TECHNICAL SUPPORT DOCUMENT

30 TAC Chapter 116, Subchapter B

Use of Emission Reductions in New Source Review Permitting

§§ 116.116(f), 116.174, 116.175

July 25, 2011

FOR FURTHER INFORMATI ON CONTACT: Ms. Erica Le Doux, United States Environmental Protection Agency Region 6, Ai r Permits Section (6PD-R), 1445 Ross Avenue, Dallas, Texas 75202-2733, (214) 665-7265.2 Subject: 30 TAC Chapter 116, Subchapter B, Us e of Emission Reductions in New Source Review Permitting, §§ 116.116(f), 116.174, 116.175

Contents:

I. Executive Summary

II. Summary of State Submittals

III. Technical Review of State Submittals

IV. Conclusion3 I. Executive Summary

What actions are evaluated in this Technical Support Document?

This technical support document (TSD) reviews seve rable portions of three proposed revisions to the Texas State Implementation Plan (SIP) conc erning the use of emissi on credits in the New Source Review (NSR) Permitting Program. This re view will determine if the revisions are consistent with the requirements of the Clean Air Act and EPA’s policy and guidance.

August 31, 1993

• On August 16, 1993 the Texas Air Control Board (TACB) 1 adopted revisions to Regulation VI, Concerning Control of Air Pollution by Pe rmits for New Construction or Modified Sources, including the adoption of new s ections 116.174 and 116.175 concerning the use of emission reductions in NSR permitting. Governor Ann Richards submitted these revisions to

the Texas SIP in a le tter dated August 31, 1993.

• On August 16, 1993, the TACB also adopted other revisions to Regulation VI to reorganize the permitting section. With the exception of the revisions to section 116.410 concerning emergency orders, EPA has already acted on th e other components of the 1993 SIP submittal.

EPA is under a Consent Decree to take final action on the Emergency Order provisions no later than December 31, 2012.

• The revisions to sections 116.174 and 116.175 are severable from the remainder of the 1993 submittal and are the only portion of the 1993 submittal under review in this document.

July 22, 1998

• On June 17, 1998, the Texas Natural Re source Conservation Commission (TNRCC) 2
adopted new section 116.116(f) concerning the us e of discrete emissi on reduction credits in NSR permitting and revisions to section 116.174. Governor George W. Bush submitted these provisions as a revision to the Texas SIP in a letter date d July 22, 1998, for rule project

number 98001-116-AI.

• New section 116.116(f) is severable from the remainder of the submittal because it addresses the use of discrete emission reduction credits in NSR permitting.

• The revision to section 116.174 is severable fr om the remainder of the submittal because it addresses the criteria used by the Executive Director to authorize the use of emission reductions in NSR permitting.

• On June 17, 1998, the TNRCC also adopted other amendments to Subchapters A through D, F, and G of Chapter 116. These amendments we re also submitted by Governor Bush as part of rule project number 98001-116-AI. With the exception of sections 116.311(a), 116.312, and 116.620, EPA has already taken final actions on this submittal.

1 The Texas Air Control Board (TACB) is a predecessor name for the Texas Co mmission on Environmental Quality. The remainder of this document will refer to actions taken by the TCEQ to promote clarity.

2 The Texas Natural Resource Conservation Commission (T NRCC) is a predecessor na me for the TCEQ. The remainder of this document will refer to actions taken by the TCEQ to promote clarity.4 • EPA is under a Consent Decree to take final action on section 116.620 for Installation and/or

Modification of Oil and Gas F acilities no later than Octobe r 31, 2011. EPA plans to act on this SIP in a separate action.

• EPA will address section 116.311(a), concerning qua lified facilities for permit renewals, in a later action when the subseque nt submissions of the qualified facilities program are

addressed.

• EPA will address section 116.312, concerning public participation for permit renewals, in a later action when subsequent submissions for public participa tion are addressed.

October 5, 2010

• On September 15, 2010, the TCEQ adopted revisi ons to section 116.116(f) to update internal cross-references. Bryan W. Shaw, Chairman of the TCEQ, submitted these revisions to the Texas SIP in a letter dated October 5, 2010.

• On September 15, 2010, the TCEQ also adopted amendments to the qualified facilities program. These revisions are severable from the amendments to section 116.116(f) and will be addressed in a later rulemaking.5 II. Summary of State Submittals

August 31, 1993 Submittal

• Section 116.174 – Determination by Executive Director to Authorize Reductions The TCEQ adopted section 116.174 on August 16, 1993, to provide the criteria by which the

Executive Director will determine whether emi ssion reductions can be used for purposes of NSR permitting. Section 116.174 requires that the Executive Director approve reductions for use pursuant with requirements set forth in SIP-approved section 116.170. Additionally, any emission reductions approved for use by the Exec utive Director must be made enforceable permit conditions.

• Section 116.175 – Recordkeeping The TCEQ adopted new section 116.175 on August 16, 1993, to establish that the recordkeeping burden for the generation and use of emission reductions in NSR permitting is that of the applicant. The TCEQ will only maintain records associated with the permit application and files. The perm it applicant is responsible for ma king all records related to the emission reductions available upon request by the Executive Director.

July 22, 1998 Submittal

• Section 116.116(f) – Use of credits The TCEQ adopted new section 116.116(f) on June 17, 1998, to provide that DERCs generated under the commission’s banking and trading provisions at 30 TAC former Section 101.29 can be used to exceed permit allowables, if all applicable requirements of section

101.29 are satisfied. The use of DERCs cannot be used to authorize any physical changes to a facility.

• Section 116.174 – Determination by Executive Director to Authorize Reductions The TCEQ adopted amendments to section 116.174 on June 17, 1998, to remove outdated references to the Texas Air Control Board, and to update references to other sections of the Texas NSR permitting regulations where emission reductions can be used in permits.

October 5, 2010 Submittal

• Section 116.116(f) – Use of credits The TCEQ adopted amendments to secti on 116.116(f) on September 15, 2010, to update the

outdated references to section 101.29 to the current SIP-approved section 101.376.6 III. Technical Review of State Submittal

This technical review of the August 31, 1993, submittal of sections 116.174 and 175; the July 22, 1998, submittal of sections 116.116(f) and revi sions to 116.174; and the October 5, 2010, submittal of revisions to section 116.116(f) consis ts of a comparison between the relevant CAA requirements and the corresponding sections in the SIP submittal. Each SIP submittal is separately reviewed for completeness as a SIP submittal under Part 51, Appendix V. Next, a section-by-section review of the three submittals in comparison to 40 CFR Part 51 is presented to determine whether the submittals satisfy th e requirements for preparation, adoption, and submittal of a SIP revision. Then the three propos ed SIP revisions are analyzed with respect to the current SIP-approved NSR program and subse quent revisions. A comparison of the three proposed SIP revisions with sec tion 110(l) of the CAA is presen ted to determine whether the proposed revisions interfere with any applicable CAA provisions . These analyses produce a

written evaluation that will be us ed to make a determination of whether or not the provisions concerning emission reductions in NSR perm itting in the August 31, 1993, July 22, 1998, and October 5, 2010, SIP submittals are in agreement w ith the CAA, other EPA policies or guidance.

A. Part 51, Appendix V Evaluation 1. August 31, 1993 SIP Submittal 2. July 22, 1998 SIP submittal 3. October 5, 2010 SIP Submittal

B. Review with respect to Part 51 C. Section-by-Section Review D. Review with respect to Section 110(l) of CAA7 III.A. Part 51, Appendix V Evaluation

1. Evaluation of the August 31, 1993 SIP Submi ttal with respect to Part 51, Appendix

V

The criteria for completeness determination ar e found in Appendix V to Part 51 - Criteria for determining the completeness of plan submissions and are outlined below:

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

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

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the requirements of this appendix V within 60 days of EPA's receipt of the submittal, but no later than 6 months after the date which the State was required to submit the plan or revision. If a completeness de termination is not made by 6 months from receipt of a submittal, the submittal shall be deemed complete by operation of law on the date 6 months from receipt. A determination of co mpleteness under this paragraph means that

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

The attached checklist outlines the basic criter ia included under 2.1, 2.2, and 2.3 of Appendix V.8 SIP Completeness Checklist for the August 31, 1993 SIP Submittal

Rule Log No: Regulation VI Genera l Rules and Standard Exemption List

Administrative Materials (2.1)

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

The SIP revision was submitted by a letter from Governor Ann W. Richards, dated August 31, 1993. The SIP submittal was received by EPA Region 6 External Affairs on October
1, 1993.

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

The revisions were adopted by the Texas Air Control Board on August 16, 1993, and became effective September 13, 1993.

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

The authority for promulgating changes to the Texas State Implementa tion is found in the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code.

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

The August 31, 1993, submittal included a copy of the official State regulation document, submitted by Governor Ann Richards.

5. Evidence is included that the State followed all the procedural requirements of its laws and/or its constitution in the conducting a nd completing the adoption/issuance of the plan.

The SIP submittal package included a certifica tion that demonstrated the SIP submittal was developed pursuant to 40 CFR 51.104.9 6. Evidence is included that public notice was given of the proposed changes consistent with the procedures approved by EPA, including the date of publication of such notice, (e.g., notarized or certified copi es of any public notices publis hed in newspapers). (The notice should be at least 30 days prior to the public hearing(s).

Notices of public hearings were published in the following newspape rs on the date listed:

• Austin American Statesman: February 11, 1993

• El Paso Times/Herald Post: February 11, 1993

• Fort Worth Star Telegram: February 12, 1993

• Houston Chronicle: February 10, 1993 and March 12, 1993

• Lubbock Avalanche-Journal: February 11, 1993.

A public hearing was held in Austin, Texas, on March 16, 1993.

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

An order adopting revisions to the SIP was incl uded. This order states that the public hearing was conducted pursuant to Texas Health and Safety Code § 382.017, Texas Government Code Chapter 2001, and 40 CFR § 51.102.

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

The SIP submittal package did include a compilation of comments. TCEQ received written testimony from 46 parties during the comment period, including EPA Region 6. Oral testimony was received from 19 par ties during the March 16, 1993 public hearing.

Technical Support (2.2)

The State should include the followi ng technical information in its SIP revision request package.

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

The SIP submittal addresses the use of emissi on reductions in NSR permitting; therefore the SIP submittal has the potential to address all regulated NSR pollutants.

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

The provisions to use emission reductions in NSR permitting can be applied statewide based on relevant permitting regulations for a specific area.10 3. Quantification of the changes in SIP allowa ble emissions from the affected sources is included. (Examples include estimates of changes in current actual emissions from affected sources and/or, where appropriate, quantification of changes in actual emissions from affected sources through calculations of the differences between certain baseline levels and allowable emissions anticipat ed if the revisions were approved.)

The provisions for using emission reductions in NSR permitting do not need to include quantification of the changes in SIP allowable emissions from the affected sources. The mechanics of the NSR permitting process ensure appropriate amounts of permitted emissions are approved.

4. Demonstration is included that the NAAQ S/PSD increments/RFP demonstration and visibility as applicable would be prot ected if the revision were approved and implemented.

The provisions for using emission reductions in NSR permitting do not need to include a demonstration that NAAQS/PSD increments/RFP /visibility is protected. The emission reduction provisions, when used in the NSR permitting process, will be protective of the NAAQS/PSD increment/RFP/visi bility as appropriate.

5. FOR REDESIGNATIONS:

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

Not applicable.

b. Are contingency measures included?

Not applicable.

6. Modeling information, if app licable, is required to s upport the proposed revision.

Modeling information is not necessary to s upport this SIP revision. Dispersion modeling is required as part of the NSR permitting proce ss, but is not part of the use of emission

reductions.

7. Evidence is included where necessary, that emission limitations are based on continuous emission reduction technology (e.g., add-on controls, industria l/process equipment designs, reformulated materials, etc.).

The use of emission reductions in NSR perm itting does not in itself establish emission limitations. The NSR permitting program w ill implement emission limitations on a permit-by-permit basis as appropriate.11 8. Evidence is included indicating that a SIP re vision contains emission limitations, work practice standards, and recordkeeping/reporti ng requirements to ensure stated emission

levels.

The emission reduction provisions do include a recordkeeping component for the use of

the emission reductions. Add itionally, each individual NSR permit will include separate emission limitations, work practice standards and recordkeeping/reporting requirements sufficient to ensure permitted emission levels.

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

The emission reduction provisions do not need to include compliance/enforcement strategies. Compliance/enforcement of the NSR permitting program will be determined on a permit-by-permit basis.

10. As appropriate, special economic and tec hnological jus tifications are included per applicable EPA policies or an explanation why such justificati ons are not necessary should be included. For example, requests for alternative RACT may require such justification.

These justifications are not n ecessary for this SIP revision.

The August 31, 1993 SIP submittal (Rule Project No. Regulation VI General Rules and Standard Exemption List) meets the complete ness criteria established in 40 CFR part 51, Appendix V.12 III.A. Part 51, Appendix V Evaluation

2. Evaluation of the July 22, 1998, SIP submi ttal with respect to Part 51, Appendix V

Part 51, Appendix V Completeness Checklists

The criteria for completeness determination is Appendix V to Part 51 - Criteria for determining the completeness of plan submissions and is outlined below:

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

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

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the requirements of this appendix V within 60 days of EPA's receipt of the submittal, but no later than 6 months after the date which the State was required to submit the plan or revision. If a completeness de termination is not made by 6 months from receipt of a submittal, the submittal shall be deemed complete by operation of law on the date 6 months from receipt. A determination of co mpleteness under this paragraph means that

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

The attached checklist outlines the basic criter ia included under 2.1, 2.2 and 2.3 of Appendix V.13 SIP Completeness Checklist for the July 22, 1998 SIP Submittal

Rule Log No: 98001-116-AI

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

Administrative Materials (2.1)

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

The SIP revision was submitted by a letter from Governor George W. Bush, dated July 22, 1998.

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

The revisions were adopted by the Texas Natural Resource Conservation Commission on June 17, 1998, and became effective July 8, 1998.

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

The authority for promulgating changes to th e Texas State Implementation Plan, Chapter 101, Subchapter A – General Rules; Subchapter H – Emissions Banking and Trading is found in Chapter 382 of the Texas Health and Safety Code.

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

The July 22, 1998, submittal included a copy of the official State regulation document, signed, stamped, and dated by Eugenia K. Brumm, PhD, Chief Clerk of the Texas Natural

Resource Conservation Commission.

5. Evidence is included that the State followed all the procedural requirements of its laws and/or its constitution in the conducting a nd completing the adoption/issuance of the plan.14 The authority for promulgating changes to the Texas State Implementation Plan is found in the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code.

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

Notices of public hearings were published in the following newspape rs on the date listed:

• Austin American Statesman: March 10, 1998,

• Beaumont Enterprise-Journal: March 11, 1998

• Fort Worth Star-Telegram: March 11, 1998

• Houston Chronicle: March 13, 1998

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

The order adopting the new and amended se ctions to 30 TAC Chapter 116 provided evidence that the public hearing was conduc ted pursuant to Texas Health and Safety Code § 382.017 and 40 CFR § 51.102. The adopti on order was stamped and signed by Eugenia K. Brumm, PhD, Chief Clerk of the Texas Natural Resource Conservation Commission, July 1, 1998.

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

The SIP submittal package did include a compilation of public comments and the State’s responses. The TCEQ received written comments from three parties including EPA Region 6; no oral testimony was received at the public hearing.

Technical Support (2.2)

The State should include the followi ng technical information in its SIP revision request package.

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

The SIP submittal addresses the use of emissi on reductions in NSR permitting; therefore the SIP submittal has the potential to address all regulated NSR pollutants.

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

The provisions to use emission reductions in NSR permitting can be applied statewide based on relevant permitting regulations for a specific area.15 3. Quantification of the changes in SIP allowa ble emissions from the affected sources is included. (Examples include estimates of changes in current actual emissions from affected sources and/or, where appropriate, quantification of changes in actual emissions from affected sources through calculations of the differences between certain baseline levels and allowable emissions anticipat ed if the revisions were approved.)

The provisions for using emission reductions in NSR permitting do not need to include quantification of the changes in SIP allowable emissions from the affected sources. The mechanics of the NSR permitting process ensure appropriate amounts of permitted emissions are approved. New section 116.116(f) does provide for the use of discrete emission reduction credits (DERCs) to be us ed in NSR permitting, the DERC generation and use provisions that have been separat ely submitted and evaluated by EPA provide adequate assurances that generation and use of DERCs will not negatively impact the SIP, (see71 FR 52703 and 75 FR 27644).

4. Demonstration is included that the NAAQ S/PSD increments/RFP demonstration and visibility as applicable would be prot ected if the revision were approved and implemented.

The provisions for using emission reductions in NSR permitting do not need to include a demonstration that NAAQS/PSD increments/RFP /visibility is protected. The emission reduction provisions, when used in the NSR permitting process, will be protective of the NAAQS/PSD increment/RFP/visibility as appropriate. New section 116.116(f) does provide for the use of discrete emission reduction credits to be used in NSR permitting, the DERC generation and use provisions that have been separately submitted and evaluated by EPA provide adequate assurances that generation and use of DERCs will not negatively impact the SIP.

5. FOR REDESIGNATIONS:

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

Not applicable.

b. Are contingency measures included?

Not applicable.

7. Modeling information, if app licable, is required to s upport the proposed revision.

Modeling information is not necessary to s upport this SIP revision. Dispersion modeling is required as part of the NSR permitting proce ss, but is not part of the use of emission

reductions.16 7. Evidence is included where necessary, that emission limitations are based on continuous emission reduction technology (e.g., add-on controls, industria l/process equipment designs, reformulated materials, etc.).

The use of emission reductions in NSR perm itting does not in itself establish emission limitations. The NSR permitting program w ill implement emission limitations on a permit-by-permit basis as appropriate.

8. Evidence is included indicating that a SIP re vision contains emission limitations, work practice standards, and recordkeeping/reporti ng requirements to ensure stated emission

levels.

The emission reduction provisions do include a recordkeeping component for the use of

the emission reductions. Add itionally, each individual NSR permit will include separate emission limitations, work practice standards and recordkeeping/reporting requirements sufficient to ensure permitted emission levels.

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

The emission reduction provisions do not need to include compliance/enforcement strategies. Compliance/enforcement of the NSR permitting program will be determined on a permit-by-permit basis.

10. As appropriate, special economic and tec hnological jus tifications are included per applicable EPA policies or an explanation why such justificati ons are not necessary should be included. For example, requests for alternative RACT may require such justification.

These justifications are not n ecessary for this SIP revision.

The July 22, 1998, SIP submittal (Rule Proj ect No. 98001-116-AI) meet s the completeness criteria established in 40 CFR part 51, Appendix V.17 III.A. Part 51, Appendix V Evaluation

3. Evaluation of the October 5, 2010, SIP subm ittal with respect to Part 51, Appendix

V

Part 51, Appendix V Completeness Checklists

The criteria for completeness determination is Appendix V to Part 51 - Criteria for determining the completeness of plan submissions and is outlined below:

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

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

1.2 The EPA shall inform the submitting official whether or not a plan submission meets the requirements of this appendix V within 60 days of EPA's receipt of the submittal, but no later than 6 months after the date which the State was required to submit the plan or revision. If a completeness de termination is not made by 6 months from receipt of a submittal, the submittal shall be deemed complete by operation of law on the date 6 months from receipt. A determination of co mpleteness under this paragraph means that

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

The attached checklist outlines the basic criter ia included under 2.1, 2.2 and 2.3 of Appendix V.18 SIP Completeness Checklist for the October 5, 2010, SIP Submittal

Rule Log No: 2010-006-116-PR

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

Administrative Materials (2.1)

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

The SIP revision was submitted by a letter from Bryan W. Shaw, PhD, Chairman of the Texas Commission on Environmental Quality, dated October 5, 2010. Governor Rick Perry designated that the Chairman of th e Texas Commission on Environmental Quality would be his designee for SIP submit tals in a letter dated May 21, 2002.

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

The revisions were adopted by the Texa s Commission on Environmental Quality on September 15, 2010, and became effective October 7, 2010.

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

The authority for promulgating changes to th e Texas State Implementation Plan, Chapter 101, Subchapter A – General Rules; Subchapter H – Emissions Banking and Trading is found in Chapter 382 of the Texas Health and Safety Code.

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

The October 5, 2010, submittal included a copy of the official State regulation document, signed, stamped, and dated by Steve Hagle, Ai r Permits Division Director of the Texas Commission on Environmental Quality.19 5. Evidence is included that the State followed all the procedural requirements of its laws and/or its constitution in the conducting a nd completing the adoption/issuance of the plan.

The authority for promulgating changes to the Texas State Implementation Plan is found in the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code.

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

Notices of public hearings were published in the following newspape rs on the date listed:

• Austin American Statesman: April 2, 2010

• Fort Worth Star-Telegram: April 2, 2010

• Houston Chronicle: April 2, 2010

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

The order adopting the new and amended se ctions to 30 TAC Chapter 116 provided evidence that the public hearing was conduc ted pursuant to Texas Health and Safety Code § 382.017 and 40 CFR § 51.102. The adopti on order was stamped and signed by LaDonna Castanuela, Chief Clerk of the Texas Commission on Environmental Quality, September 21, 2010.

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

The SIP submittal package did include a compilation of public comments and the State’s responses. The TCEQ received written comme nts from six parties including EPA Region 6; no oral testimony was received at the public hearing.

Technical Support (2.2)

The State should include the followi ng technical information in its SIP revision request package.

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

The SIP submittal addresses the use of emissi on reductions in NSR permitting; therefore the SIP submittal has the potential to address all regulated NSR pollutants.

2. Identification of the locations of affected sources including the EPA attainment/nonattainment design ation of the locations and th e status of the attainment plan for the affected area(s) is included.20 The provisions to use emission reductions in NSR permitting can be applied statewide based on relevant permitting regulations for a specific area.

3. Quantification of the changes in SIP allowa ble emissions from the affected sources is included. (Examples include estimates of changes in current actual emissions from affected sources and/or, where appropriate, quantification of changes in actual emissions from affected sources through calculations of the differences between certain baseline levels and allowable emissions anticipat ed if the revisions were approved.)

The provisions for using emission reductions in NSR permitting do not need to include quantification of the changes in SIP allowable emissions from the affected sources. The mechanics of the NSR permitting process ensure appropriate amounts of permitted emissions are approved. Amended section 116.116( f) does provide for the use of discrete

emission reduction credits to be used in NSR permitting, the DERC generation and use provisions that have been separately submitted and evaluated by EPA provide adequate assurances that generation and use of DERC s will not negatively impact the SIP.

4. Demonstration is included that the NAAQ S/PSD increments/RFP demonstration and visibility as applicable would be prot ected if the revision were approved and implemented.

The provisions for using emission reductions in NSR permitting do not need to include a demonstration that NAAQS/PSD increments/RFP /visibility is protected. The emission reduction provisions, when used in the NSR permitting process, will be protective of the NAAQS/PSD increment/RFP/visibility as appr opriate. Amended section 116.116(f) does provide for the use of discrete emission reduction credits to be used in NSR permitting, the DERC generation and use provisions that have been separately submitted and evaluated by EPA provide adequate assurances that generation and use of DERCs will not negatively impact the SIP.

5. FOR REDESIGNATIONS:

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

Not applicable.

b. Are contingency measures included?

Not applicable.

8. Modeling information, if app licable, is required to s upport the proposed revision.

Modeling information is not necessary to s upport this SIP revision. Dispersion modeling is required as part of the NSR permitting proce ss, but is not part of the use of emission

reductions.21 7. Evidence is included where necessary, that emission limitations are based on continuous emission reduction technology (e.g., add-on controls, industria l/process equipment designs, reformulated materials, etc.).

The use of emission reductions in NSR perm itting does not in itself establish emission limitations. The NSR permitting program w ill implement emission limitations on a permit-by-permit basis as appropriate.

8. Evidence is included indicating that a SIP re vision contains emission limitations, work practice standards, and recordkeeping/reporti ng requirements to ensure stated emission

levels.

The emission reduction provisions do include a recordkeeping component for the use of

the emission reductions. Add itionally, each individual NSR permit will include separate emission limitations, work practice standards and recordkeeping/reporting requirements sufficient to ensure permitted emission levels.

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

The emission reduction provisions do not need to include compliance/enforcement strategies. Compliance/enforcement of the NSR permitting program will be determined on a permit-by-permit basis.

10. As appropriate, special economic and tec hnological jus tifications are included per applicable EPA policies or an explanation why such justificati ons are not necessary should be included. For example, requests for alternative RACT may require such justification.

These justifications are not n ecessary for this SIP revision.

The October 5, 2010, submittal (Rule Project No. 2010-006-116-AI) meets the completeness criteria established in 40 CFR part 51, Appendix V.22 III.B. Review with respect to Part 51

Requirements for the preparation, adoption, and submittal of implementation plans can be found in 40 CFR Part 51. The August 31, 1993; Ju ly 22, 1998; and October 5, 2010, proposed revisions for using emission reductions in NSR permitting were evaluated against the applicable requirements in Part 51. This analysis is incl uded in Table III-B below. This analysis only

addresses the sections under review in this TSD: specifi cally, sections 116.116(f), 116.174 and

116.175. All other sections submitted in these th ree SIP submittals will be evaluated with respect to Part 51 requirements when EPA takes action on those sections.

Table III-B: Analysis of Part 51 Requirements

Part 51 – Requirements for Preparation, Adoption, and Submittal of Implementation

Plans Use of Emission Reductions in NSR Permitting 30 TAC §§ 116.116(f), 116.174, and 116.175

Subpart A – Emission Inventory Reporting Requirements The submitted sections for the use of emission reductions in the SIP-approved NSR permitting program do not affect the current TX SIP requirements for Emission Inventory Reporting. Subparts B – E [Reserved] Not applicable. Subpart F – Procedural Requirements Subpart F – Procedural Requirements
§ 51.100 Definitions § 51.100 is not applicable to the submitted sections

in the three SIP submittals under review in this

TSD. § 51.101 Stipulations § 51.101 is not applicable to the submitted sections

in the three SIP submittals under review in this

TSD.. § 51.102 Public Hearings

• States must conduct one or more public hearings

• Public hearings will only be held after reasonable notice, given at least 30 days prior to the date of the hearing

• The state must submit with the revision a certification that the hearing was held in

accordance with this section Please see section III.A of this TSD for the

evaluation of the three submitted SIP revisions with respect to the Part 51, Appendix V Checklist. The three SIP submissions met the requirements of 51.102 for notification of public hearings, as detailed in the Part 51, Appendix V Checklists and certified by appropriat e state officials.

§ 51.103 Submission of plans, preliminary review of plans

• The state makes an offici al plan submission to EPA only when the submission conforms to the requirements of Part 51, Appendix V.

• The state delivers 5 copies of the plan with a letter giving notice of the action to the EPA regional office. Please see section III.A of this TSD for the

evaluation of the three submitted SIP revisions with respect to the Part 51, Appendix V Checklist. These SIP submissions meet the requirements for completeness.

§ 51.104 Revisions

• States may revise the plan from time to time

• EPA will approve revisions only after appropriate public hearing requirements have

been met

• Revisions must be submitted in accordance

with 51.103 Please see section III.A of this TSD for the

evaluation of the three submitted SIP revisions with respect to the Part 51, Appendix V Checklist. The three SIP submissions met the requirements of 51.103 and 51.104 for notification of public hearings and submission of revisions, as detailed in the Part 51, Appendix V Checklists and certified by appropriate state officials.23 Subpart G – Control Strategy Subpart G – Control Strategy
§ 51.110 Attainment and Maintenance of National

Standards Requirements found in § 51.110 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The NSR permitting program has been submitted separately and evaluated by EPA as sufficient to not interfere with attainment and maintenance of the NAAQS. § 51.111 Description of Control Measures Requirements found in § 51.111 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program and do not provide control strategies. The NSR permitting program has been submitted separately and evaluated by EPA as sufficient to provide necessary control strategies for permitted facilities on a permit-by-permit basis. § 51.112 Demonstration of Adequacy Requirements found in § 51.112 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The NSR permitting program has been submitted separately and evaluated by EPA as sufficient to not interfere with attainment and maintenance of the NAAQS. § 51.113 Reserved Not applicable. § 51.114 Emissions Data and Projections Requirements found in § 51.113 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The NSR permitting program has been submitted separately and evaluated by EPA as sufficient to not interfere with attainment and maintenance of the NAAQS. As such, these three sections do not need to provide a detailed emission inventory and summary of projected emission levels after the implementation of control strategies. § 51.115 Air Quality Data and Projections Requirements found in § 51.113 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The NSR permitting program has been submitted separately and evaluated by EPA as sufficient to not interfere with attainment and maintenance of the NAAQS. As such, these three sections do not need to include data on existing air quality or summarize expected air quality impacts from the implementation of control strategies. § 51.116 Data Availability

The State must make available to the public all data

and calculations used in the preparation of each plan Requirements found in § 51.116 are applicable to

the three sections in the three SIP submittals under

review in this document. The TCEQ provided the public the opportunity to24 or plan revision.

Each plan must provide for public availability of emission data reported by source owners or
operators. participate in stakeholder meetings in the rulemaking development process, and the public received comment periods on the three proposed

SIP revisions. The Texas Clean Air Act, Texas Health and Safety Code at Section 382.040 requires that all information submitted to the TCEQ for compliance purposes be made available to the public, unless a written request for nondisclosure is approved. § 51.117 Additional provisions for lead Requirements found in § 51.117 are not applicable

to the SIP submittal under review in this document. Section 116.116(f) provides for the use of DERCs to exceed permit allowable; the SIP-approved DERC program does not permit the generation or use of DERCs for lead requirements. Section 116.174 requires the TCEQ Executive Director to

authorize the use of emission reductions consistent with the SIP-approved requirements at 116.170. Section 116.170 requires the emission reductions to be generated and banked under the TCEQ ERC and DERC programs – both of which prohibit the generation or use of emission reductions from lead. Section 116.175 establishes the recordkeeping

burden for section 116.174 and therefore also does

not involve lead emissions. § 51.118 Stack Height Provisions Requirements found in § 51.118 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program and do not involve good engineering practices for stack heights. § 51.119 Intermittent Control Systems Requirements found in § 51.119 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program and do not require or address intermittent control systems. § 51.120 Requirements for State Implementation Plan Revisions relating to Motor Vehicles Requirements found in § 51.120 are not applicable

to the three sections in the three SIP submittals

under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The ERC and DERC programs under which the emission reductions used in NSR permitting must be certified do provide for the generation and use of mobile emission reductions, but this is not related to the part 51 requirements for SIP revisions relating to

motor vehicles. § 51.121 Findings and requirements for submission of State Implementation Plan Revisions relating to emissions of oxides of nitrogen Requirements found in § 51.121 are not applicable

to the three sections in the three SIP submittals under review in this document. § 51.121 establishes the requirements for the NO X SIP Call; Texas was not subject to the NO X SIP Call. § 51.122 Emissions reporting requirements for SIP revisions relating to budgets for NO X emissions. Requirements found in § 51.122 are not applicable

to the three sections in the three SIP submittals under review in this document. § 51.122 establishes25 the emission reporting re quirements for the NO X SIP Call; Texas was not subject to the NO X SIP

Call. § 51.123 Findings and requirements for submission of State Implementation Plan Revisions relating to Emissions of Oxides of Nitrogen pursuant to the

Clean Air Interstate Rule Requirements found in § 51.123 are not applicable

to the three sections in the three SIP submittals under review in this document. § 51.123 establishes the requirements for the NO X Annual and Ozone season programs for the Clean Air Interstate Rule (CAIR). § 51.124 Findings and requirements for submission of State Implementation Plan Revisions relating to Emissions of Sulfur Dioxide pursuant to the Clean

Air Interstate Rule Requirements found in § 51.124 are not applicable

to the three sections in the three SIP submittals under review in this document. § 51.124 establishes the program requirements for the CAIR SO 2 Programs. § 51.125 Emissions reporting requirements for SIP revisions relating to budgets for SO 2 and NO X emissions. Requirements found in § 51.125 are not applicable

to the three sections in the three SIP submittals under review in this document. § 51.125 establishes the emission reporting requirements for the CAIR

NO X and SO 2 trading programs. Subpart H – Prevention of Air Pollution Emergency Episodes Requirements found in 51, Subpart H are not applicable to the three sections in the three SIP

submittals under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. and are not part of the Texas air pollution emergency episode plan. Subpart I – Review of New Sources and

Modifications Part 51, Subpart I requirements are applicable to the

three sections in the three SIP submittals underreview in this document. Please see the section-bysection analysis for more details about how each section satisfies the CAA and Part 51, Subpart I requirements for NSR permitting. Subpart J – Ambient Air Quality Surveillance Requirements found in 51, Subpart J are not applicable to the three sections in the three SIP

submittals under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. Ambient air quality surveillance is not part of the NSR permitting program. Subpart K – Source Surveillance Subpart K – Source Surveillance § 51.210 Each plan must provide for monitoring the status of compliance with rules and regulations that set forth any portion of the control strategy. The Texas NSR program, and the three sections under review in this document, was developed and

submitted in accordance with the Texas Health and Safety Code. Texas enforcement provisions are not typically in the State’s individual rules but are separately codified. Texas Water Code Chapter 7 contains the State’s statutory provisions for enforcement of programs developed according to the Texas Health and Safety Code; i.e., the Texas ERC program. Section 382.111 of the Texas Health and Safety Code provides the ability to enter and periodically inspect statio nary sources. Section

382.021 establishes that the Texas Commission on Environmental Quality can determine the necessary sampling and detection methods used to § 51.211 The plan must provide for legally enforceable procedures fo r requiring stationary sources to maintain records and report the following

to the State:

• Information on the nature and amount of emissions from the stationary source; and

• Other information as nece ssary for the State to

determine whether the sources are in compliance. § 51.212 The plan must provide for periodic testing and inspection of stationary sources. Additionally, the plan must establish a system for detecting26 violations and include enforceable test meth ods. demonstrate compliance with an emission

limitation. § 51.213 The plan must contain procedures for obtaining and maintaining data on actual emissions reductions achieved as a result of implementing transportation control measures. § 51.213 is not applicable to the three sections in the

three SIP submittals under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The ERC and DERC programs under which the emission reductions used in NSR permitting must be certified do provide for the generation and use of mobile emission reductions, but these reductions must be surplus to transportation control measures

in the SIP. § 51.214 The plan must contain legally enforceable procedures to require stationary sources subject to emission standards as part of the applicable plan to install, calibrate, maintain, and operate continuous emission monitoring systems. § 51.213 is not applicable to the three sections in the

three SIP submittals under review in this document. These three sections provide for the use of emission reductions in the Texas NSR permitting program. The NSR permitting program has separate provisions for establishing emission standards. Subpart L – Legal Authority Subpart L – Legal Authority § 51.230 Each plan must show that the State has the necessary legal authority to carry out the plan, including the authority to adopt emission standards and limitations necessary for attainment of the NAAQS, enforce applicable laws and regulations and seek injunctive relief. The Texas NSR program, and the three sections under review in this document, was developed and

submitted in accordance with the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code. The Texas Health and Safety Code and the enforcement provisions in the Texas Water Code provide TCEQ the necessary legal authority to implement the SIP. § 51.231 The provision of law or regulation which the State determines provides the authorities required must be specifically identified and copies must be submitted with the plan. Texas identified in the three submittal packages that each SIP revision was developed in accordance with the Texas Health and Safety Code. Please see section III.A of this document for the Part 51, Appendix V checklist for each submittal. EPA Region 6 does not require the State to submit copies of laws and regulations that have been submitted for prior SIP submittals. § 51.232 A state government agency other than the State air pollution control agency may be assigned responsibility for carrying out a portion of the plan. Each of the three SIP submittals identified the TCEQ as the agency resp onsible for implementing

the SIP. Please see section III.A of this document for the Part 51, Appendix V checklist for each

submittal. Subpart M – Intergovernmental Consultation Each plan must identify organizations by title that will participate in the development, implementation,

and enforcement of the plan. Each of the three SIP submittals identified the TCEQ as the agency responsible for developing, implementing, and enforcing the SIP. Please see section III.A of this document for the Part 51, Appendix V checklist for each submittal. Subpart N – Compliance Schedule The three sections under review in this document establish provisions for the use of emission reduction in NSR permitting. They do not establish a compliance schedule for any NAAQS, and therefore do not need to address the requirements of 40 CFR part 51, subpart N. Subpart O – Miscellaneous Plan Content Requirements Each of the three SIP revisions identified that no fiscal implications are an ticipated for TCEQ or any other state/local government through the implementation of these rules. Additionally, it was27 estimated that the public benefit as a result of implementing these revisions would be a continued

reduction in air contaminants. Subpart P – Protection of Visibility None of the three SIP revisions under review in this document was submitted as part of Texas’s plan to protect visibility. Subpart Q – Reports The three sections being reviewed here for using emission reductions in NSR permitting do not revise the existing reporting requ irements for the emission inventory in the Texas SIP. EPA approved the emission inventory requirements at 30 TAC § 101.10 on August 26, 1994 (59 FR 44036). Subpart R – Extensions Requirements found in 51, Subpart R are not applicable to any of the three SIP submittal under review in this document; none of these SIP revision submittals is a request for an 18-month extension. Subpart S – Inspection/Maintenance Program Requirements Requirements found in 51, Subpart S for an inspection/maintenance program are not applicable to the three sections providing for the use of emission reductions in NSR permitting. Subpart T – Conformity to State or Federal Implementation Plans of Transportation Plans, Programs, and Projects Developed, Funded, or Approved Under Title 23 U.S.C or the Federal

Transit Laws The three sections under review in this document provide for the use of emission reductions in NSR permitting and will not interfere with the transportation conformity budgets developed for each nonattainment and maintenance area pursuant to subpart T. The emission reductions used in NSR permitting under these three sections must be generated and banked as either ERCs or DERCs. Both the ERC and DERC programs provide that mobile sources can generate mobile emission credits, but these credits most be surplus to the

baseline emissions in the SIP. Subpart U – Economic Incentive Programs 40 CFR part 51, subpart U establishes requirements for statutorily mandated economic incentive programs under sections 182(g)(3), 182(g)(5), 187(d)(3), or 187(g) of the CAA. The three sections

under review in this document revise the NSR permit program and are not part of a mandatory Economic Incentive Program under Subpart U. Subpart W – Determining Conformity of General Federal Actions to State or Federal Implementation

Plans The three sections providing for the use of emission reductions in NSR permitting do not interfere with the requirements for general conformity in subpart W. All emission reductions used in NSR permitting under these three sections must be generated and banked as ERCs or DERCs, whether from stationary or mobile sources, and must be surplus to the

baseline emissions in the SIP. Subpart X – Provisions for Implementation of 8-hr Ozone NAAQS Requirements found in 51, Subpart X are for the implementation of the 8-hour ozone NAAQS. These requirements are not applicable to the three sections providing for the use of emission reductions in NSR permitting. Subpart Y – Mitigation Requirements The three sections under review in this document providing for the use of emission reductions in NSR permitting do not create procedures by which Texas28 could exclude air quality data due to exceptional

events. Subpart Z – Provisions for Implementation of PM2.5 National Ambient Air Quality Standards Requirements found in 51, Subpart X are for the implementation of the PM2.5 NAAQS. These requirements are not applicable to the three sections providing for the use of emission reductions in NSR permitting.29 III.C. Section-by-Section Review

The following analysis will review each of the three submitted sections, 116.116(f), 116.174, and 116.175, from original adoption thro ugh subsequent revisions to further analyze whether the submitted revisions as a whole support the CAA, EPA policy and guidance for NSR permitting.

Table III-C.1: Revisions to § 116.116(f) – Use of Credits

Adopted State Language June 17, 1998 Rule Project No: 98001-116-AI Adopted State Language September 15, 2010 Rule Project No.: 2010-006-116-AI 116.116(f) Use of credits. Notwithstanding any othe r subsection of this section, discrete emission reduction credits may be used to exceed permit allowables as described in § 101 .29(d) (4)(v) of this title (relating to Emission Credit Banking and Trading) if all appli cable conditions of §101.29

of this title are met. This subsection does not authorize any physical changes to a facility. 116.116(f) Use of credits. Notwithstanding any othe r subsection of this section, discrete emission reduction credits may be used to exceed permit allowables as described in § 101 .29(d)(4)(v) of this title (relating to Emission Credit Banking and Trading) §101.376(b) of this title (relating to Discrete Emission Credit Use) if all applicable conditions of §101.29 §101.376 of this title are met. This subsection does not authorize any physical changes to a facility.

TCEQ adopted new section 116.116(f) on June 17, 1998, and submitted this section as a SIP revision on July 22, 1998. TCEQ adopted ame ndments to section 116.116(f) and submitted

these amendments as a SIP revision on Octobe r 5, 2010. The provisions in section 116.116(f) allow a permit holder to exceed permit allowable through the use of discrete emission reduction credits (DERCs), pursuant to the appropriate DERC regulations. At the time of the initial adoption on June 17, 1998, the DERC regulations were codified at 30 TAC Chapter 101, section 101.29(d)(4)(v). The TCEQ subsequently recodi fied the DERC regulations to30 TAC Chapter 101, section 101.376(b). This recodi fication is captured in the amendment to section 116.116(f) adopted September 15, 2010, and submitted October 5, 2010.

EPA reviewed and approved the DERC program on September 6, 2006, see 71 FR 52703. At

that time we reviewed the use provisions for DERCs and found th em consistent with the CAA and EPA’s Economic Incentive Program Guidance. Specifically, the use of DERCs to exceed permit allowables is limited to the following instances:

(1) in ozone nonattainment areas, permitted facilities may use discrete emission credits to exceed permit allowables by no more than ten tons for nitrogen oxides or five tons for volatile organic compounds in a 12-month period as approved by the executive

director. This use is limited to one exceed ance, up to 12 months within any 24-month period, per use strategy. The user shall de monstrate that there will be no adverse impacts from the use of discrete emissi on credits at the levels requested; or30 (2) at permitted facilities in coun ties or portions of counties de signated as attainment or unclassified, discrete emission credits ma y be used to exceed permit allowables by values not to exceed the prevention of signi ficant deterioration significance levels as provided in 40 Code of Federal Regulati ons (CFR) §52.21(b)(23), as approved by the executive director prior to use. This use is limited to one exceedance, up to 12 months within any 24-month period, per use st rategy. The user shall demonstrate that there will be no adverse impacts from the use of discrete emission credits at the levels requested;

A further restriction on DERC usage to exceed pe rmit allowables is that all requirements of section 101.376 must be satisfied. This means that for a permit holder to exceed permit

allowables as described above a demonstration mu st be made that the usage will result in no adverse impacts on the attainment or nonattainment area, and th e user must retire 10% more DERCs than are necessary for the use as an e nvironmental contribution. For these reasons, EPA approved this usage provision of the DERC rule as consistent with section 110(l) of the CAA.

Because the provisions at section 116.116(f) refe rence SIP-approved provisions, EPA finds that the original August 31, 1993, submission of sect ion 116.116(f) with the amendments submitted October 5, 2010, is approvable into the Texas SIP.

Table III-C.2: § 116.174 – Determination by Ex ecutive Director to Authorize Reductions

Adopted State Language August 16, 1993 Rule Project No.: Regulation VI General Rules and Standard Exemption List Adopted State Language June 17, 1998 Rule Project No: 98001-116-AI

116.174. Determination by Executive Director

to Authorize Reductions.

The Executive Director may grant authority to a permit applicant to use prior emission reductions and emission reductions granted to the applicant by another entity (either public or private) in accordance with S116.170 if the

Texas Air Control Board determines that the prior emission reductions have, in fact, occurred and, when considered with other emission reductions that may be required by the permit as well as contaminants that will be emitted by the new source, will result in compliance with §116 .150(b) of this title (relating to New Major Source or Major Modification Required), §116 .160 of this title (relating to Preven tion of Significant Deterioration Requirements), and §116 .152 of this title (relating to Evaluation of Air Quality 116.174. Determination by Executive Director

to Authorize Reductions.

The executive director may grant authority to a permit applicant to use prior emission reductions and emission reductions granted to the applicant by another en tity (either public or private) in accordance with §116 .170 of this title (relating to Applicability for Reduction Credits) if the Texas Air Control Board if the

commission determines that the prior emission reductions have, in fact, occurred and, when

considered with other emission reductions that may be required by the permit as well as contaminants that will be emitted by the new source, will result in compliance with §116.150(b) of this title (relating to New Major Source or Major Modification Required), §116.160 of this title (relating to Prevention of Significant Deterioratio n Requirements), and31 Impacts), as applicable, in the area where the

new source is to be located. Prior as well as

future emission reductions to be used as an offset shall be made conditions for granting authority to construct the proposed new source

and shall be enforced. §116 .152 of this title (relating to Evaluation of Air Quality Impacts ) §116.150 of this title (relating to New Major Source or Major Modification in Ozone Nonattainment Areas), § 116.151 of this title (relating to New Major Source or Major Modification in nonattainment Areas Other Than Ozone), § 116 .160 of this title (relating to Pr evention of Significant Deterioration Requireme nts), and § 116 .162 of this title (relating to Evaluation of Air Quality Impacts) , as applicable, in the area where the

new source is to be located. Prior as well as

future emission reductions to be used as an offset shall be made conditions for granting authority to construct the proposed new source

and shall be enforced.

TCEQ adopted new section 116.174 on August 16, 1993, and submitted this section as a SIP revision on August 31, 1993. Amendments to section 116.174 were adopted on June 17, 1998, and submitted as a SIP revision on July 22, 1998. Th e intent of new section 116.174 is to specify that the Executive Director must approve th e use of emission reductions in NSR permitting consistent with the provisions in section 116.170. The revisions submitted July 22, 1998,

remove the reference to the Texas Air Control Board and update the references to the specific Texas NSR permitting provisions, but the intent of the section remains the same. The TCEQ Executive Director may only approve emission reductions to be used in a permitting action consistent with the requirements at secti on 116.170. Further, section 116.174 specifies that emission reductions (prior as well as futu re) must be enforceable permit conditions.

EPA reviewed section 116.170 and SIP-approved the provisions for the app licability of the use

of emission reductions as offsets on Marc h 20, 2009, see 74 FR 11851. We found that the following provisions from section 116.170 are consis tent with the requirements for offsets at

sections 171 and 173 of the CAA.

116.170 – Applicability of Emi ssion Reductions as Offsets (a) No reduction may be used as an offset unless it has been certified as an emission credit under Chapter 101, Subchapter H, Division 1 or 4 of this title (relating to Emission Credit Banking and Trading; or Discrete Emission Credit Ba nking and Trading), except as provided for in subsection (c) of this section. (b) Existing reductions not yet cer tified and banked as an emissi on credit must be certified and banked with the executive director by Se ptember 1, 2004 in order to be considered

for use as an offset. (c) A future reduction may be used as an offset for a permit provided that:

(1) the permit contains special conditions that specify the date by which the permit holder must submit to the executive director appropria te and sufficient data to verify that the

reduction has occurred and the reduction is provided by start of operation;32 (2) the reduction must be achieved prior to commencement of the permitted emissions for which the offset is required; (3) the reduction meets al l of the requirements of Chapte r 101, Subchapter H, Division 1

or 4 of this title when submitted to th e executive director for review per the requirements of the issued permit; and (4) the permit holder agrees to obtain additio nal offsets if the review by the executive

director indicates the reduc tions do not satisfy the original offset requirements.

Therefore, when the TCEQ Executive Director approves the use of an emission reduction in a permitting action under section 116.174, this approval mu st be consistent with the provisions in section 116.170. Section 116.170 require s that the reduction be certifie d and banked as either an

emission reduction credit or a DERC under TC EQ’s SIP-approved Emissions Banking and Trading provisions at 30 TAC Chapter 101, Subc hapter H, Divisions 1 and 4, and that the reductions will be in place, real and enforceable by the start of operation. Section 116.174 works together with section 116.170 to ensure only appropriate emission reductions are approved for use in NSR permitting. As such, the original August 31, 1993, submission and subsequent July 22, 1998 submitted revisions to section 116.174 are approvable by EPA into the Texas SIP.

Table III-C.3: § 116.175 Recordkeeping

Adopted State Language August 16, 1993 Rule Project No: Regulation VI General Rules and Standard Exemption List 116.175 – Recordkeeping

The Executive Director will maintain no record s of emission offset credits claimed by an applicant in accordance with §116 .170 other than those contained in permit application and permit files. The applicant shall maintain all records necessary to substantiate claims of emission

reductions and shall make such records availa ble for inspection upon requ est of the Executive

Director.

The TCEQ adopted section 116.175 on August 16, 1993, and submitted this section as a SIP revision on August 31, 1993. New section 116.175 wa s adopted to place the recordkeeping burden on the use of emission reductions in NSR permitting in accordance with section 116.170 on the permit applicant rather than the TCEQ. The TCEQ will main tain records contained in the permit application and permit files, all other necessary information to verify the emission reductions used in the permit are the responsib ility of the permit holder and must be made available at the request of the TCEQ Executive Director. Placing the burden of proof on the permit holder is consistent with the requirements in NSR and PSD permitting that the permit holder maintain all necessary records to substa ntiate emission reductions and verify emission limitations. Further, the SIP-approved Emissions Banking and Trading Pr ovisions at 30 TAC Chapter 101, Subchapter H, Divisions 1 a nd 4 for the Emission Reduction Credit and DERC programs, makes clear that the generator and user of the emission reductions is responsible for33 maintaining all necessary records to substantiate the reduction – not the TCEQ. Therefore, EPA finds that the August 16, 1993, adoption of sectio n 116.175 is approvable into the Texas SIP.34 III.D. Evaluation with respect to section 110(l) of the CAA

This section 110(l) analysis will be conducted considering the three sections submitted in the three SIP submittals as one component of the Texas NSR permitting program. Specifically, these three sections provide the regulations for the use of DERCs to exceed permit allowables, the authority of the TCEQ Executive Director to approve the use of emission reductions consistent with section 116.170, and the recordkeeping requirements for using emission reductions in NSR permitting.

Section 110(l) of the Clean Air Act states:

Each revision to an implementation plan subm itted by a State under this Act shall be adopted by such State after reasonable notice and public hearing. The Administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement concerning attainment and re asonable further progress (as defined in section 171), or any other applicable requirement of this Act.

Thus, under section 110(l), sections 116.116( f), 116.174, and 116.175 must not interfere with

attainment or reasonable furthe r progress or any other applicable requirement of the Act. The three sections are necessary components of the Texas NSR permitting program. Without these provisions, permit applicants will not have the necessary flexibility provided them in the Texas

SIP and the CAA.

Section 116.116(f) will not interfer e with attainment, reasonable fu rther progress, or any other applicable requirement of the Act. Section 116. 116(f) refers to a SIP-approved usage of DERCs to exceed permit allowable. This use of DERCs to exceed permit allowables was previously SIP-approved by EPA on September 6, 2006, to be c onsistent with section 110(l) of the CAA, see 71 FR 52703. In our proposed approval noti ce of the DERC program we stated that:

We have also considered whether the potenti al use of DECs to exceed allowable emission levels under 30 TAC § 101.376(b)(1) is contrary to section 110(l) in that it could allow sources to exceed limits in their CAA Title V permits, which are “applicable requirements” under the Act. We conclude that this aspect of the rule does not violate section 110(l), for the following reasons. Firs t, EPA has addressed the interface of Title V permits and trading programs in the EIP guidance, which provides:

If a facility that has a title V operating permit wishes to participate in your approved EIP, you must modify the faci lity’s operating perm it to include the detailed compliance provisions necessary to assure compliance with the EIP. Thus, the permit becomes a valuable tool to ensure the source meets the requirements of the EIP.

Once the permit includes terms and conditi ons necessary to implement the EIP (as described below), the source may typically make individual trades under the EIP without the need for future formal pe rmit revisions. This is true because most trading activity under such a permit w ould already be addressed and allowed by35 the specific terms and conditions of the permit and such trading would not normally conflict with the permit. This is the principle exp ressed by section 70.6(a)(8) of the CFR, whic h states that permit revi sions are not required for trading program changes that are “p rovided for” in the permit.

(EIP Guidance, Appendix 16.8.) Texas has modifi ed its Title V permit template so as to address the permissible use of DECs to m eet Title V permit requirements. As further explained in this TSD, we find that the Texas permit language satisfies the concerns identified in Appendix 16.8.

In reaching this conclusion, we also considered that a Title V permit is not itself a source of substantive limits. Rather, it incorporates applicable requirements under other permits and programs. In Texas, as elsewhere, many of the allowable emission levels in Title V permits are determined through New Sour ce Performance Standards (NSPS), Best Available Control Technology (BACT), Lowest Achievable Emission Rate (LAER), or

National Emission Standards for Hazardous Air Pollutants (NESHAPs). Under the Texas rules, DECs may not be used for compliance with any of these programs. The rule does allow DECs to be used for compliance w ith Reasonably Availabl e Control Technology (RACT) standards, in accordance with EP A’s guidance. Specifically, the guidance provides that “[i]f your EIP allows sources to avoid di rect application of RACT technology, your EIP must ensure that the le vel of emission reductions resulting from implementation of the EIP will be equal to those reductions expected from the direct application of RACT.” (EIP Guidance, Appendix 16.7) The Texas program ensures consistency with that element of the EIP Gu idance through the requirement that a user of DECs must retire 10 percent mo re credits than are needed. Accordingly, any use of DECs for RACT compliance will have been preced ed by a ten percent greater reduction.

The above discussion concerns criteria pollu tants for which an area is classified as nonattainment. As for pollutants for which an ar ea is in attainment, EPA believes that the

DERC rule is consistent with section 110(l). Discrete credit use in attainment areas could potentially result in temporary local increases in such attainment pollutants, but only in the sense of authorizing limited exceedances of state-only permit requirements. That is, in attainment areas in Texas, the Federally enforceable permit limits are all based on programs, such as BACT and NSPS, for which DEC use is not authorized under the Texas rule. DEC use for attainment pollu tants can therefore only affect non-SIP requirements. Irrespective of the DERC rule , such non-SIP requirements are subject to change without undergoing a 110(l) analysis. Accordingly, the DERC SIP revision is not itself causing any increases in attainment po llutants that might be contrary to section 110(l). [See 70 FR 58165 – 58166, October 5, 2002]

Section 116.174 will not interfere with attainment, reasonable fu rther progress, or any other applicable requirement of the Act. Section 116.174 states that the TCEQ Executive Director will approve the use of emission reductions for NSR permitting consistent with the requirements of section 116.170. EPA SIP-approved section 116.170 as consistent with section 110(l) on March 20, 2009 (74 FR 11851).36 Section 116.175 will not interfere with attainment, reasonable fu rther progress, or any other applicable requirement of the Act. Section 116.175 states that the r ecordkeeping burden for emission reduction usage will be the responsibilit y of the permit holder. These recordkeeping requirements will not violate 110(l).37 IV. Conclusion

The technical analysis provided in the preceding s ections has compared the applicable sections of the CAA and 40 CFR Part 51 to TCEQ’s August 31, 1993, submission of sections 116.174 and 116.175; the July 22, 1998, submission of s ections 116.116(f) and 116.174; and the October 5, 2010 submission of section 116.116(f).

This analysis found that the adoption of the new sections 116.174 and 116.175 submitted on August 31, 1993, is consistent with the CAA and 40 CFR Part 51. EPA also finds that the adoption of new section 116.116(f) and the re visions to section 116.174 submitted on July 22, 1998, is consistent with the CAA and 40 CFR Part 51. Additionally, EPA finds that the adoption of revisions to section 116.116(f) submitted on Oc tober 5, 2010, is consistent with the CAA and

40 CFR Part 51.

Because our review of sections 116.116(f), 116.174, and 116.175 finds that the intent of these

sections is to reference other SI P-approved sections or to estab lish the burden for recordkeeping requirements, we have determined that this actio n should be considered n oncontroversial. It is recommended that direct final approv al of these revisions be published.