RobertJ. Huston, Chairman R. B. "Ralph" Marquez, Commissioner Kathleen HartnettWhite, Commissioner JeffreyA Saitas, ExecutiveDirector

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## TEXAS NATURAL RESOURCE CONSERVATION COMMISSION Protecting Texas byReducingandPreventingPollution July 

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Mr. Gregg Cooke Regional Administrator U.S. Environmental ProtectionAgency, Region 6 1445 Ross Avenue Dallas, Texas 

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### 22,2002, the Texas Natural Resource Conservation Commission (Commission) adopted revisions to the State Implementation Plan (SIP). The Commission adopted new and amended sections to Chapter 

### 39, Public Notice; and new and amended sections to Chapter 

### 116, Control ofAir Pollutionby Permits for New Construction or -Modification. The adopted changes to Chapter 

### 39 and Chapter 116 concern requirements and
. procedures for the permitting ofgrandfathered facilities and an incentive programfor the reduction of emissions ofnitrogen oxides from**~ertain** grandfatheredreciprocating interrial combustion engines associated with pipelines. The new and amended sections ofChapter 

### 39; all sections ofChapter 

### 116, Subchapter H except §116.776; and the new and amended sections ofChapter 116, Subchapters A and I are being submitted as a revision to the SIP. Enclosed are the proposed revisions to the SIP, a public hearing certification, a complete record ofthe public hearing, and the accompanying order. I lookforward to your expeditious approval ofthese SIP revisions. ly,

Chairman 

### RJH/js
cc: The Honorable Rick Perry, Governor ofTexas Ms. Wendy Wyman, Environmental and Natural Resources Policy Director, Office ofthe Governor ' Mr. Jeffrey A. Saitas, P.E., Executive Director, Texas Natural Resource Conservation Commission Enclosures

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# . P.O. Box 13087 • Austin, Texas 78711-3087 • 5121239-1000 • Internetaddress: www.tnrcc.state.tx.us prinkJ un**r~·cyd~J** p<lper lIsing soy-bJ:.eJ inkMr. Gregg Cooke Page 2
bee: Mr. Randolph Wood, Deputy Director, Office of Environmental Policy, Analysis, and Assessment Mr. 

### JimMuse, Director, Policy and Regulations Division Ms. Heather Evans, Strategic Assessment Division Ms. Jill Burditt, Policy and Regulations Division OEPAA fileTexas Natural Resource Conservation Commission Public Hearings January 22-24, 28, 29, 2002 Concerning revisions to 30 TAC Chapter 116, Subchapters A, H, and I, Control ofAir Pollution by Permits for New Construction or Modification; and Chapter 39, Subchapter H and Subchapter K, concerning Public Notice; and a revision to the state implementation plan Rule Log Number2001-076-116-AIINTRODUCTION
The Texas Natural Resource Conservation Commission (commission) held public hearings to receive testimony regarding revisions to 30TAC Chapter39 and Chapter 116, and tothe state implementation plan (SIP). The public hearings were held at the following times and locations: January 22, 2002, 7:00 p.m., TylerJuniorCollege Regional Training and Development Center, Room 104, 1530 South Southwest Loop 323, Tyler; January 23, 2002, 7:00 p.m., City of Houston, City Council Chambers, 2nd Floor, 901 Bagby, Houston; January 24, 2002, 7:00 p.m., City of Odessa, City Council Chambers; 5th Floor, 411 West 8th Street, Odessa; January 28, 2002, 6:30 p.m., City of Irving, Central Library Auditorium, 801 West Irving·· Boulevard, Irving; and January 29, 2002, 2:00 p.m., Texas Natural Resource Conservation Commission, 12100 North 1-35, Building F, Room 2210, Austin.

This volume concerns new and amended sections to Chapter 39, Public Notice; and new and amended sections to Chapter 116, Control of Air Pollution by Permits for New Construction or Modification. The adopted changes toChapter39 and Chapter 116 concern requirements and proceduresforthe permitting. ofgrandfathered facilities and an incentive program forthe reduction ofemissions of nitrogen oxides from certain grandfathered reciprocating internal combustion engines associated with pipelines. The new and amended sectionsofChapter39are being submittedtothe United States Environmental Protection Agency (EPA) as a revision to the state implementation plan (SIP). All sections ofSubchapter H except §116.776, are being submitted to the EPAas a revision to the SIP. The new and amended sections of SubchapterA and I are also being submitted to the EPA as a revision to the SIP.

Written comments were accepted through January 29, 2002. All testimony and comments have been reviewed and seriously considered. This hearing record contains a complete record ofthe public hearings and is divided into the following four sections:o Public Notification and Proposal o Written and Oral Testimony o Evaluation ofTestimony o Staff Recommendations

Additional copies ofthis hearing record are maintained in theTNRCC central officeat 12100 Park35 Circle, Austin, Texas 78753. Forfurther information, please contact Jill Burditt at (512) 239-0560.

# EVALUATION OF TESTIMONY

# Texas Natural Resource Conservation Commission INTEROFFICEMEMORANDUM To: Commissioners Date: May 3,2002 Thru:

From: Subject: Caption: LaDonna Castafiuela Chief Clerk RandolphWood, Deputy Director Office ofEnvironmental Policy, Analysis, and Assessment Commission Approval for Adoption ofRulemaking Docket No. 2001-1408-RUL. Consideration for adoption of new and amended sections of 30 TAC Chapter 116, Control of Air Pollution by Permits for New Construction or Modification, SubchapterA, Definitions; SubchapterH, Permits for Grandfathered Facilities; and SubchapterI, Electric Generating Facility Permits; and Chapter 39, Public Notice, SubchapterH, Applicability and General Provisions; and SubchapterK, PublicNotice ofAirQualityApplications. Additionally, consideration ofsubmission ofall sections ofChapter 116, SubchapterH, except Section 116.776; the new and amended sections ofChapter 116, Subchapters A and I; and the new and amended sections ofChapter 39 as a revision to the state implementationplan. The revisions to Chapters 116 and 39 establish requirements and procedures for the permitting of grandfathered facilities in accordance with House Bill (HB) 2912, Sections 5.02

- 5.04, 77th Legislature, 2001, and establish an incentive program for thereductionofemissions ofnitrogenoxidesfromcertaingrandfatheredreciprocating internal combustion engines associated with pipelines as authorized by HB 2914, Section 78, 77th Legislature, 2001. The Chapter 116 proposal was published in the January 4, 2002 issue ofthe Texas Register (27 TexReg 78), and the Chapter 39 proposal was published in the January 11, 2002 issue of the Texas Register (27 TexReg 353). (SteveHagle, Terry Salem, JillBurditt) (RuleLog No. 2001-076-116- AI) What the Adopted Rules Will Do: The new and amended sections ofChapter 116 establish the eligibility, application, and control requirements for the four new types ofpermits created by HB 2912: existing facility permits; small business stationary source permits; electric generating facility permits; and pipeline facilities permits. Consistent with HB 2912, the rulemaking establishes the dates by which facilities must apply for a permit and have controls operational or submit a notice ofshutdown. The revisions to Chapter 39, Public Notice, clarify the notice and hearing requirements for grandfathered facility permits consistent with HB 2912 requirements. HB 2912 defines a natural-gas-fired electric generating facility as a facility designed to burn either natural gas or fuel oil ofa grade approved by commission rule. Based on a preliminary analysis, staffhad originally proposed limiting the burning offuel oil to ASTM Grade No.2Commissioners Page 2 May 3, 2002 Re: Docket No. 2001-1408-RUL fuel oil with a maximum sulfur content of0.3 % by weight. After a more complete analysis, the rule was changed to allow the burning ofany ASTM grade offuel oil with a maximum sulfur content of0.7% by weight (except in those areas already having a more stringent limit on sulfur content in Chapter 112). The preliminary analysis was limited to No.2'fuel oil partially due to a concern about impacts associated with metals whenburning heavier fuel oil grades. Because the health impacts associated with metals are based on long-term exposure, and because the burning offuel oil is expected only to occur for shortperiods oftime, the final rule allows the burning ofthese heavier grades. An upcoming MACT standard is also expected to address the metals associated with burning fuel oil. Any utility which burns fuel oil for extended periods oftime would be subject to this MACT standard. In order to keep better track ofthe amount offuel oil burned by electric utilities, aprovision was added to the final rule to require an annual report on the units which burn fuel oil, the grade and amount offuel oil burned, and the date(s) that fuel oil is burned. Additionally, the rulemaking establishes the guidelines for how any money deposited into the Emissions Reductions Incentives Account created by HB 2914, §78 is to be distributed to owners or operators making reductions in emissions from grandfathered reciprocating internal combustion engines associated with pipelines. All sections ofChapter 116, SubchapterH, except §116.776; the new and amended sections of Chapter 116, Subchapters A and I; and the new and amended sections ofChapter 39

### will be submitted as a revision to the state implementation plan (SIP).· Section 116.776 is not being submitted as a SIP revision because it deals only with reimbursements from the Emissions

. . Reductions Incentives Account. All other sections ofSubchapterH need to be submitted so that the existing sections regarding voluntary emission reductionpermits, as well as the proposed new sections, become part ofthe SIP. 

### Applicable Law: These new and amended sections would be adopted under the authority ofnumerous sections of the Texas Clean Air Act, which generally relate to permitting requirements, and Texas Water Code, §5.103, which authorizes the commission to adopt rules, and §5.122, which authorizes the commission to delegate uncontested matters to the executive director. 

### Reason Rules Are Needed: The new and amended sections in Chapters 116 and 39 are necessary to implement and administer the requirements ofHB 2912, §§5.02

- 5.04, which revised the Texas Health and Safety Code to require that all grandfathered facilities obtainpermits, and HB 2914, §78, which established a reimbursementprogram for certain emissions reductions from reciprocating internal combustion engines associated with pipelines. 

### Public Comment: The commission received comments on the proposed rules from elected officials, industry, environmental and public interest groups, individuals, and the EPA. All commenters suggestedCommissioners Page 3 May 3, 2002 Re: Docket No. 2001-1408-RUL changes to some portion ofthe rules. The interest ofthe elected officials seemed to focus on two primary areas ofthe rulemaking

- burning offuel oil by electric utilities and pipeline facilities permits. Staffbelieves the final rule regarding the burning offuel oil by electric utilities adequately addresses the concerns expressed in comment. The elected official interest inpipeline facilities permits centered around the amount ofNOx reductions that wouldbe required from engines located 

### in WestTexas. Industry is opposed to being required to make any reductions in NOx emissions 

### in WestTexas without a finding by the commission that there is a specific environmentalbenefit associated with the requirement to reduce emissions. There may be some support from elected officials for this position. However, the rule language requiring up to a 20%reduction from these engines has not changed from the proposal. This language tracks the statutory language ofHB 2912. In addition, staffhas reiteratedthat the intent ofthe commission would be to focus on reductions that canbe achieved at little or no capital cost to the owner or operator. Staffbelieves this is consistent with the statutory language and legislative intent. Final Regulatory Impact Analysis Determination: The rulemaking implementing HB 2912, §§5.02

- 5.04 meets the definition ofa "major environmental rule," but the proposed rulemaking implementing HB 2914, §78 does not meet the definition ofa major environmental rule. However, neither rulemaking meets any ofthe four applicability requirements under Texas Government Code, §2001.0225. Therefore, a regulatory impact analysis is not required. Takings Impact Assessment: This rulemaking is not subject to Texas Government Code, Chapter 2007 because this is an action that is reasonably taken to fulfill an obligationmandated by federal law, which is exempt under Texas Government Code, §2007.003(b)(4). The action is mandated by federal law because the rules will be submitted for the United States Environmental Protection Agency approval as part ofthe SIP to assistthe state's efforts to attain the ozone national ambient air quality standard. Consistency with the Coastal Management Program: This rulemaking is subject to the Texas Coastal Management Program (CMP). This proposal will require the owners or operators ofall previously grandfathered facilities to obtain a permit for those facilities in order to continue to operate. The permits issued for these facilities are expected to result in reduced emissions ofair contaminants and improved compliance with state and federal air pollution control requirements. Therefore, this rulemaking is consistent with the CMP. Affected Agency Programs: The affected agency programs for this rulemaking are the Air Permits Division; the Field Operations Division; and the Enforcement DivisionCommissioners Page4 May 3,2002 Re: Docket No. 2001-1408-RUL Agency Contacts: 

### Jill Burditt, Office ofEnvironmental Policy, Analysis, and Assessment, 239-0560 Steve Hagle, Air Permits Division 239-1295 Terry Salem, Environmental Law Division, 239-0469 GarrettArthur, Environmental Law Division, 239-5757 Angela Slupe, Texas Register/Administrative SupportTeam, 239-4712
cc: 7 copies to the Chief Clerkfor distributionEVALUATION OF TESTIMONY

The Texas Natural Resource Conservation Commission (commission) adopts new §39.404, Applicability for Certain Initial Applications forAir Quality Permits for Grandfathered Facilities. The commission also adopts amendments to §39.411, Text of Public Notice; §39.419, Notice ofApplication and Preliminary Decision; §39.420, Transmittal ofthe Executive Director's Response to Comments and Decisions; §39.603, Newspaper Notice; §39.604, Sign-Posting; and §39.606, Alternative Means of Notice for Voluntary Emission Reduction Permits. Sections 39.404, 39.411, 39.419, 39.420, 39.603, 39.604, and 39.606 are adopted withoutchangesto the proposed text as published in the January 11, 2002 issue of the Texas Register(27 TexReg 353) and will not be republished. The new and amended sections of Chapter 39 will be submitted to the United States Environmental Protection Agency (EPA) as a revision to the state implementation plan (SIP).

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE ADOPTED RULES During the 75th Legislature, 1997, House Bill (HB) 3019 directed the commission to develop a voluntary emissions reduction plan forthe permitting of existing significant sources. These existing significant sources are commonly known as grandfathered facilities. A grandfathered facility is one that existed at the time the legislature created the Texas Clean AirAct (TeM) in 1971. These facilities were not required to comply with (Le., grandfathered from) the then new requirement to obtain permits for construction or modifications offacilities that emit aircontaminants. Ifgrandfathered facilities had not been modified since 1971, they continued to be authorized to operate without a permit. The intent of HB 3019 was to create a program that would encourage the remaining grandfathered facilities to voluntarily obtain permits thatwould reduce the emissions from those facilities. In response to HB 3019, the commission created the Clean Air Responsibility Enterprise (CARE) Committee to develop recommendations forthe voluntary permitting of grandfathered facilities.

1In 1999, the 76th Legislature used the CARE Committee's recommendation as the basis for Senate Bill (SB) 766, which directed the commission to develop rules containing incentives forthe voluntary permitting of grandfathered facilities. This program is known as the Voluntary Emission Reduction Permit (VERP) program. The commission adopted rules to implement the VERP program on December 16, 1999. Since the VERP rules became effective, the owners and operators of a numberof grandfathered facilities have taken advantage ofthe incentives offered by the VERP program and submitted VERP applications fortheir grandfathered facilities. Additionally, the owners and operators of othergrandfathered facilities have submitted permit-by-rule registrations and other new source review permit applications to permittheir grandfathered facilities. The deadline to apply for a VERP was August 31,2001.
Additionally, the 76th Legislature, 1999 amended the Texas Utilities Code, Title 2, Public Utility Regulatory Act, Subtitle B, Electric Utilities, and created a new Chapter 39, Restructuring of Electric Utility Industry by adopting SB 7. SB 7 required the commission to implement the permitting and allowance requirements of newTexas Utilities Code, §39.264, concerning Emissions Reductions of "Grandfathered Facilities." SB 7 required the commission to develop a mass cap and trade system to distribute emission allowances for use by electric generating facilities (EGFs). Under SB 7, two categories of EGFs are eligible to use the proposed trading system. The first category consisted of EGFs in existence on January 1, 1999, which were not subject to the requirement to obtain a permit underTCM, §382.0518(g). These facilities are commonly referred to as grandfathered facilities. SB 7 also mandated that grandfathered EGFs apply for a permit on or before September 1, 2000, and obtain a permit by or cease operation after May 1, 2003. The second category of EGFs consisted of permitted EGFs thatwere not subject to the permitting requirements ofSB 7, yet elected to participate in the allowance trading system.

Most recently, the 77th Legislature, 2001, amended Texas Health and Safety Code (THSC), TCM to require that all grandfathered facilities obtain permits. The mandatory permitting requirements of HB 22912 are the culmination of legislative efforts, beginning in 1997, to permit orotherwise authorize all grandfathered facilities. HB 2912 created four newtypes of permits for grandfathered facilities: existing facility permits, small business stationary source permits, EGF permits, and pipeline facilities permits. HB 2912 also mandated the dates by which grandfathered facilities must apply for a permit and have controls operational or submit a shutdown notice. Grandfathered facilities that are addressed by an application for a VERP are not required to comply with the provisions of HB 2912 for grandfathered facilities. However, grandfathered facilities thatwithdraw theirVERP applications and electto submit a permit application for an authorization under HB 2912 will forfeit those incentives, including eligibility for amnesty from enforcement.

To implementthese revisions to the TCM, the commission adopts new and amended rules in 30 TAC Chapter 116, SubchapterA, Definitions; Subchapter H, Permits for Grandfathered Facilities; and Subchapter I, Electric Generating Facility Permits, which are published in this issue ofthe Texas Register.
Additionally, revisions to Chapter 39, Public Notice, were necessary to implement the provisions of HB 2912, §§5.02 - 5.05. The revisions to Chapter 39 are necessary to implement the public participation requirements of HB 2912.
THSC, TCM, §382.05181(h) provides that applications for pipeline facility permits, existing facility permits, existing facility flexible permits, and EGF permits are subjectto the public notice and hearing requirements of §382.05191. TCM, §382.05191 provides that public participation for initial issuance of a permit under §§382.05183, 382.05185(c) or (d), 382.05186, or 382.0519 will be done in the mannerof TCM, §382.0561, concerning Federal Operating Permit; Hearing, and §382.0562, ,concerning Notice of Decision.

3THSC, TCAA, §382.0561 requires the commission to provide a pUblic comment period for an application, during which members ofthe pUblic can submitwritten statements to the commission regarding the application. The initial issuance ofa grandfatherpermit, with the exception ofsmall business stationary source permits, is subject to notice and comment hearing procedures. Underthese· procedures, interested persons can request a hearing. The hearing is recorded, and oral comments are accepted. The commission will provide reasonable accommodations to any individual who may wish to comment on a permit but has difficulty providing those comments in writing, including assistance for those persons who are blind, deaf, or require interpreterassistance. The commission requests that such individuals notify the commission staffsufficiently early that arrangements can be made to affordthese individuals the opportunity to participate in the permitting process. The commission requires notice of the public comment period, which must be at least 30 days, and may extend or reopen the comment period ifappropriate. The notice must meet the requirements of§382.056, which provides specifications relating to the specifics ofthe newspaper notice and sign-posting, and other requirements for notice.
THSC, TCAA, §382.0561 also requires that public hearings not be conducted underTexas Government Code, Chapter2001, so they are not contested case hearings. The commission is required to hold a public hearing on an application, priorto granting the permit, ifa person who may be affected by the emissions or a member ofthe legislature from the general area in which the facility is located requests a hearing. However, the commission is not required to hold a hearing ifthe basis ofthe request by a person who may be affected is determined to be unreasonable. The commission is required to consider all comments received during the comment period and hearing in determining whetherto issue the permit and what conditions should be included ifa permit is issued.
THSC, TCAA, §382.0562 provides forthe mailing of notice ofthe commission's decision on an application to all persons who submitted comments, and to the applicant. The notice must include a response to all comments, and identify any changes to the conditions ofthe draft permit and the reasons forthe change. 4Additionally, TCM, §382.05191 requires the opportunity for a motion for rehearing and judicial review under§382.032. The commission will utilize existing procedural rules concerning motions to overturn action by the executive director, found in 30 TAC Chapter 50 (relating to Actions on Applications and OtherAuthorizations), to give effect to the intent ofthe legislature to provide forthe intermediate review, by affected persons, of commission actions on applications for grandfathered facility permits. Therefore, the commission is not adopting new procedures for grandfathered facility permits in this chapter.

SECTION BY SECTION DISCUSSION SubchapterH, ApplicabilityandGeneralProvisions ,. The adopted new §39.404, Applicability for Certain Initial Applications forAir Quality Permits for Grandfathered Facilities, is necessary to implement requirements of HB 2912, §§5.02 - 5.05. The existing §39.403, Applicability, was not available to be opened to propose and adopt changes to include applicability of public notice procedures forthe new grandfathered facility permits. The commission believes thatthe requirements of HB2912, §§5.02 - 5.05**s~ould** be implemented expeditiously. and therefore adopts new §39.404 to specify the applicability of Chapter 39 to the new grandfatheredfacility permits. HB 2912, §5.03 created a newTHSC, §382.05185, which established a new EGF permit for certain facilities located at a site forwhich the owner oroperator has already applied for a permit under SB 7 and for the permitting ofadditional criteria pollutants at grandfathered coal-fired EGFs forwhich the owner or operator has already applied for a permit under SB 7. Section 382.05185 also provided that the permit application for such a permit be subjectto notice and hearing requirements as provided by THSC, §382.05191, as revised by HB 2912. The adopted new §39.404 implements this requirement by specifying the portions of Chapter 39, Subchapters Hand K, that apply to applications for an EGF permit.

HB 2912 also created newTHSC, §382.05183 and §382.05186, which established existing facility permits and pipeline facilities permits, respectively, and §382.05181, which required thatthe permit applications for grandfathered facilities permits were SUbject to notice and hearing requirements as 5provided by THSC, §382.05191. The adopted new §39.404 implements this requirement by specifying the portions of Chapter39, Subchapters Hand K, that apply"to applications for existing facility permits and pipeline facilities permits.

The adopted amendments to §39.411, Text of Public Notice, are necessary due to the addition of new §39.404, which adds existing facility permits and pipeline**fa~ilities** permits. The existing §39.411(b)(10)(B) specifies the requirement to include a statement in the public notice concerning the right to request a notice and comment hearing in the text ofthe pUblic notice for air applications described in §39.403(b)(11) or (12). The adopted §39.411 (b)(10)(B) specifies requirements for applications described in §39.403(b)(11) or (12), or§39.404 to include existing facility, pipeline facility, and EGF permits.

The adopted amendments to §39.419, Notice ofApplication and Preliminary Decision, are necessary due to the addition of new §39.404, which adds existing facility permits.and pipeline facilities permits. The existing §39.419(e)(1 )(D) refers to an application for initial issuance ofa permit described in §39.403(b)(11) or (12). The adopted §39.419(e)(1 )(D) refers to an application for initial issuance of a permit described in §39.403(b)(11) or (12), or §39.404. Applicants for initial issuance ofexisting facility permits and pipeline facilities permits will not be required to publish Notice ofApplication and Preliminary Decision.
Additionally, revisions are adopted for §39.419(e)(3). The existing §39.419(e)(3) specifies publication requirements for a Notice ofApplication and Preliminary Decision for permits t.hat are not exempt under §39.419(e)(1)(A) - (C) from publication requirements. The exemptions from publication in §39.419(e)(1) also include a subparagraph (D). The adopted §39.419(e)(3) correctly refers to exemptions under §39.419(e)(1 )(A) - (D).

6The adopted amendments to §39.420, Transmittal ofthe Executive Director's Response to Comments and Decision, are necessary to indicate thatthe transmittal is not required to include instructions for reconsideration ofthe executive director's decision orfor requesting a contested case hearing for existing facility permits, EGF permits, and pipeline facilities permits, in addition to VERPs, because permits for grandfathered facilities are not subject to the contested case hearing process. The adopted rules include a reference to THSC, §§382.05183, 382.05185, and 382.05186 in §39.420(c)(1). The existing §39.420(c)(1) only refers to applications for initial issuance ofVERPs underTHSC, §382.0519. Additionally. the adopted revisions delete the words "voluntary emission reduction" since multiple permit types are referenced in the adopted language.
SubchapterK, Public Notice of AirQualityApplications The adopted amendments to §39.603, Newspaper Notice, are necessary to correct a subsection reference. The existing §39.603(e)(1) specifies that a small business applicant does not have to comply with subsection (a)(2) ifcertain conditions are met. The reference to (a)(2) is incorrect. The adopted §39.603(e)(1) corrects this referenceto subsection (c)(2), which specifies the requirements for the publication in the newspaper otherthan the legal section ofthe newspaper. The adopted amendments to §39.604, Sign-Posting, are necessary to correct a typographical error in the existing rule.

The adopted amendments to §39.606, Alternative Means of Notice forVoluntary Emission Reduction Permits, are necessary to ensure that alternative means of notice are available for all small businesses who apply to permit theirgrandfathered facilities.

FINAL REGULATORY IMPACTANALYSIS DETERMINATION The commission reviewed the adopted rulemaking in light ofthe regulatory analysis requirements of Texas Government Code, §2001.0225, and determined thatthe changes to this chapter needed to implementthe procedural aspects of HB 2912, §§5.02 - 5.04 do not meet the definition ofa "major 7environmental rule" as defined in that statute. The 77th Legislature, 2001, amended THSC to require that all grandfathered facilities obtain permits. The adopted rules implement the procedural requirements associated with the permitting system created by HB 2912, including four different types of permits which will coverall grandfathered facilities, and provide for potential emission reductions. The substantive requirements ofthe permitting system created by HB 2912 are contained in the 30 TAC Chapter 116 rulemaking, also adopted in this issue ofthe Texas Register.

A majorenvironmental rule means a rule, the specific intent ofwhich is to protectthe environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, productivity, competition, jobs, the environment, orthe public health and safety ofthe state ora sector ofthe state. Although the Chapter 116 rules adopted to implement the HB 2912 sections concerning the substantive permitting requirements are intended to protectthe'environment or reduce risks to human health from environmental exposure and may have adverse effects on the economy, productivity, competition, orjobs ofthe state ora sector ofthe state, the adopted newsections. of Chapter 39 are merely procedural. Furthermore, the analysis required by Texas Government Code,
. §2001.0225(c) does not apply because the adopted rules do not meet any ofthe four applicability requirements ofa major environmental rule. The adopted rules do not exceed a standard set by federal law, exceed an express requirement of state law, exceed a requirement of a delegation agreement, or adopt a rule solely underthe general powers ofthe agency. The rules are adopted specifically to comply with HB 2912, and do not exceed the requirements ofthat bill.

TAKINGS IMPACTASSESSMENT The commission completed a takings impactassessment forthe adopted rules. The purpose ofthe adopted rules is to create the procedural provisions necessary forthe implementation ofthe substantive permitting requirements of HB 2912, and the adopted rules advance this purpose by supporting the permitting system created by HB 2912. This system includes four different types of permits which cover all grandfathered facilities, and provide for potential emission reductions. 8The commission evaluated the adopted rules and performed an assessment ofwhetherTexas Government Code, Chapter2007 is applicable. The commission's assessment indicated thatTexas Government Code, Chapter2007 does not apply to the adopted rules because this action qualifies for two exceptions to the application of Chapter2007. First, this action is reasonably taken to fulfill an obligation mandated by federal law, and is therefore exempt underTexas Government Code, §2007.003(b)(4). The action is mandated by federal law because the rules will be submitted for EPA approval as part ofthe SIP, which is mandated by 42 United States Code (USC), §7410. Also, the adopted rules are a necessary component ofthe permitting program created by HB 2912 and implemented by the changes to Chapter 116, and implement requirements of42 USC, §7410. Second, §2007.003(b)(13) states that Chapter 2007 does not apply to an action that: 1) is taken in response to a real and substantial threat to public health and safety; 2) is designed to significantly advance the health and safety purpose; and 3) does not impose a greater burden than is necessary to achieve the health and safety purpose. Although the rule revisions do not directly prevent a nuisance or prevent an immediate threat to life or property, they do prevent a real and substantial threat to public health and safety. The revisions also significantly advance the health and safety purpose. The reductions in nitrogen oxides and volatile organic compounds that will occurthrough the implementation ofthe permitting program created by HB 2912 significantly advance a health and safety purpose by assisting the state's efforts to attain the ozone national ambient airquality standards set by the EPA under42 USC, §7409 for nonattainment areas ofthe state, and maintain the quality ofthe state's air in attainment areas. Because any reductions required by these rules are no greaterthan those required by HB 2912 to implementthe procedural requirements specified by the legislature, this action does not impose a greater burden than is necessary to achieve the health and safety purpose. In conclusion, this action is taken in response to a real and substantial threat to public health and safety, designed to significantly advance the health and safety purpose, and does not impose a greater burden than is necessary to achieve the health and safety purpose. Thus, this action is exempt from the application ofTexas Government Code, Chapter2007 under §2007.003(b)(4) and §2007.003(b)(13).

9Finally, adoption and enforcement ofthese rules will not burden private real property. The adopted rules do not affect private property in a mannerwhich restricts or limits an owner's right to the property that would otherwise exist in the absence of governmental action. Consequently, the adopted rules do not meetthe definition ofa taking underTexas Government Code, §2007.002(5).

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM The commission reviewed the rulemaking and found thatthe rules are neither identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11, norwill they affect any action orauthorization identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11. Although commission rules governing air pollutant emissions are subjectto the Texas Coastal Management Program (CMP), the adopted actions concern only the procedural rules ofthe commission; do not govern orauthorize any actions subject to the CMP; and are not themselves capable ofadversely affecting a coastal natural resource area. Therefore, the adopted rulemaking is not subject to the CMP.

HEARING AND COMMENTERS Public hearings on this rulemaking were held at the following times and locations: January 22, 2002, 7:00 p.m., TylerJunior College Regional Training and Development Center, Room 104, 1530 South Southwest Loop 323, Tyler; January 23, 2002, 7:00 p.m., City of Houston City Council Chambers, 2nd Floor, 901 Bagby, Houston; January 24, 2002, 7:00 p.m., City ofOdessa City Council Chambers, 5th Floor, 411 West 8th Street, Odessa; January28,2002,6:30 p.m., City of Irving Central Library Auditorium, 801 West Irving Boulevard, Irving; and January 29, 2002, 2:00 p.m., Texas Natural Resource Conservation Commission, 12100 North 1-35, Building F, Room 2210, Austin.

The commission received comments from the follOWing organizations and companies: Southeast Coalition of Civic Clubs (SCCC); St. Francis Xavier Catholic Church (St. Francis); Sierra Club Houston Regional Group (HSC); Texas Campaign forthe Environment (TCE); and Galveston-Houston Association for Smog Prevention (GHASP). 10In addition, the commission received comments from, oron behalfof, the following elected officials: Mr. Larry Green representing the Honorable Sheila Jackson Lee, U.S. House of Representatives, Eighteenth District ofTexas; the Honorable Lon Burnam, District 90, Fort Worth, Texas House of Representatives; and the Honorable Ada Edwards, Council Member, District 0, City of Houston. Representative Lon Burnam expressed support forthe comments submitted by the Houston Sierra Club.

All commenters suggested changes to the proposed rules.

RESPONSE TO COMMENTS HSC and GHASP commented that the commission should not require comments to be made in writing at a public meeting, since there are circumstances where individuals may preferto make oral statements instead. HSC and GHASP also stated that the commission shouldalways record public statements so it can use them later in the comment consideration process. GHASP stated that requiring comments to be in writing may be a violation ofthe federal Clean AirAct. Representative Lon Burnam strongly opposed the requirement to submit all comments in writing.

The commission has made no change in response to these comments. The commission does accept oral comments made atformal public hearings. The commission will provide reasonable accommodations to any individual who may wish to comment on a permit but has difficulty providing those comments in writing, including assistance forthose persons who are blind, deaf, or require interpreter assistance. The commission requests that such individuals notify the commission staffsufficiently early that arrangements can be made to afford these individuals the opportunity to participate in the permitting process. Public meetings that may be held in conjunction with a specific air permit are recorded and oral comments are accepted. The initial issuance ofa grandfather permit, with the exception ofsmall business stationary source permits, will be SUbjectto notice and comment hearing procedures. Underthese procedures, interested

11persons can request a hearing. The hearing is recorded, and oral comments are accepted. The commission is unaware ofany prohibition in the federal Clean AirAct relating to the requirement forsubmission ofwritten comment.

SCCC, St. Francis, Larry Green, and Council Member Edwards commented on the need for the public to be notified offacilities applying for permits. SCCC and Larry Green suggested a 60- to 90-day notice period. Council Member Edwards suggested six months to one year for notification ofa facility applying for a permit.

The commission has made no changes to the rule in response to these comments. The commission agrees that it is importantforthe public to be notified of pending permit applications, and included adequate notice provisions in the proposed rules. The suggested notice periods ofsix months to one yearwould not provide adequate permit review and processing time because THSC, §382.05181(f) requires the commission to take final action on grandfather permit applications within one yearof receiving an administratively complete application. Sections 39.418 and 39.603 require all facilities exceptforfacilities qualifying for a small business stationary source permitto publish notice in a newspaperofgeneral circulation in the municipality in which the facility is located or in the municipality nearestthe location ofthe facility. The newspaper notice must be published no laterthan 30 days afterthe executive directordeclares an application administratively complete. This notice is followed by a 30-day public comment period and is intended to give notification early in the permitting process that an application is under review. The 30-day comment period is not a notice that a permit is going to be issued in 30 days. Ifa hearing is requested and granted during this comment period, the comment period is actually extended beyond 30 days to the end ofthe hearing. Additionally, §39.604 requires applicants to place signs atthe site ofthe facility declaring the filing ofan application forthe permit and stating the manner in which the commission may be contacted for
12further information. Small business stationary source permits are exempted from the requirementto publish newspaper notice by THSC, §382.05184(f).

TCE requested clarification ofthe commission's determination that the changes to public notice requirements in Chapter 39 implementing HB 2912 §§5.02 - 5.04 do not meet the definition ofa major environmental rule.

The commission's analysis regarding the regulatory impact analysis determination is fully discussed elsewhere in this preamble. The commission provides the following discussion to supplementthat determination.
Implementing HB 2912, §§5.02 - 5.04 required changes to Chapter 39. However, the substantive rule changes required by these HB 2912 sections are found in Chapter 116. The changes in Chapter39 are procedural support forthe permitting changes in Chapter 116. Whether or notthe rUles are characterized as a majorenvironmental rule, a regulatory impact analysis is required only ifthe rulemaking meets any ofthe four applicability requirements in Texas Government Code, §2001.0225(a). By applying these four factors to the adopted rules, the commission determined that the rules do not: 1) exceed a standard set by federal law; 2) exceed an express requirement ofstate law; 3) exceed a requirement of a delegation agreement orcontract between the state and an agency or representative ofthe federal governmentto implement a state and federal program; or4) adopt a rule solely underthe general powers ofthe agency instead of underaspecific state law. The rules are adopted specifically to comply with HB 2912 and do not exceed the requirements ofthat bill. The Chapter39 adopted rules do not meet any ofthe applicability requirements in Texas Government Code, §2001.0225(a), and forthis reason the adopted rules are not subjectto a regulatory impact analysis underTexas Government Code, §2001.0225.
13STATUTORY AUTHORITY The amendments and new section are adopted underTHSC, TCAA, §382.011, which authorizes the commission to administerthe requirements ofthe TCAA; §382.012, which provides the commission the authorityto develop a comprehensive plan forthe state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes ofthe TCAA; §382.0365, which authorizes and governs the commission's small business stationary source program; §382.0518, which authorizes the commission to issue permits for construction of newfacilities or modifications ofexisting facilities; §382.05181, which requires grandfathered facilities to apply for a permit and comply with its conditions by certain dates, and requires certain actions ofthe commission; §382.05182, which requires notices forthe shutdown of certain grandfathered facilities; §382.05183, which requires certain grandfathered facilities to obtain an existing facility permit; §382.05184, which requires certain grandfathered facilities to obtain a small business stationary source permit; §382.05185, which requires certain EGFs to obtain a permit; §382.05186, which requires certain reciprocating internal combustion engines to obtain a permit; §382.051 91, which requires applications for certain permits to publish notice consistent with the procedures forfederal operating permits; §382.05192, which requires that certain permits to be renewed in accordance with §382.055; §382.055, which authorizes the commission to establish procedures for review or renewal of a permit; §382.056, which authorizes the commission to require public notice of certain permit applications and proceduresfor requesting hearings and responding to comments; §382.0561, which authorizes hearing procedures forfederal operating permits; §382.0562, which requires notices of decision; and Texas Water Code (TWC), §5.103, which authorizes the commission to adopt rules.

14

### EVALUATION OF TESTIMONY

The Texas Natural Resource Conservation Commission (commission) adopts amendments to Subchapter A, Definitions, §116.1O and §116.18; and SubchapterI, Electric Generating Facility Permits, §§116.91O, 116.911, 116.913, 116.921, and 116.930. The commission adopts new §§116.770

- 116.772, 116.774

- 116.777, 116.779

- 116.781, 116.783, 116.785

- 116.788, 116.790, 116.793

- 116.802, and 116.804

- 116.807 in SubchapterH, Permits for Grandfathered Facilities; and
new §§116.917, 116.918, 116.926, and 116.928 in Subchapter I. 

### Sections 116.18, 116.771, 116.774- 116.776, 116.779, 116.780, 116.783, 116.787, 116.790, 116.797, 116.807, 116.911, 116.913, 116.917, and 116.928 are adopted 

### with changes to the proposed text as published inthe January 4, 2002 issue ofthe 

### Texas Register(27 TexReg 78). Sections 116.10, 116.770, 116.772, 116.777, 116.781, 116.785, 116.786, 116.788, 116.793

- 116.796, 116.798

- 116.802, 116.804

- 116.806,

. . . 

### 116.910, 116.918, 116.921, 116.926, and 116.930are adopted 

### withoutchanges and will not be republished. All sections ofSubchapterH except, §116.776, will be submitted to the United States Environmental Protection Agency (EPA) as a revision to the state implementationplan (SIP). The new and amended sections ofSubchapter A and I will also be submitted to the EPA as a revision to the SIP.

BACKGROUND AND SUMMARY OF THE FACTUALBASIS FOR THE ADOPTED RULES During the 75th Legislature, 1997, House Bill (HB) 3019 directed the commission to develop a voluntary emissions reduction plan for the permitting ofexisting significant sources. These existing significant sources are commonly known as grandfathered facilities. A grandfathered facility is one that existed at the time the legislature created the Texas CleanAir Act (TCAA) in 1971. These facilities were not required to comply with (Le., grandfathered from) the then new requirement to obtainpermits for construction or modifications offacilities that emit air contaminants. If 1grandfathered facilities had notbeen modified since 1971, they continued to be authorized to operate without apermit. The intent ofHB 3019 was to create aprogram that would encourage the remaining grandfathereci facilities to voluntarily obtainpermits thatwould reduce the emissions from those facilities. In response to HB 3019, the commission created the CleanAir Responsibility Enterprise (CARE) Committee to develop recommendations for the voluntary permitting ofgrandfathered facilities.

In 1999, the 76th Legislature used the CARE Committee's recommendation as the basis for Senate Bill (SB) 766, which directed the commission to develop rules containing incentives for the voluntary permitting ofgrandfathered facilities. This program is known as the Voluntary Emission Reduction Permit (VERP) program. The commission adopted rules to implement the VERPprogram on December 16, 1999. Since the VERP rules became effective, the owners and operators ofa number of grandfathered facilities have taken advantage oftheincentives offered by the VERPprogram and submitted VERP applications for their grandfathered facilities. Additionally, the owners and operators ofother grandfathered facilities have submitted permit-by-rule registrations and other new source review permit applications to permit their grandfathered facilities. The deadline to apply for a VERP
was August 31,2001.
Additionally, the 76th Legislature, 1999, amended the Texas Utilities Code, Title 2, Public Utility Regulatory Act, Subtitle B, Electric Utilities, and created a new Chapter39, Restructuring ofElectric Utility Industry by adopting SB 7. SB 7 required the commission to implement the permitting and allowance requirements ofnew Texas Utilities Code, §39.264, concerning Emissions Reductions of "Grandfathered Facilities." SB 7 required the commission to develop a mass cap and trade system to distribute emission allowances for use by electric generating facilities (EGFs). Under SB 7, two 2

### categories ofEGFs are eligible to use the proposed trading system. The first category consisted of EGFs in existence onJanuary 1, 1999, which were not subjectto the requirementto obtain apermit under TCAA, §382.0518(g). These facilities are commonly referred to as grandfathered facilities. SB 7 also mandated that grandfathered EGFs apply for apermit on orbefore September 1, 2000, and obtain apermitby, or cease operation after May 1, 2003. The second category ofEGFs consisted of permitted EGFs thatwere not subjectto the permitting requirements ofSB 7, yet electedto participate in the allowance trading system.

Mostrecently, the 77th Legislature, 2001, amended Texas Health and Safety Code (THSC), TCAA to require that all grandfathered facilities obtainpermits. The mandatory permitting requirements ofHB 2912 are the culmination oflegislative efforts, beginning in 1997, to permit or otherwise authorize all grandfathered facilities. HB 2912 created four new types ofpermits for grandfathered facilities: existing facility permits; small business stationary source permits;EGFpermits;aildpipeline facilities permits. HB 2912 also mandated the dates by which grandfathered facilities must apply for a permit and have controls operational or submit a shutdown notice. Grandfathered facilities that are addressed by an application for aVERP are not required to comply with the provisions ofHB 2912 for grandfathered facilities. However, grandfathered facilities that withdraw their VERP applications and electto submit apermit application for an authorizationunder HB 2912 will forfeit those incentives, including eligibility for amnesty from enforcement.

HB 2912 specifies certain requirements based upon the geographic location ofthe grandfathered facility. Grandfathered facilities must submitpermit applications or notices ofshutdownby September 1,2003 for facilities in EastTexas; September 1,2004 for facilities inWest Texas; and for small business stationary source permits, by September 1, 2004, irrespective ofthe location ofthe facility. 3The commission is required to act on applications by the first anniversary after receipt ofan administratively complete application. HB 2912 provides that the applicant may request a onetime, one-year, "good cause" extension oftime to install controls ifthe permit is not issued within the one year from receipt ofan administratively complete application. This provision for a good cause extensionhas been added as new §116.771(b).
Existing facility permits are available for all grandfathered facilities, and require consideration oftenyear-old best available control technology (BACT), considering the age and remaining useful life ofthe facility. Existing facility flexible permits are also available for grandfathered facilities and facilities permitted under a VERP, located at a single site. Small business stationary source permits are available for sources defined as a small business stationary source in TCAA, §382.0365(h), and which do nothave to submit emissions inventory informationunder TCAA, §382.014. Facilities eligible for small business stationary source permits may not emit air contaminants after.March 1, 2008 ifthey do

.not have apermit or apending application. HB 2912 provides that gas-fired EGFs that were required to obtain a permitunder SB 7, or were exempt from the requirement to obtain a SB 7 permit, are considered permitted for all air contaminants. The commission will issue a "permit" to these facilities. The permit will identify the facilities which have beenpermitted and will contain the general provisions in §116.913. Permits issued under §116.917 will receive the additional general and special conditions in §116.918. HB 2912 also provided that coal-fired EGFs that were required to obtain a permitunder SB 7 are considered permitted for nitrogen oxides (NOx)' sulfur dioxide (S02)' and particulate matter (PM) as it relates to opacity. HB 2912 further provides that coal-fired EGFs are eligible for an EGF permit for the criteriapollutants not addressed by the SB 7 permit. Additionally, TCAA, §382.05185 provides for the permitting of: 1) generators that do not generate electric energy for compensation and
are not used more than 10% ofthe annual operating schedule; and 2) auxiliary fossil-fuel-fired 4

### combustionfacilities thatdo not generate electric energy and do not emit more than 100tons peryear (tpy) ofany air contaminant.

Grandfathered reciprocating internal combustion engines that are part ofthe processing, treating, compression, orpumping facilities connected to, orpart of, a gathering or transmissionpipeline may apply for a pipeline facilities permit. 

### Inthe proposed rule, the commissionprovided that an applicant could apply for a single permitfor all engines connected to apipeline or a separate permit for all discrete and separate engines. 

### Inthis final rule, the commission is changing the rule language to read that the applicant may apply for a single permitfor a group ofengines connected to apipeline or a separate permit for all discrete and separate engines. The commission is making this change inpart due to the difficulty in determining where one pipeline ends and anotherbegins, thus making it difficult to determine ifall engines have been included in the permit. Additionally, the commission must allow for mandatory emissionreductions to be achieved at either a single engine or.by averaging reductions among multiple engines connected to apipeline. HB 2912 requires a 50% reduction in NOx

### emissions at facilities located in EastTexas, and allows the commission to require up to a 50% reduction in volatile organic compounds (VOe). For facilities located inWest Texas, the commission may require up to a 20% reduction in NOx 

### and

## voe emissions. For facilities located inWest Texas, the commission will focus on reductions that can be achieved at little or no capital cost. Owners or operators who electto average among more than one account cannot include reductions made to comply with other state or federal requirements. However, ifthe owner or operator does not average emissions to achieve the mandatory reductions, they may include reductions made since January 1, 2001 to comply with other state or federal requirements.

5TCAA, §382.05181(h), provides that applications for pipeline facilities permits, existing facility permits, existing facility flexible permits, and EGF permits are subject to the public notice and hearing requirements ofTCAA, §382.05191. TCAA, §382.05191 provides thatpublic participationfor initial issuance ofa permitunder TCAA, §§382.05183, 382.05185(c) or (d), 382.05186, or 382.0519 will be done in the manner ofTCAA, §382.0561, concerning Federal Operating Permit; Hearing, and TCAA, §382.0562, concerning Notice ofDecision. These sections allow for notice and commenthearings instead ofcontested case hearings under Texas Government Code, Chapter 2001. Notice and comment hearing procedures provide for public inspection ofthe draftpermit and a 30-day commentperiod. In this commentperiod, any person may submit a written statementto the commission. Additionally, a person who may be affected by the emissions or amember ofthe legislature from the general area in which the facility is located canrequest ahearing. At the hearing, any person may submit an oral or written statement concerning the application. The public comment period extends to the close ofthe hearing. The commission will send notice ofthe final actionon thepermitto all persons who comment during the public commentperiod or at a public hearing. The notice will include a response to any comment submitted during the public commentperiod. The notice and commenthearing process is the
same process authorized for VERPs by SB 766.

Small business stationary source permits are not subject to these notice and comment hearing procedures. Review and renewals ofexisting facility permits, EGFpermits, pipeline facilities permits, and small business stationary source permits will be conducted under the same procedures for preconstructionpermits, generally. Existing facility permits, EGFpermits, pipeline facilities permits, and small business stationary sourcepermits are subjecttojudicial review, under TCAA, §382.032.

6HB 2914, §78, 77th Legislature, 2001, created a new incentiveprogram to assist in retrofitting reciprocating internal combustionengines associated withpipelines. The new TCAA, §382.051865, Reimbursement Program for Certain Emissions Reductions from Reciprocating Internal Combustion Engines Associated with Pipelines, provides thatthe commissionmay develop a program, in cooperation with local governments, other agencies, and EPA to provide incentives to owners or operators ofreciprocating internal combustion engines that are required to make a 50

### % reduction in NOx emissions under new TCAA, §382.05186, Pipeline Facilities Permits.

HB 2914, §78 also established an Emissions Reductions Incentives Account within the CleanAir Account Number 151. The section establishes guidelines for how any money deposited into this account is to be distributed to owners or operators making reductions in NOxemissions from grandfathered reciprocating internal combustion engines associated with pipelines. H;B 2914 provides for apartial reimbursement for the capital cost ofinstalling technology toreduce emissions thatmeet certain criteria. To implement these revisions, the commission is adopting new §116.776, Distribution ofFunds from the Emissions Reductions Incentives Account for Control ofEmissions from Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region, in Subchapter H. The section identifies the facilities which are eligible for a partial reimbursement for the cost ofcontrols. The rules also containthe criteria the commission will consider in determining who will receive money from the account and how much money a particular facility will receive. In order to be eligible for reimbursementunder this program, the owner or operator ofa grandfathered reciprocating internal combustion engine must make at least a 50

### % reduction in actual emissions of NOxas compared to the emissions reported for the facility in the 1997 industrial point source emissions inventory. The commissionbelieves that an actual reduction in emissions is necessary to receive reimbursement in order to assure that air quality benefits will be achieved under this incentive program. 7Another criteria for reimbursement is the requirement to obtain apipeline facilities permit or replace the grandfathered engine with an electric engine. This implements the HB 2914 requirement that limits reimbursement to facilities required to achieve a 50% reduction in NOx emissions. Facilities that obtain pipeline facilities permits are the only facilities required to achieve a 50% reduction in NOx emissions and the replacement ofgrandfathered engines with electric engines will eliminate that source ofNOx emissions. In response to comments, the commissionhas made changes to when the owner or operator ofapipeline facility must request reimbursement from the Emissions Reductions Incentives Account. These changes are described in the response to comments. The commission also changed §116.776(a)(1O) to clarify that only facilities requiredby any other state or federal law to make reductions in emissions of

### NOxare not eligible for reimbursement. In the proposed rule, the commission identified the following criteria for distribution: location ofthe facility; percentage of reduction in the hourly emissions ofNOx; cost effectiveness ofthe controls; and when the reductions
are actually achieved and the requestfor reimbursement is received. Due to the changes in when the request for reimbursement mustbe received, the commission is deleting when the request for reimbursement is received as a criteria for reimbursement. The remaining criteria will provide incentives to ensure that reimbursements for emission reductions are prioritized for those reductions that occur in areas ofthe state where those reductions will be beneficial, for projects that achieve the highest percentage reductions first, are most cost effective, and for projects that occur early. Weighting the criteria to provide for larger, cost effective, earlierreductions considering the area ofthe state where the reduction is proposed will maximize the air quality benefits for the state. Guidance concerning the implementation ofthe reimbursementprogram is still under development by the commission. Interested stakeholders will be provided the opportunity to comment on the guidance before the guidance is finalized.

8

### The proposal contained language allowing the commission to delegate to the executive director the authority to take action onpermit applications for grandfathered facilities. The commission solicited comment onthe proposal to delegate to the executive director the authority to take any action on these grandfathered facility permits, and also to make decisions regarding the implementation and administration ofthe permitting program, generally. The commission received no comments in response to this solicitation. Therefore, the commission has changed the rule in the delegation sections to state thatthe commission delegates to the executive director the authority to take any action on these grandfathered facility permits, and also to make decisions regarding the implementation and administration ofthe permitting program, generally. As a consequence ofthis delegation, it is necessary for the commissionto change the Notice ofFinal Action sections ofthe rule to allow for the filing ofamotion to overturn rather than apetition for rehearing. In addition, the commission has added language to §116.928 that states that any Notice ofFinal Action sent regarding apermit action under SubchapterI will state that aperson affected by a decision ofthe executive director may file a motion to overturnthe executive director's decisionunder §50.139 rather than apetition for rehearing. It was necessary to add this language to §116.928 because the commission did not originally propose changes to §116.922 (relating to Notice ofFinal Action). The commission has provided further detail concerning the specifics ofthis rulemaking in the Response to Comments portion ofthis preamble.

To implementthese revisions to TCAA, the commission adopts new and amended rules in Chapter 116, Subchapter A, Definitions; Subchapter H, Permits for Grandfathered Facilities; and Subchapter I, Electric Generating Facility Permits. Additionally, revisions to 30 TAC Chapter 39, Public Notice, are necessary to implementthe provisions ofHB 2912. The adopted amendments to Chapter 39 are also published in this issue ofthe Texas Register.

9SECTION BY SECTION DISCUSSION SubchapterA, Definitions The adopted amendment to §116.10, General Definitions, revises the definition of"grandfathered facility" to be consistent with TCAA, §382.0518(g). The revised definition clarifies that a grandfathered facility is one that is not a new facility, was constructedprior to August 30, 1971 (or no construction contract was executed on orbefore August 30, 1971 that specified a beginning construction date on orbefore February 29, 1972) and has notbeenmodified since August 30, 1971.

The amendments to §116.18, Electric Generating Facility Permits Definitions, are adopted with changes to the proposed text. The adopted amendments add adefinition for "natural gas-fired electric generating facility" for consistency with the EGFpermit requirements ofHB 2912. HB 2912, in TCAA, §382.05185(i), provides that a natural gas-fired EGF includes a facility that was designed to burn either natural gas or fuel oil ofagrade approved by commission rule. In general, physical or operational changes at a facility to allow the burning offuel oil will be considered apart ofthe design
as long as they do not constitute a modification ofthe facility. It is the commission's positionthat "designed to burn" usually means that all ofthe necessary equipment (including fuel oil tanks, fuel lines, atomizers, and pre-heaters ifnecessary) were constructed and maintained as part ofthe grandfathered EGF. Any modification necessary to allow an EGF to burn fuel oil will be required to comply with the requirements ofSubchapter B, New Source Review Permits, before beginning the construction.

The commission conducted a modeling analysis ofgrandfathered EGFs with the potential to burn fuel oil in all areas ofthe state. The commission looked at the maximum short-term emission rate for S02 associated with burning fuel oil. The modeling approach assumed all facilities operated continuously at 10maximumfiring rate. This approach is conservative because not all grandfathered gas-fired EGFs designed to burn fuel oil willbe firing fuel oil atthe maximumfiring rate atthe same time. A screening procedure was used for the initial analysis. For those sites thatdid notmeet screening criteria, amore detailed analysis was performed. The commission first looked at firing fuel oil with a sulfur content of0.3% by weight or less for those facilities in Harris and Jefferson Counties and fuel oil with a sulfur content of0.7% by weight or less for all other counties in the state. Facilities in Harris andJefferson Counties are limited to burning fuel oil with a sulfur content of0.3% by weight or less by currentrules. Using the approach outlined previously, the 

### S02 maximumpredicted ground level concentrations were compared to relevant air standards. For the initial screening procedure, all concentrations were below standards, with the exception ofthe state 

### S02 30-minute standard. Two sites were identified as potentially exceeding the state 

### S02 standard. These sites were then modeled again using a more detailed analysis. The number ofhours these sites were predicted to exceed the 

### S02 stan4ard were counted at each point and found to be less than 0.15% ofall hours modeled. Due to the conservative nature ofthe modeling demonstration, which assumes all sources operating at full capacity simultaneously at all hours ofthe year, 100% compliance with the state 

### S02 standard is expected. Metals have been identified as the primary hazardous air pollutant associated with the burning offuel oil. Adverse impacts from metals are causedby long-term exposure to unacceptable levels of emissions. The commission does not expect long-term exposure to metals emissions because fuel oil is only burned for shortperiods oftime due to natural gas curtailments or extremely high natural gas prices. Historical data has shown that these curtailments and high natural gas prices have occurred infrequently and last only for short periods oftime. Thus, the commission does not expect any adverse health effects associated with the burning offuel oil. However, the commissionhas added a general conditionto §116.913 requiring the EGF to keep records offuel oil burning and submit those records with the report required under §101.336(b). In addition, EPA is developing a maximum achievable 11control technology (MACT) standard which is expected to address emissions ofmetals, primarily nickel, from fuel oil fired EGFs. Any EGF whichburns fuel oil for any extended period oftime would likely be subject to this MACT standard. The commissionhas also added language in §1l6.913(a)(8) that clarifies that the burning ofwaste or used oils is not authorized under Subchapter 1. Based on this analysis, and withthe limitations mentioned previously, the commission's Toxicology and Risk Assessment Section has concluded thatburning American Society for Testing and Materials (ASTM) grades offuel oil or any blend ofASTM grades offuel oil, as limitedby the adopted rules, will not pose adverse health or welfare effects in the general public. The establishment ofacceptable fuel oil grades does not relieve the owner or operator ofa natural-gas-fired EGF from the responsibility to comply with any emissions limitations or conditions ofany permit or state or federal regulation.

The adopted amendments also add a definition for "normal annual operating schedule." This definition is needed to establish the normal annual operating schedule at an EGF site. The normal annual·· operating schedule is needed to determine ifa generator that the owner or operatoris seeking to permit under an EGF permit is used not more than 10% ofthe normal annual operating schedule as required by TCAA, §382.05185(d)(l). The final rule establishes the normal operating schedule as the maximum number ofoperating hours for an EGF in any 12 consecutive monthperiodbetween 1997 and 1999. For sites with more than one EGF, the owner or operatormay use the EGF with the highest number of operating hours.
SubchapterH, Permitsfor GrandfatheredFacilities The adopted amendments to SubchapterH include changing the subchaptertitle from "Voluntary Emission Reduction Permits" to "Permits for Grandfathered Facilities" in order to correctly reflect the modified content ofthe subchapter. The subchapterhas been divided into four divisions. The existing 12sections ofthe subchapter are placed into Division4, Voluntary Emission Reduction Permits. Division 1, General Applicability; Division 2, Small Business Stationary Source Permits, Pipeline Facilities Permits, and Existing Facility Permits; and Division 3, Existing Facility Flexible Permits contain new sections ofSubchapterH adopted to implement and administer the requirements ofHBs 2912 and 2914.



### Division 1, 

### GeneralApplicability Division 1 contains the general requirement for agrandfathered facility to obtain a permit, permitby rule, or shutdown. The owner or operator ofa grandfathered facility must choose whichpermitting option is best for his orher facility and situation. Ifthe facility meets the qualifications, the owner or operator may choose one ofthe new types oftypes ofpermits for grandfathered facilities contained in Division 2 and 3 ofthis subchapter or the electric generating facility permit contained in Subchapter I. The owner or operator may also choose any otherpermit type under Chapter 116 orpermit by rule underChapter 106 for which the facility qualifies as long as the application is submitted by the applicable deadline contained in this division. Adopted new §116.770, Requirements to Apply, contains the deadlines by which the owner or operator ofa grandfathered facility must apply for a permit to operate that facility under Chapter 116, qualify for apermitby rule under 30 TAC Chapter 106, or submit a notice ofshutdown. As required by HB 2912, apermit application or notice of shutdown must be submitted before September 1, 2003, for facHities located in the East Texas region and before September 1,2004, for facilities located in the West Texas region and EI Paso County. HB 2912 defines the East Texas region as all counties traversed by or east ofInterstate Highway 35 North ofSan Antonio or traversed by or east ofInterstate Highway 37 South ofSan Antonio, including Bexar, Bosque, Coryell, Hood, Parker, Somervell, and Wise Counties. The West Texas region is then defined as all counties not contained in the East Texas region. This definition is slightly different from the definition created by SB 7 in that the SB 7 definition for West Texas region does not include EI 13Paso County. Therefore, ratherthan create a new definition, the commissionuses the language, "West Texas Region as defined in §101.330 ofthis title (relating to Definitions) and EI Paso County" inplace ofthe West Texas region as defined by 

### HB 2912.

New §116.771, Implementation Schedule for Additional Controls, is adopted with changes to the proposed text. The adopted new section explains in subsection (a) the implementation schedule to be contained in a permit ifthe installation ofadditional controls is required for a grandfathered facility to meet an emissions limitfor a pollutant. As required by 

### HB 2912, required controls must be installed and operating before March 1, 2007, for facilities located in the East Texas region and before March 1, 2008, for facilities located in the West Texas region and EI Paso County. Also as provided by 

### HB 2912 the applicant may request a onetime, up to one-year "good cause" extension ofthe time to install controls ifthe permit is not issued within one year ofthe receipt ofan administratively complete

. . . . application. This good cause extension language has been added as §116.TH(b).

Consistent with TCAA, §382.05182, Notice ofShutdown, adopted new §116.772, Notice ofShutdown, establishes the procedures for submitting a notice ofshutdown in lieu ofobtaining a permit for a grandfathered facility, and the deadlines by which a grandfathered facility shutting down must cease emitting air contaminants. Facilities for which the owner or operator submits a notice ofshutdownby the application deadlines contained in §116.770 may continue to operate until March 1,2007, ifthe facility is located in the East Texas region or March 1, 2008, ifthe facility is located in the West Texas region or EI Paso County. The deadlines for sources eligible for a small business stationary source permit are described in the following discussion of§116.774. Facilities thathave been shut down and for which a notice ofshutdownhas been submitted must obtain authorization under Chapter 116 or Chapter 106 prior to restarting operations. In order to enable the commission to keep better track of 14facilities which are shutdown, the notice ofshutdown will be required to include, at a minimum, an identification ofthe facility being shut down, the date the facility intends to cease operating, and an inventory ofthe type and amount ofemissions that will be eliminated.



### Division 2, 

### SmallBusiness Stationary Source Permits, Pipeline Facilities Permits, andExisting Facility Permits New §116.774, Eligibility for Small Business Stationary Source Pennits, is adopted with changes to the proposed text. The adopted new section states the facilities which are eligible for a small business stationary source permit in accordance with TCAA, §382.05184. Only the owners or operators of facilities located at small business stationary sources as definedby TCAA, §382.0365(h), and which
are not required by TCAA, §382.014 to submit emissions inventories to the commission may apply for
a small business stationary source pennit. The owner or operator must apply for the small business stationary source perinitbefore September.1, 2004, The new section specifies that any grandfathered facility, including any facility for which the owner or operatorhas submitted a notice ofshutdown under proposed §116.772, located at a small business stationary source may not emit air contaminants
on or after March 1, 2008, unless the facility is permitted orhas apending permit application under Chapter 116, or apending registration for apermitby rule under Chapter 106. The new section also requires an application for a small business stationary source pennit to be submitted under the seal ofa Texas licensed professional engineer, ifrequired by §116.110(e), and states that the facility's owner or operator is responsible for applying for the pennit and complying with the subchapter. The commission revised §116.774(b) to clarify that a small business stationary source may not emit air contaminants on or after March 1, 2008, unless the facility is pennitted, has apermit application pending, orhas a registration orpending registration for apennitby rule.

15New §116.775, Eligibility for Pipeline Facilities Permits, is adopted with changes to the proposed text. The adopted new section identifies the facilities which are eligible for apipeline facilities permit in accordance with TCAA, §382.05186. The owner or operator ofa grandfathered reciprocating internal combustion engine or group ofengines that are part ofprocessing, treating, compression, orpumping facilities connected to orpart ofa gathering or transmissionpipeline may apply for a pipeline facilities permit. The new section also requires an application for a pipeline facilities permit to be submitted under the seal ofa Texas licensedprofessional engineer, ifrequired by §116.110(e), and states that the facility's owner or operator is responsible for applying for the permit and complying with the subchapter. The new section allows the owner or operator ofmore than one grandfathered reciprocating internal combustion engine to apply for a pipeline facilities permit for a single grandfathered engine or for a group ofgrandfathered engines connected to orpart ofa gathering or transmission pipeline. The commission revised §116.775(d) to clarify that the owner or operatormay apply for a permit for a single engine or a group ofengines.

New §116.776, Distribution ofFunds from the Emissions Reductions Incentives Account for Control of Emissions from Grandfathered Reciprocating Engines Located in the East Texas Region, is adopted

. with changes to the proposed text. The adopted new section implements the requirements ofHB 2914,

§78 to establish procedures and criteria for reimbursementto owners or operators for the partial cost of installing controls to reduce emissions from grandfathered reciprocating internal combustion engines at facilities associated with pipelines. The new section establishes which facilities will be eligible for reimbursement, the limitations on reimbursement, and the criteria for distribution. The adopted subsection (a)(6) was revised to require identification ofthose facilities requesting a reimbursement from the Emissions Reductions Incentives Account at the time the permit application is filed. However, no money canbe paid to a facility until the permit is issued and the required reductions have 16been accomplished at the facility. The commission also clarified in §116.776(a)(1O) that only the
owners or operators ofgrandfathered engines required to reduce emissions ofNOxby some other state
or federal law are not eligible for reimbursement. Because grandfathered engines in nonattainment
areas for ozone are required to reduce emissions ofNOx' they are noteligible for reimbursement. Therefore, the adopted criteria for distribution in subsection (c)(1) will only consider whether a facility is located in an attainment area for ozone or a near nonattainment area for ozone.
Although HB 2912 limits reimbursement to the owners or operators ofthose facilities required to reduce emissions ofNOxby 50

### %because they are seeking apipeline facilities permit, the commission believes it is also appropriate to provide the opportunity for reimbursementto certain owners or operators who choose to replace their grandfathered internal combustion engines with new electric engines. This section will allow the commission to process requests for reimbursement for the replacement ofgrandfathered reciprocating internal combustion engines through the registration ofthe replacement electric engines. Registration ofthe electric engines is necessary because there is no requirement to permit an electric engine since there are no emissions associated with electric engines.
Adopted new §116.777, Eligibility for Existing Facility Permits, states the facilities which are eligible for an existing facility permit in accordance with TCAA, §382.05183. The owner or operator ofany grandfathered facility may apply for an existing facility permit. The new section also requires an application for an existing facility permit to be submitted under the seal ofa Texas licensed professional engineer, ifrequired by §116.110(e), and states that the facility's owner or operator is responsible for applying for the permit and complying with SubchapterH.

17New §116.779, Applications for Small Business Stationary Source Permits, Pipeline Facilities Permits,
or Existing Facility Permits, is adopted with changes to the proposed text. The adopted new section specifies the application requirements and demonstrations which must be met in order for a facility to be granted a small business stationary sourcepermit, pipeline facilities permit, or existing facility permit. These requirements are consistent with the requirements for otherpermits issuedunder Chapter 116.
Adopted new §116.779(a)(1) provides thatthe emissions from the facility must comply with the rules and regulations ofthe commission, including the protection ofpublic health and physical property. The commissionmay not 

### issue apermitfor a grandfathered facility if

### it finds thatthe emissions from the grandfathered facility will notbe protective ofpublic health and physical property. The requirement to protectpublic health and physical property is also included in the adopted §116.794(l), concerning

. . . .

. existing facility flexible permits and the adopted §116.917(a)(l), concerning permits for certain

.. . grandfathered coal-fired EGFs and certain grandfathered facilities located at EGF sites. In order to
assure that permits are protective ofpublic health and property, the commission will conduct an appropriate health effects review for eachpermit application for a grandfathered facility. Details of what the review will entail will be developed and provided in a guidance document. The guidance document will be published at a laterdate, and the commission will invite stakeholder inputprior to finalizing the guidance. The permit may also have provisions for the measurement ofair contaminants, including installation ofsampling ports and sampling platforms.

In order to be consistent with the currentreview process for permits and applicable federal requirements, §§116.779, 116.794, and 116.917 require the owner or operator ofa grandfathered facility applying for a small business stationary source permit, pipeline facilities permit, existing facility 18permit, existing facility flexible permit, or EGF permitto be able to demonstrate that they meet applicable federal New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAP). Facilities mustbe able to meetperformance standards specified inthe application and may be required to provide informationthat demonstrates ongoing compliance after the permit is issued. Ifapplicable, facilities would be required to comply with Prevention of SignificantDeterioration (PSD) and nonattainment review as specified in Chapter 116, Subchapter B. Since grandfathered facilities must comply with federal requirements, ifapplicable, it is appropriate to
ensure that these facilities are in compliance with federal requirements inthe process ofreviewing applications. These sections also require the facility to submit air dispersion modeling ifa more refined health effects review is required. Finally, these sections require the applicationto identify each grandfathered facility to be included in the permit, identify the air contaminants emitted, and provide emission rate calculations.
Adopted new §116.779(b) specifies additional requirements which apply to applicants for apipeline facilities permit. In accordance with TCAA, §382.05186(e), facilities located in the East Texas region will be required to demonstrate that each engine will achieve at least a 50% reduction ofthe hourly emissions rate ofNOx' and may also be required to demonstrate a 50% reduction ofthe hourly emissions rate ofVOC, both expressed in terms ofgrams perbrake horsepower-hour (gfbhp-hr). Consistent with TCAA, §382.05186(f), the new section also states that the commission shall require up to a 20% reduction in the hourly emissions rate ofNOx and may require up to a20% reduction inthe hourly emissions rate ofVOC, expressed interms ofg/bhp-hr, for facilities located in the West Texas region orEI Paso County. In accordance with TCAA, §382.05186(b), the proposed section allows the
owner or operator ofmore than one grandfathered reciprocating internal combustion engine to average the reductions achieved among more than one engine connected to orpart ofa gathering or 19transmission pipeline in order to demonstrate the required reductions or to demonstrate that the required reductions will be achieved at each individual facility. Consistent with TCAA, §382.05186(c) and (d), the new section states that, ifthe owner or operatorchooses to average among engines located in boththe East andWest Texas regions or EI Paso County, the owner or operator must demonstrate that the sum ofthe reductions achieved from all ofthe engines located in the East Texas region will achieve the 50% reduction required for facilities located in the East Texas region. Ifthe emission reductions required by this adopted subsection will be achieved by averaging reductions, the rule also states thatthe average may not include emission reductions achieved in order to comply with any other state or federal law. Ifthe emission reductions required by this adopted subsection will be achieved at
one account, the rule allows the reduction to include emission reductions achieved sinceJanuary 1, 2001 in order to comply with another state or federal law.
Adopted 

### §116.779(c) specifies additional requirements with which applicants for an existing facility permit will have to comply. In accordance with TCAA, §382.05183(b), applicants for existing facility permits will have to propose an airpollution control method that is at least as beneficial as the BACT that the commission required or would have required for a facility ofthe same class or type as a condition ofissuing a permit orpermit amendment 120 months (ten-year-old BACT) before the submittal ofthe existing facility permit application, considering the age and remaining useful life ofthe facility, and identify the date by which the control method will be implemented.

New §116.780, Public Participation for Initial Issuance ofPipeline Facilities Permits and Existing Facility Permits, is adopted with changes to the proposed text. The adopted new section requires that
an applicant for a pipeline facilities permit or an existing facility permitpublish notice ofintent to obtain a permit in accordance with Chapter 39, Subchapters Hand K. The new section establishes that 

### 20any person who may be affectedby emissions from the grandfathered facility seeking apermitmay request that the commission hold a notice and commenthearing onthe permit application. The new section states that any hearing requestmustbe submitted during the 30-day commentperiod, which ends 30 days afterpublication ofthe notice ofintent. The new section specifies the procedures and requirements for the hearing and the rights ofaffected persons. In accordance with TCAA, §382.05181, small business stationary sourcepermits are not subjectto these notice and comment hearing procedures. The commission corrected a typographical error in §116.780(d) to correctly reference procedures in §116.783.
Adopted new §116.781, Notice and CommentHearings for Initial Issuance ofPipeline Facilities Permits and Existing Facility Permits, specifies the applicability ofthe hearing requirements in the section, the responsibilities ofthe commission in determining whether or not to hold a hearing, the applicant's responsibilities ifa hearing·is to be held, and the

### require~ents regarding submission oforal
or written statements and data concerning a draftpermit. TCAA, §382.05181(h) provides that applications for pipeline facilities permits, existing facility permits, existing facility flexible permits, and EGF permits are subject to the public notice and hearing requirements ofTCAA, §382.05191. TCAA, §382.05191 provides thatpublic participation for initial issuance ofa permitunder TCAA, §§382.05183, 382.05185(c) or (d), 382.05186, or 382.0519 will be done in the manner ofTCAA, §382.0561, concerning Federal Operating Permit; Hearing, and §382.0562, concerning Notice of Decision. These sections allow for notice and commenthearings instead ofcontested case hearings under Texas Government Code, Chapter 2001, and require the commissionto send notice offinal action to persons who comment during the commentperiod or during a hearing.

21New §116.783, Notice ofFinal Action onPipeline Facilities Permit Applications and Existing Facility PermitApplications, is adopted with changes to the proposed text. The adopted new section specifies the commission's responsibilities for sending notice ofthe final action on an application for a pipeline facilities permit or an existing facility permit, and the informationthat the commissionmust include in the notice. The new section will require the commission to individually notify persons who commented during the public commentperiod orat apermithearing, ofthe final action ofthe commission. The notice mustbe sentby first-class mail to the commenters and to the applicant. The proposed rule stated that the notice must include the response to comments, the identification ofany changes in the permit, and a statement that any person affected by the decision ofthe commission may petition for rehearing and forjudicial review. Because, in §1l6.790, the commission is delegating to the executive director the authority to take any action on a permit issuedunder this division, this section nowrequires that the notice state that any person affectedby the decision ofthe executive directormay file a motion to overturnrather than a petitionfor rehearing.
Adopted new §116.785, PermitFee, establishes a permit fee of$450 for persons applying for a permit under Subchapter H, Division 1, unless the facility is a small business stationary source, as definedby TCAA, §382.0365(h), then the fee will be $100. These fees will allow the commission to partially offset the cost ofprocessing the applications. The new section also establishes requirements for payment and return offees. TCAA, §382.062 authorizes the commission to establish fees for permits.
Adopted new §116.786, General and Special Conditions, allows the commission to include general and special conditions in the permits issued under SubchapterH, Division 2, and requires that permit holders comply with any and all general and special conditions that the permitmay contain. The new section also lists the general conditions permitholders are subject to, regardless ofwhether they are 

### 22specifically stated within the permitdocument. These requirements are consistent with the requirements for otherpermits issuedunder Chapter 116.

New §116.787, Amendments and Alterations ofPermits IssuedUnder this Division, is adopted with changes to the proposed text. The adopted new section specifies that owners or operators planning the modifications ofa facility permitted under Chapter 116, SubchapterH, Division 2, must comply with the requirements ofSubchapterB, New Source Review Permits, before beginning the construction of the modification. The new section also states that amendments and alterations ofpermits issued under SubchapterH, Division 2, are subject to the requirements ofSubchapter B. The commission corrected
a typographical error in this section.
Adopted new §116.788, Renewal ofPermits Issued Under this Division, implements TCAA, §382.055 and the changes to §382.05192 to require thatsmall business stationary source permits,·pipeline facilities permits, and existing facility permits be renewed in accordance with Chapter 116, Subchapter D, Permit Renewals.

New §116.790, Delegation, is adopted with changes to the proposed text. In accordance with the commission's authority under TCAA, §382.061, and Texas Water Code (TWC), §5.122, adopted new §116.790 delegates to the executive director the authority to take any action on a permit issued under SubchapterH, Division 2.



### Division 3, 

### Existing Facility Flexible Pennits Adopted new §116.793, Eligibility for Existing Facility Flexible Permits, identifies the conditions under which a grandfathered facility or group ofgrandfathered facilities is eligible for an existing 

### 23facility flexible permit in accordance with TCAA, §382.05183(c). Consistent with §382.05183(c), the
new section also allows facilities pennitted under §382.0519 to be included inthe existing facility flexible pennit. The new section requires an application for an existing facility flexible pennit to be submitted underthe seal ofa Texas licensedprofessionalengineer, ifrequired by §116.110(e). The
new section also requires specific actions by owners or operators offacilities covered by an existing facility flexible permit for changes ofownership. The new section specifies that the facility's owner or operator is responsible for applying for the pennit and complying with SubchapterH, except after a change ofownership as explained in the section.
Adopted new §116.794, Existing Facility Flexible Permit Application, specifies the application requirements and demonstrations which mustbe met in orderfor a facility to be granted an existing facility flexible permit. These requirements are consistent with currentflexible permit requirements, except fOf the required level ofcontrol. The level ofcontrol required by the adopted section, consistent with the requirement ofTCAA, §382.05183, is at least as beneficial as ten-year-old BACT, considering the age and remaining useful life ofthe facility.
Adopted new §116.795, Public Participation for Initial Issuance.ofExisting Facility Flexible Permits, requires that an applicant for an existing facility flexible permit publish notice ofintent to obtain a pennit in accordance with Chapter 39, Subchapters Hand K. The new section establishes that any person who may be affected by emissions from the grandfathered facility seeking apennit may request that the commission hold a notice and commenthearing on the pennit application. The new section states that any hearing request must be submitted during the 30-day commentperiod, which ends 30 days after publication ofthe notice ofintent. The new section specifies the procedures and requirements for the hearing and the rights ofaffected persons. 24Adopted new §116.796, Notice and CommentHearings for Initial Issuance ofExisting Facility Flexible Permits, specifies the applicability ofthe hearing requirements inthe section, the responsibilities ofthe commission in determining whether or not to hold a hearing, the applicant's responsibilities ifa hearing is to be held, and the requirements regarding submission oforal or written statements and data concerning a draft permit. TCAA, §382.05181(h) provides that applications for pipeline facilities permits, existing facility permits, existing facility flexible permits, and EGFpermits are subjectto the public notice and hearing requirements of§382.05191. TCAA, §382.05191 provides thatpublic participation for initial issuance ofapermitunder §§382.05183, 382.05185(c) or (d), 382.05186, or 382.0519 will be done in the manner ofTCAA, §382.0561, concerning Federal Operating Permit; Hearing, and §382.0562, concerning Notice ofDecision. These sections allow for notice and comment hearings instead ofcontested case hearings under Texas Government Code, Chapter 2001, and require the commission to send notice offinal action to persons who comment during the commentperiod or during

### a hearing.

New §116.797, Notice ofFinal Action on Existing Facility Flexible Permit Applications, is adopted with changes to the proposed text. The adopted new section specifies the commission's responsibilities for sending notice ofthe final action on an application for an existing facility flexible permit and the information that the commissionmust include in the notice. The new section requires the commission to individually notify persons who commented during the public commentperiod or at apermit hearing, ofthe final action ofthe commission. The notice mustbe sentby first-class mail to the commenters and to the applicant. The proposed rule stated that the notice must include the response to comments, the identification ofany changes inthe permit, and a statementthat any person affected by the decision ofthe commissionmay petition for rehearing and forjudicial review. Because, in §116.807, the commission is now delegating to the executive director the authority to take any action 

### 25on apermit issued under this division, this sectionnow requires that the notice state that anyperson affected by the decision ofthe executive directormay file a motion to overturnrather than a petitionfor rehearing.
Adopted new §116.798, PermitFee, establishes apermitfee of$450 for persons applying for a permit under SubchapterH, Division 3, unless the facility is a small business stationary source facility, as definedby TCAA, §382.0365(h), and then the fee would be $100. These fees will allow the commissionto partially offsetthe cost ofprocessing the applications. The new section also establishes requirements for payment and returnoffees. TCAA, §382.062 authorizes the commissionto establish fees forpermits.
Adopted new §116.799, General and Special Conditions, requires that permitholders comply with any

". . .' . . and all general and special conditions that the existingfaCility flexible permitmay contain
..The new section states that upon a specific finding by the executive director that an increase ofa particular air contaminant could result in a significant impact onthe air environment, or could cause the facility, group offacilities, or account to become subject to review under §116.150 and §116.151 and §§116.160

- 116.163 (relating to Nonattainment Review or Prevention ofSignificant Deterioration Review), or Subchapter C ofChapter 116 (relating to Hazardous Air Pollutants: Regulations Governing Constructed or Reconstructed Major Sources (FCAA, §112(g), 40 CFR Part 63)), the permit may include a special condition which requires the permittee to obtain written approval from the executive director before constructing a facility under a standard permit or apermitby rule under Chapter 106. Additionally, the new section specifies that apollutant specific emission cap or multiple emission caps and/or individual emission limitations shall be established for each air contaminant for all facilities authorized by the permit. The new section also lists the general conditions applicable to every 

### 26

### existing facility flexible permit and states that there may be additional special conditions attached to an existing facility flexible permitupon issuance or amendment ofthe permitthat may be more restrictive than the requirements ofthe section. These requirements are consistent withthe requirements for flexible permits issued under Subchapter G.
Adopted new §116.800, Emission Caps and Individual Emission Limitations, specifies the criteria for establishing the emission cap for a specific pollutant and the criteriafor establishing an individual emission limitation for apollutant. The new section also specifies the requirements for readjustment of
.. the emission cap when a facility is shut down, a new facility is brought into the permit, or a facility becomes subjectto any new state or federal regulation which would lower emissions or require an emissions reduction. These requirements are consistent with the requirements for flexible permits issued under Subchapter G, except that there is not an insignificant emission factor specified for grandfathered facilities. The cOrrimissiondoes not believe that an insignificantemission factor would be necessary or appropriate for grandfathered facilities, since use ofthe ten-year-old BACT control method will provide sufficient flexibility for these facilities.
Adopted new §116.801, Implementation Schedule for Additional Controls, explains the implementation schedule to be contained in apermit ifthe installation ofadditional controls is required for a grandfathered facility to meet an emission cap for an air contaminant. As required by TCAA, §382.05181, installation ofrequired controls mustbe completedbefore March 1, 2007, for facilities located in the EastTexas region, and before March 1,2008, for facilities located in the West Texas region or EI Paso County. The new section also specifies how the emission cap will be adjusted ifsuch
a facility is taken out ofservice or fails to install the additional control equipment as provided by the implementation schedule in the permit. 27Adopted new §116.802, Significant EmissionIncrease, defines when an increase in emissions from operational orphysical changes at an existing facility covered by an existing facility flexible permit will be consideredinsignificant for the purposes ofstate new source review under SubchapterH, and will not require a permit amendment. The new section states that any increase in emissions from a new facility or emissions ofan air contaminant notpreviously emitted by an existing facility will require a permit amendment.
Adopted new §116.804, Limitation on Physical and Operational Changes, states that neither operational
nor physical changes at an accountmay result in an increase in actual emissions at facilities not covered by the existing facility flexible permitunless those affected facilities are authorized in accordance with §116.1l0, Applicability.
Adopted new §116.805, Amendments and Alterations for Existing Facility FlexiblePehnits, specifies that amendments and alterations for existing facility flexible permits are subject to the requirements of SubchapterB.
Adopted new §1l6.806, Existing Facility Flexible PermitRenewal, states that existing facility flexible permits will be renewed in accordance with the requirements ofSubchapterD, Permit Renewals, consistent with the permit requirements ofChapter 116.

New §1l6.807, Delegation, is adopted with changes to the proposed text. In adopted new §116.807 the commission delegates to the executive directorthe authority to take any action on apermit issued under Subchapter H, Division 3 consistent with the authority ofTCAA, §382.061, and TWC, §5.122. This delegation will allow for efficientprocessing ofpermit applications. 

### 28With the addition ofthree new divisions to this subchapter, the existing requirements for VERPs have beenplacedunder a new Division4. There have been no changes to the requirements for VERPs.


### SubchapterI, Electric GeneratingFacility Permits The adopted amendments to SubchapterI implementthe portions ofTCAA, §382.05185, which create
a new EGF permit. The EGF permit will allow the owners or operators ofEGFs who have already applied for apermitrequiredby SB 7, 76th Legislature to apply for apermit for: 1) generators that do not generate electric energy for compensation and are notused more than 10% ofthe annual operating
. schedule; and 2) auxiliary fossil-fuel-fired combustion facilities that do not generate electric energy and do not emit more than 100 tpy ofany air contaminant. The adopted changes will also allow coal-fired EGFs which were required to apply for apermitunder SB 7, 76th Legislature to apply for an EGF permitfor criteriapollutants other than NOx, 

### S02' and PM as it relates to opacity. 

### In addition, the amendments to Subchapter Iprovide that gas-fired EGFs which were required to be permitted

# und~rSB 7, 76th Legislature or were exemptfrom the requirement to apply for such apermit are considered permitted for all air contaminants.

The adopted amendments to Subchapter I include revising the subchaptertitle to Electric Generating Facility Permits.

The adopted amendments to §116.91O, Applicability, allow the owners or operators ofEGFs who have already applied for apermitrequiredby SB 7, 76th Legislature to apply for an EGF permit for certain auxiliary generators or other combustion equipment. The amendments delete the old subsection (e) as unnecessary since this section deals with applicability and the pollutants covered by the permit are identified in §116.119 and the permit document itself. The changes adopted in subsection (f) clarify 

### 29that EGFs generating electric energyprimarily for internal use are not required to obtain a permit under this subchapter. However, since these internal use generators are grandfathered, TCAA, §382.05181, as codified in §116.770, requires that the owners or operators obtain authorization from the commission. The facility must obtain apermitunder either Chapter 116 or qualify for a permitby rule under Chapter 106.

The amendments to §1l6.911, Electric Generating Facility Permit Application, are adopted with changes to the proposed text. The adopted amendments clarify that gas-fired EGFs which were required to bepermitted under SB 7, 76thLegislature or were exempt from the requirement to apply for such apermit are considered permitted under the TCAA for all air contaminants. The adopted additions to this section also allow the owners or operators ofEGFs who have already applied for a permit required by SB 7, 76th Legislature to apply for apermit for generators thatdo notgenerate electricityfor.compensation and are not usedmore thim 10% ofthe normal operating schedule, or for other combustion equipment thatdoes not generate electric energy and does not emit more than 100 tpy ofany air contaminant. The adopted amendments to this section allow coal-fired EGFs which were required to apply for a permitunder SB 7, 76th Legislature to apply for an EGF permit for criteria pollutants other than NOx, 

### 502, and PM as it relates to opacity. The adopted additions to this section identify the date by which applications mustbe filed and state that emissions ofair contaminants from auxiliary generators or other combustionequipment that is permitted must be included in the allowance trading program created by SB 7, 76th Legislature. The commission revised §116.911(d) and (e) for clarification and to correct a typographical error.

The amendments to §1l6.913, General and Special Conditions, are adopted with changes to the proposed text. The adopted amendments update the conditions ofany permit issued under this 30

### subchapter, including the pollutants or allowances that may be authorized for each permit and the requirements ofthe SB 7 allowance trading programfor the additional equipment which may be permittedunder this subchapter
. Existing paragraph (2) ofthis section is deleted as it is no longer necessary because HB 2912 either considers these additional air contaminants already permitted for gas-fired EGFs which have obtained or applied for apermitunder SB 7, orprovides for the permitting ofthe additional criteriapollutants for coal-fired EGFs which have obtained or applied for a SB 7 permit. Subsequentparagraphs have been renumbered. Permits for certain grandfathered coal-fired EGFs and certain grandfathered facilities located at EGF sites authorized under §116.917 will contain additional general and special conditions, as identified in adopted new §116.918. The proposed rule established ASTM Grade Number 2 fuel oil containing notmore than 0.3

### %sulfurby weight as acceptable. The commission stated in the preamble to the proposed rule that staffwas continuing to analyze otherfuel oil grades and refine the modeling analysis. As a result ofthis additional analysis, the commissionhas determined that any ASTM grade offuel oil with a sulfur content of0.7

### %

### hy weight or less is acceptable, except in those areas where a lower sulfur content is required by 30 TAC Chapter 112. This limitation has been added to the general conditions in §116.913 along with a clarification that the burning ofwaste orused oils is not authorized under Subchapter 1. 

### The commissionhas also added a general condition to §116.913 requiring the EGF to keep records offuel oil burning and submitthose records with the report required under §101.336(b). Additionally, the commissionmade aminor language clarification in §116.913(a)(2) and clarified the language in §116.913(a)(I)(E) to apply only to criteria pollutants instead ofall air contaminants in order to be consistent with TCAA, §382.05185.

New §116.917, Electric Generating Facility PermitApplication for Certain Grandfathered Coal-Fired Electric Generating Facilities and Certain Grandfathered Facilities Located at Electric Generating 31Facility Sites, is adopted with changes to the proposed text. The adopted new section outlines the application requirements for grandfathered coal-fired EGFs which choose to permit their additional criteriapollutants, and the auxiliary generators and the additional combustion equipment which can
now be permitted under this subchapter. In order to be consistent with the current review process for permits and applicable federal requirements, §116.917 requires the owner or operator ofa grandfathered facility applying for an EGFpermitto be able to demonstrate that the facility meets applicable federal NSPS and NESHAP. Facilities mustbe able to meetperformance standards specified in the application and may be required to provide information that demonstrates ongoing compliance after the permit is issued. Ifapplicable, facilities wouldbe required to comply with PSD and nonattainment review as specified in Chapter 116, Subchapter B. Since grandfathered facilities must comply with federal requirements, ifapplicable, it is appropriate to ensure that these facilities are in compliance with federal requirements in the process ofreviewing applications. These sections also require the facility to submitairdispersion modeling ifamore refined health effects review is required. Finally, these sections require the application to identify each grandfathered facility to be included in the permit, identify the air contaminants emitted, and provide emission rate calculations. The commission revised an incorrect reference to §116.611(f)(l) and (2) to correctly reference §116.911(f)(1) and (2).
Adopted new §116.918, Additional General and Special Conditions for Grandfathered Coal-Fired Electric Generating Facilities and Certain Grandfathered Facilities Located atElectric Generating Facility Sites, identifies some ofthe general and special conditions which may be included in any permit issued under the adopted §116.917 and states that there may be additional special conditions attached to a permit upon issuance ofthe permit that may be more restrictive than the requirements of the section. Additional general and special conditions are required by §116.913. Permitholders are 

### 32required to comply with any and all general and special conditions that the permit may contain. These requirements are consistentwith the requirements for permits issuedunder Chapter 116.

The adopted amendments to §116.921, Notice and Comment Hearings for Initial Issuance, are necessary to include the auxiliary generators and additional combustion equipment described in adopted §116.911(f), which may be.permitted under this subchapter, as facilities subject to the notice and hearing requirements ofthis section. These changes implement the requirement contained in TCAA, §382.05191.
Adopted new §116.926, Permit Fee, is necessary to allow the commission to collect application fees for any permits issued in accordance with §116.917. These fees will allow the commission to partially offset the cost ofprocessing the applications. TCAA, §382.062 authorizes the commission to establish fees for permits.

New §116.928, Delegation, is adopted with changes to the proposed text. 

### In new §116.928, the commission delegates to the executive director the authority to take any action on a permit issued under this subchapter, consistent with the authority ofTCAA, §382.061, and TWC, §5.122. This delegation will allow for efficientprocessing ofpermit applications. 

### In this section the commission also provides thatbecause ofthis delegation to the executive director, the notice offinal action under §116.922 will
now notify the persons affected by the executive director's decision ofthe opportunity to file a motion to overturn rather than a petition for rehearing. It was necessary to add this language to §116.928 because the commission did not originally propose changes to §116.922 (relating to Notice ofFinal Action).

33The adopted amendments to §116.930, Modifications, include a revision ofthe section title to "Amendments and Alterations ofPermits Issued Underthis Subchapter." The adopted amendments are intended to clarify that the owner or operator ofa facility with apermit issued under this subchapter mustcomply with the requirements ofSubchapterB priorto beginning the construction ofthe modification and that any required alteration or amendment will follow the procedures contained in SubchapterB.

FINAL REGULATORY IMPACT ANALYSIS DETERMINATION The commission reviewed the adopted rulemaking in light ofthe regulatory analysis requirements of Texas Government Code, §2001.0225, and determined that the changes to this chapter needed to implement the substantive permitting requirements ofHB 2912, §§5.02

- 5.04 meet the definition ofa "major environmental rule" as defined in that statute. However, the adopted rulemaking implementing HB 2914, §78 does notmeet the definition ofamajor environmental rule. The 77th Legislature amended THSC to require that all grandfathered facilities obtainpermits. These rules implement the comprehensive permitting system created by HB 2912, including four different types ofpermits which will cover all grandfathered facilities, and provide for potential emission reductions. The rules implementing HB 2914 specify the procedures and criteria governing reimbursement from the Emissions Reductions Incentives Account, established to assist certain owners or operators making reductions in emissions from grandfathered reciprocating internal combustion engines associated with pipelines.

A major environmental rule means a rule, the specific intent ofwhich, is to protect the environment or reduce risks to human health from environmental exposure and thatmay adversely affect in a material

34way the economy, productivity, competition,jobs, the environment, or the public health and safety of the state or a sector ofthe state.
Although the adopted rules to implementthe HB 2912 sections are intended to protectthe environment
orreduce risks to humanhealth from environmental exposure, they may have adverse effects on the economy, productivity, competition, orjobs ofthe state or a sector ofthe state since they require mandatory permitting or shut down ofcertain grandfathered facilities. However, the analysis required by Texas Government Code, §2001.0225(c) does not apply because the adopted rules do not meet any ofthe four applicability requirements ofa major environmental rule. The adopted rules do not exceed
a standard setby federal law, exceed an express requirement ofstate law, exceed a requirement ofa delegation agreement, or adopt arule solely under the general powers ofthe agency. The rules are adopted specifically to comply with HB 2912 and related provisions ofTCAA, and do not exceed the requirements ofeither

The adopted rules to implementthe HB 2914 sections are intended to protect the environment or reduce risks to human health from environmental exposure. Because this is an incentive program designed to provide financial assistance to certain facilities, the adopted rules will not adversely affect in a material way the economy, productivity, competition,jobs, the environment, or the public health and safety of the state or a sector ofthe state. Therefore, the adopted rules implementing the HB 2914 sections do not fit the definition ofa major environmental rule, and the analysis required by §2001.0225(c) does not apply.

TAKINGS IMPACT ASSESSMENT

35The commission completed a takings impact assessment for the adopted rules. Thepurpose ofthe adopted rules is to fulfill the commission's obligationto implement HB 2912, §§5.02

- 5.04 and HB 2914, §78, concerning grandfathered facilities. The adopted rules advance this purpose by creating a comprehensive permitting system induding four different types ofpermits which cover all grandfathered facilities, andprovide the potential for emission reductions. The rules also contain procedures and criteria governing partial reimbursement from the Emissions Reductions Incentives Account, established to assist certain owners or operators making reductions in emissions from grandfathered reciprocating internal combustionengines associated withpipelines.

The commission evaluated the adopted rules andperformed an assessment ofwhether Texas Government Code, Chapter 2007 is applicable. The commission's assessment indicated that Texas Government Code, Chapter2007 does not apply to the adopted rules because this is an action that is reasonably taken to fulfill an obligation mandated by federal law, which is exempt under Texas Government Code, §2007.003(b)(4). Section 2007.003(b)(l3) states that Chapter 2007 does not apply to an action that: 1) is taken in response to a real and substantial threat to public health and safety; 2) is designed to significantly advance the health and safety purpose; and 3) does not impose a greater burden than is necessary to achieve the health and safety purpose. Although the rule revisions do not directly prevent a nuisance or prevent an immediate threat to life orproperty, they do prevent a real and substantial threat to public health and safety and significantly advance the health and safety purpose. In addition, these rules fulfill an obligation mandated by federal law
. The adopted rules implement requirements of42 United States Code (USC), §741O. The reductions in NOx and VOC significantly advance a health and safety purpose by assisting the state's efforts to attain the ozone national ambient air quality standards (NAAQS) setby the EPA under42 USC, §7409, for nonattainment areas ofthe state and maintain the quality ofthe state's air in attainment areas. The 36action is mandated by federal law because the rules will be submitted for EPA approval as part ofthe SIP. Texas Government Code, Chapter2007 also does not apply because this is an action that is taken in response to a real and substantial threatto public health and safety, that is designed to significantly advance the health and safety purpose, and that does not impose agreaterburdenthan is necessary to achieve the health and safety purpose. Reductions requiredby these rules will be no greater than those required by HB 2912. Thus, this action is exemptunder Texas Government Code, §2007.003(b)(13).
Adoption and enforcement ofthese rules will notburdenprivate real property. The adopted rules do not affectprivate property in a manner which restricts or limits an owner's right to the property that would otherwise exist in the absence ofgovernmental action. Consequently, the adopted rules do not meet the definition ofa taking under Texas Government Code, §2007.002(5).

CONSISTENCY WJTH THE COASTAL MANAGEMENT PROGRAM The commission determined that the rulemaking relates to an action or actions subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources Code, §§33.201 et seq.), and the commission rules in 30 TAC Chapter 281, SubchapterB, Consistency with the CMP. As required by 31 TAC §505.11(b)(2) and 30 TAC §281.45(a)(3) relating to actions and rules subjectto the CMP, commission rules governing air pollutant emissions must be consistent with the applicable goals and policies ofthe CMP. The commission reviewed the rulemaking for consistency with the CMP goals and policies in accordance with the rules ofthe Coastal Coordination Council, and determined that the rulemaking is consistent with the applicable CMP goals and policies. The CMP goal applicable to this rulemaking is the goal to protect, preserve, and enhance the diversity, quality, quantity, functions, and values ofcoastal natural
resource areas (31 TAC §501.12(l). The CMP policy applicable to this rulemaking is the policy (31 37TAC §501.14(q) that commission rules comply with federal regulations in40 Code ofFederal Regulations (CFR) to protect and enhance air quality in the coastal area (31 TAC §501.14(q)). This rulemaking requires the owners or operators ofall previously grandfathered facilities to obtain apermit for those facilities in order to continue to operate. The permits issued forthese facilities are expected to result inreduced emissions ofair contaminants and improved compliance with state and federal air pollution control requirements. Therefore, this rulemaking is consistent with the applicable policy and goal.

No comments on the CMP consistency determination were received.

HEARING AND COMMENTERS Public hearings on the proposal were held at the following times and locations: January 22,2002, 7:00 p.m., TylerJunior College Regional Training andDevelopmentCenter, Room 104, 1530 South Southwest Loop 323, Tyler; January 23,2002, 7:00p.m., City ofHouston City Council Chambers, 2nd Floor, 901 Bagby, Houston; January 24,2002, 7:00p.m., City ofOdessa City Council Chambers, 5th Floor, 411 West 8th Street, Odessa; January 28,2002,6:30 p.m., City ofIrving Central Library Auditorium, 801 West Irving Boulevard, Irving; and January 29,2002,2:00 p.m., Texas Natural Resource Conservation Commission, 12100 North 1-35, Building F, Room 2210, Austin.

The commission received comments from the following organizations and companies: Birds-i Network (BIN); Southeast Coalition ofCivic Clubs (SCCC); St. Francis Xavier Catholic Church (St. Francis); League ofWomen Voters ofDallas (LOWV); TXU Business Services Company, on behalfofTXU Energy (TXU); Texas Oil & Gas Association (TxOGA); Texas Campaign for the Environment (TCE); Sierra Club Houston Regional Group (HSC); Galveston-Houston Association for Smog Prevention 38'. (GHASP); United States Environmental ProtectionAgency (EPA); Environmental Defense (EDet); Downwinders at Risk/Blue Skies Alliance (DAR/BSA); Association ofTexas Intrastate Natural Gas Pipelines/Gas Processors Association (ATINGP/GPA); Association ofElectric Companies ofTexas (AECT); and City Public Service ofSan Antonio (CPS).

In addition, the commissionreceived comments from, or onbehalfof, the following elected officials: Mr. Larry Green representing the Honorable SheilaJackson Lee, U.S. House ofRepresentatives, Eighteenth District ofTexas; House Committee on Environmental Regulation, Texas House of Representatives, the Honorable Warren Chisum, Chairman; the Honorable Warren Chisum, District 88, Texas House ofRepresentatives; the Honorable Lon Burnam, District 90, FortWorth, Texas House ofRepresentatives; the Honorable Al Edwards, District 146, Houston, Texas House of Representatives; the Honorable Lee Brown, Mayor, City ofHouston; and the Honorable Ada Edwards, Council Member, District D, City ofHouston.
SCCC, St. Francis, Larry Green (Congresswoman SheilaJackson Lee's office), Representative Edwards, Houston City Council Member Edwards, GHASP, EPA, and Lee P. Brown, Mayor, City of Houston, generally supported the proposed rulemaking. All commenters suggested changes to some portion ofthe proposed rules.

TXU supported the comments ofAECT. GHASP expressed support for the comments expressed by others regarding the details ofthe rules relating to grandfathered pipeline facilities. Representative Lon Burnam expressed support for the comments submitted by the Houston Sierra Club and the Texas Campaign for the Environment.

39

### RESPONSE TO COMMENTS SCCC, St. Francis, Larry Green (Congresswoman SheilaJackson Lee's office), Representative Edwards, Houston City Council MemberEdwards, GHASP, EPA, and Lee P. Brown, Mayor, City of Houston, expressed general support for the rule.

The commission appreciates the support.

GHASP commented that any good cause extensions for the installation ofcontrols should notbe automatic, and the duration ofthe extensions shouldbe minimized. TCE commented that the commission should provide definitions or conditions thatjustify the extension. Lee P. Brown, Mayor, City ofHouston urged the commission to complete the review ofpermit applications within six to 12 months after receipt.

The commission appreciates the comments, and has designated the proposed §116.771 as subsection (a) and added new language under subsection (b) 

### to provide for the possible good cause extensions. The commission is committed to completing the permit review for these facilities within the required time frame. The commission will make every effort to review and act on all 

### permit applications submittedin accordance with these rules within one yearfrom the date of receipt ofthe administratively complete application.

TCE expressed concern that many aspects ofthe implementation ofthe legislation are being left to guidance documents and that the public has a limited role in the guidance documentprocess, and suggested that a balanced work group be used to develop the guidance documents.

40

### The commission has made no change inresponse to this comment. The development ofguidance documents willbe conducted through a balanced stakeholderprocess, which allows for public review and comment from interested persons.

RSC and DAR/BSA 

### commented that the proposed rules should specify the details ofthe health effects review, so that the public may review and comment on the criteria. RSC also commented that they wanted specific criteria in the rules to preventthe commission from acting arbitrarily and capriciously by treating some facilities in 

### amore beneficial manner than others. ATINGP/GPA 

### expressed support for the commission's proposals regarding health effects review guidance and encouraged the commission to ensure that the extent and nature ofthe review corresponds to the potential health risks from aparticular facility.

. . 

### The commission has made no change in response to these comments. The development ofthe guidance for health effects review will be conducted through a balanced stakeholder process, which allows for public review and commentfrom interested persons. The commission does not agree that the use ofa guidance document would allow the commission to act in an arbitrary and capricious manner with respectto the review for any permit. The commission appreciates the support for the development ofthe health effects review guidance, and looks forward to working with all stakeholders in its development.

TCE and GRASP commented that the health effects review should include a review ofcomplaints against the facility. Additionally, GRASP commented that health effects reviews should include a review ofnotices ofviolation, and any other compliance information that might indicate pastproblems at a site. GRASP commented that adding these items to the health effects review would be particularly 41

### importantfor facilities that will notbe required to makepollutionreductions in exchange for apermit. TCE also statedthatthey want to make sure that the compliance history ofgrandfath.eredplants is thoroughly reviewed, including, butnot limitedto, violations and complaints, before permits are issued to grandfatheredfacilities

- small and large.

The commissionhas made no changein response to this comment. The commissionnotes thatthe classification and use ofcompliancehistory in alltypes ofpennit reviews, including permits for grandfathered facilities, is currently being addressedin separate rulemakings. Notices of violation are now includedin the components ofa person's compliance history.

TCE commented that the rule should specifically address the prevention ofpublic nuisance and the prevention ofimmediate threat to life orproperty in addition to the rule inclusion for prevention ofreal and substantial threat to public health and safety
..
The commission has made no change in response to the comment. Generally, the health effects reviews conductedby the commission will considerthe nuisance effects from compounds either through a review ofthe compliance history ofthe facility orthrough a detailed lookatthe offproperty impacts ofthe emissions from the facility. When the commission conducts a detailed modeling analysis, the off-property impacts are comparedto the effects screening level (ESL) of the compound. TheESL for each compound is based on the nuisance potential orthe potential for adverse health effects, whicheveris lower. In 

### addition, the commission's rule regarding nuisance, 30 TAC §lOl.4, 

### provides adequate enforcement authority regarding nuisance conditions. The commission also notes that private citizens may have other private remedies

42

### regarding nuisance conditions. Immediatethreats to life and property from potential acute exposures will also be considered during the permitreview.
GHASP, DAR/BSA, 

### and TCE commented thatthe $450 fee is too low for large businesses, but support the low fee for small business sources. HSC also commented that the $450 fee was too low, and that the fee shouldbe a minimum of$1,000. TCE commented thatthere shouldbe ahigher fee for companies that did notparticipate inthe VERPprogram. TCE suggested thatthe commissionuse the existing fee structure for new and modified sources. TCE suggested thatthe commissionconsider hiring persons with accounting backgrounds, rather than engineering backgrounds, to detennine the appropriate value ofthe facilities being pertnitted. TCE also suggested that the commissionnot charge
a single fee for a pennitfor numerous facilities located on apipeline.

. The commission has made no change in response to this comment. The commission does not

agree that it is appropriate to use the existing fee structure for facilities that were constructed
over 30 years ago, and that have notbeenmodified. The permitting ofthese facilities is not anticipated to require as many resources as reviewing a permit for new construction. The commission notes, however, that fees for the permitting ofgrandfathered facilities have been included in a review ofpermit fees currently being conducted to assess whether changes shouldbe proposed to permit fees in general. The commission will charge a fee for each permit application reviewed. Even ifan application for a permitincludes multiple facilities associated with a pipeline, the fee will be a single application fee.

TCE and DAR/BSA 

### questioned how the commissionwill compile an accurate listing ofthe additional large, small, and micro-business grandfathered facilities not included in the 1997 emissions inventory. 43TeE and DAR/BSA also questioned how the addition ofthese facilities to the inventory will affect the SIP.



### The conunission has made no change in response to.these comments. The commission will 

### not attemptto compile a list ofthe additional large, small, and micro-business grandfathered facilities which are notincludedinthe 1997 emissions inventory. The commission will make efforts to outreachto as many businesses as possible to make sure they are aware that any grandfathered
. facilities theymayhave will 

### need to be permitted. However, the emissions from most ofthese businesses are already accounted for in the inventory, and thus the SIP, by established procedures used to estimate the emissions from area sources. Thus, there should be little orno impact on the 

### SIP.

. . '" EPA commentedthat the proposed §§116.771, 116.776, 116.779, 116.794, and 116.801 should clarify that control measures and implementation schedules be agreed upon prior to permit issuance and induded inpermits.



### The commission agrees that control measures and implementation schedules shouldbe codified in the permit, when controls are required. The proposed §1l6.771 specifies thatifany additional controls are required by a permit for a grandfathered facility, the permit will specify a schedule for the implementation ofthose controls. This requirement applies to any permitissued under SubchapterH.

EPA commented that the proposed rules provided that notice and comment hearing requirements apply only to the initial issuance ofpipeline facilities permits, existing facility permits, existing facility 44

### flexible permits, and"EGFpermits. EPA states thatthe commission should require public notice for revisions and modifications ofpipeline facilities permits, existing facility permits, existing facility flexible permits, and EGF permits to meet40 CFR §51.161.

The commissionhas made no changein response to this comment. HB 2912 providedthat public participationfor initial issuance 

### ofpipelinefacilities permits, existingfacility permits, existing facility flexible permits, and EGF permits, would be conductedin the same manner as public participationfor federal operating permits. Therefore, for initialissuance, 

### public participation includes a requirement for publication ofnewspaper notice, signposting, and an opportunityto request a notice and commenthearing. However, HB 2912 providedthat for modifications and renewals 

### ofpipeline facilities permits, existing facility permits, existing facility flexible permits, and EGF permits must comply with TCAA, §382.0518, which requires public participationto

. . .. 

### include publication ofnewspaper notice, signposting, and an opportunity to request a contested"
case hearing. Proposed and adopted §§116.787, 116.788, 116.805, and 116.806 require that modifications and renewals ofsmall business stationary source permits, pipeline facilities permits, existing facility permits, and existing facility flexible permits comply with Chapter 116, Subchapters Band D, and therefore, meet the requirements of40 CFR §51.161. Adopted §116.930 requires that modifications ofEGF permits comply with Subchapter B and existing §116.931 requires that renewals ofEGF permits comply with SubchapterD, thus also satisfying the requirements of40 CFR §51.161 for EGF permits.

EPA commented that proposed §§116.786(b)(2), 116.799(c)(2), and 116.918(b)(2) do not meetthe requirements of40 CFR §51.212(c), which provides that compliance must be determined by methods in40 CFR 51 Appendix M; 40 CFR 60 Appendix A; or as approved by the EPA administrator. 45

### The commissionhas made no change in response to this comment. The rules as written continue the current practice ofreviewing any alternate method requests and sending recommendations to EPAfor approval as appropriate. These rules and procedures satisfy the requirements of40 CFR §51.212(c).

LOWV expressed concern regarding whether the hearing process has any impact onpermit issuance. LOWV also stated that air contaminants are carriedbyprevailing winds, can be carried far away from sources, andthe wind currents are not always the same. Lastly, LOWV commented that the agency response to this issue has been very weak and industries do not have the right to pollute the air. LOWV stated that citizens have the right to breathe clean air.

The commission has made no·changes to the rule in response to these comments. The commission

.supports inputfrom the public iIi 

### all penfiitting decisions through both public comment andthe

opportunity to request a hearing where authorizedby statute. The commission agrees that certain air contaminants may be carried some distance by prevailing winds. The commission
assesses the impact ofthese air contaminants on downwind areas as part ofthe permit review process.

TXU commented that the permitting ofexisting facilities is anew process and does not necessarily have to be consistent with the processes for permitting new and modified facilities. TXU stated that the permitting process for grandfathered facilities should adhere closely to what is authorized in SB 7 and HB 2912 and not add on traditional permitting procedures.

46

### The commissionhas made no change in response to this comment. The commission agrees that HB 2912 provides specific permittingrequirements for grandfatheredfacilities in acknowledgment ofthe fact thatthese facilities have alreadybeen constructed. However, HB 2912 also provides that review and renewal ofthese permits be completedunder existing Chapter 116 procedures. This requires thatthe commissionharmonizethe review ofgrandfathered facilities in the context ofthe existing structure for permittingnew andmodified facilities.

TxOGA requested that the commission create a "regional permitfor aggregated facilities" for grandfathered tank orpipeline facilities other than engines. TxOGA's proposed regional permit would require that the aggregate allowable emissions meet the equivalent overall emission limit ofcurrent BACT.



### The commission appreciates the suggestion; however, this suggestion isbeyond the scope ofthis rulemaking, so no change has beenmade in response to this comment.

TCE and DAR/BSA requested that the commission change the word "may" to "shall" inthe sections of the rules relating to the provision for measurement ofair contaminants, including installation of sampling ports and sampling platforms. In addition, TCE comments that the rules do not include requirements for certified monitoring data.



### The commissionhas made no change in response to these comments. These general conditions are includedin all permits. The commission does not agreethatit is 

### appropriate to require the installation ofsampling ports and sampling platforms for all facilities. Inthose cases where the permit engineer determines that it is appropriate to require sampling and/or monitoring, the 

### 47

### permit will 

### contain specific conditions requiring the provisions for these activities. 

### In addition, perinit engineers are aware ofthe periodic monitoring and compliance assurance monitoring requirements ofTitleV and permits for grandfatheredfacilities will satisfy those requirements where appropriate.

TCE and DAR/BSA supportedthe rule language stating that there may be special conditions included in the permit that may be more restrictive than the requirements ofthe section.



### The commission appreciates the support.

HSC commented that the commission should define the criteria ituses to determine when the basis ofa hearing request by aperson who may be affected (by a facility requesting apermit) is determined to be

. . . unreasonable. HSC's perspective is that any person who is breathing ormay"breathe the air contaminants from a facility is affected and the commission does not have the right to withhold from any person the right to have apublic hearing.



### The commissionhas made no changes in 

### response to these comments. The public notice provisions inthe adopted rules implementtherequirements ofHB 2912, §§5.02

- 5.05 to provide for public notice and an opportunity for a.notice and commenthearing, inthe samemanner as provided for federal operating permits under TCAA, §382.0561. Section 382.0561 provides that the commission is not required to hold ahearingifthe basis ofthe request by a person who may be affected is determinedto be unreasonable. Therefore, reasonableness is the statutory standard by whichrequests for hearings arerequired to bejudgedby the commission. Although the conunission believes that "reasonableness" is a term thatis circumstantial and not requiredto be 

### 48

### dermedby the commission, the factors relevantto a determination ofreasonableness have previously been discussed in the commission's procedural rules, and the commission coulduse those factors as guidance.

EPA commented that these regional reductions will not only result in improvements to air quality near the specific facilities, but should also provide benefits in reducing ozone levels inthe nonattainment and
near nonattainment areas, as well as reduce regional haze.



### The commission appreciates the support.

EPA commented that §116.772 should clarify that a source which shuts down and then restarts must be re-permitted under Chapter 116, SubchapterB orunder Chapter 106.



### The commissionhas made no change in response to this comment. The proposed §116.772(c) requires thatthe owner or operator ofa source which is shut down and which the owner or operatorthen elects to restart must obtain authorization under Chapter 116 or Chapter 106 prior to operating the facility. The permitting is notlimitedto Chapter 116, SubchapterB. For instance, ifan owner or operator ofa grandfathered facility locatedin West Texas shuts the facility down in 2002, but elects to re-startthe facility, the owner or operatormay submit an application for a grandfathered facility permitunder Subchapter H (except for Division 4- VERP) priorto September 1, 2004.

49EPA asked ifForm PI-IGSD, Notice ofShutdown, along with application forms for Small Business Stationary Source Permits, Pipeline Facilities Permits, and Existing Facility Permits were available for public review and comment.



### The forms to implementthese grandfatherpermittingrules are being developed. The forms will bemade availableto the public whentheyhave been completed, and the commission always welcomes public comment onhow forms and guidance canbeimproved.

EPA commented that §1l6.786(b)(3) should also discuss public availability ofrecords, and that records should be available to the public upon requestunless determined to be confidential business informationunder40 

### CPR 2.



### The conunission has made no changein response to this comment. Thecoinmission agrees that public availability is an important component ofthe permitting process, and has implemented procedural rules, 30 TAC §1.5, to ensure thatthe records ofthe agency are properly available to the public, subject to appropriate confidentiality restrictions. The commission provides information to the public, subjectto thelimitations providedin TCAA, the Texas Public InformationAct, and copyrightlaw.

EPA commented that §1l6.786(c)(2)(A), special conditions for written approval, should provide that the public record for any permit application should document the basis for requiring, or not requiring, prior written approval from the executive director.



### 50

### The commissionhas made no change in response to this comment. The proposed §116.786(c)(2)(B) identifies the reasons why the commissionmay include a provision requiring priorwritten approval before constructing a source under certain authorizations. The basis for including such a conditionin a permit will 

### be identifiedin the technical review ofthe permit application. This technical review is available inthe permit fIle availableto the public.

EPA commented thatpermits for coal-fired EGFs and certain grandfathered facilities located at EGF sites as identified in §116.917 should containprovisions for measuring the emissions ofair contaminants as determined by the commission. Specifically, EPA commented with regard to §116.917(a)(6), that the commission should require both initial and ongoing compliance measures (for example, periodic monitoring), in order to ensure initial and ongoing compliance. EPA commented that the pipeline facilities permit needs to specify the method for determining how the source will

'. .

. . demonstrate achievement of50% and 20% reduction, respectively, on a continual basis. DAR/BSA also commented that the emissions from these pipeline facilities should be reliably monitored and tracked to ensure greatest reductions.



### The commission has made no change in response to these comments. Permits issuedby the commission include any appropriate measures needed to ensure initial and ongoing compliance with the permit and any underlying standards. In addition, most, ifnot all, ofthese facilities are required to obtain a Title Vpermit and are subjectto acid rain permitting requirements. The commission is required to place the appropriate periodic monitoring and compliance assurance monitoring requirements in these permits.

51BOefstated that the commission should ensure that the owners and operators offacilities applying for a permitunderthese proposed rules cannotuse the permit to make operational orphysical changes.such
as increasing the utilization, capacity, or throughput ofexisting units without going through the normal New Source Review (NSR) permitting process. BOefstated that the commission should add a requirement that the maximum capacity under any grandfathered permit may not significantly exceed historical levels.



### The owneror operator ofa facility for which an application for a grandfatheredfacility permitis submitted shouldbe able to documentthatthe facility is truly a grandfatheredfacility and thus eligible for one ofthe four new types ofpermits for grandfatheredfacilities. The commission staffwill 

### review this information along with the remainder ofthe application information (including utilization, capacity, andthroughputinformation) to ensure thatthe facility qualifies for the type ofpermit for which the application was submitted. In 

### those cases where applications
are submitted for facilities that are not grandfathered, orfor whichthe applicantis requesting physical or operational changes to the facility that would constitute a modificationthe applicant will be directed to submit the appropriatetype ofNSR permit application.

BOefrequested that the commission require in the final rules a certification, signed by a responsible official that the facility has notbeen modified since 1971.



### The commission has made no change in response to this comment. The commission does not believe that a certification ofgrandfathered status is necessary. As 

### mentioned previously, the
owner or operator ofthe grandfatheredfacility must be ableto provide documentation regarding the grandfathered status ofthe facility being permitted. The commission also notes that for those 

### 52

### facilities which have submittedTitleV permit applications, the owner or operatorhas provided infonnationregarding the grandfathered status ofthe facilities with applicable requirements at the site and has certifiedthattheinformation providedis true and accurate.

DARIBSA commentedthat the proposed rule is ofconcern since a recently released EPA study of MOBILE6 projects thatvehicles will emit 90% more NOx and 21 % more

## voe in 2003 than previously documented, which will result in further reductions necessary for nonattainment areas to meet federal law and protect the public from harmful air pollution.



### The commissionhas made no change in response to this comment. If

### the new mobile source model predicts more emissions than the previous model, the commission, along with the local stakeholders, may be required to identify more reductions in NOx 

### and/orVOC emissions in order

. . .

. '. .



### . . to**re~ch** 

### attainment ofthe NAAQS inthe nonattainment areas. The need for additional reductions will be evaluated afterthe results from the new mobile source model are evaluated.

ATINGP/GPA requested that the commission establish a procedure whereby all permit applications for grandfathered facilities at the same account be processed at the same time.



### The commissionhas made no change in response to this comment. The commission will work with any applicant and is developing internal procedures to coordinate the review and issuance of permits to the extentthatthe requirements are similar.

Forexample: If

### the owner oroperator applies for both an existing facility permit and a pipeline facilities permit, the commissionmay be able to coordinate the review for both applications to 53

### provide for a single public notice for both applications, concurrent review ofthe applications, and issuanceofa single permit. Such coordination ofreview andissuance will 

### requirethe assistance ofthe applicant. Bothapplications mustbe submittedtogether andmust clearly identify the requestfor a single permitnumber and combined public notice. The applicantmust also ensure thatany deficiencies identified with either application are addressed quickly so thatthe coordinated review is notjeopardized.

Lee P. Brown, Mayor, City ofHoustonurged the commissionto quantify the emissions reductions from bothpermitting ofgrandfathered facilities and fewer industrial upsets resulting from the implementation ofHB 2912 as soon as possible. Additionally, the City ofHoustonurged the commission to complete air quality modeling to determine resulting ozone and fine particle reductions to allow the City ofHouston to work with regional stakeholders in developing strategies to avoid nonattaininent for the forthcoming fine particle standard.



### The commissionhas made no change in response to these comments. Although the comments address areas beyond the scope ofthis rulemaking, the commission appreciates the comments and provides the following response.

The commission agrees that emission reductions ofozone precursors resulting from the implementation ofHE 2912 should be quantified. These emission reductions will be quantified as part ofthe ozone modeling for the Houston/Galveston Area's mid-course review. Phase I ofthe modeling for the midcourse review is currently in 

### progress.

54

### The commentermakes referenceto "theforthcoming fme particle standard." The commission wishes to clarify thatthe federal fme particle (PM2.S) 

### standards were promulgatedin 1997. However, nonattainment designations for PM2• S

### have not yetbeen made by the state and the EPA. Pending further guidance from EPA regarding the implementation ofthe PM2.S 

### standard, such designations, ifdeemed appropriate from the monitoring data, couldbemade as early as 2003. The designations wouldbe based onmonitoring data from the three-yearperiod2000 through 2002.

The commenterrequests thatthe commission complete PM2.S 

### air quality modeling to allow the City ofHouston to work with regional stakeholders in developing strategies to avoid PM2.S



### , nonattainment in the Houston area. The commission does not plan to conduct PM2.S

### modeling in

advance ofany PM2• S

### nonattainment designations. However, the commission would conduct such modeling should the Houston areabe designated nonattainment, as part ofthe development ofan attainment demonstration SIP.

The commission acknowledges the programbegun in late 1999 by the City ofHouston and stakeholders to help the area avoid a PM2.S 

### nonattainment designation. Participants in this program developed and implemented a number ofearly PM2.S

### control strategies.

In 2000, a field study was conductedby universities, with assistance from the commission, to betterunderstand the formation and transport ofPM2.S 

### inthe Houston area. Datafrom the study
are being analyzed, and will provide an enhanced scientificbasis for evaluatingthe effectiveness ofpotential controls shouldthe areabe designated nonattainmentfor PM2.S'



### 55

### The representative from the Birds-i Network commented regarding personal observations ofincreased incidence ofdiabetes, lupus, and otherdiseases with mysterious lupus-like symptoms, and othervarious birthdefects.

Birds-i Network also expressed concernregarding mercury, and noted that EPA provides an annual report to Congress regarding mercury that appears to indicate thatmercury from utility emissions is responsible for birth defects and immune illnesses.

Birds-i Network commented that all lignite fired plants have no filters on the smokestacks.

Birds-i Network commented that afederal grandjury investigating the Rocky Flats nuclear reservation in Colorado issued more than 60 criminal indictments forhow thatplant was being operated, and that the federal grandjury shouldbe convened to take testimony from utility officials aboutwhat occurred during the nineties, regarding mercury.

The connnission has made no change in response to these comments. The 1990 amendments to the Federal Clean Air Actidentified 189 hazardous air pollutants (HAPs). Congress directed EPAto identify source categories which emit significant amounts ofthese HAPs and further directed them to establish standards requiring reductions in the emissions ofthese HAPs. One of the HAPs identifiedby Congress was mercury, and one ofthe source categories identified by EPA
as emitting mercury was coal-firedEGFs. As 

### the commission discussed elsewhere in this preamble, the commission expects thatEPA will be addressing mercury emissions from EGFs in the near future. The commission has no data to supportthe comments regarding the alleged increases in various diseases orbirth defects. The connnission has no informationregarding 56

### events atthe Rocky Flats nuclearreservation in Colorado and the commission does nothave authority to convene a federal grandjuryregarding any matter.

EPA requested additional discussion ofwhat is a "Small Business" under TCAA, §382.014.

The commission has made no changein response to this comment. TCAA, §382.014 does not derme "Small Business." TCAA, §382.014 enables the commissionto require a person whose activities cause emissions ofair 

### contaminants to submitinformation the commissionneeds in orderto develop an inventory ofemissions in Texas. The requirementto submitthis information needed to develop the inventory is based onthe level ofemissions from the facilities located atthe account (site), and applies to any person or company regardless ofwhether ornotthe person or company is a small business. As statedin §116.774(a), small business is dermed in TCAA, §382.0365(h).

TCE and DAR/BSA statedthat industry representatives testified at legislative hearings thatthey do not have exact emission figures for all pipeline facilities. TeE and DAR/BSA are concerned that the
owners or operators ofpipeline facilities that apply for a small business stationary source permitmay indeed be above the 50 tpy threshold ofany regulated airpollutant ormay emitmore than 75 tpy ofall regulated air pollutants. TCE and DAR/BSA are concerned thatthese pipeline facilities may be improperly exemptfrom having to obtain an existing source permit.

The commission has made no changes in response to this comment. The commission anticipates that most pipeline facilities will 

### receive pipeline facilities permits. However, there may be some pipeline facilities that will qualify for a small business stationary source permit. The commission 57

### will review each application to ensure thatitmeets the eligibility criteria, including the emission limits to be considered a smallbusiness source. Any applicant who does notmeetthe eligibility criteriafor the type ofapplication submitted will

### be required to submit a new application appropriatefor the facility.

TCE and DARIBSA commentedthatthe proposed rules will not necessarily result in significant reductions in emissions, and therefore, do not accurately reflect legislative intent. TCE commented thattheproposed rules require areduction inthe rate ofemissions for apipeline facilities permit rather than areduction in the tonnage ofemissions. TCE statedthat permits that require a 50%

### reduction in NO. emissionrates, in addition to VOC reductions, should notbe issued without substantial changes to those facilities.

The rule provisions may notresultin reductions in emissions. This is consistent with the statute since reductions are not required in all cases, as noted in other responses to commentin this rulemaking. HB 2912 provides clearstatutory direction for the situations in which emission reductions orcontrols are required for the permitting ofgrandfathered facilities. The commission notes, however, thatthe permitting ofthese facilities will provide for codification of requirements applicableto these facilities, whichmay resultin air quality benefits from better enforcement.
TCAA, §382.05186(e) clearly states thatthe commission shall grant a pipeline facilities' permit for
a facility orfacilities locatedin the East Texas Region, ifthe commission fmds that the conditions ofthe permit will require a 50% reductioninthe hourly emissions rate of

### NO. expressedin terms ofglbhp-hr. The statute also requires up to a 50% reduction in VOC emissions from facilities 58

### locatedin East Texas, and up to a 20% reduction inNOx

### andVOC emissions from facilities locatedinWestTexas. All ofthese reductions are expressedin terms ofg/bhp-hr. The staffof the AirPermits Division (APD) will 

### be reviewing the applications for these facilities to ensure that any reductions claimed are a result ofreal and substantial changes atthe facility. There will be
no claims ofa 50% reductioninNOx

### emissions allowed where there has notbeen any physical or operational change madeto the facility in 

### orderto achievethose reductions.

EDefcommented thatthe commission shoulduse its general authority to protectpublic health and adopt
.. stronger rules that ensure predictable and significant reductions occur from the permitting of grandfatheredpipeline facilities. EDefcommented that ifthe commission is going to claim credit for permitting grandfathered emissions in the 

### SIP, it must provide reasonable assurance that the projected emission reductions 

### will be achieved inpractice, and that the commission 

### will have to do more than

. . . . adopt a 50% reduction in emissions from pipeline facilities in order for this measure toIle creditable under the 

### SIP. EDefcommented that the commission should establish a cap on emissions from pipeline facilities, modeled after the emission reductionprogram established in SB 7.



### The commissionhas made no change in response to these comments. Section 382.05186(e) clearly states thatthe commission shall issue a permit for a pipeline facility or facilities locatedin East Texas ifthe conditions ofthe permit will require a 50% reduction in the hourly emissions rate of NOx

### expressedin terms ofglbhp-hr. However, ifthese reductions overall do not resultinthe amount ofNOx 

### emissions predicted for 

### SIPpurposes, the commission, along with the local stakeholders, may be required to identify additional reductions ofNOx 

### emissions in order for the
ozone nonattainment areas to achieve compliance with the NAAQS.

59ATINGP/GPA stated that the use ofthe word "may" in the proposed 

### §1l6.779(b)(1) for an up to 50% reduction in VOC emissions does notprovide due notice to owners/operators ofgrandfathered engines ofthe level ofreductions thatmay be required by the commissionto obtain a permit. ATINGP/GPA stated that some types ofNOxcontrols will actually result in an increase in the emissions ofVOC, thus creating an implementationproblem. ATINGP/GPA statedthat the commission should not require any VOC reductions without a demonstrated regional air quality orpublic health need. ATINGP/GPA stated that natural gas-fired engines are not significant sources ofVOC emissions, but diesel-fired engines emit relatively significant quantities ofVOCs. ATINGP/GPA stated thatVOC emission reductions, ifwarranted by regional airquality needs, should be imposed on diesel, rather than natural gas engines. ATINGP/GPA requested that the commissionmodify the proposed rules to state that grandfathered engines inEast Texas are not required to reduce VOC emissions in order to obtain a pipeline facilities permit. ATINGP/GPA suggested that ifthere is a demonstrated need for reductions

. in VOCemissions, the commission shouldconsider requiring reductions ofup to 50% for VOC

emissions from diesel-fueled engines.



### The commission has made no change in response to these comments. The regulatory language in §116.779(b)(1) allowing the commission to request up to a 50% reductionin VOC emissions is consistent with the statutory language in TCAA, §382.0518(e). The commission acknowledges that some NOx

### reductiontechniques may result in increases inVOC emissions. The commission also acknowledges that the VOC emissions from gas-fired engines are minimal andrequiring control ofthese VOC emissions at this time may resultinminimal improvementin air quality. However, the commission will reviewthe emissions from each facility, including diesel-fueled engines, on a case-by-case basis to determine ifreductions inVOC emissions are appropriate.

60ATINGP/GPA expressed supportfor the portion ofthe proposed rule requiring reductions for pipeline engines on a g/bhp-hrbasis. ATINGP/GPA stated that this conforms to legislative intent to protect a pipeline's capacity and not impairthe deliverability ofnatural gas throughout Texas.



### The commission appreciates the support.

TeE and DAR/BSA are concerned aboutthe commission determiningand verifying the following for all pipeline facilities permits: 1) the determination ofthe emissions rate; 2) verification ofthe actual rates prior to and post reductionby the commission; 3) baseline rate estimation

- how will the commission calculate the baseline emissions for the facilities that are required to make the 50 and 20

### % reductions in the emissions; 4) guarantee oftonnage reductions; and 5) commission verification of applicants that choose to average emissions are not also including reductions made to comply with other state orfederal requirement.



### The commissionhas made no changes in response to this comment. With the exception ofthe guarantee oftonnage reductions, all ofthese items will be reviewed and verifiedby the permit engineer actually assigned to the permit. The actual method ofverification will depend on the specific situation. Forexample, there may be cases where the permit engineer determines that there is enough data available aboutthe emissions associated with a particular engine type that no additional testing ormonitoring is necessary. In other cases, the permit engineermay request the
use ofa portable analyzerto verify beforemodification emissions, after modification emissions, or both.

61With regard to the guarantee oftonnage reductions, the statutory language does not supportthe position thatthe legislature intended a tpy reduction from these facilities. Therefore, these rules 

### will not require a reductionin annual emissions exceptinthe cases where the owner or operatoris seeking partial reimbursement for the cost ofcontrols from the Emissions Reductions Incentives Account. Inthis case, the commission asserts that reductions in annual emissions are appropriate for reasons outlined elsewhere inthis analysis oftestimony.

EDefrequested that the commissiondefme a clearmethodology to determine the baseline from which pipeline facilities' emissions reductions are measured. EDefsuggested either requiring certified monitoring data for each facility or establishing default baseline rates for various engine types based on eitherpublished emissions data orcertified testing ofarepresentative sampling ofengines in Texas.

'.' . . . . . The commission has made no change in response to this comment. The commission will establish procedures to verify both before and after control emissions from pipeline facilities to ensure that the specified reductions are actually achieved. Because different types ofengines will require different procedures, the verification process will be accomplished during the review ofthe permit for the engine orengines. Where the commission determines that the same type ofinformationis needed to verify emissions for a particulartype ofengine, the commissionmay develop guidance forthat engine type ifthere are a sufficient number ofengines that such guidance will be useful. Any guidance that is developed will be made available through the agency web site and other appropriate means.

TxOGA and ATINGP/GPA commented that the rules should provide that zero reductions may be acceptable in instances in West Texas where reductions cannot be economically achieved, and 

### 62ATINGP/GPA 

### commented that the statutory language does not mandate reductions ofeitherVOC or NOx 

### from facilities located inWestTexas, but instead allows the commission to find that zero reduction is required. ATINGP/GPA 

### stated that

### any expenditure offunds by industry inWest Texas to achieve emissions reductions is notjustified and serves to consume personnel and capital resources that could otherwise be directed toward making improvements in the EastTexas and nonattainment regions ofthe state. ATINGP/GPA 

### stated thatunless the commission ties a requirement to reduce emissions to a specific finding ofneed to protectthe public health, general welfare, orphysical property, the requirement to reduce emissions is not authorized by the Clean Air Act. ATINGP/GPA 

### stated thatthe legislature viewed the West Texas reductions as a very narrow provision, not to be applied in ablanketfashion across the breadth ofWest Texas, but rather only to meet limited regional air quality needs. ATINGP/GPA 

### stated that there is no modeling or other evidence that a 20% or less reduction ofthe relatively minor emissions from grandfathered engines would improve public health or any regional air quality condition. ATINGP/GPA 

### stated that a 1

### % reduction levelis an arbitrary floor. Representative Warren Chisum expressed support for the proposed language regarding the potential reductions for NOx 

### and VOC from pipeline facilities applying for apermit in West Texas. Representative Chisum commented that it was not the intent ofthe legislature to require at least a 1

### % reduction, and that in
some cases a0.0% reduction would be completely appropriate in West Texas.



### The commission has made no change in 

### response to these comments. The proposed rule language in §116.779(b)(2) closely tracks the statutory language in TCAA, §382.05186(f), and while the commission agrees itis appropriateto review, among otherthings, health effects and proximity to nonattainment areas, such reviews will be done on a case-by-case basis. The commission agrees thatthere may be some instances where reductions cannot be economically achieved based on specific engine models or configurations orthe age and remaining life ofthe engine. Decisions 63

### regarding the level ofcontrol required, ifany, willbe based on technical and economic evaluations ofthe control options available to specific facilities. However, the commissionhas determined that itis appropriate to askfor reductions from engines located in West Texas when there are measures that can be applied to the enginethat will resultin reductions ofemissions at little orno capital cost.

HSC commented that the commission should maximize the emission reduction requirements for pipeline facilities in West Texas so that they will be 20%, not "up to a 20%" reduction. HSC commented that the commission has been negligent in protecting important natural resources such as the Guadalupe Mountains National Park, Big Bend National Park, Big Bend Ranch State Natural Area, Franklin Mountains State Park, Hueco Tanks State Historic Park, and Fort Davis State Historic Park from visibility problems, and that now is the time to require maximum reductions, not delay.



### The commission has made no change to this comment. TCAA, 

### §382.05186(t) specifically requires thatthe commission grant a permitifthe commission fmds thatthe conditions ofthe permitwill require up to a 20% reduction ofthe hourly emissions rate ofNOx• 

### The commission notes that there are ongoing efforts relating to regional haze, which are not the subject ofthis rulemaking.

EDefstated that the commission should define how average emissions from multiple pipeline facilities
are calculated. EDefstated that the averaging process needs to ensure that there is not a reduction in the actual amount ofemissions reduction that would have been achieved through the permitting process ifthe units had been permitted individually.

64

### The commissionhas made no change in response to these comments. The commission is developing guidance onthe procedures to beused to calculatethe required emissionreductions from pipeline facilities. This guidance will 

### includethe procedures to be used whenthe owner or operatorelects to averagethe required reductions overmore than one engine. The guidance will notbefmalized untilinterested stakeholders have hadthe opportunityto review and comment on the draft guidance.

ATINGP/GPA indicated support for the rule proposals that allow the permitting ofmore than one engine under a single pipeline facilities permit and the provisions allowing the owner/operatorto average among more than one engine statewide in order to achieve any necessary emission reductions.



### The commission appreciates the support.

ATINGP/GPA recommended that the criteria for averaging emission reductions among more than one engine be incorporated into the rule and recommended the following criteria: 1) use g/bhp-hr in the emissions averaging calculations and extend the glbhp-hr for engines ofdifferent horsepowers; 2) enable use ofemissions reductions achieved as a result ofshut down engines in the permitting of operating engines; 3) enable use ofemissions reductions achieved as a result ofengines shut down after September 1, 1997 in any emissions averaging calculations; 4) ATINGP/GPA stated this would be rewarding, not penalizing, early participants in the voluntary program; 5) the commission should create
a mechanism to bank and utilize emission reduction credits. In the alternative, an accounting of emission reduction credits that are generated or utilized should be kept by the permittee/commission; 6) enable use ofvarious emissions credits available under other agency emissions creditprograms for the purposes ofemission averaging, such as discrete emission reduction credit (DERC), emission reduction 65credit (ERC), and mobile emissionreduction credit (MERe); 7) ifemission averaging is utilized, a supporting schedule should be incorporated into the pipeline facilities permit that documents the creation and utilization ofemission credits; and 8) an entity with excess emission credits should be allowed to transfer or sell those credits to another entity.



### The commissionbelieves thatthere is 

### sufficient flexibility builtinto the statute and rule by allowing owners and operators to averagethe required emissions reductions across multiple sites and thatthe additional flexibility providedby an emissiontrading programis not authorized by statute and notneeded. Owners or operators electing to averagethe required emission reductions
overmore than one engine will 

### be requiredto establishthe emissionrate for each engine and will 

### notbe allowed to establish a cap andmake changes to individual engine emission rates to stay underthe cap. The emission rate for each engine**,~ill** 

### be identified inthe pipeline facilities permit. Sincethe commission will

### not establish a cap and tradetype systemfor pipeline facilities, the owners or operators will notbe allowed to transfer or sell II

### credits II 

### to another entity.
Existing rules regarding the use ofERCs orMERCs would have to be modified to allow the use of ERCs and MERCs to comply with the required emission reductions needed in orderto obtain a pipeline facilities permit. However, since the rules for DERCs allow the use ofthese credits for compliance with any SIPrequirement, the commission**,~ill** 

### allow the use ofDERCs to comply with the required emissionreductions.

TxOGA requested that the commission clarify that engine shutdowns can be used when averaging among more than one engine to achieve the emission reductions required for apipeline facilities permit.



### 66

### TxOGA also requested thatthe commission clarify that emissionreductions achieved through the VERP programcanbe included inthe average.

The commissionhas made no changein response to these comments. The commission agrees that engine shutdowns (or other emissionreductions notrequired by another state orfederal rule) that occurred on or afterJanuary 1, 1997 may be used when averaging reductions among more than
onereciprocating internal combustion engine connectedto or part ofa gathering ortransmission pipeline. Thebaseline year for purposes ofSIPplanningis 1997, and therefore it would be inappropriate to allow the inclusion ofshutdowns occurring priorto January 1, 1997 in the calculation ofthe average. Please notethatifreductions are averaged overmore than one engine, and if

### shutdown engines areincludedinthe average, the g/bhp-hr emission rate for each shut down engine, priorto the shutdown, mustbe includedinthe average to determine the amount emissions mustbe reducedto meetthe appropriate reduction requirement.
Engines for which an owner or operatorhas received a VERP 

### are not eligible for inclusion in 

### an average. The pipeline facilities permit and the requirement for reductions in order to be eligible for the permit apply only to grandfathered facilities. Facilities for which a VERP 

### has been issued
are no longerconsidered grandfathered facilities and thus cannot be includedinthe average.

ATINGP/GPA 

### stated thatthe language inproposed §116.779(b) does not specifically state tha.t engines in nonattainment areas are subjectto the provisions ofthe SIP for the area ratherthan the emission reduction requirements ofthese proposed sections. ATINGP/GPA 

### suggested that the commission include language clarifying the applicability ofthe emission reductions requirements ofthese proposed rules to engines located innonattainment areas. 67

### The commission has made no changein response to tbis comment. Pipeline facility engines locatedin nonattainment areas are subjectto both the requirements ofthe SIPfor the area and the requirements ofthese sections. These rules require all 

### grandfatheredfacilities in the state to obtaina permit orshut down. Grandfatheredreciprocating internal combustion engines associated with pipelines, including those locatedin nonattainment areas, can apply for a pipeline facilities permit in 

### orderto comply with this requirement. In orderto obtain a pipeline facilities permit, the owner or operator ofthe facility must demonstrate thatthe engine will meetthe eIilissions reductions requirements containedinthe proposed §116.779(b)(2). In addition, these facilities must meetthe appropriate emissions reductions required in the SIP. The owner or operator shouldbe aware thatthe reductions must satisfy both ofthese requirements when choosing how to reduce the emissions. Section 116.779(b)(4) ofthe proposed rules allow the
owner or operatorto take creditfor any reductions, such as those required by the SIP, which are achieved afterJanuary 1,2001 as long as the o\Vl1er or operator does not average emissions

## fr~m more than one account.

ATINGP/GPA expressed support for the provision in §116.779(a)(9) stating that the commissionmay require computerized air dispersion modeling ifthe modeling is necessary to determine impacts from the facility. However, ATINGP/GPA stated that the provision for ambient monitoring contained in this
same subsection is generally not warranted because ofthe expense and time involved inperforming the monitoring in remote areas ofthe state where many ofthese facilities are located.



### The commissionhas made no change in response to this comment. Althoughnot often required, there may be situations where ambientmonitoring is appropriate and useful. The commission
reserves the ability to require ambientmonitoring in those situations. In addition, a few 68

### applicants have electedto perform ambientmonitoring in orderto establishthe level ofimpacts from theirfacility onthe surrounding property orto providefor an ongoing compliance demonstration.

ATINGP/GPA stated thatthe commission's cost analysis fails to take into accountthe engineering costs and studies that mustbe performed to study and analyze the types ofcontrols that will be successful in achieving controls on a particular engine. ATINGP/GPA stated that no one-size-fits-all control technology orparametric controls will work for every engine. ATINGP/GPA specifically cited the commission's cost estimates for low emission combustiontechnology and non-selective catalytic reduction as being too low. Inboth instances, ATINGP/GPA cited the commission's failure to account for any needed engine/exhaust/intake/etc modifications necessary to make the control systems operate properly.



### The commission's cost estimates were based on publicly available information, the EPA's alternative controltechniques (ACT) document for NOx 

### controls on stationary reciprocating engines. The authors ofthe EPA document attempted to reconcile lower cost estimates from control equipment vendors withhigher costs suggestedby the regulated community. Although hundreds ofstationary gas-fired engines have beenmodified to reduce NOx 

### emissions in the last decades, complete cost documentation is often guardedby engine owners for competitiveness or otherreasons. The published cost estimates are only rough approximations, using standard estimating factors for engineering costs. Qualitatively, a population ofolderengines is likely to require more costly engineering analysis ofcontrol options comparedto a newer one because engine conditions become more varied overtime. Nonetheless, once engineering studies are completed, the more modest emissionreduction goals ofthe grandfatheredpipeline permit 69

### programas comparedto low emissionretrofits presumedinthe costnote shouldresult inlower costs inmany instances thanthe costnote. Fromlimited costinformationin applications for use determination rued with the commissioninconjunction with propertytax abatements for pollution control systems, it appears thatthe capitalcosts fornon-selective catalytic reduction agree fairly well withthe ACT. Two use determinations for low emissionretrofits for compliance with the Chapter 117 engine NOx

### ruleinBeaumont Port/Arthur (75% • 85% NOx

### reduction) indicate higher engine modification costs than identifiedinthe ACT. These higher costs may resultfrom a combination ofadditional modifications necessary to makethe control systems operate properly, notidentifiedinthe ACT, andupgrades which provide both qualitative emissionbenefit andmore quantitative operational benefit. Sometimes itis difficult to separate these costs. The commission willhavethe opportunity to considercosts more specifically with individual permit applications.

HSC stated that the reimbursement criteria, "highest percentage reductions" and "projects that occur early" should be weighed more heavily than those that "are most cost effective." HSC stated that "cost effectiveness" is a company determination, not a commission determination. HSC also commented that the use ofpurchased emission credits allows companies to ignore environmentaljustice and local community impacts ofemissions.



### The commission has made no change in response to this comment. However, as noted elsewhere inthe response to comments, the commission is not going to allowthe use ofcredits in achieving the reductions required bythese rules. The one exceptionto this, as also noted elsewhere, is the
use ofDERCs. The commission does not anticipatethe widespread use ofDERCs to comply with the emission reduction requirements ofthese rules. The commission also wishes to note thatthe commissionhas addressed environmentaljusticeissues relating to the cap and trade programin a 70

### previous rulemaking regarding that program. Those rules provide for the executive directorto halttrading for a certain areaifproblems result fromtrading in a localized area ofconcern and providethatincreases in emissions by use ofcredits are allowed on a temporary basis, not perpetually, and arelimitedto 25 tons for NOx 

### and five tons for VOC in any 12-month period. All otheruses would allow sources only to remain atthe current emissionrates orlower. Additionally, the commissionhas made a strong policy commitmentto address environmental equity by creating an environmental equity program withinthe Office ofPublic Assistance. This program works to help citizens andneighborhood groups participate in the regulatory process; to
ensure that agency programs that substantially affecthumanhealth orthe environment operate without discrimination; andto make sure that citizens' concerns are consideredthoroughly and
are handled in a way thatis fair to all. The Office ofPublic Assistance canbe reached at 1-800-687-4040for further information.

EPA statedthat the provisions ofthe rule pertaining to the partial reimbursement ofthe cost ofcontrols for pipeline facilities does not need to be submitted as apart ofthe SIP.

The commission agrees with the commenter, and has removed the sections ofthe rule regarding reimbursement from the SIP submittal, since the reimbursement portion ofthe rules will be effective for a limited duration, and are not directly tied to attainment ormaintenance ofair quality.

TCE and EDefexpressed general supportfor the proposed requirement for a 50

### % reduction in annual emissions in order for pipeline facilities located in EastTexas to be eligible for partial reimbursement ofthe cost ofcontrols. EDefalso stated they supported the proposed criteria for the distribution of 71funds with one exception

- they state funds should not be used for reductions already required in a SIP. ATINGP/GPA stated that proposed §1l6.776(c)(l) contains a typo in that it still has a reference to a facility that is located in a nonattainment area for ozone. ATINGP/GPA stated that this clause should be deleted to make it consistent with other subsections ofthis section.



### The commission appreciates the support, and agrees that facilities required to make reductions in NOx

### emissions by another state orfederal requirement are not allowedto requestreimbursement from the Emissions Reductions Incentives Account. This restriction was includedin §116.776(a), andhas been clarified in 

### §116.776(c)(1) by removing "
...locatedin
... a nonattainment area for ozone" from the criteriato be considered.

ATINGP/GPA expressed support for the proposed provision that makes engines required to reduce emissions by some other state or federal law ineligible for reimbursement from the Emissions Reductions Incentives Account, but asked that the commission clarify the intent ofthis section, otherwise the section could be misconstrued to make ineligible those engines that will be subject to a MACT standard.



### The commission appreciates the support. The commission has changed the language of §116.776(a)(lO) to state, "Facilities required by any otherstate orfederal. law to make reductions in emissions ofNOx 

### are not eligible for reimbursement." MACT standards are intended to regulate emissions ofhazardous air pollutants, and not NOx' 

### Therefore, the commission agrees that an engine subjectto a MACT standard is 

### still eligible for reimbursement as long as itis not subjectto any state orfederal law which specifically requires a reduction in NOx 

### emissions.

72ATINGP/GPA expressed general support for the provisions ofproposed §116.775 regarding the distribution offunds from the Emissions Reductions Incentives Account. ATINGP/GPA and TXU commented that the criteriarequiring a reduction of50

### % in the annual emissions ofNOx in order to qualify for a reimbursement ofaportion ofthe cost ofcontrols for pipeline facilities inEast Texas shouldbe deleted, since HB 2912 and HB 2914 require only a 50% reduction in hourly emissions of NOx•


### The commissionhas made no change in response to these comments. The commission disagrees withthe commentthatthe requirementto achieve actual reductions in NOx 

### emissions from the 1997 emissions inventory detracts from requirementto obtain a 50% reduction in g/bhp-hrin orderto obtain a pipeline facilities permit. Indeed, the commissionbelieves thatthe requirement to make reductions in 

### annual NOx

### emissions from the 1997 emissions inventory actually helps to achieve the purpose behindthe reimbursement program, which was to encourage real, anIiual reductions in 

### NOx 

### emissions from sources outside the nonattainment areas inEastTexas. HB 2912 does require a 50% reduction in hourly emissions ofNOx

### in orderto obtain a pipeline facilities permitin East Texas. HB 

### 2914 states that facilities required to obtain a 50% reduction inNOx 

### emissions in East Texas are eligible for a partial reimbursement ofthe cost ofcontrols from the Emissions Reductions Incentives Account. Further, HB 

### 2914 directs the commissionto develop the criteriafor reimbursement and leaves the criteriato the commission's discretion. The Emissions Reductions Incentives Account was createdto provide for a partial reimbursement of the cost ofcontrols for pipeline engines outside the nonattainment areas in East Texas because the
owners and operators ofthese engines are being asked to make reductions in NOx 

### emissions in orderto help nonattainment areas reach attainment. The commissionbelieves that setting one of the criteriafor reimbursement as a reduction in annual emissions ofNOx 

### is appropriate since 73

### these emission reductions willbeneeded in orderto reachthe goal ofattainmentfor ozone inthe East Texas nonattainment areas.

ATINGP/GPA commented thatproposed §116.776(a)(6), requiring a pipeline facilities pennit to be issued before the owner/operator can request a distribution from the reimbursement account is awkward, and that the review should take place simultaneously with the review ofthe application. ATINGP/GPA suggested that the rule be revised to require an applicationfor apipeline facilities pennit to be filed and undergoing review before the owner/operator may request a distribution from the fund.



### The commission agrees withthis comment and has changed §116.776(a)(6) to require identification ofthose facilities requesting a reimbursement from the Emissions Reductions

. . . '. 

### Incentives Account atthe time the perinit application is iIled. The commission is requesting this information in orderto obtain alist ofthe facilities potentially eligible for reimbursement as early
as possible. However, no money can be paidto a facility until the permit is issued andthe required reductions have been accomplished at the facility. The actual process for reimbursement is still under development atthis time and will 

### be providedin a guidance document at a later date.

ATINGP/GPA requested that the commission delete the requirement inproposed §116.779(b)(l) to obtain "at least" a 50% reduction ofthe hourly emissions rate ofNO., expressed in glbhp-hr, in order to be eligible for reimbursement. ATINGP/GPA indicated they thought that the "at least" should be removed so that it will not be construed thitt the commissionmay require reductions beyond 50%from facilities in East Texas in order to get apipeline facilities permit. 

### 74The commissionhas made no change in response to this comment. The "atleast" language was included 

### in this rule to make it clearthat a 50% reduction in the emissions ofNOx' expressed 

### in terms ofglbhp-hr, is the 

### minimum amount ofJ;eductions that will be needed in order to be eligible for a pipeline facilities permit. Any reductions over the required 50% are welcomed and encouraged by the commission. However, the commission will not require greater than 50% reductions in orderto qualify for a pipeline facilities permit.

TCE commented that they did not find any language relating to 

### HB 2914 emission rate reductions in the proposed rules.

The commission has not made any change in response to this comment. HB 2914 itselfdoes not specify any emissions rate reductions. HB 2914 does require that a facility be a grandfathered reciprocating internal combustion engine associated with a pipelinethat is subject to the requirement to reduce emissions by 50%. HB 2914 also specifies that the engine be reducing its hourly emissions ofNOx by 50% in order to request reimbursement from the Emissions Reductions Incentives Account.

TCE requested clarification regarding the specific criteria the commission is referring to in the proposed language regarding the distribution offunds from the Emissions Reductions Incentives Account.

The criteria that the commission will use in determining the priorities for reimbursement from the Emissions Reductions Incentives Account are listed in §116.776(c). However, the actual process that will be used to assess the weighting ofeach ofthe criteriato determine the priority and 75

### amount ofdistribution from theEmissions Reductions Incentives Accountis still under development at this time and will be addressed in guidance which will be provided at a laterdate. The commission will invite stakeholderinputpriorto finalizing the guidance.

ATINGP/GPA requested clarification oftheproposed §1l6.779(a)(5), regarding demonstration of compliance with any applicable MACT standard. ATINGP/GPA requested clarification that the commission did not expectthe owner/operatorofan engine subjectto aMACT standard to have any required MACT controls installed by the date they must submit apermit application when the MACT standardprovides for alater date by which controls mustbe installed.

Thecommission has made no change in response to this comment, but does confirmthat an existing source will 

### not have to be in compliance with any applicable MACT standard until the compliancedate for that standard. The commission does encourage owners and operators of
sources that are required to install controls to obtain a permit for a grandfathered source to take into consideration any additional controls that may be required by an applicable MACT standard.

Lee P. Brown, Mayor, City ofHouston stated that the commission should take extra care to ensure that the emission reduction standards ofHB 2912 are consistently met for any facility-wide, flexible permits.
Any permit issued by the commission, including any flexible permit orexistingfacility flexible permit, will specifythe emissions limits and control requirements necessary to obtain the permit.

76

### The permitwill 

### also contain conditions necessary to ensure ongoing compliance withthose emissions limitations and control requirements.

EPA stated that §116.777, Eligibility for Existing Facility Permits, should clarify how an "Existing Facility Permit" differs from a permit to operate under §116.770.



### The commissionhas made no rule changein response to this comment. The proposed §116.770 states the general requirementfor the owners or operators ofall grandfathered facilities to obtain
a permitfor those facilities. Additionallanguage was added to the Sectionby SectionDiscussion portion ofthis preamble for Division 1 which explains the relationship between the general requirements inDivision 1 andthe specific permit requirements containedinDivisions 2 and 3 and**Sub~hapter** I. 

### The "Existing Facility Permit" is onetype ofpermitthatthe owners or operators ofcertain grandfathered facilities may use to satisfythe requirements of§116.770to obtain a permit.

ATINGP/GPA requested that the commission develop a guidance document that identifies ten-year BACT for many common grandfathered sources in order the streamline the review process for existing facility permits.



### The commissionhas existing guidance which is updated annually and identifies ten-year-old BACT for many common types ofsources. The documentis entitled, "Guidance for Air QualityQualified Changes Under Senate Bill 1126." Appendix A ofthis document contains the information onten-year-old BACT. Appendix A canbe found onthe APD web site at: www.tnrcc.state.tx.us/permitting/airperm/nsryermits/bact.htm 77

### You may also contactthe APD for a copy ofthis guidance. Although the guidance document itselfwas developedfor differentpurposes, the information onten-year-old BACT canbe used as
a starting place for identifyingten-year-old BACTfor existingfacility permits. However, this is a guidance document, and is not a rmal determination ofacceptability bythe commission. APD or the individual permit engineer shouldbe contactedto ensurethattheinformation is still current and the controltechnology stillmeetsthe ten-year-old BACTrequirement.

TCE and DAR/BSA expressed support for the commission's position that an insignificant emission factor would not be included when calculating the emissions limit for and existing facility flexible permit.



### The commission appreciates the support.

HSC commented that the proposed §116.802 provides for the avoidance ofNSR permitting for any company that increases its emissions. HSC stated that the commission does not define "significant," and that the public should allowed to review and comment on the definition.



### The commission has made no changein response to this comment. Although the proposed §1l6.802 does not specifically define "significant," it states that any increase in emissions from operational or physical changes at an existing facility covered by an existing facility flexible permitthat does not result in an increase in emissions overthe capis insignificant. As part ofthe permit review for an existingfacility flexible permit, the commission conducts a review ofthe emissions as established in the cap. Therefore, any increasein emissions which does not exceed this cap has already been reviewed by the commission andthe company is not "avoiding" NSR 78

### permitting. In 

### addition, the public has access to all ofthis information during the permit review process. Finally, the companyis not allowed to installnew facilities oremit a new air contaminantunder the cap - either ofthese activities will require a new review under the NSR permitting procedures.

EPA requested clarification ofhow an "Existing Facility Flexible Permit" is distinguished from a "Flexible Permit" under SubchapterG ofthe rule.

The commission has made no changein response to this comment. Flexible permits under Subchapter G may be used by any facility, including grandfathered facilities, provided the facility meets the requirements ofSubchapter G. Existing facility flexible permits are only available for grandfathered facilities. Additionally, flexible permits require BACT and an opportunity for a contested case hearing and existing facility flexible permits

### ~equire ten...;yeat-old BACT and.a notice and comment hearing for initial issuance. Once issued, existing facility flexible permits are subjectto the same renewal and amendmentrequirements as flexible permits, including BACT for amendments and an opportunity for a contested case hearing for both amendments and renewals.

EPA commentedthat the airpollution control methods discussed in §116.794(3) should be agreed upon prior to permit issuance and incorporated as terms and conditions into the permit.

The commission has made no changein response to this comment. The commission agrees with this comment and notes that the controlmethods necessary for any air permitting process mustbe

79

### identifiedinthe application, agreed to priorto permitissuance, and appropriately incorporated into the issued permit.

EPA requested clarification ofhow the commission

# will implementthe provision, "are considered permitted for all air contaminants" for gas-fired EGFs thatwere required to obtain apermitunder SB 7
or were exempt from the requirement to obtain apermitunder SB 7.



### SB 7 required the commissionto establish allowances for NOx

### emissions from gas-firedEGFs. However, the permits required by SB 7 areissued underthe Texas Utilities Code. HB 2912 clearly states that any gas-firedEGF which satisfies the permittingrequirements ofSB 7 orwhich is exempt from the permitting requirements ofSB 7 is considered permittedfor all air contaminants underTHSC, Chapter382. Thus, theseEGFs are no longerconsidered

. . -. - 

### grandfathered facilities underTHSC, Chapter 382. The COmInission will issue a f1permitfl to these facilities. The permit will identify thefacilities which have been permitted and will contain the general and special conditions in §1l6.913. Permits issued under §1l6.917 will receivethe additional general and special conditions in §116.918.

EPA commented that the commission should clarify and explainthe phrases "emissions ofall air contaminants" and "all air contaminants," contained in §116,913(a)(1)(A) and (E), respectively.



### The commission has made no change to this comment. In enacting the requirements ofHB 2912, the Texas Legislature specifically statedin TCAA, §382.05185, that an electric generating facility is considered permitted with respectto all air contaminants ifthe facility met certain conditions.

80

### Section 116.913 implements this plainrequirement for electric generating facility permits. "Air contaminant" is dermed in TCAA, §382.003.

TXU identified whatthey assumed was atypographical error inthe proposed §116.917(a). TXU stated thatthey believed the reference to an applicationfor grandfathered facilities identified in §116.611(f)(1)
or (2) should instead reference §116.911(f)(1) and (2). TXU statedthat ifthe reference as they believe it was intended is correct thenthe owner or operator ofanEGF seeking an EGF permitmust demonstrate thatthe facility will meetprotection ofpublic health and welfare requirements. TXU states thatthe only requirement for coal-fired EGFs is to look at criteriapollutants, and the only requirement for non-EGF combustionunits is to include their emissions in the emission allowance trading program without additional allowances. TXU states that the term "air contaminants" in §116.917(a)(11) should be replaced with "relevant criteriapollutants."

The commission agrees with the comment regarding the typographical error and has changedthe rule to reflect the correct citation of§116.911(f)(1) or (2).

The statutory language ofTCAA, §382.05185 clearly requires the commission to issue permits for coal-firedEGFs for the criteria pollutants otherthan NOx' 

### S02 or opacity ifthe emissions from the facility will not contravene the intent ofthe TCAA, includingthe protection ofthe public's health and physical property. The commission has determined thatthe appropriate way to implementthis requirement is to require thatEGF permits be subjectto permitting application andissuance requirements similarto the requirements for NSR permits. This will ensure consistent permit reviews with appropriate emphasis on the relevant statutory obligations for EGFs, in the context ofthe appropriate permit review. 81

### The commission agrees that §382.05185(e) clearly requires emissions from non-EGF combustion units to be includedin the emission allowance trading program, andthe commissionmay notissue
new allowances. However, the commission also observes thatthe allowance program only provides for emissions on NOx, 

### while the legislature clearly contemplatedthattheseEGF permits would address all air contaminants, andthat emissions from these facilities would not contravene the intent ofthe TCAA, including the protection ofthe public's health and physical property.

The commissionhas not changedthe language of§1l6.917(a)(ll), since limitingthe required information submittedin applications to "relevantcriteria pollutants" would not ensure that adequateinformation would be providedto meetthe requirements ofthe complete permit review, which includes the requirementto ensure that emissions from the facility will not contravenethe intent ofthe TCAA, including the protection ofthe public's health and physical property.

CPS opposes the application of§116.771 to EGFs because it implies that controls are mandated and that an implementation schedule must be provided for the installation and operation ofsuch controls.



### The commission has made no change in response to this comment. The commission disagrees that §1l6.771 implies any mandate for controls since this sectionbegins with the conditional phrase, "Ifthe installation ofadditional controls is required
...." Although the commission does not anticipate any control requirementfor EGFs beyond any controls necessary to comply with SB 7, TCAA, §382.05181 specifies thatthe requirementto have any additional controls installed prior to March 1, 2007 in East Texas and March 1, 2008 in West Texas applies to any 

### facility affected by TCAA, §382.0518(g), notjustany non-EGF facility.

82CPS stated that they hope the commission will continue to considerEGF permits unique from other permits inproviding the flexibility ofcontrol and allocation ofallowances based on annual limits provided for Chapter 101, SubchapterH, Division 2.



### The commissionhas made no change in response to this comment. The commissionintends to continue to allow EGFs the flexibility to meetthe allowance requirements for air 

### contaminants coveredby SB 7. However, the commission will 

### issue permits withmaximum allowable emission rate tables (MAERT) for grandfathered auxiliary generators and othergrandfathered combustion equipmentlocated at an EGF site, but which is also required by HB 2912 to obtain a permit or shut down. In addition, the emissions from the auxiliary generators and other combustion equipmentmustbe includedin the amount ofallowances needed for the site in any givenyear. As stated in HB 2912, no new allowances will be issued to the site for the operation ofthis equipment.

CPS commented that the proposed methodology for adding new units at existing EGFs brings these new units into the standardized state permitting requirements rather than continuation ofthe flexible allowance based system ofSB 7. CPS stated that the proposed language needs to be changed to provide for the allowance based system envisioned by SB 7.



### The commission agrees withthe commentthat the proposed methodology for permitting existing combustion equipment at an EGF is similarto the methodology for permitting new andmodified units. However, the allowance based system providedby SB 7 is 

### retained in §382.05185(e) and the proposed methodology provides the flexibility ofSB 7 permits for emissions ofNOx

### in thatthe only limit on NOx 

### emissions containedinthe permit for the additional combustion units will bethe 83

### NOx 

### allowances for the site resulting from SB 7. The other air contaminants emitted from these facilities will

### have limits includedin aMAERTjustlike any other NSR permit. The commission believes this approachis appropriate andis consistent withthe statute. These facilities are requiredto apply for a permit and specifiedthat any modifications to the permit orrenewal of thepermitbe reviewed underthe existing requirements contained in 

### the act. Because these EGF permits will 

### follow the existing procedures for modification and renewal, itis appropriate that they use similarmethodology and look as similar as possibleto permits for new and modified
sources. This harmonizes the requirements ofHB 2912 and the pre-existing TCAA permitting requirements.

RSC and GRASP commented that they oppose allowing a company to operate for 10% ofits operating hours without applying for apermit. RSC and GRASP also commented that this operation could occur during peak ozone season, which would have the most impact on citizen's health and welfare.· GHASP stated that the provision should be revised to establish a maximum weekly operating limit of20 hours in addition to the proposed restriction.



### The commission has made no changes in response to these comments. The proposed rules do not allow a company to operate any unit for 10% ofits normal operatinghours and avoid the requirementto obtain a permit. The proposed rules require all

### grandfathered facilities in Texas to obtain a permit or shut down. If

### an auxiliary generatoroperating at a facility whichis required to obtain a permit under SB 7 operates less than 10% ofthe normal operating hours (as defmedin §1l6.10), the owneror operator ofthe facility may apply for anEGF permit rather than some othertype ofpermit. Althoughthese auxiliary generators could operate during the

84.' 

### ozone season, there will 

### notbe any additional annual emissions ofNOx

### from these facilities since they do not get any additional allowances under SB 7.

The statute is 

### clearthatfacilities operatingless than 10% ofthe normal operatinghours ofthe EGFs at the site may apply for an EGF permit. Therefore, the commission does not believe it is appropriate to place any additional limitations onthe operating time ofthese facilities in orderto obtain anEGF permit.

TCE is concerned that ifimpacts are found, the commissionmight not request changes to the permit-if
an auxiliary generator is operated less than 10% ofthe time.



### The commission has made no change in response to this comment. If

### a facility is found to violate

- - 

### a standard such as the NAAQS, the commissionmay notissue a permitto that facility no matter what percent ofthe time it operates.

TXU commented that the definition of "normal operating schedule" should be based on the normal operating schedule ofthe grid (8,760 hours peryear) rather than the normal operating schedule ofthe EGFs at aparticular site.



### The commission does not agree thatthe "normal operating schedule" should be the operating schedule ofthe electric grid. The statutory language in TCAA, §382.05185(d) refers to facilities, notthe electric grid. There is 

### no indication in the statutory requirements for electric generating facility permits that the legislature intended to rely upon such a schedule, in lieu ofthe schedule applicable to a specific site. However, the commission does agree thatthe statute may be 85

### interpretedto provide some additional flexibility, andthe commissionhas changedthelanguage in this defInition to establishthe normal operating schedule as the maximumnumber ofoperating hours for anEGF in any 12 consecutive month periodbetween 1997 and 1999. For sites with
more than one EGF, the owner or operatormay use the EGF with thehighest number of operatinghours.

EPA commented that there was no basis specified for the definition of "Normal Annual Operating Schedule," particularly why years 1997

- 1999 were required to be included in the calculation ofthe average, but years 2000 and 2001 were not.



### The commission used theheatinputfor 1997 as the basis for establishing allowables for EGFs under SB 7. Since HB 2912 requires the emissions from these auxiliary combustion units which

, . . . - . .". , 

### receive an EGF permit to fit underthose same allowables, the**co~sion** 

### considers it appropriate to use a similarbasis to define "normal operating schedule." However, in orderto provide some additional flexibility, the commission decided to use the maximum number of operatinghours for an EGF in any 12 consecutive month period between 1997 and 1999. For sites with more than one EGF, the owner or operatormay use the EGF ,vith the highest number ofoperating hours. The commissionhas changedthe language in this defInition for the reasons mentionedin the response to the previous comment.

TCE expressed concern that the modeling for grandfathered EGF's designed to burn fuel oil is not sufficient to make a determination that any grade offuel oil should be allowable. HSC stated that they support requiring EGF facilities to undergo NSR permitting ifthey decide to burn fuel oil rather than natural gas. The House Committee on Environmental Regulation stated that the goals ofthe legislation 86were to provide for the widest range offuel oil use possible to give grandfathered EGFs a meaningful choice offuel and to ensure that emissions controls would not interfere with the SIPs, specifically with regard to NOx• AECT stated that the intent ofthe legislature regarding acceptable fuel oil grades was that the commission would designate as being acceptable as broad a range ofgrades offuel oil as possible, as long as air quality standards would be met. AECT stated that designation ofabroad range ofacceptable grades offuel oil is critical to ensure maximum fuel flexibility and continued availability ofreliable electric power in Texas. AECT stated that the proposed §1l6.18(1l) unnecessarily and unreasonably limits the range offuel oil grades that could be burned in grandfathered EGFs. AECT and the House Committee on Environmental Regulation stated that the legislative intent was to limit the commission's review ofacceptable fuel oil grades to "standards," and since the commission's effects screening levels are not standards, the evaluation offuel oil firing with respect to the ESLs is contrary to legislative intent. AECT stated that the methodology the commission used to establish the acceptable fuel oil grades proposedin §1l6.18(1l) was unnecessarily restrictive" and resulted in a limit that was too stringent. The House Committee on Environmental Regulation and AECT commented that the commission should allow grandfathered EGFs to burn any grade offuel oil that meets the specifications in §1l2.9, as long as the owner or operator ofthe grandfathered EGF can ensure that the burning of the desired grade offuel oil in the EGF will not cause a violation ofthe S02 property line standard. AECT also requested that the rule language inproposed §116. 18(1l)(B) be changed to refer to a "determination" by the executive director rather than a "demonstration" by the owner or operator ofthe facility. The House Committee on Environmental Regulation and AECT suggested that proposed §1l6.18(1l) be revised to reads as follows: "11) Natural gas-fired EGF

- Forpurposes ofSubchapterI ofthis chapter, an EGF that was designed to burn either natural gas or fuel oil, and that when burning fuel oil only burns fuel oil ofa grade determined by the commission to be acceptable. Burning ofa fuel oil designated by this definition as acceptable does not relieve the owner or operator ofthe EGF 87from the responsibility to comply with the emissionlimitations, allowances, or conditions ofany permit
or state or federal regulation, such as the applicable sulfur dioxide (S02) property line standard in §112.3. Acceptable fuel oil grades are: A) Any American Society for Testing and Materials (ASTM) grade offuel oil, the burning ofwhich will comply with the applicable limitsin §112.9. B) Any other grade offuel oil which the executive director determines is protective ofthe S02property line standard in §112.3."

TXU stated that it had a great deal ofconcern over the process being used by the commissionto establish acceptable fuel oil grades. TXU and CPS stated that the maximum fuel oil sulfur content that shouldbe modeled by the commission should be 0.7% because a higher sulfur content would result in a stack concentration that exceeds the limit in Chapter 112. TXU stated that the grade ofacceptable fuel oil should be changed to any grade with 0.7% sulfur except for specific plants where the modeling indicates there may be a problem. CPS commented that the commission should considerallQwing utilities to burn fuel oil at levels ofsulfur at orbelow 0.7% or at least consider modeling these levels to determine impacts with the state standards. TXU stated that the analysis should be an open process that includes a review by the owners ofthe facilities being modeled to ensure that the model inputs are accurate. AECT and the House Committee on Environmental Regulation commented that the commission's interpretation ofthe the term "designed to burn" is more narrow than allowed by the statutory language in TCAA, §382.05185(i). The House Committee on Environmental Regulation and AECT commented that "designed to burn" should only prohibit a physical change that would constitute
amodificationunder §116.10(9). AECT stated that based onthe regulatory definitions of "EGF" and "facility" the EGF does not include every piece ofequipment at a grandfathered EGF site that is involved with the burning offuel oil. AECT stated that any maintenance or repairs to any equipment that comprises the EGF, or any like-kind replacement ofany such equipment, that is necessary to allow 88the EGF to burn fuel oil, should notpreventthe EGF from being considered to be "designedto burn" fuel oil. The House Committee onEnvironmental Regulation stated that "designedto burn" inTCAA, §382.05185(i) means a facility was designed to burn any fuel oil grade

- even ifthe grade will no longerbe considered acceptable forburning following the adoption oftheserules. Similarly, AECT stated that ifan EGF is "designed to burn" a grade offuel oil, the fact that such fuel oil grade may not be considered acceptable under the final rules should notpreventthe EGF from meeting the "designed to burn" condition. The House Committee commented that the statute only limits the grade offuel oil prospectively, but does not mean the grade historically burned should prohibitburning a lighter grade inthe future. AECT stated thatproposed §1l6.18(1l) and the associated preamble need to be revised to clearly provide that the "designed to burn" condition is met for such an EGF. AECT requested that the review process for case-by-case determinations be made quick and simple and be based on modeling and/or monitoring results related to the impact ofburning ofthe desired grade offuel oil on

. . . the ability ofthe site to meenhe S02 property line standard
. EPA stated thatwith regard to §116.18(1l)(B), there should be a "replicable" procedure for how the executive director will determine if "any other grade offuel oil" is protective ofpublic health and physical property." AECT specifically requested that the procedure involve submittal ofa written request to the commission staffthat includes any necessary fuel and facility information. The commission should then use modeling or monitoring information it already has to evaluate the request, model the request using staffresources, or request that the applicant conduct the modeling or monitoring anaysis and submit it to the stafffor review. AECT requested that this case-by-case determinationprocess be discussed in the preamble to the final rule. AECT also requested that §1l6.18(1l)(B) provide for an opportunity to request reconsideration ofany determination ofacceptable fuel oil grades under 30 TAC Chapter 55. AECT requested that the following language be used for §116.18(1l)(B): "In the event that the owner or operator ofthe EGF



### 89disagrees with the executive director's determination, the owner or operator may request a reconsideration ofthat determination under the procedures ofChapter 55."

TXU stated that facilities shouldbe allowed to combust the fuel they have on-site and any limitations should be placed on the receipt ofany new fuel oil. TXU stated that limiting the ability ofutilities to fire residual oils will limit the market for these fuels in Texas and could result in the fuels being combustedby sources that would have a higher impact on the public because ofthe location and height ofthe emissions. TXU also stated thatprohibiting the burning ofNumber 5 fuel oil could impact winter reliability ifnatural gas is curtailedbefore a conversionto Number 2 oil can be accomplished. TXU stated that itwould cost them $30 million to $40 million to convert 14 facilities from firing Number 5 fuel oil to firing Number 2 fuel oil with the majority ofthe costbeing to change out the fuel.

. .'
. . The proposed rule established ASTM Grade Number 2 fuel oil containing not more than 0.3% sulfurby weight as acceptable. The commission stated in the preamble to the proposed rule that staffwas continuing to analyze other fuel oil grades and refme the modeling analysis. As a result ofthis additional analysis ofthe effects ofburning fuel oil in grandfathered EGFs and in order to address all ofthe comments on the burning offuel oil, the commission changed the proposed defmition of"Natural gas-fired EGF" in §1l6.1S(1l) to simply state that for purposes of SubchapterI, a natural gas-fired EGF is, "an EGFthat was designed to burn either natural gas
or an EGF that was designed to burn both natural gas and fuel oil." The conditions governirig the burning offuel oil at grandfathered EGFs have been added as general conditions §1l6.913(a)(S) and (9).



### 90

### The commission has determinedthat any ASTM grade offuel oil with a sulfurcontent of0.7% by weight orless is acceptable, exceptin areas where sulfur contentis limited further by Chapter 112. This limitation has been added to the general conditions in §116.913. The modeling analysis for S02 concluded that there will 

### notbe any exceedances ofthe NAAQS or state standards in Chapter 112. Metals have beenidentified as the primary hazardous air pollutant associated with the burning offuel oil. Adverse impacts from metals are caused by long term exposure to unacceptable levels ofemissions. Thecommission does not expect long term exposure to metals emissions because fuel oil is only burned for short periods oftime due to natural gas curtailments
orextremely high natural gas prices. Historical data has shownthat these curtailments and high natural gas prices have occurredinfrequently andlast only for short periods oftime. Thus, the. commission does not expect any adverse health effects associated with the burning offuel oil. However, the commission has added a general condition to §116.913 requiring the EGF to keep

. . . . 

### records offuel oil burning andsubinitthose records with the report required under §101.336(b). In addition, EPA is developing a MACT standard which is expected to address emissions of metals, primarily nickel, from fuel oil fired EGFs. Any EGF which burns fuel oil for any extended period oftime would likely be subject to this MACT standard. The commission has also added language in §116.913(a)(8) that clarifies that the burning ofwaste or used oils is not authorized under Subchapter I.



### EPA recommended adding "as determined by ASTM method D396" to the end ofthe sentence in §1l6.18(1l)(a) which reads "American Society for Testing and Materials (ASTM) grade number 1 or 2 fuel oil containing not more than 0.3%

### sulfur by weight."

The commission has madethe suggested addition to the condition contained in §116.913(a)(8). 91

### TCE and DAR/BSA commented that the commission should review mercury emissions from grandfathered facilities. Additionally, TCE commented that the commission should review all the pollutants from grandfathered powerplants, including five-minute exposure to sulfurcompounds. TCE stated thatthey were concerned aboutplaces where people congregate inclose proximity to power plants and the effects ofpowerplants on waterways thatare far from the facility. DAR/BSA also expressed concern regarding lead emissions, and commented that this rulemaking would be agood opportunity to obtain loweremissions ofmercury and lead.

The commission has made no change in 

### response to these comments. Mercury has been raised by many organizations across the country as an air contaminant ofconcern for coal-fired power plants. However, there are significanttechnical and policy questions which need to be answered before a comprehensive strategy to handle mercury emissions from EGFs can be fully developed. Mercury emissions associated withthese units

# willbe addressed illthe

## futur~ by the President's Clear Skies Initiative multi-pollutant strategy and/or a MACT standard under development by the EPA. Accordingly, without downplaying the importantissues with respect to mercury, the commission considers it prudent to review the outcomes ofthe Clear Skies Initiative and the utility MACT before making further decisions about regulation ofmercury from EGFs in Texas.

Coal-fired EGFs can apply for an EGF permit for the criteria pollutants not addressed by SB 7, and once they obtain this EGF permit, they are no longer considered grandfathered facilities. The commission notes that lead is a criteria pollutant; therefore, these EGFs willhave to address any lead emissions in 

### the EGF permit application.



### 92

### The commission agrees that numerous studies have shown thatfive-minute exposure to bursts of S02 can cause individuals with asthmato experiencerespiratory effects due to bronchial constriction. In fact, the EPA has a proposedintervention level for S02 of600 parts perbillion (ppb) (five-minute averaging period), above whichasthmatics may experience shortness ofbreath, chesttightness, wheezing, and disruption ofnormal activities. While the NAAQS is not protective ofthese five-minute bursts, the Chapter 112 standard for S02' 30-minute average net ground level concentration of400 ppb, helps to minimize the potential occurrence offive-minute concentrations greaterthan 600 ppb. Therefore, the commission notes thatthe required demonstration ofcompliance withthe Chapter 112 standard would alleviate five-minute S02
concerns.

STATUTORY AUTHORITY The amendments are adopted under THSC, TCAA, §382.011, which

### a~thorizes the commission to administer the requirements ofthe TCAA; §382.012, which provides the commission the authority to develop a comprehensive plan for the state's air; §382.017, which authorizes the commission to adopt rules consistent with the policy and purposes ofthe TCAA; §382.051, which authorizes the commission to issue apermit for numerous similar sources; §382.0518, which authorizes the commission to issue permits for construction ofnew facilities or modifications ofexisting facilities; §382.05181, which requires grandfathered facilities to apply for apermit and comply with its conditions by certain dates, and requires certain actions ofthe commission; and TWC, §5.103, which authorizes the commissionto adopt rules.

93