UPDATES TO NEW SOURCE REVIEW 

AND TITLE V PERMITTING PROGRAMS

REGULATION 2 – RULES 1, 2, 4 & 6

BACKGROUND DISCUSSION FOR

SECOND DRAFT OF PROPOSED AMENDMENTS

&

RESPONSES TO COMMENTS RECEIVED ON FIRST DRAFT

May 25, 2012
i

INTRODUCTION AND EXECUTIVE SUMMARY

Staff of the Bay Area Air Quality Management District (District) are issuing a second draft of their

proposed amendments to Regulation 2. The proposed amendments will update the District’s New 

Source Review (NSR) and Title V permitting programs (District Regulation 2, Rules 1, 2, 4 & 6). The 

proposed amendments will update the NSR and Title V permitting programs as follows:

1. Add NSR Permitting requirements for PM2.5, which is required because of EPA’s designation of 

the Bay Area as non-attainment for the 24-hour PM2.5 National Ambient Air Quality Standard.

2. Add GHGs as a Regulated Air Pollutant subject to the District’s NSR and Title V permitting 

programs, because of EPA’s recent regulation of GHGs.

3. Adopt a District “Prevention of Significant Deterioration” (PSD) Program for EPA approval. The 

District has never had an EPA-approved program for this important element of NSR permitting.

4. Update, reorganize and clarify the regulatory language to make it easier to understand and 

apply.

In addition, there are also certain aspects of the District’s current permitting programs that do not 

satisfy EPA’s requirements for these programs. The proposed amendments will address any such 

discrepancies that Staff have identified.

Staff are publishing this document to explain the rationales behind the second draft of the proposed 

amendments, as well as to respond to comments Staff received on the first draft. Those comments 

were received after a public workshop that Staff held on February 22, 2012, as well as three meetings of 

a technical working group that Staff convened to discuss the specific regulatory language addressed by 

the proposed amendments, on February 28, 2012, and March 8 and 20, 2012. This document provides a 

written response to all of the comments that were received, and explains Staff’s rationales for further 

revisions being made in the second draft. These further changes are shown in the second draft of the 

proposed amendments that Staff are publishing along with this document. 

Briefly, the major changes in the second draft include the following:

1. Adding a requirement for all new sources and modifications that will result in a significant 

increase in emissions to demonstrate that they will not cause or contribute to an exceedance of 

any National Ambient Air Quality Standard. Such a demonstration was proposed in the first 

draft for PSD Projects; Staff are now proposing to require such a demonstration for all projects 

with a significant increase in emissions of any pollutant (including non-attainment pollutants). 

This proposal is addressed in Section I.C.

2. Providing additional flexibility in calculating baseline emissions for purposes of determining 

whether PSD permitting requirements apply for GHGs. The District’s baseline calculation 

procedures normally use emissions during the three most recent years to establish the baseline; 

Staff are proposing to allow facilities to use a period going back as far as ten years for 

establishing the baseline for GHG emissions. (The baseline period would remain the same for 

other pollutants.) This proposal is addressed in Section III.
ii

3. Eliminating the provision for inter-pollutant offset trading that allowed POC reductions to be 

used to offset NOx emissions increases. Such trading is beneficial for purposes of addressing 

ozone, but NOx is also a precursor to PM2.5 and using POC reductions to offset NOx increases 

does not result in an air quality benefit from a PM2.5 perspective. Moreover, such trading is no 

longer allowed under EPA’s regulations. This proposal is addressed in Section I.B.2.

4. Expanding the requirements for protection of visibility in Class I Areas to include non-attainment 

pollutants. The first draft required a review of visibility impacts in Class I Areas for PSD 

pollutants; staff are expanding the requirement in the second draft to include non-attainment 

pollutants as required by EPA regulations. This proposal is addressed in Section III.

5. Adding provisions describing the procedures for calculating the PM2.5 fraction of existing banked 

PM10 emission reduction credits, and for calculating the amount of banked PM credits when 

condensable PM emissions are included. These procedures will provide clear, objective 

standards that will establish how the District’s historical regulation of particulate matter will 

transition into the new regulatory environment with regulation of the PM2.5 fraction and 

enhanced testing methods. These provisions are described in Section I.D.2.

In addition to these further changes, Staff are also considering whether to amend the definition of 

“modification” in Section 2-1-234 to add an additional element to the definition that would incorporate 

the federal Major NSR applicability test. Staff are soliciting further input on whether to add this test to 

the definition, as explained in Section IV.E.2 herein. Staff are also making a number of other adjustments

to the changes proposed in the first draft in response to the comments received, as explained herein. 

Staff are circulating this discussion report to provide interested parties with the background on Staff’s 

reasoning behind the second draft proposed amendments and to provide written responses to all of the 

comments that were submitted. Interested parties are invited to review the revised proposal and

Staff’s responses to the comments and to submit any further comments. Comments should be in 

writing and should be directed to Carol Lee at the Bay Area Air Quality Management District, 939 Ellis 

Street, San Francisco, CA, 94117; or electronically at clee@baaqmd.gov. Comments must be received 

by June 25, 2012, in order that Staff can consider them before finalizing any proposal to submit for 

consideration by the District’s Board of Directors. Ms. Lee may also be reached by phone to answer any 

questions at (415) 749-4689.

In addition, in response to suggestions from members of the public, Staff will be preparing (through a 

consultant) an Environmental Impact Report (EIR) to evaluate whether anything in the proposed 

amendments may have the potential to cause any significant environmental impacts. Staff will be

undertaking this EIR process to ensure that the District complies with all applicable requirements under 

the California Environmental Quality Act (CEQA). Concerns regarding the potential for significant 

environmental impacts are important and warrant a formal EIR analysis to consider all relevant issues in 

detail. The District will be able to make a fully-informed determination on whether or not there will be 

any such significant environmental impacts at the conclusion of the EIR process. Staff invite interested 

members of the public to participate in that process. Staff anticipate publishing an Initial Study/Notice 

of Preparation shortly, which will formally commence the EIR process. Notice regarding the CEQA 

process will be provided separately. 
iii

TABLE OF CONTENTS

I. UPDATING NSR PERMITTING REQUIREMENTS FOR PARTICULATE MATTER............................1

A. PM2.5 BACT Requirement............................................................................................ 1

Comment I.A.1. – Best Available Control Technology for PM2.5 ...................................................................1

B. PM2.5 Offsets Requirement......................................................................................... 2

Comment I.B.1. – Use of Banked Credits to Offset New Emissions Increases..............................................2

Comment I.B.2. – Inter-pollutant Trading for NOx and POC as PM2.5 Precursors ........................................3

Comment I.B.3. – Ensuring that Offsets are “Surplus” .................................................................................4

C. Evaluating Ambient Air Quality Impacts from Non-“Major” Facilities.......................... 6

Comment I.C.1. – Evaluating Potential PM and Other Ambient Air Quality Impacts from NonMajor Sources.....................................................................................................................6

D. Explicitly Defining PM10 and PM2.5 to Include Condensable Particulate Matter ............ 8

1. Compliance with existing PM permit limits (established before the 

regulatory changes): ............................................................................................. 8

Comment I.D.1. – Request for Clarification on How Prior Regulatory Determinations Will Be 

Treated Under the Revised PM Definitions........................................................................8

2. Treatment of Existing PM Banked Emission Reduction Credits:............................ 13

Comment I.D.2.a. – The Mechanics of Updating Existing Banked PM Credits...........................................13

Comment I.D.2.b. – Timing for Updating the Existing Inventory of Banked PM Credits............................14

Comment I.D.2.c. – Use of a PM Credit for Both Its PM10 Value and PM2.5 Value......................................15

Comment I.D.2.d. – Fees for Updating Banked PM Credits........................................................................16

Comment I.D.2.e. – Language Clarification.................................................................................................16

3. Particulate Matter Test Methods ........................................................................ 17

Comment I.D.3. – Use of Alternate PM Test Methods When Methods 201A/202 Cannot Be Used..........17

4. Other Issues Regarding Condensable Particulate Matter Emissions ..................... 18

Comment I.D.4.a. – No Need to Reference Size of Condensable PM Emissions........................................18

Comment I.D.4.b. – Regulating Precursors Does Not Constitute “Double-Counting” of Emissions...........18

Comment I.D.4.c. – Deferral of Implementation of New Particulate Matter Test Methods......................18

II. ADDING PERMITTING REQUIREMENTS FOR GHGS............................................................19

Comment II.1. – Use of “Tailoring Rule” Applicability Thresholds..............................................................19

Comment II.2. – “Automatic Invalidation” Provision for GHG Permitting Requirements..........................20

Comment II.3. – Considerations of Energy Efficiency in NSR Permitting....................................................22

Comment II.4. – GHG Permitting Fees........................................................................................................23
iv

III. ADOPTING A DISTRICT PSD PERMITTING PROGRAM FOR EPA SIP APPROVAL....................23

Comment III.1. – Support for Adopting District PSD Program....................................................................23

Comment III.2. – “NSR Reform” Applicability Methodologies for PSD.......................................................24

Comment III.3. – Determining “Net” Emissions Increases for PSD Applicability........................................29

Comment III.4. – PSD Source Impact Analysis for GHGs.............................................................................30

Comment III.5. – Class I Area Visibility Protection for Non-Attainment Pollutants....................................31

IV. REVISIONS TO REGULATORY LANGUAGE AND STRUCTURE..................................................32

A. Determining “Baseline” Emissions For Purposes of Calculating Emissions 

Increases and Decreases........................................................................................... 32

Comment IV.A.1. – Baseline Calculation Period .........................................................................................32

Comment IV.A.2. – Clarification on Determining When Baseline Period Commences for 

Calculating Amount of Emission Reduction Credit...........................................................32

Comment IV.A.3. – Suggestion to Allow an “Idle Period” When Establishing the Baseline for an 

Emission Reduction Credit................................................................................................34

Comment IV.A.4. – Types of Projects Covered by Baseline Calculation and Emission 

Increase/Decrease Calculation Procedures in Sections 2-2-604 and 2-2-606..................35

Comment IV.A.5. – Emissions Increases For Purposes of “Modification” Definition .................................35

Comment IV.A.6. – “Potential to Emit” Increase Calculation Procedure in Section 2-2-605 and 

PSD Projects......................................................................................................................36

B. Regulation 2-1 Permit Exemptions............................................................................ 36

Comment IV.B.1. – Review of Existing Exemptions....................................................................................36

Comment IV.B.2. – Proposals to Add New Permit Exemptions for Certain Types of Sources....................37

Comment IV.B.3. – Exemption for Installation of Components with Fugitive Emissions Under 

Section 2-1-128.21............................................................................................................38

Comment IV.B.4. – Components with Fugitive Emissions Installed on Equipment That Is Not Part 

of a “Process Unit”............................................................................................................39

C. Accelerated Permitting Program............................................................................... 40

Comment IV.C.1. – Threshold for Using Accelerated Permitting Program.................................................40

Comment IV.C.2. – Issuance of Temporary Permit to Authorize Operation Pending Full Permit 

Review...............................................................................................................................40

Comment IV.C.3. – Accelerated Permitting Requirements for “Alterations”.............................................41

Comment IV.C.4. – Requirements for “Complete” Application Under Accelerated Permitting 

Program ............................................................................................................................42

Comment IV.C.5. – Reference in Current Regulation 2-1-106 to “Alterations” That Do Not Involve 

An Increase In Emissions...................................................................................................43
v

Comment IV.C.6. – Accelerated Permitting Program for Modification/Replacement/Addition of 

Components with Fugitive Emissions Exempt from Permitting Under Section 2-1-

128.21 ...............................................................................................................................43

Comment IV.C.7. – Hypothetical Example Regarding Use of Accelerated Permitting Program.................44

Comment IV.C.8. – Accelerated Permitting Program Not Available For Projects Subject to NSPS ............45

D. “Case-by-Case MACT” Requirement.......................................................................... 45

Comment IV.D.1. – Importance of Identifying Case-by-Case MACT Issues Pre-Construction....................46

Comment IV.D.2. – Basis for Implementing Case-by-Case MACT Requirement.........................................47

Comment IV.D.3. – Question About Applicability Language of Case-by-Case MACT Requirement...........47

E. Definitions ............................................................................................................... 48

1. “Facility” Definition ............................................................................................ 48

Comment IV.E.1.a. – “Related Sources” And Cumulative Increase Calculations........................................49

Comment IV.E.1.b. – “Adjacent” Sources vs. Bright-Line 3-Mile Test ........................................................49

Comment IV.E.1.c. – “Support Facility” Issue .............................................................................................49

2. Definitions of “Alteration” and “Modification”.................................................... 50

a) The “Modification” Definition in Section 2-1-234 ........................................... 50

Comment IV.E.2.a.1. – “NSR Permit Limits” ...............................................................................................53

Comment IV.E.2.a.2. – Group (or “Bubble”) Limits ....................................................................................54

Comment IV.E.2.a.3. – Support for Clarifying “Modification” Language....................................................56

Comment IV.E.2.a.4. – A “Modification” is an Increase in Potential to Emit Any Pollutant......................56

Comment IV.E.2.a.5. – Concerns About Using “Potential to Emit” Concept..............................................57

Comment IV.E.2.a.6. – Using Hourly Emissions to Determine Daily PTE and Daily Emissions to 

Determine Annual PTE......................................................................................................57

Comment IV.E.2.a.7. – Using “Historical Operating Records” to Determine PTE.......................................57

Comment IV.E.2.a.8. – Applying “Modification” Definition For Multiple Pieces of Equipment That 

Operate Interdependently................................................................................................58

b) Potential Incorporation of Federal “Major NSR” Modification Test in 

Section 2-1-234 ............................................................................................. 59

Comment IV.E.2.b. – Solicitation of Input on Incorporating Federal “Major NSR” Test in 

Modification Definition in Section 2-1-234.......................................................................59

c) The “Alteration” Definition in Section 2-1-233................................................ 63

Comment IV.E.2.c.1. – Clarification on What Kinds of Changes Constitute an “Alteration” 

Requiring an Authority to Construct.................................................................................63

Comment IV.E.2.c.2. – Imposing Permit Conditions To Keep A Change From Becoming a 

“Modification” ..................................................................................................................65

Comment IV.E.2.c.3. – Alterations Not Subject to NSR Requirements.......................................................66

3. “Portable” Definition .......................................................................................... 66

Comment IV.E.3.a. – District “Portable” Definition vs. ARB PERP Definition .............................................69
vi

Comment IV.E.3.b. – Other Comments Regarding “Portable” Definition ..................................................69

4. Definition of BACT (Consideration of Overall Environmental Benefits in 

BACT Determinations) ........................................................................................ 70

Comment IV.E.4. – Flexibility in Applying BACT To Ensure Maximum Environmental Benefit ..................70

5. Other Definitions................................................................................................ 71

Comment IV.E.5.a. – “Federally Enforceable” Definition ...........................................................................71

Comment IV.E.5.b. – “Regulated Air Pollutant” Definition.........................................................................72

Comment IV.E.5.c. – “New Source” Definition ...........................................................................................72

Comment IV.E.5.d. – “PSD Pollutant” Definition and “Split” Attainment Designations.............................73

Comment IV.E.5.e. – “PSD Pollutant” Definition and Precursors...............................................................74

Comment IV.E.5.f. – “Pollutant-Specific Basis” Definition..........................................................................74

Comment IV.E.5.g. – “Contemporaneous” Definition ................................................................................74

Comment IV.E.5.h. – “Contemporaneous” Definition................................................................................75

Comment IV.E.5.i. – “Creditable” Emissions Increases and Decreases for Purposes of PSD 

Applicability ......................................................................................................................75

Comment IV.E.5.j. – “Offsets” Definition....................................................................................................76

Comment IV.E.5.k. – “Emission Reduction Credit” Definition in Section 2-4-201......................................77

Comment IV.E.5.l. – “Significant” Emissions Increase Definition in Section 2-2-226.................................77

Comment IV.E.5.m. – “Significant” Increase Definition for Total Particulate Matter ................................77

Comment IV.E.5.n. – “Closure” and “Shutdown” Definitions.....................................................................78

Comment IV.E.5.o. – Title V “Significant Source” Definition for Greenhouse Gases .................................78

Comment IV.E.5.p. – Definition of Day, Month & Year ..............................................................................79

V. CONSIDERATION OF THE POTENTIAL FOR ANY ADVERSE ENVIRONMENTAL IMPACTS UNDER 

CEQA.............................................................................................................79

Comment V – Preparation of Environmental Impact Report to Consider the Potential for 

Significant Adverse Environmental Impacts.....................................................................79

VI. MISCELLANEOUS COMMENTS........................................................................................80

Comment VI.1. – Guidance on Permitting Procedures...............................................................................80

Comment VI.2. – No Offsets Required for CO ............................................................................................80

Comment VI.3. – Tying Title V Permit Revisions to NSR Permit Revisions .................................................81

Comment VI.4. – Rules In Effect at Time of Permit Application Govern ....................................................81

Comment VI.5. – Flexibility in Regulatory Language ..................................................................................81

Comment VI.6. – Renumbering of Regulations ..........................................................................................82

Comment VI.7. – Specification of Source Test Frequencies .......................................................................82

Comment VI.8. – RACT adjustment for Requirements in Clean Air Plan....................................................82

Comment VI.9. – RACT adjustment for MACT standards ...........................................................................83

Comment VI.10. – Including Acetone as a Non-Precursor Organic Compound .........................................83
1

I. UPDATING NSR PERMITTING REQUIREMENTS FOR PARTICULATE MATTER

One of the principal reasons for the proposed amendments to Regulation 2 is to update the District’s 

NSR program to add new permitting requirements directed specifically at the smallest fraction of 

particulate matter, PM2.5. EPA has established new particulate matter NAAQS aimed specifically at 

PM2.5, and the Bay Area has been designated as non-attainment for the short-term (24-hour) NAAQS for 

this particulate matter fraction. As a result, the District is required to adopt Non-Attainment NSR 

permitting requirements for PM2.5 specifically. (Regulation 2 already includes provisions applicable to 

the larger fraction of particulate matter, PM10.) The proposed amendments add requirements specific 

to PM2.5. In addition, EPA has also updated its testing requirements for particulate matter, for both 

PM10 and PM2.5, as testing methods have improved. EPA now requires that all testing and measurement 

of PM10 and PM2.5 must take into account both filterable and condensable particulate matter emissions. 

In the past, the testing and measurement requirements did not specify whether both portions had to be 

included, and in many cases only the filterable portion was included when NSR permitting was done for 

particulate matter. The proposed amendments will update the definition of particulate matter, for PM10

and PM2.5, to state explicitly that all PM10 and PM2.5 measurements and regulatory determinations must 

be based on both filterable and condensable particulate matter emissions for all purposes under 

Regulation 2. 

The District received comments on these proposed amendments as follows.

A. PM2.5 BACT Requirement

Comment I.A.1. - Best Available Control Technology for PM2.5: In the first draft, Staff proposed to 

require Best Available Control Technology (BACT) for PM2.5 for sources with the potential to emit over 

10 pounds per day of PM2.5. Although this threshold would be far more stringent that is required by EPA 

– EPA’s program only requires BACT for facilities over 100 tons per year and with increase of over 10 

tons per year – this is the same regulatory threshold that the District uses for other criteria pollutants. 

(See Regulation 2-2-301.) Some commenters supported setting the threshold for PM2.5 BACT at this 

level. Others suggested that the District should consider using a different threshold. These commenters 

stated that in some cases, a PM2.5 source could have health impacts on nearby receptors at an emissions 

rate of less than 10 pounds per day. They suggested that the District should evaluate different emissions 

rates from typical sources to see whether some other threshold would be more appropriate in terms of 

ensuring that PM2.5 emissions do not cause adverse health impacts. 

Response: Staff are not proposing to depart from the 10 lb/day BACT threshold that the District has 

historically been applied to criteria pollutants, including the larger fraction of particulate matter, PM10. 

Staff considered whether the BACT threshold for PM2.5 should be set at a different level in order to 

address the concern raised in the comments about potential health impacts to nearby sensitive 

receptors. Such concerns about toxic health risks to sensitive receptors are very important, and are a 

central part of the District’s ongoing regulatory efforts regarding PM2.5. Such toxic health risks are best 

addressed through the District’s “Toxics New Source Review” permitting requirements in Regulation 2, 
2

Rule 5, however.1 That program, which the District updated most recently in 2010, requires a review of 

new and modified sources to ensure that such sources will not cause any significant toxic health risks to 

nearby sensitive receptors, using the most recent toxics evaluation protocols developed by the 

California Office of Environmental Health Hazard Assessment (OEHHA). The Toxics NSR program 

specifically takes into account diesel PM, which is one of the principal drivers of health risk in fine 

particulate matter, among a long list of other toxic health hazards. The program does not yet address 

PM2.5 health risk in other contexts beyond diesel PM, but that is because the scientific understanding of 

such risks and how to evaluate them is still evolving. As the state of the science evolves and OEHHA 

develops health risk protocols for PM2.5 in other contexts in addition to diesel PM, the District’s Toxics 

NSR program will incorporate them as well. 

Moreover, the Toxics NSR program targets the specific location at which the source will be causing the 

emissions and requires an analysis of impacts on specific sensitive receptors that may be located near 

that source. In this way, the Toxics NSR program is a better tool to address the potential for health risks 

from specific sources on nearby receptors, compared with the BACT requirement under Regulation 2, 

Rule 2, which uses a one-size-fits-all applicability threshold that applies to all sources regardless of 

whether they will be located near any sensitive receptors or not. 

For all of these reasons, the District’s Toxics NSR program is the best tool to address potential health 

risks from PM2.5 sources (in addition to other tools outside of the District’s regulations, such as CEQA). 

Staff are therefore not proposing that the District adopt a PM2.5 BACT threshold that would be tailored 

to specific health risks from individual PM2.5 sources. That type of analysis is undertaken in accordance 

with the requirement so Regulation 2-5. BACT under Regulation 2-2 is still an important regulatory tool 

for ensuring the Bay Area’s compliance with the PM2.5 NAAQS, of course, and implementing the BACT 

requirement at 10 lb/day will help accomplish that goal. But for targeting potential health risks to 

nearby sensitive receptors, toxics NSR is the more appropriate tool. The second draft therefore retains 

the 10 lb/day BACT applicability threshold for regulating PM2.5 under Section 2-2-301.

B. PM2.5 Offsets Requirement

Comment I.B.1. - Use of Banked Credits to Offset New Emissions Increases: The District received 

comments stating that allowing facilities to use banked emission reduction credits (offsets) to 

counteract new emissions increases is problematic. The comments stated that using banked emission 

reduction credits allows 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. These comments stated that 

the District’s regulations should not allow banking and trading of emission reduction credits. 

 

1

Note that there are also other regulatory provisions in place beyond the Air District’s regulations that address 

concerns such as this. CEQA, for example, requires an evaluation of toxic risks to sensitive receptors from air 

emissions, and this requirement will also help address the important concerns that these comments are 

addressing. 
3

Response: The Clean Air Act has long provided for the use of banked credits to satisfy offsets 

requirements. EPA’s federal Non-Attainment NSR provisions provide for banking of emission 

reductions,

2

as do the District’s NSR provisions adopted under the California Health & Safety Code. 

There are a number of reasons why allowing emissions reductions to be banked is beneficial. 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. 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 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 flexibility for the 

Bay Area to locate any such sources except in locations where sources are already present. And the 

banking rules ensure that attainment and maintenance of the NAAQS are not jeopardized, 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 not impacted in any way 

depending on whether emissions banking is allowed or not. 

Staff agree that the District’s NSR program must support the District’s efforts to promote environmental 

justice throughout the Bay Area. The District imposes a number of safeguards to ensure that emissions 

banking and 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 credits, that source is still subject to the District’s Toxics New Source Review requirements, 

among others. As discussed above, the Toxics NSR requirements ensure that such sources will not have 

any significant adverse health impacts on any nearby sensitive receptors.3 

In addition, Staff are proposing in the second draft an additional requirement for all new and modified 

sources that will cause a significant emissions increase to demonstrate that they will not cause or 

contribute to any exceedance of any National Ambient Air Quality Standard. This demonstration will 

need to be made for the specific area around where the source will be located. 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. 

For all these reasons, Staff are not proposing any major substantive changes to the District’s current 

rules that allow for the use of banked emission reduction credits, and are implementing the PM2.5

offsets requirements using these same emissions banking provisions. 

Comment I.B.2. - Inter-pollutant Trading for NOx and POC as PM2.5 Precursors: The District received 

comments stating that it should not allow POC emission reductions to offset NOx emissions increases. 

The comment stated that NOx and POC are PM2.5 precursors, and the proper trading ratios (i.e., the 

 

2

See 40 C.F.R. Part 51, Appendix S, Section IV.C.5 (“ ‘Banking’ of emission offset credit.”).

3

As also mentioned above, other requirements outside of the District’s regulations provide additional protections, 

such as CEQA. 
4

ratios at which a certain amount of NOx reductions should be considered equivalent to a certain amount 

of POC reductions) are not well understood with respect PM2.5 impacts. The comment also questioned 

the District’s assumption on which the District’s current POC-for-NOx trading provision (current 

Regulation 2-2-302.2) is based – that ozone formation in the Bay Area is POC-limited4– and suggested

that the District should not prefer POC reductions over NOx reductions in addressing ozone concerns. 

The comment stated that the District should not allow POC emission reduction credits to be used to 

offset NOx emissions.

Response: In considering these comments, Staff first note that the Bay Area is POC-limited with respect 

to ozone formation, and so the rationale for allowing POC reductions to be used to offset NOx emissions 

increases remains valid. NOx is a PM2.5 precursor, however, as the comments note, whereas POC is not. 

From a PM2.5 perspective, therefore, this same rationale does not apply. Moreover, Staff reviewed 

EPA’s requirements for inter-pollutant trading for Non-Attainment NSR in 40 C.F.R. Section 

51.165(a)(11), which apply for NOx and POC as ozone precursors. Those requirements do not allow 

inter-pollutant trading at all for ozone precursors. Under that paragraph, inter-pollutant trading is 

allowed only for PM2.5 under certain specific conditions as specified in that paragraph. For these 

reasons, Staff are removing the POC/NOx inter-pollutant trading provisions in the second draft. 

Staff also considered the similar provisions in Section 2-2-303 regarding inter-pollutant trading for PM10

and NOx and SO2 as PM10 precursors. These concerns that warranted removal of the NOx/POC trading 

provisions do not apply in the PM10 precursor context. First and foremost, inter-pollutant trading 

between PM10 and its precursors is not allowed unless the applicant first makes a showing that there will 

be a net air quality benefit and EPA concurs after public notice and comment. This showing must 

demonstrate on a case-by-case basis, based on modeling, that the trading will in fact improve air quality. 

This requirement eliminates the concern discussed above with NOx/POC trading that such trading could 

actually have a negative air quality impact. Second, the prohibition in 40 C.F.R. Section 51.165(a)(11) 

does not apply for PM10 offsets because the Bay Area is attainment for PM10; Section 51.165 does not 

apply. (Note that this trading is allowed for PM10 only, not for PM2.5.) For both these reasons, Staff are 

not removing the provisions allowing for inter-pollutant trading for NOx and SO2 as PM10 precursors. 

Comment I.B.3. - Ensuring that Offsets are “Surplus”: A commenter noted that CAA Section 173(c)(1)

requires that offsets provided for a new or modified source must be in effect and enforceable by the 

time the source commences operation; and must ensure that the total tonnage of increased emissions 

must be offset by an equal or greater amount of actual emissions reductions from the same or other 

sources in the area. The commenter stated that the District’s offsets provisions do not satisfy these 

 

4

“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 which 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 reduction requirements, because the District would prefer to get POC reductions and 

the additional ozone-reduction benefit associated with them, as compared to getting the same amount of NOx 

reductions. 
5

requirements; it stated that the District’s program does not require the use of offsets that are “surplus” 

as required by the CAA. The commenter stated that the District must ensure that offsets provided for 

new or modified sources are “surplus at the time the project begins.” 

Response: Staff disagree that the District’s banking and offset provisions allow for the use of emission 

reduction credits that are not “surplus” as required by the Clean Air Act. The amount of emissions 

reduction credits that the District will credit for offsets purposes is based on the actual emissions of the 

source that is shut down to generate the credit, and the amount of credits that must be provided is 

equal to or greater than the total tonnage of the new emissions being offset, as required by Section 

173(c)(1). Moreover, the District adjusts the actual emissions baseline for the source that is shut down 

to generate the credit downwards to reflect the most stringent regulatory requirements that are in 

effect when the source is shut down, in order to satisfy the requirement that such reductions are 

“surplus” (i.e., in excess of what the source would be required to do anyway under applicable regulatory 

requirements). The District refers to this reduction in the baseline as the “RACT adjustment”.5

These comments appear to relate to whether any further adjustment to a banked credit should be made 

after the source is shut down that generated the credits, in the event that new regulations are 

promulgated in the future after the shutdown takes place. Such further reduction is not warranted or 

required under CAA Section 173. Section 173(c)(2) prohibits credit from being granted for reductions at 

a source that are otherwise required by law. But once a source is shut down and is no longer generating 

emissions, any new regulations that come into effect after that time cannot by definition require 

anything further of the source that has been shut down. If a source is shut down and not operating, 

then any new regulations will not – and by definition cannot – require anything further from that source. 

Thus, applying the RACT adjustment when the source is shut down and the emission reduction is banked

satisfies the CAA’s requirement that offsets be “surplus” of what is required anyway by regulatory 

requirements. There is no CAA requirement to further reduce the amount of credit generated based on 

new regulations that are adopted later, because any such regulations will not require reductions from a 

source that is not in operation. 

Moreover, any such further reduction would not make any difference in the Bay Area’s ability to make 

“Reasonable Further Progress” or attain the NAAQS – which is the whole purpose of the Section 173 

requirements (and the CAA Non-Attainment Plan requirements in general in Subpart D of Title I of the 

Act). The full amount of all banked credits is carried in the District’s emissions inventory that is used as 

the basis for planning for attainment. When new regulatory requirements come into effect, this 

emissions inventory does not take credit for how such requirements would impact sources that have 

already been shut down. This is logical from an accounting perspective because the new requirements 

will not have any effect in obtaining emission reductions from sources that are not emitting anymore. 

But it also means that the District’s strategy for attaining and maintaining the NAAQS is built on an 

assumption that such credits will not be adjusted for such new regulations. That is, when the District 

 

5

The comment referenced CAA Section 173(c)(1), but the “surplus” requirement is in Section 173(c)(2), which 

states that “[e]mission reductions otherwise required by this chapter shall not be creditable as emissions 

reductions for purposes of any such offset requirement.” 
6

commits to measures to achieve regional emission reductions necessary to attain the NAAQS, such 

measures inherently take into account the fact that they will not have any effect on sources that have 

already been shut down, and that banked credits will be used in the amount that was credited at the 

time of the shutdown. There is no need to further adjust such banked credits in order for such 

measures to be effective to achieve their stated goals.

Finally, undertaking a further adjustment to a banked credit after it was generated would be a 

significant additional administrative burden on the District’s banking program, because a RACT 

adjustment requires a detailed engineering review of what emissions the source actually emitted and 

what part of those emissions may have been in excess of recently-adopted regulatory standards. This 

additional administrative step would be unduly burdensome where it is not necessary to achieve the 

clean air goals that underlie the offsets requirements. Moreover, it would add significant regulatory 

uncertainty to the program, as holders of banked credits would not be able to determine with certainty

exactly how much emission reductions their credits will actually reflect. Holders of such credits could 

even be encouraged to use them sooner, out of a concern that they may lose value, whereas it is always 

preferable for such credits to remain in the bank where they are carried on the inventory for accounting 

purposes but are not actually being emitted.

For all of these reasons, Staff disagree with these comments that the District’s offset provisions fail to 

satisfy the Clean Air Act’s requirements, either in letter or in spirit. Staff are not proposing to delete the 

provisions for banking of emission reduction credits in the second draft.

C. Evaluating Ambient Air Quality Impacts from Non-“Major” Facilities

Comment I.C.1. - Evaluating Potential PM and Other Ambient Air Quality Impacts from Non-Major 

Sources: The District received comments suggesting that the District should evaluate and consider 

potential PM impacts from smaller PM emissions sources, in particular from sources that are below the 

NSR “major” source thresholds. The commenter suggested that the District should consider the extent 

to which such non-major sources could cause an exceedance of the PM NAAQS. The comments noted 

that in doing so, it is important to consider “micro- and middle-scale” impacts, meaning impacts within a 

distance of several meters to several city blocks from a source. The comments suggested that the 

District should consider potential impacts of such sources with emissions as low as 10 pounds per day 

(the level below which most permitting requirements do not apply). The comments provided some 

modeling analyses from hypothetical PM sources emitting at rates below the NSR “major” source 

threshold suggesting that in some cases, such sources could have the potential for causing a NAAQS 

exceedance. 

Response: Staff agree that it would be appropriate to require smaller sources to demonstrate that they 

will not cause any exceedance of a NAAQS, even at facilities that do not exceed the “major” facility 

thresholds at which such a demonstration would be required under the PSD program (100 or 250 tons 

per year in emissions of any regulated air pollutant). Staff are therefore adding a requirement that any 

new or modified source at any facility, regardless of the facility’s size, must make such a demonstration 

where it will result in any significant emissions increase of any criteria pollutant. (A “significant” 
7

increase for these purposes is defined using the established NSR significance levels under the definition 

set forth in Section 2-2-227 in the second draft.) Any new source or modification that will result in a 

significant increase in any criteria pollutant will be required to demonstrate through modeling that it will 

not cause or contribute to a NAAQS exceedance. This demonstration will be made using the same 

modeling and related procedures as those used for the demonstration made for PSD permitting 

applicable to sources over the PSD “major source” threshold. The demonstration will be required for all 

criteria pollutants, both attainment pollutants and non-attainment pollutants.

Staff believe that requiring such a demonstration for significant increases is important, even at non-

“major” facilities, because significant increases that could interfere with attainment and maintenance of

the NAAQS need to be identified and avoided even if the facility 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. Moreover, requiring such a demonstration will help the District establish for 

EPA’s SIP review that the District’s NSR program will ensure that no new or modified source “will 

interfere with attainment or maintenance of a [NAAQS],” as is required under 40 C.F.R. Section 

51.160(a)(2) and (b)(2). These requirements are applicable to the District’s NSR program in general, and 

not just to “major” facilities. EPA Region IX staff have told District Staff that these requirements in 

Section 51.160(a)(2) and (b)(2) need to be addressed in order for EPA to approve the District’s program.

Requiring such a demonstration for all significant emissions increases is the most appropriate 

mechanism to address these concerns. Applying this requirement to significant increases will 

encompass the majority of all the emissions increases from new and modified sources within the Bay 

Area, without requiring overly burdensome permit review requirements for the smallest and most 

inconsequential sources. New and modified sources that will result in less-than-significant emissions 

increases are considered to be de minimis and would 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, and so requiring the demonstration for all such sources would not be warranted given the 

additional administrative burdens of doing so. Basing the requirement on the NSR significance levels is 

also consistent with how EPA’s NSR program treats a number of air quality analysis requirements (e.g., 

PSD air quality impacts).

Finally, regarding the point noted in the comments about the importance of considering impacts within 

a distance of a few meters to a few blocks of an emissions source, staff agree that it is important to 

consider localized impacts of this nature. The demonstration that is being added in the second draft 

amendments requires such an evaluation, using the same modeling analysis requirements that apply for 

PSD permitting for “major” facilities. This demonstration will address the potential for the new source 

or modification to cause a violation of the NAAQS at all locations, including locations close to the source 

and those that are more distant. 
8

D. Explicitly Defining PM10 and PM2.5 to Include Condensable Particulate Matter

As noted above, the proposed amendments specify explicitly in the definition of particulate matter 

(PM10 and PM2.5) that particulate matter includes “condensable” particulate matter emissions – that is, 

emissions that are in the gaseous phase when emitted but condense at ambient temperatures to form 

particulate matter. Historically, the District’s particulate matter definition did not specify whether the 

condensable portion should be included. As a result, the condensable portion oftentimes has not been 

included when permitting particulate matter emissions (although in many cases it has). EPA has recently 

updated its requirements for NSR permitting programs and now requires them to specify explicitly that 

the condensable portion must be included. The first draft included language in the definitions of PM10

and PM2.5 to specify that the condensable portion would be included when applying these terms. This 

language raised a number of important issues.

1. Compliance with existing PM permit limits (established before the regulatory 

changes):

Comment I.D.1. – Request for Clarification on How Prior Regulatory Determinations Will Be Treated 

Under the Revised PM Definitions: A number of commenters stated that the regulations should specify 

what will be done with existing permit limits and other regulatory determinations that were established 

taking into account only the filterable portion. For example, if a source has a PM emissions limit that 

was established assuming that PM would be measured using only filterable PM emissions, commenters 

stated that the District should specify that compliance with that permit limit going forward should 

continue to be based on filterable PM emissions only. To do otherwise, these commenters stated, 

would have the practical effect of changing the existing permit limits. Some commenters suggested 

adding language similar to what EPA used in 40 C.F.R. § 52.21(b)(50)(vi). 

Other similar comments concerned emissions baselines used for determining the amount of an 

emissions increase or decrease from a modification. After the new amendments take effect, the 

commenters asked, will the baseline against which future emissions increases and decreases are 

measured include the condensable portion, even for a source where PM determinations have been 

made in the past based only on filterable emissions? In addition, a baseline period may span the date 

on which the amendments take effect, so the regulations need to clarify whether such a source’s 

baseline emissions during this period are calculated using just filterable PM emissions or both filterable 

and condensable emissions.

Response: Staff agree that these issues need to be addressed explicitly in the regulations, and have 

added language to do so. The new provisions added to address these issues are Sections 2-1-604 and 2-

1-605 in the second draft amendments.

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 
9

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. 

Staff are proposing to 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, Staff are adding language to clarify that compliance with such conditions in the future will 

be determined on the same basis as applied 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 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. These principles are codified in proposed Section 2-1-604 in the 

second draft of the proposed amendments. 

With respect to regulatory determinations, 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 the 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 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. Thus, new permit limits on 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 
10

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 offsets accordingly. 

These principles are codified in proposed Section 2-1-605 in the second draft of the proposed 

amendments. The following descriptions explain in more detail how these principles will work in some 

specific permitting situations that commonly arise. These procedures are also illustrated in examples of 

how the provisions would apply at actual facilities set forth in the Appendix at the end of this document. 

• 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 the emissions before the change and 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-toapples” comparison.6

 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 

three-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 

 

6

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.
11

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 

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: BACT 

is required for facilities with a PTE of 100 tons per year or more of PM10 (and under the 

proposed amendments for PM2.5). 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 would 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 would 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 would 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 the 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.
12

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 

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 

reduction: 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 onsite 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,7before the source was shut down or otherwise reduced 

its emissions (and will be subject to any RACT 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 “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 

 

7

The baseline periods for contemporaneous on-site emission reduction credits and for banking of credits are set 

forth in Section 2-2-603.
13

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. 

However, going forward after the effective date of the proposed amendment, 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 any 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. 

2. Treatment of Existing PM Banked Emission Reduction Credits:

Staff received a number of comments regarding how banked PM10 emission reduction credits, which 

have usually been calculated using only filterable PM emissions, will be treated. Commenters were 

concerned in particular with (i) how existing PM credits based on filterable emissions will account for the 

fact that condensable emissions are also being included in the definition of particulate matter; and (ii) 

how existing PM10 credits will be treated with respect to reflecting the fact that the PM10 emission 

reductions that created the banked credits also involved a certain amount of PM2.5 emission reductions 

as well. These issues are discussed below.

Comment I.D.2.a. – The Mechanics of Updating Existing Banked PM Credits: The District received a 

number of comments on the procedures Staff proposed to determine the amount of PM2.5 emission 

reductions that can be credited to an existing banked PM10 credit and to determine the amount of 

reductions reflecting both filterable and condensable emissions. Some of the comments inquired about 

how the District will “reconstruct” the condensable portion (the “back half”) of existing banked credits. 

One particular concern raised was what kind of information the District will require to demonstrate 

what the condensable emissions were from the source that was shut down to create the credit, and 

whether the District will accept best available data to support such a demonstration. Other comments 

noted that the provisions that Staff proposed in Section in 2-4-603 regarding the evaluation of the 

amount of reductions that can be credited including condensable addressing only the PM10 element of 

such credits; these comments stated that the provision should address the condensable portion of the 

PM2.5 fraction of existing banked credits as well. 

Response: Staff are proposing provisions in Regulation 2-4 to address these issues. Specifically, Section 

2-4-216 creates a procedure for holders of PM10 credits to apply to have the corresponding PM2.5

fraction specified and to have the amount of credit specified including condensable PM. Section 2-4-602 

specifies the procedures for establishing the filterable PM2.5 portion of a credit’s filterable PM10

emissions, and Section 2-4-603 specifies the procedure for determining the condensable emissions. The 

amount of PM2.5 and the amount of condensable emissions will be determined based on the most 

reliable information that is available for each credit for which an update is sought. 
14

With respect to the types of information required in order to undertake the update calculations, the 

same rule of reason will apply as applies for all District permitting regulations. Information must be 

sufficiently reliable in order that the District can say with reasonable certainty how much PM2.5

emissions are involved and how much filterable and condensable emissions are involved. District Staff 

will be flexible in determining what types of information will suffice in each case, as long as the 

information meets general minimum engineering standards for reliability. What will be required in each 

specific case must necessarily be made on a case-by-case basis. 

With respect to the condensable portion of PM2.5 credits, there are no existing PM2.5 credits in the 

District’s banking system and so there are no existing PM2.5 credits to update. When new PM2.5 credits 

are created after the effective date of the proposed amendments, they will be created based on both 

filterable and condensable emissions at that time. Moreover, condensable emissions are generally very 

small and are both PM10 and PM2.5, so when a PM10 credit is updated, the condensable portion is the 

same for PM10 as for PM2.5.

Comment I.D.2.b. – Timing for Updating the Existing Inventory of Banked PM Credits: Several 

commenters commented on how the process of updating the existing inventory of PM10 credits will 

occur. These commenters were concerned that regulated entities that may be considering new projects 

that will result in increases in PM emissions need to have a good understanding of the market for PM 

credits. The commenters stated that in order for that to happen, all of the existing PM credits need to 

be formally updated so that prospective purchasers can know exactly how many PM10 and PM2.5 credits 

are available (as defined including condensable emissions). The commenters were concerned that some 

current credit-holders may not request an update of their existing banked PM10 credits, which would 

mean that the regulated community would not have an understanding of what the market for PM2.5

credits (and for updated PM10 credits, including condensable emissions) will look like. The commenters 

suggested that the District should take it upon itself to update existing PM10 banked credits – or at least 

of the credits held by the largest current PM10 credit-holders – so as to provide an idea of cost and 

availability of credits to the market. On a related issue, one commenter stated that some thought and 

consideration needs to be given to what will happen if banked credits are not available for purchase. 

Response: Staff considered the market need for timely updating of PM credits and have built in a 

market-based mechanism to encourage credit-holders to apply to the District for updating. Specifically, 

if holders of banked credits are in the market for selling credits, it is strongly in their interest to have 

their credits updated so that they can market them. An existing PM credit that has already been 

updated to reflect its PM10 and PM2.5 fractions, with condensable PM emissions included, will be far 

more marketable than a credit that has not been updated. Staff therefore expect that the holders of all 

existing marketable PM10 credits will apply to have those credits updated in a timely manner. If any 

credit holders are not interested in selling their credits, they will have less of an incentive to have their 

credits updated; but if they are not interested in selling them, those credits are not in the market 

anyway and having them updated does not help prospective purchasers who are looking for offsets for 

their projects. (Although staff notes that even credit holders who are not interested in selling will have 

an incentive to have their existing credits updated, in order that they can know with certainty their PM10

and PM2.5 fractions, with condensable PM emissions included, which will help the holders in planning 
15

any future activities that may require offsets.) Staff are therefore not proposing to create an affirmative 

obligation on the District to conduct any certain number of credit updates within any specified time 

period, and instead are proposing to set up a system whereby credit holders will have the incentive to 

approach the District to have their credits updated. Staff expect that this system will have the same 

effect, resulting in timely updates of existing marketable credits so that prospective buyers and sellers 

have the information they need to make sound pricing decisions for credit transactions.

Regarding what happens if a facility owner wants to undertake a project for which offsets are required 

but for which it cannot purchase sufficient banked credits, staff do not anticipate that outcome as there 

are currently a substantial amount of existing PM10 credits in the District’s bank and the bulk of these 

credits are expected to be usable for their PM2.5 credit as well. Hypothetically, however, if such a 

situation did arise and banked credits were not available for purchase, the other alternative would be to 

shut down some existing PM source to create credit (either at the same facility as the new project being 

built, which will generate a contemporaneous onsite emission reduction credit; or at some other facility, 

which can be banked and used to satisfy offset requirements). This is a fundamental principle inherent 

in the basic NSR concept of offsets (i.e., “no net increase” in emissions of non-attainment pollutants 

from major sources), and is not unique to PM2.5. Moreover, it is an inescapable consequence of EPA’s 

offset requirements for Non-Attainment NSR, and it is not something that the District can eliminate 

from its NSR program. But again, staff do not anticipate this situation arising in practice.

Comment I.D.2.c. – Use of a PM Credit for Both Its PM10 Value and PM2.5 Value: A commenter 

suggested that the District should clarify that the same banked credit can be used for both its PM10 value 

and its PM2.5 value. The commenter suggested that staff include some examples in the staff report to 

demonstrate how this would work.

Response: Staff agrees that it is important that this point be clearly understood by the public and by the 

regulated community. For any new increase in PM10 emissions, a certain fraction of the PM10 emissions 

will be PM2.5, because PM2.5 is a subset of PM10. By the same token, for any decrease in PM10 emissions, 

a certain fraction of the PM10 emissions will be PM2.5. If there is an increase in PM10 and PM2.5 in this 

manner, both the PM10 and PM2.5 elements of that increase can be offset by the same emission 

reduction, provided that the reduction involves at least as much PM10 and PM2.5 as the increase. 

As an example, take a PM emission source where the PM2.5 fraction is 80% of the PM10. An increase in 

10 tons of PM10 emissions will therefore involve 8 tons of PM2.5 emissions. Such an increase could be 

offset by shutting down a similar source that also has an 80% PM2.5/PM10 ratio. Shutting down such a 

similar source with 10 tons of PM10 emissions and 8 tons of PM2.5 emissions would offset both the PM10

and PM2.5 elements of the emissions increase. This reduction at one source would thus satisfy both 

elements of the PM offsets requirements. The same principles hold true if the shutdown is reflected in a 

banked credit. A single banked credit reflecting such a shutdown could be used to offset the new 

increase in both PM2.5 and PM10, as long as the banked credit reflects 8 tpy of PM2.5 reductions and 10 

tpy of PM10 reductions. 
16

A related question concerns the amount of PM credit remaining if the PM10 value is used up but not all 

of the PM2.5 value is used, or vice-versa. Because both the PM10 value and the PM2.5 value reflect the 

same emissions reduction – the two values simply reflect different fractions of the same emissions 

stream – it is impossible to use up one fraction and not use the other fraction as well. Once the credit is 

used up, it is used up for all purposes and cannot be used again for any “unused” value in the PM10 or 

PM2.5 fraction. By the same token, if only a portion of the total credit value is used, the same pro-rated 

portion of both the PM10 and PM2.5 fractions is used. Thus, in the example above with a PM credit that 

reflects 10 tpy of PM10 and 8 tpy of PM2.5, say that a facility wanted to use this credit to offset a 5 tpy 

emissions increase that was all PM with a diameter of 8 microns – i.e., an increase of 5 tpy of PM10 but 

zero PM2.5 (because none of the PM is smaller than 2.5 microns). In that case, the facility would be using 

5 of the 10 tons of PM10 credit, which is half of the value of the credit. Both the PM10 and PM2.5 fractions 

would have their value reduced by 50%, since half of the emission reduction that created the credit has 

now been accounted as reflected by the new emissions increase. After the transaction, the facility

would be left with a credit worth 5 tpy of PM10 and 4 tpy of PM2.5, a 50% reduction in both values.

Comment I.D.2.d. – Fees for Updating Banked PM Credits: A commenter questioned why the fees for 

updating of an existing banked PM credit should be the same as the fees for banking the credit in the 

first place. The commenter suggested that the conversion process will require less staff time and thus 

should carry a lower fee. 

Response: The fees for updating existing PM banked credits are the same as the fees for banking credits 

in the first place because the amount of work involved in evaluating an update application will be similar 

to the amount of work involved in evaluating the initial application for the creation of the credit in the 

first place. This is because the update process may require a great deal of research though multiple past 

banking applications. Staff have reached this conclusion based on experience researching banking 

applications as part of the District’s efforts to demonstrate federal equivalency of its offset program, per 

Regulation 2-2-423. A given banking certificate may have been re-issued multiple times, though several 

different owners. To evaluate the update application, Staff have to trace the credit back to the original 

issuance in order to determine the type of source that generated the original credits. In the case where 

several sources generated the original credits, Staff will also have to re-create the calculations that 

created the initial credits to divide the credits among the various source types, prior to applying the 

appropriate conversion factors for PM2.5. The application fees for an update application are intended to 

account for the District Staff resources that the update process will require. 

Comment I.D.2.e. – Language Clarification: A commenter suggested that the language on PM10

conversion should state that the conversion is “PM10 to PM10 and PM2.5”, not just “PM10 to PM2.5”. 

Response: Staff agree with this clarification. It is reflected in the second draft of the amendments. 
17

3. Particulate Matter Test Methods

Comment I.D.3. – Use of Alternate PM Test Methods When Methods 201A/202 Cannot Be Used:

Commenters suggested that the regulations should provide flexibility in selecting which PM 

test/measurement methods to use. The first draft that staff published required EPA Methods 201A and 

202 to be used, and commenters suggested that the regulations should also allow other test methods to 

be used “with approval from the District”. The reasons that the commenters gave fall into two 

categories. First, commenters stated that there are some situations in which EPA Methods 201A and 

202 cannot be used for technical reasons, for example where water is present or where stack gas 

temperatures exceed 500°F. EPA’s test methods themselves state that the methods cannot be used in 

such situations. Commenters stated that the District needs to provide flexibility to use another test 

method when Methods 201A and 202 are not appropriate. Second, commenters cited concerns about 

the accuracy and repeatability of Methods 201A and 202 at low concentrations, and about the costs that 

may be associated with using such methods. These commenters criticized Methods 201A and 202 as 

appropriate test methods even in situations where the Methods are applicable. The commenters stated 

that the District should provide flexibility to use other test methods instead. These commenters added 

that providing such flexibility will also allow more reliable test methods to be used if they become 

available.

Response: With respect to the first point, about situations where EPA Methods 201A and 202 cannot be 

used because they are not appropriate given exhaust gas conditions, Staff agree with the commenters 

that an alternative method should be provided for cases where such methods cannot be used for 

technical reasons. Staff have added language in the second draft amendments to this effect. The 

additional language explicitly limits such alternative methods to situations where such methods are 

inapplicable because of the physical characteristics of the emissions being tested, such as the situations 

identified by the commenters where the emission stream’s water content or temperature is too high. 

This language does not give a facility the option of using a different method where Methods 201A and 

202 can be used. 

With regard to the second point, about flexibility to use different testing methods even where Methods 

201A and 202 is technically appropriate, Staff disagree that it would be appropriate to allow regulated 

entities to opt to use a different test method. EPA has established that Methods 201A and 202 must be 

used for purposes of determining combined (filterable and condensable) particulate matter emissions. 

EPA would not be able to approve a rule that allows the District to depart from these test methods 

(other than situations where such methods cannot be used for technical reasons, as addressed above). 

Staff acknowledge that there have been some concerns expressed about the burdens and difficulties 

associated with using such test methods, but EPA has considered these concerns and has made a 

determination that Methods 201A and 202 should be used to determine combined particulate matter 

emissions.
18

4. Other Issues Regarding Condensable Particulate Matter Emissions

Comment I.D.4.a. – No Need to Reference Size of Condensable PM Emissions: Commenters noted that 

there is no need to reference particle size for the condensable portion, since all condensable 

particulates are of very small size and are well below both the 10 micron and 2.5 micron size used to 

define PM10 and PM2.5. 

Response: The commenters’ observation is correct. The second draft removes the reference to 

condensable size in these definitions. PM10 and PM2.5 include condensable particulates without regard 

to size. This tracks EPA’s treatment of this issue in its PM10 and PM2.5 definitions. 

Comment I.D.4.b. – Regulating Precursors Does Not Constitute “Double-Counting” of Emissions: 

Commenters expressed concern that the regulations would be “double-counting” emissions by 

regulating PM precursors both as precursors and as pollutants in their own right. For example, the 

District has long regulated NOx for ozone purposes, and now will be regulating NOx as a PM precursor as 

well. The concern expressed was that this would lead to “double-counting” of NOx emissions, i.e., that 

the same NOx emissions would be regulated twice because they would be counted towards NOx 

emissions and also towards PM2.5 emissions. 

Response: The proposed amendments will not subject any emissions to “double-counting”. Whenever 

emissions are measured for purposes of regulatory applicability, any emissions from a source will be 

counted only once for determining whether a regulatory requirement applies. It is true that some 

pollutants are now being regulated for multiple reasons – for example, because they are of concern as 

precursors and also because they are of concern as pollutants in their own right – but the regulations 

that are being applied will count such emissions only once. Taking the NOx example, the District treats 

NOx emissions as an important pollutant and requires sources to use BACT to control NOx emissions 

over 10 pounds per day for a number of reasons, including NOx’s role in ozone formation and NOx’s role 

as a PM2.5 precursor as well as the fact that NO2 is a criteria pollutant. If a source emits more than 10 

pounds of NOx per day, the District will require the source to use BACT to control those NOx emissions 

for all of those reasons. But in determining whether the NOx emissions are above this 10 lb/day 

threshold, the District will count the NOx emissions only once. If actual NOx emissions are only 8 lb/day, 

the District will not count them twice, once because of the ozone concern and a second time because of 

the PM2.5 concern, to give 16 lb/day of emissions and make the source subject to BACT. 

Comment I.D.4.c. – Deferral of Implementation of New Particulate Matter Test Methods: 

Commenters stated that the District should build in some lead time before the new PM definitions take 

effect. These commenters stated that it will take some time to engineer and implement PM2.5 testing 

using the specified EPA methods. One reason cited concerned potential lack of stack access and 

refractory configuration issues that may need to be worked out. Another issue concerned test accuracy 

issues. Commenters stated that EPA’s testing methods can produce a wide range of results, and that it 

is important that we better understand test accuracy issues before regulating the condensable portion 

of PM emissions. These commenters requested that the District build in a specified delay period before 

the regulations will start to include condensable PM emissions.
19

Response: Staff disagree that the regulations should build in a delay period before the amended PM 

definitions take effect and require that the condensable portion of PM emissions to be included. Staff 

are planning to propose an effective date for the amendments that will occur when EPA approves them 

as consistent with federal NSR requirements. EPA’s approval will not occur until after they are adopted 

by the District’s Board of Directors, after they are approved by ARB and submitted to EPA, and after EPA 

has had a chance to review and consider them, all of which will take a certain period of time during 

which affected facilities can begin any preparations necessary to implement the new definitions. 

Moreover, EPA’s federal New Source Review permitting requirements in 40 C.F.R. Part 51, Appendix S 

and 40 C.F.R. section 52.21 already require facilities in the Bay Area to include condensable emissions 

for PM permitting, so affected facilities are already subject to these requirements even before the 

amendments to District regulations become effective. Finally, EPA’s requirements for NSR programs do 

not provide for any such delay period – they require PM determinations to be made including the 

condensable portion immediately in order to be approvable. For all of these reasons, staff are not 

proposing any delay period before the definitions of PM10 and PM2.5 will require condensable particulate 

matter emissions to be included. 

II. ADDING PERMITTING REQUIREMENTS FOR GHGS

The second principal purpose of the updates to Regulation 2 is to add greenhouse gases (GHGs) to the 

list of pollutants that are regulated under Regulation 2’s permitting programs. EPA started regulating 

GHG emissions starting January 2, 2011, when its Light Duty Vehicle Rule went into effect and started 

imposing GHG emissions limitations on new cars and trucks. Now that GHGs are “subject to regulation” 

under the Clean Air Act, GHG emissions from stationary sources must be included in NSR and Title V 

permitting requirements. The proposed amendments will add GHG requirements for the District’s NSR 

and Title V programs in order to meet EPA’s requirements. 

For Title V, the proposed amendments will add GHGs by including them within the definition of 

“Regulated Air Pollutant” for purposes of the Title V program (along with related implementation 

provisions). For NSR, GHGs are not a non-attainment pollutant and so they fall within the PSD element 

of the NSR program. As such, they will be included in the District PSD program that Staff are proposing, 

which is addressed in detail in Section III below. This document addresses general issues regarding the 

proposal to add GHGs to these regulatory programs in this section; issues specific to PSD permitting are 

addressed in Section III. 

Comment II.1. – Use of “Tailoring Rule” Applicability Thresholds: The District received several 

comments regarding the proposal to incorporate the regulatory thresholds effective under EPA’s 

“Tailoring Rule”, which (generally speaking) make facilities subject to NSR and Title V permitting 

requirements if their GHG emissions are over 100,000 tpy CO2e. Some comments supported the 

proposal to use the Tailoring Rule thresholds. Others stated that the District should be as stringent as 

possible in its permitting requirements for GHGs and should start imposing permit requirements (such 

as BACT) at lower thresholds. One commenter also suggested that the District should establish a daily 

threshold as well as an annual threshold for triggering such requirements. 
20

Response: Staff continue to believe that using the Tailoring Rule thresholds is the most appropriate 

approach to phasing in GHG regulation under the NSR and Title V programs. Those thresholds reflect a 

careful and considered balance between the benefits of bringing the most significant sources of GHG 

emissions into these programs first and the drawbacks that would result from flooding these permitting 

programs with thousands of permit applications for smaller sources that collectively are not significant 

contributors to the Bay Area’s emissions inventory. Staff note that this approach has recently been 

reaffirmed by EPA in its proposal for “Step 3” of the Tailoring Rule, in which EPA further considered 

whether these thresholds continue to be appropriate. EPA is proposing in Step 3 to keep these 

thresholds at the same levels, finding that the same considerations that justified them initially continue 

to be applicable.8 Staff also note that although some commenters suggested that the District should 

implement these permitting requirements at lower thresholds, none of the commenters suggested that 

some other thresholds would strike a better balance between the benefits of regulating the largest 

sources first and the drawbacks inherent in the administrative burdens of regulating smaller sources at 

this time. Staff are therefore not proposing anything different in the second draft with respect to GHG 

thresholds. 

With respect to establishing daily emissions thresholds as well as annual emissions thresholds, the PSD 

and Title V programs have always looked to annual emissions to determine whether a facility is a 

“major” emitter and should be subject to permitting requirements. This practice arises from Congress’ 

judgment in the Clean Air Act that annual emissions are the best way to assess whether a facility is a 

major contributor to air quality problems. Staff are not proposing to depart from this practice with 

respect to the “major” facility thresholds for GHGs. Moreover, GHG emissions and global climate 

change long-term problems that depend more on long-term emissions that occur day in and day out 

than what happens on any particular day. It is more appropriate to target these permitting programs 

towards facilities that have large emissions over the course of the entire year, even if they may not have 

especially high emissions on any particular day. By the same token, there is relatively little to be gained 

(at least at this stage) by targeting sources that may not have any significant emissions over the course 

of a year but which may have high emissions on one particular day. Staff are therefore not proposing to 

add a daily emissions applicability threshold for these permitting programs.9 

Comment II.2. – “Automatic Invalidation” Provision for GHG Permitting Requirements: A number of 

commenters noted that there are a several legal challenges pending to EPA’s “Tailoring Rule”.10 These 

 

8

See Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3, GHG Plantwide 

Applicability Limitations and GHG Synthetic Minor Limitations, Proposed Rule, 77 Fed. Reg. 14,226 (March 8, 2012).

9

The commenter who suggested a daily GHG threshold cited the goals of the 2010 Clean Air Plan and in particular 

Further Study Measure 9, which addressed considering GHG impacts when making BACT determinations for 

criteria pollutants. Staff agree that BACT determinations for criteria pollutants should take into account 

considerations such as GHG impacts, and are incorporating that flexibility into the proposed amendments. But 

that effort relates to how BACT is defined, not to the thresholds for GHG permitting. Using an annual threshold, 

established at EPA’s Tailoring Rule levels, is fully consistent with supporting GHG considerations in BACT 

determinations.

10 With respect to the reference to challenges to the “Tailoring Rule”, District staff read these comments as 

referring to the challenges to EPA regulation of GHGs under the Clean Air Act and its treatment of GHGs as 
21

commenters suggested that the District should include provisions in the NSR and Title V programs in 

Regulation 2 to provide that the permitting requirements for GHGs will cease to be effective if those 

challenges are successful and a reviewing court invalidates EPA’s regulation of GHGs. This type of 

provision has been referred to as an “automatic invalidation” provision, meaning that it will 

automatically invalidate the GHG permitting requirements in the event of such a judicial determination, 

without any need for further action by District Staff or by the District’s Board of Directors. 

Response: Staff considered whether to include such an “automatic invalidation” provision for GHGs but

are not inclined to do so. The primary reason is that there are a number of legal challenges pending,

which assert a number of different arguments objecting to EPA’s authority to regulate GHGs, as well as 

to the manner in which EPA has chosen to exercise that authority. It is impossible to predict with any 

certainty how any one of these challenges may be resolved, let alone what the total impact will be once 

the courts have finally adjudicated all of them. Accordingly, there is no way to know with any certainty 

at all how exactly the regulatory landscape could potentially be altered as a result of these challenges. 

The result could be a blanket approval of EPA’s regulatory efforts in their entirety, a blanket invalidation 

of those efforts in their entirety, or something in between in which some parts of EPA’s program are 

upheld while others are invalidated. Moreover, the courts could remand certain elements on 

procedural grounds, meaning that EPA would have to undertake additional rulemaking proceedings but 

could end up with exactly the same substantive policy determinations. For all of these reasons, it is

impossible to try to predict what the future may hold and try to craft regulatory language that will 

anticipate all potential scenarios that could potentially arise. Rather than attempt to do so and risk 

unintended consequences if these cases result in an outcome that was not anticipated, staff believe that 

it is preferable to wait and see how things actually turn out and then decide at that point how best to 

respond. Should the courts invalidate or otherwise undermine EPA’s authority to regulated GHGs, it 

may well be appropriate to revisit these programs and eliminate the GHG requirements. On the other 

hand, should the outcome of the legal challenges be something other than a blanket invalidation of 

EPA’s authority, some other response may be more appropriate.11 Rather than try to predict the future, 

 

regulated under NSR and Title V. The so-called “Tailoring Rule” referred to in the comments is not what created 

the requirement that GHGs must be regulated under NSR and Title V; it simply raised the thresholds at which GHGs 

are treated as “regulated” for purposes of these programs. Thus, if the “Tailoring Rule” were to be invalidated, 

GHGs would still be regulated, they would just be regulated at a lower threshold. There are a number of other 

legal challenges to related EPA actions that are currently pending, however, and some of these could alter the legal 

landscape regarding whether GHGs must be included under EPA’s NSR and Title V programs. Staff have evaluated 

this comment assuming that is contemplating the potential impacts of all of these legal challenges.

11 Moreover, even if the federal courts were to invalidate EPA’s authority to regulated GHGs under the Clean Air 

Act, the District could potentially want to consider developing similar permitting requirements under state law. 

Staff have not considered that possibility because there is no indication at this point that the courts will invalidate 

EPA’s efforts. But the point is that it does not make any sense to start planning an appropriate regulatory course of 

action at this stage, where the future state of affairs is unclear. 
22

Staff believe that it is preferable to see what actually happens and then take action at that point, when 

the situation can be understood and evaluated better.12 

In addition, it is probable that the District will need to come back and revisit these permitting programs 

anyway as other regulatory developments occur. Such periodic updates will provide a convenient 

opportunity to address the outcome of these pending legal challenges, if necessary. The District does 

not need to specify at this point what should happen after the courts resolve these legal challenges, 

because there will be plenty of opportunities to revisit these issues after the result is known.

Finally, EPA has historically been reluctant to approve such “automatic sunset” provisions.13 Rather than 

attempt to craft such a provision, Staff have concluded that the best policy will be to wait and see how 

these challenges are resolved and then develop an appropriate regulatory response at that time, when 

full information is available. 

Comment II.3. – Considerations of Energy Efficiency in NSR Permitting: A commenter suggested that 

the District should include energy efficiency in NSR permitting under Regulation 2, so that when facilities 

apply for permits the District will ensure that they are conducting their operations in the most energyefficient manner. The commenter referenced 2010 CAP Stationary Source Measure 15 – GHGs in 

permitting, energy efficiency.

Response: Staff agree that incorporating energy efficiency into the NSR permitting requirements for 

GHGs is critical to achieving meaningful GHG emission reductions. Staff’s draft amendments are set up 

to do just that. For facilities subject to NSR permitting for GHGs, the amendments would require the 

facility to implement Best Available Control Technology (BACT) to reduce GHG emissions, which focuses 

on energy efficiency. EPA has clarified in its published guidance documents that BACT for GHGs will be 

implemented primarily be ensuring that facilities are built with the most energy-efficient equipment.

14

 

The proposed amendments will incorporate EPA’s permitting procedures by reference, including this 

BACT requirement for energy efficiency. Staff also notes that using the most energy-efficient equipment 

will also have benefits in helping to minimize emissions of other pollutants. With respect to Stationary 

 

12 A related comment suggested that the District should do nothing at this point, but should instead wait to see 

what happens with the litigation before adding permitting requirements for GHGs. Staff disagree that waiting 

would be beneficial at this time. The District is required to update its NSR rules at this time to add PM2.5 because 

of the Bay Area’s recent non-attainment designation, and it makes sense on a number of levels to make all 

appropriate regulatory updates while the rule is open for revision – including adding GHGs. Moreover, the final 

resolution of the challenges may take some time, with review in the Court of Appeals and then the potential for 

Supreme Court review as well. Staff believe that it is preferable to go ahead with developing a PSD program that 

meets EPA’s requirements as they currently exist (which includes GHGs), and then to the extent that a legal 

decision invalidates part of those rules, to respond as appropriate at that time.

13 See, e.g., Approval and Promulgation of Implementation Plans; Georgia; Prevention of Significant Deterioration; 

Greenhouse Gas Tailoring Rule and Fine Particulate Matter Revision; Proposed Rule; 75 Fed. Reg. 73,017, 73,018 

n.1 (Nov. 29, 2010). 

14 See PSD and Title V Permitting Guidance for Greenhouse Gases, U.S. Environmental Protection Agency, Office of 

Air and Radiation, Office of Air Quality Planning and Standards (March 2011), at pp. 21-22, available at 

www.epa.gov/nsr/ghgdocs/ghgpermittingguidance.pdf. 
23

Source Measure 15, that measure addressed GHG impacts from projects as they are considered under 

CEQA. The District is currently implementing a policy of considering GHG impacts in CEQA documents, 

and the District will consider energy efficiency in conducting such CEQA review as appropriate, among 

other issues. 

Comment II.4. – GHG Permitting Fees: A commenter suggested that the District raise its existing GHG 

emission fee in Regulation 3 in order to cover the resource cost of implementing GHG permitting under 

Regulation 2. The commenter also suggested that GHG emission fees should also be used for a grant 

fund for climate action and adaptation. 

Response: Staff agrees that the fees for NSR and Title V permitting, including GHG permitting, should 

generally be tied to the District’s costs in administering these permitting programs. The District aims to 

set its permitting fees (in District Regulation 3) on this basis, and will continue to do so. As far as raising 

funds for grant funds for climate action and adaptation, the District looks for funding revenue where 

appropriate and carefully balances the pros in terms of raising funds for worthy purposes against the 

cons in terms of unduly increasing financial burdens. Staff notes that the District has already adopted a 

GHG emissions fee, which the District uses to fund regulatory activities aimed at responding to global 

climate change. (See District Regulation 3-334 & Schedule T.) Staff are not proposing to add any 

additional revenue sources as part of these updates to the NSR and Title V permitting programs, but will

continue to evaluate potential revenue sources where appropriate.

III. ADOPTING A DISTRICT PSD PERMITTING PROGRAM FOR EPA SIP APPROVAL

A third principal reason for the proposed amendments is to adopt a District Prevention of Significant 

Deterioration (PSD) permitting program. PSD is an important sub-element of New Source Review that 

applies to pollutants for which the Bay Area is designated as attainment (or unclassified, including 

pollutants such as GHGs for which no NAAQS has been established). For historical reasons, the District 

has never had its own EPA-approved PSD program, and so PSD permitting has been handled in the Bay 

Area by EPA using the federal program. The proposed amendments would adopt a District PSD 

program, which the District would then ask EPA to approve to become legally effective for implementing 

the Clean Air Act’s PSD requirements for facilities in the Bay Area. The District received a number of 

comments with respect to this aspect of the proposed amendments.

Comment III.1. – Support for Adopting District PSD Program: Many commenters expressed support for 

adopting a District PSD program. Some of those who supported the idea generally suggested certain 

specific changes to some of the applicability methodologies proposed in the first draft (see for example 

next comment below regarding NSR Reform), but overall they supported the idea of the District 

implementing PSD through its own state-law program instead of having PSD implemented in the Bay 

Area as a federal program under EPA’s regulations. A typical comment stated that the commenter 

“strongly endorses the District’s proposal to move forward with [SIP-approval for PSD]. . . . [A] SIPapproved program . . . should avoid unnecessarily duplicative and lengthy processes associated with 

issuance of separate permits pursuant to both the District’s rules and 40 CFR § 52.21.” (Calpine )
24

Response: Staff are encouraged by this support for adopting a District PSD program. Staff believe that a 

District PSD program will avoid the confusion that has arisen from having two similar but legally distinct 

permitting regimes applicable for major sources in the Bay Area. Staff believe that the proposal for a 

robust District PSD program will enhance the implementation of this important Clean Air Act regulatory 

program.

Comment III.2. – “NSR Reform” Applicability Methodologies for PSD: A number of commenters stated 

that in adopting a District PSD program, the District should use the applicability provisions that EPA 

adopted in 2002 known collectively as the “NSR Reform” applicability provisions. These provisions 

include15:

1. Allowing a more flexible “baseline period” to be used in determining whether an emission 

increase from a modification at the source will require PSD permitting. A PSD permit is required 

for any modification that will result in a “significant” increase in emissions above the levels at 

which the source historically emitted during the baseline period. With a restrictive “baseline 

period”, the source may be forced to base its emissions increase calculation on a 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 

were based on its maximum permitted emissions for determining whether a modification to the 

source would cause a “significant” increase and require PSD 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 PSD 

permitting 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 a PSD 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 a PSD permit. NSR Reform added provisions to the federal PSD program allowing the 

use of PALs as an alternative means of complying with the PSD program. 

Some commenters suggested that the District should adopt all of these provisions across the entire PSD 

program in order to provide additional flexibility for regulated entities to modify their facilities without 

being subject to PSD permit requirements. Other commenters recognized that the District is limited by 

 

15 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).
25

SB 288, a California law that was adopted to restrict the use of the NSR Reform methodologies in 

California. SB 288 prohibits any air district from relaxing any NSR requirements that were in place as of 

the end of 2002, when NSR Reform was adopted. These commenters stated that even if the District is 

prohibited from adopting NSR Reform with respect to regulations that were on the books in 2002, the 

District should adopt the NSR Reform methodologies with respect to new pollutants that were not 

subject to regulation at that time, such as greenhouse gases. Other commenters submitted that the 

District need not worry about SB 288 at all with respect to adopting the NSR Reform methodologies, 

because NSR Reform will actually benefit air quality and will not be a relaxation compared to the preNSR Reform tests. These commenters stated that allowing the additional flexibility in how the PSD 

requirements are applied will allow them to make beneficial improvements to their facilities that will 

increase efficiency and reduce emissions. They stated that without NSR Reform, the more stringent preNSR Reform applicability provisions will discourage them from making such improvements because of 

the cost, delay and uncertainty they would face if they had to get PSD permits for such projects. They 

stated that by encouraging such projects, the NSR Reform applicability tests would actually improve air 

quality and so they would not be a relaxation prohibited by SB 288. 

Response: Regardless of the policy arguments for and against NSR Reform, the District is restricted by 

SB 288 from adopting NSR Reform for the criteria pollutants that it regulated as of 2002 when SB 288 

was adopted. The legislature was clear in SB 288 that it did not agree with NSR Reform as it was 

adopted back then, and that it was prohibiting the air districts from adopting the NSR Reform 

methodologies at that time. The Air Resources Board – which will be required to approve the proposed 

amendments as consistent with SB 288 – has taken the same position. Staff are therefore not 

considering any adoption of any NSR Reform methodologies for any of the criteria pollutants that it 

regulated as of 2002.

Greenhouse gases were not regulated in 2002, however, and so SB 288 does not apply for implementing 

the PSD program for GHGs.16 ARB has issued a legal opinion confirming this understanding of the law.17 

Staff have therefore considered whether it would make sense as a policy matter to adopt any of the NSR 

Reform applicability methodologies for GHGs. Staff have considered each of the elements of EPA’s NSR 

Reform package on its individual merits. 

 

16 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 no NAAQS has been 

established, 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. 

17 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).
26

• 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 in determining baseline emissions. 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 very real potential to end up with baseline emissions that are 

not actually 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 

as the economy 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. Staff are therefore proposing to adopt the more flexible baseline 

period for GHGs in the second draft. 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 mirrors 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. 

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 three-year baseline will continue to apply. 

• 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, Staff disagree with the suggestions to adopt this approach to 

PSD permitting. Relying on projections instead of actual enforceable permit limits has 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, Staff are not proposing to adopt the projectedactual-emissions increase test for GHGs. If a facility intends to make a modification that will not result in 

a significant increase in emissions, the District would not require a PSD permit for such a project – but 

the facility would need to commit to the fact that there would not be any significant increase in 
27

emissions through an enforceable emissions limit. Staff are not proposing to adopt an approach to PSD 

permitting that is based solely on the facility’s unenforceable projection of what emissions may be.

In reaching this conclusion, Staff have been mindful of the comments 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 

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 commenters 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.18 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. 

 

18 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, and so the concern is that if a source’s maximum 

capacity is more than a “significant” amount over the baseline emissions, then the source will need to take a 

permit limit at less than maximum capacity in order to avoid PSD permitting. Staff are proposing to allow for the 

baseline period to be established during the highest 24-month period during the past 10 years, however, 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. 
28

Staff disagree that these concerns outweigh the problems discussed above that are inherent in basing 

PSD permitting on projections of future emissions instead of enforceable permit limits. For one, the PSD 

permitting requirements would never prohibit the use of this 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 terribly onerous. BACT by definition is limited to 

technologies that are 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 energy-efficient 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 simply because of the fuel savings involved. Being 

required to do so under a PSD permit condition would therefore be unlikely to make much of a 

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 millions 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 

anyway). And as noted above, it is unlikely that any facility would object to using the most energyefficient equipment that is justified on cost-effectiveness grounds anyway, given the fuel and/or power 

savings that would result.19

For all of these reasons, Staff are not proposing to base PSD permitting on unenforceable projections of 

what emissions may be in the future. The PSD requirements for GHGs in the second draft are 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. 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 

 

19 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. 
29

implement cost-effective BACT measures to address its GHG emissions. Such projects should be subject 

to PSD review, because PSD has always been designed to apply to projects with significant emissions 

increases. 

• PALs

The third element of the NSR Reform methodologies concerns Plant-wide Applicability Limits. At 

present, PALs are subject to a number of restrictions with respect to GHGs that limit how effectively 

they can be used in that context. EPA is currently undertaking a rulemaking to address some of these 

concerns and has published a proposed rule setting forth some alternative options for streamlining the 

use of PALs for GHG sources,20 but it has not finalized anything at this stage. EPA is expected to publish 

a final decision later this year, but at this point we have no definitive indication of what revised rules for 

PALs may result. 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 to 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, Staff are not making any final determination 

at this point regarding whether to add provisions for PALs as part of the proposed PSD program. Staff 

intend instead to wait to see what develops from EPA’s current rulemaking on the subject, and then to 

consider at that point whether to add them to the District’s PSD permitting program for GHGs. If the 

District were to decide to include PAL provisions for GHGs, developing the regulatory language to do so 

would require considerable additional time and effort. Staff are therefore deferring any such additional 

regulatory development until after EPA’s process is complete. If future events suggest 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. 

Comment III.3. – Determining “Net” Emissions Increases for PSD Applicability: PSD permitting 

requirements apply to modifications that will result in a significant net increase in emissions. “Net” 

emissions increases take into account “contemporaneous” emissions increases and decreases: if the 

sum of all increases and decreases within the “contemporaneous” period are above the established 

level of significance, then PSD permitting requirements apply. Commenters raised questions about how 

the “netting” analysis is conducted. They asked what kind of prior emissions increases and decreases 

can be credited, and whether such increases and decreases have to have been part of “modification” (as 

defined in Section 2-1-234) that went through NSR permitting. A related question asked whether the 

“contemporaneous” time period for netting was the same 5-year period that the District uses for 

establishing contemporaneous on-site emission reduction credits. 

 

20 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3, GHG Plantwide 

Applicability Limitations and GHG Synthetic Minor Limitations, Proposed Rule, 77 Fed. Reg. 14,226 (March 8, 2012).
30

Response: Staff intend to establish PSD “netting” that will work in the same way as netting for the 

federal PSD program. Emission increases do not need to have been part of a “modification” as defined 

in Section 2-1-234 in order to be counted. Any change at a source that results in an emissions increase 

or decrease can be counted so long as it falls within the language of “net emissions increase” in Section 

2-2-220. A “modification”, by contrast, is a change that results in an increase in emissions above the 

levels specified in Section 2-1-234. The emissions increases and decreases that can be used in the 

netting analysis is therefore a somewhat larger universe. 

Reviewers should note the requirements for netting as set forth in Section 2-2-220 in order to 

understand what types of emissions increases can be counted. One requirement is that the increase or 

decrease has to be calculated in accordance with the emission increase/decrease calculation provisions 

in Section 2-2-604. Those provisions account for decreases only to the extent that they are enforceable. 

Thus, in order to use a prior emission reduction in a netting analysis, the emission reduction would need 

to be enforceable through permit condition or otherwise (because any decrease in emissions is based on 

the source’s potential to emit, which is an enforceable level of emissions). Another requirement is that 

that the emission increase or decrease be “creditable” as defined in Section 2-2-207, which means that 

it cannot have already been relied on in an earlier PSD permitting analysis. Similarly, the increase or 

decrease needs to be “contemporaneous”, which means that it needs to have occurred within the past 5 

years. 

With respect to the time period for “contemporaneous” emissions increases and decreases, the 

“contemporaneous” period is the same five-year period for netting as it is for contemporaneous on-site 

emission reduction credits. The same term “contemporaneous”, defined in Section 2-2-206, applies in 

both situations.

Comment III.4. – PSD Source Impact Analysis for GHGs: A commenter requested that staff clarify that a 

PSD Source Impact Analysis does not need to include an analysis of GHGs. The commenter requested 

that staff clarify what exactly will be required in a PSD analysis for GHGs.

Response: The commenter is correct that the proposed amendments would not require a PSD Source 

Impact Analysis to include an analysis of GHG impacts. The District’s proposed PSD Source Impact 

Analysis requirements in Section 2-2-305 incorporate by reference all of the requirements applicable to 

federal PSD Source Impact Analyses prepared by EPA under 40 C.F.R. Section 52.21(k)-(m). As EPA has 

stated, these federal requirements for PSD Source Impact Analyses do not require an analysis of GHGs. 

As EPA explains in its recent Guidance on PSD permitting issues for GHGs:

Since there are no NAAQS or PSD increments for GHGs, the requirements in sections 

52.21(k) and 51.166(k) of EPA’s regulations to demonstrate that a source does not cause 

or contribute to a violation of the NAAQS is not applicable to GHGs. . . . ¶ Monitoring for 

GHGs is not required because EPA regulations provide an exemption in sections 

52.21(i)(5)(iii) and 51.166(i)(5)(iii) for pollutants that are not listed in the appropriate 

section of the regulations, and GHGs are not currently included in that list. However, it 

should be noted that sections 52.21(m)(1)(ii) and 51.166(m)(1)(ii) of EPA’s regulations 
31

apply to pollutants for which no NAAQS exists. These provisions call for collection of air 

quality monitoring data “as the Administrator determines is necessary to address 

ambient air quality for that pollutant in any (or the) area that the emissions of that 

pollutant would affect.” In the case of GHGs, the exemption in sections 52.21(i)(5)(iii) 

and 51.166(i)(5)(iii) is controlling since GHGs are not currently listed in the relevant 

paragraph. Nevertheless, EPA does not consider it necessary for applicants to gather 

monitoring data to assess ambient air quality for GHGs under section 52.21(m)(1)(ii), 

51.166(m)(1)(ii), or similar provisions that may be contained in state rules based on 

EPA’s rules. GHGs do not affect “ambient air quality” in the sense that EPA intended 

when these parts of EPA’s rules were initially drafted. Considering the nature of GHG 

emissions and their global impacts, EPA does not believe it is practical or appropriate to 

expect permitting authorities to collect monitoring data for purpose [sic] of assessing 

ambient air quality impacts of GHGs.21 

Section 2-2-305 incorporates EPA’s federal PSD Source Impact Analysis requirements by reference, 

including these requirements relating to what needs to be done (or does not need to be done) for GHGs. 

Since a GHG analysis is not required under the federal program, it would not be required under the 

District’s program either. (Further guidance on what needs to be included in a PSD Source Impact 

Analysis generally can also be found in EPA’s New Source Review Workshop Manual,22 as well as in other 

EPA guidance documents.)

Comment III.5. – Class I Area Visibility Protection for Non-Attainment Pollutants: Staff from EPA 

Region IX commented that 40 C.F.R. Section 51.307(b) requires that the District’s NSR program must 

include provisions for evaluating impacts on visibility in Class I Areas for non-attainment pollutants. Per 

Section 51.307, review of Class I Area visibility impacts for non-attainment pollutants must be 

implemented in conjunction with the Class I Area visibility analysis for attainment pollutants under the 

PSD program. 

Response: In order to ensure that there are no adverse impacts on visibility resources in Class I Areas 

from non-attainment pollutants, Staff are expanding the Class I Area visibility analysis requirements in 

proposed Section 2-2-307 to include non-attainment pollutants. The requirement will now apply to 

major modifications at major sources for non-attainment pollutants (and their precursors), as well as to 

attainment pollutants. The title of Section 2-2-307 will be changed to simply “Consideration of Class I 

Area Impacts” (as opposed to “PSD Class I Area Impacts”) to avoid the impression that it applies only for 

PSD pollutants. In addition, the supporting provisions in Section 2-2-401.4 (requiring a Class I Area 

visibility analysis in permit applications) and 2-2-402 (regarding notice to the Class I Area Federal Land 

Manager(s)) are being updated to reflect this change. These provisions will ensure that visibility is 

 

21 PSD and Title V Permitting Guidance for Greenhouse Gases, U.S. Environmental Protection Agency, Office of Air 

and Radiation, Office of Air Quality Planning and Standards (March 2011), at pp. 47-48, available at 

www.epa.gov/nsr/ghgdocs/ghgpermittingguidance.pdf. 

22 Draft New Source Review Workshop Manual, Prevention of Significant Deterioration and Nonattainment Area 

Permitting (EPA, Oct. 1990), available at www.epa.gov/ttn/nsr/gen/wkshpman.pdf.
32

protected in Class I Areas from impacts from all pollutants, not just attainment pollutants, as required by 

40 C.F.R. Section 51.307(b).

IV. REVISIONS TO REGULATORY LANGUAGE AND STRUCTURE

The fourth principal purpose of the proposed amendments is to clean up and reorganize the language 

and structure of the Regulation to make it easier to understand and to implement. The District received 

a number of comments on these proposed changes as well.

A. Determining “Baseline” Emissions For Purposes of Calculating Emissions Increases and 

Decreases 

An important aspect of the District’s NSR regulations is how increases and decreases in a source’s 

emissions are calculated when a change is implemented at the source. The District received a number 

of comments on these issues. 

Comment IV.A.1. – Baseline Calculation Period: Section 2-2-603 sets forth how the baseline period is 

established for purposes of measuring the actual emissions baseline when calculating emissions 

increases and decreases compared to baseline. The current rules use the most recent 3 years as the 

baseline period. Commenters suggested that sources be allowed to use a different baseline period if it 

is more representative of normal source operation. They suggested that this would be consistent with 

SB 288 because it would not affect the existing requirement that a source’s baseline be calculated using 

actual emissions.

Response: Staff disagree that using a different baseline period would be consistent with SB 288.23 Using 

a different baseline period that is more “representative” would allow an applicant to utilize a more 

favorable baseline period, during which emissions were higher. This would result in a higher baseline, 

which would in turn lead to a smaller emissions increase (or a larger decrease, in the case of emissions 

reduction credits), which would be less stringent in terms of applicability of the District’s permitting 

requirements. Staff are not proposing to change the baseline calculation period from what exists in the 

current regulation because doing so would be prohibited by SB 288.

Comment IV.A.2. – Clarification on Determining When Baseline Period Commences for Calculating 

Amount of Emission Reduction Credit: A number of commenters asked for clarification on how 

Emission Reduction Credits (ERCs) are calculated for contemporaneous on-site ERCs (i.e., those that are 

not banked), as compared with banked ERCs. These comments focused specifically on the baseline 

period that is used for determining the amount of ERCs. They sought clarification on how the baseline 

period is calculated when determining the amount of contemporaneous on-site ERCs.

 

23 This discussion of baseline periods and SB 288 applies to pollutants covered by the District’s regulations as they 

existed in 2002, the effective date for SB 288 purposes. It does not apply to GHGs. Baseline calculation issues 

GHGs are addressed separately in the discussion of NSR Reform issues in Section III of this document.
33

Response: The provisions for determining the beginning and end of the three-year baseline period for 

calculating the amount of an Emission Reduction Credit were set forth in Subsections 2-2-603.1.2 and 2-

2-603.1.3 of the first draft, and they codified the District’s current procedures for determining the 

baseline period under the existing Regulation 2-2. For contemporaneous on-site emission reduction 

credits, the key concept is that the baseline period is the three-year period immediately before the 

reduction is actually implemented as an Emission Reduction Credit, as that term is defined and applied 

under the District’s NSR rules. And the key concept for implementing an Emission Reduction Credit 

under the District’s NSR program in this context is that any reductions must be enforceable in order to 

be credited. The baseline period is therefore the three-year period immediately preceding the date on 

which an emission reduction becomes enforceable and thus satisfies the requirements for being an 

“Emission Reduction Credit” under Sections 2-2-211 and 2-2-606.24

Thus, where a source is shut down and emissions reductions occur (i.e., the actual emissions that were 

occurring before the shutdown cease), the baseline period for determining the amount of reductions 

that can be credited as an ERC is the three-year period immediately preceding the date on which the 

shutdown is enforceable. 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, a similar commitment can be provided through some other 

legally binding method, such as contractual provisions that create a legal obligation not to operate the 

source. 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 three-year period immediately preceding the date on which 

the enforceable reduction occurred. 

Conversely, if a source ceases operating for other reasons – for example, because demand is down and 

there is no immediate need for the source’s product – but the owner/operator wants to retain the legal 

right to begin operating the source (and causing the associated air emissions), then any emission 

reductions cannot be credited as an ERC. As long as the operator retains the legal ability to start up 

again, there is no guarantee that the reductions will continue into the future and the owner/operator 

cannot take credit for them for air permitting purposes. If the owner/operator decides that it will not 

need to use the source at all in the future and wants to take credit for the reductions, it can do so by 

making a legally-binding commitment not to operate the source as discussed above (e.g., through 

enforceable permit restrictions or relinquishing the source’s permit, by permanently dismantling and/or 

removing the source, etc.). The baseline period would then be calculated as the three-year period 

immediately preceding the date on which any such legally enforceable guarantee was implemented. 

 

24 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. 
34

The owner/operator would not be able to take credit as part to the baseline for the period before that 

date when the shutdown was not enforceable, because during that period any such voluntary 

reductions do not qualify as an “Emission Reduction Credit” under the District’s rules.25 

Staff identified a concern about the clarity of the language that was proposed in the first draft, based on 

the apparent confusion among those who reviewed the first draft regarding these issues. To address 

this concern, in the second draft Staff have revised the language to articulate these principles more 

clearly. Section 2-2-603.1.3 establishes the baseline period for contemporaneous on-site Emission 

Reduction Credits, and it provides that the baseline period is the 3 year period immediately preceding 

“the date on which the emission reduction becomes enforceable as required under Section 2-2-211 and 

2-2-606.”26 

In addition, in considering these issues Staff have realized that the language on enforceability of 

emission reduction credits in Section 2-2-606 should also be clarified. The revised language in the 

second draft recognizes additional specific ways in which an emission reduction can be enforceable, i.e., 

if a source relinquishes its permit so that there is an enforceable legal prohibition on operating the 

source, and if a source is physically removed so that it can no longer operate and any replacement or 

reinstallation of the source would require a new permit.

Comment IV.A.3. – Suggestion to Allow an “Idle Period” When Establishing the Baseline for an 

Emission Reduction Credit: A number of commenters also asked for clarification on what happens if a 

unit is “idled” for a period of time before the facility attempts to make the reduction in emissions from 

the unit permanent. These comments address the situation where the facility stops using an emissions 

unit (or runs it at a reduced capacity) for business reasons, and then later decides to make the shutdown 

(or reduction) permanent by dismantling the unit or making the shutdown (or reduction) binding 

through a permit condition, or by giving up the permit altogether. This period between when the facility 

reduces the emissions for business reasons and when it makes an irrevocable commitment to the 

reduction by removing the unit or taking a permit restriction has been referred to as an “idle” period –

 

25 A similar situation arises where a source reduces its operation because it has excess capacity (as opposed to 

shutting down completely) and wants to get credit for the reduced emissions as an ERC. In order to get credit as 

an ERC, the reduction in operation must be made enforceable. To do so, the source must take an enforceable limit 

in its permit to create a legally enforceable guarantee that the emissions reductions will be permanent. If the 

source reduces its operation and associated emissions for business reasons, any such reduction will not be 

creditable because the source could ramp its operations back up at any time. The baseline period in such a 

situation will be the three-year period immediately preceding the date on which any reduction in emissions 

becomes legally enforceable. 

26 For banking of emission reduction credits, 2-2-603.1.4 establishes the baseline period. For banking, the District 

uses a baseline period that is the three-year period immediately prior to 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 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.
35

as opposed to a “shutdown”, a term used to connote a binding and enforceable reduction for which an 

emission reduction credit can be granted. Commenters suggested that the District allow for such “idle” 

time between the date of a voluntary reduction in emissions and the date such a reduction is made 

enforceable. Some commenters suggested allowing up to six months of “idle” time be allowed without 

impacting the amount of emission reductions that can be credited, both for calculating 

contemporaneous on-site emission reduction credits and for calculating banked credits. 

Response: The District does not currently allow any credit for such “idle periods” in determining the 

baseline for calculating emission reduction credits. Any “idle” periods must be included in the baseline 

period, even if emissions are zero during that period and therefore reduce the source’s total baseline 

emissions. Staff do not believe that it would be appropriate to change the way the this calculation 

currently works. Simply “idling” a source for business reasons is not consistent with the concept of 

making an enforceable, permanent commitment to emission reductions that is central to the concept of 

emission reduction credits. If a facility wants to get credit for such reductions, it should make such 

reductions permanent and enforceable either by physically removing the source or by making an 

enforceable legal obligation to do so. Staff do not believe that it is appropriate to give credit for such 

reductions unless and until such an enforceable commitment is in place. Such “idle periods” of 

voluntary but not legally enforceable reductions should not be excluded from the baseline period for 

calculating the amount of an emission reduction credit. The baseline period is the three-year period 

before an emission reduction becomes enforceable, even if that period includes some time when the 

source was “idle”.

Comment IV.A.4. – Types of Projects Covered by Baseline Calculation and Emission Increase/Decrease 

Calculation Procedures in Sections 2-2-604 and 2-2-606: A commenter suggested that the District 

should use the word “modify” in Sections 2-2-604 and 2-2-606 to describe the types of projects with 

changes in emissions that would be addressed under these sections, instead of the word “change” that 

was used in the first draft. The commenter noted that NSR applies to new sources and “modifications”, 

and stated that the calculation procedures in Sections 2-2-604 and 2-2-606 should therefore refer to 

“modifications”, not “changes”. 

Response: Staff disagrees that “modification” is more appropriate. A “modification” is a certain type of 

change at a source – a change that results in an increase in emissions (see definition of “modification” in 

Section 2-1-234). But the provisions in 2-2-604 and 2-2-606, which address how to calculate the amount 

of an emissions increase or decrease from a change at a source, do not apply solely to changes that 

result in increases. They also apply to calculating the amount of an emissions decrease resulting from a 

change. The broader term “change” is therefore more appropriate.

Comment IV.A.5. – Emissions Increases For Purposes of “Modification” Definition: One commenter 

stated its interpretation that the emissions increase/decrease calculation procedures in 2-2-604 should 

not be used for determining whether a change at a source is a “modification” or an “alteration” under 

Regulation 2-1. The commenter requested confirmation on this point.
36

Response: This interpretation is correct. Whether a change constitutes a “modification” is determined 

by the definition set forth in Section 2-1-234. (Note that this statement pertains to the existing 

definition of modification based on increases in Potential to Emit. The District is seeking comment at 

this time on whether to include an additional “modification” test that would be based on an actual 

emissions baseline of the type set forth in Section 2-2-603 and used in the increase/decrease calculation 

methodology in Section 2-2-604. Further information on that issue can be found in Section IV.E.2.b.)

Comment IV.A.6. – “Potential to Emit” Increase Calculation Procedure in Section 2-2-605 and PSD 

Projects: Another commenter requested clarification that the “Potential To Emit” increase calculation 

procedures in Section 2-2-605 apply to determining cumulative increase only, and not to “PSD 

calculations”. The commenter also requested that staff verify that Sections 2-2-605.2 and 2-2-605.3 are 

consistent with the definition of modification in 2-1-234. 

Response: The commenter is correct that the procedures in Section 2-2-605 apply only for purposes of 

calculating cumulative increase. This is expressly stated at the very beginning of Section 2-2-605. There 

are no “PSD calculations” that would be implicated by the provisions in Section 2-2-605. Similarly, there 

is nothing in the provisions in Section 2-2-605 that are inconsistent with the definition of “modification” 

in Section 2-1-234. The procedures in Section 2-2-605 apply for purposes of calculating cumulative 

increase, and not for any other purposes. 

B. Regulation 2-1 Permit Exemptions 

Comment IV.B.1. – Review of Existing Exemptions: The District received comments regarding the 

amendments to Regulation 2-1 addressing the exemptions provided in the regulation. The comments 

stated that the District should review the exemptions to determine whether they continue to be 

justified and acceptable. The comments focused in particular on how exemptions could potentially 

allow certain sources of PM2.5 (and PM10) to be constructed and operated in a manner that could cause 

an exceedance of the NAAQS. 

Response: EPA staff have also asked District Staff to evaluate the exemptions in Regulation 2-1, as there 

are a number of new exemptions that have been added since the last time that EPA evaluated 

Regulation 2-1. District staff have been working on a line-by-line analysis of each new exemption that

has been added since EPA’s last review, and Staff will submit the full analysis as part of the District’s SIP 

submittal. In general, Staff are finding that such exemptions are justified as part of the District’s NSR 

permitting program, for a variety of reasons. For example, some exemptions were provided when the 

District made its regulations more stringent to apply to new categories of sources. In some cases, 

exemptions needed to be provided so that the strengthened regulations would not apply in a manner 

that would cause unintended adverse consequences. In such cases, these exemptions reflect a 

strengthening, not a relaxation, of the District’s permitting requirements. Another example involves 

sources that have never been subject to permitting requirements, such as mobile sources that the 

District has never had authority to regulate. Such exemptions simply state explicitly what has always 

been the case, and in these cases the exemptions make no effective change to the District’s regulatory 

programs. In some other cases, certain new exemptions do exempt some sources that had previously 
37

been subject to permit requirements, but in those cases Staff’s review is finding that such exemptions 

are justified because the sources will not have any significant impact on air quality. For all of these 

reasons, Staff’s review of the exemptions in Regulation 2-1 is finding that they are justified and 

acceptable. As noted above, the District will publish its full line-by-line analysis when it is complete. 

Comment IV.B.2. – Proposals to Add New Permit Exemptions for Certain Types of Sources: The District 

received several comments suggesting that it should add new permit exemptions for certain types of 

sources. One commenter suggested that the District should add an exemption for liquid storage tanks 

that are used to hold organic liquids with a vapor pressure of less than 0.5 psi. Another commenter 

suggested that the District add an exemption for sources at manufacturers of solar energy devices in the 

same way that there is an exemption for certain sources at semiconductor manufacturers. This 

commenter stated that solar energy devices are moving away from being based on semiconductors that 

would be eligible for the semiconductor manufacturing exemption.

Response: With respect to tanks storing low-vapor-pressure organic liquids, emissions from such tanks 

are often low. However, there are circumstances in which emissions may be of concern, even when 

storing a material with a vapor pressure (RVP) less than 0.5 psia. Emissions may be high if the tank is 

large, has a large throughput, or is uncontrolled. It would therefore not be appropriate to add a blanket 

permit exemption for such tanks. Situations where a tank holds a low-vapor-pressure organic liquid and 

truly does have low emissions are better addressed through existing exemptions for low-emission 

situations.

Similarly, regarding an exemption for solar manufacturers, solar energy is indisputably a beneficial 

power source that California needs to be pursuing, but that does not necessarily mean that there should 

be a blanket exemption for all such operations. Where such manufacturing activities have air emissions 

that would be subject to District regulations, it is appropriate to require such manufacturers to obtain 

permits to ensure that their beneficial manufacturing operations do not have unintended adverse airquality impacts. For operations that truly do have minimal air emission impacts, it would be preferable 

to address such situations through existing exemptions.

One such existing exemption for low-emitting sources that may apply in these situations is in Section 2-

1-103. This exemption applies to sources with emissions of less than 10 pounds per day that are not 

subject to any substantive requirements of District regulations (among certain other requirements). For 

such sources, there would be little additional environmental benefit to be gained by requiring a permit. 

For low-vapor-pressure tanks or sources at solar manufacturers, if such sources truly do have minimal 

environmental impacts then they would likely qualify for this exemption. For such sources that do have 

environmental impacts that would be subject to District requirements, then it would be appropriate to 

require those sources to obtain a permit and ensure that such requirements are being implemented. 

For all these reasons, Staff are not proposing to add any new exemptions in the second draft. The 

existing exemptions are designed to be flexible enough to be applied in a large number of situations 

where sources should not be required to obtain a permit. These existing exemptions should be 

sufficient to address most if not all appropriate situations described above regarding low-vapor-pressure 
38

tanks and solar manufacturing equipment. To the extent that there need to be new exemptions 

developed specifically for these situations, any such exemptions would be more appropriately addressed 

when the applicable source-specific regulations are next updated. That is, when the District reexamines 

the specific regulations that apply to emissions from tanks or from solar manufacturing equipment, that 

would be the appropriate time to examine in detail what regulatory requirements apply to these 

situations and where a new source-specific exemption may be appropriate. Staff are disinclined to 

engage in this source-specific type of review during these revisions to the District’s general permitting 

regulations in Regulation 2. 

Comment IV.B.3. – Exemption for Installation of Components with Fugitive Emissions Under Section 2-

1-128.21: The District attempted to clarify in the first draft of the amendments how the exemption for 

certain components with fugitive emissions under Section 2-1-128.21 works in practice. The first draft 

revisions raised a number of issues in comments received by the District, and it has become clear to staff 

that further detail is needed in the regulatory language about how this provision works. Several specific 

issues arose that need to be addressed.

Response: Based on all of the discussion around this issue, Staff have revisited the language and intent 

of this exemption and have made the following changes.

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 

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 
39

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 is stated explicitly the proposed 

amendments in subsection 128.21.5 in the second draft.

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 

is stated explicitly the proposed amendments in subsection 128.21.1 in the second draft.

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. 

The second draft reflects these further revisions regarding how this exemption should be applied.

Comment IV.B.4. – Components with Fugitive Emissions Installed on Equipment That Is Not Part of a 

“Process Unit”: Beyond the discussions above regarding how the exemption for fugitive-emissions 

components works, several commenters also suggested a change in the language on the applicability of 

the exemption. These commenters noted that the current language in the exemption refers only to 

components on existing “process units”. The commenters suggested that the exemption should apply 
40

to such fugitive emissions components installed on equipment that may not be part of a “process unit” –

e.g., on tank farms and interplant piping. 

Response: Staff agree that the exemption was not intended to be applied so narrowly. The same 

considerations that support the exemption for components installed on “process units” also apply to 

components installed on other types of equipment that may not normally be considered part of a 

“process unit”. The second draft amendments include additional language to specify that components 

on other types of equipment can qualify for the exemption (assuming they satisfy all of the 

requirements of the exemption). With respect to the requirement that fugitive emissions from all 

additional components installed on a process unit within 12 months do not exceed 10 pounds per day, 

the total emissions from all such components installed in any 12 months period – i.e., all components 

installed at the facility under this exemption that are not installed on a “process unit” – must not exceed 

10 pounds per day. 

C. Accelerated Permitting Program

Comment IV.C.1. – Threshold for Using Accelerated Permitting Program: The District received 

comments stating that the revised language would limit the use of the Accelerated Permitting Program 

to facilities that emit less than ten pounds per day (or facilities where the increase from the permit 

would be less than ten pounds per day), and questioning whether this was really the intent underlying 

this program. 

Response: The Accelerated Permitting Program is not limited to facilities with emissions under ten 

pounds per day. Any facility of any size may utilize the Accelerated Permitting Program for any source at 

the facility that meets the criteria of the rule. One of the criteria (covered by subsections 2-2-106.1 of 

the current Regulation 2-1 and subsection 2-1-302.2.1 of the draft revisions) does include a 10-poundper-day threshold, and this comment appears to be alluding to this provision. This provision applies to 

sources, not to facilities; and it does not categorically exclude sources over 10 pounds per day, it just 

requires that they be pre-certified under Section 2-1-415. This is how the program works now under the 

current version of Regulation 2-1, and how it would continue to work under the draft amendments. 

Comment IV.C.2. – Issuance of Temporary Permit to Authorize Operation Pending Full Permit Review: 

Several commenters asserted that under the current rule, an applicant may commence construction on 

a project under the Accelerated Permitting Program as soon as it has submitted a certified complete 

permit application, without waiting for any response from the District. These commenters stated that 

the draft revisions would change the way the program works and require that the District issue a 

Temporary Permit to Operate based on the application before construction can commence. These 

commenters stated that the requirement for a Temporary Permit to Operate is a “new” requirement.

Response: Staff acknowledge the confusion that has arisen under the current regulatory language, 

which is one of the reasons for clarifying these provisions. The current regulation does require a 

Temporary Permit to Operate (“A temporary Permit to Operate will be issued as soon as the APCO 

determines that the application is complete.”), and it has been the District’s practice to issue them 
41

under the Accelerated Permitting Program. Moreover, the Accelerated Permitting Program is required 

to have such a provision in order to be approvable under the Clean Air Act. District staff met with 

representatives of EPA Region IX regarding this provision, and Region IX staff commented that the 

District should make the Temporary Permit requirement more clear in order to avoid the appearance 

that this may be an impermissible “notice-and-go” permitting program. As Region IX staff explained, a 

“notice-and-go” program simply requires the applicant to inform the permitting agency of its proposed 

project and then authorizes the applicant to commence construction without waiting for permission or 

approval from the permitting agency. This type of permit program is not allowed under the Clean Air 

Act in an NSR regulation. The District is clarifying the language on how the Temporary Permit to 

Operate process works in part to respond to this concern. The District’s program has always had this 

required element that the applicant be issued a Temporary Permit to Operate before starting on the 

project, and the District is simply clarifying how the process works in order to avoid this sort of 

confusion in the future. 

Comment IV.C.3. – Accelerated Permitting Requirements for “Alterations”: The District received a 

number of comments on how “alterations” to existing sources would be addressed under the 

Accelerated Permitting Program. In the current rule language, the Accelerated Permitting Program 

addresses alterations in a separate provision in the last sentence in Section 2-1-106. In the first draft of 

the amendments, staff proposed treating “alterations” in the same provision that applies to new 

sources and modifications in Section 2-1-302.2.1 – which would limit use of the Accelerated Permitting 

Program to situations where the source emits less than 10 pounds per day or is pre-certified under 

Section 2-1-405, among other requirements. 

Commenters objected to moving the provision for “alterations” to section 302.2.1 and making them 

subject to the same restrictions that apply to new sources and to modifications (i.e., source must be 

under 10 pounds per day or be pre-certified under Section 2-1-405). They stated that doing would 

effectively restrict the Accelerated Permitting Program to sources at which emissions are less than 10 

lbs/day and objected that this would virtually eliminate the use of the Accelerated Permitting Program 

for alterations for refineries for sources over 10 pounds. They stated that this would be contrary to the 

District’s intent when it added a permitting requirement for “alterations”, and would be contrary to the 

District’s past practice regarding “alterations”. They stated that adding “alterations” to the Accelerated 

Permitting Program was a compromise reached when the District started requiring permits for 

“alterations” between the need for District review of “alterations” (that is, projects that don’t increase 

emissions, as defined in Section 2-1-233) and the need for regulated facilities to be able to make such 

changes without undue permitting delay. They stated that the District should not upset this 

compromise, because it continues to reflect the appropriate balance between the need for the District 

to review these situations and the need for regulated facilities to implement such changes in a timely 

manner. 

The commenters brought up examples such as where an inspection during a maintenance turnaround 

shows that a burner needs to be replaced – which would normally be an “alteration” because it would 

not result in any increase in emissions. They stated that such a replacement would need to be 

completed quickly, because maintenance turnarounds normally last only 30 days or less. They stated 
42

that if it qualifies for the Accelerated Permitting Program, the facility would be able to implement it 

quickly; but if it does not, the facility could have to wait for up to 9 months for the full permit review to 

be complete. These commenters were greatly concerned about the impact if such projects—and similar 

emissions-neutral projects, emissions abatement projects, energy efficiency projects, etc.—are 

restricted to sources that are below 10 lb/day or pre-certified under Section 2-1-405. The commenters 

suggested that the amendments should restore the provision allowing alterations to qualify for the 

Accelerated Permitting Program without regard to the qualifications in subsection 2-1-302.2.1. 

Response: Staff reviewed the staff report and related materials prepared in connection with the 

adoption of the current Accelerated Permitting Program provisions addressing “alterations”,27 and have 

considered these points regarding the need to expedite the approval of this type of project – and in 

particular the observation that by definitions “alterations” do not involve increases in emissions. Staff 

agree that these considerations warrant having a separate provision that covers “alterations” without 

the same restrictions that apply for new sources and modifications. In the second draft, Staff have 

restored the separate provision for “alterations” under the Accelerated Permitting Program that 

currently exists in the last sentence of Section 2-1-106. This provision is in subsection 2-1-302.2.3 in the 

second draft. Note that the applicant will have to certify in its application for the Accelerated Permitting 

Program that the project satisfies the requirements for accelerated permitting – which in this case will 

be that it does not involve an increase in emissions and therefore qualifies as an “alteration” under 

Section 2-1-233. 

Comment IV.C.4. – Requirements for “Complete” Application Under Accelerated Permitting Program: 

Several commenters expressed concern about the distinction between the completeness requirements 

for a full permit application under Regulation 2 vs. the completeness requirements for an application for 

a temporary permit under the Accelerated Permitting Program. These comments noted that the criteria 

for an application under the Accelerated Permitting Program are different than the completeness 

criteria for a full permit application. They noted that the completeness review for a full permit 

application can be very lengthy, given the extensive criteria and information that needs to be submitted 

for a full application; whereas the requirements for the preliminary review for obtaining a Temporary 

Permit to Operate under the Accelerated Permitting Program are necessarily less extensive (i.e., the 

process is accelerated). The comments requested that the amendments clarify the difference. One idea 

that was suggested was to use a different term than “complete application” for Temporary Permits to 

Operate issued under the Accelerated Permit Program, as that term has already an established meaning 

in relation to review of the full permit application. As an alternative, another suggestion was to create 

an expedited completeness determination process for all permit applications. 

Response: These comments are correct in pointing out the distinction between the expedited review 

for a Temporary Permit to Operate under the Accelerated Permitting Program and the subsequent full 

permit review. The preliminary expedited review pending the completion of the comprehensive full 

permit review is the hallmark of the Accelerated Permitting Program. Staff agree that the use of the 

 

27 See Staff Report, Proposed Amendments to BAAQMD Regulation 1 (General Provisions) and Regulation 2 

(Permits) etc., BAAQMD Permit Services Division (May 2000) at p. 15.
43

term “complete” permit application could be misleading and cause confusion because of the way that 

term is commonly used in relation to the full permit review. Staff have therefore removed reference to 

a “complete” application under the Accelerated Permitting Program in subsection 2-1-302.2, and have 

instead inserted the phrase “application [that] contains all of the elements required by” the Program. 

This language states very clearly that when an applicant submits an application that includes each of the 

elements required under the Accelerated Permitting Program, the District will issue the Temporary 

Permit to Operate and allow construction to commence during the period while the District is 

conducting its full, comprehensive permit review. 

Comment IV.C.5. – Reference in Current Regulation 2-1-106 to “Alterations” That Do Not Involve An 

Increase In Emissions: The District received comments regarding the wording in the current regulation 

about an “alteration that does not result in an increase in emissions.” The comments stated that the 

amendments should define “increase” in this context as an increase above currently permitted limits. 

Response: This reference to alterations that do not involve emissions increases is redundant, because 

by definition an alteration is a change that does not involve an increase in emissions as defined in 

Section 2-1-233. Staff thus agree with the idea expressed in these comments about how this provision 

should be interpreted. But this concept is already inherent in the “alteration” definition of Section 2-1-

233, and so it does not need to be repeated in the requirements for alterations to qualify for the 

Accelerated Permitted Program. Staff are therefore deleting the reference to “increase in emissions” 

here. To the extent that there is any need for clarification of how “alteration” should be interpreted, 

staff are adding a reference to the “alteration” definition in Section 2-1-233. 

Comment IV.C.6. – Accelerated Permitting Program for Modification/Replacement/Addition of 

Components with Fugitive Emissions Exempt from Permitting Under Section 2-1-128.21: The District 

received several comments regarding how the Accelerated Permitting Program would be applied to 

projects involving components with fugitive emissions that are exempt from permitting requirements 

under Regulation 2-1-128.21. As discussed in more detail in Section IV.B.3. of this document, Regulation 

2-1-128.21 provides that the modification, replacement or addition of components such as valves, 

flanges, pumps, compressors, etc., that do not have emissions under routine conditions (other than 

potential fugitive emissions) are exempt from permitting under Regulation 2 and do not need an 

Authority to Construct (assuming they meet certain requirements set forth in the exemption). 

The comments stated that if a project being implemented at a source involves the installation of such 

components that is exempt under Section 2-1-128.21, and the project otherwise qualifies as an 

“alteration” with no increase in emissions under the definition in Section 2-1-233 (i.e., the only potential 

increase in emissions would be fugitive emissions from the components being installed under Section 2-

1-128.21), then the project should be able to qualify for the Accelerated Permitting Program as an 

“alteration”. The comments pointed to the last sentence of the current Section 2-1-106 in this regard, 

which would be re-codified in subsection 2-1-302.2.3 under Staff’s second draft amendments; some of

commenters also referred to this as “Option 3” of the Accelerated Permitting Program. The 

commenters stated that the eligibility of such projects under “Option 3” was discussed extensively in 

connection with the 2000 rule amendments, and the intent of those amendments was to allow the use 
44

of the Accelerated Permitting Program for projects with no emissions increases except for the addition 

of components with fugitive emissions that are exempt from permitting under Section 2-1-128.21. The 

commenters suggested that the District should add language to the Accelerated Permitting Program 

provisions clarifying that where a project does not involve any increase in emissions other than potential 

fugitive emissions from the addition of components exempt from permitting under Section 2-1-128.21, 

the project can still qualify for the Accelerated Permitting Program as an “alteration”. 

Response: There is no need for the Accelerated Permitting Program to make special accommodations 

for situations where the addition of components with fugitive emissions is exempt from permitting 

under Section 2-1-128.21. If the installation of such components is exempt from permitting, then it does 

not need a permit and there is nothing to accelerate. It is exempt and can go ahead without any review 

by the District.

These comments appear to contemplate the specific situation where a facility undertakes a more 

significant project that involves a physical change at an existing source that does require a permit, but 

which also includes the addition of some fugitive components that meet the requirements set forth in 

Section 2-1-218.21. The comments appear to address the situation where such physical change would 

not result in an increase in emissions and therefore would be an “alteration” under Section 2-1-233, 

except for the question of new fugitive emissions because of the addition of the exempt fugitive 

components. The comments appear to express a concern that such changes to a source that would 

otherwise be an “alteration” could thus become a “modification” because of the fact that they involve 

the addition of fugitive components and thus new potential fugitive emissions.

This situation would not be a concern for permitting, because the determination of whether a project is 

an “alteration” or a “modification” is made based on the equipment being permitted – not any exempt 

equipment that is not subject to permit requirements. In this situation, the changes at the source 

requiring an Authority to Construct do not involve an increase in emissions and therefore would be an 

“alteration”. The additional fugitive components are not part of this permitting action because they are 

exempt – installing them does not require a permit per Section 2-1-128.21. The Authority to Construct 

would be issued for the changes being made to the source that constitute the “alteration”, which would 

not include the installation of the exempt fugitive components. (The permitting documentation may 

discuss the additional exempt equipment that will be installed and note that it is exempt, which 

improves the clarity and understanding of what will be occurring at the facility for all involved. But the 

permit that is issued will not be for the additional exempt equipment, because it is exempt.) This is how 

exempt equipment is treated under the District’s permitting system, and there is no need to make any 

changes to the Accelerated Permitting Program to account for the addition of components that are 

exempt under Section 2-1-128.21. 

Comment IV.C.7. – Hypothetical Example Regarding Use of Accelerated Permitting Program: 

Commenters raised a hypothetical example regarding how the Accelerated Permitting Program would 

work in practice. The hypothetical concerned what would happen in the situation where a facility is in 

the middle of a maintenance turnaround and it finds that it unexpectedly needs to replace a burner 

component (or similar element of a process unit) at the last minute. In this example, the facility will 
45

need to take action quickly, because the process unit is only down for a short period of time for the

maintenance turnaround. The comments asked whether this type of situation could be accommodated 

under the Accelerated Permitting Program. 

Response: The District’s current rules as well as the draft amendments could apply to this hypothetical 

situation in several ways, depending on the particular facts and circumstances involved. First, if the 

component replacement constitutes “routine repairs, maintenance or cyclic maintenance that includes 

replacement of components with identical components,” then it is not an alteration or modification that 

would be subject to permitting requirements under Section 2-1-301. Assuming it was not and required 

a permit, then it could be addressed under the accelerated permitting program as an “alteration”, 

assuming that the replacement did not involve an emissions increase that would make it a 

“modification” under Section 2-1-234. And even if it was a “modification” under 2-1-234, it could still 

qualify for the Accelerated Permitting Program if it satisfied the eligibility criteria in current subsections 

2-1-106.1 through 2-1-106.3, which are being moved in the draft amendments to subsections 2-1-

302.2.1. 

Comment IV.C.8. – Accelerated Permitting Program Not Available For Projects Subject to NSPS: Staff 

observed that the Accelerated Permitting Program should not be available for projects that are subject 

to EPA’s New Source Performance Standards (NSPS), because these regulations may impose substantive 

requirements on the project that may require design changes. 

Response: The District does not want to create a situation where an applicant goes forward and starts 

constructing a project with a Temporary Permit to Operate under the Accelerated Permitting Program, 

only to find later on down the road that it needs to change its project design because of NSPS 

requirements. The second draft amendments therefore add a requirement that an applicant under the 

Accelerated Permitting Program must certify that the project does not trigger any NSPS requirements. 

This provision is not intended to be a requirement that the applicant make a determination with 100% 

accuracy as to whether any NSPS standards apply, and there is no sanction if the District or EPA later 

disagrees. It is intended solely to ensure that the applicant has considered the NSPS requirements and 

does not foresee any potential problems, so that no such problems arise later on after the applicant has 

begun the project under a Temporary Permit to Operate. The applicant will assume the risk that its 

assessment of NSPS applicability may turn out to be wrong and that it may later be determined that 

some NSPS requirement does apply, but at least the issue will have been flagged beforehand and the 

applicant will not be able to claim ignorance of the requirement.

D. “Case-by-Case MACT” Requirement

The Clean Air Act Amendments of 1990 required EPA to establish National Emissions Standards for 

Hazardous Air Pollutants (NESHAPs) for certain categories of facilities that emit such pollutants. The 

Amendments required EPA to adopt NESHAPs as nationwide regulatory standards according to a 

specified schedule. As a backstop in the event that EPA failed to adopt such nationwide standards as 

required, the Amendments also established a provision requiring permitting agencies to impose 

standards equivalent to what would be required by a NESHAP on a case-by-case basis for any facilities 
46

for which EPA has not adopted a NESHAP. (See CAA § 112(j).) This requirement is called the “case-bycase MACT” requirement. The District’s regulations currently implement this requirement as part of the

NSR permitting program through Section 2-2-317. Staff are proposing to recodify the requirement in the 

Title V permitting regulations in new Section 2-6-315, because the Clean Air Act Amendments of 1990 

intended that the case-by-case MACT requirement would be implemented through the Title V permit 

process. (See CAA § 112(j)(4),(5).)

Staff received a number of comments on these issues. 

Comment IV.D.1. – Importance of Identifying Case-by-Case MACT Issues Pre-Construction: Several 

commenters stated that it is important to ensure that any applicable Case-by-Case MACT requirements 

are identified at the time of pre-construction permitting. These commenters noted that it would not be 

an efficient outcome if a new source is designed and built and starts operating, only to find out later on 

that it will be subject to a case-by-case MACT requirement and may need to take additional pollution 

control steps that it had not anticipated. To address this issue, some commenters suggested that the 

case-by-case MACT requirement should at least be flagged in a permitting review under Regulation 2-1 

or 2-2, rather than put off until the Title V permitting process which often does not take place until after 

construction is complete. The commenters suggested that perhaps a provision addressing any 

applicable case-by-case MACT requirements should be added to Regulation 2-5, the District’s rule on 

Toxics New Source Review. 

Response: Staff agree that it is important to identify all regulatory requirements that may be applicable 

to a source before the source is built and begins operating. Staff agree that it would not be good 

practice for a source to be permitted and then begin operating, only to discover later on that there is 

some regulatory requirement that requires the source to install additional pollution control equipment 

or otherwise have to change its operation. Staff note, however, that this principle applies to all 

Hazardous Air Pollutant requirements – and indeed, all regulatory requirements in general – and not just 

to the Case-by-Case MACT requirement. This is why the District’s pre-construction permitting review 

evaluates all applicable regulatory requirements, not simply the New Source Review requirements set 

forth in Regulation 2, Rule 2 or other specific requirements contained in regulation 2. This preconstruction review, which the District documents in its Engineering Evaluation it prepares for each 

permit, evaluates NSR requirements, other requirements in Regulation 2 such as toxics requirements 

from the District’s toxics NSR rule in Regulation 2, Rule 5, and requirements imposed by other 

regulations outside of Regulation 2, such as federal NESHAP requirements. This comprehensive 

regulatory review is designed to ensure that all such requirements that may be applicable to a source’s 

operation are identified and addressed at the pre-construction stage (among other purposes). This 

review in the Engineering Evaluation is designed to address any case-by-case MACT requirements, in the 

same way that it addresses any NESHAP requirements where EPA has promulgated a NESHAP. The caseby-case MACT requirement was adopted as a back-stop to ensure that if EPA fails to adopt a NESHAP for 

some reason, permitting agencies will impose the same effective controls as a NESHAP would require for 

each individual source. The District’s Engineering Evaluation addresses any NESHAP that will apply to a 

source where EPA has promulgated a NESHAP, and it also addresses any case-by-case MACT 

requirement in cases where EPA has not promulgated a NESHAP and that requirement kicks in instead. 
47

Staff are therefore not adding any regulatory language specific to the Case-by-Case MACT requirement. 

The issue will instead be addressed through the District’s Engineering Evaluation that it prepares for 

every permit it issues for every new or modified source.

Comment IV.D.2. – Basis for Implementing Case-by-Case MACT Requirement: A commenter stated 

that proposed Section 2-6-315.3 would allow the District to impose MACT requirements if EPA has not 

promulgated any NESHAP standards for the source. The commenter stated that it was unclear what the 

District’s authority would be for doing so, given that stringent local toxics standards already apply. The 

commenter also noted that this requirement may be in addition to the District’s TBACT requirements, as 

EPA’s “Hazardous Air Pollutant” list is not identical to the District’s “Toxic Air Contaminant” list. The 

commenter proposed deleting this proposed provision from Regulation 2-6. 

Response: As explained above, the Case-by-Case MACT requirement was created as a backstop to 

address hazardous air pollutant concerns specifically in cases where EPA has not adopted a NESHAP. 

This requirement therefore applies specifically in cases where EPA has not done so. That is why Section 

2-6-315 applies specifically in cases where EPA has not adopted a NESHAP. (Where EPA has adopted a 

NESHAP, the provisions of the NESHAP would apply instead and there would be no Case-by-Case MACT 

requirement.) Moreover, the federal Case-by-Case MACT requirement is slightly different from, and in 

addition to, the District’s own stringent air toxics requirements. This is why the District includes it in the

regulations as a separate requirement (although the District’s requirements will most likely be 

substantively the same and will not require anything different from sources subject to the federal 

requirement28). The authority for this provision – and the mandate that the District must include it – is 

in Section 112(j) of the Clean Air Act, which creates the Case-by-Case MACT requirement for situations 

where EPA has not promulgated a NESHAP and provides that it is to be implemented through the Title V 

permitting process.

Comment IV.D.3. – Question About Applicability Language of Case-by-Case MACT Requirement: A 

commenter stated that the draft language on the Case-by-Case MACT requirement changes the 

requirement from evaluating a “source” to evaluating a “facility”. The commenter requested 

clarification that this change is intended to change how the requirement would be applied. 

Response: The commenter is correct that the proposed provisions implementing the Case-by-Case 

MACT requirement would not make any substantive change in how the requirement will be applied. 

This change in terminology from “source” to “facility” arises because the requirement is being moved 

from Rule 2, which governs NSR permits issued for new and modified “sources”, to Rule 6, which 

governs Title V permits issued to major “facilities”. The language in current Section 2-1-317 thus states 

that no permit may be issued for a “new or modified source” unless Case-by-Case MACT is implemented 

(to the extent it is applicable) for the source, whereas the revised language in Section 2-6-315 will state 

that the Case-by-Case MACT requirement needs to be implemented (to the extent it is applicable) in the 

 

28 Indeed, the similarity between the District’s TBACT requirement and the federal Case-by-Case MACT 

requirement is the reason why the current Section 2-2-317 implements Case-by-Case MACT through language 

referencing the District’ TBACT standard. The requirements are not exactly identical, however. 
48

Title V permit for any “facility” that meets the specified criteria (i.e., the facility is “major” for HAPs, it is 

in a EPA-listed category of HAP sources, and EPA has missed its deadline for promulgation of a NESHAP 

for that source category).29 

E. Definitions

The District received the following comments on other definitions.

1. “Facility” Definition

The first draft included revisions to the definition of “Facility” that were intended (i) to clarify how the 

definition works and (ii) to consolidate the three different definitions listed in Sections 2-1-213, 2-2-215, 

and 2-6-206 so that there will be a single provision in which this term is defined for purposes of 

Regulation 2. In making these draft changes, staff had three main points in mind that are relevant to the 

comments raised. First, the revised language incorporated the concepts in current subsections 2-2-

215.1 through 2-2-215.3 regarding the inclusion of emissions from “related sources” at different 

facilities when calculating a facility’s cumulative increase. The draft incorporated these related source 

concepts into the definition of “facility” because this is how they are currently addressed in the existing 

rule. Second, the draft language also attempted to capture the concept of a “support facility” that is 

included in the definition of “facility”. The “support facility” concept is a long-standing interpretation of 

the “facility” definition that has been developed over many years, and includes as part of the main 

facility emissions from subsidiary facilities that convey, store, or otherwise assist in the production of 

the principal product of the main facility, even when the support facility is not in the same major 

industrial grouping. There has been confusion in the past over how this interpretation applies under the 

current language of the definition. Staff wanted to address this issue more specifically with the revised 

language, and intended to have the “related source” language cover “support facility” issues. Third, the 

draft language also proposed to change the current test that is used to determine whether noncontiguous sources may constitute a single common “facility”. Currently, the definition specifies that 

sources on different properties can be treated as a single common “facility” if they are “adjacent”, which 

is a broad term that can be applied flexibly. The first draft proposed to replace this broad term with a 

specifically defined “bright-line” 3-mile limit to make it clearer and easier to apply in practice. The 

District received a number of comments on these issues.30

 

29 Note also that the revised language in proposed Section 2-6-315 refers to NESHAPs that have been established 

by EPA for a “category or subcategory of sources”. The proposed language uses this term because EPA refers to an 

entire facility as a “source”, and when it establishes a NESHAP applicable to facilities in a particular industry, it says 

that the NESHAP is applicable to that category of subcategory of “source”. The District refers to the entire facility 

as a “facility”, and to an individual emissions unit at the facility as a “source”. 

30 The District notes that the first draft revisions to Section 2-1-213 were included only in the summary table 

explaining the revisions. Only part of the revised language was included in the underline/strikeout version of 

Regulation 2-1 that was published on the District’s website. Several commenters noted this discrepancy and 

stated that it was confusing as to what the District intended. The District apologizes for any inconvenience, and 

invites any members of the public who were not able to understand what Staff were proposing as a result of this 

oversight to submit comments on these issues during the further comment period. 
49

Comment IV.E.1.a. – “Related Sources” And Cumulative Increase Calculations: Several commenters 

noted that the provisions regarding “related sources” in the current rule apply only to calculating 

cumulative increase. They stated that retaining them in the definition of “facility” for general permitting 

purposes would change the definition of “facility” from what exists now. The commenters suggested 

that these “related sources” provisions should be put in the cumulative increase calculation procedures 

in the 2-2-600s section. 

Response: Staff agree that under the current rule the “related sources” provisions apply only to 

calculating cumulative increase. Staff is not intending to change the way the “facility” definition applies, 

and agrees that making the “related sources” provisions an element of the definition for all permitting 

purposes would be a change to the way the regulation works currently. The second draft revisions 

therefore remove the “related sources” provisions from the definition of “facility”, where they are 

located under the current regulation, and move them to the cumulative increase calculation procedures 

as suggested by the commenters. This change will ensure that the revised regulation is consistent with 

the way the current version works.

Comment IV.E.1.b. – “Adjacent” Sources vs. Bright-Line 3-Mile Test: The District also received 

comments suggesting that the District should not adopt a “bright-line” test for aggregating different 

sources as a common “facility”, but should continue to retain discretion to make such a determination 

on a case-by-case basis. The commenters were concerned that some sources should not be treated as a 

common facility even where they are within 3 miles; some stated a concern that the three-mile brightline test would result in improper “co-mingling” permits from “non-contiguous facilities” that are 

commonly owned. They cited several EPA documents explaining EPA’s policy position that source 

aggregation for the purposes of defining a “facility” is highly fact-specific and should be made on a caseby-case basis. 

Response: Staff agree that determinations of what constitutes a “facility” are highly fact specific and 

should be made on a case-by-case basis. Sometimes sources within three miles should not necessarily 

be treated as a single common facility, and sometimes sources more than three miles apart should be 

treated as a single common facility. The second draft of the proposed amendments changes the 

distance test back to the more flexible “adjacent” test that is used in the current regulation. 

Comment IV.E.1.c. – “Support Facility” Issue: The District also received comments regarding the 

“support facility” concept. The comments suggested that, as with the distance test discussed in the 

previous comment, the District should continue to apply the “support facility” concept on a case-by-case 

basis and consistent with EPA guidance. 

Response: Staff agree that the “support facility” concept needs to be applied on a case-by-case basis. 

In the first draft, staff had attempted to combine the “support facility” concept with the “related 

source” concept discussed above. As stated in response to Comment No. IV.E.1.a., the “related source” 

provisions are now being moved to the cumulative increase calculation procedures in Section 2-2-608. 

This leaves the “support facility” concept to be addressed in the “facility” definition in Section 2-2-213. 

It is staff’s intention that the concept should be applied in the same manner as EPA applies it under the 
50

federal definition of “facility”, which is substantially identical to the District’s definition of “facility”. The 

second draft is therefore adding language that tracks the language EPA uses in applying the “support 

facility” concept. 

The second draft also adds a definition of “support facility” in Section 2-1-242, which uses the identical 

language to EPA’s; and it adds language in the “facility” definition in Section 2-2-213 that makes clear 

that “support facilities” are considered part of the principal facility that they support for permitting 

purposes under Regulation 2. On this issue, Staff are soliciting input from interested members of the 

public on whether to include an element in the “support facility” definition requiring that 50% of a 

support facility’s output or services be dedicated to the principal facility for this “support facility” 

relationship to exist. EPA’s policy is to treat this 50% threshold as a presumptive indicator that a 

“support facility” relationship exists, but not as a determinative requirement. That is, EPA’s policy 

allows the agency to find that such a “support facility” relationship exists even where less than 50% of 

the support facility’s output or services are dedicated to the principal facility in cases where other 

factors demonstrate that such a relationship exists. Staff invite interested members of the public to 

comment on whether the District’s definition should include this 50% threshold as an explicit element of 

the definition of “support facility”, or whether the District should simply apply the 50% threshold as a 

presumptive indicator in the same manner as EPA does. 

2. Definitions of “Alteration” and “Modification”

Staff are proposing to amend the definitions of “alter” and “modify” to clarify how these terms function. 

These are very important definitions for purposes of New Source Review, because NSR permitting 

requirements apply to new sources and modifications. Thus, if a change at a source is a “modification”, 

it is subject to the NSR requirements in Regulation 2-2. Conversely, if it is an “alteration”, it is not 

subject to those requirements. These provisions, and the comments the District received regarding 

them, are discussed below.

a) The “Modification” Definition in Section 2-1-234

The current definition of “modification” in Section 2-1-234 states that a modification is an increase in 

emissions above a permit limit (in current subsections 234.1 and 234.2); and if there are no applicable 

permit limits, then an increase above the source’s actual, physical capacity to emit a pollutant (in 

current subsection 234.3).

31

 

In the first draft of the amendments, Staff attempted to clarify how this definition works with respect to 

the types of permit limits that are effective for determining whether a “modification” takes place under 

subsections 234.1 and 234.2. Staff attempted to do so by stating more specifically what types of 

 

31 Note also that there is an exclusion in this definition for de minimis increases in toxics emissions. The District’s 

NSR rule that is the subject of this rulemaking is primarily concerned with criteria pollutant emissions, not toxics. 

The following discussion therefore focuses on the criteria pollutant elements of the “modification” definition, 

which are based simply on increase in PTE, with no de minimis threshold level. These elements are the effective 

“modification” threshold for criteria pollutant NSR.
51

provisions set forth in District permits would be credited for purposes of this definition and what types 

of provisions would not be credited. The first draft used the term “NSR Permit Limits” to delineate what 

kinds of permit limits would be credited. This proposed terminology generated a great deal of 

comments about what exactly it means and how it would be applied. Based on this feedback, Staff have 

given further consideration to how the “modification” test is Section 2-1-234 was intended to work. 

Based on this further consideration, it is apparent that a “modification” was intended to be an increase 

in the source’s maximum legally-authorized emissions as allowed under its permit conditions; or in the 

absence of any enforceable permit limit, then its maximum physical capacity to emit air pollutants. This, 

in essence, is a measure of a source’s “Potential to Emit”, which is a measure of the maximum amount 

of air pollution that a source can emit given all legal, practical, and physical constraints on its operation. 

“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 advocates. Staff are therefore further revising the proposed amendments to 

Section 2-1-234 to state that a “modification” under this definition is a change at a source that will result 

in an increase in the source’s potential to emit. This simple definition is substantively the same as the 

more complicated definition in the current Section 2-1-234 (which refers to increase above permitted 

limits or above physical capacity where there is no permit limit), but it states the definition in a manner 

that is much easier to understand and apply.

In addition, based in part on feedback from commenters, Staff are proposing to retain certain additional 

language in the definition clarifying how the concept of an increase in Potential to Emit will be applied in 

specific situations. 

• Determining Long-Term and Short-Term PTE: Potential to Emit is a concept that applies to both 

long-term and short-term emissions. An increase in a source’s potential to emit either shortterm emissions or longer-term emissions is a modification under Section 2-1-234. Staff have 

retained language in the second draft amendments 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 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 operated at its fully hourly maximum for the full 

24 hours in a day, its maximum emissions would be its hourly maximum emissions times 24. 

Similarly, staff have retained 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 short-term maximum emission rates over the longer term). 
52

These principles are already implied in the concept of PTE, but the second draft amendments 

state 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 the second draft amendments state it explicitly. In this scenario, the boiler’s individual 

PTE is obviously being increased, even if the group permit limit is unchanged. 

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,32 and any increase in this PTE will be a “modification” 

under 2-1-234.

• 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. The second draft 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 

 

32 Obviously, there are a number of factors, both legal and technical, that can constrain a source’s potential to emit 

under different circumstances. In the above 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.
53

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. 

Although these concepts are already inherent in the basic concept of “Potential to Emit”, the District is 

including 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 these further revisions in mind, which Staff are making in the second draft of the proposed 

amendments, we now turn to the comments received on these issues.

Comment IV.E.2.a.1. – “NSR Permit Limits”: As noted above, the first draft used the term “NSR Permit 

Limits” to describe the type of enforceable emissions limits that would be credited as establishing a 

source’s potential to emit. Commenters expressed a great deal of concern about this term, stating that 

no guidance is provided on how to determine if a limit was established under Regulation 2-2 as an NSR 

permit limit. The commenters also stated that using this term would eliminate the possibility that a Title 

V permit limit could be used in determining whether a modification will occur. 

Response: As noted above, Staff agree that the original approach in the first draft had drawbacks and 

could be improved upon. Staff have therefore revised the proposed amendments in the second draft 

and have removed this term. Instead of focusing on whether a permit limit was imposed as part of NSR 

review, the definition will focus on whether the permit limit establishes the source’s potential to emit. 

Potential to emit is the relevant concept embodied in the current “modification” test, and so Staff have 

used that concept as the touchstone for the revised definition as well. Permit limits will therefore be 

relevant to whether a change at a source is a “modification” to the extent that they establish the 

source’s potential to emit. Any permit limit can establish a source’s potential to emit, regardless of how 

and why it was imposed, as long as it (i) is legally enforceable and (ii) actually reflects the maximum 

emissions the source is legally and physically capable of emitting. 

Using this revised approach will avoid debates about whether a permit limit was imposed as an NSR limit 

or not. Instead, any permit limit that is legally enforceable will form the basis for determining whether a 

change at the source is a “modification” (unless there is some other reason that some lower emissions 

level reflects the source’s actual maximum capacity to emit air pollution, e.g., a physical bottleneck that 

limits to source’s actual maximum emissions to some level below its permit limit). If there is some 

emissions level specified in a permit that is not an enforceable limit on emissions (e.g., emissions levels 

of certain grandfathered sources as reflected in Table II of such sources’ Title V permits), then such 

levels do not establish the source’s Potential to Emit and are not relevant to whether there has been a 

“modification”. Instead, in such cases the “modification” test will look to whatever permit limits apply 

to the source that are legally enforceable; or in the absence of such enforceable permit limits, the 

source’s actual, physical maximum capacity to emit air pollution. Focusing on the question of legal 
54

enforceability of a permit limit, which is inherent in the concept of “potential to emit”, will remove the 

potential for ambiguity and confusion that these commenters were concerned about with respect to the 

“NSR Permit Limit” terminology.33

Comment IV.E.2.a.2. – Group (or “Bubble”) Limits: In the first draft, the proposed amendments to 

Section 2-1-234 made clear that in determining whether a change at a source is a “modification”, a 

permit limit applicable to a source will form the basis for the “modification” test only if it specifically 

limits the emissions from that individual source. The draft language stated that if a permit limit applies 

to the combined emissions from multiple sources, then such a limit would not be used for determining 

whether there is a “modification” (unless the limit imposes an effective limit on emissions from the 

individual source by itself). 

This proposal generated a number of comments stating that the District should allow group limits that 

apply to combined emissions from multiple sources – or “bubble limits” as some commenters called 

them – to be used as the test for whether a change constitutes a modification. These commenters 

stated that many sources have permits with “bubble limits” that were established in order to allow for 

operational flexibility. These commenters suggested that where there is a bubble limit, a facility should 

be able to make any changes to any of the sources subject to such a bubble limit without having the 

change being a “modification” and subject to NSR review. 

One commenter suggested that not allowing these bubble limits to be used in the “modification” 

analysis would be “an illegal taking of a vested right.” It noted that it has “bubble limits” in some of its 

permits, and suggested that if the District does not provide for such limits to be used in the test to 

determine whether a change is a “modification” then “the rights granted by [such permits] would be 

negated retroactively if the amendments are adopted.” This commenter noted in particular a letter 

from 1984 regarding a specific permit that the District issued to the commenter that the commenter 

contended shows an intent that bubble limits would be used as the basis for the “modification” test. 

The commenter suggested that the District should allow it to make any changes to any of the individual 

sources included under the bubble without applying NSR, regardless of any emissions increases, as long 

as there is no change in the overall bubble and the total emissions potential for the combined units. 

These commenters contended that in specifying how group limits (or “bubble limits”) will be treated for 

purposes of the “modification” definition, the proposed amendments would be a significant expansion 

of the District’s NSR permitting program and will greatly increase the number of projects that will 

require NSR permits. 

Response: Staff disagrees with these contentions about group limits applicable to multiple sources. 

These contentions would undermine the basic concept that a source is “modified” and should be subject 

to NSR review when its Potential to Emit is increased. If a facility implements a change at a source that 

 

33 One commenter suggested that the District should provide guidance on what is meant by an enforceable permit 

limit. Whether a regulatory limit is enforceable is a well-understood concept that does not need to be defined 

further. If violation of the limit creates a legal cause of action and subjects the violator to legal consequences such 

as penalties or injunctive relief, then it is enforceable. 
55

increases the source’s PTE, then that change should be a “modification” and should go through NSR 

review even if there is some overall group limit applicable to multiple sources that is not be changed. To 

hold otherwise would allow for very substantial changes at a source, which could greatly increase the 

source’s capacity to emit air pollution, to escape NSR review simply because they happen to be subject 

to a group limit that will not be exceeded. This result would be bad policy, and is inconsistent with the 

language and intent of the District’s NSR program. 

Staff note that group limits will still be effective to provide operational flexibility at facilities that are 

subject to them. Such facilities can continue to operate their sources however they want to, subject to 

the applicable group limits. The only prohibition will be on modifying such sources – that is, increasing 

their PTE in some way. Thus in the example above with the boiler subject to a group limit along with 

nine other sources, the facility will be able to operate the boiler however it wants under the group limit, 

up to and including the boiler’s maximum capacity (assuming the group limit is complied with). It is only 

if the facility wants to make some change that will increase the capacity of the boiler (and thus increase 

its PTE) that the “modification” definition will be triggered. At that point, NSR should appropriately be 

applied to review such an increase in capacity.

With respect to the comments on “vested rights” to make changes at a source subject to a group limit 

without NSR review, District permits do not grant any such “vested rights”. As noted above, a group 

limit grants a right to operate permitted sources in a flexible manner consistent with the group limit; 

such permits do not authorize the permit holder to make a modification to the equipment for which the 

permit was granted (e.g., by increasing its capacity or otherwise increasing PTE). To the contrary, 

District regulations have long required a permit revision and NSR review for making a modification. 

Moreover, even if the proposed amendments were going to make some change in the way the 

“modification” test works (which they are not, as explained above), the District is authorized to make 

such changes through its regulatory authority granted by the legislature. Simply changing a regulatory 

definition would not impinge upon any “vested right”, even if one existed. 

And finally, with respect to the 1984 letter cited by the commenter,34 that letter notes that the “bubble” 

is being imposed to provide operational flexibility for the facility. It does not say that the facility can 

make any and all changes to any source as long as the bubble limit is not changed. The letter does note 

that the “bubble” “will serve as a baseline for future refinery modifications”, which is correct and is 

consistent with the foregoing discussion. For one, the “bubble” emissions rate forms a baseline for 

providing additional offsets in connection with future modifications. Offsets would only need to be 

provided above the facility’s emissions already authorized under the bubble. Similarly, in appropriate 

cases the “bubble” emissions limit can also be relevant to determining PTE for individual sources as 

described above. In this context, it is undoubtedly “a baseline” for determining PTE, although it is not 

necessarily the only baseline that is relevant. What the letter does not say is that the “bubble” will be 

the only baseline ever to be used for any purpose, or that the facility is authorized to make any change 

 

34 Letter from M. Feldstein, BAAQMD, to Judy Moorad, Shell Oil Co. (Nov. 30, 1984). 
56

whatsoever at any source without undergoing NSR review as long as the “bubble” limits are not 

changed. That is not how the definition in 2-1-234 is intended to work.35 

Comment IV.E.2.a.3. – Support for Clarifying “Modification” Language: At least one commenter 

supported Staff’s efforts to provide more certainty and clarity in the rule language. The commenter 

noted confusion even among District staff over how the “modification” definition is intended to 

function, and stated that this shows that there is additional need for clarity. The commenter stated that 

the District should adopt clear rule language and should provide specific examples in the Staff Report to 

make sure that everyone understands how the rule language functions. 

Response: Staff agrees that the current “modification” definition should be improved. Based on input 

received, Staff believe that the most appropriate way to clarify this definition is to state clearly and 

succinctly that a “modification” is a change at a source that increases the source’s potential to emit. As 

noted above, “Potential to Emit” is a well-defined and well-understood regulatory concept. In addition, 

to provide further guidance, Staff are proposing additional language in Section 2-1-234 to describe how 

the concept is applied in specific situations. That additional language in the regulation, as well as the 

discussion that Staff is providing in the rule development documentation (i.e., this response to 

comments document, the Staff Report that will be prepared, etc.), will provide the certainty and clarity 

that the commenter is seeking. 

Comment IV.E.2.a.4. – A “Modification” is an Increase in Potential to Emit Any Pollutant: Some 

commenters raised a question regarding whether an increase in the potential to emit of any pollutant 

would cause a change to be a “modification” – or whether it is just an increase in the potential to emit 

of pollutants subject to permit conditions. As an example, commenters asked how the regulations treat 

a source that may emit 6 different regulated air pollutants, but where only 2 of them are subject to 

emissions limits in the permit and the other 4 do not have specific limits. These commenters asked how 

the “modification” definition would be applied in this situation. They suggested that as long as there is 

no increase in the permitted emission level of the 2 pollutants with permit limits (i.e., no increase in the 

PTE of these two pollutants), then a change would not be a “modification” regardless of what happens 

to emissions of the other 4 pollutants. 

Response: A “modification” is an increase in the PTE of any pollutant, not just pollutants subject to 

emissions limits. If there is no emissions limit applicable to a pollutant, then the PTE for that pollutant is 

determined by the source’s maximum physical ability to emit the pollutant given its design and 

operational constraints and other similar considerations. If the source will increase its PTE for such a 

pollutant, it is a “modified” source under Section 2-1-234. Any such increase in PTE for any pollutant 

that a source emits constitutes a “modification” under Section 2-1-234.36

 

35 Note also that to the extent that a letter from a District staff person is inconsistent with a regulation adopted by 

the District’s Board of Directors, the regulation trumps the letter. 

36 Note, of course, that there are further criteria that must be satisfied before a “modified” source is subject to any 

substantive regulatory requirements for any particular pollutant as specified in Regulation 2-2. If a source is 

“modified” under Section 2-1-234, that just means that one has to proceed to Regulation 2-2 to determine what, if 
57

Comment IV.E.2.a.5. – Concerns About Using “Potential to Emit” Concept: A commenter noted Staff’s 

explanation that where there is no enforceable permit limit on a source’s emissions, the “modification” 

test depends on the source’s actual physical capacity to emit air pollution to establish the source’s PTE.

The commenter objected that this measure of actual, physical PTE “is ultimately subjective and [its] 

application is at the discretion of the District.” 

Response: Staff disagree that “Potential to Emit” is a subjective concept. Where there is no enforceable 

permit limit in place, PTE is determined by the source’s actual, physical maximum capability to emit air 

pollution. This is an objective engineering concept based upon the physical, operational, and design 

characteristics of the equipment at issue. In certain cases there may be an element of engineering 

judgment that goes into determining the source’s PTE, but that does not make the concept “subjective”. 

This is true of many engineering concepts. In such cases, the District is required to exercise sound 

engineering judgment in a reasonable manner consistent with accepted, objective engineering 

principles. Doing so does not make the concept “subjective”. 

Comment IV.E.2.a.6. – Using Hourly Emissions to Determine Daily PTE and Daily Emissions to 

Determine Annual PTE: Several commenters voiced concerns about removing language regarding 

multiplying hourly limits by 24 to calculate daily PTE and multiplying daily limits by 365 to calculate 

annual PTE (where appropriate). Commenters stated that if such references are removed from the 

definition, that may be taken as an affirmative indication that such PTE calculations are prohibited under 

the revised definition. In a related concern, one commenter stated that the definition did not indicate 

how daily emissions should be calculated. 

Response: The concept of “Potential to Emit” inherently encompasses the situation where a source’s 

effective maximum daily emissions are its hourly maximum emissions times 24, and where maximum 

annual emissions are daily emissions time 365. In absence of any other effective restraint on emissions, 

a source cannot emit more in a day than its hourly emissions times 24 hours, and cannot emit more in a 

year than its daily emissions times 365. In this context, hourly emission limits provide a backstop for 

daily PTE, and daily limits for annual PTE, in cases where there are no more restrictive limitations on a 

source’s emissions. Staff agree, however, that it would be appropriate to make an explicit statement to 

this effect in the definition of modification to make clear how the concept works. Staff are also 

including language to note the limitations of this principle, in that it does not provide a method to 

calculate PTE where there is some indication that the source cannot operate at its maximum rate 24 

hours per day or 365 days per year.

Comment IV.E.2.a.7. – Using “Historical Operating Records” to Determine PTE: Several concerns were 

raised about including a reference to using “historical operating records” as a basis for determining a 

source’s actual, physical capacity to emit air pollutants. These comments requested clarification that it is 

a source’s actual maximum capacity that determines PTE in such cases, not the highest documented 

 

any, of those substantive requirements apply. Note also that many requirements applicable to modified sources 

apply on a “pollutant-specific basis”, meaning that if a source is modified not all of the source’s pollutants will 

necessarily trigger such requirements. Only the specific pollutants that exceed the applicable regulatory threshold 

levels will be subject to the requirements.
58

emissions or throughput that the source has experienced historically. The comments suggested that the 

definition use more generic catch-all language such as “other reliable technical information” to address 

this situation, which could include historical operating records if they really are appropriate for

determining maximum capacity. The comments also suggested that some specific examples be included 

in the Staff Report illustrating how this concept would be applied in practice. 

Response: The commenters are correct that a source’s PTE is based on its maximum potential 

emissions, and not necessarily the highest documented emission or throughput rate it has achieved in 

the past. In certain cases where no more reliable information is available, however, documented 

throughput or emissions can provide a useful approximation of PTE. For example, where a source’s PTE 

is limited by a bottleneck such that design capacity and similar information do not provide a measure of 

PTE, and there is indication that the source has in the past actually operated at its highest bottlenecked 

capacity, historical operating records documenting throughput and emissions at that point can be useful 

in determining the source’s effective PTE. That said, there is no reason to elevate historical operating 

records over any other type of relevant information that could provide the basis for a PTE calculation in 

such a situation. Staff agree that the more generic catch-all term “other reliable technical information” 

better captures the universe of information that can be used to determine PTE.

Comment IV.E.2.a.8. – Applying “Modification” Definition For Multiple Pieces of Equipment That 

Operate Interdependently: A commenter that operates combined-cycle power plants raised a question 

about how the “modification” definition should be applied for the specific equipment used at such 

plants. The commenter’s concern involved the situation where a combined-cycle power plant’s gas 

turbine and its associated Heat Recovery Steam Generator (HRSG) are covered by a common emissions 

limit that applies to emissions at the exhaust from the combined turbine/HRSG train. The commenter’s 

concern was about making an efficiency improvement to the turbine to allow it to burn more fuel and 

produce more electricity, resulting in a reduction in emissions per unit of power produced. The 

commenter suggested that if it agreed to maintain its existing (pre-change) emissions limits, then it 

should be allowed to undertake the project without being treated as a “modification” and thus without 

having to go through NSR permitting. The commenter was concerned that the current “modification” 

definition would not be applied in this way, and would treat the turbine and the HRSG as separate 

“sources”. Treating the turbine and HRSG as separate sources would mean that such a change is a 

“modification”, because the turbine’s emissions will increase even though the combined turbine/HRSG 

permit limits will not change. The commenter offered some proposed regulatory language that would 

specify how to treat what the commenter called a “dependent source”, which would be a source like the 

HRSG in this example whose operation is dependent on the gas turbine and can operate only when the 

main source is operating. The commenter’s proposed language would essentially treat a combined 

emission limit on the principal source and the dependent source as a single-source limit, and an increase 

at the principal source or the dependent source would not be a “modification” as long as the combined 

limit would not change.

Response: Staff disagree that the “modification” definition needs to be amended to apply to this 

specific situation involving a combined-cycle gas turbine/HRSG combination. The current definition can 

be applied to this situation to achieve an appropriate result. If the turbine/HRSG combination really 
59

should be treated as a single unit for purposes of determining whether emissions are increasing and 

should be subject to NSR review as a “modification”, then the District can regulate them as a single 

“source” and apply the definition of “modified source” to the combined equipment as a single unit. If 

that is the appropriate regulatory treatment, then the “modification” test will apply to the combined 

emissions limit applicable to the “source”, i.e., the turbine/HRSG combination. Conversely, if the 

turbine and HRSG really should be treated as separate units for purposes of determining whether there 

is a modification, then the District can regulate them as separate “sources” and apply the “modification” 

definition to the turbine and HRSG separately.37 (Note that the definition of “source” in Regulation 1-

227 is sufficiently flexible to address both of these situations, where appropriate.) Which approach is 

more applicable in a given situation at a given facility will depend upon the specific facts and 

circumstances of each individual facility and the equipment it uses. Such determinations will therefore 

need to be made on a case-by-case basis for each facility. But the regulatory language as currently 

proposed will allow the District to apply the definition in an appropriate manner, under whichever 

alternative should be applied in a given situation. There is no need to add additional regulatory 

language to make the definition applicable to this type of facility. 

b) Potential Incorporation of Federal “Major NSR” Modification Test in Section 2-

1-234

Comment IV.E.2.b. – Solicitation of Input on Incorporating Federal “Major NSR” Test in Modification 

Definition in Section 2-1-234: As noted above, the District’s current definition of “modification” is 

based on an increase in short-term or long-term Potential to Emit as a result of the change being 

implemented at a source. During discussions regarding the first draft of the proposed amendments, 

several observers questioned whether this definition is consistent with general NSR principles. They 

pointed out that in general the federal NSR program bases its applicability on whether there will be a 

“significant” increase in emissions compared to an actual emissions baseline. That is, the federal NSR 

program measures the emissions increase resulting from a physical change or change in method of 

operation of a source compared to its actual emissions in the past. If the future emissions will be higher 

than actual emissions in the past by more than a significant amount, then the change becomes a 

“major” modification subject to NSR requirements. The District’s test, by contrast, is based on an 

increase in the source’s maximum permitted emissions level, not the levels at which it actually emitted 

in the past. (See discussion above for further detail.) These observers questioned whether the District’s 

test for major NSR applicability is as stringent as, or more stringent than, the federal test for major NSR 

applicability, which is required in order for EPA to approve it under the Clean Air Act.

Response: Based on an evaluation of how the respective Major NSR applicability tests work in practice, 

District staff have concluded that the District’s test is at least as stringent as the federal test, if not more 

stringent. 

 

37 Note that in such a case, changes could still be implemented at each individual element of the combined 

turbine/HRSG train without constituting a “modification” as long at the changes do not result in an increase above 

the levels specified in Section 2-1-234.
60

First, the District has no “significance” threshold below which a modification is not subject to major NSR 

requirements. Under the federal test, a modification becomes “major” and thus subject to major NSR 

requirements if it will result in a “significant” increase, which is an amount that depends on the 

individual pollutant but is generally in the range of 10-100 tons per year. Under the District’s test, there 

is no such leeway for modifications less than the “significant” level to escape NSR permitting. Any

increase in a source’s PTE is a “modification” subject to NSR permitting requirements, no matter how 

small.38 The District’s test will therefore subject changes implemented at a source to NSR in many

situations where they would be exempt under EPA’s test. 

Second, the District’s modification test looks to short-term as well as annual emissions. An increase in a 

source’s daily potential to emit is a “modification”, not just an increase in its annual emissions (i.e., tons 

per year). This distinction also means that the District’s test will cover additional scenarios where EPA’s 

test would not require major NSR permitting, such as where a source does not operate all year long and 

can limit its hours of operation to keep annual emissions down. Such a source could double its firing 

capacity and burn twice the amount of fuel as before, but escape major NSR permitting if it can keep its 

annual emissions low because it does not operate for the full year. The District’s test would require 

such a major increase in capacity to obtain an NSR permit as a “modification”; EPA’s test would allow 

such a change without requiring a major NSR permit review as long as there is no “significant” increase 

in annual emissions. If the facility can keep its annual emissions down to a level where there is no 

significant increase above its historical annual emission levels, then it would not need to implement any 

major NSR requirements under EPA’s test. The District’s test is more stringent in this respect as well.

Third, the District applies its “modification” test more narrowly and looks only at increases from an 

individual project at an individual source. EPA allows for “netting” of prior emissions increases and 

decreases as a way to avoid having a “significant” emissions increase, and it allows for emissions to be 

averaged across all sources at a facility using “Plantwide Applicability Limits” (PALs). The District does 

not allow such accounting mechanisms to be used in determining whether a physical change or change 

in the method of operation at a source is a “modification” that must go through NSR permitting.39 This 

 

38 There is a de minimis threshold for “modifications” for toxics emissions, but these are not subject to NSR. For 

pollutants regulated under the federal NSR program, the District’s test does not have any de minimis exemption 

based on a “significant” increase level. Note also that certain NSR elements have applicability thresholds, so not 

every NSR requirement will be triggered and implemented in every NSR permit. Any increase in PTE will be a 

“modification”, however, and will require an NSR permit and an evaluation to see what NSR requirements are 

triggered for that permit. 

39 Note that the Staff are proposing to incorporate the netting concept for purposes of PSD permitting and some 

related provisions. But this would not apply to determining whether a change at a source is a “modification” 

under the current Section 2-1-234 definition. That test looks only at whether the individual project at the 

individual source will increase the source’s PTE. Once it is determined that a project will be a “modification” under 

Section 2-1-234 and will thus have to get an NSR permit under Regulation 2-2 (which applies to new and 

“modified” sources), there are various applicability tests to see what specific NSR requirements will apply to that 

permit. Some of these applicability tests incorporate concepts such as netting (although some do not, such as the 

District’s BACT requirement). But for comparing the stringency of the District’s “modification” definition in Section 

2-1-234 with EPA’s NSR triggering test, the District’s “modification” test does not allow for any of these averaging 

provisions that allow projects to escape major NSR permitting review altogether under EPA’s test. 
61

is a further distinction that makes EPA’s applicability test less stringent that the District’s for facilities 

that can take advantage of these averaging provisions.40 

Moreover, EPA’s track record in approving the District’s “modification” definition suggests that EPA has 

found the definition to be at least as stringent as the federal NSR applicability test. The District’s 

definition has been explicitly based on a “potential to emit” concept since at least 1994, when the 

District adopted what was then Section 2-2-223, a definition of “Modified Source or Facility”. That 

definition defined modification based on an increase in “permitted emission level”, which is essentially 

the same PTE concept that the District uses today in Section 2-1-234. EPA approved that definition into

California’s SIP as part of its overall approval of the 1994 version of Regulation 2 on January 26, 1999 

(see 64 FR 3850), and the substance of the definition has not changed between then and the current 

version (with respect to the PTE test, at least).

41

 

Furthermore, EPA has also approved similar tests used by other California air districts, further suggesting 

that this PTE test is at least as stringent as the federal approach and approvable by EPA under the Clean 

Air Act. The Sacramento Metropolitan Air Quality Management District’s Rule 214 (Federal New Source 

Review), for example, defines “modification” in Section 225 as a physical change or change in the 

method of operation that “would necessitate a change in permit condition or result in potential to emit 

being higher than the historic potential emissions.” This “modification” test works in exactly the same 

way as the District’s “modification” test, as a first step in determining whether any NSR permit

requirements are potentially applicable. If a change at the source results in an increase in potential to 

emit compared to historic potential emissions, then one needs to look at the relevant major NSR 

provisions in that district’s rules to see which are applicable. The threshold test for whether a physical 

change or change in the method of operation at a source will require NSR permitting – i.e., whether 

such a change is a “modification” – therefore works in exactly the same manner as the District’s 

threshold test in Section 2-1-234.42 EPA approved Sacramento’s Rule 214 less than a year ago.43 EPA 

has also approved the San Joaquin Valley Air Pollution Control District’s Rule 2201, Section 3.25, which 

 

40 Staff also note that the District has much more stringent applicability thresholds for many of its NSR provisions, 

such as the 10 lb/day BACT threshold. The District’s NSR program overall is very robust and clearly more stringent 

than the federal minimum requirements, regardless of whatever conclusions one might draw regarding the 

“modification” test. 

41 District Staff researched the available records regarding any discussion that EPA may have provided on this issue 

in connection with approving the District’s NSR rules, but were not able to find anything. But EPA’s ultimate 

conclusion that the District’s program is as stringent as or more stringent than the federal requirements is 

demonstrated by the fact that EPA did approve it as satisfying all CAA NSR requirements. 

42 Note that in certain situations Sacramento’s rules define “historic potential to emit” in terms of actual emissions, 

not potential to emit. See Sacramento Rule 214, Section 221. In most circumstances the potential to emit test will 

apply, however. But more importantly, the fact that EPA approved Sacramento’s use of the “potential to emit” 

test in any circumstances demonstrates that, when applied as it is here, it is at least as stringent as the federal NSR 

applicability test. 

43 See Revisions to the California State Implementation Plan, Sacramento Metropolitan Air Quality Management 

District, Final Rule, 76 Fed. Reg. 43,183 (July 20, 2011).
62

defines “modification” in terms of changes “that would necessitate change in permit conditions” – i.e., 

an increase in permitted emissions, not an increase based on actual emissions. 

For all of these reasons, Staff have concluded that the “modification” test for applicability of the NSR 

requirements in Regulation 2, Rule 2 is at least as stringent as, and likely more stringent than, EPA’s 

federal minimum requirements. District Staff met with representatives from EPA Region IX to discuss 

this issue and to solicit their concurrence with the District’s understanding, but have not received a 

response as of the publication of this document. Staff do not expect that EPA will disagree with the 

District’s evaluation as set forth above, given the agency’s approval of the District’s current 

“modification” test and the other similar tests used by other California air districts. Obviously, if EPA 

takes the position now that California’s air districts need to make a major change in the way they 

approach applicability of their NSR programs, that would be a major policy shift that will have significant 

ramifications beyond just the San Francisco Bay Area. Staff would like to await EPA’s response and 

consider their before making any final decisions as how to proceed on this issue, however. 

For purposes of the second draft, therefore, Staff are not proposing any substantive change to the 

Potential to Emit concept contained in current Section 2-1-234.44 Staff would like to solicit further input 

from all interested parties on this issue, however, given the fact that it got relatively little discussion in 

the comments on the first draft as well as the fact that EPA staff have not had time to provide the 

District with input as of this time. Staff are therefore inserting language into the second draft for 

Section 2-1-234 – simply as a placeholder for further discussion – that would incorporate the federal test 

as a “backstop” that would apply in any situation where the federal test may more stringent than the 

District’s current test. This “federal backstop” element to the Section 2-1-234 definition would be in 

Section 2-1-234.2, and would incorporate by reference the federal NSR “major modification” tests. 

Incorporating such a “federal backstop” element would address any potential concern that there could 

be any situation in which the federal test would be more stringent. In most cases, where the District’s 

test would be the more stringent, that test would continue to apply and render a change at a source a 

“modification” based on an increase in PTE. If there is any situation where a change at a source would 

not be a “modification” under the District’s test, but would be a “major modification” under EPA’s test, 

the second element of the definition would apply and the change would be a “modification” subject to 

NSR permitting under Regulation 2, Rule 2. 

As noted above, District Staff do not believe that the District’s test is any less stringent than the federal 

test, and in fact believe that it is more stringent than the federal minimum requirements under the 

Clean Air Act. For these reasons, Staff do not see any need to change the way the regulation currently 

works. Staff are highlighting this issue at this point, and are providing the placeholder language in the 

second draft of Section 2-1-234, simply so that interested parties can see what it would look like if the 

District were to add such a requirement. PLEASE NOTE THAT THIS LANGUAGE IS BEING INSERTED FOR 

DISCUSSION PURPOSES ONLY AND IS NOT A PROPOSAL BY DISTRICT STAFF AT THIS POINT. DISTRICT 

 

44 The second draft obviously contains significant revisions to the regulatory language in Section 2-1-234, but staff 

are not proposing any change to the fundamental concept set forth in that section that a “modification” is an 

increase in a source’s potential to emit.
63

STAFF ARE SOLICITING FURTHER INPUT ON THIS ISSUE, AND WILL MAKE A FINAL DECISION ON WHAT 

APPROACH TO TAKE AND WHAT SPECIFIC REGULATORY LANGUAGE TO USE AFTER HEARING FROM 

ALL INTERESTED PARTIES, INCLUDING EPA STAFF. The District encourages all interested parties to 

review this issue and the placeholder language in Section 2-1-234 and to provide input to District staff 

on what would be the most appropriate way to address this issue.

c) The “Alteration” Definition in Section 2-1-233

An “alteration” is defined as a change at a source that may affect emissions and therefore needs an 

Authority to Construct, but one which does not increase emissions in such a manner as to fall within the 

definition of “modification”. The District added the requirement to obtain an Authority to Construct for 

an “alteration” to an existing source in 2000 in order to review such changes and confirm that they are 

not, in fact, alterations (and not modifications that would have to go through NSR permitting). The

District proposed certain amendments to the current definition in the first draft, which generated a 

number of comments. 

Comment IV.E.2.c.1. – Clarification on What Kinds of Changes Constitute an “Alteration” Requiring an 

Authority to Construct: A number of commenters asked for clarification on what kinds of changes at a 

source would be an “alteration” that would require an Authority to Construct. Many commenters noted 

that the first draft included “changes in throughput or hours of operation” in the definition of alteration, 

and asked whether they would be required to apply for and obtain an authority to construct if their 

hours of operation went up or down simply because of demand, even if there would not be any increase 

in permitted emissions. (An increase in permitted emissions, of course, would be a “modification” and 

would clearly require an authority to construct and NSR review.) These commenters asked staff to 

consider and provide guidance on exactly what kinds of changes at a source would require an authority 

to construct, noting concerns about making this requirement too broad and requiring large numbers of 

permit applications for changes that, by definition, do not involve emissions increases. They suggested 

that an “alteration” should be limited to hardware changes, and not changes in throughput based solely 

on demand. Some also suggested that the District should retain the language in the current “alteration” 

definition regarding specific types of changes that are or are not treated as “alterations” (e.g., certain 

changes in process stream composition, replacement of burners with non-identical burners, etc.) Other 

commenters suggested that it would be useful to provide examples or a flow chart in the Staff Report 

about what kinds of projects should be treated as “alterations” requiring an Authority to Construct. 

Response: Staff agree with the concerns about being overly inclusive in requiring permit applications 

for situations that do not constitute “modifications” and are therefore not subject to NSR review. 

Requiring too many permit applications for “alterations” in these situations would overwhelm the 

permitting system without achieving any commensurate benefit in air quality. Staff have concluded that 

the heart of the concerns being raised surrounding this issue involve the addition of the language about 

requiring permit applications for “changes in throughput or hours of operation”. In developing the first 

draft, Staff imported this language from the “modification” definition so that the language in the 

“modification” definition and “alteration” definition would track each other. Staff have now concluded 

that doing so is not appropriate. Changes in throughput and hours of operation are clearly important 
64

and must go through NSR review if they will result in an increase in emissions as specified in Section 2-1-

234. Those types of changes require a permit application because they are subject to NSR review. For 

changes in throughput and hours of operation that will not result in an increase as specified in Section 2-

1-234, however, those types of changes are less important because they are not subject to any NSR 

requirements (because they are not “modifications”). Moreover, facilities make such changes all the 

time, and requiring them to obtain an Authority to Construct every time they wanted to implement such 

a change would be unworkable from the perspective of the District’s permitting program, not to 

mention highly burdensome and restrictive on facilities’ operations. Staff are therefore removing the 

language regarding “changes in throughput and hours of operation” from the definition of “alteration” 

in the second draft. Only physical changes and changes in the method of operation will be treated as 

“alterations” requiring an Authority to Construct. These are the types of changes that are most 

important for the District to review, because they have the greatest potential to increase the capacity of 

a source in a manner that could result in a “modification”. The District needs to review such situations 

to ensure that the change is not in fact a “modification” that should be subject to NSR permitting.45

Regarding language specifically identifying certain types of changes as constituting or not constituting 

“alterations”, Staff are not inclined to enumerate a specific list for several reasons. One is that it is 

difficult to state with certainty that a certain type of project will categorically be an “alteration” in all 

situations that may arise in the future. Although one can predict generally how a certain type of project 

will likely be treated, specifying whether a certain type of project will or will not be an “alteration” in 

every circumstance can result in problems when the provision is implemented in practice. Another is 

that it is difficult to come up with a comprehensive list of different types of projects. Developing a truly 

comprehensive list is most likely impossible, and it will be in the unanticipated situations that are not on 

any such list where the difficult implementation questions will most likely arise. For these reasons, Staff 

are not proposing to include a specific list of projects that are or are not alterations, but instead is simply 

proposing regulatory language that states the rule that can be applied in each situation regardless of the 

type of project at issue.

Staff do agree, however, that it would be appropriate and beneficial to include some specific examples 

in the Staff Report and related guidance documents of the types of projects that will, generally speaking, 

be treated as alterations (or not). Such guidance can be very helpful in understanding how the rule will 

be applied, without being as hidebound and prone to unintended consequences as formal regulatory 

language. Staff have begun developing a list of such examples, and will continue to do so as the Staff 

Report is being prepared. At this point, Staff have identified the following examples of what types of 

changes generally would or would not need an authority to construct as an “alteration”. (Note that in 

 

45 Note also that the definition of “alteration” includes only physical changes and changes in the method of 

operation that may affect air emissions. Any such changes that are completely unrelated to air emissions do not 

need an authority to construct, for obvious reasons. In addition, note that routine repairs, maintenance, and cyclic 

maintenance that includes replacement of components with identical components never require an authority to 

construct under the language of Section 2-1-301. These provisions should also be kept in mind when considering 

what kinds of projects may need an authority to construct as an “alteration” under Section 2-1-233. 
65

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.) 

Examples of Alterations that require permit applications

 Burner replacement – identical or equivalent, no increase in max. firing rate;

 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, even if no 

emission increase.

Examples of projects that do 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.

Comment IV.E.2.c.2. – Imposing Permit Conditions To Keep A Change From Becoming a 

“Modification”: Some commenters objected to the language referencing the APCO’s authority to 

impose permit conditions in an Authority to Construct for an alteration to ensure that the project will 

not increase emissions in a manner that would constitute a “modification”. Commenters objected to 

adding permit conditions of this type on the grounds that “[p]ermit conditions should only be required if 

there is a nexus between a project’s scope and its potential emission impacts.” Commenters continued 

that “[u]nder any regulatory context, any condition imposed must be related to a project’s actual or 

potential impacts.” Commenters stated that permit conditions of this type have not been imposed by

the District in the last 10 years. Commenters were concerned that if “constraining and restrictive” 

conditions of this type are imposed for alterations, then such projects would not be undertaken. 

Commenters stated that “[t]his is particularly true when there is no methodology provided for how such 

conditions would be established.” Commenters were concerned that this provision would lead to 

“permits for alterations [with] very arbitrary permit conditions and limits, which have no technical basis 

or basis in the context of the BAAQMD regulations,” and permits with “no nexus between actual 

emission impacts and whether or not permit conditions are imposed.” Commenters suggested that the 

definition should clarify that any such conditions imposed “must be related to real or potential impacts 

from a project and that the technical aspects of the change should be taken into account prior to 

imposing permit conditions.” The commenters stated that conditions should not be imposed for 

“pollutants that are not germane to the proposed project,” and that any permit conditions imposed 

under this language should be “tied to relevant reasons to demonstrate the change is not a modification 

based on the project’s technical basis.”

Response: The proposed language on this point clearly states the reason why such permit conditions 

would be imposed: “to ensure that the change authorized by the authority to construct or permit to 
66

operate will not result in a modification under Section 2-1-234.” This language makes clear that this 

provision for imposing permit conditions will work as a benefit to regulated sources that want to 

implement a change and want to ensure that such change will not be a “modification” subject to NSR 

review. Such sources can simply accept a permit limit so that there will be no increase above a level that 

would constitute a “modification” under the definition in Section 2-1-234. Using enforceable permit 

limits in this way to create a “synthetic” exclusion from a permitting requirement is a standard air 

permitting practice. Moreover, this language also makes clear that such permit conditions need to be 

established for the specific purpose of keeping the change from resulting in an emissions increase that 

will trigger the definition in Section 2-1-234. The concerns about arbitrary conditions being imposed 

under this language that have nothing to do with any regulatory requirement are therefore misplaced. 

This language, by its terms, only authorizes permit conditions that will keep a change from increasing

emissions in a manner that would constitute a modification (i.e., permit conditions to ensure that there 

is no increase in PTE that would trigger Section 2-1-234). Such conditions by definition are “related to 

real or potential impacts from a project,” are “germane to the proposed project,” and have a “nexus” to 

actual emission impacts, because they are imposed to ensure that emissions will not increase and be 

subject to NSR review as a “modification”. This regulatory language as initially proposed embodies 

sufficient safeguards to ensure that arbitrary permit conditions are not imposed, and it is not necessary 

to restrict the District’s permitting authority further to address these concerns.

Comment IV.E.2.c.3. – Alterations Not Subject to NSR Requirements: A commenter requested that 

Staff confirm that Reg. 2-2 NSR provisions, including the “PSD Project” definition and associated PSD 

requirements, do not apply to alterations. The commenter suggested that Staff add explicit language to 

this effect in Section 2-2-101.

Response: The commenter is correct that “alterations” are not subject to NSR requirement in 

Regulation 2-2. All of the substantive requirements in Regulation 2-2 apply to new sources and to 

modified sources, but not to alterations. This includes the definition of “PSD Project”, and thus all of the 

PSD requirements that apply by their terms to “PSD Projects”. This principle is clear from the language 

in Regulation 2-2 making the requirements applicable to “new and modified sources” and excluding 

“alterations”, and it is not necessary to add clarifying language to Section 2-2-101. To the extent that 

any clarification is necessary, it is being provided here and will also be included in the Staff Report for 

the proposed amendments. 

3. “Portable” Definition

The term “portable” is referenced in two different contexts related to Regulation 2 permitting: (1) 

portable equipment registration under CARB’s Portable Equipment Registration Program (PERP); and (2) 

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 around the state. Such equipment includes portable 

generators that are used in multiple locations, diesel-fired construction equipment that may be moved 
67

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 districts in which it may operate, ARB addresses such equipment on a statewide 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 

district without having to get a district-specific permit.46 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 such 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 –

 

46 PERP registration supersedes local air district permitting requirements, and in the Bay Area the Air District has 

adopted Section 2-1-105, which explicitly exempts PERP-registered portable equipment from District permitting 

requirements, in recognition of the preemptive effect of PERP registration.
68

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 located. For this purpose, the 

key regulatory concepts are 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 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.

Staff are therefore changing the approach set forth in the first draft for these two provisions. In the 

second draft, the exemption in Section 2-1-105 now states 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 

second draft removes 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 

second draft therefore removes the language about “portable” equipment in Section 2-1-413 and 

focuses 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”, staff are also proposing to change the title of Section 2-1-403 to “Permits for Operation of 

Equipment at Multiple Locations Within the District”. 
69

Finally, with respect to the definition of “portable” in 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 – there is no 

need for a “portability” test in the District’s regulations on this issue.47 And for multiple-location 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”, Section 2-1-220 is being deleted in the second draft.48

Note that this approach is a departure to what Staff proposed in the first draft. In the First Draft, staff 

focused on trying to conform the District’s “portable” definition with the definition ARB uses for the 

PERP program. In doing so, Staff were focused on the term as it applies in the PERP context, but this 

approach missed the key concept underlying the multiple-location permitting provisions as described 

above. It was also unnecessary, as there is no need to mirror the ARB PERP definition of “portable” as 

explained above. Staff have therefore reconsidered the situation and are proposing the new approach 

reflected in the second draft. 

Comment IV.E.3.a. – District “Portable” Definition vs. ARB PERP Definition: Several commenters 

stated that the definition of “portable” in the first draft did not track ARB’s PERP definition exactly. They 

suggested revisions or additions so that the District’s definition of “portable” would mirror ARB’s 

treatment of portable equipment exactly. Some suggested that the District should simply incorporate 

ARB’s definition by reference.

Response: As explained above, it is confusing to have the term “portable” apply both in the PERP 

context and in the context of District multiple-location permitting. The second draft therefore dispenses 

with the term “portable”, for the reasons explained in the foregoing discussion. In the context of the 

PERP program, the substantive effective will be the same as incorporating the PERP definition by 

reference, because there will be a single “portability” requirement that will apply in that situation and it 

will be governed by ARB’s PERP definition. Portable equipment that satisfies ARB’s definition and is 

PERP registered will be exempt from District permitting based on the valid PERP registration. 

Comment IV.E.3.b. – Other Comments Regarding “Portable” Definition: A commenter stated that the 

proposed changes to the “portable” definition in the first draft “could prevent permitting and require 

 

47 As noted above, the equipment would still have to be “portable” to be eligible for PERP registration, but that 

requirement would 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).

48 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. 
70

retirement of specialty equipment, including safety equipment such as large emergency fire water 

pumps that are used throughout the state.” The comment also stated that the provisions in the first 

draft would require a source that becomes ineligible for the permit exemption because it loses its 

“portability” to be permitted like a new source; and stated that this rule would be in contraction of the 

definition of new source (in 2-1-231), which excludes loss of exemption or exclusion under 2-1-424. 

Response: Staff considered whether any of the District’s provisions for treating PERP-registered 

portable equipment or equipment permitted for multiple-location operation could “prevent permitting 

and require retirement of specialty equipment.” Staff did not find any provisions that could be applied 

to prevent any permitting of any such sources (assuming such sources satisfy all applicable regulatory 

requirements, of course). Indeed, nothing in any of the provisions on PERP-registered portable 

equipment or multiple-location operation would prohibit any such equipment from being permitted 

under the District’s normal permitting procedures applicable to every other type of source, if the 

equipment did not qualify for the PERP-registration exemption or the multiple-location permitting 

provisions. Those provisions provide additional alternative regulatory mechanisms for addressing such 

equipment, which regulated entities may find beneficial for certain types of operations. Nothing in 

these provisions would prohibit any equipment from being permitted that otherwise satisfies District 

permitting requirements. 

With respect to the comment about the need to get a District permit if the exemption for PERP 

registration under Section 2-1-105 becomes inapplicable, there is nothing inconsistent with the 

definition of “new source” in Section 2-1-232. Section 2-1-232 provides a definition of “new source” 

that specifies certain types of situations where an operation needs to obtain a permit, and it excludes 

situations where an existing operation lost its exemption as addressed in Section 2-1-424. But the loss 

of exemption scenario addressed in Section 2-1-424 is where a change in law or regulation eliminated 

the exemption, not where a change in the way the equipment is operated rendered it no longer eligible 

for the exemption. Thus, if portable equipment is no longer eligible for PERP registration (for example, 

because it is kept at the same location for more than 12 months), it is no longer exempt from District 

permitting requirements under Section 2-1-105 and must obtain a District permit if it is to be operated 

in the Bay Area. There is nothing in Section 2-1-424 that is inconsistent with this requirement.49

4. Definition of BACT (Consideration of Overall Environmental Benefits in BACT 

Determinations)

Comment IV.E.4. – Flexibility in Applying BACT To Ensure Maximum Environmental Benefit: 

Commenters suggested that the District should provide flexibility in applying the BACT requirement in 

Section 2-2-301 to ensure that it achieves the maximum environmental benefits. These comments 

 

49 Note also that Section 2-1-424 requires sources that lose their exemption because of changes in law to obtain a 

permit, just as Section 2-1-105 does for a source that becomes ineligible for the PERP exemption. (See Section 2-1-

424 (“[A] source which . . . loses an exemption or exclusion because of changes in federal, California or District laws 

or regulations shall submit a complete permit application . . . .”).) This is another reason why Sections 2-1-105 and 

2-1-424 are not inconsistent. 
71

address potential trade-offs where achieving emission reductions for one pollutant may result in 

increased emissions for some other pollutant. Commenters were interested in ensuring that the 

District’s NSR regulations provide that BACT should be applied to achieve the maximum environmental 

benefit in such situations. 

Response: Staff agree that BACT needs to be implemented to provide the maximum environmental 

benefits. Such considerations have always been implicit in the District’s BACT definition, which 

contemplates the most “effective” and “stringent” pollution controls. Reading the requirements to be 

“effective” and “stringent” broadly takes into account broad environmental goals. Staff are proposing to 

reflect this principle more explicitly in the proposed amendments. The greatest amount of flexibility to 

consider such concerns arises when determining whether to go beyond what has already been achieved 

in practice by other facilities and require additional control technologies that are feasible and costeffective. The proposed revisions will highlight how BACT determinations made on this basis should 

take into account considerations such as any ancillary health and environmental impacts to ensure that 

maximizing the broadest environmental benefit is the ultimate goal. There is less leeway where a 

control technology has been achieved in practice by other similar facilities, as such technologies are 

required as BACT. But even here there can be an element of flexibility, in particular where there are 

tradeoffs in cases where reducing emissions of one pollutant necessarily increases emissions of another 

pollutant (e.g., with NOx and CO from combustion sources). In such cases, the most stringent level of 

control achieved for one pollutant at a particular facility may be physically incompatible with the most 

stringent level of control achieved for the other pollutant at some other facility. In cases like this, it may 

be technically impossible to achieve both levels of control simultaneously at the same facility, and so a 

choice must be made. Here, there can be some flexibility in making the choice to achieve the maximum 

overall environmental benefit. Staff support the application of flexibility in this manner.50 

5. Other Definitions

Comment IV.E.5.a. – “Federally Enforceable” Definition: A commenter questioned why the reference 

to “District permit requirements established pursuant to 40 CFR 52.21 (PSD)” is being deleted. The 

commenter stated that PSD permits are federally enforceable and should continue to be listed as such. 

Response: The proposed amendments delete this reference because it incorrectly refers to PSD permits 

issued pursuant to 40 C.F.R. Section 52.21 as “District” permits. PSD permits issued under 40 C.F.R. 

Section 52.21 are federal permits, not District permits, and this reference is being deleted to avoid 

propagating this confusion. Federal PSD permit conditions are federally enforceable, of course, and they 

still will fall within the revised definition of “federally enforceable” because they are enforceable by the 

administrator of EPA. As federal permits issued under the Code of Federal Regulations, EPA is the 

 

50 How an individual BACT determination would be made in such a situation would necessarily have to be decided 

on a case-by-case basis depending on the specific circumstances. In the NOx/CO tradeoff situation described 

above, for example, the District would normally prioritize NOx reductions at the expense of CO reductions, 

because NOx is an ozone and PM2.5 precursor and the District is designated as non-attainment for ozone and PM2.5. 

What specific emission levels the District would require in a particular situation would have to be decided on a 

case-by-case basis, however. 
72

primary enforcement authority. Staff do not believe that there will be any potential for confusion over 

whether federal PSD permit conditions are federally enforceable under the revised definitions. 

Comment IV.E.5.b. – “Regulated Air Pollutant” Definition: A commenter stated that it is awkward to 

refer to air pollutants that are regulated under other District regulations, instead of providing a listing of 

specific pollutants that are “regulated”. The commenter asked staff to clarify the intent of this 

definition. 

Response: This definition is necessary because the term “regulated air pollutant” is used in two 

different ways in Regulation 2. For Title V purposes, the term has a specific meaning including certain 

specific categories of pollutants as listed in Regulation 2-6-222. In certain other places, the term is used 

more generally to refer to pollutants from a source for which some District regulatory requirement 

applies. For example, Section 2-1-113.1.2 provides an exemption for agricultural sources that do not 

emit any regulated air pollutant in an amount over 50 tons per year. In those cases, the use of the 

general term “regulated air pollutant” is appropriate because there may be many such sources 

throughout the Bay Area and it is not clear exactly what types of pollutants subject to District 

regulations any particular source may emit. Rather than try to list every individual pollutant subject to 

District regulations that such sources may emit, it is more appropriate simply to use the general term 

“regulated air pollutant” in this context. Moreover, although the term is one of general application, it 

does have a clear and specific definition: if there is some District regulation that applies to emissions of a 

pollutant, then that pollutant is a “regulated air pollutant” under this definition.

Comment IV.E.5.c. – “New Source” Definition: Section 2-1-232.1 includes as a “new source” any source 

constructed after March 7, 1979, but which never had a valid District authority to construct or permit to 

operate. A commenter stated that this provision should also address sources that were issued federal 

permits (e.g., a federal PSD permit). The commenter stated that sources that were constructed after 

1979 without a federal PSD permit, or without what the commenter referred to as a federal NonAttainment NSR permit issued under 40 C.F.R. Section 51.165, should also be treated as new sources 

under this definition. 

Response: The purpose of this provision in the “new source” definition is to treat existing sources that 

were built without a District permit as “new” sources, so that they will have to go through District 

permit review and comply with current permitting standards. If a source was somehow built without a 

permit, it is treated as a “new” source under this provision and must go back after the fact and be 

permitted as a new source, as it should have been in the first place. This comment refers to sources that 

were built with a valid District permit but did not for some reason have a valid federal PSD permit.51 In 

such cases, where the source complied with all District requirements but did not obtain a federal PSD 

permit as required by 40 C.F.R. Section 52.21, that is a violation of EPA’s regulatory program and it is 

primarily a matter for EPA enforcement (in the first instance, at least). Rather than specify how such a 

 

51 If the source was built without a District permit and without a federal PSD permit, then it would already fall 

within the “new source” language in the current form of the definition. This comment addresses the situation 

where the source was built with valid District permits and is therefore outside of the language in current Section 2-

1-232.1, but did not have a valid federal PSD permit for some reason. 
73

violation should be treated under District regulations, it would be more appropriate to allow EPA to 

address any such situation that arises and determine what the best enforcement response should be. In 

some cases, requiring such a source to obtain a permit as a new source may be the most appropriate 

way to address the situation, and there is nothing in Section 2-1-232 that would prevent such a response 

in appropriate circumstances. But it would not be appropriate to mandate in District regulations that 

such a situation must be addressed by treating the source as a “new” source in all such cases. Staff are 

therefore proposing to leave the language as it is, which will continue to give EPA primacy in 

determining what enforcement response is most appropriate where a facility violates EPA’s regulations 

in 40 C.F.R. Section 52.21. 

With respect to the reference to “federal” non-attainment permits issued by EPA under 40 C.F.R. Section 

51.165, this reference is misplaced. Section 51.165 is not a permitting program and EPA does not issue 

federal non-attainment permits for the Bay Area under this regulation. To the contrary, the District has 

always issued non-attainment permits for the Bay Area – i.e., District Authorities to Construct issued 

under the District’s NSR rule in Regulation 2-2.52 Section 51.165 sets forth EPA’s minimum requirements 

for approval of state non-attainment NSR programs; it is not a non-attainment NSR permitting program 

itself. The situation where a source was built without a non-attainment NSR permit is therefore already 

addressed by the language referring to sources built without an Authority to Construct. The authority to 

construct is the non-attainment NSR permit, issued under the District’s SIP-approved Non-Attainment 

NSR permitting program. A source that is built without such a permit is treated as a “new” source under 

Section 2-1-232.1 and must be permitted as such. 

Comment IV.E.5.d. – “PSD Pollutant” Definition and “Split” Attainment Designations: A commenter 

raised an issue regarding the second sentence of the “PSD Pollutant” definition, which states that where 

a pollutant is subject to multiple standards, it is a “PSD Pollutant” only for the standard(s) for which the 

Bay Area has not been designated as non-attainment. The commenter stated that where there are 

multiple federal NAAQS for a pollutant, and the region is in attainment of one and non-attainment of 

another, the substantive elements of PSD are inapplicable to that pollutant under 40 C.F.R. § 52.21(i)(2). 

The language in the “PSD Pollutant” definition confusingly suggests that where there is such a “split 

designation”, PSD requirements would still apply for that pollutant for some purposes because of the 

attainment part of the “split designation”. But this is not the case, per 40 C.F.R. § 52.21(i)(2). The 

commenter noted that the first draft of the PSD provisions does correctly recognize this situation in the 

explanatory note to the “Significant” definition, but stated that the language in the “PSD Pollutant” 

definition seems contradictory, could cause confusion, and should be removed. The commenter 

suggested referencing only the situation where there could be a “split” designation involving attainment 

of a federal NAAQS and non-attainment of a California ambient air quality standard. 

 

52 For the narrow situation where federal permits issued by EPA for non-attainment pollutants under 40 C.F.R. Part 

51, Appendix S, during the interim period while the District is developing its own non-attainment NSR 

requirements, Staff’s response would be the same as for federal PSD permits issued by EPA. If a facility is built in 

violation of any applicable Appendix S permit requirement, EPA should determine the appropriate enforcement 

response in the first instance, and the District’s regulations should not try to dictate what such a response should 

be.
74

Response: Staff agree that the “PSD Pollutant” should be clarified in this manner. If there are multiple 

federal NAAQS applicable to a pollutant, and the Bay Area is designated as non-attainment for one of 

the standards, then the substantive requirements of the PSD program are inapplicable for that pollutant 

under 40 C.F.R. Section 52.21(i)(2) and there is no need to address the distinction in the definition of 

“PSD Pollutant”. There is still a need to address the situation where there may be a California standard 

and a federal standard and the Bay Area is designated as attainment for one and non-attainment for the 

other, however. The second draft contains revised language to incorporate these comments. 

Comment IV.E.5.e. – “PSD Pollutant” Definition and Precursors: A commenter noted that the 

definition of PSD pollutant says that pollutants are not PSD pollutants if the District is non-attainment of 

the NAAQS for a pollutant, including precursors to such pollutants. The commenter stated that this 

could be interpreted to mean that precursors to non-attainment pollutants are not PSD pollutants, 

which would exclude NO2 and SO2. The commenter suggested that Staff should clarify that this is not 

the intent. 

Response: The commenter is correct that precursors to non-attainment pollutants are not excluded 

from the “PSD Pollutant” in such a situation, where they are regulated as a pollutant in their own right 

and have a NAAQS established specifically for them. Such pollutants include NO2 and SO2, which are 

subject to non-attainment NSR requirements because they are precursors of ozone and PM2.5, but which 

are also PSD pollutants because they have their own NAAQS, with which the Bay Area is in attainment. 

The second draft of the proposed amendments removes the parenthetical about precursors to nonattainment pollutants not being PSD pollutants, which should address this ambiguity. NO2 and SO2 will 

be PSD pollutants under this definition, because the Bay Area has not been designated as nonattainment of the NO2 or SO2 NAAQS. 

Comment IV.E.5.f. – “Pollutant-Specific Basis” Definition: A commenter requested that staff clarify the 

context in which this definition is used. 

Response: “Pollutant-Specific Basis” is a concept that is used in several different contexts where a 

regulatory requirement may address multiple pollutants, but is intended to apply only to those 

pollutants for which a source exceeds the stated applicability thresholds. Where such regulations are 

applied on a “pollutant specific basis”, it means that pollutants for which the source exceeds the 

threshold are subject to the regulation while pollutants for which the source does not exceed the 

threshold are not subject to the regulation. The non-attainment NSR BACT and offsets requirements 

apply on a pollutant-specific basis, for example. The BACT requirement applies to multiple criteria 

pollutants, but BACT is required only for those pollutants for which the source’s emissions exceed the 10 

lb/day applicability threshold.

Comment IV.E.5.g. – “Contemporaneous” Definition: EPA staff noted that any contemporaneous 

emission reductions used to counter new emissions increases for purposes of NSR permitting of a new 

source or modification need to be in effect before the new source or modification begins operation. 

(See 40 C.F.R. §§ 51.165(a)(1)(vi)(B), 51.166(b)(3)(ii).) The only exception is for a new or modified source 

that is a replacement. (See 40 C.F.R. §§ 51.165(a)(1)(vi)(F), 51.166(b)(3)(vii).) EPA staff stated that the 
75

District should remove the provision in proposed Section 2-2-206.2.2 that would allow emission 

reductions used in connection with modification permits to be treated as “contemporaneous” where 

they will be in effect up to 90 days after initial operation of the modification. EPA staff noted that the 

provision in proposed Section 2-2-206.2.3 for replacement units is authorized under EPA’s NSR program 

requirements. 

Response: Staff are removing the provision in Section 2-2-206.2.2 in the second draft, regarding 

modifications. For modifications, emission reductions will need to be in place by the time the 

modification begins operating to be treated as “contemporaneous”, as is the case with new sources. 

Only in the case of replacements will the 90-day window after initial operation apply. Removing the 

provision in Section 2-2-206.2.2 also allows for simplification of the definition: it is no longer as 

important to enumerate specific sub-parts in the definition. 

Comment IV.E.5.h. – “Contemporaneous” Definition: Commenters suggested that the definition of 

“contemporaneous” in Section 2-2-206 is confusing in that the end of the “contemporaneous” period is 

defined somewhat differently depending on the type of project involved (i.e., a replacement project vs. 

a new source). Commenters asked what the additional time period provided in Sections 2-2-206.2 and 

2-2-206.3 was for, and asked for clarification on how the definition should be applied.

Response: See generally response to Comment No. IV.E.5.g. above. In the case of replacement projects, 

a little bit of additional time is allowed for an emission reduction to be implemented and still be counted 

as “contemporaneous”. This is because for replacement projects, the old unit being replaced will likely 

have to continue operating up until the replacement is up and running, and often for a short period 

afterwards to allow for any shakedown or commissioning of the replacement unit. This provision allows

emission reductions from the shutdown of the old unit being replaced to be “contemporaneous” with 

the new unit if they occur up to 90 days after initial operation of the new, replacement unit. 

Comment IV.E.5.i. – “Creditable” Emissions Increases and Decreases for Purposes of PSD Applicability: 

A commenter asked for clarification on what types of projects are included in the calculation for 

creditable contemporaneous emissions increase and decreases.

Response: The proposed PSD provisions allow for “netting” of contemporaneous emission increases 

and decreases in a manner similar to EPA’s provisions for netting under the federal PSD program. Any 

creditable emissions decreases or increases within the past 5 years are included in this netting analysis. 

A definition of “creditable” is being added to define what types of projects can be counted, in Section 2-

2-207, which essentially provides that any increases or decreases are not relied on more than once for 

“netting” purposes. If any such increases or decreases are relied on in issuing a PSD permit, that 

permitting action wipes the slate clean with respect to those increases and decreases, and they are not 

counted in future netting exercises for determining PSD applicability. (See proposed Section 2-2-207.) 

A related question concerns what kind of changes at a source that may result in emission increases or 

decreases can be taken into account in the netting analysis. The answer is that any physical change, 

change in method of operation or change in throughput or production that results in an increase in 

emissions compared with the source’s baseline emissions is taken into account; and any such change 
76

that results in a decrease in emissions is taken into account as long as the change and the resulting 

decrease are enforceable. (In both of these situations, the increase or decrease is measured using an 

actual-to-potential test.) The key provision that governs the netting analysis is the definition of “net 

emissions increase” in Section 2-2-220, which states that a “net emissions increase” takes into account 

any creditable contemporaneous emissions increases and decreases determined according to the 

emission increase/decrease calculation procedures Section 2-2-604. Thus, changes at a source are taken 

into account in the netting analysis to the extent that they are counted in the Section 2-2-604 

calculation procedures. For increases, Section 2-2-604 looks to the difference between (i) the source’s 

adjusted baseline emissions before the change and (ii) the maximum allowable emissions (PTE) after the 

change. Any change at the source that will result in such an increase will be counted (as long as it is 

creditable, contemporaneous, etc.). For decreases, Section 2-2-604 similarly looks to the difference 

between (i) the source’s adjusted baseline emissions before the change and (ii) the maximum allowable 

emissions (PTE) after the change. This means that any change that results in a decrease can be counted 

(as long as it is creditable, contemporaneous, etc.), but only insofar as the decrease is enforceable so 

that the lowered emissions rate reflects the source’s new maximum allowable emissions rate (PTE). A 

change that the source voluntarily makes and that can be reversed at any time would not be counted in 

the netting analysis, because it is not enforceable and is therefore not reflected in the source’s PTE after 

the change as is required for the reduction to be counted under the Section 2-2-604 calculation 

procedures. 

Note also that in all these cases, such changes and the increases and decreases associated with them do 

not necessarily need to be “modifications” as that term is defined in Section 2-1-234. Changes that 

result in emissions decreases, and changes that result in increases over actual baseline emissions but 

not above the Section 2-1-234 trigger levels, are technically not “modifications” as that term is defined. 

But they still are included in the netting analysis to the extent that they are taken into account in the 

Section 2-2-604 increase/decrease calculation procedures. 

Comment IV.E.5.j. – “Offsets” Definition: A commenter suggested that Staff consider adding 

contemporaneous emission reduction credits into the “offsets” definition (and elsewhere in the rule). 

Response: Offsets refer to banked credits that are provided to offset cumulative increase as that term is 

defined in Section 2-2-208 and related provisions, and don’t include non-banked contemporaneous 

onsite emission reduction credits. Contemporaneous onsite emissions reduction credits are addressed 

in determining the amount of cumulative increase for which offsets must be provided. They are not 

“offsets” themselves, as that term is used in Regulation 2; they are reductions that reduce the amount 

of offsets that need to be provided. The effect is the same – contemporaneous on-site emission 

reduction credits can be used to counterbalance an increase in emissions from a new project at a 

facility, just like offsets can. But they are accounted for in a different part of the offsets calculation 

process. They are subtracted at the front end, when the cumulative increase is being calculated. They 

are not added to the amount of offsets being provided to account for that cumulative increase.

An example may help illustrate this point. Take a facility that is proposing a new project that will 

increase emissions by 10 tons per year. If the facility has no contemporaneous on-site emission 
77

reduction credits, then the cumulative increase is 10 tpy, and it must provide 10 tpy of offsets under 2-2-

608 (assuming the facility has no pre-existing un-offset cumulative increase). The facility would satisfy 

that offsets requirement by providing offsets – i.e., banked credits. But say the facility has a 

contemporaneous on-site emission reduction credit of 5 tpy (based on shutting down a source two years 

ago that had adjusted baseline emissions of 5 tpy calculated pursuant to Section 2-2-603). In that case, 

the cumulative increase is the 10 tpy increase from the new project less the 5 tpy contemporaneous onsite emission reduction credit, per the cumulative increase calculation procedures in Section 2-2-607. 

That makes the cumulative increase only 5 tpy, and the facility needs to provide only 5 tpy of offsets in 

the form of banked credits. 

Essentially, this is a semantic issue about how contemporaneous on-site emissions reduction credits 

should be described. District staff are choosing to stick with the current language in Regulation 2-2,

which treats contemporaneous on-site ERCs as reducing the cumulative increase, and not as “offsets” 

provided to counterbalance the cumulative increase. But as noted above, the effect is the same – at the 

end of the day when all of the calculations are done, the facility can use the contemporaneous 

shutdown as a way of lessening the amount of banked credits it needs to provide.

Comment IV.E.5.k. – “Emission Reduction Credit” Definition in Section 2-4-201: A commenter 

suggested that staff should update the definition of Emission Reduction Credit in 2-4-201 to reference 

section 2-2-211 (currently Section 2-4-201 references the existing ERC definition in 2-2).

Response: This correction has been made in the second draft.

Comment IV.E.5.l. – “Significant” Emissions Increase Definition in Section 2-2-226: In the part of the 

definition that specifies that the PSD “significant” increase threshold is zero for PSD pollutants that are 

not listed in the table, a commenter suggested that the definition should specify that the threshold is 

zero “for any PSD pollutant” that is not listed in the table. 

Response: Staff believe that the language in the first draft was effective to limit PSD applicability to 

significant increases in PSD Pollutants only. That is, the first draft language did not contain any 

ambiguity on whether an increase in emissions of a pollutant that is not a “PSD Pollutant” could require 

PSD review. Nevertheless, to provide additional clarity on this point, Staff are adding additional 

language in the second draft along the lines suggested by this comment. 

Comment IV.E.5.m. – “Significant” Increase Definition for Total Particulate Matter: A commenter 

suggested that the District needs to include the PSD significant emissions rate for total particulate 

matter, which is 25 tpy. Otherwise, the regulations would impose a zero significance rate for this 

pollutant. 

Response: Staff agree that this significance rate (25 tpy) should be included in the significance table, 

and have added it in the second draft.
78

Comment IV.E.5.n. – “Closure” and “Shutdown” Definitions: Commenters stated that the District

should delete the current definitions of “closure” and “shutdown” in Sections 2-1-235 and 2-1-236, as 

they are confusing. 

Response: Staff agree with this comment and have removed these definitions in the second draft. 

These definitions defined “shutdown” as a temporary cessation of operation of a source and “closure” 

as a permanent cessation of operations, but this is not how these terms are commonly used by District 

staff an in District regulations. For example, in common usage a “shutdown” can be a short-term 

cessation when a source is shut down overnight, a longer-term outage such as when a source is taken 

out of service for maintenance or overhaul, or a permanent removal from service. Because the term is 

applied flexibly in common usage, establishing one single definition creates more problems than it 

solves. Staff believe that these terms are well enough understood by their common dictionary

definitions and do not require more specific definitions for purposes of Regulation 2. The difference 

between a permanent shutdown (or closure) and a temporary shutdown (or closure) can more clearly 

and easily be specified simply by using the adjectives “permanent” and “temporary” where appropriate. 

Comment IV.E.5.o. – Title V “Significant Source” Definition for Greenhouse Gases: One commenter 

stated that the Title V threshold in Section 2-6-239 for being a “significant source” for GHGs and HAPs is 

set too low and asked for an explanation of where these levels came from. The commenter stated that 

2,000 tpy is too low a threshold for “significant source” for GHGs, and suggested setting it at 15,000 tpy 

instead. The commenter stated that the PM2.5 threshold is 2 tpy, which is 20% of the 10-tpy NSR 

“significance” rate, and using that logic the GHG threshold should be 15,000 tpy, which is 20% of the 

75,000-tpy NSR “significance” rate for GHGs.

Response: The “significance” rate for Title V is part of the Title V program, not the NSR program, and it 

is set at 2% of the Title V permitting threshold, not at a percentage of the NSR significance rate. The 

concept of a “significant” source for Title V is relevant for Section 2-6-405, which specifies the 

information that an applicant needs to provide in an application for a Title V permit. Section 2-6-405 

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 – 2% of the effective 

100,000 ton-per-year Title V applicability threshold for GHGs. Staff disagree that the Title V significant 

source level should be based on NSR significance levels instead. 
79

Comment IV.E.5.p. – Definition of Day, Month & Year: Commenters stated that the District should 

clarify what is meant by “calendar” day and “calendar” month. The commenter noted that different 

months have different lengths.

Response: A “calendar” day and month are those time periods as they are demarcated on a calendar. 

Thus, a calendar day is the 24-hour period from midnight when a day begins until the next midnight 

when that day ends. A calendar month is the one-month period from the beginning of the first day of 

the month to the end of the last day of the month, as that month is set forth on the calendar. It is true 

that different months have different lengths, meaning that calendar months can be different lengths 

depending on the month, but this does not create a problem with the implementation of the District’s 

permitting regulations. The term is simply applied with the recognition that different months have 

different lengths. For example, if a regulatory provision looks to the highest emissions in any month, 

emissions in each month must be evaluated taking into account the fact that some months have a few 

extra days. 

V. CONSIDERATION OF THE POTENTIAL FOR ANY ADVERSE ENVIRONMENTAL IMPACTS UNDER 

CEQA

Comment V – Preparation of Environmental Impact Report to Consider the Potential for Significant 

Adverse Environmental Impacts: The District received several comments suggesting that the 

amendments to Regulation 2 that staff are considering could result in significant adverse environmental 

impacts.

Some commenters were concerned that implementing the revisions to the NSR Program could impose 

permitting burdens that would hinder environmentally beneficial energy-efficiency and other emissionreduction projects, meaning that affected facilities would choose not to undertake them. These 

commenters stated that the amendments could therefore cause adverse environmental effects 

compared to what currently exists, in that these beneficial projects would not be undertaken and their 

benefits would not be realized. Another commenter expressed a concern that the proposed 

amendments include changes that the commenter felt were not related to changes in federal regulatory 

requirements (i.e., the new rules for PM2.5 permitting and other new federal requirements). The 

commenter expressed a concern that such changes would require a significant increase in the number of 

permits that regulated entities will need to obtain; will add significant expense to potential projects, 

including environmentally beneficial projects; will delay the processing of permit applications; and will 

take away “vested rights” to pollute the air that had been granted to facilities in the past. The 

commenter’s concern was that these changes could result in environmentally beneficial projects being 

delayed or postponed, and that this could have an adverse impact on the environment including but not 

limited to a diminished supply of gasoline in California. 

Other commenters mentioned other concerns about potential adverse impacts, including (i) impacts 

from what the commenters characterized as a changed definition of “emission offsets”; (ii) impacts from 

the regulation’s offset provisions more generally “due to the current and existing environmental 
80

landscape”; (iii) impacts from “unexplored interactions between the numerous proposed changes”; (iv) 

impacts resulting from the adoption of a District PSD rule that would take over PSD permitting from EPA 

under the federal rules; (v) impacts from what the commenters referred to as a “weakening of current 

rules”; (vi) impacts from what the commenters stated would be “increased emissions of combustion 

products as oil refineries retool to process lower quality crude” as a result of the proposed 

amendments; (vii) impacts from what the commenters characterized as an addition of new exemptions, 

such as an exemption for asbestos and asbestos-related material; and (viii) impacts from what the 

commenters stated was “[a] decision to actively omit pollution data in the BACT calculus [and] omit 

information about pollution from a proposed project” as a result of the proposed amendments. 

All of these commenters questioned whether it would be appropriate to proceed with a Negative 

Declaration under CEQA in light of these concerns about the potential for significant adverse 

environmental impacts. They suggested that an Environmental Impact Report would be more 

appropriate so that the District can consider the potential for significant environmental impacts in more 

detail.

Response: Staff does not find anything in these comments that demonstrates that there will be any 

significant adverse environmental impacts from the proposed amendments. Staff believe, however, 

that the potential for adverse environmental impacts is something that needs to be given full and indepth consideration before any regulatory amendments are adopted, and is therefore preparing to 

begin an Environmental Impact Report (EIR) process so that all of these points can be considered in 

detail on the record as part of the regulatory development process. The District will be soliciting public 

involvement in the EIR process, and staff invite all of these commenters to get involved so that the 

District can fully consider all of these issues. At the conclusion of the EIR process, the District will then 

be in a position to make a fully-informed determination as to whether any of the proposed amendments 

will in fact have any significant adverse environmental impacts. Staff anticipate publishing an Initial 

Study/Notice of Preparation shortly, which will formally commence the EIR process. Notice regarding 

the CEQA process will be provided separately. 

VI. MISCELLANEOUS COMMENTS

Comment VI.1. – Guidance on Permitting Procedures: Commenters suggested that the District should 

describe its implementation policies in detail in the Staff Report for the amended regulations and in 

permit procedures in the Manual of Procedures. They suggested that the District should provide 

detailed guidance and examples on how the requirements would be applied. 

Response: Staff agrees and intends to provide guidance in the Staff Report and in a permitting manual 

and other documentation that will be made available to the public. 

Comment VI.2. – No Offsets Required for CO: A commenter suggested that the District should consider 

adding a provision stating that offsets are not required for CO because the Bay Area is in attainment of 
81

the CO NAAQS. The commenter stated that it is confusing that the District continues regulate CO as a 

BACT pollutant, even though the Bay Area is in attainment of the CO NAAQS.

Response: The offset requirements in Regulation 2-2 are clearly stated in Sections 2-2-302 and 2-2-303 

and do not include CO. There is no need to list all of the pollutants that are not subject to offset 

requirements; the fact that they are not included in Sections 2-2-302 and 2-2-303 is sufficient to 

establish that the requirements do not apply to them. Staff agree that the Bay Area is in attainment of 

the CO NAAQS, but the District is prohibited under SB 288 from relaxing any NSR permitting 

requirements and so it will continue to require BACT for CO. Moreover, regardless of the Bay Area’s 

attainment status, CO continues to be an important air pollutant that should be controlled from a public 

health perspective.

Comment VI.3. – Tying Title V Permit Revisions to NSR Permit Revisions: A commenter suggested that

the District should create a “defined connection” between Reg. 2 New Source Review and Title V 

permitting, so that when an NSR permit is issued the new source or modification is added to the Title V 

permit as a minor modification. The commenter stated that currently the District requires a 

“significant” revision to the Title V permit for this type of change, and doing so takes time and leads to a 

Title V permit condition gap. The commenter stated that the regulations could be set up so that the NSR 

notice-and-comment process could also serve as the Title V notice-and-comment process.

Response: The current regulations allow for addressing NSR and Title V permit amendments at the 

same time in a consolidated amendment proceeding, with the notice-and-comment process going 

forward concurrently. The draft amendments would not change this situation. Staff do not want to 

create a requirement that such amendments be done together, however, because there are situations 

in which it is preferable to complete the NSR permitting process immediately without waiting to do the 

Title V amendment at the same time. The draft amendments will retain this flexibility. The District will 

continue to work to expedite Title V permitting to make it track NSR permit updates as closely as 

possible.

Comment VI.4. – Rules In Effect at Time of Permit Application Govern: A commenter suggested that 

the District should specify that the rules that are in effect at the time of a permit application govern 

permit issuance. 

Response: Staff are not proposing to change the current situation on this issue. Currently, Regulation 2-

1-409 provides that “[t]he decision as to whether an authority to construct shall be granted or denied 

shall be based on federal, state and District BACT, offset, TBACT, and project risk regulations or 

standards in force on the date the application is declared by the APCO to be complete.” The draft 

amendments retain this language. 

Comment VI.5. – Flexibility in Regulatory Language: A commenter stated that the District should 

provide some flexibility in the regulatory language to allow for discretion by the APCO in certain 

situations. The commenter suggested, for example, that the District should add language such as “or as 

allowed by permit condition” to provide flexibility in applying regulatory requirements. The commenter 

stated that doing so will allow for unanticipated situations to be addressed. 
82

Response: Staff are wary of adding such undefined and open-ended provisions in the District’s 

permitting regulations. It is difficult to consider and evaluate the kinds of situations that could 

potentially arise where such alternative permit conditions might be appropriate. The District’s 

permitting regulations already provide sufficient flexibility to craft permit conditions appropriate to 

particular situations (e.g., in making source-specific BACT determinations), and Staff do not believe that 

it would be warranted to expand upon this existing flexibility with such a provision. 

Comment VI.6. – Renumbering of Regulations: A commenter suggested that the District should 

consider renumbering the regulations from 2-1 to 2-11 and 2-2 to 2-12. The commenter stated that 

doing so will make it clearer in cross-references whether the reference is to the new NSR rules or the old 

NSR rules. 

Response: Staff do not believe that such a renumbering is necessary. The fact that the regulations will 

change as a result of the proposed amendments, and that some regulation numbers will be different, is 

not an insurmountable problem. This situation arises every time the District makes significant revisions 

to its regulations, and there are ways to address the fact that old documents will reference the old 

version of the rules even after the rules change. Upon adoption of the amendments, Staff plan to 

publish correlation tables showing where and how all existing requirements are reflected in the new 

regulations and vice versa, and will continue to make the existing versions of the regulations available 

on the District’s website along with the new versions. These tools will allow any interested party to 

readily determine what regulatory requirements are being referenced in older documents, even if the 

older documents reference section numbers that have become outdated. This is traditionally how 

regulatory agencies address such concerns when they update their regulations, and the District’s current 

regulatory updates are no different. 

Comment VI.7. – Specification of Source Test Frequencies: A commenter raised an issue concerning 

how frequently source testing should be required. The commenter noted that if testing requirements 

state that no more than one year can pass between tests, the testing frequency ultimately ends up 

getting shorter and shorter because as a practical matter no facility wants to go exactly 365 days from 

test to test. The commenter suggested specifying a frequency of not less than 10 months apart not 

more than 14 months apart, as the District has done in other rules. 

Response: Periodic source testing is an important element in many NSR and Title V permits, but the 

manner in which testing frequency is specified in permit conditions is not spelled out in Regulation 2. 

This suggestion should be addressed permit language, not in the language of the NSR and Title V 

permitting regulations. 

Comment VI.8. – RACT adjustment for Requirements in Clean Air Plan: A commenter noted with 

respect to the RACT adjustment methodology in current Section 2-2-605.5/draft amendment Section 2-

2-603.5 that the regulations require RACT adjustment for regulatory requirements that are in a Clean Air 

Plan but that have not yet been adopted. The commenter stated a concern that a Clean Air Plan can 

include relatively inchoate regulatory concepts that have not been developed into specific regulatory 
83

standards yet. The commenter questioned how the District can do a RACT adjustment for such 

elements included in a Clean Air Plan. 

Response: Where a potential regulatory concept is included in a Clean Air Plan but has not been 

developed to the level where a specific regulatory standard is contemplated, there is nothing to base a 

RACT adjustment on. Where this type of regulatory concept in set forth in a Clean Air Plan, it is not 

included in the RACT adjustment. This has been the case for many years under Regulation 2-2 and the 

wording of the regulation on this point has never caused problems. Staff are not proposing to change 

the way the RACT adjustment regulations work. The draft amendments are a verbatim restatement of 

the current regulation with respect to this section. 

Comment VI.9. – RACT adjustment for MACT standards: A commenter noted that the RACT adjustment 

to baseline emissions in current Section 2-2-605.5/draft amendment Section 2-2-603.5 is not required to 

include MACT standards, citing EPA policy.

Response: Staff are not proposing to change the way the RACT adjustment regulations work. The draft 

amendments are a verbatim restatement of the current regulation with respect to this section. 

Comment VI.10. – Including Acetone as a Non-Precursor Organic Compound: A commenter suggested 

that the District include acetone as a Non-Precursor Organic Compound (NPOC).

Response: Acetone is a compound that has been identified as having a negligible contribution to ozone 

formation, and so it is appropriate to add it to the list of compounds included in the definition of NPOC. 

Staff have also reviewed the list to identify any other compounds that should be included, and have

made several other updates accordingly. 
A - 1

APPENDIX A – EXAMPLES OF PM REGULATORY DETERMINATIONS USING AMENDED DEFINITIONS

The following examples illustrate how the proposed amendments will work in practice with respect to 

regulatory determinations for PM10 and PM2.5.

Example 1: Facility A was permitted and built in 1992. Facility A has a facility-wide PM10 potential to 

emit (PTE) of 90 tpy when only filterable PM10 is considered, and another 20 tpy of condensable PM10

emissions (110 tpy total when both filterable and condensable are included). The facility has historically

been permitted for PM10 taking only the filterable PM10 emissions into account, and so it has not been 

required to provide any PM10 offsets because its facility PM10 PTE has been treated as being below the 

100 tpy regulatory threshold in Regulation 2-2-303 for which PM10 offsets requirements apply. Facility A 

wants to make a modification after the effective date of the amended regulations that will increase 

PM10 PTE by 10 tpy (measured including both filterable and condensable, which is how PM10 will be 

required to be measured after the amendments become effective). This increase will make the total 

facility PM10 PTE 130 tpy (including both filterable and condensable). The facility burns natural gas and 

all of its PM10 emissions are also PM2.5, so PM2.5 PTE will also be 130 tpy (including both filterable and 

condensable) after the modification. Under the draft amendments, Facility A would be required to 

provide offsets for both PM10 and PM2.5, because the facility’s PTE for both PM2.5 and PM10 will be over 

100 tpy. 

For PM10, the facility will be required to provide offsets for its un-offset cumulative increase back to April 

5, 1991, the cumulative increase baseline date for PM10. Under Section 2-2-608, the facility’s cumulative 

increase is calculated by looking at the cumulative increase in PM10 (i.e., the increase in PM10 PTE less 

any contemporaneous onsite ERCs, per Section 2-2-607) for each permit issued for the facility back to 

the 1991 baseline date. For increases from permits issued before the effective date of the amendments, 

the District will not reopen any cumulative increase determinations made in connection with these prior 

permits, even if they were made based on filterable emissions only. For Facility A, that means that the 

historical cumulative increase of the existing facility, before the modification is made, is 90 tpy PM10. 

For new increases after the effective date of the amendments, the condensable portion must be

included as well. The additional PM10 cumulative increase from the proposed modification is thus 10 

tpy. The total cumulative increase back to the baseline date is therefore 100 tpy in total: 10 tpy that will 

result from the modification and 90 tpy pre-existing cumulative increase from the facility as it exists at 

the time of the application. The facility has not yet provided any PM10 offsets, so it must provide 100 tpy 

PM10 offsets. 

For PM2.5, the cumulative increase baseline date is the effective date of the amended regulations. The 

permit for this modification will be the first permit issued after the effective date of the amendments, so 

the cumulative increase is only the increase associated with this modification – 10 tpy (measured 

including both the filterable and condensable portion). So offsets are required for 10 tpy of PM2.5. 

(Note also that the facility could use contemporaneous on-site emission reduction credits for PM2.5, if 

available, to reduce the cumulative increase associated with the modification. Any such 

contemporaneous on-site emission reduction credits would reduce the cumulative increase associated 
A - 2

with the modification as calculated under Section 2-2-607, meaning that fewer offsets (banked credits) 

would need to be provided. See example 3 below.)

Example 2: Facility B was permitted and built in 1992. Facility B has a facility-wide PM10 PTE of 120 tpy 

of filterable PM10 and 30 tpy condensable PM10. Facility B has provided PM10 offsets for 120 tpy in PM10

emissions, because it has been over the 100 tpy threshold for requiring offsets under 2-2-303 (and the 

amount provided was 120 tpy and because offsets were calculated historically considering only the 

filterable portion of its PM10 emissions). After the effective date of the amendments Facility B wants to 

make a modification that will increase its PM10 PTE by 10 tpy (measured including both filterable and 

condensable), so that total PM10 PTE will be 160 tpy (measured including both filterable and 

condensable). As above, all of the PM10 is also PM2.5, so the PM2.5 PTE will also be 160 tpy. The facility 

would be required to provide offsets for both PM10 and PM2.5, because the facility’s PTE for both PM2.5

and PM10 will be over 100 tpy (the threshold for triggering offsets requirements under 2-2-303). 

For PM10, the cumulative increase baseline date is April 5, 1991, and offsets must be provided for all 

cumulative increase calculated back to this date. The existing cumulative increase for permits issued 

before the effective date of the amendments was calculated using filterable PM emissions only, and the 

District will not reopen those prior determinations, so the total pre-existing cumulative increase is 120 

tpy. All of that pre-existing cumulative increase has already been offset, so there is no prior un-offset 

cumulative increase under 2-2-608.2. For the modification after the effective date of the amendments, 

the new cumulative increase from the modification is calculated taking into account both the filterable 

and condensable portions, which is 10 tpy. So offsets need to be provided for the modification in an 

amount of 10 tpy, which is the facility’s un-offset cumulative increase under 2-2-608.

For PM2.5, the cumulative increase baseline date is the effective date of the regulations, and so only the 

cumulative increase from the modification needs to be offset (the same as with example 1 above). The 

cumulative increase from the modification is 10 tpy PM2.5 (including both filterable and condensable), 

and so 10 tpy of PM2.5 offsets needs to be provided. 

Example 3: In example No. 2 above, Facility B is making a modification that will involve an increase in 

PTE of 10 tpy PM10 and 10 tpy PM2.5. Assume that Facility B shut down a PM source 3 years ago that had 

4 tpy filterable PM and 1 tpy condensable PM. (Again, assume the use of gaseous fuel and that all of the 

PM emissions are both PM10 and PM2.5.) This shutdown was within 5 years before the facility submitted 

its application for the modification, and so it is “contemporaneous” under District regulations and can 

be used as a contemporaneous on-site emission reduction credit to reduce the cumulative increase 

associated with the modification. Both the emissions increase from the modification and the calculation 

of the contemporaneous on-site emission reduction credits from the shutdown are occurring after the 

effective date of the amendments, so both calculations will be required take into account both the 

filterable and condensable portions of the PM emissions involved. (Note that even though the shutdown 

of the old PM source was before the effective date of the amendments, the calculation of the amount of 

contemporaneous on-site emission reduction credits is being made after the effective date of the 

amendments as part of the determination of the amount of cumulative increase associated with the 

modification. So the amount of credit to be given will be governed by the calculation procedures set 
A - 3

forth in the amendments, which specify that both filterable and condensable PM emissions are 

counted.) So the modification will involve an increase in PTE of 10 tpy, and there are 5 tpy of 

contemporaneous on-site emission reduction credits, so the cumulative increase associated with the 

modification under Section 2-2-607 is 10 tpy – 5 tpy = 5 tpy. There is no prior un-offset cumulative 

increase under 2-2-608.2, because all of the PM10 cumulative increase back to 1991 has already been 

offset, and because there is no pre-existing PM2.5 cumulative increase because this is the first permit 

application after the effective date of the amendments. So the facility un-offset cumulative increase 

under 2-2-608 is 5 tpy, for both PM10 and PM2.5, and the facility must therefore provide 5 tpy of PM10

and PM2.5 offsets (i.e., banked credits).