## TECHNICAL SUPPORT DOCUMENT July 24 , 2013

30 TAC Chapter 122

– Federal Operating Permits

Subchapter C: Initial Permit Issuances, Revisions, Reopenings, and Renewals

Division 2: Permit Revisions

§§ 122.215

– 122.218

No material in this submittal package was designated as Confidential Business Information.

FOR FURTHER INFORMATION CONTACT: Ms. Adina Wiley, United States Environmental Protection Agency Region 6, Air Permits Section (6PD

- R), 1445 Ross Avenue, Dallas, Texas,

75202

- 2733, (214) 665

- 21152 Subject: Review of Revisions to the State Implementation Plan

– Texas Administrative Code Title 30, Chapter 122: Federal Operating Permits, Subchapter C: Initial

Permit I ssuances, Revisions, Reopenings and Renewals, Division 2: Permit Revisions, Sections 122.214, 122.215, 122.216, 122.217, 122.218

Contents:

I. Executive Summary

II. Technical Review

A. Part 51, Appendix V Completeness Checklists

B. Analysis of State Submittal s III. Conclusion3 I. Executive Summary

This technical support document (TSD) reviews portions of two proposed revisions to the Texas State Implementation Plan (SIP) concerning the Federal Operating Permits Program. The Federal Operating Permits applies statewide

. This review will determine if the program revisions

submitted on October 4, 2001 , and August 11, 2003 (as discussed below), are consistent with the requirements of the Clean Air Act and EPA’s policy and guidance and should be approved into

the Texas SIP

.

October 4, 2001

In a letter dated October 4, 2001 , Governor Rick Perry submitted revisions to the Texas SIP at Rule Log No. 2000

- 043

- 122

- AI that were adopted by the Texas Natural Resources Conservation Commission (TNRCC) on May 9, 2001 , and became effecti ve on June 3 , 2001

. 1 This SIP submittal included revisions to the following parts of the Texas Air Code, Title 30, Chapter 122:

1. Minor permit revisions at 30 TAC 122.215

, 2. Applications for Minor Permit Revisions at 30 TAC 122.216,

3. Procedures for Minor Permit Revisions at 30 TAC 122.217, and

4. Minor Permit Revision Procedures for Permit Revisions Involving the Use of Economic Incentives, Marketable Permits and Emissions Trading at 30 TAC 122.218.

August 11, 2003

In a letter dated Aug ust 11, 2003

, Mr. Robert J. Huston, Chairman of the TNRCC, submitted revisions to the Texas SIP at Rule Log No. 2002

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- 122

- AI that were adopted by the TNRCC on November 20, 2002, and became effective on December 11, 2002 . This SIP submittal

included revi sions to the following parts of the Texas Air Code, Title 30, Chapter 122:

1. Revisions to the Procedures for Minor Permit Revisions at 30 TAC 122.217

.

1 Note t hat the Texas Natural Resource Conservation Commission (TNRCC) was a predecessor to the current Texas environmental agency, the Texas Commission on Environmental Quality. This analysis will identify the TNRCC when talking about a specific action taken by t he TNRCC such as rule adoption and SIP submittal, but will generally refer to the TCEQ when discussing current duties of the state environmental agency.4 II. Technical Review

I I .A Evaluation of the October 4, 2001 and August 11, 2003 SIP Submittals with respe ct to the Part 51, Appendix V Completeness Checklist Part 51, Appendix V Completeness

Checklists

The criteria for completeness determination is Appendix V to Part 51

- Criteria for determining the completeness of plan submissions and is outlined below:

1.0 Purpose: This appendix V sets forth the minimum criteria for determining whether a State implementation plan submitted for consideration by EPA is an official submission for purposes of review under § 51.103.

1.1 The EPA shall return to the submittin g official any plan or revision thereof which fails to meet the criteria set forth in this appendix V, and request corrective action, identifying the component(s) absent or insufficient to perform a review of the submitted plan.

1.2 The EPA shall inform t he submitting official whether or not a plan submission meets the requirements of this appendix V within 60 days of EPA's receipt of the submittal, but no later than 6 months after the date which the State was required to submit the plan or

revision. If a completeness determination is not made by 6 months from receipt of a submittal, the submittal shall be deemed complete by operation of law on the date 6 months from receipt. A determination of completeness under this paragraph means that

the submission is an official submission for purposes of §51.103.

The attached checklist outlines the basic criteria included under 2.1 and 2.2 of Appendix V.

Section 2.3 of Appendix V describes the "parallel process procedure" which EPA had previously adopted to expedit e the review of plans. This feature, however, is being deleted from the next revised CFR on completeness. Therefore, it is not included in the checklist.5 SIP Completeness Checklist

– October 4, 2001

Rule Log No: 2000

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- AI

When preparing a SIP rev ision request, the SIP reviewer should go through this list to help identify that the package submitted to EPA is complete. States can use the check list to assure SIP submittals meet Appendix V criteria.

Administrative Materials (2.1)

1. The package is sent with a formal submittal letter from the Governor or his or her designee requesting EPA's approval of the revision.

The SIP revision was submitted by a letter from Governor Rick Perry dated October 4,

2001.

2. Evidence is included that the State has adopted the revision in the State code or body of regulations, or that the State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date of adoption or final

issuance and the effective date o f revision, if different from adoption/issuance date.

The revisions were adopted by the Texas Natural Resource Conservation Commission on May 9, 2001, and became effective June 3, 2001.

3. Evidence is included that the State has necessary legal authority under State law to adopt and implement the revision, e.g., a citation of the appropriate State authority.

The authority for promulgating changes to the Texas State Implementation Plan, Chapter 122, Subchapter C, Division 2, Sections 122.215

- 218 is found in Chapter 382 of the Texas Health and Safety Code.

4. A copy is included of the actual regulation or document submitted for approval and incorporation by reference into the SIP including an indication of the changes made to the existing approved plan whe re applicable. The submittal shall be a copy of the official State regulation document signed, stamped, and dated by the appropriate State official indicating that it is fully enforceable by the State. The effective date of the regulation document shall, w henever possible, be indicated in the document itself.

The October 4, 2001, submittal included a copy of the official State regulation document, signed, stamped, and dated by Robert J. Huston, Chairman of the Texas Natural

Resource Conservation Commissi on.

5. Evidence is included that the State followed all the procedural requirements of its laws and/or its constitution in the conducting and completing the adoption/issuance of the plan.6 A certification signed by LaDonna Castanuela, Chief Clerk of the Texas Natural

Resource Conservation Commission was included that demonstrated the SIP submittal was developed pursuant to 40 CFR 51.104.

6. Evidence is included that public notice was given of the proposed changes consistent with the procedures approved by EPA, including the date of publication of such notice, (e.g., notarized or certified copies of any public notices published in newspapers). (The notice should be at least 30 days prior to the public hearing(s).

Notices of public hearing were published on January 19, 2001, in the Austin American Statesman, the Fort Worth Star Telegram, and the Houston Chronicle. A public hearing was held in Austin, Texas, on February 20, 2001.

7. A certification is included indicating that public hearing(s) was/were hel d in accordance with the information provided in the public notice(s) and the State's laws and constitution, if applicable.

A certification signed by LaDonna Castanuela, Chief Clerk, Texas Natural Resource

Conservation Commission was included. This certif ication states that the public hearing was held pursuant to 40 CFR § 51.102(a) and that notice of the hearing was given which conformed to 40 CFR § 51.102(d).

8. A compilation of public comments and the State's response is included.

The SIP submittal pac kage did include a compilation of public comments and the State’s

responses. The Texas Natural Resource Conservation Commission received comments from 12 organizations and 118 individuals during the public comment period.

Technical Support (2.2)

The Stat e should include the following technical information in its SIP revision request package.

1. Identification of all regulated pollutants affected by the revision is included.

This is not applicable to the SIP revision under review. This revision provides procedures for minor permit revisions and does not regulate specific pollutants.

2. Identification of the locations of affected sources including the EPA attainment/nonattainment designation of the locations and the status of the attainment plan for the affected area(s) is included.

This SIP revision applies to minor permits issued by the Texas Natural Resource

Conservation Commission on a statewide basis.7 3. Quantification of the changes in SIP allowable emissions from the affected sources is

included. (Examples include estimates of changes in current actual emissions from affected sources and/or, where appropriate, quantification of changes in actual emissions from affected sources through calculations of the differences between certain baseline

levels and allowable emissions anticipated if the revisions were approved.)

Quantification of the changes in SIP allowable emissions from the affected sources is not applicable to this SIP revision. The SIP revision requires at section 122.216(6) that any

perm it holder requesting a minor permit revision must quantify the emissions resulting from the change.

4. Demonstration is included that the NAAQS/PSD increments/RFP demonstration and visibility as applicable would be protected if the revision were approved and implemented.

Not applicable to this SIP revision. Section 122.215(3) states that a minor permit revision does not require or change a case

- by

- case determination of an emission limitation or other standard, or a source

- specific determination for tempor ary sources of ambient impacts, or a visibility or increment analysis.

5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality standards for at least 10 years as required by §175A of the Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

(A). Modeling information, if applicable, is required to support the propose revision.

Modeling information is not necessary to support the SIP revision.

7. Evidence is included where necessary, that emission limitations are based on continuous emission reduction technology (e.g., add

- on controls, industrial/process equipment designs, reformulated materials, etc.).

Evidence of emission limitations based on CEM technology is not applicable.

8. Evidence is included indicating that a SIP revision contains emission limitations, work practice standards, and recordkeeping/reporting requirements to ensure stated emission

levels.8 Enforceability is determined on case

- by

- case basis in ea ch individual permit. Section 122.215 also states that a minor permit revision cannot violate any applicable requirement and does not involve significant changes to existing monitoring, reporting, or recordkeeping requirements.

9. Compliance/enforcement s trategies including how compliance will be determined in practice (including at what frequency).

Determination of compliance is specified on case

- by

- case basis in each individual permit. Section 122.215 also states that a minor permit revision cannot violate any applicable requirement and does not involve significant changes to existing monitoring, reporting, or recordkeeping requirements.

10. As appropriate, special economic and technological justifications are included per applicable EPA policies or an explanation why such justifications are not necessary

should be included. For example, requests for alternative RACT may require such justification.

These justifications are not necessary for this SIP revision.

The SIP submittal of Rule Log No.: 2 000

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- AI meets the completeness criteria.9 SIP Completeness Checklist

– August 11, 2003

Rule Log No: 2002

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- 122

- AI

When preparing a SIP revision request, the SIP reviewer should go through this list to help identify that the package submitted to EPA is complete. States can use the check list to assure SIP submittals meet Appendix V criteria.

Administrative Materials (2.1)

1. The package is sent with a formal submittal letter from the Governor or his or her designee requesting EPA's approval of the revision.

The SIP revision was submitted by a letter from Robert J. Huston, Chairman of the Texas Commission on Environmental Quality, on August 11, 2003.

2. Evidence is included that the State has adopted the revision in the State code or body of regulations, or that the State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date of adoption or final issuance and the effective date of revision, if different from adoption/issuance da te.

The revisions were adopted by the Texas Natural Resource Conservation Commission on November 20, 2002, and became effective December 11, 2002.

3. Evidence is included that the State has necessary legal authority under State law to adopt and implemen t the revision, e.g., a citation of the appropriate State authority.

The authority for promulgating changes to the Texas State Implementation Plan, Chapter 122, Subchapter C, Division 2, Section 122.217 is found in Chapter 382 of the Texas Health and Safe ty Code.

4. A copy is included of the actual regulation or document submitted for approval and incorporation by reference into the SIP including an indication of the changes made to the existing approved plan where applicable. The submittal shall be a cop y of the official State regulation document signed, stamped, and dated by the appropriate State official indicating that it is fully enforceable by the State. The effective date of the regulation document shall, whenever possible, be indicated in the docum ent itself.

The August 11, 2003, submittal included a copy of the official State regulation document, signed, stamped, and dated by Robert J. Huston, Chairman of the Texas Commission on Environmental Quality.

5. Evidence is included that the State foll owed all the procedural requirements of its laws and/or its constitution in the conducting and completing the adoption/issuance of the plan.10 The SIP submittal package included a certification signed by Jim Muse, Records Administrator, Policy and Regulati ons Division of the Texas Commission on Environmental Quality, that demonstrated the SIP submittal was developed pursuant to

40 CFR 51.104.

6. Evidence is included that public notice was given of the proposed changes consistent with the procedures approv ed by EPA, including the date of publication of such notice, (e.g., notarized or certified copies of any public notices published in newspapers). (The notice should be at least 30 days prior to the public hearing(s).

Notices of public hearings were publis hed in the following newspapers on the date listed:

• Austin American Statesman: July 14, 2002 and March 14, 2003

• El Paso Times: July 13, 2002

• Fort Worth Star Telegram: July 13, 2002 and March 14, 2003

• Houston Chronicle: July 13, 2002 and March 11, 2003.

Public hearings were held in Austin, Texas, on August 19, 2002 and April 14, 2003.

7. A certification is included indicating that public hearing(s) was/were held in accordance with the information provided in the public notice(s) and the State's laws and constitution, if applicable.

An order adopting revisions to the SIP signed by Robert J. Huston, Chairman of the Texas Commission on Environmental Quality was included. This order states that the public hearing was conducted pursuant to Texas Health and Sa fety Code § 382.017, Texas Government Code Chapter 2001, and 40 CFR § 51.102.

8. A compilation of public comments and the State's response is included.

The SIP submittal package did include a compilation of comments.

Technical Support (2.2)

The State s hould include the following technical information in its SIP revision request package.

1. Identification of all regulated pollutants affected by the revision is included.

This is not applicable to the SIP revision under review. This revision provides procedures for minor permit revisions and does not regulate specific pollutants.

2. Identification of the locations of affected sources including the EPA attainment/nonattainment designation of the locations and the status of the attainment plan for the a ffected area(s) is included.

This SIP revision applies to minor permits issued by the Texas Commission on Environmental Quality on a statewide basis.11 3. Quantification of the changes in SIP allowable emissions from the affected sources is

included. (Exam ples include estimates of changes in current actual emissions from affected sources and/or, where appropriate, quantification of changes in actual emissions from affected sources through calculations of the differences between certain baseline

levels and a llowable emissions anticipated if the revisions were approved.)

Quantification of the changes in SIP allowable emissions from the affected sources is not applicable to this SIP revision.

4. Demonstration is included that the NAAQS/PSD increments/RFP de monstration and visibility as applicable would be protected if the revision were approved and implemented.

Not applicable to this SIP revision.

5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality

st andards for at least 10 years as required by §175A of the Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

(B). Modeling information, if applicable, is required to support the propose revision.

Modeling information is not necessary to support the SIP revision.

7. Evidence is included where necessary, that emission limitations are based on continuous emission reduction technology (e.g., add

- on controls, industrial/process equipment designs, reformulated materials, e tc.).

Evidence of emission limitations based on CEM technology is not applicable.

8. Evidence is included indicating that a SIP revision contains emission limitations, work practice standards, and recordkeeping/reporting requirements to ensure stated em ission

levels.

Enforceability is determined on case

- by

- case basis in each individual permit.

9. Compliance/enforcement strategies including how compliance will be determined in practice (including at what frequency).12 Determination of compliance is specified on case

- by

- case basis in each individual permit.

10. As appropriate, special economic and technological justifications are included per applicable EPA policies or an explanation why such justifications are not necessary

should be included. For example, requests for alternative RACT may require such justification.

These justifications are not necessary for this SIP revision.

The SIP submittal of Rule Log No.: 2002

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- AI meets the completeness criteria.13 I I.B Analysis State Submittal

History of the Minor Permit Provisions in the Texas Title V Program

Under Title V of the Clean Air Act (CAA), as amended on November 15, 1990, the EPA promulgated rules, which define the minimum elements of an approvable State operat ing permits program. Those rules include the corresponding standards and procedures by which EPA will approve, oversee, and withdraw approval of a State operating permits program (see 57 FR 32250, July 21, 1992). The EPA codified these rules at Title 40 Co de of Federal Regulations (CFR) part 70 (the part 70 regulations). Title V require d States to develop and submit to EPA programs for issuing operating permits to all major stationary sources and to certain other

sources.

The CAA required States to develop and submit these programs to EPA by November 15, 1993, and that EPA approve or disapprove each program within one year after receiving the submittal. EPA's program review occurs under § 502 of the CAA and the part 70 regulations, which together outline cr iteria for approval or disapproval. Where a program substantially, but not fully meets the requirements of part 70, EPA may grant the program interim approval (IA). If EPA has not fully approved a program by two years after November 15, 1993, or by the end of an IA, then EPA must establish and implement a Federal program. 42 United States Code (U.S.C.) 7661a(d) and (g).

In our June 7, 1995, Federal Register notice ( 60 FR 30037), EPA identified several

inconsistencies between Texas’s Chapter 122 Federal Operating Permits Program and Part 70, including the provisions for minor permit revisions. TCEQ amended sections 122.215

– 122.218 to ensure Chapter 122 is consistent with 40 CFR § 70.7(e)(2)(i). These amendments were adopted by the st ate on May 9, 2001, and submitted to EPA for inclusion in the Texas Title V Operating Permit program on May 30, 2001, and submitted to EPA as a SIP revision on October 4, 2001. EPA published approval of these revisions into the Federal Operating Permit pro gram on December 6, 2001 (66 FR 63318), based on our determination that TCEQ had corrected the deficiencies identified in Chapter 122, including those pertaining to the minor permit revisions.

TCEQ subsequently adopted amendments to 122.217 regarding minor permit procedures on November 20, 2002. These amendments removed an obsolete reference to the monitoring process for general operating permits and renumbered the section for consistency. These

amendments to 122.217 were submitted to EPA as revisions to the Texas Title V Operating Permit Program on December 9, 2002; and submitted as a SIP revision on August 11, 2003. EPA published approval of these revisions into the Federal Operating Permit program on March 30, 2005 (70 FR 16134).

While EPA has revi ewed and approved the amendments to sections 30 TAC 122.215

- 122.218 into the Texas Operating Permit Program, this review marks the first time that EPA has taken

action on these sections as revisions to the Texas SIP. In doing so, we are acting on the origi nal submission of October 4, 2001, and the subsequent revisions through the August 11, 2003,

submittal.14 Summary of the State Submittal

30 TAC Sections 122.215

– 122.218 establish provisions for minor permit revisions in the Texas Federal Operating Permit s Program. These sections are already approved under the Texas Federal Operating Permits Program but must also be included in the SIP for full functionality.

What is considered a minor permit revision?

Section 122.215 defines a minor permit revision to i nclude any change that:

• does not violate any applicable requirement;

• does not involve significant changes to existing monitoring, reporting, or recordkeeping requirements in the permits;

• does not require or change a case

- by

- case determination of an emissio n limitation or other standard, or a source

- specific determination for temporary sources of ambient impacts, or a visibility or increment analysis;

• does not seek to establish or change a permit term or condition for which there is no corresponding underlyi ng applicable requirement and that the source has assumed to avoid an applicable requirement to which the source would otherwise be subject; and

• is not a modification under any provision of Title I of the CAA.

Notwithstanding the requirements of section 1 22.215, section 122.218 establishes that minor permit revision procedures may also be used for permit revisions involving the use of economic incentives, marketable permits, emissions trading, and other similar approaches, to the extent that such minor per mit revision procedures are explicitly provided for in the SIP or in applicable requirements promulgated by EPA.

How does a source apply for a minor permit revision?

Sections 122.216 and 122.217 describe what information is required in a minor permit rev ision application and how the TCEQ will process the application.

The application for the minor permit revision must include, at a minimum, a description of the change; a description of the affected emission units; the provisional terms and conditions as

d efined in § 122.10 (General Definitions) that codify the new applicable requirement; a statement that the change qualifies for a minor permit revision; a certification in accordance with § 122.165 (Certification by a Responsible Official); and the emission s resulting from the change. The complete application is submitted to the TCEQ Executive Director (ED).

Upon receipt of a complete minor revision permit application, the TCEQ Executive Director (ED) will notify the EPA and the affected state(s) within fiv e working days. The TCEQ ED may issue a minor permit revision provided that the changes meet the criteria for a minor permit revision; the TCEQ ED has received a complete application; the conditions of the permit provide for compliance with the requirement s of 30 TAC Chapter 122 (Federal Operating Permits Program); and the requirements for public announcement, affected state review, and EPA review

have all been satisfied. The TCEQ will take final action on the minor permit revision application15 no later than 90 days after receipt of an application, or 15 days after the end of the EPA review period, whichever is later.

Can a source operate the requested changes before the issuance of the revised operating permit?

Consistent with the minor permit provisions at 40 CFR 70.7(e)(2)(v), 30 TAC Section 122.217 does provide sources the ability to operate the requested minor changes before issuance of the revised operating permit, as long as the source meets a few requireme nts. The permit holder must comply with all applicable requirements, state

- only requirements, and provisional terms and conditions as defined in section 122.10 governing the change. The applicable requirements are always enforceable in every case. The permit holder does not need to comply with the original

terms and conditions codified in the operating permit if they have been replaced by provisional

terms or conditions before issuance or denial of a revision or renewal. The permit holder must

also have submitted to the TCEQ ED a complete application containing all information required

under section 122.216. Additionally, the permit holder must also maintain all the information required under 122.216 until the permit is revised.16 Why do the Minor Permi t Revisions need to be part of the SIP?

Because of the different CAA requirements and authorizations surrounding each program, EPA generally prefers to not approve a state’s Title V permitting provisions into the applicable SIP

. However, there are instanc es where approving a portion of the Title V program into the SIP is appropriate and necessary to ensure proper functionality for both the Title I and V permitting programs. For instance, EPA approved the “potential to emit” provisions at 30 TAC 122.122 int o the Texas SIP on N ovember 14, 2003 (68 FR 64543). In this instance, EPA required TCEQ to revise the “potential to emit” provisions through our January 7, 2002, Notice of Deficiency of the Texas Title V program; we further required that the corrected PTE provisions be submitted as revisions to both the Texas SIP and Title V programs.

The TCEQ adopted revisions to the Texas Title V minor permit pro visions at 30 TAC 122.215

- 218 to satisfy inconsistencies identified by EPA June 7, 1995, in the Texas p art 70 program. After correcting the deficiencies and adopting revised rules at 30 TAC 122.215

– 218, the TCEQ has submitted and requested Title V and SIP approval. EPA has already evaluated and approved the revisions into the state’s part 70 program. We now addr ess whether these provisions should

be SIP

- approved.

The TCEQ has requested SIP approval because of section 122.218; which provides that minor permit procedures may be used for emission trading programs and other similar approaches only

to the extent th at such minor permit revision procedures are explicitly provided for in the Texas

SIP or in the applicable requirements promulgated by the EPA. Texas has several emissions trading programs approved into the Texas SIP, but none of these programs explicitly provide for the use of Title V minor permit revision procedures. Our analysis and approval of each of these state trading programs, found that through approval of the trading programs into the Texas SIP, these programs themselves would become applicable r equirements under the approved Texas part 70 program. Since the programs themselves do not provide for the use of minor permit revisions under title V, the minor permit revision procedures in the part 70 program must be explicitly included in the SIP to en sure the Texas sources participating in the

SIP

- approved trading programs can use the minor permit revision mechanisms. Following is a brief summary of the Texas emissions trading programs, also known as Economic Incentive Programs (EIPs).

What is an Econ omic Incentive Program?

An EIP is a regulatory program that achieves an air quality objective by providing market

- based

incentives or information to emission sources. A uniform emission reduction requirement, based for instance on installation of a requi red emission control technology, does not take account of variations in processes, operations, and control costs across sources even of the same type, such as electric utilities, or petroleum refiners. By providing flexibility in how sources meet an

emiss ion reduction target, an EIP empowers sources to find the means that are most suitable and

most cost

- effective for their particular circumstances.

In addition, an EIP can create incentives for sources to go beyond an emission reduction target. By setting a price on pollution and pollution reductions through a fee

- based approach or a17 trading program, some sources can realize an economic gain or avoid additional costs by selling excess emission reductions, or making the reductions for less than the c ost imposed by a fee. Because of the improved efficiency, EIPs may also lead to achieving air quality goals more quickly.

What is the status of EIPs in Texas?

TCEQ has adopted five EIPs into state regulations. The regulations are found in Divisions 1

– 4

and 6 of 30 TAC Chapter 101, Subchapter H. The five EIP programs in Texas are summarized

in Table II

- 1. Additionally, TCEQ has adopted one federal trading program into state regulation, found in Division 7 of 30 TAC Chapter 101, Subchapter H.

Table II

– 1 TCEQ EIP Trading Programs and Regional Applicability

TCEQ Trading Program Geographical / Ozone Non

- attainment Regions

DFW HGB BPA El Paso East and

Central Texas West Texas

ERC Optional Optional Optional n/a n/a n/a

EBTA n/a n/a n/a Mandatory Mandatory Mandatory

MECT n/a Mandatory n/a n/a n/a n/a

DERC Optional Optional Optional Optional Optional Optional

HECT n/a Mandatory n/a n/a n/a n/a

CAIR Federally Mandated Trading Program

Mandatory means that sources in the region must participate in the EIP program. Optional means that sources in the region have the option to participate in the EIP program.

n/a

- The EIP does not apply to the geographical region.

DFW

- Dallas Ft Worth ozone nonattainment area for both 1

- hour and 8

- hou r ozone standard.

HGB

- Houston/Galveston/Brazoria ozone nonattainment area for both 1

- hour and 8

- hour ozone standard.

BPA

- Beaumont/Port Arthur ozone nonattainment area for both 1

- hour and 8

- hour ozone standard.

El Paso

- El Paso ozone nonattainment area for 1

- hour ozone standard. El Paso is maintenance for 8

- hour ozone standard.

East and Central Texas

- Those counties east of Interstate Highway 35.

West Texas

- Those counties west of the counties in the East and Central Texas area, excluding El Paso.

The TCEQ emissions trading regulations are summarized below:

1. Emission Credit Banking and Trading (ERCs) (30 TAC Chapter 101, Subchapter H, Division 1)

The Emission Credit Banking and Trading EIP or Emission Reduction Credit (ERC) program for VOC and NO X in ozone nonattainment areas was first adopted by Texas at 30 TAC § 101.29 on December 23, 1997. Effective January 18, 2001, § 101.29 was repealed and Chapter 101, Subchapter H, Divisions 1, 3, and 4 were created. This action created separate divisi ons for the ERC, MECT, and DERC programs. The submittal effective April 14, 2002, amended §101.302. The submittal effective January 17, 2003,18 completely reorganized the ERC and DERC program rules into more standardized formats paral lel to each other, with a rule structure which followed a process of recognizing, quantifying, and certifying reductions as credits while explaining the guidelines for trading and using creditable reductions. The 2003 submittal amended §§101.300, 101.301, 101.302, 101.303, 101.304, 101.306, 101.309, and 101.311. The December 6, 2004, submittal amended §§101.300, 101.302, 101.303, 101.304, and 101.311. Our final approval on September 6, 2006, acted on the original submission of the ERC program and all sub sequent revisions through the December 6, 2004 submittal.

Division 1 defines emission credits (ECs) in terms of a rate (tons per year). Emission credits can be generated and banked from stationary sources as emission reduction credits (ERCs) or generate d and banked from mobile sources as mobile emission reduction credits (MERC s ). The ERCs from the bank have traditionally been used as offsets for permitting major new or modified facilities. ERCs have also been banked and traded for alternative complianc e with Reasonably Available Control Technology (RACT) requirements. MERCs have not been banked or traded under the program to date. On December 6, 2004, TCEQ submitted revisions to the SIP that expand ed the ERC program to cover reductions of criteria pol lutants (excluding lead) or precursors of criteria pollutants for which an area is designated nonattainment. EPA published a final approval of the ERC program on September 6, 2006, 71 FR 52698.

After EPA’s final approval on September 6, 2006, TCEQ revised the ERC program to address the commitments of the DERC conditional approval. Additionally, the TCEQ adopted revisions to the ERC program consistent with the requirements of Senate Bill 784, adopted during regular session, 2005, of the 79 th Texas L egislature. Senate Bill 784 allows for greater flexibility in the generation and use of international emission reductions. These revisions were adopted by the TCEQ on October 4, 2006, and became effective on October 26, 2006. The adopted regulations wer e submitted to EPA as a SIP revision on October 24, 2006. TCEQ also promulgated revisions to the ERC program that update the cross

- references to the new numbering structure in 30 TAC Chapter 117. These revisions were adopted on July 25, 2007, and became effective on August 16, 2007. The adopted regulations were submitted to EPA as a SIP revision on August 16, 2007. EPA fully approved the 2006 and 2007 revisions to the ERC program on April 30, 2010. See 75 FR 27647, May 18, 2010.

2. Emissions Banking a nd Trading of Allowances (EBTA) (30 TAC Chapter 101, Subchapter H, Division 2)

The TCEQ created the EBTA Program to implement the requirements of Senate Bill (SB) 7, from the 76 th Legislature, 1999, which deregulated the electric utility industry. Under SB 7, TCEQ was required to develop a permitting system and a mass cap and trade system to distribute allowances for use by electric generating facilities. The TCEQ created the EBTA Program to establish an emission reduction cap which provides for a

50% re duction in NO X emissions from EGFs and a 25 % reduction in SO 2 emissions from solid fuel EGFs. The permitting system required under SB 7 and established at 30 TAC Chapter 116, Subchapter I, is the subject of a separate rulemaking review and action19 by EPA (see Docket EPA

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- 0031). The EBTA program began operation in 2003. Allowances for NO X and SO 2 are deposited into each EGFs compliance account annually. The EGFs will be allowed to purchase, bank or sell allowances to meet operational demand s. The EBTA program is divided into three regions; East and West Texas as divided by Interstate Highway 35 and the El Paso region (consisting of El Paso County; Juarez, Mexico; and Sunland Park, New Mexico).

The first SIP submittal to EPA on January 3, 2000, established the details of the emission trading program, including the establishment of the trading regions, the allowance allocation formula, and the banking provisions for unused allowances. This submittal established new §§ 101.330

- 101.337 and w as contained in rule log number 99033

- 101

- AI. The second SIP submittal (rule log number 1999

- 029B

- 116

- AI) sent to EPA on September 9, 2001, amended the Allocation of Allowances at § 101.333. The third revision to the EBTA was submitted to EPA on July 15, 2002, and established new § 101.338, which provided for the use of emission reductions from outside the United

States to be used in lieu of EBTA allowances. Section 101.338 was added to the EBTA in response to SB 1561 which allows surplus emission reduct ions achieved outside the United States to satisfy emission reduction requirements in Texas by allowing reductions in one air contaminant to substitute for reductions in another criteria pollutant. This submittal was part of rule log number 2001

- 063

- 101

- A I. The final revision to the EBTA was submitted to the EPA on October 24, 2006, for rule project number 2005

- 054

- 101

- PR. The 2006 amendments to the EPA repealed and replaced the international provisions

in section 101.338 and created section 101.339 for program audits and reports.

EPA approved the EBTA program through direct final action on November 16, 2010 (see 75 FR 69884).

3. Mass Emissions Cap and Trade (MECT) Program (30 TAC Chapter 101, Subchapter H, Division 3)

The MECT program was adopted as a State regulation on December 6, 2000. This program is mandatory for stationary facilities that emit NO X in the HGB ozone nonattainment area which are subject to emission specifications in the TCEQ NO X rules at 30 TAC Chapter 117.310, 117.1210, and 11 7.2010; and which are located as a site where they collectively have an uncontrolled design capacity to emit 10 tons per year or

more of NO X . The program set a cap on NO X emissions beginning January 1, 2002, with a final reduction to the cap occurring in 2007. Facilities are required to meet NO X allowances on an annual basis. Facilities may purchase, bank, or sell their allowances. The program has a provision to allow a facility to use credit generated through the Division 1 EIP (ERCs) to permanently increase the allowances for the individual facility in the MECT if the credits were generated for NO X in the HGB area before December 1, 2000. The program also has a provis ion to allow a facility to use credits generated through the Division 4 EIP (DERCs) in lieu of allowances if they are generated in the HGB area. EPA published a final rule approving the MECT program (except for the use of DERCs in the MECT, which we defer red acting on until our action on the DERC rule) on November 14, 2001 (66 FR 57252). Texas subsequently revised the MECT program in SIP submittals dated January 31, 2003 and December 6, 2004. EPA published a final20 approval of the MECT program revisions o n September 6, 2006 (71 FR 52698), including revisions to the MECT necessary to accomplish the shift in attainment strategy from 90 percent control of industrial NO X sources to 80 percent control in the HGB area. The approved revisions also approved the u se of discrete emissions credits generated from stationary sources (DERCs) or mobile sources (MDERCs) in lieu of MECT allowances. Since our 2006 final approval, TCEQ has promulgated revisions to the MECT to update the cross

- references to the Chapter 117 N O X rules. EPA subsequently approved the revisions to the MECT through a direct final action on July 16, 2009 (see 74 FR 34503).

TCEQ adopted revisions to the MECT program in conjunction with the development of

the Houston/Galveston/Brazoria 1997 8

- hour o zone attainment demonstration on March 10, 2010. The MECT amendments were submitted as revisions to the Texas SIP on April 6, 2010. EPA is reviewing these pending revisions to the Texas SIP and will address in a separate rulemaking from our action on the s ubmitted revisions to 30 TAC Chapter 122.

4. Discrete Emission Credit Banking and Trading (DERCs) (30 TAC Chapter 101, Subchapter H, Division 4)

The DERC program was first adopted by the state at 30 TAC § 101.29 on December 23, 1997. Effective January 18, 2001, § 101.29 was repealed and Chapter 101, Subchapter H, Divisions 1, 3, and 4 were created. This action created separate divisions for the ERC, MECT, and DERC programs. Discrete emission credits (DECs) are quantified, banked

and traded in terms of mass (tons), not a rate as is the case with ECs. DECs may be generated from stationary sources and banked as discrete emission reduction credits (DERCs) or may be generated from mobile sources and banked as mobile discrete emission reduction credits (MDE RCs). DECs may be generated and used statewide and can apply to all criteria pollutants, with the exception o f lead. Traditionally DECs have been used for RACT compliance for VOCs and NO X

. Amendments to the MECT program were adopted on October 18, 2001 ; these amendments also included changes made primarily for clarification to §§ 101.370, 101.372, and 101.373 in the DERC program. The DERC program was amended again effective April 14, 2002, to include the provisions in Texas Senate Bill 1561 for air emi ssions trading across international

boundaries. The submitt al effective January 17, 2003, completely reorganized the ERC and DERC program rules into more standardized formats parallel to each other, with a rule structure which followed a process of recogn izing, quantifying, and certifying reductions as credits while explaining the guidelines for trading and using creditable

reductions. The December 6 , 2004 submittal amended §§ 101.370, 101.373, 101.37 4

, and 101.376. Our final conditional approval on Sept ember 6, 2006, acted on the original submission of the DERC program and all subsequent revisions through the December 6

, 2004, submittal (71 FR 52703). Our conditional approval is contingent upon TCEQ satisfactorily addressing the terms of their September 8, 2005, commitment letter.

After EPA’s final conditional approval on September 6, 2006 , TCEQ revised the DERC program to address the commitments of the conditional approval. Additionally, the TCEQ adopted revisions to the DERC program consistent with the requirements of Senate Bill 784, adopted during regular session, 2005, of the 79 th Texas Legislature.21 Senate Bill 784 allows for greater flexibility in the generation and use of international emission reductions. These revisions were adopted by the TCEQ on October 4, 2006, and became effective on October 26, 2006. The adopted regulations were submitted to EPA as a SIP revision on October 24, 2006. TCEQ also promulgated revisions to the DERC program that update the cross

- references to the new number ing structure in 30 TAC Chapter 117. These revisions were adopted on July 25, 2007, and became effective on August 16, 2007. The adopted regulations were submitted to EPA as a SIP revision on August 16, 2007. EPA fully approved the 2006 and 2007 revisio ns to the DERC program on April 30, 2010. See 75 FR 27644, May 18, 2010.

5. Highly

- Reactive Volatile Organic Compound Emission Cap and Trade (HECT) Program (30 TAC Chapter 101, Subchapter H, Division 6)

The HECT program was adopted as a State regulation on December 1, 2004. This program is mandatory for covered facilities including vent gas streams, flares, and cooling tower heat exchange systems that emit highly

- reactive VOCs, as defined in § 115.10, and that are located at a site sub ject to Chapter 115, Subchapter H. Facilities are required to meet HRVOC allowances on an annual basis. Facilities may purchase, bank or sell their allowances for use in the following control period. The program has a provision to allow a facility to us e credits of less

- reactive VOCs generated through the Division 1 EIP (ERCs) in lieu of allowances if they are generated in the HGB area. EPA published final approval of the HECT program on September 6, 2006.

TCEQ adopted revisions to the HECT program in conjunction with the development of

the Houston/Galveston/Brazoria 1997 8

- hour ozone attainment demonstration on March 10, 2010. The HECT amendments were submitted as revisions to the Texas SIP on April 6, 2010. EPA is reviewing these pending revisions to the Texas SIP and will address in a separate rulemaking from our action on the submitted revisions to 30 TAC Chapter 122.

6. Clean Air Interstate Rule (CAIR) Program (30 TAC Chapter 101, Subchapter H, Division 7)

The Texas CAIR program was adopted as a Stat e regulation on July 12, 2006, and submitted as a SIP revision on August 4, 2006. The Division 7 regulations incorporate by reference the CAIR NO X Annual and SO 2 trading programs as adopted by EPA on May 12, 2005 (70 FR 25162). Additionally, the Texas CA IR program establishes a NO X allocation methodology and provisions for the compliance supplement pool to replace the provisions at subpart EE of 40 CFR part 97, the CAIR Federal Implementation Plan. EPA published a direct final approval of the Texas CAIR NO X Abbreviated SIP for the Phase I allocation methodology on July 30, 2007 (72 FR 41453).

TCEQ adopted revisions to the CAIR program on February 10, 2010, to update the NO X allocation methodology and the incorporation by reference dates for the NO X ann ual and

SO 2 trading programs. These revisions were submitted to EPA as a SIP revision on March 4, 2010. EPA is reviewing these pending revisions to the Texas SIP and will22 address in a separate rulemaking from our action on the submitted revisions to 30 TA C Chapter 122.

Does TCEQ have the necessary legal authority to implement the revisions to Chapter 122 as part of the SIP?

The application of penalties or obtaining corrective action, and citizen filing of lawsuits are not

addressed in §§ 122.215

- 218 of the Federal Operating Permits Program. Texas enforcement provisions are not typically in individual rules but are separately codified. Texas Water Code Chapter 7 contains the statutory provisions for enforcement of the Federal Operati ng Permits Program. In particular, TWC § 7.051 provides for the assessment of administrative penalties, and § 7.032 provides for injunctive relief. The TCEQ enforcement rule at 30 TAC § 70.5 incorporates remedies found in the state statutes (Texas Water Co de and the Texas Health and Safety Code), and permits referrals to EPA for civil, judicial or administrative action. Once the rule is approved into the SIP, EPA will be able to enforce it under section 113 of the Clean Air

Act.

The 40 CFR part 70, CAA Tit le V operating permits program has been reviewed and found to have sufficient enforcement provisions. The Office of the Attorney General of the State of Texas has provided a written opinion for this program . The opinion state s that TCEQ has the necessary

l egal authority to implement and enforce the Title V operating permits program . TCEQ has the authority to have reasonable requirements for measuring and monitoring air emissions and to require owners and operators of sources to make and maintain records of the emissions. Therefore, TCEQ has the necessary legal authority to implement and enforce the minor permit revision procedures in accordance with the requirements of the CAA.

The Office of the Attorney General of the State of Texas cited State laws and regulations that regulate, at a minimum, the same sources as the Clean Air Act and do so with standards that are no less stringent than those specified by the CAA. The cited laws and regulations are: Texas Health and Safety Code Ann. sections 382.016 (Moni toring Requirements, Examination of Records), 382.021 (Sampling Methods and Procedures), 382.0514 (Sampling, Monitoring and Certification); 30 TAC sections 122.132 (Application and Required Information for Initial Permit Issuance, Reopening, Renewal, or Ge neral Operating Permits), 122.134 (Complete Application), 122.136 (Application Deficiencies), 122.142 (Permit Content Requirements), 122.143 (General Terms and Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms and Conditio ns), 122.146 (Compliance Certification Terms and Conditions), 122.165 (Certification by Responsible Official; 30 TAC sections 101.8 (Sampling), 101.9 (Sampling Ports).

What is EPA’s analysis of the Chapter 122 Federal Operating Permits program with respect to section 110(l) of the Clean Air Act?

Section 110(l) of the Clean Air Act states:23 Each revision to an implementation plan submitted by a State under this Act shall be adopted by such State after reasonable notice and pu blic hearing. The Administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress (as defined in section 171), or any other applicable requirement of this Act.

Thus, under section 110(l), this SIP revision must not interfere with attainment or reasonable further progress or any other applicable requirement of the Act.

Generally, because Title V minor permit revisions are defined at § 122.215 as no t violating applicable requirements and not being a modification under Title I of the CAA, the limitations placed on what permit actions will qualify as a Title V minor permit revisions will ensure that

these SIP revisions will not interfere with attainmen t, reasonable further progress, or any other applicable requirement of the CAA.

Section 122.218 does allow a minor permit revision to be used for permits involving the use of economic incentives, marketable permits, emissions trading, and other similar a pproaches. Section 122.218 could be used when the permit holder becomes subject to a federal emissions trading program such as the Acid Rain Program or Clean Air Interstate Rule. The federal trading programs have been designed by EPA to assist states in ad dressing interstate transport at a national level and to satisfy an upwind state’s significant contribution to nonattainment and

maintenance. Therefore, it can be assumed that using Section 122.218 to revise a permit based on participation in a federal tra ding program will not interfere with attainment or reasonable further

progress.

Additionally, Section 122.218 could be used when a permit holder wishes to modify their permit based upon participation in one of the state’s five SIP

- approved emissions trading programs or

EIPs

. Texas’s emissions trading programs are published at 30 TAC Chapter 101 General Air Quality, Subchapter H Emissions Banking and Trading, Divisions 1

- 4 and 6

.

T he EPA guidance document for reviewing and approving discretionary EIP submittals is “Improving Air Quality with Economic Incentive Programs” (EPA

- 452/R

- 01

- 001, January 2001). The EIP Guidance applies to the establishment of a discretionary EIP for attaining or maintaining the national ambient air quality standards (NAAQS) f or criteria pollutants. The EIP Guidance identifies three fundamental principles that apply to all EIPs: integrity, equity, and

environmental benefit. Four elements make up the integrity principle: surplus, quantifiable, enforceable, and permanent. The eq uity principle consists of two elements: general equity and environmental justice.

As a general matter, the satisfaction of the environmental benefit principle and the other integrity principles applicable to trading programs will tend to demonstrate th at a trading program will do no worse than maintain existing air quality. Accordingly, EPA has determined that discretionary EIPs that are consistent with the EIP Guidance are consistent with section 110(l):

Congress did not address specific requirements for EIPs in the CAA. Consistent with our mandate, the EPA has interpreted what an EIP should contain in order to meet the24 requirements of the CAA. This document is a guidance document that sets forth EPA’s

non

- binding policy for EIPs. This document does no t represent final EPA action on the requirements for EIPs. Rather, this document identifies several different types of economic incentive programs, and proposes elements for each type that, if met, EPA currently believes would assure that the program would meet the applicable CAA provisions. The guidance phrases these elements in the imperative

– that is, using the terms “must” or “shall”. This is done only to signify that EPA would propose to approve a SIP submittal of a program containing the indicated el ements on grounds that under section 110(l) of the CAA, the SIP revision does not interfere with any applicable requirement concerning attainment, reasonable further progress, or any other applicable requirement.

(EIP Guidance, section 1.9.) Thus, if the Texas trading programs are consistent with the EIP Guidance the programs will each satisfy section 110(l).

On September 9 , 200 6 , EPA published approval of the Emission Credit Banking and Trading Program (Division 1), the Discrete Emission Credit Banking and Trading Program (Division 4), the Highly

- Reactive Volatile Organic Compound Emissions Cap and Trade Program (Division 6), and revisions to the Mass Emissions Cap and Trade Program (Division 3). EPA published approval of the Emissions Banking and Tradin g of Allowances Program (Division 2) on January 3, 2011. In each of these rulemakings we established that these discretionary EIPs are consistent with the EIP Guidance and therefore, satisfy section 110(l). For a further discussion please see the

followin g rulemaking dockets: EPA

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EPA

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, and EPA

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0012, respectively.

III. Conclusion

The technical analysis provided in the preceding sections has provided an adequate justification

for the inclusion in the Texas SIP of the title V Minor Permit Revision procedures established at

30 TAC Sections 122.215

– 122.218 . These provisions are neces sary so that the SIP

- approved emissions trading programs in 30 TAC Chapter 101 can be fully implemented as intended through Title V. The preceding technical analysis has also demonstrated that the TCEQ has adequate legal authority to implement and enforce the title V Minor Permit Revisions as part of the Texas SIP. Therefore, it is recommended that EPA propose full approval of the October 4, 2001, and August 11, 2003 SIP submittals.

It is recommended that a direct final approval of these sections be publi shed. Direct final approvals are appropriate for non

- controversial rulemakings. EPA feels that the SIP

- approval of the October 4, 2001 and August 11, 2003 SIP Submittals for the title V Minor Permit Revision procedures at 30 TAC 122.215

– 122.218 is non

- controversial because these provisions have already been approved into the Texas Part 70 program and have been in effect and operational since 2001/2003, without any negative impact to attainment or maintenance in Texas.