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OAR Box 1796 

Prepped by Keeia Richards 

Document Number: 

38) IV-H-64 

Docket Number: 

A-90-37 

Printed 10/31/2008 4:20:37 PM Sheet 38 of 107 
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To: 

FGX# ; 

From: 

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FAX TRANSMISSION 

OFFICE OF INFORMATION AND ReeuiATORy AFFAIRS 

OFFICE OF MANAGEMENT AND BUDGET 

NATURAL RESOURCES, ENERsy AND AGRICULTURE BRANCH 

725 17th Street. NW, Room 10202 

Washington, DC 20503 

Office: 202-395-3084/Fax: 202-395-7285 

Date: 

IV- H-6H 

( ) ArtFraas 

( ) Rich Theroux 

( ) Jim Laity 

( ) Amanda Lee 

( S X Amy Farrell 

r ) &ryon Allen 

( ) Margie Malanoski 

( ) David Rostker 

( ) Ruth Solomon 

( ) Edmond ToyPages: ., including this cover sheet 

NW 2 2 2002 

Comments: 

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F*x5Me_rr>*a 
NOU-22-2002 09=46 

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U/jfA V-^v^Si^^ ^&fa*f£*-ikj£. ^" 8 PA L Comments 

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at a diffa a/tithe same levelAfthey determine t/tat level is mm u repi tentative ujthe baseline 

actual emissions? of all thi emissions units at the source plus the significant level equals to or is 

greater than 80 % of the PAL level. If this is not the case; then, the reviewing authority vu-waj^ /^tenyf 

consider adjusting the PAL level based on several factors jncluding air quality planning rieeds. / 

advances in control technology' etc. However, if the renewed PAL level is higher than the 

current PAL, the source must comply with the PAL increase provisions in the final rules. 

In adopting this system, we have struck-•what we believe is an appropriate balance 

between the need to keep PALs ieasonably representative of baseline actual emissions and the 

need 10 provide an incentive for you to reduce emissions under tiie PAL. We agree with the 

eonnnci-rtei1 that the PAL need not be adjusted downward at renewal if the utilization is within 20 

pciu.i_t of thi initial TAL. The final rules'provide that the reviewing authority need not adjust 

the PAL at all if the emissions-level, computed in the exact maimer used to set the level uf'the 

initial PAL, is equal to or gieater than 80 percent of your current PAL. if you do not meal tiiis 80 

pei cent tin eshold, the i evicwing atrthoi ity ordinal ily will sat your renewed PAL at the level of 

your baseline actual emissions with an added updating margin of 20 percent of the. currant. PAL 

(v> the significant level of Ota PAL pollutant, ifgieatet). To provide additional flexibility, the: 

reviewing authority has tha discretion to set the renewed PAL at uny level (up tv /he level of OK 

current PAL) if it believes that level to be mure representative of your operations. Wu believe 

that this system will continue to pi ovide you with an adequate upci uting mm gin under the 

renewed PAL, and avoids any automatic "ratcheting dwm " of the PAL at renewal. 

We agree with the commenters who believe that a unit-by-unit review and adjustment 

based on capacity utilization would be labor intensive and inappropriate. We have opted instead 

for a simpler and more manageable system based on source-wide baseline actual emissions as 

the basis for any PAL adjustment. 

One commenter suggested that sources should be able to maintain the right lo emit at the 

level of allowable emissions if they use controls that continue to qualify as BACT/LAER. This 

option is available unit by unit through the Clean Unit provisions elsewhere in the final rules. 

We have not included it in the PAL rules. We are reserving the issue of allowables PALs for 

future consideration. 

We do not agree with the commenter who suggested that PAL adjustments for unused 

capacity be based on a 3-month period in the previous 10 years. We believe that baseline actual 

emissions are the appropriate starting point for evaluating potential PAL adjustments, and that 

the PAL program should be consistent with the rest of the major NSR program in defining 

baseline actual emissions. See Volume I, 2.2 for the discussion of our reasoning for defining 

baseline actual emissions based on a consecutive 24-month period in the previous 10 years. 

We agree with the commenter who suggested that a single 12-month period is not 

appropriate for evaluating capacity utilization at a source; we have finalized a 24-month period 

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NOU-22-2002 09=47 

FLA. 

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8-1998 PAL Comments 

We do not agree with the commenter who suggested that PALs be established and 

renewed by factoring in a process variability amount above the PAL pollutant significant level. 

You are free to select your consecutive 24-month baseline period in the last 10 years to maximize 

the baseline actual emissions that form the basis for your PAL. We believe that process 

variability has been adequately accounted for by this process. 

Jf1 u We do not agree with the commenter who stated that the PAL process should be tied to 

v^ the title V permit program. For practical enforceability, we believe jbat you must conduct 

monitoring tuquantify emisshnToif an ongoing baata? which ufton wpt .squire better monitoring 

than that required under title V. (See Volume I, 7.12.) In addition, we believe that the PAL term 

should be 10 years, rather than the 5 years of the title V permit, although we suggest that you 

and your reviewing authority coordinate the two so that the PAL is renewed concurrently with 

every other title Vpermit renewal. (See Volume I, 8.7.) We agree that the PAL should be 

reviewed and adjusted at renewal, but as discussed above and in Volume I, 7.8.2, not as 

i suggested by the commenter. In addition, the final rules provide for the PAL to be opened and 

adjusted under certain circumstances. 

We do not agree with the commenters who indicated that you should be able to meet your 

PAL with ERCs that you purchase from other facilities. Use ofERCs would defeat the purpose 

of PALs, which include capping your source 's emissions and encouraging you to implement 

good controls andP2, thereby shifting production over time to less-polluting equipment. 

8.7 Time Period for PAL Review 

Comment: 

8.7.1 Ten-Year Time Period for PAL Review 

Four industry commenters (TV-D-210,256,273, 298) and one regulatory agency 

commenter (TV-D-253) felt that 10 years is the appropriate time period for PAL review. One 

industry commenter (IV-D-221) contended that the 10-year review of PALs should be restricted 

to an administrative review for the purpose of ensuring accurate accounting. 

The regulatory agency commenter (TV-D-253) emphasized the following^ Ten years is 

generally an appropriate period, as long as there is recognition of the need for necessary 

adjustments to reflect any changes in environmental requirements that cannot be addressed by the 

current terms of the PAL, or to reflect States' needs to demonstrate attainment when the current 

terms of the PAL may obstruct such a demonstration. The commenter claimed that States must 

* 3i^— ==== ^^a_E" " m.^tM ""•' =g__IE_S_____SS^g 

have the flexibility to revisit PALs under certain defined circumstances, which would normally 

require a source's permit to be revisited anyway. In the absence of such events, tiie commenter 

claimed that it would be convenient to review a PAL every other time the title V permit is 

renewed. GThe commenter stated statjhat given possible delays in processing title V permits, it 

Draft- Do not quote, cite, copy, or distribute. 1-8-31 November 4, 2002 
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NOU-22-2002 .09=47 

i&ffi f^-*lJ-^-__ yt> K r ?Cs,,-^^_S 8-1998 PAL Comments 

We believe the final PAL rules avoid this inappropriate outcome, by requiring the 

reviewing authority to ^•"'ftfn '-"Wftr* T^rr

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baseline actual emissions and of your PTE (if lower than your baseline actual emissions) at the 

time of PAL permit renewal. Because and provide a written rationale for public comment if it 

determines that an adjustment is warranted. As part of this process^ the reviewing authority 

must ordinarily adjust yottrthe PAL downward if it is no longei / eusonabhyour source's current 

PTE is below thet PAL level. We believe that this adjustment is important for air quality planning 

purposes. AdditionaUv.jhe reviewing puthoritymav renewn the PAL at the same level, without 

consideration of any other factors, if your source's baseline actual emissions plus the significant 

level are equal to or greater than 80 percent of the PAL level. Conversely, ifvour source's 

baseline actual emissions plus the significant level .are less than 80 percent of the PAL level the 

reviewing authority may set the PAL at ajevel that it determines to be more representative Ojjhg 

source's baseline actual emissions, or it is no longer representative of your current PTE, -a PAL 

will not pi oiide you with an unfettered right lo pollute at your historical level of baseline actual 

emissions: 

— Ailhough we firmly believe that apei iodic review of the-level of the PAL is necessary, 

and that this should i esult in an adjustment in your PAL to a level that is representative oryoui 

buseline actual emissions or cun cnl PTE-(whichever-is lower), we do not believe that we should 

inundate un adjustment to the PAL bused on only one pi escribed methodology. Such an 

approach could lead to inappropi iate results, as discussed behw. •Instead, we believe that our 

concerns can be appi opriately addi csscd by providing the Slates the authority to adjust the PAL 

based on what is repr esentative of your baseline actual emissions (or cm rent PTE). 

it determines to be appropriate considering air quality needs, advances in control technology,. 

anticipated economic growth in the area, desire to reward or encourage the source's voluntary 

emissions reductions, or other factors as specifically identified by the reviewing authority in its 

written rationale. 

We believe that some discretion in determining what is representative of actual emissions 

is appropriate based, in part, on our experience with the pilot projects previously mentioned. In 

one instance, a participant voluntarily agreed to reduce its actual emissions by 54 percent in 

exchange for obtaining a source wide emissions cap. After agreeing to this emissions reduction, 

the participant further reduced emissions by increasing capture efficiency and incorporating P2 

strategies into its operations. Unexpectedly, the participant also suffered an unusual economic 

downturn that caused a decrease in the rate of production and a corresponding decrease in 

actual emissions. At the time of renewal of the source wide emissions cap, the participant's 

actual emissions were 10 percent of its actual emissions before committing to the emissions cap. 

The participant chose not to renew its emissions caps, because renewal required an automatic 

adjustment to its current actual emissions level. Clearly, such a result contravenes the mutual 

benefits operating under a PAL provides, and discourages you from undertaking voluntary 

reductions. Accordingly, although the final i ules require the reviewing authority lo consider a 

downward adjustment of the. PAL when your current actual emissions are lass than 80 percent of 

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NOU-22-2002 09 = 48

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8-1998 PAL Comments 

or local agency can adopt rules requiring emission reductions which, in turn, would lead to 

adjustment of the PAL. The commenter requested EPA-shott-d require that any State opting into 

the PAL use PAL emissions in the SIP attainment demonstration, and EPA should change its 

guidance on the use of actual emissions in attainment demonstrations to reflect this. 

Response; 

In our 1998 NOA, we expressed three reasons why it might be appropriate to require 

PALs to be periodically adjusted. First, we expressed concern that the allowable-to-allowable 

applicability system of the PAL would allow you to indefinitely retain the right to pollute at an 

historical level of actual emissions. Second, we were concerned that a PAL may allow you to 

retain unused emissions credits that would otherwise be available for economic growth in the 

area. And third, we were concerned that a PAL may interfere with a State's ability to plan for 

attainment if your actual emissions to the atmosphere are, lower during a SIP planning year than 

in a subsequent year. Commenters responded to our request for comments in this area with the 

comments summarized above. 

After reviewing these comments, our concerns related to unadjusted PALs remain. We 

agree with the commenters who noted the potential for unadjusted PALs to affect the 

environment, economic growth, and attainment planning. The final PAL rules provide for 

periodic review and adjustment to address these Concerns. (See Volume I, 7.8.2 and 8.6 for 

additional detail on this topic) In addition, the final rules provide for both mandatory and 

discretionary reopenings to adjust the PAL under some circumstances, in part to address these 

concerns. (See Volume 1, 7.8.1 for more detail on PAL reopenings.) 

Because the reviewing authority must ordinarily adjust your source's PAL downward if it 

is no longer reasonably representative oj its baseline actual emissions, or it is no longer 

urgent PTE, a PAL will " ^ prmtirlr vqu with n*i nnffttPYPd ri&htMx-^ ^ ((QI^J 

evel of baseline actual emissions. Although we firmly believe that a 

periodic review of the level of the PAL is necessary, and thftt fft. f fhcjtJd result in fm-ndJTtsWtFnt 

ill your PAL to a level that is representatiw orfyauzjjyurre '.v hasrlinp acp'nl g"»>TiV>n<- <-»_-

ourrcni PTE (whichever is lower), 'we do not believe that we should mandate an adjustment to 

the PAL based on only one prescribed methodology. Such an approach could lead to 

inappropriate results. Instead, we believe that our concerns can be appropriately addressed by 

providing the States the authority to adjust the PAL based on what is representative of your 

source's baseline actual emissions (or current PTE). This approach allows reviewing 

authorities to consider the effect of the PAL on the environment, other sources, and attainment 

planning. [Needs-to be revised after resolution with OMB] 

We are providing your reviewing authority discretion to take into consideration air 

quality planning needs. For example, although we remain concerned that a PAL may allow you 

to retain unused emissions credits that would otherwise be available for economic growth in 

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4 - Late Comments on PALs 

4.12 Other Comments on PALs 

Comment: 

A few commenters (TV-D-333, 370, 388, 390, 397) advocated a declining PAL. One of 

the commenters (TV-D-397) would not support a PAL that allows firms to "hold" emissions for 

some period of time, which contrast5: with the goal of the PSD program. The commenter instead 

suggested that the PALs could have a specified cap. The cap could be reduced during the 

periodic review, by a set reduction, or every 5 years based on the average of the last 2 years or the 

highest 2 years. 

One commenter (IY-D-370) supported the implementation of cap-and-trade programs 

with the caps declining to the appropriate level for each criteria pollutant. PALs are one 

approach for this. The commenter believed that the declining cap concept could be implemented 

in such a manner as to achieve equivalent or greater reductions than the existing NSR program.^ 

Response: 

A.\ nuti.d abvrve in svctiun S. 4. Notwithstanding the fact that we did not propose or Seek 

comments on declining PALs. we do not believe that a PAL should be a declining emissions cap 

^iythat requires BACT/LAER performance levels for the existing unils at the PAL facility. 

ir Nevertheless, we believe that a PAL should remain representative ofymtrthe source 's baseline 

\_* actual emissions.AThe final rules require PAL review and adjustment at each 10-year renewal. 

Ay t^TMsreyiSwii^lttmid^ '£ baseline actual emissions over the previous 10 years, 

W although the pei mittintireviewing authority retains the flexibility to consider a variety of factors 

in setting the level of the renewed PAL. See Volume I, 7.8.2 and 8.6 for additional discussion 

about periodic PAL review and adjustments. 

States are free to implement cap-and-trade programs as they see fit to resolve 

nonattainment problems. However, we do not believe that it is appropriate to integrate PALs, 

which are created for purposes of major NSR applicability, with cap-and-trade programs, which 

have the purpose of bringing about area-wide reductions in the target pollutant.-

Comment: 

One commenter (IV-D-341) stated that they do not support the requirement of offsets in 

the setting of a PAL unless it is being established in the context of the pemiitting of a change that 

would otherwise trigger offsets that was initiated at the time the PAL is being established. 

Response: 

Draft-Do not quote, cite, or distribute. 11/04/2002 

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