UPDATES TO BAAQMD

NEW SOURCE REVIEW AND TITLE V PERMITTING PROGRAMS

REGULATION 2; RULES 1, 2, 4, AND 6

(INCORPORATING STATIONARY SOURCE CONTROL MEASURE SSM-16)

FINAL STAFF REPORT

SEPTEMBER 26, 2012

ACKNOWLEDGEMENTS

The Proposed Amendments to the New Source Review and Title V permitting regulations of the Bay 

Area Air Quality Management District that are addressed in this Staff Report are the result of the 

collaborative efforts of many District staff members and consultants, with input from representatives of 

the regulated community and of environmental organizations, representatives of other governmental 

agencies, interested members of the public, and others. Air District Staff wish to acknowledge the 

participation of all those who took part in the development of these Proposed Amendments and to 

thank them for their input.

The District rule development team with primary responsibility for drafting the Proposed Amendments, 

and this Staff Report, included the following District staff members:

Alexander “Sandy” Crockett, Esq., Assistant Counsel (principal author)

Jim Karas, Director of Engineering Greg Stone, Manager, Engineering Projects Section

Brenda Cabral, Supervising Air Quality Engineer M.K. Carol Lee, Senior Air Quality Engineer

 

NSR AND TITLE V UPDATES STAFF REPORT | TABLE OF CONTENTS i

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY...................................................................................1

II. BACKGROUND ON NEW SOURCE REVIEW AND TITLE V PERMITTING.................5

A. Overview of New Source Review and Title V: Comprehensive Permitting 

Programs For Stationary Sources of Air Pollution ........................................................ 5

1. What Are New Source Review and Title V Permits?..................................................... 5

2. What Types of Facilities and Sources are Regulated Under These Permit 

Programs? ..................................................................................................................... 6

3. What Types of Air Pollution Are Regulated Under These Permit Programs? .............. 7

4. What Do These Permit Programs Require of Regulated Facilities? ............................. 7

5. How Do These Permit Programs Relate to Other District Regulatory 

Programs? ..................................................................................................................... 8

6. Why Are Updates To These Permitting Programs Necessary At This Time?.............. 10

B. Regulatory Framework for New Source Review and Title V 

Permitting Requirements ......................................................................................... 10

1. “Cooperative Federalism”: The Overlapping System of Federal and State 

Regulation of Air Quality............................................................................................. 10

2. “New Source Review” (NSR) Permitting ..................................................................... 12

a) Federal NSR Requirements.................................................................................... 13

i. THE DISTINCTION BETWEEN “NON-ATTAINMENT” AREAS AND 

“ATTAINMENT” AREAS......................................................................................................................13

ii. “NON-ATTAINMENT NSR” FOR NON-ATTAINMENT AREAS .....................................................14

iii. “PREVENTION OF SIGNIFICANT DETERIORATION” (PSD) FOR 

ATTAINMENT AREAS..........................................................................................................................15

iv. “MINOR” NSR .....................................................................................................................................17

b) State Law Requirements....................................................................................... 17

i. STATE REQUIREMENTS FOR NSR PERMITTING...........................................................................17

ii. SB 288 AND THE PROHIBITION ON RELAXING DISTRICT NSR RULES. ..................................18

3. Title V “Major Facility Review” Permitting ................................................................. 18
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C. Current Status of the Air District’s New Source Review and Title V Permit 

Programs.................................................................................................................. 19

III.RECENT REGULATORY DEVELOPMENTS NECESSITATING REVISIONS TO THE 

DISTRICT’S NSR AND TITLE V PERMITTING RULES.........................................21

A. EPA’s Designation of the Bay Area as “Non-Attainment” of the Short-Term 

Federal Air Quality Standard for PM2.5 ...................................................................... 21

B. EPA’s Addition of Greenhouse Gases as a Pollutant Regulated Under the New 

Source Review and Title V Programs......................................................................... 22

C. Need for EPA-Approved “Prevention of Significant Deterioration” Provisions in 

District Regulations.................................................................................................. 23

D. Additional Deficiencies Identified by EPA Region IX Staff Review .............................. 23

E. Issues Identified by District Staff That Need To Be Addressed ................................... 24

F. Need to Clarify and Simplify District Regulatory Language ........................................ 24

IV. DETAILED ANALYSIS OF PROPOSED REGULATORY REVISIONS.....................25

A. Proposed Revisions to Regulation 2, Rule 1 – General Permit Requirements ............. 25

1. Definitions of “Modify” and “Alter” – Sections 2-1-233 and 2-1-234 ........................ 25

a) Clarification of Current “Modification” Test (Increase In Potential to Emit) 

– Section 2-1-234.1 ............................................................................................... 26

b) Addition of “Federal Backstop” Provision Required By Change in EPA 

Policy – Section 2-1-234.2..................................................................................... 31

2. Addressing PM2.5 and “Condensable” Particulate Matter in District Permitting 

Programs – Sections 2-1-229, 2-1-241, 2-1-603, 2-1-604 and 2-1-605 ...................... 34

3. Temporary Permits under the Accelerated Permitting Program –

Sections 2-1-302.2 and 2-1-106.................................................................................. 40

4. Permitting of Portable Combustion Equipment – Sections 2-1-413 

and 2-1-105................................................................................................................. 43

5. Clarification of Requirements for Permit Applications – Sections 2-1-402 and 

2-1-202........................................................................................................................ 46
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6. Compliance with Material Representations in Permit Applications –

Section 2-1-320........................................................................................................... 47

7. Compliance with State Implementation Plan and Other Applicable 

Requirements – Section 2-1-321 ................................................................................ 47

8. Effect of Explanatory Notes in Regulation Text – Section 2-1-130............................. 48

9. Applicability of General Provisions in Regulation 2 – Section 2-1-102....................... 48

10. Clarification of Exemption Provisions......................................................................... 49

a) Sources Not Subject to District Rules – Section 2-1-103 ....................................... 49

b) Agricultural Sources Engaged in Biomass Composting –

Section 2-1-113.1.2 ............................................................................................... 49

c) Space Heaters – Section 2-1-113.2.14 .................................................................. 50

d) Combustion Equipment Mobile Sources – Section 2-1-114 .................................. 50

e) Low-Usage Wipe Cleaning – Section 2-1-118.9 .................................................... 51

f) Graphic Arts Operations – Section 2-1-119.5 ....................................................... 51

g) Modification, Replacement and Installation of Fugitive Components –

Section 2-1-128.21 ................................................................................................ 51

11. Exemption Backstop Provision – Section 2-1-318 ...................................................... 53

12. Timeline for Final Action on Permits – Sections 2-1-408 and 2-1-411 ....................... 53

13. Including Fugitive Emissions in Regulatory Determinations – Section 2-1-308 ......... 54

14. Amendments to Definitions........................................................................................ 54

B. Proposed Amendments to Regulation 2, Rule 2 – New Source Review ...................... 56

1. Non-Attainment NSR Requirements........................................................................... 57

a) Pollutants to Which Non-Attainment NSR Requirements Apply........................... 57

b) District “Best Available Control Technology” Requirement –

Section 2-2-301 ..................................................................................................... 58

c) Offsets Requirements – Sections 2-2-302 and 2-2-303......................................... 60

i. SECTION 2-2-302: NOX AND POC OFFSETS................................................................................61

ii. SECTION 2-2-303: SO2 AND PARTICULATE MATTER OFFSETS ...............................................65

iii. ACCOUNTING FOR CARGO CARRIER EMISSIONS AND “RELATED SOURCE”

EMISSIONS............................................................................................................................................68
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iv. POLICY CONSIDERATIONS REGARDING THE USE OF EMISSIONS BANKING 

IN IMPLEMENTING THE OFFSETS REQUIREMENTS......................................................................68

d) Compliance Certification – Section 2-2-309.......................................................... 70

e) Alternatives Analysis............................................................................................. 70

f) Procedural Requirements...................................................................................... 71

2. Prevention of Significant Deterioration (PSD) Requirements .................................... 71

a) General Approach: Incorporation by Reference of the Substantive 

Elements of the Federal PSD Program.................................................................. 72

b) Applicability: “PSD Projects” as Defined in Section 2-2-224 ................................. 74

c) PSD “Best Available Control Technology” Requirement – Section 2-2-304 .......... 76

d) PSD Source Impact Analysis Requirement – Section 2-2-305 ............................... 77

e) PSD Additional Impacts Analysis Requirement – Section 2-2-306........................ 78

f) PSD Class I Area Requirements – Section 2-2-307 ................................................ 79

g) Procedural Requirements...................................................................................... 80

3. Other Provisions of Regulation 2, Rule 2 .................................................................... 80

a) NAAQS Protection Requirement (Modeling of Air Quality Impacts for NonPSD Sources) – Section 2-2-308............................................................................. 81

b) Compliance Review For Issuance of Permit to Operate – Section 2-2-310........... 86

c) Public Notice and Public Participation Provisions – Sections 2-2-401 

through 2-2-408 .................................................................................................... 87

d) Other Administrative Requirements – Sections 2-2-409 through 2-2-414 ........... 88

e) Post-Construction Monitoring – Section 2-2-501.................................................. 90

f) Monitoring and Modeling Procedures – Sections 2-2-601 & 2-2-602 .................. 91

g) Emissions Calculation Procedures – Sections 2-2-603 through 2-2-611............... 91

i. CALCULATING EMISSIONS INCREASES AND DECREASES: THE NSR

“ACTUAL-TO-POTENTIAL” APPLICABILITY TEST FOR EMISSIONS 

INCREASES............................................................................................................................................91

ii. CONSIDERATIONS REGARDING USE OF EPA’S “NSR REFORM”

EMISSIONS INCREASE CALCULATION METHODOLOGIES ............................................................98

iii. CALCULATING THE AMOUNT OF AN EMISSION REDUCTION CREDIT .................................... 105
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iv. CALCULATING A FACILITY’S EMISSIONS OFFSETS OBLIGATIONS.......................................... 106

v. ADDRESSING CARGO CARRIER AND FUGITIVE EMISSIONS IN NSR

CALCULATIONS ................................................................................................................................. 112

h) Definitions – Sections 2-2-201 through 2-2-227 ................................................. 113

i) General Provisions – Sections 2-2-101 through 2-2-103..................................... 115

j) Provisions Removed from Current Regulation 2, Rule 2 ..................................... 116

C. Proposed Revisions to Regulation 2, Rule 4 – Emissions Banking ............................ 117

D. Proposed Revisions to Regulation 2, Rule 6 – Title V “Major Facility Review” .......... 121

1. Addition of GHGs to Title V Permit Program ............................................................ 121

2. Implementation of the “Case-by-Case MACT” Requirement Through 

Title V Permitting ...................................................................................................... 124

3. Updates to Definitions.............................................................................................. 125

E. Effective Date of Proposed Amendments and Transitioning to New Regulatory 

Requirements......................................................................................................... 126

V. REGULATORY ANALYSES............................................................................129

A. Environmental Impact Report Prepared under the California Environmental 

Quality Act............................................................................................................. 129

B. Findings and Assessments Under Health & Safety Code Sections 40727 and 

40728.5.................................................................................................................. 129

VI. RULE DEVELOPMENT PROCESS AND INPUT FROM INTERESTED 

 MEMBERS OF THE PUBLIC.....................................................................135

VII. CONCLUSION.......................................................................................137

 

NSR AND TITLE V UPDATES STAFF REPORT | SECTION I – EXECUTIVE SUMMARY 1

I. EXECUTIVE SUMMARY

Staff of the Bay Area Air Quality Management District (Air District or District) are proposing amendments 

to the Air District’s “New Source Review” (NSR) and “Title V” permitting programs. The New Source 

Review and Title V programs are important air pollution permitting programs that the Air District 

implements under the federal Clean Air Act and California’s clean air laws. Air District Staff are 

proposing updates to these permitting programs to reflect recent regulatory developments, as well as to 

enhance and strengthen the programs’ effectiveness. This Staff Report provides a detailed explanation 

of the Proposed Amendments and the reasons why they are necessary.

The Air District’s NSR and Title V programs that are the subject of the Proposed Amendments are set 

forth in District Regulation 2. The New Source Review program is contained in Regulation 2, Rule 2, 

along with additional provisions in Regulation 2, Rule 4 that help implement the program’s emission 

“offsets” requirements. The Title V program is contained in Regulation 2, Rule 6. Both programs also 

rely on provisions in Regulation 2, Rule 1, which contains general requirements applicable to all District 

permitting. The Proposed Amendments make revisions to these four Rules in Regulation 2. The

permitting programs involved are described in greater detail in Section II of this Staff Report. 

Air District Staff have developed these Proposed Amendments to update the District’s NSR and Title V 

programs to address a number of recent regulatory developments. The principal revisions to the 

District’s current permitting rules that will be made to address these recent developments include the 

following:

 ADDING NSR PERMITTING REQUIREMENTS FOR FINE PARTICULATE MATTER (PM2.5). First, the District needs 

to incorporate new federal requirements for fine particulate matter (particulate matter with a 

diameter of less than 2.5 microns, or “PM2.5”) into its NSR permitting program. In 2009, EPA 

designated the San Francisco Bay Area as “non-attainment” of the National Ambient Air Quality 

Standard for short-term (24-hour average) PM2.5 concentrations. Although more recent data show 

that PM2.5 concentrations are now below that standard, the region remains administratively 

designated as “non-attainment” by EPA. The District is taking a number of steps to address this 

situation, including preparation of a PM2.5 “Clean Data Finding” for EPA’s review that addresses 

this more recent air quality data. Adding PM2.5 requirements to the District’s NSR program is 

another measure that the District must take to address the PM2.5 “non-attainment” designation. 

The District committed to updating its NSR program to add PM2.5 requirements as part of 

Stationary Source Measure No. 16 (SSM-16) in its 2010 Clean Air Plan (CAP). The Proposed 

Amendments will add PM2.5 to the category of pollutants that are regulated under the NSR 

program.

 ADDING PERMITTING REQUIREMENTS FOR GREENHOUSE GASES. Second, the District needs to incorporate 

new federal requirements for greenhouse gas (GHG) permitting. In 2011, EPA began regulating 

GHGs under the Clean Air Act, which means that GHG emission sources are subject to NSR and 

Title V requirements. The Air District needs to address this situation and ensure that its NSR and 
2 NSR AND TITLE V UPDATES STAFF REPORT | SECTION I – EXECUTIVE SUMMARY

Title V permitting programs adequately cover GHGs. The Proposed Amendments will add GHG 

permitting requirements so that GHGs are explicitly included in the District’s permitting programs.

 ADOPTING A DISTRICT “PREVENTION OF SIGNIFICANT DETERIORATION” PERMITTING PROGRAM FOR EPA

APPROVAL. Third, the District needs to obtain EPA’s approval of its “Prevention of Significant 

Deterioration” regulations. Prevention of Significant Deterioration, or “PSD”, is an important 

component of federal NSR permitting. For historical reasons, the District has never had an EPAapproved PSD program. Instead, EPA has had to step in and administer PSD permitting in the Bay 

Area under its own federal regulations. Air District Staff have come to realize that this situation is 

unworkable, because it means that facilities in the Bay Area are subject to a confusing system of 

overlapping regulations – District regulations for most aspects of NSR permitting, but federal 

regulations for the PSD element – that are oftentimes similar but are not identical in every 

circumstance. The result has been confusion that has led to delays, inconsistency, and sometimes 

even litigation over exactly what regulatory requirements apply in specific situations. To address 

this concern, the Proposed Amendments will adopt PSD requirements into the District’s 

regulations, which EPA can then approve as effective for PSD permitting in the Bay Area.

 MISCELLANEOUS OTHER UPDATES TO STRENGTHEN NSR AND TITLE V PERMITTING. Fourth, in addition to 

these recent regulatory developments, Air District Staff have identified a number of other areas in 

which the District’s current NSR and Title V programs could be improved to make them more 

effective. Some of these updates are also legally compelled by EPA’s requirements for these 

programs under the federal Clean Air Act. These additional updates include:

• Revising the NSR applicability test for modifications to existing sources to address a 

change in EPA policy on how “modifications” must be defined.

• Adding a “NAAQS Protection” modeling requirement, which will require NSR permit 

applicants to demonstrate through air quality modeling that they will not cause or 

contribute to an exceedance of the National Ambient Air Quality Standards.

• Expanding the public notice and comment requirements for NSR permits so that 

interested members of the public will have a greater opportunity to get involved in

permitting decisions.

Although the District’s current permitting programs are already very comprehensive and robust, 

these revisions will help strengthen them even more and ensure that they fully comply with all 

legal requirements. 

 NON-SUBSTANTIVE LANGUAGE AND ORGANIZATIONAL REVISIONS TO IMPROVE READABILITY. Fifth, the 

Proposed Amendments also include a number of non-substantive changes to the language and 

structure of the current regulations. The regulations have become opaque and unclear in some 

places as they have evolved over the years, with the result that it can be difficult for regulated 

entities, members of the public, and even Air District staff to understand exactly what the 

regulations require in practice. The Proposed Amendments reorganize a number of the regulatory 

provisions involved in these programs – and in particular the NSR program – and revise the 

language that is used in them to make it clearer and easier to understand. These changes do not 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION I – EXECUTIVE SUMMARY 3

alter the substantive requirements of these permitting programs in any way. (The areas where 

the Proposed Amendments make substantive changes are those summarized above.) But they do 

make important changes in the way the regulations are written and presented to ensure that they 

can more easily be implemented by all who will use them. 

This Staff Report provides a detailed background discussion of the reasons for the Proposed 

Amendments. The remainder of the Report is organized as follows. Following this Executive Summary, 

Section II provides a brief review of the purposes of the NSR and Title V permitting programs and how 

they work in practice. Section III then reviews the recent regulatory developments that require the Air 

District to update these programs. Section IV provides a detailed analysis of the specific provisions that 

are affected by the Proposed Amendments, explaining how the Proposed Amendments will affect each 

provision and the reasons why an amendment is necessary. The Report then addresses environmental 

and regulatory impact analyses in Section V, including the Environmental Impact Report that has been 

prepared for the Proposed Amendments under the California Environmental Quality Act. Section VI 

provides an overview of the public outreach and participation process that District Staff undertook to 

engage interested members of the public (including industry representatives and environmental 

organizations) in the development of these Proposed Amendments. 

In addition to this Staff Report, Air District Staff have also published a number of other explanatory 

documents during the rule development process to present the basis for and intent behind the 

Proposed Amendments. District Staff published these documents to explain for interested members of 

the public why the District was developing updates to its NSR and Title V programs and to respond to 

comments that were received on various issues that were raised by the public. These documents are 

discussed further in Section VI, and they are incorporated herein by reference regarding the regulatory 

intent underlying the development of the Proposed Amendments.
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NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 5

II. BACKGROUND ON NEW SOURCE REVIEW AND TITLE V PERMITTING

This section provides a brief overview of the New Source Review and Title V permitting programs, and of 

the legal framework that underlies them. 

A. Overview of New Source Review and Title V: Comprehensive Permitting Programs For

Stationary Sources of Air Pollution

In order to understand the context in which these Proposed Amendments arise, it is important to 

understand the purposes of the Air District’s NSR and Title V permitting programs and how they 

operate. The following discussion outlines these important regulatory programs.

1. What Are New Source Review and Title V Permits?

“New Source Review”, or NSR, is a pre-construction permitting review requirement that ensures that 

when a new source of air pollution is built, or when an existing source is modified, the source will 

implement effective emission control technology and will comply with related regulatory requirements 

pertaining to air emissions. NSR is primarily aimed at ensuring that the region’s air will comply with air 

quality standards that have been established to ensure that concentrations of pollutants in the ambient 

air we breathe remain at safe and healthful levels – the National Ambient Air Quality Standards, or 

“NAAQS”. In addition, the program also addresses other pollutants for which NAAQS have not yet been 

adopted. NSR permitting focuses on projects at the design stage, before construction on the source 

begins, where it easiest and most appropriate to incorporate effective pollution control technology (as 

opposed to having to retrofit a source after it is built). Based upon this pre-construction review, the 

District issues an “Authority to Construct” for the source, which authorizes construction and imposes 

permit conditions to ensure that the source satisfies all applicable regulatory requirements. The Air 

District’s New Source Review

permitting program is contained in

District Regulation 2, Rule 2 (with 

certain additional elements in 

Regulation 2, Rule 4). 

Title V permits, by contrast, are 

operating permits. Instead of 

applying pre-construction like New 

Source Review permits, the Title V 

permit requirement – also known as 

“Major Facility Review” – applies after 

a source is constructed and begins 

operating. Title V permitting does not 

impose any new substantive 

requirements on sources; the 

NSR and Title V are comprehensive permitting programs that 

apply to all stationary sources in the Bay Area that emit more 

than specified threshold amounts of regulated air pollutants.
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substantive requirements to limit emissions are imposed through the pre-construction New Source 

Review permitting process, through the emissions standards and limitations in the District’s regulations, 

and through other applicable legal requirements. Instead, Title V permits compile all of these 

substantive requirements in one single document to improve enforceability, implementation, and 

transparency. The Title V permit thus becomes an important regulatory document covering the facility’s 

operation, providing facility operators, District inspectors, interested members of the public, and others 

with a single location to readily access all of the legal requirements to which the facility is subject. In 

this way, Title V permits aid in enhancing the enforceability of air quality requirements, in ensuring 

compliance with such requirements by the facility, and in providing transparency to the public in how air 

quality regulations are being implemented. The District’s Title V Major Facility Review permitting 

program is contained in Regulation 2, Rule 6. 

2. What Types of Facilities and Sources are Regulated Under These Permit Programs?

Unlike many District regulations, which are aimed at specific types of operations at specific types of 

facilities (e.g., boilers at petroleum refineries, gasoline dispensing nozzles as gas stations, gas turbines at 

power plants, etc.), the New Source Review and Title V permitting programs apply to all sources at all 

facilities that are large enough to exceed the programs’ applicability thresholds. These permitting 

programs therefore affect a wide variety of sources and facilities throughout the San Francisco Bay Area. 

The federal New Source Review and Title V permitting programs have been developed to apply primarily 

to “major” facilities, which are generally facilities with the potential to emit over 100 tons per year of 

regulated air pollutants.

1

 This is a fairly high threshold in most instances, corresponding to large 

industrial facilities such as refineries, power plants, or large factories. There are currently approximately 

100 such “major” facilities in the Bay Area. 

Under California law and District regulations, however, several important elements of New Source 

Review permitting are applied at much lower thresholds. The District implements one of the most 

important requirements of the New Source Review program – the requirement to use the “Best 

Available Control Technology” (BACT) to control air emissions – for all sources that emit 10 pounds per 

day or more of certain important air pollutants. The District implements another important NSR 

requirement – the requirement to “offset” any new emissions increases through shutdowns of existing 

sources elsewhere to ensure an overall no-net-increase in emissions from such sources – at facilities that 

emit 10 tons per year or more of ozone precursors. These applicability thresholds are considerably

lower than the 100 ton-per-year “major” facility threshold, and so the requirements apply to a much 

 

1

The “major” facility threshold is 100 tons per year in most instances, although in certain circumstances a different 

threshold applies. For example, for certain types of facilities a 250-ton-per-year threshold is used for PSD. The 

major facility thresholds are discussed in more detail in Sections II.B. and IV.B.2. below. In addition, the federal 

NSR program requires permitting for facilities below the “major” facility threshold – which EPA calls “minor NSR” 

permitting – but the important substantive requirements of the federal NSR program apply to these “major” 

facilities. This Staff Report refers to the federal NSR program to mean the requirements applicable to major 

facilities, except where specifically noted. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 7

larger category of facilities than the “major” facilities noted above. There are approximately 8,000

operations in the Bay Area that are subject to such permitting requirements. 

The Proposed Amendments will update the NSR and Title V permitting programs, and so they could 

potentially affect any or all of these facilities. Many aspects of these permitting programs are not being 

changed, however, so for many of these facilities they will not actually see any change in how the 

regulations apply to them. How the Proposed Amendments will affect any particular facility will depend 

on the facility’s specific circumstances. 

3. What Types of Air Pollution Are Regulated Under These Permit Programs? 

New Source Review and Title V are comprehensive permitting programs that apply to a broad range of 

air pollutants.

The New Source Review program is primarily aimed at helping to attain and maintain the National 

Ambient Air Quality Standards – or “NAAQS” – and so most aspects of this program apply to pollutants 

for which such Standards have been established. These include ozone (which is addressed by regulating 

its precursors, NOx and VOC), particulate matter, carbon monoxide, sulfur dioxide, and others. In 

addition, the program also applies to a number of other regulated air pollutants for which NAAQS have 

not been established, such as hydrogen sulfide and sulfuric acid mist. Greenhouse gases have also 

recently been added by EPA to the pollutants regulated under New Source Review. New Source Review 

does not apply to hazardous air pollutants, however. These are addressed under a number of other 

federal, state and District regulatory programs – including the District’s air toxics permitting program in 

District Regulation 2, Rule 5, and other regulatory initiatives as discussed in the next section – but they 

are not part of the New Source Review program.

The Title V program applies to all of the pollutants regulated under New Source Review, as well as to 

hazardous air pollutants. As noted above, the purpose of the Title V program is primarily procedural in 

nature. Title V permitting helps to improve enforceability, implementation and transparency by 

collecting all applicable air quality requirements into a single permitting document so that they are 

easily accessible by facility operators, Air District staff, interested members of the public, and others. 

Title V permitting therefore encompasses all different types of air pollutants of concern that a facility 

could emit. A full description of all of the different types of air pollutants covered by the District’s Title V 

program is set forth in District Regulation 2-6-222. 

4. What Do These Permit Programs Require of Regulated Facilities?

For facilities that are subject to the NSR permitting requirements, the program requires them to obtain 

an “Authority to Construct” from the Air District before installing a new source or making a modification 

to an existing source at the facility. To obtain the Authority to Construct, the applicant must undergo a 

pre-construction review process to ensure that it will comply with applicable regulatory requirements. 

In summary, the principal elements of this pre-construction NSR review process include the following 

requirements:
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• All sources with emissions over 10 pounds per day must implement the “Best Available 

Control Technology” to control their emissions;

• Facilities with emissions over 10 tons per year of NOx and VOC and 100 tons per of 

particulate matter and SO2 must “offset” any new emissions increases with emission 

reductions elsewhere to ensure a “no-net-increase” in these pollutants;

• For other pollutants, facilities must conduct computer modeling of their emissions to 

evaluate the impact that the emissions would have on ambient concentrations of air 

pollutants, and based on that analysis must demonstrate that the emissions would not 

cause or contribute to a violation of air quality standards; 

• All facilities must comply with important procedural requirements such as notice to 

interested members of the public and the opportunity for them to comment on proposed 

permitting decisions. 

For facilities subject to the Title V requirements, the program requires them to obtain a Title V permit to 

operate through a comprehensive public process. This process is designed to bring transparency to how 

major facilities are permitted and how they ensure that they are complying with air quality 

requirements. The Title V permitting process involves identifying all applicable requirements; ensuring 

that the facility is adequately monitoring its compliance status with respect to all such requirements; 

ensuring that the facility is in fact complying with all such requirements; and compiling all of the 

applicable requirements into a single permitting document, with notice to, and an opportunity to 

comment by, interested members of the public.

The specifics of what these permitting programs require are discussed further in Section II.B., which 

outlines the regulatory framework under which the District implements the programs; and in Section IV, 

which goes through the major elements of these programs in detail in connection with each individual 

revision included in the Proposed Amendments. 

5. How Do These Permit Programs Relate to Other District Regulatory Programs?

New Source Review and Title V are very broad permitting programs, applying to a wide variety of 

sources and emissions. But they are only part of the comprehensive system of federal, state, and 

District regulations that govern air pollution from stationary sources in the San Francisco Bay Area. 

In addition to these two general permitting programs, the District also has other permitting 

requirements in Regulation 2 such as the Toxics New Source Review permitting requirements in 

Regulation 2, Rule 5. This permitting program is aimed at reducing toxic health risks from stationary 

sources. It requires the use the Best Available Control Technology to reduce toxic health risks from 

sources above the applicable thresholds, and prohibits such sources altogether if the health risks would 

be too high. The Toxics New Source Review program acts as an important adjunct to the New Source 

Review program in Regulation 2, Rule 2, which does not cover hazardous air pollutants as noted above. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 9

Beyond the permitting programs in Regulation 2, the District also has a number of specific regulatory 

requirements in its other rules that apply to air pollution from stationary sources. These range from 

restrictions on certain types of activities, such as open burning (Regulation 5) or wood burning in 

fireplaces (Regulation 6, Rule 3), to emissions limits on particular types of equipment and facilities, such 

as commercial cooking equipment (Regulation 6, Rule 2) or boilers and heaters at petroleum refineries 

(Regulation 9, Rule 10). These regulations create industry-specific or activity-specific regulatory 

standards that affected facilities and sources must comply with to reduce air pollution.

There are also a number of state and federal requirements that the District implements for sources in 

the Bay Area. Examples include Airborne Toxics Control Measures (ATCMs) adopted by the California Air 

Resources Board to address toxic health risks from air pollution, and federal New Source Performance 

Standards and National Emissions Standards for Hazardous Air Pollutants adopted by the federal 

Environmental Protection Agency. 

All of these regulatory requirements apply to stationary sources in the Bay Area to create a 

comprehensive system to address all types of air pollution. The District implements these regulatory 

requirements by issuing permits to facilities stating how the requirements apply to each individual 

source, and by inspecting such facilities to ensure that they are complying with all regulatory 

requirements and permit conditions. The New Source Review and Title V permitting programs are 

essential elements in this comprehensive system – although by no means the only elements. 

Finally, in addition to these regulatory requirements aimed specifically at air pollution, there are also 

other general environmental requirements that encompass air quality concerns, such as the California 

Environmental Quality Act (CEQA). CEQA applies any time a governmental agency grants a discretionary 

permit or other authorization for a development project. It requires the agency to consider whether 

there would be any significant adverse environmental impacts from the project, and to disapprove the 

project unless any such impacts can be mitigated or there are significant overriding considerations that 

weigh in favor of approving it. This requirement is normally implemented by a governmental agency of 

general jurisdiction such as a city or county, although in some cases the District implements it where 

there is no other agency involved in the permitting of the project. 

All of these requirements work in concert to protect and improve air quality in the Bay Area by 

regulating emissions from stationary sources.2 New Source Review and Title V permitting are important 

elements in this regulatory tapestry to ensure that all potential air pollution concerns are addressed in 

an appropriate and health-protective manner. 

 

2

In addition to the Air District’s regulatory efforts, the agency also works to improve air quality through nonregulatory efforts such as grants and incentives to encourage voluntary emission reductions, educational initiatives 

to help members of the public understand how they can help achieve clean air through their own healthy choices, 

and other similar efforts.
10 NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING

6. Why Are Updates To These Permitting Programs Necessary At This Time?

The District’s NSR permitting rule has not been updated since 2005, and its Title V permitting rule has 

not been updated since 2006. There have been a number of technical and regulatory developments 

that have taken place since that time. As a result, the Air District needs to revise its regulations to bring 

them up to date. These recent regulatory developments are summarized in more detail in Section III 

below, as well as in Section IV in connection with the specific regulatory provisions that are being 

amended to address them. 

B. Regulatory Framework for New Source Review and Title V Permitting Requirements

The New Source Review and Title V permit programs are governed by a number of federal and state 

requirements that specify certain minimum requirements for what the programs must contain. The 

District’s New Source Review and Title V regulations – and the amendments that Staff are now 

proposing – must satisfy all of these requirements, and the Air Resources Board and EPA will be 

reviewing them to ensure that they comply with all such requirements. These requirements therefore 

form an important legal backdrop for the proposed amendments. In order to understand the context 

for the proposed amendments is it necessary to understand these legal requirements. The following 

discussion describes this legal framework in more detail. 

1. “Cooperative Federalism”: The Overlapping System of Federal and State 

Regulation of Air Quality

Both the New Source Review and Title V permitting programs have their origin in the federal Clean Air 

Act, but they are implemented by the District under state law. That is, the District implements these 

federal requirements for air pollution sources in the Bay Area through regulations that the District 

adopts under the legal authority granted to it under the California Health and Safety Code, a state law. 

In order to understand how these regulatory requirements are implemented, it is necessary to 

understand how this overlapping system of state and federal action – which is often referred to as

“cooperative federalism” – works. 

In the Clean Air Act, the United States Congress established certain minimum permitting requirements 

that it wanted to see implemented in all areas throughout the country. The federal Clean Air Act 

therefore requires that major stationary sources of air pollutants cannot be built or operated without 

permits that satisfy the Act’s requirements. But Congress envisioned that the states would take the lead 

in implementing these requirements and would adopt their own permitting programs under state law to 

do so. Congress intended that the states would use their own regulatory powers under state law to 

establish state-law permitting programs that meet the minimum requirements set forth in the Clean Air 

Act. EPA would then review these state-law permitting programs to ensure that they were sufficiently 

stringent, and then would approve them as satisfying the Act’s minimum requirements. Once EPA has 

approved a state’s program, the state then implements the Act’s requirements through that program,
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 11

and permits issued by the state agency under that program satisfy the federal legal requirements in the 

Clean Air Act. 

This cooperative system provides a number of benefits. One benefit to having the states implement 

these permitting programs is that it relieves the federal EPA of the burden of having to do so all across 

the country. EPA simply does not have the personnel and resources to administer permits for every 

regulated source throughout the United States, and so it makes sense administratively to have state 

regulatory agencies administer the permits for sources in their state. Another benefit is that the states 

can tailor their permitting programs to their own individual needs. Each state can design its own 

permitting program as it sees fit, and can make it more stringent than the federal minimum 

requirements if it so desires, as long as it satisfies the Clean Air Act’s minimum standards. These 

attributes have made the “cooperative federalism” model a successful regulatory policy tool.

Under our federal system, Congress cannot require the states to adopt a particular type of regulatory 

program, as that would impermissibly infringe on the states’ sovereignty to decide for themselves on 

what their own state laws should require. Thus, the Clean Air Act technically does not require the states 

to implement these permitting programs.3 Instead, it uses a number of “carrots” and “sticks” to 

encourage the states to do so. States are eligible for federal highway funds if they cooperate and 

develop permitting programs to implement the Clean Air Act; if they do not, they can lose federal 

highway funding, and 

EPA will step in and 

implement even more 

stringent regulatory 

requirements for sources 

in the state. 

The states have therefore 

cooperated, and for the 

most part they have 

developed their own 

programs to implement

these requirements –

both because of the 

carrots and sticks built 

into the Clean Air Act, 

and also because they 

support the air quality 

goals embodied in these 

Clean Air Act programs.

In the event that a state is unwilling or unable to adopt its own state permitting program, EPA can step 

in and implement the permitting programs itself. In such cases, covered sources must apply to EPA for a 

 

3

See Brown v. EPA, 521 F.2d 827 (9th Cir. 1975). 

The Air District must satisfy multiple state and federal legal requirements 

in adopting or amending NSR and Title V permitting requirements.

BAAQMD NSR 

and Title V 

Regulations

Federal CAA 

Requirements 

(Federal statute and EPA 

regulations)

California Health 

& Safety Code 

Requirements 

(Cal. Clean Air Act, 

SB 288, etc.) Other California 

Requirements for 

Regulatory Action 

(CEQA, open meeting 

laws, etc.)
12 NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING

federal permit, which EPA issues under federal permitting rules set forth in the Code of Federal 

Regulations. There is one element of the Clean Air Act’s permitting requirements relevant to this 

rulemaking – known as “Prevention of Significant Deterioration” – that is currently implemented 

federally by EPA in the Bay Area. This situation is addressed in more detail below, and one goal of the 

proposed amendments to obtain EPA approval of the District’s permitting program in this area so this 

element will be implemented by the District and not EPA.4 

In developing its permitting programs, the District is therefore governed by a number of important and 

overlapping legal requirements. The District is the agency that implements the federal permitting 

requirements of the Clean Air Act, as fleshed out in more detail in EPA’s implementing regulations, and 

so it must ensure that its regulations satisfy those requirements, at a minimum. The District is also a 

state agency subject to the requirements established by the California Legislature in the Health & Safety 

Code – as well as by the California Air Resources Board in its implementation and oversight role – and so 

it must ensure that its regulations satisfy those requirements as well. With this background in mind, the 

remainder of this discussion of the legal framework for the proposed amendments focuses in detail on 

the various federal and state requirements applicable to the District’s NSR and Title V permitting 

programs. 

2. “New Source Review” (NSR) Permitting

The first permit program that the District is addressing in this rulemaking project is the “New Source 

Review”, or “NSR”, program. As noted above, the NSR program focuses on ensuring compliance with 

the National Ambient Air Quality Standards (NAAQS). For pollutants where current air quality exceeds 

these established standards, New Source Review is directed at ensuring that any new development will 

not interfere with efforts to reduce air pollution to healthy levels. For pollutants where current air 

quality meets these standards, New Source Review focuses on ensuring that new development does not 

degrade air quality to the extent that the standards may be violated. The program also aims to minimize 

emissions of other air pollutants for which no standards have yet been established. 

The New Source Review program applies these requirements to new sources, and to modifications or 

expansions of existing sources that will increase air emissions. When a new source or modification is 

built of sufficient size to exceed the NSR applicability thresholds, it is required to implement stringent 

emissions control requirements. The requirements are outlined below.

 

4

Failure by a state agency to have an approved “Prevention of Significant Deterioration” program does not trigger 

the sanctions described above that apply for other elements of Clean Air Act permitting where a state does not 

develop its own permitting program. The Bay Area has therefore not been subject to sanctions historically for 

failure to have an EPA-approved program in this area, which is one reason why this situation has existed thus far. 

The District has found that not having an EPA-approved PSD program has led to a number of problems with 

implementation, however, as described below, which is why staff are now recommending that the District adopt a 

PSD program and seek to have it approved by EPA. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 13

a) Federal NSR Requirements

New Source Review was created under the federal Clean Air Act and is primarily driven by federal 

requirements, although there are also a number of important additional state-law requirements that 

apply. This section addresses the federal requirements that apply to New Source Review. The 

additional state-law requirements are addressed in Section II.B.2.b. below.

i. THE DISTINCTION BETWEEN “NON-ATTAINMENT” AREAS AND “ATTAINMENT” AREAS

The federal NSR permitting program makes an important distinction between (1) pollutants for which 

the region is in “attainment” of the federal air quality standards, and (2) pollutants for which the region 

is “non-attainment” of the federal air quality standards. For a pollutant for which the region is in 

“attainment” of the federal standard, that means that the concentrations of that pollutant measured in 

the ambient air around the region are lower than the maximum healthy levels established by EPA as 

“National Ambient Air Quality Standards” (NAAQS) for that pollutant. For a pollutant for which the 

region is in “non-attainment”, that means that the concentrations of that pollutant measured in the 

ambient air in the region exceed the NAAQS for that pollutant.

5

 The Bay Area is currently designated as 

non-attainment for ozone (smog) and for the short-term standard for PM2.5. The Bay Area is currently 

designated as attainment for all other NAAQS.6 

The federal NSR permitting program imposes somewhat more stringent requirements for nonattainment areas, in recognition of the fact that these areas need to implement more ambitious efforts 

to reduce emissions and bring the area into compliance with the NAAQS. In attainment areas – those 

where the air quality does not exceed the NAAQS – the requirements are somewhat less stringent,

although they are still substantial because it is important to remain proactive even in cleaner areas to 

ensure that the air quality does not deteriorate to the point where pollution exceeds the NAAQS. The 

element of the permitting program that applies for non-attainment pollutants is called “Non-Attainment 

NSR”, while the element that applies in attainment areas is called “Prevention of Significant 

Deterioration” (PSD), which recognizes the emphasis on ensuring that air quality is not degraded in 

these cleaner areas.7 

 

5

Note that multiple NAAQS have been established for some pollutants, and so it is possible to be in attainment of 

one NAAQS and non-attainment of another NAAQS for the same pollutant. This is the situation in the Bay Area 

with respect to fine particulate matter (PM2.5). There are two NAAQS for PM2.5, a short term standard that applies 

to PM2.5 concentrations averaged over any one-hour period and a long-term standard that applies to PM2.5

concentrations averaged over an entire year. The Bay Area is in attainment of the long-term (annual) standard, 

but is designated as non-attainment of the short-term (24-hour) standard. 

6

For a few of the NAAQS, the Bay Area is technically designated as “unclassified” meaning that EPA has not been 

able to make an attainment or non-attainment designation based on available air quality data. For New Source 

Review purposes, unclassified areas are treated in the same manner as attainment areas. This Staff Report 

therefore refers to both attainment and unclassified designations simply as “attainment”.

7

The PSD requirements also apply to regulated air pollutants for which EPA has not established NAAQS, such as 

greenhouse gases. (EPA has recently started regulating greenhouse gases because of their impact on global climate 

change, but it has not established any health-based NAAQS for the maximum amount of greenhouse gases in the 
14 NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING

ii. “NON-ATTAINMENT NSR” FOR NON-ATTAINMENT AREAS

The requirements for Non-Attainment NSR permitting for major sources are set forth in Section 173 of 

the Clean Air Act, with further more detailed requirements specified in EPA’s implementing regulations 

in 40 C.F.R. Section 51.165. The principal elements of Non-Attainment NSR are the following:

• Lowest Achievable Emissions Rate (equivalent to “California BACT”): The Clean Air Act’s NonAttainment NSR provisions specify that NSR permits must require new and modified sources to 

achieve the “Lowest Achievable Emissions Rate”, or “LAER”, for their emissions of nonattainment pollutants. This requirement is specified in CAA Section 173(a)(2). This level of 

control is effectively the most stringent control technology or emissions limitation that has been 

successfully implemented at other facilities of the same type as the one being permitted; or 

which can be feasibly and cost-effectively implemented at the facility, even if it has not yet been 

implemented elsewhere. 

California law requires a similar level of emissions control that it calls “Best Available Control 

Technology”, or “BACT”. This level of control is often called “California BACT”, to distinguish it 

from the level of control that EPA requires for emissions of attainment pollutants under the PSD 

program, which EPA also calls “BACT”. The requirement for non-attainment pollutants is that 

they use a level of pollution control technology that constitutes LAER/California BACT; for 

attainment pollutants, PSD permitting requires federal BACT as discussed below, which is a 

slightly less stringent level of control. 

• Emission Offsets: Non-Attainment NSR also requires that new and modified sources obtain 

emission reductions from existing sources to counter any new emissions increases from the new 

or modified source. These emission reductions from existing sources “offset” the new emissions 

so that will not hinder the region’s efforts to reduce emissions and bring air quality back into 

attainment of the NAAQS. This requirement is specified in CAA Sections 173(a)(1)(A) and 173(c).

• Compliance Certification: Non-Attainment NSR also requires that the permit applicant for a new 

or modified source must certify that all of the facilities that it owns in California are in 

compliance with all applicable air quality regulatory requirements. This requirement is specified 

in CAA Section 173(a)(3).

• Alternatives Analysis: Non-Attainment NSR also requires that the applicant must demonstrate 

that the benefits of the proposed new or modified source outweigh any environmental and 

social costs that would result from its location, construction or modification. This requirement is 

specified in CAA Section 173(a)(5).

• Public Notice and Comment Opportunity: Finally, Non-Attainment NSR requires that the public 

must be notified before any permit is issued for a new or modified source and must be given an 

opportunity to comment on and provide input into the permitting decision. The notice-and-

 

air that we breathe.) For pollutants for which EPA has not established a NAAQS, a region cannot by definition be

non-attainment of a NAAQS for that pollutant.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 15

comment requirements applicable to Non-Attainment NSR permitting are set forth in EPA’s 

regulations in 40 C.F.R. section 51.161.

The San Francisco Bay Area is “non-attainment” for ozone and PM2.5, and so these requirements apply 

for “major” facilities in the Bay Area (i) to NOx and VOC as precursors to ozone formation; and (ii) to 

directly-emitted PM2.5 and to NOx and SO2 as precursors to secondary PM2.5 formation.8 The District has 

long had a Non-Attainment NSR permitting program, set forth in Regulation 2, Rule 2, which has been 

approved by EPA as satisfactorily implementing all of these federal requirements for Non-Attainment 

NSR. The current Proposed Amendments will update the District’s Non-Attainment NSR program to add 

PM2.5 in response to the PM2.5 non-attainment designation. How the Proposed Amendments will satisfy 

all of the applicable Non-Attainment NSR requirements is discussed in detail in Section IV.B.1. below. 

Once the revised Non-Attainment NSR provisions are adopted, the District will submit them to EPA 

(through the Air Resources Board) for approval under the Clean Air Act. 

iii. “PREVENTION OF SIGNIFICANT DETERIORATION” (PSD) FOR ATTAINMENT AREAS

The general requirement for PSD permitting for attainment pollutants is set forth in Section 165 of the 

Clean Air Act. The detailed requirements for how PSD programs must be implemented are specified in 

EPA’s regulations in 40 C.F.R. Section 51.166, however. The principal elements required for PSD 

permitting are the following:

• “Best Available Control Technology” (“federal BACT”): PSD permitting must require new and 

modified sources to implement the Best Available Control Technology for their emissions of 

attainment pollutants. This level of control technology – which is referred to in the District’s NSR 

program as “federal BACT” – is somewhat less stringent than the federal LAER/California BACT 

level of control referred to above, in recognition of the fact that where the region is in 

attainment of the NAAQS for a pollutant the need for stringent emissions controls is not quite as 

important. The principal difference between LAER/California BACT (for non-attainment 

pollutants) and federal BACT (for attainment pollutants) is that federal BACT always 

incorporates a cost-effectiveness element. LAER/California BACT requires that a facility must 

utilize a control technology whenever it has been successfully implemented at a similar 

operation, even if it may be very costly for that particular facility. Federal BACT allows the 

facility to use a less effective control technology in that situation, if the more stringent 

technology would not be cost-effective. The PSD BACT requirement is set forth in 40 C.F.R. 

Section 51.166(j).

• Air Quality Impact Analysis (and related analyses): PSD does not require “offsets” for new 

emissions increases, as is required for Non-Attainment NSR. For PSD pollutants, the region is by 

 

8

In addition, the District has historically applied some of these Non-Attainment NSR requirements to other 

pollutants such as carbon monoxide, even though the Bay Area is not currently “non-attainment” of the NAAQS for 

these pollutants. The Proposed Amendments do not relax this level of regulation for carbon monoxide for a 

number of reasons, most importantly because such a relaxation would be prohibited by state law under SB 288. 

For more information on the SB 288 prohibition on relaxation of existing NSR requirements, see Section II.B.2.b.ii. 

below.
16 NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING

definition not in violation of the NAAQS, and so it can allow a certain amount of additional 

emissions without exceeding the health-based air quality standards. To ensure that any such 

increases do not jeopardize compliance with the NAAQS, however, PSD requires an analysis of 

the impacts that the emission increases will have to ensure that they will not cause or 

contribute to a NAAQS exceedance. In addition, the analysis must show that the increases will 

not consume an air quality “increment”, which is an increase in air pollutant concentrations that 

would constitute impermissible “significant deterioration” in air quality. PSD also requires an 

analysis of whether such increases will adversely affect visibility, soils or vegetation in the 

region; and any air-quality related values in areas of special environmental value such as 

National Parks (called “Class I Areas”). These impact analysis requirements are set forth in 40 

C.F.R. Sections 51.166(k)-(p).

• Public Notice and Comment Opportunity: As with Non-Attainment NSR, PSD also requires that 

the public must be notified before any permit is issued for a new or modified source and must 

have an opportunity to provide input on the permitting decision. The notice-and-comment 

requirements for PSD permitting are set forth in 40 C.F.R. Section 51.166(q).

Unlike with Non-Attainment NSR, the District has never had an approved PSD permitting program.9 

Instead, PSD permitting for sources in the Bay Area has always been done under the federal PSD 

program, implemented through EPA’s regulations in 40 C.F.R. Section 52.21. PSD permits for sources in 

the Bay Area are therefore federal permits issued under the authority of the federal Clean Air Act and 

EPA’s federal regulations – not District permits issued under the District’s authority under the California 

Health & Safety Code and District regulations. EPA’s federal program has a provision allowing for EPA to 

delegate administration of federal PSD permits to local agencies, however, and EPA has exercised this 

power and has delegated its authority to administer the federal PSD program to the District for sources 

in the Bay Area (with certain exceptions). Thus, for most sources, the District now processes and issues 

federal PSD permits on EPA’s behalf, using EPA’s regulations, as EPA’s delegatee. As EPA’s 

Environmental Appeals Board has described this delegation situation, the District acts as the federal 

permitting authority for PSD purposes and issues the federal PSD permit “standing in the shoes” of 

EPA.10 

One of the primary purposes of the Proposed Amendments is to adopt a PSD program in the District’s 

regulations for approval by EPA. Once EPA approves the District’s program, the District will be able to 

issue its own permits under Regulation 2, Rule 2 that will satisfy all of the Clean Air Act’s PSD 

requirements. At that point, PSD permitting in the Bay Area will no longer be a federal program 

 

9

The District adopted several provisions in Regulation 2, Rule 2 that were aimed at obtaining EPA approval for a 

PSD program, but EPA never approved them as being effective for purposes of implementing the federal PSD 

requirement. Sources subject to PSD requirements must obtain a federal PSD permit under EPA’s regulations in 

order for the permit to be legally effective. 

10 Currently, EPA has only partially delegated its PSD permitting authority to the District. For permits that fall 

within the scope of this partial delegation, the District processes and issues the federal PSD permit on EPA’s behalf. 

For permits that are outside the scope of the partial delegation, EPA processes and issues the permits itself. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 17

governed by EPA’s regulations, but will become a part of the District’s permitting program implemented 

through the District’s permitting regulations.

iv. “MINOR” NSR

Under the federal Non-Attainment NSR and Prevention of Significant Deterioration requirements, these 

programs are applicable to new and modified sources at “major” facilities, which is defined as facilities 

that emit 100 tons per year or more of a regulated NSR air pollutant (or, for PSD, 250 tons per year or 

more for certain source categories).11 EPA has also adopted requirements that apply to District 

permitting of facilities that fall below these thresholds. These requirements – called “Minor NSR” by 

EPA12– are less stringent and comprehensive, but they are still important required elements that the 

District’s permitting regulations must contain for EPA to approve them. These Minor NSR program 

requirements will not be outlined in detail here, but certain relevant requirements are referred to in 

other parts of this document where applicable. 

b) State Law Requirements

The District’s NSR program is designed to implement the Clean Air Act’s NSR provisions outlined above.

It must therefore satisfy these minimum federal requirements in order for EPA to approve it. The 

District adopts its NSR program under the authority granted to it under California law, however,

13 which

imposes additional requirements that the District must satisfy in implementing NSR permitting. These 

additional requirements apply over and above the minimum federal requirements under the Clean Air 

Act. The District must ensure that its NSR program satisfies these state-law requirements as well as 

fulfilling EPA’s minimum requirements under the federal Clean Air Act.

i. STATE REQUIREMENTS FOR NSR PERMITTING

The Health & Safety Code specifies a number of additional requirements aimed at attainment of 

ambient air quality standards. These requirements are set forth in Division 26, Part 3, Chapter 10 of the 

 

11 These emissions thresholds apply to the facility’s maximum emitting potential, not to its actual emissions. Thus, 

even if a facility has historically emitted only 90 tons per year, it would still be over the 100 tons-per-year 

threshold if it could possibly emit more than that amount under its design and operational constraints and permit 

limitations. 

12 EPA often refers to these “Minor NSR” requirements as if they were a separate permitting program. Technically, 

these requirements – which are set forth in 40 C.F.R. Sections 51.560 through 51.164 – apply to all NSR permitting, 

including permitting of facilities over the “major” facility threshold as well as those under the threshold. The 

difference with facilities over the “major” facility threshold is that they are also subject to the additional “major 

NSR” requirements in 40 C.F.R. 51.165 (“major” facility requirements for non-attainment pollutants) and/or 40 

C.F.R. Section 51.166 (“major” facility requirements for attainment/unclassified pollutants). “Minor NSR” simply 

refers to NSR permits for new and modified sources that do not trigger the “major” NSR thresholds of Sections 

51.165 and 51.166.

13 The California legislature has granted the District the authority to adopt regulations governing air pollution 

emissions from stationary sources through Health & Safety Code Sections 40001 and 40702, among other 

provisions.
18 NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING

Health & Safety Code.

14 They follow the general approach of the federal NSR program in many ways, 

although they are more stringent in a number of areas. These requirements include (among others):

• More Stringent “BACT” Requirements: As noted above, California requires a stringent “BACT” 

standard that is equivalent to the federal “LAER” standard. California requires the District to 

implement this BACT requirement at sources with emissions of 10 pounds or more per day. This 

is significantly more stringent than the federal “major” NSR requirements, which do not apply to 

facilities with emissions below 100 tons per year.

• Lower “Offsets” Thresholds: California also requires offsets for emissions of non-attainment 

pollutants at a lower level that the federal program. California requires the District to require 

offsets for NOx and VOC at facilities with a potential to emit 10 tons per year of those 

pollutants. Again, this is significantly lower than the 100-ton-per-year federal threshold for 

offsets.

ii. SB 288 AND THE PROHIBITION ON RELAXING DISTRICT NSR RULES.

The Health & Safety Code also contains an important prohibition on relaxing any NSR Rules from the 

standards that were in effect as of the end of 2002. This statutory prohibition is in the Protect California 

Air Act of 2003, also known as “SB 288”.15 The Legislature enacted this provision specifically in response 

to an EPA initiative known as “NSR Reform” that relaxed certain federal requirements in 2002. The 

California legislature disagreed that such a relaxation was appropriate for the state, and so it enacted SB 

288 to ensure that the California air districts did not follow EPA’s lead. This prohibition is implicated 

most centrally in the Proposed Amendments in connection with adopting the District’s PSD program, 

and it is discussed in detail in that regard in Section IV.B.3.g.ii. of this Staff Report. But more generally, 

SB 288 also provides an additional statutory requirement that applies for the entire set of regulatory 

updates that are addressed by the Proposed Amendments. The Proposed Amendments may not relax 

any of the existing provisions in the District’s current NSR Rules, to the extent that they were in effect as 

of the end of 2002. 

3. Title V “Major Facility Review” Permitting 

The second permitting program that the District is addressing at this time is the so-called “Title V” 

permitting program, which is named after the Title in the federal Clean Air Act in which the requirement 

was established. 

The Title V permitting program is an operating permit program. It does not create any substantive 

regulatory requirements that facilities must adhere to. Those substantive requirements come from legal 

authorities such as the pre-construction NSR permitting requirements discussed above, from the 

District’s regulations that limit emissions from specific source types, from ARB and federal regulations, 

 

14 Health & Safety Code §§ 40910-40930.

15 See Health & Safety Code §§ 42500 et seq.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING 19

and from various other legal provisions. The Title V program is designed to collect up all of those various 

disparate legal requirements in one single document to improve enforceability, implementation, and 

transparency. This allows facility operators, inspectors and members of the public to easily access all of 

the legal requirements to which the facility is subject, which aids in ensuring compliance. Title V 

permitting also enhances compliance by requiring permittees to monitor emissions and to certify 

compliance with applicable emissions limits. Title V permitting therefore plays an important role in 

implementing air quality regulation at major facilities, although it does not impose any additional 

substantive emissions control requirements.

Like the NSR program described above, Title V permitting is ultimately a federal requirement established 

under the federal Clean Air Act, but it is intended to be implemented by the States. State air quality 

agencies like the Air District adopt Title V regulatory programs using their legal authority granted to 

them under state law, and then EPA reviews those state programs to ensure that they meet the Clean 

Air Act’s minimum requirements for stringency. Once EPA approves the state agency’s program, that 

permitting program becomes the effective Title V permitting program in that area. A facility that 

obtains a state Title V permit under such an EPA-approved complies with the Title V requirements of the 

Clean Air Act. (If EPA does not approve a state program for some reason, then EPA has to step in and 

become the permitting authority. Sources in such areas would have to obtain a federal Title V permit 

from EPA in order to comply with the Clean Air Act.) 

EPA has promulgated regulations describing what a state must include in its Title V permitting program 

in order for EPA to approve the program. These minimum requirements for Title V programs are set 

forth in Part 70 of Title 40 of the Code of Federal Regulations. The District currently has an approved 

Title V program, which is set forth in District Regulation 2, Rule 6. The District is proposing to make 

several changes in Regulation 2, Rule 6, to reflect certain recent changes in EPA’s requirements for an 

approved Title V program. These recent changes are described in Section III. below.

C. Current Status of the Air District’s New Source Review and Title V Permit Programs

The District’s current Regulation 2 includes New Source Review and Title V permitting programs that 

implement these federal and state requirements. 

With respect to NSR, the District has adopted Non-Attainment NSR permitting requirements in 

Regulation 2, Rule 2 (New Source Review) and related provisions. EPA approved the District’s 

Regulation 2, Rule 2 for Non-Attainment NSR purposes most recently on January 26, 1999.16 The 

District’s Non-Attainment NSR program were approved as meeting the federal minimum requirements 

for Non-Attainment NSR permitting, and they also meet the additional state-law requirements for nonattainment pollutant permitting. In addition, the District has revised its NSR program several times since 

then, most recently on June 15, 2005, although these more recent revisions have never been finally 

approved by EPA. The Proposed Amendments will update the District’s current NSR permitting 

provisions to address all current federal Non-Attainment NSR requirements (including recent 

 

16 See 64 Fed. Reg. 2850 (Jan. 26, 1999).
20 NSR AND TITLE V UPDATES STAFF REPORT | SECTION II – BACKGROUND ON NSR AND TITLE V PERMITTING

developments such as the Bay Area’s non-attainment designation for PM2.5). The District will then 

submit them (through ARB) to EPA for approval. 

With respect to PSD permitting, for historical reasons EPA has never approved the District’s PSD 

regulations. For this element of NSR, the District has never had an EPA-approved program. Instead, 

EPA’s federal PSD program set forth in 40 C.F.R. Section 52.21 governs PSD permitting for sources in the 

Bay Area. PSD permits issued under this program are federal permits issued through EPA’s authority 

under the Clean Air Act, not District permits issued through the District’s authority under the California 

Health & Safety Code. PSD permits are governed by federal law and regulations, and they are 

appealable through the Environmental Appeals Board (EPA’s federal administrative tribunal) and 

ultimately to the federal courts. For administrative convenience, EPA has delegated the processing of 

certain types of federal PSD permits to the District, and the District evaluates and issues such permits on 

EPA’s behalf. But even where the District processes the permits, the permits remain federal PSD 

permits issued under EPA’s authority. As EPA’s Environmental Appeals Board has noted, in such cases 

the District is implementing EPA’s federal regulatory authority “standing in the shoes” of EPA. The 

Proposed Amendments will adopt a District NSR program for EPA approval, at which point the District 

will be able to implement PSD permitting under its own regulations.

With respect to Title V permitting, EPA has approved the District’s Title V program. Title V permitting in 

the Bay Area is a District permitting program implemented through District Regulation 2, Rule 6. EPA 

approved the Title V permitting provisions in Regulation 2, Rule 6 on June 23, 1995.17 The Proposed 

Amendments will make necessary changes to the District’s Title V program to reflect recent 

developments, and the revised regulations will be submitted to EPA for approval.

This is the current state of the District’s NSR and Title V permitting regulations. The Proposed 

Amendments will make changes to these regulatory programs as they currently exist. The full text of 

the District’s current regulations can be found on the District’s web page 

(www.baaqmd.gov/Divisions/Planning-an-Research/Rules-and-Regulations.aspx). For PSD permitting, 

the PSD regulations that currently govern permitting in the Bay Area can be found at 40 C.F.R. Section 

52.21.

 

17 See 60 Fed. Reg. 32,606 (June 23, 1995).
NSR AND TITLE V UPDATES STAFF REPORT | SECTION III – RECENT REGULATORY DEVELOPMENTS 21

III. RECENT REGULATORY DEVELOPMENTS NECESSITATING REVISIONS TO THE 

DISTRICT’S NSR AND TITLE V PERMITTING RULES

District Staff have undertaken this rulemaking effort and have developed the Proposed Amendments to 

address a number of recent regulatory developments that have affected NSR and Title V permitting. 

These recent developments include the following. 

A. EPA’s Designation of the Bay Area as “Non-Attainment” of the Short-Term Federal Air 

Quality Standard for PM2.5

EPA has recently designated the San Francisco Bay Area as “Non-Attainment” of the NAAQS for shortterm concentrations of fine particulate matter. This means that EPA has made an administrative 

determination that the amount of PM2.5 in the ambient air in the Bay Area exceeds the NAAQS, the 

federal standard for the maximum healthy amounts of PM2.5 that can be present in the air we breathe. 

The NAAQS for short-term PM2.5 requires that concentrations of PM2.5 must not exceed 35 μg/m3, 

averaged over a 24-hour period. EPA reviewed data on the amount of PM2.5 in the air measured at 

locations around the Bay Area between 2006 and 2008, and based on this data designated the Bay Area 

as non-attainment of the NAAQS effective December 14, 2009. More recent air quality data show that 

PM2.5 levels have come down to below this standard, but as an administrative matter EPA’s nonattainment designation is still legally in effect. As an EPA-designated “Non-Attainment Area”, the Clean 

Air Act requires the District to undertake a number of actions to address the situation.

One CAA requirement that the District must satisfy as a result of the PM2.5 non-attainment designation is 

to develop a planning response to ensure that the Bay Area will be able to comply with the NAAQS. The 

District is responding to this mandate by preparing a PM2.5 “Clean Data Finding” to demonstrate for 

EPA’s review that current PM2.5 levels are now below the standard. In addition, the District is pursuing a 

comprehensive set of initiatives to further address existing particulate matter pollution issues 

throughout the Bay Area to ensure that ambient particulate matter levels continue to decline.

18

The other main requirement that the District must satisfy is to amend its NSR permitting rules to 

implement the Non-Attainment NSR permitting requirements for PM2.5. The Clean Air Act requires that 

the District adopt Non-Attainment NSR requirements for PM2.5 and submit them to EPA for approval 

within three years after the date of the non-attainment designation. The District committed to updating 

its NSR program to add PM2.5 requirements as part of Stationary Source Measure No. 16 (SSM-16) in its 

2010 Clean Air Plan (CAP). The Proposed Amendments will implement SSM-16 by adding PM2.5 to the 

category of pollutants that are regulated under the NSR program. 

 

18 More information about the District’s ongoing efforts to address particulate matter pollution in the Bay Area can 

be found in the District’s recent publication “Particulates Matter: Understanding PM to Protect Public Health in the 

Bay Area”, available at www.baaqmd.gov/Divisions/Planning-and-Research/Plans/PM-Planning.aspx. This 

document also provides additional information on the “Clean Data Finding” and the District’s planning response to 

the PM2.5 non-attainment designation.
22 NSR AND TITLE V UPDATES STAFF REPORT | SECTION III – RECENT REGULATORY DEVELOPMENTS

In addition, as part of EPA’s PM2.5 NSR implementation regulations, EPA has clarified how particulate 

matter emissions must be measured. There are two components to PM emissions: (i) solid particles that 

are emitted directly from the exhaust stack; and (ii) gaseous components that are not in solid form when 

they are emitted but that rapidly condense to form solid particles as they cool down in the ambient air. 

The first component is known as “filterable” particulate matter, and the second component is known as 

“condensable” particulate matter. Historically, NSR regulations have not explicitly defined how PM is to 

be measured, and in many cases NSR has been applied taking only the filterable component into 

account (although in some cases condensable particulate matter has been included as well). In part, this 

was because testing methodologies were not as advanced for the condensable component as they were 

for the filterable component. More recently, however, improvements in testing methodologies have led 

EPA to revise its particulate matter definitions to specify explicitly that both the filterable and 

condensable components must be included for all purposes for NSR permitting. EPA’s regulations 

require that the District amend its particulate matter definitions – both for PM2.5 and for PM10 – to state 

explicitly that such emissions include both the filterable and condensable components.19 

B. EPA’s Addition of Greenhouse Gases as a Pollutant Regulated Under the New Source 

Review and Title V Programs

EPA has also begun regulating greenhouse gases (GHGs) as an air pollutant under the Clean Air Act. 

Specifically, EPA adopted its “Light Duty Vehicle Rule”, which establishes GHG emissions standards for 

new light duty cars and trucks starting with the 2012 model year. As a result of these regulations, GHGs 

are now “subject to regulation” as that phrase is used under the NSR and Title V programs. These 

programs require NSR and Title V permitting for major stationary sources for all pollutants that are 

“subject to regulation”, which now includes GHGs. The District’s permitting programs must now include 

GHGs to reflect this requirement.20 

For the NSR program, there is no NAAQS for GHGs and so the Bay Area is not, by definition, in nonattainment of any NAAQS for GHGs. GHGs are therefore an “attainment” pollutant subject to the PSD 

element of the NSR program.21 As discussed above, PSD permitting is currently administered by EPA in 

the Bay Area under its federal regulations, as the District does not have an EPA-approved PSD program. 

If the District were to leave that situation as it exists now, EPA would implement PSD permitting for 

GHGs along with the rest of PSD permitting, with no action necessary by the District. District Staff have 

come to realize that having EPA administer the PSD element of NSR permitting while the District 

administers the rest of the NSR program is unworkable, however, for a number of reasons, and so the 

Proposed Amendments establish a District PSD program for approval by EPA. This proposed District PSD 

program will address GHGs along with all other elements of PSD permitting.

 

19 Further details can be found in EPA’s PM2.5 Implementation Rule, 73 Fed. Reg. 28,321 (May 16, 2008).

20 Further details on EPA’s efforts to regulate GHGs, and how they impact the NSR and Title V permitting programs, 

can be found in EPA’s so-called “Tailoring Rule”, 75 Fed. Reg. 31,515 (June 3, 2010).

21 Technically, GHGs are “unclassified”, but unclassified pollutants are treated as attainment pollutants for 

purposes of NSR permitting.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION III – RECENT REGULATORY DEVELOPMENTS 23

For Title V permitting, the District has an EPA-approved Title V program that implements Title V 

permitting under its own regulations, as with Non-Attainment NSR. The District’s current Title V 

regulations do not address GHGs explicitly, although they do contain a provision that allows the District 

to treat facilities that emit GHGs as subject to Title V permitting as “designated facilities”. A designated 

facility is defined in District Regulation 2-6-204 as a facility in a source category that has been designated 

as subject to Title V by EPA, which now includes facilities that emit GHGs. “Designated facilities” are 

subject to Title V permitting requirements under District Regulation 2-6-304. This existing provision 

does give the District authority to address GHGs under Title V, but it is not an optimal approach from a 

regulatory standpoint. The District therefore needs to revise its Title V program to address GHGs 

explicitly. The Proposed Amendments will do that. 

C. Need for EPA-Approved “Prevention of Significant Deterioration” Provisions in District 

Regulations

In addition to these recent regulatory changes, the District has come to realize based on recent 

experience that the lack of an EPA-approved PSD permitting program in the Bay Area is not a workable 

situation for stationary source permitting. Currently, PSD permitting is implemented in the Bay Area as 

a federal program under the auspices of EPA Region IX. Rather than have the District adopt its own PSD 

program under District Regulations, instead EPA Region IX has delegated its federal authority to the 

District to issue federal permits on EPA’s behalf. When this system of delegation was first set up, it 

appeared to be a workable arrangement because EPA’s PSD permitting procedures are very similar to 

the District’s Non-Attainment NSR permitting procedures, and EPA presumed that if the District simply 

followed its own permitting procedures, that would satisfy both District requirements and federal PSD 

requirements. However, a number of situations have arisen where slight differences between the 

District’s permitting requirements and the federal PSD requirements have led to problems with PSD 

permitting that resulted in procedurally defective PSD permits. These problems have resulted in delays 

in processing PSD permits, situations where certain federal procedural requirements were not followed 

properly because they are different from District requirements, and even litigation over the validity of 

PSD permits issued by the district under EPA’s delegated authority. It is now clear that having separate 

permitting regulations for Non-Attainment NSR (under District regulations) and for PSD (under EPA’s 

federal regulations) is untenable. It is clear that to avoid such problems the District needs to adopt its 

own District PSD permitting requirements and have EPA approve them for PSD permitting in the Bay 

Area.

D. Additional Deficiencies Identified by EPA Region IX Staff Review

In addition to addressing the regulatory developments outlined above, District Staff also conferred with 

EPA Region IX staff during the rule development process about the District’s current permitting 

program. EPA Region IX staff identified several areas where the District’s current program does not 

satisfy EPA’s requirements and needs to be revised. 

Most significantly, EPA Region IX staff informed the District that EPA has changed its policy regarding the 

District’s current NSR applicability requirements for modifications to existing sources. EPA no longer 
24 NSR AND TITLE V UPDATES STAFF REPORT | SECTION III – RECENT REGULATORY DEVELOPMENTS

considers the District’s existing definition of when a source is “modified” and thus becomes subject to 

NSR permitting requirements to satisfy Clean Air Act requirements. EPA Region IX staff have therefore 

informed the District that it must change its current definition of “modified source” in order for EPA to 

continue to approve the District’s NSR program. (This issue is addressed in more detail in Section IV.A.1.

below.) The Proposed Amendments include revisions to the District’s existing definition of the term 

“modified source” to address this concern. 

EPA also identified certain other areas where the District’s NSR program should be strengthened to 

comply with EPA’s requirements. The Proposed Amendments include a number of other revisions that 

will help address these concerns, including the expanded public notice and comment opportunities 

being provided for NSR permits and the provisions requiring permit applicants to demonstrate that 

emissions increases from their new and modified sources will not result in a violation of the NAAQS.

EPA’s concerns regarding specific permitting issues are noted in the detailed analysis of the Proposed 

Amendments in Section IV.

E. Issues Identified by District Staff That Need To Be Addressed

District Staff have also identified a number of more minor substantive areas in recent years where the 

NSR and Title V permitting programs could be improved. No matter how well designed a regulatory 

program is, implementing it in practice nearly always reveals areas where it could be made to work 

better. District staff have identified several such areas, and have taken the opportunity to address them 

while the Proposed Amendments were being developed. The specific areas where such revisions are 

being made are identified in the detailed analysis of the Proposed Amendments in Section IV.

F. Need to Clarify and Simplify District Regulatory Language

Finally, District staff and others have realized that the District’s NSR regulations are in some places 

difficult to understand and implement. The regulations have developed over the years as new 

requirements have been added or updated, and sometimes that has happened without a great deal of 

consideration of how the regulations work as a coherent whole. District Staff have therefore realized 

that Regulation 2, Rule 2 (and certain other provisions) are in need of an overhaul to reorganize and 

clarify them. In addition, certain regulatory language is confusing and it can be difficult to understand 

how the regulation is intended to be applied in practice. This situation can cause confusion among the 

regulated community and others about what exactly is required by the regulations, and it can lead to 

inconsistent implementation by District staff. To address these issues, the Proposed Amendments 

reorganize Regulation 2, Rule 2 (and related provisions) and revise much of the regulatory language 

used to present it in a manner that is clearer and easier to understand. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 25

IV. DETAILED ANALYSIS OF PROPOSED REGULATORY REVISIONS

This section of the Staff Report describes in detail the amendments to District Regulation 2 that Staff are 

proposing in order to address the regulatory developments outlined in Section III above. The discussion 

begins with Rule 1, which sets forth general requirements applicable to all permitting under Regulation 

2. It then discusses Rule 2, which contains the District’s New Source Review permit program, followed 

by Rule 4, which contains the rules for banking emission reduction credits in connection with Rule 2’s 

emissions offsets requirements. It then discusses Rule 6, which contains the District’s Title V permit 

program. It concludes with a discussion the effective date of the Proposed Amendments and how the 

District will transition to the revised Regulation 2 after it is adopted.

A. Proposed Revisions to Regulation 2, Rule 1 – General Permit Requirements 

The Proposed Amendments make several changes to District Regulation 2, Rule 1, which sets forth the 

general requirements for District permitting. Many of these changes are necessary to support the 

implementation of the proposed updates to the NSR and Title V permitting programs, including issues 

that have been identified by EPA as needing to be addressed in order for the District’s programs to be 

approved. Others are necessary to address confusion or ambiguity that has arisen in applying the rules 

in their current form. The proposed revisions to the general permitting requirements in Regulation 2, 

Rule 1 are discussed below. The revisions are addressed in the order of the amount of discussion and 

comment from interested members of the public that they generated during the rule development 

process. 

1. Definitions of “Modify” and “Alter” – Sections 2-1-233 and 2-1-234

The Proposed Amendments include important revisions to the definitions of the terms “modify” and 

“alter”. These terms are highly important in the administration of NSR permitting, because NSR applies 

to “new and modified” sources. The definition of what constitutes a “modified” source therefore 

establishes the threshold applicability requirement for NSR permitting: If a proposed change at a source 

is a “modification”, then all applicable NSR permitting requirements (e.g., BACT, offsets, PSD air quality 

impact analyses, public notice and comment, etc.) must be complied with in order for the District to 

issue an authority to construct to allow source to make the change. An “alteration”, by contrast, is a 

change at a source that is not substantial enough to trigger NSR requirements. The District still conducts 

a permitting review of such changes to ensure that they will not violate any applicable air quality 

requirement, but the permit does not need to go through the NSR review process. 

The Proposed Amendments include two important sets of changes to these definitions. The first set of 

changes includes language changes to the District’s current “modification” and “alteration” tests to 

make them simpler and to reduce ambiguity in how they are applied. These are non-substantive 

changes that will simply clarify how the District’s NSR program works currently. Given how these terms 

function in determining NSR applicability, is it important that they be clearly specified in Regulation 2. 

The second set of changes involve adding a new element to the “modification” definition that EPA is

requiring to ensure that the District’s NSR program complies with federal NSR program requirements. 
26 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

This is a substantive change that EPA is requiring based on a change in policy on how NSR must be 

applied. EPA has informed the District that the “modification” definition that it has approved in the past 

will no longer be acceptable and must be changed. Both of these sets of revisions are discussed in turn 

below.

a) Clarification of Current “Modification” Test (Increase In Potential to Emit) –

Section 2-1-234.1

The touchstone of what constitutes a “modification” as opposed to an “alteration” under the District’s 

current Regulation 2 is whether the change at the source will increase the source’s capacity to emit a 

regulated air pollutant – either by allowing an increase above an existing permitted emissions limit or, if 

there is no permit limit, by increasing the source’s physical capacity to emit air pollutants based on its 

design and operational characteristics. This is the essence of the concept of “potential to emit”, which is 

defined in Regulation 2-1-217. Under the District’s current “modification” test, any change at a source 

that increases its potential to emit air pollutants is a modification that is subject to NSR permitting 

requirements under Regulation 2, Rule 2. This has been codified in Regulation 2 since at least 1994, 

when Regulation 2 was amended to specify that a “modification” is based on an increase in a source’s 

“permitted emission level” (as opposed to its actual emissions), and it is included in the version of the 

Regulation that EPA has approved in the California State Implementation Plan. With respect to this 

definition, the Proposed Amendments will state the “potential to emit” increase concept in a more 

direct manner than the current language, and provide certain additional language on how exactly the 

concept is to be implemented in practice. These amendments are contained in proposed Section 2-2-

234.1, and they do not involve any substantive changes from the District’s current “modification” test. 

(The substantive changes being proposed under EPA’s new policy direction are in proposed Section 2-2-

234.2, and they are addressed in Section IV.A.1.b. below.)

• Current Regulations

The District’s current “potential to emit” modification test is set forth in current Section 2-1-234, the 

definition of “Modified Source”. Current subsections 2-1-234.1 and 234.2 specify that if the change at 

the source will result in an increase in any daily or annual emission level established in an authority to 

construct or permit to operate (or in the production rate or capacity used to estimate the emissions 

level), then the change is a “modification”.22 If the source does not have any such emissions level 

specified in a permit, Subsection 2-1-234.3 provides that the change will be a “modification” if it will 

result in an increase in the source’s daily or annual potential to emit (or its maximum production rate or 

capacity that is used to estimate emissions of) any regulated air pollutant above its current maximum

physical potential to emit (i.e., the maximum level at which the source is physically capable of emitting, 

given its design and operational characteristics). The source’s current potential to emit is determined by 

(i) its highest attainable design capacity, (ii) its highest capacity listed in a District permit to operate, or 

 

22 The current definition also provides that the APCO may convert hourly limits to daily limits by multiplying the 

hourly limit by 24 hours, and may convert daily limits to annual limits by multiplying the daily limit by 365 days.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 27

(iii) its highest documented emissions (or production rate or capacity) prior to March 1, 2000, whichever 

is the highest, as set forth in subsection 234.3.1. If the source’s potential emissions are limited by an 

upstream or downstream “bottleneck”,23 then the “bottlenecked” potential is used as the source’s 

maximum effective potential and any increase above this “bottlenecked” maximum constitutes a 

modification to the source, as described in subsection 234.3.2. 

For toxic air contaminants, a change at a source will constitute a “modification” if it increases toxic 

emissions in an amount that would result in an increased cancer risk of more than 1.0 in one million for 

carcinogens, or an increased chronic hazard index of more than 0.20 for non-carcinogenic toxic risk. This 

element of the definition is set forth in current Section 2-1-234.4. 

“Alterations” are changes at a source that do not fall within the definition of “modification” in Section 2-

1-234 and therefore do not have to go through the NSR process in order to obtain an authority to 

construct. The definition of what it means to “alter” a source is set forth in current Section 2-1-233, and 

covers any physical change to, or change in the method of operation of, a source that may affect 

emissions but that will not result in an increase above the levels set forth in Section 2-1-234. The 

current definition also provides three specific scenarios that are expressly defined as alterations: (i) 

replacement of burners with non-identical burners; (ii) maintenance of glass furnaces that involve 

replacement of components with different types of components; and (iii) extension of the physical 

boundaries of a semiconductor fabrication area. 

• Proposed Amendments

The proposed non-substantive revisions do not make any changes to the meaning of these definitions

(the substantive changes from adding the new provision required by EPA are discussed in the next 

section). But they will streamline how the definitions work in practice.

With respect to the “modification” definition, the Proposed Amendments will simply state in Section 2-

1-234.1 that a “modification” is a change at a source that will result in an increase in the source’s 

potential to emit. (Section 2-1-234.2 will contain the additional “Federal Backstop” test being required 

by EPA as discussed below.) This simple definition is substantively the same as the more complicated 

definition in the current Section 2-1-234, but it uses wording that is much easier to understand and 

apply. “Potential to Emit” is a familiar regulatory concept, with a definition set forth in current Section 

2-1-217. Moreover, it is a concept that succinctly captures the intent expressed in Section 2-1-234, and 

one that is already well-understood by the regulated community and others involved in air quality 

regulation such as consultants and engineers. This change will replace the current lengthy three-part 

 

23 A “bottleneck” is some operational limitation present in an upstream or downstream unit that prevents a source 

from being operated at full capacity. For example, if a source processes a feedstock from an upstream unit, and 

the upstream unit’s maximum production rate provides only enough feedstock to run the source at 50% capacity, 

the source is “bottlenecked” at 50% capacity – the source’s maximum capacity as a practical matter. The source is 

treated as if this level of operation, and the corresponding emissions, is its maximum potential to emit, even 

though this is not a permit limit or the maximum design or operational limit on the source’s operations. If some 

future change allows the source to be operated above 50% capacity, that is treated as an increase in the source’s 

maximum capacity under Subsection 234.3 and constitutes a “modification” to the source. 
28 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

test in subsections 2-1-234.1 through 2-1-234.3 with a concise one-sentence test that achieves the same 

substantive result.

In addition, based in part on feedback from commenters during the rule development process, the 

Proposed Amendments retain certain additional language in the definition clarifying how the concept of 

an increase in Potential to Emit will be applied in specific situations. These clarifications are already 

inherent in the concept of “Potential to Emit” as defined in Section 2-1-217, but the language is being 

retained in Section 2-1-234.1 to make them explicit and to ensure that they are clear to all those who 

will use this definition. These clarifications include the following. 

• Determining Daily and Annual PTE: Potential to Emit is a concept that applies to both long-term 

and short-term emissions, and an increase in either a source’s daily or annual potential to emit 

will be a modification under Section 2-1-234. The Proposed Amendments retain the language 

referencing the fact that, in establishing longer-term PTE, an hourly emissions limit on a source 

may be multiplied by 24 to determine the source’s daily potential to emit, unless the source 

cannot operate at its full permitted hourly limit for 24 hours per day. This statement simply 

reflects the reality that, in absence of any other legal or physical limitation on operations, if the 

source is operated at its full hourly maximum for the full 24 hours in a day, its daily emissions 

will be its hourly maximum emissions times 24. Similarly, the Proposed Amendments retain the 

language referencing the fact that a source’s daily emissions limit may be multiplied by 365 to 

determine annual potential to emit, unless the source cannot operate at its full permitted daily 

limit for all 365 days per year. These methods of establishing longer-term PTE by multiplying up 

from a short-term permit limit only apply if they will accurately reflect the source’s actual 

maximum longer-term ability to emit air pollution, of course. They will not apply where there is 

any reason why the use of short-term permit limits does not accurately represent longer-term 

potential to emit (e.g., if the source is constrained in some way from actually operating at shortterm maximum emission rates over the longer term). These principles are already implied in the 

concept of PTE, but proposed Section 2-1-234.1.1 states them explicitly to make it clear how the 

concept will be applied in practice. 

• “Group” Limits: A permit limit that applies to combined emissions from multiple sources does 

not establish an individual source’s potential to emit, unless the limit imposes an effective, 

legally enforceable limitation specifically on the emissions from the individual source. As such, a 

permit limit applicable to multiple sources will not in most cases be determinative in applying 

the definition of “modification”. For example, if a boiler is subject to a limit applicable to the 

combined emissions of the boiler and nine other sources, the facility could implement a change 

at the boiler to double its capacity and related emissions, and yet could keep the same group 

limit applicable to the ten sources combined. In such a situation, the doubling of the size of the 

boiler should be treated as a “modification” and subject to NSR review, even if the facility keeps 

the same overall group limit. Again, this is a principle that is already implied in the concept of 

PTE, but proposed Section 2-1-234.1.1 states it explicitly. In this scenario, the boiler’s individual 

PTE is obviously being increased, even if the group permit limit is unchanged. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 29

The one exception is where a group limit does in fact impose an effective limit specifically on the 

emissions of an individual source, for example by imposing a bottleneck on facility operations 

that establishes the maximum rate at which the source can be operated. In such a case, the 

group limit does in fact establish the PTE,24 and any increase in this PTE will be a “modification” 

under Section 2-1-234.1.

• Determining Physical Capacity as PTE: As noted above, where a source’s maximum emissions 

are not limited by any enforceable permit condition, the source’s PTE is determined by its 

maximum physical capability to emit air pollutants given its applicable design and operational 

characteristics. Proposed Section 2-1-234.1.2 states explicitly that in such a situation, the 

source’s PTE will be determined by the most relevant and reliable technical information 

available regarding the source’s operation, which may include design information, engineering 

specifications, or other information. The particular information used in an individual permitting 

situation will depend on the facts and circumstances of each individual case.

• “Bottlenecked” Sources: The “potential to emit” concept takes into account both (i) direct 

limitations on a source’s ability to emit air pollution resulting from the source’s own physical 

capacity, and (ii) indirect limitations on the source’s actual effective capacity as a result of the 

capacity of any upstream or downstream process. Where a source cannot run at its full, 

maximum capacity because its rate of operation is limited by the capacity of some other process 

that it depends on, the source’s PTE is based on the maximum rate of operation that the source 

can achieve taking into account this limitation imposed by the other process. This situation is 

referred to as a “bottleneck” in the production process. The source’s PTE is the maximum 

emissions it can achieve as limited by the “bottleneck”; and any increase in such PTE because of 

the removal of a “bottleneck” constitutes a “modification” under the definition in Section 2-1-

234. This principle is also addressed in proposed Section 2-1-234.1.2.

Although these concepts are already inherent in the basic concept of “Potential to Emit”, the Proposed 

Amendments include language in Section 2-1-234 to state clearly that they apply for purposes of 

determining whether a change at a source increases the source’s PTE and is thus a “modification”.

With respect to toxic air contaminants, proposed Section 2-1-234.1 will incorporate the existing risk 

thresholds in current section 2-1-234.4 into proposed subsection 2-1-234.1.3. There will be no 

substantive change in how the definition applies for toxic emissions. Proposed subsection 234.1.3 

provides that if the increase in toxic emissions does not result in an increase in cancer risk of more than 

one in one million or an increase in non-cancer chronic hazard index of more than 0.20, then it is not a 

 

24 Obviously, there are a number of factors, both legal and technical, that can constrain a source’s potential to emit 

under different circumstances. In this example, the group limit is the factor that is determinative in establishing 

the potential to emit because this is the limitation on emissions that must be relaxed in order to accommodate the 

modification at the source. In other contexts, there may be other factors constraining emissions that are the 

determinative factors for establishing the source’s PTE and determining whether a change constitutes a 

“modification”. If one of those other constraints is relaxed, so as to increase PTE, that is a modification even if the 

group limit does not change.
30 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

“modification”. This provision incorporates the existing toxics threshold levels in the District’s current 

definition in Section 2-1-234.4. The Proposed Amendments also add a clarification that the toxic risk 

screening trigger levels in Table 2-5-1 of Regulation 2, Rule 5 can be used as screening tool in evaluating 

whether a change at a source will exceed these risk levels, as is the District’s current practice. The 

screening levels in Table 2-5-1 are emissions levels that are conservatively presumed not to cause toxic 

risks over the threshold levels in subsection 234.1.3. If a change at a source will not increase the 

source’s potential to emit any of the pollutants listed in the Table by the corresponding screening levels 

listed in the Table, then one can conservatively conclude that any increase in risk associated with such 

change will not exceed the threshold levels specified in subsection 234.1.3. If any increase in emissions 

will exceed any of the screening levels listed in Table 2-5-1, then a health risk assessment must be 

conducted to ascertain the actual increase in risk that will result from the change. If, based on such an 

assessment, the actual risk is above the threshold levels specified in subsection 234.1.3, then the change 

will constitute a modification. 

With “modification” thus defined, the definition of “alteration” is simply any change at the source that 

does not involve an increase in the source’s potential to emit above any of the levels specified in Section 

2-1-234 (i.e., increases that would make the change a “modification”). The proposed revisions to 

Section 2-1-233 make this definition clear. In addition, the revisions remove the current references to 

the three specific situations identified as “alterations” in the current definition. These specific scenarios 

were listed in the current definition in Section 2-1-233 because they are changes at sources that will not, 

in most instances, involve any increase in emissions that would make them “modifications” under the 

definition in Section 2-1-234. For example, replacement of burners at a combustion source, component 

replacement at a glass furnace, and physical expansion of a semiconductor fabrication area are not likely 

to involve an increase in permitted limits or physical capacity of the source. As such, these scenarios 

already constitute “alterations” as defined in Section 2-1-233, and it is redundant to call them out 

specifically in the definition. Moreover, if any such change were to result in an increase in emissions 

above existing permitted levels or physical capacity, it is important that the District review the change 

under its NSR program to ensure that any applicable regulatory requirements are applied to the 

emission increases that would result from the change. For these reasons, the proposed amendments 

remove the specific scenarios in Subsections 2-1-233.

The purpose of requiring permits for “alterations” is to ensure that changes at an existing source that 

may affect emissions are not in fact “modifications” that require NSR permitting. The District added the 

“alteration” permit requirement in 2000 to allow the District review such changes to confirm that they 

will not in fact trigger a “modification”. Since then, the District has interpreted the definition of 

“alteration” in keeping with this intent, and District Staff intend that such an interpretation will continue 

to apply under the Proposed Amendments. In general, the types of changes that Staff envision as 

requiring an authority to construct as an “alteration” include the following:25 

 

25 Note that in all cases, it is assumed that there would not be any emissions increase that would render the 

change a “modification” under Section 2-1-234. Any change listed here that increases emissions in a manner that 

constitutes a “modification” would need to undergo full NSR review under Regulation 2, Rule 2.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 31

Examples of projects that will generally be “Alterations” and require permit applications:

 Changing or replacing an abatement device;

 Adding gas wells to a landfill gas collection system;

 Any change that is defined as a modification or reconstruction under NSPS/NESHAPS, but 

does not involve any emission increase that triggers Section 2-1-234.

Examples of projects that generally will not be “Alterations” and not require permit applications:

 Changing coating or solvent, not otherwise limited by permit conditions;

 A decrease in throughput or production rate;

 Installing emission testing ports on a stack;

 Removing fuel oil backup capability for a furnace or boiler;

 Changing material stored in a tank, provided the new material has equal or lower vapor 

pressure, and it is not limited by permit condition.

Each specific project must be evaluated on a case-by-case basis, but these examples provide a general 

idea of how the “alteration” definition is applied.

b) Addition of “Federal Backstop” Provision Required By Change in EPA Policy –

Section 2-1-234.2

In addition to the non-substantive revisions discussed above, EPA has also informed the District that it 

has changed its policy on how California air districts, including this District, must define “modification” 

for purposes of implementing the federal NSR requirements. EPA has indicated that it will no longer 

accept the District’s current modification test based on increases in “potential to emit” for NSR for 

major facilities. To address this EPA requirement, the Proposed Amendments add an additional element 

to the “modification” definition that will apply to “major” facilities. This additional element is in 

proposed Section 2-1-234.2. District Staff refer to this additional element as the “Federal Backstop” test 

because it is being added at EPA’s request to ensure that there are no situations where the District’s 

current test could be less stringent than what EPA requires under its NSR regulations. 

The “modification” definition in Section 2-1-234 will therefore involve a two-part test under the 

Proposed Amendments. The first element, in Section 234.1, is the District’s existing modification test 

based on increase in potential to emit. A change at a source will constitute a “modification” if it 

increases the source’s potential to emit as set forth in Section 234.1. The second element, in Section 

234.2, will be the “Federal Backstop” test for major facilities and will incorporate EPA’s “major 

modification” test in 40 C.F.R. Sections 51.165 and 51.166. A change at a major facility that will be a 

“major modification” under those federal regulations will also be a “modification” and will be subject to 

NSR requirements. Both elements of this modification definition will apply equally: a physical change or 

change in the method of operation will be a “modification” if it satisfies either of these two applicability 

tests (or both). 
32 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

This “Federal Backstop” test in Section 2-1-234.2 functions by incorporating by reference the federal 

“major” NSR applicability tests in 40 C.F.R. Sections 51.165 (for non-attainment pollutants) and 51.166

(for attainment pollutants). This incorporation by reference will work as follows. 

• Non-Attainment Pollutants – Subsection 234.2.1: 40 C.F.R. Section 51.165 governs “major” NSR 

for Non-Attainment pollutants, and so the Proposed Amendments make the federal “major 

modification” applicability test under Section 51.165(a)(1)(v) applicable for NOx, VOC, PM2.5 and 

SO2 through proposed District regulation 2-1-234.2.1. (These four pollutants are the pollutants 

and precursors for which the Bay Area is subject to non-attainment NSR requirements.) Under 

this test, “major” NSR applies where the facility (i) is over the 100 tpy “major” non-attainment 

NSR facility threshold in 40 C.F.R. Section 51.165(a)(1)(iv), and (ii) undergoes a physical change 

or change in method of operation that will result in a net increase in emissions (over an actual 

emissions baseline) of a “significant” amount.26 Subsection 234.2.1 provides that if the change 

at a source will result in an increase in emissions of these pollutants that will constitute a “major 

modification” as defined in 40 C.F.R. Section 51.165(a)(1)(v), then the change is a “modification” 

under Regulation 2, which subjects it to NSR permitting under Regulation 2, Rule 2.

• Attainment (and Unclassified) Pollutants – Subsection 234.2.2: 40 C.F.R. Section 51.166 governs 

“major” NSR for all other pollutants besides non-attainment pollutants (i.e., attainment and 

unclassified pollutants), and so the Proposed Amendments make the federal “major 

modification” applicability test under Section 51.166(b)(2) applicable for all other pollutants 

besides the four non-attainment pollutants addressed under subsection 234.2.1. Under this 

test, “major” NSR applies where the facility is over the PSD “major” facility threshold in 40 C.F.R. 

Section 51.166(b)(1), which is either 100 tpy or 250 tpy depending on the source category. NSR 

permitting is triggered whenever such a facility undergoes a physical change or change in 

method of operation that will result in a significant net increase in emissions (over an actual 

emissions baseline), using the same NSR significance thresholds noted above. Subsection 

234.2.1 provides that if the change at a source will result in an increase in emissions of these 

pollutants that will constitute a “major modification” as defined in 40 C.F.R. 

Section 51.166(b)(2), then the change is a “modification” under Regulation 2, which subjects it 

to NSR permitting under Regulation 2, Rule 2.

In implementing these federal “major modification” tests incorporated by reference to 40 C.F.R. 

Sections 51.165 and 51.166, all of the regulatory provisions in those C.F.R. sections applicable for 

implementing these tests must be followed in determining whether an increase is a “modification” 

under Section 2-1-234.2. This includes all of the federal definitions that apply when determining 

 

26 “Significant” is defined using EPA’s NSR significance thresholds, which are discussed further in relation to the 

NSR program in Regulation 2, Rule 2. These significance thresholds vary depending on the pollutant, but generally 

they range between 10 tpy and 100 tpy. The District has also adopted these thresholds in its own definition of 

“significant” for NSR permitting in current Section 2-2-227 (although it is the federal rules being incorporated by 

reference that will govern application of the “Federal Backstop” test under Section 2-1-234.2, not any District 

definitions). 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 33

whether change results in a “major modification” and all of the emissions increase calculation 

procedures associated with such a determination. In particular, this includes the use of an actual 

emissions baseline as provided for in Sections 51.165 and 51.166, and also includes the use of the “NSR 

Reform” calculation methodologies that are part of EPA’s federal regulations in Section 51.165(a)(2) and 

Section 51.166(a)(7). Furthermore, where the NSR Reform calculation methodologies are implicated, 

the documentation, monitoring, recordkeeping and reporting requirements in Section 51.165(a)(6) and 

(a)(7) and Section 51.166(r)(6) and (r)(7) must be followed. Using these federal provisions in applying 

the definition of “major modification” is implicit in the incorporation-by-reference of the federal 

regulations in Sections 51.165(a)(1)(v) and 51.166(b)(2). But the Proposed Amendments also add 

explicit language on this point at the end of proposed Section 2-1-234.2 to ensure that all who use the 

regulations will understand how the federal incorporation by reference applies, and to remove any 

potential for debate over the legal enforceability of these elements of the federal program with respect 

to implementing the “Federal Backstop” provision.

Under this “Federal Backstop” test, there will be no possibility that any physical change or change in 

method of operation at a major facility that EPA would treat as a “major modification” subject to NSR 

can escape NSR permitting under the District’s program. To the extent that there could be any such 

changes that would not be “modifications” under the District’s existing test in Section 2-1-234.1, they 

will be captured under the “Federal Backstop” test in Section 2-1-234.2 and will be subject to NSR 

permitting. Adding this additional element to the District’s definition of “modification” will address 

EPA’s concern that there could be specific situations in which the District’s test could be applied in a 

manner that is less stringent than the federal program. District Staff do not anticipate that the Federal 

Backstop provision will be implicated very often (if at all), given that the District’s existing modification 

test is very stringent and will most likely require NSR permitting in any situation where the federal test 

would require it. But if any situation were to arise where the District’s current test applies more 

narrowly than the federal test, the Federal Backstop will ensure that it does not escape NSR review. 

Although it is unlikely to be implicated very often, this Federal Backstop test will add an additional layer

of complexity in implementing the District’s NSR program. The District has little choice but to adopt it, 

however, as EPA has made clear that it will no longer accept a definition of “modification” that is based 

on increases in “potential to emit”. This is a clear change in EPA policy, as EPA has never objected to 

using this “modification” definition in the past in approving the District’s NSR program. Moreover, EPA 

has recently approved other California air district NSR programs using the very similar modification 

definitions explicitly based on increases in potential to emit. In discussing this issue with Region IX staff, 

District Staff pointed out that there are a number of reasons why the District’s current EPA-approved 

modification test is at least as stringent – if not more stringent – than the federal minimum 

requirements of EPA’s NSR regulations. These reasons include:

 The fact that the District’s modification test does not include a de minimis exemption for 

emissions increase that are less than “significant”. Unlike EPA’s test, the District’s modification 

test covers all increases in PTE, no matter how small. 

 The fact that the District’s modification test looks to short-term increases in PTE and not just 

annual increases. EPA’s program excludes major increases in the capacity of the equipment at a 
34 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

facility, as long as the facility can cap its annual emissions increase at a less-than-significant 

level. The District’s modification test captures all such increases; EPA’s does not.

 The fact that the District’s test applies to increases from each individual source. EPA’s program 

allows a facility to average out increase and decreases at multiple sources to avoid triggering a 

modification, through approaches such “netting” and “Plantwide Applicability Limits”. These 

provisions allow facilities to avoid NSR review under EPA’s test in many situations that are 

captured by the District’s test.

District Staff also discussed all of these reasons why the District’s current “modification” test is very 

stringent and is more than adequate to be approvable under EPA’s regulations in its May 25, 2012, 

Background Discussion document. Nevertheless, EPA Region IX has clearly indicated that it will no 

longer approve the District’s current “modification” test. EPA Region IX staff informed the District in a 

letter dated July 26, 2012, that the District will need to change its current modification definition in 

order to retain EPA approval of its NSR program.27 District Staff have developed the “Federal Backstop” 

provision in Section 2-1-234.2 in the Proposed Amendments to address EPA’s position on this issue. In 

addition, District Staff have sought to ensure that EPA will apply this new policy consistently across all of 

the California air districts, as there are several others that use a similar “modification” definition based 

on increases in potential to emit. EPA Region IX staff have stated that they do not believe that other air 

district regulations that define “modification” as a change at a source that will “result in the potential to 

emit being higher than the historic potential emissions” constitute a PTE-to-PTE test – although they 

declined to explain the basis for their conclusion when District Staff inquired. District Staff will continue 

to address these issues with EPA Region IX staff, and are confident that EPA will ensure that it is applying 

the federal NSR requirements consistently throughout the State. 

2. Addressing PM2.5 and “Condensable” Particulate Matter in District Permitting 

Programs – Sections 2-1-229, 2-1-241, 2-1-603, 2-1-604 and 2-1-605

EPA has made a number of changes in its requirements for permitting programs addressing particulate 

matter. EPA now requires that the District’s particulate matter permitting provisions must address fine 

particulate matter (PM2.5) specifically, as opposed to just PM10. In addition, EPA now requires that the 

District’s particulate matter permitting provisions must specifically address “condensable” particulate 

matter emissions – that is, emissions that are in the gaseous phase when emitted but condense at 

ambient temperatures to form solid particulate matter. Historically, the District’s particulate matter 

definition has not specified whether the condensable portion should be included, and so the 

condensable portion oftentimes has not been included when permitting particulate matter emissions 

(although in many cases it has). The Proposed Amendments include revisions to Regulation 2, Rule 1 to 

address both of these recent developments.

First, the Proposed Amendments add a definition of PM2.5, in proposed Section 2-1-241. Although the 

District has long regulated particulate matter, it has never applied permitting requirements specifically 

 

27 See EPA Comment Letter, at pp. 2-4, § I.2.a. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 35

for PM2.5. Accordingly, a new definition is required to specify exactly what will be covered by the new 

PM2.5 requirements. The definition specifies that PM2.5 means particulate matter with an aerodynamic 

diameter of 2.5 microns or less.

Second, the Proposed Amendments clarify in both the existing definition of PM10 in Section 2-1-229 and 

in the new definition of PM2.5 in proposed Section 2-1-241 that these pollutants are measured including 

both filterable emissions and condensable emissions. This specification that condensable emissions are 

included tracks EPA’s definitions for including condensable emissions. 

The Proposed Amendments also specify the measurement procedures that will be used in implementing 

these definitions in practice, which are set forth in proposed Section 2-1-603. Section 2-1-603 provides 

that EPA’s required source test methods, EPA Methods 201A and 202, must be used for all 

measurements of PM emissions from specific stationary sources. The only exceptions will be in 

situations where the physical characteristics of the emissions to be measured render these methods 

inapplicable because of the limitations of the test methods. These situations include cases where the 

emissions have a moisture content or temperature that is higher than allowed under the specifications 

for using Methods 201A and 202. In these limited cases an alternative method must be used, and prior 

written approval will have to be obtained from the APCO and from EPA. For measuring ambient PM 

concentrations, proposed Section 2-1-603 provides that the methods set forth in 40 C.F.R. Parts 50, 53, 

and 58 shall be used. 

These new regulatory provisions will be effective going forward into the future and will determine how 

the District’s permitting requirements for particulate matter will be applied henceforth. But it is also 

important to specify how prior regulatory determinations regarding particulate matter requirements will 

be treated, and in particular for situations where these prior determinations may not have addressed 

PM2.5 or condensable PM emissions. The Proposed Amendments include new Sections 2-1-604 and 2-1-

605 to address how such prior determinations will be addressed.

The guiding principle that Staff have used in addressing these issues in the Proposed Amendments is 

that when the new provisions take effect, what has taken place before that date will be treated as past 

history and will not be revisited to address condensable emissions any differently. The new provisions 

will only be applied prospectively going forward after the date they take effect. They will not be applied 

retroactively to any permit conditions or other regulatory determinations that may have been made in 

the past taking only the filterable portion into account. In essence, “the books are closed” on such prior 

historical determinations, and the District will not reopen such determinations retroactively to 

reevaluate them based on condensable emissions. The Proposed Amendments apply this general 

principle in specific situations as follows. 

With respect to determining compliance with permit limits that were established in the past under 

Regulation 2, the Proposed Amendments add Section 2-1-604 to clarify that compliance with such 

conditions in the future will be determined on the same basis that was used when the permit condition 

was imposed. As noted above, permit conditions have most often been based only on the filterable 

portion of PM emissions, and where that is the case compliance with such conditions in the future will 
36 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

continue to be based on the filterable portion only. There have been cases where existing PM emissions 

limits have been based on condensable PM emissions as well, however, and in those cases compliance 

will continue to be determined taking the condensable portion into account. However an existing 

permit limit was established, the amendments will not reopen that past history; the permit limit will 

continue to apply as it was intended when it was adopted. 

With respect to prior regulatory applicability determinations and emissions calculations, such as 

whether a source’s PM emissions were at a level that would trigger some permitting requirement, those 

past determinations will similarly not be reopened when the Proposed Amendments take effect. Thus, 

where a permit was issued for a source in the past and the District determined that it was not subject to 

District BACT requirements because its filterable PM10 emissions were less than 10 pounds per day, the 

District will not go back and reopen that determination and require BACT retroactively even if the 

source’s total PM10 emissions (filterable + condensable) are greater than 10 pounds per day. Similarly, 

where a permit was issued to a facility in the past that was subject to PM10 offsets requirements, and 

the facility provided offsets for its PM10 cumulative increase that was calculated considering only the 

filterable portion, the District will not go back and reopen that cumulative increase determination and 

change the amount of offsets that were required. What has been established in the past (before the 

effective date of the amendments) is past, and these historical regulatory determinations will be 

considered final and will not be reopened when the amendments take effect. 

For all new regulatory determinations made in the future, after the effective date of the amendments 

when the new definitions will become applicable, both the filterable and condensable portions of PM10

and PM2.5 must be counted for all purposes.28 Thus, new permit limits for PM10 and PM2.5 will be based 

on both portions, in keeping with the new definitions that are being proposed, and sources will need to 

include both portions when determining compliance with such limits. In the example above regarding 

the source that was not subject to BACT because its filterable PM emissions were below 10 pounds per 

day, when that source is modified, a new determination will need to be made regarding its PM 

emissions taking into account condensable emissions as well. If the total PM emissions are over 10 

pounds per day, then the source will be subject to BACT (assuming an emissions increase that triggers 

BACT under 2-2-301, of course). And in the example above regarding the facility that provided offsets for 

a cumulative increase calculated based on filterable emissions only, for future emissions increases it will 

need to calculate the amount of such new increases based on both filterable and condensable emissions 

and provide additional offsets accordingly. 

 

28 The District’s current particulate matter definitions do not specify whether or not the condensable portion 

should be included, which has resulted in the District including it or excluding it on a case-by-case basis as 

warranted by each individual permitting situation. The current definitions will continue to be in effect up until 

such time as the Proposed Amendments take effect, and so the District will continue to retain the discretion to 

include or exclude condensable emissions up until that time. Nothing in this Staff Report is intended to prejudice 

any such determinations. In particular, the District may opt to include condensable emissions under its existing 

definitions even before the Proposed Amendments take effect, where appropriate. Once the Proposed 

Amendments take effect, inclusion of the condensable portion will be mandatory in all cases.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 37

These principles are set forth in Section 2-1-605 in the Proposed Amendments. The following 

descriptions explain in more detail how these principles will work in some specific permitting situations 

that commonly arise. District Staff also provided some examples of how these provisions will apply at 

actual facilities in the Appendix at the end of the May 25, 2012, Background Discussion document, and 

those examples are further incorporated herein as additional explanation of how the Proposed 

Amendments will work in practice. 

• Determining the amount of an emissions increase or decrease: A number of provisions in 

Regulation 2 depend upon the amount of an emissions increase or decrease resulting from a 

change at a source. These include the definition of “modification” in Section 2-1-234 and the 

emissions increase/decrease calculation procedures in Section 2-2-604, among others. 

Determining the amount of an emissions increase or decrease from a change requires 

comparing emissions before the change with emissions after the change. Under the Proposed 

Amendments, both the emissions before the change and the emissions after the change will be 

determined including both the filterable and condensable portions of the PM emissions, to 

ensure that increases and decreases are always calculated based on an “apples-to-apples” 

comparison.29 This is an important principle, because one cannot accurately compare emissions 

before and after unless one uses the same definition of emissions for the “before” 

measurement and the “after” measurement. 

Determinations of the amount of an increase or decrease made after the effective date of the 

Proposed Amendments will use the new definitions for all purposes, even if a portion of the 

“before” emissions occurred before the effective date. Specifically, if an emissions increase or 

decrease from a change to a source is made in comparison to the source’s emissions over a 

multi-year baseline period, and part of that baseline period is before the effective date of the 

Proposed Amendments, the determination will take into account both the filterable and 

condensable portions during the entire baseline period – including the portion of the baseline 

period before the effective date. This approach will ensure that emissions increases and 

decreases reflect a true “apples-to-apples” comparison under all circumstances. 

• Determining whether a source is subject to BACT under Section 2-2-301: BACT is required for 

sources with a PTE of 10 pounds or more per day (for new sources and for modifications with 

any increase in emissions). Under the Proposed Amendments, this 10 lb/day threshold must be 

applied including both filterable and condensable PM emissions. In some cases, sources that 

were treated as being under 10 lb/day historically based only on filterable PM emissions may 

find that they are subject to BACT the next time that they are modified, if their PM emissions are 

 

29 Note that some provisions in District regulations look to increases in potential emissions and some look to 

increases in actual emissions. These principles will apply in all such cases. Regardless of whether potential 

emissions or actual emissions are being measured (or whether the comparison involves both actual and potential 

emissions), all emissions rates used in measuring emissions increases and decreases will include both the filterable 

and condensable portions. In all such cases, both the “before” emissions and the “after” emissions will be 

calculated using both portions, to ensure an “apples-to-apples” comparison with respect to how PM10 and PM2.5

are defined and measured.
38 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

over 10 lb/day when including the condensable portion as well. Section 2-2-301 would apply to 

such sources at such time as the source is modified and becomes subject to NSR requirements 

(assuming there is an increase in PM emissions from the modification and all other elements of 

Section 2-2-301 apply). 

• Determining whether a facility is subject to offset requirements under Section 2-2-303:

Offsets are required for facilities with a PTE of 100 tons per year or more of PM10 (and under the 

Proposed Amendments for PM2.5 as well). Under the Proposed Amendments, this 100 tpy 

threshold must be applied including both filterable and condensable PM emissions. In some 

cases, facilities that were historically treated as being under 100 tpy of PM10 based only on 

filterable PM emissions may find that they are over the 100 tpy threshold when the condensable 

portion is included. Section 2-2-303 will require such facilities to offset their cumulative 

increase for PM10 and PM2.5 the next time they apply for a permit for a new source or 

modification at the facility that triggers NSR. Such facilities will not need to provide offsets 

immediately when the amendments become effective, but the next time the District issues an 

NSR permit for the facility that is subject to Section 2-2-303, the facility will need to provide 

offsets for the cumulative increase in PM10 and PM2.5 emissions at the facility per the terms of 

Section 2-2-303. 

• Determining the amount of cumulative increase in PM10 and PM2.5 emissions at a facility 

subject to the Section 2-2-303 offsets requirements: Facilities that exceed the applicability 

threshold in Section 2-2-303 must provide offsets for their cumulative increase in PM10

emissions and (under the Proposed Amendments) in PM2.5 emissions back to the cumulative 

increase baseline date. 

For PM10, the cumulative increase baseline date is April 5, 1991. A facility’s cumulative increase 

in PM10 is therefore the sum of all the increases in PM10 emissions authorized by permits issued 

for the facility back to 1991. Cumulative increases associated with permits issued in the past, 

before the effective date of the amendments, were determined in accordance with the existing 

definition and were most often based on filterable PM10 emissions only. Any such prior 

cumulative increases associated with past permits that were determined based only on 

filterable emissions will not be reopened or recalculated to include condensable emissions. Nor 

will any offsets provided in connection with such prior permits be reopened or recalculated. 

Such prior history will be considered final for all future regulatory purposes. Any new 

cumulative increases associated with new permits issued after the effective date of the 

amendments will be calculated based on both the filterable and condensable portions, however, 

consistent with the new definitions. Going forward, additional cumulative increase associated 

with new permits will be based on both filterable and condensable, and offsets will have to be 

provided for that amount of cumulative increase as required under Section 2-2-303.

For PM2.5, the cumulative increase baseline date will be the effective date of the amendments, 

and so the situation will be less complicated. A facility’s cumulative increase for PM2.5 will be 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 39

the cumulative increase associated with all permits issued after the effective date of the 

amendments, and all such cumulative increases will be determined based on both filterable and 

condensable in accordance with the new definitions. 

• Determining the amount of emission reduction credits available for PM10 and PM2.5 emission 

reductions: If a facility undertakes an enforceable reduction in emissions that satisfies the 

applicable requirements, it can take credit for such reductions either (i) by crediting such 

reductions against an increase in PTE from a new or modified source as a “contemporaneous 

on-site emission reduction credit”, which reduces the amount of cumulative increase for which 

offsets (banked credits) need to be provided; or (ii) by banking the reduction for future use to 

offset future cumulative increases at the same facility or at a different facility. The regulatory 

determination of how much credit should be given for such reductions – that is, the amount of 

the emission reduction credit available – is made at the time of the permit application in which 

the credit is sought. For a contemporaneous on-site emission reduction credit, the credit is 

sought and the determination is made at the time the facility applies for a permit for a 

new/modified source at the facility and wants to use the contemporaneous on-site emission 

reduction credit to reduce the cumulative increase associated with the new/modified source. 

For a banked credit, the credit is sought and the determination is made at the time the facility 

submits a banking application to bank the emission reduction credit. 

After the effective date of the Proposed Amendments, all such determinations will be made 

using the revised definitions and will be required to take into account both the filterable and 

condensable portions of the PM emissions. These are regulatory determinations about the 

amount of an emission reduction credit that can be granted that are being made after the new 

definitions are in effect, and so they will be made using the PM measurements required by 

those definitions. The amount of emission reduction credit will be based on the source’s 

emissions during the baseline period,30 before the source was shut down or otherwise reduced 

its emissions (and will be subject to any “surplus” adjustment required under Section 2-2-603), 

and such emissions will be determined taking into account both filterable and condensable 

emissions. Note also that both filterable and condensable emissions will be counted for the 

entire baseline period, even if the baseline period extends back before the effective date of the 

regulations, in order to ensure an accurate “apples-to-apples” comparison. 

• Title V “Major Facility Review” Applicability: If a facility has historically been treated as not 

being subject to Title V permitting requirements because it was not a Title V “Major Facility” 

based on an assessment of its PM emissions being below the 100 tpy “Major Facility” threshold 

that took into account only filterable emissions, the District does not intend to revisit that 

historical regulatory determination. That is, the District does not intend to treat such a source’s 

historical operation without a Title V permit as having violated any Title V requirements where 

the District determined that no Title V permit was required based on filterable emissions only. 

 

30 The baseline periods for contemporaneous on-site emission reduction credits and for banking of credits are set 

forth in Section 2-2-603.
40 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

However, going forward after the effective date of the Proposed Amendments, if the District 

determines that the facility is over the 100 tpy Major Facility threshold when both filterable and 

condensable emissions are included, the District will require the facility to apply for and obtain a 

Title V permit. The “books will be closed” with regard to any such past history before the 

effective date of the regulations, but for future purposes after the effective date, all regulatory 

determinations must be made based on both filterable and condensable emissions. This 

includes ongoing determinations of whether a facility requires a Title V permit to operate going 

forward. 

These provisions in Sections 2-1-604 and 2-1-605 will help ensure a smooth transition to the new 

requirements to address PM2.5 in particulate matter permitting and to ensure that condensable PM 

emissions are taken into account in all regulatory determinations.31 

3. Temporary Permits under the Accelerated Permitting Program – Sections 2-1-302.2 

and 2-1-106

The Proposed Amendments include clarifying revisions regarding temporary permits issued under the 

District’s Accelerated Permitting Program. The Accelerated Permitting Program, set forth in Sections 2-

1-302.2 and 2-1-106, allows certain new sources and modifications to be constructed and operated 

during the permit review process based on a preliminary review and determination that the source will 

comply with applicable BACT requirements (or that it is simply a replacement of an existing abatement 

device that will not increase emissions). The District conducts this preliminary review and, upon 

determining that the source is eligible, issues a temporary permit that allows the owner/operator to 

begin construction and operation while the full permitting review is completed. Once the District 

completes the full permitting review, it issues a full permit to operate as it would with any other source

(assuming that the source will comply with applicable regulatory requirements and is eligible for a 

permit).

32

 Current Section 2-1-302.2 provides for the issuance of temporary permits to operate under 

the Accelerated Permitting Program, and current Section 2-1-106 provides an exemption from the 

authority to construct requirement of Section 2-1-301 for sources with a temporary permit to operate. 

With this exemption, the owner/operator can begin construction and operation of the source as soon as 

it receives its temporary permit to operate, pending the full permit review that would otherwise need to 

be completed before an authority to construct can be issued. This Accelerated Permitting Program 

serves to reduce the delay involved in waiting for the full permit review to be completed in situations 

where it is preliminarily clear that the source will comply with BACT and related requirements, while still 

 

31 A related issue in how the District will transition to these new provisions governing PM permitting concerns how 

existing banked particulate matter Emission Reduction Credits will be treated. The provisions for Emissions 

Reduction Credits and banking are in Rules 2 and 4 of Regulation 2 and are addressed in Sections IV.B. and IV.C. of 

this Staff Report where those provisions are discussed.

32 In the event that the District’s full permitting review indicated that a permit to operate should not be granted for 

some reason, the District would deny the permit and the source would be required to cease operation unless and 

until it could remedy whatever defects prevented issuance of a full permit to operate. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 41

ensuring that the source is subjected to the complete permit review process before a full permit to 

operate is issued.

The Proposed Amendments do not make any substantive changes to the Accelerated Permitting 

Program. The amendments will simply clarify how the program works. In particular, the amendments 

are necessary to respond to a misconception that has arisen that a new source or modification can be 

constructed and operated immediately upon submission of a complete application. Allowing a source to 

be constructed simply based on the submission of an application would be an impermissible “noticeand-go” permitting requirement – that is, a requirement that allows for construction without any prior 

review and approval by the permitting authority – which is inconsistent with the Clean Air Act. The 

District’s Accelerated Permitting Program is not such a requirement, as it does in fact require review by 

the District and issuance of a temporary permit before construction and operation of the source can 

begin (and a full, comprehensive permit review before a full permit to operate can be issued). The 

proposed amendments will clarify this situation.

In addition, a number of the substantive requirements for permit review under the Accelerated 

Permitting Program and issuance of a temporary permit are set forth in the exemption in Section 2-1-

106, and not in the provisions of Section 2-1-302.2, which sets forth the procedures for the program. 

This situation is confusing because users of the regulation look to Section 2-1-302.2 to find the rules on 

how the program works for issuance of the temporary permit; Section 2-1-106 is designed to provide an 

exemption from the authority to construct requirement so that construction and operation can begin 

under the temporary permit even though an authority to construct has not been issued. The proposed 

revisions therefore move the procedures for accelerated permitting that are currently in Section 2-1-106 

– including the specifications for what types of sources are eligible for accelerated permitting in current 

subsections 106.1 through 106.3 – into Section 2-1-302.2 where they should properly be listed. Section 

2-1-106 will retain the statement of exemption from the authority to construct requirement for sources 

that have obtained a temporary permit under the Accelerated Permitting Program.

The Accelerated Permitting Program will work the same way under these amendments as it does 

currently. The program will be available for three types of permit applications. The first is for any new 

source, or any modification to an existing source, that can be preliminarily determined to be compliant 

with BACT and certain other applicable requirements pending full permit review. To be eligible, the

applicant must make a preliminary demonstration that the source will meet the following requirements: 

(i) the source will comply with the District BACT requirement in Section 2-2-301, either because its 

PTE will be below the 10 lb/day BACT threshold (determined without taking into account the 

effect of any abatement device or equipment) and therefore not subject to the requirement, or 

because the source has been pre-certified as compliant with BACT under Section 2-1-415;

(ii) the source will not have a toxics PTE above any of the screening threshold levels set forth in 

Table 2-5-1 of Regulation 2, Rule 5 (also determined without taking into account the effect of 

any abatement device or equipment); and 
42 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

(iii) the source is not subject to the public notice requirements in Section 2-1-412 applicable to 

sources located within 1,000 feet of a school. 

These requirements are set forth in proposed subsection 2-1-302.2.1. The second type of permit 

application eligible for the Accelerated Permitting Program is an application for an abatement device 

that will simply be a replacement for an existing abatement device and will not increase the potential to 

emit any regulated air pollutant of either the abatement device or any source whose emissions it abates. 

The requirements for such abatement devices are set forth in proposed subsection 2-1-302.2.2.33 The 

third type of permit application eligible for the Accelerated Permitting Program is an application for an 

alteration to an existing source, as defined in Section 2-1-233. Per Section 2-1-233, an alteration is a 

change at a source that will not result in an increase in emissions from the source. The provisions for 

alterations under the Accelerated Permitting Program are set forth in proposed subsection 2-1-302.2.3.

The mechanics of the Accelerated Permitting Program will continue to work in the same way under the 

Proposed Amendments. An applicant that wants to construct a new source or a modification or 

alteration to an existing source, or a replacement of an existing abatement device, that is eligible for the 

Accelerated Permitting Program must submit a complete application consisting of (i) an application form

and source data form(s); (ii) payment of fees; (iii) an explanation of which category of eligibility for the 

Accelerated Permitting Program the application falls into; (iv) a certification that the application meets 

all of the applicable eligibility criteria of the relevant category; (v) a certification that the source is not 

subject to Sections 2-1-316 through 2-1-319 (which are provisions that limit eligibility for the program); 

and (vi) a certification that the applicant has reviewed all applicable New Source Performance Standards

(NSPS) and has determined that the application will comply. (This latter requirement is being inserted to 

ensure that applicants have considered the potential for NSPS applicability before starting the project, in 

order to prevent a situation where they may install equipment only to realize later that it must be redesigned because of NSPS requirements.) Upon receipt of such an application, the APCO shall review 

the application and shall issue a temporary permit to operate upon verification that all eligibility criteria 

have been met.34 The owner/operator can then commence construction and operation of the source (or 

abatement device) immediately upon receipt of the temporary permit to operate. The APCO shall 

 

33 Note that for both of these types of projects, the Accelerated Permitting Program in not available if the project 

will be subject to any of the provisions of Sections 2-1-316 through 2-1-319, which limit the applicability of permit 

exemptions for certain toxics sources, for sources that cause a public nuisance, for certain sources of hazardous 

substances, and sources with emissions of more than 5 tons per year of any regulated air pollutant. 

34 The review of an application under the Accelerated Permitting Program is not the same as the full compliance 

review undertaken before issuing the full Permit to Operate. The review for issuing a temporary permit to operate 

looks only to whether the information required under elements (i)-(vi) in Section 2-2-302.2 has been submitted. If 

all of the required elements of the application have been submitted, the APCO will promptly issue the temporary 

permit to operate to allow the source to begin construction and operation, and will then commence the full 

compliance review in order to issue the full permit to operate (assuming the source is eligible). Of course, if it is 

immediately obvious on the face of the application that the project will not be eligible for the full permit to 

operate, the APCO may deny the application immediately with an explanation of the reasons why; in such a 

situation, there would be no reason to wait for the full compliance review in order to identify the reasons why the 

application should be denied.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 43

continue to process the application after issuance of the temporary permit to operate and shall take 

final action on the application – that is, shall issue or deny a full permit to operate – within 35 days of 

receipt of the complete application in accordance with Section 2-1-408. (Note that this process 

necessarily relies on the applicant following through with the full application process in a timely manner; 

if an applicant fails to provide any requested information necessary for completing the full permit 

review or otherwise unreasonably delays the District’s processing of the application, the APCO may 

cancel the application and the temporary permit to operate will cease to be valid per the terms of 

Section 2-1-302.2.) 

The temporary permit to operate shall cease to be effective upon this final action. The source can 

operate under the temporary permit to operate up until such final action, but must maintain records 

sufficient to demonstrate that emissions do not exceed applicable qualifying levels under the 

Accelerated Permitting Program. If the final action on the permit application is issuance of a full permit 

to operate, the source will then be able to operate from that point onward under the full permit to 

operate. If the final action on the permit application is denial of the permit, then the source will be 

required to cease operating unless and until it can remedy any deficiencies and obtain a valid permit. In 

constructing and operating a source under a temporary permit to operate, the owner/operator assumes 

the risk that the source will not be able to satisfy District regulations upon a full permit review and will 

not be permitted. The fact that the owner/operator has incurred costs in constructing the source under 

the temporary permit will not be a reason for granting a full permit to operate or a defense in an 

enforcement action if the source continues to operate after the permit is denied. 

4. Permitting of Portable Combustion Equipment – Sections 2-1-413 and 2-1-105

The Proposed Amendments include several revisions addressing regulation of portable combustion

equipment. These revisions address the potential for confusion that has arisen because of the fact that 

the term “portable” is referenced in two different contexts related to Regulation 2 permitting: (i) 

portable equipment registration under ARB’s Portable Equipment Registration Program (PERP); and (ii) 

District permitting of equipment that may end up being used at multiple locations within the Bay Area 

under District Regulation 2-1-413. 

ARB’s PERP program is designed to address portable equipment (primarily diesel-fired equipment) that 

may be moved around among different air districts within the state. Such equipment includes portable 

generators that are used in multiple locations, diesel-fired construction equipment that may be moved 

from one construction site to another as needed, rental equipment that may be rented out to different 

users in different locations, and the like. Instead of requiring such equipment to get multiple permits 

from the multiple different air districts in which it may operate, ARB addresses such equipment on a 

state-wide level by providing a mechanism for it to obtain a single registration document that will allow 

it to operate anywhere within the state. Substantively, the PERP program requires such equipment to 

comply with ARB’s Airborne Toxic Control Measure (ATCM) requirements, among others. Procedurally, 

the owner/operator of such equipment registers it with ARB based upon a certification that it complies 

with such requirements, and that registration then allows the equipment to be operated in any air 
44 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

district without having to get a district-specific permit.35 The central element of the PERP program is 

that the equipment must be portable: If the equipment is not such that it could be moved around 

frequently from one district to another so that getting individual district permits would be burdensome, 

then it makes more sense to have it obtain a permit from the specific air district in which it will be 

operating.

The District’s permitting provisions for sources that will be used at multiple locations is somewhat 

different. That program applies for sources that are not PERP-registered – and therefore need to obtain 

a District permit – but that may end up being operated at different locations within the Bay Area. The 

District’s rules provide for issuing permits for such operation in multiple locations in Regulation 2-1-413. 

That provision provides for permits that allow operation at any location within the Bay Area, as long as 

the source satisfies certain requirements to ensure that it will not have any significant air quality impacts 

no matter where it is used – for example, the source must satisfy the toxic risk screen requirements of 

Regulation 2-5, it cannot be used within 1000 feet of a school, etc. 

Currently, Regulation 2-1 uses the term “portable” to define the types of equipment that are eligible 

under both of these two separate programs. The exemption in Section 2-1-105 for PERP-registered 

equipment applies to “portable” equipment; and the District permitting provisions for equipment that 

may be used in multiple locations in Section 2-1-413 also applies to “portable” equipment. It is likely 

that in adopting a single, common definition for use under both programs, the District felt that using a 

single definition would simplify the implementation of both programs. 

District staff have now come to realize, however, that making both of these programs apply to 

“portable” equipment, and using a common definition for that term, actually complicates the 

implementation of these programs. This is because the purpose behind the two programs, and the 

types of permitting situations that they were intended to apply to, are in fact different. The District’s 

provisions related to the PERP program – specifically, the exemption in Section 2-1-105 for PERPregistered equipment – were intended to exempt all equipment that is regulated by ARB under the PERP 

program from District permitting requirements, in order to avoid duplicative regulation of these sources. 

For this purpose, the key regulatory concept is whether or not the equipment is registered under ARB’s 

PERP program. By contrast, the District’s provisions for multiple-location operations – Section 2-1-413 –

were intended to ensure that any source that is not permitted for a specific location is such that it will 

not cause any significant impacts no matter where in the Bay Area it is operated. For this purpose, the 

key regulatory concept is whether there would be any air quality concerns arising from a location where 

it may operate, such as the potential for significant toxic impacts on nearby receptors under Regulation 

2, Rule 5, or operation within 1000 feet of a school. Although there are likely to be similarities between 

these two different situations in many contexts, they are in fact different and so it does not make sense 

 

35 PERP registration supersedes all local air district permitting requirements. (See Health & Safety Code 

§ 41752(a)(1).) In the Bay Area, the Air District has adopted Regulation 2-1-105, which explicitly exempts PERPregistered portable equipment from District permitting requirements, in recognition of the preemptive effect of 

PERP registration.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 45

that they both have a single, common requirement that equipment be “portable” in order to be eligible 

for the District’s regulatory provisions applicable to the two situations.

The Proposed Amendments therefore revise the way Regulation 2, Rule 2 will address these two 

situations. The exemption in Section 2-1-105 for PERP-registered equipment will be revised to state

explicitly that if equipment is validly registered under ARB’s PERP program, then it is exempt from 

District permitting requirements. This exemption simply recognizes the fact that ARB PERP registration 

preempts District permitting requirements. If a piece of equipment has a valid PERP registration, it is 

not required to obtain a District permit as a matter of law. In practice, such equipment will still need to 

be “portable” in order for these provisions to apply. But the requirement will be implemented through 

ARB’s requirement to be “portable” in order to be eligible for PERP, not through any District definition of 

“portable”. Simply put, if equipment is portable and otherwise satisfies ARB’s PERP requirement, and it 

is duly registered under and complies with ARB’s PERP program, then it is exempt from District 

permitting requirements. There are no additional eligibility requirements for this exemption beyond 

valid PERP registration.

With respect to the District’s provision for multiple-location permitting under Section 2-1-413, the 

Proposed Amendments remove the language about such permitting being applicable only to equipment 

that is “portable” under the relatively narrow definition that is currently set forth in Section 2-1-220. 

Equipment that may be operated at multiple locations around the Bay Area may obtain such a multiplelocation permit as long as it meets the substantive requirements of Section 2-1-413 designed to prevent 

impacts on nearby receptors no matter where the source is operated (e.g., satisfaction of toxic risk 

requirements under Regulation 2-5, no operation within 1000 feet of a school, etc.). Such equipment 

will be eligible for multiple-location permitting even if it does not meet the strict definition of “portable” 

used in the PERP program. For example, equipment may be operated at a single location for more than 

one year, which would classify it as not “portable” under PERP. Such equipment may still be moved 

around from one location to another at various times, however, and so it still should qualify for multiplelocation permitting under Section 2-1-413 (as long as it meets all the criteria set forth in that section). 

Similarly, equipment that is attached to a fixed foundation and would therefore not be “portable” under 

the PERP definition may nevertheless be moved from one location to another at times, and so it too 

should qualify for multiple-location permitting (again, assuming it meets all the applicable criteria). The 

Proposed Amendments therefore remove the language about “portable” equipment in Section 2-1-413 

and focus that provision instead on the substantive protections to sensitive receptors that are the 

touchstone of the District’s multiple-location permitting provisions. To avoid confusion on this issue of 

“portability”, the Proposed Amendments also change the title of Section 2-1-413 to “Permits for 

Operation of Equipment at Multiple Locations Within the District”. 

Finally, with respect to the definition of “portable” in current Section 2-1-220, with the changes outlined 

above there is no longer any need for such a definition. For PERP-registered equipment under Section 

2-1-105, the test for the exemption is simply whether the equipment has a valid PERP registration –
46 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

there is no need for a “portability” test in the District’s regulations on this issue.36 And for multiplelocation permits under Section 2-1-413, the requirements for such permits are simply whether the 

equipment satisfies the substantive requirements under that Section – there is no need to limit such 

permits to “portable” equipment, as long as the equipment satisfies all such requirements. As there is 

no longer any need for a definition of “portable”, the Proposed Amendments delete Section 2-1-220.37

5. Clarification of Requirements for Permit Applications – Sections 2-1-402 and 2-1-

202

The Proposed Amendments also make certain clarifications to the requirements for permit applications. 

Current Section 2-1-402 addresses the administrative procedures for submitting an application, but it 

states only that all required information must be submitted. The specific requirements for the 

information that needs to be included is listed in Section 2-1-202, which is the definition of “Complete 

Application”. The requirements for what information needs to be submitted with a permit application 

are more appropriate in the section on administrative requirements for permit applications – Section 2-

1-402 – than in the definition of the term “Complete Application”. The Proposed Amendments move 

these requirements to Section 2-1-402. “Complete Application” will be defined in Section 2-1-202 as an 

application that includes all of this required information. 

The Proposed Amendments also make some clarifying changes to the descriptions of the information 

required to be submitted with a permit application. In addition, the requirement to submit PSD-related 

information (currently in Section 2-2-202.4) will be expanded to include all applicable information 

required for NSR permit applications under Section 2-2-401 (to the extent that NSR requirements of 

Regulation 2, Rule 2 are applicable), and a catch-all requirement will be added in Subsection 2-1-402.8 

to provide that any other information requested by the APCO that is necessary to conduct a complete 

permit review must also be provided, to the extent it is not already covered by the specific application 

requirements. 

 

36 As noted above, the equipment will still have to be “portable” to be eligible for PERP registration, but that 

requirement will be implemented through ARB’s PERP program. If PERP registration requires the equipment to be 

“portable”, there is no need for the District’s regulations to apply an additional requirement that it be “portable”. 

The requirement that the equipment satisfy the PERP requirements fully accomplishes this end, without the need 

for any additional District “portable” requirement (or “portable” definition to specify how such a requirement is 

applied).

37 There are a few other places in Regulation 2 where the term “portable” is used without any intent for any 

specific regulatory definition to apply. In these cases, the general dictionary definition will apply. This is 

appropriate for these situations, as the term is used in these places simply for its normal dictionary meaning and 

not for any special regulatory meaning. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 47

6. Compliance with Material Representations in Permit Applications – Section 2-1-

320

The Proposed Amendments add a new section 2-1-320, which requires that the owner/operator of a 

source must comply with any material representations made or information submitted in connection 

with its application for a permit for the source. This requirement is implicit in the requirement to obtain 

a permit for sources subject to permitting requirements, because the District can issue a permit only for 

the source described in the application on which the permit decision was made. If the owner/operator 

constructs and operates a source that is not the same as the source described in the application, then 

the source necessarily is not covered by the permit and the owner/operator is in violation of the 

District’s permitting requirements. In order to be covered by the permit, the owner/operator must 

construct and operate the source as the owner/operator described it in the permit application. If the 

owner/operator builds and operates a materially different source instead, it is not covered by the 

permit. 

The District has long treated information and representations submitted in connection with permit 

applications as binding on permit-holders under this general legal principle. The District also reminds 

permit recipients that such information and representations are binding and enforceable in the standard 

language the District uses in all permit issuance documents. The Proposed Amendments add new 

Section 2-1-130 to restate this principle explicitly in District regulations. This provision will serve as an 

additional way to ensure that owners and operators understand and are on notice of the fact that if they 

have represented to the District that they will build and operate their equipment in a certain way in 

order to obtain a District permit, then they need to comply with those representations in order to be 

covered by the permit that the District issues based on those representations.

It is also important to note that the touchstone for whether an owner/operator may depart from 

information submitted or representations made to the District in connection with a permit application is 

whether the information or representation is material to the District’s permitting analysis and decision 

whether to issue the permit (and under what conditions). If the information or representation was such 

that the District would not have issued the permit if it understood how the source would actually be 

constructed or operated – or would have issued the permit, but on a different basis or with different 

permit requirements – then the owner/operator must build and operate the source consistent with the 

information or representation at issue in order to be covered by the permit. Conversely, if an 

application contains any information or representations that are ancillary to the permitting analysis and 

not relied on by the District in evaluating or deciding on the application, then the owner/operator may 

depart from such information or representation and still be covered by the permit. 

7. Compliance with State Implementation Plan and Other Applicable Requirements –

Section 2-1-321

The Proposed Amendments add a new section 2-1-321, which states that the issuance of an authority to 

construct or permit to operate does not relieve the owner/operator of a facility from its obligations 

under any applicable legal authority to comply with applicable regulatory requirements, including 
48 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

(without limitation) all applicable requirements of the State Implementation Plan for California. This 

principle is inherent in existing law, as nothing in the District’s regulations purports to make a District 

permit effective to preempt other regulatory requirements. The proposed amendments add new 

Section 2-1-321 to make this principle explicit in District regulations, which will serve as an additional 

means to provide notice to any permit holder who may misunderstand the effect of the permit as

relieving it from its duty to comply with the law. Adding this new section also responds to comments 

from staff of EPA Region IX that this principle needs to be stated explicitly in District regulations for 

purposes of NSR approvability. 

8. Effect of Explanatory Notes in Regulation Text – Section 2-1-130

In certain places in Regulation 2, explanatory notes are included to point out to readers certain 

information that may be helpful in understanding how the regulations work. These explanatory notes 

are not intended to create any regulatory requirements (beyond what is laid out in the regulatory text 

itself), but they are useful in certain situations to highlight important information that a reader might 

not readily be aware of. Staff believe that adding these explanatory notes where appropriate can help 

make the regulations clearer and easier to understand and implement for all involved. To make it clear 

that these notes are explanatory only and do not create any binding legal requirements, the proposed 

amendments add a new Section 2-1-130 explaining the intent behind these explanatory notes. 

9. Applicability of General Provisions in Regulation 2 – Section 2-1-102

Current Section 2-1-102, entitled “Applicable Requirements”, states that the requirements in regulation 

2, Rule 1 apply to Rules 2, 3 and 6 of Regulation 2 (unless specifically superseded). It has always been 

the District’s intent and practice that the general requirements in Regulation 2, Rule 1 apply to all 

permitting under Regulation 2, including Rules 2, 3, and 6 as well as all other provisions of Regulation 

2.38 The proposed revisions to Section 2-1-102 expand the applicability to include all such provisions. 

This means that any general requirement in Regulation 2 will apply to all Regulation 2 permitting. For 

example, the general definitions in Sections 2-1-200 et seq. apply to NSR permitting under Regulation 2, 

Rule 2, toxics permitting under Regulation 2, Rule 5, Title V permitting under Regulation 2, Rule 6, and 

all other situations that may arise under Regulation 2. The exception to this general rule is that if there 

is a requirement in a specific permitting rule that conflicts with a general requirement, then the specific 

permitting rule takes precedence. 

 

38 Note that the District’s intent and understanding has always been that general requirements set forth at the 

beginning of a regulation (or set of regulations) apply to the more specific rules that follow. Thus, the District has 

always intended and understood that the general provisions and definitions in Regulation 1 apply to all District 

rules and regulations (unless specifically superseded). Similarly, the District has always intended and understood 

that the general provisions and definitions in Rule 1 of regulations such as Regulation 2 (permits), Regulation 6 

(particulate matter) and Regulation 8 (organic compounds) apply to all of the specific rules in those regulations. 

The proposed amendments to Section 2-1-102 will simply make this principle explicit in Regulation 2. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 49

10. Clarification of Exemption Provisions

The Proposed Amendments also make revisions to a number of the exemption provisions in the current 

Rule. The areas in which the current exemptions are being revised are outlined below. 

In addition, at the request of EPA Region IX staff, Air District Staff have prepared an analysis of the 

exemptions in Regulation 2 under Section 110(l) of the Clean Air Act.39 Section 110(l) requires that when 

a state revises its State Implementation Plan, EPA shall not approve the revision if it would interfere with 

any requirement concerning attainment and reasonable further progress, or any other applicable CAA 

requirement. This analysis compares the exemptions contained in Regulation 2, Rule 1 in the Proposed 

Amendments with the most recent EPA-approved regulations in the State Implementation Plan. As 

provided in that analysis, the revisions to the District’s permitting exemptions under the Proposed 

Amendments (and those made in earlier amendments since the most recent EPA-approved version) will 

not interfere with any requirement concerning attainment and reasonable further progress or any other 

applicable CAA requirement. 

a) Sources Not Subject to District Rules – Section 2-1-103 

The Proposed Amendments make several minor revisions to the exemption in Section 2-1-103 for 

sources that are not subject to the District regulations listed in that exemption. For such sources, there 

is little purpose to be served by requiring them to obtain a permit (i) because the listed District 

regulatory requirements do not apply and therefore do not subject them to any requirements to be 

imposed through a permit; and (ii) because the emissions associated with such sources are minor. The 

Proposed Amendments make several revisions to the wording of the exemption to make it read more 

clearly. They also move the explanatory notes accompanying the regulatory provisions to the end of the 

section so that they do not interrupt the enforceable regulatory language of the section.

b) Agricultural Sources Engaged in Biomass Composting – Section 2-1-113.1.2 

The Proposed Amendments clarify how the exemption for agricultural sources in Section 2-1-113.1.2

applies with respect to agricultural operations that engage in composting or similar biomass processing 

and also process some biomass material from non-agricultural operations. Questions have arisen in 

recent years over whether such operations can process biomass from non-agricultural sources and still 

qualify as an “agricultural source” under this exemption – and if so, how much non-agricultural material 

would be allowed. The Proposed Amendments add a provision establishing that such agricultural 

 

39 See CAA Section 110(l) Analysis of BAAQMD Permit Exemption Provisions in Regulation 2, Rule 1, available at 

www.baaqmd.gov/Divisions/Engineering/Proposed-Reg-2-Changes.aspx. Per Section 110(l), the analysis addresses 

all exemptions in Regulation 2, Rule 1 that are different from the exemptions contained the most recent EPAapproved version of the District’s regulations in the State Implementation Plan. These changes include revisions to 

exemptions being made under the Proposed Amendments, and also a number of other changes that were made in 

previous amendments adopted by the Board of Directors but which have not yet been approved by EPA in the 

State Implementation Plan. The analysis addresses all changes to the exemption provisions in Regulation 2, Rule 1 

that EPA will be requested to approve into the State Implementation Plan. 
50 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

sources that primarily process green materials or animal waste products derived from agricultural 

operations can continue to be eligible for this exemption as long as they do not processes 500 or more 

tons per year of such material from non-agricultural operations. Providing for such operations to process 

non-agricultural waste materials is important because agricultural composting operations often need to 

find other sources of non-agricultural waste material to mix into their agricultural wastes in order to 

properly balance their compost product. The agricultural source exemption should allow for them to do 

so without penalizing them for engaging in composting. Allowing up to 500 tons per year of such wastes 

is consistent with the amount of biomass processing allowed under the exemption for non-agricultural 

composting operations under Section 2-1-115.2.3. 

c) Space Heaters – Section 2-1-113.2.14

The Proposed Amendments remove the exemption in current Section 2-1-113.2.14 for natural gas and 

LPG space heaters with a heat input less than 20 MMBtu/hr that are not subject to any regulatory 

requirements under Regulation 9, Rule 7. This exemption is being removed because there are very few 

(if any) such devices in the Bay Area that could benefit from such an exemption; and to the extent that 

there are such devices, there does not appear to be any reason why they need this exemption. 

Regulation 9, Rule 7 applies to natural gas and LPG heaters with a heat input of 2 MMBtu/hr or more, 

and by definition these are not eligible for the exemption even though it nominally applies to heaters up 

to 20 MMBtu/hr. Moreover, there is a general exemption in Section 2-1-114.2 that applies to all natural 

gas and LPG devices of less than 10 MMBtu/hr, and so this exemption already addresses most 

equipment that would be covered by this exemption. As there is no clear justification for this 

exemption, it is being deleted in the Proposed Amendments. 

d) Combustion Equipment Mobile Sources – Section 2-1-114

Section 2-1-114.2 provides an exemption for combustion emissions from certain internal combustion 

engines and gas turbines. Subsections 114.2.4 and 114.2.5 apply to engines on vehicles, trains, ships, 

etc. Both subsections include a statement unrelated to the exemption regarding the fact that in 

implementing the offsets requirements in Sections 2-2-302 and 2-2-303 of the District’s NSR Rule 

(discussed below in Section IV.B.c.), emissions from cargo carriers associated with a facility are included 

and the cargo carrier emissions are counted as part of the emissions of the source that receives or loads 

the cargo from the cargo carriers. These references are correct in their statement of how cargo carrier 

emissions are treated in connection with the District’s offsets requirements, but that fact is not related 

to the exemption involved in Section 2-1-114. The Proposed Amendments therefore remove these 

statements. There will be no substantive change in District regulations from this change. The engines 

subject to the exemption will still be exempt, and emissions associated with cargo carriers will still be 

counted in implementing the offsets requirements in Sections 2-2-302 and 2-2-303. To avoid any 

potential for confusion, new Section 2-2-610 is also being added to specify how cargo carrier emissions 

will be included in applying the offsets requirements. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 51

e) Low-Usage Wipe Cleaning – Section 2-1-118.9

The Proposed Amendments revise the language of the exemption for wipe cleaning with low annual 

solvent usage and emissions in Section 2-1-118.9 to clarify how it applies. The revisions delineate the 

two requirements for applicability of the exemption into subsections 118.9.1 and 118.9.2, and clarify (i) 

that the limit of 20 pounds of solvent usage per year covers all wipe cleaning operations and (ii) that the 

150 pound-per-year limit on VOC emissions is uncontrolled emissions. 

f) Graphic Arts Operations – Section 2-1-119.5

The Proposed Amendments clarify that the exemption in Section 2-1-119.5 for graphic arts operations 

with emissions of less than 400 pounds of VOCs per month applies to uncontrolled emissions. 

g) Modification, Replacement and Installation of Fugitive Components – Section 

2-1-128.21

The Proposed Amendments include language clarifying how the exemption in Section 2-1-128.21 works 

in practice. This exemption applies to components that may have the potential for fugitive emissions –

i.e., emissions that come from vents, valves, and the like, and not from an intended emission point such 

as an exhaust stack – but which do not otherwise cause emissions themselves. The exemption provides 

that such components (often called “fugitive components” as a short-hand reference) may be modified, 

replaced, or added at existing process units without a permit under Regulation 2. The Proposed 

Amendments will make clear how the following principles apply in implementing this exemption.

First, this exemption is only for the modification/replacement/addition of components that do not 

normally have air emissions during routine operations, except for their potential fugitive emissions. 

Such components include (although are not limited to) valves, flanges, pumps, compressors, and so 

forth, as listed in the regulatory language. Where other equipment is being modified, installed or 

replaced that is not such a component, that other equipment is not exempt from permitting simply 

because it has some of these fugitive components installed on it. For example, a piece of equipment 

(e.g., a pressure vessel) may have a number of such components installed on it. Modification of the 

equipment itself is not covered by this exemption and would require a permit. Only modification of the 

fugitive-emission components installed on the equipment can qualify for this exemption. This principle 

is already explicit in the current language of subsection 128.21, which states that the activity that is 

exempt from permitting is the “[m]odification, replacement or addition of fugitive components,” not 

any and all changes at any equipment on which such components may be installed. 

Second, the exemption is only an exemption from the requirement to obtain an Authority to Construct 

before engaging in the activity that constitutes the modification/replacement/addition of the 

component(s). It is not a blanket exclusion of fugitive emissions from such components from all 

regulatory oversight. Where a modification of the source on which the fugitive-emissions component is 

installed is not subject to an exemption and requires a permit, fugitive emissions from the components 

installed on the source are included in the permit review for the source, regardless of whether the 
52 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

components are/were installed subject to this exemption. Thus, in the example above, say the source 

involved undergoes a modification that does not just involve the installation of components that is 

exempt under Section 2-1-128.21, but instead requires NSR permitting. The modification to the source 

must undergo NSR review under Regulation 2, which could involve the implementation of BACT under 

Regulation 2-2-301 if emissions from the source are above the applicable 10 pounds-per-day BACT 

threshold. In applying this 10-pound-per-day threshold, all emissions from the source are counted, 

including emissions that happen to be emitted as fugitive emissions from the components installed on 

the source. The same principle applies for application of other regulatory provisions. The 

modification/installation/addition of the components may be undertaken without an authority to 

construct (assuming the exemption applies), but the emissions from such components are still taken 

into account when any regulatory requirements are applied to the source on which the components are 

installed. This principle has always been implicit in the exemption, and it is stated explicitly the 

Proposed Amendments in subsection 128.21.5.

Third, modification/replacement/addition of components under this exemption cannot be used to 

circumvent permitting requirements where such modification/replacement/addition may result in an 

increase in non-fugitive emissions from the equipment on which the components are installed. For 

example, modification/replacement/addition of pumps or compressors on a process unit could 

potentially increase the effective capacity of the process unit – either directly or by removing a 

“bottleneck” in the overall process – and thereby increase emissions. Such an emissions increase from 

the process unit would be a “modification” as defined in Section 2-1-234 and would require an Authority 

to Construct, and the existence of this exemption for installation of such components cannot be used to 

avoid this permitting requirement. In such a case, the modification/replacement/addition of the 

component that resulted in such an emissions increase would be subject to permit review. The 

exemption would not apply. This principle is also implicit in the current language of the exemption, and 

it is stated explicitly the Proposed Amendments in subsection 128.21.1.

Fourth, the exemption applies only for the addition of fugitive-emissions components on process units 

where the total fugitive emissions from all additional components installed on the process unit in any 

12-month period do not exceed 10 pounds per day. This is stated in the current reference to 

“cumulative emissions” from such components not exceeding 10 pounds per day, which will be revised 

to read “total allowable fugitive emissions” with an explanation that such emissions are based on the 

total allowable fugitive emissions under District regulations. This revision will clarify (i) that it is fugitive 

emissions from all such components installed within the past 12 months that is taken into account in 

applying the 10 lb/day requirement; and (ii) that it is total fugitive emissions that the components are 

legally entitled to emit that is taken into account – not typical measured leak rates or anticipated 

average leak rates, which may be lower than the maximum allowable leak rate, and not actual leak rates 

from any valves emitting in violation of District regulations (e.g., non-repairable equipment on a 

petroleum refinery’s “turnaround list” awaiting replacement), which would be higher than the 

maximum allowable leak rate. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 53

Fifth, the Proposed Amendments will establish how the exemption applies for components that are not 

associated with equipment that is traditionally thought of as a “process unit”. 

Modification/replacement/addition of such components can be eligible for the exemption (assuming all 

requirements of the exemption are satisfied), but the limitation on fugitive emissions not exceeding 10 

lb/day for all components installed within a 12-month period applies for all such components 

throughout the entire facility. That is, the total fugitive emissions of all components modified, replaced 

or installed under this exemption within a 12-month period that are not associated with a specific 

process unit must not exceed a combined 10 pounds per day facility-wide. The provisions for these 

types of components will be in subsection 128.21.2. 

The Proposed Amendments revise the language of Section 2-1-128.21 to clarify how this exemption

applies in practice.

11. Exemption Backstop Provision – Section 2-1-318

Section 2-1-318 sets forth a backstop that prevents a source from using the exemptions in Regulation 2, 

Rule 1, for sources at facilities subject to PSD permitting that will have increases in hazardous air 

pollutants above the PSD significance thresholds. The language of the provision uses the term “PSD 

Major Facility” to indicate facilities subject to PSD permitting requirements. In implementing the PSD 

requirements in proposed Regulation 2, Rule 2, staff have avoided using the term “major facility” in 

order to prevent confusion with the term “major facility” as used in the Non-Attainment NSR context. 

The proposed revision to 2-1-318 therefore removes the term “PSD Major Facility”. Instead, Section 2-

1-308 will indicate the class of facilities subject to PSD permitting requirements that fall within this 

backstop provision – and are therefore ineligible for the permit exemptions – by referencing the 

100/250 ton-per-year PSD applicability threshold directly. 

12. Timeline for Final Action on Permits – Sections 2-1-408 and 2-1-411

The Proposed Amendments make two slight revisions to the timing for final action on permit 

applications in specific situations.

The first concerns the final decision on applications for authorities to construct for projects that are 

subject to review under the California Environmental Quality Act (CEQA). For applications subject to 

CEQA review, current Section 2-1-408.1 provides that the APCO’s 35-day period for acting on an 

application shall be extended until 30 days after the lead agency’s final approval of the CEQA document 

for the project. This provision was created in recognition of the fact that the CEQA review process will 

often take much longer than 35 days and that the APCO is prohibited under CEQA from taking any final 

action on an application until the CEQA evaluation process is completed. The current regulation does 

not address what happens when an appeal is filed after the lead agency approves the CEQA document, 

however. In such a case, it would be inappropriate to take final action on the permit application 

because the approval of the CEQA document may ultimately be invalidated. The proposed revision to 

Section 2-1-408 would expand on the current procedures to provide that in the event of an appeal of 

the lead agency’s final approval of the CEQA document, the APCO need not take final action until 30 
54 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

days after the final resolution of the appeal (through a final decision on the appeal and exhaustion of all 

avenues for further appeal.) 

The second concerns final action on issuance of permits to operate. When the District issues an 

authority to construct for a source, that approval authorizes construction of the source, and also 

authorizes initial operation during a start-up period that allows the District to review the source and 

determine whether it complies with the conditions in the authority to construct and any other 

applicable requirements. Once the District is able to confirm that the source has been built and is 

operating in compliance – which may involve source testing to evaluate the source’s emissions, a site 

inspection, or other similar efforts – the District issues a Permit to Operate under Section 2-1-411 to 

authorize continued operation going forward. Current Section 2-1-411 provides for a start-up period of 

90 days to complete this evaluation, which can be extended for an additional 90 days upon written 

approval of the APCO. The District has found, however, that in certain circumstances it is not possible 

for a source to complete its startup operations and demonstrate compliance within this 180-day 

window. This situation can arise with complicated industrial facilities that need to undergo a highlyinvolved “commissioning period” (also known as a “shakedown period”) during which equipment is testfired, evaluated, tuned, and otherwise prepared for commercial operation. In such cases, it may not be 

possible for the equipment to be commissioned such that it is ready for its initial source testing and 

related compliance determinations within 90 days or even 180 days of first fire. Section 2-1-411 needs 

to be amended to provide the necessary flexibility to address these situations. The Proposed 

Amendments will provide this flexibility. 

13. Including Fugitive Emissions in Regulatory Determinations – Section 2-1-308

Current Section 2-1-308 provides that fugitive emissions – emissions that come from vents, valves, and 

the like, and not from an intended emission point such as an exhaust stack – must be included in 

applying permitting requirements such as the NSR requirements in Regulation 2, Rule 2. The Proposed 

Amendments seek to clarify exactly when fugitive emissions are included, especially in light of the fact 

that the District will be adopting its own PSD program, which has its own special provisions for 

treatment of fugitive emissions. The proposed revisions to Section 2-1-308 set forth a general 

presumption that fugitive emissions are included when applying the provisions of Regulation 2, except 

for when a more specific provision in the regulation establishes that they should not be included. This 

general provision will ensure that fugitive emissions must be included where required, but will allow for 

specific situations where fugitives are not included (for example, in determining whether a listed facility 

is over the 100 ton “major” facility threshold for PSD permitting requirements as set forth proposed 

Section 2-2-611). 

14. Amendments to Definitions

The Proposed Amendments also revise the definitions set forth in the “200s” Sections of the Rule. 

These revisions include the following:
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 55

• Particulate Matter Definitions

The Proposed Amendments include a new definition of PM2.5 to help implement the new permitting 

requirements for PM2.5. In addition, the Proposed Amendments specify in the definitions of both PM2.5

and PM10 that all particulate matter measurements must include both filterable and condensable 

emissions. These issues are addressed in detail in Section IV.A.2. above.

• “Regulated Air Pollutant” Definition

The Proposed Amendments also clarify the meaning of the term “Regulated Air Pollutant”. “Regulated 

Air Pollutant” has a specific meaning for purposes of Title V permitting under Regulation 2, Rule 6 that 

excludes certain specific types of air contaminants. The specific definition that applies in the Title V 

context is specified in Section 2-6-222. Outside of the Title V context, the term “regulated air pollutant” 

is also used in various places in Regulation 2 simply to mean any pollutant that is regulated by District 

rules or other applicable regulatory provisions. (See, e.g., Section 2-1-113.1.2, Section 2-1-319, etc.) The 

District is clarifying the general definition in Section 2-1-218 to make clear that the broader general term 

applies outside of the Title V context, and the specific definition in Section 2-6-222 applies for Title V 

purposes.

• Moving Definitions to Appropriate Locations within Regulation 2

The Proposed Amendments also move certain definitions that are used only in specific rules within 

Regulation 2 to the respective rules where they are used. Regulation 2, Rule 1 sets forth general 

requirements that apply to all permitting under Regulation 2, and the definitions in Rule 1 should 

therefore include general definitions of common terms that are used throughout Regulation 2. For 

terms that are specific to one of the individual permitting programs in Regulation 2 (e.g., NSR, Title V, 

etc.), it is more appropriate to define those terms in the specific rule in which the term is used. In some 

cases, similar terms are used in different rules to mean different things, and in such cases is can be very 

confusing to try to define such terms generally in Regulation 2, Rule 1. The Proposed Amendments will 

set forth the definitions for the various terms used in Regulation 2 in the location most appropriate for 

the term being defined.

The terms affected are the following:

Major Facility: “Major Facility” is a term that has different meanings in different contexts. It means 

one thing for purposes of NSR permitting under Regulation 2, Rule 2, and another thing for purposes 

of Title V permitting under Regulation 2, Rule 6. The Proposed Amendments therefore take the 

definition out of the general requirements in Regulation 2, Rule 1 and leave the term to the 

definitions provided in individual rule-specific definitions in Rule 2 (for NSR – Section 2-2-217) and 

Rule 6 (for Title V – Section 2-6-212). 

Emission Reduction Credits: The term “Emission Reduction Credit” is also used to mean different 

things in different rules in Regulation 2. In Regulation 2, Rule 2, for example, it is defined to mean 

any emission reduction that is surplus, real, permanent, quantifiable, and enforceable and otherwise 

meets all of the applicable requirements in Regulation 2, Rule 2. In Regulation 2, Rule 9, however, 
56 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

the term is defined to mean only emission reductions that are banked pursuant to Regulation 2, 

Rule 4. This latter definition would exclude unbanked contemporaneous onsite emission reductions, 

which can count as “emission reduction credits” as that term is used in Regulation 2, Rule 2. The 

Proposed Amendments therefore eliminate the general definition in Section 2-2-201 and leave 

definition of the term to the specific rules where it is used.

Reasonably Available Control Technology (RACT): This term is used only in Regulation 2, Rule 2, and 

it is defined there in Section 2-2-225. The additional definition in current Section 2-1-225 is 

therefore redundant and will be deleted. 

Health Risk Screening Analysis (HRSA): The term “Health Risk Screening Analysis” is used in 

implementation of the toxics NSR permitting requirements in Regulation 2, Rule 5. The term is 

already defined there, in Section 2-5-211, and having an additional definition is redundant. The 

Proposed Amendments therefore delete the superfluous definition in current Section 2-1-225.

Major Facility Review: The term “Major Facility Review” is a term specific to Title V Major Facility 

Review permitting under Regulation 2, Rule 6. The proposed amendments therefore delete the 

superfluous definition in Section 2-1-129 and leave the definition to Section 2-6-213. 

Synthetic Minor Operating Facility: “Synthetic Minor Operating Facility” is also specific to Title V 

permitting, and so the definition in Section 2-1-219 is being deleted to leave the operative definition 

in Section 2-6-231. 

• Deleted Definitions

In addition, the Proposed Amendments also delete the definition of National Ambient Air Quality 

Standards (NAAQS) in Section 2-1-205. This definition is confusing because it is defined not only to 

include the NAAQS, but also the California ambient air quality standards. Defining this larger group of 

standards as “NAAQS” is confusing, because in common regulatory parlance “NAAQS” means only the 

federal standards, not the California standards. And the term “National Ambient Air Quality Standards” 

as it relates to only the federal standards does not need specific regulatory definition in Regulation 2, 

because it is already a well-defined term and is clearly understood in the regulatory community. The 

Proposed Amendments therefore remove this definition. There will be no substantive change in how 

Regulation 2 applies in this regard, however, because the Regulation will specifically identify both the 

California and National standards in every situation where it is important that both sets of standards be 

addressed.

The Proposed Amendments also delete the definition of “organic compound” in Section 2-1-206. This 

term is already defined in Regulation 1, which is a general definition that applies to all District 

Regulations. Duplicating the definition in Regulation 2 is redundant.

B. Proposed Amendments to Regulation 2, Rule 2 – New Source Review

Updating the New Source Review program in Regulation 2, Rule 2 is one of the central purposes of the 

Proposed Amendments. These important revisions include:
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 57

• Adding new NSR permitting requirements for PM2.5.

• Adopting a District PSD Program for EPA Review and Approval.

• Other important substantive improvements, such as adding the new NAAQS protection 

requirement.

This section will discuss these proposed revisions to the NSR program, why the District needs to adopt

them at this time, and how they will work in practice.

In addition, as noted above, the Proposed Amendments will also revise and reorganize the language and 

structure of the District’s NSR Rule in a number of ways in order to make it clearer and easier to 

understand and implement. Because of this reorganization, the most efficient way to discuss the 

Proposed Amendments is not through a provision-by-provision review of each proposed change in turn. 

Instead, the following discussion is organized around the major elements of the NSR permitting 

program, and will focus on how each of them will be implemented through the Proposed Amendments. 

The following discussion therefore addresses the NSR rule (Regulation 2, Rule 2) in its entirety, 

highlighting the areas where substantive changes are being proposed, rather than going through the 

rule section number by section number. The discussion first addresses the two primary elements of NSR

that apply to “major” facilities, the Non-Attainment NSR requirements and the PSD requirements. It

then addresses the general NSR permitting requirements that apply generally for all NSR permits, as well 

as other related provisions such as procedural requirements, emission calculation procedures, emission 

monitoring provisions, and the like.

1. Non-Attainment NSR Requirements

This section addresses the “Non-Attainment NSR” requirements under Regulation 2, Rule 2. Nonattainment NSR is governed primarily by EPA’s requirements set forth in 40 C.F.R. Section 51.165. EPA’s 

regulations make the requirements applicable at facilities with a potential to emit above EPA’s “major” 

facility threshold for non-attainment pollutants, which is 100 tons per year. California law makes several 

important requirements applicable at lower thresholds, and also imposes certain additional 

requirements as discussed below.

a) Pollutants to Which Non-Attainment NSR Requirements Apply

As noted above, Non-Attainment NSR applies to air pollutants for which the Bay Area has been 

designated by EPA as “non-attainment” of the National Ambient Air Quality Standards and to precursors 

to the formation of such pollutants. The District is designated as non-attainment for ozone and PM2.5, 

and so the Non-Attainment NSR requirements apply to NOx and VOC (which are ozone precursors), and 

to direct PM2.5 and to NOx and SO2 (which are PM2.5 precursors). Beyond these federal requirements, 

the District also applies the substantive requirements of Non-Attainment NSR to several other 

pollutants, for historical reasons and/or because of requirements of California law. Where the NonAttainment NSR requirements apply to additional pollutants besides NOx, VOC, PM2.5 and SO2, they are 

specifically identified in the following sections.
58 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

In the context of Non-Attainment NSR for PM2.5, it is important to note that there are two additional 

PM2.5 precursors, VOC and ammonia (NH3), that can contribute to the formation of PM2.5. The District is 

concerned about the role that these precursors play in the Bay Area’s PM2.5 pollution challenges and is 

addressing them in its efforts to reduce PM2.5 pollution.40 District Staff are not proposing to include 

them as specific PM2.5 precursors for purposes of the PM2.5 NSR program, however. The primary reason 

is that EPA excludes these pollutants from the Non-Attainment NSR program unless the implementing 

agency provides a demonstration that emissions of these precursors constitute a significant contributor 

to the region’s ambient PM2.5 concentrations.41 Although the District has found that these precursors 

are pollutants of concern because of their role as precursors to secondary PM2.5 formation, the District 

does not yet have a sufficient understanding of the extent of the role that they play in influencing the 

Bay Area’s regional PM2.5 levels in order to make this finding and regulate them under the NonAttainment NSR program. In addition, in the case of ammonia, the District does not have a fully 

comprehensive understanding at this point of the total universe of ammonia sources that would be 

affected by bringing them into the NSR program; and in the case of VOC, VOC is already regulated as an 

ozone precursor, and so the substantive requirements of NSR permitting already apply to VOC emissions 

regardless of whether they are included as a PM2.5 precursor as well. For all of these reasons, the 

proposed amendments are not adding VOC and ammonia to the Non-Attainment NSR program as PM2.5

precursors at this time. The District is considering VOC and ammonia in its other regulatory efforts to 

address PM2.5, of course, and will continue to evaluate the role of these precursors in forming secondary 

PM2.5 with a view bringing them into the Non-Attainment NSR program as PM2.5 precursors in the future

as appropriate. For purposes of the current updates to the NSR program, however, only SO2 and NOx 

are treated as specific PM2.5 precursors. 

b) District “Best Available Control Technology” Requirement – Section 2-2-301

Non-Attainment NSR requires that any new major facility or major modification to an existing major 

facility must achieve the “Lowest Achievable Emissions Rate” (LAER) to control non-attainment pollutant 

emissions.

42

 Air quality agencies in California use an equivalent level of emissions control that they call 

“Best Available Control Technology” (BACT).43 EPA has determined that California BACT is equivalent to 

federal LAER, and so the District’s current BACT regulation in Section 2-2-301 implements the federal 

LAER requirement. In addition, the California Health & Safety Code requires that the District implement 

California BACT (the equivalent of federal LAER) at any new or modified source with the potential to 

 

40 For further discussion of these efforts, see the District’s recent publication “Particulates Matter: Understanding 

PM to Protect Public Health in the Bay Area”, available at www.baaqmd.gov/Divisions/Planning-andResearch/Plans/PM-Planning.aspx. 

41 See Implementation of the New Source Review (NSR) Program for Particulate Matter less Than 2.5 Microns 

(PM2.5), Final Rule, 73 Fed. Reg. 28,321, 28,329-30 (May 16, 2008).

42 See CAA Section 173(a)(2).

43 See generally Health & Safety Code § 40405 (defining “Best Achievable Control Technology” as an emissions 

limitation that will achieve the lowest achievable emission rate for the source to which it is applied).
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 59

emit any non-attainment pollutant (or precursor) in an amount of 10 pounds or more per day.44 Current 

Section 2-2-301 requires BACT at this level.

Staff are not proposing to change the substance of the BACT requirement in Section 2-2-301, except to 

add PM2.5 as an additional pollutant subject to BACT (the equivalent of federal LAER) now that the Bay 

Area has been designated as non-attainment for PM2.5.

45

 The BACT requirement in Section 2-2-301 will 

apply to any source that has the potential to emit (PTE) 10 pounds or more per day of PM2.5. The 

regulation will require the District to implement BACT (i) for any new source that has a PTE of 10 pounds 

or more per day; and (ii) any modification at a source with a PTE of 10 pounds or more per day that will 

result in any increase in PM2.5 emissions (calculated as defined in Sections 2-2-603 and 2-2-604 using the 

“actual-to-potential” NSR applicability test, which is described in Section IV.B.3.g.i. of this Report).

Adding PM2.5 as a pollutant subject to the BACT requirement is the only substantive change being 

proposed in Section 2-2-301. Adding a BACT requirement for PM2.5 is required under the Clean Air Act 

as a result of the Bay Area’s designation as non-attainment for the PM2.5 NAAQS. The remainder of the 

proposed changes to the language of Section 2-2-301 involve rewording some of the language to make it 

clearer how the BACT requirement is to be applied. These clarifications address the following:

• The new language breaks out how BACT is to be applied (i) in the case of a new source (in 

proposed subsection 301.1) and (ii) in the case of a modification to an existing source (in 

proposed subsection 301.2). This separation is intended to make clear that for new sources, 

BACT applies where the source has a PTE of 10 pounds or more per day; and that for 

modifications to existing sources, BACT applies where there is any increase in emissions over the 

historical baseline (as determined under Sections 2-2-603 & 2-2-604), where the source (after 

the modification) has a PTE of 10 pounds per day or more. There is no requirement that the 

increase from the modification will be 10 pounds per day. As long as the source as a whole will 

have a PTE of 10 pounds per day, then any modification that will result in any increase over 

baseline will be required to implement BACT.

• The new language clarifies what was meant by sources with a potential to emit of “10.0 pounds 

or more per highest day . . . .” The District has always applied this 10 pound threshold to mean a 

source with a potential to emit of 10 pounds per day – that is, a source whose maximum 

possible emissions over the course of a full day, operating at its maximum technical and legal 

capacity, is 10 pounds per day. This concept is embodied in the definition of “potential to emit”

(see Section 2-1-217), and the reference to PTE on the “highest day” was not intended to modify 

the PTE concept in any way. For example, it was not intended to refer in any way to the day on 

which the facility’s actual emissions may have been the highest. The proposed amendments 

 

44 Health & Safety Code Section 40919(a)(2). This requirement applies for air districts with serious (or worse) nonattainment air pollution levels, as well as to up-wind districts such as the Bay Area. 

45 Note that the regulated precursors to PM2.5, NOx and SO2, which are also subject to the federal LAER 

requirement, are already addressed by the District’s current BACT provision in Section 2-2-301. The only new 

pollutant that needs to be added as a result of the PM2.5 non-attainment designation is direct PM2.5.
60 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

therefore remove the reference to “highest day” in favor of emphasizing that the 10-pound 

BACT threshold is based on PTE, as defined in Regulation 2-1-217.

• The new language creates a new defined term “District BACT pollutant”, which is defined in 

proposed Section 2-2-210 to include the list of pollutants that are subject to the BACT 

requirement. This list of pollutants – which currently includes POC, NPOC, NOx, SO2, PM10 and 

CO, and which will now have PM2.5 added to it as well – is getting quite long, and it is somewhat 

unwieldy to have to recite it in the language of Regulation 2-2-301. The Proposed Amendments 

therefore define the new term “District BACT pollutant” to include all of the pollutants on this 

list, and then simply reference that term in Regulation 2-2-301 where it refers to the specific 

pollutants that are covered by the District BACT requirement.

• The new language clarifies that the BACT requirement applies “on a pollutant-specific basis.” 

BACT does not necessarily apply to all pollutants that may be emitted by a source. Rather, for 

new sources it applies only to those pollutants where the source’s PTE is 10 pounds per day or 

more; and for modified sources it applies only to those pollutants for which the source was 

“modified” under the definition of modification in Section 2-1-234 and for which there is an 

increase in emissions from the modification as calculated in accordance with Sections 2-2-603 

and 2-2-604 (implementing the “actual-to-potential” applicability test described above). The 

District has historically applied BACT on a pollutant-specific basis, but the regulatory language 

has not clearly specified what that means. The revisions will now explicitly state that BACT 

applies on a pollutant-specific basis and will clearly specify what that means. The Proposed 

Amendments also include a definition of “pollutant specific basis” in proposed Section 2-2-222. 

• The new language clarifies that the APCO has a duty to implement BACT permit conditions in the 

authority to construct and/or permit to operate for any new source or modification subject to 

Regulation 2-2-301. The current language of Section 2-2-301 states that the applicant shall 

apply BACT, but does not explicitly state that BACT needs to be implemented as legally-binding 

conditions in the permit for the new source or modification. 

Note that the Proposed Amendments also include an update to the District’s definition of BACT in 

Section 2-2-202 to clarify how this important requirement will be determined. The BACT definition is 

discussed in more detail in Section IV.B.3.h. of this Report. 

c) Offsets Requirements – Sections 2-2-302 and 2-2-303

Non-Attainment NSR also requires that that before any new major facility or major modification to an 

existing major facility can receive an NSR permit, the owner or operator of the proposed new source or 

modification must provide emissions “offsets” to ensure that emissions from existing sources are 

reduced by a sufficient amount such that total regional emissions will make “reasonable further 

progress” towards attainment.

46

 The California Health & Safety Code contains a similar offsets 

 

46 See CAA §§ 173(a)(1)(A) & 173(c). 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 61

requirement designed to ensure a “no-net-increase” in emissions of non-attainment pollutants from 

facilities subject to the requirement. This California offsets requirement mandates that emissions from 

existing sources must be reduced to compensate for any new NOx or POC emissions increases from any 

new or modified with a potential to emit 10 tons or more per year.47

The District’s current offset requirements are set forth in Sections 2-2-302 (for NOx and POC) and 2-2-

303 (for PM10 and SO2). The most significant update to these requirements in the proposed 

amendments is the addition of offset requirements for PM2.5, which is required as a result of the Bay 

Area’s designation as non-attainment of the PM2.5 NAAQS. The proposed amendments also make a few 

other more minor changes to reflect other EPA requirements for offsets, as well as revisions to the 

regulatory language to make it clearer and easier to understand. All of these changes are discussed 

below.

i. SECTION 2-2-302: NOX AND POC OFFSETS

Current Section 2-2-302 contains the offset requirements for NOx and POC. It requires that in order for 

a facility with NOx or POC emissions over 10 tpy to obtain a permit for a new or modified source at the 

facility, the applicant must provide offsets for any new emissions increases that will result from the 

project (net of any contemporaneous onsite emission reduction credits). For facilities with emissions 

between 10 tpy and 35 tpy, offsets must be provided at a 1:1 ratio to offset new emissions increases 

from the project, and they may be provided by the District on the applicant’s behalf from the District’s 

small facility banking account (if offset credits are available there). For facilities with emissions of 35 tpy 

or more, offsets must be provided at a 1:1.15 ratio to offset new emissions increases from the project, 

and the small facility banking account cannot be used. In addition, facilities with emissions of 35 tpy or 

more must reimburse the District’s small facility banking account for any credits the District previously 

provided from that account before they can receive permits, and the regulation provides a procedure 

for reimbursement to be accomplished by accepting enforceable emissions limits on existing sources to 

lower the emissions levels for which those credits were provided. Current Section 2-2-302 also allows 

POC credits to be used to offset NOx emissions increases. 

Under current Section 2-2-302, the amount of NOx and POC offsets that must be provided (before 

applying any offset ratio) is calculated by adding the following: 

(i) the increase in emissions that will result from the new source or modification being 

permitted; plus

(ii) any preexisting cumulative increase in emissions that occurred as a result of prior permits 

issued for the facility since the cumulative increase baseline date of April 5, 1991; minus

(iii) any contemporaneous onsite emissions reduction credits at the facility. 

The concept embodied in this requirement is that all increases in the facility’s potential to emit NOx and 

VOC that have occurred as a result of permits issued since the 1991 baseline date will be offset (at the 

 

47 The 10 ton-per-year offsets threshold for ozone precursors applies to the District under ARB’s regulations for 

ozone transport because of the non-attainment status of air districts downwind from the Bay Area. See 17 Cal. 

Code Regs. 70600(b)(2)(C).
62 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

appropriate offset ratio) by corresponding emissions reductions elsewhere – either by 

contemporaneous onsite emission reduction credits, or by banked credits. Contemporaneous onsite 

emission reduction credits are credits from the shutdown (or reduced operation) of other sources at the 

same facility that have occurred within the five years prior to the new project seeking to take credit for 

the past shutdown.48 Banked credits (offsets) are credits that a facility operator documented to the 

District and had the District approve through the issuance of a banking certificate. Such banked credits 

may be from shutdowns of other sources that occurred more than five years in the past, and they may 

be from shutdowns at different facilities from the facility where they are used. The fact that the District 

confirmed and documented the extent of such credits through the issuance of a banking certificate 

makes the credits reliable for use in offsetting new emissions increases even if they may be more than 

five years old or may be from a different facility. For emission reduction credits that have not been 

banking in this way, Section 2-2-302 allows them to be used only if they are less than 5 years old (i.e., 

“contemporaneous”) and are from the same facility (i.e., “onsite”). By ensuring that all permitted 

increases since the 1991 baseline date – what the regulations refer to as the facility’s “cumulative 

increase” – are offset by corresponding decreases from other sources, the offset requirements ensure 

that there is no net increase in NOx and POC emissions from sources subject to these requirements after 

that date.49

It is also worth noting that the offset requirements apply to the source’s total potential to emit (PTE), 

which may be greater than what the source actually emits in practice. That is, where a new source or 

modification will increase the facility’s maximum potential emissions, the regulations conservatively 

assume that facility will actually emit the full amount of its PTE and require offsets to be provided for 

that full amount (above the facility’s historical background emissions levels), even if the facility may not

actually put out its full potential emissions. In this respect, the offsets requirement uses the “actual-topotential” test discussed above in connection with the BACT requirement in Section 2-2-301. Offsets are 

provided based on increases in potential to emit over historical background emissions levels to ensure 

an overall “no net increase” in emissions. The Proposed Amendments include detailed provisions on 

calculating the amount of offsets required in Sections 2-2-605 through 2-2-608; these provisions are 

discussed further in Section IV.B.3.g.iv. of this Staff Report. 

The proposed revisions to Section 2-2-302 make one substantive change to these requirements, 

eliminating the provision in current Section 2-2-302.2 allows POC credits to be used to offset NOx 

emissions increases. This provision is being eliminated for two reasons. First, it is no longer clear that 

POC credits benefit air quality more than NOx credits. The provision was created in the context of POC 

 

48 “Contemporaneous” is defined in current Section 2-2-242 as occurring within the five years immediately prior to 

the permit application for the project for which the emission reduction credit will be used. The Proposed 

Amendments will retain this 5-year limitation on the use of historical emission reductions from past projects that 

were not banked. See proposed Section 2-2-206 (the provision has been renumbered because the Regulation 2, 

Rule 2 definitions are being reorganized into alphabetical order). 

49 Note also that because of the increased offset ratio for certain facilities, there will actual be a net decrease in 

emissions under this requirement.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 63

and NOx as ozone precursors, and was designed to encourage POC reductions in preference to NOx 

reductions in recognition of the fact that ozone formation in the Bay Area is POC-limited.50 But NOx is 

also a PM2.5 precursor, and from a PM2.5 perspective this same rationale does not apply. It is not clear 

that POC reductions are preferable to NOx reductions when it comes to PM2.5 formation, and in fact the 

situation may be the opposite. Second, POC/NOx trading is no longer allowed under EPA’s NSR 

regulations. EPA’s requirements governing inter-pollutant trading for non-attainment pollutant 

precursors are set forth in 40 C.F.R. Section 51.165(a)(11), and they allow inter-pollutant trading only for 

PM2.5 under certain specific conditions as specified in that paragraph – and not for POC and NOx. For 

both of these reasons, the Proposed Amendments remove the POC/NOx inter-pollutant trading 

provision in current Section 2-2-302.2.

Beyond this substantive change, the proposed revisions also make a number of non-substantive changes

that clarify and expand in several respects on how the offsets requirement is to be interpreted and 

applied. These changes are intended to set forth explicitly and in detail how offsets work, in order to 

address areas where the current regulatory language is silent or ambiguous. The revised Section 2-2-

302 will do so as follows:

• Proposed new Section 2-2-302 begins with an explicit statement that an authority to construct 

or permit to operate cannot be issued for any facility with a PTE over 10 tons per year of NOx or 

POC unless offsets have been provided according to the section’s specific requirements in 

subsections 302.1 through 302.5. The new language removes references to Section 2-2-213 and 

2-2-421, which the current rule refers to as “exceptions” to the offset requirements for facilities 

with a PTE of 35 tpy or more. Section 2-2-313 was deleted in 2000 and so this reference is 

redundant. Section 2-2-421 was an exception that allowed certain facilities to defer providing 

the required offsets until a future date under certain circumstances. This deferral provision was 

originally created for administrative convenience so that District staff and permit applicants 

would not have to mail physical documents back and forth frequently when only small amounts 

of offsets were at issue. With modern email communications, Staff have now found that this 

deferral provision creates more inconvenience than its saves, and so the Proposed Amendments 

will eliminate it. The Proposed Amendments therefore do not include the deferral provision in 

current section 2-2-241, and there is no reference to it in proposed 2-2-302.

• Proposed new Section 2-2-302.1 provides the offset rules for facilities with a PTE for NOx and/or 

POC between 10 tpy and 35 tpy. Offsets must be provided at a 1:1 ratio for any “un-offset 

cumulative increase”, which means any cumulative increase at the facility since the cumulative 

 

50 “POC limited” means that there is additional NOx in the atmosphere compared to POC, so that the chemical 

reaction that forms ozone can continue up until all the available POC is used up. Since there is additional NOx 

available, obtaining reductions in NOx is not as important as obtaining reductions in POC, because removing POC 

from the atmosphere will reduce the potential for ozone formation in a way that removing NOx will not. The fact 

that the Bay Area is POC-limited was the basis on which the District adopted its provision allowing POC credits to 

be used to satisfy NOx offset requirements, because at the time the District preferred to get POC reductions and 

the additional ozone-reduction benefit associated with them, as compared to getting the same amount of NOx 

reductions. 
64 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

increase baseline date (April 5, 1991, for NOx and POC) for which offsets have not already been 

provided in connection with prior permits. The new language references the detailed 

procedures for determining the amount of this un-offset cumulative increase in the proposed 

new Section 2-6-608. The current provisions in Section 2-2-302 are silent and ambiguous on 

exactly how the amount of such offsets is to be determined, and new Section 2-2-608 (and 

related provisions) will provide some much-needed clarity in this area. (See Section IV.B.3.g.iv.

of this Staff Report below for further, detailed discussion of these calculation procedures.)

Subsection 2-2-302.1 also provides additional specificity on how offsets can be provided from 

the District’s Small Facility Banking Account, in Subsections 2-2-302.1.1 through 2-2-302.1.3. 

These provisions make clear that the APCO shall provide the offsets if there are sufficient credits 

in the Small Facility Banking Account and if the applicant (or any entity under related ownership) 

does not already own or control such offsets. If the Small Facility Banking Account is exhausted, 

or the applicant owns or controls sufficient offsets itself, then the applicant must provide them. 

Subsection 2-2-302.1.3 also provides that an applicant cannot request an artificially high 

emissions limit simply to get more offsets from the Small Facility Banking Account. This would 

be an abuse of the purposes the Small Facility Banking Account was designed to serve, and so 

emissions limits that will be offset by Small Facility Banking Account credits may not be higher 

than the applicant will reasonably need (including a reasonable margin to allow for foreseeable 

future growth and similar changes), and in no event higher than the source’s maximum physical 

or design capacity. 

• Proposed new section 2-2-302.2 provides the offset rules for facilities with a PTE for NOx and/or 

POC of 35 tpy or more. If the facility will have a PTE over 35 tpy after the authority to construct 

or permit to operate is issued, then it must provide offsets according to Section 2-2-302.2. The 

facility must first provide offsets to reimburse the District’s Small Facility Banking Account for 

any offsets the District has provided from that Account in the past for projects at the facility. 

This reimbursement must be made at a 1:1 ratio for any offsets provided from the account (e.g., 

if the facility obtained 20 tpy in offsets from the Account in the past, it must reimburse the 

Account with 20 tpy). The facility must then provide offsets for any new cumulative increase 

that will result from the authority to construct/permit to operate that has not already been 

offset (i.e., “un-offset cumulative increase” calculated according to Section 2-2-608) at a 1:1.15 

ratio. This ratio applies to the entire new increase, not just the portion of the new increase 

above 35 tpy. Thus, if a facility has a PTE of 30 tpy NOx and applies for a modification that will 

increase PTE to 40 tpy NOx and thereby generate an un-offset cumulative increase of 10 tpy, the 

entire 10 tpy increase must be offset at the 1:1.15 ratio, not just the 5 tpy that will be above the 

35 tpy PTE threshold. In this scenario, the facility must provide 11.5 tpy of NOx offsets [10 tpy x 

1.15], not 10.75 tpy [(5 tpy x 1) + (5 tpy x 1.15)]. 

• Proposed new section 2-2-302.3 provides more detail on the procedures in the current rule for 

reimbursement of the Small Facility Banking Account by adjusting an existing source’s 

cumulative increase (which are addressed in current Section 2-2-302.3). Under the current rule 

(and under the proposed revision), a source can accept a lower emissions limit in a prior permit 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 65

for which offsets were provided from the Small Facility Banking Account. With a lower 

emissions limit, the cumulative increase associated with that prior permit will be less than it was 

at the time the offsets were provided from the Small Facility Banking Account, and so fewer

offsets would be required in connection with that prior permit than were provided at the time 

of issuance. This will create, after the fact, what is effectively an “overpayment” by the Small 

Facility Banking Account in connection with that prior permit. The amount of such 

“overpayment” created by adjusting the cumulative increase associated with the prior permit 

can then be credited back to the Small Facility Banking Account as a way to reimburse that 

Account. The language in proposed Section 2-2-302.3 specifies the procedures for an applicant 

to request such an adjustment, for the APCO to review and approve it, and for the Small Facility 

Banking Account to be reimbursed upon approval. 

• Proposed new section 2-2-302.4 states the provision contained in the current rule that the NOx 

and POC offset requirements are to be applied on a pollutant-specific basis. The proposed 

revisions also include a new definition of “pollutant-specific basis” to make clear what this 

concept means, in proposed Section 2-2-222. With respect to NOx and POC offsets, this means 

that the NOx and POC offsets are calculated independently of each other. A facility may be in 

the 0-10 tpy, 10-35 tpy, or 35+ tpy category for NOx and have its NOx offset requirements 

calculated accordingly (i.e., no offsets required, offsets required at a 1:1 ratio, or offsets 

required at a 1:1.15 ratio), and may be in a completely different category for POC if its POC 

emissions are different. A facility’s NOx offset requirements are determined by its NOx 

emissions only and not its POC emissions, and vice versa. 

These detailed procedures will provide needed clarity and specificity in how the NOx and VOC offsets 

requirements are to be implemented.

ii. SECTION 2-2-303: SO2 AND PARTICULATE MATTER OFFSETS

Current Section 2-2-303 sets forth similar requirements for SO2 and PM10; although for these pollutants, 

offsets are not required until a facility’s PTE reaches 100 tpy, offsets are not required at any ratio above 

1:1, and there is no small facility bank provision, among other differences. The 100 tpy PTE threshold is 

currently specified in the language making the provision applicable to facilities over the 100 tpy “Major 

Facility” threshold (which is set forth in the “Major Facility” definition in current Section 2-1-204); as 

well as in the observation that a facility with a PTE below the 100 tpy threshold can voluntarily provide 

offsets but is not required to. The first sentence of the section states the section’s basic requirement, 

which is that new or modified SO2 and PM10 sources at major facilities must provide offsets, at a 1:1 

ratio, for (i) the increase in emissions from the new or modified source being permitted, plus (ii) any preexisting cumulative increase since the April 5, 1991, cumulative increase baseline date, minus (iii) any 

contemporaneous onsite emission reduction credits. 

This language embodies the same concept as with the NOx and POC offsets provision in 2-2-302 

described above: For facilities over the threshold levels, offsets must be provided for all increases in the 

facility’s PTE (over historical actual emissions levels) for SO2 and PM10 resulting from any permits issued 

since 1991, net of any contemporaneous onsite emission reduction credits that were provided in 
66 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

connection with any such permits when they were issued. There is a slight difference in that offsets do 

not need to be provided in cases where the cumulative increase since the 1991 baseline date is less than 

1 tpy. This provision was adopted to avoid the administrative hassles of providing offsets in situations 

involving only very minor changes at a facility where the amount of emissions at issue is very small. 

Once the cumulative increase exceeds 1 tpy – either because of a single, large increase or because of the 

cumulative total of a series of small increases – then the offset requirement is triggered and the 

cumulative total of all such increases needs to be offset. Other than this minor difference, the 

mechanics of the offset requirements for SO2 and PM10 for facilities with a PTE of those pollutants over 

100 tpy are very similar to the NOx and POC offset requirements described above. 

In addition, current Section 2-2-303 provides that NOx and SO2 offsets may be used to fulfill PM10 offset 

obligations. The provisions for doing so are set forth in current Section 2-2-303.1. The APCO can allow 

such substitution on a case-by-case basis by determining the appropriate amount of NOx and/or SO2

offsets that need to be required in order to result in a net air quality benefit. The APCO’s determination 

needs to include adequate modeling, and the APCO must (i) provide public notice of and an opportunity 

to comment on the determination and (ii) obtain EPA’s concurrence. 

The proposed revisions to Section 2-2-303 make several changes to the current requirements. The most 

significant change is to add offset requirements for PM2.5 in recognition of the Bay Area’s designation as 

non-attainment of the 24-hour PM2.5 NAAQS. Now that the Bay Area is non-attainment for PM2.5, 

offsets need to be required for major sources of PM2.5 emissions.51 The Proposed Amendments will add 

PM2.5 to the list of pollutants for which offsets are required, in addition to PM10 and SO2. PM2.5 offsets 

will be required in the same manner as with PM10.

Beyond adding this new PM2.5 offset requirement, the Proposed Amendments do not make any 

substantive revisions to current Section 2-2-303. The Proposed Amendments retain the existing 

requirement to provide offsets for PM10. This requirement will apply in addition to the new requirement 

to provide offsets for PM2.5. Since PM2.5 is a subset of PM10, reductions in PM10 emissions will also 

constitute reductions in PM2.5 emissions, and in many cases an applicant will be able to use the same PM 

reduction to satisfy both PM10 and PM2.5 offsets requirements. Further discussion for how the 

mechanics of the offsets requirements would work in such a situation is provided in Section IV.B.3.g.

The Proposed Amendments also retain the existing inter-pollutant trading provisions that allow NOx and 

SO2 credits to be used to satisfy PM10 offset requirements. Staff are not proposing to eliminate this 

trading provision in the existing regulation because it requires that there be a demonstrated overall air 

quality benefit in order for such trading to be used. This demonstration of an air quality benefit – which 

 

51 Note also that offsets are required for PM2.5 precursors NOx and SO2. The District’s offset requirements already 

apply to these pollutants in their own right, so the District does not need to add any new requirements with 

respect to these pollutants.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 67

must be subject to public review and participation and EPA approval – will alleviate any concerns that 

inter-pollutant trading among PM10 precursors may not actually be beneficial.52 

In addition, the Proposed Amendments clarify and expand in several respects on how the offsets 

requirement is to be interpreted and applied. These changes are intended to set forth explicitly and in 

detail how offsets work, in order to address areas where the current regulatory language is silent or 

ambiguous. All of the changes are summarized below: 

• Proposed new Section 2-2-303 begins with an explicit statement that an authority to construct 

or permit to operate cannot be issued for a facility with a PTE of 100 tpy or more of PM2.5, PM10, 

or SO2 unless offsets have been provided according to the section’s specific requirements in 

subsections 303.1 through 303.4.

• Proposed new Section 2-2-303.1 sets forth the requirement that once the cumulative increase 

exceeds 1 tpy, offsets must be provided for any un-offset cumulative increase since the baseline 

date in accordance with the calculation procedures in Section 2-2-608. The concepts embodied 

in Section 2-2-608 and the determination of the un-offset cumulative increase are the same as 

for NOx and POC offsets described above. The provision for allowing very small increases to be 

deferred until the cumulative increase reaches 1 tpy is the same as exists in the current 

regulation. 

• Proposed new section 2-2-303.2 sets forth the provisions for providing NOx and/or SO2 offsets 

to satisfy PM10 offset obligations under the rule. The procedures are substantively identical to 

those provided under the current rule. Note that that these procedures apply to PM10 offset 

requirements only; no substitution is allowed for compliance with the PM2.5 offset 

requirements.

• Proposed new section 2-2-303.3 clarifies that any NOx and/or SO2 offsets provided to satisfy 

PM10 offset requirements under subsection 303.2 must be provided in addition to any NOx or 

SO2 offsets required independently because of NOx or SO2 emissions. This provision ensures 

that where a source emits both direct PM emissions and PM precursor emissions, it does not 

use the same offset to counteract both of these contributions to ambient PM concentrations. In 

such a case, the source must ensure that it is providing sufficient offsets to counteract all of its 

emissions that contribute to air pollution. 

• Proposed new section 2-2-303.4 provides that the offset requirements in Section 2-2-303 are to 

be applied on a pollutant-specific basis. This provision serves the same purpose as Section 2-2-

302.4 described above for NOx and POC.

These procedures will specify how the PM and SO2 offsets requirements work with greater clarity and 

specificity than under the current version of Section 2-2-303.

 

52 Note also that the Bay Area is not non-attainment for PM10 and so the restrictions in 40 C.F.R. § 51.165(a)(11) 

that limit inter-pollutant offset trading for precursors do not apply for PM10. 
68 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

iii. ACCOUNTING FOR CARGO CARRIER EMISSIONS AND “RELATED SOURCE” EMISSIONS

Under the Air District’s current offsets provisions, offsets must be provided for any emissions from cargo 

carriers associated with the facility, and offsets must be provided for “related sources”, which are 

sources at different facilities but whose operation depends upon, supports or affects the operation of 

the facility. The Proposed Amendments will not change these requirements substantively, but will move 

them to a more appropriate location within the Rule.

These requirements are currently specified in the definition of “Facility” in Section 2-2-215. This is not 

the most appropriate location within Regulation 2, Rule 2 to specify these requirements, because strictly 

speaking they are not attributes of the definition of “facility”. To the contrary, they are requirements 

for calculating the amount of cumulative increase at a facility that needs to be offset under Sections 2-2-

302 and 2-2-303. The Proposed Amendments therefore move these provisions from the “Facility” 

definition and place them with the calculation procedures for determining the amount of offsets that 

are required for a facility. They will be in proposed Sections 2-2-610 and 2-2-611, respectively, and are 

discussed in more detail in Section IV.B.3.g.v. of this Staff Report. 

iv. POLICY CONSIDERATIONS REGARDING THE USE OF EMISSIONS BANKING IN 

IMPLEMENTING THE OFFSETS REQUIREMENTS

Finally, certain policy considerations regarding the use of emissions “banking” as part of the Air District’s 

NSR program were raised during the rule development process, and it is important to address them 

here. 

The District implements the offsets requirements in its NSR program using a system of emissions 

“banking”, under which the emission reductions that result when an existing source is shut down can be 

“banked” for future use. That is, the owner of the source that is shut down can apply to the District to 

have the emission reductions “banked” by the District in its emissions accounting system, and then can 

either (i) use those “banked” reductions to offset new emissions when it expands its own facility in the 

future, or (ii) sell the “banked” emission reduction credits to some other facility for use in offsetting new 

emissions at that other facility. This use of emissions banking is central to the system of New Source 

Review created in the Clean Air Act;53 and it has been the mechanism through which the District 

implements its NSR program for many years in order to provide flexibility in how old sources are shut 

down and new sources are built, consistent with the program’s clean air goals. District staff have not 

proposed changing this element of the District’s existing NSR program, and are proposing to have it 

apply to the new offset requirement for PM2.5 that is being added. 

 

53 The offset requirement was created under CAA Section 173, which explicitly provides that new and modified 

sources can comply with offset requirements by obtaining emission reductions from the same source “or other 

sources in the area.” CAA § 173(c)(2). In creating this requirement, Congress recognized that requiring all offsets 

for new and modified facilities to be obtained from emission reductions at the same facility would be inflexible and 

unworkable. EPA’s implementation regulations similarly reflect this central element of NSR under the Clean Air 

Act. See 40 C.F.R. Part 51, Appendix S, Section IV.C.5 (“ ‘Banking’ of emission offset credit.”).
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 69

During the rule development process, the District received comments stating that allowing facilities to 

use banked emission reduction credits to offset new PM2.5 emissions increases could be problematic. 

The comments stated that using banked emission reduction credits can allow for local increases in 

emissions, while only requiring reductions elsewhere where the benefits may not accrue in the local 

area where the new increase will occur. The comments cited environmental justice concerns regarding 

the use of banked credits, and suggested that the District should abandon the use of banking and 

trading of emission reduction credits for compliance with the PM2.5 offset requirements. 

Achieving equity in implementing its regulatory programs is one of the Air District’s core values, and 

District Staff have carefully considered these concerns in developing the Proposed Amendments. Based 

on this policy review, District Staff have concluded that it is important to retain emissions banking for 

implementation of the NSR offsets requirements, for two major reasons. First, the offsets program 

needs the flexibility provided by emissions banking in order to function effectively. Second, there are a 

number of other requirements in the District’s regulations – some of which are being strengthened 

through these Proposed Amendments – that will help ensure that local communities are not significantly 

impacted in cases where banked credits are used.

There are a number of reasons why the flexibility provided by banking emissions reductions is necessary 

for achieving the overall goals of the NSR program. First and foremost, allowing banking of voluntary 

emission reductions provides an incentive for facilities to shut down existing operations and take credit 

for the resulting emission reductions. Without banking, a facility would have an incentive to delay such 

shutdowns so that the reductions could be used in future offset situations. With banking, a facility can 

shut down an under-utilized source immediately and bank the reductions, knowing that it will not lose 

the benefit of such reductions if they are needed in the future to offset a subsequent expansion. 

Banking also allows for future growth and development while at the same time ensuring protection of 

the NAAQS and related air quality goals. Without banking, no new sources subject to the offset 

requirements could be built except in the same location where an existing source is located that could 

be shut down to allow for the new source. This would remove any ability for the Bay Area to locate any 

such sources except in locations where sources are already present. Moreover, banking allows this 

flexibility without jeopardizing attainment and maintenance of the NAAQS, because all such banked 

credits are accounted for in the District’s planning analyses as if the emissions were still being emitted. 

The District’s control strategy for attaining the NAAQS is therefore not impacted in any way depending 

on whether emissions banking is allowed or not. 

Moreover, this system of emissions banking is implemented in conjunction with a number of other 

safeguards that ensure that the use of banked credits will not allow any significant adverse air impacts in 

any community, including environmental justice communities. Even where a new or modified source is 

built using banked emission reduction credits that were generated by a shutdown at some other 

location, these safeguards will be in place to protect air quality and public health at the location where 

the new or modified source is built. These safeguards include the District’s Toxics New Source Review 

requirements in District Regulation 2, Rule 5, which require that new and modified sources demonstrate 

that they will not have any significant adverse toxic health impacts on any nearby sensitive receptors. In 

addition, for criteria pollutants, the Proposed Amendments include a new requirement for all new and 
70 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

modified sources to demonstrate that they will not result in ambient air concentrations above any 

National Ambient Air Quality Standard.54 This additional requirement will further ensure that the use of 

banked emission reduction credits will not allow any source to cause significant environmental impacts 

in any community. And these District requirements will work in conjunction with other legal safeguards 

such as CEQA, the California law aimed at protecting communities from significant adverse 

environmental impacts. 

For all these reasons, District Staff are not proposing that the District should abandon its long-standing 

policy of implementing the NSR offsets requirement through an emissions banking system. Emissions 

banking is necessary for effective implementation of the offsets requirements, and it will be 

implemented with multiple safeguards to ensure that public health is protected in impacted 

communities. The Proposed Amendments therefore retain the emissions banking provisions that have 

served the Bay Area for many years, and make them applicable to the new PM2.5 offsets requirements 

being added to the program. 

d) Compliance Certification – Section 2-2-309

Non-Attainment NSR requires that before any new major facility or major modification to an existing 

major facility can receive an NSR permit, the owner or operator of the proposed new source or 

modification has demonstrated that all major sources in California under the owner or operator’s 

control are in compliance (or on a schedule for compliance) with all applicable emissions standards and 

limitations.55 The District’s current NSR rule requires such a compliance demonstration in Section 2-2-

307, which provides that the applicant must certify compliance under penalty of perjury, and must 

provide evidence to support the certification upon request, in order to receive an Authority to Construct 

for a new major facility or a major modification to a major facility. The District is proposing to retain this 

requirement in a substantively identical form. The requirement would be moved to Section 2-2-308 

under the proposed reorganization of Regulation 2-2. 

e) Alternatives Analysis

Non-Attainment NSR requires that before any new major facility or major modification to an existing 

major facility can receive an NSR permit, an analysis must be undertaken comparing the benefits of the 

proposed source with the environmental and social costs that would result from its location, 

construction or modification.56 The District’s current NSR regulations require such an analysis to be 

conducted in conjunction with any application for a new facility or modification with an emissions 

increase above specified threshold trigger levels of CO, POC and NOx emissions. This requirement is in 

current Section 2-2-401.1. The District is proposing to retain this requirement in proposed Section 2-2-

 

54 This requirement, in proposed Section 2-2-308, will apply for all new and modified sources that will increase 

emissions by more than de minimis amounts. See Section IV.B.3.a. of this Staff Report for further discussion.

55 See CAA § 173(a)(3).

56 See CAA § 173(a)(5)
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401.3. The new requirement will be essentially the same, although the language will clarify that the 

requirement applies to new major facilities (as defined in Section 2-2-217) and to major modifications of 

major facilities that will cause a significant increase in any Non-Attainment pollutant (or precursor). The 

specific list of pollutants identified in the requirement will also be expanded, because currently it does 

not include all Non-Attainment pollutants and precursors. Currently, PM2.5 and SO2 are not included as 

pollutants subject to this requirement, but they need to be included because of the Bay Area’s nonattainment designation for PM2.5. This is the only substantive change to this requirement; other than 

that, the only revision is to change the sub-section numbering of this requirement from 2-2-401.1 to 2-2-

401.3 because two new informational requirements are being added in 2-2-401.1 and 2-2-401.2. 

It is also important to note that this Non-Attainment NSR alternatives analysis is similar – although by no 

means identical – to the alternatives analysis requirements contained in the California Environmental 

Quality Act (CEQA). Given the similarity of the Non-Attainment NSR alternatives analysis and the CEQA 

alternatives analysis, District staff envision that these two analyses for any particular project will most 

likely be carried out at the same time and by the same person on behalf of the applicant (e.g., by 

environmental compliance staff or an environmental consultant). This is an appropriate approach and 

may conserve applicants’ resources, as long as it is done properly (i.e., applicants and their consultants 

will need to ensure that they address both of the requirements independently and ensure that they are 

both fully satisfied, even if some elements of the analyses will overlap). The proposed revisions 

therefore list the CEQA-related information requirements and the Non-Attainment NSR alternatives 

analysis requirements next to each other in subsection 401.3 in the list of application requirements, 

separated by a semicolon to indicate that they are two separate and distinct legal requirements. Permit 

applicants may elect to address these two requirements jointly, but are cautioned to make sure that 

they satisfy all respective elements of these two legally distinct permitting requirements. 

f) Procedural Requirements

Non-Attainment NSR permitting for “major” facilities requires that permits must go through a public 

participation process whereby interested members of the public are provided with notice of any 

proposed issuance of a permit and an opportunity to comment on the proposal before final issuance. 

The “major” Non-Attainment NSR requirements in 40 C.F.R. Section 51.165 do not establish any special 

additional requirements for “major” facilities, however, above the notice-and-comment requirements 

that apply generally to NSR permitting under 40 C.F.R. Section 51.161. These general NSR notice-andcomment requirements are addressed in Section IV.B.3.c. below, and will apply to “major” NonAttainment NSR permits as well as non-“major” permits. 

2. Prevention of Significant Deterioration (PSD) Requirements

The second major element of the NSR program is Prevention of Significant Deterioration, or PSD. As 

noted above, the Proposed Amendments will create a District PSD program that will satisfy the Clean Air 

Act’s requirements for PSD permitting and will be approvable by EPA for that purpose. Although the Air 

District has adopted requirements aimed at implementing PSD requirements, for historical reasons the 

District has never obtained EPA approval for a District-implemented PSD program. The proposed 
72 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

amendments will create a District PSD program that will be submitted for EPA review and approval, 

which will allow the District to implement the PSD program for facilities in the Bay Area. Obtaining EPA 

approval for a District-administered PSD program will simplify and streamline permitting of major 

facilities by having a single set of permitting regulations – those in the District’s NSR rule in Regulation 2, 

Rule 2 – govern all NSR permitting requirements for major facilities, instead of having NSR split between 

District regulations for some pollutants and federal regulations for other pollutants.

a) General Approach: Incorporation by Reference of the Substantive Elements of 

the Federal PSD Program

The general approach that District Staff are recommending for adopting an approvable PSD rule is to 

incorporate by reference the substantive elements of EPA’s federal PSD program. EPA has a welldeveloped PSD program that has benefitted from many years of implementation experience. Adopting 

appropriate elements of this federal program by reference will provide the District with a workable and 

effective PSD program. Several other air districts in California have adopted versions of this

“incorporation-by-reference” approach, with the approval of EPA, ARB, and CAPCOA. 

Staff are not proposing to incorporate all elements of the federal program, however. There are certain 

aspects of EPA’s federal PSD permitting program that would not be appropriate for the Bay Area. For 

example, as explained in the next section, the District has always based the applicability of its NSR 

permitting program on enforceable permit limits. This is different than the applicability test under

federal program, which EPA recently revised to be based only on a facility’s unenforceable projections of 

what its future emissions may be. Relaxing the District’s NSR applicability standards to that they are 

based on unenforceable emissions projections, rather than enforceable emissions limits, would not 

provide for effective air pollution regulation. Furthermore, the District is legally prohibited under State 

law from relaxing its applicability test (in most cases) to reflect EPA’s less stringent test. The proposed 

amendments therefore create District-specific procedures for elements where the District differs with 

EPA’s federal program (in particular, the applicability provisions), and incorporates the federal 

procedures by reference where those procedures are appropriate for use in the Bay Area (i.e., the 

substantive requirements for PSD review). This type of hybrid incorporation-by-reference of the federal 

PSD program is consistent with the approaches adopted by other air districts that have been approved 

by EPA, ARB, and CAPCOA. 

The proposed revisions therefore create a District-specific applicability test for PSD permitting. Under 

this applicability test, PSD permitting requirements will be triggered for “PSD Projects”, a term that is 

defined in proposed Section 2-2-224 and is discussed in more detail in Section IV.B.2.b. of this Report 

below. New sources and modifications to existing sources that trigger PSD permitting requirements 

because they fall within the definition of “PSD Project” will then be subject to all of the substantive 

elements of the PSD program. Each substantive element is set forth in a specific section of the proposed 

regulations, in proposed Sections 2-2-304 through 2-2-307. Each of those specific PSD provisions states 

that the authority to construct for the PSD Project must implement that element of the PSD program, 

and then incorporates the provisions of EPA’s program for that particular element by reference. In this 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 73

way, all of the detailed requirements for each element of EPA’s federal PSD program will become 

applicable to PSD Projects under the District’s program, and the District will implement each such 

element as part of its permit review for PSD Projects. (Each specific element is discussed in more detail 

in the following sections of this Report.)

This approach will also help in ensuring clarity in how the District’s PSD program works. Anyone seeking 

to understand how the PSD program applies to a particular project – including District permitting staff, 

regulated facilities applying for a permit, and interested members of the public seeking to understand a 

proposed permitting action during the public comment period, among others – will be able to look to 

the definition of “PSD Project” in Section 2-2-224 to see if the PSD requirements are triggered for the 

project. If so, they will then be able to look to sections 2-2-304 through 2-2-307 to see the specific PSD 

permitting requirements applicable to the project. Each of those specific sections will state that the 

project has to comply with the applicable PSD requirement, and will refer to and incorporate the details 

of that requirement as set forth in the Code of Federal Regulations for the specifics of what the 

requirement entails and how it should be implemented in practice. This approach strikes a good overall 

balance between including sufficient detail in District regulations to make it clear to users of the 

regulations what is required, and incorporating by reference EPA’s established, well-developed PSD 

provisions. To ensure that it is clear how this incorporation-by-reference will apply legally, the Proposed 

Amendments also include a provision in Section 2-2-103 explicitly providing that the incorporation of 

the PSD program elements incorporates and is subject to all applicable provisions, procedures, and 

related requirements for implementation that apply under the Code of Federal Regulations when EPA 

implements the program.

Proposed Section 2-2-103 also provides explicitly that this incorporation-by-reference approach will 

incorporate the requirements of the EPA program as they exist at the time of adoption by the Board of 

Directors. The incorporation by reference will not be “rolling” in the sense that any future changes by 

EPA to its PSD program will not automatically become part of the District’s program. If EPA changes its 

PSD regulations in the future, the existing version of the regulations (the version in effect on the date of 

the Board’s adoption) will continue to be the version that is incorporated by reference, until such time 

as the Board of Directors can revisit the issue and incorporate EPA’s revised version. This is somewhat 

cumbersome from a regulatory efficiency perspective, as it will require continued vigilance by the Air 

District to ensure that the District’s program is kept up to date with any future changes by EPA. But it is 

necessary in order to ensure that the District’s Board of Directors retains ultimate control over the 

regulatory requirements that facilities in the Bay Area are subject to under the Air District’s authority. 

For example, if EPA were to make some changes to the PSD program that are not appropriate for the 

Bay Area, it is important that the District’s Board of Directors have a chance to review and consider 

them before they become legally effective.57 A “rolling” incorporation-by-reference would remove this

 

57 EPA’s “NSR Reform” is a good example of how this situation could arise in practice. In that case, EPA adopted a 

change to its NSR rules that the California legislature disagreed with and declared was contrary to the policy of the 

State of California. A “rolling” incorporation-by-reference provision that automatically incorporated changes like 

NSR Reform would not be appropriate because it would remove the Board of Director’s independent authority to 

determine what the District’s regulations should require. 
74 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

Board of Directors oversight, and would be legally impermissible for this reason. Moreover, the 

administrative burden in having to monitor and revisit the rule in the event of changes by EPA to its PSD 

regulations would be the same whether the District used an incorporation-by-reference approach or 

drafted entirely separate stand-alone regulations that did not refer to EPA’s program. Even if the 

District were to create its own independent regulations in this way, it would still have to revisit and 

revise those regulations to keep current with any further EPA developments in the future.58 This 

requirement is simply a reality that the District must contend with in light of the joint state/federal 

system of “cooperative federalism” through which the Clean Air Act is implemented. District Staff will 

continue to monitor EPA developments in this area, and will bring any changes back to the Board of 

Directors for review and concurrence as appropriate.

b) Applicability: “PSD Projects” as Defined in Section 2-2-224

The PSD requirements apply at all facilities with a potential to emit a PSD pollutant in an amount that 

exceeds the PSD applicability thresholds.59 The applicability threshold is 100 tpy for facilities in any of 

the 28 specific categories listed in CAA Section 169(1) and 40 C.F.R. Section 51.166(b)(1)(i)(a) (which 

includes most types of major industrial facilities); and 250 tpy for facilities that are not in one of the 

listed categories. If a facility will have the potential to emit any PSD pollutant at these levels, then the 

facility is subject to PSD permitting. 

PSD permitting applies to new sources and modifications to existing sources at PSD facilities that will 

result in a net increase in emissions above specified PSD “significance” levels. The significance 

thresholds vary depending on the pollutant, and are between 10 tpy and 100 tpy. (EPA’s significance 

thresholds are set forth in 40 C.F.R. section 51.166(b)(23)(i); the proposed revisions incorporate the 

same thresholds, set forth in the definition of “significant” in proposed Section 2-2-227.) Before a 

permit can be issued for any construction at a facility over the 100/250 tpy PSD facility threshold (either 

for a new source or a modification of an existing source), the PSD requirements must be satisfied for 

each PSD pollutant for which the new construction will result in a net increase in emissions of a 

significant amount. Increases are based on the source’s actual emissions baseline, as provided in 

proposed Section 2-2-603 and 2-2-604. (These actual emissions baseline and emissions increase 

calculation concepts are discussed below in Section IV.B.3.g.i.) 

 

58 The recent developments with PM2.5 are a good example of this situation. There is no way that EPA’s regulation 

of PM2.5 could be made self-implementing through the District’s NSR program. The only appropriate way to add 

PM2.5 to the District’s regulations – practically, politically, and legally – is through action by the Board of Directors.

59 PSD pollutants are all pollutants that are subject to regulation by EPA under the Clean Air Act, except for nonattainment pollutants and hazardous air pollutants. Those types of pollutants are regulated under the nonattainment NSR provisions discussed above and under Section 112(b) of the Clean Air Act, respectively. With 

respect to hazardous air pollutants, the District also regulates a similar category of pollutants known as toxic air 

contaminants under its Regulation 2, Rule 5 (Toxic Air Contaminants). The term “PSD Pollutant” is defined in 

proposed Section 2-2-223.
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Applying the PSD permitting requirements thus involves a two-party inquiry. The first inquiry is whether 

the facility will be over the 100/250 tpy PSD applicability threshold. If a facility will have the potential to 

emit more than the applicable threshold amount (after the permit is issued), then the PSD requirements 

are implicated. The second inquiry is then to determine whether the permit will authorize a 

“significant” net increase in emissions of any PSD Pollutant. Any time that such a facility wishes to 

construct a new source or make a modification to an existing source at the facility that will increase the 

facility’s net emissions by more than a “significant” amount, the new source or modification will be 

subject to the PSD provisions in Regulation 2-2 for each pollutant for which there will be a significant net 

increase.60 Increases that are less than these “significant” levels have been determined by EPA to be de 

minimis in relation to their potential to cause or contribute to a violation of the NAAQS, in accordance 

with Alabama Power v. Costle, 636 F.2d. 323 (D.C. Cir. 1979). (See discussion in Section IV.B.3.a. below 

for further detail on EPA’s establishment of these de minimis “significant” increase thresholds.)

The PSD applicability test also incorporates EPA’s concept of “netting”, under which emissions increases 

from new projects are considered in connection with other recent increases and decreases associated 

with recent projects over the past 5 years. Projects within this 5-year netting period are referred to as 

“contemporaneous”, and the District’s 5-year “contemporaneous” period is set forth in the definition of 

that term in proposed Section 2-2-206. PSD permitting applies at major facilities where there will be a 

significant “net” increase in emissions of a PSD pollutant.

The Proposed Amendments implement these applicability concepts through proposed Section 2-2-224, 

which establishes a definition of “PSD Project”.61 This term is the key applicability provision because all 

of the substantive and procedural requirements for PSD permitting (as set forth in proposed Sections 2-

2-304 through 2-2-307, 2-2-401 through 2-2-406, and elsewhere) apply to “PSD Projects” as defined in 

Section 2-2-224. The definition incorporates the three applicability requirements outlined above as 

follows:

 

60 Note also that PSD requirements will apply to construction of a new or modified source at a facility with a PTE 

below the PSD “major” facility threshold if the new or modified source by itself would result in an increase over the 

“major” facility threshold. This requirement is set forth in the final sentence of the “PSD Project” definition in 

proposed Section 2-2-224. For example, take a facility in one of the listed categories with PSD “major” facility 

threshold of 100 tpy. If the facility has a PTE of 75 tons per year it would normally not be subject to PSD because 

its emissions are below this 100 tpy “major” facility threshold. If the facility were to propose a new or modified 

source that would result in an emissions increase of 100 tpy, however, that project would be subject to the PSD 

requirements because it would be over the 100 tpy threshold all by itself. 

61 Staff carefully considered the most appropriate term to use to designate what types of projects will be subject to 

PSD. EPA’s PSD regulations use the terms “major facility” and “major modification” to delineate which projects 

trigger PSD. Staff did not want to use those terms for PSD applicability in Regulation 2, Rule 2, however, because it 

would risk causing confusion with the terms “major facility” and “major modification” in the non-attainment NSR 

context. (See current Regulations 2-1-204, 2-2-220 and 2-2-221.) Staff are therefore proposing the term “PSD 

Project” instead as the clearest way to indicate what projects are subject to PSD permitting requirements. The 

substantive elements of PSD applicability set forth in the definition of “PSD Project” incorporate the same 

substantive elements that EPA uses; the only difference is that the District will be using a different term in order to 

avoid confusion. The proposed revisions also add a note in connection with the definition of “major modification 

to a major facility” to clarify that those terms are being used for non-attainment NSR applicability and the term 

“PSD Project” is being used for PSD applicability. 
76 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

• First, the facility at which a new source or modification will occur must have a PTE in excess of 

the 100/250 tpy PSD applicability threshold (depending whether it is one of the 28 listed 

categories) in order to trigger PSD permitting. This element of the applicability test is set forth 

in proposed subsection 224.1.

• Second, the new emissions from the new source or increase in emissions from the modification 

being proposed must exceed the specified significance thresholds in order to trigger PSD 

permitting. This element of the applicability test is set forth in proposed subsection 224.2. The 

subsection references the significance thresholds set forth in proposed Section 2-2-227, which 

mirror the federal significance thresholds adopted by EPA.

• Third, the net emissions increase associated with the new source or modification must exceed 

the significance thresholds, when other recent increases and decreases at the facility are taken 

into account. This element of the applicability test is set forth in proposed subsection 224.3. 

The proposed revisions also explicitly set forth how to undertake the “netting” analysis to make 

this determination, in proposed Section 2-2-220. Section 2-2-220 provides that the net increase 

in emissions for purposes of PSD applicability is determined by summing (i) the increase from 

the proposed new source or modification being permitted, plus (ii) any other creditable 

contemporaneous emissions increases, less (iii) any other creditable contemporaneous 

emissions decreases. Past emissions increases and decreases must have occurred within the 

past 5 years in order to be “contemporaneous” (per Section 2-2-206), and they must not have 

already been accounted for in a previous PSD netting analysis in order to be “creditable” (per 

Section 2-2-207). 

Finally, it is also important to mention that the District’s PSD program will be based on the difference 

between the facility’s actual emissions in the past, before a modification is implemented, compared 

with its maximum permitted emissions in the future after the modification is implemented. It will not 

incorporate EPA’s “NSR Reform” approach of basing PSD applicability on unenforceable future 

projections of what emissions may be instead of on enforceable permit limits. Staff’s analysis of this 

issue and reasons for preferring to base PSD permitting on enforceable emissions limitations are 

addressed in detail in Section IV.B.3.g.ii. of this Staff Report. 

c) PSD “Best Available Control Technology” Requirement – Section 2-2-304

The first substantive PSD permitting requirement is the federal PSD “Best Available Control Technology” 

(BACT) requirement. This requirement is set forth in EPA’s implementing regulations in 40 C.F.R. Section 

51.166(j) (which mandates that approved state PSD programs must require BACT) and 40 C.F.R. Section 

52.21(j) (which requires BACT under the federal PSD program). The District’s regulations must require 

PSD BACT to control emissions of any PSD pollutant for which there will be a significant net increase in 

emissions as a result of the PSD Project. 

The Proposed Amendments implement this requirement in proposed Section 2-2-304, entitled “PSD 

BACT Requirement”. Section 2-2-304 requires that a PSD Project must use BACT to control emissions of 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 77

any PSD Pollutant for which the net increase in emissions as a result of the project will exceed the 

significance threshold for that pollutant. For each such pollutant, the permit will require BACT for each 

new or modified source at which there will be a net emissions increase. This provision therefore creates 

a two-part inquiry for projects that involve multiple new or modified sources. First, the PSD Pollutants 

that will be subject to the BACT requirement are determined – these are all PSD pollutants for which 

there will be a significant net increase from the project as a whole. Second, the sources at which BACT 

must be applied for such sources is determined – these are any sources with a net increase in one of 

those pollutants. Each new or modified source that is part of the project must apply BACT for each such 

pollutant for which it will have a net increase in emissions. Put another way, a new or modified source 

will be subject to BACT for a PSD Pollutant if (i) the project as a whole will have a significant net increase 

in emissions of the pollutant, and (ii) source in question will have any net increase in emissions of the

pollutant. 

For sources that trigger BACT under these applicability procedures, proposed Section 2-2-304 

incorporates by reference the requirements of the federal PSD program in specifying how BACT is to be 

implemented. It uses the Clean Air Act definition of BACT in CAA Section 169(3) to define the level of 

emissions control required as BACT, and incorporates by reference all of EPA’s other requirements in the 

federal PSD program for implementing BACT.62 Under this provision, the APCO will implement BACT for 

PSD Projects in the Bay Area in exactly the same manner as EPA implements BACT under the federal PSD 

project, and subject to exactly the same requirements that EPA is subject to under the federal PSD 

program. These procedures include the requirements specified in 40 C.F.R. Section 52.21(j), as well as 

applicable EPA guidance, policies, and interpretative precedents implementing Section 52.21(j). These 

procedures also include any applicable exemptions such as those set forth in 40 C.F.R. Section 52.21(i). 

Simply put, any technical or policy consideration that must be taken into account in implementing BACT 

in federal PSD permitting will also apply for implementing BACT in District permits for PSD Projects. 

d) PSD Source Impact Analysis Requirement – Section 2-2-305

The second substantive PSD permitting requirement is the federal PSD “Source Impact Analysis” 

requirement. This requirement is set forth in EPA’s implementing regulations in 40 C.F.R. Sections 

51.166(k)-(n) (which mandate that approved state PSD programs must include a Source Impact Analysis 

requirement) and 40 C.F.R. Section 52.21(k)-(n) (which set forth the Source Impact Analysis 

requirements under the federal PSD program). The District’s PSD provisions must incorporate this 

Source Impact Analysis requirement. In a nutshell, the requirement (i) prohibits PSD Projects that will 

cause or contribute to an exceedance of any NAAQS for any PSD pollutant or to any exceedance of a PSD 

“increment”; and (ii) establishes procedures for analyzing and determining whether emissions from a 

PSD Project will cause or contribute to any such exceedance.

 

62 Note that PSD BACT applicable under proposed Section 2-2-304 is different from District BACT applicable under 

proposed Section 2-2-301. As explained in Section IV.B.1.b. above, District BACT under Section 2-2-301 (which is 

defined in proposed Section 2-2-202) is a more stringent level of control that is equivalent to the federal “Lowest 

Achievable Emissions Rate” (also sometimes referred to as “California BACT”). PSD BACT is the level of control that 

is required under the federal PSD program, and is defined in Section 169(3) of the Clean Air Act.
78 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

The Proposed Amendments implement this requirement in proposed Section 2-2-305, entitled “PSD 

Source Impact Analysis Requirement”. Section 2-2-305 prohibits the APCO from issuing an authority to 

construct for any PSD Project unless the APCO determines, for each PSD Pollutant for which the project 

will result in a significant net increase in emissions, that such net increase in emissions will not cause or 

contribute to a violation of any PSD NAAQS or PSD increment. Proposed Section 2-2-305 also specifies 

the procedures for making such a determination, incorporating by reference the federal procedures 

established by EPA in 40 C.F.R. Section 52.21 for the federal PSD program. Specifically, subsection 2-2-

305.1 requires that an applicant for an authority to construct for a PSD Project must prepare and submit 

an analysis of background air quality in the area of the project for each PSD pollutant for which the 

project will result in a significant net increase in emissions, using the procedures for such analyses 

required under the federal PSD program in 40 C.F.R. Section 52.21(m). Subsection 2-2-305.2 requires 

that the applicant must then demonstrate for each such pollutant that the project’s net increase in 

emissions will not cause or contribute to a violation of an applicable ambient air quality standard 

(including both California63 and National standards for which the Bay Area is not in non-attainment) or 

applicable increment, using the procedures for such demonstrations required under the federal PSD 

program in 40 C.F.R. Section 52.21(k). This incorporation by reference will incorporate the procedures 

for undertaking a preliminary analysis comparing the project’s impacts with applicable Significant Impact 

Levels (SILs) and then a full analysis (if necessary) for impacts that exceed the SILs as established by EPA 

guidance. Subsection 2-2-305.3 specifies the modeling methodologies that must be used in such an 

analysis. Subsection 2-2-503.4 requires that the APCO must review the analysis and determine that any 

such net emissions increase will not cause or contribute to an exceedance of any applicable air quality 

standard or increment before issuing an authority to construct for the project. As with the procedures 

for conducting the PSD BACT analysis, this incorporation by reference will draw into District PSD 

permitting all of the applicable guidance, policies, and interpretative precedents that EPA has developed 

as part of its PSD program, as well as the exemptions set forth in 40 C.F.R. Section 52.21(i) to the extent 

that they may be applicable for exempting a PSD Project having to undergo a Source Impact Analysis. 

e) PSD Additional Impacts Analysis Requirement – Section 2-2-306

PSD permitting also requires PSD Projects to undergo an “Additional Impacts Analysis” that evaluates 

any impairment to visibility, soils and vegetation that may occur as a result of the project, as well as an 

analysis of any general commercial, residential, or other growth associated with the project. This

requirement is set forth in EPA’s implementing regulations in 40 C.F.R. Sections 51.166(o) (which 

mandates that approved state PSD programs must include an Additional Impacts Analysis requirement) 

and 40 C.F.R. Section 52.21(o) (which sets forth the Additional Impact Analysis requirement under the 

federal PSD program). 

 

63 The requirement to demonstrate no exceedance of any California standard is being carried over from the 

District’s current PSD requirements, in accordance with SB 288. See generally current Section 2-2-304 (requiring 

NAAQS exceedance analysis) and current Section 2-1-205 (defining NAAQS to include California standards); and 

current Section 2-2-414 (requiring analysis of “air quality standards” generally). 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 79

The proposed PSD regulations implement these requirements through proposed Section 2-2-306, 

entitled “PSD Additional Impacts Analysis Requirements”. Subsection 306.1 requires an applicant for a 

PSD Project to prepare an analysis of potential impairment to visibility, soils and vegetation; subsection 

306.2 requires the applicant to prepare an analysis of potential impacts from any associated growth; and 

subsection 306.3 provides for APCO review of the analyses. As with the other PSD elements, proposed 

Section 2-2-306 incorporates by reference the requirements for such analyses under EPA’s PSD program 

as specified in 40 C.F.R. Section 52.21(o), as well as applicable EPA guidance, policies, and interpretative 

precedents; and it is subject to the exemptions set forth in 40 C.F.R. Section 52.21(i). The District will 

implement the Additional Impacts Analysis requirements under proposed Section 2-2-306 in exactly the 

same manner that EPA implements the requirement under its federal PSD permitting program. 

f) PSD Class I Area Requirements – Section 2-2-307

The fourth substantive requirement of the PSD permitting program is the Class I Area impacts analysis 

requirement. This requirement is designed to protect air quality in designated Class I Areas, which are 

areas of special natural importance such as National Parks. The only such Class I Area within the 

District’s jurisdiction is Point Reyes National Seashore in Marin County.64

The Class I Area Impacts requirement provides that the PSD permitting authority must work in 

conjunction with the Federal Land Manager for any Class I Area located within 100 km (62 miles) of a 

PSD project to ensure that the Federal Land Manager can review and evaluate the potential adverse 

impacts to air-quality related values in the Class I Area.65 These requirements are set forth in EPA’s 

implementing regulations in 40 C.F.R. Sections 51.166(p) (which establishes Class I Area Impact 

requirements that must be included in approved state PSD programs) and 40 C.F.R. Section 52.21(o) 

(which sets forth the Class I Area Impact requirements for the federal PSD program), among other 

provisions. 

The proposed PSD provisions implement the Class I Area Impacts requirement through Section 2-2-307, 

as well as through the Federal Land Manager notice provision for PSD projects in Section 2-2-402. 

Proposed Section 2-2-402 requires the APCO to notify the Federal Land Manager (i) if the APCO receives 

advance notification of an application for a PSD Project that will be located within 100 km of a Class I 

Area; and (ii) within 30 days of receipt of any such application (and at least 60 days before holding any 

public hearing on such application), with that notice including a copy of the permit application and the 

application’s analysis of potential Class I Area impacts.66 This notice will provide the Federal Land 

 

64 Note also that certain projects located near the edge of the District’s jurisdictional boundaries could also 

implicate other Class I Areas in adjacent air districts, such as Pinnacles National Monument. These will also be 

encompassed within the Class I Area impacts analysis requirements. 

65 The Federal Land Manger is the federal official with responsibility for the Class I Area. It is defined in proposed 

Section 2-2-212 as the Secretary of the federal department with authority over such lands, or a subordinate acting 

with the Secretary’s authority.

66 Proposed Section 2-2-401.4 requires the applicant to prepare and submit this analysis, which the APCO will 

forward on to the Federal Land Manager for review in accordance with Section 2-2-402.
80 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

Manager the opportunity to review any potential impacts to the Class I Area and inform the District of 

any concerns. Proposed Section 2-2-307 then states that if the Federal Land Manager concludes that 

the emissions from the project may have an adverse impact on air-quality-related values in the Class I 

Area and provides the APCO with a demonstration of such adverse impacts within 30 days of receiving 

notice of the application, the APCO shall promptly review and consider that demonstration. If the APCO 

concurs (or if the APCO comes to such a conclusion independently based on the APCO’s own review), 

the APCO shall deny the application. If the APCO finds that the demonstration does not establish that 

the project would have such an adverse impact, the APCO shall provide notice of the basis for such 

finding in connection with any subsequent notice of public hearing. These requirements in Section 2-2-

307 track the requirements of EPA’s federal PSD permitting regulations in Title 40 of the Code of Federal 

Regulations. 

Note also that proposed Section 2-2-307 will address Non-Attainment NSR Class I Area visibility concerns 

as well, in accordance with 40 C.F.R. Section 51.307. 40 C.F.R. Section 51.307(b) establishes a process 

for addressing potential visibility impacts in coordination with the Federal Land Manager that is similar 

to the process for PSD permitting, but extends it to address non-attainment pollutants as well. 40 C.F.R. 

Section 51.307(c) provides that this process for non-attainment pollutants shall be conducted in 

conjunction with the PSD Class I Area analysis. Accordingly, proposed Section 2-2-307 (and proposed 

Sections 2-2-401.4 and 402, which help implement Section 2-2-307) apply to new major facilities and 

major modifications to major facilities that are “major” for NOx, VOC, SO2 and PM2.5. 

g) Procedural Requirements

EPA’s PSD regulations also include certain procedural requirements to ensure that interested members 

of the public have notice of, and an opportunity to participate and provide input in, District PSD 

permitting activities. These requirements are set forth in 40 C.F.R. Section 51.166(q), and they are 

similar in many ways to the procedural/public participation requirements that apply to NSR permitting 

programs generally under 40 C.F.R. Section 51.161. The District’s NSR program addresses public 

participation in permitting actions under current Section 2-2-405/proposed Section 2-2-404, which 

provide a comprehensive public notice and participation process. These public notice and comment 

procedures are discussed in more detail in Section IV.B.3.c. below, and fully satisfy all of the PSD 

procedural/notice-and-comment requirements of 40 C.F.R. Section 51.166(q). 

3. Other Provisions of Regulation 2, Rule 2

In addition to these important requirements that apply specifically to “major” facilities under the NSR 

program, there are also a number of additional provisions in Regulation 2, Rule 2 that help implement 

the program. These other provisions are discussed below.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 81

a) NAAQS Protection Requirement (Modeling of Air Quality Impacts for Non-PSD 

Sources) – Section 2-2-308

The Proposed Amendments add a new requirement that applicants must conduct a modeling analysis to 

demonstrate that their emissions will not cause or contribute to an exceedance of the NAAQS. This new 

requirement, in proposed Section 2-2-308, will help ensure that the NAAQS are protected in the Bay 

Area, which is the primary focus of the NSR program.

• Reasons for Extending NAAQS Protection Requirement to Non-“Major” Facilities and NonAttainment Pollutants

Proposed Section 2-2-308 requires that all new and modified sources that will cause a significant net 

increase in emissions of any pollutant for which a NAAQS has been established must demonstrate that 

the emissions will not cause or contribute to an exceedance of the NAAQS for that pollutant. This 

requirement is essentially the same as the current air quality impact modeling requirement for PSD 

projects (see discussion regarding proposed Section 2-2-305 above), except that it will apply to all new 

and modified sources, not just to PSD projects. The current PSD requirement applies only at facilities 

that exceed the PSD “major” facility thresholds (100 or 250 tons per year, depending on the type of 

facility), and only for emissions for which the Bay Area has not been designated as “non-attainment”. 

Proposed Section 2-2-308 will extend this requirement to apply to all projects with significant net 

increase in emissions (as defined in Section 2-2-22767), including projects at facilities below the “major” 

facility threshold, and including emissions of non-attainment pollutants. Whenever a project will result 

in a significant net increase in emissions of any pollutant for which a NAAQS has been established,68 the 

applicant (i) will need to conduct a modeling analysis of the impacts of the project on pollutant 

concentrations in the ambient air, and (ii) will need to demonstrate based on this modeling analysis that 

the project will not cause or contribute to a violation of the NAAQS. The modeling analysis and NAAQS 

compliance demonstration will be undertaken using the same long-established procedures that are used 

for such analyses and demonstrations under the PSD program.

Proposed Section 2-2-308 extends the air quality impact analysis requirement to smaller facilities and to 

non-attainment pollutants for the same reasons that the air quality impact analysis is required for PSD 

 

67 A “significant” increase for these purposes is defined using the established NSR significance levels under the 

definition set forth in proposed Section 2-2-227. This significance threshold mirrors the threshold used for 

applicability of the current source impact analysis requirements for PSD permitting. EPA considers projects with 

emissions increases that are less than “significant” to be de minimis in terms of their potential to cause a violation 

of the NAAQS.

68 Note that modeling will not be required for determining impacts on ozone concentrations. Modeling ozone 

impacts is not practicable for several reasons. Ozone is not emitted directly, but is formed through a complex 

chemical reaction between oxides of nitrogen and volatile organic compounds in the presence of heat and 

sunlight. As such, the dispersion models that are used for standard air quality modeling are not appropriate for 

ozone modeling, and effective modeling tools simply do not exist for most applications. In addition, the modeling 

will be conducted in accordance with EPA’s “Guideline” in Appendix W and will follow the Guideline’s 

requirements for PM2.5, which require modeling of direct PM emissions only, and not the impacts from how any 

precursor emissions may subsequently combine in the atmosphere to form secondary PM2.5. 
82 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

Projects – that is, to ensure that new and modified sources will not jeopardize compliance with the 

NAAQS. Significant increases that could interfere with attainment and maintenance of the NAAQS need 

to be identified and avoided, even if they occur at a facility that does not exceed a “major” facility 

emissions threshold. All exceedances of the NAAQS count towards the Bay Area’s attainment status, 

regardless of the size of the facilities that cause them, and their impacts on the public health and 

welfare are the same. By the same token, significant increases in emissions of non-attainment pollutants 

are equally important as significant increases in emissions of PSD pollutants if they will interfere with 

attainment of maintenance of the NAAQS. Such increases need to be identified and avoided to ensure 

protection of human health and the environment. Extending the air quality impact analysis requirement 

to cover significant net increases in emissions at smaller, non-“major” facilities, and to encompass nonattainment pollutants as well as PSD Pollutants, will help accomplish these important air quality goals. 

Requiring such a demonstration for all significant net emissions increases – i.e., net increases above the 

“significant” levels set forth in Proposed Section 2-2-227 – is a reasonable, targeted approach to 

addressing these concerns. Requiring this demonstration for projects with significant net emissions 

increases targets those projects with the greatest potential for jeopardizing the region’s compliance 

with the NAAQS. Excluding smaller projects where the net increase is less than significant allows such 

projects to avoid overly burdensome permit review requirements in cases where the emissions involved 

are relatively small and, compared to the region’s total emissions inventory, not very consequential. 

Where a project’s net emissions increase is less than significant, it is considered to be de minimis and 

will not be subject to this requirement. Such small sources are numerous, but they collectively make up 

a relatively small contribution to the region’s total emissions. Requiring a modeling analysis and

demonstration for all such sources would not be warranted given the additional administrative burdens 

of doing so. Excluding small sources with emissions increases that are less than “significant” is also 

consistent with how EPA’s NSR program treats other air quality analysis requirements (e.g., PSD air 

quality impacts).

Compliance with this requirement will be demonstrated using the same air quality impact analysis 

procedures and protocols that have been working well in the PSD context for many years. These are set 

forth in EPA’s “Guideline on Air Quality Models” (codified in 40 C.F.R. Part 51, Appendix W) and related 

EPA guidance. Applicants will be required to model the ambient air quality impacts from any emission 

increases subject to the modeling requirement using EPA’s computer model and determine if they 

exceed the “Significant Impact Level” (SIL). For any impacts above the SIL, applicants will be required to

compare the impacts to background emission concentrations to see if the impacts will significantly 

contribute to an exceedance of a NAAQS. The modeling will be conducted using EPA’s approved air 

quality models, databases, and related requirements specified in Appendix W. Regulated entities and 

consultants will be readily familiar with all of these requirements from their experience with PSD 

permitting, and they should be able to apply their experience to this new requirement with relative 

ease. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 83

• Compliance of the District’s NSR Program With 40 C.F.R. Section 51.160 

This NAAQS compliance demonstration requirement in proposed Section 2-2-308 will also serve as an 

additional means to demonstrate for EPA’s review that the Air District’s NSR program will prevent any 

new or modified sources subject to NSR permitting from interfering with attainment or maintenance of 

any NAAQS. This is an EPA requirement for NSR programs under 40 C.F.R. Section 51.160, which 

provides (among other things) that each State Implementation Plan (SIP) must include enforceable 

procedures to prevent construction of any new source or modification that “will interfere with the 

attainment or maintenance of” any NAAQS.69

The Air District’s NSR rules comply with this requirement – both currently and under the Proposed 

Amendments – by ensuring that new and modified sources are consistent with the Air District’s 

comprehensive regulatory program adopted to ensure that the Bay Area will achieve its clean air goals, 

including attainment and maintenance of the NAAQS. This comprehensive regulatory program contains 

multiple requirements and provisions to control air pollution and provide for healthy air quality. As a 

result, the air quality in the Bay Area is either well within the established NAAQS, or on a path to 

attainment. Moreover, the District’s comprehensive regulatory program has been approved by EPA as 

satisfying all applicable federal requirements under the Clean Air Act regarding timely attainment and 

maintenance of the NAAQS.70 The District’s regulatory program provides for a certain amount of 

emissions growth from new and modified stationary sources, and it still ensures that overall the Bay 

Area will attain and maintain the NAAQS because of the stringency of the District’s regulations (along 

with those of other agencies). As long as new and modified sources that may be constructed in the 

future remain consistent with this comprehensive overall regulatory program, they will not interfere 

with attainment or maintenance of any NAAQS.

The District’s NSR permit review process provides for a thorough regulatory review to ensure that all 

new and modified sources will be consistent with this regulatory program and therefore will not 

“interfere with attainment or maintenance” of the NAAQS. Specifically, Section 2-1-304 provides that

the APCO will deny an Authority to Construct and/or Permit to Operate for any new or modified source 

that will not comply. The Air District’s NSR regulation therefore contains procedures (i) to identify 

whether any source will interfere with attainment or maintenance of the NAAQS (i.e., a thorough permit 

review to determine whether it will be consistent with the District’s comprehensive regulatory program

that ensures NAAQS attainment and maintenance); and (ii) to prohibit construction of any source that 

will interfere with attainment or maintenance (i.e., by denying authority to construct any source that 

 

69 40 C.F.R. Section 51.160(a)(2) requires that the SIP must contain procedures for determining whether any new or 

modified source will interfere with attainment or maintenance of any NAAQS, and 40 C.F.R. Section 51.160(b)(2) 

requires that the SIP contain procedures for preventing construction of a new or modified source if it will result in 

such interference.

70 In the case of PM2.5, the District is in the process of developing documentation to submit to EPA for review and 

approval demonstrating compliance with CAA requirements for PM2.5. (As explained elsewhere, adding PM2.5

provisions to the District’s NSR program is one element of the District’s CAA compliance efforts for PM2.5.) District 

Staff expect that EPA will fully approve the District’s submission when it has had an opportunity to complete its 

review. 
84 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

will not comply with this program). These procedures satisfy the requirements of 40. C.F.R. Section 

51.160. 

This has long been the Air District’s understanding of how its NSR program satisfies 40 C.F.R. Section 

51.160. The District interprets EPA’s position to be the same, as evidenced by EPA’s approval of the 

District’s existing SIP-approved NSR regulations without having raised any objection regarding 40 C.F.R. 

Section 51.160. However, EPA Region IX staff stated in a comment letter that they would like “additional 

information” on this issue.71 Region IX staff identified several alternative approaches for satisfying 

Section 51.160, including (i) providing emissions projections that account for growth from new and 

modified sources without jeopardizing attainment or maintenance and (ii) requiring dispersion modeling 

for all new and modified sources that will result in a significant net increase in emissions.

The District’s NSR program as set forth in the Proposed Amendments will utilize both of these 

approaches.72 As noted above, the comprehensive system of air quality regulations that governs

emissions in the Bay Area allows for emissions growth from new and modified stationary sources, while 

still providing for attainment and maintenance of the NAAQS. For ozone and PM2.5, the two pollutants 

for which the Bay Area is designated as non-attainment, the District’s emissions projections show an 

increase in emissions from stationary sources in future years, while at the same time showing overall 

reductions in total emissions leading towards attainment and maintenance of the NAAQS. As noted 

above, the District satisfies all of EPA’s requirements for attainment planning with respect to these 

pollutants. New and modified sources that are consistent with these planning efforts (as is required by 

Section 2-1-304) will not interfere with attainment or maintenance, even if they do involve emissions 

increases. For the other criteria pollutants, for which the Bay Area is designated as attainment, the 

District’s regulations allow for emissions growth from new and modified sources, but current pollution 

levels are sufficiently below the NAAQS that such growth is not expected to cause a NAAQS exceedance. 

Even making conservative assumptions about the extent of such growth that could occur in the future, 

additional emissions from new and modified stationary sources cannot reasonably cause a NAAQS 

exceedance given the current magnitude of the Bay Area’s total emissions and the amount that would 

be necessary to cause an NAAQS exceedance. District Staff have conducted a detailed analysis of this 

situation, for both attainment and non-attainment pollutants.

73

 Based on this analysis, it is clear that 

the District’s NSR program satisfies 40 C.F.R. Section 51.160 because it requires all new and modified

sources to comply with the District’s comprehensive regulatory program, which will provide for 

 

71 EPA Region IX Staff Comment Letter at p. 8, § 5.b. (“NAAQS Compliance”). The letter referenced 40 C.F.R. 

Section 51.160(f), not Sections 51.160(a) and (b). District Staff understand from discussions with EPA Region IX 

Staff that their concern involves how the District will address the requirements to ensure that new and modified 

sources will not interfere with attainment or maintenance, which are the requirements addressed in Sections 

51.160(a) and (b). 

72 Region IX staff did not identify any legal requirements or agency guidance on how Section 51.160 should be 

interpreted on these issues, and District Staff are not aware of any. The District’s NSR rule as contained in the 

Proposed Amendments comports with both of these alternatives suggested by EPA Region IX staff, however. 

73 See C. Lee, BAAQMD, Analysis of Compliance with 40 C.F.R. Section 51.160(a) & (b) (Aug. 2012).
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 85

attainment and maintenance of the NAAQS even with a certain amount of growth from new and 

modified sources. 

In addition, the new NAAQS protection requirement in proposed Section 2-2-308 will implement the 

second alternative that EPA Region IX staff identified. As explained above, this provision will apply to all 

NSR permits, not just to PSD projects, and it will require a demonstration that the emissions associated 

with them will not cause or contribute to a violation of the NAAQS. Every NSR permit for any new or 

modified source will be subject to this requirement, with the only exception being for permits with de 

minimis net emissions increases. Section 2-2-308 establishes this de minimis exemption at the levels 

approved by EPA as being sufficiently small that the potential benefits from modeling their impacts on 

NAAQS compliance is not warranted given the administrative burdens that would be involved. EPA 

adopted these de minimis threshold levels – which are also referred to as the NSR “significance” levels –

in accordance with the principles set forth in Alabama Power v. Costle, 636 F.2d 323 (D.C. Cir. 1979), 

which authorize exemptions from NSR permitting requirements for de minimis sources.

74

 As EPA has 

determined, emissions increases below these levels do not have a significant potential to cause a NAAQS 

exceedance sufficient to warrant a NAAQS compliance modeling demonstration.75 For the same 

reasons, they are appropriate levels at which to exempt new and modified sources from the NAAQS 

compliance modeling requirement in proposed Section 2-2-308. Using these de minimis levels is also 

consistent with the comment letter from EPA Region IX staff, which states that if an agency chooses to 

use emissions modeling to satisfy 40 C.F.R. Section 51.160, it should require modeling for “new and 

modified sources that will result in a significant net increase in emissions . . . .”76 

 

74 Requirements for Preparation, Adoption, and Submittal of State Plans; Approval and Promulgation of 

Implementation Plans, Final Rule, 45 Fed. Reg. 52.676, Section XI (“De Minimis Exemptions”) (Aug. 7, 1980). 

Alabama Power v. Costle involved the de minimis principle in the context of a federal administrative agency 

implementing a federal statute, but EPA has recognized that the same principle applies to State agencies in 

adopting their NSR programs. See Approval and Promulgation of Implementation Plans; revisions to the Nevada 

State Implementation Plan; Stationary Source Permits, Proposed Rule, 77 Fed. Reg. 38,557, 38,562 & fn. 6 (June 28, 

2012).

75 Note that the bulk of EPA’s de minimis NSR “significance” thresholds were adopted in 1980 (see 45 Fed. Reg. 

52,676), and the NAAQS have not been static since that time. But EPA has continued to reaffirm their 

appropriateness and to rely on them as exemption levels under the Alabama Power principle. This point is 

highlighted both by EPA’s determination not to revisit the thresholds that were established in 1980, as well as the 

agency’s recent statements continuing to treat them as de minimis for NSR purposes. When EPA adopted a de 

minimis “significance” threshold for PM2.5 in 2008, for example, it explained that “EPA considers such lower 

emissions increases [i.e., below the “significance” thresholds] to be de minimis . . . .” Implementation of the New 

Source Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM2.5), Final Rule, 73 Fed. Reg. 

28,321, 28,332 (May 16, 2008). EPA also noted this fact in 2010 in addressing greenhouse gases under the NSR 

program, stating that “EPA has established significance levels for various pollutants, generally relying on a de 

minimis basis.” Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, Final Rule, 75 

Fed. Reg. 31, 514, 31,560 (June 3, 2010) (citing August 7, 1980, rulemaking adopting “significance” thresholds). 

Relying on EPA’s “significance” levels as the thresholds for the NAAQS protection requirement in proposed Section 

2-2-308 therefore continues to be consistent with EPA’s approach to modeling emissions impacts for purposes of 

evaluating potential NAAQS exceedances. 

76 See EPA Region IX staff comment letter, at p. 8 (emphasis added).
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In addition, District Staff have undertaken their own analysis of the extent to which using these de 

minimis thresholds for the NAAQS compliance demonstration requirement in Section 2-2-308 would 

exempt new emissions increases in the Bay Area specifically. This analysis further supports the use of 

EPA’s de minimis exemption levels under Alabama Power v. Costle. District Staff conducted a review of 

all NSR permits issued over the past 20 years to identify the total amount of emissions that would be 

exempt under these de minimis thresholds. Staff then compared the amount of such exempt emissions 

to the Bay Area’s total annual emissions. Staff conducted this comparison for each criteria pollutant to 

determine the percentage emissions increase that would be authorized each year under these de

minimis exemption levels without being subject to the Section 2-2-308 NAAQS compliance analysis 

requirement. The amount of such exempt emissions varies depending on the pollutant involved and the 

year reviewed, but the bottom line is that the total emissions increases from all of the NSR permits 

issued each year that will be eligible for this de minimis exemption in Section 2-2-308 will amount to 

only 0.02% to 0.34% of the region’s total emissions inventory.

77

 Conducting a full modeling analysis to 

demonstrate NAAQS compliance for each of these de minimis permits would not be warranted, given 

the small overall addition the region’s emissions inventory and the administrative burdens that would 

be involved. This analysis further supports exempting these permits from the Section 2-2-308 

requirement under Alabama Power v. Costle.

For all of these reasons, the District’s NSR program fully satisfies all requirements of 40 C.F.R. Section 

51.160(a) and (b) to ensure that new and modified sources permitted under the program will not 

“interfere with attainment or maintenance” of the NAAQS.

b) Compliance Review For Issuance of Permit to Operate – Section 2-2-310

Before issuing an Authority to Construct for a new or modified source, District staff conduct a thorough 

review of all applicable regulatory air quality requirements to ensure that the new or modified source 

will comply with them. This is the District’s primary method of ensuring compliance through its NSR 

permitting program. In addition, after the Authority to Construct is issued and the applicant constructs 

the source under the Authority to Construct, District Staff then conduct an additional compliance check 

prior to issuing a Permit to Operate for the source. This final check focuses specifically on whether the 

source has conducted and passed any required source testing for the equipment on startup, and 

whether it has taken any required steps to shut down existing equipment to generate emission 

reduction credits.

78

 Upon completion of this review and a determination that the source is in 

compliance, the APCO issues the Permit to Operate. This provision is in current Section 2-2-312, and the 

 

77 See C. Lee, BAAQMD, Analysis of Compliance with 40 C.F.R. Section 51.160(a) & (b) (Aug. 2012).

78 Note also that there is a general prohibition on all permits issued under Regulation 2 that the APCO may not 

issue a permit to any source that is not operating in compliance with all applicable regulatory requirements. See 

Section 2-1-304. This requirement would prohibit the APCO from issuing a Permit to Operate unless the source is 

operating in compliance with all conditions in the Authority to Construct and all other applicable regulatory 

requirements. The purpose of the final compliance check in Section 2-2-310 is to confirm explicitly that the source 

has conducted and passed any required source testing and that any sources that need to be shut down to create 

emission reduction credits have in fact been shut down. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 87

proposed amendments retain the same requirement essentially verbatim (with only a few minor 

wording revisions to clarify its application and renumbering to Section 2-2-310). The proposed

amendments do not make any substantive changes to this requirement. 

c) Public Notice and Public Participation Provisions – Sections 2-2-401 through 2-

2-408

The Proposed Amendments expand the public notice and comment requirements for NSR permits. 

Currently, Regulation 2, Rule 2 requires the APCO to publish a notice and provide the public with an 

opportunity to comment on any proposed Authority to Construct for a new major facility or a major 

modification to an existing major facility. These are facilities with emissions over the 100 tpy “major” 

facility threshold, and modifications at such facilities that will increase emissions by a significant 

amount. Before issuing an Authority to Construct for a new major facility or a major modification at an 

existing major facility, the APCO must publish a notice of the proposed decision to issue the permit and 

provide the public with at least 30 days to review and comment on the decision. The APCO must also 

provide an opportunity for a public hearing, if warranted. The APCO must then review and consider any 

comments received on the proposal to issue the Authority to Construct before making any final decision 

on whether to issue it. 

The Proposed Amendments will expand this requirement by lowering the threshold at which public 

notice and comment applies. The Proposed Amendments will require public notice and an opportunity 

to comment on any Authority to Construct for a new or modified source that will result in a significant 

increase in emissions, regardless of the size of the facility. That is, whereas the current requirement 

applies to new and modified sources with significant increases at facilities over the 100 tpy “major” 

facility threshold, the Proposed Amendments will require notice of all such new and modified sources at 

all facilities, regardless of whether they are over the 100 tpy “major” facility threshold or not. 

Extending the public notice and comment provisions to cover sources with significant emissions 

increases, even where they are not located at “major” facilities, is important because the impact of such 

emissions increases is the same regardless of the size of the facility at which they occur. To the extent 

that members of the public may be interested in being notified of permitting activity regarding such 

increases, and may want to review and comment on such permitting actions, it is important to provide 

such an opportunity. Expanding the public notice-and-comment requirements will ensure that 

interested members of the public will be guaranteed this opportunity for any permitting action that will 

involve a significant increase in a facility’s emissions. 

Providing such notice-and-comment opportunity will also ensure that the District’s NSR program is 

consistent with EPA’s requirements in 40 C.F.R. Section 51.161. That provision sets forth the notice-andcomment provisions that must be included for SIP approval, and it is not limited to providing for notice 

and comment only for “major” facilities. It applies to the NSR program in general, including permits for 

non-“major” facilities and modifications. The Proposed Amendments will ensure that the District’s 

program complies with this requirement by requiring notice and an opportunity to comment on all NSR 

permits, except for those that will involve only a de minimis increase in emissions. As discussed above in 
88 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

Section IV.B.3.a. regarding the NAAQS protection requirement, EPA has established that increases below 

the “significant” levels it has established for NSR permitting are de minimis in terms of the impact that 

they will have on whether the region will comply with the NAAQS. Excluding permits involving such de 

minimis emissions increases from the notice-and-comment requirements is therefore consistent with 

the principles established in Alabama Power v. Costle. Furthermore, District Staff have conducted an 

analysis of the contribution that such sources make to the region’s overall emissions of criteria 

pollutants and found that permits that will be exempted under this provision will account for only 0.02%

to 0.34% of the region’s total emissions per year. Exempting such permits from the notice-andcomment requirements is appropriate because the additional burdens and delay from subjecting such 

de minimis increases to the full notice and comment process are not outweighed by any additional 

benefit given the relatively small amount of emissions that these permits involve. 

The Proposed Amendments also add a requirement that the public notice required under these 

provisions must be posted prominently on the District’s website. Currently, the notice is required to be 

published only in a newspaper of general circulation. Although the District has normally made a practice 

of posting such notices on its website, the Proposed Amendments will codify this requirement and make 

it mandatory. The existing requirement for newspaper publication applicable for Authorities to 

Construct involving major facilities and major modifications will remain in place; the new requirement 

for all notices to be posted on the District’s website will be in addition to this existing requirement and 

will augment it. This treatment of website publication for NSR permits is consistent with recent EPA 

guidance regarding providing public notice for NSR permits under 40 C.F.R. Part 51,79 and it recognizes 

that in the current day and age the internet is an effective and convenient method for disseminating 

important information to the public. District Staff have considered the benefits of using the Internet to 

provide notice of NSR permits and have concluded that it is a medium that is routinely and readily 

accessible to the public.

d) Other Administrative Requirements – Sections 2-2-409 through 2-2-414

The remainder of the Administrative Requirements in Sections 2-2-409 through 2-2-414 contain several 

additional provisions applicable to NSR permit applications, processing, and issuance. These 

requirements are mostly being carried over from the current Regulation 2, Rule 2 without any 

substantive changes. These provisions include the following requirements: 

Proposed Section 2-2-409 provides that if an existing regulatory requirement (including a permit 

condition) is relaxed such that a source’s potential to emit is increased above an NSR permitting 

threshold under Regulation 2, Rule 2, then the owner/operator of the source must apply for and obtain 

an NSR permit for the source as if it were a new or modified source under the rule. Thus, if a source has 

a regulatory limit such as a permit condition that keeps its potential to emit a District BACT pollutant 

 

79 See Memorandum from J. McCabe to EPA Regional Administrators, “Minor New Source Review Program Public 

Notice Requirements Under 40 CFR 51.161(b)(3) (April 17, 2012), available at: 

www.epa.gov/region07/air/nsr/nsrmemos/pubnot.pdf.
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below 10 pounds per day, and that limit is relaxed in some way such that the source’s potential to emit 

is now over 10 pounds per day, then the source needs to apply for and obtain an NSR permit that 

applies BACT for that pollutant under Section 2-2-301 in the same manner as for a new or modified 

source. The same would apply for a facility that has a limit on emissions that keeps its potential to emit 

below 100 tons per year and thus has not been subject to “major” non-attainment NSR or PSD 

requirements: if the regulatory limit is relaxed such that the facility’s now exceeds the 100 ton-per-year 

“major” facility threshold, it would need to apply for an obtain a permit applying all applicable 

requirements for a “major” facility as if it were a new or modified source. This requirement is in current 

Section 2-2-412 and is being carried over verbatim in the proposed amendments in Section 2-2-409. 

Only the Section number is being changed; District Staff are not proposing any changes in the language 

of this provision.

Proposed Section 2-2-410 states explicitly that the APCO may impose any and all conditions in an 

Authority to Construct and/or Permit to Operate that are necessary to ensure compliance with 

applicable NSR requirements, including requirements on how the applicant operates the source or 

abatement equipment or other sources used to generate emission reduction credits. This is a 

fundamental legal principle inherent in any permitting system, but this provision states it explicitly to 

avoid any potential for uncertainty on this point by any party. The provision also states explicitly that 

provisions can be specified with a future effective date and made conditional on certain events such as 

source test results, monitoring data, and public complaints. This provision is in current Section 2-2-419, 

and the proposed amendments carry it over into proposed Section 2-2-410 without any substantive 

changes. Proposed Section 2-2-410 is substantively the same as current Section 2-2-419, with certain 

revisions to the regulatory language to improve its clarity, and renumbering as a result of the 

reorganization of Regulation 2, Rule 2. 

Proposed Section 2-2-411 sets forth procedures for an applicant to obtain a refund of unused offsets 

(i.e., banked emission reduction credits) where (i) the applicant has provided more offsets in connection 

with a permit application than are legally required or (ii) the applicant provided offsets in order to 

obtain a permit, but never built or operated the source and so has never actually “used” the offsets. In 

the latter case, the applicant must either demonstrate that the permit has expired or surrender the 

permit if it has not expired. In these situations, the APCO will refund the amount of any such unused 

offsets, without charging banking fees, upon request by the applicant.

This provision is in existing Section 2-2-422. The Proposed Amendments will carry it over in proposed 

Section 2-2-411 with only minor changes. The one substantive change concerns the current language 

contemplating that a source can obtain a refund of offsets if it is permitted to operate up to a certain 

level, but it is operated with actual emissions at a lower level. The existing language contemplates that 

the source could take a lower emission limit to reflect the lower actual emissions, and obtain a refund 

for the full amount of the difference between the permitted emissions level and the actual emissions 

level. Credit should certainly be given in such a situation, but the appropriate mechanism for doing so is 

for the source to use the reduced level of operation to generate emission reduction credits under the 

calculation methodology in proposed Section 2-2-605. That is the mechanism that the District’s NSR 

program uses to credit situations where a source is permitted at a certain level of emissions but opts to 
90 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

take a lower emissions limit because it is not emitting up to its full potential. To put all sources in this 

situation on an equal footing, Staff have drafted proposed Section 2-2-411 to require that any credit for 

such reductions must be given through the emission reduction credit process, not through the offset 

refund process. 

Proposed Section 2-2-412 provides that the APCO will make an annual demonstration of the 

effectiveness of the District’s offset requirements for ozone precursors. This provision is in current 

Section 2-2-423. The Proposed Amendments will not make any changes to it, but will recodify it in 

Section 2-2-412. This provision was added in 2000 in response to an EPA comment regarding whether 

the District’s offset requirements for ozone precursors were sufficiently stringent to satisfy federal 

requirements. The District has always believed that its offset requirements are considerably more 

stringent than required under the federal CAA for a number of reasons, and this provision was added to 

address EPA’s concerns. 

Proposed Section 2-2-413 provides that the APCO will publish a triennial report on how the District is 

implementing the no-net-increase requirements of Section 40919 of the California Health & Safety 

Code. This provision is in current Section 2-2-316, and is being retained verbatim in the Proposed 

Amendments. This is not a substantive requirement for implementation of NSR, but is more in the 

nature of an administrative requirement for the District to document its compliance with Section 40919, 

and so it is being moved to the “400s” section of the Rule, which sets forth the Rule’s administrative 

requirements. 

Proposed Section 2-2-414 provides that the APCO will publish a workbook setting forth recent BACT 

determinations, which permit applicants, District staff, and others can use as guidance in how BACT 

should be applied in certain situations. Provisions for publishing this workbook are in the definition of 

“BACT” in current Section 2-2-206. The provisions are being moved to the administrative requirements 

in the “400s” section of the NSR Rule, because they are not really part of the definition of BACT but 

instead are an administrative procedure the District uses to help with implementation of the BACT 

requirement in practice. No substantive changes are being made to this provision. Note that the 

important language regarding use of the BACT Workbook as guidance and the requirement that BACT 

must be determined on a case-by-case basis for each source where it is applied is being retained. 

Interested persons are encouraged to use the BACT Workbook as a guidance document, but should keep 

these limitations in mind when considering what BACT requires for any specific permitted source. 

e) Post-Construction Monitoring – Section 2-2-501

Proposed Section 2-2-501 provides that the APCO can require monitoring of a source’s emissions as a 

permit condition where necessary to determine the source’s impact on air quality. This provision for 

requiring post-construction monitoring is set forth in current Section 2-2-502. The proposed revision 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 91

clarifies the regulatory language and provides that monitoring can be required for any NSR permit when 

necessary, not just for PSD Projects.80 

f) Monitoring and Modeling Procedures – Sections 2-2-601 & 2-2-602

Proposed Sections 2-2-601 and 2-2-602 establish procedures that govern ambient air quality monitoring 

and modeling analyses, respectively. Proposed Section 2-2-601 provides that all air quality monitoring 

conducted for NSR permitting must be conducted in accordance with the District’s Manual of 

Procedures and EPA’s guidelines in 40 C.F.R. Part 58, Appendix B. Proposed Section 2-2-602 provides 

that when modeling a source’s emissions impacts, the source may not use an artificially high exhaust 

stack to increase dispersion and reduce its impacts. In conducting modeling, no credit may be given for 

an exhaust stack height that is higher than what is required consistent with good engineering practices. 

These provisions are set forth in existing Sections 2-2-601 and 2-2-602. The Proposed Amendments do 

not make any substantive changes; they simply clarify some of the regulatory language and update the 

regulatory citations to EPA’s requirements in these areas. 

g) Emissions Calculation Procedures – Sections 2-2-603 through 2-2-611

The Proposed Amendments expand upon the current regulation in order to provide additional clarity on 

how emissions are calculated in implementing Regulation 2, Rule 2. The details of how a facility’s or a 

source’s emissions are calculated – and in particular, how emissions increases and decreases are 

calculated – are crucial to how the substantive NSR permitting requirements apply in specific situations. 

The District has found that the current regulatory language addressing these calculations is ambiguous 

and unclear in some places, which has led to difficulties in understanding what exactly is required by the 

regulations, differences in interpretation of how the permitting provisions should be applied, and in 

some cases inconsistent application of the requirements. To address this situation, the Proposed 

Amendments include additional specific regulatory language to explain in detail how these concepts are 

to be applied in practice. As explained below, these more detailed calculation provisions do not change 

the District’s current procedures, but instead codify them in clear language that will set forth explicitly 

how each of the substantive NSR permitting requirements should be applied in individual NSR permits. 

These amendments will help District Staff, regulated facilities, and interested third parties in achieving a 

consistent understanding of how the NSR Rule is to be implemented. 

i. CALCULATING EMISSIONS INCREASES AND DECREASES: THE NSR “ACTUAL-TOPOTENTIAL” APPLICABILITY TEST FOR EMISSIONS INCREASES

Many important NSR requirements apply based on the amount of the emissions increase or decrease 

that results from a new or modified source. Calculating the emissions increase (or decrease) that will 

 

80 Note that current Section 2-2-501 provides for pre-construction monitoring of air quality in the area of a 

proposed PSD Project. The requirements for pre-construction air quality monitoring are now addressed in 

proposed Section 2-2-305, which incorporates by reference the federal procedures for conducting PSD ambient air 

quality analyses, including the procedures for when pre-construction monitoring is required. 
92 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

occur when a new source is built or when a change at an existing source is implemented is therefore 

central to implementing this program.

New sources present a relatively simple case. The amount of emissions increase from a new source that 

has never been in existence before is simply the maximum amount of emissions that the source could 

potentially emit once it is built and begins operating. This level of emissions is referred to as the 

“Potential to Emit”, or “PTE”, and is defined in Section 2-1-217. Even where a source will rarely (if ever) 

actually operate at its full maximum potential, it is important to base permitting decisions on this full 

maximum emissions rate in order to be conservative and ensure that the worst-case scenario is 

adequately addressed by the permit. 

Calculating the amount of an emissions increase or decrease when a change is made to an existing 

source is somewhat more complicated. In applying the NSR permitting requirements, the amount of the 

emissions increase or decrease that results from a change to an existing source has always been 

measured by comparing (i) the source’s actual emissions before the change is made with (ii) the source’s 

new maximum potential emissions (PTE) after the change.81 The calculation has always based the prior 

emissions scenario (called the “baseline”) on the source’s actual emissions in the past – rather than its 

maximum permitted emissions – to ensure that the baseline scenario reflects actual environmental 

conditions and not hypothetical permitted emissions that have not actually been emitted. Similarly, the 

calculation has always based the future emissions scenario on maximum potential emissions to account 

for the fact that the source may well emit up to that full amount after the change is implemented. 

As an example to illustrate this concept, consider a source that is permitted to emit up to 100 tons per 

year, but that has only operated at half capacity and has thus emitted only 50 tons per year. If the 

facility wants to make a change that will increase its maximum potential to emit to 150 tons per year, 

the NSR program would treat this change as resulting in an increase of 100 tons per year: an increase 

from the 50 tons-per-year actual emissions baseline before the change to the 150 tons-per-year 

maximum potential emissions after the change. Any other calculation methodology – for example, 

treating the change as only a 50 ton-per-year increase because the source’s maximum capacity is 

increasing by only 50 tons per year – would underestimate the magnitude of the real change in 

emissions to the environment that could occur after the change is implemented: i.e., a 100-ton increase 

from 50 tons per year to 150 tons per year of actual emissions.82 

 

81 Note that changes at a source that affect emissions are sometimes referred to generally as “modifications”. The 

term “modification” has a specific regulatory definition, however, meaning a change at a source that increases 

emissions in a manner that triggers NSR permitting review. (See Section 2-1-234.) But the emissions 

increase/decrease measurement concepts apply more broadly than this. For example, changes at a source that 

reduce emissions are not “modifications” as defined in Section 2-1-234, because (by definition) they do not result 

in an emissions increase. For this reason, this discussion and the associated regulatory provisions use the more 

general term “change” at an existing source instead of the term “modification”. 

82 Note that the same concept applies for emissions reductions as well. Take the facility with maximum permitted 

emissions of 100 tons per year but that actually emits only 50 tons per year. If that facility is shut down, the 

emissions that are actually taken out of the air are only the 50 tons per year that the facility actually emitted. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 93

This methodology for determining emissions increases and decreases is often referred to as the “actualto-potential” test, and it is the methodology that is contained in the District’s current NSR provisions. 

The Proposed Amendments will retain these same concepts, but explain them more clearly and with an 

increased level of detail. Specifically, current Sections 2-2-604 and 2-2-605 establish that emissions 

increases are based on an actual emissions “baseline”, and then are measured based on the future 

Potential to Emit that will result after the new or modified source. But they are somewhat difficult to 

follow, in that they set forth a detailed procedure for calculating the amount of an emission reduction, 

and then for emissions increases simply cross-reference that methodology. The proposed amendments 

will present the methodology in a more straightforward manner by first setting forth the “baseline” 

calculation procedure (i.e., how to calculate the emission before the change is made), and then 

specifying how this “baseline” will be compared to the future potential to emit (i.e., how to measure the 

increase or decrease in emissions from this baseline after the change is made).

• Current Provisions

Currently, the District’s NSR rule applies this methodology in the following provisions. 

Section 2-2-605 sets forth the “actual-to-potential” emission calculation procedure for Emission 

Reduction Credits that a source can claim from implementing a change in operations that will reduce its 

emissions. This is where the core actual-emissions “baseline” concept is codified. Section 2-2-605 

provides that Emissions Reduction Credits are calculated based on a source’s historical “baseline” 

emissions, which is the source’s average actual emissions over the past three years (or shorter period if 

the source is less than 3 years old). 

The source’s baseline emissions are then adjusted to reflect current regulatory standards, so that the 

source cannot claim credit for reductions that would be required by law. If a regulation would require a 

source to reduce its emissions anyway, then the source should not be able to claim credit for doing so 

voluntarily. This adjustment is sometimes referred to as the “surplus” adjustment, because it aims to 

ensure that credited voluntary reductions are “surplus” of what is required by law.83 The “surplus” 

adjustment is made by calculating the source’s baseline emissions rate and then applying current 

regulatory standards to see what emissions rate they would require at the source. The baseline 

emission rate is calculated by dividing the average throughput during the baseline period (the baseline 

throughput) by the average emissions during the baseline period (the baseline emission rate) in order to 

obtain an average emission rate per unit of production during the baseline period. A review is then 

conducted of the most stringent regulatory standards applicable to the operation, and if any of those 

standards would require a lower emission rate per unit of production, the baseline emission rate is 

 

Calculating the amount of the reductions based on its maximum permitted capacity (100 tons per year) would 

over-estimate the actual environmental benefit from shutting down the facility.

83 This adjustment has historically been commonly referred to as a “RACT adjustment”, after the acronym for 

“Reasonably Available Control Technology,” because RACT standards are one of the types of regulatory standards 

that are applied when this adjustment is made. “Surplus adjustment” is a more accurate short-hand reference, 

because the adjustment is made for all applicable regulatory requirements, not just RACT. This Staff Report will 

use “surplus adjustment” as a short-hand reference for this concept.
94 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

adjusted accordingly to reflect what would be required under current regulations.84 This adjusted 

baseline emission rate is then multiplied back up by the baseline throughput to give an annual emission 

rate adjusted to reflect current regulatory standards. The amount of Emission Reduction Credits the 

source can claim is the difference between this adjusted baseline emissions rate before the change in 

operations and the source’s potential to emit after the change.85 

Section 2-2-604 then establishes the same “actual-to-potential” test for measuring emissions increases. 

It provides that the same baseline calculation procedure is used for calculating emissions increases from 

operational changes at a source. The emissions baseline is the actual historical average emissions rate 

over the past three years, adjusted downward to reflect the most stringent current regulatory 

standards. The amount of emissions increase is the difference between this baseline emissions rate and 

the source’s potential to emit after the operational change is implemented. This “actual-to-potential” 

emissions increase test is used in determining whether the BACT requirements in Section 2-2-301 apply 

to a source.

• Proposed Amendments

The Proposed Amendments retain these calculation procedures, but they expand upon and clarify the 

existing regulations to explain in more detail how they are to be applied in specific situations. In 

particular, instead of having the baseline calculation procedure embedded in the methodology for 

determining emission reduction credits, the Proposed Amendments set forth the baseline calculation 

procedure in its own section and then specify how to perform the “actual-to-potential” emission 

increase/decrease calculation compared to that baseline. 

Section 2-2-603 sets forth the procedures for determining historical baseline emissions and the 

“surplus” adjustment to reflect current regulatory standards. As under the current rule, proposed 

Section 2-2-603 establishes a three-year baseline period – with the exception of GHGs, for which a 

slightly different baseline period is being provided, as discussed in more detail Section IV.B.3.g.ii. below. 

Section 2-2-603 sets forth the procedures for exactly how this baseline period is to be established, how 

baseline emissions during this period are determined, and how such baseline emissions are adjusted to 

ensure that only “surplus” emissions are credited.

The first step in establishing an emissions baseline is determining the baseline period. This is done by 

determining when the baseline period ends under Section 2-2-603.1, and then determining the period 

preceding that baseline period ending date over which the baseline emissions will be calculated under 

 

84 Specifically, current Section 2-2-605.5 states that the baseline emission rate shall be adjusted to comply with 

“the most stringent of RACT, BARCT, and District rules and regulations in effect or contained in the most recently 

adopted Clean Air Plan.” 

85 The current regulation makes an exception for sources that are “fully offset”, meaning that the facility 

owner/operator has provided offsets for the full amount of the source’s permitted emissions rate. (See current 

Section 2-2-245.) For sources that are “fully offset” in this way, the baseline for calculating emission reduction 

credits is the permitted emission rate, not the actual historical average emissions rate. The permitted emission 

rate is still adjusted to reflect current regulatory standards, even for fully offset sources. 
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Section 2-2-603.2 – i.e., the baseline period. The baseline period ending date is established under 

Section 2-2-603.1 as follows: 

• For an emissions increase from a new or modified source, the baseline period is the period 

immediately preceding the application date86 for the new or modified source, as provided in 

subsection 603.1.1.87 

• For an emissions reduction that can be credited from a change at a source that results in lower 

emissions, the baseline period is the period immediately preceding the date upon which the 

reduction became enforceable. Enforceability is the key concept in crediting such emissions 

reductions, because voluntary emission reductions cannot be credited for NSR purposes unless 

they are enforceable (among other requirements). The baseline period is therefore the period 

immediately preceding the date on which an emission reduction becomes enforceable and thus 

satisfies the requirements for being an “Emission Reduction Credit” under proposed Sections 2-

2-211 and 2-2-605.

88

 This can occur in a number of ways. For example, the source can be 

physically dismantled and removed from service such that it would take a new permit 

application (and a new NSR review) in order to reinstall it or otherwise place the source back in 

service. Alternatively, if the source is not physically removed, permit conditions can be 

implemented to provide a legally binding commitment that it will not operate (or alternatively, 

the source’s permit can be relinquished). For a source that does not require a permit, some 

other legally binding commitment is needed. In each of these cases, there is a legally 

enforceable guarantee that the source will no longer be causing the emissions that it did 

previously, which is the touchstone for generating an Emission Reduction Credit. The baseline 

period is the period immediately preceding the date on which the enforceable reduction 

occurred. This provision is set forth in subsection 603.1.3. 

• For emissions banking applications under Regulation 2, Rule 4, the baseline period is the period 

immediately preceding the date of the banking application. The District uses this period for 

banking applications because it is important to ensure that facilities that want to bank emission 

 

86 Note also that time periods that are based on the submission of an application are in fact specified in the rule as 

based on the date that the application is determined to be complete. For simplicity, this discussion refers to 

application dates; such references should be understood to mean complete applications.

87 The rule also includes a provision for calculating increases resulting from projects that did not go through the 

permitting process as a new source or modification. This provision is in subsection 603.1.2, and it is intended to 

address situations that arise in the context of a “netting” analysis where a change was implemented at a source in 

the past that resulted in an increase in emissions over baseline, but the change was not a “modification” that 

triggered NSR permitting. Such emissions increases must still be accounted for in netting (where appropriate), and 

so a provision needs to be made for establishing the baseline where there was no permit application. Subsection 

603.1.2 provides that in such a situation, the baseline period is the period immediately preceding the date when 

the change that resulted in the increased emissions was first implemented. 

88 There are other important concepts regarding Emission Reduction Credits, such as the “surplus” requirement. 

Obviously, a source cannot take credit for an emission reduction as an ERC unless and until the reduction satisfies 

all such requirements. But in this context, for determining how the baseline period is applied, the key concept is 

when the reduction becomes enforceable. 
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reductions bring the reductions to the District’s attention as soon as possible. When credits are 

banked, they can be used for many years into the future and at different facilities, and so it is 

important that the District review the details of the shutdown that generates a banked ERC as 

soon as the shutdown occurs, and not several months or years later. In order to encourage 

facilities to submit banking applications immediately upon shutdown of a source, and to limit 

the potential for the District to have to review a source’s operations too far back into history, 

the District calculates the baseline period starting at the date of submission of the banking 

application. This is the District’s current procedure for handling banking applications under 

Regulation 2, Rule 4, and it will be codified in subsection 603.1.4. 

The baseline period is the time period leading up to this “baseline period ending date” during which the 

baseline emissions will be evaluated. As noted above, for all pollutants except for GHGs, the District 

uses a three-year baseline period. The baseline period will be the three years immediately before the 

baseline period ending date discussed above (i.e., the three years immediately before the application 

date, the three years immediately before an emission reduction became enforceable, etc.). For GHGs, 

the baseline period is a 24-month period to be selected by the applicant according to certain 

requirements described in the rule. These provisions are set forth in subsection 603.2. Subsection 

603.2.1 establishes the 3-year baseline period for all pollutants except GHGs; and subsection 603.2.2 

sets forth the special rules that apply for GHGs. 

It is also worth noting that because the baseline period for determining the amount of a 

contemporaneous emission reduction credit extends back over the three years before the credit is 

generated, the time period that needs to be reviewed may extend back before the five-year 

“contemporaneous” period from which such credits can be used. That is, if an emission reduction credit 

results from a change that a facility made four years ago that reduced emissions, that change is 

“contemporaneous” because it occurred within the past five years and it can be used to reduce the 

facility’s cumulative increase associated with a new permit application today. But the baseline period 

for determining the amount of the emission reduction credit is the three-year period before the change 

took place – that is, the period between four years ago and seven years ago. Thus, in evaluating the 

amount of this contemporaneous emission reduction credit, emissions data will need to be reviewed

from beyond the five-year contemporaneous period. This is appropriate (and indeed, required) under 

the rules for establishing the emissions baseline – as long as the actual change itself that generated the 

emissions reductions occurred (and became enforceable) within the five-year contemporaneous period.

Once the baseline period is determined, the second step is to determine the source’s baseline 

emissions. Baseline emissions are established as a “baseline emissions rate” per unit of throughput. 

This calculation is provided for in subsections 603.3 through 603.5. The baseline emissions rate is 

obtained by dividing (i) the source’s average emissions during the baseline period by (ii) its average 

throughput during the baseline period. The source’s throughput is the operational parameter that 

correlates most closely with the source’s emissions, which will necessarily be different for different 

types of operations. The baseline throughput is the actual average throughput during the baseline 

period (unless the throughput exceeded an applicable permit limit, in which case the baseline 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 97

throughput is the permitted throughput).89 Baseline emissions are the actual average annual emissions 

during the baseline period (excluding any emissions that exceed any applicable limit).90 Dividing the 

baseline throughput by the baseline emissions gives emissions per unit of throughput during the 

baseline period, which is the baseline emissions rate.

The third step is then to adjust the baseline emissions rate to reflect current regulatory standards – the 

“surplus adjustment”. This is done by adjusting the baseline emissions rate downward, if necessary, to 

reflect what the emissions would be per unit of throughput if the operation were to comply with the 

most stringent regulatory standard currently in effect or contained in the District’s most recently 

adopted Clean Air Plan.91 The adjusted baseline emission rate is then multiplied back up by the baseline 

throughput to get adjusted baseline emissions for the baseline period. These calculations are provided 

for in subsections 603.6 and 603.7. This adjusted baseline emissions are then used in determining 

emissions increase and decreases as specified in Sections 2-2-604 et seq. 

Section 2-2-604 then sets forth the “actual-to-potential” test for emissions increases and decreases from 

changes made at a source. The emissions increase or decrease from a physical change, change in 

throughput or production, or other similar change at a source is measured as the difference between (i) 

the source’s PTE after the change and (ii) the source’s adjusted baseline emissions before the change 

calculated according to the baseline emissions calculations set forth in Section 2-2-603. This procedure 

is identical to the current “actual-to-potential” test set forth in current Section 2-2-604. It applies in 

determining whether a new source or modification is subject to the BACT requirement in Section 2-2-

301, as well as determining applicability of the PSD requirements in proposed Sections 2-2-304 through 

307 (among other requirements).

 

89 Note that an applicant can claim credit only for throughput that is adequately documented and verifiable. If the 

applicant does not have sufficient records to substantiate its claims of historical throughput, its throughput will be 

presumed to be zero during any portions of the baseline period where sufficient records are unavailable (or will be 

presumed to be only as much as the applicant can substantiate through adequate documentation). Only 

throughput that can be adequately documented will be credited in calculating baseline throughput. 

90 Again, if adequate documentation is not available for any portion of the baseline period, no emissions will be 

credited during that portion of the baseline. Only emissions that can be adequately documented will be credited in 

calculating baseline emissions. For purposes of calculating an emissions increase, emissions will be presumed to 

be zero during such periods (or will be presumed to be only as much as the applicant can substantiate through 

adequate documentation). For purposes of calculating emissions reductions from baseline, emissions will be 

presumed to be at the maximum permitted level (either absolute maximum or maximum per unit of throughput, 

whichever is more conservative) for periods where adequate documentation is not available. 

91

 There is an exception to the general rule for surplus adjustments for purposes of determining whether PSD 

requirements apply. For that purpose, adjustments do not need to be made beyond what is required under the 

federal program as set forth in 40 C.F.R. Section 51.166(b)(47)(i)(b) and (b)(47)(ii)(b) & (c) (for example, for 

reductions required in the District’s most recent Clean Air Plan that exceed a RACT level of control).
98 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

ii. CONSIDERATIONS REGARDING USE OF EPA’S “NSR REFORM” EMISSIONS INCREASE 

CALCULATION METHODOLOGIES

An important consideration that District Staff addressed during development of the Proposed 

Amendments concerns a relaxation to the “actual-to-potential” methodology that EPA made in 2002 for 

purposes of applying NSR to “major” facilities. This regulatory change was called “NSR Reform” by EPA,

and it changed the way that EPA applies its NSR program. NSR Reform includes three principal 

elements:92

1. Allowing a more flexible “baseline period” to be used in determining whether an emission 

increase from a modification at a source will require NSR permitting. The “major” facility 

requirements of the NSR program require a permit for any modification that will result in a 

“significant” increase in emissions above what the source emitted historically during the

“baseline” period. With a restrictive “baseline period”, the source may be forced to base its 

emissions increase calculation on a time period during which emissions may have been lower 

than what would be expected during typical operations. NSR Reform allowed the baseline 

period to reach back as far as 10 years to find a representative emissions baseline. 

2. Allowing a source to calculate its emissions increase based on its projection of what future 

emissions will be, rather than on an enforceable permit limit. Historically, a source’s emissions 

have always been based on its maximum permitted emissions for determining whether a 

modification to the source would cause a “significant” increase and require NSR permitting. If a 

source made a modification and did not anticipate that it would cause a significant increase, the 

source had to make an enforceable commitment – in the form of an enforceable permit limit –

that the modification would not cause a significant increase. NSR Reform allowed sources to 

avoid NSR permit requirements based solely on an unenforceable projection that a modification 

would not cause a significant increase in emissions, without any enforceable permit limit to 

ensure that a significant increase would not in fact occur.

3. Allowing the use of “Plant-wide Applicability Limits” (PALs) for purposes of determining whether 

PSD permitting is required. PALs are facility-wide emissions caps that allow facilities to increase 

emissions at some sources without getting an NSR permit, as long as they decrease emissions at 

other sources such that overall facility-wide emissions do not increase by an amount that would 

require an NSR permit. NSR Reform added provisions to the federal NSR program allowing the 

use of PALs as an alternative means of complying with NSR. 

EPA’s relaxation of its “major” NSR requirements opened the door for the states to relax their own

regulatory programs implementing the federal NSR program. The California legislature disagreed that 

doing so would be an appropriate choice for California, however, and so it enacted a law that prohibits 

California’s air districts from doing so. The law – called “the Protect California Air Act of 2003”, or SB 

 

92 These are the NSR Reform provisions that survived legal challenges. Two other elements were invalidated by the 

D.C. Circuit Court of Appeals. See New York v. United States EPA, 413 F.3d 3 (D.C. Cir. 2005). EPA’s full suite of NSR 

Reform provisions can be found at 67 Fed. Reg. 80,186 (Dec. 31, 2002).
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 99

288,93 prohibits any air district from relaxing any NSR requirements that were in place as of the end of 

2002, when NSR Reform was adopted. SB 288 effectively prohibits the District from adopting NSR 

Reform, as doing so would relax the District’s NSR regulations compared to the District’s existing 

regulations that were on the books in 2002. (Note that although the District does not have a PSD 

program that was approved by EPA, it did have PSD provisions in its NSR Rule as of 2002, and adoption 

of NSR Reform would relax these requirements in violation of SB 288.) 

The one exception to the SB 288 prohibition concerns greenhouse gases. The District has never 

regulated greenhouse gases before, and so no matter what applicability provisions it adopts – NSR 

Reform, pre-NSR Reform, or otherwise – they cannot by definition be a relaxation of existing 

requirements with respect to GHGs.94 ARB has issued a legal opinion confirming this understanding of 

the law.95 Staff therefore considered whether it would make sense as a policy matter to adopt any of 

the NSR Reform applicability methodologies for GHGs – and specifically whether to incorporate them 

into the PSD provisions that are being included in the Proposed Amendments, as these are the 

provisions that apply to GHG emissions. Staff have considered each of the elements of EPA’s NSR 

Reform package on its individual merits.

• Baseline Period

With respect to the baseline period, the District’s regulations for criteria pollutants currently require the 

most recent three-year period to be used as discussed above in Section IV.B.3.g.i. Emissions increases 

are measured as increases over the source’s average emissions over the most recent three years. It is 

clear that with this baseline period there is a potential to end up with baseline emissions that may not 

actually be representative of normal operations. If the most recent three years reflect recession 

conditions when demand is depressed – as is the case currently – then the baseline emissions against 

which an emissions increase is measured will not actually be representative of normal source 

operations. To the contrary, in such a scenario much of the measured “increase” will not in fact be new

emissions occurring after the modification, but will simply reflect a return to “normal” emissions levels 

 

93 See California Health & Safety Code §§ 42500 et seq.

94 Some commenters suggested that the same situation applies for PM2.5. Unlike GHGs, however, PM2.5 is not a 

completely new pollutant compared to what was regulated in 2002 because PM2.5 is a subset of PM10, which was a 

regulated pollutant in 2002. Furthermore, the principal rationale used by ARB in its legal memorandum concluding 

that SB 288 does not apply to GHGs was that SB 288 focuses on pollutants for which a NAAQS has been established 

– which applies for GHGs because GHGs do not have a NAAQS, but which is not true for PM2.5. Whether SB 288 

applies for PM2.5 as a legal matter is therefore unclear. But District Staff do not believe that adopting the NSR 

Reform applicability methodologies would be appropriate anyway, even if it is authorized under SB 288. PSD 

requirements already apply for PM10, and PM2.5 emissions will closely correlate with PM10 emissions for most 

sources. Thus providing the NSR reform flexibility for PM2.5 would not create any meaningful difference for most 

sources, because they would be subject to PSD permitting for PM10 even if they could avoid it for PM2.5 because of 

NSR Reform. For all of these reasons, Staff are not proposing to adopt any of the NSR Reform methodologies for 

PM2.5.

95 See Air Resources Board Guidance Document, “Tailoring Rule Implementation and SB288” (Dec. 22, 2010), 

attached to Letter from R. Fletcher, Deputy Executive Officer, ARB, to California Air Pollution Control Officers (Dec. 

22, 2010).
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when demand recovers. The use of the source’s baseline actual emissions as the basis for determining 

whether there will be a “significant” increase was never intended to capture such emissions. It was 

intended to capture real increases in emissions that would occur after the modification is implemented 

at the source, not simply a return to normal conditions that would occur anyway regardless of whether 

or not the modification is made. The Proposed Amendments therefore use the more flexible baseline 

period for GHGs. For GHGs only, sources will be able to select any 24-month period within the past 10 

years to use as the baseline period. (There is a slightly different rule for electrical utility steam 

generating units, which mirror’s EPA’s provisions for these types of facilities.) This baseline period will 

allow the PSD permitting program to more accurately target emissions increases related to 

modifications being made at a facility, rather than changes in emissions due simply to fluctuations in the 

business cycle. The more flexible baseline period for GHGs is set forth in subsection 603.2.2 of the 

baseline emission calculation provision in Section 2-2-603. (Note also that the District is providing this 

more flexible baseline period for GHGs only, because SB 288 bars any relaxation of the current 3-year 

baseline period for other pollutants. For all other pollutants, the 3-year baseline will continue to apply

per subsection 603.2.1.) 

• Enforceability of Less-Than-Significant Emission Increases

With respect to measuring emission increases based merely on projections of future emissions rather 

than on enforceable emissions limitations, the Proposed Amendments do not adopt this element of NSR 

Reform. Relying on projections instead of actual enforceable permit limits raises significant 

enforcement concerns. Although a facility may project at the time of permitting that a modification will 

not cause a significant increase in emissions, if those projections turn out to be wrong once the project 

is implemented and starts operating, there may end up being a significant increase without any PSD 

requirements being implemented. Moreover, the NSR Reform approach to using projected emissions 

looks only at the first five years after the modification is implemented. This would allow significant 

increases to escape PSD permitting review as long as they occur over a time frame of more than 5 years. 

Many projects have a lifetime of more than 5 years, and so longer-term emissions increases are clearly a 

concern for PSD permitting. For all of these reasons, the Proposed Amendments do not use the 

projected-actual-emissions increase test for GHG permitting. If a facility intends to make a modification 

that will not result in a significant increase in emissions, the District would not require PSD review for 

such a project, but the facility would need to commit to keeping its emissions to less than a significant 

increase through an enforceable emissions limit. It would not be appropriate to base important PSD 

permitting requirements solely on the facility’s unenforceable projection of what emissions may be.

In deciding to require PSD permitting for GHGs to be based on enforceable emission limits, District Staff 

were mindful of the comments from some industry representatives that requiring PSD permitting for 

energy-efficiency projects and similar beneficial enhancements can be counter-productive because it 

can discourage worthwhile projects from being implemented. Staff disagree that requiring enforceable 

assurances that such beneficial projects will not cause significant increases will unduly dissuade such 

projects, however. If a facility is planning a beneficial project that will reduce emissions, Staff agree that 

such a project should be encouraged and that the PSD requirements applicable to significant emissions 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 101

increases should not apply. But if the project will in fact reduce emissions, the facility can undertake it 

without having to undergo PSD permitting simply by agreeing not to increase emissions by more than a 

significant amount through an enforceable permit limit. If the facility truly wants to implement a 

beneficial emissions-reduction project, it can do so as long as it makes an enforceable commitment that 

there will be no significant increase. If the facility is not comfortable making such an enforceable 

commitment, either because it is not really sure that there will be no significant increase or because it 

simply wants to retain the flexibility to increase emissions if the need arises, then it will have to obtain a 

PSD permit. But requiring a PSD permit in this latter scenario is entirely appropriate as a policy matter, 

because that scenario envisions the possibility of a significant emissions increase – which is exactly the 

outcome that the PSD program is designed to address. Simply put, if it is sufficiently clear that a project 

really will be beneficial and will not result in a significant emissions increase, that project can go forward 

without PSD permitting simply by taking an enforceable permit limit. If there is a potential that the 

project will result in a significant increase then the project will be subject to PSD permitting, as is 

appropriate for significant emissions increases.

Staff have also been mindful of the argument made by some industry representatives that requiring 

facilities to agree to enforceable permit limits would effectively eliminate some of the excess capacity 

that they currently have. This argument envisions a scenario where a source has never utilized its full 

capacity and so it has the ability in the future to greatly increase its emissions.96 If the source wants to 

implement a beneficial improvement project to reduce emissions, but has to agree to an enforceable 

permit limit at some level below its full capacity in order to avoid PSD permitting requirements, then it 

will effectively be giving up some of the capacity that it currently has for future expansion, according to 

this argument. 

These concerns are obviously highly important as the District considers how to implement PSD 

permitting for GHGs, and staff considered them carefully in developing the Proposed Amendments. But 

for a number of reasons, these concerns do not outweigh the problems discussed above that are 

inherent in basing PSD permitting on unenforceable projections of future emissions instead of 

enforceable permit limits. For one, the PSD permitting requirements would never prohibit the use of a 

facility’s unused excess capacity under any circumstances. They would simply require that the facility 

implement the applicable PSD requirements as part of their permit in order to do so. Moreover, the 

primary substantive requirement, to use the Best Available Control Technology (BACT) to control 

emissions, is not unduly burdensome. PSD BACT – by definition – is limited to technologies that are 

 

96 Specifically, this situation would apply where the source has not utilized its full capacity during the baseline 

period from which emissions increases are measured. PSD permitting requirements apply if there is a “significant” 

emissions increase over emissions during the baseline period, which for GHGs is effectively 75,000 tons per year 

CO2e. The concern is therefore that if a source’s maximum capacity is more than 75,000 tpy CO2e over its 

emissions during the baseline period, then the source will need to take a permit limit at less than maximum 

capacity in order to avoid PSD permitting. The Proposed Amendments allow for the baseline period for GHGs to be 

established during the highest 24-month period during the past 10 years, which should give sufficient flexibility to 

establish baseline emissions at a level that reflects the maximum operations that the source has historically 

experienced. Thus, the concerns about limiting a source’s capacity are for all intents and purposes arguments 

about capacity that the source has never utilized. 
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cost-effective for the individual facility being permitted, and so by definition PSD permitting will not 

require facility to spend large sums of money that are not justified by large GHG emission reduction 

benefits. And EPA has indicated that such benefits will be achieved primarily by installing energyefficient equipment, which most facilities are likely to do anyway as part of the project design. It is 

unlikely that any facility would not want to implement the most energy-efficient equipment that it can 

justify on cost-effectiveness grounds, given the cost savings involved from reduced fuel or power usage. 

Being required to do so under a PSD permit condition would therefore be unlikely to make a 

determinative difference in dissuading facilities from installing efficiency upgrades and similar beneficial 

projects, which is the concern on which these arguments are based.

In addition, a second reason why these concerns are misplaced is that simply because a facility has 

excess capacity that it has never utilized does not mean that it should be entitled to that capacity 

forever without having to implement cost-effective emission-reduction technologies. A facility that 

happens to have extra capacity to emit hundreds of thousands of tons of GHGs above what it has 

historically emitted should not be penalized because of that fact, but it should not necessarily get a free 

pass to emit that full amount where there are available, cost-effective methods that it can implement to 

get meaningful GHG reductions at a reasonable cost. That is all that the facility would need to do 

substantively in order to retain its full capacity, in situations where it did not want to take a permit limit 

to avoid PSD review (or if it took a permit limit to avoid PSD review, but then decided that it wanted to 

use the full capacity later on). And as noted above, it is unlikely that any facility would object to using 

the most energy-efficient equipment that is justified on cost-effectiveness grounds anyway, given the 

fuel and/or power savings that would result.97

For all of these reasons, it would not be appropriate to base PSD permitting on unenforceable 

projections of what emissions may be in the future. The PSD requirements for GHGs in the Proposed 

Amendments are therefore based on whether or not the source being permitted will have the potential 

to cause a significant increase in GHG emissions, based on its maximum permitted emissions – the same 

test that applies for all other pollutants. If a beneficial efficiency upgrade or similar modification will in 

fact reduce GHG emissions (or at least, not result in a significant increase), then the source can commit 

to ensuring that there will be no such significant increase through an enforceable permit limit and no 

PSD permitting requirements will apply. Conversely, if the project will have the potential to significantly 

increase GHG emissions, then it will be required to go through PSD review and implement cost-effective 

BACT measures to address its GHG emissions. And such projects should be subject to PSD review, 

because PSD has always been designed to apply to projects with the potential for significant emissions 

increases. 

 

97 Note also that cost-effectiveness for the PSD BACT requirement is evaluated on a source-by-source basis. Thus, 

the cost-effectiveness of implementing a certain type of equipment for a retrofit of an existing facility would be 

evaluated differently from the cost-effectiveness of using such equipment in the design of a completely new 

facility. It is likely that the design goals of any modification to an existing facility subject to PSD review will mesh 

fairly closely with requirements to use energy-efficient equipment for PSD BACT purposes. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 103

• PALs

The third element of the NSR Reform methodologies concerns Plant-wide Applicability Limits (PALs). As 

District Staff were developing the Proposed Amendments, PALs were subject to a number of restrictions 

with respect to GHGs that limited how effectively they can be used in that context. EPA was working 

concurrently on a rulemaking to address some of these concerns, but that rulemaking was only just 

completed in the final weeks before District Staff published the Proposed Amendments (it became 

effective August 13, 2012), meaning that District Staff did not have any definitive indication of what EPA 

would allow for PALs as the Proposed Amendments were being developed.

98 Moreover, the rules for 

establishing PALs and using them in permitting decisions are highly complex. Developing provisions for 

PALs for GHGs as part of the District’s PSD program will take considerable time and effort, if Staff were 

to conclude that doing so would enhance the PSD program. Finally, PALs provide for an alternative 

method of establishing compliance with PSD permitting requirements, and so they are not necessary in 

order to adopt a fully functioning PSD program. Although there are arguments that adding the option of 

using PALs may improve a PSD program, they are not necessary to make it work. For all of these 

reasons, District Staff concluded that it would not be appropriate to include provisions for PALs for GHGs 

as part of the Proposed Amendments. Instead, District Staff intend to review EPA’s recent rulemaking on 

the subject and consider whether it would be appropriate to add PALs in a subsequent update. If 

further consideration of the subject suggests that adding PALs to the District’s PSD program for GHGs 

would be beneficial, Staff will work with all interested stakeholders to develop such provisions. 

• Conclusions

For all of these reasons, the Proposed Amendments do not adopt EPA’s “NSR Reform” methodology for 

the District’s NSR program in Regulation 2, Rule 2, with the exception of allowing the use of the more 

flexible baseline period for applying the PSD requirements to GHG permitting. This approach to NSR 

permitting satisfies SB 288, and it reflects the sound policy considerations discussed above. 

Finally, it is also important to discuss a related consideration that District Staff addressed regarding NSR 

Reform, involving consistency with EPA’s NSR approval requirements in 40 C.F.R. Sections 51.165 

(“major” facility requirements for Non-Attainment pollutants) and 51.166 (“major” facility requirements 

for PSD pollutants). In adopting NSR Reform, EPA justified its relaxation of the NSR applicability 

requirements by claiming that NSR permitting was onerous and was discouraging facilities from 

implementing beneficial upgrade projects for fear of becoming a “major modification” subject to NSR 

permitting requirements. EPA argued that relaxing the applicability of NSR would allow such beneficial 

improvement projects to go forward without triggering NSR permitting, which would result in an overall 

environmental benefit. At the time EPA adopted NSR Reform and took this position, the agency 

suggested that if local permitting agencies did not adopt NSR Reform as well, then EPA would have to 

disapprove of their SIP programs for being less stringent than the federal program requirements. 

District Staff have therefore evaluated whether EPA will be able to approve the District’s NSR program, 

 

98 See Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide 

Applicability Limitations, Final Rule, 77 Fed. Reg. 41,051 (July 12, 2012).
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which does not use the NSR Reform methodologies (with the exception of the more flexible baseline for 

GHGs).

After considering this issue, District Staff have concluded that its NSR program continues to be 

approvable, even without incorporating the NSR Reform methodologies. EPA did not ever take any

action in the wake of NSR Reform to disapprove the District’s program, and has allowed all of 

California’s air districts – including this District – to continue implementing their NSR programs using the 

pre-NSR methodologies as required by SB 288.

99 This track record implies that EPA is comfortable with 

California implementing NSR using the pre-NSR Reform methodologies. Moreover, EPA recently 

addressed this issue specifically in its review of the “major” NSR program of the Sacramento 

Metropolitan Air Quality Management District, and the agency concluded that it is appropriate and 

consistent with the Clean Air Act to allow California to continue to implement NSR using the pre-NSR 

reform methodologies as they are required to do under SB 288. The Sacramento district’s NSR program 

is set forth in Rule 214 (for Non-Attainment pollutants) and Rule 203 (for attainment pollutants), and 

neither of these rules uses the NSR Reform methodologies. EPA evaluated them in light of this issue and 

concluded that it was not necessary for them to incorporate NSR Reform in order to be approvable 

under the Clean Air Act. EPA reasoned that California has a robust regulatory system over and above 

the NSR program, and as a result there would be little benefit for regulated facilities from relaxing the 

NSR applicability provisions as EPA has done for the federal program. As EPA stated, “[in] light of these 

facts, EPA is proposing to find that it is acceptable for SMAQMD to not incorporate the NSR Reform 

provisions into their SIP approved NSR programs . . . .”100 EPA finalized its proposal to do so effective 

August 19, 2011.

101

 

99 EPA Region IX did revoke its delegation of its federal PSD permitting to the BAAQMD (and other districts) in the 

wake of the standoff between EPA and California over NSR Reform and SB 288. But it is not clear whether there 

was ever any substantive purpose or effect from this revocation vis-à-vis the NSR Reform debate, because such 

delegated federal PSD permitting by definition follows the federal rules and thus automatically incorporated NSR 

reform upon adoption by EPA, regardless of what any California air district had to say about it. (See 40 C.F.R. 

§ 52.21, setting forth the requirements that apply to PSD permitting under delegation agreements.) What is clear 

is that EPA never told the California air districts that their own NSR programs adopted under State law – the ones 

affected by SB 288 – were no longer satisfactory or had to be amended to incorporate NSR Reform. Even where 

EPA has objected to air district’s NSR program on other grounds – through issuance of what is known as a “SIP call” 

– EPA has never objected to a California air district’s NSR regulations because they failed to incorporate NSR 

Reform. (See Action to Ensure Authority to Issue Permits under the Prevention of Significant Deterioration 

Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call, Final Rule, 75 

Fed. Reg. 77,698 (Dec. 13, 2010).) 

100 Technical Support Document for EPA’s Notice of Proposed Rulemaking for the California State Implementation 

Plan for the Sacramento Metropolitan Air Quality Management District, Rule 214 - Federal New Source Review, 

Rule 203 - Prevention of Significant Deterioration (May 5, 2011), at p. 17.

101 See Revisions to the California State Implementation Plan, Sacramento Metropolitan Air Quality Management 

District, Final Rule, 76 Fed. Reg. 43,183 (July 20, 2011). The final approval was a full approval of the PSD provisions 

in Rule 203, and a partial approval and partial disapproval of the Non-Attainment NSR provisions in Rule 214; none 

of the reasons for the partial disapproval concerned NSR Reform. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 105

Given these precedents, District Staff have concluded that the District’s NSR program is approvable 

under the Clean Air Act without the relaxations in the applicability provisions that EPA adopted in its 

NSR Reform initiative. For the same reasons that EPA approved the Sacramento district’s major NonAttainment NSR and PSD provisions in that district’s Rules 214 and 203, the District’s major NonAttainment NSR and PSD provisions in Regulation 2, Rule 2, are also approvable.

In a meeting with District Staff, EPA Region IX staff members raised an additional question regarding this 

issue specifically with respect to GHGs. EPA Region IX staff members opined that the passages referred 

to above in connection with Sacramento’s rule primarily addressed criteria air pollutants, and they 

suggested that the District should develop its own, independent analysis for its treatment of GHGs (i.e., 

why the District’s proposed PSD applicability provisions with respect to GHGs are approvable in light of 

NSR Reform). In light of this discussion, District Staff reviewed the cited discussion. Although it is true 

that the discussion was aimed primarily at criteria pollutants, the context of the analysis involved noncriteria PSD pollutants as well (i.e., regulated air pollutants for which no National Ambient Air Quality 

Standards have been developed) – including GHGs. Moreover, as a matter of law, EPA’s approval of 

Sacramento’s regulations specifically included approval of the provisions addressing GHGs. Indeed, one 

of the primary reasons that Sacramento submitted its revised NSR regulations was in response to EPA’s 

“SIP Call” explicitly mandating that Sacramento update its regulations to address GHGs.102 EPA

responded to the this submission by approving it as consistent with the Clean Air Act. Under these 

circumstances, EPA could not have intended its approval to exclude Sacramento’s provisions on GHGs. 

District Staff have therefore concluded that the same reasons why EPA found Sacramento’s PSD 

provisions to be approvable make the District’s PSD provisions approvable as well. 

iii. CALCULATING THE AMOUNT OF AN EMISSION REDUCTION CREDIT

The Proposed Amendments also include a provision, in Section 2-2-605, specifying how to determine the 

amount of an Emission Reduction Credit. It is important to specify exactly how emission reductions will 

be calculated for this purpose, as an Emissions Reduction Credit serves an important regulatory function 

in implementing the Rule’s offset provisions under Sections 2-2-302 and 2-2-303. The current rule does 

so in Section 2-2-605.6 (with Sections 2-2-605.1 through 2-2-605.5 specifying how the actual emissions 

baseline is calculated using with the principles outlined above). The Proposed Amendments separate 

out the baseline calculations into their own separate section, and then specify the Emission Reduction 

Credit calculation procedures in proposed Section 2-2-605.

Emission reduction credits are emission reductions that occur when a facility makes a change at a source 

that results in reduced emissions from that source (for example, by shutting down the source and 

removing it from service). When the facility then applies for a permit for a new source or modification 

in the future that will increase emissions, it can count those earlier emission reductions to reduce the 

cumulative increase associated with the new source or modification, as long as the change that caused 

the emission reduction was “contemporaneous” (i.e., occurred within the past five years). Alternatively, 

the facility can apply to “bank” those emission reductions for use in offsetting emissions increase in the 

 

102 See Action to Ensure Authority to Issue Permits etc., Final Rule, 75 Fed. Reg. 77,698 (Dec. 13, 2010).
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future, either by offsetting increases at its own facility or by selling the banked credits to another facility 

to offset emissions increases there. To qualify as an emission reduction credit for these purposes, a 

reduction must satisfy all of the requirements set forth in Section 2-2-211, which requires that it must 

be enforceable through permit conditions or some other legally enforceable mechanism; and must be 

real, permanent, quantifiable and in excess of what is required by applicable regulations. These 

requirements are all specified in proposed Section 2-2-605, along with the procedures for calculating the 

amount of emission reduction credits generated. 

For calculating the amount of such reductions that is creditable, the procedure depends on whether the 

source is “fully offset” – that is, whether offsets have been provided for the entire amount of the 

source’s permitted emissions limit.103 If the source is fully offset, then the amount of emission reduction 

credits is based on the source’s permitted limit before the change that caused the reductions (adjusted 

to reflect current regulatory standards). The amount of emission reduction credits generated is the 

difference between (i) the (adjusted) permit limit before the change that caused the emission reduction,

and (ii) the new permit limit after the change is implemented (or zero, in the case of a source that is shut 

down). If the source is not fully offset, then the amount of emission reduction credits is based on the 

source’s adjusted baseline emission rate before the change that caused the reduction as calculated 

under Section 2-2-603. The amount of emission reduction credits generated is the difference between 

(i) the adjusted baseline emissions rate and (ii) the new permit limit after the change is implemented (or 

zero, in the case of a source that is shut down). If the change that resulted in the emission reductions 

occurred within the past five years and satisfies all of the other requirements for generating emission 

reduction credits, then the cumulative increase associated with a new permit application at the facility 

can be reduced by the amount of the emission reduction credit from the change; or alternatively, the 

emission reduction credit can be banked under Regulation 2, Rule 4 for future use or sale to another 

facility. 

iv. CALCULATING A FACILITY’S EMISSIONS OFFSETS OBLIGATIONS 

The Proposed Amendments also provide detailed calculation procedures to set forth exactly how a 

facility’s emissions offset obligations will be determined for purposes of the offsets requirements in 

Sections 2-2-302 and 2-2-303. These procedures are in proposed Sections 2-2-606 through 2-2-609. For 

a facility with emissions over the offset requirement applicability thresholds, these provisions will 

specify how the facility’s offset obligations will be calculated. 

As discussed above in connection with Sections 2-2-302 and 2-2-303, the offsets provisions are an 

essential element of NSR permitting for non-attainment pollutants. Where a region is non-attainment 

of the NAAQS for a pollutant, the Clean Air Act requires the region to adopt a two-fold strategy to come 

back into attainment: first, the region needs to cap emissions from major sources so that they will not 

 

103 The definition of “fully offset” is in current Section 2-2-245 and in proposed section 2-2-213. The Proposed 

Amendments do not make any substantive change to this definition (although they do make explicit the District’s 

practice of not treating a source as “fully offset” if the permit limit has been offset by unreimbursed small facility 

banking account credits). 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 107

continue to increase and make the non-attainment situation worse; and second, the region needs to 

adopt emission reduction measures to reduce emissions from current levels to bring pollution levels 

back within the NAAQS. The offsets requirements implement the first part of this strategy – capping 

emissions from existing major sources. It is set forth in CAA Section 173(a)(1), which requires that 

before a proposed major new or modified source of a non-attainment pollutant can begin operation, 

“sufficient offsetting emissions reductions [must] have been obtained, such that total allowable 

emissions from existing sources in the region, from [new and modified minor sources], and from the 

proposed source will be sufficiently less than total emissions from existing sources . . . so as to represent 

. . . reasonable further progress” towards attainment of the NAAQS.104 The offset requirements in 

Sections 2-2-302 and 2-2-303 implement this requirement by capping emissions of non-attainment 

pollutants from major facilities at no more than what was being emitted at the time that the District 

started implementing its offset program – what is referred to as the “baseline date”. These offset 

requirements keep such emissions from increasing and making the non-attainment situation worse, 

giving the District’s other regulatory efforts a chance to work and bring the region’s emissions down in 

order to attain compliance with the NAAQS.105 

The District’s offset provisions implement this mandate by requiring that facilities subject to the offset 

provisions must provide offsetting emissions reductions for any new emissions increases after the 

applicable baseline date.

106

 These increases – all emissions increases from new sources or modifications 

since the baseline date – are referred to collectively as the facility’s “cumulative increase”. A facility’s 

cumulative increase, and hence the amount of offsets that need to be provided, is calculated by 

reviewing all permits that have been issued for the facility back to the applicable baseline date and 

summing the individual cumulative increases associated with each one. For each permit that was 

issued, the increase is the amount of extra potential emissions (i.e., the increase in PTE) that was 

allowed under the permit, minus any contemporaneous on-site emissions reduction credits. The sum of 

 

104 CAA Section 173(a)(1)(A) provides that offsets must be required for federal non-attainment pollutants sufficient 

to ensure that the Bay Area as a whole continues to make “reasonable further progress” towards attainment of 

the NAAQS. California law further provides that offsets for California non-attainment pollutants must be required 

sufficient to ensure a “no net increase” in emissions, which is overall a more stringent standard. The District’s 

offset requirements are implemented based on the “no net increase” principle.

105 This is a somewhat simplified summary for purposes of this discussion. In fact, emissions from major facilities 

are not just capped, they are actually decreasing under the District’s offsets requirements. There are several 

reasons for this, including the fact that in some cases the District requires offsets to counter new emissions 

increases at greater than a 1:1 ratio and the fact that some facilities are shut down or reduce their emissions 

without any new increases to take their place, among other reasons (not to mention the significant reductions that 

are occurring because of the District’s many other regulatory requirements unrelated to the offsets provisions). 

For purposes of this discussion, the important point is that the offset requirements are intended to ensure that 

there are no overall increases in non-attainment pollutants from major facilities that would hinder efforts to get 

back into attainment. 

106 The cumulative increase baseline date is April 5, 1991, for all pollutants except PM2.5. For PM2.5, the baseline 

date will be the effective date of the proposed amendments that implement the new PM2.5 offsets requirement. 

See proposed Section 2-2-209.
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all such increases associated with all prior permits issued for the facility back to the baseline date is the 

facility’s total cumulative increase. This is the amount of emissions that needs to be offset.

The offsets requirements are based on increases in the facility’s maximum potential emissions above 

what it was actually emitting as of the baseline date. The requirements conservatively assume that the 

facility will emit up to its full potential, and so offsets must be provided for the full amount of the 

facility’s PTE above the level at which it was emitting as of the cumulative increase “baseline date” to 

ensure that there is no net increase above that level. Accordingly, the first time a facility seeks to 

increase its emissions after the “baseline date”, it must provide offsets for the difference between its 

actual emissions baseline and its full PTE. This initial calculation is essentially the same “actual-topotential” test described above. Beyond this initial application of the offset requirement, any 

subsequent modifications to the facility require additional offsets to the extent that they further 

increase facility’s potential to emit. This is because the facility is required to offset its full maximum 

potential emissions above its historical baseline levels, and so any additional increase in potential 

emissions will need corresponding reductions to ensure that the facility’s maximum emissions will be 

offset. If the facility makes a modification that does not increase its potential to emit, it does not need 

to provide any additional offsets to ensure that there will be no net increase over its historical baseline 

emissions. In that case, sufficient offsets have already been provided for the facility’s emissions up to 

the full extent of its maximum potential (above its historical baseline emissions). Even if it operates at 

that maximum level, its emissions will be fully offset by the emissions reductions that have already been 

provided, and there will be no net increase in emissions above what was actually being emitted 

historically before the offsets requirements were implemented.

An example helps illustrate this situation. Take a facility with maximum potential emissions of 100 tons 

per year of a non-attainment pollutant, but that has historically been operating at 50% capacity with 

emissions of only 50 tons per year. When the District starts to implement its regulatory efforts to come 

into attainment of the NAAQS, it implements an offsets requirement to cap emissions from major 

facilities at existing levels and ensure that any new increases from such facilities are offset with emission 

reductions elsewhere. The facility subsequently seeks to expand, such that its maximum potential 

emissions will be 150 tons per year. At that point, the facility must provide 100 tons per year in 

emissions offsets (achieved from shutdowns of other sources elsewhere), so that if it operated up to its 

150 tpy maximum emissions level there will be no net increase over the 50 tpy it was emitting when the 

system was first implemented. If the facility provides the offsets and undertakes the project, its new 

potential to emit will be 150 tpy, but those emissions will be offset. If the facility then wants to make an 

additional modification, but one that will not increase its total potential emissions above 150 tpy, it does 

not need to provide any additional offsetting emission reductions to ensure that there is “no net 

increase” above its 50 tpy historical emissions rate. Even if the facility emits up to its full 150 tpy 

potential after this additional modification is implemented, the extra 100 tpy of emissions over the 

historical 50 tpy rate will be adequately offset by the 100 tpy of emissions reductions that have already 

been provided. If the facility wants to increase its PTE further, however, it will need to provide 

additional offsets. If it makes a subsequent modification that increase PTE to 200 tpy, for example, it 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 109

will need to provide an additional 50 tpy of offsets to ensure that there will be no net increase above 

historical baseline emissions levels. 

The offsets requirements are therefore based on the same “actual-to-potential” test described in 

previous sections for determining the amount of offsets to be provided. Offsets are required for the 

facility’s entire cumulative increase, which is the difference between the facility’s actual emissions 

historically and its current maximum potential emissions. The first time the facility is modified after the 

baseline date, it must provide offsets for full amount of its PTE above its actual emissions baseline. 

Subsequently, further modifications require additional offsets for any additional increase in PTE above 

this actual emissions baseline. This is how the District implements its offsets requirements under the 

current regulations. The Proposed Amendments will not make any changes to these procedures, 

although they will specify in greater detail how exactly the calculations should be undertaken.

• Current Regulations

Section 2-2-606 in the current regulation sets forth the procedure for calculating the amount of offsets 

that must be provided pursuant to the offset requirements in Sections 2-2-302 and 2-2-303. It 

embodies the calculation principles outlined above, although it does not provide a great amount of 

detail. (Providing additional detail to make the procedures easier to understand and reduce the 

potential for ambiguity in areas such as this is a central purpose of the Proposed Amendments.) It states

that offsets must be provided under Sections 2-2-302 and 2-2-303;

107 that offsets must be provided by 

the applicant of from the Small Facility Banking Account where appropriate; that offsets must be 

provided for the cumulative increase and multiplied by the applicable offset ratios in Sections 2-2-302 

and 2-2-303; and that any excess offsets provided may be re-banked without charge. The section notes 

that offset requirements can be satisfied either by providing credits from the District’s emissions bank or 

by reducing the offsets requirements through contemporaneous emission reduction credits. 

• Proposed Amendments

Sections 2-2-606 through 2-2-609 in the Proposed Amendments set forth the procedures for 

determining the amount of offsets that must be provided for permitting of a new source or 

modification. They embody these same procedures in the existing regulations discussed above, but 

state with greater detail and specificity exactly how the calculations must be undertaken in specific 

situations. Offsets are required for the full amount of the facility’s cumulative increase in emissions, 

which is the total increase in the facility’s PTE associated with the current project being and all previous 

NSR permit issued for the facility since the applicable baseline date compared to historical baseline 

emissions levels (i.e., actual emissions at the time the offsets program was first implemented). The 

procedures specify (i) how the emissions increase associated with the current project is calculated (in 

Section 2-2-606); (ii) how the cumulative increase associated with each prior permit is calculated (in 

Section 2-2-607); and (iii) how all of these increases are summed to obtain the total cumulative increase 

 

107 Section 2-2-606 also references an offset requirement in Section 2-2-313, but this reference is redundant as 

that section was deleted in 2000.
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for the facility, and any offsets already provided are subtracted out, to obtain the total offsets obligation 

associated with the permit application under review (in Section 2-2-608). 

First, Section 2-2-606 sets forth the procedures for calculating the amount of emissions increase 

associated with the project that is currently being permitted. As explained above, the amount of offsets 

that will be required is on the “actual-to-potential” increase concept. For new sources, the project’s 

increase is thus the full amount of the potential to emit of the source (over a zero emissions baseline, 

because the source by definition has never operated in the past). This scenario is addressed in 

subsection 606.1. For modifications to existing sources, the first time the source is modified after 

becoming subject to the offset requirements, the increase is measured based on the difference between 

PTE and the source’s actual emissions. The increase associated with this modification is the difference 

between the source’s actual emissions baseline before the modification, adjusted to reflect current 

regulatory standards (calculated in accordance with Section 2-2-603 as the “adjusted baseline 

emissions”), and its new potential to emit. This scenario is addressed in subsection 606.2. For 

subsequent modifications, after offsets have already been provided, any further increase is measured 

based on further increases in potential emissions above what has already been offset. The increase 

associated with such a modification is the difference between the potential to emit after the 

modification and the potential to emit before the modification, adjusted to reflect current regulatory 

standards. This scenario is addressed in subsection 606.3.108 Section 2-2-606 also references the fact 

that Section 2-2-610 requires that cargo carrier emission be included in the cumulative increase 

calculations. The purpose of providing this additional reference is so that this element of the calculation 

is not overlooked.

Once the amount of the emissions increase associated with the project under review is calculated, the 

cumulative increase associated with the permit is determined by subtracting any contemporaneous onsite emissions reduction credits.109

 This calculation is set forth in proposed Section 2-2-607. This section

also explains that the amount of Emission Reduction Credits associated with a permit is determined as 

of the time the permit is issued. Thus, when contemporaneous on-site emissions reductions are 

credited in connection with an NSR permit, that permitting action will not be reopened in the future to 

 

108 It is important to adjust the PTE to reflect any tightening of emissions limitations or other regulatory advances, 

so that de facto increases in capacity do not escape offset requirements. If, for example, a facility has a PTE of 100 

tpy when operating at full capacity, and more stringent regulations come into effect that reduce its effective PTE to 

50 tpy when operating at full capacity, a subsequent modification should provide additional offsets even if the PTE 

after the modification is still 100 tpy. In that case, the modification represents a doubling of the effective capacity 

of the facility, even though the nominal PTE is not increasing. The PTE adjustment to reflect current regulatory 

standards will require such modifications to provide offsets for the potential that there will be new emissions from 

the facility that would not have occurred absent the modification. 

109 This subtraction applies to contemporaneous on-site emission reduction credits only, not banked credits. The 

difference is that banked credits are provided to satisfy offset obligations, whereas contemporaneous on-site 

credits are applied to reduce the extent of the offset obligations in the first place. The arithmetic involved can be 

represented as: [emissions increase] – [contemporaneous on-site credits] = [banked credits provided]. 

Contemporaneous on-site credits and banked credits are ultimately both taken into account, just on different sides 

of the equation. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 111

re-assess the cumulative increase associated with it – even if the date of the reductions recedes in time 

beyond the 5-year “contemporaneous” window applicable to future permit applications, or if regulatory 

standards change. In this way, the cumulative increase calculation associated with a permit application 

is “frozen” as of the date of the permitting action. Subsequent modifications may increase the total 

amount of the facility’s cumulative increase, but any additional cumulative increase will be added on top 

of the cumulative increase associated with earlier permits. Those prior cumulative increase 

determinations will not be reopened in subsequent permit calculations.110 Finally, Section 2-2-607 also 

explains that if an emission reduction is used to reduce a source’s cumulative increase in connection 

with one permit, the same emission reduction cannot be used again to reduce a further cumulative 

increase in connection with a second permit, even if it is still within the 5-year “contemporaneous” 

period. This would allow “double-counting” of emission reduction credits, which would not be 

consistent with the concept of maintaining a “no-net-increase” under the Rule’s offset provisions. 

Section 2-2-608 then sets forth the procedure for adding up the total cumulative increase associated 

with a facility and determining the amount of offsets that need to be provided so that the facility’s 

entire cumulative increase over its historical baseline emission levels is sufficiently offset. The amount 

of offsets required is the facility’s total cumulative increase less the offsets that have been provided 

already in connection with past permits. The total is calculated by adding (i) the cumulative increase 

from the project being permitted (i.e., the project’s increase in PTE minus any contemporaneous on-site 

ERCs) plus (ii) the un-offset cumulative increase from all previous permits issued since the applicable 

baseline date (i.e., for each previous permit, the cumulative increase minus the offsets provided in 

connection with the permit), including any for related sources as defined in Section 2-2-226.

111

 The sum 

of the un-offset cumulative increases from all of these prior permits is the facility’s un-offset cumulative 

increase, and offsets need to be provided for this amount (times the applicable offset ratio, which is 

1:1.15 for NOx and POC at facilities with a PTE of 35 tpy or more and 1:1 in all other situations). Note 

that the calculation excludes permits that were issued for a source solely because the source lost its 

permit exemption. The calculation also excludes permits for sources that have been shut down and 

permanently removed from service. Once such sources have been permanently removed from service, 

their emissions are no longer counted as part of the facility’s cumulative increase. 

 

110 For example, if a facility had a project in 2000 that increased its PTE by 10 tpy, and addressed that increase with 

5 tpy of emission reductions from a shutdown in 1997 (which were “contemporaneous” at the time because they 

occurred within 5 years before 2000) and 5 tpy of banked credits, the cumulative increase will not be recalculated 

if the facility applies for another NSR permit in 2012, even though the on-site emission reduction in 1997 is no 

longer “contemporaneous” to 2012. In that case, the cumulative increase calculated in 2000 was 5 tpy (10 tpy in 

project emissions increase less 5 tpy in contemporaneous on-site emission reduction credits). When the facility 

applies for another NSR permit in 2012, that cumulative increase associated with that prior permit in 2000 will 

remain 5 tpy, and will not be revised because the 1997 reduction is no longer “contemporaneous” in 2012. (A 

1997 on-site reduction would be ineligible to reduce the cumulative increase associated with the new project in 

2012, of course. Any emission reductions used to reduce the cumulative increase associated with the 2012 project 

would need to have occurred between 2007 and 2012 in order to be “contemporaneous” with the 2012 project.) 

111 These related source cumulative increases are included under the provisions set forth in current Section 2-2-

215, the definition of “facility”, and are being moved to Section 2-2-608 to consolidate all of the calculation 

procedures in one regulatory section. 
112 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

Finally, Section 2-2-609 provides that the APCO may establish and maintain a database to record the 

cumulative increase associated with each permit issued for a facility and the amount of offsets 

associated with it. Maintaining such a database is necessary administratively so that permit engineers 

do not have to go back and review a facility’s entire permitting history back to 1991 every time they 

receive a permit application for the facility. By keeping running totals of historical cumulative increase 

and offsets provided in connection with past permits in a database, a permit engineer can readily 

determine what additional offsets may need to be provided in connection with a new permit. The 

District already maintains a database of cumulative increase and offsets, and this provision will codify 

that practice in Regulation 2, Rule 2. District Staff make every effort to ensure that the information 

contained in this database is accurate, and Section 2-2-609 provides that the database may be 

presumptively used to establish a facility’s cumulative increase. The information in the database shall 

not be binding in the case of an error, however, either on the APCO or on any other person. The APCO 

may amend the database if further information shows that it contains an error. 

v. ADDRESSING CARGO CARRIER AND FUGITIVE EMISSIONS IN NSR CALCULATIONS

Sections 2-2-610 and 2-2-611 round out the Rule’s procedural provisions by addressing how cargo 

carrier emissions and fugitive emissions are treated for purposes of applying the NSR requirements. 

These requirements are currently set forth in the definition of “Facility” in Section 2-2-215, but they are 

more in the nature of emission calculation procedures than elements of the definition of what 

constitutes a “facility”. The proposed amendments are therefore moving these provisions to the “600s” 

sections. 

Proposed Section 2-2-610 provides that emissions from cargo carriers such as ships and trains (but 

excluding motor vehicles such as trucks) must be included in applying the offset requirements. Thus, 

where cargo carriers serve a facility by bringing raw materials to the facility or shipping the facility’s 

products, the emissions associated with them must be included in determining whether the facility’s 

emissions are over the applicability thresholds of the offsets requirements, and if so, the amount of 

offsets that need to be provided. Such emissions are accounted for as part of the source that receives 

or loads the cargo. As with the current provisions for cargo carriers, these emissions are included for 

offsets purposes only, and not for application of other provisions of Regulation 2, Rule 2, such as the 

District BACT requirement in Section 2-2-301 and the PSD provisions in Sections 2-2-304 through 2-2-

307.

In addition, with respect to ship traffic, the cargo carrier provisions include emissions from cargo carriers 

only within the District and within California Coastal Waters adjacent to the District; and only to the 

extent that they will have a substantial impact on air quality within the District. Section 2-2-610 codifies 

the District’s practice of counting ship emissions out to the pilot station 11 nautical miles from the 

Golden Gate Bridge. The District does not normally consider ship emissions beyond that point to have 

any substantial impact on air quality within the District. Section 2-2-610 contains a provision for 

including additional ship emissions if they do have such an impact, however (for example, if ships were 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 113

to sail close to the coastline for some reason after leaving the pilot station). Any such additional 

emissions will be considered on a case-by-case basis. 

Proposed Section 2-2-611 provides that fugitive emissions – that is, emissions that come from vents, 

valves, and the like, and not from an intended emission point such as an exhaust stack – should be 

included in all emissions calculations for purposes of applying NSR under Regulation 2, Rule 2. 

The sole exception is for purposes of determining whether a facility is over the 100 tpy applicability 

threshold that subjects it to PSD permitting under Section 2-2-224.1. If the facility is in one of the 28 

categories of facility listed in Section 169(1) of the Clean Air Act, and is therefore subject to the 100 tpy 

threshold for PSD permitting, fugitive emissions are not included in determining whether its emissions 

exceed that 100 tpy threshold. If the facility is in any other category, it is subject to the 250 tpy 

threshold for PSD permitting, and its fugitive emissions are included in determining whether its 

emissions exceed this PSD applicability threshold. In addition, at all facilities subject to PSD permitting, 

fugitive emissions are included in determining whether emissions increases are “significant”; this rule 

for emissions increases applies equally regardless of the facility category. These rules for counting 

fugitive emissions in PSD permitting mirror how fugitive emissions are addressed under the federal PSD 

program. 

h) Definitions – Sections 2-2-201 through 2-2-227

The Proposed Amendments also make certain revisions to the definitions provided in Regulation 2, Rule 

2. Certain redundant definitions are being deleted while a few new definitions are being added; some 

general definitions applicable beyond just the NSR program will be moved to Regulation 2, Rule 1, which 

addresses general permitting provisions; some current definitions will be retained but with revisions to 

clarify what they mean; and all of the definitions will be reorganized and renumbered into alphabetical 

order to make them easier to use.

In particular, the new PSD provisions that are being added need some additional definitions in order to 

implement them. As discussed in Section IV.B.2.a. of this Staff Report, the Proposed Amendments add a 

new definition of “PSD Project” in Section 2-2-224 to specify the applicability test for the PSD 

requirements, which apply to “any PSD Project”. In addition, several supporting definitions are being 

added to help implement this term, including “Net Emissions Increase” in Section 2-2-220 and 

“Creditable” in Section 2-2-207, which specify how the “netting” analysis is conducted for purposes of 

PSD applicability. In addition, certain other supporting definitions are being added, including “PSD 

Pollutant” in Section 2-2-223, which defines the universe of pollutants subject to the PSD requirements; 

“Greenhouse Gases”, or GHGs, in Section 2-2-213, which sets forth the six specific constituents that 

make up that pollutant and the calculation methodologies that shall be used to measure them; and

“Indian Governing Body” in Section 2-2-216, which sets forth which specific Indian bodies must be 

provided notice of proposed PSD permitting decisions.

These definitions that will be used in implementing the PSD requirements are being set forth specifically 

in Regulation 2, Rule 2, because they are terms that are used in the District’s own regulatory provisions 
114 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

implementing PSD. A number of other important terms related to PSD permitting are being 

incorporated by reference. For these terms, the Proposed Amendments do not include separate 

definitions in Regulation 2, Rule 2, they simply incorporate the definitions by reference to the federal 

regulations that use them. This incorporation-by-reference is set forth in provisions incorporating each 

of the substantive requirements for PSD permitting in Sections 2-2-304 through 2-2-307, which state 

that the PSD permitting requirements will be applied according to and subject to all of the requirements 

for federal permitting under the Code of Federal Regulations. These requirements include the 

definitions provided there, as PSD permitting under the federal program that is being referenced is 

implemented using those definitions. This incorporation-by-reference principle is also explicitly stated 

in Section 2-2-103, which establishes the general principle that governs the incorporation-by-reference 

of the federal PSD. Section 2-2-103 explicitly provides that where federal PSD requirements are 

incorporated by reference, all associated procedures, definitions, and other regulatory provisions are 

incorporated as well. In addition, Section 2-2-103 also identifies certain specific definitions about which 

EPA Region IX staff expressed concerns and clarifies that these are also included, including the terms 

“baseline concentration”, “major source baseline date”, “baseline area”, “secondary emissions”, and 

“subject to regulation”. (This list is illustrative rather than exhaustive; all applicable definitions are 

covered by Section 2-2-103 whether specifically listed or not.) These provisions will make clear – and 

enforceable as a matter of law – that all applicable definitions that need to be included in Regulation 2, 

Rule 2, for implementation of the PSD program under 40 C.F.R. Section 51.166 are included. All such 

definitions are either set forth specifically in a definition contained in the Rule, or they are incorporated 

by reference to the federal PSD requirements. EPA has indicated that either approach (i.e., specific 

definition in District rule or incorporation-by-reference of federal definition) is approvable under 40 

C.F.R. Part 51. 

This incorporation by reference of PSD-related definitions also replaces the need to have certain PSD

terms defined in Regulation 2, Rule 2. Where terms are no longer used in the District’s regulation, and 

are simply part of the PSD provisions that will now be incorporate by reference, there is no need to 

specify them explicitly in the District’s regulation.112 The specific definitions in the current Regulation 2, 

Rule 2, that fall into this category include: Section 2-2-202, Baseline Area, PSD; Section 2-2-203, Baseline 

Concentration, PSD; Section 2-2-204, Baseline Date, PSD; Section 2-2-205, Baseline Period, PSD; Section 

2-2-219, Impact Area; Section 2-2-231, Point of Maximum Ground Level Impact; Section 2-2-232, 

Prevention of Significant Deterioration (PSD) Increments; and Section 2-2-222 Modeling, PSD.113 These 

definitions are therefore being deleted. The terms will of course continue to have importance for 

permit applications that are subject to the PSD requirements, but they will be defined by reference to 

 

112 It is also worth noting that although these definitions were intended to support PSD permitting in the District, 

they were never ultimately approved by EPA for that purpose. Since the District’s PSD program was never 

approved by EPA, these definitions were never effective for purposes of PSD permitting. 

113 Note that the definition of “modeling” in current Section 2-2-222 also serves to set forth substantive 

requirements for conducting PSD air quality modeling. The proposed revisions set forth requirements for PSD 

modeling in Section 2-2-305.3, which requires modeling to follow EPA’s guidelines in Appendix W of 40 C.F.R. Part 

51 (among other requirements).
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 115

the definitions contained in the federal regulations, per the incorporation by reference and the 

provisions of Section 2-2-103. 

i) General Provisions – Sections 2-2-101 through 2-2-103

The general provisions in the “100s” sections in District rules typically contain a description of the rule, 

certain general applicability requirements or exemptions, and other similar provisions. The Proposed 

Amendments contain three such sections in Regulation 2, Rule 1. 

Proposed Section 2-2-101 is in the current version of the Rule and sets forth a general description of the

Rule’s purpose and applicability. This general description is not a substantive provision, and the 

Proposed Amendments do not make any substantive changes to the language of the provision in any 

event. The Proposed Amendments simply revise certain elements to make the description more 

accurate and comprehensive, such as (i) specifying that the NSR provisions apply to Permits to Operate 

for new and modified sources, in addition to Authorities to Construct for such sources; (ii) referring 

generally to all aspects of the New Source Review requirements of the federal and California Clean Air 

Acts, instead of only to certain specific provisions of those laws; and (iii) removing a statement that 40 

C.F.R. Sections 51.165 and 51.166 are incorporated by reference, consistent with the removal of existing 

Sections 2-2-310 and 2-2-311 as discussed below.

Proposed Section 2-2-102 sets forth an “exemption” for secondary emissions from abatement devices. 

It provides that such emissions must use RACT to control secondary emissions. This provision is in 

current Section 2-2-112 and is being retained in Section 2-2-102 with no substantive changes. The 

provision includes only minor language changes to address a potential for confusion among regulatory 

terms identified by EPA Region IX Staff regarding the term “secondary emissions”. This term is being 

removed to avoid any potential for such confusion. The exemption will apply (as it always has) to 

emissions of secondary pollutants that are the direct result of the use of a control device or emission 

reduction technique used on a source to comply with applicable BACT or BARCT control requirements 

for another pollutant. This provision will be applied by District Staff in reviewing permit applications in 

the same manner as every other regulatory provision, using best engineering judgment and other 

reasonable analytical approaches.

(Note also that two other provisions presented as “exemptions” in the current rule are being deleted 

because they will be addressed in different sections of Regulation 2. The current provision in Section 2-

2-111, which sets forth the levels at which ambient air quality monitoring is required as part of an 

application for a PSD Project, will be addressed in the PSD provisions in the Rule. The current provision 

in Section 2-2-114, which sets forth the applicability criteria for the “Case-By-Case MACT” requirement, 

will be addressed through the Title V permitting program in Regulation 2, Rule 6. These provisions are 

discussed elsewhere in this Staff Report.) 

Proposed Section 2-2-103 states explicitly the legal principles that govern the incorporation by 

reference of the substantive requirements of the federal PSD permitting program in Sections 2-2-304 
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through 2-2-306. This provision is discussed in more detail in connection with those provisions in 

Section IV.B.2.a. of this Staff Report above. 

j) Provisions Removed from Current Regulation 2, Rule 2

As noted above, the Proposed Amendments will reorganize the structure of Regulation 2, Rule 2 to 

make it more logical and simpler to follow and understand. In so doing, a number of the substantive 

provisions in the current Regulation 2, Rule 2 will be moved to different locations within the Rule, 

although they will continue to apply substantively in largely the same way, as explained in this Staff

Report. For example, as discussed in Section IV.B.2. above, the references to PSD requirements that are 

currently scattered in different areas of the rule will be consolidated into the four substantive PSD 

requirements in Section 2-2-304 through 2-2-307. Certain other provisions in the current Regulation 2, 

Rule 2 will be deleted, in cases where they are redundant, should be moved to other permitting 

programs in Regulation 2, or are otherwise not appropriate for inclusion in the NSR rule. These 

provisions that are being removed in the Proposed Amendments are addressed below.

Denial for Failure to Comply with BACT and Offsets Requirements: Current Sections 2-2-310 and 2-2-

311 provide that the APCO shall deny a permit application if it does not comply with the BACT and 

offsets requirements in Sections 2-2-301 through 2-2-303. The principle that a permit applicant cannot 

obtain a permit unless it complies with all of the legal requirements for obtaining the permit is a 

fundamental legal principle that is inherent in every permitting system, and so stating it explicitly here in 

the context of the BACT and offsets requirements is not necessary. (It is also redundant, because 

Section 2-1-304 provides generally that the APCO cannot issue any permit under Regulation 2 if the 

applicant does not comply with all applicable legal requirements.) Moreover, stating explicitly that the 

application will be denied if it fails to comply with BACT and offsets begs the question of whether it will 

be denied for failure to comply with any other applicable NSR requirement, such as the PSD 

requirements. An argument could be made that because Sections 2-2-310 and 2-2-311 do not say that 

the application will be denied for failure to comply with any of these other requirements, the APCO does 

not have the authority to deny an application in that situation. These redundant sections are therefore 

being removed to avoid the potential for any such misinterpretation. Note that Staff do not intend to 

change the current rule that an application that does not comply with BACT or offset requirements will 

be denied (unless the applicant can amend the application to satisfy them). Staff’s intent is merely to 

delete redundant (and potentially confusing) provisions. To address any potential concern that these 

deletions could be seen as a relaxation on this point, the proposed amendments will also specifically 

mention BACT and offset requirements in Section 2-1-304. That provision will explicitly provide that the 

APCO will deny an Authority to Construct or Permit to Operate that does not comply with all applicable 

requirements, “including but not limited to the BACT and offsets requirements in Regulations 2-2-301 

through 2-2-303 . . . .” 

Incorporation by Reference to EPA’s SIP Approval Criteria: Current Sections 2-2-314 and 2-2-315 refer 

to EPA’s criteria for approving state major non-attainment NSR and PSD permitting programs in 40 C.F.R. 

Sections 51.165 and 51.166, respectively. Sections 2-2-314 and 2-2-315 state that these federal SIP 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 117

approval criteria are incorporated by reference into the District’s NSR rules. These references are not 

necessary or appropriate in the District’s rules, because the District has its own NSR program and it is 

this regulatory program that creates the legal requirements that apply for NSR permits in the Bay Area, 

not EPA’s SIP-approval criteria. EPA’s approval criteria are obviously highly relevant to the District’s NSR 

program and District Staff have developed the program to satisfy all approval criteria in EPA’s 

regulations, but it is the District’s program that will govern NSR permitting in the Bay Area, not EPA’s 

SIP-approval requirements. Current Sections 2-2-314 and 2-2-315 are therefore being deleted; in the 

few places in the District’s NSR rules where specific regulatory provisions in 40 C.F.R. Sections 51.165 or 

51.166 are incorporated by reference, the applicable District regulatory provision will do so by citing the 

specific provision being incorporated. These situations are discussed individually in other sections of 

this Staff Report. 

Case-By-Case MACT Requirement: Current Section 2-2-317 provides that certain new and modified 

sources must implement “Best Available Control Technology for Toxics”, or “TBACT”. This provision is 

intended to implement Section 112 of the Clean Air Act, which addresses hazardous air pollutants. CAA 

Section 112 requires EPA to develop such regulations for controlling hazardous air pollutant emissions 

according to a specified schedule. It requires EPA to adopt nationwide regulations, called “National 

Emissions Standards for Hazardous Air Pollutants”, or “NESHAPs”, based on a level of control known as 

“Maximum Available Control Technology” or “MACT”. Section 112(j) also established a “backstop” 

mechanism to ensure that these pollutants would be regulated even if EPA failed to act by the statutory 

deadlines set forth in the Act. Specifically, the section provides that if EPA fails to promulgate 

nationwide NESHAPs by the statutory deadlines, then individual permitting agencies are required to 

implement the same level of emissions control – “MACT” – on a case-by-case basis (i.e., by making 

determinations of what MACT requires for individual sources at the time of permitting, rather than 

applying a single nation-wide NESHAP rule applicable to all sources). Section 112(j) further specifies that 

this “case-by-case MACT” requirement should be implemented through the Title V operating permit 

process. This approach makes sense, because the “case-by-case MACT” requirement applies both to 

new and modified sources and to existing sources. Putting the requirement into the Title V program will 

make it applicable to existing sources, whereas the New Source Review program applies only to new and 

modified sources. Staff are therefore moving the “case-by-case MACT” requirement to the Title V 

permitting program in Regulation 2, Rule 6, and removing it from the NSR program in Regulation 2, Rule 

2.114 See the discussion regarding the proposed revisions to the Title V program in Section IV.D. below 

for further details. 

C. Proposed Revisions to Regulation 2, Rule 4 (Emissions Banking)

Regulation 2, Rule 4 sets forth the procedures applicable for the banking of emissions reduction credits. 

Emissions banking allows facilities that shut down an existing emissions source to “bank” the emissions 

reductions that result from the shutdown, and then either use the banked credits to offset emissions 

 

114 This includes removing the substantive requirement in current Section 2-2-307, as well as the “exemption” in 

Section 2-2-114 that specified the applicability criteria for determining when a new or modified source was subject 

to the requirement.
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increases from new projects at the facility in the future or sell the banked credits to another facility for 

use with new projects there. This banking system supports the implementation of the emissions offset 

requirements in District Regulations 2-2-302 and 2-2-303. Banking of emission reduction credits is 

central to the functioning of the NSR offsets requirements, in that (i) it encourages facilities to shut 

down under-utilized production capacity when it is no longer needed and (ii) it allows flexibility in siting 

new and modified sources in locations where there may not be an existing source to shut down for 

offsets purposes. (These functions of the credit banking provisions are described in more detail in 

connection with the offsets requirements in Section IV.B.3.g.iv. above.) 

Regulation 2, Rule 4 sets forth the accounting procedures that govern emissions banking under the NSR 

program. The Proposed Amendments include two substantive changes to the current procedures. Both 

of them are related to the addition of particulate matter regulatory requirements addressing PM2.5.

115

The first change adds PM2.5 as a specific pollutant in the list of pollutants in Section 2-4-203 for which 

emission reduction credits can be banked. 

The second change creates a mechanism by which the District can establish the amount of PM2.5

emission reductions that are reflected in existing banked PM10 credits. PM2.5 is a subset of PM10, and so 

for any given amount of PM10 emissions, a certain fraction of those emissions will be made up of PM2.5. 

The District’s offset requirements for particulate matter have never had requirements specific to PM2.5

emissions before, however. As a result, in banking particulate matter emissions reductions in the past,

the banking system has accounted only for the amount of PM10 involved in an emission reduction and 

not the amount of PM2.5. Now that the particulate matter offset provisions are being updated to target

PM2.5 specifically – and PM2.5 emissions reductions will be required to offset new increases in PM2.5

emissions from new projects – the amount of PM2.5 reflected in these earlier reductions will need to be 

established. The Proposed Amendments create a mechanism for doing so.

The conversion mechanism will also allow existing banked credits that may have been created based

only on the filterable portion of the PM emissions to account for the condensable portion as well. As 

discussed above in Section IV.A.2., per EPA requirements the Proposed Amendments will specify for the 

first time that the condensable portion of PM emissions must be taken into account for all purposes in 

NSR permitting. Historically, in the majority of cases only the filterable portion of PM emissions were 

accounted for, and thus many existing banked PM credits are based on the filterable portion only. Now 

that the condensable portion must be accounted for in NSR permitting, the District will need to 

determine the condensable portion of existing PM credits for purposes of implementing the PM offset 

requirements in Section 2-2-303. The conversion mechanism being created in the Proposed 

 

115 Two other minor non-substantive changes are (i) an update to the cross-reference to the definition of “Emission 

Reduction Credit” in Section 2-4-201 to reflect the renumbering in the Proposed Amendments to Regulation 2, 

Rule 2; and (ii) the removal a redundant reference in current Section 2-4-301.8 regarding banking of emission 

reduction credits from mobile sources, because the District no longer credits emission reductions from mobile 

sources and so there is nothing for this provision to apply to. 
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Amendments will allow existing credits that were based only on the filterable portion to be adjusted to 

account for the condensable portion as well. 

There are a number of provisions that, working together, will create this conversion mechanism. 

Proposed Section 2-4-416 creates a provision for the owner of an existing PM10 banked credit that has 

not yet been used to apply to the District to have the credit re-evaluated and the PM2.5 fraction 

determined. The provision also covers applications for banked credits that were based only on the 

filterable portion of the PM emissions to be recalculated taking into account the condensable portion as 

well. As emissions banking applications, these applications would be subject to the same application 

fees as for the creation of a new banked credit. Based on the experience of District Staff in conducing 

the research and analysis regarding existing banked credits that would be required to process a 

conversion application, requiring the same processing fees as for new banking applications is

appropriate to defray the cost of the Staff resources that will be involved.116

Proposed Sections 2-4-602 and 2-4-603 provide the procedures under which the amount of the PM2.5

fraction and the amount of the condensable portion of the emissions, respectively, will be calculated. 

Proposed Section 2-4-602 provides that an existing banked PM10 credit will have the PM2.5 fraction 

calculating by (i) determining the appropriate PM10/PM2.5 conversion factor, based on the nature of the 

PM emissions from the source that was shut down to create the banked credit; and then (ii) multiplying 

the amount of the PM10 credit by that conversion factor. This conversion process will result in a banked 

PM credit that is expressed as a certain amount of PM10 credit and a certain amount of PM2.5 credit 

(which will be somewhere between 0% and 100% of the PM10 credit, depending on the nature of the 

source that was shut down to create the credit). 

Subsections 602.1 through 602.4 provide further guidance on how the appropriate conversion factor will

be calculated. In cases where source test data is available from the source that was shut down to create 

the emission reduction credit, or from a similar source with the same PM emissions profile, that test 

data can be used to establish the conversion factor per subsections 602.3 and 602.4. Where no such 

source-specific test data is available, conversion factors can be drawn from published emissions factors 

such as EPA’s AP-42 factors or other similarly reliable sources, per subjection 602.2. In addition, as the 

District develops experience and expertise with making these conversion factor determinations, it will 

publish conversion factors for common source categories in the Permit Handbook per subsection 602.1. 

These subsections set forth the various alternatives for calculating the appropriate conversion factor to 

make it clear that a “rule of reason” will apply in determining what information will be used in making 

the conversion determination. The District will make the determination using the best available 

information that, from an engineering perspective, has adequate assurances of accuracy and reliability. 

The information that will be available for the conversion process for each individual banked credit will 

necessarily depend on the specific circumstances of each credit, and the proposed language of this 

section will provide flexibility so that the most appropriate information available will be used in each 

specific case. 

 

116 Further discussion of the basis for the application fee for the conversion application is provided in May 25, 

2012, Background Discussion document. See p. 16, Comment No. I.D.2.d.
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Proposed Section 2-4-603 sets forth a similar conversion procedure for determining the amount of 

condensable emissions associated with an existing PM credit that was originally based only on filterable 

PM emissions. The conversion will be undertaken by (i) determining an appropriate 

filterable/condensable conversion factor, based on the type of source that was shut down to create the 

credit; and then (ii) multiplying the amount of the existing PM credit by that conversion factor. (Note 

that condensable particulate matter is all very small in diameter and is thus both PM10 and PM2.5; 

references to condensable particulate matter therefore generally do not differentiate between PM10

and PM2.5.) If the evidence demonstrates that the emissions from the source that was shut down to 

create the credit actually had filterable emissions that were lower than the amount credited in the 

original PM10 credit, the applicant will not get the benefit of this over-estimate in the original 

application; in that case, the amount of the condensable credit will be based on the actual emissions 

from the source that was shut down, not the amount reflected in the banked credit (although the 

amount of the existing filterable credit will not be reduced if it was granted through a valid banking 

procedure). 

In addition, Section 2-4-405 will be amended to require applications for conversions of existing banked 

PM credits to go through the same public notice and comment process as applications for new PM 

emissions banking credits. Under Section 2-4-405, the APCO must publish notice of any proposed 

approval of credit banking in the amount of 40 or more tons per year, and must provide the public with 

an opportunity to review and comment upon the basis for such approval. For the same reasons that this 

public notice and comment process is provided for creation of new credits of 40 or more tons per year, 

the Proposed Amendments will provide it for re-evaluation of existing credits worth 40 or more tons per 

year. 

Finally, it is also important to note that while the bulk of the Proposed Amendments will not become 

effective until final approval by EPA, District Staff are proposing that these amendments to the banking 

procedures in Regulation 2, Rule 4, take effect immediately upon adoption by the District’s Board of 

Directors. A number of commenters have expressed a concern that the conversion of existing banked 

credits to account for the PM2.5 fraction and/or condensable portion could take some time, and that it 

could unduly delay the processing of permit applications when the Proposed Amendments take effect. 

To address this concern, one commenter suggested that the District should make the amendments to 

the banking regulations specifying this conversion process effective immediately upon adoption, rather 

than in the future upon EPA approval, so that holders of existing PM10 credits could start the conversion 

process immediately. District Staff agree that this is a good suggestion and are therefore recommending 

this approach to the Board for adoption. Unlike with the rest of the revisions to the NSR regulations, 

there is no great concern regarding a potential “gap”, or inconsistency, between the effective District 

regulations and the SIP-approved NSR requirements that have been approved by EPA. Moreover, there 

is a significant benefit from having these provisions go into effect immediately so that holders of existing 

banked PM10 credits can start the conversion process immediately. This will allow them to update their 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 121

credits to accurately reflect PM2.5 and PM10 emissions – and both filterable and condensable emissions –

as soon as possible.117 

D. Proposed Revisions to Regulation 2, Rule 6 (Title V – Major Facility Review)

The fourth rule in Regulation 2 that will be updated under the Proposed Amendments is the District’s 

Title V Major Facility Review permitting rule in Regulation 2, Rule 6. The changes involved in the 

Proposed Amendments are outlined in detail below.118

1. Addition of GHGs to Title V Permit Program

As discussed above, one of the primary motivations for the current rulemaking effort is to add 

greenhouse gases to District permitting programs, now that they are regulated by EPA. Now that EPA is 

regulating GHGs under the Clean Air Act, all state Title V implementing programs need to include GHGs. 

The proposed revisions to the Title V regulations will add GHGs to Title V permitting by making GHGs a 

“Regulated Air Pollutant” as defined by Section 2-6-222. Specifically, the revisions add new subsection 

222.6 to the definition, which explicitly states that GHGs are a “Regulated Air Pollutant” subject to Title 

V permitting, but only at facilities with GHG emissions over 100,000 tons per year CO2e. This revision 

will bring GHGs into Title V permitting at a 100,000 ton-per-year CO2e threshold, the threshold level that 

EPA has promulgated in its Tailoring Rule.

The Title V permitting requirements under District Regulation 2, Rule 6 apply to any “Major” emitter 

(which is defined as emitting 100 tons or more per year on a mass basis) of any “Regulated Air Pollutant” 

(which for GHGs will now be defined as 100,000 tons or more per year CO2e). A facility will thus be 

subject to Title V permitting based on its GHG emissions based on a two-part test: it must exceed the 

100 tpy absolute mass threshold and the 100,000 tpy CO2e threshold. If GHG emissions exceed one 

threshold but not the other, the facility will not be subject to Title V permitting as a result of its GHG 

emissions (although emissions of other pollutants could still trigger Title V permitting if they are 100 

tons or more per year). This two-part applicability threshold mirrors EPA’s applicability approach 

adopted under the Tailoring Rule. To make sure that it is clear how this two-part applicability test works 

to anyone reading the regulations, the proposed revisions add an explanatory note at the end of the 

Major Facility definition in Section 2-6-212 to this effect.

 

117 Similar concerns were also expressed regarding the market for PM2.5 credits. Some commenters were 

concerned that the market for these credits will not be able to function properly until all or a significant portion of 

the existing inventory of marketable PM10 credits is converted, in order that market participants can understand 

the extent of the credits that are available for purchase. Allowing the conversion process to start immediately will 

help address this concern as well. Anyone holding existing PM10 credits who is interested in marketing them will 

have a strong incentive to apply to the District to have the conversion undertaken as soon as possible. District 

Staff anticipate that this process will occur fairly quickly. District Staff addressed this issue in its May 25, 2012, 

Background Discussion document (see pp. 14-15, Comment No. I.D.2.b.).

118 The Proposed Amendments’ substantive revisions are outlined below. The Proposed Amendments also include 

a few minor clerical revisions such as making grammatical clarifications and adding cross-references. 
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In addition, the Proposed Amendments to Regulation 2, Rule 6 add associated GHG regulatory 

thresholds for certain other elements of Title V permitting.119 Specifically:

• Section 2-6-239, Definition of “Significant Source” for Purposes of Application Materials: Section 

2-6-405, which specifies the information that an applicant needs to provide in an application for 

a Title V permit, requires that a calculation and summary of a source’s emissions must be 

submitted for any source at a Title V facility that is “significant” as defined in Section 2-6-239. 

Current Section 2-6-239 defines “significant source” as any source with emissions of over 2 tons 

per year of any regulated air pollutant or over 400 pounds per year of any hazardous air 

pollutant. These threshold significance levels are set at 2% of the Title V major facility 

applicability thresholds (100 tons per year for regulated air pollutants and 10 tons per year for 

any single hazardous air pollutant), and they reflect the percentage at which the District treats 

an individual source at a Title V facility as making a significant contribution to the facility’s total 

emissions. Since the District is establishing an effective Title V applicability level for GHGs at 

100,000 tons per year of GHGs, the Significant Source definition needs to reflect a significance 

level for GHGs at 2% of this threshold level. The proposed revision to Section 2-6-239 therefore 

establishes the definition of “significant source” for GHG emissions at 2,000 tons per year CO2e 

– i.e., 2% of the effective 100,000 ton-per-year CO2e Title V applicability threshold for GHGs.

• Section 2-6-312, Major Facility Review for Smaller Facilities: Section 2-6-312 requires that any 

facility with actual emissions over certain thresholds must demonstrate that it is not a Title V 

“major facility” subject to Title V permitting requirements. These threshold actual emission 

levels are designed to cover facilities whose actual emissions do not exceed the “major facility” 

levels, but are high enough that the facility potential to emit (PTE) may in fact exceed the “major 

facility” levels.120 If a facility’s actual emissions exceed the levels specified in Section 2-6-312, it 

must demonstrate that its PTE is below the major facility thresholds and it is not subject to Title 

V permit requirements (or alternatively that it has a synthetic minor permit). Otherwise, it must 

submit a Title V permit application. Current Section 2-6-312’s threshold levels are established at 

25% of the major facility threshold levels (25 tpy for regulated air pollutants, 2.5 tpy for any 

single hazardous air pollutant, and 6.25 tpy for all hazardous air pollutants combined). The 

proposed revisions add a threshold level for GHGs at 25% of the effective 100,000 tpy CO2e 

major facility threshold for GHGs, or 25,000 tpy CO2e. Facilities with actual GHG emissions 

 

119 There is also a related provision in current Section 2-6-404.8 that established regulatory thresholds for certain 

existing facilities to submit their initial Title V permit applications by October 20, 2000. This provision is no longer 

necessary because the time for initial applications for these facilities has passed. The Proposed Amendments 

therefore do not establish a corresponding threshold for GHGs, and instead delete this provision as obsolete. 

120 Facilities become subject to Title V permitting based on their “Potential to Emit”, which is defined in Section 2-

2-217 as the maximum amount of emissions the facility could possibly have, based on permit limits, design 

characteristics, etc. Even if a facility’s actual emissions in the past have not exceeded the Title V applicability 

thresholds, the facility still may be subject to Title V if it could potentially have emissions over the thresholds. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 123

above this level would need to make a Section 2-6-312 PTE demonstration with respect to their 

GHG emissions.121 

• Section 2-6-423, District Procedures for Synthetic Minor Operating Permits: One option for 

complying with Title V requirements for facilities that have the physical capability to emit more 

than the Title V threshold levels is to obtain a “synthetic minor” operating permit. These 

permits establish enforceable emissions limits to ensure that the facility’s emissions will not 

exceed any Title V threshold levels. These permits “synthetically” create a minor facility out of 

what would otherwise be a major facility by capping the facility’s PTE through the enforceable 

permit limits. The current synthetic minor permitting procedures in Section 2-6-423 require that 

emission limits in synthetic minor operating permits be set at 95% of the Title V major facility 

threshold levels, which provides a 5% cushion to ensure that even if a facility exceeds its permit 

limit somewhat, it will still not become a Title V major facility.122 The proposed revisions add a 

synthetic minor limit for GHGs at 95% of the effective 100,000 tpy CO2e major facility threshold 

for GHGs, or 95,000 tpy CO2e. Synthetic minor permits for GHGs will need to include an 

enforceable GHG emissions limit at this level. 

The proposed revisions also add new definitions of GHG and CO2e to specify how these terms are to be 

used in implementing the Title V requirements for GHGs. 

• GHG Definition: Proposed new Section 2-6-245 defines GHGs as the term is defined by EPA in its 

federal regulations, as a single air pollutant made up of six constituents: carbon dioxide, nitrous 

oxide, methane, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. The definition 

also specifies how GHGs are to be measured. For determining whether a facility is a “major” 

emitter, GHGs are measured as absolute mass (i.e., without any adjustment applied to reflect 

the global-warming potential of the various constituents). If a facility’s total mass of GHG 

emissions is below 100 tons per year, it is not a “major” emitter of that pollutant as defined in 

the Clean Air Act. For all other purposes, GHGs are measured as CO2e, which weights each 

constituent based on its global warming potential. If a facility’s GHG emissions measured as 

CO2e are less than 100,000 tons per year, the emissions are not a “regulated air pollutant” as 

defined in Section 2-6-222 and the facility is not a Title V major facility because of its GHG 

emissions (although it may still be major for other pollutants). 

 

121 Note that for GHGs, the facility can show either (i) that PTE is below 100,000 tpy CO2e or (ii) that PTE is below 

100 tpy on an absolute mass basis in order to demonstrate that it is not subject to Title V permitting. If a facility’s 

emissions are below either of these threshold levels, it is not a major emitter (i.e., over 100 tpy absolute mass) of a 

regulated air pollutant (i.e., over 100,000 tpy CO2e). 

122 Synthetic minor emissions limits are legally enforceable limits, and so an exceedance of these 95% synthetic 

minor conditions would be a violation of District Regulation 2-6-307 and would subject the facility to enforcement 

action. In such a case, the District would take such action as may be necessary to ensure that any additional 

exceedances of the 95% level do not occur (including but not limited to imposing monetary penalties as a 

deterrence against future violations and injunctive relief to require operational changes to prevent problems from 

recurring). 95% of the major source threshold level is an action level so that the District can identify potential 

problems and take appropriate action without risking an actual exceedance of the major facility thresholds. 
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• CO2e Definition: Proposed new Section 2-6-246 defines CO2e and specifies how the weighting of 

GHG emissions for global warming potential will be calculated. The calculation procedure will

follow the method that EPA has prescribed in its Title V regulations, using the weighting factors 

set forth in Table A-1 to subpart A of 40 C.F.R. Part 98.

These definitions track the federal definitions adopted by EPA.

2. Implementation of the “Case-by-Case MACT” Requirement Through Title V 

Permitting

The Proposed Amendments will also implement the Clean Air Act’s “case-by-case MACT” requirement

through the District’s Title V program, instead of through NSR permitting as provided for in the current 

regulations. The Clean Air Act specifies that this “case-by-case MACT” requirement is to be 

implemented through the Title V permitting process, and this change will make the District’s program 

consistent with the Act in this respect.

Section 112 of the Clean Air Act requires EPA to develop nationwide regulations for the control of 

hazardous air pollutant emissions, called “National Emissions Standards for Hazardous Air Pollutants”, or 

“NESHAPs”. Section 112 requires EPA to establish these NESHAPs based on a level of emissions control 

known as “Maximum Available Control Technology” or “MACT”. Section 112 set forth a schedule by 

which EPA was required to adopt these NESHAPs; and it also established a “backstop” mechanism, in 

Section 112(j), to ensure that these pollutants would be regulated even if EPA failed to act by the 

statutory deadlines. Specifically, Section 112(j) provides that if EPA fails to promulgate nationwide 

NESHAPs by the statutory deadlines, then individual permitting agencies are required to implement the 

same level of emissions control – “MACT” – on a case-by-case basis (i.e., by making determinations of 

what MACT requires for individual sources at the time of permitting, rather than by applying a single 

nation-wide NESHAP rule applicable to all sources). Section 112(j) further specifies that this “case-bycase MACT” requirement should be implemented through the Title V operating permit process.123

 As 

discussed above in Section IV.B.3.j., the District’s current permitting rules implement this “case-by-case 

MACT” requirement through the NSR program under Regulation 2, Rule 2, not through the Title V 

program. This could potentially be problematic, because the Section 112(j) “case-by-case MACT” 

requirement applies to existing sources as well, not just to new and modified sources that are subject to 

NSR permitting. To address this situation and to make the District’s implementation of the “case-bycase MACT” requirement consistent with Section 112(j), the Proposed Amendments move this 

requirement from Regulation 2, Rule 2, to Regulation 2, Rule 6. 

The Proposed Amendments make this change by deleting the current case-by-case MACT requirements 

in Regulation 2-2-317 (and related provisions in Regulation 2, Rule 2) and adding corresponding 

provisions in the Title V requirements in Regulation 2, Rule 6. Specifically, proposed new Section 2-6-

315 adds a case-by-case MACT requirement for Title V permitting, setting forth the applicability criteria 

 

123 See, e.g., CAA § 112(j)(4) (permit applications reviewed and approved or disapproved under the Title V 

permitting provisions of CAA § 505); CAA § 112(j)(5) (permits issued under Title V). 
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for this requirement. Under Section 2-6-315, the requirement will apply to any facility where (i) the 

facility has a potential to emit hazardous air pollutants (HAPs) above the Title V “major” facility 

threshold (10 tpy of any single HAP or 25 tpy of any combination of multiple HAPs); (ii) the facility is in a 

category or subcategory of HAP sources listed by EPA for regulation under CAA Section 112; and (iii) EPA 

has failed to promulgate a NESHAP for that category or subcategory by the applicable deadline under 

Section 112. For any facility that satisfies these applicability criteria, the Title V permit must implement 

the case-by-case MACT requirement and include a permit limit on the facility’s HAP emissions that 

reflects a MACT level of control. To assist in implementation of this requirement, the Proposed 

Amendments also add a definition of “Maximum Achievable Control Technology (MACT)” in proposed 

Section 2-6-247, which mirrors the MACT standard as set forth in CAA Section 112(j). 

3. Updates to Definitions

As noted above, Staff are proposing to move certain definitions to their most appropriate locations 

within Regulation 2. Definitions of terms that are used in multiple places throughout the various rules in 

Regulation 2 should be located in Regulation 2, Rule 1, General Requirements (in Section 2-1-200 et 

seq.). These general definitions apply to all the specific rules in Regulation 2. Definitions of terms that 

are used only in specific rules within Regulation 2 should be located in the specific rule in which they are 

used. Definitions that are specific to Title V permitting under Regulation 2, Rule 6, for example, should 

be located in Regulation 2, Rule 6 (in Section 2-6-200 et seq.). The Proposed Amendments move several 

definitions to accomplish this end. 

In particular, there are three specific definitions in Regulation 2, Rule 6, which more appropriately 

belong in Regulation 2, Rule 1, because they are general definitions applicable to all of the rules in 

Regulation 2. These are (1) Section 2-6-206, the definition of “Facility”; (2) Section 2-6-207, the 

definition of “Federally Enforceable”; and (3) Section 2-6-218, the definition of “Potential to Emit”. The 

Proposed Amendments establish the definitions for these terms in Regulation 2, Rule 1, and retain

appropriate cross-references in the definitional sections in Regulation 2, Rule 6 to help readers locate 

the definitions. 

The Proposed Amendments also add new definitions for Greenhouse Gases (GHGs) and CO2e as part of 

the implementation of Title V permitting for GHGs. These definitions, in proposed new sections 2-6-245 

and 2-6-246, are discussed above in connection with incorporating GHGs into the Title V program. The 

Proposed Amendments similarly add a new definition of “Maximum Achievable Control Technology” to 

help implement the “case-by-case MACT” requirement as also discussed above. 

Finally, the Proposed Amendments also clarify in the definition of “Regulated Air Pollutant” in Section 2-

6-222 that total suspended particulate is not treated as a separate regulated air pollutant in its own 

right. Particulate matter is regulated under the Title V program as PM10 and PM2.5, not as total 
126 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

suspended particulate matter. This clarification implements EPA’s policy for addressing total suspended 

particulate matter in the context of Title V permitting.

124

E. Effective Date of Proposed Amendments and Transitioning to New Regulatory 

Requirements

District Staff intend to propose that the Board of Directors adopt the Proposed Amendments to become 

effective as of the date that EPA approves the Proposed Amendments into the California State 

Implementation Plan. Basing the effectiveness of the Proposed Amendments on the date of EPA 

approval is important to ensure that there is only a single set of regulatory requirements that will apply 

for all purposes. 

Under California law, District regulations are effective as soon as the Board of Directors makes them so 

(i.e., the Board’s designated effective date). For purposes of implementing the Clean Air Act’s federal 

requirements, however, District regulations do not become effective until they are approved by EPA. 

Thus if the Proposed Amendments become effective immediately upon adoption, it will create a “gap” 

between the version of the regulations that is effective under state law and the version that is effective 

for federal purposes during the period between Board adoption and EPA approval. That is, the revised 

version contained in the Proposed Amendments will be effective under State law, and regulated 

facilities will be required follow that version under the Health and Safety Code; but the prior EPAapproved version will still be in effect for federal purposes, and regulated facilities will have to follow 

that version under the Clean Air Act. 

This “SIP gap” scenario would generate an inordinate amount of complexity and confusion for all 

involved. To avoid the “SIP gap”, District Staff will propose that the Board establish the effective date of 

the Proposed Amendments to coincide with the date of EPA’s approval. Other California air districts 

have successfully used this approach, and it will greatly simplify the transition to the new requirements 

in the Bay Area. Under this approach, the current version of the regulations will continue in effect after

the Board of Directors approves the Proposed Amendments, up until such time as EPA has had the 

chance to review and approve them. At that point, when EPA approves the Proposed Amendments as 

effective for federal purposes, the revised version will take effect and establish a single common set of 

legal requirements that are effective for all purposes under state and federal law.125 

 

124 See Memorandum from L. Wegman, Deputy Director, EPA Office of Air Quality Planning & Standards, to EPA 

Regional Directors, re “Definition of Regulated Pollutants for Particulate Matter for Purposes of Title V” (Oct. 16, 

1995), available at www.epa.gov/ttn/oarpg/t5/memoranda/pmregdef.pdf. 

125 Note that under Section 2-1-409, permit applications are processed according to the regulations that are in 

effect as of the date of the complete application. Thus, complete applications that are submitted before the 

effective date of the Proposed Amendments will be processed under the current version of the regulations, not the 

revised version. For any activities at regulated facilities that do not require a permit, the version of the regulations 

that applies is the version in effect at the time the activity takes place. For example, if construction of a particular 

source or modification is subject to an exemption and does not require a permit, the version of the exemption that 

applies is the one in effect at the time the construction takes place. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS 127

The one exception that District Staff will suggest for Board of Directors approval concerns the updates to 

the emissions banking procedures in Regulation 2, Rule 4. These updates are discussed in Section IV.C.

above, and they will establish procedures for determining the PM2.5 fraction of existing PM10 banked 

credits and the condensable PM emissions associated with such credits. As explained in Section IV.C., it 

is more appropriate for these amendments to take effect immediately upon adoption by the Board of 

Directors so that holders of existing banked PM10 credits can begin the conversion process and establish 

with certainty the amount of credits that they are eligible for. Moreover, there is no “SIP gap” downside 

to having these revisions take effect immediately, because these are essentially all new provisions that 

are being added to Rule 4. There are no existing requirements that would be in place during the “gap” 

that could result in potentially conflicting or confusing regulatory requirements during EPA’s review 

period. For these reasons, it is more appropriate for the revisions to the emissions banking procedures 

in Regulation 2, Rule 4 to take effect immediately upon approval by the Board of Directors. 

Accordingly, District Staff intend to propose that the Board of Directors adopt the Proposed 

Amendments to Rules 1, 2 and 6 of Regulation 2 with an effective date as of the date that EPA approves 

them into the California State Implementation Plan. Staff further intend to proposed that the Board of 

Directors adopt the Proposed Amendments to Rule 4 of Regulation 2 effective immediately upon 

adoption. District Staff will prepare language for a Resolution for the Board of Directors to consider 

consistent with this approach.

Finally, as an additional effort to help transition to the new provisions included in the Proposed 

Amendments, District Staff intend to develop a comprehensive update to the District’s Permit 

Handbook.126 District Staff have developed the Proposed Amendments after a thorough review of how 

the District’s permitting programs currently work, as well as how they can be improved. This review has 

resulted in the reorganization, clarification, and streamlining of the regulatory provisions in Regulation 2 

described above. District Staff intend to follow up on this review of the District’s permitting regulations 

with a similar review of the provisions of the Permit Handbook that explain how these regulations work. 

This review will also include an update to address the new and revised provisions in Regulation 2 that 

are being made through the Proposed Amendments. District Staff intend to develop these revisions to 

the Permit Handbook during the post-adoption period when EPA is reviewing the Proposed 

Amendments for inclusion in the SIP. That way, the revised Permit Handbook can be finished and 

available for use by the time EPA completes its review and the Proposed Amendments become 

effective. District Staff will work with the regulated community and other interested parties in 

developing these revisions to the Permit Handbook to ensure that the procedures address in it will be 

efficient and workable for all involved. As always, District Staff will remain available to provide 

additional guidance, information, and direction to regulated entities and others in understanding how 

the Proposed Amendments will apply in individual permitting situations.

 

126 The District’s current Permit Handbook can be found on the District’s website at: 

http://hank.baaqmd.gov/pmt/handbook/rev02/permit_handbook.htm. 
128 NSR AND TITLE V UPDATES STAFF REPORT | SECTION IV – ANALYSIS OF PROPOSED AMENDMENTS

 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION V – REGULATORY ANALYSES 129

V. REGULATORY ANALYSES

Adoption and amendment of District regulations is subject to certain statutory requirements as 

addressed below.

A. Environmental Impact Report Prepared under the California Environmental Quality 

Act 

The Proposed Amendments have been prepared to help the Air District implement important Clean Air 

Act permitting programs, which will help ensure that District regulations are complied with, air pollution 

is reduced, and the region’s clean air goals are achieved. The Proposed Amendments will undoubtedly 

have overall positive environmental benefits. The District also received comments suggesting that the 

Proposed Amendments could have the potential to result in significant ancillary adverse environmental 

impacts in certain areas. In order to evaluate whether there could be any such significant adverse 

impacts, District Staff have prepared (through an environmental consultant) an Environmental Impact 

Report (EIR) in accordance with the requirements of the California Environmental Quality Act (CEQA). 

The District and its consultant have followed all applicable requirements of CEQA through this process, 

and have prepared a draft EIR at this time for public review and consideration. The District is publishing 

this draft EIR in connection with this Staff Report and the Proposed Amendments. The District will 

consider comments received on the draft EIR and will prepare a Final EIR, as appropriate, for 

consideration and certification by the Board of Directors. The EIR has evaluated the potential for 

environmental impacts from the Proposed Amendments and has found that there will not be any 

significant environmental impacts from this project. District Staff invite interested members of the 

public to review and comment on this EIR. 

B. Findings and Assessments Under Health & Safety Code Sections 40727 and 40728.5

Before adopting or amending any regulations, the Board of Directors must make certain findings 

required by Health & Safety Code Section 40727. These include findings of necessity, authority, clarity, 

consistency, non-duplication, and reference. District Staff have conducted an analysis of the Proposed 

Amendments and have concluded that there is substantial evidence on which the Board of Directors can 

make these required findings. The basis for this conclusion is as follows.

• Necessity: This finding requires a demonstration that a need exists for the proposed 

amendments, as demonstrated by the record. As discussed above in Section III, the Proposed 

Amendments are necessary to address a number of recent regulatory and technical 

developments concerning the NSR and Title V programs. Several of these recent developments 

are requirements that the District must address to obtain EPA approval of its regulatory 

programs. California will face sanctions if the District fails to satisfy these requirements. Certain 

other of these recent developments concern effective implementation of the District’s 

permitting program. Effective implementation requires that the Proposed Amendments be 

adopted to address these areas. 
130 NSR AND TITLE V UPDATES STAFF REPORT | SECTION V – REGULATORY ANALYSES

• Authority: This finding requires identification of the state or federal law that permits or 

requires the District to adopt the Proposed Amendments. The federal law that requires the 

District to adopt NSR permitting regulations is in Part C and Part D of Title I of the Clean Air Act. 

The federal law that requires the District to adopt Title V permitting regulations is Title V of the 

Clean Air Act. The California law that requires the District to adopt permitting requirements to 

provide for attainment of ambient air quality standards is Division 26, Part 2, Chapter 10 of the 

California Health & Safety Code (commending with Section 40910). Additional California law 

authorizing the District to adopt NSR and Title V permitting regulations is contained in Sections

40001 and 40702 of the California Health & Safety Code, which are general provisions 

authorizing air districts to adopt and implement appropriate regulations as necessary to achieve 

and maintain air quality standards and to execute the powers and duties granted to and 

imposed on them.

• Clarity: This finding requires that the Proposed Amendments are written so that the 

regulation’s meaning can be easily understood by persons affected by it. As explained in this 

Staff Report, District Staff have conducted a thorough review of the regulatory language 

contained in the Proposed Amendments to ensure that it presents the requirements of the NSR 

and Title V permitting programs in the clearest possible manner. District Staff have also 

conducted a public outreach process and engaged with members of the public who will be 

affected by the regulations to solicit their input on how the regulations should be written and 

presented.

• Consistency: This finding requires that the Proposed Amendments must be in harmony with, 

and not in conflict with or contradictory to, existing statutes, regulations, and decisional law. As 

explained in this Staff Report, District Staff have reviewed all relevant provisions of state and 

federal law, and court decisions to the extent applicable, to ensure that the Proposed 

Amendments are consistent with them. A primary purpose of the Proposed Amendments is to 

address certain inconsistencies and ensure that the District’s programs are in fact consistent 

with applicable legal requirements. 

• Non-Duplication: This finding requires that the Proposed Amendments must not impose the 

same requirements as an existing state or federal regulation, unless they are necessary and 

proper to execute powers and duties granted to or imposed upon the District. To the extent 

that the District’s NSR and Title V programs require stationary sources to obtain preconstruction and operating permits in the same manner as EPA’s federal programs, the District’s 

permitting programs are necessary and proper to execute the District’s power and duty to 

implement these requirements in the Bay Area. As discussed above in Section II.B. on the legal 

framework for NSR and Title V permitting, although Federal law creates these programs and sets

forth the minimum requirements for how they are implemented (with additional requirements 

imposed by State law), the programs are intended primarily to be implemented by local 

agencies through their own regulations. The Proposed Amendments will allow the District’s 

permitting programs to do so effectively and in accordance with law.
NSR AND TITLE V UPDATES STAFF REPORT | SECTION V – REGULATORY ANALYSES 131

• Reference: This finding requires identification of and reference to the provisions of law that will 

be implemented by the Proposed Amendments. These provisions are those identified and 

referred to in connection with the “authority” finding above.

Based on the foregoing, evidence exists on which the Board of Directors can make the findings required 

by Health & Safety Code Section 40727. 

In complying with these requirements of Health & Safety Code Section 40727, the District is required 

under Health & Safety Code Section 40727.2 to prepare an analysis identifying all existing federal air 

pollution control requirements and District rules and regulations that apply to the types of sources and 

equipment that are subject to the Proposed Amendments. As the NSR and Title V permitting programs 

apply to essentially all regulated stationary sources of air pollution in the Bay Area, the universe of 

existing federal and District pollution control requirements and rules and regulations that apply to the 

facilities that may be affected by the Proposed Amendments includes all federal requirements for 

stationary sources and all District requirements. These requirements are numerous, and they are listed 

in Title 40 of the Code of Federal Regulations, Chapter 1, Subchapter C (Air Programs); and in District 

Regulations 1 through 12. 

In addition, under Health & Safety Code Section 40728, before adopting or amending any regulations 

that will significantly affect air quality or emissions limitations, the District must assess any potential 

socioeconomic impacts from the adoption or amendment, to the extent that data are available. This 

requirement is not strictly applicable to the Proposed Amendments, because they involve permitting 

programs in Regulation 2, and not the air quality emissions limitations that the Air District adopts to 

impose specific emissions limits on particular categories of sources in the District’s other rules. 

Regardless of whether such an analysis is technically required by statute, however, Air District staff have 

considered the cost impacts and other factors addressed under Section 40728 because they are 

important considerations in how the District should implement its permitting programs. These 

considerations also satisfy the requirements of and intent behind Section 40728, to the extent that the 

Section is applicable in this situation. Consideration of these factors supports the conclusion that there 

will be no significant adverse socioeconomic impacts from the Proposed Amendments. Section 40728 

defines socioeconomic impacts to include the following elements:

• Businesses Affected: NSR and Title V permitting address a wide variety of stationary sources in 

the Bay Area, and these programs could potentially affect any business in the region. The 

District currently has approximately 8,000 permitted facilities, and the Proposed Amendments 

could potentially affect any or all of them. Many aspects of the NSR and Title V permitting 

programs are not being changed, of course, and so many of these facilities will not see any 

change in the specific provisions that apply to them. Moreover, many aspects of these 

permitting programs apply to new and modified sources, and so how any particular business 

may be affected will depend upon its plans for adding new sources or modifying its existing 

sources in the future. As such, it not possible to determine with any greater specificity how the 

Proposed Amendments will affect any particular operation or any particular type of business or 
132 NSR AND TITLE V UPDATES STAFF REPORT | SECTION V – REGULATORY ANALYSES

segment of industry. There are no data available to make such a determination at that level of 

specificity. 

• Impact on Employment and the Economy: For the same reasons that it is not possible to state 

with specificity exactly what businesses will be affected by the Proposed Amendments or exactly 

how any particular business or industry segment will be affected, it is not possible to quantify 

with specificity the extent of any potential impacts on employment and the economy. It is clear 

that any such impacts would be minimal, however, if there are any impacts at all. The Proposed 

Amendments do not create any substantial new emissions control requirements that sources 

are not subject to already, or specify any specific emissions limitations that will require sources 

to install or substantially modify pollution control equipment in any significant manner. Where 

the Proposed Amendments do add new requirements, these are not expected to require 

affected facilities to have to hire any additional staff or to impose costs that will have any 

appreciable adverse impact on the region’s economy. As analyzed in the draft EIR prepared for 

this project, the additional substantive provisions being added in Regulation 2 will not require 

regulated facilities to add any significant additional pollution control equipment or conduct their 

operations in any significantly different manner, compared to what they would be required to 

do anyway under existing regulatory conditions. Moreover, adopting the Proposed 

Amendments will allow the Air District to retain EPA approval of its NSR and Title V permitting 

programs, which will have significant benefits in having the District remain as the permitting 

agency for these programs (instead of having EPA implement them under its federal authority),

and in avoiding sanctions that would be imposed on the Bay Area if it were to fail to have EPAapproved programs (e.g., loss of federal highway funds). To the extent that the Proposed 

Amendments will have any net impact on employment and the economy in the Bay Area, it is 

therefore expected to be positive. There are not expected to be any significant adverse impacts 

on employment and the economy. 

• Range of Probable Costs of Regulation: As noted above, the additional substantive provisions 

being added in Regulation 2 will not require regulated facilities to add any significant additional 

pollution control equipment or conduct their operations in any significantly different manner. 

The types of pollution control equipment that may be needed to address new requirements 

being added under the Proposed Amendments will most likely already be required to address 

existing regulatory requirements. For example, although new requirements for PM2.5 are being 

added, it is likely that sources subject to this requirement will already be required to implement 

control devices for PM10 under current District regulations and/or to address PM2.5 under federal 

requirements. It is not possible to state with specificity exactly what will be required at each 

facility that may be subject to the Proposed Amendments, as data are not available on what 

each individual facility may do in the future to become subject to these requirements. The only 

conclusion that can readily be drawn based on existing data is that the costs of complying with 

the new requirements being added in the Proposed Amendments are likely to be minor.

Air District Staff reviewed the Proposed Amendments to identify any new or additional 

requirements that may impose additional costs (compared to the current regulatory baseline) 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION V – REGULATORY ANALYSES 133

that can be identified with specificity. The one area in which the proposed amendments will 

impose a new requirement with a quantifiable additional specific cost is the NAAQS protection 

requirement modeling requirement in proposed Section 2-2-308. This provision will expand the 

air quality impact analysis modeling requirement that currently applies for permit applicants 

that trigger PSD requirements, and will apply it to certain additional applications that involve 

significant net emissions increases. (See Section IV.B.3.a. for further detail on this requirement.) 

For permit applicants that become subject to this requirement under Section 2-2-308 (i.e., for 

projects with significant net emissions increases that are not currently subject to any modeling 

requirements already), they will be required to conduct a computer modeling analysis of their 

emission. The cost for conducting such modeling varies depending on the complexity of the 

project being modeled and whether a screening-level analysis will suffice or whether a more 

detailed analysis is required, but it is generally in the range of approximately $5,000 for a simple 

scenario to up to $60,000 to $70,000 for a more complex case. 

District Staff reviewed the number of additional permit applications that will be subject to this 

requirement to estimate an overall cost to the regulated community in order to ensure that 

such projects do not cause or contribute to a violation of the NAAQS under proposed Section 2-

2-308. Staff reviewed data on all of the permit applications that the District has received back to 

2000 to see how many had significant net emissions increases that would require modeling 

under proposed Section 2-2-308 that were not already subject to existing modeling 

requirements. Over the past 12+ years, the District’s database lists 36 such applications, or 

approximately 3 per year on average.

127

 Moreover, for all but two of them the pollutant 

involved was particulate matter. Requiring modeling of significant PM emissions increases is 

especially important given the fact that the Bay Area is designated as non-attainment for PM2.5. 

The relatively modest additional cost involved is more than justified in these instances to ensure 

that the PM emissions increases from such projects does not result in any additional PM2.5

NAAQS exceedances. 

• Availability of Cost-Effective Alternatives: There are no alternatives that will satisfy the legal 

requirements and policy goals of the Proposed Amendments with less cost. The District is 

required to adopt these updates to its NSR and Title V programs to satisfy its obligations under 

the Clean Air Act. The Proposed Amendments are implementing these requirements in a 

manner that will minimize the costs of compliance, and there are no alternatives that would do 

so at less cost. Staff reviewed several policy alternatives that were suggested by members of 

the public during the rule development process and the reasons why they were not chosen as 

the preferred alternative in Chapter 4 of the Draft EIR. To the extent that there are alternatives 

to the Proposed Amendments that satisfy the minimum legal requirements under state and 

federal law, these were not found to be preferable alternatives because they were not 

practicable in terms of ensuring flexibility and enforceability in these programs.

 

127 See Spreadsheet, GAS Emissions Increases for 2-2 Analysis, prepared by G. Stone and D. Brunelle, BAAQMD, 

August 2012.
134 NSR AND TITLE V UPDATES STAFF REPORT | SECTION V – REGULATORY ANALYSES

• Emission Reductions: It is difficult to quantify the emission reductions that will be gained 

specifically through the Proposed Amendments, because these permitting programs do not 

establish emissions limitations or emissions reduction requirements directly. Rather, they 

create permitting programs and then leave it up to the permit application and review process 

for each individual facility to determine what regulatory requirements apply at each facility and 

what they will require in terms of emission reductions. The Proposed Amendments will help 

implement these permitting programs effectively, however, and are therefore vital to ensuring 

that the District can achieve the clean air goals of its regulatory programs. The Proposed 

Amendments therefore play an important role in achieving the emission reductions from all of 

the District’s regulations. 

• Necessity: As noted above in connection with Section 40727, the Proposed Amendments are 

necessary to implement recent regulatory developments. These developments are summarized 

in Section III of this Staff Report. 

Section 40728 requires the Board of Directors to consider the socioeconomic impact of the Proposed 

Amendments, and to make a good faith effort to minimize any adverse socioeconomic impacts 

associated with them. In light of the discussion above, District Staff have concluded that the Proposed 

Amendments will not have any significant adverse socioeconomic impacts. Staff submit that adoption of

the Proposed Amendments will be an effective way to implement state and federal NSR and Title V 

permitting requirements with the minimum amount of socioeconomic impact possible consistent with 

achieving these programs’ important clean air goals. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION VI – RULE DEVELOPMENT PROCESS 135

VI. RULE DEVELOPMENT PROCESS AND INPUT FROM INTERESTED MEMBERS OF 

THE PUBLIC

The Proposed Amendments are the product of over a year of work by District Staff with input from a 

large number of interested stakeholders, including EPA Region IX and ARB staff, representatives from 

the regulated community and industry groups, representatives from environmental and advocacy 

organizations, and interested members of the public. Engagement and participation by these 

stakeholders has resulted in significant improvements to the Proposed Amendments as they have 

evolved during this process. 

District Staff began this process in 2011 with a review of the District’s current NSR and Title V permitting 

programs and the recent regulatory developments affecting them. This internal review led to the 

development of a number of rule development concepts, and subsequently to the development of an 

initial concept draft of proposed amendments for internal consideration. District Staff also shared this 

preliminary work with staff of EPA Region IX and ARB to get their initial impressions and feedback on 

District Staff’s proposed approach. District Staff met with staff of these agencies on October 4, 2011, to 

discuss the proposed amendments.

Based on this preliminary work, District Staff developed a first draft of the proposed amendments and 

published it in January of 2012 for consideration and comment by interested members of the public. 

The first draft of the proposal was also accompanied by a summary of each regulatory provision affected 

and a Staff Report explaining the reasoning behind the proposed revisions. 

District Staff presented a briefing to the Stationary Source Committee of the District’s Board of Directors 

on January 9, 2012, just after the release of the first draft of the proposed amendments. District Staff 

presented the Stationary Source Committee with an overview of the NSR and Title V permitting 

programs, a summary of the recent developments that have necessitated this update project, a 

discussion of what the proposed amendments involve, and an outline of the remaining rule 

development process including upcoming public participation opportunities. 

District Staff then held a public workshop on February 22, 2012, to introduce the proposed amendments

to the public, explain the purposes and goals of the amendments, answer questions, and obtain 

feedback. This public workshop was webcast and it was attended by approximately 80 people. District 

Staff requested written comments on the first draft by March 2, 2012, and received 7 comment letters.

Several attendees at the public workshop requested that District Staff convene a technical working 

group to discuss the specific language in the proposed amendments in more detail. These attendees 

wanted to discuss specific regulatory language in greater detail than was possible at the public 

workshop. In response, District Staff convened a technical working group and held approximately 10

hours of further public meetings to discuss these specific issues on February 28, 2012, and March 8 and 

20, 2012. To allow further time to address these issues in writing, District Staff extended the public 

comment period on the first draft of the proposed amendments until March 27, 2012, and received 8

additional comment letters.
136 NSR AND TITLE V UPDATES STAFF REPORT | SECTION VI – RULE DEVELOPMENT PROCESS

District Staff also attended a conference organized by the Golden West Section of the Air & Waste 

Management Association specifically to discuss the proposed amendments. This conference was held 

on April 5, 2012, and was attended by a number of District Staff as well as representatives from industry, 

environmental organizations, ARB, and EPA Region IX.

Based on the public input and feedback received on the first draft of the proposed amendments, District 

Staff revised the proposed amendments and issued a second draft on May 25, 2012. District Staff also 

published a Background Discussion document to explain how they were changing the proposal from the 

first draft and the reasons why. This document also included responses to all of the comments that had 

been received on the first draft. District Staff then held a further public meeting of the technical 

working group on June 7, 2012, to discuss the revisions made in second draft, answer any questions, and 

receive input and feedback from the public. District Staff also solicited further written comment on the 

second draft and received an additional 4 comment letters.

District Staff also engaged members of the public with respect to the preparation of the CEQA 

Environmental Impact Report (EIR) for this project. District Staff published a Notice of Preparation and 

Initial Study and requested written comment on it. District Staff also held a CEQA scoping meeting on 

July 10, 2012, to discuss the scope of the EIR and the environmental issues to be evaluated in it. 

Approximately 8 members of the public attended the scoping meeting. 

District Staff also made themselves available throughout the process by phone and in person to answer 

questions, explain issues, and receive input from members of the public. District staff have had a large 

number of communications – by telephone, by email and in person – with interested members of the 

public during this process. 

District Staff also maintained a web page for this rule development project on the District’s website in 

order to provide a central location at which interested members of the public could access information 

and documents related to the project. The web page is located at 

www.baaqmd.gov/Divisions/Engineering/Proposed-Reg-2-Changes.aspx, and it provides a useful archive 

of the principal public documents related to this rule development project, including the early drafts of 

the Proposed Amendments, the background documents published in connection with those drafts, 

presentation materials from the public meetings and workshops that were held, and the comments 

received from members of the public and Staff’s responses.

District Staff have relied on all of the public input, feedback, and comment that was received during this 

rule development process to develop the final version of the Proposed Amendments. Many of the 

commenters provided helpful insights, and their comments have helped improve the Proposed 

Amendments significantly. District Staff would like to thank all those who took the time to review Staff’s 

initial drafts and provide feedback. 
NSR AND TITLE V UPDATES STAFF REPORT | SECTION VII – CONCLUSION 137

VII. CONCLUSION

For the reasons discussed in the foregoing Staff Report, District Staff recommend that the Board of 

Directors adopt the Proposed Amendments. The Proposed Amendments have met all applicable legal 

requirements for adopting amendments to District regulations, including substantive and procedural

requirements. The Proposed Amendments have also been developed in coordination with interested 

stakeholders and have incorporated helpful comments received from members of the public. The 

Proposed Amendments will strengthen the District’s NSR and Title V permitting programs and ensure 

that they can be implemented consistently and efficiently. The Proposed Amendments will update 

Regulation 2, Rules 1, 2, 4 & 6 so that EPA can approve them and allow the District to continue to 

implement these important permitting programs under the Clean Air Act.

District Staff respectfully submit that the Board of Directors should exercise the legal authority granted 

to it by legislature of the State of California under the Health and Safety Code and the adopt the 

Proposed Amendments as the policy and regulations of the Bay Area Air Quality Management District.