STAPPA /ALAPCO/ECOS Preliminary Comments on EPA's NSR in Transitional Ozone Nonattainment Areas Concept Paper Environmental Council of the States State and Territorial Air Pollution Program Administrators Association of Local Air Pollution Control Officials December 1, 1997 David Solomon Office of Air Quality Planning and Standards U.S. Environmental Protection Agency Research Triangle Park, NC 27711 Dear Mr. Solomon: Earlier this year, EPA briefed the Environmental Council of the States' (ECOS') Air Committee, the State and Territorial Air Pollution Program Administrators (STAPPA) and the Association of Local Air Pollution Control Officials (ALAPCO) on the agency's concept for implementing New Source Review (NSR) in Transitional ozone nonattainment areas, and solicited our comments on the concept. Pursuant to our commitment to provide such preliminary comments, we are pleased to offer the following on behalf of the ECOS Air Committee, STAPPA and ALAPCO on EPA's October 31, 1997 Concept Paper on Implementing the New Source Review Program in Transitional Areas Under the 8-Hour Ozone Standard. We understand that this concept paper is intended to serve as the basis of a March 1998 proposed rulemaking, to be promulgated by December 1998. ECOS, STAPPA and ALAPCO appreciate EPA's efforts to develop regulations to implement NSR requirements in "Transitional" ozone nonattainment areas, as provided for by President Clinton's July 16, 1997 directive, entitled Implementation of Revised Air Quality Standards for Ozone and Particulate Matter. Such early action on this important program is needed to provide regulators and the regulated community with certainty and clarity about program responsibilities and expectations. Further, we are pleased that a number of the approaches contained in EPA's concept paper reflect longheld state and local NSR principles (a copy of STAPPA/ALAPCO's NSR principles is attached to these comments). However, although EPA contemplates some interesting and potentially viable NSR program components, ECOS, STAPPA and ALAPCO believe that the concept paper provides insufficient detail to enable state and local agencies to accurately assess the usefulness and likely effectiveness of this approach. Further, while we support EPA's intent to provide incentives for state and local governments to accelerate their attainment efforts -- which likely will result in emissions reductions and, thus, health benefits earlier
than would otherwise occur -- given the lack of detail, it is unclear to us whether this NSR concept, in fact, provides such incentives. To assist EPA in better understanding our initial concerns and the need for additional information, ECOS, STAPPA and ALAPCO provide the following preliminary comments and questions on the NSR program discussed in EPA's concept paper and look forward to receiving further details from EPA on this important effort. Emissions Offsets Among the incentives to pursue Transitional nonattainment status is an alternative NSR approach which, as currently being developed by EPA, would afford state and local agencies the opportunity to create and use pools of offsets to facilitate new development that may not otherwise occur due to circumstances limiting available emission reductions. These offset pools would be composed of actual emission reductions achieved through regional (and applicable local) NO x control strategies. Unfortunately, the lack of detail provided in the agency's concept paper limits our ability to assess whether the benefits of this emissions offsets approach outweigh the additional costs (e.g., new tracking systems, staff time). ECOS, STAPPA and ALAPCO have fundamental concerns with four elements of this emissions offsets strategy, including 1) offset projections, 2) baselines for determining excess emissions reductions, 3) intrastate versus interstate offset trading and 4) necessary programmatic changes. EPA's Offset Projections State and local agencies are not convinced that surplus emissions reductions from regional attainment strategies and program requirements will be available to support the offset pools contemplated in EPA's new approach. It is our understanding that the NO x budgets established by EPA in its proposed SIP call under Section 110 of the Clean Air Act are intended to accommodate new growth projected through 2007. The agency affirms this by stating in its concept paper that "[i]n light of the abundant NO x reductions that will result from the regional NO x strategy, there should be ample excess reductions to provide the offsets necessary to accommodate anticipated major new source growth." We are concerned that EPA's projection of "abundant" surplus emission reductions may be overly optimistic. ECOS, STAPPA and ALAPCO request that EPA specify and explain its projections that sufficient excess emission reductions will be generated to meet emission reduction requirements and accommodate new growth. We believe that accurate projections of emissions reductions are critical to avoid situations where state and local agencies that select EPA's NSR approach in Transitional areas discover too late that either actual emissions increases from new growth exceed projected new growth emissions increases,
or actual emission reductions are insufficient to meet attainment and NO x reduction requirements, let alone accommodate new development. ECOS, STAPPA and ALAPCO recommend that EPA's concept paper expressly provide that state and local agencies selecting EPA's NSR approach in Transitional areas may, in appropriate circumstances (e.g., where pooled offsets are unavailable or inadequate for new development), require sources to comply with Part D NSR requirements, including requiring sources proposing new development to bear the burden of identifying emissions reductions to offset projected emissions increases. Without this flexibility, EPA's concept paper could be interpreted to place this responsibility on state and local agencies, which would likely have to impose unfair and cost-ineffective additional controls on industries and smaller sources other than those proposing the new growth, or create uncertainty by delaying proposed new development until additional offsets become available. In addition, ECOS, STAPPA and ALAPCO are concerned that EPA's concept does not explain from where states and localities not subject to the Section 110 SIP calls will derive excess emission reductions to support offset pools for Transitional areas. Many such states and localities may have to impose additional controls or requirements on smaller sources and industries to generate the additional emissions reductions needed to support offset pools for new growth. As previously mentioned, this is not a cost-effective approach to achieving emissions reductions. We request that EPA better explain how all states and localities with Transitional areas may identify or develop excess emission reductions for use in offset pools. Baselines for Determining Excess Emissions Reductions To better ensure that EPA's approach contains accurate offset projections for states and localities selecting the agency's new approach in Transitional areas, ECOS, STAPPA and ALAPCO recommend that EPA use the following baselines for NOx and volatile organic compound (VOC) emissions reductions: The baseline for determining surplus NO x offsets should be the NOx budget provided for under the Section 110 SIP calls, plus emission reductions from any additional local controls necessary for attainment. The baseline for determining surplus VOC offsets should be the maintenance inventory in the year that the one-hour ozone NAAQS is attained. Intrastate Versus Interstate Offset Trading ECOS, STAPPA and ALAPCO support appropriate emission trading programs and believe they can play an important role in state and local agencies' management of emissions reductions. EPA's concept paper would encourage such trading by allowing state and local air agencies to use intra- and interstate pools of emissions reductions to meet the offset requirements of Part D. We believe, however, that agencies will be more likely to use EPA's approach if it is generally restricted to intrastate pooling for several reasons.
First, we are concerned that allowing interstate pooling and trading of offsets could create inequitable and adverse air quality impacts across the states. For example, use of offsets in an interstate pool for new development in a Transitional area could increase ozone transport to another state. Second, we are concerned that an interstate approach to offset pools would require more complex tracking systems than would be necessary for intrastate offset pooling (see comments below under Necessary Programmatic Changes). It is unclear from EPA's concept paper who would decide disputes or otherwise oversee the various pools possible under an interstate offset pool approach. For example, if numerous states and localities pool their offsets under EPA's approach, who would decide which projects in the participating states and localities get offsets if the offset pool is insufficient to accommodate all projected emissions increases from new development? ECOS, STAPPA and ALAPCO believe that, with the exception of areas that have experience in successfully engaging in interstate trading (e.g., the Ozone Transport Region), an intrastate pooling approach where offsets are derived from statewide emissions reductions and allocated only for new intrastate development, best enables state and local regulators to avoid unintended interstate inequities. Moreover, because intrastate emissions trading also can produce localized air quality impacts, we recommend that EPA include appropriate provisions to prevent intrastate trading of offsets from causing new, or exacerbating existing, localized air quality problems. We also recommend that EPA clarify what, if any, impacts its new approach will have on emissions trading in existing nonattainment areas. For example, EPA should clarify whether state and local agencies opting to use EPA's new approach in Transitional areas may also engage in emissions trading in other (i.e., non- Transitional) nonattainment areas. In addition, it is unclear from EPA's new approach whether sources in other (i.e., non-transitional) nonattainment areas are eligible to use offsets from pools established under EPA's new approach. Necessary Programmatic Changes The President's directive calls on EPA to revise its rules for NSR so state and local agencies will be able to comply with only "minor" revisions to their existing programs in areas classified as Transitional. ECOS, STAPPA and ALAPCO, however, are not convinced that EPA's approach, as detailed in the concept paper, will involve only minor changes to current state and local NSR programs. For example, state and local agencies would be responsible for managing the offset pools and determining the availability of offsets for individual sources. EPA specifies in its concept paper that state and local agencies would be required to 1) commit in SIP submittals to ensuring that the emissions reductions counted in the offset pools actually occur; 2) demonstrate, once every year or two, that the
permitted amount of emissions increases from major new source growth is matched by a sufficient amount of creditable, enforceable, and contemporaneous emissions reductions from the offset pool; 3) demonstrate that the emissions reductions used for offsets actually accrued during, or prior to, the year (or other required period) of the major new source growth; and 4) show that sufficient reductions have occurred within the same nonattainment area as the new source growth, or from other nonattainment areas with an equal or higher nonattainment classification. Participating agencies also would need to implement tracking systems to monitor the offset pools to demonstrate that emissions reductions used to offset new source growth during the prescribed period of time meet the initial program criteria cited above. ECOS, STAPPA and ALAPCO are concerned that these requirements may impose significant programmatic burdens on state and local agencies, which may provide a disincentive for agencies otherwise interested in participating in this voluntary program. While the requirements are not unreasonable, they represent significant responsibilities likely to impose additional resource demands on air agencies. We encourage EPA to avoid adding complex, resource-intensive administrative and procedural requirements to state and local agencies' NSR programs through this new approach. Control Technology Requirements Because traditional Best Available Control Technology (BACT) analyses have not considered regional environmental impacts associated with the various control options and pollutants under review, EPA's concept paper would require BACT determinations under this NSR alternative in Transitional areas to reflect the regional nature of the ozone problem. EPA indicates in its concept paper that "the consideration of adverse regional environmental impacts will result in BACT determinations in transitional areas that will require the use of the most effective technologies available, if not the most stringent limits." This amounts to an "enhanced" BACT. ECOS, STAPPA and ALAPCO continue to believe that the best time to control a source is at the time of its installation or modification, and that the appropriate control should be the best available technology requirement or emissions limit. Often, this means applying LAER. Because EPA's concept paper does not adequately define what "enhanced BACT" means, or the difference between enhanced BACT and LAER, we are uncertain whether, in fact, application of enhanced BACT will ensure that the best available technology requirement or emissions limits will continue to be required under the new program. Moreover, the concept paper does not adequately define the requirement to analyze regional consequences when applying enhanced BACT. State and local agencies need more information about EPA's enhanced-bact concept to determine if it is appropriate.
Major Source Applicability Threshold The applicability threshold for a major stationary source under the NSR program is 100 tons per year (tpy) for a nonattainment pollutant, while that threshold is either 100 or 250 tpy under the PSD program, depending on the type of stationary source under review. EPA's concept paper, to be consistent with the relevant Part D NSR requirements, would make new or modified sources of ozone precursors (VOCs and NOx) in transitional areas subject to the 100 tpy threshold. ECOS, STAPPA and ALAPCO believe this is necessary and support EPA's recommendations for major source thresholds. Additional NSR Requirements EPA's concept paper also would require sources locating in Transitional areas to certify that their other facilities in the state are in compliance with applicable emissions limits and other standards and perform a benefits analysis considering alternative siting and operating options to show that the proposed construction outweighs environmental and social costs. While ECOS, STAPPA and ALAPCO believe these are appropriate requirements, and ones that some state and local agencies already impose, we anticipate heightened public scrutiny of alternative siting decisions (e.g., environmental justice) and recommend that EPA further elaborate on how these requirements should be fulfilled. Inequities ECOS, STAPPA and ALAPCO are concerned about the possible interstate inequities that may arise under EPA's concept, where sources in Transitional areas in one state are subject to less stringent review and control requirements than similar sources in other states. For example, sources in attainment areas within the Ozone Transport Region and nonattainment areas outside the OTR that are subject to LAER would be subject to more stringent requirements than sources located (or locating) in Transitional areas. Such inequities are likely to create confusion among both regulators and the regulated community and result in added complexities unintended by the President's directive. We are also concerned that EPA's proposed one-to-one ratio of offsets to increased emissions in Transitional areas may create inequities from state to state. For example, Marginal ozone nonattainment areas are currently subject to 1.1:1 offset ratios, which require more than one unit of emissions reductions for each unit of increased emissions. Yet Transitional areas would be provided a lower standard for offsetting increased emissions. This could serve to attract sources to Transitional areas, potentially exacerbating air quality problems in those areas. Conclusion
ECOS, STAPPA and ALAPCO generally support EPA's alternative approach for implementing NSR in Transitional ozone nonattainment areas, but believe that this approach should be voluntary. Although, EPA has stated in various forums that the agency intends this program to be a voluntary alternative to existing NSR program requirements in Transitional areas, the concept paper is silent on this issue. EPA should expressly provide that states and localities with Transitional areas have the discretion to select this new approach or the existing NSR program requirements under Part D of Title I of the Clean Air Act. As a voluntary program alternative, we believe EPA's concept has the potential to offer state and local agencies a valuable new tool to use in appropriate circumstances. However, more detail is needed in several critical areas previously identified in these comments to enable state and local agencies to determine whether EPA's approach is a sound one. As such, we believe that EPA can greatly improve its concept by considering our preliminary concerns and recommendations. ECOS, STAPPA and ALAPCO look forward to continuing to work with EPA on the agency's ongoing regulatory development of this new approach. Please let us know if you have questions or desire additional information. Sincerely, (original signed) Christophe Tulou Chair ECOS Air Committee (original signed) George Meyer Deputy Chair ECOS Air Committee (original signed) John Paul Chair STAPPA/ALAPCO NSR Subcommittee