PROPOSED AMENDMENT OF

RULE 5 02

, NEW SOURCE REVIEW

STAFF REPORT

Executive Summary

Placer County Air Pollution Control District’s (District) New Source Review (NSR) Rule

502 was rescinded and re

- adopted on February 11, 2010

, in order to obtain approval of the United States Environmental Protection Agency (EPA) and the California Air Resources Board (ARB) for incorporation into the State Implementation Plan (SIP)

. Prior to adoption, staff ha d worked with these agencies and believed the pro posed rule would be approvable. Upon legal review of the rule by EPA most of the rule was approved but

some deficiencies were cited that need to be addressed before the rule can fully be approved into the SI P

. EPA’s action was published in the Federal Register on July 27,

2011

, on page 44809. EPA prepared a Technical Support Document (T SD ) which gives

the basis for the limited approval, limited disapproval. The T SD is included as an

attachment to this staff r eport.

The limited disapproval resulted from two main deficiencies:

**•** Using the term “legally and practically enforceable” without a definition instead

of the EPA defined term “federally enforceable”; and

**•** Omission of a provision in the rule that requires a source that becomes major, or has a major modification, solely due to a relaxation of a n enforceable limit , to apply the NSR requirements as though construction had not yet commenced on

the source or modification.

The proposed amendments to Rule 502 to remove these deficiencies are:

**•** Add a definition of “federally enforceable” and use that term in the text of the

rule where “practically enforceable” or “legally and practically enforceable” had been used; and

**•** Add a paragraph that addresses when a source becomes major or has a major modification solely due to a relaxation of a n enforceable limit to apply NSR as though construction had not yet commenced; and

**•** Add definition s for the terms “commence”, “necessary preconstruction approvals or permits”, and “begin actual construction”, which are all used in the newly added paragraph noted above.

Since the final rulemaking action, EPA pointed out that in section 304.1, Potential Visibility Impacts

, there is no guidance as to when the APCO should consult with the Federal Land Manager concerning a new major source or major modification that mayRule 502, NEW SOURCE REVIEW Staff Report

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impact visibili ty in a Class I area. Criteria w ere a dded to this section and a definition of

Class I Area was added to the definition section of the rule.

The Federal Re gister notice states that sanctions will be imposed on the District unless EPA approves a subsequent SIP revision that corrects the rule deficiencies withi n 18 months of August 26, 2011. Since the District is not able to control EPA’s schedule, staff is pr oceeding wi th this amendment expeditiously in order to give EPA sufficient time to

meet this deadline.

Discussion of Proposed Amendments

Rule 502

, New Source Review

, was adopted by the District Board on February 11, 2010

, and submitted to EPA via the ARB by a letter dated July 20, 2010

, for a revision of the California State Implementation Plan. There was not a NSR version of Rule 502 in the SIP prior to the limited approval of this amendment ( a previous Rule 508, circa 1979/1980, dealt with NSR.)

. In a F ederal Register announcement on August 27, 2011, EPA approved the bulk of Rule 502 for incorporation into the SIP, with disa pproval of

several minor items. The limited disapproval does not prevent the District from enforcing the rule as federally enforceab le.

One of the issues is federal enforceability of Rule 502. The rule submitted for incorporation into the SIP used several different terms in different places when referring to enforceability, such as “federally enforceable”, “legally and practically enf orceable”, “practically enforceable ”, and “enforceable”. EPA has commented that by not using the term “federally enforceable” consistently and by not defining exactly what that means creates a program deficiency since it does not ensure the legal en forceab ility that is required.

EPA defines “federally enforceable” in 40 CFR 51.165 as:

“ xiv) Federally enforceable means all limitations and conditions which are enforceable by the Administrator, including those requirements developed pursuant to 40 CFR parts 60 and 61, requirements within any applicable State implementation plan, any permit requirements established pu rsuant to 40 CFR 52.21 or under regulations approved pursuant to 40 CFR part 51, subpart I, including operating permits issued under an EPA

- approved program that is incorporated into the State I mplementation P lan and expressly requires adherence

to any per mit issued under such program. ”

The rule amendment defines “federally enforceable” exactly as stated above and is

inserted in the rule in each instance where enforceable is used.

The second deficiency in Rule 502 noted by EPA is to provide a provision pursuant to 40 CFR 51.165(a)(5)(ii) which requires a new source review for a source or modificationRule 502, NEW SOURCE REVIEW Staff Report

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which becomes major due to a relaxation in a federally enforceable limit

. Such sour ces and modifications are subject to new source review “as though constr uction had not yet

commenced”. This regulation states:

“ At such time that a particular source or modification becomes a major source or major modification solely by virtue of a relaxa tion in any enforcement limitation

which was established after (date of adoption) , on the capacity of the source or modification otherwise to emit (list NA pollutants) or its precursor, such as a restriction on hours of operation, then the requirements of this rule shall apply to the source or modification as though construction had not yet commenced on the

source or modification. ”

The proposed rule amendment inserts a similar statement in to section 102, Applicability

. The wording was modified slightly to be more readable:

“ If any source or modification becomes a major source or major modification solely by virtue of the relaxation of any limitation that was established after August 7, 1980, on the capacity of the source or modification to emit a federal

n onattain ment pollutant or its precursor such as a re striction on hours of operation, then t he requirements of this rule shall apply to such a source or modification as though construction had not yet commenced on the source or

modification. ”

A number of n ew terms are introduced through the abo ve statement which needs to be

included in the definition section of the rule

. “Commence” is defined by EPA in 40 CFR

51.165 and is similarly defined in the rule:

Commence as applied to construction of a major station ary source or major modification means that the owner or operator has all necessary preconstruction approvals or permits and either has:

**•** Begun, or caused to begin, a continuous program of actual on

- site construction of the source, to be completed within a reasonable time; or

**•** Entered into binding agreements or contractual obligations, which cannot be canceled or modified without substantial loss to the owner or operator, to undertake a program of actual construction of the source to be completed

within a r easonable time.

The definition of commence brings in two other new terms that will require definitions; “Necessary preconstruction approvals or permits” and “Begin actual construction”. Both

of these terms are d efined by EPA in 40 CFR 51.165. The propose d amendment of Rule 502 uses almost identical wording :

“ 207 BEGIN ACTUAL CONSTRUCTION: Initiation of physical on

- site

construction activities on an emissions unit which is of a permanentRule 502, NEW SOURCE REVIEW Staff Report

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nature. Such activities include, but are not limited to, installation of building supports and foundations, laying of underground pipework, and construction of permanent storage structures

. With respect to a change in method of operation that does not involve a p hysical change, this term

refers to those on

- site activities, other than preparatory activities, which mark the start of the change in the method of operation

. ”

“234 NECESSARY PRECONSTRUCTION APPROVALS OR PERMITS: Federal air quality control laws and reg ulations and those air quality control laws and regulations which are part of the SIP. ”

EPA also later commented that the definition of “Significant” contains a small error

. “Significant” defines the emissions increase level of a modification at a major s ource that

is c onsidered a major modification. New source review for major modifications is performed using the federal gu idelines portions of this rule. Smaller modifications are handled using the “state

- only” or mino r source portions of this rule. “Signi ficant” is defined by EPA in 40 CFR 51.165 (a)(1)(x)(A), (B), and (C)

. The current rule defines “Significant” for NOx and VOC as 40 tons per year (tpy). This is correct for serious

ozone non

- attainment classification, but the District is now classified as “severe” non

attainment, so the correct significant level is 25 tpy for NOx and VOC. This value is

corrected in this amendment.

Federal requirements (40 CFR 51.307) require that the APCO consult with the Federal Land Manager of a Class I area on a propos ed new major source or major modification that may impact visibility in a Class I area. The regulations, however, don’t set any specific criteria as to when visibility may be impacted. The District must develop

consistent criteria for when such a consultat ion is required. Language has been added to

section 304.1 of Rule 502 to set the criteria. The proposed section reads:

“304.1 Potential Visibility Impacts: The APCO shall consult with the Federal Land Manager on a proposed major stationary source or majo r modification that may impact visibility in any Class 1 Area, in accordance

with 40 CFR 51.307 if the net emissions increase from the new or modified source exceeds 10 tons/year of PM2.5, 15 tons/year of PM10, or 40 tons/year of NOx; and the location of t he source, relative to the closest boundary of a specified federal Class I area is within 20 miles. ”

These criteria are similar to those used in the New Source Review rule of the South Coast Air Quality Management District, wh ich has received EPA approval

. It is unlikely that this consultation will ever be required in Placer County since there are currently no Class I areas in the County, and the only Class I area within 20 miles of County boundaries is

the Desolation Wilde rness Area in El Dorado County. Tahoe City is t he only Placer County city withi n this 20 mile range

. Most major sources are located in industrial areas,Rule 502, NEW SOURCE REVIEW Staff Report

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thus it would be unlikely for a new major source to locate in Tahoe City or in the

mountainous rural area included in the 20 mile range

.

This discussion of visibility impacts on Class I areas requires that Class I areas be defined

so there is no confusion as to what it means. The following definition is added to the

definition section of the rule:

“ CLASS I AREA: Any area listed as Class I in 40 CFR 81.405 or an area otherwise specified as Class I in the legislation that creates a national monument, a national primitive area, a national preserve, a national recreational area, a national wild and scenic river, a national wildlife refuge, a n ational lakeshore or

seashore. The only designated Class I area within 20 miles of Placer County as of October 13, 2011 was Desolation Wilderness Area in El Dorado County. ”

Fiscal Impact

The proposed amendment of Rule 502 should have no fiscal impact on permit applicants as compared with evaluations done under the current version of the rule. The addition of a provision which requires NSR for a source or modification which becomes major solely due to a relaxation in a permit condition should not have a fiscal impact because NSR would be required by other provisions of Rule 502.

The addition of the definition of “federally enforceable” should not have a fiscal impact because the rule is already enforceable.

Analysis and Findings

The following Analysis and the subsequent Findings are intended to address the requirements set forth in the Health and Safety Code relating to adoption of a new or amended District Rule, as well as other State statutes referenced herein.

Cost

- Effectiveness of a Control Measur e

California Health & Safety Code (H&S) Section 40703 requires a District to consider and make public “the cost

- effectiveness of a control measure”. Since the amendment of Rule 502 has no cost impact on the public or permit applicants, there is no cost

- effectiveness

related to this action.

Socioeconomic Impact

H&S Section 40728, in relevant part, requires the Board to consider the socioeconomic impact of any new rule if air quality or emission limits are significantly affected. However,

Districts with a population of less than 500,000 persons are exempted from theRule 502, NEW SOURCE REVIEW Staff Report

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socioeconomic analysis. In 20 10 , the population of Placer County was approximately 348,432 persons.

California Environmental Quality Act (CEQA)

Proposed amended Rule 5 02 is not an activ ity that may cause a direct or reasonably foreseeable indirect physical effect in the environment therefore not considered a “project”, as defined by Section 21065 of the California Public Resource Code and Section 15378(b) (4)&(5) of the CEQA guidelines. A CEQA analysis is therefore not necessary.

The amendments to Rule 502 are changes to bring the current rule into compliance with the

federal Clean Air Act.

Findings

A. Necessity

– The amendment of Rule 5 02 is necessary in order to obtain federal

and state recognition the District’s New Source Review rule in the SIP.

B. Authority

– California Health and Safety Code, Sections 40000, 40001, 40701, 40702, and 40716 are provisions of law that provide the District with the authority to adopt this amended Rule.

C. Clarity

– There is no indication, at this time, that the proposed Rule is written in such a manner that persons affected by the Rule cannot easily understand

them.

D. Consistency

– The regulation is in harmony with, and not in conflict with or

contra dictory to, existing statutes, court decisions, or state or federal regulations.

E. Non

- duplication

– The regulation does not impose the same requirements as an existing state or federal regulation.

F. Reference

– All statutes, court decisions, and other provi sions of law used by PCAPCD in interpreting this regulation is incorporated into this analysis and this finding by referen ce.

Attachment to Staff Report: Strikeout copy of Rule 502 New Source Review