As published in the HillCo Client News Flash, on March 31st, the Environmental Protection Agency (EPA) disapproved the Qualified Facilities exemption rule that the Texas Commission on Environmental Quality (TCEQ) had submitted for inclusion in its federally approved State Implementation Plan. Al Armendariz, EPA Regional Administrator for Region 6 stated as a result of the EPA action, transparency will be improved, “by requiring companies that modify their operations to notify the public and will assure that all air emitting sources are properly permitted under the Clean Air Act.”


A 23 page summary of the decision can be found by visiting: 


On April 2nd EPA called a meeting with industry representatives in Austin to discuss EPA’s disapproval of the Qualified Facilities Program, EPA future actions with regard to Flexible Permits, NSR Reform and BACT.  Immediately following the summary below are copies of the 3 documents that EPA handed out at the meeting.


The EPA message was that it desires to create a program where the regulated community holds only SIP-approved, federally-enforceable permits (as determined by EPA). 


In regard to qualified facilities, those facilities that made changes under the program will be examined on a case-by-case basis to determine whether PSD/NSR was circumvented.  Other qualified facilities issues will be addressed when a facility’s permit comes up for Title V renewal or modification.


EPA is very concerned that flexible permits are not unit-specific and they offered a broad methodology for fixing the flexible permit issues (see section titled DOCUMENT ONE below).  Part of that methodology includes a voluntary 3rd-party audit, the details of which are more fully outlined below in “DOCUMENT THREE: Audit 3-31-10.”  EPA seems to favor the audit process for large facilities and indicated that there would likely be fewer questions raised by EPA or TCEQ for those companies that use the audit process.


The EPA has been silent on their possible approval of the flexible permits but it is thought they outcome will be similar to Qualified Facilities Program. However, EPA is optimistic that TCEQ’s changes to the public participation program and TCEQ’s proposed definition of BACT will be approved by EPA.


There seems to be attention primarily on the federal PALs (plant-wide applicability limits).  EPA indicated that dialogue has started between EPA and TCEQ to possibly implement the federal PAL rules – look for this issue to get attention around the Fall of 2010.


Armendariz during the April 2nd meeting relayed to those in the room that as long as there was no intent or egregious circumvention of federal requirements, then EPA would work with facilities.



DOCUMENT ONE Broad methodology for creating unit-specific permit conditions in new permits.


1.         Public notice that a facility is entering into a process of potentially changing its permit.


EPA, TCEQ, Third-Party Auditors:


2.          List unit-specific emission limitations, operational limitations, and monitoring, recordkeeping, and reporting (MRR) requirements, based on: NSPS, MACT, NESHAP, Nonattainment SIPs, SIP-approved state rules, consent decrees and other enforcement orders,


3.          List unit-specific emission limitations, operational limitations, MRR requirements, based on: SIP-approved PSD/NSR requirements.


4.          For units constructed or modified under a flexible permit and/or without SIP-approved PSD/NSR requirements, that did not circumvent federal PSD/NSR:    the PSD/NSR emissions limitations, operational limitations, and MRR requirements will be established in a structure that considers: representations in FP permit applications, current-year BACT, BACT at last modification, other factors.


5.          Facilities may propose weaker than current-year BACT as PSD/NSR limitations for units that did not circumvent federal PSD/NSR and were constructed or modified under a flexible permit and/or without SIP-approved PSD/NSR requirements. Weaker than current-year BACT will require a two-part analysis in order to establish a federal basis for permit conditions moving forward:


a.          A report/audit of ___ years of year-by-year actual emissions, operational changes, and permit modifications from: minor modifications, qualified facilities exemptions, PBR, administrative changes. Justify that PSD/NSR not triggered.


b.          A report/audit of ___ years of year-by-year actual emissions, operational changes, and permit modifications from: flexible permit issuance and modifications. Justify that PSD/NSR not triggered.


6.          If permittees/auditors/TCEQ/EPA determine that PSD/NSR requirements were circumvented, an administrative/enforcement process will be entered into to get appropriate requirements assigned and to discuss mitigation options. Presumptive limits will be based on current-year BACT, with dialogue to be considered for other options.


7.          Permittee will apply to modify its permits (potentially with audit report) to reflect new unit-specific permit conditions, and go through public notice and comment.


8.          Newly modified PSD/NSR permits put forward for public notice and comment.


9.          A “plain English” statement-of-basis explaining origin and legal basis for each permit condition will be prepared for Title V permits.


10.        State-only permit conditions could be listed in separate section of permit, if state chooses and wants to prevent grandfathered unit backsliding or for other reasons.


11.        Facilities/auditors will evaluate current actual emissions and PTEs for compliance with new permit conditions. If necessary, facility will propose compliance schedule and mitigation measures with timeline in Title V process.


12.        Facilities/auditors with units constructed or modified under a flexible permit and/or without SIP-approved PSD/NSR requirements will evaluate actual emissions (as reported to state, or EPA, or recorded electronically, etc) going back a number of years, and evaluate actual emissions for compliance with federally-applicable requirements listed in new permit. If necessary, facility will propose mitigation measures for periods of noncompliance under an administrative/enforcement process.


13.        Draft Title V permits put forward for public notice and comment.



DOCUMENT TWO Prioritizing Permitting Work (DRAFT: 3/31/10)


Action item:  Agree to draft and jointly-develop the prioritization list for permits to address (requested by TCEQ)


TCEQ needs to be able to continue its baseline work of processing requests for new permits (both NSR/PSD and Title V), permit renewals, and permit modification in a reasonable time,


•           while addressing objection issues like IBR.


We need a schedule to manage new permitting work that is reasonable in terms of resources.  (We need to avoid creation of prohibitive backlog of permits.)


a)  We need to resolve all of the permit objections quickly because of the statutory timetable (companies have only one year from the date after EPA gains jurisdiction, [generally 90 days after objection] to submit a complete application)


b)        We need to be able to allow facilities already under construction to get attention so that construction is not unduly slowed.


c)         We need to start a process to address a certain number of Flexible Permits each month (which may require some reopening of non-objected FPs) and convert them into standard NSR/PSD permits with unit-specific emissions limits, monitoring, and recordkeeping.


d)        Qualified facilities issues can be addressed at facilities when their permits come up for renewal or modification.



How many permits in categories “a, b, and c” can be addressed each month?


Can we do some prioritization of permits with objections, or do we need to address all 38 in short order?


What factors should we use to prioritize permits within the Flex Permit category?

            High emissions levels

            High toxics emissions (TRI)

            Proximity to neighborhoods

            Record of non-compliance, upset emissions


What steps can be taken to advance the permitting work?

            EPA role, assistance?

            Can facilities include in their permit applications, the requirements applicable to each unit?






         Purpose:  To create a process by which new SIP compliant PSD/NSR permits can be issued to facilities currently operating under TX flexible permits (FP). 


         Goal:  To document and establish, where necessary, appropriate emission limits and emission monitoring and record-keeping requirements on a unit specific basis for all unit covered by a facilities flexible permit.  This includes establishing or re-establishing BACT limits, as necessary.


         Tenets

o          Audit will be voluntary

o          Audit will be conducted by independent third party

o          Audit will be available to all TX FP holders

o          Audit will be implemented in partnership with TX

o          Audit will include significant involvement of environmental community


         Process

o          Companies enter into Audit Agreement with Agency

o          Audit will be completed in 300 days

o          Results of Audit will be memorialized in Compliance Agreement Final Order (CAFO) with Agency


         Audit

o          Audit will cover all sources covered under a Flexible Permit


         Review will focus  on:

•           Determining SIP approved emission limits

•           Determining SIP approved monitoring requirements

•           Determining SIP approved record keeping requirements

•           Establish or re-establish BACT levels as appropriate


         CAFO

o          Requirement that company apply for a SIP approved permit incorporating unit specific emission agreements

o          The CAFO will require the company to request a new Title V permit from the State of TX to incorporate unit specific emission agreements (limits, monitoring, record-keeping) into their Title V permit and all appropriate underlying SIP approved permits.

o          Covenant language

o          Significant community-based environmental projects/penalty

o          Enforceable schedule for implementation     


1)         Stakeholder meetings to solicit input into Independent Audit Program


2)         Public Notice and Comment of Independent Audit Program through Federal Register and response to comment with Final Notice of Independent Audit Program through Federal Register.


3)         Subset of 126 Flex Permit companies elect to participate in the audit program


4)         EPA and company enter into an agreement for the company to obtain an independent audit of their operations and permitting activities and modifications since the issuance of the flexible permit


a.         Auditing back to the original Flexible Permit would not apply to units with up-to-date Federal limits


5)         Independent auditor produces report of unit specific emission limits, operational requirements, and MRR.  Facilities would be charged with reviewing the full operational and permitting history of each emission unit regulated under the flexible permit from the time of the issuance of the first flexible permit through the present.  Provide audit report to EPA and Company


6)         Company reviews audit report and proposes (with potential revisions) unit specific emission limits, operational requirements and MRR for approval


7)         EPA engages the company in negotiations concerning the proposed emissions limits, covenant and significant community-based environmental projects.  EPA will welcome input from TCEQ.


8)         If EPA and company agree, the findings are then memorialized in a Consent Agreement Final Order (CAFO) requiring the company to request revised limits in a Title V compliance plan and obtain the appropriate NSR authorizations from the State.


9)         CAFO voluntarily submitted to public notice and comment prior to final order. 


10)       A draft Title V permit amendment is prepared including appropriate NSR limits, MRR and compliance plan and draft NSR permit put forward in a permit application.


11)       TCEQ to process permit amendment application request including public comment.