Title V and NSR Offsets:Observations from the Experts

William Wong, South Coast Air Quality Management District

Joseph Hower, P.E., DEE, ENVIRON International Corporation

Jocelyn Niebur Thompson, Weston Benshoof, Rochefort, Rubalcava MacCuish LLP

What is Title V?Title V - The Big Picture

What is Title V?Title V - The Big Picture

EPA

Administering Agency

Title VPermit

Facility

Title IUrban Smog

Title IIMobile Sources

Title IIIAir Toxics

Title IVAcid Rain

Title VIOzone Layer

1990 CAAA

Title VIIEnforcement

What is Title V?Permit to OperateWhat is Title V?Permit to Operate

Permit D1

State AirRules

Permit D3

Permit D2

FederalProgram

Facility PTO

Scenario 1

Scenario 2

Conditions

Old Permits

Title V Permit

Title V ApplicabilityTitle V Major Source Thresholds - PTE

Pollutant Classification Threshold (tpy)

OzoneOzone MarginalMarginal 100 (NO100 (NOxx or VOC) or VOC)

ModerateModerate 100 (NO100 (NOxx or VOC) or VOC)

SeriousSerious 50 (NO50 (NOxx or VOC) or VOC)

SevereSevere 25 (NO25 (NOxx or VOC) or VOC)

ExtremeExtreme 10 (NO10 (NOxx or VOC) or VOC)

HAPsHAPs 10 individual / 25 total10 individual / 25 total

Synthetic Minor permits

Title V Imposes Many Hardships

Longer Permit Modification Schedules- Project delays particularly for combined programs

Additional Monitoring, Recordkeeping, and Reporting- Deviation Reporting

Compliance Certifications

More Scrutiny

Public and EPA Notice Requirements

The only good thing about Title V is that it allows emissions over the thresholds

Becoming a Non-Major Source

True Minor

Categorical Exemptions- Asbestos Demo And Removal- Residential Wood Heaters

Physical Demolition

SIC Code Groupings

Prohibitory Rules

Non-federally Enforceable Control Equipment (Temporary)

Actuals <50% Of PTE Thresholds- Compliance With SCAQMD Rule 3008

Synthetic Minor Permits

Title V is triggered based on Potential emissions, not actuals

Many facilities operate far below their potential

A way out of Title V for many facilities

Must Accept a Cap On Emissions

Annual limits vs. monthly

Specific language is important

Monitoring and Reporting Requirements

Can Trigger NSR if the cap is later exceeded

FE vs. non-FE provisions in permits

DOES YOUR TITLE V PERMIT CONTAIN SOME LOCAL SEASONING?

Health & Safety Code Section 42301.12 (a) requires that any Title V permit issued by a district:

“Identify in the permit, to the greatest extent feasible, permit terms and conditions which are federally enforceable and those which are not federally enforceable.” 42301.12(a)(3)

Federally enforceable conditions are those “imposed pursuant to a federal requirement or because the source has requested [that they be federally enforceable].” 42301.12(a)(3)(A)

“[B]ase the reopening [of the Title V permit] upon the federal criteria for reopening and limit the reopening to only the federal component of the Title V permit.”

FE vs. non-FE provisions in permits

In Re Riverside Cement Co.

Background

• Riverside Cement Co. appealed the Executive Officer’s deletion from its Title V permit of an erroneous permit condition imposed pursuant to then expired Rule 2009.1, which had not been submitted to EPA and was therefore not federally enforceable.

• The Hearing Board, sua sponte, questioned whether the Executive Officer was required to first give notice to EPA pursuant to the District’s Rule 3003(j), which requires notice for any Title V permit revision that is not administrative.

• In a split 3-2 decision, the Hearing Board decided on other grounds that the Executive Officer’s action was improper.

FE vs. non-FE provisions in permits - Bill

DISTRICT POSITION

EPA should have no interest in non-federally enforceable conditions placed in Title V permits.

EPA POSITION (?)

Because the District’s Rule 203, which prohibits operation contrary to permit conditions, is SIP-approved, all District permit conditions are federally-enforceable.

Permit Shield

Clean Air Act §504; 40 CFR §(f)

Offers limited protection from enforcement for requirements not included in permit conditions

Optional program:- Air district not required to include in Title V program

- If included in program, permit applicant may choose whether to apply

Practice varies among districts

Permit must explicitly exclude the requirement

Circumstances when permit shield would be beneficial

Compliance Certifications – Types

Deviation Reports

Semiannual Monitoring Reports

Annual Compliance Certifications

Compliance Certifications – Deviation Reports

Prompt reporting of deviations from permit requirements (40 CFR § 70.6 (a)(3)(iii)(B))

“Prompt” is defined by the local jurisdiction

Reporting deadline may be affected by:- Emergencies- Breakdowns- Excess emissions- Other

Compliance Certifications – Semiannual Monitoring Reports

Reports of any required monitoring must be submitted at least every 6 months

All deviations must be clearly identified

Reports must be certified by responsible official

40 CFR §70.6(a)(3)(iii)(A)

Compliance Certifications -Annual Compliance Certification

Compliance certifications must be submitted at least annually

Include detailed inventory of permit terms and conditions

Identify methods used to determine compliance

As to each requirement, specify whether compliance was continuous or intermittent

Identify each deviation from permit terms

40 CFR §70.6(c)(5)

Compliance Certifications – What is “Reasonable Inquiry”?

Mandatory compliance certification language:“Based on information and belief formed after reasonable inquiry, the statements and information in the [application, report or compliance certification] are true, accurate and complete.” 40 CFR §70.5(d)

No definition of “reasonable inquiry”

Agency tendency to apply hindsight, e.g., if a violation is later found, the inquiry must not have been reasonable

Implementation tips

Compliance Certifications - Other

NSR Permitting – Federal CAA Requirement- Applicability: NSR permitting for a major emitting facility

- Scope: Major stationary sources within the state- Status: In compliance or on a schedule of compliance with applicable emissions limits under the CAA

- CAA § 173(a)(3); included in local SIP-approved NSR rules

NSR Permitting – Additional Local Requirements- Applicability: NSR permitting for any sources- Scope: All sources at the facility submitting the application

- Status: Compliance with all district rules- E.g., SCAQMD Rule 1303 (b)(4)- Is a variance or abatement order sufficient compliance?

Offsets and New Source Review

AIR POLLUTION CREDITS – AN ENDANGERED SPECIES??

Background

The Federal Offset System: “A key method for controlling air pollution without impeding new economic activity is through "offsetting." Under this strategy, the relevant air pollution control authority, whether it be the EPA or a state or local agency, will permit the creation of a new source of emissions only if the new polluter is able to secure an offsetting reduction  in emissions from preexisting polluters at least equal to the amount of pollution the new source could potentially generate.” Santa Barbara County APCD v. U.S. EPA, 31 F.3d 1179, 1181 (DC Cir. 1994)

New Source Review

CAA Section 173 provides that the District must show that “by the time the source is to commence operation, sufficient offsetting emission reductions have been obtained, such that total allowable emissions from existing sources in the region, from new or modified sources which are not major emitting facilities, and from the proposed source will be sufficiently less than total emissions from existing sources . . . prior to the application for such permit to construct or modify so as to represent (when considered together with the [required] plan provisions . . .) reasonable further progress . . ..”

CAA Section 171(3) defines “reasonable further progress” as such “annual incremental reductions in emissions of the relevant air pollutant as are required . . . for the purpose of ensuring attainment of the applicable [NAAQS] by the applicable date.”

New Source Review

The District has demonstrated to EPA that its more stringent NSR program, while deviating from certain specific EPA requirements, nevertheless overall achieves “reasonable further progress” and is equivalent to the federal program.

District offsets minor sources as well as non-major modifications to major sources

Minor sources are subject to state BACT or LAER taking into account cost considerations

ERC’s are adjusted for BACT.

District offset ratio 1.2 : 1 for all pollutants; EPA requires 1: 1 offset for all non-extreme pollutants, currently VOC’s and NOx as ozone precursors.

EPA has rescinded 1 hour ozone standard in lieu of 8-hour standard and reclassified the District from extreme to serious-17. The District as well as other states have sued EPA in the case, SCAQMD v. EPA (D.C. Cir) No. 04-1200. A decision is expected within the next few months.

New Source Review

The State Offset System

“Each district with moderate air pollution or worse shall include in its attainment plan “[a] stationary source control program designed to achieve no net increase in emissions of nonattainment pollutants or their precursors from new or modified stationary sources which emit or have the potential to emit [at specified thresholds ]” (Health & Safety Codes Sections 40918 et seq.)

CARB has also allowed the District to establish equivalency to the state offset requirement programmatically.

Federal requirements for offsets are more stringent than state requirements, and thus District treats federal offsets as meeting state requirements.

New Source Review Creation of external offsets (ERC’s)

District Rule 1309(b)(4) requires ERC’s to be based on emission reductions that are real, quantifiable, permanent, federally enforceable, and not greater than current BACT (surrogate for being surplus at time of use)

Industry has complained that the BACT discount removes any incentive to reduce emissions to create credits.

Alternative means of credit generation:- District Regulation XVI (SIP-approved)*:

Provides for the creation of mobile source offsets (MSERC’s)- All effectively expired (except Rule 1632 for ship hotelling operations, which expires in 2010).

Rule 2507: (SIP-approved)- Provides for the creation of area source credits (ASC’s) through the electrification of agricultural pumps

- To be used only as RECLAIM Trading Credits or RTC’s. - Effectively expired until EPA, ARB, and the District decide whether these “credits” are still surplus.

*See USA v. Vista Paint Corp., No. 92-55160, 1992 US App. LEXIS 24747 (9th Cir. (Sept. 24, 1992)

New Source Review

MAXIMIZING CURRENT USE OF CREDITS

Amended Rule 1309 (2002) (Not SIP-approved) Provides for the creation of short term credits or STC’s ( in effect yearly ERC’s through 2010 and permanent thereafter.)

STC’s include SIP-approved MSERC’s and ASC’s

Amended Rule 1309(h) (1995) (SIP-approved) Allows for the creation of interpollutant offsets on a case by case basis.

Amended Rule 1309(i) 1995) (SIP-approved) Allows for the creation of inter-basin or inter-district offsets

Rule 1303(b) (SIP-approved) Allows netting out of the offset requirement when the proposed source yields no net emission increase at a facility.

QUERY: ARE EMISSION REDUCTIONS DISCOUNTED?Rule 1304(c)(2) (SIP-approved)

Allows for an offset exemption for concurrent facility modifications

Emission reductions are discounted but not BACT-discounted

New Source Review

Rule 1303(b) (SIP-approved) Allows netting out of the offset requirement when the proposed source yields no net emission increase at a facility.

Query: are emission reductions discounted?

Rule 1304(c)(2) (SIP-approved) Allows for an offset exemption for concurrent facility modifications

Emission reductions are discounted but not BACT-discounted

Getting Credits from the District Bank: Rule 1309.1: (2002 amendments SIP-approved)

-Provides designated sources with access to District’s internal bank of offsets

New Source Review

SB288 – Protect California Air Act of 2003 (Health & Safety Code section 42500 et seq.)

Enacted to counter EPA’s NSR Reform Freezes each agency’s NSR rules as of Dec. 30, 2002 Allows agencies to make NSR more stringent Allows agencies to relax NSR only if it meets specified requirements (e.g. substantial hardship) and is approved by CARB

Query: Does SB288 apply to offset requirements?

CAPCOA: No; CARB: Yes NRDC has petitioned CARB to find District’s Rule 1315 -Federal NSR Tracking System and 2006 amendments to Rule 1309.1 (extending thermal power plant access to Priority Reserve Credits) to violate SB 288

Neither rule affects the amount of offsets required for NSR purposes

Early review by CARB of proposed rules disclosed no SB 288 concerns

Questions or Comments Joseph Hower, P.E., DEE

Managing Principal ENVIRON International Corporation(213) 943-6319, jhower@environcorp.com

Jocelyn Niebur ThompsonPartnerMcClintock, Weston, Benshoof, Rochefort, Rubalcava & MacCuish, LLP

(213) 576-1104, jocelyn@wbcounsel.com

William WongSenior Deputy Counsel South Coast Air Quality Management District(909) 396-2000, wwong@aqmd.gov