Ms. Cheryl Nolan Assistant Secretary UNITED STATES ENVIRONMENTAL PROTECTION AGENCY REGIONS 1445 ROSS AVENUE, SUITE 1200 DALLAS, TX 75202-2733


# JAN 2 42008

Office ofEnvironmental Services Louisiana Department ofEnvironmental Quality P.O. Box 4313 Baton Rouge, LA 70821-4313
RE: Concerns with Louisiana's New Source Review (NSR) Reform State Implementation Plan (SIP) Submittal
DearMs. Nolan:
Revisions to the LouisianaDepartment ofEnvironmental Quality (LDEQ) regulations were submitted to us on December 20, 2005, to revise Louisiana's SIP to address the U.S. Environmental Protection Agency's (EPA) regulations for NSR Reform, promulgated December 31, 2002, and revisedNovember 7, 2003. During ourreview, we have identified areas for which we need clarification from LDEQ before we can act on the submittal. These areas include: (1) the use ofvariances to authorize emissions from startups, shutdowns, and malfunctions when calculating the "baseline actual emissions" and "projected actual emissions"; (2) public participation for the major source plantwide applicability limits in nonattainment areas; and (3) the definitions of"malfunction." Our more specific concerns are discussed in the Enclosure to this letter.
Werequest a response from LDEQ addressing the following:
1. What actions LDEQ will take to expeditiously address the concerns identified in the Enclosure. As you are aware, for LDEQ rules (and any revisions thereto) to be approved byEPA into the Louisiana NSR SIP they must meet, orbe more stringent than, the corresponding Federal requirements. IfLDEQ chooses to adopt provisions that are different from the Federal requirements, we encourage you to discuss such provisions

InternetAddress (URL) • http://www.epa.gov Recycled/Recyclable • Printed wnh Vegetable Oil Based Inks on Recycled Paper (Minimum 25% Postconsumer)2

with us andto provide demonstrations that the LDEQ provisionsalthough written differently-still meet the Federal SIPregulatory requirements.
2. A timeline by which LDEQ will provide any needed clarifications, make any necessary commitments, revise Louisianaregulations as appropriate, and submit to EPA any necessary commitments and revisions to the SIP.
Please provide us a response and accompanying timeline within 60 days ofthe date ofthis letterdetailing how and when LDEQ proposes to address the concerns we have raised in the Enclosure to this letter. We look forward to working with you on these matters. Ifyou have any questions, please call JeffRobinson at (214) 665-6435 or StanleyM. Spruiell at (214) 665-7212.

Enclosure Sincere!y yours,

# ~J:J~Yf Thomas H. Diggs Associate Directorfor AirCOMMENTS ONLOUISIANA'S NSR REFORM SIPSUBMITTAL
General Comment: 

### The comments in this letterdo not limit or alterthe scope ofour review ofthis or any otherpending orfuture SIP submission, and our silence in this letter on particular provisions submitted for SIP approval may not be construed as any indication ofwhether we will approve those provisions into the SIP.
Variances


### I. Louisiana's NSR Reform SIP submittal provides that baseline actual emissions include "authorizedemissions associated with startups, shutdowns, and malfunctions" (emphasis added). See the definitions of"baseline actual emissions" at Louisiana Administrative Code (LAC) 33.III.509.B (relating to Prevention ofSignificantDeterioration applicability) and atLAC 33.III.504.K (relating to nonattainment new source review (NNSR) applicability).
A. Louisiana's definition differs from the Federal definition by addition ofthe word "authorized."
B. Generally, use ofthe term "authorized emissions" wouldmeetFederal requirements because itexcludes emissions that exceed legally enforceable emission limitations, pursuant to 40 Code ofFederal Regulations 51.165(a)(l)(xxxv)(A)(2) and (B)(2)-(3) 

### and 51.166(b)(47)(i)(b) and (ii)(b)- (c).


### C. "Authorizedemissions" in the Louisiana SIP, however, can include excess emissions authorized by variances that the LDEQ issues underLAC 33.III.917. 1

1. 

### LAC 33.III.917 provides:

a. Where, upon written application ofthe responsible person or persons, the administrative authority finds that by reason of exceptional circumstances strict conformity with any provision ofthese regulations would cause undue hardship, would be unreasonable, impractical or not feasible under the circumstances, the administrative authority may permit a variance from these regulations.

1LAC 33.III.917 is SIP-approved (dating back to approval ofLouisiana's original SIP as published at 37 FR 10841 (May 31, 1972)). TheLouisiana SIP includes additional pollutant-specific variance provisions, but LDEQ stated during a telephone conference on May 3, 2007, that it primarily utilizes section 917, a general variance provision, to authorize emissions that exceed permitted limits. This discussion, therefore, focuses on the section 917 variance provision; however, EPARegion 6's concerns regarding variances are transferable to Louisiana's other air-related variance provisions. See §§1311 (ParticulateMatter), 1505 (Sulfur Dioxide), and 2119 (Organic Compounds). 

### ' i2

b. No variance may permit or authorize the maintenance ofa nuisance, or a danger to public health or safety.
2. Louisianaissues hundreds ofvariances per yearfor excess emissions originating from, for example, routine startup/shutdown (SU/SD) events and what LDEQ calls "temporaryequipment emission sources" (e.g., abackup control device while the normal control device is being repaired). TheLDEQ stated during a conference call that it does not issue variances for malfunctions, although nothing in the rule explicitlyprevents LDEQ from doing so. II. EPARegion 6's concerns regarding LDEQ's issuance ofvariances.
A. EPA policy and guidance on excess emissions.
1. EPApolicy and guidance on excess emissions has evolved through preambles oftwo EPA rules promulgated in 1977 and five guidance memorandums issued in 1982, 1983, 1993, 1999, and 2001 (collectively hereinafter, for purposes ofthis comment letter, "EPA's excess emissions guidance").2

2 EPA's excess emissions guidance includes: Final Rule for Utah Sulfur Dioxide Control Strategy, 42 FR 21472 (Apri127, 1977) and Final Rule for Idaho Sulfur DioxideControl Strategy, 42 Federal Register 58171 (November 8, 1977), which discuss EPA's position on no automatic exemptions for excess emissions ("1977 FRNs"); Memorandum from Kathleen M. Bennett, dated September28, 1982, entitled, "PolicyonExcess Emissions During Startup, Shutdown, Maintenance, and Malfunctions"; Memorandum from Kathleen M. Bennett, datedFebruary 15, 1983, entitled, "Policy onExcess Emissions During Startup, Shutdown, Maintenance, and Malfunctions," which clarifies EPA's position on excess emissions during certain types ofSU/SD (together with the aforementioned guidance issued in 1982, "1982 and 1983 Guidance"); Memorandum from John B. Rasnic, dated January 28, 1993, entitled, "Automatic or BlanketExemptions for Excess Emissions During Startup,[sicl and Shutdowns UnderPSD"; Memorandum from Steven A. Herman and RobertPerciasepe, dated September 20, 1999, entitled, "State Implementation Plans: PolicyRegardingExcess Emissions DuringMalfunctions, Startup, and Shutdown," which reaffirms the 1982 and 1983 guidance memoranda, supplements them by adding the "affirmative defense option,"**and-cJarifies--FRA-~s--posjtjon-on-excess** emissjons-during.certain.types.of Startup-and-Shutdown for certain source categories (1999 Guidance); and Memorandum from Eric Schaeffer, dated December 5, 2001, entitled "Re-Issuance ofClarification- State ImplementationPlans (SIPs): Policy Regarding Excess Emissions During Malfunctions, Startup, and Shutdown" (2001 Guidance).3

2. The 1982 and 1983 Guidance assumed that States adequately addressed and provided for "routine" SU/SD/Maintenance emissions in its permits. Therefore, the 1982 and 1983 Guidance focused on EPARegions disapproving or working with states to revise any deficient SIPrevision that provided automatic exemptions for excess emissions during periods ofSU/SD, maintenance, and malfunctions.3
3. Ifthe existing SIP was silent on treatment ofexcess emissions due to malfunctions, the 1982 and 1983 Guidance stated that SIP permits couldbe used to address excess emissions, rather than adopting and submitting a rule to EPA for approval into the SIP. The 1982 and 1983 Guidance also acknowledged that enforcement discretion could be another option for addressing excess emissions due to a malfunction and delineated the criteria a State was to consider when drafting an approvable SIP revision relying upon an enforcement discretion decision to address excess emissions due to malfunctions.
4. The 1999 Guidance recognized that SIPs continued to bedeficient throughout the nation by still providing for automatic exemptions for malfunctions. Although EPA's intent merely was to reaffirm the 1982 and 1983 Guidance in the 1999 Guidance, as well as add the affirmative defense option and clarify how to address excess emissions during SU/SD for some certain source categories, litigation occurred on the issue that the 1999 Guidance in some way "invalidated" a State's already issued permits and its related SIP terms. As a consequence ofsettlement, EPA issuedthe 2001 Re-issuance of Clarification ofthe 1999 Guidance to explicitly confirm that the 1999 Guidance "was not intended to affect existing permit terms or conditionsregarding malfunctions, startups and shutdowns that reflect approved SIP provisions," nor to alter the status ofany existing SIP provisions addressing excess emissions. The 2001 Re-issuance also confirms thatEPA will consider the 1999 Guidance (that incorporates the 1977, 1982, and 1983 guidance) and the statutory principles upon which itis based in the context of future SIP rules and permit terms andconditions that reflect approved SIP provisions.

3 EPA's excess emissions guidance defines "malfunction" as "a sudden and unavoidable breakdown.of process.or-control-equipment.''-and recognizes_that,

__although all _excess_emissions_are viewed as violations ofthe applicable emission limitation, ..the imposition ofapenalty for sudden and unavoidable malfunctions caused by circumstances entirely beyond the control ofthe owner and/or operator" may not be appropriate. Attachment, page 1, ofthe 1982, 1983, and 1999 Guidance. Therefore, SIP provisions on malfunctions must be carefully tailored. The Guidance is also clear that ifexcess emissions occurduring routine SU/SD or scheduled maintenance due to a malfunction, then those occurrences should be treated the same as other malfunctions in accordance with EPA policy on malfunctions. 1999 Guidance, p.6; 1993 Guidance, p. 2; 1983 Guidance, p. 3; 1982 Guidance, p. 2-3.4

5. Although we understand that Louisiana's variance provisions have been SIP-approved and utilized for some time now, itis in the context ofNSR Reform SIPrulemaking thatEPARegion 6 believes Louisiana's variance provisions, as written, are no longer a viable element ofLouisiana's regulatory scheme. Inclusion ofthese variance-authorized excess emissions in the baseline actual emissions calculation couldinflate the baseline, decreasing the likelihood that a proposed modification would constitute a significant emissions increase and triggermajorNSR (PSD orNNSR). In order for Louisiana's NSR Reform rules to comply with Federal permitting requirements, Louisiana's airpermittingrules and policies on treatment of"routine" SU/SD/Maintenanceemissions in NSR SIP permits and ofexcess emissions shouldreflect the legal positions and policies delineated in EPA's excess emissions guidance. We explain further below.
B. General concerns aboutLDEQ's treatment ofSU/SD emissions in air permitting.4
1. Itis unclear whetherpermits issued by LDEQ address emissions associated with routine SU/SD.

a. Louisiana has not historically required routine SU/SD emissions to be specifically addressed in its permits, although LDEQ stated in a recent conference call that emissions associated with routine SU/SD events are now, as a general practice, included in the permits. However, Louisiana has stated that ifthe permit is silent on routine SU/SD emissions, one can assume that routine SU/SD emissions are considered part ofnormal operations and are addressed in the permit. Therefore, due to the State's historical omission ofpermitprovisions addressingroutine SU/SD emissions and the State's current treatment ofSU/SD emissions in its permits (i.e., possibly silent), it is unclear on the ·faceofeach permit whetherthe permit addresses emissions

associated with routine SU/SD events. b. Because it is unclear whetherLDEQ-issued permits address emissions associated with SU/SD, it is resulting unclear whether BestAvailable Control Technology (BACT) (or where

4Pursuant to EPA excess emissions guidance, EPA legal interpretations and policies on excess emissions also apply to emissions associated with maintenance. We focus here on emissions associated with SU/SD because those are most relevant to Louisiana's NSR Reform SIP submittal, which is pending for action before us. However, emissions associated with maintenance should be similarly addressed in Louisiana's air permitting program.

### 5
appropriate, Lowest Achievable Emission Rate, or "LAER") limits are being appropriately applied during periods ofSU/SD.5
2. OnJanuary 18,2005,EPAprovided comments to Louisiana on its SU/SD guidance. To date, LDEQ has not shared with EPArevised draftrules and/or guidance to address the deficiencies identified by those comments, deficiencies largely stemming from inconsistency with EPA's long-standing legal position and policies regarding excess emissions during malfunction, startup, and shutdown. Consequently, lack ofregulatory clarity persists, which contributes to ourconcern that LDEQ's airpermitting program is inconsistent with EPA's position on excess emissions.
C. Specific concerns about LDEQ's issuance ofvariances.
1. Inappropriate use ofvariances as an "automatic exemption" from enforcement.

a. Because careful and prudent planning and design are expected to eliminate violations ofemission limitations, including during periods ofSU/SD and scheduled maintenance, all excess emissions are considered violations. However, enforcement of excess emissions violations can be discretionary where the source demonstrates the excess emissions were causedby a malfunction, including a malfunction during periods ofroutine SU/SD and/or scheduled maintenance.
b. In contrast to an enforcement discretion approach, LDEQ's variances appear to operate more like automatic exemptions, which EPA considers inconsistent with the Act because oftheir potential to aggravate air quality and interfere with attainment/maintenance ofambient air quality standards. In fact, EPA's excess emissions guidance explicitly forbids the use of automatic exemptions for excess emissions.

c. Variances, which are not subject to EPA or public review, also limit EPA and citizen enforcement action for excess emissions. All excess emissions should be considered violations, and any decision by LDEQ not to pursue enforcement should not bar

5 BACT (and, where appropriate, LAER) limits are applicable at all times and may not be waived during SU/SD periods. Ifcompliance with existingBACT (orLAER) limits is infeasible, then an alternative limit should bejustified during SU/SD periods and included in the permit. See, e.g., Environmental Appeals Board Orders, In re: Prairies State Generating Company, PSD Appeal No. 05-05, 113-120 (August 24, 2006) and Inre: Tallmadge Generating Station, PSD Appeal No. 02-12 (May 21, 2003). Because LDEQ permits do not explicitly address emissions during SU/SD periods, it is unclear how BACT (or LAER) limits are being applied during SU/SD periods.6

EPA and citizen enforcement ofthe applicable requirements. However, LDEQ's issuance ofvariances effectively acts as such a barto enforcement ofemissions that exceed permitted limits.
2. No EPA orpublic review.

a. LDEQ issues variances without public participation.
b. Byits terms, this variance SIP rule does not require a variance to be submittedto EPA for approval as a revision to the SIP, and Louisiana does not submit variances to EPA for SIP approval.

c. In contrast, see 40 CPR 51.102(a)(3) and 51.104(d), which respectively require public participation for variances and submittal ofvariances as revisions to the SIP.
3. Minimal substantivereview ofvariances priorto issuance byLDEQ.

a. This variance SIPrule does not explicitly require that the Secretary make a finding that the issuance ofthe variance will not interfere with attainment andmaintenance ofthe National Ambient AirQuality Standards (NAAQS).
b. This variance SIP rule does not require that the Secretary make a finding that the issuance ofthe variance is consistent with SIPapprovedcontrol strategies.
4. Additionally, LDEQ's issuance ofvariances appears to be an improper implementation ofthe variance SIP rule. A review byEPARegion 6 staffofselected variances issued by LDEQ appears to indicate that LDEQ performed limited analysis to verify that the variances meet the section 917 variance requirements. In several instances, LDEQ indicated that a requirement of section 917 was met by using a check mark and didnot include any data, technical analysis, or documentation to demonstrate how the relevant requirements (e.g., exceptional circumstances exist) were met.
5. Further, in the context ofNSR Reform, EPA Region 6 is concerned that inclusion ofthese variance-authorized excess emissions in the baseline actual emissions calculation could inflate, or at the very least skev,:, thebaseline, malcing 

### itlesslikely thata proposedmoe!ificatioo would constitute a significant emissions increase and trigger major NSR (PSD orNonattainment NSR). REQUESTED ACTION: EPARegion 6 believes thatLDEQ should address the following aspects ofits air permitting program:7

A. Transparently and explicitly address routine SU/SD6 emissions in air permitting. In addition, submit to EPA a plan on how the State will implement a formal process for updating its permits to explicitly address "routine" SU/SD emissions.
B. In accordance with EPA's excess emissions guidance, appropriately address excess emissions through enforcement, enforcement discretion, and/or (undercertain circumstances) an affirmative defense, andrevise LDEQ's rules andLouisiana's SIPto reflect this approach, ratherthan addressing excess emissions through variances.
C. Revise LAC 33.III.917 and other variance provisions to be consistent with 40 CFR 51.104 and 51.102(a)(3).
D. Include a schedule for expeditiously adopting the above changes and submitting them to EPAfor SIP approval.
NNSRPlantwideApplicability Limit (PAL) Public Participation Rule
I. We understand that LDEQ intends for§ 504.J.5. to mimic the Federal NNSRPAL Public Participationrule, 40 CFR 51.165(f)(5), thereby requiring the same elements for public participation as those required under40 CFR 51.165(f)(5), and, therefore, those required under 40 CFR 51.160 and 51.161.
II. LDEQ e-mailed the following language, proposing to revise§ 504.J.5, to reflect this intent:
A. PublicparticipationRequirement forPALs. Procedures to establish, renew, or increase PALsfor existing majorstationary sources shall be consistent with40 CFR 51.160 and51.161. These include the requirement that the administrative authorityprovide thepublicwith notice of theproposed approval of a PALpermitandat least a 30-dayperiod for submittal of public comments. The administrative authority shall address all material comments before takingfinal action on thepermit.
B. Webelieve this revised language addresses ourprevious concerns and wouldbe approvable into the SIP.
C. LDEQ staffconfirmed during a conference call on May 3, 2007, that they 

### still pi!Ill 

### to !'@¥is!! §

### 5()4.L5 

### aGe€lt:ding!ymd will

### initiatemlemak:ing once the remaining issues with the NSR Reform submittal are resolved.

6 Again, we focus here on emissions associated with SU/SD becauseoftheir relevance to NSR Reform, but we encourage LDEQ to also examine its treatment ofemissions associated with maintenance, and appropriately address those emissions in accordance with EPA's long-standing position on excess emissions.8

REQUESTED ACTION: EPA Region 6 requests that LDEQ include a schedulefor expeditiously adopting the above changes and submitting them to EPAfor approval.
New Definition ofthe term "malfunctions"
I. In its NSRReform SIP revisions, LDEQ adopted a new definition of "malfunctions" in LAC 33:III.504.K and LAC 33:III.509.B. (together hereinafter referred to as the "NSR malfunction definition"). The LDEQ adoptedthe NSR malfunction definition in conjunction with its rule amendment to include only "authorized" emissions resulting from startup, shutdown, and malfunction in baseline actual emissions andprojected actual emissions calculations. The NSR malfunction definition defines "malfunctions" as: 

### Malfunctions-for purposes ofthis Section, 

### malfunctions shall include any such emissions authorized by permit, variance, orthe on-line operating adjustment provisions of LAC 33:III.1507.B and 2307.C.2, butexclude any emissions that are not compliant with Federal or State standards.
II. TheNSR malfunction definition differs from the SIP-approved (and SIP-wide applicable) definition of"malfunction" in LAC 33:Ill.lll (hereinafter "SIP-wide malfunction definition"). Furthermore, whereas the SIP-wide malfunction definition closely tracks the use of"malfunction" in EPA's excess emissions guidance (and therefore is consistent with EPApolicy), the NSRmalfunction definition does not appearto be consistent with EPApolicy normeetEPA's long-standing legal interpretation ofthe Act.
A. Because the LDEQNSR malfunction definition fails to reference the SIP-wide malfunction definition, it appears on its face to replace the SIPwide malfunction definition for purposes ofNSR (NNSR under 504 and PSD under 509) with a definition inconsistent with both the SIP-wide malfunction definition and with EPA policy. It also appears to condone certain types ofmalfunction events, contrary to how malfunctions are typically conceptualized (i.e., automatic emission limitation exemptions during periods ofexcess emissions due to SU/SD, maintenance, and malfunction are not allowed).
B. TheNSR malfunction definition adopted with the Louisiana NSRReform is less**st:liltgeflttll!i!~tlle** geRent!SWwlde oofiRitief!··afldwould 

### bea·relllll\atiO!I ofthe existing SIP. And, as you are aware, any SIPrelaxation request must meet section 110(1) ofthe Act. Section 110(1) requires the State to demonstrate that such a relaxation will not interfere with any applicable requirement concerning attainment andreasonable further progress, or any other applicable requirement ofthe Act (e.g., PSD increments). Because9

EPA's excess emissions guidance has been based on the Act's requirements to protect attainment ofthe NAAQS and PSD increments, andnot aggravate airquality, itis difficult to conceptualize an approvable Section 110(1) demonstration due to the nature ofmalfunctions.
C. In addition to a lack ofotherconditions tbat should characterize which malfunctions are eligible for enforcement discretion orthe affirmative defense option offered in the 1999 Guidance, EPA Region 6 has two major concerns about the LDEQ NSR malfunction definition:
l. TheNSR malfunction definition is not limited to sudden unavoidable breakdowns that are beyond the control ofthe owner oroperator; and
2. The NSR malfunction definition could include an activity orevent that was foreseeable and couldhave been avoided by better operation and maintenance, which are the types ofactivities orevents thatEPA does not consider to be malfunctions.
III. In reading LDEQ's responses to comments and preamble to the LDEQ NSR malfunction definition rule, it appears that LDEQ's intent was not to substitute the NSR malfunction definition for the SIP-wide malfunction definition for purposes ofNSR, but rather to clarify the types ofemissions associated with malfunctions that should be includedin the calculation ofbaseline actual emissions and projected actual emissions. Ifsubstitution was not LDEQ's intent, then EPA Region 6 suggests clarifying the NSR malfunction definition by referencing the SIP-wide malfunction definition. Forexample: 

### Malfunctions-shall mean "malfunction" as defined in LAC 33.111.111 and, for purposes ofcalculating baseline actual emissions and projected actual emissions under this section, shall include any such emissions authorized by permit, variance, orthe on-line operating adjustment provisions ofLAC 33.III.1507.B arid 2307.C.2, but exclude anYemissions that are not compliant with Federal or State standards.7 REQUESTED ACTION: Please further explain LDEQ's intentregarding the NSR malfunction definition and propose actions (including a timeline for such action) to correct the current inconsistencies between the proposed NSR definition ofmalfunctions, the current SIP-approved definition ofmalfunction, andEPApolicy.

7 EPARegion 6 recognizes that ifLDEQ revises its variance provisions as recommended, LDEQ's NSR definition ofmalfunction would require further consideration (and revision). This revised definition ofmalfunction is provided only as an example in the context ofLDEQ'scurrentNSR Reform SIP submittal.10

Reasonable Possibility Provision I. The submittedregulations include the "reasonable possibility" provisions that were promulgated in the NSR Reform rules dated December 31, 2002. Louisiana adopted these provisions in Sections 504.D.9 and 509.R.6. On June 24, 2005, the Circuit Court ofAppeals for the District ofColumbiaremanded the reasonable possibility provisions to EPAfor further consideration. On December21, 2007, EPApromulgatedits final rule clarifying the "reasonablepossibility" recordkeeping and reporting standard ofthe 2002 NSR Reform rules. See 72FR72607.
II. The preamble to the December21, 2007 rulemaking states:
In the case ofNSR SIPrevisions that include the term "reasonable possibility" butEPA has not yet approved, we will approve the SIP revision ifthe State orlocal agency commits to implementing the "reasonablepossibility" standard in a mannerconsistent with ourfinal rule.
See 72FR 72613. REQUESTED ACTION: EPA Region 6 requests LDEQ submit a commitmentto implement the "reasonable possibility" provisions in Sections 504.D.9 and 509.R.6 in a manner consistent with EPA final rule promulgated December 21, 2007. Although a revision to your "reasonablepossibility" provisions may not immediatelybe necessary for us to approve LDEQ's NSR Reform SIP revision submittal currently before us, we encourageLDEQ-forpurposes ofregulatory clarity-to adopt revisions (and submit those revisions to EPA for SIP approval) reflecting EPA's clarification ofthe "reasonable possibility" recordkeeping and reporting standard ofthe 2002 NSR Reform rules. Should LDEQ choose to adopt such revisions, those revisions must be submitted to EPAfor SIP approval byDecember 21, 2010.