UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

 REGION IX

 75 Hawthorne Street

 San Francisco, CA 94105

April 11, 2006 

Dr. Barry Wallerstein 

Executive Officer 

South Coast Air Quality Management District 

21865 E. Copley Drive 

Diamond Bar, CA 91765 

 RE: Proposed NSR Offset Tracking System 

Dear Dr. Wallerstein: 

 I am writing in response to your letter dated February 24, 2006 requesting EPA review of 

the District’s recently Revised NSR Offset Tracking System, a copy of which was provided with 

the letter. We appreciate the many hours your staff has spent to develop an approvable NSR 

Offset Tracking System. 

 We have reviewed the District’s proposed Revised NSR Offset Tracking System and 

believe the system now addresses underlying historical issues, such as the use of pre-1990 

credits, credit for the District’s BACT discount, the need to adjust “aging” credits retained in the 

system, and proper crediting and debiting of credits into and out of the NSR Offset Tracking 

System. In addition, the District and EPA have agreed to a list of permitting actions that will 

either add credits to the Tracking System (i.e. unclaimed orphan shutdown credits that have 

undergone a QA/QC process) or debit credits to provide the necessary offsets required by the 

federal Clean Air Act, but not required by the District’s NSR regulations (i.e. specified 

exemptions from NSR offset requirements). 

 In addition the District has agreed to perform an annual two-part equivalency 

determination to demonstrate the system contains a positive balance, indicating the District has 

provided an equivalent number of credits as would have been required under Federal regulations. 

The first part of the equivalency determination will assume a worst case scenario by subtracting 

all of the previous years’ debits (offset credits provided by the District) from the NSR Offset 

Tracking System balance, without adding any offset credits that became creditable during the 

same time period. If the Tracking System shows a negative balance, a second final 

determination will be made using all eligible credits and debits from the previous year. If the 

District is unable to make this second demonstration, then the District will take specific actions 
to bring the NSR Offset Tracking System back into balance. Each of these provisions will be 

reflected in the District’s new tracking rule, planned for adoption later this year. 

 We believe that adoption of a rule codifying the Revised NSR Offset Tracking System 

will provide a mechanism to ensure an equivalent amount of federal offsets are provided 

annually, in lieu of offsets that would otherwise be required under the federal Clean Air Act. 

EPA understands that the District will proceed by taking this proposal through the rulemaking 

process, including a public workshop and adoption by your Governing Board. We look forward 

to continuing working with your staff as you proceed with the adoption of a Revised NSR Offset 

Tracking System rule. 

 Please contact Laura Yannayon at (415) 972-3534 if you have any other questions related 

to this matter. 

 Sincerely, 

 Original signed by Matt Haber for 

 Deborah Jordan 

 Director, Air Division 

cc: Peter Greenwald, Senior Policy Advisor, SCAQMD 

 Moshen Nazemi, Assistant Deputy Executive Officer, SCAQMD 

 Mike Tollstrup, Chief of Project Assessment Branch, ARB