Approval and Promulgation of Implementation Plans; Texas; Permitting of New and Modified Sources in Nonattainment Areas

Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: January 18, 2000 (Volume 65, Number 11)]
[Proposed Rules]
[Page 2560-2573]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18ja00-20]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[TX-100-7390; FRL-6524-4]

Approval and Promulgation of Implementation Plans; Texas;
Permitting of New and Modified Sources in Nonattainment Areas

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The EPA proposes to approve revisions to the Texas State
Implementation Plan (SIP). The revisions concern the permitting of new
major sources and major modifications in areas which do not meet the
national ambient air quality standards (NAAQS) promulgated by EPA
(nonattainment areas). The EPA proposes to approve these revisions to
satisfy the provisions of the Clean Air Act (Act) which relate to the
permitting of new and modified sources which are located in
nonattainment areas.

DATES: Comments must be received on or before February 17, 2000.

ADDRESSES: Written comments should be addressed to Ms. Jole C. Luehrs,
Chief, Air Permits Section, at the EPA Region 6 Office listed below.
Copies of documents relevant to this action are available for public
inspection during normal business hours at the following locations.
Anyone wanting to examine these documents should make an appointment
with the appropriate office at least two working days in advance.

Environmental Protection Agency, Region 6, Air Planning Section
(6PD-L), 1445 Ross Avenue, Dallas, Texas 75202-2733.
Texas Natural Resource Conservation Commission, Office of Air
Quality, 12124 Park 35 Circle, Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: Stanley M. Spruiell of EPA Region 6
Air Permits Section at (214) 665-7212 at the address above, or at
spruiell.stanley@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, wherever we, us,
or our are used, we mean EPA.

Table of Contents

I. General Overview of Texas Nonattainment Permitting Regulations
A. What are we proposing to approve in this action?
B. Who is affected by this action?
C. What are the major source thresholds for nonattainment
pollutants?
D. What is a major modification?
E. What are the requirements for permitting new and modified
sources in nonattainment areas?
II. Review of Texas' Regulations for Permitting Major Sources and
Major Modifications in Ozone Nonattainment Areas
A. What does the current Texas SIP require?
B. What SIP revisions did Texas submit?
C. Summary of Texas 182(f) NO_X Waivers
1. What does section 182(f) of the Act require?
2. Did we approve NOX waivers in Texas?
3. What is the current status of Texas NO_X waivers?
4. Texas Rule Changes to Accommodate Section 182(f)
NO_X Waivers
D. Texas' NSR Provisions for Implementing Special Provisions for
Ozone Nonattainment Area Permitting under Sections 182(c)(6), (7),
and (8)
1. The De Minimis Rule in Section 182(c)(6) of the Act
2. Texas Five TPY Netting Trigger
3. Texas Definition of ``Contemporaneous Period'' under Section
182(f) of the Act
4. Special Modification Rules in Sections 182(c)(7) and (8) of
the Act
E. Other Revisions Affecting NSR Permitting in Nonattainment
Areas
1. Definition of ``De Minimis threshold test''
2. Definition of ``major modification''
3. Definition of ``net emission increase''
4. Definition of ``offset ratio''
5. Definition of ``potential to emit''
6. Definition of ``stationary source''
III. Individual SIP Submittals Acted Upon in This Document
IV. Request for Public Comments
V. Administrative Requirements

I. General Overview of The Texas Nonattainment Permitting
Regulations

We propose to approve the recodification of and revisions to the
Texas SIP relating to revisions to Title 30, Texas Administrative Code
(TAC) Chapter 116, ``Control of Air Pollution by Permits for New
Construction or Modification,'' as indicated in Table 1 below:

Table 1.--SIP Regulations Submitted by Texas to EPA
------------------------------------------------------------------------
Section in 30 TAC chapter 116 Title/(Subject)
------------------------------------------------------------------------
116.12....................... Nonattainment Review Definitions.
116.150...................... New Major Source or Major Modification in
Ozone Nonattainment Area.
116.151...................... New Major Source or Major Modification in
Nonattainment Area Other than Ozone.
116.170...................... Applicability for Reduction Credits.
116.170(1)................... (Emission reductions not required by
State Implementation Plan or other
Federal requirements).

[[Page 2561]]

116.170(3)................... (Offset provisions for emission increases
from rocket engine or motor firing).
------------------------------------------------------------------------

This proposal includes portions of revisions submitted by the
Governor of Texas to EPA on the following dates:
August 31, 1993
November 1, 1995
July 18, 1996
April 13, 1998
March 16, 1999
We are taking this rulemaking action under sections 110, 301 and
part D of the Act. As explained in the following section, we are acting
only on those parts of these submittals which relate to permitting
sources in nonattainment areas.

A. What Are We Proposing To Approve in This Action?

We propose to approve regulations submitted by Texas that satisfy
provisions of the Act that pertain to permitting major sources and
major modifications in areas in Texas that do not meet the ambient air
quality standards adopted by EPA.
Table 2 below identifies the regulations that we propose to
approve:

Table 2.--Regulations That EPA Proposes to Approve
----------------------------------------------------------------------------------------------------------------
Recodified 30 TAC chapter Submittal dates of recodified
116 section Title or description Former rule
----------------------------------------------------------------------------------------------------------------
116.12................... August 31, 1993................ Nonattainment Review 101.1.
July 18, 1996.................. Definitions.
April 13, 1998.................
March 16, 1999.................
116.150.................. August 31, 1993................ New Major Source or Major 116.3(a)(7) and (8).
November 1, 1995............... Modification in Ozone
April 13, 1998................. Nonattainment Areas.
March 16, 1999.................
116.151.................. August 31, 1993................ New Major Source or Major 116.3(a)(10).
April 13, 1998................. Modification in
Nonattainment Area Other
than Ozone.
116.170.................. August 31, 1993................ Applicability for 116.3(c).
Reduction Credits.
----------------------------------------------------------------------------------------------------------------

We propose to approve only those provisions of the individual SIP
submittals which relate to the permitting sources in nonattainment
areas. We will act on the remaining provisions in a separate action.

B. Who Is Affected by This Action?

These State regulations apply to each owner and/or operator who
constructs or modifies a stationary source in a nonattainment area in
Texas if the stationary source is major for the air pollutant for which
the area is nonattainment. A stationary source is major if it emits, or
has the potential to emit, the nonattaining pollutant, or precursor
thereto, in amounts greater than the major source threshold for the
nonattaining pollutant.

C. What Are the Major Source Thresholds for Nonattainment Pollutants?

The major source threshold varies, depending on the pollutant and
the classification of the nonattainment area. Any owner or operator who
proposes to construct a major stationary source must obtain a permit
which complies with the regulations that we are proposing to approve
herein. Table 3 below lists the major source threshold for each
pollutant.

Table 3.--Major Source Thresholds
------------------------------------------------------------------------
Major source Where specified in
Pollutant: Classification threshold the Act
------------------------------------------------------------------------
Ozone:
marginal.................... 100 TPY........... Section 302(j)
moderate.................... 100 TPY........... Section 302(j)
serious..................... 50 TPY............ Section 182(c)
severe...................... 25 TPY............ Section 182(d)
CO:
Moderate.................... 100 TPY........... Section 302(j)
Serious..................... 50 TPY............ Section 187(c)(1)
PM-10:
Moderate.................... 100 TPY........... Section 302(j)
Serious..................... 70 TPY............ Section 189(b)(3)
SO2......................... 100 TPY........... Section 302(j)
NO_X......................... 100 TPY........... Section 302(j)
Lead........................ 100 TPY........... Section 302(j)
------------------------------------------------------------------------

[[Page 2562]]

Table 3 refers to classifications for areas designated
nonattainment for ozone, carbon monoxide (CO), and particulate matter
less than 10 micrometers (PM-10). These nonattainment classifications
are defined in the Act as follows:
Section 181(a) defines five area classifications for
ozone. These five classifications are marginal, moderate, serious,
severe, and extreme. Texas has no extreme ozone nonattainment areas and
does not address such areas in its regulations.
Section 186(a) defines two area classifications for CO.
These two classifications are moderate and serious.
Section 188 defines two area classifications for PM-10.
These two classifications are moderate and serious.
A detailed description of the individual area classifications for
ozone, CO, and PM-10 nonattainment areas is contained in EPA's General
Preamble for the Implementation of Title I of the 1990 Amendments, 57
FR 13498 (April 16, 1992).

D. What is a Major Modification?

A major modification is any physical change, or change in the
method of operating a major stationary source which significantly
increases net emissions of the air pollutant, or precursor, for which
the area is nonattainment and which the source is a major source before
the modification.
Any owner or operator who proposes a major modification must obtain
a permit that complies with the regulations that we are proposing to
approve. Table 4 below lists the significance level for each pollutant
which is used in determining whether a net emissions increase is a
major modification.

Table 4.--Significance Levels for Major Modifications
------------------------------------------------------------------------
Where specified in
Pollutant: Classification Significance level the Act or
Regulations
------------------------------------------------------------------------
Ozone:
Marginal.................... 40 tons per year 40 CFR
(TPY). 51.165(a)(x)
Moderate.................... 40 TPY............ 40 CFR
51.165(a)(x)
Serious..................... 25 TPY............ Section 182(c)(6)
of the Act
Severe...................... 25 TPY............ Section 182(c)(6)
of the Act
CO:
Moderate.................... 100 TPY........... 40 CFR
51.165(a)(x)
Serious..................... 50 TPY............ ( \a\)
PM-10:
Moderate.................... 15 TPY............ ( \a\)
Serious..................... 15 TPY............ ( \a\)
SO2............................. 40 TPY............ 40 CFR
51.165(a)(x)
NO_X............................. 40 TPY............ 40 CFR
51.165(a)(x)
Lead............................ 0.6 TPY........... 40 CFR
51.165(a)(x)
------------------------------------------------------------------------
\a\ No significance level is specified in the Act nor in the
regulations. The significance levels specified in Table 3 are the
significance levels the we approved for Texas on September 27, 1995
(60 FR 49781).

E. What Are the Requirements for Permitting New and Modified Sources in
Nonattainment Areas?

The Act sets out the air quality planning requirements for
nonattainment NSR in part D of title I. We have issued a ``General
Preamble'' which describes our preliminary views for reviewing SIPs and
SIP revisions submitted under part D.\1\ This includes SIP submittals
with nonattainment area permitting requirements in section 173 of the
Act. Table 5 below identifies these requirements and how Texas
addresses the requirements in its revised regulations.
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\1\1 See 57 FR 13498 (April 16, 1992) and 57 FR 18070 (April 28,
1992).

Table 5.--Summary of Requirements for Permitting Major Sources and Major Modifications in Nonattainment Areas
----------------------------------------------------------------------------------------------------------------
Where addressed in Former State regulation
The Act Citation and description of requirement recodified State Regulation before recodification^a
----------------------------------------------------------------------------------------------------------------
Sec. 173(a)(1)(A). Base emissions offsets on the Sec. 116.150(a)(4); Sec. Sec. 116.3(a)(7)(C); Sec.
same emissions baseline used in the demonstration of 116.151(3). 116.3(a)(10)(D)
reasonable further progress.
Sec. 173(a)(2). Apply Lowest Achievable Emission Sec. 116.150(a)(1); Sec. Sec. 116.3(a)(7)(A); Sec.
Rate (LAER). 116.151(1). 116.3(a)(10)(A)
Sec. 173(a)(3). Demonstrate that all other major Sec. 116.150(a)(2); Sec. Sec. 116.3(a)(7)(B); Sec.
stationary sources under the same ownership or 116.151(2). 116.3(a)(10)(B)
operation in the State are complying with the Act.
Sec. 173(a)(4). State cannot issue a permit if the The EPA has made no such determination for Texas. If EPA
EPA Administrator finds that the State is not makes this determination in the future, EPA will address
adequately enforcing the provisions of the this matter with Texas at that time.
applicable implementation plan for the nonattainment
area in which the source proposes to construct or
modify.
Sec. 173(a)(5):

[[Page 2563]]

Analyze alternative sites, sizes, Sec. 116.150(a)(4); Sec. Sec. 116.3(a)(7)(D); Sec.
production processes, and environmental control 116.151(4). 116.3(a)(10)(E)
techniques for proposed sources
Demonstrate that the benefits of the
proposed source significantly outweigh the
environmental and social costs associated with
its location, construction, or modification
Sec. 173(b) Prohibits use of growth allowance Not Applicable.............. Not Applicable
included in a SIP prior to the Act Amendments of
1990 in an area which receives notice that such plan
is substantially inadequate.
Sec. 173(c)(1). A sources may obtain offsets in
another nonattainment area under the following
conditions:
The area in which the offsetting Sec. 116.150(a)(3); Sec. Sec. 116.3(a)(7)(C); Sec.
reductions originate has an equal or higher 116.151(3). 116.3(a)(10)(D)
nonattainment classification, and
The emissions from the nonattainment
area where the offsetting reductions originate
will contribute to a National Ambient Air
Quality Standards (NAAQS) violation in the area
in which the source would construct.
Sec. 173(c)(1). A new or modified major stationary Sec. 116.150(a)(3); Sec. Sec. 116.3(a)(7)(C); Sec.
source must offset a proposed emissions increase 116.151(3); Sec. 116.3(a)(10)(D)
with real reductions in actual emissions. 116.12(14)--Definition of
``Offset ratio''.
Sec. 173(c)(2). Must not use emission reductions Sec. 116.170(1)............ Sec. 116.3(c)(1)
otherwise required by the Act.
Sec. 173(e). A State may allow any existing or Sec. 116.170(3)............ Sec. 116.3(c)(3)
modified source that tests rocket engines or motors
to use alternative or innovative means to offset
emissions increases from firing and related
cleaning.^b.
----------------------------------------------------------------------------------------------------------------
^a All Sections cited in this column are Sections that EPA approved on September 27, 1995 (60 FR 49781).
^b This type of source may use alternative or innovative offsetting if it satisfies the following conditions:
(a) the proposed modification is for expansion of a facility already permitted for such purposes as of November
15, 1990;
(b) the source has used all available offsets and all reasonable means to obtain offsets and sufficient offsets
are not available;
(c) the source has obtained a written finding by the appropriate, sponsoring Federal agency that the testing is
essential to national security; and
(d) the source will comply with an alternative measure designed to offset any emissions increases not directly
offset by the source.
The Act further provides an alternative to the above. The permitting authority may require an emission fee
amounting to no more than 1.5 times the average cost of stationary control measures adopted in that area
during the previous three years.

II. Review of Texas' Regulations for Permitting Major Sources and
Major Modifications in Ozone Nonattainment Areas

A. What Does the Current Texas SIP Require?

We approved the Texas SIP for permitting major sources and major
modifications in ozone nonattainment areas on September 27, 1995 (60 FR
49781). We approved the regulations after we determined that they meet
the requirements of title I, part D, subpart 2 of the Act.
The current SIP addresses ozone nonattainment area permitting in
section 116.3(a)(7). This section includes the provisions described in
Table 5 of this preamble and meets the requirements of sections 173 and
182 of the Act.
Section 182 of the Act provides special provisions for ozone
nonattainment areas. This section specifies individual major source
thresholds for marginal, moderate, serious, severe and extreme ozone
nonattainment areas. See Table 3 in section I.C of this preamble for a
list of the individual major source thresholds.
Section 182 also specifies the offset ratios that are required for
marginal, moderate, serious, severe and extreme ozone nonattainment
areas. Table 6 below lists the applicable offset ratio for each type of
ozone nonattainment area.

Table 6.--Offset Ratios for Each Type of Ozone Nonattainment Area
------------------------------------------------------------------------
Clean Air Act
Ozone nonattainment Offset ratio citation for
classification offset ratio
------------------------------------------------------------------------
marginal........................ 1.10 to 1......... Section 182(a)(4).
moderate........................ 1.15 to 1......... Section 182(b)(5).
serious......................... 1.20 to 1......... Section
182(c)(10).
severe.......................... 1.30 to 1......... Section 182(d)(2).
Extreme......................... 1.50 to 1......... Section 182(e)(1).
------------------------------------------------------------------------

The current SIP includes major source thresholds and the offset
ratios in Table I of Section 116.12. In Table I, the applicable offset
ratio of volatile organic compounds (VOC) or NO_X is the same
as required by the above stated sections of the Act.
Finally, the current SIP includes provisions pertaining to the use
of emission reduction credits as offsets and special provisions for
offsetting emissions increases at facilities which test rocket engines
and motors in section 116.3(c)(1) and (3).

B. What SIP revisions did Texas submit?

Texas recodified Chapter 116 and submitted the recodified
regulation to EPA in August 31, 1993. The recodified regulation also
revised Texas' provisions for implementing section 182(c)(6) of the
Act.

[[Page 2564]]

Subsequent to the recodification, Texas submitted revisions to
waive the requirement to address NOX as a precursor to ozone on
November 1, 1995; July 18, 1996; and April 13, 1998. On April 13, 1998,
Texas submitted a revision to further modify its provisions for
implementing section 182(c)(6) and to incorporate the provisions of
sections 182(c)(7) and (8) of the Act.
Texas also submitted revised definitions of

``major modification,''
``net emissions increase,'' and
``potential to emit'';

and submitted new definitions for

``de minimis threshold test,''
``offset ratio,''
``project net,'' and
``stationary source''

We will discuss the Texas nonattainment permitting provisions as
outlined below:
Section C discusses Texas' plan to implement the NOX
waivers approved by EPA under section 182(f) of the Act,
Section D discusses Texas' regulation for implementing
section 182(c)(6), (7) and (8) of the Act, and
Section E discusses the new and revised nonattainment
permitting definitions.

C. Summary of Texas 182(f) NOX Waivers

1. What Does Section 182(f) of the Act Require?
Section 182(f) sets forth the presumption that NOX is an ozone
precursor unless the Administrator makes a finding of nonapplicability
or grants a waiver pursuant to criteria contained therein.
Specifically, section 182(f) provides that requirements applicable for
major stationary sources of VOC shall apply to major stationary sources
of NOX, unless otherwise determined by the Administrator, based upon
certain determinations related to the benefits or contribution of NOX
control to air quality, ozone attainment, or ozone air quality.
2. Did We Approve NOX waivers in Texas?
We approved petitions submitted by Texas under section 182(f) to
waive NOX provisions in Texas, as follows:
On November 28, 1994, we conditionally approved two
petitions from Texas, each dated June 17, 1994. This action exempted
Dallas-Fort Worth (DFW) \2\ and El Paso (ELP) \3\ ozone nonattainment
areas from NOX control requirements of section 182(f) of the Act. See
59 FR 60709.
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\2\ Includes the following Texas counties: Collin, Dallas,
Denton, and Tarrant Counties in Texas
\3\ Includes El Paso County in Texas.
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On April 19, 1995, we approved a petition from Texas dated
August 17, 1994. This action temporarily exempted the Houston-Galveston
(HGA) \4\ and Beaumont-Port Arthur (BPA) \5\ ozone nonattainment areas
from the NOX control requirements of section 182(f) of the Act. These
temporary exemptions expired December 31, 1996. See 60 FR 19515.
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\4\ Includes the following Texas counties: Brazoria, Chambers,
Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller.
\5\ Includes the following Texas counties: Hardin, Jefferson,
and Orange Counties.
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On May 23, 1997, we approved a petition from Texas dated
March 8, 1996, to extend the NOX waiver in HGA and BPA until December
31, 1997. See 62 FR 28344.
On April 20, 1999, we approved a petition from Texas dated
November 13, 1998, to rescind the conditional NOX exemption for the DFW
ozone nonattainment area. Texas petitioned for rescission of the
exemption after EPA reclassified DFW from a moderate ozone
nonattainment area to a serious ozone nonattainment area. The modeling
for this serious ozone nonattainment area SIP shows that control of NOX
sources will help the area to attain the air quality standard for
ozone. See 64 FR 19283.
3. What Is the Current Status of Texas NOX Waivers?
On December 31, 1997, the NOX waiver in HGA and BPA expired. On
February 12, 1998, we published a document in the Federal Register
concerning Texas' decision not to petition for further extension of the
NOX exemption in the HGA and BPA areas. See 63 FR 7071. Since the
extension of the temporary exemption expired on December 31, 1997, the
State must implement the numerous requirements relating to NOX in the
HGA and BPA areas. Accordingly, any NSR permits that Texas had not
deemed to be complete prior to January 1, 1998, must comply with the
NOX NSR requirements, consistent with the policy set forth in the EPA's
NSR Supplemental Guidance memorandum dated September 3, 1992, from John
Seitz, Director, EPA's Office of Air Quality Planning and Standards.
On February 18, 1998, we published our finding that the DFW
nonattainment area has not attained the 1-hour ozone NAAQS by the
applicable attainment date in the Act for moderate ozone nonattainment
areas, November 15, 1996. We based the finding on the review of
monitored air quality data from 1994 through 1996 for compliance with
the 1-hour ozone NAAQS. As a result of this finding, the DFW ozone
nonattainment area was reclassified by operation of law as a serious
ozone nonattainment area, effective March 20, 1998. Texas was required
to submit a new SIP, no later that March 20, 1999, addressing
attainment of that standard by November 15, 1999. Texas submitted a
revised plan on March 16, 1999, in satisfaction of this requirement.
In its revised plan, Texas again recognizes NOX as an ozone
precursor in the DFW nonattainment area. Texas also forwarded a
petition to us on November 13, 1998, requesting that we withdraw the
waiver for NOX that we had approved on November 28, 1994, for the DFW
nonattainment area. On April 20, 1999, we approved this petition and
reinstated NOX as an ozone precursor in the DFW nonattainment area.
4. Texas Rule Changes To Accommodate Section 182(f) NO_X
Waivers
Texas submitted the following SIP revisions to incorporate the
section 182(f) NO_X waivers and subsequent reinstatement for
NO_X as an ozone precursor:
On November 1, 1995, Texas submitted revisions to section
116.150 to implement the NO_X waivers approved for the DAL,
ELP, HGA, and BPA ozone nonattainment areas. On July 18, 1996, Texas,
submitted revisions to Table I in section 116.12 \6\ to remove
NO_X as an ozone precursor, consistent with EPA's approval of
the NO_X waivers.
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\6\ Table I of section 116.12 specifies the various
classifications of nonattainment along with the associated emission
levels which designate a major modification for those areas. A
detailed discussion of the changes to Table I is included in section
of the preamble describing the submitted definition of ``major
modification.''
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On April 13, 1998, Texas submitted revisions to sections
116.12 (Table I)and 116.150(c), to reinstate NO_X as an ozone
precursor in the HGA and BPA areas following the expiration of the
temporary waivers for those areas on December 31, 1997.
On March 16, 1999, Texas submitted revisions to sections
116.12 (definition of ``major modification'' and Table I) and
116.150(b), to reinstate NO_X as an ozone precursor in the
DFW area.
The above described revisions to section 116.150 are discussed in
the following paragraphs.
a. What are Texas' provisions for addressing NO_X Waivers
in DFW and ELP? Texas addresses the NO_X waivers for DFW and
ELP in section 116.150(b) submitted November 1, 1995. Section
116.150(b) is consistent with the NO_X

[[Page 2565]]

waiver approved by EPA on November 28, 1994. Following the
redesignation of DFW to a serious ozone nonattainment area, Texas
revised section 116.150(b) to revoke applicability of the
NO_X waiver in DFW. As revised, section 116.150(b) now only
identifies ELP as the only area in Texas where a section 182(f) waiver
continues to apply. Texas submitted these revisions to section
116.150(b) on March 16, 1999.
b. What are Texas' provisions for addressing NO_X Waivers
in HGA and BPA? Texas addresses the NO_X waivers for HGA and
BPA in section 116.150(c) submitted November 1, 1995. This Section
temporarily removes the requirements relating to NO_X
emissions (as an ozone precursor) in these areas.
Section 116.150(c) exempts NO_X from otherwise applicable
nonattainment area permitting requirements \7\ (except for
NO_X offsets). The requirements for obtaining NO_X
offsets continue to apply, and will be included in the source's permit.
However, the requirement to obtain such offsets is held in abeyance
until January 1, 1998.
---------------------------------------------------------------------------

\7\ Section 116.150(c) exempts NO_X from the
application of lowest achievable emission rate, statewide compliance
by all sources under common control with the applicant, and
alternate site analysis, which are otherwise required by section
116.150(a)(1), (2), and (4), respectively.
---------------------------------------------------------------------------

Section 116.150(c) further requires a source to document any
proposed increase of NO_X equal to or greater than 40 TPY and
submit documentation of netting calculations associated with the
proposed increase, and the source must otherwise comply with the
requirements of sections 116.150(a)(1)-(4). The requirements of
sections 116.150(a)(1)-(4) are discussed in sections I.C and II.D of
this preamble.
Texas submitted further revisions to section 116.150(c) on April
13, 1998. This submittal reinstates the NSR requirements for
NO_X in HGA and BPA, effective January 1, 1998. The submittal
further provides that sources with NO_X offsets in the HGA
and BPA areas held in abeyance shall obtain the required NO_X
offsets no later than January 1, 2000.
The provisions of section 116.150(b) and (c), submitted November 1,
1995; and revisions submitted April 13, 1998, and March 16, 1999; are
consistent with the NO_X waivers approved by EPA for DFW,
ELP, HGA, and BPA on November 28, 1994; April 19, 1995; and May 23,
1997; pursuant to section 182(f) of the Act. The revisions submitted
April 13, 1998, reinstate the NO_X requirements in HGA and
BPA consistent with the December 31, 1997, expiration of the
NO_X waiver in those areas. The revisions submitted March 16,
1999, reinstate the NO_X requirements in DFW.

D. Texas' NSR Provisions for Implementing Special Provisions for Ozone
Nonattainment Area Permitting Under Sections 182(c)(6), (7), and (8).

Sections 182(c)(6), (7), and (8) of the Act apply in serious and
severe ozone nonattainment areas. \8\ \9\ Section 182(c)(6) sets forth
procedures for determining whether a physical or operational change at
an existing major stationary source would be subject to the
nonattainment area permit requirements. Section 182(c)(7) and (8)
establish special provisions for permitting sources if the source
internally offsets its proposed increase resulting from a major
modification. Following is a discussion of how Texas' regulations meet
the provisions of sections 182(c)(6), (7), and (8) of the Act.
---------------------------------------------------------------------------

\8\ Section 181(a) defines five area classifications for ozone
based on ambient ozone concentrations (ozone design values). These
five classifications (in ascending order of severity) are marginal,
moderate, serious, severe, and extreme.
A detailed description of the individual area classifications
for ozone nonattainment areas is contained in the EPA's General
Preamble for the Implementation of Title I of the 1990 Amendments.
\9\ Subsection 182(c) of the Act, including paragraphs (6), (7),
and (8) therein, sets forth special provisions applicable in serious
ozone nonattainment areas. Subsection 182(d) of the Act incorporates
the provisions of subsection 182(c) as applicable requirements for
severe ozone nonattainment areas.
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Section 1 below addresses the de minimis rule in section 182(c)(6)
of the Act. Section 2 addresses the special provisions in sections
182(c)(7) and (8) of the Act.
1. The De Minimis Rule in Section 182(c)(6) of the Act
a. What is the de minimis rule? Section 182(c)(6) of the Act
applies in serious and severe ozone nonattainment areas. It specifies
an approach for determining whether a proposed modification is subject
to nonattainment NSR. \10\ It states that increased emissions of VOC
(and presumably NO_X) resulting from any modification of a
major stationary source:
---------------------------------------------------------------------------

\10\ A thorough analysis of the de minimis rule in section
182(c)(6) and EPA's interpretations of this section is contained in
the proposed NSR reform rulemaking published July 23, 1996 (61 FR
38298).

``. . . shall not be considered de minimis for purposes of
determining the applicability of the permit requirements established
by this chapter unless the increase in net emissions of such air
pollutant from such source does not exceed 25 tons when aggregated
with all other net increases in emissions from the source over any
period of 5 consecutive calendar years which includes the calendar
---------------------------------------------------------------------------
year in which such increase occurred . . .''

This provision changes the process for determining applicability at
existing major sources as follows:
It changes the significance level for VOC emissions from
40 TPY to ``greater than 25 TPY,'' i.e., 25 TPY or less is de minimis.
It specifies a slightly different ``contemporaneous''
period, and
It departs from the ``non-aggregation'' policy \11\ to
require netting over the contemporaneous period in all instances where
there is a net increase in emissions from the proposed modification
standing alone.
---------------------------------------------------------------------------

\11\ EPA's nonaggregation policy provides that a proposed
modification resulting in a de minimis increase is not major. This
applies when the proposed increase in emissions standing alone
without considering any decreases associated with the proposed
modification is less than the applicable significance threshold. See
Table 4 for a list of the significance thresholds. In such case, a
source does not consider previous contemporaneous emission increases
and decreases to determine if its proposed project is major. This
policy is discussed in detail in an EPA memorandum dated June 3,
1983 entitled ``Net Emission Increase Under PSD'' from Sheldon
Myers, Director, Office of Air Quality Planning and Standards.
Section 182(c)(6) of the Act is a departure from this
interpretation.
---------------------------------------------------------------------------

Neither the Act itself nor the current Federal regulation defines
what constitutes a ``net increase'' as provided in the de minimis rule.
However, in the proposed NSR reform rulemaking (see footnote 10), we
proposed a procedure for determining the net increase in emissions
under section 182(c)(6) and applicability of the de minimis rule. Under
this proposal, a source determines applicability of nonattainment new
source review (NNSR) as follows:
(1) It determines the ``increase in net emissions'' from the
proposed modification. The net emissions from the proposed modification
(referred to here as the ``project net'') is the sum of all proposed
creditable emissions increases and decreases proposed at the source
between: (A) the date of application for the modification and (B) the
date the modification begins emitting. An increase or decrease is
creditable if it meets the criteria described in 40 CFR
51.165(a)(1)(vi).
(2) If the project net is an emissions increase, then the source
aggregates the project net emissions increase with all other ``net
increases in emissions from the source'' over a period of five
consecutive calendar years which includes the year in which the source
increase occurs. We refer to this aggregation as the contemporaneous
net. If the contemporaneous net increase is greater than 25 TPY, then
the proposed modification is subject to NNSR. (The

[[Page 2566]]

``contemporaneous period'' is discussed in greater detail in section
II.D.3.)
b. How does the current Texas SIP address the de minimis rule? On
September 27, 1995 (60 FR 49781), we approved revisions to Texas
Chapter 116--``Control of Air Pollution by Permits for New Construction
or Modification'' which included provisions pertaining to permitting
major sources and major modifications in nonattainment areas. We
approved these revisions based upon our determination that they satisfy
the provisions of title I, part D of the Act.
The Texas SIP currently incorporates the de minimis rule as
codified in the Act. As approved, the de minimis rule applies in
moderate, serious, and severe ozone nonattainment areas in Texas. Under
the current SIP-approved rule when a source proposes a physical or
operational change at an existing major source it must determine the
contemporaneous net emissions increase. The source makes this
determination by aggregating the proposed increase with all other
creditable increases and decreases during the previous five calendar
years, including the calendar year of the proposed change.
A source must currently undergo NNSR if the contemporaneous net
increase in VOC or NO_X equals or exceeds 40 TPY in moderate
ozone nonattainment areas or 25 TPY of VOC or NO_X in serious
and severe ozone nonattainment areas. See 30 TAC section 101.1
(definition of ``de minimis threshold''), section 116.3(a)(7), and
Table I in section 116.12.
c. What changes did Texas make to its de minimis rule? On August
31, 1993, Texas submitted a recodification of and revisions to Chapter
116 to EPA. The recodification and revisions submitted April 13, 1998,
include provisions which implement the de minimis rule.
As submitted, Texas made two changes to section 116.150 (formerly
section 116.3a(7)) which relate to the de minimis rule in section
182(c)(6) of the Act. These changes are:
(1) The proposed project triggers contemporaneous netting (the
``netting trigger'') unless at least one of the following conditions
are met:

--the proposed increase is less than five TPY without consideration of
other decreases at the source, or
--the ``project net'' \12\ is zero or less.

\12\ Texas submitted a revision on April 13, 1998, to include a
provision to trigger contemporaneous netting on the basis of any
increase in ``project net.''
---------------------------------------------------------------------------

(2) Texas specifies a different contemporaneous time period over
which a source may aggregate creditable increases and decreases to
determine its contemporaneous net emission increase.
On the basis of information gathered in 1995, we believe that the
submitted regulation meets the de minimis requirements of section
182(c)(6) of the Act, even with provisions that are not verbatim to the
Act. The basis for this conclusion is discussed in the following
sections of this preamble. Section 2 addresses the five TPY netting
trigger and section 3 addresses the contemporaneous period.
2. Texas Five TPY Netting Trigger
a. How does a source trigger contemporaneous netting under Texas'
regulations? As submitted August 31, 1993, section 116.150(a) requires
the de minimis threshold test (which includes contemporaneous netting)
for all proposed VOC and NO_X emission increases that equal
or exceed five TPY in moderate, serious, and severe ozone nonattainment
areas. On April 13, 1998, Texas submitted revisions to sections 116.12
and 116.150 to include a second netting trigger based upon the
``project net.'' The April 13, 1998, submittal also revised section
116.12 to add a new definition of ``project net'' (section 116.12(16)
consistent with EPA's policy as described in the NSR reform proposal.
This revision provides a second netting trigger. A source may trigger
contemporaneous netting on the basis of any increase in the ``project
net.'' Texas defines the project net as the total increase in emissions
resulting from a proposed physical or operational change at a
stationary source minus any creditable source wide decreases proposed
at the source between the date of application for the modification and
the date the resultant modification begins emitting. If the project net
is an increase, then the source aggregates the project net with all
other creditable increases and decreases in emissions from the source
over the contemporaneous period to determine the ``contemporaneous
net.'' As revised, section 116.150 now provides that a proposed project
triggers contemporaneous netting unless the project results in either:
(1) less than five TPY increase from the proposed project or (2) no
increase in project net.
b. Does the five TPY netting trigger meet the Act? As adopted by
Texas, the five TPY netting trigger is the sum of all increases which
occur as the result of the proposed project without consideration
(unlike the Federal counterpart) of any decreases. If these project
increases equal or exceed five TPY, the source must perform
contemporaneous netting, unless the project net is zero or less. For
reasons below, we conclude that the Texas five TPY netting trigger
meets the Act.
Under Alabama Power Company v. Costle, 636 F.2d 323 (D.C. Cir.
1979), the court held that we have the authority to recognize and
exempt inconsequential or trivial increases except where Congress has
unambiguously expressed an intention to preclude them. As discussed in
the proposed NSR reform rulemaking, we have determined that the term
``net increase'' in this context is ambiguous. We believe that Texas
has met its burden of demonstrating that the netting trigger of a five
TPY increase irrespective of decreases would ``yield a gain on trivial
or no value,'' id. at 357 and is appropriate to exempt as de minimis.
As explained below, the particular circumstances of this case
demonstrate why this increase meets the Act's de minimis rule.
In June 1995, we reviewed several permits issued by Texas in the
Houston/Galveston area (a severe ozone nonattainment area) to assess
Texas' five TPY netting trigger comparing it to the project net which
triggers the requirement to perform contemporaneous netting. In this
study, we evaluated which projects triggered contemporaneous netting
under Texas' five TPY trigger to those which triggered contemporaneous
netting based upon the project net increase. The study revealed that
all projects which triggered contemporaneous netting under the project
net would have triggered contemporaneous netting under the five TPY
increase.
The data reviewed in 1995 indicate that the five TPY netting
trigger meets the Alabama Power test and thus the statutory project
net. Facts which indicate this conclusion are discussed below.
The data show that it is unlikely that a source will be
able to indefinitely schedule projects with less than five TPY
increases. A project with a five TPY increase is an extremely small
project. It would be impractical for a source to indefinitely avoid
nonattainment NSR by constructing a series of projects less than five
TPY.
If a source triggers the requirement to perform
contemporaneous netting, it must include all creditable increases and
decreases in the calculation of the contemporaneous net emissions
increase. This includes any emission increases less than five TPY which
did not undergo nonattainment NSR.
The increases are inherently conservative. This is evident
when one examines the procedure for calculating the creditable
increases of a particular change. This creditable increase is the
change:

[[Page 2567]]

--From the old level of actual emissions
--To the new potential to emit (PTE) or the new allowable emission
rate, whichever is lower.

This is known as the ``actual to potential'' method for determining the
creditable increase. Typically, an emissions unit's actual emissions is
less than its PTE because the unit does not actually operate at maximum
production rate for an entire year. Thus the actual increase is less
than the creditable increase. The creditable increase consequently
represents a ``worst case'' scenario which the source cannot exceed
without violating its permit.
No matter how insignificant, the structure of the Texas program
necessarily requires the State to quantify and track these increases
for they remain perpetually within the contemporaneous window. Thus the
State assures compliance with the NAAQS. Further, these increases are
counted as minor source growth under section 173(a)(1)(A) of the Act.
Finally, we have approved a similar five TPY netting
trigger in Louisiana's nonattainment SIP. Louisiana's nonattainment
regulations apply in the Baton Rouge Area, a serious ozone
nonattainment area. The de minimis provisions of section 182(c)(6) of
the Act apply to this area. Louisiana's regulations likewise trigger
contemporaneous netting whenever a major source of VOC equals or
exceeds five TPY. We approved this regulation after careful
consideration of all aspects of its regulations, including the five TPY
netting trigger. See 62 FR 52948, published October 10, 1997.
These facts form the basis for the conclusion that the five TPY
netting trigger adopted by Texas is equivalent to and satisfies the
requirement of section 182(c)(6) of the Act and therefore meets the
Act.
3. Texas Definition of ``Contemporaneous Period'' under Section
182(c)(6) of the Act
a. What is the contemporaneous period in section 182(c)(6) of the
Act? Section 182(c)(6) of the Act provides that a particular physical
change or change in the method of operation is de minimis only if the
increase in net emissions of VOC or NO_X resulting from such
project does not exceed 25 TPY when aggregated with all other net
increases in emissions of VOC or NO_X from the source over
any period of five consecutive calendar years which includes the
calendar year in which such increase occurred.
b. What is the contemporaneous period in the current Texas SIP? The
currently approved SIP addresses the applicable contemporaneous period
in the definition of ``de minimis threshold'' in section 101.1 of the
General Rules, Table I of section 116.12, and in section 116.3(a)(7) of
Chapter 116. The SIP requires the following:
--Section 101.1 defines the term ``de minimis threshold'' as an
emission level determined by aggregating the proposed increase with all
other creditable increases and decreases during the previous five
calendar years, including the calendar year of the proposed change. The
total of this aggregation is de minimis if it is less than the
applicable major modification level (in TPY) for the specific
nonattainment area.
--Section 116.3(a)(7) requires

--a source to apply the de minimis threshold test to any proposed
increase of VOC or NO_X in moderate, serious, and severe
ozone nonattainment areas.
--The de minimis test thresholds are the same as the major modification
levels stated in Table I, but aggregated over the applicable five-year
netting period.
--The source must evaluate past net increases even when the proposed
increase is below the major modification level.

--Table I of section 116.12 specifies the various classifications
of nonattainment along with the associated emission levels which
designate a major modification for those areas. Table I specifies the
de minimis thresholds as 40 TPY of VOC in marginal and moderate ozone
nonattainment areas and 25 TPY of VOC in serious and severe ozone
nonattainment areas. We approved these provisions on September 27,
1995.
c. What changes did Texas make to its contemporaneous period? As
submitted August 31, 1993, Texas defined the term ``contemporaneous
period'' as described in the Table 7 below:

Table 7. Description of Texas' Contemporaneous Periods
------------------------------------------------------------------------
Contemporaneous period Contemporaneous
Pollutant begins period ends
------------------------------------------------------------------------
If source has PTE less than 250 TPY
------------------------------------------------------------------------
VOC........................... Five years before Date that new or
commencement of modified source
construction. begins
operation.
------------------------------------------------------------------------
NO_X........................... Latter of............. Date that new or
--November 15, 1992, modified source
or. begins
--Five years before operation.
commencement of
construction.
If source has PTE equal to or greater than 250 TPY
------------------------------------------------------------------------
VOC........................... The earlier of........ Date that new or
--Five years before modified source
commencement of begins
construction. operation.
--November 15, 1992...
NO_X........................... November 15, 1992..... Date that new or
modified source
begins
operation.
------------------------------------------------------------------------

On April 13, 1998, Texas submitted a revision to definition of
``contemporaneous period.'' Texas revised the definition to delete the
start of the contemporaneous period at five years prior to commencement
of construction for a source with a PTE of 250 TPY or greater. This
change is administrative in that it recognizes that as of the date of
the adoption of the revision (March 18, 1998), all permit applications
would be submitted after November 15, 1997, and the applicable
contemporaneous period would begin on November 15, 1992. This change
does not affect applications which were submitted prior to November 15,
1997, which must consider all creditable increases and decreases which
occur five years prior to the commencement of construction.
d. Does Texas' contemporaneous period meet the requirements of the
Act? The Texas definition of

[[Page 2568]]

``contemporaneous period'' does not track but meets the Act. To
determine whether Texas' definition ``contemporaneous period'' meets
the Act, we reviewed several permit files for sources permitted with
increases of VOC in Harris County, Texas (within the Houston/Galveston
region, a severe ozone nonattainment area). Following a thorough review
of the data, we have concluded that Texas' definition of
``contemporaneous period'' requires the same netting period established
in section 182(c)(6) of the Act and more.
A source with a PTE greater than or equal to 250 TPY performs
contemporaneous netting over a period which begins on the earlier of
the date five years prior to commencement of construction or November
15, 1992. The contemporaneous period ends when the proposed increase in
emission actually occurs. After November 15, 1997, the beginning date
of the contemporaneous period is ``tagged'' at November 15, 1992, for
all complete permit applications submitted after November 15, 1997.
Thus, after November 15, 1997, a proposed modification considers all
creditable increases and decreases which occur between November 15,
1992, and the date that the proposed increase in emissions occurs. This
will result in a longer contemporaneous period than specified in
section 182(c)(6) of the Act. This means that sources must demonstrate
that the contemporaneous net is satisfied over an even longer period
than that required by the Act.
For sources greater than 250 TPY, the tagged netting window
simplifies the netting process and facilitates a source's ability to
plan for the future by providing stability in the increases and
decreases that are creditable for netting. Such sources have numerous
options available for expansion by shutting down older, inefficient,
units or adding emission controls to the units. Furthermore, these
sources undertake numerous modifications each year. These numerous
modifications, combined with a ``moving'' five year contemporaneous
period would make the netting exercise difficult because increases and
decreases are continually moving in and out of the netting window.
The 1995 evaluation indicated a trend towards reductions in net
emissions as time passes. The data further indicate that all physical
and operational changes which we reviewed would have netted out of
review under both Texas' tagged contemporaneous period and under the
five year contemporaneous period specified in section 182(c)(6) of the
Act.
This trend towards achieving lower net emissions indicates that the
netting mechanism used by Texas is achieving beneficial results
inherent in reducing emissions. The reductions occur as a result of
lowering the significance threshold from 40 TPY to 25 TPY \13\ and from
lowering the netting trigger (which triggers the requirement for a
source to perform contemporaneous netting), from 40 TPY to five TPY.
---------------------------------------------------------------------------

\13\ Prior to November 15, 1992, the applicable significance
threshold for VOC was 40 TPY. See 40 CFR 51.165(a)(1)(x). The
requirement to perform contemporaneous netting was triggered
whenever a particular physical of operational change equaled or
exceeded 40 TPY. The source would then add the proposed increase to
all other contemporaneous increases and decreases to determine the
net emissions increase. If the resulting net emissions increase was
40 TPY or more, the proposed increase was subject to permitting
requirements applicable in ozone nonattainment areas.
---------------------------------------------------------------------------

In addition, the tagged contemporaneous period used by Texas is
more conservative than the five year period in the Act. The following
information illustrates the conservative nature of the tagged
contemporaneous period:
The tagged contemporaneous period benefits the environment
by encouraging emission reductions that would not otherwise occur.
Whenever a source proposes a physical or operational change, it must
demonstrate that its net emissions increase in emissions of VOC on
NO_X are below the applicable modification level in Table I
of section 116.12. Otherwise it must undergo nonattainment review. A
major source which undergoes several projects whose contemporaneous net
emissions increase is less than 25 TPY does not undergo nonattainment
review. Over time such source must demonstrate, with each physical or
operational change, that the net emissions increase is less than the
applicable modification level (Table I of section 116.12) over an
expanding contemporaneous period which begins November 15, 1992. By
retaining increases in the tagged contemporaneous period (which would
otherwise drop out after five years) a source must continue to account
for increases that did not undergo nonattainment review and were not
offset through the nonattainment review permitting process. This
growing data base of increases will necessarily provide incentive for a
source to achieve additional reductions to net against these increases.
This results in greater environmental benefits than would otherwise
occur in the five year moving contemporaneous period required by the
Act.
Decreases are more likely to be removed from the
contemporaneous period than increases. There are many ways that
decreases may be removed from creditability for netting. Examples of
decreases which will drop out of the contemporaneous period, because
they are no longer ``creditable'' are:

--A decrease that is subsequently used as reasonably available control
technology.
--decreases used to offset increases which undergo NNSR
--decreases used in the demonstration of attainment of the national
ambient air quality standard or in the demonstration of reasonable
further progress. See 30 TAC 116.12(13) in Texas' rules and 40 CFR
51.165(a)(1)(vi)(C)(3).

Increases, however, may only be removed from consideration in
subsequent netting if: (1) they undergo nonattainment permitting and
(2) are offset at the appropriate ratio specified in Table I of section
116.12.
Consistent with the above discussion, we believe that the tagged
contemporaneous period adopted by Texas meets the requirements of the
Act. We request comments on this proposal to approve Texas tagged
contemporaneous period for major sources with a PTE greater than 250
TPY of VOC.
For sources with a PTE less than 250 TPY, Texas adopted a
contemporaneous period which begins five years prior to commencement of
construction and ends when the proposed emission increase occurs. Texas
adopted a ``moving'' contemporaneous period rather than the tagged
contemporaneous period because these smaller sources do not have as
many netting opportunities as the larger sources. The moving window
provides smaller sources with greater flexibility for growth. The
contemporaneous period is identical to the contemporaneous period
specified in 40 CFR 52.21(b)(3)(ii) for determining applicability under
the Federal regulations for prevention of significant deterioration of
air quality. This contemporaneous period more closely approximates the
contemporaneous period in section 182(c)(6) of the Act, which requires
contemporaneous netting over a period of five consecutive calendar
years.
Our evaluation of data for several Texas sources indicated that all
projects which netted out of nonattainment review using Texas'
definition of ``contemporaneous period,'' would have netted out of
review using the netting period in the Act. The Technical Support
Document for today's proposal contains the data gathered by us and our
evaluation thereof. We conclude that the

[[Page 2569]]

contemporaneous period adopted by Texas meets the Act.
Texas further provides that for major sources of NO_X in
ozone nonattainment areas in which NO_X is an ozone
precursor, the contemporaneous period for NO_X shall begin no
earlier than November 15, 1992. In serious and severe ozone
nonattainment areas, the contemporaneous period is different from the
netting period in section 182(c)(6) of the Act. Prior to November 15,
1997, Texas' definition will provide for a shorter contemporaneous
period than the five consecutive calendar years specified in the Act.
However, Texas recognized the need to incorporate a transition period
because the Act does not require NO_X to be regulated as an
ozone precursor until after November 15, 1992.
We believe that the conclusions made for VOC will hold equally well
for the emissions of NO_X. Earlier discussions herein
illustrate that since November 15, 1992, a declining trend in the net
increases of VOC emissions in ozone nonattainment areas. Factors which
contribute to this trend are the lower significance threshold of 25 TPY
and the five TPY netting trigger. We believe that this trend will hold
true for net increases of NO_X and well as for VOC. After
November 15, 1997, NO_X increases will be treated the same as
VOC increases. At that time, the reasoning for proposing approval of
the contemporaneous period for VOC will hold true for proposing to
approve the contemporaneous period for NO_X. For sources with
a PTE of 250 TPY or more of NO_X, the tagged contemporaneous
period will continue to apply after November 15, 1997. As discussed
earlier in this preamble, the tagged contemporaneous period will result
in additional incentives for sources to reduce emissions of
NO_X than would otherwise occur in a moving five-year window.
The trend towards lower emissions in an ozone nonattainment area should
mitigate any affects caused by not including increases and decreases of
NO_X which occurred prior to November 15, 1992.
For the reasons described above, we consider the definition of
``contemporaneous period'' to be consistent with the Act and proposes
to approve this definition as submitted. We request comments concerning
Texas' definition of ``contemporaneous period.''
4. Special Modification Rules in Sections 182(c) (7) and (8) of the Act
a. What does the Act require in sections 182(c)(7) and (8)? These
sections establish special rules for a major stationary source located
in a serious or severe ozone nonattainment area. These sections apply
to a major source which undergoes a physical or operational change that
is not considered de minimis under section 182(c)(6). These subsections
offer sources options that may be more desirable than would otherwise
apply. Specifically, sections 182(c)(7) and (8) allow a major source to
internally offset its proposed increase of VOC or NO_X\14\ at
a ratio of 1.3 to 1. Obtaining this internal offset allows a source to:
---------------------------------------------------------------------------

\14\ Section 182(f)(1) of the Act provides that requirements
(which include the requirements of sections 182(c)(6), (7), and (8))
applicable for major stationary sources of VOC shall apply to major
stationary sources of NO_X, unless otherwise determined by
the Administrator, based upon certain determinations related to the
benefits or contribution of NO_X control to air quality,
ozone attainment, or ozone air quality. See section II.C.I of this
preamble for further discussion of the requirements of section
182(f)(1).
---------------------------------------------------------------------------

Avoid NSR entirely if the source emits, or has the
potential to emit, less than 100 tpy of the offset pollutant under
section 182(c)(7), or
Avoid application of Lowest Achievable Emission Rate if
the source emits, or has the potential to emit, 100 tpy or more of the
offset pollutant under section 182(c)(8).
A summary of the provisions of sections 182(c)(7) and (8) is in
Table 8 located in paragraph b below. Table 8 also compares Texas
regulations with the Act. \15\
---------------------------------------------------------------------------

\15\ A thorough analysis of the special rules in section
182(c)(7) and(8) and EPA's interpretations of this section is
contained in the proposed NSR reform rulemaking.
---------------------------------------------------------------------------

b. What SIP revisions did Texas make to address Sections 182(c)(7)
and (8)? On April 13, 1998, Texas submitted revisions to Section
116.150 which implement the special rules in sections 182(c)(7) and (8)
of the Act. Section 116.150 provides the following as shown in Table 8
below:

Table 8.--Description of Special Requirements for Permitting Modifications in Serious and Severe Ozone Nonattainment Areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential to emit Section of Act State regulation Provision of Act Provisions of state rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than 100 TPY of VOC or NOX.. Sec. 182(c)(7)................ Sec. 116.150(a)(3)(A)......... Project is not a NNSR is not required if
modification subject to the project increases
NNSR if source elects to are offset with
internally offset the internal offsets the
same pollutant at an same pollutant at a
offset ratio of at least ratio of at least 1.3
1.3 to 1 the proposed to 1.
increase of VOC or NOX.
Sec. 116.150(a)(1)............ Best available control If a source elects to
technology (BACT) is use internal offsets,
substituted for LAER, if it can substitute BACT
a source elects not to for LAER, which is more
use internal offsets. stringent than required
by the Act.
Greater than or equal to 100 TPY Sec. 182(c)(8)................ Sec. 116.150(a)(3)(B)......... The requirements of LAER Source can substitute
of VOC or NOX. otherwise required by BACT for LAER, if the
section 173(a)(2) of the project increases are
Act do not apply, if the offsetwith internal
source elects to offsets of the same
internally offset the pollutant at a ratio of
same pollutant at 1.3 to at least 1.3 to 1.
1 such proposed increase
of VOC or NOX^a.
Sec. 116.150(a)(3)(B)......... A source which elects to Internal offsets used as
avoid LAER by satisfying described above can
the provisions of also be applied to
section 182(c)(8) may satisfy the offset
use the 1.3 to 1 requirement.
internal offset ratio in
lieu of the general
offset ratio.
--------------------------------------------------------------------------------------------------------------------------------------------------------
^a Applies to a proposed increase of VOC or NOX from a any discrete operation, unit, or other pollutant emitting activity at the source.

[[Page 2570]]

c. Does Texas' regulation satisfy sections 182(c)(7) and (8) of the
Act? We have evaluated the provisions of sections 116.150(a)(1) and
(3)(A) and (B) which Texas adopted to implement the requirements of
section 182(c)(7) and (8) of the Act. We have determined that these
provisions of the State's regulations implement the special provisions
of the Act only for project increases which are offset internally at an
offset ratio of 1.3 to 1. These provisions of section 116.150,
described in paragraph b of this preamble above, apply to any major
source which internally offsets its proposed project increase at a
ratio of at least 1.3 to 1. The project increase includes any increase
resulting from any discrete operation, unit, or other pollutant
emitting activity at the source that is part of the proposed project.
These provisions are consistent with the Federal interpretation of
section 182(c)(7) and (8) as discussed in paragraph a, above.

E. Other Revisions Affecting NSR Permitting in Nonattainment Areas

Texas submitted revisions to its definitions which apply to its
permitting in nonattainment areas. Specifically Texas submitted
definitions for:

``de minimis threshold test''--new definition
``major modification''--revised definition
``net emissions increase''--revised definition
``offset ratio''--new definition
``potential to emit''--revised definition
``stationary source''--new definition

The evaluation of these definitions is discussed below.
1. Definition of ``de minimis threshold test''
A new definition of ``de minimis threshold test'' in section 116.12
replaces the former definition of ``de minimis threshold.'' The former
definition of ``de minimis threshold'' defined the term as an emissions
level, as determined by aggregating the proposed increase with all
other creditable increases and decreases \16\ during the previous five
calendar years, including the calendar year of the proposed change
which equals the major modification level for the specific
nonattainment area. Texas now defines ``de minimis threshold test''
consistent with the de minimis rule. Section II.D.1-2 of this preamble
contains further discussion of the de minimis rule. To summarize, the
definition requires a source to add the proposed increase with all
other creditable emission increases and decreases during the
contemporaneous period, and compare the sum with the major modification
column in Table I (following the definition of ``major modification'')
for the specific nonattainment area. A major source must undergo
nonattainment review if the sum exceeds the major modification level in
Table I.
---------------------------------------------------------------------------

\16\ To be creditable, an increase or decrease must meet the
criteria in the definition of ``net emissions increase'' in section
116.12. The definition of ``net emissions increase'' is discussed in
section II.E.3 of this preamble.
---------------------------------------------------------------------------

The procedure described above is the same as the procedure for
determining ``net emissions increase'' in 40 CFR 51.165(a)(vi). This
section of the Federal rule provides that the net emissions increase is
determined by adding the increase in actual emissions from a particular
physical change or change in the method of operation at a stationary
source with all other increases and decreases in actual emissions at
the source that are contemporaneous with the particular change and are
otherwise creditable. See 40 CFR 51.165(a)(vi)(A)(1) and (2).
Texas submitted the definition of ``de minimis threshold test'' on
August 31, 1993, and minor revisions thereto on April 13, 1998, to
clarify that the definition only applies to contemporaneous netting in
nonattainment areas. We determine that the definition of ``de minimis
threshold test'' is consistent with section 182(c)(6) of the Act.
2. Definition of ``Major Modification''
Texas recodified its definition of ``major modification'' from
section 101.1 of its General Rules to section 116.12, and made several
revisions thereto. The former rule defined the term as any physical
change or change in the method of operation of a facility/stationary
source which causes a net increase in its PTE, by the amounts in Table
I, of VOC or any air contaminant for which a national ambient air
quality standard has been established. The former definition was
inconsistent with Texas' definition of ``net emissions increase'' in
section 116.12 which requires such increase to be calculated on an
actual emissions basis. It was also not consistent with the Federal
definitions of ``major modification'' and ``net emissions increase'' in
40 CFR 51.165(a)(1)(ii) and (vi), respectively. The Federal definition
bases major modifications upon a net increase in actual emissions.
Texas revised its definition of ``major modification'' to clarify
that a major modification is based upon a net emissions increase in
actual emissions, in order to be consistent with its definition of
``net emission increase'' and to ensure consistency with the Federal
definition of ``major modification.'' Texas also clarified that a
physical change or change in the method of operation at a source not
qualifying as an existing major stationary source is subject to
nonattainment permitting only if the increase by itself equals or
exceeds the emissions specified in the major source column in Table I.
The definition of ``major modification'' also includes Table I,
which specifies the various classifications of nonattainment along with
the associated emission levels which designate a major modification for
those areas. On September 27, 1995, we approved Table I, as submitted
August 31, 1993. See 60 FR 49781. On July 18, 1996; April 13, 1998; and
March 16, 1999; Texas submitted revisions to Table I to make it
consistent with the section 182(f) NOx waivers that we approved.\17\
The July 18, 1996 submittal revised the Table as follows:
---------------------------------------------------------------------------

\17\ See section II.C of this preamble for further discussion on
the NO_X waivers approve in Texas under section 182(f) of
the Act.
---------------------------------------------------------------------------

(1) Changed the pollutant designation for the line for ozone
nonattainment areas from ``VOC/NO_X'' to ``ozone,'' and added
a new line for NO_X, and specified a the major source
threshold, major modification significance level, and offset ratio for
NO_X respectively at ``100 TPY'', ``40 TPY'', and ``1.00 to
1.''
(2) Clarified that the Table only applies to Texas nonattainment
area designations specified in 40 CFR 81.344,
(3) Clarified that the major modification threshold applies only to
existing major sources and applicability of nonattainment area NSR is
evaluated after netting, unless that source chooses to apply
nonattainment NSR directly to the project,
(4) Clarified that VOC and NO_X are precursors to ozone
and are quantified individually. In counties which have approved
exemptions for NO_X under section 182(f) of the Act, only VOC
is precursor to ozone,
(5) Removed a reference to Victoria County as county designated as
nonattainment for ozone but not classified because of incomplete
data.\18\
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\18\ On November 15, 1990, the CAA Amendments of 1990 were
enacted (Public Law 101-549, 104 Stat. 2399, codified at 42 U.S.C.
7401-7671q). The ozone nonattainment designation for Victoria County
continued by operation of law according to section 107(d)(1)(C)(i)
of the Act, as amended in 1990. See 56 FR 56694, November 6, 1991.
Since the State had not yet collected the required three years of
ambient air quality data necessary to petition for redesignation to
attainment, the nonattainment area was further designated as
nonclassifiable incomplete data for ozone. On July 27, 1994, Texas's
submitted a maintenance plan for Victoria County and a request to
redesignate Victoria County to attainment. On March 7, 1995, we
approved the maintenance plan and redesignated Victoria County from
ozone nonattainment to attainment. See 60 FR 12453.

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[[Page 2571]]

(6) Added a provision that NO_X sources granted the
temporary exemption and authorized under section 116.211 of this title
(relating to Standard Exemption List) shall require registration for
increases in NO_X over the major source/major modification
level in Table I.
On April 13, 1998, Texas submitted a revision to Table 1 to remove
the provision requiring the registration of NO_X sources
granted the temporary exemption and authorized under section 116.211 of
this title (relating to Standard Exemption List). This provision is no
longer necessary with the expiration of the temporary NO_X
waivers. On March 16, 1999, Texas submitted further revisions to Table
I consistent with the reinstatement of NO_X as an ozone
precursor in the Dallas-Fort Worth ozone nonattainment area. The
changes to Table I as submitted April 13, 1998, and March 16, 1999, are
discussed in section II.C of this preamble.
We have reviewed these changes and determine that these changes to
the definition of ``major modification'' and to Table I are consistent
with the Act.
3. Definition of ``Net Emissions Increase''
Texas recodified the definition of ``net emissions increase'' to
section 116.12 and formatted the definition consistent with the
definition in 40 CFR 51.165(a)(1)(vi). Texas continues to define ``net
emissions increase'' as the sum of the total increase in actual
emissions from a particular physical change or change in the method of
operation at a stationary source, plus any source wide creditable
contemporaneous increases and decreases minus any source wide
creditable contemporaneous decreases.
In the former definition, Texas specified that an increase or
decrease was creditable if it occurred within a reasonable time (to be
specified by the permitting authority) before the date that the
increase from a particular change occurs. In ozone nonattainment areas,
Texas specified a period of five consecutive calendar years (including
the calendar year of the proposed increase plus the four preceding
calendar years) in former section 116.3(a)(7) to determine if a
particular increase in emissions of VOCS or NO_X is subject
to nonattainment review. The provisions for permitting major sources
and modifications in areas designated nonattainment for criteria
pollutants other than ozone (former section 116.3(a)(10)) did not
specify a specific time frame in which emissions increases and
decreases would be considered to be contemporaneous with a particular
change.
In the revised definition, Texas specified that the increase or
decrease must actually occur within the contemporaneous period, which
Texas has defined separately.\19\ We consider the submitted definition
of ``net emissions increase'' to be consistent with the requirements in
40 CFR 51.165(1)(vi) and with the Act.
---------------------------------------------------------------------------

\19\ Texas definition of ``contemporaneous period'' is in
section 116.12(7). We discuss the definition of ``contemporaneous
period'' in section II.D.3 of this preamble.
---------------------------------------------------------------------------

4. Definition of ``Offset Ratio''
Texas adopted the definition of ``offset ratio'' to satisfy section
173(a)(1)(A) of the Act. The provisions of this definition were
previously included in sections 116.3(a)(7)(C) and 116.3(a)(10)(D). In
the recodified regulations, the provisions of sections 116.3(a)(7)(C)
and 116.3(a)(10)(D), were incorporated into a new sections
116.150(a)(3) and 116.151(c), respectively. In the recodification,
Texas removed specific language which defined ``offset ratio'' from
sections 116.3(a)(7)(C) and 116.3(a)(10)(D) and referenced the offset
ratios in Table I of section 116.12 (part of the definition of ``major
modification''). Texas then added the new definition of ``offset
ratio'' and defined it as ratio of total actual reductions of emissions
to the total allowable emissions increases of such pollutant from the
new source. The definition references the minimum offset ratios in
Table I under the definition of major modification.
On April 13, 1998, Texas submitted a revision to the definition of
``offset ratio'' and added a sentence which clarifies that creditable
offsets must be enforceable, permanent, quantifiable through a
replicable methodology, real, and surplus. The revision further
specified that the reduction must occur after January 1, 1990, must be
represented in the 1990 and subsequent emissions inventory, and not
relied upon in issuance of any previous nonattainment permit or permit
issued under regulations for the prevention of significant
deterioration. This definition is consistent with section 173(a)(1) of
the Act.
5. Definition of ``Potential to Emit''
Texas recodified the definition of ``potential to emit'' from
section 101.1 of its General Rules into section 116.12, and revised the
term to match the definition as presently defined in 40 CFR
51.165(a)(1)(iii). The definition as revised does not conflict with the
federal definition or with the Act.
6. Definition of ``Stationary Source''
Texas adopted a new definition of ``stationary source'' consistent
with the term as defined in 40 CFR 51.165(a)(1)(i). The submitted
definition does not conflict with the Federal definition or with the
Act.

III. Individual SIP Ssubmittals Acted Upon in This Document

A. General Discussion

The Governor of Texas submitted revisions to the Texas SIP to us
relating to the permitting of new and modified sources in nonattainment
areas. We are proposing to approve revisions submitted August 31, 1993;
November 1, 1995; July 18, 1996; April 13, 1998; and March 16, 1999.
The basis for our proposed approval is discussed in section II of this
preamble.

B. Summary of Each Individual SIP Submittal

Table 9 below summarizes each individual SIP submittal that we are
proposing to approve in today's action.

Table 9. Summary of Each Individual SIP Submittal
----------------------------------------------------------------------------------------------------------------
Date adopted by state Date submitted to EPA Description of SIP submittal
----------------------------------------------------------------------------------------------------------------
August 16, 1993....................... August 31, 1993....................... Provisions of submittal relating
to permitting under part D of
the Act. This includes:
--Section 116.12,
--Section 116.150, and
--116.151, and
--Section 116.170(1) and (3).

[[Page 2572]]

October 26, 1995...................... November 1, 1995...................... Revisions to Section 116.150 to
address nonattainment
permitting requirements for NO_X
(as an ozone precursor) in the
Dallas-Fort Worth, El Paso,
Houston-Galveston, and Beaumont-
Port Arthur ozone nonattainment
areas consistent with waivers
approved by EPA pursuant to
section 182(f) of the Act.
May 15, 1996.......................... July 18, 1996......................... Revisions to Table I of Section
116.12 to conform to NO_X
waivers approved by EPA
pursuant to section 182(f) of
the Act.
March 18, 1998........................ April 13, 1998........................ Revisions to Sections 116.12,
Table I of Section 116.12, and
116.150, and 116.151. Texas
revised the SIP to reinstate
NO_X as an ozone precursor in
the Houston-Galveston and
Beaumont-Port Arthur ozone
nonattainment areas.
February 24, 1999..................... March 16, 1999........................ Revisions to Chapter 116, which
reinstate the requirement to
review NO_X as an ozone
precursor in the Dallas-Fort
Worth ozone nonattainment area.
----------------------------------------------------------------------------------------------------------------

C. EPA Action

For the reasons stated herein, we have determined that each of the
above SIP submittals or revisions to 30 TAC Chapter 116 satisfies the
requirements of Title I of the Act. Sections II and III of this
preamble and the TSD for this proposed action contain detailed
evaluations of each of the sections submitted by the State of Texas and
the basis for EPA's proposal to approve of these sections.

IV. Request for Public Comments

We are requesting comments on all aspects of the requested SIP
revision and our proposed rulemaking action. Comments received by date
indicated above will be considered in the development of EPA's final
rule.

V. Administrative Requirements

A. Executive Order 12866

The Office of Management and Budget (OMB) has exempted this
regulatory action from Executive Order 12866, entitled ``Regulatory
Planning and Review.''

B. Executive Order 13132

Executive 13132, entitled ``Federalism'' (64 FR 43255, August 10,
1999) revokes and replaces Executive Order 12612, ``Federalism,'' and
Executive Order 12875, ``Enhancing the Intergovernmental Partnership.''
Executive Order 13132 requires EPA to develop an accountable process to
ensure ``meaningful and timely input by State and local officials in
the development of regulatory policies that have federalism
implications.'' ``Policies that have federalism implications'' is
defined in the Executive Order to include regulations that 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.'' Under
Executive Order 13132, EPA may not issue a regulation that has
federalism implications, that imposes substantial direct compliance
costs, and that is not required by statute, unless the Federal
government provides the funds necessary to pay the direct compliance
costs incurred by State and local governments, or EPA consults with
State and local officials early in the process of developing the
proposed regulation. The EPA also may not issue a regulation that has
federalism implications and that preempts State law unless the Agency
consults with State and local officials early in the process of
developing the proposed regulation.
This proposed rule will 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,
because it merely approves a State rule implementing a Federal
standard, and does not alter the relationship or the distribution of
power and responsibilities established in the Act.

C. Executive Order 13045

Executive Order 13045, entitled ``Protection of Children from
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23,
1997), applies to any rule that: (1) is determined to be ``economically
significant'' as defined under Executive Order 12866, and (2) concerns
an environmental health or safety risk that EPA has reason to believe
may have a disproportionate effect on children. If the regulatory
action meets both criteria, the Agency must evaluate the environmental
health or safety effects of the planned rule on children, and explain
why the planned regulation is preferable to other potentially effective
and reasonably feasible alternatives considered by the Agency.
The 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.

D. Executive Order 13084

Under Executive Order 13084, EPA may not issue a regulation that is
not required by statute, that significantly or uniquely affects the
communities of Indian tribal governments, and that imposes substantial
direct compliance costs on those communities, unless the Federal
government provides the funds necessary to pay the direct compliance
costs incurred by the tribal governments, or EPA consults with those
governments. If EPA complies by consulting, Executive Order 13084
requires EPA to provide to the OMB, in a separately identified section
of the preamble to the rule, a description of the extent of EPA's prior
consultation with representatives of affected tribal governments, a
summary of the nature of their concerns, and a statement supporting the
need to issue the regulation. In addition, Executive Order 13084
requires EPA to develop an effective process permitting elected
officials and other representatives of Indian tribal governments ``to
provide meaningful and timely input in the development of regulatory
policies on matters that significantly or uniquely affect their
communities.''
Today's rule does not significantly or uniquely affect the
communities of Indian tribal governments. This action does not involve
or impose any requirements that affect Indian tribes. Accordingly, the
requirements of section 3(b) of Executive Order 13084 do not apply to
this rule.

[[Page 2573]]

E. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 600 et seq., generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. Small entities
include small businesses, small not-for-profit enterprises, and small
governmental jurisdictions. This proposed rule will not have a
significant impact on a substantial number of small entities because
SIP approvals under section 110 and subchapter I, part D of the Act do
not create any new requirements but simply approve requirements that
the State is already imposing. Therefore, because the Federal SIP
approval does not create any new requirements, I certify that this
action will not have a significant economic impact on a substantial
number of small entities. Moreover, due to the nature of the Federal-
State relationship under the Act, preparation of a flexibility analysis
would constitute Federal inquiry into the economic reasonableness of
state action. The Act forbids EPA to base its actions concerning SIPs
on such grounds. See Union Electric Co. v. U.S. EPA, 427 U.S. 246, 255-
66 (1976); 42 U.S.C. 7410(a)(2).

F. Unfunded Mandates

Under section 202 of the Unfunded Mandates Reform Act of 1995,
signed into law on March 22, 1995, EPA must prepare a budgetary impact
statement to accompany any proposed or final rule that includes a
Federal mandate that may result in estimated annual costs to State,
local, or tribal governments in the aggregate; or to private sector, of
$100 million or more. Under section 205, EPA must select the most cost-
effective and least burdensome alternative that achieves the objectives
of the rule and is consistent with statutory requirements. Section 203
requires EPA to establish a plan for informing and advising any small
governments that may be significantly or uniquely impacted by the rule.
The EPA has determined that the approval action promulgated does
not include a Federal mandate that may result in estimated annual costs
of $100 million or more to either State, local, or tribal governments
in the aggregate, or to the private sector. This Federal action
approves pre-existing requirements under State or local law, and
imposes no new requirements. Accordingly, no additional costs to State,
local, or tribal governments, or to the private sector, result from
this action.

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Carbon Monoxide,
Hydrocarbons, Incorporation by reference, Lead, Nitrogen oxides, Ozone,
Particulate matter, Sulfur oxides, Volatile organic compounds.

Authority: 42 U.S.C. 7401 et seq.

Dated: December 16, 1999.
Jerry Clifford,
Acting Regional Administrator, Region 6.
[FR Doc. 00-1081 Filed 1-14-00; 8:45 am]
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