Major NSR Reform - Discussion Group. Items to Cover. NSR Meeting Schedule. Ohio EPA DAPC December 16, 2003

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1 Major NSR Reform - Discussion Group Ohio EPA DAPC December 16, Items to Cover Introductions Purpose of group/meetings Ground rules Schedule Background information Equipment Replacement Rule Review of comments 2 NSR Meeting Schedule Meeting Date and Time September 15, 2003; 1:00 pm October 16, 2003; 1:00 pm November 20, 2003; 1:00 pm Agenda Discussion Topic: Pollution Control Project Exclusion and Clean Unit Test Discussion Topic: Actual Emissions Baseline Discuss Comments: Pollution Control Project Exclusion and Clean Unit Test Discussion Topic: Actual-to-Projected Actual Test Discuss Comments: Actual Emissions Baseline Comment Due Date September 23, 2003 October 24, 2003 December 1, 2003 December 16, 2003; 1:00 pm January 20, 2004; 1:00 pm Optional Meeting February 19, 2004: 1:00 pm Discussion Topic: Routine Maintenance, Repair and Replacement Discuss Comments: Actual-to-Projected Actual Test Discussion Topic: PALs Discuss Comments: Routine Maintenance, Repair and Replacement Discuss Comments: PALs Discussion Topic: Wrap-up Discussion January 5, 2004 January 30, 2004 N/A 3 1

2 Background What is routine maintenance, repair, and replacement (RMRR)? Answer to the question becomes important whether major NSR is applicable. 4 Background Major modification definition has a specific exclusion for routine maintenance, repair and replacement Means that activities that fall under routine maintenance, repair, and replacement do not have to go thorough the applicability tests of actual to potential or actual to projected actual 5 Background So what is routine maintenance, repair, and replacement? US EPA s previous approach is to complete analysis on a case-by-case basis. Is a timeconsuming process that does not lead to regulatory certainty. 6 2

3 Background WEBCO case sets an example of a project that is not routine, but in that case, the activity would be considered extensive and not routine by most people. Detroit Edison applicability determination took one year and 29 pages to determine it would be a non-routine project to upgrade steam turbines. 7 Revised rules There is a new Equipment Replacement Provision (ERP) Rule (40 CFR (h) & (y)) and several new definitions to support it (Process unit, Functionally equivalent, Fixed capital cost, Total Capital cost) The old approach of a case-by-case determination remains available for use as an alternative (e.g., if the change doesn t qualify under the ERP) 8 Revised rules ERP states: Without regard to other considerations, RMRR includes, but is not limited to, the replacement of any component of a process unit with an identical or functionally equivalent component(s), and maintenance and repair activities that are part of the replacement activity, provided a set of requirements are met. 9 3

4 Revised rules Three requirements to discuss: 1. Fixed capital cost of the replacement cannot exceed 20% of a replacement value 2. Cannot change the basic design parameter(s) 3. Cannot exceed any legally enforceable limits 10 Fixed capital cost cannot exceed 20% 1. Capital Costs threshold for equipment replacement: a. Provides separate language for EUSGUs and non-eusgus, however, they are identical: the fixed capital cost of any associated maintenance and repair activities that are part of the replacement shall not exceed 20% of the replacement value of the process unit, at the time the equipment is replaced 11 Fixed capital cost cannot exceed 20% How is the replacement cost determined? Four options 1. Estimate of the fixed capital cost of constructing a new unit or the current appraised value (at time of activity) of the entire process unit, OR 2. Invested cost, adjusted for inflation, OR 3. Insurance value where it covers complete replacement of the unit, OR 4. Another accounting procedure if based on generally accepted accounting principles (GAAP) 12 4

5 Fixed capital cost cannot exceed 20% Notification requirements: When using options 2, 3 or 4, a notice must be sent. The first time notice can occur at any point but future notices for the same process unit must be sent at the beginning of the process unit s fiscal year Facilities must use the same option for multiple evaluations within a given unit s fiscal year. If a facility used options 2, 3 or 4 previously and during a future fiscal year wishes to switch to any other option than the one used previously, a new notice identifying this is required. 13 Cannot change the basic design parameters 2. The basic design parameter(s) cannot change Rule specifies parameter for EUSGUs as either: Input based: maximum hourly heat input and fuel consumption rate, OR Output based: maximum hourly electric output rate and maximum steam flow rate 14 Cannot change the basic design parameters Rule specifies parameter for non-eusgus as either: Input based: maximum rate of fuel or material input, OR Output based: maximum rate of product output Additional option can be proposed by either and would have to be approved by the State and made legally enforceable through a permit. This provides some flexibility. For example, maximum steam production rate is often used for boilers and may be more sensible than maximum heat input, OR, a crude oil distillation tower may need multiple sets of parameters for each type of crude that is processed. 15 5

6 Cannot change the basic design parameters Other consideration under the basic design parameter(s) provision: If establishing fuel consumption specification in terms of weight or volume the minimum fuel quality based on BTU content shall be used for determining the basic design parameter(s) for a coal-fired EUSGU Non-EUSGUs, combustion process unit will typically use maximum rate of fuel input For sources having multiple end products or raw materials, the owner or operator should consider the primary product or primary raw material 16 Cannot change the basic design parameters Other consideration under the basic design parameter(s) provision: Efficiency of a process unit is not considered a basic design parameter. An equipment replacement that improves a process unit s efficiency and enables the unit to return to its design parameters can qualify as RMRR even if current ACTUAL emissions increase as a result. 17 Cannot change the basic design parameters Other consideration under the basic design parameter(s) provision: Additional flexibility and how the basic design parameters are demonstrated should be afforded (e.g., EGU could reference available creditable information such as historic maximum capability tests or engineering calculations, to demonstrate a heat input value). 18 6

7 Cannot change the basic design parameters Other consideration under the basic design parameter(s) provision: Can set different design parameters for different fuel types or a combustion device that can accommodate multiple fuel types (e.g. should consider the fuel consumption rate will vary depending on the quality of coal for a given heat input) Manufacturer s design parameters are always acceptable Source can have flexibility to select an averaging time that best accommodates their operation. Long term averaging periods (e.g. 12-month fixed period) is not appropriate. 19 Cannot change the basic design parameters Other consideration under the basic design parameter(s) provision: Rule requires the use of credible information, such as results of historic maximum capability tests, design information from the manufacturer, or engineering calculations but states that if, in RARE cases, design information is not available then use the maximum value achieved by the process unit in the 5-yr period immediately preceding the planned activity. 20 Cannot exceed any enforceable limits 3. Replacement activity does not cause the process unit to exceed any emission limitation or operational limitation (that has the effect of constraining emissions) that applies to any component of the process unit and that is legally enforceable 21 7

8 Other important points There are several important points regarding ERP provisions: Component is meant to be applied broadly (e.g., a large boiler reheater or small screw) Routine is not meant to be constrained by time (e.g.., one component can wear out yearly and another every 20 years) 22 Other important points Activities Could be labor, contract services, major equipment rental or associated repair and maintenance. Cannot be certain ancillary costs such as purchasing replacement power during a shutdown of a utility. 23 Other important points Process unit is defined Developed to be consistent with 40 CFR (NSPS) Means any collection of structures and/or equipment that processes, assembles, applies, blends, or otherwise uses material inputs to produce or store an intermediate or a completed product. A single stationary source may contain more than one process unit, and a process unit may contain more than one emissions unit Preamble clarifies that intermediates are the intended product of an integrated facility operation (e.g.., paint body shell but not each individual coating operation) Preamble clarifies that administrative buildings (and warehouses) are not includes but other non-emitting units integral to the process are 24 8

9 Other important points Process unit is defined Rule specifies that control equipment is excluded unless it serves a dual purpose in the process (e.g., condenser controls emissions of organics and is an integral component of the operation of a fractionation column). Rule specifies when components are shared by process units, their costs are proportionately (based on capacity) allocated. 25 Other important points Process unit is defined Rule includes specific definition of what constitutes a process unit for: Steam electric generating facility Petroleum refinery Incinerator Preamble also provides examples for: Natural gas compressor station Flat glass manufacturer Fiberglass producer Precipitated amorphous silica producer Chemical manufacturer 26 Other important points Functionally equivalent component is defined Means a component that serves the same purpose as the replaced component Preamble provides good examples: Replacing worn out pipes in a chemical plant that are constructed of a different metallurgy Replacing an analog controller with a digital one even though a similar one could still be purchased Replacing spray nozzles with new higher transfer efficiency nozzles (serve same purpose) 27 9

10 Other important points Functionally equivalent component is defined Preamble provides bad examples: A physical change at a chemical processing facility that allows production of a new end product that could not have been produced before replacement 28 Other important points Fixed capital cost is defined Means capital needed to provide all depreciable components where depreciable components refers to all components of fixed capital cost and is calculated by subtracting land and working capital from the total capital investments. 29 Other important points Total capital investment is defined Means sum of all the following: all costs required to purchase needed process equipment (purchased equipment costs); the costs of labor and materials for installing that equipment (direct installation costs); the costs of site preparation and buildings; other costs such as engineering, construction, and field expenses, fees to contractors, startup and performance tests, and contingencies (indirect installation costs); land for the process equipment; and working capital for the process equipment

11 Approach Ohio EPA plans to adopt by reference the federal RMRR rules as emergency rules to be effective by February 1, The emergency rule package is temporary, lasting 90 days, and will be followed by a proposal of the permanent rule package. 31 Approach DRAFT Rule Changes for OAC (VV)(1): (1) Routine maintenance, routine repair, and routine replacement as defined in 40 CFR ; Remove the word routine from repair and replacement to be consistent with the federal rule. Federal rule clearly states that routine maintenance, repair and replacement includes.replacement of any component and maintenance and repair activities that are part of the replacement activity; therefore, it is clear that the repair and replacement must also be routine. Include the reference to 40 CFR to include the equipment replacement provision and all associated definitions needed for that rule. 32 Approach DRAFT Rule Changes for OAC (IIII)(2) Incorporated Materials Insert new: (h): 40 CFR ; "Permit Requirements;" 51 FR 40669, Nov. 7, 1986, as amended at 52 FR 24713, July 1, 1987; 52 FR 29386, Aug 7, 1987; 54 FR 27285, June 28, 1989; 57 FR 3946, Feb. 3, 1992; 57 FR 32334, July 21, 1992; 67 FR 80244, Dec. 31, 2002; 68 FR61248, Oct. 27, 2003; 68 FR 63027, Nov. 7, This change is necessary to meet the requirements for Incorporation by Reference (SB 265) 33 11

12 Approach DRAFT Rule Changes for OAC (VV) "Major modification... In determining whether there has been a net emissions increase, fugitive emissions, to the extent quantifiable, shall be considered from only those stationary sources listed in paragraph (VV)(WW)(4)of rule of the Administrative Code... This is necessary to fix an error from the last amendment to this rule. The order of the rule changed, however, (VV) was not changed to refer to (WW). This amendment will remove (VV) and replace it with (WW). 34 Approach Comments on Draft RMRR Rule: All comments received in response to this meeting will be considered as part of the interested party process for the RMRR rule package. After consideration of those comments, the final rule package will be proposed, a public comment period will be held along with a public hearing, and submittal to JCARR. Comments should be submitted by January 5, 2003 to: Jennifer Nichols, Ohio EPA DAPC, Lazarus Government Center, PO Box 1049, Columbus, OH Jennifer.nichols@epa.state.oh.us Meeting 3 Summary of Comments 36 12

13 Recommends against the adoption of the new federal language we feel NSR for existing source modifications will be virtually eliminated 37 Reiterates position that applicable law provides that in order to receive delegated authority to enforce the CAA in Ohio, Ohio s program needs to be at least as stringent as, yet can be more stringent than, the federal program. A decision by Ohio not to adopt the federal rule on actual to projected-actual applicability would make Ohio s program more stringent than the federal program and would avoid the legal defects associated with the new federal rules. Accordingly, commentor recommends that Ohio EPA reject this federal rule in its entirety. 38 US District Court for the Southern District of Ohio has already issued an opinion that discusses the definitions of modification, actual emissions, representative actual annual emissions, net emissions increase and contemporaneous. This opinion provides for regulatory certainty and establishes legal precedent. Adding another definition, projected actual emissions, to an already confusing, cumbersome and rather unwieldly regulatory program, for which regulatory certainty and legal precedent have been established, would add more confusion and result in the expenditure of more time and resources than Ohio EPA currently has, thereby lengthening the permitting process to the detriment of human health and the environment

14 Ohio EPA s Chief of the DAPC conceded on November 20, 2003, the proposed federal rules package don t make things simpler and will require Ohio EPA to do a lot of work incorporating them into Ohio EPA s existing regulatory program. Consequently, it makes no sense for Ohio EPA to devote substantial amounts of time, energy, resources and labor incorporating into its regulatory program federal rules that weaken, relax and are inconsistent with the Clean Air Act 40 Ohio EPA reiterates the previous statement, pointed out by the commentor, that it will take a lot of work incorporating the rules. Incorporation a federal rule package of this size and magnitude will not be an easy task, however, it is required by USEPA that SIP approved States adopt these rules, or some version thereof, that is as, or more, stringent. We do not believe USEPA would agree that not adopting the rules would be more stringent. As noted at the previous meeting, USEPA s recent reconsideration re-affirmed that NSR improvements likely will result in greater environmental benefits than the prior program.. 41 Ohio EPA is considering all options, including adopting the federal rules as written vs. making changes to them. However, Ohio EPA must consider that the further the Agency strays from the federal language, the greater the risk of jeopardizing the approval of USEPA

15 Ohio EPA must be committed to keeping its state rules which require preconstruction review for all new units and existing unit modifications which increase allowable emissions. Ohio EPA absolutely must resist industry pressure to weaken or eliminate the existing state permit to install rules. 43 Ohio EPA has not considered exempting sources that do not trigger a major modification from minor NSR. The only consideration we have made is how to incorporate the new federal PCP program into our existing PCP program under minor NSR. 44 Ohio has lost upwards of 174,000 manufacturing jobs over the past 3 years. Any steps that can be adopted to ensure that businesses can return to full operations as the economy improves should be implemented as expeditiously as possible. The NSR Improvement Rules will ensure that sources will not be forced to give up capacity simply because operations have been reduced due to the downturn in the economy and will help allow business to bring jobs back to Ohio consistent with the Clean Air Act and its goals

16 Desire to see the federal NSR rules adopted by Ohio in their current form. Recognize the expertise and experience of groups such as STAPPA/ALAPCO, but simply feel that the time is past for alternative approaches that do not mirror the federal rules. Clearly, the prudent and most efficient path to achieving approvable NSR rules in Ohio is by following the template of the now effective federal rules. 46 Concerns with deviating from the federal rules: 1. Pursuing an alternative applicability test would be akin to starting the entire NSR reform process all over again in Ohio. Numerous parties spent a considerable amount of time reviewing and participating in the development of the revised federal rules, a process begun well in advance of the 1996 proposal by USEPA. To reopen that rule development process in Ohio would only serve to delay the implementation of NSR rules in Ohio while the parties rehash the same arguments that were put forth and roundly discussed during the federal process. The present NSR process, particularly the actual to potential test, is so problematic that the concept of delaying reform by another several years to adequately evaluate potential alternatives in Ohio is unwise and unwarranted. 47 Concerns with deviating from the federal rules cont. 2. Consistency is important for corporations with facilities in multiple states. One of the biggest problems with the prior federal NSR program was the degree of inconsistent guidance, interpretive letters and the like. While we can accept and anticipate that various states will have different formatting and other nuances in their state rules, we generally anticipate that most state rules will ultimately follow the main themes of the federal rules. Having a different and unique PSD applicability test in Ohio would then serve only to promote the kind of inconsistency and confusion that has bedeviled the PSD program

17 Concerns with deviating from the federal rules cont. 3. No secret that USEPA tends to subject Ohio to a high degree of scrutiny and criticism. To the extent that Ohio EPA wanted to take a new and different track in its NSR regulations and vary significantly from the federal regulations, (particularly in terms of applicability tests) it would certainly significantly delay Region 5 approval, if not forestall approval altogether. Given the degree of USEPA involvement in the PPEC s exemption threshold rule development, one can only imagine the involvement and scrutiny that would be triggered by the Ohio s development of alternatives to the now-effective federal NSR rules 49 Adopt as written: The federal rules have been subject to years of public comment. They have been reviewed, again and again, by regulatory experts, and they reflect a balanced and reasonable approach to projecting the impacts of a project while not inappropriately confiscating the capacity of existing plant equipment or discouraging efficiency improvement projects. Any deviations from the federal rule will potentially jeopardize approval of the program as well as reduce the benefits that U.S. EPA intended to achieve from the issuance of these rules. 50 Adopt as written cont U.S. EPA s in-depth study of the prior NSR rules showed: An adverse impact on investment in expanding and preserving manufacturing capacity resulting from several aspects of the regulations, including the blanket application of an actual-to-potential test. Plants often declined to make efficiency and environmental improvements due to the actual-to-potential methodology. An environmental analysis of the rules showed that overall emissions of air contaminants would not be expected to increase as a result of the new emission increase calculation methodology

18 Recent NSR case law developments appear to invalidate the actual to potential test and validate the new applicability test. Because we have seen no indication that Ohio EPA intends to stop its application of the long-standing actual to potential test under the existing Ohio NSR rules, we feel it is important for Ohio to focus on the language of the new federal rules and adopt it expeditiously. 52 The NSR Improvement Rules create a consistent and understandable approach to projecting emissions, an approach absent from the pre-2003 regulations: They explain the parameters and data required for projecting future emissions; and Establishing validation mechanisms for source projections of future emissions through uniform record keeping and reporting requirements to track emissions after a change. These two elements of the rule actually enhance the enforceability of the pre-2003 rules by imposing consistent and replicable requirements for all sources to document the impact of projects on emissions and to track those emissions over time. 53 Ohio EPA remains concerned that deviating to far from the federal rule, especially in attempting to adopt an applicability test that USEPA has already found to be less desirable than the actual-to-projected-actual test, could jeopardize obtaining SIP approval. However, it is important that Ohio EPA identify areas where the federal rule could be, for example, enhanced, clarified or improved upon

19 Commentor continuously finds itself in the position of analyzing and addressing PSD requirements. Often modifies emissions units such that the physical change or change in the method of operation criteria is triggered, even for minor physical or operational changes that will result in only very minor increases of actual emissions (well below the significant net emissions increase threshold) 55 Hypothetical example from same commentor: Spray coating emission unit with a permitted PTE of 80 TPY VOC. Last few years, actual emissions have been only 25 TPY VOC. Install 2 new spray guns, expecting actual emissions to increase by 2 TPY VOC (substantially less than the 40 TPY PSD trigger ), Apply current actual to potential test 80 TPY 25 TPY = increase of 55 TPY VOC, well above the 40 TPY PSD trigger. 56 Hypothetical example cont Consequently, because of an entirely fictional calculation which bears no resemblance whatsoever to the actual emission increase, Commentor finds itself facing an immersion into the rigorous and time-consuming PSD program notwithstanding the very minor nature of the changes

20 Hypothetical example cont Possible paths. 1. Subject itself to the expensive and time consuming PSD process. 2. Attempt to net out of PSD. 3. Potentially establish a synthetic minor permit for the emission unit in question, such that the change does not result in a significant net emissions increase. 4. Simply might opt to not pursue the change at all due to the burdens attendant on undergoing PSD review. This is particularly troublesome, as it means that easily achievable improvements in efficiency (e.g., less emissions per unit of production) and quality are forfeit because of the desire to avoid the time-consuming PSD process. 58 Hypothetical example cont The Actual to Projected Actual test brings: Needed degree of reality to the permitting process Allow facilities to efficiently implement necessary improvements that result in minimal emission increases. As a safeguard, provide that if there is a reasonable possibility that actual emissions may go above significance levels, appropriate record keeping and reporting is required. 59 Ohio EPA should adopt the federal post-project record keeping and reporting requirements to ensure that a source s projection of actual emissions for an existing unit is validated after a unit resumes regular operation. These requirements apply when there is a reasonable possibility that a project will result in a significant emissions increase. The pre rules contained no such requirements. With the new rules, all sources are on a level playing field and are on notice of the record keeping and reporting requirements that apply. Cont 60 20

21 Cont Ohio EPA should adopt the reasonable possibility test, particularly in light of the fact that U.S. EPA recently reaffirmed its appropriateness in response to petitions for reconsideration on the final rule, as well as the associated record keeping, emissions tracking and reporting requirements in the federal rule. 61 One topic of discussion raised during the 11/20/03 meeting involved the extent of reporting that should be required of sources utilizing the Actual-to- Projected Actual emissions test. One suggestion was to require notification to Ohio EPA every time a facility uses the Actual-to-Projected Actual test. In addition, it was suggested that any minor NSR PTI required would include an explanation of how the emissions test was done for the project. We disagree with these suggestions and urge EPA not to implement reporting requirements that go beyond the federal regulations. Cont.. 62 Cont Reporting on any change that uses the Actual-to-Projected Actual test would impose unreasonable burdens on both the state and regulated facilities. The agency would be flooded with notifications regarding projects that do not have a reasonable possibility of causing an emission increase and that do not trigger NSR. As USEPA stated in its Notice of Reconsideration, the reasonable possibility provision was included because.. without some qualifier on when sources must retain records and report..it would encompass any physical or operational change you undertake no matter how inconsequential and unlikely that an emissions increase would result

22 Cont At a time when Ohio EPA has not had enough resources to deal with the PTI applications that are pending, it does not make sense to require that additional paperwork be filed that would also need to reviewed by permit engineers. For sources, this would impose an unreasonable burden and would fundamentally change the nature of the NSR program. As USEPA stated: The NSR program has always relied upon sources to decide when and whether they need a major NSR permit. If a source ignores the requirement to obtain a permit, we have the option of bringing an enforcement action. We think that a strong enforcement presence is the proper response to deter violators, and that under an effectively enforced program, we expect a high level of compliance. 64 Ohio EPA should adopt record keeping and reporting requirements for sources that choose to implement the federal applicability test. Suggested wording for such is provided in the STAPPA/ALAPCO Menu of Options. Require the owner/operator to submit the required information to the Director before commencing actual construction, and require the owner/operator to maintain the required information at the facility for a period of at least five years. Define what is meant by reasonable possibility. Who makes this reasonable possibility determination, the Director or the owner/operator? What standards will be used to measure whether a reasonable possibility has occurred? 65 Ohio EPA is looking at notification options for the new applicability tests similar to what other States with minor NSR programs in the region are requiring. For example, Indiana is considering reviewing major NSR applicability with the minor NSR review or requesting this information as part of the annual Title V compliance certification. Michigan has incorporated the requirement into their minor NSR that this information be submitted with a minor NSR application and that all relevant monitoring, reporting and record keeping be placed into the minor NSR permit

23 We suggested three possible alternatives: 1. All relevant documents be submitted with netting applications 2. Non-netting minor NSR applicants submit a notice that the new applicability test was used and either: 1. The relevant documents are submitted and reviewed and the minor NSR PTI acknowledges approval, or 2. The relevant documents are not submitted or reviewed and the minor NSR PTI acknowledges this. 3. When no minor NSR is applicable, a notice of the use of the new applicability test is sent but no documents are reviewed and/or approved. 67 We are also concerned with being overburdened with reviewing an unreasonable amount of notices. The purpose of the notice was not to require review. It was to provide Ohio EPA with the knowledge that the test was used so that IF additional information wanted to be requested, Ohio EPA could do so. We would not intend to review documents associated with every use of the new test. We do not believe that this would be an unreasonable burden or fundamentally change the nature of the NSR program. These documents and information must be generated in order to apply the test in the first place. Cont. 68 Furthermore, the federal rule does not require the information even be kept for every use of the new test. The records generated from using the test and the post-project monitoring, reporting and record keeping (M,R&R) are only required if there is a reasonable possibility the project may result in a significant emissions increase. Cont 69 23

24 Reasonable possibility is not defined. We believe it will be essential to identify either through rule, or guidance, as to what reasonable possibility means, and a potential option would be to apply the additional notice requirements and possible include the required M,R&R in any associated minor NSR permit, only in those cases. Ohio EPA will have to have additional discussion with USEPA to discover if there is any additional information on what reasonable possibility entails. 70 In reference to the requirement that the source shall make the information required to be documented and maintained available for review upon request..by the reviewing authority or the general public : Documents or information required by law to be kept or submitted to an agency constitute public records, except as otherwise provided by applicable law. This proposed section is nothing more than a regulatory attempt to circumvent the public records laws. In this case, the addition adds nothing that Ohio s public records act does not already provide. 71 Recall, the federal rule only requires the information even be kept and made available for regulatory or public request if there is a reasonable possibility the project may result in a significant emissions increase. This federal language would not circumvent Ohio s current requirements for public records, it reiterates it

25 The provisions we specifically object to are: The new definition of baseline actual emissions which allows a 10-year look back and the establishment of a baseline using the highest 24-month period of emissions. The projection of future actual emissions which has no required submission of calculations to the reviewing authority prior to construction, lax record keeping requirements for projects that increase emissions, no enforceable requirements on future emissions, and no pre-construction review or control requirements even for sources that increase capacity. The provision for exemption of emissions increases which are claimed to be due to increased demand for the product being made. 73 Ohio EPA should adopt the provisions which exclude emissions impacts that are unrelated to the change and that could have been accommodated during the baseline period: Under the federal rules, U.S. EPA has adopted for all sources the exclusion of emissions unrelated to the change that has been explicitly in the rules for utilities since 1992 (referred to as the demand growth exclusion ). This exclusion recognizes that requirement in the Clean Air Act and the pre-2003 rules that emissions increases must actually result from the project in order to trigger NSR permitting requirements. This element of the rule is critical to the reforms that U.S. EPA has adopted and it should be adopted by Ohio as well. 74 Ohio EPA should adopt the requirements to project emissions for existing units based on the maximum expected emissions in the 5-year period following a project (or 10-year period if the project will increase design capacity or PTE of a regulated NSR pollutant): Commentor supports the approach in the federal rules because it sets reasonable periods over which emissions impacts from a project would be expected to occur. In our experience, the impacts of a project are typically seen within the first 2 to 3 years of a project, so the 5-year period provides more than an adequate time frame to ensure that emissions related to a change will be considered and evaluated by Ohio EPA

26 Ohio EPA does not plan to draft changes to the 5 or 10 year projection period that is used or the availability of using the demand growth exclusion. When projecting future actual emissions, the company considers documentation that was generated for purposes OTHER THAN the applicability test (e.g., prospectus for shareholders) to identify any future projections of business growth. Documents cannot be generated for the purpose of the applicability test, they must have existed and been distributed previously. Cont 76 For example, a company prospectus could show that they expect business to grow by 5% over the next 5 years. There are then three possible scenarios: 1. The proposed project is related to this growth (e.g. the company is adding a new product that will cause business to grow and the modification is needed to allow the new product to be made), or 2. The proposed project and growth are unrelated (e.g., The company has produced Jordache jeans for years and they are becoming popular and everyone wants a pair), or 3. A mix of 1 and 2 Cont 77 Only the growth projected from 2 can be excluded from the future projection. The increased growth is first added to the projection and any of the growth that can be attributed to 2 is then subtracted back out. The demand growth exclusion only allows a company to EXCLUDE the fraction of the emissions unrelated to the change that were INCLUDED in the projection in the first place. If the company is unable to provide the necessary documents to show they expect an unrelated increase in business, then it cannot be ADDED to the projection and then cannot be DEDUCTED from the projection either

27 In reference to the 5 year projection period: The phrase that reads in any one of the 5 years (12-month period) should be replaced with for the two year period. A five year look ahead is not representative of actual emissions. Moreover, a two year look ahead provides just as much certainty as does a 5- year look ahead. 79 This refers to how far in the future a projection should be made. The intent was to ensure that the facility would consider any increases in emissions for a period of time that would be affected by the modification and have to do any appropriate M,R&R for those periods also. Shortening the 5 or 10 year period would be considered a relaxation of the rule, and therefore, Ohio EPA would not be able to consider this. 80 The phrase that reads following the date the unit resumes regular operation after the project should be replaced with after a physical change or change in the method of operation of a unit. The proposed rule would allow additional emissions into the atmosphere without being accounted for, i.e., emissions from the date of startup to the date of regular operation, and would thus be detrimental to human health and the environment. In addition, the proposed rule fails to define regular operation, thus allowing additional emissions into the atmosphere to the detriment of human health and the environment. The sooner the projected-actual calculation is begun, the lesser the adverse impact the construction will have on human health and the environment 81 27

28 Ohio EPA does not plan to draft changes to this aspect of the rule. Emissions associated with startup are accounted for and included in both the baseline and future projections as part of the startup, shutdown and malfunction emissions. These emissions must be projected as part of the future projected actual emissions. Ohio EPA disagrees that the rule will allow additional emissions into the air because the proposed rule fails to define regular operation. These emissions will occur regardless of inclusion of a definition of when commencing operation or resuming regular operation. It will retain the same meaning that is applied today. 82 In reference to the language that states or in any one of the 10 years following the date, if the project involves increasing the emissions unit s design capacity or its PTE : This should be deleted in its entirety because it makes no sense. As written, a source could increase its potential to emit without being subject to NSR. This is clearly contrary to the existing definition of modification as contained in both the CAA and the OAC. Cont 83 Cont For example, a source that increases its PTE would be increasing its allowable emissions, and under current Ohio law constitutes a modification and must be preceded by the issuance of a PTI. The proposed rule, however, would compare those increased emissions to a baseline to determine whether significant threshold levels are exceeded, and if not NSR is unnecessary. Consequently, the proposed rule creates an absurd result and should not be adopted by Ohio EPA

29 Ohio EPA is not considering changing the definition of modification which is applicable to minor NSR. The referenced language refers to a facilities applicability to a major modification. A source can increase its PTE, and therefore, allowable emissions, without triggering major NSR but minor NSR would still be applicable as it is today. 85 There is no way to determine a maximum annual rate of emissions associated with startups, shutdowns and malfunctions (SSM). Moreover, implicit in the definition of projected actual emissions is that such emissions should be representative of the source s normal operation, and emissions associated with SSM are not at all representative of normal operations. In addition, including emissions from SSM in a projected actual emissions determination results in an artificial projection. Moreover, emissions from startups and shutdowns are not included in a source s actual emissions for purposes of determining compliance with the source s allowable emission limit so they should not be included in determining any projected actual emission level for the source. 86 As discussed at previous meetings, USEPA believes that SSM is representative of normal operation and should be included in both the baseline and projected calculations. Ohio EPA is not planning to draft changes to this aspect of the rule

30 The proposed rule, as written, would allow a source to include as part of its projected actual calculation all actual emissions that exceed its allowable emissions, creating an absurd result, i.e., including non-complying emissions in a projected actual calculation. 88 The facilities are expected to include emissions from SSM in their projections. The federal rules do not state that SSM emissions must be adjusted to exclude non-complying emissions as it does explicitly state for the baseline actual emissions. The preamble states the only adjustment for projected actual emissions is that the projected hourly emissions rate used to calculate the actual emissions should be based on the units operational capabilities after the change, accounting for any legally enforceable restrictions that could affect the hourly emissions rate after the change. However, this is not identified in the rule. Ohio EPA intends to get clarification from USEPA as to whether including emissions from SSM above the allowables is intended or if these emissions should also be adjusted downward to reflect any legally enforceable restrictions. 89 In reference to the (a)(6) where there is a reasonable possibility that a project that is not a part of a major modification Define what is meant by projects. Is it all projects? Pollution control projects? Pollution prevention projects? Pre-construction projects? Modifications? Define what is meant by a part of. Does part of refer to projects that are part of the same project expenses? Does part of refer to projects that are operationally united in some way? Does part of refer to projects that are expensed or capitalized in the same budget? Does part of refer to projects that emit different pollutants? 90 30

31 The language referred to discusses a single project where there was a determination that the specific project in question was not a part of a major modification. As presented at the previous meeting, Ohio EPA acknowledges the importance of the definition of project and intends for its meaning to be consistent with the current use and will clarify it in rule if necessary. This will be explored further during rule language drafting. 91 In reference to (a)(6) the owner or operator elects to use the method specified in paragraphs (1) through (3) for calculating projects actual emissions: What does it mean that only one of the three specified methods trigger the plan provision? If the emissions unit s PTE is used as the method for projecting actual emissions, does the plan provision even apply? Conversely, if the unit s PTE is the method used, does this mean that the project does NOT have to result in a significant emissions increase in order for the plan provision to be triggered? Clarification is needed on what the intent is behind including only three of the applicable methods for calculating projected actual emissions. 92 This is a misinterpretation of the language. This language does not refer to different applicability test methods. It refers back to the actual-to-projectactual method and (1) (3) refers to procedures for that method

32 In reference to the language for Utilities: It should be deleted in its entirety. This section makes no sense other than to provide preferential treatment to owners/operators of existing electric utility steam generating units. USEPA made certain changes to the previous rule for Utilities and applied it to non-utilities. They decided the changes were not applicable to Utilities. For example, Utilities are still required to report yearly on their actual emissions regardless of whether they exceeded their projected emissions by the significance level. Ohio EPA does not plan to draft changes to remove the different requirements for Utilities and non-utilities. 94 Ohio EPA should incorporate the definition of replacement unit adopted by USEPA on October 27, 2003, and should treat replacement units as existing units for purposes of baseline and projected actual emissions. In such a case, the replacement unit would receive the baseline of the unit it replaces and the replacement unit would project emissions based on its expected maximum operations in the next 5 or 10 years 95 As stated at the previous meeting, Ohio EPA does not intend to draft changes to USEPA s new definition for replacement units. Replacement units will be able to use the emissions history of the replaced unit (for baseline and future projection purposes) so long as all the requirements included in the definition of replacement units are met

33 Ohio EPA should require that new units project actual emissions using PTE. Ohio EPA should adopt the provision that eliminates the record keeping requirements of the rule if PTE is used to project emissions for an existing unit. 97 Ohio EPA does not plan to draft changes to the requirements for new units (use of the actual-to-potential test) or incorporate any new requirements for the actual-to-potential test, such as special record keeping. 98 Ohio EPA must devise a process for tracking and analyzing the impact of actual emissions increases that will be allowed under the federal rule. We suspect that PSD increment will be consumed by these increases, but will be not be reviewed under the federal rule. If Ohio allows these increases and increment consumption to occur without review, then air quality will be degraded and a SIP revision eventually required. Note: for the purposes of air quality impact, the definition of actual emissions remains; thus, actual emissions increases will consume increment and should be analyzed

34 USEPA states they do not believe the new rules will negatively affect air quality. They further stated that if the result is not a major modification, that a state s minor NSR should include a determination that the source will not cause or contribute to a NAAQS violation and that sources that do not cause a significant emissions increase under the new rules are unlikely to cause a problem with the PSD increments or AQRVs. Nevertheless, when such problems are identified, States should take the appropriate course of remedy through their approved implementation program. Cont The primary reason that Ohio EPA operates a minor NSR program is to ensure that the NAAQS are protected. One of the criteria used by the Director prior to issuance of a PTI is whether the NAAQS will be maintained. 101 Menu of Options General Discussion of Applicability In order to determine whether a source modification triggers NSR, the source must determine what the emissions increase will be..use the "actual-to-projected-actual" test, predicting for five years after the project subtracting demand growth. State and local air agencies have several significant concerns with this provision, including: demand growth exclusion no opportunity for review prior to construction does not make the projected emissions levels enforceable limits on the source, does not require adequate reporting after the project to assure the project did not result in significant emissions increases

35 The Menu of Options: 3 for applicability test 1. Retains the actual-to-potential applicability test for all types of new and existing emissions units (utilities and non-utilities). a. The source may elect to take an enforceable limit on the PTE in order to avoid NSR 2. Current rule: utilize the actual-to-potential test for all new and existing emissions units except existing EUSGUs. Under this option, EUSGUs are provided the actual-toprojected actual test. Cont 103 The Menu of Options cont 3. Same basic applicability tests as the revised federal rule. However: a. Must submit the applicability determination, including the projections for post-project emissions and the basis for those projections, to the permitting authority prior to construction of the project., and b. Must determine actual emissions each year for 10 years following the project, and review the applicability determination using the actual emissions data to assess whether the project resulted in a significant emissions increase. Reports of the annual review must be submitted to the permitting authority. 104 The Menu of Options Two options for the demand growth exclusion: 1. Demand growth exclusion is eliminated 2. If demand growth exclusion is used, preconstruction reporting and post-construction record keeping and reporting are used to verify that the emissions excluded are based on increased demand

36 Ohio EPA Should Not Adopt the STAPPA/ALAPCO Menu of Options Approach to the Projecting Future Actual Emissions: During the 11/20/03 meeting, the NSR Menu of Options being developed by STAPPA/ALAPCO (S/A) was raised.. While it appears that S/A has devoted considerable resources to developing these options, we believe the S/A options do not address the fundamental deficiencies of the pre-2003 rules and the way in which they were implemented. For example, with respect to projecting future emissions, they essentially impose an actual-to-potential test on all sources, resulting in confiscation of capacity and discouraging environmentally beneficial and energy efficient projects. 106 All Comments Comments from Meeting 3 that were not addressed in these slides Were related to language/rule consistency issues rather than conceptual issues which Ohio EPA is not in a position to address these comments at this time, OR Were previously commented on