[Federal Register Volume 82, Number 109 (Thursday, June 8, 2017)]
[Proposed Rules]
[Pages 26634-26638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11906]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[EPA-R06-OAR-2017-0192; FRL-9962-32-Region 6]
Approval and Promulgation of Implementation Plans; Texas;
Revisions to Emissions Banking and Trading Programs for Area and Mobile
Sources
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: Pursuant to the Federal Clean Air Act (CAA or the Act), the
Environmental Protection Agency (EPA) is proposing to approve revisions
to the Texas State Implementation Plan (SIP) Emissions Banking and
Trading Programs submitted for parallel processing on March 10, 2017.
Specifically, we are proposing to approve revisions that clarify and
expand the existing provisions for the generation and use of emission
credits from area and mobile sources.
DATES: Written comments must be received on or before July 10, 2017.
ADDRESSES: Submit your comments, identified by Docket No. EPA-R06-OAR-
2017-0192, at http://www.regulations.gov or via email to
[email protected]. Follow the online instructions for submitting
comments. Once submitted, comments cannot be edited or removed from
Regulations.gov. The EPA may publish any comment received to its public
docket. Do not submit electronically any information you consider to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Multimedia submissions (audio,
video, etc.) must be accompanied by a written comment. The written
comment is considered the official comment and should include
discussion of all points you wish to make. The EPA will generally not
consider comments or comment contents located outside of the primary
submission (i.e. on the web, cloud, or other file sharing system). For
additional submission methods, please
[[Page 26635]]
contact Adina Wiley, 214-665-2115, [email protected]. For the full
EPA public comment policy, information about CBI or multimedia
submissions, and general guidance on making effective comments, please
visit http://www2.epa.gov/dockets/commenting-epa-dockets.
Docket: The index to the docket for this action is available
electronically at www.regulations.gov and in hard copy at the EPA
Region 6, 1445 Ross Avenue, Suite 700, Dallas, Texas. While all
documents in the docket are listed in the index, some information may
be publicly available only at the hard copy location (e.g., copyrighted
material), and some may not be publicly available at either location
(e.g., CBI).
FOR FURTHER INFORMATION CONTACT: Adina Wiley, 214-665-2115,
[email protected]. To inspect the hard copy materials, please
schedule an appointment with Ms. Adina Wiley or Mr. Bill Deese at 214-
665-7253.
SUPPLEMENTARY INFORMATION: Throughout this document wherever ``we,''
``us,'' or ``our'' is used, we mean the EPA.
I. Background
A. CAA and SIPs
Section 110 of the CAA requires states to develop and submit to the
EPA a SIP to ensure that state air quality meets the National Ambient
Air Quality Standards (NAAQS). These ambient standards currently
address six criteria pollutants: carbon monoxide, nitrogen dioxide,
ozone, lead, particulate matter, and sulfur dioxide. Each federally-
approved SIP protects air quality primarily by addressing air pollution
at its point of origin through air pollution regulations and control
strategies. The EPA-approved SIP regulations and control strategies are
federally enforceable.
The Texas SIP includes several discretionary emissions trading
programs developed consistent with the EPA's Economic Incentive Program
(EIP) Guidance, that are designed to promote flexibility and innovation
in complying with State and Federal air emission requirements
established in the SIP and the SIP-approved air permitting programs.\1\
This proposed action will address revisions to two of the Texas
emissions trading programs--the Texas Emission Credit (EC) and Discrete
Emission Credit (DEC) Programs that were submitted to the EPA on March
10, 2017, with a request for parallel processing. The EPA is proposing
approval at the same time that the Texas Commission on Environmental
Quality (TCEQ) is completing the corresponding public comment and
rulemaking process at the state level. The March 10, 2017, SIP revision
request will not be complete and will not meet all the SIP
approvability criteria until the state completes the public process and
submits the final, adopted SIP revision with a letter from the Governor
or Governor's designee to EPA. The EPA is proposing to approve the SIP
revision request after completion of the state public process and final
submittal. Please see the Technical Support Document (TSD) accompanying
this rulemaking for an identification of the specific sections impacted
by this proposed rulemaking.
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\1\ ``Improving Air Quality with Economic Incentive Programs''
(EIP Guidance) (EPA-452/R-01-001, January 2001) is the EPA guidance
document for reviewing and approving discretionary EIP submittals.
The EIP Guidance applies to the establishment of a discretionary EIP
for attaining or maintaining the NAAQS for criteria pollutants. The
EIP Guidance supersedes and takes precedence over the discretionary
EIP guidance provided in prior documents such as the 1994 EIP (April
7, 1994, 59 FR 16690, 40 CFR part 51, subpart U) and the guidance in
the emission trading policy statement (ETPS) (December 4, 1986, 51
FR 43813).
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B. Overview of the Texas Emissions Banking and Trading Programs
1. The EC Program
The EC Program enacted at 30 Texas Administrative Code (TAC)
Chapter 101, Subchapter H, Division 1 allows owners or operators of a
facility or mobile source to generate emission credits by reducing
emissions of criteria pollutants or their precursors, with the
exception of lead, below any applicable regulations or requirements.
Emission credits are generated and banked in terms of rate (tons per
year). The ECs encompass reductions generated and banked from
stationary sources as emission reduction credits (ERCs) or generated
and banked from mobile sources as mobile emission reduction credits
(MERCs). The ECs from the bank have traditionally been used as offsets
for the permitting of major new or modified facilities in nonattainment
areas. ECs have also been banked and traded for alternative compliance
with Reasonably Available Control Technology (RACT) requirements. The
EPA initially approved the EC program on September 6, 2006 (71 FR
52698) with updates approved on May 18, 2010 (75 FR 27647). The EPA has
taken a separate action via a direct final rulemaking to address the
revisions to the EC Program adopted on June 5, 2015 and submitted to
the EPA as a SIP revision on August 14, 2015. See 82 FR 21919, May 11,
2017.
On March 8, 2017, the TCEQ Commissioners voted to propose for
adoption revisions to the EC Program that clarify and augment the
existing regulations pertaining to the generation and use of ECs from
area and mobile sources. The TCEQ submitted this proposal package on
March 10, 2017 with a request for parallel processing.
2. The DEC Program
The DEC Program enacted at 30 TAC Chapter 101, Subchapter H,
Division 4 allows an owner or operator of a facility or mobile source
to generate discrete emission credits by reducing emissions of criteria
pollutants or their precursors, with the exception of lead, below any
applicable regulation or requirement. Discrete emission credits (DECs)
are quantified, banked and traded in terms of mass (tons), not a rate
as is the case with ECs. DECs may be generated from stationary sources
and banked as discrete emission reduction credits (DERCs) or may be
generated from mobile sources and banked as mobile discrete emission
reduction credits (MDERCs). Traditionally DECs have been used for RACT
compliance for Volatile Organic Compounds (VOCs) and nitrogen oxides
(NOX); DECs can also be used to offset new major sources or
major modifications to existing sources in nonattainment areas. The EPA
initially approved the DEC Program on September 6, 2006, with updates
approved on May 18, 2010 (75 FR 27644). The EPA is addressing, in a
separate direct final action, revisions to the DEC program that were
submitted on December 22, 2008; May 14, 2013; and August 14, 2015. See
82 FR 21919, May 11, 2017.
On March 8, 2017, the TCEQ Commissioners voted to propose for
adoption revisions to the DEC Program that clarify and augment the
existing regulations pertaining to the generation and use of DECs from
area and mobile sources. The TCEQ submitted this proposal package on
March 10, 2017 with a request for parallel processing.
II. The EPA's Evaluation
Both the Texas EC and DEC SIP programs contain existing language to
provide for the generation of emission reductions from area and mobile
sources. The TCEQ is proposing revisions to the existing regulations to
clarify the processes for area and mobile source credit generation and
quantification in an effort to incentivize increased utilization of the
program. The accompanying TSD for this action includes a detailed
analysis of the
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proposed revisions submitted for EPA's consideration for parallel
processing.\2\ In many instances the revisions are minor or non-
substantive in nature and do not change the intent of the original SIP-
approved EC or DEC programs. Following is a summary of our analysis for
those revisions that we view as substantive revisions to the existing
SIP-approved programs.
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\2\ The accompanying Technical Support Document is available in
the rulemaking docket, EPA-R06-OAR-2017-0192.
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A. Addressing Uncertainty in Area and Mobile Source Emission Estimates
The area and mobile source inventories used by TCEQ for attainment
planning are based on emission estimates and models rather than actual
reported emissions data. To reduce the uncertainty in the emission
estimates in the overall area and mobile source inventories, the TCEQ
is proposing revisions to the definition of ``State Implementation Plan
(SIP) emissions'' at 30 TAC Sections 101.300(30) and 101.370(31) to
discount the overall area and mobile source pool available for
generating reductions; 75% of the respective area source and non-road
mobile source emissions inventory is eligible to generate emission
reductions, and 85% of the on-road mobile source emissions inventory is
eligible to generate emission reductions. The TCEQ is also proposing at
30 TAC Sections 101.303(b), 101.304(b), 101.373(b), and 101.374(b) that
the emission and activity rates used to determine the historical
adjusted emissions for area and mobile source generation strategies
will be determined from two consecutive years from the past five years.
The lookback window may be extended up to 10 years if the source has
detailed operational records to demonstrate the actual emissions.
The EPA proposes that the overall reduction factor in the area and
mobile source inventories available for credit generation is
appropriate and approvable. We also propose that limiting the lookback
window to five years, with the ability to extend up to 10 years if
detailed operational records are available, is appropriate and
approvable. In both instances, the TCEQ has identified an area of
uncertainty and presented a reasonable method for mitigating the
uncertainty and ensuring the credits generated under the EC and DEC
programs represent real reductions that will benefit the airshed.
Restricting the lookback window to five years addresses the differences
in emission estimations used for area and mobile sources and the
reported actual emissions in the point source universe. The option to
extend the lookback window up to 10 years for detailed operational
records will also encourage and incentivize more detailed emissions
monitoring and recordkeeping for area and mobile sources.
B. Limiting the Sources and Strategies Eligible for Generating ECs or
DECs
The TCEQ has submitted proposed revisions to the General Provisions
of the EC and DEC programs at 30 TAC Sections 101.302(c) and 101.372(c)
to identify the source categories ineligible for generating ECs or
DECs. Examples of ineligible source categories include residential area
sources and on-road mobile sources that are not part of an industrial,
commercial, nonprofit, institutional, or municipal/government fleet.
Additionally, the TCEQ has proposed at 30 TAC Section 101.303(a)(2)(D)
that ERCs may not be generated from shutdowns of specific types of
inelastic area sources that are driven by population demands.\3\ A list
of inelastic area sources will be maintained by the TCEQ on the agency
Web site; the TCEQ has proposed a methodology where any person can
petition the TCEQ Executive Director to add or remove source categories
from the list.
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\3\ Inelastic is an economic term used to describe when the
supply and demand for a good or service is independent of the price.
In the context of the proposed Texas rules, an inelastic area source
is a source that will exist regardless of economic factors. Gas
stations and dry cleaners are examples of inelastic area sources
because the population will demand these services regardless of
price.
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The EPA proposes to find that the TCEQ has appropriately revised
the EC and DEC programs to identify the sources and types of emission
reduction strategies eligible for participation within the programs.
The TCEQ has proposed to limit the eligible source categories to those
where the sources have required established emissions monitoring and
recordkeeping provisions and the TCEQ has the authority to ensure the
reductions will be federally enforceable and permanent, as applicable,
through construction permits or other certifications. These limits will
ensure that the emission reductions generated are real, quantifiable,
surplus, and permanent as required by the Texas SIP.
The exclusion of shutdowns from inelastic area sources is an
appropriate method to prevent demand shifting--an outcome where one
inelastic source (for example, a dry cleaner or gas station) will shut
down and the same type of source will open down the street based on
population needs and economic considerations. There is no net reduction
in emissions in this scenario; by prohibiting inelastic area source
shutdowns from generating reductions the TCEQ is protecting the airshed
by ensuring generated and banked ERCs will be real, permanent and
surplus. The proposed methodology for developing and maintaining the
inelastic area source category list is also approvable; the proposed
methodology provides a replicable mechanism for public input.
C. Addressing Uncertainty in the Area and Mobile Source Generation
Strategy
The TCEQ is proposing additional adjustment factors to address
uncertainty in credit generation and quantification at 30 TAC Sections
101.303(c), 101.304(c), 101.372(c) and 101.374(c). For emission
reductions from the shutdown of area or mobile sources, the TCEQ is
proposing that the amount of ECs or MDERCs will be reduced by 15%. For
emission reductions of area or mobile sources using alternative methods
for emissions quantifications, the TCEQ is proposing that the amount of
ECs or DECs will be reduced by 15%. If the source is subject to both
adjustment factors, the TCEQ proposes the total combined reduction will
be 20%.
The EPA proposes to find that the proposed adjustment factors
applied to credit generation and certification are approvable. The
adjustment factor applied for the shutdown of area or mobile sources
will mitigate the possibility of unanticipated demand shifting. The
adjustment factor applied for alternative methods of emissions
quantification will address the uncertainty associated with emission
estimation techniques and could serve to incentivize the use of more
robust emissions monitoring and reporting consistent with point source
requirements. These adjustment factors will help ensure that the TCEQ
certifies emission reductions that are real, surplus, quantifiable, and
permanent as required by the CAA and the Texas SIP.
D. Exceptions to Application Deadlines and Emission Credit Lifetimes
The Texas SIP currently provides that ECs will have a lifetime of
60 months (5 years) from the date of the emission reduction, see 30 TAC
Section 101.309(b). The TCEQ has proposed limited exceptions to the EC
application deadline and credit lifetimes at 30 TAC Sections 101.303(d)
and 101.304(e). The TCEQ has demonstrated that the extended application
deadlines and credit lifetimes would apply to a small subset of the
potential EC population for
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a specified time period. These extensions in lifetime are proposed to
assist in program implementation, incentivize expeditious plugging of
oil and gas wells, and to equitably process the EC applications
submitted during the stakeholder and rule development process. Each of
the applications with the extended lifetime will be processed by the
TCEQ in accordance with the proposed regulations; the TCEQ will apply
the overall discount to the area or mobile source inventories and apply
the adjustment factors to address uncertainty in the emission
estimations and unanticipated activity shifting. The TCEQ also has
existing SIP-authority at 30 TAC Section 101.302(g), proposed to be
renumbered as 101.302(i), to require recordkeeping beyond the nominal 5
year lifetime of the EC. In its preamble to the proposed state rule,
the TCEQ interprets this existing SIP-authority to require
recordkeeping for the entirety of the extended EC lifetime and states
this requirement would be annotated in the federally enforceable
certification paperwork required by the TCEQ executive director;
thereby ensuring that the recordkeeping for the ECs with the extended
lifetime continues to satisfy the CAA and the Texas SIP.\4\ The
proposed limited exceptions to the EC application deadline and credit
lifetimes at 30 TAC Sections 101.303(d) and 101.304(e) are approvable.
We are making a preliminary finding that the TCEQ has appropriately
defined the scope of the EC program and has the authority to require
recordkeeping for the life of the generated ECs to ensure compliance
with the CAA and the Texas SIP.
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\4\ See 42 TexReg 1340, March 24, 2017.
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E. Clarification of the DEC Program To Provide for the Generation of
MDERCs From Shutdowns
The TCEQ is proposing to clarify the existing SIP-approved language
for MDERC generation at 30 TAC Section 101.374(c)(1) to explicitly
provide for the generation of MDERCs from shutdowns, including
permanent shutdowns and temporary curtailments of activity from a
mobile source. The TCEQ must still review each MDERC generated from a
shutdown to determine whether the reduction is real, quantifiable,
surplus and enforceable before certifying the reduction, consistent
with the Texas SIP and the CAA.
The EPA is proposing to approve the clarification of the MDERC
generation language to provide for generation of credits from mobile
source shutdowns. Sources have traditionally not availed themselves of
the current SIP provisions for generating MDERCs, therefore any
generation of emission reductions (including those from the shutdown of
mobile sources) would likely be considered innovative and novel. The
DEC program is an open market trading program designed to promote
creative and innovative emission strategies. We believe that emission
reduction strategies for the shutdown of mobile sources is consistent
with the intent of the EIP because these strategies could result in a
benefit to the specific airshed and promote and incentivize mobile
source reductions. The emission adjustment factor of 15% proposed by
the TCEQ will address any uncertainties associated with the generation
of MDERCs from shutdowns or concerns about activity shifting, further
ensuring that the reduction strategies generate real, enforceable and
surplus reductions.
F. Analysis Under Section 110(l) of the CAA
Our analysis indicates that the March 8, 2017 regulations proposed
for adoption by TCEQ have been developed in accordance with the CAA and
submitted on March 10, 2017 with a request for parallel processing. The
Texas EC and DEC programs are SIP-approved programs that provide for
compliance flexibility and generation and use of emission credits in
the SIP-approved nonattainment New Source Review permitting program.
The proposed revisions to the EC and DEC programs further clarify and
update the existing programs specific to the generation and use of
emission reductions from area and mobile sources. These submitted
proposed revisions do not change the fundamental premise or structure
of the approved programs. Therefore, we find that the proposed
revisions to the EC and DEC programs will not interfere with
attainment, reasonable further progress or any other applicable
requirements of the Act.
III. Proposed Action
The EPA has made the preliminary determination that the March 10,
2017, proposed revisions to the Texas SIP and request for parallel
processing are in accordance with the CAA and consistent with the CAA
and the EPA's policy and guidance on emissions trading. Therefore,
under section 110 of the Act, the EPA proposes to approve the following
revisions to the Texas SIP that were proposed for adoption on March 8,
2017 and submitted for parallel processing on March 10, 2017:
Revisions to 30 TAC Section 101.300;
Revisions to 30 TAC Section 101.302;
Revisions to 30 TAC Section 101.303;
Revisions to 30 TAC Section 101.304;
Revisions to 30 TAC Section 101.306;
Revisions to 30 TAC Section 101.370;
Revisions to 30 TAC Section 101.372;
Revisions to 30 TAC Section 101.373;
Revisions to 30 TAC Section 101.374; and
Revisions to 30 TAC Section 101.376.
The EPA is proposing this action in parallel with the state's
rulemaking process. We cannot take a final action until the state
completes its rulemaking process, adopts its final regulations, and
submits these final adopted regulations as a revision to the Texas SIP.
If during the response to comments process, the state rule is changed
significantly from the proposed rule and the rule upon which the EPA
proposed, the EPA may have to withdraw our initial proposed rule and
repropose based on the final SIP submittal.
IV. Incorporation by Reference
In this action, we are proposing to include in a final rule
regulatory text that includes incorporation by reference. In accordance
with the requirements of 1 CFR 51.5, we are proposing to incorporate by
reference revisions to the Texas regulations as described in the
Proposed Action section above. We have made, and will continue to make,
these documents generally available electronically through
www.regulations.gov and/or in hard copy at the EPA Region 6 office.
V. Statutory and Executive Order Reviews
Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the Act and applicable
Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in
reviewing SIP submissions, the EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. Accordingly, this
action merely proposes to approve state law as meeting Federal
requirements and does not impose additional requirements beyond those
imposed by state law. For that reason, this action:
Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under
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Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR
3821, January 21, 2011);
Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
Is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
Does not have Federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
Is not subject to requirements of section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and
Does not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian
reservation land or in any other area where EPA or an Indian tribe has
demonstrated that a tribe has jurisdiction. In those areas of Indian
country, the proposed rule does not have tribal implications and will
not impose substantial direct costs on tribal governments or preempt
tribal law as specified by Executive Order 13175 (65 FR 67249, November
9, 2000).
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Carbon monoxide,
Incorporation by reference, Intergovernmental relations, Lead, Nitrogen
dioxide, Ozone, Reporting and recordkeeping requirements, Sulfur
oxides, Volatile organic compounds.
Authority: 42 U.S.C. 7401 et seq.
Dated: May 24, 2017.
Samuel Coleman,
Acting Regional Administrator, Region 6.
[FR Doc. 2017-11906 Filed 6-7-17; 8:45 am]
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