Robert J. Huston, Chairman

R. B. "Ralph" Marquez, Commissioner

Kathleen Hartnett White, Commissioner

Jeffrey A Saitas, Executive Director

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TEXAS NATURAL RESOURCE CONSERVATION COMMISSION

Protecting Texas by Reducing and Preventing Pollution

July 31, 2002

Mr. Gregg Cooke

Regional Administrator

U.S. Environmental Protection Agency, Region 6

1445 Ross Avenue

Dallas, Texas 75202-2733

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On May 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 of Air Pollution by Permits for New Construction or

-Modification. The adopted changes to Chapter 39 and Chapter 116 concern requirements and .

procedures for the permitting of grandfathered facilities and an incentive program for the reduction of

emissions of nitrogen oxides from ~ertain grandfathered reciprocating interrial combustion engines

associated with pipelines. The new and amended sections of Chapter 39; all sections of Chapter 116,

Subchapter H except §116.776; and the new and amended sections of Chapter 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 of the

public hearing, and the accompanying order. I look forward to your expeditious approval of these SIP

revisions.

ly,

Chairman

RJH/js

cc: The Honorable Rick Perry, Governor of Texas

Ms. Wendy Wyman, Environmental and Natural Resources Policy Director, Office of the

Governor '

Mr. Jeffrey A. Saitas, P.E., Executive Director, Texas Natural Resource Conservation

Commission

Enclosures

- . P.O. Box 13087 • Austin, Texas 78711-3087 • 5121239-1000 • Internet address: www.tnrcc.state.tx.us

prinkJ un r~·cyd~J p<lper lIsing soy-bJ:.eJ ink
Mr. Gregg Cooke

Page 2

bee: Mr. Randolph Wood, Deputy Director, Office of Environmental Policy, Analysis, and

Assessment

Mr. Jim Muse, Director, Policy and Regulations Division

Ms. Heather Evans, Strategic Assessment Division

Ms. Jill Burditt, Policy and Regulations Division

OEPAA file
Texas 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 of Air 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 Number 2001-076-116-AI
INTRODUCTION

The Texas Natural Resource Conservation Commission (commission) held public hearings to receive

testimony regarding revisions to 30 TAC Chapter 39 and Chapter 116, and to the state implementation plan

(SIP). The public hearings were held at the following times and locations: January 22, 2002, 7:00 p.m.,

Tyler Junior 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 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 to Chapter 39 and Chapter 116 concern requirements and procedures for the permitting.

of grandfathered facilities and an incentive program for the reduction of emissions of nitrogen oxides from

certain grandfathered reciprocating internal combustion engines associated with pipelines. The new and

amended sections ofChapter 39 are being submitted to the United States Environmental Protection Agency

(EPA) as a revision to the state implementation plan (SIP). All sections of Subchapter H except §116.776,

are being submitted to the EPA as a revision to the SIP. The new and amended sections of Subchapter A

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 of the public hearings

and is divided into the following four sections:
o Public Notification and Proposal

o Written and Oral Testimony

o Evaluation of Testimony

o Staff Recommendations

Additional copies ofthis hearing record are maintained in the TNRCC central office at 12100 Park 35 Circle,

Austin, Texas 78753. For further information, please contact Jill Burditt at (512) 239-0560.
EVALUATION OF

TESTIMONY
Texas Natural Resource Conservation Commission

INTEROFFICE MEMORANDUM

To: Commissioners Date: May 3,2002

Thru:

From:

Subject:

Caption:

LaDonna Castafiuela

Chief Clerk

Randolph Wood, Deputy Director

Office of Environmental Policy, Analysis, and Assessment

Commission Approval for Adoption of Rulemaking

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, Subchapter A, Definitions; Subchapter H, Permits for

Grandfathered Facilities; and Subchapter I, Electric Generating Facility Permits; and

Chapter 39, Public Notice, Subchapter H, Applicability and General Provisions; and

Subchapter K, Public Notice of Air Quality Applications. Additionally, consideration

ofsubmission of all sections of Chapter 116, Subchapter H, except Section 116.776;

the new and amended sections of Chapter 116, Subchapters A and I; and the new and

amended sections of Chapter 39 as a revision to the state implementation plan.

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

the reduction of emissions of nitrogen oxides from certain grandfathered reciprocating

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 of the 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). (Steve Hagle, Terry Salem, Jill Burditt) (Rule Log No. 2001-076-116-

AI)

What the Adopted Rules Will Do:

The new and amended sections of Chapter 116 establish the eligibility, application, and control

requirements for the four new types of permits 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 of shutdown.

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 of a grade approved by commission rule. Based on a preliminary

analysis, staff had originally proposed limiting the burning of fuel oil to ASTM Grade No.2
Commissioners

Page 2

May 3, 2002

Re: Docket No. 2001-1408-RUL

fuel oil with a maximum sulfur content of 0.3 % by weight. After a more complete analysis,

the rule was changed to allow the burning of any ASTM grade of fuel oil with a maximum

sulfur content of 0.7% 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 when burning heavier fuel oil

grades. Because the health impacts associated with metals are based on long-term exposure,

and because the burning of fuel oil is expected only to occur for short periods of time, the final

rule allows the burning of these 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 of time would be subject to this MACT standard. In order to keep better track

of the amount of fuel oil burned by electric utilities, a provision was added to the final rule to

require an annual report on the units which burn fuel oil, the grade and amount of fuel 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 of Chapter 116, Subchapter H, except §116.776; the new and amended sections of

Chapter 116, Subchapters A and I; and the new and amended sections of Chapter 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 of Subchapter H need to be submitted so

that the existing sections regarding voluntary emission reduction permits, as well as the

proposed new sections, become part of the SIP.

Applicable Law:

These new and amended sections would be adopted under the authority of numerous 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 of HB 2912, §§5.02 - 5.04, which revised the Texas Health and

Safety Code to require that all grandfathered facilities obtain permits, and HB 2914, §78,

which established a reimbursement program 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 suggested
Commissioners

Page 3

May 3, 2002

Re: Docket No. 2001-1408-RUL

changes to some portion of the rules. The interest of the elected officials seemed to focus on

two primary areas of the rulemaking - burning of fuel oil by electric utilities and pipeline

facilities permits. Staff believes the final rule regarding the burning of fuel oil by electric

utilities adequately addresses the concerns expressed in comment.

The elected official interest in pipeline facilities permits centered around the amount of NOx

reductions that would be required from engines located in West Texas. Industry is opposed to

being required to make any reductions in NOx emissions in West Texas without a finding by

the commission that there is a specific environmental benefit 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 of HB 2912. In

addition, staff has reiterated that the intent of the commission would be to focus on reductions

that can be achieved at little or no capital cost to the owner or operator. Staff believes 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 of a "major

environmental rule," but the proposed rulemaking implementing HB 2914, §78 does not meet

the definition of a major environmental rule. However, neither rulemaking meets any of the

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 obligation mandated 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 of the SIP to assist the 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 of all 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 of air 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 Division
Commissioners

Page 4

May 3,2002

Re: Docket No. 2001-1408-RUL

Agency Contacts:

Jill Burditt, Office of Environmental Policy, Analysis, and Assessment, 239-0560

Steve Hagle, Air Permits Division 239-1295

Terry Salem, Environmental Law Division, 239-0469

Garrett Arthur, Environmental Law Division, 239-5757

Angela Slupe, Texas Register/Administrative Support Team, 239-4712

cc: 7 copies to the Chief Clerk for distribution
EVALUATION OF TESTIMONY

The Texas Natural Resource Conservation Commission (commission) adopts new §39.404, Applicability

for Certain Initial Applications for Air Quality Permits for Grandfathered Facilities. The commission also

adopts amendments to §39.411, Text of Public Notice; §39.419, Notice of Application and Preliminary

Decision; §39.420, Transmittal of the 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 without changes to 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 for the 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 Air Act (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 of facilities that emit air contaminants. If grandfathered 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 that would reduce the emissions from those facilities. In response to HB 3019, the

commission created the Clean Air Responsibility Enterprise (CARE) Committee to develop

recommendations for the voluntary permitting of grandfathered facilities.

1
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 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 number of

grandfathered facilities have taken advantage of the incentives offered by the VERP program and

submitted VERP applications for their grandfathered facilities. Additionally, the owners and operators of

other 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 Chapter 39, Restructuring of Electric

Utility Industry by adopting SB 7. SB 7 required the commission to implement the permitting and

allowance requirements of new 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

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

under TCM, §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 that were not subject to the permitting requirements of SB 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

2
2912 are the culmination of legislative efforts, beginning in 1997, to permit or otherwise authorize all

grandfathered facilities. HB 2912 created four new types 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 that withdraw their VERP applications and elect to submit a

permit application for an authorization under HB 2912 will forfeit those incentives, including eligibility for

amnesty from enforcement.

To implement these revisions to the TCM, the commission adopts new and amended rules in 30 TAC

Chapter 116, Subchapter A, Definitions; Subchapter H, Permits for Grandfathered Facilities; and

Subchapter I, Electric Generating Facility Permits, which are published in this issue of the 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 subject to 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 manner of

TCM, §382.0561, concerning Federal Operating Permit; Hearing, and §382.0562, ,concerning Notice of

Decision.

3
THSC, TCAA, §382.0561 requires the commission to provide a pUblic comment period for an

application, during which members of the pUblic can submit written statements to the commission

regarding the application. The initial issuance of a grandfather permit, with the exception of small

business stationary source permits, is subject to notice and comment hearing procedures. Under these·

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 interpreter assistance. The commission requests that such

individuals notify the commission staff sufficiently early that arrangements can be made to afford these

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 if appropriate. The notice must meet the requirements of §382.056, which provides specifications

relating to the specifics of the newspaper notice and sign-posting, and other requirements for notice.

THSC, TCAA, §382.0561 also requires that public hearings not be conducted under Texas Government

Code, Chapter 2001, so they are not contested case hearings. The commission is required to hold a

public hearing on an application, prior to granting the permit, if a person who may be affected by the

emissions or a member of the legislature from the general area in which the facility is located requests a

hearing. However, the commission is not required to hold a hearing if the basis of the 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 whether to issue the

permit and what conditions should be included if a permit is issued.

THSC, TCAA, §382.0562 provides for the mailing of notice of the 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 of the draft permit and the reasons

for the change.

4
Additionally, 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

Other Authorizations), to give effect to the intent of the legislature to provide for the 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

Subchapter H, Applicability and General Provisions ,.

The adopted new §39.404, Applicability for Certain Initial Applications for Air 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 for the new grandfathered facility permits. The commission

believes that the 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 new THSC, §382.05185, which established a new EGF permit for

certain facilities located at a site for which the owner or operator has already applied for a permit under

SB 7 and for the permitting of additional criteria pollutants at grandfathered coal-fired EGFs for which 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 subject to 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 new THSC, §382.05183 and §382.05186, which established existing facility

permits and pipeline facilities permits, respectively, and §382.05181, which required that the permit

applications for grandfathered facilities permits were SUbject to notice and hearing requirements as

5
provided by THSC, §382.05191. The adopted new §39.404 implements this requirement by specifying

the portions of Chapter 39, 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 of the 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 of Application 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 of a 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 of existing facility

permits and pipeline facilities permits will not be required to publish Notice of Application and Preliminary

Decision.

Additionally, revisions are adopted for §39.419(e)(3). The existing §39.419(e)(3) specifies publication

requirements for a Notice of Application 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).

6
The adopted amendments to §39.420, Transmittal of the Executive Director's Response to Comments

and Decision, are necessary to indicate that the transmittal is not required to include instructions for

reconsideration of the executive director's decision or for 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 of VERPs under THSC, §382.0519.

Additionally. the adopted revisions delete the words "voluntary emission reduction" since multiple permit

types are referenced in the adopted language.

Subchapter K, Public Notice ofAir Quality Applications

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) if certain conditions are met. The reference to (a)(2) is incorrect. The adopted

§39.603(e)(1) corrects this reference to subsection (c)(2), which specifies the requirements for the

publication in the newspaper other than the legal section of the 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 for Voluntary Emission Reduction

Permits, are necessary to ensure that alternative means of notice are available for all small businesses

who apply to permit their grandfathered facilities.

FINAL REGULATORY IMPACT ANALYSIS DETERMINATION

The commission reviewed the adopted rulemaking in light of the regulatory analysis requirements of

Texas Government Code, §2001.0225, and determined that the changes to this chapter needed to

implement the procedural aspects of HB 2912, §§5.02 - 5.04 do not meet the definition of a "major

7
environmental 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 cover all grandfathered facilities, and provide for potential emission reductions. The

substantive requirements of the permitting system created by HB 2912 are contained in the 30 TAC

Chapter 116 rulemaking, also adopted in this issue of the Texas Register.

A major environmental rule means a rule, the specific intent of which is to protect the environment or

reduce risks to human health from environmental exposure and that may adversely affect in a material

way the economy, productivity, competition, jobs, the environment, or the public health and safety of the

state or a sector of the state. Although the Chapter 116 rules adopted to implement the HB 2912

sections concerning the substantive permitting requirements are intended to protect the'environment or

reduce risks to human health from environmental exposure and may have adverse effects on the

economy, productivity, competition, orjobs of the state or a sector of the state, the adopted new sections.

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 of the four applicability

requirements of a major environmental rule. The adopted rules do not exceed a standard set by federal

law, exceed an express requirement of state law, exceed a requirement of a delegation agreement, or

adopt a rule solely under the general powers of the agency. The rules are adopted specifically to comply

with HB 2912, and do not exceed the requirements of that bill.

TAKINGS IMPACT ASSESSMENT

The commission completed a takings impact assessment for the adopted rules. The purpose of the

adopted rules is to create the procedural provisions necessary for the implementation of the 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.

8
The commission evaluated the adopted rules and performed an assessment of whether Texas

Government Code, Chapter 2007 is applicable. The commission's assessment indicated that Texas

Government Code, Chapter 2007 does not apply to the adopted rules because this action qualifies for

two exceptions to the application of Chapter 2007. First, this action is reasonably taken to fulfill an

obligation mandated by federal law, and is therefore exempt under Texas Government Code,

§2007.003(b)(4). The action is mandated by federal law because the rules will be submitted for EPA

approval as part of the SIP, which is mandated by 42 United States Code (USC), §7410. Also, the

adopted rules are a necessary component of the permitting program created by HB 2912 and

implemented by the changes to Chapter 116, and implement requirements of 42 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 occur through the implementation of the

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 air quality standards set by the EPA under 42

USC, §7409 for nonattainment areas of the state, and maintain the quality of the state's air in attainment

areas. Because any reductions required by these rules are no greater than those required by HB 2912

to implement the 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 of Texas

Government Code, Chapter 2007 under §2007.003(b)(4) and §2007.003(b)(13).

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Finally, adoption and enforcement of these rules will not burden private real property. The adopted rules

do not affect private property in a manner which restricts or limits an owner's right to the property that

would otherwise exist in the absence of governmental action. Consequently, the adopted rules do not

meet the definition of a taking under Texas Government Code, §2007.002(5).

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM

The commission reviewed the rulemaking and found that the rules are neither identified in Coastal

Coordination Act Implementation Rules, 31 TAC §505.11, nor will they affect any action or authorization

identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11. Although commission

rules governing air pollutant emissions are subject to the Texas Coastal Management Program (CMP),

the adopted actions concern only the procedural rules of the commission; do not govern or authorize any

actions subject to the CMP; and are not themselves capable of adversely 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., Tyler Junior 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 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.

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 for the Environment (TCE); and Galveston-Houston

Association for Smog Prevention (GHASP).

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In addition, the commission received comments from, or on behalf of, the following elected officials: Mr.

Larry Green representing the Honorable Sheila Jackson Lee, U.S. House of Representatives, Eighteenth

District of Texas; 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 for the 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 prefer to make oral statements

instead. HSC and GHASP also stated that the commission should always 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 of the federal Clean Air Act. 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 at formal 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 for those persons who are blind, deaf,

or require interpreter assistance. The commission requests that such individuals notify the

commission staff sufficiently 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 of a grandfather permit, with the exception of small business stationary source permits,

will be SUbject to notice and comment hearing procedures. Under these procedures, interested

11
persons can request a hearing. The hearing is recorded, and oral comments are accepted. The

commission is unaware of any prohibition in the federal Clean Air Act relating to the requirement

for submission of written comment.

SCCC, St. Francis, Larry Green, and Council Member Edwards commented on the need for the public to

be notified of facilities 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 of a 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 important for the public to be notified of pending permit

applications, and included adequate notice provisions in the proposed rules. The suggested

notice periods of six months to one year would 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 year of receiving an administratively complete

application. Sections 39.418 and 39.603 require all facilities except for facilities qualifying for a

small business stationary source permit to publish notice in a newspaper of general circulation in

the municipality in which the facility is located or in the municipality nearest the location of the

facility. The newspaper notice must be published no later than 30 days after the executive

director declares 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. If a hearing is requested and granted during this comment period, the

comment period is actually extended beyond 30 days to the end of the hearing. Additionally,

§39.604 requires applicants to place signs at the site of the facility declaring the filing of an

application for the permit and stating the manner in which the commission may be contacted for

12
further information. Small business stationary source permits are exempted from the

requirement to publish newspaper notice by THSC, §382.05184(f).

TCE requested clarification of the 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 of a 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

supplement that 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

Chapter 39 are procedural support for the permitting changes in Chapter 116. Whether or not the

rUles are characterized as a major environmental rule, a regulatory impact analysis is required

only if the rulemaking meets any of the 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 of state law; 3) exceed a requirement of a delegation agreement or contract between

the state and an agency or representative of the federal government to implement a state and

federal program; or 4) adopt a rule solely under the general powers of the agency instead of

under a specific state law. The rules are adopted specifically to comply with HB 2912 and do not

exceed the requirements of that bill. The Chapter 39 adopted rules do not meet any of the

applicability requirements in Texas Government Code, §2001.0225(a), and for this reason the

adopted rules are not subject to a regulatory impact analysis under Texas Government Code,

§2001.0225.

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STATUTORY AUTHORITY

The amendments and new section are adopted under THSC, TCAA, §382.011, which authorizes the

commission to administer the requirements of the 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 of the 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 new facilities or modifications of existing

facilities; §382.05181, which requires grandfathered facilities to apply for a permit and comply with its

conditions by certain dates, and requires certain actions of the commission; §382.05182, which requires

notices for the 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 for federal 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 for federal operating permits;

§382.0562, which requires notices of decision; and Texas Water Code (TWC), §5.103, which authorizes

the commission to adopt rules.

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EVALUATION OF TESTIMONY

The Texas Natural Resource Conservation Commission (commission) adopts amendments to

Subchapter A, Definitions, §116.1O and §116.18; and Subchapter I, 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 Subchapter H, 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 in the January 4,

2002 issue of the 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 116.930 are adopted without changes and will not be

republished. All sections of Subchapter H except, §116.776, will be submitted to the United States

Environmental Protection Agency (EPA) as a revision to the state implementation plan (SIP). The new

and amended sections of Subchapter A and I will also be submitted to the EPA as a revision to the 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 for the 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 Air Act (TCAA) in 1971. These

facilities were not required to comply with (Le., grandfathered from) the then new requirement to

obtain permits for construction or modifications of facilities that emit air contaminants. If

1
grandfathered 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

grandfathereci facilities to voluntarily obtain permits that would reduce the emissions from those

facilities. In response to HB 3019, the commission created the Clean Air Responsibility Enterprise

(CARE) Committee to develop recommendations for the voluntary permitting of grandfathered

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 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 number of

grandfathered facilities have taken advantage of the incentives offered by the VERP program and

submitted VERP applications for their grandfathered facilities. Additionally, the owners and operators

of other 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 Chapter 39, Restructuring of Electric

Utility Industry by adopting SB 7. SB 7 required the commission to implement the permitting and

allowance requirements of new 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 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

under TCAA, §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 that were not subject to the permitting requirements of SB 7, yet elected to participate

in the allowance trading system.

Most recently, the 77th Legislature, 2001, amended Texas Health and Safety Code (THSC), TCAA to

require that all grandfathered facilities obtain permits. The mandatory permitting requirements of HB

2912 are the culmination of legislative efforts, beginning in 1997, to permit or otherwise authorize all

grandfathered facilities. HB 2912 created four new types of permits for grandfathered facilities:

existing facility permits; small business stationary source permits;EGF permits;aild 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 that withdraw their VERP applications and

elect to submit a permit application for an authorization under HB 2912 will forfeit those incentives,

including eligibility for amnesty from enforcement.

HB 2912 specifies certain requirements based upon the geographic location of the grandfathered

facility. Grandfathered facilities must submit permit applications or notices of shutdown by September

1,2003 for facilities in East Texas; September 1,2004 for facilities in West Texas; and for small

business stationary source permits, by September 1, 2004, irrespective of the location of the facility.

3
The commission is required to act on applications by the first anniversary after receipt of an

administratively complete application. HB 2912 provides that the applicant may request a onetime,

one-year, "good cause" extension of time to install controls if the permit is not issued within the one

year from receipt of an administratively complete application. This provision for a good cause

extension has been added as new §116.771(b).

Existing facility permits are available for all grandfathered facilities, and require consideration of tenyear-old best available control technology (BACT), considering the age and remaining useful life of the

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 not have to submit emissions inventory information under TCAA, §382.014. Facilities eligible for

small business stationary source permits may not emit air contaminants after.March 1, 2008 if they do

.not have a permit or a pending application. HB 2912 provides that gas-fired EGFs that were required

to obtain a permit under 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 been permitted 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 permit under

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 criteria pollutants 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% of the annual operating schedule; and 2) auxiliary fossil-fuel-fired

4
combustion facilities that do not generate electric energy and do not emit more than 100 tons per year

(tpy) of any air contaminant.

Grandfathered reciprocating internal combustion engines that are part of the processing, treating,

compression, or pumping facilities connected to, or part of, a gathering or transmission pipeline may

apply for a pipeline facilities permit. In the proposed rule, the commission provided that an applicant

could apply for a single permit for all engines connected to a pipeline or a separate permit for all

discrete and separate engines. In this final rule, the commission is changing the rule language to read

that the applicant may apply for a single permit for a group of engines connected to a pipeline or a

separate permit for all discrete and separate engines. The commission is making this change in part

due to the difficulty in determining where one pipeline ends and another begins, thus making it difficult

to determine if all engines have been included in the permit. Additionally, the commission must allow

for mandatory emission reductions to be achieved at either a single engine or.by averaging reductions

among multiple engines connected to a pipeline. HB 2912 requires a 50% reduction in NOx emissions

at facilities located in East Texas, and allows the commission to require up to a 50% reduction in

volatile organic compounds (VOe). For facilities located in West Texas, the commission may require

up to a 20% reduction in NOx and voe emissions. For facilities located in West Texas, the

commission will focus on reductions that can be achieved at little or no capital cost. Owners or

operators who elect to average among more than one account cannot include reductions made to

comply with other state or federal requirements. However, if the 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.

5
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 of TCAA, §382.05191. TCAA, §382.05191 provides that public participation for initial

issuance of a permit under TCAA, §§382.05183, 382.05185(c) or (d), 382.05186, or 382.0519 will be

done in the manner of TCAA, §382.0561, concerning Federal Operating Permit; Hearing, and TCAA,

§382.0562, concerning Notice of Decision. These sections allow for notice and comment hearings

instead of contested case hearings under Texas Government Code, Chapter 2001. Notice and comment

hearing procedures provide for public inspection of the draft permit and a 30-day comment period. In

this comment period, any person may submit a written statement to the commission. Additionally, a

person who may be affected by the emissions or a member of the legislature from the general area in

which the facility is located can request a hearing. At the hearing, any person may submit an oral or

written statement concerning the application. The public comment period extends to the close of the

hearing. The commission will send notice of the final action on thepermitto all persons who comment

during the public comment period or at a public hearing. The notice will include a response to any

comment submitted during the public comment period. The notice and comment hearing 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 of existing facility permits, EGF permits, pipeline facilities permits,

and small business stationary source permits will be conducted under the same procedures for

preconstruction permits, generally. Existing facility permits, EGF permits, pipeline facilities permits,

and small business stationary source permits are subject to judicial review, under TCAA, §382.032.

6
HB 2914, §78, 77th Legislature, 2001, created a new incentive program to assist in retrofitting

reciprocating internal combustion engines associated with pipelines. The new TCAA, §382.051865,

Reimbursement Program for Certain Emissions Reductions from Reciprocating Internal Combustion

Engines Associated with Pipelines, provides that the commission may develop a program, in

cooperation with local governments, other agencies, and EPA to provide incentives to owners or

operators of reciprocating 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 Clean Air

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 NOx emissions from

grandfathered reciprocating internal combustion engines associated with pipelines. H;B 2914 provides

for a partial reimbursement for the capital cost of installing technology to reduce emissions that meet

certain criteria. To implement these revisions, the commission is adopting new §116.776, Distribution

of Funds from the Emissions Reductions Incentives Account for Control of Emissions from

Grandfathered Reciprocating Internal Combustion Engines Located in the East Texas Region, in

Subchapter H. The section identifies the facilities which are eligible for a partial reimbursement for the

cost of controls. The rules also contain the 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 reimbursement under this program, the owner or operator of a grandfathered

reciprocating internal combustion engine must make at least a 50% reduction in actual emissions of

NOx as compared to the emissions reported for the facility in the 1997 industrial point source emissions

inventory. The commission believes 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.

7
Another criteria for reimbursement is the requirement to obtain a pipeline 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 of grandfathered engines with electric engines will eliminate that source of NOx

emissions. In response to comments, the commission has made changes to when the owner or operator

of a pipeline 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 required by any other state or federal law to make

reductions in emissions of NOx are not eligible for reimbursement. In the proposed rule, the

commission identified the following criteria for distribution: location of the facility; percentage of

reduction in the hourly emissions of NOx; cost effectiveness of the controls; and when the reductions

are actually achieved and the request for reimbursement is received. Due to the changes in when the

request for reimbursement must be 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 of the 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, earlier reductions considering the area of the

state where the reduction is proposed will maximize the air quality benefits for the state. Guidance

concerning the implementation of the reimbursement program 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 on permit applications for grandfathered facilities. The commission solicited

comment on the 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 of the 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 that the 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 of the permitting program, generally. As a consequence of this delegation, it is

necessary for the commission to change the Notice of Final Action sections of the rule to allow for the

filing of a motion to overturn rather than a petition for rehearing. In addition, the commission has

added language to §116.928 that states that any Notice of Final Action sent regarding a permit action

under Subchapter I will state that a person affected by a decision of the executive director may file a

motion to overturn the executive director's decision under §50.139 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 of Final Action). The commission has provided further detail

concerning the specifics of this rulemaking in the Response to Comments portion of this preamble.

To implement these 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 implement the provisions of HB 2912. The adopted amendments to Chapter 39 are also

published in this issue of the Texas Register.

9
SECTION BY SECTION DISCUSSION

Subchapter A, 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 constructed prior to August 30, 1971 (or no

construction contract was executed on or before August 30, 1971 that specified a beginning

construction date on or before February 29, 1972) and has not been modified 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 a definition for "natural gas-fired electric

generating facility" for consistency with the EGF permit requirements of HB 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 of a grade approved by commission rule. In general, physical or

operational changes at a facility to allow the burning of fuel oil will be considered a part of the design

as long as they do not constitute a modification of the facility. It is the commission's position that

"designed to burn" usually means that all of the necessary equipment (including fuel oil tanks, fuel

lines, atomizers, and pre-heaters if necessary) were constructed and maintained as part of the

grandfathered EGF. Any modification necessary to allow an EGF to burn fuel oil will be required to

comply with the requirements of Subchapter B, New Source Review Permits, before beginning the

construction.

The commission conducted a modeling analysis of grandfathered EGFs with the potential to burn fuel

oil in all areas of the 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

10
maximum firing rate. This approach is conservative because not all grandfathered gas-fired EGFs

designed to burn fuel oil will be firing fuel oil at the maximum firing rate at the same time. A

screening procedure was used for the initial analysis. For those sites that did not meet screening

criteria, a more detailed analysis was performed. The commission first looked at firing fuel oil with a

sulfur content of 0.3 % by weight or less for those facilities in Harris and Jefferson Counties and fuel

oil with a sulfur content of 0.7% by weight or less for all other counties in the state. Facilities in

Harris and Jefferson Counties are limited to burning fuel oil with a sulfur content of 0.3% by weight or

less by current rules. Using the approach outlined previously, the S02 maximum predicted ground

level concentrations were compared to relevant air standards. For the initial screening procedure, all

concentrations were below standards, with the exception of the 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 of hours these sites were predicted to exceed the S02

stan4ard were counted at each point and found to be less than 0.15 % of all hours modeled. Due to the

conservative nature of the modeling demonstration, which assumes all sources operating at full capacity

simultaneously at all hours of the year, 100% compliance with the state S02 standard is expected.

Metals have been identified as the primary hazardous air pollutant associated with the burning of fuel

oil. Adverse impacts from metals are caused by 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 short periods of time 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 of time. Thus, the commission does not expect any adverse

health effects associated with the burning of fuel oil. However, the commission has added a general

condition to §116.913 requiring the EGF to keep records of fuel oil burning and submit those records

with the report required under §101.336(b). In addition, EPA is developing a maximum achievable

11
control technology (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 of time would

likely be subject to this MACT standard. The commission has also added language in §1l6.913(a)(8)

that clarifies that the burning of waste or used oils is not authorized under Subchapter 1. Based on this

analysis, and with the limitations mentioned previously, the commission's Toxicology and Risk

Assessment Section has concluded that burning American Society for Testing and Materials (ASTM)

grades of fuel oil or any blend of ASTM grades of fuel oil, as limited by the adopted rules, will not

pose adverse health or welfare effects in the general public. The establishment of acceptable fuel oil

grades does not relieve the owner or operator of a natural-gas-fired EGF from the responsibility to

comply with any emissions limitations or conditions of any 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 if a generator that the owner or operator is seeking to permit

under an EGF permit is used not more than 10% of the normal annual operating schedule as required

by TCAA, §382.05185(d)(l). The final rule establishes the normal operating schedule as the maximum

number of operating hours for an EGF in any 12 consecutive month period between 1997 and 1999.

For sites with more than one EGF, the owner or operator may use the EGF with the highest number of

operating hours.

Subchapter H, Permitsfor Grandfathered Facilities

The adopted amendments to Subchapter H include changing the subchapter title from "Voluntary

Emission Reduction Permits" to "Permits for Grandfathered Facilities" in order to correctly reflect the

modified content of the subchapter. The subchapter has been divided into four divisions. The existing

12
sections of the subchapter are placed into Division 4, 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 of Subchapter H adopted to implement and administer the requirements of HBs 2912 and 2914.

Division 1, General Applicability

Division 1 contains the general requirement for a grandfathered facility to obtain a permit, permit by

rule, or shutdown. The owner or operator of a grandfathered facility must choose which permitting

option is best for his or her facility and situation. If the facility meets the qualifications, the owner or

operator may choose one of the new types of types of permits for grandfathered facilities contained in

Division 2 and 3 of this subchapter or the electric generating facility permit contained in Subchapter I.

The owner or operator may also choose any other permit type under Chapter 116 or permit by rule

under Chapter 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 of a grandfathered facility must apply for a

permit to operate that facility under Chapter 116, qualify for a permit by rule under 30 TAC Chapter

106, or submit a notice of shutdown. As required by HB 2912, a permit 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 of Interstate Highway 35 North

of San Antonio or traversed by or east of Interstate Highway 37 South of San Antonio, including

Bexar, Bosque, Coryell, Hood, Parker, Somervell, and Wise Counties. 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

13
Paso County. Therefore, rather than create a new definition, the commission uses the language, "West

Texas Region as defined in §101.330 of this title (relating to Definitions) and EI Paso County" in place

of the 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 if the installation of additional controls is required for a grandfathered facility to

meet an emissions limit for 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 of the time to install

controls if the permit is not issued within one year of the receipt of an administratively complete . . . .

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

Consistent with TCAA, §382.05182, Notice of Shutdown, adopted new §116.772, Notice of Shutdown,

establishes the procedures for submitting a notice of shutdown in lieu of obtaining 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 ofshutdown by

the application deadlines contained in §116.770 may continue to operate until March 1,2007, if the

facility is located in the East Texas region or March 1, 2008, if the 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 that have been shut down and

for which a notice of shutdown has 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

14
facilities which are shut down, the notice of shutdown will be required to include, at a minimum, an

identification of the facility being shut down, the date the facility intends to cease operating, and an

inventory of the type and amount of emissions that will be eliminated.

Division 2, Small Business Stationary Source Permits, Pipeline Facilities Permits, and Existing 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 defined by 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 perinit before September .1, 2004, The new section specifies that any grandfathered

facility, including any facility for which the owner or operator has submitted a notice of shutdown

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 or has a pending permit application under

Chapter 116, or a pending registration for a permit by rule under Chapter 106. The new section also

requires an application for a small business stationary source pennit to be submitted under the seal of a

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 a permit application

pending, or has a registration or pending registration for a pennit by rule.

15
New §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 a pipeline facilities permit in

accordance with TCAA, §382.05186. The owner or operator of a grandfathered reciprocating internal

combustion engine or group of engines that are part of processing, treating, compression, or pumping

facilities connected to or part of a gathering or transmission pipeline 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 of a 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 the

subchapter. The new section allows the owner or operator of more than one grandfathered

reciprocating internal combustion engine to apply for a pipeline facilities permit for a single

grandfathered engine or for a group of grandfathered engines connected to or part of a gathering or

transmission pipeline. The commission revised §116.775(d) to clarify that the owner or operator may

apply for a permit for a single engine or a group of engines.

New §116.776, Distribution of Funds 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 of HB 2914,

§78 to establish procedures and criteria for reimbursement to 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 of those facilities requesting a reimbursement

from the Emissions Reductions Incentives Account at the time the permit application is filed.

However, no money can be paid to a facility until the permit is issued and the required reductions have

16
been accomplished at the facility. The commission also clarified in §116.776(a)(1O) that only the

owners or operators of grandfathered engines required to reduce emissions of NOx by some other state

or federal law are not eligible for reimbursement. Because grandfathered engines in nonattainment

areas for ozone are required to reduce emissions of NOx' they are not eligible 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 of those facilities required to

reduce emissions of NOx by 50% because they are seeking a pipeline facilities permit, the commission

believes it is also appropriate to provide the opportunity for reimbursement to 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 of grandfathered reciprocating internal combustion engines through the registration of the

replacement electric engines. Registration of the 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 of any

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 of a Texas licensed professional

engineer, if required by §116.110(e), and states that the facility's owner or operator is responsible for

applying for the permit and complying with Subchapter H.

17
New §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 source permit, pipeline facilities permit, or existing facility

permit. These requirements are consistent with the requirements for other permits issued under

Chapter 116.

Adopted new §116.779(a)(1) provides that the emissions from the facility must comply with the rules

and regulations of the commission, including the protection of public health and physical property. The

commission may not issue a permit for a grandfathered facility if it finds that the emissions from the

grandfathered facility will not be protective of public health and physical property. The requirement to

protect public 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 of public health and property, the commission will conduct an

appropriate health effects review for each permit 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 later date, and the commission will invite stakeholder input prior to

finalizing the guidance. The permit may also have provisions for the measurement of air contaminants,

including installation of sampling ports and sampling platforms.

In order to be consistent with the current review process for permits and applicable federal

requirements, §§116.779, 116.794, and 116.917 require the owner or operator of a grandfathered

facility applying for a small business stationary source permit, pipeline facilities permit, existing facility

18
permit, existing facility flexible permit, or EGF permit to be able to demonstrate that they meet

applicable federal New Source Performance Standards (NSPS) and National Emission Standards for

Hazardous Air Pollutants (NESHAP). Facilities must be able to meet performance standards specified

in the application and may be required to provide information that demonstrates ongoing compliance

after the permit is issued. If applicable, facilities would be required to comply with Prevention of

Significant Deterioration (PSD) and nonattainment review as specified in Chapter 116, Subchapter B.

Since grandfathered facilities must comply with federal requirements, if applicable, it is appropriate to

ensure that these facilities are in compliance with federal requirements in the process of reviewing

applications. These sections also require the facility to submit air dispersion modeling if a more 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.

Adopted new §116.779(b) specifies additional requirements which apply to applicants for a pipeline

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 of the hourly

emissions rate of NOx ' and may also be required to demonstrate a 50% reduction of the hourly

emissions rate of VOC, both expressed in terms of grams per brake 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 of NOx and may require up to a 20% reduction in the

hourly emissions rate of VOC, expressed in terms of g/bhp-hr, for facilities located in the West Texas

region or EI Paso County. In accordance with TCAA, §382.05186(b), the proposed section allows the

owner or operator of more than one grandfathered reciprocating internal combustion engine to average

the reductions achieved among more than one engine connected to or part of a gathering or

19
transmission 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, if the owner or operator chooses to average among engines located

in both the East and West Texas regions or EI Paso County, the owner or operator must demonstrate

that the sum of the reductions achieved from all of the engines located in the East Texas region will

achieve the 50% reduction required for facilities located in the East Texas region. If the emission

reductions required by this adopted subsection will be achieved by averaging reductions, the rule also

states that the average may not include emission reductions achieved in order to comply with any other

state or federal law. If the emission reductions required by this adopted subsection will be achieved at

one account, the rule allows the reduction to include emission reductions achieved since January 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 air pollution control method that is at least as beneficial as the BACT

that the commission required or would have required for a facility of the same class or type as a

condition of issuing a permit or permit amendment 120 months (ten-year-old BACT) before the

submittal of the existing facility permit application, considering the age and remaining useful life of the

facility, and identify the date by which the control method will be implemented.

New §116.780, Public Participation for Initial Issuance of Pipeline 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 permit publish notice of intent to

obtain a permit in accordance with Chapter 39, Subchapters Hand K. The new section establishes that

20
any person who may be affected by emissions from the grandfathered facility seeking a permit may

request that the commission hold a notice and comment hearing on the permit application. The new

section states that any hearing request must be submitted during the 30-day comment period, which

ends 30 days after publication of the notice of intent. The new section specifies the procedures and

requirements for the hearing and the rights of affected persons. In accordance with TCAA,

§382.05181, small business stationary source permits are not subject to 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 Comment Hearings for Initial Issuance of Pipeline Facilities

Permits and Existing Facility Permits, specifies the applicability of the hearing requirements in the

section, the responsibilities of the commission in determining whether or not to hold a hearing, the

applicant's responsibilities if a hearing· is to be held, and the require~ents regarding submission of oral

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 EGF permits are subject to the public notice and hearing requirements of TCAA, §382.05191.

TCAA, §382.05191 provides that public participation for initial issuance of a permit under TCAA,

§§382.05183, 382.05185(c) or (d), 382.05186, or 382.0519 will be done in the manner of TCAA,

§382.0561, concerning Federal Operating Permit; Hearing, and §382.0562, concerning Notice of

Decision. These sections allow for notice and comment hearings instead of contested case hearings

under Texas Government Code, Chapter 2001, and require the commission to send notice of final

action to persons who comment during the comment period or during a hearing.

21
New §116.783, Notice of Final Action on Pipeline Facilities Permit Applications and Existing Facility

Permit Applications, is adopted with changes to the proposed text. The adopted new section specifies

the commission's responsibilities for sending notice of the final action on an application for a pipeline

facilities permit or an existing facility permit, and the information that the commission must include in

the notice. The new section will require the commission to individually notify persons who commented

during the public comment period or at a permit hearing, of the final action of the commission. The

notice must be sent by 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 of any changes in the permit,

and a statement that any person affected by the decision of the commission may petition for rehearing

and for judicial review. Because, in §1l6.790, the commission is delegating to the executive director

the authority to take any action on a permit issued under this division, this section now requires that the

notice state that any person affected by the decision of the executive director may file a motion to

overturnrather than a petition for rehearing.

Adopted new §116.785, Permit Fee, 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 defined by

TCAA, §382.0365(h), then the fee will be $100. These fees will allow the commission to partially

offset the cost of processing the applications. The new section also establishes requirements for

payment and return of fees. 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 Subchapter H, Division 2, and requires that permit

holders comply with any and all general and special conditions that the permit may contain. The new

section also lists the general conditions permit holders are subject to, regardless of whether they are

22
specifically stated within the permit document. These requirements are consistent with the

requirements for other permits issued under Chapter 116.

New §116.787, Amendments and Alterations of Permits Issued Under this Division, is adopted with

changes to the proposed text. The adopted new section specifies that owners or operators planning the

modifications of a facility permitted under Chapter 116, Subchapter H, Division 2, must comply with

the requirements of Subchapter B, New Source Review Permits, before beginning the construction of

the modification. The new section also states that amendments and alterations of permits issued under

Subchapter H, Division 2, are subject to the requirements of Subchapter B. The commission corrected

a typographical error in this section.

Adopted new §116.788, Renewal of Permits Issued Under this Division, implements TCAA, §382.055

and the changes to §382.05192 to require that small 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

Subchapter H, 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 of grandfathered facilities is eligible for an existing

23
facility 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 in the existing facility

flexible pennit. The new section requires an application for an existing facility flexible pennit to be

submitted under the seal of a Texas licensed professional engineer, if required by §116.110(e). The

new section also requires specific actions by owners or operators of facilities covered by an existing

facility flexible permit for changes of ownership. The new section specifies that the facility's owner or

operator is responsible for applying for the pennit and complying with Subchapter H, except after a

change of ownership as explained in the section.

Adopted new §116.794, Existing Facility Flexible Permit Application, specifies the application

requirements and demonstrations which must be met in order for a facility to be granted an existing

facility flexible permit. These requirements are consistent with current flexible permit requirements,

except fOf the required level of control. The level of control required by the adopted section,

consistent with the requirement of TCAA, §382.05183, is at least as beneficial as ten-year-old BACT,

considering the age and remaining useful life of the facility.

Adopted new §116.795, Public Participation for Initial Issuance.of Existing Facility Flexible Permits,

requires that an applicant for an existing facility flexible permit publish notice of intent 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 a pennit may request

that the commission hold a notice and comment hearing on the pennit application. The new section

states that any hearing request must be submitted during the 30-day comment period, which ends 30

days after publication of the notice of intent. The new section specifies the procedures and

requirements for the hearing and the rights of affected persons.

24
Adopted new §116.796, Notice and Comment Hearings for Initial Issuance of Existing Facility Flexible

Permits, specifies the applicability of the hearing requirements in the section, the responsibilities of the

commission in determining whether or not to hold a hearing, the applicant's responsibilities if a hearing

is to be held, and the requirements regarding submission of oral 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 EGF permits are subject to the

public notice and hearing requirements of §382.05191. TCAA, §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 manner of TCAA, §382.0561, concerning Federal Operating Permit;

Hearing, and §382.0562, concerning Notice of Decision. These sections allow for notice and comment

hearings instead of contested case hearings under Texas Government Code, Chapter 2001, and require

the commission to send notice of final action to persons who comment during the comment period or

during a hearing.

New §116.797, Notice of Final 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 of the final action on an application for an existing facility flexible permit and the

information that the commission must include in the notice. The new section requires the commission

to individually notify persons who commented during the public comment period or at a permit

hearing, of the final action of the commission. The notice must be sent by 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 of any changes in the permit, and a statement that any person affected by

the decision of the commission may petition for rehearing and for judicial review. Because, in

§116.807, the commission is now delegating to the executive director the authority to take any action

25
on a permit issued under this division, this section now requires that the notice state that any person

affected by the decision of the executive director may file a motion to overturn rather than a petition for

rehearing.

Adopted new §116.798, Permit Fee, establishes a permit fee of $450 for persons applying for a permit

under Subchapter H, Division 3, unless the facility is a small business stationary source facility, as

defined by TCAA, §382.0365(h), and then the fee would be $100. These fees will allow the

commission to partially offset the cost of processing the applications. The new section also establishes

requirements for payment and return of fees. TCAA, §382.062 authorizes the commission to establish

fees for permits.

Adopted new §116.799, General and Special Conditions, requires that permit holders comply with any

". . .' . .

and all general and special conditions that the existing faCility flexible permit may contain.. The new

section states that upon a specific finding by the executive director that an increase of a particular air

contaminant could result in a significant impact on the air environment, or could cause the facility,

group of facilities, or account to become subject to review under §116.150 and §116.151 and

§§116.160 - 116.163 (relating to Nonattainment Review or Prevention of Significant Deterioration

Review), or Subchapter C of Chapter 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 a permit by rule under

Chapter 106. Additionally, the new section specifies that a pollutant 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 permit upon issuance or amendment of the permit that may be more restrictive

than the requirements of the section. These requirements are consistent with the 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 criteria for establishing an individual

emission limitation for a pollutant. 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 subject to 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 cOrrimission does not believe that an insignificant emission factor would

be necessary or appropriate for grandfathered facilities, since use of the 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 a permit if the installation of additional controls is required for a

grandfathered facility to meet an emission cap for an air contaminant. As required by TCAA,

§382.05181, installation of required controls must be completed 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 or EI Paso County. The new section also specifies how the emission cap will be adjusted if such

a facility is taken out of service or fails to install the additional control equipment as provided by the

implementation schedule in the permit.

27
Adopted new §116.802, Significant Emission Increase, defines when an increase in emissions from

operational or physical changes at an existing facility covered by an existing facility flexible permit will

be considered insignificant for the purposes of state new source review under Subchapter H, and will

not require a permit amendment. The new section states that any increase in emissions from a new

facility or emissions of an air contaminant not previously 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 account may result in an increase in actual emissions at facilities not covered

by the existing facility flexible permit unless 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

Subchapter B.

Adopted new §1l6.806, Existing Facility Flexible Permit Renewal, states that existing facility flexible

permits will be renewed in accordance with the requirements of Subchapter D, Permit Renewals,

consistent with the permit requirements of Chapter 116.

New §1l6.807, Delegation, is adopted with changes to the proposed text. In adopted new §116.807

the commission delegates to the executive director the authority to take any action on a permit issued

under Subchapter H, Division 3 consistent with the authority of TCAA, §382.061, and TWC, §5.122.

This delegation will allow for efficient processing of permit applications.

28
With the addition of three new divisions to this subchapter, the existing requirements for VERPs have

been placed under a new Division 4. There have been no changes to the requirements for VERPs.

Subchapter I, Electric Generating Facility Permits

The adopted amendments to Subchapter I implement the portions of TCAA, §382.05185, which create

a new EGF permit. The EGF permit will allow the owners or operators of EGFs who have already

applied for a permit required by SB 7, 76th Legislature to apply for a permit for: 1) generators that do

not generate electric energy for compensation and are not used more than 10% of the 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 of any air contaminant. The adopted changes will also allow coal-fired

EGFs which were required to apply for a permit under SB 7, 76th Legislature to apply for an EGF

permit for criteria pollutants other than NOx, S02' and PM as it relates to opacity. In addition, the

amendments to Subchapter I provide that gas-fired EGFs which were required to be permitted und~rSB

7, 76th Legislature or were exempt from the requirement to apply for such a permit are considered

permitted for all air contaminants.

The adopted amendments to Subchapter I include revising the subchapter title to Electric Generating

Facility Permits.

The adopted amendments to §116.91O, Applicability, allow the owners or operators of EGFs who have

already applied for a permit required by 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

29
that EGFs generating electric energy primarily 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 a permit under either Chapter 116 or qualify for a permit by

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 be permitted under SB 7, 76th Legislature or were exempt from the requirement to apply

for such a permit are considered permitted under the TCAA for all air contaminants. The adopted

additions to this section also allow the owners or operators of EGFs who have already applied for a

permit required by SB 7, 76th Legislature to apply for a permit for generators that do not generate

electricity for. compensation and are not used more thim 10% of the normal operating schedule, or for

other combustion equipment that does not generate electric energy and does not emit more than 100 tpy

of any air contaminant. The adopted amendments to this section allow coal-fired EGFs which were

required to apply for a permit under 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 must be filed and state that emissions of air contaminants from

auxiliary generators or other combustion equipment 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 of any permit issued under this

30
subchapter, including the pollutants or allowances that may be authorized for each permit and the

requirements of the SB 7 allowance trading program for the additional equipment which may be

permitted under this subchapter. Existing paragraph (2) of this 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 a permit under SB 7, or provides for the permitting

of the additional criteria pollutants for coal-fired EGFs which have obtained or applied for a SB 7

permit. Subsequent paragraphs 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 not more than 0.3 % sulfur by weight as

acceptable. The commission stated in the preamble to the proposed rule that staff was continuing to

analyze other fuel oil grades and refine the modeling analysis. As a result of this additional analysis,

the commission has determined that any ASTM grade of fuel oil with a sulfur content of 0.7% 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 of waste or used oils is not authorized under Subchapter 1. The

commission has also added a general condition to §116.913 requiring the EGF to keep records of fuel

oil burning and submit those records with the report required under §101.336(b). Additionally, the

commission made a minor language clarification in §116.913(a)(2) and clarified the language in

§116.913(a)(I)(E) to apply only to criteria pollutants instead of all air contaminants in order to be

consistent with TCAA, §382.05185.

New §116.917, Electric Generating Facility Permit Application for Certain Grandfathered Coal-Fired

Electric Generating Facilities and Certain Grandfathered Facilities Located at Electric Generating

31
Facility 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

criteria pollutants, 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 of a

grandfathered facility applying for an EGF permit to be able to demonstrate that the facility meets

applicable federal NSPS and NESHAP. Facilities must be able to meet performance standards

specified in the application and may be required to provide information that demonstrates ongoing

compliance after the permit is issued. If applicable, facilities would be required to comply with PSD

and nonattainment review as specified in Chapter 116, Subchapter B. Since grandfathered facilities

must comply with federal requirements, if applicable, it is appropriate to ensure that these facilities are

in compliance with federal requirements in the process of reviewing applications. These sections also

require the facility to submit air dispersion modeling if a more 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 at Electric Generating

Facility Sites, identifies some of the 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 of the permit that may be more restrictive than the requirements of

the section. Additional general and special conditions are required by §116.913. Permit holders are

32
required to comply with any and all general and special conditions that the permit may contain. These

requirements are consistent with the requirements for permits issued under 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 of this 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 of processing 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 of TCAA, §382 .061, and TWC, §5 .122. This delegation

will allow for efficient processing of permit applications. In this section the commission also provides

that because of this delegation to the executive director, the notice of final action under §116.922 will

now notify the persons affected by the executive director's decision of the 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 of Final

Action).

33
The adopted amendments to §116.930, Modifications, include a revision of the section title to

"Amendments and Alterations of Permits Issued Under this Subchapter." The adopted amendments are

intended to clarify that the owner or operator of a facility with a permit issued under this subchapter

must comply with the requirements of Subchapter B prior to beginning the construction of the

modification and that any required alteration or amendment will follow the procedures contained in

Subchapter B.

FINAL REGULATORY IMPACT ANALYSIS DETERMINATION

The commission reviewed the adopted rulemaking in light of the regulatory analysis requirements of

Texas Government Code, §2001.0225, and determined that the changes to this chapter needed to

implement the substantive permitting requirements of HB 2912, §§5.02 - 5.04 meet the definition of a

"major environmental rule" as defined in that statute. However, the adopted rulemaking implementing

HB 2914, §78 does notmeet the definition of a major environmental rule. The 77th Legislature

amended THSC to require that all grandfathered facilities obtain permits. These rules implement the

comprehensive permitting system created by HB 2912, including four different types of permits 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 of which, is to protect the environment or

reduce risks to human health from environmental exposure and that may adversely affect in a material

34
way the economy, productivity, competition, jobs, the environment, or the public health and safety of

the state or a sector of the state.

Although the adopted rules to implement the HB 2912 sections are intended to protect the environment

or reduce risks to human health from environmental exposure, they may have adverse effects on the

economy, productivity, competition, or jobs of the state or a sector of the state since they require

mandatory permitting or shut down of certain grandfathered facilities. However, the analysis required

by Texas Government Code, §2001.0225(c) does not apply because the adopted rules do not meet any

of the four applicability requirements of a major environmental rule. The adopted rules do not exceed

a standard set by federal law, exceed an express requirement of state law, exceed a requirement of a

delegation agreement, or adopt a rule solely under the general powers of the agency. The rules are

adopted specifically to comply with HB 2912 and related provisions of TCAA, and do not exceed the

requirements of either

The adopted rules to implement the 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 of the state. Therefore, the adopted rules implementing the HB 2914 sections do

not fit the definition of a major environmental rule, and the analysis required by §2001.0225(c) does

not apply.

TAKINGS IMPACT ASSESSMENT

35
The commission completed a takings impact assessment for the adopted rules. The purpose of the

adopted rules is to fulfill the commission's obligation to 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 of permits which cover all

grandfathered facilities, and provide 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 combustion engines associated with pipelines.

The commission evaluated the adopted rules and performed an assessment of whether Texas

Government Code, Chapter 2007 is applicable. The commission's assessment indicated that Texas

Government Code, Chapter 2007 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 or property, 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 of 42 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) set by the EPA under 42 USC, §7409, for

nonattainment areas of the state and maintain the quality of the state's air in attainment areas. The

36
action is mandated by federal law because the rules will be submitted for EPA approval as part of the

SIP. Texas Government Code, Chapter 2007 also does not apply because this is an action that is taken

in response to a real and substantial threat to public health and safety, that is designed to significantly

advance the health and safety purpose, and that does not impose a greater burden than is necessary to

achieve the health and safety purpose. Reductions required by these rules will be no greater than those

required by HB 2912. Thus, this action is exempt under Texas Government Code, §2007.003(b)(13).

Adoption and enforcement of these rules will not burden private real property. The adopted rules do

not affect private property in a manner which restricts or limits an owner's right to the property that

would otherwise exist in the absence of governmental action. Consequently, the adopted rules do not

meet the definition of a 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, Subchapter B, 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 subject to the CMP, commission rules governing air

pollutant emissions must be consistent with the applicable goals and policies of the CMP. The

commission reviewed the rulemaking for consistency with the CMP goals and policies in accordance

with the rules of the 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 of coastal natural

resource areas (31 TAC §501.12(l). The CMP policy applicable to this rulemaking is the policy (31

37
TAC §501.14(q) that commission rules comply with federal regulations in 40 Code of Federal

Regulations (CFR) to protect and enhance air quality in the coastal area (31 TAC §501.14(q)). This

rulemaking requires the owners or operators of all 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 of air 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., Tyler Junior 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 of Odessa 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 of Civic Clubs (SCCC); St. Francis Xavier Catholic Church (St. Francis);

League of Women Voters of Dallas (LOWV); TXU Business Services Company, on behalf of TXU

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 Protection Agency (EPA); Environmental Defense (EDet);

Downwinders at Risk/Blue Skies Alliance (DAR/BSA); Association of Texas Intrastate Natural Gas

Pipelines/Gas Processors Association (ATINGP/GPA); Association of Electric Companies of Texas

(AECT); and City Public Service of San Antonio (CPS).

In addition, the commission received comments from, or on behalf of, the following elected officials:

Mr. Larry Green representing the Honorable Sheila Jackson Lee, U.S. House of Representatives,

Eighteenth District of Texas; House Committee on Environmental Regulation, Texas House of

Representatives, the Honorable Warren Chisum, Chairman; the Honorable Warren Chisum, District

88, Texas House of Representatives; the Honorable Lon Burnam, District 90, Fort Worth, Texas

House of Representatives; the Honorable Al Edwards, District 146, Houston, Texas House of

Representatives; the Honorable Lee Brown, Mayor, City of Houston; and the Honorable Ada Edwards,

Council Member, District D, City of Houston.

SCCC, St. Francis, Larry Green (Congresswoman Sheila Jackson 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 of the proposed rules.

TXU supported the comments of AECT. GHASP expressed support for the comments expressed by

others regarding the details of the 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 Sheila Jackson Lee's office), Representative

Edwards, Houston City Council Member Edwards, 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 of controls should not be

automatic, and the duration of the extensions should be minimized. TCE commented that the

commission should provide definitions or conditions that justify the extension. Lee P. Brown, Mayor,

City of Houston urged the commission to complete the review of permit 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 submitted in accordance with these rules within one year from the date of

receipt of the administratively complete application.

TCE expressed concern that many aspects of the implementation of the legislation are being left to

guidance documents and that the public has a limited role in the guidance document process, and

suggested that a balanced work group be used to develop the guidance documents.

40
The commission has made no change in response to this comment. The development of guidance

documents will be conducted through a balanced stakeholder process, which allows for public

review and comment from interested persons.

RSC and DAR/BSA commented that the proposed rules should specify the details of the 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 prevent the commission from acting arbitrarily and capriciously

by treating some facilities in a more 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 of the review corresponds to the potential health risks

from a particular 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 comment from interested persons. The commission does not

agree that the use of a guidance document would allow the commission to act in an arbitrary and

capricious manner with respect to the review for any permit. The commission appreciates the

support for the development of the 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 of complaints

against the facility. Additionally, GRASP commented that health effects reviews should include a

review of notices of violation, and any other compliance information that might indicate past problems

at a site. GRASP commented that adding these items to the health effects review would be particularly

41
important for facilities that will not be required to make pollution reductions in exchange for a permit.

TCE also stated that they want to make sure that the compliance history of grandfath.ered plants is

thoroughly reviewed, including, but not limited to, violations and complaints, before permits are issued

to grandfathered facilities - small and large.

The commission has made no change in response to this comment. The commission notes that the

classification and use of compliance history in all types of pennit reviews, including permits for

grandfathered facilities, is currently being addressed in separate rulemakings. Notices of

violation are now included in the components of a person's compliance history.

TCE commented that the rule should specifically address the prevention of public nuisance and the

prevention of immediate threat to life or property in addition to the rule inclusion for prevention of real

and substantial threat to public health and safety..

The commission has made no change in response to the comment. Generally, the health effects

reviews conducted by the commission will consider the nuisance effects from compounds either

through a review of the compliance history of the facility or through a detailed look at the offproperty impacts of the emissions from the facility. When the commission conducts a detailed

modeling analysis, the off-property impacts are compared to the effects screening level (ESL) of

the compound. The ESL for each compound is based on the nuisance potential or the potential

for adverse health effects, whichever is 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. Immediate threats to life and property from potential acute

exposures will also be considered during the permit review.

GHASP, DAR/BSA, and TCE commented that the $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 should be a minimum of $1,000. TCE commented that there should be a higher fee for

companies that did not participate in the VERP program. TCE suggested that the commission use the

existing fee structure for new and modified sources. TCE suggested that the commission consider

hiring persons with accounting backgrounds, rather than engineering backgrounds, to detennine the

appropriate value of the facilities being pertnitted. TCE also suggested that the commission not charge

a single fee for a pennit for numerous facilities located on a pipeline.

. 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 not been modified. The permitting of these 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 of grandfathered facilities have been

included in a review of permit fees currently being conducted to assess whether changes should be

proposed to permit fees in general. The commission will charge a fee for each permit application

reviewed. Even if an application for a permit includes multiple facilities associated with a

pipeline, the fee will be a single application fee.

TCE and DAR/BSA questioned how the commission will compile an accurate listing of the additional

large, small, and micro-business grandfathered facilities not included in the 1997 emissions inventory.

43
TeE and DAR/BSA also questioned how the addition of these facilities to the inventory will affect the

SIP.

The conunission has made no change in response to. these comments. The commission will not

attempt to compile a list of the additional large, small, and micro-business grandfathered facilities

which are not included in the 1997 emissions inventory. The commission will make efforts to

outreach to as many businesses as possible to make sure they are aware that any grandfathered .

facilities they may have will need to be permitted. However, the emissions from most of these

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 or no impact on the

SIP.

. . '"

EPA commented that 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 in permits.

The commission agrees that control measures and implementation schedules should be codified in

the permit, when controls are required. The proposed §1l6.771 specifies that if any additional

controls are required by a permit for a grandfathered facility, the permit will specify a schedule

for the implementation of those controls. This requirement applies to any permit issued under

Subchapter H.

EPA commented that the proposed rules provided that notice and comment hearing requirements apply

only to the initial issuance of pipeline facilities permits, existing facility permits, existing facility

44
flexible permits, and "EGF permits. EPA states that the commission should require public notice for

revisions and modifications of pipeline facilities permits, existing facility permits, existing facility

flexible permits, and EGF permits to meet 40 CFR §51.161.

The commission has made no change in response to this comment. HB 2912 provided that public

participation for initial issuance of pipeline facilities permits, existing facility permits, existing

facility flexible permits, and EGF permits, would be conducted in the same manner as public

participation for federal operating permits. Therefore, for initial issuance, public participation

includes a requirement for publication of newspaper notice, signposting, and an opportunity to

request a notice and comment hearing. However, HB 2912 provided that for modifications and

renewals of pipeline facilities permits, existing facility permits, existing facility flexible permits,

and EGF permits must comply with TCAA, §382.0518, which requires public participation to

. . ..

include publication of newspaper 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 of small 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 of 40 CFR §51.161. Adopted

§116.930 requires that modifications of EGF permits comply with Subchapter B and existing

§116.931 requires that renewals of EGF permits comply with Subchapter D, thus also satisfying

the requirements of 40 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 meet the

requirements of 40 CFR §51.212(c), which provides that compliance must be determined by methods

in 40 CFR 51 Appendix M; 40 CFR 60 Appendix A; or as approved by the EPA administrator.

45
The commission has made no change in response to this comment. The rules as written continue

the current practice of reviewing any alternate method requests and sending recommendations to

EPA for approval as appropriate. These rules and procedures satisfy the requirements of 40

CFR §51.212(c).

LOWV expressed concern regarding whether the hearing process has any impact on permit issuance.

LOWV also stated that air contaminants are carried by prevailing winds, can be carried far away from

sources, and the 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 input from the public iIi all penfiitting decisions through both public comment and the

opportunity to request a hearing where authorized by statute. The commission agrees that

certain air contaminants may be carried some distance by prevailing winds. The commission

assesses the impact of these air contaminants on downwind areas as part of the permit review

process.

TXU commented that the permitting of existing facilities is a new 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 commission has made no change in response to this comment. The commission agrees that

HB 2912 provides specific permitting requirements for grandfathered facilities in

acknowledgment of the fact that these facilities have already been constructed. However, HB

2912 also provides that review and renewal of these permits be completed under existing Chapter

116 procedures. This requires that the commission harmonize the review of grandfathered

facilities in the context of the existing structure for permitting new and modified facilities.

TxOGA requested that the commission create a "regional permit for aggregated facilities" for

grandfathered tank or pipeline facilities other than engines. TxOGA's proposed regional permit would

require that the aggregate allowable emissions meet the equivalent overall emission limit of current

BACT.

The commission appreciates the suggestion; however, this suggestion is beyond the scope of this

rulemaking, so no change has been made in response to this comment.

TCE and DAR/BSA requested that the commission change the word "may" to "shall" in the sections of

the rules relating to the provision for measurement of air 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 commission has made no change in response to these comments. These general conditions are

included in all permits. The commission does not agree that it is appropriate to require the

installation of sampling ports and sampling platforms for all facilities. In those 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 of the periodic monitoring and compliance assurance monitoring

requirements of Title V and permits for grandfathered facilities will satisfy those requirements

where appropriate.

TCE and DAR/BSA supported the rule language stating that there may be special conditions included

in the permit that may be more restrictive than the requirements of the section.

The commission appreciates the support.

HSC commented that the commission should define the criteria it uses to determine when the basis of a

hearing request by a person who may be affected (by a facility requesting a permit) is determined to be

. . .

unreasonable. HSC's perspective is that any person who is breathing or may" 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 a public hearing.

The commission has made no changes in response to these comments. The public notice

provisions in the adopted rules implement the requirements of HB 2912, §§5.02 - 5.05 to provide

for public notice and an opportunity for a .notice and comment hearing, in the same manner as

provided for federal operating permits under TCAA, §382.0561. Section 382.0561 provides that

the commission is not required to hold a hearing if the basis of the request by a person who may

be affected is determined to be unreasonable. Therefore, reasonableness is the statutory standard

by which requests for hearings are required to be judged by the commission. Although the

conunission believes that "reasonableness" is a term that is circumstantial and not required to be

48
dermed by the commission, the factors relevant to a determination of reasonableness have

previously been discussed in the commission's procedural rules, and the commission could use

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 in the 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, Subchapter B or under Chapter 106.

The commission has made no change in response to this comment. The proposed §116.772(c)

requires that the owner or operator of a source which is shut down and which the owner or

operator then elects to restart must obtain authorization under Chapter 116 or Chapter 106 prior

to operating the facility. The permitting is not limited to Chapter 116, Subchapter B. For

instance, if an owner or operator of a grandfathered facility located in West Texas shuts the

facility down in 2002, but elects to re-start the facility, the owner or operator may submit an

application for a grandfathered facility permit under Subchapter H (except for Division 4-

VERP) prior to September 1, 2004.

49
EPA asked if Form PI-IGSD, Notice of Shutdown, 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 implement these grandfather permitting rules are being developed. The forms will

be made available to the public when they have been completed, and the commission always

welcomes public comment on how forms and guidance can be improved.

EPA commented that §1l6.786(b)(3) should also discuss public availability of records, and that

records should be available to the public upon request unless determined to be confidential business

information under 40 CPR 2.

The conunission has made no change in response to this comment. Thecoinmission agrees that

public availability is an important component of the permitting process, and has implemented

procedural rules, 30 TAC §1.5, to ensure that the records of the agency are properly available to

the public, subject to appropriate confidentiality restrictions. The commission provides

information to the public, subject to the limitations provided in TCAA, the Texas Public

Information Act, and copyright law.

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

§116.786(c)(2)(B) identifies the reasons why the commission may include a provision requiring

prior written approval before constructing a source under certain authorizations. The basis for

including such a condition in a permit will be identified in the technical review of the permit

application. This technical review is available in the permit fIle available to the public.

EPA commented that permits for coal-fired EGFs and certain grandfathered facilities located at EGF

sites as identified in §116.917 should contain provisions for measuring the emissions of air

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 of 50% 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 issued by the

commission include any appropriate measures needed to ensure initial and ongoing compliance

with the permit and any underlying standards. In addition, most, if not all, of these facilities are

required to obtain a Title V permit and are subject to acid rain permitting requirements. The

commission is required to place the appropriate periodic monitoring and compliance assurance

monitoring requirements in these permits.

51
BOef stated that the commission should ensure that the owners and operators of facilities applying for a

permit under these proposed rules cannot use the permit to make operational or physical changes.such

as increasing the utilization, capacity, or throughput of existing units without going through the normal

New Source Review (NSR) permitting process. BOef stated that the commission should add a

requirement that the maximum capacity under any grandfathered permit may not significantly exceed

historical levels.

The owner or operator of a facility for which an application for a grandfathered facility permit is

submitted should be able to document that the facility is truly a grandfathered facility and thus

eligible for one of the four new types of permits for grandfathered facilities. The commission

staff will review this information along with the remainder of the application information

(including utilization, capacity, and throughput information) to ensure that the facility qualifies

for the type of permit for which the application was submitted. In those cases where applications

are submitted for facilities that are not grandfathered, or for which the applicant is requesting

physical or operational changes to the facility that would constitute a modification the applicant

will be directed to submit the appropriate type of NSR permit application.

BOef requested that the commission require in the final rules a certification, signed by a responsible

official that the facility has not been modified since 1971.

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

believe that a certification of grandfathered status is necessary. As mentioned previously, the

owner or operator of the grandfathered facility must be able to provide documentation regarding

the grandfathered status of the facility being permitted. The commission also notes that for those

52
facilities which have submitted Title V permit applications, the owner or operator has provided

infonnation regarding the grandfathered status of the facilities with applicable requirements at

the site and has certified that the information provided is true and accurate.

DARIBSA commented that the proposed rule is of concern since a recently released EPA study of

MOBILE6 projects that vehicles 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 commission has made no change in response to this comment. Ifthe 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/or VOC emissions in order . . . . '. .

. . to re~ch attainment ofthe NAAQS in the nonattainment areas. The need for additional

reductions will be evaluated after the 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 commission has 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 extent that the requirements are similar.

For example: Ifthe owner or operator applies for both an existing facility permit and a pipeline

facilities permit, the commission may be able to coordinate the review for both applications to

53
provide for a single public notice for both applications, concurrent review of the applications, and

issuance of a single permit. Such coordination of review and issuance will require the assistance

of the applicant. Both applications must be submitted together and must clearly identify the

request for a single permit number and combined public notice. The applicant must also ensure

that any deficiencies identified with either application are addressed quickly so that the

coordinated review is not jeopardized.

Lee P. Brown, Mayor, City of Houston urged the commission to quantify the emissions reductions

from both permitting of grandfathered facilities and fewer industrial upsets resulting from the

implementation of HB 2912 as soon as possible. Additionally, the City of Houston urged the

commission to complete air quality modeling to determine resulting ozone and fine particle reductions

to allow the City of Houston to work with regional stakeholders in developing strategies to avoid

nonattaininent for the forthcoming fine particle standard.

The commission has made no change in response to these comments. Although the comments

address areas beyond the scope of this rulemaking, the commission appreciates the comments and

provides the following response.

The commission agrees that emission reductions of ozone precursors resulting from the

implementation of HE 2912 should be quantified. These emission reductions will be quantified as

part of the ozone modeling for the Houston/Galveston Area's mid-course review. Phase I of the

modeling for the midcourse review is currently in progress.

54
The commenter makes reference to "the forthcoming fme particle standard." The commission

wishes to clarify that the federal fme particle (PM2.

S) standards were promulgated in 1997.

However, nonattainment designations for PM2•

S have not yet been made by the state and the EPA.

Pending further guidance from EPA regarding the implementation of the PM2.

S standard, such

designations, if deemed appropriate from the monitoring data, could be made as early as 2003.

The designations would be based on monitoring data from the three-year period 2000 through

2002.

The commenter requests that the commission complete PM2.

S air quality modeling to allow the

City of Houston 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 of any PM2•

S nonattainment designations. However, the commission would conduct such

modeling should the Houston area be designated nonattainment, as part of the development of an

attainment demonstration SIP.

The commission acknowledges the program begun in late 1999 by the City of Houston and

stakeholders to help the area avoid a PM2.

S nonattainment designation. Participants in this

program developed and implemented a number of early PM2.

S control strategies.

In 2000, a field study was conducted by universities, with assistance from the commission, to

better understand the formation and transport of PM2.

S in the Houston area. Data from the study

are being analyzed, and will provide an enhanced scientific basis for evaluating the effectiveness

of potential controls should the area be designated nonattainment for PM2.

S'

55
The representative from the Birds-i Network commented regarding personal observations of increased

incidence of diabetes, lupus, and other diseases with mysterious lupus-like symptoms, and other various

birth defects.

Birds-i Network also expressed concern regarding mercury, and noted that EPA provides an annual

report to Congress regarding mercury that appears to indicate that mercury 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 a federal grand jury investigating the Rocky Flats nuclear reservation

in Colorado issued more than 60 criminal indictments for how that plant was being operated, and that

the federal grand jury should be 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 Act identified 189 hazardous air pollutants (HAPs). Congress directed

EPA to identify source categories which emit significant amounts of these HAPs and further

directed them to establish standards requiring reductions in the emissions of these HAPs. One of

the HAPs identified by Congress was mercury, and one of the source categories identified by EPA

as emitting mercury was coal-fired EGFs. As the commission discussed elsewhere in this

preamble, the commission expects that EPA will be addressing mercury emissions from EGFs in

the near future. The commission has no data to support the comments regarding the alleged

increases in various diseases or birth defects. The connnission has no information regarding

56
events at the Rocky Flats nuclear reservation in Colorado and the commission does not have

authority to convene a federal grand jury regarding any matter.

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

The commission has made no change in response to this comment. TCAA, §382.014 does not

derme "Small Business." TCAA, §382.014 enables the commission to require a person whose

activities cause emissions of air contaminants to submit information the commission needs in

order to develop an inventory of emissions in Texas. The requirement to submit this information

needed to develop the inventory is based on the level of emissions from the facilities located at the

account (site), and applies to any person or company regardless of whether or not the person or

company is a small business. As stated in §116.774(a), small business is dermed in TCAA,

§382.0365(h).

TCE and DAR/BSA stated that industry representatives testified at legislative hearings that they do not

have exact emission figures for all pipeline facilities. TeE and DAR/BSA are concerned that the

owners or operators of pipeline facilities that apply for a small business stationary source permit may

indeed be above the 50 tpy threshold of any regulated air pollutant or may emit more than 75 tpy of all

regulated air pollutants. TCE and DAR/BSA are concerned that these pipeline facilities may be

improperly exempt from 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 that it meets the eligibility criteria, including the emission

limits to be considered a small business source. Any applicant who does not meet the eligibility

criteria for the type of application submitted will be required to submit a new application

appropriate for the facility.

TCE and DARIBSA commented that the proposed rules will not necessarily result in significant

reductions in emissions, and therefore, do not accurately reflect legislative intent. TCE commented

that the proposed rules require a reduction in the rate of emissions for a pipeline facilities permit rather

than a reduction in the tonnage of emissions. TCE stated that permits that require a 50% reduction in

NO. emission rates, in addition to VOC reductions, should not be issued without substantial changes to

those facilities.

The rule provisions may not result in reductions in emissions. This is consistent with the statute

since reductions are not required in all cases, as noted in other responses to comment in this

rulemaking. HB 2912 provides clear statutory direction for the situations in which emission

reductions or controls are required for the permitting of grandfathered facilities. The

commission notes, however, that the permitting of these facilities will provide for codification of

requirements applicable to these facilities, which may result in air quality benefits from better

enforcement.

TCAA, §382.05186(e) clearly states that the commission shall grant a pipeline facilities' permit for

a facility or facilities located in the East Texas Region, if the commission fmds that the conditions

of the permit will require a 50% reduction in the hourly emissions rate of NO. expressed in terms

of glbhp-hr. The statute also requires up to a 50% reduction in VOC emissions from facilities

58
located in East Texas, and up to a 20% reduction in NOx and VOC emissions from facilities

located in West Texas. All of these reductions are expressed in terms of g/bhp-hr. The staff of

the Air Permits Division (APD) will be reviewing the applications for these facilities to ensure that

any reductions claimed are a result of real and substantial changes at the facility. There will be

no claims of a 50% reduction in NOx emissions allowed where there has not been any physical or

operational change made to the facility in order to achieve those reductions.

EDef commented that the commission should use its general authority to protect public health and adopt ..

stronger rules that ensure predictable and significant reductions occur from the permitting of

grandfathered pipeline facilities. EDef commented that if the 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 in practice, 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. EDef commented that the commission should establish a cap on emissions from pipeline

facilities, modeled after the emission reduction program established in SB 7.

The commission has made no change in response to these comments. Section 382.05186(e) clearly

states that the commission shall issue a permit for a pipeline facility or facilities located in East

Texas if the conditions of the permit will require a 50% reduction in the hourly emissions rate of

NOx expressed in terms of glbhp-hr. However, if these reductions overall do not result in the

amount of NOx emissions predicted for SIP purposes, the commission, along with the local

stakeholders, may be required to identify additional reductions of NOx emissions in order for the

ozone nonattainment areas to achieve compliance with the NAAQS.

59
ATINGP/GPA stated that the use of the word "may" in the proposed §1l6.779(b)(1) for an up to 50%

reduction in VOC emissions does not provide due notice to owners/operators of grandfathered engines

of the level of reductions that may be required by the commission to obtain a permit. ATINGP/GPA

stated that some types of NOx controls will actually result in an increase in the emissions of VOC, thus

creating an implementation problem. ATINGP/GPA stated that the commission should not require any

VOC reductions without a demonstrated regional air quality or public health need. ATINGP/GPA

stated that natural gas-fired engines are not significant sources of VOC emissions, but diesel-fired

engines emit relatively significant quantities of VOCs. ATINGP/GPA stated that VOC emission

reductions, if warranted by regional air quality needs, should be imposed on diesel, rather than natural

gas engines. ATINGP/GPA requested that the commission modify the proposed rules to state that

grandfathered engines in East Texas are not required to reduce VOC emissions in order to obtain a

pipeline facilities permit. ATINGP/GPA suggested that if there is a demonstrated need for reductions

. in VOCemissions, the commission shouldconsider requiring reductions of up 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% reduction in VOC emissions is

consistent with the statutory language in TCAA, §382.0518(e). The commission acknowledges

that some NOx reduction techniques may result in increases in VOC emissions. The commission

also acknowledges that the VOC emissions from gas-fired engines are minimal and requiring

control of these VOC emissions at this time may result in minimal improvement in air quality.

However, the commission will review the emissions from each facility, including diesel-fueled

engines, on a case-by-case basis to determine if reductions in VOC emissions are appropriate.

60
ATINGP/GPA expressed support for the portion of the proposed rule requiring reductions for pipeline

engines on a g/bhp-hr basis. ATINGP/GPA stated that this conforms to legislative intent to protect a

pipeline's capacity and not impair the deliverability of natural gas throughout Texas.

The commission appreciates the support.

TeE and DAR/BSA are concerned about the commission determining and verifying the following for

all pipeline facilities permits: 1) the determination of the emissions rate; 2) verification of the actual

rates prior to and post reduction by 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 of tonnage reductions; and 5) commission verification of

applicants that choose to average emissions are not also including reductions made to comply with other

state or federal requirement.

The commission has made no changes in response to this comment. With the exception of the

guarantee of tonnage reductions, all of these items will be reviewed and verified by the permit

engineer actually assigned to the permit. The actual method of verification will depend on the

specific situation. For example, there may be cases where the permit engineer determines that

there is enough data available about the emissions associated with a particular engine type that no

additional testing or monitoring is necessary. In other cases, the permit engineer may request the

use of a portable analyzer to verify before modification emissions, after modification emissions, or

both.

61
With regard to the guarantee of tonnage reductions, the statutory language does not support the

position that the legislature intended a tpy reduction from these facilities. Therefore, these rules

will not require a reduction in annual emissions except in the cases where the owner or operator is

seeking partial reimbursement for the cost of controls from the Emissions Reductions Incentives

Account. In this case, the commission asserts that reductions in annual emissions are appropriate

for reasons outlined elsewhere in this analysis of testimony.

EDef requested that the commission defme a clear methodology to determine the baseline from which

pipeline facilities' emissions reductions are measured. EDef suggested either requiring certified

monitoring data for each facility or establishing default baseline rates for various engine types based on

either published emissions data or certified testing of a representative sampling of engines 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 of engines will require

different procedures, the verification process will be accomplished during the review of the permit

for the engine or engines. Where the commission determines that the same type of information is

needed to verify emissions for a particular type of engine, the commission may develop guidance

for that engine type if there are a sufficient number of engines 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

62
ATINGP/GPA commented that the statutory language does not mandate reductions of either VOC or

NOx from facilities located in West Texas, but instead allows the commission to find that zero reduction

is required. ATINGP/GPA stated that any expenditure of funds by industry in West Texas to achieve

emissions reductions is not justified and serves to consume personnel and capital resources that could

otherwise be directed toward making improvements in the East Texas and nonattainment regions of the

state. ATINGP/GPA stated that unless the commission ties a requirement to reduce emissions to a

specific finding of need to protect the public health, general welfare, or physical property, the

requirement to reduce emissions is not authorized by the Clean Air Act. ATINGP/GPA stated that the

legislature viewed the West Texas reductions as a very narrow provision, not to be applied in a blanketfashion across the breadth of West 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 of the

relatively minor emissions from grandfathered engines would improve public health or any regional air

quality condition. ATINGP/GPA stated that a 1% reduction level is 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 a permit in West Texas. Representative Chisum

commented that it was not the intent of the legislature to require at least a 1% reduction, and that in

some cases a 0.0% 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 it is appropriate to review, among other things, health effects and proximity to

nonattainment areas, such reviews will be done on a case-by-case basis. The commission agrees

that there may be some instances where reductions cannot be economically achieved based on

specific engine models or configurations or the age and remaining life of the engine. Decisions

63
regarding the level of control required, if any, will be based on technical and economic

evaluations of the control options available to specific facilities. However, the commission has

determined that it is appropriate to ask for reductions from engines located in West Texas when

there are measures that can be applied to the engine that will result in reductions of emissions at

little or no 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

that the commission grant a permit if the commission fmds that the conditions of the permit will

require up to a 20% reduction of the hourly emissions rate of NOx• The commission notes that

there are ongoing efforts relating to regional haze, which are not the subject of this rulemaking.

EDef stated that the commission should define how average emissions from multiple pipeline facilities

are calculated. EDef stated that the averaging process needs to ensure that there is not a reduction in

the actual amount of emissions reduction that would have been achieved through the permitting process

if the units had been permitted individually.

64
The commission has made no change in response to these comments. The commission is

developing guidance on the procedures to be used to calculate the required emission reductions

from pipeline facilities. This guidance will include the procedures to be used when the owner or

operator elects to average the required reductions over more than one engine. The guidance will

not be fmalized until interested stakeholders have had the opportunity to review and comment on

the draft guidance.

ATINGP/GPA indicated support for the rule proposals that allow the permitting of more than one

engine under a single pipeline facilities permit and the provisions allowing the owner/operator to

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 of different horsepowers; 2)

enable use of emissions reductions achieved as a result of shut down engines in the permitting of

operating engines; 3) enable use of emissions reductions achieved as a result of engines 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 of various emissions credits available under other agency emissions credit programs for the

purposes of emission averaging, such as discrete emission reduction credit (DERC), emission reduction

65
credit (ERC), and mobile emission reduction credit (MERe); 7) if emission averaging is utilized, a

supporting schedule should be incorporated into the pipeline facilities permit that documents the

creation and utilization of emission credits; and 8) an entity with excess emission credits should be

allowed to transfer or sell those credits to another entity.

The commission believes that there is sufficient flexibility built into the statute and rule by

allowing owners and operators to average the required emissions reductions across multiple sites

and that the additional flexibility provided by an emission trading program is not authorized by

statute and not needed. Owners or operators electing to average the required emission reductions

over more than one engine will be required to establish the emission rate for each engine and will

not be allowed to establish a cap and make changes to individual engine emission rates to stay

under the cap. The emission rate for each engine ,~ill be identified in the pipeline facilities

permit. Since the commission will not establish a cap and trade type system for pipeline facilities,

the owners or operators will not be allowed to transfer or sell IIcreditsII to another entity.

Existing rules regarding the use of ERCs or MERCs would have to be modified to allow the use of

ERCs and MERCs to comply with the required emission reductions needed in order to obtain a

pipeline facilities permit. However, since the rules for DERCs allow the use of these credits for

compliance with any SIP requirement, the commission ,~ill allow the use of DERCs to comply

with the required emission reductions.

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 a pipeline facilities permit.

66
TxOGA also requested that the commission clarify that emission reductions achieved through the VERP

program can be included in the average.

The commission has made no change in response to these comments. The commission agrees that

engine shutdowns (or other emission reductions not required by another state or federal rule) that

occurred on or after January 1, 1997 may be used when averaging reductions among more than

one reciprocating internal combustion engine connected to or part of a gathering or transmission

pipeline. The baseline year for purposes of SIP planning is 1997, and therefore it would be

inappropriate to allow the inclusion ofshutdowns occurring prior to January 1, 1997 in the

calculation of the average. Please note that if reductions are averaged over more than one engine,

and ifshutdown engines are included in the average, the g/bhp-hr emission rate for each shut

down engine, prior to the shutdown, must be included in the average to determine the amount

emissions must be reduced to meet the appropriate reduction requirement.

Engines for which an owner or operator has 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 longer considered grandfathered facilities and thus cannot be included in the average.

ATINGP/GPA stated that the language in proposed §116.779(b) does not specifically state tha.t engines

in nonattainment areas are subject to the provisions of the SIP for the area rather than the emission

reduction requirements of these proposed sections. ATINGP/GPA suggested that the commission

include language clarifying the applicability of the emission reductions requirements of these proposed

rules to engines located in nonattainment areas.

67
The commission has made no change in response to tbis comment. Pipeline facility engines

located in nonattainment areas are subject to both the requirements of the SIP for the area and

the requirements of these sections. These rules require all grandfathered facilities in the state to

obtain a permit or shut down. Grandfathered reciprocating internal combustion engines

associated with pipelines, including those located in nonattainment areas, can apply for a pipeline

facilities permit in order to comply with this requirement. In order to obtain a pipeline facilities

permit, the owner or operator of the facility must demonstrate that the engine will meet the

eIilissions reductions requirements contained in the proposed §116.779(b)(2). In addition, these

facilities must meet the appropriate emissions reductions required in the SIP. The owner or

operator should be aware that the reductions must satisfy both of these requirements when

choosing how to reduce the emissions. Section 116.779(b)(4) of the proposed rules allow the

owner or operator to take credit for any reductions, such as those required by the SIP, which are

achieved after January 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 commission may

require computerized air dispersion modeling if the 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 of the expense and time involved in performing the

monitoring in remote areas of the state where many of these facilities are located.

The commission has made no change in response to this comment. Although not often required,

there may be situations where ambient monitoring is appropriate and useful. The commission

reserves the ability to require ambient monitoring in those situations. In addition, a few

68
applicants have elected to perform ambient monitoring in order to establish the level of impacts

from their facility on the surrounding property or to provide for an ongoing compliance

demonstration.

ATINGP/GPA stated that the commission's cost analysis fails to take into account the engineering costs

and studies that must be performed to study and analyze the types of controls that will be successful in

achieving controls on a particular engine. ATINGP/GPA stated that no one-size-fits-all control

technology or parametric controls will work for every engine. ATINGP/GPA specifically cited the

commission's cost estimates for low emission combustion technology and non-selective catalytic

reduction as being too low. In both 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 control techniques (ACT) document for NOx controls on stationary reciprocating

engines. The authors of the EPA document attempted to reconcile lower cost estimates from

control equipment vendors with higher costs suggested by the regulated community. Although

hundreds of stationary gas-fired engines have been modified to reduce NOx emissions in the last

decades, complete cost documentation is often guarded by engine owners for competitiveness or

other reasons. The published cost estimates are only rough approximations, using standard

estimating factors for engineering costs. Qualitatively, a population of older engines is likely to

require more costly engineering analysis of control options compared to a newer one because

engine conditions become more varied over time. Nonetheless, once engineering studies are

completed, the more modest emission reduction goals of the grandfathered pipeline permit

69
program as compared to low emission retrofits presumed in the cost note should result in lower

costs in many instances than the cost note. From limited cost information in applications for use

determination rued with the commission in conjunction with property tax abatements for pollution

control systems, it appears that the capital costs for non-selective catalytic reduction agree fairly

well with the ACT. Two use determinations for low emission retrofits for compliance with the

Chapter 117 engine NOx rule in Beaumont Port/Arthur (75% • 85% NOx reduction) indicate

higher engine modification costs than identified in the ACT. These higher costs may result from a

combination of additional modifications necessary to make the control systems operate properly,

not identified in the ACT, and upgrades which provide both qualitative emission benefit and more

quantitative operational benefit. Sometimes it is difficult to separate these costs. The commission

will have the opportunity to consider costs 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 of purchased emission credits allows companies to ignore environmental justice and local

community impacts of emissions.

The commission has made no change in response to this comment. However, as noted elsewhere

in the response to comments, the commission is not going to allow the use of credits in achieving

the reductions required by these rules. The one exception to this, as also noted elsewhere, is the

use of DERCs. The commission does not anticipate the widespread use of DERCs to comply with

the emission reduction requirements of these rules. The commission also wishes to note that the

commission has addressed environmental justice issues relating to the cap and trade program in a

70
previous rulemaking regarding that program. Those rules provide for the executive director to

halt trading for a certain area if problems result from trading in a localized area of concern and

provide that increases in emissions by use of credits are allowed on a temporary basis, not

perpetually, and are limited to 25 tons for NOx and five tons for VOC in any 12-month period.

All other uses would allow sources only to remain at the current emission rates or lower.

Additionally, the commission has made a strong policy commitment to address environmental

equity by creating an environmental equity program within the Office of Public Assistance. This

program works to help citizens and neighborhood groups participate in the regulatory process; to

ensure that agency programs that substantially affect human health or the environment operate

without discrimination; and to make sure that citizens' concerns are considered thoroughly and

are handled in a way that is fair to all. The Office of Public Assistance can be reached at

1-800-687-4040 for further information.

EPA stated that the provisions of the rule pertaining to the partial reimbursement of the cost of controls

for pipeline facilities does not need to be submitted as a part of the SIP.

The commission agrees with the commenter, and has removed the sections of the rule regarding

reimbursement from the SIP submittal, since the reimbursement portion of the rules will be

effective for a limited duration, and are not directly tied to attainment or maintenance of air

quality.

TCE and EDef expressed general support for the proposed requirement for a 50% reduction in annual

emissions in order for pipeline facilities located in East Texas to be eligible for partial reimbursement

of the cost of controls. EDef also stated they supported the proposed criteria for the distribution of

71
funds 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 of this section.

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

NOx emissions by another state or federal requirement are not allowed to request reimbursement

from the Emissions Reductions Incentives Account. This restriction was included in §116.776(a),

and has been clarified in §116.776(c)(1) by removing "...located in... a nonattainment area for

ozone" from the criteria to 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 of this 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 other state or federal. law to make reductions

in emissions of NOx are not eligible for reimbursement." MACT standards are intended to

regulate emissions of hazardous air pollutants, and not NOx' Therefore, the commission agrees

that an engine subject to a MACT standard is still eligible for reimbursement as long as it is not

subject to any state or federal law which specifically requires a reduction in NOx emissions.

72
ATINGP/GPA expressed general support for the provisions of proposed §116.775 regarding the

distribution of funds from the Emissions Reductions Incentives Account. ATINGP/GPA and TXU

commented that the criteria requiring a reduction of 50%in the annual emissions of NOx in order to

qualify for a reimbursement of a portion of the cost of controls for pipeline facilities in East Texas

should be deleted, since HB 2912 and HB 2914 require only a 50% reduction in hourly emissions of

NOx•

The commission has made no change in response to these comments. The commission disagrees

with the comment that the requirement to achieve actual reductions in NOx emissions from the

1997 emissions inventory detracts from requirement to obtain a 50% reduction in g/bhp-hr in

order to obtain a pipeline facilities permit. Indeed, the commission believes that the requirement

to make reductions in annual NOx emissions from the 1997 emissions inventory actually helps to

achieve the purpose behind the reimbursement program, which was to encourage real, anIiual

reductions in NOx emissions from sources outside the nonattainment areas in East Texas. HB

2912 does require a 50% reduction in hourly emissions of NOx in order to obtain a pipeline

facilities permit in East Texas. HB 2914 states that facilities required to obtain a 50% reduction

in NOx emissions in East Texas are eligible for a partial reimbursement of the cost of controls

from the Emissions Reductions Incentives Account. Further, HB 2914 directs the commission to

develop the criteria for reimbursement and leaves the criteria to the commission's discretion. The

Emissions Reductions Incentives Account was created to provide for a partial reimbursement of

the cost of controls for pipeline engines outside the nonattainment areas in East Texas because the

owners and operators of these engines are being asked to make reductions in NOx emissions in

order to help nonattainment areas reach attainment. The commission believes that setting one of

the criteria for reimbursement as a reduction in annual emissions of NOx is appropriate since

73
these emission reductions will be needed in order to reach the goal of attainment for ozone in the

East Texas nonattainment areas.

ATINGP/GPA commented that proposed §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 of the application.

ATINGP/GPA suggested that the rule be revised to require an application for a pipeline facilities

pennit to be filed and undergoing review before the owner/operator may request a distribution from the

fund.

The commission agrees with this comment and has changed §116.776(a)(6) to require

identification of those facilities requesting a reimbursement from the Emissions Reductions

Incentives Account at

.

the time.the

.

perinit application is iIled. The commission

'.

is requesting this

information in order to obtain a list of the facilities potentially eligible for reimbursement as early

as possible. However, no money can be paid to a facility until the permit is issued and the

required reductions have been accomplished at the facility. The actual process for

reimbursement is still under development at this time and will be provided in a guidance

document at a later date.

ATINGP/GPA requested that the commission delete the requirement in proposed §116.779(b)(l) to

obtain "at least" a 50% reduction of the hourly emissions rate of NO., 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 commission may require reductions beyond 50% from

facilities in East Texas in order to get a pipeline facilities permit.

74
The commission has made no change in response to this comment. The "at least" language was

included in this rule to make it clear that a 50% reduction in the emissions of NOx' expressed in

terms of glbhp-hr, is the minimum amount of J;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 order to 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 itself does not

specify any emissions rate reductions. HB 2914 does require that a facility be a grandfathered

reciprocating internal combustion engine associated with a pipeline that is subject to the

requirement to reduce emissions by 50%. HB 2914 also specifies that the engine be reducing its

hourly emissions of NOx 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 of funds 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 of each of the criteria to determine the priority and

75
amount of distribution from the Emissions Reductions Incentives Account is still under

development at this time and will be addressed in guidance which will be provided at a later date.

The commission will invite stakeholder input prior to finalizing the guidance.

ATINGP/GPA requested clarification of the proposed §1l6.779(a)(5), regarding demonstration of

compliance with any applicable MACT standard. ATINGP/GPA requested clarification that the

commission did not expect the owner/operator of an engine subject to a MACT standard to have any

required MACT controls installed by the date they must submit a permit application when the MACT

standard provides for a later date by which controls must be installed.

The commission has made no change in response to this comment, but does confirm that an

existing source will not have to be in compliance with any applicable MACT standard until the

compliance date 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 of Houston stated that the commission should take extra care to ensure that

the emission reduction standards of HB 2912 are consistently met for any facility-wide, flexible

permits.

Any permit issued by the commission, including any flexible permit or existing facility flexible

permit, will specify the emissions limits and control requirements necessary to obtain the permit.

76
The permit will also contain conditions necessary to ensure ongoing compliance with those

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 commission has made no rule change in response to this comment. The proposed §116.770

states the general requirement for the owners or operators of all grandfathered facilities to obtain

a permit for those facilities. Additional language was added to the Section by Section Discussion

portion of this preamble for Division 1 which explains the relationship between the general

requirements in Division 1 and the specific permit requirements contained in Divisions 2 and 3

and Sub~hapterI. The "Existing Facility Permit" is one type of permit that the owners or

operators of certain grandfathered facilities may use to satisfy the requirements of §116.770 to

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 commission has existing guidance which is updated annually and identifies ten-year-old

BACT for many common types of sources. The document is entitled, "Guidance for Air QualityQualified Changes Under Senate Bill 1126." Appendix A of this document contains the

information on ten-year-old BACT. Appendix A can be found on the APD web site at:

www.tnrcc.state.tx.us/permitting/airperm/nsryermits/bact.htm

77
You may also contact the APD for a copy of this guidance. Although the guidance document

itself was developed for different purposes, the information on ten-year-old BACT can be used as

a starting place for identifying ten-year-old BACT for existing facility permits. However, this is a

guidance document, and is not a rmal determination of acceptability by the commission. APD or

the individual permit engineer should be contacted to ensure that the information is still current

and the control technology still meets the ten-year-old BACT requirement.

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 of NSR 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 change in 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

permit that does not result in an increase in emissions over the cap is insignificant. As part of the

permit review for an existing facility flexible permit, the commission conducts a review of the

emissions as established in the cap. Therefore, any increase in emissions which does not exceed

this cap has already been reviewed by the commission and the company is not "avoiding" NSR

78
permitting. In addition, the public has access to all of this information during the permit review

process. Finally, the company is not allowed to install new facilities or emit a new air

contaminant under the cap - either of these activities will require a new review under the NSR

permitting procedures.

EPA requested clarification of how an "Existing Facility Flexible Permit" is distinguished from a

"Flexible Permit" under Subchapter G of the rule.

The commission has made no change in response to this comment. Flexible permits under

Subchapter G may be used by any facility, including grandfathered facilities, provided the facility

meets the requirements of Subchapter 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

subject to the same renewal and amendment requirements as flexible permits, including BACT

for amendments and an opportunity for a contested case hearing for both amendments and

renewals.

EPA commented that the air pollution 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 change in response to this comment. The commission agrees with

this comment and notes that the control methods necessary for any air permitting process must be

79
identified in the application, agreed to prior to permit issuance, and appropriately incorporated

into the issued permit.

EPA requested clarification of how the commission will implement the provision, "are considered

permitted for all air contaminants" for gas-fired EGFs that were required to obtain a permit under SB 7

or were exempt from the requirement to obtain a permit under SB 7.

SB 7 required the commission to establish allowances for NOx emissions from gas-fired EGFs.

However, the permits required by SB 7 are issued under the Texas Utilities Code. HB 2912

clearly states that any gas-fired EGF which satisfies the permitting requirements of SB 7 or which

is exempt from the permitting requirements of SB 7 is considered permitted for all air

contaminants under THSC, Chapter 382. Thus, these EGFs are no longer considered

. . -. -

grandfathered facilities underTHSC, Chapter 382. The COmInission will issue a f1permitfl to these

facilities. The permit will identify the facilities which have been permitted and will contain the

general and special conditions in §1l6.913. Permits issued under §1l6.917 will receive the

additional general and special conditions in §116.918.

EPA commented that the commission should clarify and explain the phrases "emissions of all 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 of HB 2912,

the Texas Legislature specifically stated in TCAA, §382.05185, that an electric generating facility

is considered permitted with respect to all air contaminants if the facility met certain conditions.

80
Section 116.913 implements this plain requirement for electric generating facility permits. "Air

contaminant" is dermed in TCAA, §382.003.

TXU identified what they assumed was a typographical error in the proposed §116.917(a). TXU stated

that they believed the reference to an application for grandfathered facilities identified in §116.611(f)(1)

or (2) should instead reference §116.911(f)(1) and (2). TXU stated that if the reference as they believe

it was intended is correct then the owner or operator of an EGF seeking an EGF permit must

demonstrate that the facility will meet protection of public health and welfare requirements. TXU

states that the only requirement for coal-fired EGFs is to look at criteria pollutants, and the only

requirement for non-EGF combustion units 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 criteria pollutants."

The commission agrees with the comment regarding the typographical error and has changed the

rule to reflect the correct citation of §116.911(f)(1) or (2).

The statutory language of TCAA, §382.05185 clearly requires the commission to issue permits for

coal-fired EGFs for the criteria pollutants other than NOx' S02 or opacity if the emissions from

the facility will not contravene the intent of the TCAA, including the protection of the public's

health and physical property. The commission has determined that the appropriate way to

implement this requirement is to require that EGF permits be subject to permitting application

and issuance requirements similar to the requirements for NSR permits. This will ensure

consistent permit reviews with appropriate emphasis on the relevant statutory obligations for

EGFs, in the context of the appropriate permit review.

81
The commission agrees that §382.05185(e) clearly requires emissions from non-EGF combustion

units to be included in the emission allowance trading program, and the commission may not issue

new allowances. However, the commission also observes that the allowance program only

provides for emissions on NOx, while the legislature clearly contemplated that these EGF permits

would address all air contaminants, and that emissions from these facilities would not contravene

the intent of the TCAA, including the protection of the public's health and physical property.

The commission has not changed the language of §1l6.917(a)(ll), since limiting the required

information submitted in applications to "relevant criteria pollutants" would not ensure that

adequate information would be provided to meet the requirements of the complete permit review,

which includes the requirement to ensure that emissions from the facility will not contravene the

intent of the TCAA, including the protection of the 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 of such 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 section begins with the conditional phrase,

"If the installation of additional controls is required.... " Although the commission does not

anticipate any control requirement for EGFs beyond any controls necessary to comply with SB 7,

TCAA, §382.05181 specifies that the requirement to 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), not just any non-EGF facility.

82
CPS stated that they hope the commission will continue to consider EGF permits unique from other

permits in providing the flexibility of control and allocation of allowances based on annual limits

provided for Chapter 101, Subchapter H, Division 2.

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

continue to allow EGFs the flexibility to meet the allowance requirements for air contaminants

covered by SB 7. However, the commission will issue permits with maximum allowable emission

rate tables (MAERT) for grandfathered auxiliary generators and other grandfathered combustion

equipment located 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

equipment must be included in the amount of allowances needed for the site in any given year.

As stated in HB 2912, no new allowances will be issued to the site for the operation of this

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 of the flexible

allowance based system of SB 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 with the comment that the proposed methodology for permitting existing

combustion equipment at an EGF is similar to the methodology for permitting new and modified

units. However, the allowance based system provided by SB 7 is retained in §382.05185(e) and

the proposed methodology provides the flexibility of SB 7 permits for emissions of NOx in that the

only limit on NOx emissions contained in the permit for the additional combustion units will be the

83
NOx allowances for the site resulting from SB 7. The other air contaminants emitted from these

facilities will have limits included in a MAERT just like any other NSR permit. The commission

believes this approach is appropriate and is consistent with the statute. These facilities are

required to apply for a permit and specified that any modifications to the permit or renewal of

the permit be reviewed under the existing requirements contained in the act. Because these EGF

permits will follow the existing procedures for modification and renewal, it is appropriate that

they use similar methodology and look as similar as possible to permits for new and modified

sources. This harmonizes the requirements of HB 2912 and the pre-existing TCAA permitting

requirements.

RSC and GRASP commented that they oppose allowing a company to operate for 10% of its operating

hours without applying for a permit. 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 of 20 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% of its normal operating hours and avoid the

requirement to obtain a permit. The proposed rules require all grandfathered facilities in Texas

to obtain a permit or shut down. If an auxiliary generator operating at a facility which is

required to obtain a permit under SB 7 operates less than 10% of the normal operating hours (as

defmed in §1l6.10), the owner or operator of the facility may apply for an EGF permit rather

than some other type of permit. Although these auxiliary generators could operate during the

84
.'

ozone season, there will not be any additional annual emissions of NOx from these facilities since

they do not get any additional allowances under SB 7.

The statute is clear that facilities operating less than 10% of the normal operating hours of the

EGFs at the site may apply for an EGF permit. Therefore, the commission does not believe it is

appropriate to place any additional limitations on the operating time of these facilities in order to

obtain an EGF permit.

TCE is concerned that if impacts are found, the commission might not request changes to the permit -if

an auxiliary generator is operated less than 10% of the 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 commission may not issue a permit to that facility no matter

what percent of the time it operates.

TXU commented that the definition of "normal operating schedule" should be based on the normal

operating schedule of the grid (8,760 hours per year) rather than the normal operating schedule of the

EGFs at a particular site.

The commission does not agree that the "normal operating schedule" should be the operating

schedule of the electric grid. The statutory language in TCAA, §382.05185(d) refers to facilities,

not the 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 of the schedule

applicable to a specific site. However, the commission does agree that the statute may be

85
interpreted to provide some additional flexibility, and the commission has changed the language

in this defInition to establish the normal operating schedule as the maximum number of operating

hours for an EGF in any 12 consecutive month period between 1997 and 1999. For sites with

more than one EGF, the owner or operator may use the EGF with the highest number of

operating hours.

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 of the

average, but years 2000 and 2001 were not.

The commission used the heat input for 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 under those same allowables, the co~sion considers it

appropriate to use a similar basis to define "normal operating schedule." However, in order to

provide some additional flexibility, the commission decided to use the maximum number of

operating hours for an EGF in any 12 consecutive month period between 1997 and 1999. For

sites with more than one EGF, the owner or operator may use the EGF ,vith the highest number

of operating hours. The commission has changed the language in this defInition for the reasons

mentioned in 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 of fuel oil should be allowable. HSC stated that they

support requiring EGF facilities to undergo NSR permitting if they decide to burn fuel oil rather than

natural gas. The House Committee on Environmental Regulation stated that the goals of the legislation

86
were to provide for the widest range of fuel oil use possible to give grandfathered EGFs a meaningful

choice of fuel and to ensure that emissions controls would not interfere with the SIPs, specifically with

regard to NOx • AECT stated that the intent of the legislature regarding acceptable fuel oil grades was

that the commission would designate as being acceptable as broad a range of grades of fuel oil as

possible, as long as air quality standards would be met. AECT stated that designation of a broad range

of acceptable grades of fuel 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 of fuel 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 of acceptable fuel oil grades to "standards," and since the commission's effects

screening levels are not standards, the evaluation of fuel 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 proposed in §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 of fuel oil that meets the specifications

in §1l2.9, as long as the owner or operator of the grandfathered EGF can ensure that the burning of

the desired grade of fuel oil in the EGF will not cause a violation of the S02 property line standard.

AECT also requested that the rule language in proposed §116. 18(1l)(B) be changed to refer to a

"determination" by the executive director rather than a "demonstration" by the owner or operator of the

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 - For purposes of Subchapter I

of this chapter, an EGF that was designed to burn either natural gas or fuel oil, and that when burning

fuel oil only burns fuel oil of a grade determined by the commission to be acceptable. Burning of a

fuel oil designated by this definition as acceptable does not relieve the owner or operator of the EGF

87
from the responsibility to comply with the emission limitations, allowances, or conditions of any 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 of fuel oil, the burning of which will comply with the applicable limitsin §112.9. B) Any other

grade of fuel oil which the executive director determines is protective of the S02 property line standard

in §112.3."

TXU stated that it had a great deal of concern over the process being used by the commission to

establish acceptable fuel oil grades. TXU and CPS stated that the maximum fuel oil sulfur content that

should be 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 of acceptable 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 consider allQwing

utilities to burn fuel oil at levels ofsulfur at or below 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 of the 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 of the 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

a modification under §116.10(9). AECT stated that based on the regulatory definitions of "EGF" and

"facility" the EGF does not include every piece of equipment at a grandfathered EGF site that is

involved with the burning of fuel oil. AECT stated that any maintenance or repairs to any equipment

that comprises the EGF, or any like-kind replacement of any such equipment, that is necessary to allow

88
the EGF to burn fuel oil, should not prevent the EGF from being considered to be "designed to burn"

fuel oil. The House Committee on Environmental Regulation stated that "designed to burn" in TCAA,

§382.05185(i) means a facility was designed to burn any fuel oil grade - even if the grade will no

longer be considered acceptable for burning following the adoption of these rules. Similarly, AECT

stated that if an EGF is "designed to burn" a grade of fuel oil, the fact that such fuel oil grade may not

be considered acceptable under the final rules should not prevent the EGF from meeting the "designed

to burn" condition. The House Committee commented that the statute only limits the grade of fuel oil

prospectively, but does not mean the grade historically burned should prohibit burning a lighter grade

in the future. AECT stated that proposed §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 of burning of the desired grade of fuel oil on

. . .

the ability of the site to meenhe S02 property line standard. EPA stated that with regard to

§116.18(1l)(B), there should be a "replicable" procedure for how the executive director will determine

if "any other grade of fuel oil" is protective of public health and physical property." AECT specifically

requested that the procedure involve submittal of a written request to the commission staff that 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 staff resources, or request

that the applicant conduct the modeling or monitoring anaysis and submit it to the staff for review.

AECT requested that this case-by-case determination process be discussed in the preamble to the final

rule. AECT also requested that §1l6.18(1l)(B) provide for an opportunity to request reconsideration

of any determination of acceptable 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 of the EGF

89
disagrees with the executive director's determination, the owner or operator may request a

reconsideration of that determination under the procedures of Chapter 55."

TXU stated that facilities should be allowed to combust the fuel they have on-site and any limitations

should be placed on the receipt of any new fuel oil. TXU stated that limiting the ability of utilities to

fire residual oils will limit the market for these fuels in Texas and could result in the fuels being

combusted by sources that would have a higher impact on the public because of the location and height

of the emissions. TXU also stated that prohibiting the burning of Number 5 fuel oil could impact

winter reliability if natural gas is curtailed before a conversion to Number 2 oil can be accomplished.

TXU stated that it would 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 of the cost being to change out the fuel.

. .' . .

The proposed rule established ASTM Grade Number 2 fuel oil containing not more than 0.3%

sulfur by weight as acceptable. The commission stated in the preamble to the proposed rule that

staff was continuing to analyze other fuel oil grades and refme the modeling analysis. As a result

of this additional analysis of the effects of burning fuel oil in grandfathered EGFs and in order to

address all of the comments on the burning of fuel oil, the commission changed the proposed

defmition of "Natural gas-fired EGF" in §1l6.1S(1l) to simply state that for purposes of

Subchapter I, a natural gas-fired EGF is, "an EGF that 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 of fuel oil at grandfathered EGFs have been added as general conditions

§1l6.913(a)(S) and (9).

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The commission has determined that any ASTM grade of fuel oil with a sulfur content of 0.7% by

weight or less is acceptable, except in areas where sulfur content is 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 not be any exceedances of the NAAQS or state standards in

Chapter 112. Metals have been identified as the primary hazardous air pollutant associated with

the burning of fuel oil. Adverse impacts from metals are caused by 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 short periods of time 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 of time. Thus, the.

commission does not expect any adverse health effects associated with the burning of fuel oil.

However, the commission has added a general condition to §116.913 requiring the EGF to keep

. . . .

records of fuel oil burning and subinit those 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 of time would likely be subject to this MACT standard. The commission has also

added language in §116.913(a)(8) that clarifies that the burning of waste or used oils is not

authorized under Subchapter I.

EPA recommended adding "as determined by ASTM method D396" to the end of the 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 made the suggested addition to the condition contained in §116.913(a)(8).

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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 power plants, including five-minute exposure to sulfur compounds. TCE

stated that they were concerned about places where people congregate in close proximity to power

plants and the effects of power plants on waterways that are far from the facility. DAR/BSA also

expressed concern regarding lead emissions, and commented that this rulemaking would be a good

opportunity to obtain lower emissions of mercury 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 of concern for coal-fired power

plants. However, there are significant technical 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 with these units will be addressed ill the 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 important issues with respect to mercury, the

commission considers it prudent to review the outcomes of the Clear Skies Initiative and the utility

MACT before making further decisions about regulation of mercury 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 will have to address

any lead emissions in the EGF permit application.

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The commission agrees that numerous studies have shown that five-minute exposure to bursts of

S02 can cause individuals with asthma to experience respiratory effects due to bronchial

constriction. In fact, the EPA has a proposed intervention level for S02 of 600 parts per billion

(ppb) (five-minute averaging period), above which asthmatics may experience shortness of breath,

chest tightness, wheezing, and disruption of normal activities. While the NAAQS is not protective

of these five-minute bursts, the Chapter 112 standard for S02' 30-minute average net ground level

concentration of 400 ppb, helps to minimize the potential occurrence of five-minute

concentrations greater than 600 ppb. Therefore, the commission notes that the required

demonstration of compliance with the 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 of the 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 of the TCAA; §382.051, which authorizes the commission

to issue a permit for numerous similar sources; §382.0518, which authorizes the commission to issue

permits for construction of new facilities or modifications of existing facilities; §382.05181, which

requires grandfathered facilities to apply for a permit and comply with its conditions by certain dates,

and requires certain actions of the commission; and TWC, §5.103, which authorizes the commission to

adopt rules.

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