Early Action Credits and Control Techniques Guidelines and Implications for Natural Gas Systems

Fiji George, Southwestern Energy

I. Regulatory Background:

The Clean Air Act (CAA) requires all ozone nonattainment areas classified as moderate or

higher to meet requirements of §172(c) (1) and §182(b) (2). Section 172(c)(1) requires that the state 

implementation plan (SIP) for such an area incorporate all “reasonably available control measures”, 

including reasonably available control technology (RACT), for sources of the relevant ozone pollutants, 

which are Nitrogen Oxides (NOx) and Volatile Organic Compounds (VOCs). Section 182(b)(2) requires 

the state to submit a SIP revision that implements RACT for all sources of VOCs addressed that are 

identified in a control techniques guideline (CTG) document issued by EPA and all non-CTG major 

sources of VOCs. 

Section 108(b) (1) of the Clean Air Act outlines EPA’s authorities in issuing CTGs. In general, 

the EPA provides states with the flexibility to determine the most technologically and economically 

feasible RACT requirements for a nonattainment area. EPA guidance on RACT indicates that states can 

choose to implement the CTG recommendations, implement an alternative approach, or demonstrate that 

additional control for the CTG emission source category is not technologically or economically feasible in 

the area.1

 

To help define RACT, CTGs include information on the: cost of installation and operation of 

emission control technology; energy requirements; emission reduction benefits; environmental impacts of 

certain technologies; available technology, alternative methods of prevention; control of air pollution; 

data on alternative fuels; and/or operating procedures.

To summarize, RACT rules are only required for major2 facilities in moderate and above ozone 

non-attainment areas. Ozone SIP planning is complicated and states will model the impact of new 

regulations that will be going into effect in 2016 (CPP, Mercury MACT, Tier 3 standards) in their 

attainment demonstrations before mandating new RACT rules. 

1 See, e.g., U.S. Environmental Protection Agency, Control Technique Guidelines for Automobile and Light-Dutry 

Truck Assembly Coatings, EPA-453/R-08-006 (September 2008), available at 

http://www.epa.gov/groundlevelozone/SIPToolkit/ctg_act/200809_voc_epa453_r-08-

006_auto_ldtruck_assembly_coating.pdf. Page 1 of the guidance states:

States can use the recommendations in this CTG to inform their own determination as to what 

constitutes RACT for VOCs for automobile and light-duty truck assembly coatings in their 

particular nonattainment areas. There are several hazardous air pollutants (HAPs) that are also 

VOCs. The information contained in this document is provided only as guidance. This guidance 

does not change, or substitute for, requirements specified in applicable sections of the CAA or 

EPA's regulations; nor is it a regulation itself. This document does not impose any legally binding 

requirements on any entity. It provides only recommendations for State and local air pollution 

control agencies to consider in determining RACT. State and local pollution control agencies are 

free to implement other technically-sound approaches that are consistent with the CAA and EPA's 

implementing regulations. 

2 CAA §182 (b)(1)(A)(ii)(I)‘‘major stationary source’’ shall include ... any stationary source or group of sources 

located within a contiguous area and under common control that emits, or has the potential to emit, at least 5 tons 

per year of volatile organic compounds

 
This paper aims to briefly explain the regulatory structure behind RACT, CTGs and potential for 

early action credits from voluntary programs that are based on performance-based actions, such as ONE 

Future.

II. Early Action Credit (EAC) versus Emission Reduction Credits (ERC): ERCs can be 

used for RACT compliance, EAC are needed for “de facto” compliance

Early actions by companies that voluntarily accept performance-based commitments can 

potentially generate emission reduction credits (ERCs) for VOCs as a collateral benefit to achieving the 

company’s pro-rata share of 1% by 2025. ERCs are credits that can be used by the facility itself or 

transferred to another facility. To be certified as an ERC, the state must determine that the reduction 

meets the following criteria: 

(1) real: an ERC must be a reduction in actual emissions and not a reduction due to change in 

emission factors or acceptance of a lower permit limit

(2) surplus: the reduction is surplus in the sense of not being required by current regulations in the 

State Implementation Plan (SIP); 

(3) enforceable; 

(4) permanent; and 

(5) quantifiable.

The use of ERCs as offsets is mainly by new facilities that are subject to nonattainment NSR 

(NNSR) permitting requirements. Again, this only applies to certain large sources of emissions that 

exceed the NSR thresholds established for the area (ranging from 25 tons/year potential to 100 tons/year

of NOx, and less for VOCs). Other uses of ERCs include:

• Delayed or alternative compliance with RACT requirements

• Compliance with certain air permit or rule requirements

• Operational flexibility

• Temporary increases in emissions below major source or major modification thresholds

• Compliance margin: A source may purchase excess ERCs in advance for use to ensure 

compliance

• The state could purchase and retire ERCs to assure attainment and maintenance of NAAQS

• State agencies could promote economic development by purchasing and donating ERCs to 

businesses to reduce the offset requirement burdens

• Purchase by environmental groups or others to improve air quality

• As a Supplemental Environmental Project (SEP) component to mitigate enforcement action

III. Use of Early Action Credits (EAC) under future RACT rules
Early Action Credits (EAC) essentially are reductions that meet the criteria of ERCs in addition 

to application as an ERC for compliance with RACT and NNSR programs. The regulatory pathway of 

employing reductions from voluntary programs for RACT rules raises a number of issues for early action. 

First, to be sure, there is a possibility that early actors in a particular state would reduce VOC emissions 

sufficiently that the state would avoid nonattainment status altogether. This would be a positive outcome 

for the early actors, but it would also be a positive outcome shared by the laggards in the same state.

If early action was not sufficient to avoid nonattainment, and the state must impose additional 

VOC reductions in order to close the gap between current air quality levels and attainment, then the 

question is whether and how there could be recognition for the early actors in the state SIP. Put another 

way: early actors would want to avoid a situation in which the state asks them to do the same amount of 

new abatement as the laggards. 

A strategy to ensure that performance-based voluntary actions are credited under a future 

regulation must ensure that the voluntary efforts are recognized and that such efforts do not simply 

subject the actor to additional burdens. The EPA could establish a regulatory design under which 

compliance with the emissions standard or limit is designed such that the companies carrying out these 

performance-based voluntary initatives are already achieving compliance. An example is the standards 

for pneumatic controllers for NSPS OOOO. By establishing the regulatory requirement of low bleed 

continuous controllers, firms who had changed out their high bleed controllers earlier were essentially in 

compliance with the emission standards.

3

 Similarly, CTG’s could be established at the rates or levels 

that are common for these performance based programs and therefore the states could simply develop 

their RACT rules around these rates/technologies. An example of such effort is compliance with the 

RACT rules in New York under Subpart 227-24

. A system-wide averaging plan under Subpart 227-2.5(b) 

is permissible whereby facilities are permitted to employ “a weighted average permissible emission rate”. 

Similarly, if the voluntary performance-based initiatives have to meet a system-wide average rate of X% 

methane leakage for the sub-sector (e.g. natural gas production), then as long as this average rate is less 

than the reduction levels that could be achieved by applying the CTG at each affected source, then the 

operator’s averaging plan is valid for RACT compliance. 

Hence, those oil and gas facilities in moderate or higher non-attainment areas and the OTC region 

that are subject to RACT rules would not be subject to additional capital expenditure. 

IV. CTG Design and RACT rules: Precedence in allowing Performance-based voluntary 

initatives performance based averaging designs for RACT compliance

3 NSPS Subpart OOOO imposed new monitoring, reporting and recordkeeping requirements and their associated 

legal enforceability were new as part of the Subpart OOOO regulations for most companies. 

4 http://www.dec.ny.gov/regs/4217.html

 
EPA can and has integrated substantial flexibility into a CTG-based regulatory regime for VOCs. 

Previously, the Agency has provided guidance to states on how they can allow sources subject to RACT 

requirements to meet those requirements through “economic incentive programs.” Under this guidance, a 

source subject to a RACT would be able to trade or average with another source subject to RACT 

(including a source within the same facility or company) if the first source lowers its emissions (or 

emission rate) below the RACT-required level. Several states have adopted “emission reduction credit” 

or “averaging” programs based on this concept, including Texas5

, Pennsylvania6, North Carolina7, New 

Hampshire8

, Ohio9 etc. 

In addition, the approach of using emission averaging or trading approaches as an alternative to 

source-specific RACT requirements has an analogue in EPA’s implementation of the Clean Air Act’s 

provisions addressing regional haze. Those provisions generally require a state contributing to regional 

haze problems to impose “best available retrofit technology” (BART) standards on each stationary source 

that has the potential to emit 250 tons or more of a visibility-creating pollutant (referred to as “BARTeligible sources”). However, EPA’s regional haze regulations provide that, once a state has determined a 

BART emissions level or rate for a BART-eligible source, the state is permitted to meet the requirement 

through an emissions averaging or trading approach among a group of BART-eligible sources, provided 

that the approach achieves a level of emissions performance.

Therefore, it is likely that a Performance-based voluntary initatives performance based approach 

(i.e. averaging) could be adopted as part of the state RACT rules.

V. Form and Recognition of Early Action: Need for a Registry

Calculating the form and amount of “recognition” also raises a number of issues. First, both EPA 

and the state presumably would want to recognize only VOC reductions that occur in the relevant state, 

not reductions achieved in other states (e.g., through intra-company averaging for a multi-state company). 

Second, the state presumably would be interested only in reductions in VOCs, not reductions in 

methane. So, any early actions would have to be measured in terms of tons of VOC reductions.

To make this demonstration, both the state and the early actor would need information about: (1) 

baseline VOC emissions at particular sources in the state; and (2) the reductions that would be achieved 

from particular RACT measures in the state. This information would help the early actor calculate the 

amount of early VOC reductions achieved from “over-controlling” certain sources. 

Therefore, EPA should include in its CTGs: (1) clear recommendations that states recognize early 

action; (2) encouragement for flexible performance-based measures; and (3) information on recognition 

could be calculated. Such information would make it much easier for early actors to work with state 

regulators. 

Therefore, it would be very important to establish, as soon as possible, a registry (e.g. enhanced 

eGRT) that would record – on a state-by-state basis – the VOC reductions achieved by early actors, and 

provide third-party verification for those reductions. Such a registry would provide credibility and 

transparency that would help ensure recognition of the reductions under a later regulatory program. 

5 TX §117.540 6 PA § 129.94. 7 15A NCAC 2D .1410

8 Section 125-J:5 9 3745-110-03

 
VI. Conclusions and next steps

The EPA is in the process of lowering of the current ozone standards and also developing control 

technique guidelines for oil and gas sources. Only those counties that are moderate or higher will require 

RACT controls. As part of the SIP planning process, a state can take credit for reductions due to the 

Clean Power Plan rule, Tier 3 rule and Mercury and Air Toxics Standards rule as demonstration of 

progress towards meeting the requirements for the non-attainment areas in the State. Should EPA 

conclude that additional reductions are needed beyond what are already planned, oil and gas sources 

could be targeted, but these facilities have to be major sources and current statute has a 5 tons per year 

(tpy) VOC potential threshold (it may be lower in certain counties depending on the severity of the nonattainment status). Perhaps most impactful for the production sector is how EPA redefines the 

aggregation rules under the CAA statue to aggregate well-sites and this may have significant impact to the 

production sector. 

EPA and states have quite often provided flexibility to the affected industry in their RACT rules 

through emissions averaging and performance-based programs. The performance-based voluntary 

initiatives design could be incorporated into many state RACT programs consistent with these precedents.

Early action credits generated through voluntary actions like performance-based voluntary 

programs will be important for members to ensure that future regulations do not cause additional burdens 

for such program participants. It is essential that to facilitate such credits, EPA sets up a registry to 

ensure early action reductions are accounted and registered and that the agency provide clear guidance to 

the states on how to recognize registered reductions