[Federal Register Volume 70, Number 192 (Wednesday, October 5, 2005)]
[Proposed Rules]
[Pages 58138-58146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19996]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[R06-OAR-2005-TX-0033; FRL-7981-2]
Approval and Promulgation of Air Quality Implementation Plans;
Texas; Highly Reactive Volatile Organic Compound Emissions Cap and
Trade Program for the Houston/Galveston/Brazoria Ozone Nonattainment
Area
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: EPA is proposing to approve revisions to the Texas State
Implementation Plan concerning the Highly Reactive Volatile Organic
Compound Emissions Cap and Trade Program for the Houston/Galveston/
Brazoria ozone nonattainment area. These revisions were adopted by the
Texas Commission on Environmental Quality on December 01, 2004, as new
sections 101.390-101.394, 101.396, 101.399-101.401, and 101.403, and
submitted to EPA as a SIP revision on December 17, 2004. In related
rulemakings today, EPA is also proposing approval of additional
revisions to the Texas State Implementation Plan.
DATES: Comments must be received on or before November 4, 2005.
ADDRESSES: Submit your comments, identified by Regional Material in
EDocket (RME) ID No. R06-OAR-2005-TX-0033, by one of the following
methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the on-line instructions for submitting comments.
Agency Web site: http://docket.epa.gov/rmepub/. RME, EPA's
electronic public docket and comment system, is EPA's preferred method
for receiving comments. Once in the system, select ``quick search,''
then key in the appropriate RME Docket identification number. Follow
the on-line instructions for submitting comments.
U.S. EPA Region 6 ``Contact Us'' Web site: http://epa.gov/region6/r6coment.htm. Please click on ``6PD'' (Multimedia) and select
``Air'' before submitting comments.
E-mail: Mr. David Neleigh at [email protected]. Please
also cc the person listed in the FOR FURTHER INFORMATION CONTACT
section below.
Fax: Mr. David Neleigh, Chief, Air Permitting Section
(6PD-R), at fax number 214-665-6762.
Mail: Mr. David Neleigh, Chief, Air Permitting Section
(6PD-R), Environmental Protection Agency, 1445 Ross Avenue, Suite 1200,
Dallas, Texas 75202-2733.
Hand or Courier Delivery: Mr. David Neleigh, Chief, Air
Permitting Section (6PD-R), Environmental Protection Agency, 1445 Ross
Avenue, Suite 1200, Dallas, Texas 75202-2733. Such deliveries are
accepted only between the hours of 8 a.m. and 4 p.m. weekdays except
for legal holidays. Special arrangements should be made for deliveries
of boxed information.
Instructions: Direct your comments to RME ID No. R06-OAR-2005-TX-
0033. EPA's policy is that all comments received will be included in
the public file without change, and may be made available online at
http://docket.epa.gov/rmepub/, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information the
disclosure of which is restricted by statute. Do not submit information
through RME, regulations.gov, or e-mail if you believe that it is CBI
or otherwise protected from disclosure. The EPA RME website and the
Federal regulations.gov are ``anonymous access'' systems, which means
EPA will not know your identity or contact information unless you
provide it in the body of your comment. If you send an e-mail comment
directly to EPA without going through RME or regulations.gov, your e-
mail address will be automatically captured and included as part of the
comment that is placed in the public file and made available on the
Internet. If you submit an electronic comment, EPA recommends that you
include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses. Guidance on
preparing comments is given in the SUPPLEMENTARY INFORMATION section of
this document under the General Information heading.
Docket: All documents in the electronic docket are listed in the
RME index at http://docket.epa.gov/rmepub/. Although listed in the
index, some information is not publicly available, i.e., CBI or other
information the disclosure of which is restricted by statute. Certain
other material, such as copyrighted material, is not placed on the
Internet and will be publicly available only in hard copy form.
Publicly available docket materials are available either electronically
in RME or in the official file, which is available at the Air
Permitting Section (6PD-R), Environmental Protection Agency, 1445 Ross
Avenue, Suite 700, Dallas, Texas 75202-2733. The file will be made
available by appointment for public inspection in the Region 6 FOIA
Review Room between the hours of 8:30 am and 4:30 pm weekdays except
for legal holidays. Contact the person listed in the FOR FURTHER
INFORMATION CONTACT paragraph below to make an appointment. If
possible, please make the appointment at least two working days in
advance of your visit. There will be a 15 cent per page fee for making
photocopies of documents. On the day of the visit, please check in at
the EPA Region 6 reception area at 1445 Ross Avenue, Suite 700, Dallas,
Texas.
The State submittal is also available for public inspection at the
State Air Agency listed below during official business hours by
appointment: Texas Commission on Environmental Quality, Office of Air
Quality, 12124 Park 35 Circle, Austin, Texas 78753.
FOR FURTHER INFORMATION CONTACT: Ms. Adina Wiley, Air Permitting
Section (6PD-R), Environmental Protection Agency, Region 6, 1445 Ross
Avenue, Suite 700, Dallas, Texas 75202-2733, telephone (214) 665-2115;
fax number
[[Page 58139]]
214-665-6762; e-mail address [email protected].
SUPPLEMENTARY INFORMATION: Throughout this document wherever ``we,''
``us,'' or ``our'' is used, we mean EPA.
Outline
I. Highly Reactive Volatile Organic Compound Emissions Cap and Trade
Program
A. What action is EPA proposing?
B. HECT Program Summary
1. Why did Texas develop the HECT?
2. How do HRVOCs lead to ozone problems in the HGB area?
3. How is this document related to the HGB ozone attainment
demonstration?
4. How does the HECT work?
C. EPA's Analysis
1. How did EPA review and evaluate the HECT EIP?
2. What criteria did EPA use to analyze the HECT EIP?
3. What is EPA's analysis of the fundamental principle of
integrity?
4. What is EPA's analysis of the fundamental principle of
equity?
5. What is EPA's analysis of the fundamental principle of
environmental benefit?
6. Does the HECT EIP violate the integrity of other programs?
7. What is EPA's analysis of the interaction between the annual
HRVOC cap and the short-term HRVOC limit?
8. What is EPA's analysis of the HECT EIP with respect to
section 110(l) of the Clean Air Act?
D. Conclusion
II. General Information
III. Statutory and Executive Order Reviews
I. Highly-Reactive Volatile Organic Compound Emissions Cap and Trade
Program
A. What action is EPA proposing?
EPA is proposing approval of the Highly Reactive Volatile Organic
Compound Emissions Cap and Trade (HECT) Economic Incentive Program
(EIP), published at Texas Administrative Code (TAC) Title 30, Chapter
101 General Air Quality Rules, Subchapter H, Division 6, Sections
101.390-101.394, 101.396, 101.399-101.401, and 101.403. These revisions
were submitted to EPA on December 17, 2004. Once approved, the HECT EIP
will be an element of the Texas State Implementation Plan (SIP) for the
Houston/Galveston/Brazoria (HGB) ozone nonattainment area.
B. HECT Program Summary
1. Why did Texas develop the HECT?
The HECT program was adopted as a State regulation on December 01,
2004. The Texas Commission on Environmental Quality (TCEQ) developed
the program as part of its mid-course review of the 1-hour ozone
attainment plan for the HGB ozone nonattainment area. The mid-course
review showed that ozone reductions comparable to those achieved by the
90 percent reduction in industrial nitrogen oxide (NOX)
emissions required in the November 2001 (66 FR 57160) approved SIP
could be achieved through a combination of 80 percent reduction in
industrial NOX emissions and additional targeted control of
certain highly-reactive volatile organic compounds (HRVOCs). TCEQ has
chosen to revise its attainment strategy accordingly, decreasing the
emphasis on NOX control and requiring additional reductions
of HRVOCs. The HECT program is part of TCEQ's plan for achieving those
additional HRVOC reductions.
2. How do HRVOCs lead to ozone problems in the HGB area?
Ground-level ozone forms when volatile organic compounds (VOCs)
react with NOX compounds in the presence of sunlight. Some
VOCs react more quickly in the photochemical reaction than other VOCs;
which can result in rapid spikes of ozone formation. TCEQ has
identified a number of VOCs in the HGB nonattainment area that behave
in this manner: ethylene; propylene; all isomers of butene, alpha-
butylene, and beta-butylene; and 1,3-butadiene. These VOCs are now
classified by TCEQ as HRVOCs in 30 TAC Chapter 115.
3. How is this document related to the HGB ozone attainment
demonstration?
The HECT program is part of the revised Texas plan to reduce ozone
levels through the reduction of HRVOCs. The purpose of this document is
to explain our proposed action on the HECT and why we believe the HECT
is consistent with the Clean Air Act and with our policies on trading
programs. In this document, we are not reviewing the impact on the HGB
ozone attainment demonstration of the State's request to change from 90
percent to 80 percent NOX control. We are evaluating that
change in strategy and its relationship to section 110(l) of the Clean
Air Act in our review of the revisions to the overall attainment
demonstration (RME Docket R06-OAR-2005-TX-0018). When we take final
action on the attainment demonstration, we will also take final action
on the HECT, in a separate rule.
4. How does the HECT work?
The HECT program is similar to the multi-source emissions cap-and-
trade program described in EPA's EIP Guidance ``Improving Air Quality
with Economic Incentive Programs'' (EPA-452/R-01-001, January 2001). A
multi-source emissions cap-and-trade program is designed to limit the
total emissions from a certain category or group of sources to a level
needed for an area to attain or maintain a national ambient air quality
standard (NAAQS) and to allow sources flexibility in complying with
their emission limits. In the HECT, TCEQ has established an annual
HRVOC cap at the level relied on for attainment of the NAAQS for 1-hour
ozone in 2007 in the revised attainment demonstration. As noted above,
we are evaluating the merits of that demonstration in a separate rule
(RME Docket R06-OAR-2005-TX-0018).
Under the HECT, in Harris County TCEQ has defined an HRVOC as one
or more of the following VOCs: 1,3-butadiene; all isomers of butene,
alpha-butylene, and beta-butylene; ethylene; and propylene. In
Brazoria, Chambers, Fort Bend, Galveston, Liberty, Montgomery, and
Waller Counties, an HRVOC is defined as ethylene and propylene. These
compounds were identified based on their reactivity and prevalence in
the HGB emissions inventory.
The HECT applies to each site in the HGB area that is subject to
requirements in 30 TAC Chapter 115, Subchapter H, Division 1 for Vent
Gas Control or Division 2 for Cooling Tower Heat Exchange Systems. EPA
proposed approval of these HRVOC controls at 70 FR 17640, April 07,
2005. The HECT rule, at 30 TAC section 101.391, incorporates the
definition of ``site'' at 30 TAC section 122.10: ``the total of all
stationary sources located on one or more contiguous or adjacent
properties, which are under common control or the same person (or
persons under common control).'' Any HRVOC-emitting vent gas streams,
flares, and cooling tower heat-exchange systems at these sites will be
subject to the HECT and considered covered facilities. A site can have
one covered facility or any combination of covered facilities. Each
site that meets these requirements, or elected to opt in by April 30,
2005, will always be subject to the HECT.
Sites in the HGB area that have the potential to emit ten tons per
year or less of HRVOCs from all covered facilities at the site are
exempt from the HECT. These exempt sites had the opportunity to opt in
to the HECT by notifying the TCEQ Executive Director in writing by
April 30, 2005. Two sites in the HGB area submitted the opt-in
notification to the TCEQ. No additional exempt sites will be eligible
to opt in.
[[Page 58140]]
Additionally, all sites in Brazoria, Chambers, Fort Bend,
Galveston, Liberty, Montgomery, and Waller Counties (the ``seven
surrounding counties'') are exempt from all HECT requirements other
than the Level of Activity Certification requirements of 30 TAC section
101.401. When TCEQ proposed the HECT program, industry commented that
the representations for HRVOC emissions in their air permits were
significantly lower than the HRVOC cap that would be imposed on the
seven county area. Sites in these seven surrounding counties agreed to
take enforceable permit limits on propylene and/or ethylene instead of
participating in the cap and trade program. In responding to comments
on the proposal, TCEQ stated that it would only consider retaining the
exemption if each site with a potential to emit more than 10 tpy of
HRVOC established enforceable limits. The documentation establishing
such enforceable limits was due to TCEQ by April 30, 2005. TCEQ will
review these Level of Activity Certifications for sites in these
counties to ensure that the enforceable limits achieve reductions
comparable to those that would occur under the cap. Section 101.392
allows TCEQ to end this exemption by issuing public notice of its
revocation.
The cap consists of allowances allocated by the TCEQ Executive
Director to each facility in the HECT by January 1 of each year,
beginning with January 1, 2007. Allocations are determined based on a
site's contribution to overall level of activity and the area cap for
HRVOCs. An allowance is the authorization to emit one ton of HRVOC
emissions during a control period; the control period is the calendar
year. The initial HECT control period begins January 1, 2007. A
facility can choose to operate at, above, or below its allowance
budget. A source operating below its allowance budget can bank or trade
its allowances for use only in the next control period. A source
operating above its allowance budget must purchase excess allowances
from another source to demonstrate compliance with the cap. Beginning
March 1, 2008, and no later than March 1 following the end of every
control period, each facility must hold a quantity of allowances in its
compliance account that is equal to or greater than the total emissions
of HRVOCs emitted during the control period just ending. If a
facility's actual emissions of HRVOCs during a control period exceed
the amount of allowances held in the compliance account on March 1,
allowances for the next control period will be reduced by an amount
equal to the emissions exceeding the allowances in the compliance
account, plus an additional 10 percent. This deduction does not
preclude any additional enforcement action by the TCEQ. Additionally,
if the site's compliance account does not contain sufficient allowances
to cover this deduction, the TCEQ Executive Director may issue a notice
of deficiency to the owner or operator. The owner or operator will then
have 30 days from the notice of deficiency to purchase or transfer
sufficient allowances to cover its compliance obligation. The HECT
includes a provision to allow a facility to use emission reduction
credits (ERCs) of less-reactive VOCs generated under the Texas Emission
Credit Banking and Trading program (the ``ERC rule'') in lieu of HECT
allowances if the ERCs are generated in the HGB area and the generating
facility meets additional monitoring and reporting requirements. The
HECT also includes a provision that exempts HRVOC emissions that are
above the short-term HRVOC limit established in 30 TAC Chapter 115 from
being counted towards a site's annual cap.
C. EPA's Analysis
1. How did EPA review and evaluate the HECT EIP?
Generally, SIP rules must be enforceable and must not interfere
with attainment, reasonable further progress or any applicable
requirement of the Clean Air Act. See Clean Air Act sections 110(a),
110(l), and 193.
A guidance document that we used to define evaluation criteria is
``Improving Air Quality with Economic Incentive Programs'' (EPA-452/R-
01-001, January 2001) (EIP Guidance). This guidance applies to
discretionary EIPs adopted by a State as part of a SIP to attain
national ambient air quality standards (NAAQS) for criteria pollutants,
but the EIP Guidance is not EPA's final action on discretionary EIPs.
Final action as to any such EIP occurs when EPA acts on it after its
submission as a SIP revision. Because the EIP Guidance is non-binding
and does not represent final agency action, EPA is using the Guidance
as an initial screen to determine whether potential approvability
issues arise. A more detailed review of the HECT program as compared to
the EIP Guidance is in the Technical Support Document (TSD) for the
TCEQ Highly Reactive Volatile Organic Compound Emissions Cap and Trade
Program for the HGB Nonattainment Area. The TSD is available at the
location given in the ADDRESSES section of this document.
2. What criteria did EPA use to analyze the HECT EIP?
As described in detail in the EIP Guidance, EPA has identified
three fundamental principles that apply to all EIPs: (1) Integrity
(meaning that credits are based on emission reductions that are
surplus, enforceable, quantifiable, and permanent), (2) equity, and (3)
environmental benefit. The fundamental principles can apply to an EIP
in its entirety (the programmatic level) or to individual sources (the
source-specific level). EPA evaluated the HECT EIP against these three
fundamental principles, specific concerns applicable to multi-source
cap-and-trade programs, and applicable Clean Air Act requirements. Our
complete analysis of the HECT EIP is contained in the TSD for this
action.
3. What is EPA's analysis of the fundamental principle of integrity?
The integrity principle consists of the qualities of surplus,
enforceable, quantifiable, and permanent.
Integrity Element One--Surplus. The first element of integrity is
to determine whether the emissions reductions targeted by the EIP are
surplus. Emission reductions are surplus if they are not otherwise
relied on by the State in any other air quality-related programs
including: the SIP, SIP-related requirements such as transportation
conformity, other adopted TCEQ measures not in the SIP, and Federal
rules that focus on reducing precursors of criteria pollutants such as
new source performance standards. Additionally, if the multi-source
emission cap-and-trade program is claiming reductions, the State must
demonstrate that the cap on all emissions is below the threshold that
would have been set for the affected sources before the program was
implemented. The surplus element does not apply to the individual
sources participating in a multi-source emission cap-and-trade program
because sources have the option of making reductions or purchasing
unused allowances from other facilities in the cap-and-trade program.
At the programmatic level, EPA has determined that the HECT program
satisfies the integrity element of surplus. TCEQ established the cap on
HRVOC emissions based on historical activity levels, air quality data,
and modeling completed during the mid-course SIP review. To address
uncertainty in the HRVOC inventory, TCEQ included a five percent buffer
in the cap. The development of the cap level and the 5
[[Page 58141]]
percent buffer ensures that the cap will result in overall HRVOC
emission reductions in the HGB area. Section 101.393 of the HECT
specifically requires that reductions be surplus in a programmatic
sense, by stating that allowances under the HECT may only be used for
the purposes described in the rule.
The VOC ERCs eligible for conversion into HECT allowances must also
meet the surplus criteria of the ERC rule at 30 TAC Chapter 101,
Subchapter H, Division 1. EPA is not evaluating the ERC rule in this
document. For further discussion of how the Division 1 ERCs are
surplus, please refer to our separate action on the ERC Rule at RME
Docket R06-OAR-2005-TX-0006.
For the above reasons, and as further explained in the TSD, EPA has
concluded that the HECT is consistent with Clean Air Act requirements
and EPA Guidance expectations for the integrity element of surplus.
Integrity Element Two--Enforceable. The generation and use of
emission reductions and other required actions in the EIP are
enforceable on a programmatic basis if they are independently
verifiable and if the EIP defines program violations and identifies
those liable for violations. For enforceability, both the State and EPA
should have the ability to apply penalties and secure appropriate
corrective actions where applicable. Citizens should also have access
to all the emissions-related information obtained from the source so
that citizens can file suits against sources for violations. Required
actions must be practicably enforceable. At the source-specific level,
the source must be liable for violations; the liable party must be
identifiable; and the State, the public, and EPA must be able to
independently verify a source's compliance. Additionally, EIPs that
involve trading must incorporate provisions for assessing liability,
provisions to assess penalties against participating sources, and
provisions for sources with Title V permits. In multi-source emission
cap-and-trade EIPs, each source owner or operator must be responsible
for owning enough allowances to cover its emissions for the given time
period and for providing clear title to the allowances it transfers.
EPA has determined that the HECT program is enforceable. The
monitoring and testing protocols established in 30 TAC Chapter 115 are
adequate for independent verifications of emission reductions and for
demonstrating practicable enforceability. Additionally, the VOC ERCs
that are eligible for conversion into HECT allowances must be
quantified using the monitoring and testing methods under sections
115.725 or 115.764 and must meet the recordkeeping and reporting
requirements under sections 115.726 and 115.766. An owner or operator
can violate the HECT by either not having enough allowances to cover
its actual emission level for a control period or by failing to submit
an Annual Compliance Report on time, as defined at sections 101.394(e)
and 101.400(b). The liable party is either the owner or operator of a
subject facility. Information to be made available to the public is
addressed at sections 101.399(b)(3), 101.399(c)(3), 101.399(d)(3),
101.403(a)(3), and 101.403(b). The allowance banking and trading
provisions in section 101.399 also provide clear title to the
allowances transferred.
Penalties, corrective action, and citizen filing of lawsuits are
not addressed in the HECT rules but are in separate State laws and
regulations. In particular, Texas Water Code section 7.051 provides for
the assessment of administrative penalties by TCEQ, and section 7.032
provides for injunctive relief by TCEQ. The TCEQ enforcement rule at 30
TAC section 70.5 incorporates remedies found in the state statutes
(Texas Water Code and the Texas Health and Safety Code), and permits
referrals to EPA for civil, judicial or administrative action. It is
our conclusion the TCEQ has adequate legal authority to enforce the
HECT program. Once we approve the HECT rule into the SIP, EPA will be
able to enforce it under section 113 of the Clean Air Act.
Recordkeeping requirements specific to the HECT program are set forth
at section 101.400.
For the above reasons, and as further explained in the TSD, EPA has
concluded that the HECT is consistent with Clean Air Act requirements
and EPA Guidance expectations for the integrity element of
enforceability.
Integrity Element Three--Quantifiable. On a programmatic basis,
emissions and emission reductions attributable to an EIP are
quantifiable if the source can reliably and replicably measure or
determine them. The generation or use of emission reductions by a
source or group of sources is quantifiable on a source-specific basis
if the sources can reliably calculate the amount of emissions and/or
emission reductions occurring during the implementation of the program,
and replicate the calculations. Additionally, individual sources
participating in a multi-source emission cap-and-trade program must
also quantify total emissions per unit of time. All EIPs should
incorporate provisions for predicting results, addressing uncertainty,
approving quantification protocols, and emission quantification
methods.
EPA has determined that the HECT program addresses the necessary
provisions for quantifiability. Emissions and/or emission reductions
under the HECT follow the monitoring and testing protocols in Chapter
115, thus satisfying the need to be reliably and replicably measured.
Sections 115.725 and 115.764 require sites to install and operate
continuous monitoring systems. Sources subject to the HECT will
quantify total emissions per unit time by submitting the required
Annual Compliance Report detailing actual HRVOC emissions during the
control period.
Integrity Element Four--Permanent. To satisfy the permanence
element of the integrity principle, a compliance flexibility EIP must
ensure that no emission increases (compared to emissions if there was
no EIP) occur over the time defined in the SIP. For a programmatic
reduction EIP, the emissions reductions are permanent if the State is
able to ensure that the reductions occur over the duration of the EIP,
and for as long as the reductions are relied on in the SIP.
EPA has determined that the HECT program meets the definition of a
compliance flexibility EIP because it provides sites with flexibility
in meeting existing SIP requirements and lowers the cost of
implementing a SIP. The HECT also meets the definition of a
programmatic reduction EIP because the cap is established at a level
that will achieve emission reductions beyond what are currently in the
SIP. The HECT rules and other elements of the HGB attainment
demonstration are designed to ensure that programmatic reductions occur
over the duration of the HECT program, and for as long as they are
relied on in the SIP. The TCEQ Executive Director will allocate
allowances (the authorization to emit one ton of HRVOC) each year on
January 1, starting January 1, 2007. The integrity element of
permanence does not apply to individual sources participating in the
HECT because sources have the option to make reductions or purchase
unused allowances from other sources program. We conclude that the HECT
EIP satisfies the integrity element of permanence.
4. What is EPA's analysis of the fundamental principle of equity?
Equity Element One--General Equity. General equity means that an
EIP ensures that all segments of the population are protected from
public
[[Page 58142]]
health problems and no segment of the population receives a
disproportionate share of a program's disbenefits.
The HECT EIP is designed to benefit all communities in the HGB
area. The cap in Harris County permanently caps emissions of four
HRVOCs--ethylene, propylene, 1,3-butadiene, and all isomers of butenes.
Not only will the HECT reduce the amount of ozone precursors emitted in
Harris County, it permanently caps emissions of a hazardous air
pollutant. The enforceable limits in the seven surrounding counties for
ethylene and propylene, which are the result of permit limits agreed to
between TCEQ and the affected sites, will also reduce emissions of
ozone precursors. Additionally, section 101.394(e) requires an owner or
operator of a facility that emits more HRVOCs than its allowance
holding to surrender an amount of allowances equal to the exceedance
plus an additional 10 percent as an environmental benefit. We conclude
that the HECT meets the requirements for general equity.
Equity Element Two--Environmental Justice. The environmental
justice element applies if the EIP covers VOCs and could
disproportionately impact communities populated by racial minorities,
people with low incomes, and/or Tribes. EIPs that include hazardous air
pollutants (HAPs) must also satisfy the expectations of Appendix 16.2
of the EIP Guidance, which addresses prevention and/or mitigation of
impacts from potential or actual trades involving HAPs, ensuring that
sufficient information is made available for meaningful review and
participation, public participation, and periodic program evaluations.
The HECT is designed to permanently cap emissions of four HRVOCs,
including one HAP (1,3-butadiene). EPA has evaluated the HECT with
respect to the HAP Framework and EIP Guidance and determined that the
environmental justice element of equity has been met.
Compliance with the HAP Framework element for the prevention and/or
mitigation of localized impacts from potential or actual trades
involving HAPs is demonstrated through the HECT audit program
established in section 101.403. Under this section, the TCEQ Executive
Director may limit or discontinue trading of allowances as a remedy for
problems resulting from trading in a localized area of concern.
Additionally, the TCEQ Executive Director must approve all trades of
HECT allowances.
Compliance with the HAP Framework element for sufficient
information is demonstrated further by section 101.399, which provides
that all information regarding price and quantity of allowances trades
must be available to the public. Additionally, the required annual
compliance reports and periodic program audits must be available to the
public.
The HECT program satisfies the HAP Framework element for public
participation in the development, implementation, and evaluation of the
program. In the development of the HECT rules, TCEQ held public
hearings in Austin, Beaumont, and Houston. TCEQ also has an extensive
stakeholder list of approximately 150 contacts who receive copies of
all TCEQ rulemaking actions for comment and participation in
development. During the implementation of the HECT EIP, the public has
the opportunity to view the Annual Compliance Reports submitted by each
source and the end of year reports prepared by the TCEQ in accordance
with section 101.403(b). Public participation is incorporated into the
evaluation of the HECT EIP at section 101.403(a)(3), which provides for
public participation in the audit of the HECT rule.
The final element of the HAP Framework, program evaluations, is
satisfied at section 101.403, which establishes the HECT audit program.
The rule requires a program audit every three years, with emphasis on
the impact on attainment and compliance by the participants. The audit
results must be available for public inspection.
As an added measure that demonstrates general equity and
environmental justice, TCEQ has developed the Toxicological Risk
Assessment (TARA) Effects Evaluation Procedure. Under this process,
which is authorized under section 382.0518(b)(2) of the Texas Health
and Safety Code, TCEQ may not grant a permit to a facility and a
facility may not begin operating unless it is demonstrated that
emissions will not have an adverse impact on public health and welfare.
This demonstration is accomplished by (1) establishing off-property
ground-level-air concentrations of constituents resulting from the
proposed emissions, and (2) evaluating these concentrations for the
potential to cause adverse health or welfare effects. The TARA Effects
Evaluation is used to evaluate the use of HECT allowances in an air
permit. The TCEQ guidance document ``How to Determine the Scope of
Modeling and Effects Review for Air Permits'' (RG-324, Oct. 2001) has a
detailed discussion of the TARA Effects Evaluation procedures.
5. What is EPA's analysis of the fundamental principle of environmental
benefit?
All EIPs must be environmentally beneficial. The HECT demonstrates
an environmental benefit by setting a cap on HRVOCs that will help the
HGB area in achieving attainment of the NAAQS as expeditiously as
practicable. Additionally, the HECT places a cap on emissions of a HAP
(1,3-butadiene), thereby lowering the emissions of this toxic chemical
in the HGB area. Sources that emit more HRVOCs than they have
allowances will also be required to surrender the amount equal to the
exceedance plus 10 percent as an environmental benefit.
6. Does the HECT EIP violate the integrity of other programs?
In addition to determining the programmatic and source-specific
integrity elements for an EIP, it is important to determine whether the
EIP generates emission reductions in a manner consistent with other
EIPs functioning in the same area. One feature of the HECT combines two
of the State of Texas' Emissions Banking and Trading Programs, in that
it allows a participating facility to convert reductions of less-
reactive VOCs, generated and banked according to the 30 TAC Chapter
101, Subchapter H, Division 1 Emission Credit Banking and Trading rule,
into a yearly HECT allocation. The site's owner or operator quantifies
the VOC emission reduction credits (ERCs) by performing the expanded
monitoring and testing methods under 30 TAC sections 115.725 or 115.764
and using the recordkeeping and reporting outlined in 30 TAC sections
115.726 and 115.766. ERCs eligible for this conversion must be
generated from a reduction at a site in the HGB area; from a reduction
strategy implemented after December 31, 2004; and from a reduction in
VOC species other than those defined as HRVOCs under 30 TAC Chapter
115.10. Additionally, the VOC ERCs must be real, quantifiable, surplus,
enforceable, and permanent as specified in the ERC rule at section
101.302 at the time the ERC is converted. Section 101.399 of the HECT
specifies that VOC reductions from the installation of best available
control technology do not qualify for conversion into HRVOC
allocations. This restriction on ERC generation is in addition to the
surplus requirements of section 101.302. To satisfy the criteria of the
ERC program, the reductions must be surplus to required local, State,
and Federal programs such as the application of maximum achievable
[[Page 58143]]
control technology, new source performance standards, or lowest
achievable emission rate.
The conversion of less-reactive VOC ERCs into HRVOC allowances is
limited to five percent of the site's initial HRVOC allocation, and is
based on VOC to HRVOC conversion ratios specified by the Maximum
Incremental Reactivity (MIR) scale. The MIR scale is based on research
by Dr. William Carter and others at University of California at
Riverside, who sought a method of quantifying the reactivity
differences among VOCs (Carter, 1995; Carter et al., 1995). The MIR is
a measure of the number of grams of ozone that can be formed from one
gram of the subject VOC, under ideal conditions. To determine the
relative importance of different VOCs from a reactivity perspective,
reactivity-weighted concentrations of specific compounds or groups of
compounds were calculated. Reactivity-weighted concentrations take into
consideration the substances' capability to form ozone as well as their
measured ambient concentrations.
As further discussed in the TSD for this rule and in the attainment
demonstration TSD, the program feature allowing generation of HRVOC
allowances using reductions in less-reactive VOCs does not prevent
approval of the program, because the expected impact on the attainment
demonstration is expected to be minimal. Texas is making an allowance
for a small increase in HRVOCs (up to 5 percent) to be offset with
larger reductions in less-reactive VOCs. Modeling sensitivity analyses
were performed by the University of Texas and documented in a report,
titled ``Survey of Technological and Other Measures to Control HRVOC
Event Emissions.'' In this report, trades of less-reactive VOCs much
larger than would be allowed with the 5 percent cap were considered. In
the sensitivity runs, the impacts ranged from a 2.1 ppb increase to a 3
ppb decrease in the peak ozone, depending on the episode day and the
assumptions made about the less-reactive chemical that was reduced. The
researchers looked at the impact of adding between 15 and 33 tpd of
HRVOC to the model while removing the requisite amount of less-reactive
VOCs. Under the rule, capping trades at a 5 percent increase in highly-
reactive VOCs, an increase of less than 2 tpd of HRVOCs would be all
that could be allowed. Therefore, the impact of the actual program is
expected to be minimal.
In addition, for sources that participate in the program, this
feature will have the advantage of implementing additional source
monitoring on less-reactive VOCs. EPA proposed approval of the
monitoring and testing methods in 30 TAC sections 115.725 and 115.764
and the recordkeeping and reporting requirements in 30 TAC sections
115.726 and 115.766 on April 07, 2005 (70 FR 17640). Based on the above
modeling that indicates that this limited conversion of less-reactive
VOCs will have a minimal impact on ozone levels, EPA concludes that
even with this feature, the HECT program provides compliance
flexibility and a significant strengthening of the SIP by contributing
to reduced ozone levels in the HGB area.
Our proposed approval does not represent a general endorsement of
the use of the MIR scale for use in SIPs that contain EIPs. In this
instance, with the aforementioned technical support, we believe this is
an acceptable approach, which is consistent with EPA's recently issued
``Interim Guidance on the Control of Volatile Organic Compounds in
Ozone State Implementation Plans'' (August 25, 2005). EPA will continue
to investigate how best to incorporate reactivity concepts and consider
changes to existing policy.
7. What is EPA's analysis of the interaction between the annual HRVOC
cap and the short-term HRVOC limit?
Texas has included features in the adopted HRVOC rules defining the
interaction between the annual cap and short-term limit (established at
30 TAC Chapter 115, Subchapter H) that are unique to the HECT.
Typically, all emissions during the year would be counted toward
compliance with an annual cap. In establishing a cap-and-trade system
for the petrochemical industry in the HGB area, TCEQ felt it necessary
to consider the possibility of major upsets. TCEQ believed that non-
routine emissions from process upsets, while likely to occur, are not
predictable and therefore could make management of emissions under an
annual cap difficult. Therefore, TCEQ established in its rule that
emissions above the 1200 lb/hr short-term limit are not counted toward
compliance with the annual cap but rather are expected to be controlled
by the short-term limit. TCEQ was particularly concerned about the
potential situation where a single large release could force a smaller
source to shut down for the remainder of the year because its
allowances had been exhausted.
Although EPA agrees that a forced shutdown of smaller sources is
possible, it believes that many upsets can be avoided by a source
through the development and implementation of operation and maintenance
plans that address start-up, shutdown and malfunction of process
equipment and application of good air pollution control practices such
as required by 40 CFR 60.18(d). EPA notes that application of these
procedures would significantly reduce the emissions associated with
such start-up, shutdown, and malfunction events and could avoid the
need for a forced shutdown. In addition, planning and management of
emissions by the source, including participation in the allowance
market, should also avoid a forced shutdown while ensuring compliance
with the annual cap.
Emissions above the short-term limit would still be subject to
enforcement as a violation of the short-term limit, but only 1200 lbs
would be reported for compliance with the annual cap during those hours
where emissions exceed 1200 lbs. It is our expectation that the root
cause of the conditions giving rise to the emissions above the short-
term cap will be identified and corrected. Moreover, the source is
still required to use good air pollution control practices consistent
with the applicable NSPS (40 CFR 60.11(d)) and MACT standards or other
applicable Federal or State programs.
The structure of the Texas HECT program, which does not require
emissions above the short-term limit to be counted against the annual
cap, is a significant departure from past practices for cap-and-trade
programs such as the Title IV Acid Rain program and the Houston
NOX cap-and-trade program. EPA's EIP Guidance regarding
multi-source emissions cap-and-trade programs indicates that all
sources in the program must account for all of their emissions. See
section 7.4 of the EIP Guidance. We believe, in this instance, that the
approach of not counting emissions above the short-term limit toward
the annual cap has both advantages and disadvantages as discussed
below. We are inviting comment on the appropriateness of approving a
program with this structure, as we remain concerned about excess
emissions resulting from poor operation or poor maintenance.
We believe that the structure of the HECT rule has the advantage of
establishing a clear procedure for how emissions during non-routine
events will be handled. For every hour during a large emissions event,
the source will include 1200 lbs toward meeting its annual cap. This
will avoid disputes about the validity of data during large emission
events, when monitoring may be less reliable. The rule clearly defines
the procedures to be followed during an emission event. Sources will
have no
[[Page 58144]]
choice but to ensure that at the end of the compliance period they have
sufficient allowances to cover all of the emissions up to the 1200 lb
limit, or else face deductions from their compliance account and other
potential penalties. In addition, emissions above that level would be
subject to enforcement under the short-term limit.
On the other hand, the structure of the rule has the disadvantage
that some of the incentive to prevent large releases is lost by
excluding emissions above the short-term limit from the annual cap. In
addition, some of the incentive for reducing the size of large events,
when they occur, may also be lost. With the annual cap-and-trade
program's exclusion of emissions above the hourly (short-term) limit,
it is probable that fewer violations of the annual cap will occur than
if the exclusion had not been provided. For sources that would have
violated the annual cap if emissions above the short-term limit were
considered, it may be harder to promote systemic changes at those
sources to reduce overall emissions.
Having looked at the advantages and disadvantages, we are proposing
approval of the HECT program. We are proposing approval because, even
though it provides an exclusion for non-routine emissions above the
short-term limit from the annual cap, it provides new enforceable
limits that are an improvement on the status quo. We believe the annual
cap in conjunction with the short-term limit will achieve the goals of
the attainment demonstration as indicated by the modeling analysis. The
annual cap should result in the necessary reductions in routine
emissions and the short-term limit should result in a reduction in the
amount and frequency of non-routine emission events. We note that the
program rules require TCEQ to audit the HECT program every three years,
and facilities have to provide compliance reports annually, so it will
be readily apparent if the goals of the HECT program are being
achieved.
We believe the program will achieve the necessary reductions in
routine emissions because the size of the short-term limit is such that
only truly non-routine emissions will not be counted toward the annual
cap. Based on evaluation of the emission rates that were modeled in the
January 2003 SIP, the 1200 lb/hour limit is expected to be about ten
times larger than the average hourly emission rate at the largest
sources of HRVOCs. This order of magnitude difference between the
short-term limit and the average annual hourly emissions ensures that
sources will not routinely operate near or above the short-term limit,
thus achieving the goal of reducing routine emissions.
Also, while the structure of the HRVOC rules anticipates that
emission events will not be completely eliminated, EPA believes that it
provides sufficient disincentives that sources will sufficiently reduce
the frequency and magnitude of large emissions events such that
emission events would not be expected to frequently impact peak ozone
levels. The University of Texas report ``Variable Industrial VOC
Emissions and Their Impact on Ozone Formation in the Houston Galveston
Area,'' April 16, 2004, estimated from historic information that it is
probable that at least one event will occur annually at a time and
location to impact peak ozone. This indicates that while emission
events are frequent in the Houston area, emission releases at the place
and time that impact peak ozone do not occur nearly as frequently. It
is necessary to reduce the frequency of emission events so that
emission events do not interfere with attainment of the 1-hour NAAQS,
which only allows an average of one exceedence per year. Based on the
study, we believe the hourly emission limit will achieve this goal.
After the institution of the short-term limit, EPA expects that
emissions events impacting peak ozone levels will be reduced in
frequency to fewer than one per year. While other events may occur that
impact ozone levels at other locations than where the peak ozone level
occurs, these events, because they are occurring in areas with lower
ozone levels, would not be expected to impact attainment of the 1-hour
NAAQS.
Again, EPA recognizes that the approach of providing this partial
exclusion for emissions above the short-term limit is a departure from
past practice and our EIP Guidance. We currently believe this approach
is only warranted in consideration of the HGB area's unique situation
that combines an extensive petrochemical complex and the availability
of the extensive data and analysis. Consideration of this novel
approach is warranted to balance the need to reduce both routine and
upset emissions of HRVOC, but also recognizes that large upset
emissions may never be completely eliminated in the petrochemical
industry. Because of the uniqueness of this approach, however, we
invite comment on of our proposed approval of this facet of the Texas
plan.
8. What is EPA's analysis of the HECT program with respect to section
110(l) of the Clean Air Act?
Section 110(l) of the Clean Air Act states:
Each revision to an implementation plan submitted by a State
under this Act shall be adopted by such State after reasonable
notice and public hearing. The Administrator shall not approve a
revision of a plan if the revision would interfere with any
applicable requirement concerning attainment and reasonable further
progress (as defined in section 171), or any other applicable
requirement of this Act.
As a general matter, the satisfaction of the environmental benefit
principle and the other integrity principles applicable to trading
programs will tend to demonstrate that a trading program will be
consistent with section 110(l). In the case of the HECT program, we are
proposing approval of a new set of measures instituting new controls on
a class of VOCs that are more stringent than previous controls on VOCs.
The HECT rules being proposed for approval provide no relief from any
previously approved VOC rule or any other applicable requirement.
Therefore, the proposed approval of the HECT rules is consistent with
section 110(l).
Here, however, as previously noted, the revisions to the HECT are a
part of a revised ozone attainment strategy for the HGB area. In
addition, we are reviewing the limited use of ERCs in the HECT. The
revised strategy's reduced level of industrial NOX control
and the effect of the use of ERCs in the HECT are being evaluated
separately in the HGB attainment demonstration for the 1-hour ozone
standard. The section 110(l) analysis for our action on the HECT
therefore relies on the analysis conducted for the HGB attainment
demonstration. Based on our analysis of the attainment demonstration,
we conclude that the HECT, in conjunction with all other controls in
the attainment demonstration, satisfies section 110(l).
D. Conclusion
EPA reviewed the HECT SIP submittal with respect to the
expectations of the EIP Guidance document and the requirements of the
Clean Air Act. EPA has concluded after review and analysis that the
HECT EIP is approvable. EPA is proposing to approve the new sections
101.390-101.394, 101.396, 101.399, 101.401, and 101.403 submitted by
TCEQ on December 17, 2004, for rule log number 2004-0058-101-AI. These
rules provide new requirements that will reduce emissions of HRVOCs in
the HGB ozone nonattainment area.
We will not take final action on these rules until we finally
approve the
[[Page 58145]]
attainment demonstration. Additionally, the HECT program cannot be
finally approved until the EPA finalizes approval of the 30 TAC Chapter
115 HRVOC rules that provide the enforceable monitoring and
recordkeeping requirements sufficient to demonstrate practicable
enforceability and quantifiability. Provisions allowing ERC use in the
HECT program will also not be fully approved until the rules for ERC
generation and use have been approved. The attainment demonstration and
the Chapter 115 and ERC rules are being considered in separate Federal
Register notices.
II. General Information
A. Tips for Preparing Your Comments
When submitting comments, remember to:
1. Identify the rulemaking by File ID number and other identifying
information (subject heading, Federal Register date and page number).
2. Follow directions--The agency may ask you to respond to specific
questions or organize comments by referencing a Code of Federal
Regulations (CFR) part or section number.
3. Explain why you agree or disagree; suggest alternatives and
substitute language for your requested changes.
4. Describe any assumptions and provide any technical information
and/or data that you used.
5. If you estimate potential costs or burdens, explain how you
arrived at your estimate in sufficient detail to allow for it to be
reproduced.
6. Provide specific examples to illustrate your concerns, and
suggest alternatives.
7. Explain your views as clearly as possible, avoiding the use of
profanity or personal threats.
8. Make sure to submit your comments by the comment period deadline
identified.
B. Submitting Confidential Business Information (CBI)
Do not submit this information to EPA through regulations.gov or e-
mail. Clearly mark the part or all of the information that you claim to
be CBI. For CBI information in a disk or CD-ROM that you mail to EPA,
mark the outside of the disk or CD-ROM as CBI and then identify
electronically within the disk or CD-ROM the specific information that
is claimed as CBI. In addition to one complete version of the comment
that includes information claimed as CBI, a copy of the comment that
does not contain the information claimed as CBI must be submitted for
inclusion in the official file. Information so marked will not be
disclosed except in accordance with procedures set forth in 40 CFR part
2.
III. Statutory and Executive Order Reviews
The Office of Management and Budget (OMB) has exempted this
regulatory action from Executive Order 12866, ``Regulatory Planning and
Review.'' (58 FR 51735 (October 4, 1993)). This proposed rule is not a
``significant energy action'' as defined in Executive Order 13211,
``Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use'' (66 FR 28355 (May 22, 2001)), because it
is not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This proposed action merely proposes to
approve state law as meeting Federal requirements and imposes no
additional requirements beyond those imposed by state law. Accordingly,
the Administrator certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because
this rule proposes to approve pre-existing requirements under state law
and does not impose any additional enforceable duty beyond that
required by state law, EPA has determined that this rule does not
contain a Federal mandate that may result in expenditures of $100
million or more for State, local, or tribal governments in the
aggregate, or on the private sector, in any one year. Thus, today's
rule is not subject to the requirements of sections 202 and 205 of the
Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4). In
addition, EPA has determined that this rule contains no regulatory
requirements that might significantly or uniquely affect small
governments in accordance with section 203 of UMRA.
This proposed rule also does not have tribal implications because
it will not have a substantial direct effect on one or more Indian
tribes, on the relationship between the Federal Government and Indian
tribes, or on the distribution of power and responsibilities between
the Federal Government and Indian tribes, as specified by Executive
Order 13175, ``Consultation and Coordination with Indian Tribal
Governments'' (65 FR 67249, (November 9, 2000)). This action also does
not have federalism implications because it does not have substantial
direct effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in Executive Order 13132, ``Federalism'' (64 FR 43255, (August 10,
1999)). This action merely proposes to approve a state rule
implementing a Federal standard, and does not alter the relationship or
the distribution of power and responsibilities established in the Clean
Air Act. This proposed rule also is not subject to Executive Order
13045, ``Protection of Children from Environmental Health Risks and
Safety Risks'' (62 FR 19885, (April 23, 1997)). EPA interprets
Executive Order 13045 as applying only to those regulatory actions that
are based on health or safety risks, such that the analysis required
under section 5-501 of the Order has the potential to influence the
regulation. This proposed rule is not subject to Executive Order 13045
because it approves a state program.
Section 12 of the National Technology Transfer and Advancement Act
(NTTAA) of 1995 (15 U.S.C. 272 note) requires Federal agencies to
evaluate existing technical standards when developing a new regulation.
To comply with NTTAA, EPA must consider and use ``voluntary consensus
standards'' (VCS) if available and applicable when developing programs
and policies unless doing so would be inconsistent with applicable law
or otherwise impractical. In reviewing a SIP submission, EPA has no
authority under the Clean Air Act, in the absence of a prior existing
requirement for the State to use VCS, to disapprove a SIP submission
for failure to use VCS. Thus, it would be inconsistent with applicable
law for EPA to use VCS in place of a SIP submission that otherwise
satisfies the provisions of the Clean Air Act and further consideration
of VCS is not required. Under the Paperwork Reduction Act (PRA) (44
U.S.C. 3501 et seq.), OMB must approve all ``collections of
information'' by EPA. The Act defines ``collection of information'' as
a requirement for ``answers to * * * identical reporting or
recordkeeping requirements imposed on ten or more persons.'' (44 U.S.C.
3502(3)(A)). This proposed rule does not impose an information
collection burden under the provisions of the PRA.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Intergovernmental
relations, Nitrogen oxides, Ozone, Reporting and recordkeeping
requirements, Volatile organic compounds.
Authority: 42 U.S.C. 7401 et seq.
[[Page 58146]]
Dated: September 27, 2005.
Richard E. Greene,
Regional Administrator, Region 6.
[FR Doc. 05-19996 Filed 10-4-05; 8:45 am]
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