The Texas Commission on Environmental Quality (TCEQ) has released draft rules to transition prevention of significant deterioration (PSD) greenhouse gas (GHG) permitting from EPA Region 6 to TCEQ, and to address Title V permitting for GHG-related requirements. The draft rules would set up a state permitting program based on the current federal requirements: establishing under Texas law that GHGs are a federally regulated new source review pollutant, defining how carbon dioxide equivalent (CO2e) emission are determined, and imposing parallel threshold levels. The draft rules are scheduled to be considered for proposal by the TCEQ commissioners on October 23, 2013.

TCEQ prepared the draft rules to implement Texas House Bill (HB) 788, which became law in June 2013. The State of Texas had previously refused to implement any form of GHG permitting. In response, EPA instituted a Federal Implementation Plan (FIP) for Texas under the federal Clean Air Act. HB 788 resulted from industry concern about the time-consuming and onerous process associated with obtaining a permit from EPA, which is in addition to applying to TCEQ to authorize non-GHG emissions. Industry’s time concern stemmed from the rapidly increasing number of GHG applications submitted to EPA with those application being processed by a limited number of EPA staff members, as well as requirements under other federal statutes (the Endangered Species Act and the National Historic Preservation Act) that are applicable when a federal agency issues a permit.

If approved, the rules will be filed with the Texas Register for publication and public comment. In keeping with TCEQ’s goal of fast-tracking this rulemaking, the agency is not planning to hold stakeholder meetings. Publication in the Texas Register is expected in early November, opening a 30-day public comment period. A public hearing is anticipated around December 5, 2013, and TCEQ is aiming for an expedited adoption date in March of 2014.

Highlights from the draft rules follow:

Transition Process: A key question for industry is how this permit program transition will be accomplished for permit applications that have been submitted to EPA. EPA Region 6 staff has confirmed that EPA will continue to process GHG permit applications until the Texas GHG permitting program is approved and integrated into the Texas SIP.

To assist with the process, TCEQ has indicated that it will likely perform Best Available Control Technology (BACT) reviews for EPA for some of the permits now pending before EPA. However, EPA permit processing, as well as a parallel formal withdrawal of the FIP to allow full delegation to the SIP, was held up by the federal government shutdown. The FIP withdrawal proposal was originally anticipated to be near the same date as the formal TCEQ GHG rule proposal.

TCEQ sources have reported that TCEQ-EPA coordination on the delegation package has been very close and that they believe that the package will be approved by EPA. Because the federal rules will continue to apply until full FIP withdrawal, it may be advisable to submit GHG permits to both TCEQ and EPA Region 6 to expedite permit issuance.

For applications previously submitted to EPA and for which EPA published notice of the draft permit, a new 30 TAC §39.412 would establish procedures for a combined public notice (Notice of Receipt of Application and Intent to Obtain Permit combined with Notice of Application and Preliminary Decision) with a minimum 30-day comment period.

Public Participation: Although most existing public participation and notice requirements in TCEQ’s rules would apply to GHG applications, the draft rules include a requirement to ensure that applications for GHG permits are not subject to contested case hearings or reconsideration of the executive director’s decision. Instead, under proposed rule 30 TAC §39.411, any person is entitled to request a public meeting or a notice and comment hearing, as applicable. As noted above, for applications previously submitted to EPA and for which EPA published notice of the draft permit, a new 30 TAC §39.412 would establish procedures for a combined public notice with a minimum 30-day comment period.

Title V Permits: The draft rules would make sites with emissions of GHGs exceeding federal threshold levels subject to the requirement to obtain a Title V federal operating permit. Additionally, changes to 30 TAC §122.122 provide a method for sources to certify enforceable emission limits for GHGs to avoid Title V permitting based on potential to emit. Existing sources would have 90 days after EPA’s final action approving amendments to §122.122 to submit the certification. The draft rules also provide that if an existing site becomes subject to Title V permitting as a result of GHG permitting rules, the owner or operator of the site must submit an abbreviated Title V permit application within 12 months after EPA’s final action approving either the Title V permitting program revision or the revision of Section 122.122, whichever is later.

Authorization of Non-GHGs: For New Source Review permitting overall, TCEQ is aiming to generally maintain the status quo for non-GHG permitting, while adding a separate GHG permitting requirement. Specifically, the draft provides that facilities may obtain or maintain a separate standard permit or permit by rule (PBR) to authorize non-GHG emissions, so long as the non-GHGs pollutants meet the conditions of a standard permit or PBR. In other words, TCEQ would not require that all air contaminants (GHG and non-GHG) be authorized in the permit in which GHGs are authorized. Despite this permitting mechanism flexibility, authorization of all emissions (GHGs and non-GHGs) must be secured prior to start of construction of a facility.

Emissions Event/MSS Reporting: Except for specific individual air contaminant compounds listed in the definition of reportable quantity in 30 TAC Section 101.1, the draft rule would exempt from 30 TAC Section 101.201 emissions event reporting any GHG emissions (carbon dioxide, nitrous oxide, methane, hydroflourocarbons, perflourocarbons, or sulfur hexafluoride), individually or collectively.

Emissions Inventory: Although an initial emissions inventory and annual emissions inventory update would be required for sources required to obtain a GHG permit, the commission is not proposing a requirement to report GHG emissions from any source required to submit an initial emissions inventory or annual emissions inventory update pursuant to 30 TAC Section 101.10(b)(1) or (2). However, GHG reporting could be required pursuant to a special emissions inventory conducted pursuant to Section 101.1(b)(3).

Emissions Fees: In the draft the term “regulated pollutant” is defined specifically for purposes of the fee provisions to not include individual gases listed in the definition of greenhouse gases, so that emission fees will not be assessed on emissions of GHGs. On the other hand, GHG permitting could still impact whether a facility pays emissions fees because sites required to obtain a Title V permit as a result GHG permitting will be required to pay fees on their non-GHG pollutants.