Texas Natural Resource Conservation Commission INTEROFFICE MEMORANDUM To: New Source Review (NSR) Permit Engineers Date: December 31, 1998 From: Victoria Hsu, P.E., Division Director, NSR Permits Subject: Flexible Permits and the Plantwide Applicability Limit (PAL) Effective January 1, 1999, a new process, the PAL, will be available to assess federal NSR applicability for sources that have received or are applying for a flexible permit under 30 TAC Chapter 116 Subchapter G. A policy has been developed whereby applicants can obtain a PAL in addition to the emission cap limit associated with their flexible permit. The PAL is an independent emission limit in the permit and is based on previous actual emissions plus an insignificance buffer. In certain cases, an environmental contribution of 10 % will be imposed in setting up the PAL. If the source stays under the PAL, federal review and contemporaneous netting will not be triggered. The PAL is a voluntary option that may be established when the flexible permit is obtained, or after the fact, at the request of the applicant. If it is obtained after the fact, an amendment will be required and a minimum $450.00 fee applied. Otherwise establishing the PAL can be done in conjunction with the flexible permit. Public notice is required to obtain the PAL in either case, but the notice can be combined with any permit notice that is otherwise being conducted. The PAL is a federal applicability limit only and does not impact other state NSR requirements. A special PAL permit condition has been developed and should be included in any flexible permit that contains a PAL. Details on how the PAL is established and when it must be reevaluated are included in the attached guidance paper. If you have any questions on this policy please contact Susana Hildebrand, your team leader or section manager. Federal Enforceability Policy for Flexible Permits Background: Flexible Permits The flexible permit program, was designed in 1994 by the TNRCC along with major stakeholders and environmental groups. The flexible permit creates an emission cap by pollutant for all facilities included in the permit. The primary incentives offered under the flexible permit program are: 1) time is given for the implementation of controls at the same time that operational flexibility is afforded such that the company can generate capital to offset the cost of controls, 2) the health effects' review can usually be streamlined if emissions are being reduced by demonstrating improvement in air quality, 3) sources are given the ability to manage their own operations and emissions to maintain their emission cap, 4) some modifications are pre-reviewed by the state allowing businesses to better schedule activities and minimize delays due to the permitting process. The primary benefit to the state is the permitting of a well-controlled source, which might otherwise have remained grandfathered, along with the subsequent reduction of air emissions. The flexible emission cap is established by applying Best Available Control Technology (BACT) to all facilities included in the cap and assuming maximum design capacity, plus an additional insignificance factor of up to 9%. Because a control strategy is committed to up-front as part of the process, the permit may contain a staged cap which reflects the application of controls over time. In other words, it is not uncommon to see the emission cap go down significantly each time additional controls are put in place. There is only one flexible permit allowed per account number, however, there is no requirement to include all facilities into the flexible permit. The flexible permit cap must be diminished as a result of units which are permanently shut down. The flexible permit cap represents an enforceable state limit. Federal applicability is also considered when the flexible permit is sought to ensure federal new source review permitting is not triggered. Plantwide Applicability Limit (PAL) The EPA proposed a rule July 23, 1995 and again on July 23, 1998 under NSR Reform concerning a Plantwide Applicability Limit (PAL). According to the proposal a PAL can be set be based on historical, actual emissions plus an insignificant margin. Under the PAL proposal the source has total operational and design flexibility and as long as the PAL is not exceeded, federal new source review is avoided. The PAL concept encourages pollution control and innovative technologies to be contemplated to accommodate future growth. The PAL provides for similar flexibility incentives as are derived from the Texas flexible permit. Should the PAL be exceeded, federal new source review would be applied to the project which caused the limit to be exceeded. The PAL has been sanctioned by the EPA for immediate implementation by states. Merging the PAL and the Flexible Permit The TNRCC believes that overlaying the PAL concept onto the flexible permit may provide a viable avenue to sources that have committed to a control strategy and that wish to preserve emissions for future growth. This process may be especially beneficial for those flexible permits that result in large reductions in emissions as a result of adding controls. Even for sources that have set their flexible permit limit to one that is just under the federal significance levels, obtaining a PAL may benefit the applicant by alleviating the need for netting when modifications are made. In addition, by establishing a PAL, sources may be able to pursue innovative technologies or develop pollution prevention plans to further offset their growth. By adding the PAL to the flexible permit, the source will be able to avoid Nonattainment and Prevention of Significant Deterioration (PSD) new source review and netting when sources are added or modified under exemptions or when amendments are sought, provided the PAL is not exceeded. It should be noted that authorization is still required under 30 TAC, Chapter 116, Subchapter B prior to construction or modification for activities not contemplated under the original flexible permit review (unless they qualify for an Exemption from Permitting), even though federal review and netting is not required. Implementation Beginning with the PAL permit concept, a voluntary participant would establish a baseline of historic emission levels. This baseline would be created by assessing the two-year average, actual emissions for each emission point based on what was combusted, processed or stored. The emission level must also be consistent with any enforceable limits including limitations imposed by Reasonably Acceptable Control Technology (RACT) or Maximum Achievable Control Technology (MACT) that have been relied upon for attainment strategies under the SIP. The flexible permit cap is set independently, as described above, but is established in a manner that would be consistent with federal permitting significance levels. For those sources that have already obtained a flexible permit, an amendment may be requested to establish the PAL in the flexible permit. The PAL would be established for each criteria pollutant based on the two-year average actual emissions prior to the establishment of the flexible permit. The PAL would serve as the limit under which federal new source review would not be triggered. PALs that are set up retroactively, after the issuance of the flexible permit, will have to reassess the PAL five years after issuance of the flexible permit limit so that it remains contemporaneous. For example, a flexible permit was issued in 1996. In assessing federal significance the emissions were compared to the two-year average, actual emissions prior to application submittal in 1996. Therefore the PAL would need to be reevaluated five years after the flexible permit was issued or 2001 in this case. However, because the NSR reform rule on the PAL is expected to be promulgated by June 1999 this reevaluation period may change. If the final rule allows for a longer renewal time, such as ten years, the five year renewal can be renegotiated assuming the state rules allow for the change. For sources that are seeking a new flexible permit, the PAL can be added to the permit, upon request of the applicant, prior to issuance. The reassessment of these PALs will fall into what is allowed under the new promulgated rules. Establishing a PAL in a flexible permit is considered a voluntary option that is available only to those who are seeking or have obtained an NSR flexible permit. The TNRCC, in establishing the PAL, may withhold up to 10% of the cap as an environmental contribution. An environmental contribution will not be withheld from permits that have a flexible permit limit that is equal to the PAL. Emissions credits to be banked and/or sold as creditable reductions must be excluded from the PAL. In addition, the PAL must be adjusted for any applicable SIP dependent RACT/MACT requirements. A condition will be included in the permit which requires that an alteration be submitted to the TNRCC within one year of the applicable RACT/MACT compliance dates so that the PAL can be reevaluated accordingly. Should an applicant choose to maintain a traditional approach to federal enforceability, this too is a workable option. The flexible permit limit itself is considered an enforceable limit just as a traditional permit limit is regarded as federally enforceable. However, any modifications or new sources that are sought would be subject to federal netting triggers. Permit Language The following condition should be included in the flexible permit establishing a PAL. This condition may be insert by using the macro: Alt-S, PAL. Netting requirements for this site shall be satisfied by using the Plantwide Applicability Limits (PALs) established in this permit. If future calculated emission rates exceed the PALs set forth in this permit then the permit holder shall be subject to federal new source review. Only the changes that cause the new emission rates to exceed the PAL are subject to federal new source review. The permit holder shall submit to the TNRCC a nonattainment permit and/or PSD permit application for all pollutants that exceed the PAL. The holder of this permit must still submit an amendment application in accordance with 30 TAC Chapter 116 Subchapter B to raise the MAERT limit above current MAERT levels even if the new levels do not exceed current PALs (for cases where the PAL is set higher than the MAERT). The current PALs listed in this permit must be adjusted downward for any future State Implementation Plan (SIP) reductions and/or Maximum Achievable Control Technology requirements. The lower PAL is effective on the effective date of the more stringent regulation. Within 12 months of the effective date of the regulation the permit holder shall submit a request to alter or amend the permit conditions to reflect the more stringent emission rates. The PALs shall be established for a period of five years. After five years, the permit holder shall submit a request to alter or amend the permit conditions to reevaluate the PALs based on the most recent five years of actual emissions. In addition, for those PALs established after the issuance of the flexible permit, the holder of this permit will submit an amendment to the TNRCC to reassess the PALs listed in this permit no later than _____(five years after issuance of the original flexible permit). Public Notice Establishing the PAL requires that an opportunity be given for public participation. This requirement may be satisfied in conjunction with any notice that is done for the flexible permit. Otherwise, a separate public notification in accordance with the requirements of Chapter 116, must be provided when the PAL is sought. PAL/Flexible Permit Concept Example The attached example illustrates the PAL/ Flexible Permit hybrid process. For this example, a refinery is selected as the existing major source (although for simplicity only eight emission points are used) in an attainment area. The first part of the Table illustrates each emission unit along with their current authorization. For each criteria pollutant, three values are indicated. The first is the historical actual emissions in tons per year. According to our proposal, this value would be created by assessing the previous two-year average actual emissions prior to the issuance of the flexible permit. The emission limit must be consistent with any enforceable limits including limitations imposed by Reasonably Acceptable Control Technology (RACT) or any Maximum Achievable Control Technology (MACT) that has been relied upon for attainment strategies under the SIP. The second value represents the proposed allowable for that emission point. This value is based on the potential to emit of the unit with Best Available Control Technology (BACT) applied (plus an insignificance factor of up to 9%). The third value is the net increase (or decrease) which is based on the difference between the first two columns. As you may notice, there are two emission points being proposed with this permitting action. Authorization for the proposed emission points would be sought under Subchapter B and concurrently rolled into the flexible permit. Because these are new emission points, they have no actual emissions to be added into the PAL. For each pollutant the PAL is calculated in two ways. The first method deducts an environmental contribution of up to 10% from the PAL. The second method does not. The environmental contribution is deducted when the actual emissions are greater than the proposed allowable for the flexible permit by more than a significant amount. A "significant amount" refers to applicable Prevention of Significant Deterioration (PSD) and nonattainment significance levels. From our example, NOx shows actual emissions of 362.98 tpy and a proposed allowable for the flexible permit of 150.2 tpy. The difference is 212.78 tpy, which is greater than the PSD significance level for NOx of 40 tpy. In this case 10% was removed from the actual emission level to establish the PAL at 326.6 tpy. When the proposed allowable for the flexible permit limit is greater than the actual emissions and when the difference is less than significant, as is the case with the other pollutants in our example, the proposed allowable becomes the PAL. Note that if the difference between the proposed flexible permit limit and the PAL was to be greater than the significance level, federal review would be required and authorization would be needed under the Subchapter B, PSD and/or Nonattainment Review rules. The bottom portion of our example indicates the permit emission limitations that would go into the actual permit. The Maximum Allowable Emission Rate (MAERT) is the emission level the source can operate up to under the flexible permit without further authorization under state rules. The PAL limit represents the maximum emission level the source can emit without triggering a major modification under federal rules. Once the PAL is established in the permit, it would be reevaluated for any applicable state or federal rules that could diminish its value. The permit holder will have a special condition put in the permit which requires that the PAL be readjusted within one year of MACT or RACT compliance, although they will have to abide by the lower limit once the compliance date occurs. In addition, the PAL should be reevaluated at the time of amendment or renewal. So in our example, if the applicant came back at a later date with a project to increase NOx above the MAERT limit, we would reevaluate the PAL but as long as the new proposed allowable was under the PAL, no federal review or netting would be needed. Source Current Nox CO Authorization Current Proposed Net Current Proposed Net Actuals Allowable Increase Actuals Allowable Increase Crude II Charge Htr. A Permit No. X 331.08 55.9 -275.18 24.08 37.3 13.22 Crude II Vacuum Htr. A Permit No. X 31.9 15.4 -16.5 7.98 15.4 7.42 Crude II Charge Htr. B Proposed 0 55.9 55.9 0 29.8 29.8 Crude II Vacuum Htr. B Proposed 0 23 23 0 12.3 12.3 Sulfolane Fugitives Grandfathered Butadiene Sat. Fugitives Standard Ex. Cyclohexane Fugitives Standard Ex. Storage Tanks Various 362.98 150.2 -212.78 32.06 94.8 62.74 SO2 PM VOC Current Proposed Net Current Proposed Net Current Proposed Net Actuals Allowable Increase Actuals Allowable Increase Actuals Allowable Increase 3.2 12.8 9.6 3.01 3.9 0.89 0.85 1.1 0.25 4.3 13.5 9.2 3.12 4.4 1.28 0.64 0.9 0.26 0 12.8 12.8 0 3.9 3.9 0 1.1 1.1 0 5.3 5.3 0 4.4 4.4 0 0.9 0.9 10.1 7.49 -2.61 2.02 1.03 -0.99 1.4 1.4 0 254.96 275 20.04 7.5 44.4 36.9 6.13 16.6 1 0.47 269.97 288.92 18.95 362.9 - 10% (environmental contribution) = 326.6 Permit MAERT/PAL Limitation Pollutant MAERT (TPY) PAL (TPY) Comment Nox 150.2 326.6 Future expansion possible without triggering federal review if emission kept below PAL. Actual emissions less 10 % retirement of 36.3 TPY. CO 94.8 94.8 No modification triggered under proposed allowable SO2 44.4 44.4 No modification triggered under proposed allowable PM 16.6 16.6 No modification triggered under proposed allowable VOC 288.9 288.9 No modification triggered under proposed allowable MAERT = Maximum level the source can emit without needing further authorization under state rules PAL - Maximum emissions without triggering a major modification under federal rules