November 12, 2015 Gerardo Rios (Air - 3) U.S. Environment al Protection Agency, Region 9 75 Hawthorne Street San Francisco, CA 94105 - 3901 RE: Docket ID Number EPA - R09 - OAR - 2015 - 0280: SIP Limited Disapproval: BAAQMD Stationary Source Permits Dear Mr. Ri os, We write to provide comments on behalf of the California Council for Environmental and Economic Balance (CCEEB) on the limited disapproval of the Bay Area Air Quality Management District (BAAQMD or “District”) New Source Review (NSR) rules, Regulation 2, Rules 1 and 2. CCEEB members operate facilities with numerous major and minor source permits in the Bay Area and are directly affected by the District’s NSR rules. We have three major areas of concern with EPA’s proposal: 

### 1. NAAQS%Protection%Requirement ,%De%Minimis%Threshold :$the$District’s$new$ requirement$for$significant$minor$sources$(Reg.$2,$section$2

; 2 ; 308)$goes$above$ and$beyond$what$is$required$for$federal$NSR$purposes$in$that$it$applies$ Prevention$of$Significant$Deterioration$(PSD)$modeling$to$mino r,$non ; attainment$ pollutants.$Accordingly,$CCEEB$believes$that$the$District$has$authority$to$set$a$de$ minimis$level$for$minor$sources$it$deems$as$less$than$significant.$EPA’s$ disapproval$appears$inconsistent$with$federal$guidelines$and$imposes$ administrati ve$burden$without$achieving$meaningful$environmental$benefits. 2. Emissions%Calculations%for%Major%Sources%of%Non ? Attainment%Pollutants:% EPA’s$ proposed$emissions calculation$ for$the$generation$of$emission$reduction$credits$ and$for$determining$offset$requirem ents$strays$from$the$ District’s$ existing$ and$ previously$approved$ approach$in$that$it$uses$an$actual$emissions$baseline$instead$ of$potential$to$emit$(PTE).$CCEEB$is$troubled$as$ EPA’s$proposal$would$invalidate ERCs$that$reflect$real

; world$emissions$reduction s,$and$then$ double

; count how$ many$offsets$are$requ ired$for modified$source s$that$have$already$fully$offset$ emissions$up$to$their$PTE.$Mr.$Gerardo$Rios November$12,$2015 Page$ 2 

### 3. Class%1%Area%Visibility%Impact%Analysis,%100 ? km%“Bright%Line” Threshold : the$ District’s$Reg.$2,$section$2

; 2 ; 401.4$relies on$EPA$guidance$to$establish$when$ visibility$impact$analysis$is$required,$and$yet$EPA$disapproved$ of$ this$“bright$line”$ threshold.$EPA$should$either$clarify$how$to$implement$the$“may$have$an$impact”$ language$in$40$C.F.R.$51.307$or$reverse$its$disapproval. CCEEB$believes$it$is$in$the$ best$interests$of$all$stakeholders$to$have$a$clear,$transparent$basis$for$District$ decisions$on$what$sources$need$to$conduct$impacts$analysis. CCEEB asks EPA staff to work with the BAAQMD to resolve differences in interpretati on of Clean Air Act (CAA) requirements pertinent to EPA’s proposal, and that EPA approve Regulation 2, Rules 1 and 2 as expeditiously as possible. We provide further detail and discussion on each of our concerns in the rest of this letter. Allow the BAAQ MD to Set a De Mi nimis Level for Minor Source Permits, Avoid Possible Unintended Consequences in Non - Attainment Areas EPA disapproved of Reg. 2, section 2 - 2 - 308, seemingly because the District does not require impact analysis for any project (i.e., both minor and ma jor modifications) that emits a non - attainment pollutant. Consistent with federal NSR requirements, section 2 - 2 - 305 requires an impact analysis for a significant increase in a PSD pollutant from a major facility; modeling is done to ensure th at emissions will not cause or contribute to any NAAQS exceedance. The “NAAQS Protection Requirement” in section 2 - 2 - 308 would extend applicability of PSD - modeling requirements to any source that results in a significant net increase in any pollutant. Thus , section 2 - 2 - 308 expands the use of PSD - modeling by both the type of facility (i.e., both minor and major facilities) and the number of pollutants (i.e., both PSD and non - attainment pollutants). However, section 2 - 2 - 308 allows use of EPA’s NSR significanc e levels to determine whether a project’s emissions could be considered de minimis, and thus not required to conduct an impact analysis. 1 EPA found that section 2 - 2 - 308 does not satisfy CAA requirements under 40 CFR 51.160(a) because it only applies to pr ojects that will results in a “significant net increase” rather than any project (“i.e., both minor and major modifications”). First, CCEEB disagrees that the CAA requires a NAAQS - compliance demonstration for non attainment pollutants. Moreover, it is hard to see how such a provision could be implemented in non - attainment areas without creating a de facto permit moratorium, as it would be very challenging if not impossible for sources to prove compliance using PSD - modeling methods. 2 In terms of 40 CFR 51.16 0(a), the District agrees that impact

1 Section 2 - 2 - 227.1 establishes de minimis levels for PSD pollutants. Sources with de minimis emission levels are not required to conduct impact analysis for PSD pollutants under section 2 - 2 - 305; EPA has not challenged this section, yet disapproves use of the same de minimis thresholds in section 2 - 2 - 308. 2 The BAAQMD minimizes this concern in the San Francisco Bay Area air basin because the region is currently in compliance for a ll NAAQS, even though it is officially deemed as a non - attainment area for ozone and PM2.5. Staff argues that the air basin has sufficient “headroom” to give projects flexibility in terms of demonstrating compliance for ozone and PM2.5.Mr.$Gerardo$Rios November$12,$2015 Page$ 3 analysis for non - attainment pollutants is not required by federal regulations. For example, in staff’s response to public comments, the District states explicitly that section 2 - 2 - 308 “is not based on an interpretation that it is required by EPA’s federal NSR program requirements.... Staff are [sic] proposing this requirement because it is important from an air quality and public health perspective...not because District staff believe that it is legally required.” 3 Second, while CCEEB disagrees with the District’s decision to submit section 2 - 2 - 308 to EPA as part of the State Implementation Plan (SIP) since this provision is not required under federal NSR rules, we do agree that the BAAQMD has authority to apply de minimis thresholds, and we support its use of NSR significance levels for this purpose. For most minor sources — and the businesses operating them — conducting impact analysis would be administratively burdensome and costly, as would BAAQMD staff resources needed for review. Under State law — not federal law — the District already requires minor sources that emit more than 10 pounds per day of key air pollutants to install Best Available Control Technology (BACT) ; and sources that emit 10 tons per year or more of ozone pre cursors must provide emissions offsets. 4 These requirements apply to about 8000 minor sources in the Bay Area. Adding an air impact analysis requirement gains almost nothing additional in terms of air quality since, in total, minor sources account for only 0.02% to 0.34% of the air basin’s total inventory. For these reasons, it is difficult to understand the basis of EPA’s concern over using its NSR significance levels to set a de minimis threshold in section 2 - 2 - 308. It is worth noting that EPA has found that District measures, rules, and regulations are adequate in terms of meeting NAAQS for all pollutants. Furthermore, the District’s NSR permit program requires all sources to be in compliance with its rules and regulations. As the staff report explains, “ District Staff have [sic] conducted a detailed analysis of this situation, for both attainment and non - attainment pollutants. 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 ne w and modified sources to comply with the District’s comprehensive regulatory program, which will provide for attainment and maintenance of the NAAQS even with a certain amount of growth from new and modified sources.” 5 BAAQMD PTE - to - PTE Test vs. EPA Actu al - to - Potential Test for Calculating ERCs and Cumulative Increases EPA disapproved of the way the District calculates generation of Emission Reduction Credits (ERCs)(section 2 - 2 - 605.2) and cumulative increases for modified sources (section 2 - 2 - 606.2) beca use Reg. 2 - 2 uses the difference between the pre - modification potential - to - emit (PTE) and the post - modification PTE (or potential - to - potential) to calculate emissions rather than an actual - to - PTE calculation preferred by EPA.

3 BAAQMD Responses to Comments on Final Version of Proposed Amendments , October 31, 2012. Page 9. 4 Federal NSR rules only require BACT and offsets for major facilities, i.e., those that emit 100 tons per year in most instanc es. So BAAQMD rules are much more stringent for minor sources than federal law requires. 5 Updates to BAAQMD New Source Review and Title V Permitting Programs: Regulation 2; Rules 1,2,4, and 6: Final Staff Report , September 26, 2012. Pages 84 - 85.Mr.$Gerardo$Rios November$12,$2015 Page$ 4 EPA’s proposed actual - to - PTE calculation is a departure from its own federal program, which uses an actual - to - allowable emissions calculation for offsets. EPA a lso uses an actual - to - projected - actual calculation to determine whether major NSR requirements are triggered, which reflects changes made in 2002 that are collectively referred to as “NSR reform.” It should be noted that EPA’s actual - to - projected - actual calculation is commonly viewed as less stringent than the potential - to - potential test proposed in Reg. 2 - 2. Because it is less stringent, and because the BAAQMD has long used the potential - to - potential calculation in its NSR rules, the District argues that it cannot adopt the NSR reform test, as this would violate the State’s “anti - backsliding” law, SB 288. The District further ar gues its use of post - modification PTE is consistent with federal definitions of “allowable emissions” and as such, meets federal NSR requirements. EPA’s recommended actual - to - PTE test, on the other hand, goes beyond both the potential - to - potential calcula tion put forth by the District and the actual - to - projected actual calculation used for NSR reform. CCEEB is concerned because the actual - to PTE calculation requires that sources surrender offsets multiple times for the same emissions, which themselves have already been fully offset through the NSR permitting process. Sources also lose the value of ERCs previously surrendered as offsets. At issue seems to be the common practice among air districts to allow sources to account for previously provided offsets i n permit changes. We are unsure why EPA is raising concerns over this now, and we urge EPA staff to work with District counsel to develop a common interpretation of Clean Air Act requirements. The practical effect of EPA’s proposed actual - to - PTE calculati on could be to stymie facility modernization projects at a time when the District and state agencies are urging sources to upgrade equipment and become more efficient as a means to achieving air quality and climate goals. EPA’s proposal seems counter produ ctive. It is helpful to note that the Bay Area is currently in attainment of all NAAQS, including the 8 - hour ozone standard and 24 - hour PM2.5 standard, and does not need to achieve further annual incremental reductions in emissions for attainment purposes (i.e., to show reasonable further progress). We ask EPA to clarify the rationale for its disapproval and to provide a full evaluation of approaches to calculate offset s and ERC s at different air districts so as to better substantiate its actual - to - PTE reco mmendation for the BAAQMD. BAAQMD Rightfully Sets a “Bright Line” for Class I Area Visibility Impact Analysis EPA’s own guidance recommends using a 100 - km proximity test to determine whether or not to require a new or modified source to conduct a visibil ity impact analysis for Class I areas. CCEEB believes that it is beneficial to all stakeholders to have clear, transparent, and consistent permit requirements. Ambiguity over rules and regulations only leads to confusing and conflicting interpretations, wh ich in turn increases the likelihood of unnecessary litigation. Indeed, one of the District’s key objectives in amending Reg. 2 was to reduce ambiguity and provide clarity. If the District’s “b right line” approach is inadequate, then we ask EPA to provide further guidance to clarify when and why the 100 - km test is insufficient.Mr.$Gerardo$Rios November$12,$2015 Page$ 5 Thank you for considering our views.

William J. Quinn Chief Operating Officer

cc: Amy Zimpfer, Associate Director, Air Division, EPA, Region 9 Alexander Crockett, BAAQMD Gerald D. Secundy, CCEEB Members of the CCEEB Bay Area Partners hip