### North Carolina Department

### of Environment

### and Natural 

### Resources Divisionof Air Quality Beverly Eaves Perdue Sheila 

### C.Holman Governor Director August 16,2011 Beverly H. Banister Director, Air Pesticides and Toxics Management Division United States Environmental Protection Agency, Region 4 61Forsyth Street Atlanta, Georgia 30303-8960 Dee Freeman 

### Secretary



### Re: ShuretapeTechnologies EPA Title

### V Objection to ProposedTitleV 

### Permit Requested Record Clarification

Dear Ms. Banister:

North Carolina appreciates the EPA's investment of time trying to interpret and apply the recently promulgated provisions related to Greenhouse Gasses (GHGs). We also appreciate EPA's commitment to implement these new provisions based on their plain language in a manner that protects the environment. 

### In EPA's June 27, 201

### 1 letter objecting to a proposed permit you requested clarification of the record in two specific areas. First, you requested regulatory clarification for the development of GHG Plantwide Applicability Limit (PAL) based on environmental significance, and second you requested clarification as to whether North Carolina's interpretation would produce a result that is at least as environmentally stringent as the approach outlined in Q&A document appearing on EPA's website.

As a threshold matter, the June 27, 201 1letter states that EPA is formally objecting to the proposed permit under the authority of section 505(b) of the Clean Air Act (CAA). Under that provision EPA is authorized to object to a proposed permit only if it contains provisions that are not in compliance with applicable requirements of the Act. It wasunclear from the letter precisely which applicable requirement of the CAA the GHG PAL was not in compliance with. Lnstead, the letter observed that NCDAQ7s rationale for the GHG PAL (ratherthan the proposed permit itself) "incorrectly applied the regulatory interpretation provided by EPA in its guidance document ["Q&AV]." Whether or not the applicable GHG provisions are ambiguous, we share the common belief that these provisions are designed to protect and preserve public health and the environment and therefore they must be applied in a manner that will not frustrate their intended purpose. To that end "Section One" of this record clarification provides a summary of the relevant regulations. If EPA finds that this reading is consistent with the applicable law, then we believe it would be appropriate for EPA to withdraw its June 27"' objection letter. "Section Two" of this record clarification provides EPA with a demonstration that NCDAQ7sinterpretation provides greater public health and welfare protection as compared to the interpretation suggested under the "Q&A". While such a stringency demonstration is not per 

### se required as part of a Title V process, we

1641 Mall Service Center. Raleigh. North Carolina 27699-1641 2728 Capital Blvd.. Raie~gh. NC 27604 Phone 919-733-33401 FAX 919-71 5-7175 iInternet: www.ncair.org
An EqualOpportunityiAffirmat~ve Act~on EmployerMs.Banister August 16,2011 Page 2
believe that the demonstration may help assure the EPA that NC is continuing to properly implement the PSDregulations.


### SectionOne

A PAL may be established using actual emissions under the PAL provisions in 40 CFR 51.166(w). Under 40 CFR 51.166(w), a PAL level is calculated and established for a source by adding the "baseline actual emissions" (BAE)of the PAL pollutant (for each emissions unit at the source) to the pollutants' significance level which EPA has defined for C02e as 75,000 tons per I year. The use of C02e for a GHG PAL is required under the regulations and is consistent with the policy of promoting flexibility while encouraging sources to cap GHG emissions. The following discussion outlines the salient regulatory language related to setting PALs for GHGs.
The definition of "Plantwide Applicability Limit" specifically authorizes PALs to be set in tons per year "for a pollutant at a major stationary source."' It is important to note here, and throughout this conversation, that all of the PAL provisions refer to the term "pollutant" and not the more limited term "regulated NSR pollutant" as defined elsewhere in the PSD regulations. GHGs have, since the 

### US Supreme Court's decision in 2007, been considered air pollutants under the CAA. 

### See Massachusetts v. EPA, 549 U.S. 497 (2007). In 2010 EPA revised the PSD regulations and in doing so grouped six air pollutants as a single "pollutant" called GHGS.' Although not relevant to our PAL discussion, in this same mlemaking EPA established rules for when GHGs would be considered subject to regulation and thus become "regulated NSR pollutants.''4


### Greenhouse gases (GHGs),the air pollutant defined in 

### 3 86.1818-12(a) of this chapter as the aggregate group of six greenhouse gases: Carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, shall not be subject to regulation except as provided in paragraphs (b)(48)(iv) through (v)of this section.

The plain language of the regulation requires the establishment 

### of PALSfor "pollutants" and the regulation sets out the procedures for establishing an actuals PAL.

Actuals 

### PAL for a major stationary source means a PAL based on the baseline actual emissions (as defined in paragraph (b)(47) of this section) of all emissions units (as defined in paragraph (b)(7) of this section) at the source,that emit or have the potential to emit the PALpollutant.

1 75Fed. Reg. 31606(June3, 2010) ("significant" is defined as75.000 tpy C02einstead of applyingthe value in

aranraph (b)(23)(ii)of this section.) [emphasisadded] '40 CFR 5l.l66(w).

NC adopted the relevant GHGTailoringrule provisions and they were made effective by Executive Order 81.

.lAs noted already, the PAL provisions use the more general term "pollutant" and not "regulated NSR pollutant" and therefore the establishment of a PAL doesnot turn on whether GHGs are sub,jectto regulation ofregulated NSR pollutants.Ms. Banister August 16,2011 Page 3

Theterm 

### PALpollutarzt is then defined as,

"the pollutant for which a PALis established at a major stationary source."

40 CFR 

### 51.166(~)(2)(~). Again, the regulation uses the term "pollutant" instead of the term "regulated NSR pollutant." Finally, in establishing the baseline for GHGs, the PAL regulation says the baseline actual emissions shall be established in accordance with 40 CFR 

### 51.166(b)(48)(ii)and (iii). Theseprovisions (ii) For an existing emissions unit (other than an electric utility steam generating unit), baseline actual emissions means the average rate, in tons per year, at which the emissions unit actually emitted the pollutant



### . .."

Consistent with the discussion above, the BAE is established for "the pollutant" and whether a pollutant is a "regulated NSR pollutant" or subject to regulation is not relevant. Having established the BAE, the PAL is set at the BAE "plus an amount equal to the applicable significant level for the PAL pollutant under paragraph (b)(23) of this section." The EPA established the significance value for GHGs as follows, For the pollutant GHGs

.

### .. "significant" is defined as 75,000tpy C02einstead of applying the value in paragraph (b)(23)(ii) of this section.

75 Fed. Reg. 31606 (June 3, 2010). EPA regulations and the preamble both unambiguously confirm that the values in (b)(23) do not apply. The regulation at (b)(49) states "'significant' is defined as

### 75,000tpy C02einstead of applying the value in paragraph (b)(23)(ii)of this section."


### Section

### Two NCDAQ implementation of the PAL provisions for GHGs (as C02e) will result in greater public health and environmental benefits as compared to a program that would not provide for GHG PALs (measured as C02e) or even as compared to a program that would allow PALSonly for the mass of regulated NSR pollutants. Our experience to date is that the emissions limits found in PAL-type permits result in real emissions reductions, as well as other benefits. As part of an overall agency effort to promote more flexible air permits, the NCDAQ has been working with sources, the EPA, the public, and other affected parties and has followed with interest the EPA's evaluation of flexible and innovative permits. EPA's report entitled "Evaluation of the Implementation Experience with Innovative Air Permits" which was included as an Appendix to the Supplemental Analysis of the Environmental Impact of the 2002 Final NSR Improvement Rules, United States Environmental Protection Agency November 21, 2002, included undisputed findingsthat PALS provide superior environment protection as compared to non-PAL programs.

The NCDAQ concurs with EPA's conclusion that PALs in general will result tens of thousands of tons of reductions of pollutants from source categories where frequent operational changes are made, where these changes are time-sensitive, and where there are opportunities for economical air pollution control measures. As EPA found, "[tlhese reductions occur because of

### Ms. Banister August 16,201 1 

### Page4
the incentives that the PAL creates to control existing and new units in order to provide room under the cap to make necessary operational changes over the life of the PAL. It is important to note that the incentive for sources to take PALSstemsfrom the more flexible and certain approach to NSR applicability that PALSoffer, which offers benefits for all sources, even those who may not otherwise trigger major NSR. Weexpect that many sourcesmight seekto obtain PALSbecause of the regulatory certainty they offer, even though they expect to have very few (or no) changes
over the life of the PAL that would trigger major NSR absent the PAL." The reasons EPA determined that these reductions would occur are equally applicable, and perhaps more applicable, to GHG PALS(measured as C02e).
One of the most important environmental benefits of the PAL program is that a PAL prohibits serial, small unrelated emission increases above the PAL, which otherwise can occur under major NSR. The EPA has interpreted the NSR program to allow sources to make unrelated changes that, standing alone, do not result in triggering NSR review and to allow such changes to occur without considering whether other contemporaneous emissions increases subject the change
or changes to NSR review. See, Memorandum from John Calcagni, Director, Air Quality Management Division, to William B. Hathaway, Director, Air, Pesticides, and Toxics Division, Region 

### VI, at 1-2 (Sept. 18, 1989). While the policy memorandum cited above is based on traditional pollutants and their respective significance levels, the rationale is exactly the same for the non-traditional pollutant GHG (measured as C02e) and its trigger level of 75,000 tons per year. Under North Carolina's interpretation, which is considerably more environmentally stringent than EPA's, a GHG PAL would be expressed as a source limit on GHGs measured and tracked as C02e. It would be established by adding 75,000tpy C02eto the baseline actual emissions for the PAL pollutant. With the PAL in place the facility could not exceed the limit without making the required demonstrations necessary to adjust the limit upward. In the alternative (i.e. without the GHG PAL the facility could make an unlimited number of individual unrelated changes each resulting in 74,499 tpy increasewithout subjectingGHGsto PSDreview.
Thetable below summarizes the environmental benefit of North Carolina's implementation of the PSDregulations for GHGs (measured as C02e)as compared with no PAL at all.


### Table 

### 1: Subsequent Serial Modifications

Even more importantly, a mass based GHG PAL (one consistent with the EPA's Q&A interpretation) does not provide the environmental protection and public health benefits of a GHG PAL measured as C02e because the mass based approach fails to take into account the GlobalWarming Potential (GWP) of the various pollutants that make up GHGs. GWP is a relative
measure of how much heat (or climate changepotential) a greenhouse gas traps in the atmosphere. It compares the amount of heat (or climate change potential) trapped by a certain mass of the gas

2012 New Heater Total Emissions after 2 Years 

### PALTPYC02e * 

### 295,000 (220,000

## +75,000) -~xeline Emissions Non - 

### PAL

### TPY 220,000 ‘



### +70,000 3

### 10,000 295,000Ms.Banister August 16,2011 Page 5

in question to the amount of heat trapped by a similar mass of carbon dioxide. Tables 2 and 3 below demonstrate how a PAL based on C02eis more environmentally protective than a PAL that is limited to GHG mass.


### Table

### 2: GHG Emissions from3

### Natural Gas-Fired95 mmBtu/hr Boilers (before change)
-. r I



### Table3: GHG Emissions from3Biomass-Fired 95mmBtu/hrBoilers (after switching fuel) 

## / EPA

### PALPollutant 

# I NC PALPollutant 

### (TPY C02e) 

## ] - -.

C02 CH4 Add to PAL PAL Level



# 1 After Fuel Switch 145,914 3 0 145,917

C02 CH4 Total GHG Emissions

As can be seen above, a switch from natural gas to biomass (servicing the same three 95 mmBtu/hr load) results in a increase in the mass of C02and CH4 but results in a demonstrable decrease in GWP from 220,977iTPY C02e) to 1,827 (TPY C02e). Under a mass based GHG PAL interpretation the facility would be prohibited from implementing this fuel switch. However, under North Carolina's PAL interpretation, the facility would be encouraged to fuel switch to fuels with lower GWPs and therefore such an interpretation is more environmentally protective than the alternative. 

## - 145,914 6 3 75,000 220,977

In a similar fashion, amass based PAL is less environmentally protective than a C02ePAL for complex stationary sources that might employ substations, switchgears and other gas-insulated equipment who often use compounds with high GWP. For these facilities even small shifts in emissions result in significant changes in overall GWP. Tables 4 and 5 provide an example of a facility with a mix of GHG pollutants that requests a GHG PAL. 

### (Mass

### TPY)

258,138 87 258,225



### Table4: 

### PALEstablished

AirPollutmt -C02 - 0 1,827 1,827

SF6 GHG PAL (Mass) GHG PAL (C02e) 1 49,500 (49,500

## +0) 148,439(73,439

## +75,000)

### Ms. Banister August 16,2011 Page 

### 6


### Table

### 5: Emissions Subse uenttoEstablishmentofGHGPAL



# r--I Emissions I 

### YearSubsequent

### to 

### Establishmentof

### GHG 

### PAL 

### TPY

- - - -- - -



### Under North Carolina's interpretation,the facilitywould notbe allowedto exceedthe PAL limit of 148,439 (as C02e). However, under the EPA mass based PAL, the facility would continue to easily comply with the PAL despite an actual increasein GWP emission from 73,439

### to 167,941 - 

### a 230% increasein Global Warming Potential.

GHG PAL (Mass) GHG PAL iC02e)



### In summary,the NCDAQ believesthe GHG PlantwideApplicability Limit contained in the proposed permit is consistent with the applicable regulations. NCDAQ looks forward to a resolution that preserves the superior environmental protection achieved though this proposed permit. If we can provide further assistanceto you or your staff please do not hesitate to contact Dr. Donald van der Vaart, Chief, Permits Section at (919.715.6253)or John C. 

### Evans, Supervisor, NSR Branch at (919.7

### 15.6236). 48,026 167,941

Sincerely,

SheilaHolman

cc: Donald van der Vaart John 

### C. Evans