hearings for each ofthe 4 

## • States must conductone ormore public SIP submittals underreview. hearings 

## • The public hearings were held afterreasonable 

## • 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 submitwith the revision a 

## • TCEQ submitted a certification with each SIP certification that the hearing was held in submittal thatthe 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 ofpublic hearings were provided, as well as the dates ofeach public**hearin~.** § 51.103 Submission ofplans, preliminarv review Please see section V.A - D ofthis TSD for the 

### 45ofplans 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 ofPart 51, Appendix V. The 4 SIP submissions meetthe requirements for 

## • The state delivers 5 copies ofthe plan with a completeness. lettergiving notice ofthe actionto the EPA regional office. § 51.104 Revisions TCEQ originally submittedthe 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 mustbe submitted in accordance V.A - D ofthis document, have satisfiedthe public with 51.103 hearing requirements of§ 51.102 and the requirements of§ 51.103. Subpart G - Control Strategv SubpartG - 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 ofTexas. However, the reductions resulting from the EBTA program caps are expectedto 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 ofan 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 ofemission levels after the implementation ofcontrol 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/orused. § 51.115 Air Quality Data and Projections Requirements found in § 51.115 are not applicable 

### 46to the 4 SIP submittals underreview 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 DataAvailability 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 ofeaeh plan or plan revision. The TCEQ provided the public the opportunity to partieipate in stakeholdermeetings, 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.II8 StackHeight 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 heightprovisions of51. 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 ofState Implementation Plan Revisions relating to to the 4 SIP submittals under review in this emissions ofoxides ofnitrogen document. § 51.121 establishes the requirements for the NOx SIP Call; Texas was not subjectto 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 ofState Implementation Plan Revisions relating to Emissions ofOxides ofNitrogen pursuant to the Clean Air Interstate Rule § 51.124 Findings and requirements for submission ofState Implementation Plan Revisions relating to Emissions ofSulfurDioxide 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 ofAir Pollution Emergency Episodes

Subpart I - Review ofNew Sources and Modifications
SubpartJ - 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 forthe 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 underreview 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 underreview in this document. § 51.125 establishes the emission reporting requirements for the CAIR NOx and SO, trading programs. Requirements found in 51, SubpartH are not applicable to the 4 SIP submittals underreview in this document. The EBTA program is a discretionary program and is notpart 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, SubpartJ are not applicable to the 4 SIP submittals underreview in this document. Ambient air quality surveillance is notpart 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 ofcompliance 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 enforcementprovisions 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 ofprograms 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 permitprogram for grandfathered



### 48procedures to require stationary sources subjectto 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 ofemission monitoring emission monitoring systems. systems. This permitprogram 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 thatthe State has the The EBTA program was developed and submitted necessary legal authority to carry outthe plan, in accordance with the Texas Clean AirAct, 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 enforcementprovisions in the Texas Water Code and seek injunctive relief. provide TCEQ the necessary legal authority to implementthe SIP. A more detailed discussion immediately follows this table. § 51.231 The provision oflaw orregulation which Texas identified in the 4 submittal package thatthe the State determines provides the authorities SIPrevision 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 forprior SIP submittals. § 51.232 A state government agency otherthan the The 4 SIP revisions identifiedthe TCEQ as the State airpollution 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 identifiedthe 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 enforcementofthe plan. SubpartN - 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 of40 CFRpart 51, subpart N. However, the EBTA program provides mechanisms by which users ofEBTA allowances must demonstrate they have enough allowances to cover theiruse 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 identifiedthat no fiscal 

### 49Requirements 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 ofimplementing these revisions would be acontinued reduction in air contaminants. Subpart P

- Protection ofVisibility The EBTA program is not submitted as partof Texas's plan to protectvisibility. Subpart Q - Reports The EBTA program SIP revision does notrevise the existing reporting requirements forthe emission inventory in the Texas SIP. EPA approved the emission inventory requirements at 30 TAC § 101.10 on August 26, 1994 (59 FR44036). SubpartR

- Extensions Requirements found in 51, SubpartR are not applicable to the 4 SIP submittals underreview in this document. The EBTA program is not arequest for an 18-month extension. SubpartS

- Inspection/Maintenance Program Requirements found in 51, Subpart S are not Requirements applicable to the 4 SIP submittal sunderreview in this document. The EBTA program establishes a discretionary economic incentive program and is not related to an insnectionlmaintenance nrOlITam. SubpartT - Confonnity to State or Federal The EBTAprogram 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 UnderTitle 23 U.S.C orthe Federal each nonattainment and maintenance areapursuant TransitLaws to subpart T. Subpart U

- Economic Incentive Programs 40 CFRpart 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 adiscretionary economic incentive program, and therefore not subject to the reauirements ofsubnartU. Subpart W - Detennining Confonnity ofGeneral The EBTA program does not interfere with the Federal Actions to State orFederal Implementation requirements for general confonnity in subpart W. Plans Mobile sources cannot narticinate in the EBTA. SubpartX

- Provisions for Implementation of8-hr Requirements found in 51, SubpartX are for the OzoneNAAQS implementation ofthe 8-hourozone NAAQS. While the EBTA program is operated statewide, including in 8-hourozone nonattainment areas, it is not partofthe implementation ofthe 8-hourozone standard. EPA expects thatthe TCEQ will account for the generation and use ofEBTA program allowances in all 8-hourattainment demonstrations. SubpartY

- Mitigation Requirements The EBTA program does not create procedures by which Texas could exclude air quality data due to exceutional events. SubpartZ

- Provisions for Implementation of Requirements found in 51, SubpartX are forthe PM2.5 National Ambient Air Quality Standards implementation ofthe PM2.5 NAAQS. The EBTA program revisions do not establishprocedures for imolementing the PM2.5 NAAQS.

50

### Does TCEQ have the necessary legalauthority to implementthe revisions to 30 TACSections 101.330-101.336, 101.338, and101.339aspartof the SIP? Texas enforcement provisions are nottypically 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 EBTAprogram. In particular, TWC 

### § 7.051 provides for the assessment of administrative penalties by the TCEQ, and 

### § 7.032 provides for injunctive reliefby the TCEQ. The TCEQ enforcementrule 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 conclusionthat TCEQ has adequate legal authority to enforce the EBTA programrevisions 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 AirAct. The 40 CFRpart 70 / CAA Title V operating permits program and the 40 CFRpart 63, National Emission Standards for Hazardous Air Pollutants (NESHAPs) have beenreviewed and found to have sufficient enforcement provisions. These same enforcementprovisions will apply to the EBTA Program. The Office ofthe Attorney General ofthe State ofTexas 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 implementand 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 maintainrecords ofthe emissions. The Office ofthe Attorney General ofthe State ofTexas cited State laws and regulations that regulate, at a minimum, the same sources as the CleanAir Act and do so with standards that are no less stringentthanthose 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 ContentRequirements), 122.143 (General Terms and Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms and Conditions), 122.146 (Compliance CertificationTerms and Conditions), 122.165 (Certification by Responsible Official; 30 TAC sections 1Ol.8 (Sampling), 101.9 (Sampling Ports). Recordkeeping requirements specific to the EBTArule 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 ofand compliance with the TCEQ rules and orders. The EBTA program provides emission monitoring and reporting shall be conducted in accordance with 30

51TAC 116.914, whichspecifies the use of40 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 Docketfor additional information. 52

### V.F. Analysis ofthe EBTA Program with respect to the EIP Guidance
This portion ofthe EBTA Program technical review consists ofa 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 (CommonElements ofAll EIPs), Chapter 6.0(Elements ofAll Trading EIPs), Chapter 7.0 (Elements ofSpecific Trading ElPs), Chapter 8.0 (Elements ofFinancial 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 inthis TSD. The EIP type is a Source-Specific Emissions Cap (SSEC) program. There are seven maintypes ofEIPs

- Emission Averaging Program, Source Specific Emission Caps, Multi-Source Cap-and-Trade ElPs, Open Market Trading ElPs, Financial Mechanism ElPs, CleanAir Investment Funds, and Public Information EIPs

- each with type-specific requirements. Chapter 7.0

- Elements ofSpecific Trading ElPs, outlines the specific requirements for an SSEC program. Chapter 8.0

- Elements ofFinancial 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 andApprovingEIPs 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 inTable V.F.I. Corresponding sections ofthe TCEQ submittals are provided for each guidance item.53Table V.F.I EPA EIP Guidance and TCEQ SIP Submittal Cross Reference Chapter 1 - General EPA EIP Guidance Expectation Emissions Banking and Trading ofAllowances (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 notrequired 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 ofless 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. 

### Chapter2 -

### Definingan 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 ofAllowances (EBTA) EPA-4S21R-01-OOI §§101.330 -101.336, 101.338, 101.339 2.2 Pollutants covered: Any criteriapollutant 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 subjectto 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 requirementto 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 54Table V.F.2 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 2 - Defining an EIP account under this division for the purpose ofbanking and trading emissions allowances. Note: 30 TAC Chapter 116 ofthe 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 ofa 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 of AllEIPs Chapter

### 4

- FundamentalPrinciples of AllEIPs 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 withregard to programmatic integrity and source-specific integrity. The equity principle consists oftwo elements: general equity and environmentaljustice. The environmental benefitprinciple is notfurther divided. Because the programmatic and source-specific requirements ofEIPs 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 orthe type ofsources participating in the EIP, certain elements may only apply partially, ifat all. The source-specific requirements contain general requirements and EIPspecific requirements. 

### How mustmyEIPmeetthe integrityprinciple? Table V.F.3 tabulates the requirements described in Chapter4 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 ofAll EIPs 4.1 EPA EIP GUIDANCE expectatiun Emissions Banking and Trading ofAllowances (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 attainmentrequirements 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 ofan allowance) other State airquality programs adopted butnot in your SIP, are not used by any other programs. a consent decree, orFederal rules that focus on reducing The EBTA program was created through Texas Senate Bill 7. criteriapollutants or theirprecursors. In the eventthat your EIP's Drogrammatic emission reductions are relied on to which mandated a 50% reduction in NOx and a 25% reduction 55Table V.F.3 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER4 - 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 thatyour 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 otherEPA guidance on practicable enforceability. Emissions Banking and Trading ofAllowances (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 orexceed the limitations ofany 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 nonattainmentNSR., § 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 ofa facility subject to the EBTA must possess enough allowances to cover its emissions ofregulated pollutants during the control periodjust ending. Ifemissions 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 coverthe 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 ofpenalties orobtaining corrective action, citizen filing oflawsuits, and practicable enforceability are not addressed in the EBTArules, Tcxas enforcement provisions are nottypically in individual rules but are separately codified. Texas Water Code Chapter 7 contains the statutory nrovisions for enforcementofthe EBTA nrOl!ram. In 

### S6Table V.F.3 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 4· Fundamental Principle' ofAll 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 thatno emission increases (compared to emissions if there were no EIP) occuroverthe time defined in the SIP. Emissions Banking and Trading ofAllowances (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 usedto reliably and replicably quantifyNOx 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, orusers 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 referto EPA approved protocols under40 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 reportfrom 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 ofallowances by 

### 57Table V.F.3 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 4 - Fundamental Principles ofAll EIPs 4.1 EPA EIP GUIDANCE expectation Emissions Banking and Trading ofAllowances (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 ofany 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 ofemission 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 of50% ofNOx and 25% ofS02 Generally, source-specific emission reductions ofa criteria emissions from 1997 heat inputdata. The baseline for pollutant resulting from a non-criteriapollutantprogram are the development ofthe EBTA is specified in Senate Bill surplus ifthey are not relied upon in your air quality-related 7, sect. 39.264(e); the baseline for EBTA generation of programrequirements for that criteriapollutant. 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 ofemissions 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 subjectto the EBTA may not exceed the levels equal to 75% ofthe Emission reductions measured by sources on a retrospective quantity ofemissions reported in the most recent yearof basis are surplus ifthe source's actual emissions are below emissions inventory used in the SIP, compared to the its baseline allowable orhistorical actual emissions

- total emissions ofthat pollutantduring 1997. whichever is lower

- and yourretrospective inventories 

### • The development ofthe EBTA was not through reflect actual emission infonnation as appropriate. compliance with any requirementofthe 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 inthe 

### • The sources subjectto the EBTA are counted inthe SIP or SIP-related requirements; inventory at their capped**emis~ions** levels. 

### • the reductions are not generated through compliance with any requirement ofthe CAA; 

### • the reductions resulting from shutdowns and curtailments are surplus only ifthe 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 ifa souree may be held liable; the Table V.F.3. liable party is identifiable; and TCEQ, the public, and EPA The EBTAprogram provides for liability for owners/operators ean independently verify compliance. (see § 6.1(a)) ofsources at § 101.333(4). Ifemissions ofNOx or S02 ENFORCEABLE

- SSEC EIP [EIP Guidance Table 4.2b] exceed the amount ofallowances 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 underthe 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 meetthe requirements of§ 101.336 (Emission Monitoring, Compliance Demonstration and Reporting). QUANTIFIABLE

- GENERAL The creation and use ofemission reductions are quantifiable ifthe source or group ofsources can reliably ealculate the amount ofemissions 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 ofwhy this is not appropriate and supporting doeumentation ean be provided. QUANTIFIABLE SSEC EIP [EIP Guidance Table 4.2b]

• sourees mustquantify 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 ofallowanees that pennit emissions ofthe contaminants from the faeility in thatyear. An allowance authorizes the emission ofone ton ofNOx or one ton ofS02. The allowanee caleulation for grandfathered EGFs is a function ofan apportionmentofthe 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 inputin tenns ofMMBtu during 1997. The Regions provide for speeific calculations concerning coal-fired grandfathered EGFs, with the East Texas emissions rate at0.14 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, consistentwith the emission reduction requirements ofthe Division, butnot 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 theiremissions 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 ofeach 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 oftime 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 ofAllowances, describes the EBTA Allocation ofAllowances procedures to ensure that the emissions are capped and permanent, ensuring thatthere were no increases in emissions overthe 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 accountfor thatRegion.


### Does theEBTA EIPsubmittalmeetthe EPA EIPguidance expectations for enforceability, andrelated

## eAA requirements? The owners/operators ofsources subjectto the EBTA are liable for ensuring thatthe compliance account ofeach facility has enough allowances to coverthe facility's emissions inthe given controlperiod. Informationto be made available to the public and citizens is addressed through § 101.333(7), as the maintenance ofa registry oftrades. While not a compliancepoint, 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), ifemissions of NOx

### or, ifapplicable, 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, withthe exception ofthis one group ofpenalties, the general application ofpenalties or obtaining corrective action, and citizen filing oflawsuits are not addressed inthe EBTA rules, Texas enforcementprovisions are nottypically in individual rules but are separately codified. Texas Water Code Chapter7 contains the statutoryprovisions for enforcement ofthe EBTA EIP regulation. Inparticular, TWC § 7.051 provides for the assessment ofadministrative penalties, and § 7.032 provides for injunctive relief. The TCEQ enforcementrule at 30 TAC § 70.5 incorporates remedies found inthe state statutes (Texas Water Code and the Texas Health and Safety Code), andpermits referrals to EPA for civil,judicial or administrative action. EPA has previously approved SIP revisions withpenaltyprovisions 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 EBTAprogramto all applicable rules or laws, including those under Chapter 116, Subchapter I and Suchapter B (relating to EFGpermits and New Source Review Permits), and limitthe use ofEBTA allowances from satisfying otherrequirements 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 CleanAirAct 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 enforcementprovisions consistent with the CleanAirAct have not been found deficient by EPA. The 40 CFRpart 70, 

### ICAA Title V 

### operating permits program and the 40 CFRpart 63, National Emission Standards for Hazardous Air Pollutants (NESHAPs) are two suchprograms. The Office ofthe Attorney General ofthe State ofTexas has provided written opinions forthese 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 maintainrecords ofthe emissions. Recordkeeping requirements specific to the EBTArule 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 allowedto prescribe sampling methods andprocedures to be used to determine violations ofand 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, subjectto the requirements of40 CFRpart 75 and/or 40 CFRpart 60. Forthose facilities not certified under 40 CFRpart 75 or 40 CFRpart 60,30 TAC 116.914(b)(3) provides alternate monitoring requirements to be metto 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 onpracticable enforceability (provided inthe docket for this action) is a series ofagency 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 subjectto an annual cap-and-trade program must be able to measure their emissions ofand quantify theirtotal mass ofemissions 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

### Forthe above reasons EPA has concluded that the EBTA ElP meets the Clean AirAct requirements and ElP Guidance expectations for penalties and corrective action and practicable enforceability inthe integrity element ofenforceable.

62

### How mustmyEIPmeetthe equity andenvironmentalbenefitprinciples? Table V.FA tabulates the requirements described in Chapter 4 ofthe EIP guidance pertaining to the equity and environmental benefitprinciples.
Table V.F.4 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 4 - Fundamental Principle, ofAll 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 ofaprogram'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 ofAllowances (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 ofpublic health, underthe 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 ofapplicable 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 ofallocated allowances ofNOxor S02 during a specified control period. This will ensure that public health is proteeted and disproportionate impacts are avoided. The EBTArule includes public partieipation requirements:

• § 101.333(7) requires a registry ofallowances 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 oftrades 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 atrade is available upon request from the TCEQ or on the agency's website.

• Public hearing and submission ofpublic comment for coverage under the EBTAprogram shall be in accordance with the same opportunities afforded under Sections 382.056I 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 ofAll 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 environmentaljustice element applies ifthe EIP

• covers VOCs, and

• could disproportionately impactcommunities populated by racial minorities, people with low incomes, and/orTribes To address environmentaljustice, the ElP should include provisions to protect eommunities ofconcern. 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 shouldprotect communities ofconcern 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 attainmentthan would have occWTed withoutthe EIP

• more rapid emission reduetions than would have happened withoutthe ElP

• more emission reductions (ofHAPs orcriteriapollutants) 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 % lowerthan what would have occurrcd without the ElP

• have other provisions that demonstrate environmental benefit (ifallowed)



### 64 Emissions Banking and Trading ofAllowances (EBTA) §§101.330 -101.336, 101.338, 101.339 The EBTA rule includes public participation requirements:

• § 101.333(7) requires a registry ofallowances to be maintained, which is available is available upon request from the TCEQ oron 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 ofpublie 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 environmentaljustice elemcnt does not appear to specifically apply to the EBTA program, as the EBTA does not eoverVOCs, it docs providc for protection to human health by adverse impacts ofemission 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 ofSenate Bill 7. Senate Bill 7, Sect. 39.264(c) specifies thatthe baseline for EBTA generation ofNOx 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 ofemission reported in the mostrecent 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 ofcmissions reported in the most recent year ofemissions 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% lowerthan what would have oeeurred without the EBTA program.

### Chapter 5 - 

### Common Elements of AllEIPs 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 ofan EIP for incorporation into the SIP, Section 5.2 includes requirements to quantifY EIP results; and Section 5.3 includes requirements to measure and trackEIP results. Table V.F.5 tabulates the comparison ofthe EBTArules with the elements ofChapter 5.1 ofthe EIP guidance.

Table V.F. 5 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER5

- COMMON ELEMENTS ofALL EIP, 5.1 EPA EIP GUIDANCE Expectation Emissions Banking and Trading ofAllowances (EBTA)**EPA-4521R~** 1-00I §§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 complianceflexibility 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 withoutthe EBTA EIP for Flexibility EIPs generally demonstrate an environmental NOx •and 25% lowerthan 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 ofarapid or equivalent emissions reductions. EBTAs must be retired as an environmental benefit: § 101.333(4) has user penalties thatrequire 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.

655.I(b) Localized Impacts ofHazardous Air Pollutants (HAPs) Many VOC emissions contain HAPs which are toxic air pollutants. EPA believes that localized impacts ofHAP 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 anotherthen 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 "HAPframework"
5.I(c) Penalty provisions; Violation defined; Determine violation magnitude; Set potential penalties; Ability to impose maximum penalty ofat least SIO,OOO/day EIP rule must contains provisions to assess:
• Monetary penalty ifgaining economic benefit of$5,000

• Additional penalties to deterfuture violations

• Penalties for violations ofcompliance measures, i.e. monitoring recordkeeping etc

• Statement that "Nothing herein restricts independent enforcement authorities under CAAby other parties." Also see EIP 6.1 See also Table V.FA, 4.2(b) for a discussion ofGeneral 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 userpenalties 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.



### 665.I(d) Public Disclosure provisions Some ofthe 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 ofcompliance. 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 reportto EPA and the public. 0 § 101.333(7) has a requirement for thc commission to maintain a registry ofallowances in each compliance Appendix 16.5 Ensuring Adequate Public Participation account. Foreach 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 ofavailability oftechnical 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 ofemissions ofeach allocated air contaminant during the preceding control period, and a summary ofall final trades for the preceding control period. One condition ofrule 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 oron 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 ofproposed SIP revisions through publieation in the Texas Register ofproposed rulemaking and public hearing notices. Notification ofpublic 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 StarTelegram, and Lubbock-Avalanche Journal. The TCEQ also has an extensive stakeholder list that contains approximately 150 contacts that receive copies ofall TCEQ rulemaking actions for commentand participation in development. 5.I(e) Provisions for Federal Land Manager (FLM) There are no grandfathered EGFs or electing EGFs underthe notifieation in Class I areas EBTAprogram within 100 kIn ofa Class] area in the Eastern or Western Regions ofTexas. Therefore, the FLM Appendix 16.6 FLM Notification Requirements Notifieation Requirements underAppendix 16.6 are not applicable to the EBTA EIP.



### 675.1(t) Area·wide RACT provisions EIP may allow sources subject to RAeT to avoid direet application ofRACT technology by:

• trading with other sources subjectto RACT

• trading with sources not subject to RACT Appendix 16.7 Area-wide RACT provisions EIP must ensure thatthe level ofemission reductions resulting from implementation ofthe EIP will be equal to those reductions expected from the direct application of RACT RACT is an independentrequirement 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 ofany annual emission limitation authorized under Chapter 116, SubchapterB (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 withthe elements ofChapter 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 ofAllowances (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 thatthe ElP will not interfere or Environmental Benefits, for section 4.3 ofthe EIP guidance. be inconsistentwith 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 ofattributable emission reduetion estimates. 

### • determine ifEIP will interfere with State airquality planning. 

### • detennine ifuncertainty 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 ofanyNAAQS. 

### • evaluate results ofEIP as per 5.3(b), & 

### • reconcile any problems as per 5.3(c).



### 68Table 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 ofAllowances (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 underthe 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 generatingemissions. § 116.914 establishes ahierarchy for selecting emission 

## • CEMS data on unit generating emissions not at measurement protocols in following order ofpreference to generation time. but atrepresentative conditions. detennine actual emissions: 

## • Multiple emission tests at affected unites) at A) CEMS data under40 CFR Part 75; representative conditions. B) CEMS date under 40 CFR Part 60 with an adjustment 

## • Emission test at affected unites) atrepresentative factor conditions. C) CEMS datausing alternate methods under 30 TAC 

## • Emission test at maximum load Or stacktests at identical Chapter 116.914(b)(3) unit. D) Estimated data, perAppendix E of40 CFRPart75 for


### • Emission factor (ifallowed) ormaterial balance. EGFs with aheat input ofless than 100 MMBtu!hrand for peaking units emissions in pounds perhe. E) Representative default data for missing data, per40 CFR Part75, SubpartD.



### Section 5.3 includes requirements to measure andtrackElP results. Table V.F.7 tabulates the comparison ofthe EBTA rules withthe elements ofChapter 5.3 ofthe EIP guidance.

Table V.F.7 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS ofALL EIP, 5.3 EPA EIP GUIDANCE Expectation Emission. Banking and Trading ofAllowance. (EBTA) EPA-452/R-OI-OOI §§101.330 -101.336, 101.338, 101.339 5.3 EIP FEATURES to MEASURE & TRACK RESULTS



### 69Table V.F.7 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 5 - COMMON ELEMENTS ofALL 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 orperiodic monitoring ofemissions, 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 conductprogram evaluation every 3 years.

5.3(c) EIP Reconciliation procedures A list ofpossible fOnTIS ofcorrections includes:

• Amend EIP to address problem in the future.

• Amend another SIP program to address emission shortfall.

• Add another programto 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 ofunused emission reductions (establish before a problem discovered) to make up the shortfall. Emissions Banking and Trading ofAllowances (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 ofemissions ofeach allocated air contaminant during the preceding control period and a summary ofall 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 reportto the TCEQ by June 30 ofeach year. This report details the amount ofemissions ofeach allocated air contaminant and a summary ofall 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 ofallowances 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 programevery three years. The audit will evaluate the impact ofthe program on the state's ozone attainment demonstration, the availability and cost ofallowances, compliance by the participants, and any otherelements the executive director may choose to include. The executive director will recommend measures to remedy any problems identified in the audit. The trading ofallowances may be discontinued in whole or in part as a remedy for the identified problems.

70

### Chapter 6 - 

### Elements of All Trading EIPs Chapter 6 introduces elements that are commonto all trading EIPs. These elements include enforcementprovisions, addressing specific pollutant effects, preventing interference with other air quality programs, addressing uncertainty, and a few otherprovisions such as elements for demonstrating environmental benefits. The elements described in Chapter 6 apply in addition to those in Chapter 5. Each ofthe four maintypes oftrading EIPs has its own unique characteristics and requirements. Section 6.1 includes enforcementrequirements 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 thatthe trading EIP does not interfere with otherprograms, Section 6.4 contains provisions to address uncertainty, and Section 6.5 describes otherprovisions needed in a trading EIP. Table V.F.8 tabulates the comparison ofthe EBTA rules withthe elements ofSections 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 ofAllowances (EBTA)**EPA-4521R~I-001** §§101.330 -101.336, 101.338, 101.339 6.1 Enforcement elements ofall trading EIPs

6.1(a) Provisions for assessing liability. The requirements for most ofthis 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 ifusing 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 underthe 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.



### 71Table V.F.8 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 6 - ELEMENTS ofALL TRADING EIP, §§6.I-M EPA EIP GUIDANCE Expectation Emissions Banking and Trading ofAllowances (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 notproduce 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 ofemission § 101.333(4) has user penalties thatrequire 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.



### 72Table V.F.8 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 6 - ELEMENTS ofALL 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 ofa discretionary EIP approved into a SIP. Ifa facility that has aTitle 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 ofthe SIP requirements for which the EIP serves as an alternative method ofcompliance, and a statementthat 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 ofnotices of credit generation and use and credit tracking infonnation

• Penalty and corrective action provisions

• Procedures for public disclosure ofinfonnation

• FLM notification in Class I areas
6.2 Specific pollutant effectprovisions 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 51.1 66(b) Emissions Banking and Trading ofAllowances (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 ofnotices ofEBTA allocation ofallowances, 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 ofemissions ofeach allocated air contaminant during the preceding control period and a summary ofall final trades for the preceding control period. Procedures for public disclosure ofinfonnation 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 underthe EBTAprogram within 100 km ofa 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.

Because ofthe 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 ofthe EBTA Division, and cannot be used to meet orexceed the limitations ofany annual emission limitation authorized under Chapter 116, SubchapterB, relating to NSR permits.



### Section 6.3 describes elements to ensure thatthe trading EIP does not interfere with other programs. Table V.F.9 tabulates the comparison ofthe EBTA rules withthe elements ofChapter 6.3 ofthe ErP guidance. 

### 73Table V.F.9 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CIIAPTER 6 - ELEMENTS ofALL TRADING EIP, 6.3 EPA EIP GUIDANCE Expectation Emissions Banking and Trading ofAllowances (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. Ifyour 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-credittrading Inter-eredit trading is not a feature ofthe EBTA. Inter-credittrading is the acquisition and use ofan emission reduction generated under one EIP to meetthe requirements EBTA allowances cannot be used to satisfy other programs: ofanotherEIP. IfyourEIP includes inter-credittrading 

### • § 101.332(a) Allows EBTAs to be used to comply only your EIP must meetthe provisions in section 16.12. with the requirements ofDivision 2 and Chapter 116, SUbchapter I, relating to EGF Permits. They cannot be Appendix 16.12 Provision for inter-credittrading used to meet or exceed the limitations ofany annual 

### • emission reductions mustmeet the more stringent emission limitation authorized under Chapter 116, requirements ofthe multiple programs, Subchapter B (NSR Permits ) 

### • adoptthe 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 ordiscrete emission reduction enforceability are not compromised, credits. 

### • prevent double-counting ofemission reductions, and 

### • § 101.332(d) prohibits EBTA usefor netting to avoid the 

### • maintain the level ofemissions measurement accuracy applicability offederal 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 independentrequirementthat must be met by Ifyourtrading 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 ofDivision 2 and 30TAC Chapter 116, Subchapter 1, relating to EGF Permits. They cannot be used to meet orexceed the limitations ofany annual emission limitation authorized under Chapter 116, SubchapterB (NSR Pennits) or any applicable rule or law.



### 74Table V.F.9 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS ofALL TRADING EIPs 6.3 EPA EIP GUIDANCE Expectation EPA-452/R-0I-OOI 6.3(d) Provisions for new source review and trading Ifyou choose to allow emission reductions generated by yourEIP to be used for NSR purposes then your EIP must meetthe requirements in section 16.14. Appendix 16.14 Provisions for new source review and trading:

• Sources are not exempted from any NSR orPSD requirementbecause ofEIP. • A major source ormajor modification may not avoid NSRreviewby 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 orused to comply with any other CAArequirementmay notbe 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 ofAllowances (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 nonattainmentNSR. § 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 ofany 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 offederal and state NSRrequirements. § 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 ofthe 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 meetNSPS, BACT, LAER, NSR offsetrequirements, 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 TierII program. Municipal waste combustor rule Emission reductions. The EBTA program subdivides state coverage into Regions, and the EIP under consideration covers East and WestTexas. 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.



### 75Table V.F.9 EPA EIP Guidance and TCEQ SIP Submittal Cross Reference

CHAPTER 6 - ELEMENTS ofALL 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 ofbanked emission reductions

- EPA supports unlimited, but requires safeguards

• Tracking banked emission reductions

• Adjustments to banked emission reductions

• Minimizing uncertainty Emissions Banking and Trading ofAllowances (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 ofallocation, 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 ofallocations ofemissions.

• § 101.335 (a) restricts the use ofbanked 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 ofbanked 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 ofany annual emission limitation authorized under Chapter 116, Suhchapter B (NSRPermts) 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 ofallowances 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.IO.



### Section 6.4 contains provisions to address uncertainty in a trading EIP and Section 6.5 describes otherprovisions 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 ofALL TRADING EIPs 6.4 & 6.5 EPA EW GUIDANCE Expectation Emissions Banking and Trading ofAllowances (EBTA) EPA-4521R-0I-OOI §§101.330 -101.336, 101.338, 101.339 6.4 Provisions to address uncertainty


### 76Table V.F.IO EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CIIAPTER 6· ELEMENTS ofALL 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 ofAllowances (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 withoutthe 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, hadthe 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 subsequentcontrol periods, with the restrictions listed in Table V.F. 9, 6.3(1). • § 101.333(4) has user penalties thatrequire reductions equal to emission exeeedances over allowances for a given control period, for either EGFs or elected EGFs, that are imposed over the nextcontrol period. • § 101.333(3) prevents the use ofallowances 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 eitherNOx 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 subjectto the EBTA located in a nonattainment area or in the East & Central Texas region have applicable SIP required emission limits targeting the reduction ofozone. These SIP required emission limits override any EBTA allowance limitation.



### 77Table V.F.IO EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 6 - ELEMENTS ofALL TRADING EIP, 6.4 &6.5 EPA EIP GUIDANCE Expectatioo Emissions Banking and Trading ofAllowances (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 metthrough 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 withoutthe EBTA EIP forNOx, and 25% lower than 

### • Limittrades to similar sources what would have occurred withoutthe 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. 

### • SeeTable 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) ofthe 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 musthavc 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 EastTexas and West Texas regions were created based on the concentration ofindustrial sources in eastTexas and the prevailing wind patterns outofthe SE. It is not anticipated thatthe 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 ofthe State based on geography. Again, TCEQ has committed to implementing an audit ofthe EBTA program every three years. The program will be reviewed to ensure the reductions are achieved and thattrading 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 ofa Class I area in the Eastern or Western Regions ofTexas. Therefore, the FLM Notification Requirements underAppendix 16.6 are not applicable to the EBTAEIP.



### 78Table 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 ofAllowances (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 Iuse ofemission reductions guidance) and V.F. 8 (especially the requirements covering 

### • Target enforcement resources 6.I(c) ofthe EIP guidance) 

### • ConductEIP perfonnance audits 6.5(e) Provisions concerning multi-claimants. § 10 1.330(8) Addresses the concept ofa 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 30TAC Chapter 116, Subchapter I, located atthe 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 marketabletrading unit. and mustbe allocated, transferred, or used as whole allowances under § 101.332 (g). As such, they aretraded 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 ofthe ElP. Appendix 16.17 Safeguards for EIPs that allow the use of The EBTA was designed to achieve reductions of50% ofNOx old emission reductions and 25% ofS02 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 notbe brought into the program. 6.5(g) Provisions for complianee margin. The compliance margin requirement does not applyto the Your trading ElP must include provisionsto 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 asource to calculate emission reductions for an achieve a50% reduction in NOx levels and a25% reduction in EIP without accountingfor 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.


### 79Table V.F.IO EPA EIP Guidance and TCEQ SIP Submittal Cross Reference CHAPTER 6 - ELEMENTS ofALL TRADING EIPs 6.4 &6.5 EPA EIP GUIDANCE Expectation Emissions Banking and Trading ofAllowances (EBTA) EPA-452IR-OI-00I §§IOI.330 -101.336,101.338,101.339 6.5(h) Restricting use ofAlternate Emission limits (AELs), EBTA allowances cannot be usedto satisfy requirements of Waivers, exemptions, extensions etc prohibited. other state or federal programs. Thus, the EBTA does notneed to restrict the use ofAELs. 

### Chapter 7 - 

### Elements of Specific Trading EIPs Chapter 7 introduces the differenttypes ofEIPs and the implementation requirements for each. There are four main types ofemissiontrading programs: emission averaging, source specific emission caps, multi-source emission cap-and-trade, and open markettrading. Section 7.1 identifies the characteristics ofthe 4 mainprogramtypes. 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-markettrading. 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 withthe elements ofSections 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 ofAllowances (EBTA) EPA-452IR-OI-OOI §§10I.330 -101.336, 101.338, 101.339 7.1 How do I selectthe appropriate trading EIP? Source specific emissions cap (SSEC) trading is based on: The EBTA meets the main characteristics ofa SSEC: 

### • Trading units are Mass/time 

### • Allowances are the authorization to emit one ton of 

### • Main purpose is to provide flexibility for defined source, eitherNOx 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 of NOx 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 ofSection 6.3(1) ofthe EIP Guidance
7.3 What additional provisions do I need for my sourcespecific emission cap EIP?


### 80Table 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 thatqualify 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 ofthe 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 ofAllowances (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.



### 817.3(b) Additional Compliance provisions that must be included in SSEC EIPs include the following:

• Source emissions are less than orequal to theircap
• Source may not emit more than the cap
• Emission reductions from anotherEIP 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 ofactivity 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 ofits emissions plus reductions obtained from other sourees not exceeding its source specific cap o The validity ofreductions it uses
• Each source is liable for emitting less than its soureespecific cap as reduced by the amount ithas 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, priorto the EIP approval. • § 101.333 sets up the caleulation ofthe individual allocation ofallowance for each grandfathered EGF and eleeting EGF. • § 101.333(5) sets the allocation ofallowances 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 ofa 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 emitone 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 ofthe 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 tracktransference ofallowances to other sources is eovered in Table V.FA, 4.3 and Table V.F.9,6.3(1) Procedures for public disclosure ofinformation are covered in Tables V.F.4 and V.F.5.



### 827.3(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 anotherparty

• Emission reduction banking is allowed under the provisions of6.3(1)

• The number ofviolations is the productofthe number of days the cap is violated and the number ofemission units covered under the cap • Ifthe emission reduction is generated by a source owned by one person and the user is oMled by anotherpcrson then: o each source is liable for the sum ofits 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, itmust be adjusted to reflect lower emissions perreductions 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 ofreductions 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 ofemission 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 ofinformation are covered in Tables V.F. 4 and V.F.5. The opt-in and opt-outprovisions ofthe EBTA ensure that the integrity ofthe program will not be violated. The EBTA is structured such thatnon-grandfathered EGFs could choose to be permitted and comply with the requirements ofChapter 116, Subchapter L Once receiving this permit, these EGFs are considered electing EGFs and are subject to the requirements ofthe EBTAprogram. The deadline for an EGF to opt-into the EBTA is September I, 2000, according to § 116.911(c). The opt-outmechanism for the electing EGFs is under § 116.912. The electing EGF must notify the commission ofits intent to optout prior to the beginning of thc ncxt control period. The electing EGF may not optout during a control period. Once the electing EGF has opted**ou~** all ofthe 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 notparticipate in the EBTA at any future date;

• and the owner or operator shall request an alteration to the cxisting NSRpermit to remove the conditions referencing the EGF permit.

The EBTA allocation method accounts for shutdowns from both grandfathered and electing EGFs.

83V.G. 

### Evaluation 

### ofthe 

### EBTA Program with respect 

### to CAA 110(1)
Section 

### 110(1) ofthe Clean Air Act states: 

### Each revision to an implementationplan submittedbya State under thisActshallbe adoptedby such State after reasonable notice andpublic hearing. TheAdministrator shallnotapprove a revision of aplan 

### if the revision wouldinterfere with any applicable requirementconcerning attainmentandreasonablefurtherprogress (as defined in section 171), 

### orany otherapplicable requirementof thisAct. Thus, under section 

### 110(1), these 4 SIP revisions creating and amending the EBTA program must not interfere with attainment orreasonable further progress or any other applicable requirement ofthe Act. As a general matter, the satisfaction ofthe environmental benefitprinciple and the other integrity principles applicable to trading programs will tend to demonstrate that a trading program will do no worse than maintain existing airquality. Accordingly, EPA has determined that discretionary EIPs that are consistent with the EIP Guidance are consistent with section 

### 110(1): Congress didnotaddress specific requirementsfor EIPs in the CAA. Consistentwith our mandate, the EPA has interpretedwhatan EIP shouldcontain in orderto meetthe requirements of the CAA. This document is a guidance documentthatsetsforth EPA's non-bindingpolicy for EIPs. This documentdoes notrepresent final EPA action on the requirementsforEIPs. Rather, this document identifies severaldifferenttypes of economic incentiveprograms, andproposes elementsfor each type that, 

### if met, EPA currently believes wouldassure thattheprogram wouldmeetthe applicable CAA provisions. The guidancephrases these elements in the imperative

- that is, using the terms "must" or "shall". This is done only to signifYthatEPA wouldpropose to approve a SIP submittalof aprogram containing the indicatedelements on grounds that undersection 110(/) of the CAA, the SIP revision does notinterfere with any applicable requirementconcerningattainment, reasonablefurtherprogress, orany otherapplicable requirement. (ElP Guidance, section 1.9). Thus, ifthe EBTA program is consistent with the EIP Guidance it will satisfY section 

### 110(1). As explainedthroughout 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 ofTexas 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 systemto distribute allowances for use by electric generating facilities. The TCEQ created the EBTA Programto 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 overthe life ofthe



### 84program, from 2003 to 2009.3 It is evident that in each control period the number ofallowances 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 stateprograms have also assisted in driving emission reductions (forexample new NOx RACT requirements, CAIR, the Acid Rain Program, and the MECT in HGB). Because ofthese more stringent federal and state programs that have beenpromulgated since 2003, the EBTA actual emissions are not expected to increase into the future. Ratherthe actual emission trend is expected to continue decreasing. Therefore, we conclude that the EBTA program is functioning as designed and provides significantNOx and 

### 802 emissionreductions to Texas. 

### IE'

. A fEBTANO All T bl V G 1 C

a e - ompansono x owances 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 AtulE

.. fEBTA 

### 80 All 

### T bl VG2 C

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 otherparticipating EGF in the same region, we must review whetherthe 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 underthe 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 providedthe raw dataused in Ihis seclion 110(1) analysis viaemail onSeplember28.2010.This datais available forreview in Ihe rulemaking dockel forthis aclion. 4 As noledpreviously. Ihe EI Paso Region is nol partofIhis rulemaking aclion and will nol be further analyzed for seclion 110(1) compliance.
85

### atotal 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 eitherwithin the same nonattainmentarea or from attainment county to attainment county. S02 trading inthe East Texas Region is even less robust. Only 10 trades have occurred during the 2003 through 2009 control periods, accounting for 186,836 tons ofS02. Additionally during this time, no counties in the East Texas Region have been designated nonattainment for S02. Therefore, EPA concludes thattrading in the East Texas region pursuantto the requirements of the EBTA program does not interfere with attainmentorreasonable 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 hadthe opportunity to freely trade NOx EBTA allowances underthe program. Analysis ofthe trading history in the West Texas region shows minimal trading activity. Ofthe 93 total EBTAtrades logged during the 2003 through 2009 control periods, only 33 trades occurred inthe West Texas Region, accounting for atotal of7,920 tons ofNOx. Additionally, during the time that the EBTA program has been operating no areas in the WestTexas region have become nonattainment areas for either ozone orN02. Therefore, EPA concludes that trading inthe West Texas region pursuantto the requirements ofthe EBTA program does not interfere with attainment orreasonable progress or any otherapplicable requirement ofthe Act. General Program Safeguards The TCEQ also has built an auditmechanism into the EBTA program to provide a safeguard againstthe EBTA program interfering with attainment. The audit evaluates the impact ofthe EBTA program on the state's ozone attainment demonstration. Ifany problems are identified, the TCEQ Executive Directorwill take prompt action to remedy the situation, including suspending trading in whole orpart.

86

### VI. Conclusion The technical analysis provided 

### in the preceding sections has compared the applicable sections ofthe CAA, 40 CFRPart 51, and EPA's EIP Guidance to TCEQ's January 3, 2000 revisions to the Texas SIP establishing the EBTAprogram. This technical analysis also reviewedthe subsequentrevisions 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 onJanuary 3, 2000, is consistent with the CAA, 40 CFRPart 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 withthe CAA, 40 CFRPart 51, and the EIP Guidance. This review did not address 101.337 atthe request ofTCEQ. It is recommendedthat 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 impactto attainment or maintenance in Texas.

87