### Kathleen HartnettWhite, 

### Chairman R. B. "Ralph" Marquez, 

### Commissioner Larry R. Soward, 

### Commissioner Margaret Hoffman,

### ExecutiveDirector .'- /**~-·** 

# TEXAS COMMISSION ON ENVIRONMENTAL QUALITY Protecting Texas by

### ReducingandPreventingPollution



## Docket No. 2003-0699-RUL March 1, 2004

Mr. Richard Greene Regional Administrator U.S. Environmental Protection Agency, Region 6 1445 Ross Avenue Dallas, Texas 75202-2733
Dear Mayor Greene:
On January 28, 2004, the Texas Commission on Environmental Quality adopted amendments to 30 Texas Administrative Code §§ill:

## 770, 116.772, and 116.776. Sections 116.770 and 116.772 are adopted as revisions to the state implementation plan. The adopted rules implement requirements from House Bill638, 78th Legislature, 2003,which allows grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute. Adopted §116.770 adds new subsections (b) and (c), which specify that certain facilities are considered permitted and that the owners and operators ofthose facilities must submit registrations by July 1, 2004. Adopted section 116.772 includes changes to the cross-references in §116.772(a) and (b) to parallel changes made in §116.770.
Enclosed are the proposed revision to the SIP, a public hearing certification, a complete record ofthe public hearing, and the accompanying order. I look forward to your expeditious approval ofthis SIP revision. Sincerely,

# tl11eenH~**(A)~** '

- 

## KHW/js \ (_1 

## Enclosures

cc: The Honorable Rick Perry, Governor ofTexas Ms. Wendy Wyman, Environmental and Natural Resources Policy Director, Office ofthe Governor Ms. Margaret Hoffman, Executive Director, Texas Commission on Environmental Quality

P.O. Box 13087 • Austin, Texas 78711-3087 • 512/239-1000 • Internet address: www.tceq.state.tx.us • •J

... 4

. 

### '

_,.,...

## Mayor Richard Greene Page 2 bee: Mr. Randolph Wood, Deputy Director, Office of Environmental Policy, Analysis, and Assessment Mr. Jim Muse, Director, Policy and Regulations Division Ms. Heather Evans, Strategic Assessment Division Kerri Rowland, Senior Attorney, Environmental Law Division Debra Barber, Project Manager, Policy and Regulations Division Joyce Spencer, Texas Register Coordinator, Policy and Regulations Division

# TEXAS COMMISSION ON ENVIRONMENTAL QUALITY

Docket No. 2003-0699-RUL

THE STATE OFTEXAS
COUNTY OF TRAVIS

This is to certify that the attached are true and correct copies ofdocuments for a revision to the
Texas State Implementation Plan, adopted onJanuary 28, 2004 pursuant to 40 Code ofFederal Regulations (CFR) § 

## 51.104. I am the records administrator for the Policy and Regulations Division of
the Texas Commission on Environmental Quality (Commission).

cords Adminis ator, Policy and Regulations Division exas Commission on Environmental Quality\.."**-~-**

## ~-:) "'J
,,...., 

### Texas Commission on Environmental Quality Public Hearing October 30, 2003 Concerning Revisions to 30 TAC Chapter 116, Control ofAir Pollution by Permits for New Construction or Modification; and the State Implementation Plan Rule Log Number 2003-043-116-AI

### INTRODUCTION

The Texas Commission on Environmental Quality (commission) held a public hearing in Austin on October 30, 2003, to consider revisions to 30 TAC Chapter 116, Control of Air Pollution by Permits for New Construction or Modification, and to the state implementation plan. The adopted rules would eliminate the requirement for certain grandfathered reciprocating internal combustion engines located in the HoustonGalveston nonattainment areato obtain a permitand add a requirementfor registration; change an eligibility requirementforobtaining partial reimbursementofthe costofcontrolsforgrandfathered reciprocating internal combustion engines; make a person or an affiliate of a person who pays or contributes money to the emissions reductions incentives account ineligible to receive money from the account; and alter the criteria for distributing money in the emissions reductions incentives account.

Comments were accepted through November 10, 2003. All testimony and comments have been reviewed and seriously considered. This hearing record contains a complete record of the public hearings and is divided into the following four sections:

o Public Notification and Proposal

o Written and Oral Testimony

o Evaluation ofTestimony

o Staff Recommendations (including order and Texas Register

### publication)

Additional copies ofthis hearing record are maintained in the Texas Commission on Environmental Quality central office at 12100 Park 35 Circle, Austin, Texas 78753. For further information, please contact Clifton Wise at (512) 239-2263.

# PUBLIC NOTIFICATION AND PROPOSAL

### PUBLIC NOTIFICATION

Notification to the public ofthe proposed revisions was conducted bythefollowing procedures:

1. Publication of notice of public hearings in the following newspapers on the date listed:
Austin American Statesman; September 26, 2003 Fort Worth Star-Telegram; September 29, 2003 Houston Chronicle; September 26, 2003

2. Publication ofthe proposed rules in the October 10, 2003 issue ofthe Texas Register

### (28 TexReg 8814).

3. Publication of the Notice of Public Hearings in the October 10, 2003 issue ofthe Texas Register 

### (28 TexReg 8989).

4. Correspondence forwarding the notice of public hearings to the following officials and agencies: Speaker ofthe House
Lieutenant Governor City ofVictoria Planning Department
Dallas Department of Environmental and Health Services Dallas Department ofAviation
El Paso City-County Health and Environmental District
El Paso Metropolitan Planning Organization Federal Highway Administration Fort Worth Environmental Management Department Galveston County Health District

### Houston Department of Health and Human Services
Harris County Pollution Control Department North Central Texas Council of Governments Houston-Galveston Area Council South East Texas Regional Planning Commission
Texas Department ofTransportation Texas Transportation Institute Arkansas Department of Pollution Control and Ecology
Louisiana Department of Environmental Quality
New Mexico Environmental Department Oklahoma Department of Environmental Quality U.S. Environmental Protection Agency

### Example of Newspaper Classified Ad
Austin American-Statesman, 

### September 26, 2003

NOTICE OF PUBLIC HEARING BY

THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY ON PROPOSED REVISIONS TO 30 TAC CHAPTER 116 AND THE STATE IMPLEMENTATION PLAN The Texas Commission on**Envi~** ronmental Quality (commission) will conauct a public hearing to

. receive testimony concerning re- visions to 30 TAC .Chapter 116, Control ot Air Pollution by PermitS for New Construction or Modif1cat1on, Subchapter H, Permits for Grandfathered Facilities, Division 1, General Applicability, Sections 116.770 and 116.772; and Division 2, Small Business Stationary Source Permits, Pipeline Facilities Permits, and Existing Facility Permits, Section 116.776. Sections 116.770 and 116.772 are proposed as revi· sions to the state implementation plan. The proposed rulemaking would eliminate the requirement tor cenalll grandfathered reciprocating internal combustion engines located in the HoustonGalveston nonattainment area to obtain a permit and add a reQUirement for registration; change an eligibility requirement for obtaining partial reimbursement of the cost of controls for grandfathered reciprocatmg internal combustion en- gines: make a person or an affiliate of a person who pays or contributes money to the emis-

,sions reductions incentives ac- count ineligible to receive money from the account; and alter the criteria for distributing money in the emissions reductions incentives account. A public hearing on this proposal will be held in Austin on October 30, 2003 at 2:00 p.m. in Buildinq F, Room 2210 at the commiSsion's tentral office located at 12100 Park 35 Circle. The hearing will be structared for the receipt of oral or written comments by interested per- sons. Individuals may present oral statements when called upon in order of reaistrat•on. There will be no open discussion dunng the hearing: however, an agency staff member will be available to discuss the proposal 30 mmutes prior to the hearinQ and will answer questionsbe;ore and after the heanng. Persons with disabilities who have special communication or other accommodation needs who are planmng to attend the heanng should contact the Office of Environmental Policy, Analysis, and Assessment at (5121 239-4900. Requests should be made as far in advance as possible. Comments may be submitted to Joyce Spencer. MC 205, Office of Environmental Policy, Analysis, and Assessment, Texas Commis- SIOn on Environmental Quality, P.O. Box 13087, Austin. Texas 78711-3087, or by fax to (5121239-4808. All comments 'hould reference Rule log Num- ber 2003-043-116-AI, and must be receiVf'!d by 5:00 p.m.. November 10, 2003. For funher JnformatiOn, olease comact Debra Barber, Policy and Requlatlons Div1sion at (512) 239-6412. 1ssued 1n Austm, Texas. on Sepremoer 24, 2003.TRD-200306432 Paul C. Sarahan Director, Litigation Division Texas Commission on Environmental Quality Filed: September 30, 2003 

# • • Notice ofPublic Hearing on 30 TAC Chapter 114, Control of Air Pollution from MotorVehicles The Texas Commission on Environmental Quality (commission), in coordination with the North Central Texas Council of Governments (NCTCOG), serving as the Metropolitan Planning Organization (MPO) for the Dallas/Fort Worth Metropolitan Area (DFW), proposes to substitute certain transportation control measures (TCMs) contained in the DFW state implementation plan (SIP). As provided by commission rules, the commission and the NCTCOG have initiated a process to approve substitute TCMs for the DFW SIP. Documentation regarding each proposed substitute TCM is available for public review at the commission Web site located at http://www.tnrcc.state.tx.usloprdlsipslindex.html#hotorthe NCTCOG Web site locatedat http://www.dfwcleanair.com/trans/new _rules.html. Documentation may also be obtained from Jaime Walker, Public InvolvementCoordinator,North CentralTexas Council ofGovemments, Transportation Department, Box 5888, Arlington, Texas 76005-5888 orat (817) 695-9247 orby fax at (817) 640-3028. The commission will hold a public hearing on this proposal on October 29, 2003, at 12:00 p.m., in the North Central Texas Council of Governments, TransportationBoardRoom, ThirdFloor, locatedat 616 SixFlagsDrive, Suite 200, Arlington, Texas. The hearing isstructured forthe receipt oforal orwrittencommentsbyinterestedpersons. Registration will begin 30 minutes prior to the hearing. Individuals may presentoralstatementswhencalleduponinorderofregistration. Open discussion willnotoccurduringthehearing; however, commissionand NCTCOG staffmembers will be available to discuss the proposal 30 minutesbeforethe hearing, andwill answer questionsbefore and after the hearing. Persons with disabilities whohave special communication or otheraccommodation needs, who are planning to attend the hearing, should contact JaimeWalker at (817) 695-9247. Requests should be made as far in advance as possible. Commentsmaybe submittedtoMargieMcAllister, TexasCommission on Environmental Quality, Office ofEnvironmental Policy, Analysis, andAssessment, MC 206, P.O. Box 13087, Austin, Texas 78711-3087 or

### fax (512) 239-5687. Commentsmustbereceivedby 5:00p.m., October 29, 2003, and should reference Transportation Control Measure Substitution forthe DFWarea. Forfurther information,please contact Margie McAllister at (512) 239-1967. TRD-200306436 Stephanie Bergeron Director. Environmental Law Division Texas Commission on Environmental Quality Filed: September 30, 2003 

# • • 

# • vfotice ofPublic Hearing on Proposed Revisions to 30 TAC Chapter 116 and the State Implementation Plan The Texas Commission on Environmental Quality (commission) will conduct a public hearing to receive testimony concerning revisions to 30TAC Chapter 116, ControlofAirPollutionbyPermitsforNewConstructionorModification, SubchapterH,PermitsforGrandfatheredFacilities,Division 1, General Applicability, §116.770 and §116.772; and Division2, Small Business StationarySourcePermits, Pipeline FacilitiesPermits, andExistingFacilityPermits, §116.776. Section 116.770 and §116.772 are proposed as revisions to the state implementation plan. Theproposedrulemaking would eliminate therequirement for certain grandfatheredreciprocatinginternal combustion engines locatedinthe Houston-Galveston nonattainment area to obtain a permit and add a requirement for registration; change an eligibilityrequirement for obtainingpartial reimbursement ofthe costofcontrols for grandfathered reciprocatinginternalcombustionengines;makeapersonoranaffiliate ofa personwhopaysorcontributesmoneyto theemissionsreductions incentives account ineligible to receive money from the account; and alterthe criteria for distributingmoney in the emissions reductions incentives account. A publichearing on thisproposal willbeheldinAustinon October30, 2003 at2:00p·.m. inBuildingF, Room 2210 at the commission's central office located at 12100 Park 35 Circle. The hearing will be structuredfor thereceiptoforal orwritten commentsbyinterestedpersons. Individuals maypresentoral statements when calledupon in order of registration. Therewill be no opendiscussion duringthehearing; however, an agency staffmember will be available to discuss the proposal 30 minutes prior to the hearing and will answer questions before and after the hearing. Personswith disabilities who have special communication orotheraccommodationneedswhoareplanningtoattendthehearing shouldcontact the Office ofEnvironmental Policy, Analysis, and Assessment at (512) 239-4900. Requests should be made as far in advance as possible. Commentsmaybesubmittedto Joyce Spencer, MC205, Office ofEnvironmental Policy, Analysis, and Assessment, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087, orbyfax to (512) 239-4808. All comments shouldreferenceRule Log Number2003-043-116-Al, andmustbereceivedby5:00p.m.,November 10, 2003. For further information, please contact Debra Barber, Policy and Regulations Division at (512) 239-0412. TRD-200306367 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Filed: September 26, 2003 

# • • • Notice ofPublic Hearing on Proposed Revisions to 30 TAC Chapter 116

### and the State Implementation Plan The Texas Commission on Environmental Quality (commission) will conduct a public hearing to receive testimony concerning revisions to 30 TAC Chapter 116, Control ofAir Pollution by Permits for New Construction or Modification, SubchapterB,New SourceReview Permits, §116.112, Distance Limitations, and corresponding revisions to the state implementation plan (SIP), under the requirements ofTexas Healthand SafetyCode, §382.ot7;TexasGovernmentCode, SubchapterB, Chapter 2001; and 40 Code ofFederal Regulations, §51.102 of the United States Environmental Protection Agency regulations concerning SIPs. The proposed rulemaking would allow for the storage ofan inoperative concrete crusher within 440 yards ofa residence, school, orplace ofworship; clearly define how distancemeasurements should be taken



## INADDITION October 10,2003 28 TexReg 8989and when they wouldbe applicable for concrete crushers and otherfacilities; and allow concrete crushers to recyclebroken concrete attemporary demolition sites within 440 yards ofnearby structures, unless the facility is located in a county with a population of2.4 million or more, orina county adjacent to such a county. Apublichearingonthisproposal willbeheld inAustinonOctober29, 2003 at2:00p.m. in Building F, Room 2210 atthe commission's central office located at 12100 Park 35 Circle. The hearing will be structured for thereceipt oforal orwritten commentsby interestedpersons. Individuals may present oral statements when called upon in order of registration. Therewillbeno opendiscussion duringthehearing; however, an agency staffmember will be available to discuss the proposal 30 minutes prior to the hearing and will answer questions before and after the hearing. Persons with disabilities who have special communication orotheraccommodationneedswhoareplanningtoattendthehearing shouldcontact the Office ofEnvironmental Policy, Analysis, and Assessment at (512) 239-4900. Requests should bemade as far in advance as possible. Commentsmaybesubmittedto Joyce Spencer,MC 205, Office ofEnvironmental Policy, Analysis, and Assessment, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087, orby

### fax to (512) 239-4808. All comments shouldreference RuleLog Number2003-046-116-AI, andmustbereceivedby5:00p.m., October 29,2003. Forfurther information, please contact Clifton Wise, Policy and RegulationsDivision at (512) 239-2263. TRD-200306368 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Filed: September 26, 2003 

# • 

# • Notice ofWater Quality Applications 

# •

ThefollowingnoticeswereissuedduringtheperiodofAugust25, 2003 through September 29, 2003. Thefollowingrequirethe applicantstopublishnoticeinthenewspaper. The public commentperiod, requests forpublic meetings, orrequests for acontestedcasehearingmaybesubmittedtothe Officeofthe Chief Clerk, Mail Code 105, P 

### 0 Box 13087, Austin Texas 78711-3087, WI1HIN30DAYSOFTHEDATEOFNEWSPAPERPUBLICATION OF THIS NOTICE. AEP TEXAS CENTRAL COMPANY which operates the Laredo Power Station, a steam electric power generation plant, has applied for a renewal of TPDES Permit No. 01200, which authorizes the discharge ofcooling tower blowdown commingled with low volume waste, previouslymonitoredchemical metal cleaning waste, and storm water runoffat a daily average flow not to exceed 1,300,000 gallons per day via Outfall 001. The facility is located adjacent to the Rio Grande, westofthe intersection ofinterstateHighway 35 and Del Mar Boulevard in the City ofLaredo, Webb County, Texas. AEP TEXAS CENTRAL COMPANY which operates the Barney M. DavisPowerStation, asteamelectricgeneratingfacility, hasappliedfor arenewal ofTPDESPermitNo. 01490, whichauthorizes thedischarge ofonce through coolingwaterandpreviouslymonitoredeffluents (low volume wastewater and storm water runofffrom internal Outfall 101 and low volume wastewater, metal cleaning waste, and storm water runofffrom internal Outfall 201) at a daily average flow not to exceed 540,000,000 gallons per day via Outfall 001. The facility is located



## 28 TexReg 8990 October 10, 2003 Texas Register at 4301 Waldron Road, south ofYorktown Boulevard at the base of the Encinal Peninsula, bounded on the east by Laguna Madre and on the westbyOso Creek, in the City ofCorpus Christi, Nueces County, Texas. ANGELINAWATER SUPPLY CORPORATIONhas appliedfor arenewal ofTPDES Permit No. 14128-001, which authorizes the discharge oftreated watertreatment filter backwash waterat adaily averageflownotto exceed 12,500gallonsperday. Thefacilityis locatedon the east side ofFarm-to-Market Road 326, approximately 1-3/4 miles south of U. S. Highway 69 and Community of Homer in Angelina County, Texas. ARIZONA PROPERTIES, INC. has applied for a new permit, proposedTexas PollutantDischargeElimination System (TPDES)Permit No. 14462-001, to authorize the discharge oftreated domestic wastewaterata daily average flow notto exceed46,000gallonsper day. The facility is located approximately4,300 feet south-southwest ofthe intersectionofF arm-to-MarketRoad 1903 and StateHighway34inHunt County, Texas. CITY OF AUSTIN has applied for a new permit to authorize the discharge oftreated domestic wastewater at a daily average flow not to exceed 65,000 gallons per day. The facility is located at 8250 Citation Avenue in the City of Austin, approximately 2,400 feet east ofFarm-to-Market Road 973 and approximately 2,800 feet south of Farm-to-MarketRoad 812 in Travis County, Texas. C & P UTILITIES, INC. has applied for a renewal ofTPDES Permit No. 12342-001, which authorizes the discharge oftreated domestic wastewater at a daily average flow not to exceed 45,000 gallons per day. Thefacility islocatedapproximately 800feet northofZakaRoad, west ofWindfernRoad at the southeastcorner ofMapleLeafGardens in Harris County, Texas. CAVINESS PACKING COMPANY, INC. which operates a slaughterhouse, has applied for a major amendment to Permit No. 01261 to increasethe authorized daily average wastewater flow ofeffluentto be disposedofviairrigationfrom 100,000gallonsperdayto 300,000 gallons per day and to include an additional 310 acre off-site irrigation tract for an increase in the total authorized irrigation tract area from 20 acres to 330 acres. The current permit authorizes the disposal of process wastewater and holding pen runoffat a daily average flow not to exceed I00,000 gallonsper dayviaevaporation and irrigation of20 acres ofgrassland. Thispermit will notauthorize a discharge ofpollutants into waterin the State. The facility andtheprimarylandapplication sitearelocatedadjacentto thenorthwest side ofU.S.Highway60, approximately 1.25 miles southwest ofthe intersection ofU.S. Highway 60 and U.S. Highway 385 and southwest oftheCity ofHereford; the off-sitelandapplication siteis locatedadjacenttothe southeastside ofU.S. Highway 60, approximately 1.5 miles southwest ofthe intersectionofU.S. Highway 60 and U.S. Highway 385 and approximately 0.25 miles southwest ofthe primary facility, and southwestoftheCity ofHereford, DeafSmith County, Texas. CHEVRON PHILLIPS CHEMICAL COMPANY LP which operates a petrochemical and plastics manufacturing plant, has applied for a renewal ofTPDES PermitNo. 00815, which authorizes the discharge of process wastewater, cooling tower blowdown, boiler blowdown, sanitary wastewater and storm water discharge at a daily average dry weather flow not to exceed 4,300,000 gallons per day via Outfall 001; and storm water runoff on an intermittent and flow variable basis via Outfalls 002, 003, and 004. The facility is located at 1400 Jefferson Road, on the south side ofthe Houston Ship Channel and approximately 0.5 miles west ofthe mouth ofGreen's Bayou, Harris County, Texas.

### Robert J. 

### Huston, 

### Chairman R. B. "Ralph" Marquez, 

### Commissioner Kathleen HartnettWhite, 

### Commissioner Margaret Hoffman, 

### ExecutiveDirector 

# TEXAS COMMISSION ON ENVIRONMENTAL QUALITY Protecting Texas by

### Reducing andPreventing Pollution



### NOTICE OF PUBLIC HEARING BYTHE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY

ON PROPOSED REVISIONS TO 30 TAC CHAPTER 116 AND THE STATE IMPLEMENTATION PLAN


## The Texas Commission on Environmental Quality (commission) will conduct a public hearing to receive testimony concerning revisions to 30 TAC Chapter 116, Control ofAir Pollution by Permits for New Construction or Modification, Subchapter H, Permits for Grandfathered Facilities, Division 1, General Applicability, Sections 116.770 and 116.772; and Division 2, Small Business Stationary Source Permits, Pipeline Facilities Permits, and Existing Facility Permits, Section 116.776. Sections 116.770 and 116.772 are proposed as revisions to the state implementation plan.
The proposed rulemaking would eliminate the requirement for certain grandfathered reciprocating internal combustion engines located in the Houston-Galveston nonattainment area to obtain a permit and add a requirement for registration; change aneligibility requirement for obtaining partial reimbursement ofthe cost ofcontrols for grandfathered reciprocating internal combustion engines; make a person or an affiliate ofa person who pays or contributes money to the emissions reductions incentives account ineligible to receive money from the account; and alter the criteria for distributing money in the emissions reductions incentives account.
A public hearing on this proposal will be held in Austin on October 30, 2003 at 2:00p.m. in Building F, Room 2210 at the commission's central office located at 12100 Park 35 Circle. The hearing will be structured for the receipt oforal or written comments by interested persons. Individuals may present oral statements when called upon in order ofregistration. There will be no open discussion during the hearing; however, an agency staffmember will be available to discuss the proposal 30 minutes prior to the hearing and will answer questions before and after the hearing.
Persons with disabilities who have special communication or other accommodation needs who are planning to attend the hearing should contact the Office ofEnvironmental Policy, Analysis, and Assessment at (512) 239- 4900. Requests should be made as far in advance as possible.
Comments may be submitted to Joyce Spencer, MC 205, Office ofEnvironmental Policy, Analysis, and Assessment, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087, or by fax to (512) 239-4808. All comments should reference Rule Log Number 2003-043-116-AI, and must be received by 5:00p.m., November 10, 2003. For further information, please contact Debra Barber, Policy and Regulations Division at (512) 239-0412.
Issued in Austin, Texas, on September 24, 2003.

P.O. Box 13087 ' 

### Austm. Texas 7El7ll<iOS7 " 

### 51:!/239-1000 c Internet address: www.tceq.statc.t:.u'ftBj 

### Ne pemtit shall be issaeEI feF 

### a 

### new cemmereial hamFdeHs waste 

### management faeility tmless 

### the applieant 

### tiemeflstFates that

### thefaeilitywillbeepemted

### saaste

### safegi!IH'EijHihlie

### health afKI welfare 

### and j'lFElteet physiGal propeFty andthe 

### ewrirenment.) f(B3 +he 

### measi!Fement ef 

### distances shall 

### be taken tewaHI 

### an establishedresidenee, elmreh; 

### seheel,6ay

### eareeefttef;

### SI!Ffaee wateF

### beEiyHSedfer

### ajHihlie

### EiriHkiBg wateFSllJlPly; er

### dedicatedpublis 

## Jlllfk that is 

## mliSe when the pemlit 

### llflplioation is fi.leEi with the oommissiefr. +he 

### restrictions impeseEi by 

### Sllbparagmphs 

### W

- tG) 

### efthis 

### paragraph do net apply te 

### a residence, olwrefr,- seheel, day 

### oare ee&- ter, SllFfaee wateF be6y HSed fer 

### a jHihlie drinking watef Sl:lflflly, 

### er a deEiioated jHihlie park leeated withffi the 

### boi!Bdaries 

### efa oemmereial**~o11s**waste**management~**

### erJ*OfleftyOWBedbythepermit 

### llflplioant.] «Fj +he

### meaSI!Fement

### efdistancesshaHbetakenfrem

### a perimeteraFOilBdthe prepesed**h~m~Fdoos**waste

### managementllBit +he 

### perimetershall be

### nemerethan '1-S feetfremthe edge 

### efthepropesed 

### hazardo11s waste 

### management llBit] 

## ill**[~]Concrete** crushingfacilities. A concrete crushing facility mustnotbe [leeated

### er] operatedwithin440yardsofanybuilding inuse [used] asa single ormulti-familyresidence, school, orplace ofworshipatthetimethe applicationfora permitto operatewasmade. 

### [+his

### paragraphdees netapply

### teO*istiBg OOBOFete emshingfaeili:ties, whieh 

### are those faeilities that 

### were al!thorized and**~** leeated 

### er operating at the site 

### as 

### efSeptember-l, 

### ;?.00-1-;] {A} The measurement ofdistances shall be taken from the point on the concrete crushing facility nearest to the residence, school,orplaceofworshiptothepointon the structurehousingtheresidence, school, orplaceofworshipthatis nearesttheconcretecrushing facility. 

### @} Theminimumdistance limitationandmeasurement requirements ofthisparagraphdo not applytoconcretecrushingfacilitiesthatwereauthorizedto operate atthe siteasofSeptember 1, 2001. _{Q Unless the facility is located in, or located in a county adjacentto, a countywith a population of2.4million or more, the minimum distance limitation and measurement requirements of this paragraph do notapplyto facilities operated on a site for no more than 180 consecutive calendar days thatcrush concreteresulting from the demolition ofa structure on that site for use primarily at that site, and which comply with all applicable conditions statedin commission rules, including operating conditions. {f) For applicable distance limitations at hazardous waste management facilities, see §335.205 ofthis title (relating to Prohibition ofPermit Issuance). This agencyherebycertifiesthatthe proposal has been reviewed by legalcounsel and found to bewithin theagency's legal authority to adopt. Filed with the Office ofthe Secretary of State on September 26, 2003. TRD-200306369 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Earliest possible date of adoption: November 9, 2003 For further information, please call: (512) 239-5017 

# • • •

28 TexReg 8814 October 10, 2003 Texas Register 

## JUBCHAPTER H. PERMITS FOR GRANDFATHERED FACILITIES The Texas Commission on Environmental Quality (commission) proposes amendments to §§116.770, 116.772, and 116.776. Sections 116.770 and 116.772 are proposed as revisions to the state implementation plan (SIP) and will be submitted to the United States Environmental Protection Agency (EPA). BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED RULES When the legislature first created the Texas Clean Air Act in 1971, the legislature did not require existing significant sources of air emissions to comply with (i.e., were grandfathered from) the then new requirement to obtain a permit. These existing sources are commonly known as grandfathered facilities. If grandfathered facilities had not been modified since 1971, they continued to be authorized to operate without a permit. The legislature addressed the issue of grandfathered facilities in 1997 and 1999, requiring the creation of: 1) a voluntary emissions reduction plan for the permitting of grandfathered facilities; and 2) directing the commission to implement directives regarding the permitting of grandfathered electric generating facilities. Then, the 77th Legislature, 2001, amended the Texas Health and Safety Code, Texas Clean Air Act, to require that all grandfathered facilities obtain permits. The mandatory permitting requirements of House Bi112912 were the culmination of legislative efforts, beginning in 1997, to permit or otherwise authorize all grandfathered facilities. House Bill 2912 created four newtypes of permitsfor grandfathered facilities: existing facility permits, small business stationary source permits, electric generating facility permits, and pipeline facility permits. House Bill 2912 also mandated the dates by which grandfathered facilities mustapplyfora permitand have controls operational or submit a shutdown notice. Grandfathered reciprocating internal combustion engines that are part of the processing, treating, compression, or pumping facilities connected to, or part of, a gathering or transmission pipeline may apply for a pipeline facilities permit. Additionally, House Bill 2914, §78, created a new incentive programtoassistin retrofitting reciprocating internal combustion engines associated with pipelines. To implementthis incentive program, the commission adopted §116.776, Distribution of Funds from the Emissions Reductions IncentivesAccountfor Control of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region. In order to be eligibleforreimbursementunderthis program,the owneroroperator ofa grandfathered reciprocating internal combustion engine was required to make an annual reduction in emissions of nitrogen oxides (NO,) as compared to the emissions reported forthe facility in the 1997 industrial point source emissions inventory. Most recently, the 78th Legislature, 2003, enacted House Bill 638, relating to emissions reductions incentives and the emissions reductions incentives account. House Bill 638 changes the reimbursement eligibility requirement from a 50% reduction in annual emissions to the 50% reduction in NO emissions rate needed to obtain a pipeline facilities permit. It aiso prohibits the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions incentives account; prohibits persons, or affiliates of persons, who contribute money to the emissions reductions incentives accountfrom receiving moneyfrom thefund; and allows**wandfat~ere?** 

### r":ciprocating internal combustion engines assoCiated w1th pipelines that meet certain criteria to be considered permitted by statute. To implement these revisions to the Texas Clean Air Act the commission is

## prop~sing to amend the rules in Chapter '116, Subchapter H, Perm1ts for Grandfathered Facilities. SECTION BY SECTION DISCUSSION Section 116.770, Requirement to Apply 

### The commission proposes to change the section title from "Re**quireme~tto** 

### Apply''to "Requirementto Applyor Register'' to better spec1fy the purpose ofthe section. Proposed §116.770 adds new subsections (b) and (c), which would specifythat certain facilities are considered permitted and thatthe owners and operators ofthosefacilities must submit registrations. Specifically, proposed §116.770(b) would state that a reciprocating internal combustion engine required to obtain a**pipeli~e** 

### facility permit that is subject to a mass emissions cap established by the commission is considered permitted ifthe fa

### cility is located in an ozone nonattainment area and is in compliance with all state and federal requirements for that area by June 20, 2003. 30 TAC §101.351(a) currently specifies that a mass emissions cap applies to the Houston/Galveston ozone nonattainment area. Proposed §116.770(b) would implement new Texas Health and Safety Code, §382.051860). Proposed**~11~.770(b)(2) waul~**  

### requir_e that the grandfathered reciprocatmg Internal combust1on engmes satisfy any currently applicable state or federal regulations in effect as of June 20 2003 the effective date of House Bill 638, in order to be con;idered'per**m~ed.** 

### In**additio~,** 

### the commission proposes new §116.770(c), wh1ch would reqUJre owners and operators of facilities that are considered permitted under §116.770(b) to submit registrations on orbefore July 1, 2004. The registration requirement is necessary for the executive director to determine whether all facilities that are considered to be permitted meetthe criteria outlined in**Ho~se** 

### Bill 638. The proposed subsections would require registration ratherthan require thosefacilitiesto obtain a permit under Chapter 116, qualifyfor a permit by rule, orshut down. The com**mi~sion** 

### proposesthat registrations be submitted byJuly 1, 2004. Th1s date would allow owners and operators offacilities that are**con~idered** 

### permitted to submit registrations a year afterthe efn:ctlve date of House**~ill.** 

### 638. This date is also approximately s1x months afterthe anticipated adoption date ofthese rules. Section 116. 772, Notice ofShutdown 

### The commission proposes to change the cross-references in §116.772(a) and (b) to parallel changes made in §116.770. Section 116.776, Distribution ofFunds from the Emission Reductions Incentives AccountforControl ofEmissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region. 

### The**~.of!lm!ssi?n** 

### proposes to amend the title of §116.776 from D1stnbut1on of Funds from the Emissions Reductions Incentives Accountfor Control of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region" to "Emissions Reductions Incentives for Control**o~** 

### Emissi?ns from Grandfathered Reciprocating Internal**Co":l~ust1on Engrne~**  

### Located in the East Texas Region." In**a~d1tron,** 

### the commission proposes new §116.776(a) specifymg that incentives will be made available through a grant program administered under §116.776 and 30 TAC Chapter 14 Grants. The commission also proposes new §116.776(b)(6) to specify that, to seek a distribution from the account, the owner or operator must enter a contract with the commission in accordance with a request for grant applications. A request for grant applications is a request for proposals. The section is renumbered accordingly. Also, the commission proposes to amend §116.776(b) to specify that reimbursement is based on eligibility criteria and grant program requirements and proposes to amend §116.776(c) and (d) to use theterm "incentive criteria" ratherthan "criteria for distribution". The proposed amendments would make clear that the commission is implementing the statute through a grant program. The commission proposes amendments to §116.776(b)(1) to specifythat eligibility for reimbursement ofthe cost of controls from the emissions reductions**ince~tives** 

### account would be based on hourly emissions reductions rather than annual emissions reductions. Specifically, proposed §116.776(b)(1) would require owners or operators**o~ gra~d~thered**  

### reciprocating combustion engines associated**~1th** 

### pipelines to reduce hourly NO, emission rates, expressed !n terms of grams per brake horsepower-hour, by at least 50%, rn order to be**eligibl~** 

### for reimbursement. The existing section, proposed as subsectron (b)(1 ) , requires owners or operators to make 50% reduction in the annual emissions of NO as compared to the 1997 Industrial Point Source Emissions Inventory. Proposed §116.776(b)(1) is consistent with Texas Health and Safety Code, §382.051865(a), as amended. The commission proposes0**amend~ent~** 

### to**§116.776(b)(3~** 

### and (8) to specify that a 50

### Yo**redu~1on** 

### 1n NO, may be ach1eved by replacing a grandfathered engme with an engine with a NO emission rate at least 50% lower than the rate ofthe grandfathered engine, and that the engines must obtain authorization under Chapter 116 or 30 TAC Chapter 106. In addition, the commission proposes**~mendments** 

### to**~116-!76(b)(8)** 

### to delete the language specifymg when the reg1strat1on of replacement for an electric engine be submitted. Also, the commission proposes amendments to §116.776(b)(10) to specify that engines with a NO emission rate at least 50% lower than the rate of the grandfathered engine, in addition to electric engines, must be installed and operated and the grandfathered engine be permanently shut down before the executive director can authorize payment from the emissions reductions incentive account. The commission also proposes new §116.776(b)(12), which would specify that a person or an affiliate of a person who pays or contributes to the _emissions reductions incentives account is ineligible to recerve money from the account. This would implement new**~ex~s** 

### Health and Safety Code, §382.051866(e). The commiSSion also proposes to amend §116.776(c) by adding**th~** 

### word "rate" when specifying that the commission may re1mburse costs associated with achieving emissions reductions between 30% and 50% of an engine's hourly NO emissions rate. The proposed amendment to §116.776(c) would be consistent with Texas Health and Safety Code, §382.05165(c), as amended. Lastly, the commission proposes to change the**crit~ria** 

### for distribution_of funds based on the statutory changes outlined by House Bill 638 and meetings with stakeholders held during the summer of 2002. House Bill 638 modifies Texas Health and Safety Code, §382.051865(d), to prohibit the commission from requiring any more stringent reduction criteria than the 50% reduction in grams per brake horsepower-hour for determining the eligibility for an emissions reduction project under the reimbursement program. The commission proposes to eliminate paragraphs (1)

- (3) from existing §116.776(c}, and add a new criterion in §116.776(d)(2) specifying that the executive directorwill put a cap on the amount of reimbursement for each engine, if it determines it is appropriate in order to



## PROPOSED RULES October 10,2003 28 TexReg 8815maximize equitable distribution of the fund. The criteria will be implemented by reimbursing owners and operators of engines for 40% of the cost of controls up to a maximum of $100,000 per engine. This amount of reimbursement was agreed upon by the participants in the stakeholder meetings. The commission anticipates signing contracts for more engines than can be covered by the amount of money appropriated to the agency for this purpose. Therefore, renumbered §116.776(d)(2) will allow the commission to reimburse owners or operators who achieve the reductions earlier and thus provide the most benefit to the air quality in Texas. Based on General Appropriations Act (2003), Article IX, §8.01(d), the unexpended balance in the emissions reductions incentives account at the end of Fiscal Year 2003 is available for distribution in Fiscal Year 2004 and 2005. Therefore, the commission may also issue a subsequent request for grant applications, and/or recalculate the distribution of funds under these grant applications in order to distribute funds between all grantees according tothe criteria specified in the request for grantapplication and contracts issued under it. FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT John Davis, Analystwith Strategic Planning and Appropriations, has determined that for the first five-year period the proposed amendments are in effect, there will be no fiscal implications for the agency or most units of state and local government due to implementation ofthe proposed amendments. The proposed amendmentscould result in an increased numberofunitsofstate and local government that own or operate grandfathered reciprocating internal combustion engines associated with pipelines in the East Texas Region that would be eligible for partial reimbursement of the costs of pollution controls. The commission anticipates there will be some units of government eligible for these reimbursements; however, thetotal number is unknown at thistime. Additionally, certain units ofstate governmentthatown or operate grandfathered reciprocating internal combustion engines associated with pipelines in the Houston/Galveston ozone nonattainmentarea may benefitfrom cost savings by not having to applyfor pipeline facility permits. The State ofTexas began permitting new and modified sources ofairpollutants in 1971. Sources built beforethe permitting rules becameeffectivewere not requiredto obtain permitsforairemissions as long as they were not modified. These sources are known as grandfathered sources. The EastTexas Region includes all counties traversed by oreast of Interstate Highway 35 north of San Antonio or traversed by or east of Interstate Highway 37 south of San Antonio, including Bexar, Bosque, Coryell, Hood, Parker, Somervell, and Wise Counties. All other counties in Texas are considered to be in the West Texas Region. The proposed amendments implement provisions of House Bill 638, 78th Legislature, 2003. House Bill638 changesthe requirement for partial reimbursement of the cost of pollution controls on grandfathered reciprocating internal combustion engines associated with pipelines in the East Texas Region from a 50% reduction in annual NO, emissions to the 50% reduction in the hourly NO, emissions rate, expressed in terms of grams per brake horsepower-hour. To comply with this requirement, owners or operators of affected equipment could make changes to existing equipment, or replace a grandfathered engine with an engine with a NO, emission rate at least 50% lower than the rate ofthe grandfathered engine. The new engines would have



## 28 TexReg 8816 October 10, 2003 Texas Register to obtain authorization under Chapter 116 or Chapter 106 before distribution from the incentives account may be requested. Additionally, the bill eliminated the requirement for the owners or operators of grandfathered reciprocating internal combustion engines located inthe Houston/Galveston nonattainmentareato obtain a permitforthoseengines, ifthe equipmentwas in compliance with state and federal emission control requirements. The proposed amendments are intended to implement these provisions. The commission does not know how many engines will be affected by these provisions. Units ofstate and local governmentthat seek to obtain pipeline facility permits may be eligible for partial reimbursement of the costs of pollution controls required by the permits. The commission anticipates that changing the reimbursement requirements from a specific annual 50% reduction to a 50% reduction in the hourly emission rate will make it easier for more owners or operators ofaffected engines in the EastTexas Region to apply for partial reimbursementofthe costsofpollution control equipment. The commission anticipatesthat more owners and operators will be eligibleto applyfor partial reimbursement becausethe reduction in grams per brake horsepower-hour is more representative ofthe emissions controls added to an engine than a reduction in annual emissions. These engines run intermittently and may not run the same amount oftime from year to year. Consequently, for an engine that ran very little in 1997 but most ofthe time in 2002, one would see little or no reduction in annual emissions even though significantemission controls may havebeen added. Affected facilities in East Texas must submit an application before September 1, 2003, and any controls required bythe permit must be in operation by March 1, 2007. House Bill2914, 77th Legislature, 2001, appropriated $16.2 million to the commission for the retrofitting of internal combustion engines. Under this provision, the commission was authorized to provide funds for competitive grants underthe emissions reductions incentive program. In the Fiscal Year 2002

- 2003 biennium, the agency received $10.8 millionforthis purposeand intendsto obligatethatamount, plus any interest earned as ofAugust 31, 2003, in grant awards. The unexpended balance in the emissions reductions incentives account atthe end of Fiscal Year 2003 would be made available for distribution in Fiscal Years 2004

- 2005. The commission anticipates receivingthe remaining $5.4 million in FiscalYear2004, and intendsto distributethisfunding in Fiscal Years 2004- 2005. The reimbursement to the grant recipients will be processed using a "charge back" method as authorized in Senate Bill 1, 77th Legislature, Article IX, §6.34, and as outlined in 34 TAG §5.56(f), relating to Appropriation Year Determination. The provisions in House Bill 638 that remove the permit requirement for certain affected grandfathered reciprocating internal combustion engines in the Houston/Galveston nonattainment area are anticipated to result in costs savings, which are not anticipated to be significant, to the owner or operators ofthese engines. The commission anticipates that facilities that qualify to be considered permitted under the provisions of House Bill 638 will realize cost savings by not having to go through the permit application process and public notice. The proposed amendments will allow qualifying engines in the Houston/Galveston nonattainment area to register with the commission. No registration fee is anticipated. Previously, an owner or operator of an affected engine would have to apply for a permit and go through public notice. The permit application process costs approximately $10,000, while public notice costs range from$700 to $4,350, depending on the size ofthe city newspaper in which the notice is published. Of note, in orderto qualify to be considered permitted, affected engines must still meet existing state and federal pollution control requirements. PUBLIC BENEFIT AND COSTS Mr. Davis has also determined thatfor each year ofthefirst five years the proposed amendments are in effect, the public benefit anticipated from enforcement of and compliance with the proposed amendmentswill be increased eligibilityforthe partial reimbursement of the cost of controls. However, this benefit may be offset by fewer reductions in NO, emissionsfrom pipeline engines because therewill no longer be a requirement to achieve a 50% reduction in annual emissions of NO,. Additionally, there will be no opportunity for the public to comment on permits for engines located in the Houston/Galveston nonattainment area since they will now be permitted by statute. The proposed amendments, which are intended to implement certain provisions of House Bill 638, are not anticipated to result in additional costsforowners oroperators ofaffected grandfathered reciprocating internal combustion engines associated with pipelines. The commission anticipates that more grandfathered engines inthe EastTexas Regionwill be eligibleto receive partial reimbursement for installed pollution controls. Additionally, the commission anticipates costs savings for those eligible engines in the Houston/Galveston nonattainment area that are eligible to be considered permitted without having to gothrough the permit or public notice process. Details of the eligibility for reimbursement and the potential cost savings can be found in the FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT section ofthis preamble. SMALL BUSINESS AND MICRO-BUSINESS ASSESSMENT There will be no adverse fiscal implications for small and micro-businesses as a result of implementation and enforcement ofthe proposed amendments, which are intended to implement provisions of House Bill 638. There are no known small or micro-businesseswith equipmentthatwould beaffected bythe proposed amendments. However, if there are small or micro-businesses operating equipment affected by the proposed amendments, they would be eligible for the partial reimbursement for pollution controlsand mayexperience costsavings asdiscussed in the FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT section ofthis preamble. LOCAL EMPLOYMENT IMPACT STATEMENT The commission reviewed this proposed rulemaking and determined that a local employment impact statement is not required because the proposed amendments do not adversely affect a local economy in a material way for the first five years that the proposed amended rules are in effect. DRAFT REGULATORY IMPACT ANALYSIS DETERMINATION The commission reviewed the proposed rulemaking in accordance with the regulatory analysis requirements of Texas Government Code, §2001.0225, and determined that the rulemaking does not meet the definition of a major environmental rule. A "major environmental rule" means a rule, the specific intent ofwhich is to protectthe environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, productivity, competition, jobs, the environment, orthe public health and safety ofthe state or a sector ofthe state. The proposed rulemaking implements requirements from House Bi11638, 78th Legislature, 2003, which prohibits the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in orderto receive money from the emissions reductions incentives account; prohibits persons, or affiliates of persons, who contribute money to the emissions reductions incentives account from receiving money from the fund; and allows grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute. The proposed rules would allow more grandfathered reciprocating internal combustion engines associated with pipelines to be eligible for reimbursement from the emissions reductions incentives account. The proposed rules are not anticipated to have adverse effects on theeconomy, productivity, competition, jobs, theenvironment, or the public health and safety of the state or a sector of the state, since the proposed rules allow more engines to be eligible for reimbursement. Similarly, the requirements of the proposed rules are expected to result in little or no impacts on the economy, productivity, competition, jobs, the environment, orthe public health and safety ofthe state or a sector ofthe state. All grandfathered reciprocating internal combustion engines associated with pipelines affected bythe proposed rules are already required 

### to meet control requirements specified by House Bill 2912. Additionally, the analysis required by Texas Government Code, §2001.0225(c), does not apply because the proposed rules do not meetany ofthefourapplicability requirements of a majorenvironmental rule. The proposed rules do not exceed a standard set by federal law, exceed an express requirement of state law, exceed a requirement ofa delegation agreement, oradopta rule solely under the general powers of the agency. The proposed rules do not exceed the requirements of the Federal Clean Air Act orthe Texas Clean Air Act. Additionally, the proposed rules do not exceed a requirement of a delegation agreement, since there is no agreement that is applicable to this rulemaking, and are notproposed solely underthe general powers ofthe agency. The commission invites public comment regarding the draft regulatory impactanalysisdetermination duringthe public comment period. TAKINGS IMPACT ASSESSMENT The commission evaluated the proposed rules and performed an analysis of whether the proposed rules are subject to Texas Government Code, Chapter2007. The purpose ofthe proposed rules is to fulfill the commission's obligation to implement House Bi11638, 78th Legislature, 2003. The proposed ruleswill advance this purpose by prohibiting the commission from requiring more stringentemissions reduction criteriathan the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions incentives account; prohibiting persons, or affiliates of persons, who contribute money to the emissions reductions incentives account from receiving money from the fund; and allowing grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute. The proposed rules will not burden private real property. The ability of an owner or operatorto claim a reimbursement or be considered permitted by statute will not affect private property in a manner which restricts or limits an owner's righttothe propertythatwould otherwise exist in the absence of governmental action. Consequently, the proposed rules do not meetthe definition of ataking under Texas Government Code, §2007.002(5).



## PROPOSEDRULES October 10, 2003 28 TexReg 8817CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM The commission reviewed the proposed rulemaking and found the proposal is a rulemaking identified in the Coastal Coordination Act Implementation Rules, 31 TAC §505.11(b)(2), relating to rules subject to the Coastal Management Program, and will, therefore, require that goals and policies of the Texas Coastal Management Program be considered during the rulemaking process. The commission reviewed this action for consistency and has determined that the proposed rules do not impact any Texas Coastal Management Program goals or policies. The prohibition against requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions incentives account; the prohibition against persons, or affiliates of persons, who contribute money to the emissions reductions incentives account from receiving money from the fund; and allowing grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute will not change any otherwise applicable requirement associated with controls of the affected engines. Written comments on the consistency ofthis rulemaking may be submitted tothe contact person atthe address listed underthe SUBMITTAL OF COMMENTS section of this preamble. EFFECTON SITES SUBJECTTO THE FEDERALOPERATING PERMITS PROGRAM This proposal has no impact on owners and operators of sites subject to the operating permit program unless they also own or operate grandfathered reciprocating internal combustion engines associated with pipelines. Ifso, the owners and operators of sites subject to the operating permit program will be required to revisetheir permits orpermit applications. 30TAC §122.10(2) specifies that all of the requirements of Chapter 116 are applicable requirements. Therefore, owners and operators of grandfathered reciprocating internal combustion engines associated with pipelines will be required to revise the operating permitto reflect that the facilities are considered permitted, rather than grandfathered. ANNOUNCEMENT OF HEARING The commission will hold a public hearing on this proposal in Austin on October 30, 2003 at 2:00 p.m. in Building F, Room 2210, at the commission's central office located at 12100 Park 35 Circle. The hearing is structured forthe receipt of oral orwritten comments by interested persons. Registration will begin 30 minutes priorto the hearing. Individuals may present oral statements when called upon in order of registration. Open discussion will notoccur duringthe hearing; however, commission staff memberswill be availableto discussthe proposal30 minutes before the hearing, and will answer questions before and after the hearing. Persons with disabilities who have special communication or other accommodation needs, who are planning to attend the hearing, should contact the Office of Environmental Policy, Analysis, and Assessment at (512) 239-4900. Requests should be made as far in advance as possible. SUBMITTAL OF COMMENTS Comments may be submitted to Joyce Spencer, Office of Environmental Policy, Analysis, and Assessment, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to (512) 239-



## 28 TexReg 8818 October 10, 2003 Texas Register 4808. Comments must be received by 5:00p.m., November 10, 2003, and should reference Rule Log Number2003-043-116-AI. Forfurther information, please contact Debra Barber, Policy and Regulations Division at (512) 239-0412. 

## DIVISION 1. 

## GENERAL APPLICABILITY 30 TAC §116.770, §116.772 STATUTORY AUTHORITY The amendments are proposed under Texas Health and Safety Code, Texas Clean AirAct, §382.011, which authorizes the commission to administer the requirements of the Texas Clean Air Act; §382.012, which provides for the commission the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes ofthe Texas Clean Air Act; §382.051, which authorizes the commission to issue a permit for numerous similar sources; §382.0518, which authorizes the commission to issue permits for construction of new facilities or modifications ofexisting facilities; §382.05181, which requires grandfathered facilities to apply for a permitand comply with its conditions by certain dates, and requires certain actions ofthe commission; §382.05186, which requires pipeline facilities permits; §382.051865, which requires a reimbursement program forcertain emissions reductionsfrom reciprocating internal combustion engines associated with pipelines; §382.051866, which requires an emissions reductions incentives account; and Texas Water Code, §5.103, which authorizes the commission to adopt rules. The proposed amendments implementTexas Health and Safety Code, Texas Clean Air Act, §382.002, concerning Policy and Purpose; §382.011, concerning General Powers and Duties; §382.012, concerning State Air Control Plan; §382.017, concerning Rules; §382.051, concerning Permitting Authority of Board; Rules; and §382.0518, concerning Preconstruction Permit; §382.05181, concerning Permit Required; §382.05186, concerning Pipeline Facilities Permits; §382.051865, concerning Reimbursement Program for Certain Emissions Reductions from Reciprocating Internal Combustion Engines Associated with Pipelines; §382.051866, concerning Emissions Reductions Incentives Account; and Texas Water Code, §5.103, concerning Rules. §116.770. Requirementto Apply orRegister.**~** The owneroroperatorofa grandfatheredfacility mustapply for a permit to operate that facility under this chapter, qualify for apermit byrule underChapter I06 ofthis title (relating to Permits by Rule), or submit a notice of shutdown before September I, 2003 for facilities locatedintheEastTexasregionas definedin§I01.330 ofthis title (relating to Definitions), and before September I, 2004 for facilities locatedinthe WestTexasregion asdefinedin§I01.330 ofthistitle or El Paso County. {Q1 A reciprocating internal combustion engine that is subject to the requirement to obtain a pipeline facilities permit and to a mass emissionscap as establishedbycommissionrule is consideredpermitted with respect to all aircontaminants ifthe facility is: 

## ill located in an area designated as a nonattainment area for an ozone national ambient air quality standard; and 

# ru achievingcompliancewithall stateandfederal requirements designated for that area by June 20, 2003. if) The owneroroperator ofa reciprocatinginternal combustion engine that is considered permitted under subsection (b) ofthis sectionmust submit a registration to the commission on orbeforeJulyI, 2004, which must includeFormPI-IG, Grandfathered Facility Permit Application. §116.772. Notice of Shutdown. (a) The owner or operator of a grandfathered facility who chooses to shut the facility down rather than obtain a permit under this chapter or qualify for a permit by rule under Chapter I06 ofthis title (relating to Permits by Rule), shall notify the executive director in writing by completingForm PI- 1GSD, Notice ofShutdown, prior to the deadlines specified in §116.770{10 or §116.774 of this title (relating to Requirementto Apply; and Eligibility for Small Business Stationary Source Permits). The owneroroperator ofa grandfathered facility who submits a Form PI- 1 GSD, Notice ofShutdown, priorto the deadlines specified in §116.770{10 or §116.774 ofthis title shall cease emitting air contaminants by: (1)- (2) (No change.) (b) · Theowneroroperatorofa grandfathered facility who applies for a permit prior to the deadlines specified in §116.770{10 or §116.774 ofthis title, butpriortopermitissuance, decides to shut the facility downmust submita FormPI-IGSD,NoticeofShutdown,prior towithdrawalofthepermitapplicationandmustceaseemittingaircontaminantsbythedate specifiedinsubsection(a)(l)or(2)ofthis section. (c)- (d) (No change.) Thisagencyhereby certifiesthattheproposal has been reviewed by legalcounsel and found tobewithintheagency's legal authority to adopt. Filed with the Office ofthe Secretary of State on September 26, 2003. TRD-200306365 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Earliest possible date ofadoption: November 9, 2003 For further information, please call: (512) 239-5017 

# • 

# • 

# • DIVISION2. SMALLBUSINESS STATIONARY SOURCE PERMITS, PIPELINE FACILITIES PERMITS, AND EXISTING FACILITY PERMITS 30 TAC §116.776 STATUTORY AUTHORITY The amendment is proposed under Texas Health and Safety Code, Texas Clean AirAct, §382.011, which authorizesthe commission to administer the requirements of the Texas Clean Air Act; §382.012, which provides for the commission the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes of the Texas Clean Air Act; §382.051, which authorizes the commission to issue a permit for numerous similar sources; §382.0518, which authorizes the commission to issue permits for construction of new facilities or modifications of existing facilities; §382.05181, which requires grandfathered facilities to applyfor a permit and comply with its conditions by certain dates, and requires certain actions ofthe commission; §382.05186, which requires pipeline facilities permits; §382.051865, which requires a reimbursement program forcertain emissions reductions from reciprocating internal combustion engines associated with pipelines; §382.051866, which requires an emissions reductions incentives account; and Texas Water Code, §5.103, which authorizes the commission to adopt rules. The proposed amendment implements Texas Health and Safety Code, Texas Clean Air Act, §382.002, concerning Policy and Purpose; §382.011, concerning General Powers and Duties; §382.012, concerning State Air Control Plan; §382.017, concerning Rules; §382.051, concerning Permitting Authority of Board; Rules; and §382.0518, concerning Preconstruction Permit; §382.05181, concerning Permit Required; §382.05186, concerning Pipeline Facilities Permits; §382.051865, concerning Reimbursement Program for Certain Emissions Reductions from Reciprocating Internal Combustion Engines Associated with Pipelines; §382.051866, concerning Emissions Reductions Incentives Account; and TWC, §5.103, concerning Rules. §116. 776. [Distrihlllien efF-tmdsfomtlhe]EmissionsReductionsIncentives {Aeeeunljfor Control of Emissionsfrom GrandfatheredReciprocating Internal Combustion Engines Located in the East Texas Region.**~}** Emissions reductions incentives will be made available to eligible facilities through a grantprogramadministeredunderthis section and Chapter 14 ofthis title (relating to Grants). {hl 

### (WJ Eligible facilities. Owners or operators ofgrandfatheredreciprocatinginternal combustionengines are eligible for reimbursement ofa portion ofthe cost ofcontrols from the emissions reductionsincentiveaccount [EmissiensR-eEIRetiens IneentivesAc-eetnlt] based on the following eligibility criteria and grant program requirements. (1) The owner or operator ofgrandfathered reciprocating internal combustion engine or engines associated withpipelines must reducethe hourlyemissionsrate ofnitrogen oxides (NO.),expressedin termsofgramsperbrak:ehorsepower-hour,byatleast50%: [make ffil aetllitlW%reduetien

### inthellfllRllll emissiensefnitrogen

# maees (NG,j as eemparedtetheemissiens rep6ftedfromthe grandfatheredreeipreeatingintemal eemlrustien engine 6feflgines 

### intfte .J.991lBdlfstrial Peifl.t SooreeEmissiens lBventery.] (2) The grandfathered reciprocating internal combustion engine orengines mustbe located in the East Texas region as defined in §101.330 ofthis title (relating to Definitions). (3) The owner or operator must apply for and receive a pipeline facilities permitorreplacethe grandfatheredreciprocating internal combustionenginewithanenginewithaNO,emissionratewhich isatleast50%lowerthantheemissionrateof thegrandfatheredengineor an electric engine

.. (4) Theprojectto control emissionsmust beinitiatedon or before September 1, 2006. (5) Theprojectto control emissionsmustbecompletedbefore March 1, 2007. @ Theowneroroperatorofthegrandfatheredreciprocating internal combustionengineforwhich a distribution from the emissions reductions incentives accountis sought, mustenter a contract with the commission in accordance with a request forproposals (grant applicatiO!lS}UildeTChapter 14ofthistitle. 

### ill [f&)] The owneroroperatorofthe grandfathered reciprocating internal combustion engine for which a distribution from the emissionsreductionsincentivesaccount [Emffisierls Reduetiens lBeenti-ves A-eeetlllt] is sought, mustidentify, atthetime the permit application is filed, the facilities for which reimbursement is requested.



## PROPOSEDRULES October 10,2003 28 TexReg 8819(ID [f71] The owner or operator who elects to replace a grandfathered reciprocating internal combustion engine with an electric engine must submit a Registration ofReplacement of a Grandfathered Reciprocating Internal Combustion Engine with an Electric Engine [befere the 6Wflef er**~r** ean request a distriblit:ion fFem the Emissions Reduetions Incentives Aeeoont]. Theowneroroperator whoelectstoachievethe50%reductioninNO,emissionsratebyreplacingagrandfatheredengineorengineswithnew·combustionenginesmust obtainauthorizationforthenewenginesunderthischapterorChapter106 of

thistitle(relatingtoPermitsbyRule). (2) [(&)] The emissions controls identified in the permit mustbe operating beforethe executive directorcan authorizepayment from the emissionsreductionsincentives account [Emissions Redttetions Incentives Aeeoont]. 

### !.!Q1 [f9j] For grandfathered reciprocating internal combustion engines replaced by electric engines orengineswith a NO emissionratewhich is atleast50%lowerthantheemissionrate of theWandfatheredengine, the replacement [eleetrie] engine must be installed and operating and the grandfathered reciprocating internal combustion engine must be permanently shut down before the executive director can authorize payment from the emissionsreductions incentivesaccount [EmissiensReduetiens Incentives Aeeotmt]. £!.!)**[~]Facilities** requiredbyanyother state orfederal law to make reductions in emissions ofNO, are not eligible for reimbursement. @ A person or an affiliate of a person who pays or contributes money to the emissions reductions incentives account is ineligibletoreceivemoneyfromtheaccount.**~ [~)Limitations**  onreimbursement. Thecommissionmay reimbursethe owneroroperatorofa grandfatheredreciprocatinginternal combustion engineorengines fornomore than the cost associated with achieving emissionsreductions between 30%and 50%ofthe engine's hourly emissions rate ofNO, before the addition of controls. The commissionmay distribute less than theamountcalculatedin this mannerbased onthe amountofmoney contributedto the fund andthe incentive criteria for distribution outlinedin**subsection@[~)** ofthis section. @**[~]Incentive**criteria[Gri-tefl.aferdistribmion]. Thecommission will distribute any money in the fund based on the following incentive criteria: 

### ffB wftetheFthefaeiflty is 

### leeated inanattainmentareafur oame OF a neaFHOHattainment areafer ozenet]**~** thepercentageofreductioninthe heufly emissionsof NG, en a gramsperbrake llorsepeweF-hourbasis achieved;] ff3-1 the cost effectiveness ofthe eentrels aellieve6 basetl en the tens ofemissions aetl!ally reduced per dellaroftheeest ofthe centro! method;- and] 

### ill**[~)when** thereductions are actually achieved;and[.] 

## ill ifthe executive director determines that a cap is appropriateinordertomaximizeequitabledistributionofthefund,acaponthe amounttobereimbursedforeachengine.**~** [fdj] Verification ofemissions reductions. Priorto reimbursementfrom theemissionsreductionsincentivesaccount [Emissions Reeootiens Ineentives Ac-eeunt], the owneror operator ofeach grandfathered reciprocating internal combustion engine must provide documentationverifYingthe amountofactualemissionreductionsachieved.



## 28 TexReg 8820 October 10, 2003 Texas Register This agencyherebycertifiesthatthe proposal has been reviewed by legalcounsel andfound to bewithin the agency's legal authority to adopt. Filed with the Office ofthe Secretary of State on September 26, 2003. TRD-200306366 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Earliest possible date of adoption: November 9, 2003 Forfurther information, please call: (512) 239-5017 

# • 

# • 

# • TITLE 34. 

## PUBLIC FINANCE 

# PART 1. 

# COMPTROLLER OF PUBLIC ACCOUNTS CHAPTER 9. PROPERTY TAX ADMINISTRATION SUBCHAPTER A. PRACTICE AND PROCEDURE 34 TAC §9.107 The Comptroller of Public Accounts proposes amended rule §9.107, concerning appraised value limitation and tax credit for certain qualified property. The amendment is proposed to amend model application forms referenced in subsection (c)(1) to remove request for information that is confidential by the Public Information Act and to correcttypographical errors on the application forms: Application For Appraised Value Limitation On Qualified Property (Form 50- 296); and Application For Tax Credit On Qualified Property (Form 50-300). James LeBas, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government. Mr. LeBas also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing additional information to taxpayers regarding state and local tax laws. The proposed amendment would have no significantfiscal impact on small businesses. Comments on the proposal may be submitted to Buddy Breivogel, Manager, Property Tax Division, P.O. Box 13528, Austin, Texas 78711-3528. This amendment is proposed under Tax Code, §313.031(a), which requires the comptroller to adopt rules and forms necessaryfor the implementation and administration ofthe provisions of Tax Code, Chapter 313. The amendment implements Tax Code, Chapter 313. §9.107. Appraised Value LimitationandTax Credit for Certain QualifiedProperty. (a) Appraised value limitation applicant restriction. Corporations and limited liability companies that are subject to franchise tax underTaxCode, §171.00I,mayapplytothe governingbodyofa school

# WRITTEN AND ORAL TESTIMONY

### Reference Number
W-1
W-2 INDEX OF WRITTEN TESTIMONY

Submitted by
Brandt Mannchen, Houston Sierra Club Guy Donaldson, United States Environmental Protection Agency

# HoustonRegional Group P. 0. Box 3021 Houston, Texas**77253-~21** ' > 

# SIERRA

CLUB

FOUNDED 1892

### ~7:13-895-9$09 

## http:/

# /texas.sierraclu~~hou~n/ 

# ffi

Pt. 

### rTI**=~··~** N**:~)** 

## October 16, 2003 Ms. Joyce Spencer Office Environmental Policy, Analysis, and Assessment MC205 Texas Commission on Environmental Quality P.O. Box 13087 Austin, Texas 78711-3087 Dear Ms. Spencer, 0



## Enclosed are the comments of the Houston Sierra Club (HSC) regarding the proposed amendments to 30 TAC Chapter 116.112 and 116.770, 116.772, and 116.776. The HSC understands that the Texas Commission on Environmental Quality (TCEQ) has developed rules on the measurement of distances to structures that are in use at the time of the permit application because the Texas Legislature passed a bill requiring this change. However, the HSC goes on record as opposing this change in the law and change in the rules that implementthat law. The State ofTexas has no zoning and land use planning rules. Because of this one ofthe few rules that can be used to prevent air pollution nuisance conditions is the distance limitation for some air authorizations. The impact ofthe change in state law and proposed change rules is to ensure that additional air pollution nuisance conditions will occur. The company that gets its permit approved and meets the distance requirements at that time will be provided no more certainty of operation within the air pollution rules and laws because if a sufficient distance is not kept a nuisance condition is likely to occur as residential or other development occurs around the company's property. At least in the previous form, 30 TAC Chapter 116.112 provided a buffer that probably would have reduced or eliminate the possibility of nuisance air pollution conditions under certain circumstances. The HSC also opposes exempting from the distance limitation concrete crushing facilities located on a site for 180 consecutive days due to the demolition of a structure on that site; which use crushed concrete primarily on-site; and which comply with applicable conditions stated in commission rules, including operating conditions, unless the facility is located in, or adjacent to, a county with a population of 2.4 million or more. The fact that the TCEQ does not mandate, as

"Whenwetrytopickoutanything

## byitself, we fmdithitchedtoeverything else 

## intheuniverse."

## John MiJir

Printedon 100% Kenaftreefree paper

## a condition of operation, in 30 TAC Chapter 116.112(b)(2)(C), that the facility not create an air pollution nuisance is troubling. Regarding the new permits that the State Legislature has required TCEQ to create for grandfathered facilities, under 30 TAC Chapter 116.770(b)(2), how can TCEQ consider a reciprocating internal combustion engine for a pipeline facility permitted when there is no documentation to demonstrate that the source is achieving compliance with all state and federal requirements? All TCEQ does is require that such compliance be achieved. There should be a requirement for a site visit by TCEQ or a local air quality agency to ensure that the facility is indeed in compliance before a permit is given to the facility. The HSC opposes any permit program that TCEQ has, regardless of the direction of the State Legislature, that does not require appropriate new source review or a similar permitting program to ensure that all permitted sources do emit the lowest amount of air pollution possible, within the cost and technological constraints of best available control technology.

Sincerely, Brandt Mannchen Chair, Air Quality Committee Houston Sierra Club 5431 Carew Houston, Texas 77096 H713-S64-5962, W713-640-4313 Thank you.

## 11/10/2003 MON 17:33 ¥AX**~146657~6J U~~~A**  

### KD**MULll~UlA** "'1:1

........../

---



## UNITED STATES ENVIRONMENTAL PROTECTION AGENCY REGIONS



## Ms. Joyce Spencer Office ofEnvironmentalPolicy,

Analysis and Assessment (MC 205) 1445 ROSS AVENUE, SUITE 1200 DALLAS, TX75202·2733



# NOV 10 

# 2003

Texas Commission onEnvironmental Quality P.O. Box 

## 13087 Austin, TX 78711-3087
RE· ProposedRevisions to 30 TexasAdministrative Code (TAC) Chapter 116 and the State Implementation

# Plan(SIP)RuleLogNumber: 2003-043-116-AI
DearMs. 

## Spencer: Thankyou forthe opportunityto comment onthe proposed changesto 30 TAC 

# 8

Chapter 

# 116

- Control of

# AirPollution by

## Permitsfor

# New Construction orModification. In

## this action, 

# the Texas Commission onEnvironmental Quality (TCEQ) 

## proposesto

# make several revisions to Sections 116.770, 116.772 and 116.776 

## in Subchapter H- 

## Permitsfor 

## Grandfathered Facilities. The TCEQ plansto submit only Sections 116.770 and 116.772to theEnvironmental Protection Agency as revisions tothe SIP.
Based 

## on ourreview ofthe proposedregulations, we 

## have thefollowing comments. We 

## believethatincorporation ofthese comments will clarify and strengthenthese regulations.
1. 

## Chapter 116

- Control ofAir

## Pollution 

## byPermits 

## for New ConstructionorModification If

## an emissions increase occurs as theresult ofmodifying one ormore grandfa.theredreciprocating internal combustion engines, andthese increases trigger any 

## Federalrequirements, 

## how will the Stateinsurethat the 

## appropriate permitis 

## appliedfor?
2. 

## Section 116.770-Requirementto Apply orRegister The submittal 

## does not document how an owner

## or operator ofa 

## grandfatheredfacility 

## must demonstrate initial, and ongoing, compliance with all 

## current applicable State 

## andFederal. requirements for

## theHouston-Galveston ozone nonattainment area as ofJune 20, 2003. Please documentmethods ofcompliance.

lntemet Address (URL)

- htto://www.epa.gov/earth1

## ret Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 30% PostcOnsumer)

## 11/10/2003 MON 17:33 FAX 2146657263 USEPA R6 MULTIMEDIA



## 2 

## Thankyoufor the opportunityto provide comments, and we lookforward to seeing the final rule when it

## is submitted. Ifyouhave any 

## questions, please callMr. 

## RickBarrett at (214) 665-7227.



## cc: 

# Ms. Joyce Spencer 

# Sincerely yours,

# #y}l~ Guy

## Donaldson Acting 

## Chief 

# AirPermits Section

Texas 

# Commission on

# Environmental Quality 141003/003

### INDEX OF ORAL TESTIMONY

Reference Number Submitted by



## No oral testimony was received pertaining to the proposal.

# EVALUATION OF TESTIMONY

# Texas Commission on Environmental Quality INTEROFFICE MEMORANDUM



## To: Commissioners Date: January 9, 2004**---Thru:-----LaBonna-Gastafiuela,.-Ghief-Gler~** 

## -· --**--~----------** 

## -- ---- ---**··-----~~** 

## ------·- ·- Margaret Hoffman, Executive Director
From: 

# /[J

# ~dy Wood, Deputy Director 

# V Office ofEnvironmental Policy, Analysis, and Assessment

Docket No.: 2003-0699-RUL Subject: Commission Approval for Rulemaking Adoption Chapter 116, Control ofAir Pollution by Permits for New Construction or Modification HB 638: Pipeline Facility Reimbursement Rule Project No. 2003-043-116-AI
Reasons for the rule package: Under what authority are we proposing these changes? • Texas Health and Safety Code: • §382.011, which authorizes the commissionto administerthe requirements ofthe Texas Clean Air Act; • §382.012, which provides for the commission the authority to develop a comprehensiveplan for the state's air; • §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes ofthe Texas Clean Air Act; • §382.051, whichauthorizesthecommissionto issueapermitfornumerous similar sources; • §382.0518, which authorizes the commission to issue permits for construction of new facilities or modifications ofexisting facilities; • §382.05181, which requires grandfathered facilities to apply for a permit and comply with its conditions by certain dates, and requires certain actions of the commission; • §382.05186, which requires pipeline facilities permits; • §382.051865, which requires a reimbursement program for certain emissions reductions from reciprocating internal combustion engines associated with pipelines; • §382.051866, which requires an emissions reductions incentives account; and • Texas Water Code, §5.103, which authorizes the commission to adopt rules.
Are theserules requiredbyfederal rule or state statute? Yes. Which ones? These changes are needed to implement House Bill (HB) 638, 78th Legislature, 2003, relating to emissions reductions incentives and the emissions reductions incentives account.
Are thereany legal deadlines by which these rules mustbe proposed, adopted, or effective? Although there are no specific deadlines in HB 638, the changes made by the statute became effective on June 20, 2003. The existing rules are inconsistent with the statute and need to be

## Commissioners Page 2 January 9, 2004
Re: DocketNo. 2003-0699-RUL changed as quickly aspossible. Permitapplications for grandfatheredfacilities located in the East 

# -Texas-region\vefedtiebf"Augusf3

# I;**-20D3~an.cr-granCapplicauons**

## Torllie

# part1arrefrrl6iirsemenr for the cost ofcontrols were due by August 15, 2003. Although these deadlines passed prior to the rules being adopted, the processing and approval ofthe permitapplications is ongoing andno

-money will be paid on any ofthe grant applications until the controls are in place and have been

verified. This activity will all take place during the Fiscal_Year 2004- 2005 biennium.


## Whatissue(s) orprobleui(s) arewe trying to solve? This rulemaking resolves inconsistencies ofcurrent rules with**ne~:**

## statutory requirements 

## in HB 638. 

## Why is it importantthat we do this rule package? Current rules are not consistent with HB 638. HB 638 changed the eligibility criteria for reimbursement; prohibited the commission from requiring more stringent emissions reductions in order to receive money from the emissions reductions incentives account; prohibitedpersons, oraffiliates ofpersons, whocontribute money
-_ -- tothe emissions reductions incentives account from receiving money from the fund; and allowed grandfatheredreciprocatinginternalcombustionengines associatedwithpipelinesthatmeetcertain criteria to be considered permitted by statute.


## How does itimprovetheenvironment? The rules will notnecessarily resultin animprovement to the environment. The statute and rules will most likely result in fewer reductions in nitrogen oxides 

## (NOx) emissions from engines located in the East Texas region since there will no longer be a requirement to achieve a 50% reduction in annual emissions of

## NOx compared to the 1997 inventory in order to be eligible for a partial reimbursement for the cost ofcontrols.


## Otherimportantbackgroundorhistoricalinformation. Whenthe legislature first created the Texas Clean Air Act in 1971, it did not require existing significant sources of air emissions to complywith (i.e., were grandfathered from) the then new requirementto obtain a permit. These existing significant sources are commonly known as grandfathered facilities. Ifa grandfathered facility has notbeenmodified since 1971, itcontinuestobeauthorizedto operatewithoutapermit. The legislature addressed the issue ofgrandfathered facilities in 1997 and 1999 by requiring the creation ofa voluntary emissions reductionplan for the permitting ofgrandfathered facilities and by directing the commission to implement directives regarding the permitting of grandfathered electric generating facilities. Then, the 77th Legislature, 2001, amended the Texas Health and Safety Code, Texas CleanAirAct, to require that all grandfathered facilities obtainpermits. The mandatory permitting requirements of HB 2912 adopted that session were the culmination of legislative efforts, beginning in 1997, to permitorotherwise authorize all grandfathered facilities.
HB 2912 created four new types ofpermits for grandfathered facilities: existing facility permits, small business stationary source permits, electric generating facility permits, and pipeline facility permits. Grandfatheredreciprocating internal combustion enginesthat arepartoftheprocessing, treating, compression, orpumping facilities connected to, orpartof, a gathering or transmission pipeline may apply for a pipeline facility permit. HB 2912 also mandated the dates by which

## Commissioners Page 3 January 9, 2004
Re: DocketNo. 2003-0699-RUL**griJ.!li!fa.tg«?!~d fa.~!li!!~~-!1!!!~!_** **apply_fQF_~ Pt::!'!!!i!_an~_}:l~y~~~l1tr~_(}P~~tiona!** 

## or**~~~~t-~-~~_?_!~()"\Vn**

## __ notice. Additionally, the 77th Legislature enactedHB 2914, §78, which created a new incentiveprogram to assist in retrofitting reciprocating internal combustion engines associated with pipelines. To implementthis incentiveprogram, the commission adopted §116.776, Distribution ofFundsfrom the Emissions Reductions Incentives Account for Control of Emissions from Grandfathered Reciprocating Internal CombustionEngines Located 

## inthe EastTexas Region. Tobe eligible for reimbursementunderthisprogram,theowneroroperatorofagrandfatheredreciprocating internal combustion engine was required to make an actual reduction 

## in emissions ofNOx as comparedto the emissions reported for the facility in the 1997 industrial point source emissions inventory.
The78thLegislatureenactedHB 638, relatingtoemissionsreductionsincentives andtheemissions reductions incentives account. HB 638 changed the reimbursement eligibility requirement from a reduction in annual emissionsto the same 50% reduction in NOx emissionsrateneededto obtain a pipeline facilities permit. It also prohibited the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions incentives account; prohibited persons, or affiliates ofpersons, who contribute money to the emissions reductions incentives account from receiving money from the fund; and allowed grandfathered reciprocating internal combustion engines associated withpipelines thatmeetcertain criteriato be consideredpermitted by statute.
What the rules 

## will do: Projectscope. Amendments tothe rules changethe requirementfor eligibilityfor certainpipeline facilities to obtainpartial reimbursement ofthe costofcontrols and eliminate the requirement for the owners oroperators ofgrandfathered reciprocating internal combustion engines located in the Houston/Galveston nonattainment area to obtain a permit for those engines. Changes requiredby federal rule. None. Changes requiredby state statute. HB 638: 

# •

•
•

• changed the requirement for partial reimbursement of the cost ofcontrols from a 50% reduction in annual NO. emissions to the 50% reduction in NOx emissions rate needed to obtain a pipeline facilities permit; prohibited a person or an affiliate of a person who pays or contributes money to the emissions reductions incentives account from receiving money from the account; prohibited the commission from requiring any more stringent reduction criteria than the 50% reduction in grams per brake horsepower-hour for determining the eligibility for an emissions reduction project under the reimbursement program; and permitted by statute grandfathered reciprocating internal combustion engines- associated with pipelines that meet certain criteria.

## Commissioners Page 4 January 9, 2004
Re: Docket No. 2003-0699-RUL
Staffrecommendations that differ from or fall outside offederal rule or state statute.



# ... •
--- .. ·correctcita:tio1:rs·anacross:.refetences-:-·-·--------

- --·------· -........ .-- -- -····-·-- 

# •



# • Require registration of facilities considered permitted by statute. Due to a lack of information as to which reciprocating internal combustion engines would be affected by the "considered permitted" language in the statute, the rules will require registration to identify these facilities. Inresponse to stakeholder inputpriorto this rulemaking, specify that a 50% reduction in NOx may be achieved by replacing a grandfathered engine with an engine with a NOx emission rate at least 50% lower than the rate of the grandfathered engine and that authorizationmustbeobtained underChapter 116orChapter 106beforedistributionfrom the incentives account may be requested. Impact onthe regulatedcommunity:
Who will 

## be affected? The owners and operators of grandfathered reciprocating internal combustion engines associated with pipelines located in the EastTexas region are the members of the regulated community affected by these changes.
Does it create a group of affected persons who were not affected previously? No. How? Specifying thata50% reductionin NOxmaybe achievedby replacing agrandfatheredengine with an engine with a NOx emission rate at least 50% lower than the rate ofthe grandfathered engine does not create additional regulated entities; rather, the amendments would provide greater flexibility to'"those already affected by allowing an optional method for achieving compliance.
Willtherebea fiscal impact? If

## so, estimate. No fiscal implications are anticipated for industry since the requirement to obtain the 50% reduction in the NOx emissions rate was in place previouslyandisnotanewrequirement. Specifyingthat a50% reductionin NOxmaybe achieved by replacing a grandfathered engine with an engine with a NOx emission rate at least 50% lower than the rate of the grandfathered engine would give owners and operators of grandfathered engines more flexibility to choose the most cost-effective way to achieve the 50% NOx rate reduction. Impact onthe public:
Who will be affected? Residents and businesses located in close proximity to pipeline engines in the East Texas region. Publicbenefits are expected to accrue from increased eligibility for the partial reimbursement of the cost of controls. However, this benefit may be offset by fewer reductions in NOx emissions from pipeline engines because there will no longer be a requirement to achieve a 50% reduction in annual emissions ofNO, compared to the 1997 inventory in order to be eligible for apartial reimbursement for the cost ofcontrols. Additionally, there will be no opportunity for the public to comment on permits for engines located in the Houston/Galveston nonattainment area since they will now be permitted by statute.
Does it create a group ofaffected persons who were not affected previously? No.

## Commissioners Page 5 January 9, 2004
Re: Docket No. 2003-0699-RUL

... _ .....**linJ>ai_~LQil,_j!g~l!cy_prQgr~s_;**

## ___**Th~.Lll_les** 

## '!'ill_aff'ect**!!!.~--Air_ ~~rmits**  

## Qivisio_n.

__**'I'_he_Qn!~_op~!!!~O~~-** 

## __ impacts will be the possible need to process more grant applications. This will be atleastpartially offset by the need to process fewer permit applications in the Houston/Galveston nonattainment area. Stakeholder meetings: No stakeholder meetings were held. Implications:
Whatpolicy issues areaffected? The only policy issue that may be affected is thatthere will be fewer NOxreductions inthe EastTexas region, which may resultin the need for largerreductions from other sources. Are any policies that are not currentlybased onrule being made into a rule? No.
What are the consequences if 

## this rulemaking is not approved to go forward? If this rulemaking is not approved, existing rules and guidance will be in conflict with the statute and reimbursement offunds will notbe distributed in a timely manner.
Aretherealternatives? The only alternative is to allow the existing rules to be inconsistentwith the legislation. Potentiallycontroversialmatters: Potentially controversial issues include fewer NOxreductions in East Texas and the loss of the opportunity for the public to comment on permits for engines in the Houston/Galveston nonattainment area. Both ofthese issues are driven by the statutory changes.
Public comment: Apublic hearing onthis proposal was held October 30, 2003, and the public comment period closed on November 10, 2003. No person presented oral comments at the public hearing. The commission received written comments during the commentperiod from the HoustonRegional Group of the Sierra Club (Sierra Club) and the United States Environmental ProtectionAgency (EPA). SierraClub opposed the rule proposal, while EPA supported the rule proposal, but requested clarification. Significantchanges from proposal: No changes were made to the rules in response to comments. Late comments were received from the Association ofTexas Intrastate Natural Gas Pipelines. The comments addressed the rules and preamble, as well as the request for grant applications. Although no formal responses wereincluded inthe preamble for these late comments, some changes to thepreamble havebeen made. Specifically, the**prea~ble** 

## states that the 50% reduction in NOx rate can be achieved by replacing a reciprocating internal combustion engine with a turbine.
The preamble has been changed to outline the process thatthe commission will use to distribute the funds in the emissionsreductions incentives account. The commissionwill distributeup to $100,000pereligible engine once the owner or operator installs controls and submits the necessary verification to the commission. After verification information has been received for all eligible engines or the final date for submission ofverification information specified in all individual contracts, whichever occurs first, the commission will distribute any funds remaining in the account between all eligible grantees according to the criteria specified in the request for grant application and contracts issued under it.

## Commissioners Page 6 January 9, 2004
Re: Docket No. 2003-0699-RUL Additionally, thepreamble specifiesthatthecommissionwill specify adeadline for the submittal ofproject ···verification in response·ttrthe-comments submttted-by-thei\.ssociation of·Texas-Intrastate·Natural-Gas--

Pipelines. The commenterrequestedthatthepreamble specifythatthe deadline for installation ofcontrols be March 1, 2007. However, the statute specifies the same deadline ofMarch 1, 2007 for two events that mustoccur 

## in sequence: completion ofthe emissionreductionsproject(which wouldrequire the submittal ofproject verification); and a deadline after which the commission may not pay or otherwise provide a financial incentive for such projects. In order to allow for adequate time to process payment requests, individual grant contracts may need to require an earlier date for project completion and submittal of verificationinformation than the March 1, 2007 project completion date. Staffwill decide ona fmal date for submission ofverification information inindividual contracts after additional discussions with internal staff and the Office of the Comptroller of Public Accounts regarding the time needed to process the payments. To provide certainty for early planning purposes, the preamble also states that November 1, 2006 is the earliest date by which the commission will require submittal ofverification information in 

## an individual contract. This will allow staffto process the verifications and enable the commission to meet its statutory deadlines for making payment out ofthe emission reduction incentives account (which will 

## require staffto calculate two distributions from the fund as outlined previously), while still allowing for flexibility through the grant contracts process. 

## Agency contacts: Debra Barber, Rule Project Manager, 239-0412 Tara Capobianco, Program Lead, 239-1117 Terry Salem, StaffAttorney, 239-0469 Diane Mazuca, Intergovernmental Relations Division, 239-3504 Joyce Spencer, Texas Register Coordinator, 239-5017
Attachments

cc: 5 copies to the ChiefClerk for distribution Terri Seales Sonia Ralls David Schanbacher Brian Christian Ashley K. Wadick Dan Eden Derek Seal Randolph Wood JimMuse Office ofGeneral Counsel Debra Barber Joyce Spencer

cc (without attachments): Tara Capobianco, Program Lead/Program Liaison Terry Salem, StaffAttorney Kathy Vail, Regulation Development Team Leader Kerri Rowland, OLS Liaison

### EVALUATION OF TESTIMONY

The Texas Commission on Environmental Quality (commission) adopts amendments to §§116.770, 116.772, and 116.776 

## without changes to the proposed text as published in the October 10, 2003 issue ofthe 

## Texas Register(28 TexReg 8814). Sections 116.770, 116.772,
and 116.776 will not be republished.

Sections 116.770 and 116.772 are adopted as revisions to the state implementation plan (SIP)
and will be submitted to the United States Environmental Protection Agency (EPA).

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FORTHE ADOPTED RULES
When the legislature first created the Texas Clean Air Act in 1971, the legislature did not require existing significant sources of air emissions to comply with (i.e., were grandfathered from) the then new requirement to obtain a permit. These existing sources are commonly
known as grandfathered facilities. If grandfathered facilities had not been modified since 1971, they continued to be authorized to operate without a permit. The legislature addressed the
issue of grandfathered facilities in 1997 and 1999, requiring the creation of: 1) a voluntary emissions reduction plan for the permitting of grandfathered facilities; and 2) directing the
commission to implement directives regarding the permitting of grandfathered electric generating facilities. Then, the 77th Legislature, 2001, amended the Texas Health and Safety Code, Texas Clean Air Act, to require that all grandfathered facilities obtain permits. The mandatory permitting requirements of House Bill 2912 were the culmination of legislative efforts, beginning in 1997, to permit or otherwise authorize all grandfathered facilities. House
Bill 2912 created four new types of permits for grandfathered facilities: existing facility permits, small business stationary source permits, electric generating facility permits, and pipeline facility

-1-

## permits. House Bill 2912 also mandated the dates by which grandfathered facilities must apply for a permit and have controls operational or submit a shutdown notice. Grandfathered reciprocating internal combustion engines that are part ofthe processing, treating, compression, or pumping facilities connected to, or part of, a gathering ortransmission pipeline
may applyfor a pipeline facilities permit.

Additionally, House Bill 2914, §78, created a new incentive program to assist in retrofitting reciprocating internal combustion engines associated with pipelines. To implement this incentive program, the commission adopted §116.776, Distribution of Funds from the Emissions Reductions Incentives Account for Control of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region. In order to be eligible for reimbursement under this program, the owner or operator of a grandfathered reciprocating internal combustion engine was required to make an annual reduction in emissionsof nitrogen oxides 

## (NOx) as compared to the emissions reported for the facility in the 1997 industrial point

source emissions inventory.

Most recently, the 78th Legislature, 2003, enacted House Bill 638, relating to emissions reductions incentives and the emissions reductions incentives account. House Bill 638 changed the reimbursement eligibility requirement from a 50% reduction in annual emissions to the 50% reduction in 

## NOx emissions rate needed to obtain a pipeline facilities permit. It also prohibited the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive moneyfrom the emissions reductions incentives account; prohibited persons, or affiliates of persons, who contribute money to the emissions reductions incentives accountfrom receiving moneyfrom the

-2-

### fund; and allowed grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute. To implement these revisions to the Texas Clean Air Act, the commission adopts amendments
to the rules in Chapter 1t6, Subchapter H, Permits for Grandfathered Facilities.

SECTION BY SECTION DISCUSSION
Section 116. 770, Requirement to Apply 

### The commission adopts an amendment to this section that changes the section title from "Requirement to Apply" to "Requirement to Apply or Register" to better specify the purpose of
the section.

Adopted §116.770 adds new subsections (b) and (c), which specify that certain facilities are considered permitted and that the owners and operators ofthose facilities must submit registrations. Adopted §116.770(b) implements Texas Health and Safety Code, §382.05186(j). Specifically, adopted §116.770(b) states that a reciprocating internal combustion engine required to obtain a pipeline facility permit that is subject to a mass emissions cap established by the commission is considered permitted ifthe facility is located in an ozone nonattainment

area and is in compliance with all state and federal requirements for that area by June 20,
2003. 30 TAG §101.351(a) currently specifies that a mass emissions cap applies to the Houston/Galveston ozone nonattainment area. Adopted §116.770(b)(2) requires that the grandfathered reciprocating internal combustion engines satisfy any currently applicable state

orfederal regulations in effect as ofJune 20, 2003, the effective date of House Bill 638, in order
to be considered permitted. In addition, the commission adopts new §116.770(c), which requires owners and operators offacilities that are considered permitted under §116.770(b) to submit registrations on or before July 1, 2004. The registration requirement is necessary for

-3-

### the executive directorto determine whether all facilities that are considered to be permitted
meet the criteria outlined in House Bill 638. The adopted subsections require registration rather than require those facilities to obtain a permit under Chapter 116, qualifyfor a permit by rule, or shut down. Registrations must be submitted by July 1, 2004. This date allows owners and operators offacilities that are considered permitted to submit registrations one year after the effective date of House Bill 638. This date is also approximately six months after the anticipated adoption date ofthese rules.

Section 116. 772, Notice ofShutdown
The commission adopts a change to the cross-references in §116.772(a) and (b) to parallel changes made in §116.770.

Section 116.776, Distribution ofFunds from the Emission Reductions Incentives Account for Control ofEmissions from GrandfatheredReciprocating Internal Combustion Engines Located
in the East Texas Region. The commission adopts an amendment to the title of §116.776 from "Distribution of Funds from
the Emissions Reductions Incentives Account for Control of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the EastTexas Region" to "Emissions
Reductions Incentives for Control of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region." In addition, the commission adopts

new §116.776(a) specifying that incentives will be made available through a grant program administered under §116.776 and 30 TAC Chapter 14, Grants. The commission also adopts

new §116.776(b)(6) to specify that, to seek a distribution from the account, the owner or operator must enter a contract with the commission in accordance with a request for grant applications. The remaining paragraphs are renumbered accordingly. Also, the commission

-4-

### adopts amendments to §116.776(b) to specify that reimbursement is based on eligibility criteria
and grant program requirements. The commission also adopts amendments to §116.776(c)
and (d) to use the term "incentive criteria" rather than "criteria for distribution." The adopted
amendments make it clear that the commission is implementing the statute through a grant
program. The commission adopts amendments to §116.776(b)(1) to specifythat eligibilityfor
reimbursement ofthe cost of controls from the emissions reductions incentives account is
based on hourly emissions reductions rather than annual emissions reductions. Specifically, §116.776(b)(1) requires owners or operators of grandfathered reciprocating internal combustion engines associated with pipelines to reduce hourly 

## NOx emission rates, expressed in terms of
grams per brake horsepower-hour, by at least 50%, in order to be eligible for reimbursement.
The existing section, adopted as subsection (b)(1), requires owners or operators to make a 50% reduction in the annual emissions of

## NOx as compared to the 1997 Industrial Point Source
Emissions Inventory. Adopted §116.776(b)(1) is consistent with Texas Health and Safety Code, §382.051865(a), as amended. The commission adopts amendments to §116.776(b)(3) to specifythat an owner or operator who opts to achieve the 50% reduction in 

## NOx by replacing a grandfathered engine will also be eligible for reimbursement. The commission adopts
amendments to §116.776(b)(8) to clarify that, if an owner or operator elects to achieve
reductions via replacement of an engine, the owner or operator must obtain authorization under Chapter 116 or 30 TAC Chapter 106. Since turbines may also be considered engines or combustion engines, the replacement of a reciprocating internal combustion engine with a turbine is also eligible for reimbursement. In addition, the commission adopts amendments to §116.776(b)(8) to delete language that specifies when the registration of replacement for an electric engine should be submitted. Also, the commission adopts amendments to §116.776(b)(10) to specify that engines with a 

## NOx emission rate at least 50% lower than the
rate ofthe grandfathered engine, in addition to electric engines, must be installed and operated

-5-

## and the grandfathered engine be permanently shut down before the executive director can authorize payment from the emissions reductions incentive account. The commission also adopts new §116.776(b)(12), which specifies that a person or an affiliate ofa person who pays

or contributes to the emissions reductions incentives account is ineligible to receive moneyfrom the account. This new paragraph implements Texas Health and Safety Code, §382.051866(e).
The commission also adopts an amendment to §116.776(c) by adding the word "rate" when specifying that the commission may reimburse costs associated with achieving emissions
reductions between 30% and 50% of an engine's hourly 

## NOx emissions rate. The adopted amendment to §116.776(c) is consistent with Texas Health and Safety Code, §382.051865(c),

as amended. Lastly, the commission changes the criteria for distribution offunds based on the statutory changes outlined by House Bill 638 and stakeholder meetings held during the summer of2002. House Bill 638 modifies Texas Health and Safety Code, §382.051865(d), to prohibit the commission from requiring any more stringent reduction criteria than the 50% reduction in
grams per brake horsepower-hourfor determining the eligibility for an emissions reduction project under the reimbursement program. The commission eliminates paragraphs (1)

- (3) from existing §116.776(c), and adds a new criterion in §116.776(d)(2) specifying that the executive director will put a cap on the amount of reimbursement for each engine, if it determines it is appropriate in order to maximize equitable distribution ofthe fund. After discussions with participants in the stakeholder meetings, the commission originally decided to implement the criteria by reimbursing owners and operators of engines for 40% ofthe cost of controls up to a maximum of $100,000 per engine. The commission anticipated signing
contracts for more engines than can be covered bythe amount of money appropriated to the
agency for this purpose. However, the number of requests for reimbursement was lowerthan anticipated. Based on General Appropriations Act (2003), Article IX, §8.01(d), the unexpended balance in the emissions reductions incentives account at the end of Fiscal Year 2003 is

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### available for distribution in Fiscal Year 2004 and 2005. Therefore, the commission will
distribute up to $100,000 per eligible engine once the owner or operator installs controls and
submits the necessary verification to the commission. After verification information has been
received for all eligible engines orthe final date for submission ofverification information specified in all individual contracts, whichever occurs first, the commission will distribute any funds remaining in the account between all eligible grantees according to the criteria specified
in the request for grant application and contracts issued under it. If, during the grant review
process, the commission determines that there will not be enough eligible costs to distribute all ofthe funds in the account, the commission may also issue a subsequent request for grant applications. In order to allow for adequate time to process payment requests under either of
these options, the commission concluded that the individual grant contracts will need to reflect earlier project completion dates.

House Bill638 and §116.776(b)(5) requires that the projects to control emissions be completed before March 1, 2007. However, Texas Health and Safety Code, §382.051865(g), also requires
that the commission may not pay or otherwise provide a financial incentive for an emissions
reduction project before the project is complete, and that the commission may not pay or otherwise provide a financial incentive on or after March 1 , 2007. Ifthe commission were to receive project verification information immediately priorto the deadline, there would be no time
to process the request prior to the deadline for payment. In addition, as discussed previously, the commission will distribute the funds in two separate rounds of payments: the first round of
up to $100,000 being paid upon review ofthe verification information supplied bythe grantee; and the second round to equitably distribute anyfunds remaining in the account to those

owners or operators who have eligible costs of over $100,000. In no case will payments from the fund exceed 40% ofthe actual capital cost of controls for an individual engine. In order to

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### address both the completion deadline and the payment deadline equitably, the commission will negotiate deadlines for project completion in the grant contracts. The commission determined that use ofthe contract mechanism will provide necessaryflexibility for individual circumstances, while assuring that project verification information will be received in time to allow for processing priorto the payment deadline. The commission will decide on a final date for submission of verification information in individual contracts after additional discussions with
internal staff and the Office ofthe Comptroller of Public Accounts regarding the time needed to
process the payments. However, in order to provide certainty for early planning purposes, November 1, 2006 is the earliest date bywhich the commission will require submittal of verification information in an individual contract.

FINAL REGULATORY IMPACT ANALYSIS DETERMINATION
The commission reviewed the adopted rulemaking in accordance with the regulatory analysis requirements ofTexas Government Code, §2001.0225, and determined that the rulemaking does not meet the definition ofa major environmental rule. A "major environmental rule" means

a rule, the specific intent ofwhich is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, productivity, competition, jobs, the environment, or the public health and safety ofthe state or a
sector ofthe state. The adopted rulemaking implements requirements from House Bill 638, 78th Legislature, 2003, which prohibits the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive moneyfrom the emissions reductions incentives account; prohibits persons, or affiliates of persons, who contribute moneyto the emissions reductions incentives account from receiving moneyfrom the fund; and allows grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by

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### statute. The adopted rules allow more grandfathered reciprocating internal combustion engines
associated with pipelines to be eligible for reimbursement from the emissions reductions incentives account.

The adopted rules are not anticipated to have adverse effects on the economy, productivity, competition, jobs, the environment, orthe public health and safety ofthe state or a sector ofthe state, since the rules allow more engines to be eligible for reimbursement. Similarly, the requirements ofthe adopted rules are expected to result in little or no impacts on the economy, productivity, competition, jobs, the environment, orthe public health and safety ofthe state or a
sector ofthe state. All grandfathered reciprocating internal combustion engines associated with pipelines affected by the rules are already required to meet control requirements specified by
House Bill 2912.

Additionally, the analysis required by Texas Government Code, §2001.0225(c), does not apply
because the adopted rules do not meet any ofthe four applicability requirements of a major
environmental rule. The adopted rules do not exceed a standard set by federal law, exceed an express requirement of state law, exceed a requirement of a delegation agreement, or adopt a rule solely under the general powers ofthe agency. The adopted rules do not exceed the requirements ofthe Federal Clean Air Act or the Texas Clean Air Act. Additionally, the adopted rules do not exceed a requirement of a delegation agreement, since there is no agreement that is applicable to this rulemaking, and are not adopted solely underthe general powers ofthe
agency.

The commission received no public comments regarding the draft regulatory impact analysis determination during the public comment period.

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### TAKINGS IMPACT ASSESSMENT
The commission evaluated the adopted rules and performed an analysis ofwhetherthe rules

are subject to Texas Government Code, Chapter 2007. The purpose ofthe adopted rules is to fulfill the commission's obligation to implement House Bill 638. The adopted rules advance this
purpose by prohibiting the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions incentives account; prohibiting persons, or affiliates of persons, who contribute moneyto the emissions reductions incentives account from receiving moneyfrom the fund; and allowing grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by
statute. The adopted rules will not burden private real property. The ability of an owner or operator to claim a reimbursement or be considered permitted by statute will not affect private property in a manner which restricts or limits an owner's right to the property that would otherwise exist in the absence of governmental action. Consequently, the adopted rules do not
meetthe definition of a taking underTexas Government Code, §2007.002(5).

CONSISTENCYWITH 

## THE COASTAL MANAGEMENT PROGRAM
The commission reviewed the adopted rulemaking and found it is a rulemaking identified in the Coastal Coordination Act Implementation Rules, 31 TAC §505.11 (b)(2), relating to rules subject
to the Coastal Management Program, and, therefore, required that goals and policies ofthe Texas Coastal Management Program be considered during the rulemaking process. The commission reviewed this action for consistency and determined that the adopted rules do not impact any Texas Coastal Management Program goals or policies. The prohibition against requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions

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## incentives account; the prohibition against persons, or affiliates of persons, who contribute
moneyto the emissions reductions incentives account from receiving moneyfrom the fund; and allowing grandfathered reciprocating internal combustion engines associated with pipelines that
meet certain criteria to be considered permitted by statute will not change any otherwise applicable requirement associated with controls ofthe affected engines. No comments on the consistency ofthis rulemaking were submitted during the comment period.

EFFECT ON SITES SUBJECT TO THE FEDERAL OPERATING PERMITS PROGRAM
This adoption has no impact on owners and operators of sites subject to the operating permit
program unless they also own or operate grandfathered reciprocating internal combustion engines associated with pipelines. Ifso, the owners and operators of sites subject to the operating permit program will be required to revise their permits or permit applications. 30 TAC §122.10(2) specifies that all ofthe requirements of Chapter 116 are applicable requirements. Therefore, owners and operators of grandfathered reciprocating internal combustion engines associated with pipelines will be required to revise the operating permit to reflect that the facilities are considered permitted, rather than grandfathered.

PUBLIC COMMENT
A public hearing on this proposal was held October 30, 2003, and the public comment period closed on November 10, 2003. No oral comments were received at the public hearing. The commission received written comments on the rule proposal from the Houston Regional Group ofthe Sierra Club (Sierra Club) and the EPA. Sierra Club opposed the rule proposal, while EPA supported the rule proposal, but requested clarification.

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## RESPONSE TO COMMENTS Sierra Club commented that it opposes any permit program that the commission has, regardless ofthe direction ofthe state legislature, that does not require appropriate new source review or a similar permitting program to ensure that all permitted sources do emit the lowest
amount ofair pollution possible, within the cost and technological constraints of best available control technology.



## The commission made no change in response to this comment. The commission is adopting rule changes directly implementing the statutory changes specified in House
Bill 638. Section 116.770(b) specifies that reciprocating internal combustion engines subjectto a mass emissions cap, located in an ozone nonattainment area, and achieving compliance with all state and federal requirements will be considered permitted. Although a specific facility authorized under§116.770(b) will not be required to get a permit, itwill be required to registerwith the commission in orderto be considered permitted. Registered facilities will also be required to make emission reductions under
the Mass Cap and Trade Program or obtain allowances. Each facility may not specifically be required to emitthe lowest amount ofair pollution possible, but, as a whole, facilities that are subjectto the Mass Cap and Trade Program will be required to make emission reductions. As noted, these facilities were previously "grandfathered" from the requirementto meet preconstruction permitting requirements when the Texas Clean AirActwas first created in 1971. The legislature determined in House Bill 638 that
itwould be appropriate forthese facilities to meet different permitting requirements.

The EPA asked how the state will ensure that the appropriate permit application is submitted if

an emissions increase occurs as the result of modifying one or more grandfathered

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### reciprocating internal combustion engines, and ifthe increases trigger anyfederal requirements.



## The commission made no change in response to this comment. The commission is adopting amendments to the permit requirements for grandfathered facilities in §§116.770, 116.772, and 116.776. These sections ofthe commission rules do not authorize emission increases. Rather, these sections establish the requirement to register a facility that is considered permitted and the requirementto obtain a permitfor

a grandfathered facility. The validity ofany registration issued forfacilities eligible
under House Bill 638 to be "considered permitted" is dependent upon the information
submitted bythe facility. Ifthat information is determined to be incorrect, the registration would be invalid.

The EPA commented that the proposed rules do not document how an owner or operator of a grandfathered facility must demonstrate initial and ongoing compliance with all current applicable state and federal requirements for the Houston/Galveston ozone nonattainment area

as ofJune 20, 2003, and requested that the methods of compliance be documented. Sierra Club also asked how the commission can consider a reciprocating internal combustion engine for a pipeline facility permitted when there is no documentation to demonstrate that the source is achieving compliance with all state and federal requirements. Sierra Club further commented
that all the commission requires is that compliance be achieved, and that there should be a requirement for a site visit by the commission or a local air pollution control agency to ensure that the facility is in compliance before a permit is issued to the facility.

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## The commission made no change in response to these comments. Facilities eligible to
be "considered permitted" under §116.770(b) are subjectto the Mass Cap and Trade Program, which requires an annual determination regarding the status ofemission
allowances forthose facilities. This will provide a mechanism for determining compliance with the emission limitations that apply to these facilities. The commission
does notagree that a sitevisit is necessaryto determine compliance, since the Mass Cap and Trade Program is a SIP-approved program that is already subject to other compliance reviews.

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# STAFF RECOMMENDATIONS

### CHAPTER 16: CONTROL OF AIR POLLUTION BY PERMITS
FOR NEW CONSTRUCTION OR MODIFICATION
SUBCHAPTER H: PERMITS FOR GRANDFATHERED FACILITIES
DIVISION 1: GENERAL APPLICABILITY §116.770, §116.772 

### STATUTORYAUTHORITY
The amendments are adopted under Texas Health and Safety Code, Texas Clean Air Act, §382.011, which authorizes the commission to administerthe requirements ofthe Texas Clean
Air Act; §382.012, which provides the commission the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent
with the policy and purposes ofthe Texas Clean Air Act; §382.051, which authorizes the commission to issue a permit for numerous similar sources; §382.0518, which authorizes the
commission to issue permits for construction of newfacilities or modifications of existing facilities; §382.05181, which requires grandfathered facilities to apply for a permit and comply
with its conditions by certain dates, and requires certain actions ofthe commission; §382.05186, which requires pipeline facilities permits; §382.051865, which requires a reimbursement program for certain emissions reductions from reciprocating internal combustion engines associated with pipelines; §382.051866, which requires an emissions reductions
incentives account; and Texas Water Code, §5.103, which authorizes the commission to adopt rules.

§116.770. Requirement to Apply or Register.



### (a) The owner or operator of a grandfathered facility must apply for a permitto operate that facility under this chapter, qualifyfor a permit by rule under Chapter 106 ofthis title

-1-

### (relating to Permits by Rule), or submit a notice ofshutdown before September 1, 2003 for facilities located in the East Texas region as defined in §1 01.330 ofthis title (relating to Definitions), and before September 1, 2004 forfacilities located in the West Texas region as defined in §1 01.330 ofthis title or El Paso County.

(b) A reciprocating internal combustion engine that is subject to the requirement to obtain a pipeline facilities permit and to a mass emissions cap as established by commission
rule is considered permitted with respect to all air contaminants ifthe facility is:

(1) located in an area designated as a nonattainment area for an ozone national
ambient air quality standard; and

(2) achieving compliance with all state and federal requirements designated for
that area by June 20, 2003.

(c) The owner or operator of a reciprocating internal combustion engine that is considered permitted under subsection (b) ofthis section must submit a registration to the
commission on or before July 1, 2004, which must include Form Pl-1 G, Grandfathered Facility
Permit Application.



## §116.772. Notice of Shutdown.

(a) The owner or operator of a grandfathered facility who chooses to shut the facility down rather than obtain a permit under this chapter or qualifyfor a permit by rule under Chapter
106 ofthis title (relating to Permits by Rule), shall notify the executive director in writing by

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## completing Form Pl-1 GSD, Notice of Shutdown, prior to the deadlines specified in §116.770(a)

or §116.774 ofthis title (relating to Requirement to Apply; and Eligibility for Small Business Stationary Source Permits). The owner or operator of a grandfathered facility who submits a Form PI-1GSD, Notice of Shutdown, prior to the deadlines specified in §116.770(a) or §116.774 ofthis title shall cease emitting air contaminants by:

(1) March 1, 2007, ifthe facility is not eligible for a small business stationary

source permit and is located in the East Texas region as defined in §1 01.330 ofthis title (relating to Definitions); or

(2) March 1, 2008, ifthe facility is eligible for a small business stationary source permit or is located in the West Texas region as defined in §101.330 ofthis title or El Paso County.

(b) The owner or operator of a grandfathered facility who applies for a permit priorto the deadlines specified in §116.770(a) or §116.774 ofthis title, but prior to permit issuance, decides to shut the facility down must submit a Form Pl-1 GSD, Notice ofShutdown, prior to withdrawal ofthe permit application and must cease emitting air contaminants by the date specified in subsection (a)(1) or (2) ofthis section.

(c) The owner or operator of a facility that has been shut down and forwhich a Notice of Shutdown has been submitted must obtain the proper authorization underthis chapter or Chapter 106 ofthis title prior to operating the facility.

(d) The Notice of Shutdown shall include, as a minimum, an identification ofthe facility

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## to be shut down, the date the owner or operator intends to cease operating the facility, and an inventory ofthe type and amount of emissions that will be eliminated when the facility ceases to operate.

-4-

### SUBCHAPTER H: PERMITS FOR GRANDFATHERED FACILITIES
DIVISION 2: SMALL BUSINESS STATIONARY SOURCE PERMITS,
PIPELINE FACILITIES PERMITS, AND EXISTING FACILITY PERMITS §116.776
STATUTORY AUTHORITY
The amendment is adopted under Texas Health and Safety Code, Texas Clean Air Act, §382.011, which authorizes the commission to administer the requirements ofthe Texas Clean
Air Act; §382.012, which provides the commission the authority to develop a comprehensive plan forthe state's air; §382.017, which authorizes the commission to adopt rules consistent
with the policy and purposes ofthe Texas Clean Air Act; §382.051, which authorizes the
commission to issue a permit for numerous similar sources; §382.0518, which authorizes the
commission to issue permits for construction of newfacilities or modifications of existing facilities; §382.05181, which requires grandfathered facilities to apply for a permit and comply
with its conditions by certain dates, and requires certain actions ofthe commission; §382.05186, which requires pipeline facilities permits; §382.051865, which requires a reimbursement program for certain emissions reductions from reciprocating internal combustion engines associated with pipelines; §382.051866, which requires an emissions reductions
incentives account; and Texas Water Code, §5.1 03, which authorizes the commission to adopt
rules.

§116.776. Emissions Reductions Incentives for Control of Emissions from
Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region.

(a) Emissions reductions incentives will be made available to eligible facilities through a

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### grant program administered underthis section and Chapter 14 of this title (relating to Grants).

(b) Eligible facilities. Owners or operators of grandfathered reciprocating internal combustion engines are eligible for reimbursement ofa portion ofthe cost of controls from the emissions reductions incentive account based on the following eligibility criteria and grant
program requirements.

(1) The owner or operator of grandfathered reciprocating internal combustion engine or engines associated with pipelines must reduce the hourly emissions rate of nitrogen
oxides (NOx), expressed in terms of grams per brake horsepower-hour, by at least 50%.

(2) The grandfathered reciprocating internal combustion engine or engines must be located in the East Texas region as defined in §101.330 of this title (relating to Definitions).

(3) The owner or operator must applyfor and receive a pipeline facilities permit

or replace the grandfathered reciprocating internal combustion engine with an engine with a NOx emission rate which is at least 50% lower than the emission rate ofthe grandfathered engine or an electric engine.

(4) The project to control emissions must be initiated on or before September 1,
2006.

(5) The project to control emissions must be completed before March 1, 2007.

(6) The owner or operator ofthe grandfathered reciprocating internal

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### combustion engine forwhich a distribution from the emissions reductions incentives account is sought, must enter a contract with the commission in accordance with a request for proposals (grant applications) under Chapter 14 ofthis title.

(7) The owner or operator ofthe grandfathered reciprocating internal combustion engine forwhich a distribution from the emissions reductions incentives account is sought, must identify, at the time the permit application is filed, the facilities for which
reimbursement is requested.

(8) The owner or operator who elects to replace a grandfathered reciprocating
internal combustion engine with an electric engine must submit a Registration of Replacement of a Grandfathered Reciprocating Internal Combustion Engine with an Electric Engine. The

owner or operator who elects to achieve the 50% reduction in 

## NOx emissions rate by replacing

a grandfathered engine or engines with new combustion engines must obtain authorization for
the new engines underthis chapter or Chapter 106 ofthis title (relating to Permits by Rule).

(9) The emissions controls identified in the permit must be operating before the
executive director can authorize payment from the emissions reductions incentives account.

(10) For grandfathered reciprocating internal combustion engines replaced by electric engines or engines with a 

## NOx emission rate which is at least 50% lower than the emission rate ofthe grandfathered engine, the replacement engine must be installed and operating and the grandfathered reciprocating internal combustion engine must be permanently shut down before the executive director can authorize payment from the emissions reductions incentives account.

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## (11) Facilities required by any other state orfederal law to make reductions in emissions of 

## NOx are not eligible for reimbursement.

(12) A person or an affiliate of a person who pays or contributes money to the emissions reductions incentives account is ineligible to receive moneyfrom the account.

(c) Limitations on reimbursement. The commission may reimburse the owner or operator of a grandfathered reciprocating internal combustion engine or engines for no more than the cost associated with achieving emissions reductions between 30% and 50% of the engine's hourly emissions rate of 

## NOx before the addition of controls. The commission may distribute less than the amount calculated in this manner based on the amount of money contributed to the fund and the incentive criteria for distribution outlined in subsection (d) ofthis section.

(d) Incentive criteria. The commission will distribute any money in the fund based on the following incentive criteria:

(1) when the reductions are actually achieved; and

(2) ifthe executive director determines that a cap is appropriate in order to maximize equitable distribution ofthe fund, a cap on the amount to be reimbursed for each engine.

(e) Verification of emissions reductions. Prior to reimbursement from the emissions

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### reductions incentives account, the owner or operator ofeach grandfathered reciprocating
internal combustion engine must provide documentation verifying the amount of actual emission reductions achieved.

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## Docket No. 2003-0699-RUL

OnJanuary 28, 2004, the Texas Commission on Environmental Quality (Commission), during a public meeting, considered adoption ofthe amendments to 30 Texas Administrative Code (TAC) §§116.770, 116.772 and 116.776. The Commission adopts these amendments, in Chapter 116, Control ofAir Pollution by Permits for New Construction or Modification, Subchapter H, Permits for Grandfathered Facilities, Division 1, General Applicability, and Division 2, Small Business Stationary Source Permits, Pipeline Facilities Permits and Existing Facility Permits. Sections 116.770 and 116.772 were considered as a revision to the state implementation plan (SIP). The Commission approved the submission of §116.770 and §116.772 as a revision to the SIP.
Under Tex. Health & 

## Safety Code Ann., §§382.011, 382.012, and 382.023, the Commission has the authority to control the quality ofthe state's air and to issue orders consistent with the policies and purposes ofthe Texas CleanAir Act, Chapter 382 ofthe Tex. Health & 

## Safety Code. The proposed amendments were published for comment in the October 10, 2003 issue ofthe 

## Texas Register (28 TexReg 8814).
Pursuant to Tex. Health & 

## Safety Code Ann., §382.017 (Vernon 2001), Tex. Gov't Code, Chapter 2001 (Vernon 2000 & 

## Vernon Supp. 2001) and 40 Code ofFederal Regulations §51.102 and after proper notice, the Commission conducted a public hearing to consider the amendments and revision to the SIP. Proper notice included prominent advertisement in the areas affected at least 30 days prior to the date ofthe hearing. A public hearing was held in Austin on October 30, 2003.
The Commission circulated hearing notices ofits intended action to the public, including interested persons, the Regional Administrator ofthe United State Environmental Protection Agency (EPA), and all applicable local air pollution control agencies. The public was invited to submit data, views, and recommendations on the proposed amendments to §116.770 and §116.772 as a revision to the SIP, either orally or in writing, atthe hearing or during the commentperiod. Prior to the scheduled hearing, copies ofthe proposed amendments were available for public inspection at the Commission's central office and regional offices. Data, views, and recommendations ofinterested persons regarding the proposed amendments and SIP revision were submitted to the Commission during the commentperiod, and were considered by the Commission as reflected in the analysis oftestimony incorporated by reference into this Order. The Commission finds that the analysis oftestimony includes the names ofall interested groups or

## associations offering comment on the amended rules and the SIP revision and their position concerning the same.
IT IS THEREFORE ORDERED BY THE COMMISSION that the amended rules and revisions to the SIP incorporated by reference into this Order are hereby adopted. The Commission further authorizes staffto make any non-substantive revisions to the rules necessary to comply with Texas Register requirements. The adopted rules and the preamble to the adopted rules and the revisions to the SIP are incorporated by reference into this Order as ifset forth at length verbatim in this Order.
IT IS FURTHER ORDERED BY THE COMMISSION that on behalfofthe Commission, the Chairman should transmit a copy ofthis Order, together with the adopted rules and revisions to the SIP, to the Regional Administrator ofEPA as a proposed revision to the Texas SIP pursuant to Federal Clean Air Act, §110, codified at 42 U.S. Code Ann., §§7410- 7671q, as amended.
This Order constitutes the Order ofthe Commission required by the Administrative Procedure Act, Tex. Gov't Code, §2001.033.
Ifany portion ofthis Order is for any reason held to be invalid by a court ofcompetent jurisdiction, the invalidity ofany portion shall not affect the validity ofthe remaining portions.

Date issued: 

# FEB 04 2004 TEXAS COMMISSION ON ENVIRONMENTAL QUALITYauthorize the commission to a opt rules necessary to carry out its powers and duties underTe asWaterCode; and underTexas Health and Safety Code, §382. 17, concerning Rules, which authorizesthe commission to ad t rules consistent with the policy and purposes ofthe Texas Cl n Air Act. The amendments are also adopted under Texas He lth and Safety Code, §382.002, concerning Policy and Purpos , which establishes the commission's purpose to safeguard th state's air resources, consistent with the protection of public h alth, general welfare, and physical property; §382.011, conce ing General Powers and Duties, which authorizes the commi ion to control the quality of the state's air; §382.012, concern g State Air Control Plan, which authorizes the commission to prepare and develop a general, comprehensive plan forthe pr per control ofthe state's air; and §382.016, concerning Monitor g Requirement; Examination of Records, which authorizes the mmission to prescribe reasonable requirements for measuri g and monitoring the emissions of air contaminants. This agency herebycertifiesth ttheadoption has been reviewed by legal counsel and found to a valid exercise ofthe agency's legal authority. Filed with the Office of the S cretary of State on January 30, 2004. TRD-200400613 Stephanie Bergeron Director, Environmental Law Divisi n Texas Commission on Environme al Quality Effective date: February 19, 2004 Proposal publication date: Septa For further information, please call



## DIVISION 1. 30 TAC §115.614 STATUTORY AUTHORITY er 26, 2003 (512) 239-6087 

# • RPRODUCTS

The repeal is adopted under xas Water Code, §5.103, concerning Rules, and §5.105, ncerning General Policy, which authorize the commission to a opt rules necessary to carry out its powers and duties underTe sWaterCode; and underTexas Health and Safety Code, §382. 17, concerning Rules, which authorizes the commission to ad pt rules consistent with the policy and purposes of the Texa Clean Air Act. The repeal is also adopted under Texas He th and Safety Code, §382.002, concerning Policy and Purpos , which establishes the commission's purpose to safeguard th state's air resources, consistent with the protection of public h lth, general welfare, and physical property; §382.011, cancer ing General Powers and Duties, which authorizes the commi on to control the quality of the state's air; §382.012, concerni g State Air Control Plan, which authorizes the commission to repare and develop a general, comprehensive plan for the pr er control ofthe state's air; and §382.016, concerning Monitori g Requirements; Examination of Records, which authorizes the ommissionto prescribe reasonable requirements for measuri g and monitoring the emissions of air contaminants. This agency hereby certifiesth the adoption has been reviewed by legal counsel and found to b a valid exercise ofthe agency's legal authority. Filed with the Office of the Se retary of State on January 30, 2004. TRD-200400614 Stephanie Bergeron Director, Environmental Law Divisi Texas Commission on Environmen I Quality Effective date: February 19, 2004 Proposal publication date: Septem er 26, 2003 Forfurther information, please call: (512) 239-6087 

# • 

# • CHAPTER 116. CONTROL OF AIR POLLUTION BY PERMITS FOR NEW CONSTRUCTION OR MODIFICATION SUBCHAPTER H. PERMITS FOR GRANDFATHERED FACILITIES The Texas Commission on Environmental Quality (commission) adopts amendments to §§116.770, 116.772, and 116.776 withoutchangestothe proposed text as published inthe October 10, 2003, issue ofthe Texas Register(28 TexReg 8814). Sections 116.770, 116.772, and 116.776 will not be republished. Sections 116.770 and 116.772 are adopted as revisions to the state implementation plan (SIP) and will be submitted to the United States Environmental Protection Agency (EPA). BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE ADOPTED RULES When the legislature first created the Texas Clean Air Act in 1971, the legislature did not require existing significant sources of air emissions to comply with (i.e., were grandfathered from) the then new requirement to obtain a permit. These existing sources are commonly known as grandfathered facilities. If grandfathered facilities had not been modified since 1971, they continued to be authorized to operate without a permit. The legislature addressed the issue of grandfathered facilities in 1997 and 1999, requiring the creation of: 1) a voluntary emissions reduction plan for the permitting of grandfathered facilities; and 2) directing the commission to implement directives regarding the permitting of grandfathered electric generating facilities. Then, the 77th Legislature, 2001, amended the Texas Health and Safety Code, Texas Clean Air Act, to require that all grandfathered facilities obtain permits. The mandatory permitting requirements of House Bill2912werethe culmination of legislative efforts, beginning in 1997, to permit or otherwise authorize all grandfathered facilities. House Bill 2912 created four newtypes of permitsfor grandfatheredfacilities: existing facility permits, small business stationary source permits, electric generating facility permits, and pipeline facility permits. House Bill 2912 also mandated the dates by which grandfathered facilities mustapplyfor a permitand have controls operational or submit a shutdown notice. Grandfathered reciprocating internal combustion engines that are part of the processing, treating, compression, or pumping facilities connected to, or part of, a gathering or transmission pipeline may apply for a pipeline facilities permit. Additionally, House Bill 2914, §78, created a new incentive programto assist in retrofitting reciprocating internal combustion engines associated with pipelines. To implementthis incentive program, the commission adopted §116.776, Distribution of Funds



## ADOPTEDRULES February 13, 2004 29 TexReg 1369from the Emissions Reductions Incentives AccountforControl of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region. In order to be eligiblefor reimbursement underthis**~rogram,** the**own~r**orop_eratorofagrandfathered reciprocating Internal combustion eng1ne was required to make an annual reduction in emissions ofnitrogen oxides (NO.) as**com~ared ~o**  the**emissi~ns. rep~rted**  forthe facility in the 1997 industnal p01nt source em1ss1ons mventory. Most recently, the 78th Legislature, 2003, enacted House**~ill** 638, relating to emissions reductions**incentive~** and the emissions reductions incentives account. House Bill 638 changed the reimbursement eligibility requirement from a 50% reduction in annual emissions to the 50% reduction in NO, emissions rate neededto obtain a pipelinefacilities permit. Italso prohibitedthe commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the**emis~ions** reductions incentives account; prohibited persons, or affiliates of persons, who contribute money to the emissions reductions incentives account from receiving money from the fund; and allowed grandfathered reciprocating**intern~l c~m~ustion** **engin~s** associated with pipelines that meet certam cntena to be considered permitted by statute. To implement these revisions to the Texas Clean AirAct, the commission adopts amendmentsto the rules in Chapter 116, Subchapter H, Permits for Grandfathered Facilities. SECTION BY SECTION DISCUSSION Section 116. 770, Requirement to Apply The commission adopts an amendment to this section that changes the section title from "Requirement to Apply" to "Requirementto Apply or Register" to better specify the purpose of the section. Adopted §116.770 adds new subsections (b)**a~d** (c), which specify that certain facilities are considered permitted and that the owners and operators of those facilities must submit registrations. Adopted §116.770(b) implements Texas Health and Safety Code, §382.051860). Specifically,**a~opted ~116.77~(b)**  states that a reciprocating internal combustion engme requ1red to obtain a pipeline facility permit that**i~ s~bje~t**  to a. mass emissions cap established by the comm1ss1on IS**con~1dered** permitted if the facility is located in an ozone**nonatta1nm~nt** area and is in compliance with all state and federal requirements for that area by June 20, 2003. 30 TAC §101.351(a) currently specifies that a mass emissions cap applies to the Houston/Galveston ozone nonattainment area. Adopted §116.770(b)(2) requires that the grandfathered recip_rocating internal combustion engines satisfy an/currently applicable

### s~te orfederal regulations in effect as ofJune 20,**~003,** the effe_ct1ve date of House Bill 638, in order to be considered**perm1tt~d.** In addition, the commission adopts new §116.770(c), wh1ch requires owners and operators of facilities that are considered permitted under§116.770(b) to submit registrations on or before July 1, 2004. The registration requirement is**ne~~~sary** for the executive director to determine whether all facilities that are considered to be permitted meet the criteria outlined in House Bill 638. The adopted subsections require registration rather than require those facilities to obtain a permit under_ Chapter 116, qualify for a permit by rule, or**~hut** down. Reg1strat1ons must be submitted by July 1, 2004. Th1s date**allo~s** owners an? operators of facilities that are**consi~ered** permitted to**~ubm1t** registrations one year after the**effect1~e** date of House B1ll 638.



## 29 TexReg 1370 February 13, 2004 Texas Register This date is also approximately six months afterthe anticipated adoption date ofthese rules. Section 116. 772, Notice ofShutdown The commission adopts a change to the cross-references in §116.772(a) and (b) to parallel changes made in §116.770. Section 116.776, Distribution ofFunds from the Emission Reductions Incentives AccountforControl ofEmissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region The commission adopts an amendment to the title of §116.776 from "Distribution of Funds from the Emissions Reductions Incentives Accountfor Control of Emissionsfrom Grandfathered Reciprocating Internal Combustion Engines Located. in the East Texas Region" to "Emissions Reductions Incentives for Control of Emissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region." In addition, the commission adopts new §116.776(a) specifying that incentives will be made available through a grant program administered under §116.776 and 30 TAC Chapter 14, Grants. The commission also adopts new §116.776(b)(6) to specifythat, to seek a distribution from the account, the owner or operator must enter a contract with the commission in accordance with a request for grant applications. The**remainin~ ~aragraphs**  are renumbered accordingly. Also, the comm1ss1on adopts amendments to §116.776(b) to specify that reimbursement is based on eligibility criteria and grant program requirements. The commission also adopts amendments to §116.776(c) and (d) to use the term "incentive criteria" rather than "criteria for distribution." The adopted amendments make it clear that the commission is implementing the statute through a grant program. The commission adopts amendments to §116.776(b)(1) to specifythat eligibility for reimbursement ofthe cost ofcontrols from the emissions reductions incentives account is based on hourly emissions reductions rather than an_nual emissions reductions. Specifically, §116.776(b)(1) requ1res owners. or operators of grandfathered reciprocating internal**comb~st~on** engines associated with pipelinesto reduce hourly NO, em1ss1on rates, expressed in terms ofgrams per brake horsepower-hour, by at least 50%, in orderto be eligib_le for**reimburs~ment.** The existing section, adopted as subsection (b)(1), reqUire_s**~wners** oroperatorsto make a 50% reduction in th':l annual**em1ss_1o~s** of NO as compared to the 19971ndustrial Pomt Source Em1ss1ons Inventory. Adopted §116.776(b)(1) is consistent with Texas Health and Safety Code, §382.051865(a), as amended.**T~e** commission adopts amendments to §116.776(b)(3) to spec1fy that an owneroroperatorwho opts to achieve the 50% reduction in NO by replacing a grandfathered engine will also be eligible for rei'mbursement. The commission adopts amendments to §116.776(b)(8) to clarify that, if an owner or**~perator** elects to achieve reductions via replacement of an engme, the owner or operator must obtain authorization under**Chapte~** 116 or 30TAC Chapter 106. Since turbines may also be**cons1dere~ eng1~es**  or combustion engines, the**replacem~nt** 

## ?f a**rec1~r?catmg** internal combustion engine with a turbine 1s also ehg1ble for reimbursement. In addition, the commission adopts amendments to §116.776(b)(8) to delete language**th~t** spe?ifies when the registration of replacement for an electnc engme should be submitted. Also, the commission adopts amendments to §116.776(b)(10) tospecifythat engines with a NO,**emissi~n ra~e**  at least 50% lowerthan the rate ofthe grandfathered engme, 1n addition to electric engines, must be installed and operated and the grandfathered engine be permanently shut down before theexecutive director can authorize payment from the emissions reductions incentive account. The commission also adopts new §116.776(b)(12), which specifies that a person or an affiliate of a person who pays orcontributestothe emissions reductions incentives account is ineligibleto receive moneyfromthe account. This new paragraph implements Texas Health and Safety Code, §382.051866(e). The commission also adopts an amendment to §116.776(c) by adding the word "rate" when specifying that the commission may reimburse costs associated with achieving emissions reductions between 30% and 50% of an engine's hourly NO, emissions rate. The adopted amendment to §116.776(c) is consistentwith Texas Health and Safety Code, §382.051865(c), as amended. Lastly, the commission changes the criteria for distribution of. funds based on the statutory changes outlined by House Bill 638 and stakeholder meetings held during the summer of 2002. House Bill 638 modifies Texas Health and Safety Code, §382.051865(d), to prohibit the commission from requiring any more stringent reduction criteria than the 50% reduction in grams per brake horsepower- hour for determining the eligibility for an emissions reduction project under the reimbursement program. The commission eliminates paragraphs (1)- (3) from existing §116.776(c), and adds a new criterion in §116.776(d)(2) specifying that the executive director will put a cap on the amount of reimbursement for each engine, if it determines it is appropriate in order to maximize equitable distribution of the fund. After discussions with participants in the stakeholder meetings, the commission originally decided to implement the criteria by reimbursing owners and operators of engines for 40% of the cost of controls up to a maximum of $100,000 per engine. The commission anticipated signing contracts for more engines than can be covered by the amount of money appropriated tothe agencyforthis purpose. However, the numberof requests for reimbursementwas lowerthan anticipated. Based on General Appropriations Act (2003), Article IX, §8.01(d), the unexpended balance in the emissions reductions incentives account at the end of Fiscal Year 2003 is available for distribution in Fiscal Year 2004 and 2005. Therefore, the commission will distribute up to $100,000 per eligible engine once the owner or operator installs controls and submits the necessary verification to the commission. After verification information has been received for all eligible engines or the final date for submission ofverification information specified in all individual contracts, whichever occurs first, the commission will distribute any funds remaining in the account between all eligible grantees according to the criteria specified in the request for grant application and contracts issued under it. If, during the grant review process, the commission determines that there will not be enough eligible costs to distribute all ofthe funds in the account, the commission may also issue a subsequent request for grant applications. In order to allow for adequate time to process payment requests under either of these options, the commission concluded that the individual grant contracts will need to reflect earlier project completion dates. House Bill 638 and §116.776(b)(5) requires that the projects to control emissions be completed before March 1, 2007. However, Texas Health and Safety Code, §382.051865(g), also requires that the commission may not pay or otherwise provide a financial incentive for an emissions reduction project before the project is complete, and thatthe commission may not pay orotherwise provide a financial incentive on or after March 1, 2007. If the commission were to receive project verification information immediately priorto the deadline, there would be no time to process the request prior to the deadline for payment. In addition, as discussed previously, the commission will distribute the funds in two separate rounds of payments: the first round of up to $100,000 being paid upon review of the verification information supplied by the grantee; and the second round to equitably distribute any funds remaining in the account to those owners or operators who have eligible costs of over $100,000. In no case will payments from the fund exceed 40% ofthe actual capital cost ofcontrols for an individual engine. In orderto address both the completion deadline and the payment deadline equitably, the commission will negotiate deadlines for project completion in the grant contracts. The commission determined that use ofthe contract mechanism will provide necessary flexibility for individual circumstances, while assuring that projectverification information will be received in time to allow for processing prior to the payment deadline. The commission will decide on a final date for submission of verification information in individual contracts after additional discussions with internal staff and the Office ofthe Comptroller of Public Accounts regarding the time needed to process the payments. However, in orderto provide certainty for early planning purposes, November 1, 2006 is the earliest date by which the commission will require submittal of verification information in an individual contract. FINAL REGULATORY IMPACT ANALYSIS DETERMINATION The commission reviewed the adopted rulemaking in accordance with the regulatory analysis requirements of Texas Government Code, §2001.0225, and determined that the rulemaking does not meet the definition of a major environmental rule. A "major environmental rule" means a rule, the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The adopted rulemaking implements requirements from House Bill 638, 78th Legislature, 2003, which

.prohibits the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in orderto receive money from the emissions reductions incentives account; prohibits persons, or affiliates of persons, who contribute money to the emissions reductions incentives account from receiving money from the fund; and allows grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute. The adopted rules allow more grandfathered reciprocating internal combustion engines associated with pipelines to be eligible for reimbursement from the emissions reductions incentives account. The adopted rules are not anticipated to have adverseeffects on the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state, since the rules allow more engines to be eligible for reimbursement. Similarly, the requirements ofthe adopted rules are expected to result in little or no impacts on the economy, productivity, competition, jobs,the environment, orthe public health and safetyofthe state orasectorofthe state. All grandfathered reciprocating internal combustion engines associated with pipelines affected bythe rules arealready requiredto meetcontrol requirements specified by House Bill 2912. Additionally, the analysis required by Texas Government Code, §2001.0225(c), does not apply because the adopted rules do not meet any of the four applicability requirements of a major environmental rule. The adopted rules do not exceed a standard set by federal law, exceed an express requirement ofstate law,



## ADOPTEDRULES February 13,2004 29 TexReg 1371exceed a requirement ofa delegation agreement, oradopt a rule solely under the general powers of the agency. The adopted rules do not exceed the requirements ofthe Federal Clean Air Act or the Texas Clean Air Act. Additionally, the adopted rules do not exceed a requirement of a delegation agreement, since there is no agreement that is applicable to this rulemaking, and are not adopted solely underthe general powers ofthe agency. The commission received no public comments regarding the draft regulatory impact analysis determination during the public comment period. TAKINGS IMPACTASSESSMENT The commission evaluated the adopted rules and performed an analysis ofwhetherthe rules are subject to Texas Government Code, Chapter2007. The purpose ofthe adopted rules is to fulfill the commission's obligationto implement House Bi11638. The adopted rules advance this purpose by prohibiting the commission from requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in orderto receive moneyfrom the emissions reductions incentives account; prohibiting persons, oraffiliates of persons, who contribute money to the emissions reductions incentives accountfrom receiving moneyfrom the fund; and allowing grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute. The adopted rules will not burden private real property. The ability ofan owneroroperatorto claim a reimbursement or be considered permitted by statute will not affect private property in a mannerwhich restricts or limits an owner's right to the property that would otherwise exist in the absence of governmental action. Consequently, the adopted rules do not meet the definition of a taking under Texas Government Code, §2007.002{5). CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM The commission reviewed the adopted rulemaking and found it is a rulemaking identified in the Coastal Coordination Act Implementation Rules, 31 TAC §505.11(b)(2), relating to rules subject to the Coastal Management Program, and, therefore, required that goals and policies ofthe Texas Coastal Management Program be considered during the rulemaking process. The commission reviewed this actionforconsistencyand determinedthat the adopted rules do not impact any Texas Coastal Management Program goals or policies. The prohibition against requiring more stringent emissions reduction criteria than the reductions already required to obtain a pipeline facilities permit in order to receive money from the emissions reductions incentives account; the prohibition against persons, oraffiliates ofpersons, who contribute moneytothe emissions reductions incentives account from receiving money from the fund; and allowing grandfathered reciprocating internal combustion engines associated with pipelines that meet certain criteria to be considered permitted by statute will not change any otherwise applicable requirement associated with controls of the affected engines. No comments onthe consistency ofthis rulemaking were submitted during the comment period. EFFECT ON SITES SUBJECTTOTHE FEDERAL OPERATING PERMITS PROGRAM This adoption has no impact on owners and operators of sites subject to the operating permit program unless they also own or operate grandfathered reciprocating internal combustion engines associated with pipelines. Ifso, the owners and operators



## 29 TexReg 1372 February 13, 2004 Texas Register ofsites subject to the operating permit program will be required to revise theirpermits orpermit applications. 30TAC §122.10(2) specifies that all ofthe requirements of Chapter 116 are applicable requirements. Therefore, owners and operators of grandfathered reciprocating internal combustion engines associated with pipelines will be required to revise the operating permit to reflect that the facilities are considered permitted, rather than grandfathered. PUBLIC COMMENT A public hearing on this proposal was held October 30, 2003, and the public comment period closed on November 10, 2003. Nooral commentswere received atthe public hearing. The commission receivedwritten comments onthe rule proposalfrom the Houston Regional Group of the Sierra Club {Sierra Club) and the EPA. Sierra Club opposed the rule proposal, while EPA supported the rule proposal, but requested clarification. RESPONSE TO COMMENTS Sierra Club commented that it opposes any permit program that the commission has, regardless ofthe direction ofthe state legislature, that does not require appropriate newsource review or a similar permitting program to ensure that all permitted sources do emit the lowest amount of air pollution possible, within the costand technological constraints ofbest available control technology. The commission made no change in response to this comment. The commission is adopting rule changes directly implementing the statutory changes specified in House Bill 638. Section 116.770(b) specifies that reciprocating internal combustion engines subject to a mass emissions cap, located in an ozone nonattainmentarea, and achieving compliancewith all state and federal requirements will be considered permitted. Although a specificfacility authorized under §116.770(b)will notbe required to geta permit, itwill be required to registerwiththe commission in orderto be considered permitted. Registeredfacilities will also be required to make emission reductions under the Mass Cap and Trade Program or obtain allowances. Each facility may not specifically be required to emit the lowest amount of air pollution possible, but, as a whole, facilities that are subject to the Mass Cap and Trade Program will be required to make emission reductions. As noted, these facilities were previously "grandfathered" from the requirementto meet preconstruction permitting requirements when the Texas Clean Air Act was first created in 1971. The legislature determined in House Bill 638 that itwould be appropriatefor these facilities to meet different permitting requirements. The EPA asked how the state will ensure that the appropriate permit application is submitted if an emissions increase occurs as the result ofmodifying one or more grandfathered reciprocating internal combustion engines, and ifthe increasestrigger any federal requirements. The commission made no change in response to this comment. The commission is adopting amendments to the permit requirements for grandfathered facilities in §§116.770, 116.772, and 116.776. These sections of the commission rules do not authorize emission increases. Rather, these sections establish the requirement to register afacilitythat is considered permitted and the requirement to obtain a permit for a grandfathered facility. The validity of any registration issued for facilities eligible under House Bill 638 to be "considered permitted" is dependent upon the information submitted by the facility. Ifthat information is determined to be incorrect, the registration would be invalid.The EPA commented that the proposed rules do not document howanowneroroperatorofagrandfatheredfacility mustdemonstrate initial and ongoing compliance with all current applicable state and federal requirements forthe Houston/Galveston ozone nonattainment area as ofJune 20, 2003, and requested thatthe methods ofcompliance be documented. Sierra Club also asked how the commission can consider a reciprocating internal combustion engine for a pipeline facility permitted when there is no documentation todemonstrate thatthe source is achieving compliance with all state and federal requirements. Sierra Club further commented that all the commission requires is that compliance be achieved, and that there should be a requirement for a sitevisitbythe commission ora local airpollution control agency to ensure that the facility is in compliance before a permit is issued to the facility. The commission made no change in response to these comments. Facilities eligible to be "considered permitted" under §116.770(b) are subject to the Mass Cap and Trade Program, which requires an annual determination regarding the status of emission allowances for those facilities. This will provide a mechanism for determining compliance with the emission limitations that apply to these facilities. The commission does not agree that a site visit is necessary to determine compliance, since the Mass Cap and Trade Program is a SIP-approved program that is already subject to other compliance reviews. 

## DIVISION 1. GENERAL APPLICABILITY 30TAC §116.770, §116.772 STATUTORY AUTHORITY The amendments are adopted under Texas Health and Safety Code, Texas Clean Air Act, §382.011, which authorizes the commission to administer the requirements ofthe Texas Clean Air Act; §382.012, which provides the commission the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes of the Texas Clean Air Act; §382.051, which authorizes the commission to issue a permit for numerous similar sources; §382.0518, which authorizes the commission to issue permits for construction of newfacilities or modifications of existing facilities; §382.05181, which requires grandfathered facilities to apply for a permit and comply with its conditions by certain dates, and requires certain actions ofthe commission; §382.05186, which requires pipeline facilities permits; §382.051865, which requires a reimbursement program for certain emissions reductions from reciprocating internal combustion engines associated with pipelines; §382.051866, which requires an emissions reductions incentives account; and Texas Water Code, §5.103, which authorizes the commission to adopt rules. Thisagency herebycertifiesthatthe adoption has been reviewed by legal counsel and found to be avalid exercise ofthe agency's legal authority. Filed with the Office of the Secretary of State on January 30, 2004. TRD-200400619 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Effective date: February 19, 2004 Proposal publication date: October 10, 2003 For further information, please call: (512) 239-5017 

# • • • DNISION2. SMALLBUSINESS STATIONARY SOURCE PERMITS, PIPELINE FACILITIES PERMITS, AND EXISTINGFACILITY PERMITS 30 TAC §116.776 STATUTORY AUTHORITY The amendment is adopted under Texas Health and Safety Code, Texas Clean Air Act, §382.011, which authorizes the commission to administer the requirements ofthe Texas Clean Air Act; §382.D12, which provides the commission the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes of the Texas Clean Air Act; §382.051, which authorizes the commission to issue a permit for numerous similar sources; §382.0518, which authorizes the commission to issue permits for construction of new facilities or modifications of existing facilities; §382.05181, which requires grandfathered facilities to apply for a permit and comply with its conditions by certain dates, and requires certain actions of the commission; §382.05186, which requires pipeline facilities permits; §382.051865, which requires a reimbursement program for certain emissions reductions from reciprocating internal combustion engines associated with pipelines; §382.051866, which requires an emissions reductions incentives account; and Texas Water Code, §5.103, which authorizes the commission to adopt rules. This agency herebycertifiesthattheadoption has been reviewed by legal counsel and found to be a valid exercise ofthe agency's legal authority. Filed with the Office of the Secretary of State on January 30, 2004. TRD-200400618 Stephanie Bergeron Director, Environmental Law Division Texas Commission on Environmental Quality Effective date: February 19, 2004 Proposal publication date: October 10, 2003 For further information, please call: (512) 239-5017 

# • CHAPTER 290. 

# • DRINKINGWATER The Texas Commission on Env· onmental Quality (commission) adopts the amendments to §§2 0.38, 290.39, 290.41

- 290.47, 290.104, 290.106, 290.107, 2 0.111, 290.117, 290.121, and 290.122. Sections 290.39, 90.42, 290.45, 290.46, and 290.111 are adopted with ch nges to the proposed text as published in the August 8, 20 3 issue of the Texas Register (28 TexReg 6206). Sections 0.38, 290.41, 290.43, 290.44, 290.47, 290.104, 290.106, 2 0.107, 290.117, 290.121, and



## ADOPTEDRULES February 13, 2004 29 TexReg 1373