[Federal Register Volume 79, Number 29 (Wednesday, February 12, 2014)]
[Proposed Rules]
[Pages 8368-8387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03119]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R06-OAR-2013-0542; FRL-9906-37-Region 6]


Approval and Promulgation of Implementation Plans; Texas; 
Revisions to the New Source Review State Implementation Plan; Flexible 
Permit Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
conditionally approve revisions to the Texas New Source Review (NSR) 
State Implementation Plan (SIP) submitted by the Texas Commission on 
Environmental Quality (TCEQ) \1\ and its predecessor, the Texas Natural 
Resource Conservation Commission (TNRCC), on November 29, 1994; March 
13, 1996; July 22, 1998; October 25, 1999; September 11, 2000; April 
12, 2001; July 31, 2002, September 4, 2002; October 4, 2002; September 
25, 2003; July 2, 2010; October 5, 2010; and October 21, 2013. These 
revisions to the Texas SIP establish the Flexible Permit Program. The 
flexible permit program is a minor NSR permit program which functions 
as an alternative to the traditional preconstruction permit program 
that is authorized in Title 30 of the Texas Administrative Code (30 
TAC) Chapter 116, Subchapter B. The flexible permit program is intended 
to eliminate the need for owners or operators of participating 
facilities to submit an amendment application each time certain types 
of operational or physical changes are made at a permitted facility. 
EPA is proposing to conditionally approve the Flexible Permit Program 
as initially submitted in November 1994 and amended through the October 
21, 2013, as consistent with federal requirements for minor NSR 
programs. Final approval of the Texas Flexible Permit Program is 
contingent upon TCEQ adopting and submitting to EPA an approvable SIP 
revision addressing the commitments made by the TCEQ in its October 21, 
2013, Flexible Permits Commitment Letter. EPA is proposing this action 
under Section 110 and part C of the Clean Air Act (CAA or the Act).
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    \1\ On September 1, 2002, the Texas Legislature (House Bill 
2912) formally changed the name of Texas Natural Resource 
Conservation Commission to the Texas Commission on Environmental 
Quality.

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DATES: Comments must be received on or before March 14, 2014.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R06-
OAR-2013-0542, by one of the following methods:
     http://www.regulations.gov. Follow the online instructions 
for submitting comments.
     Email: Ms. Stephanie Kordzi at [email protected].
     Fax: Ms. Stephanie Kordzi, Air Permits Section (6PD-R), at 
fax number 214-665-6762.
     Mail or delivery: Ms. Stephanie Kordzi, Air Permits 
Section (6PD-R), Environmental Protection Agency, 1445 Ross Avenue, 
Suite 1200, Dallas, Texas 75202-2733.
    Instructions: Direct your comments to Docket ID No. EPA-R06-OAR-
2013-0542. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
http://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information the 
disclosure of which is restricted by statute. Do not submit information 
through http://www.regulations.gov or email, if you believe that it is 
CBI or otherwise protected from disclosure. The http://www.regulations.gov Web site is an ``anonymous access'' system, which 
means that EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an email 
comment directly to EPA without going through http://www.regulations.gov, your email address will be automatically captured 
and included as part of the comment that is placed in the public docket 
and made available on the Internet. If you submit an electronic 
comment, EPA recommends that you include your name and other contact 
information in the body of your comment along with any disk or CD-ROM 
submitted. If EPA cannot read your comment due to technical 
difficulties and cannot contact you for clarification, EPA may not be 
able to consider your comment. Electronic files should avoid the use of 
special characters and any form of encryption and should be free of any 
defects or

[[Page 8369]]

viruses. For additional information about EPA's public docket, visit 
the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: The index to the docket for this action is available 
electronically at www.regulations.gov and in hard copy at 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). 
To inspect the hard copy materials, please schedule an appointment with 
the person listed in the FOR FURTHER INFORMATION CONTACT paragraph 
below or Mr. Bill Deese at 214-665-7253.

FOR FURTHER INFORMATION CONTACT: Ms. Stephanie Kordzi (6PD-R), Air 
Permits Section, Environmental Protection Agency, Region 6, 1445 Ross 
Avenue (6PD-R), Suite 1200, Dallas, TX 75202-2733. Telephone (214) 665-
7520, fax (214) 665-6762, email at [email protected].

SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we,'' 
``us,'' or ``our'' is used, we mean EPA.

Table of Contents

I. Background for Our Proposed Action
II. Summary of State SIP Submittals for the Flexible Permit Program
    A. November 29, 1994 Submittal
    B. March 13, 1996 Submittal
    C. July 22, 1998 Submittal
    D. October 25, 1999 Submittal
    E. September 11, 2000 Submittal
    F. April 12, 2001 Submittal
    G. July 31, 2002 Submittal
    H. September 4, 2002 Submittal
    I. October 4, 2002 Submittal
    J. September 25, 2003 Submittal
    K. July 2, 2010 Submittal
    L. October 5, 2010 Submittal
    M. October 21, 2013 Submittal
    N. Overview of the Flexible Permit Program and Establishment of 
the Emission Cap
III. What action is EPA proposing?
    A. What is a conditional approval?
    B. What are the commitments?
IV. EPA's Evaluation of the Texas Flexible Permit Program as a Minor 
NSR Program
    A. Federal Requirements for Enforceability of the Minor NSR 
Program
    1. Identifying the New Facilities and/or Modifications for 
Inclusion in a Flexible Permit
    2. Inclusion of Appropriate Monitoring and Recordkeeping 
Requirements in Flexible Permits
    3. Additional Elements Specific to Emissions Caps
    4. Provisions To Ensure the Flexible Permit Program Is a Minor 
NSR Program
    5. Provisions To Ensure the Flexible Permit Program Demonstrates 
Compliance
    B. Federal Requirements for Public Notice of Minor NSR 
Permitting
    1. Overview of the Texas Public Participation Process for 
Applications for New Flexible Permits and Flexible Permit Amendments
    2. Analysis of the Submitted Public Participation Rules for 
Flexible Permits as Minor NSR Requirements
    3. Minor NSR Public Notice Requirements Specific to Two Types of 
Minor NSR Flexible Permit Amendment Applications
    i. Identification of the Minor NSR Emission Thresholds and 
Affected Source Populations
    ii. Discussion of the ``De minimis'' and ``Insignificant'' 
Thresholds for Minor NSR Flexible Permit Amendments
    4. How do the Texas Public Notice Provisions for Applications 
for New and Amended Flexible Permits address the concerns identified 
in EPA's November 26, 2008 Proposed Limited Approval/Limited 
Disapproval for Texas public participation?
    5. Proposed Findings Specific to the Texas Public Participation 
Provisions for the Flexible Permit Program
    C. Does proposed approval of the Texas Flexible Permit Program 
interfere with attainment, reasonable further progress, or any other 
applicable requirement of the act?
    D. TCEQ's Interpretive Letter
    E. Summary of EPA's Evaluation of the Flexible Permit Program as 
a Minor NSR Program
    V. Proposed Action
    VI. Statutory and Executive Order Reviews

I. Background for Our Proposed Action

    On September 23, 2009, EPA proposed to disapprove revisions to the 
SIP submitted by the State of Texas that relate to the Flexible Permit 
Program. On July 15, 2010, EPA took final action on that proposal 
disapproving Texas' Flexible Permit Program. 75 FR 41312. This 
disapproval action is the only action taken by EPA on the flexible 
permit program. EPA has never taken any other action to approve the 
flexible permit program submittals. Below is a summary of our grounds 
for initially disapproving the Flexible Permit Program as a Minor NSR 
SIP revision. We originally found that:
     It had no express regulatory prohibition clearly limiting 
its use to Minor NSR and had no regulatory provision clearly 
prohibiting the use of this submitted Program from circumventing the 
Major NSR SIP requirements.
     It was not an enforceable NSR program.
     It lacked requirements necessary for enforcement and 
assurance of compliance.
     It lacked the necessary more specialized monitoring, 
recordkeeping and reporting (MRR) requirements required for this type 
of Minor NSR program (a compliance emission cap) to ensure 
accountability and provide a means to determine compliance.
     The types of monitoring were not specified in the rule.
     It lacked specific, established implementation procedures 
for establishing the emissions cap in a Minor NSR Flexible Permit.
     It did not ensure the terms and conditions of Major NSR 
SIP permits are retained. Holders of Major NSR SIP permits were not 
prohibited from using the submitted Program's allowable based emissions 
cap. The Clean Air Act prohibits the use of an allowable based cap for 
Major NSR SIP permittees.
    For a more detailed discussion of our rationale for the disapproval 
see 75 FR 41312 (July 15, 2010). Upon finalization of the rule several 
parties appealed the decision to the Fifth Circuit Court of Appeals.
    In July and August of 2010 the State of Texas, Texas Oil & Gas 
Association, Texas Association of Manufacturers, and Business Coalition 
for Clean Air (BCCA) Appeal Group all filed petitions with the Fifth 
Circuit Court of Appeals seeking to overturn EPA's disapproval of the 
Flexible Permit Program. During the same time period the Environmental 
Defense Fund (``EDF'') and Environmental Integrity Project (``EIP'') 
moved for leave to intervene in support of EPA's disapproval. Their 
request to intervene was granted by the Court. While the challenge was 
pending, the state adopted a modified flexible permits regulation, but 
did not submit it to EPA.
    On August 13, 2012, the Fifth Circuit Court of Appeals granted the 
petitioner's review, vacated our disapproval of the Texas Flexible 
Permit Program and remanded the matter back to EPA for further review. 
After the Court remanded the Flexible Permit Rule to EPA, the State, in 
a letter dated September 12, 2012, requested that we take action on the 
original Flexible Permit program submittal package in accordance with 
the ruling of the Fifth Circuit Court of Appeals. Following discussions 
with EPA, on September 24, 2013, Texas formally adopted and approved 
this SIP revision which is comprised of the original submittal that EPA 
took its disapproval action on as well as rule additions that EPA 
believes are essential to the program's approvability. On October 21, 
2013, Texas formally submitted to EPA this proposed revision to the 
SIP. EPA is today proposing to conditionally

[[Page 8370]]

approve the October 21, 2013, submittal.\2\
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    \2\ This October 21, 2013 submittal, including the Texas Order 
dated September 26, 2013, and the accompanying cover letter 
(available in the docket for this rulemaking), essentially resubmits 
all relevant portions of the prior Flexible Permits submittals and 
therefore constitutes the entire Flexible Permit Program.
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II. Summary of State SIP Submittals for the Flexible Permit Program

    The TCEQ has developed and submitted the Flexible Permit Program as 
a series of revisions to the Texas minor NSR Permit program. The TCEQ 
developed the Flexible Permit Program in 1994 and has adopted several 
amendments and submitted these as revisions to the Texas minor NSR SIP 
program since that time. As discussed in the Section I Background of 
this rulemaking, EPA is proposing conditional approval of the October 
21, 2013, SIP revision approved by TCEQ and submitted for EPA review. 
The following is a brief summary of each of the SIP revisions 
pertaining to the Flexible Permit Program that is subject to our 
proposed conditional approval.

A. November 29, 1994 Submittal

    On October 19, 1994, the TNRCC, predecessor to the TCEQ, adopted 
revisions to the Texas SIP to establish and implement the Flexible 
Permit Program in Texas. The TCEQ adopted the rule for Flexible Permits 
at 30 Texas Administrative Code (TAC) Chapter 116, Subchapter G--
Flexible Permits; adding Flexible Permit Definitions at 30 TAC Chapter 
116, Subchapter A, Section 116.13--Flexible Permit Definitions; and 
revising the Permit Application provisions at 30 TAC Chapter 116, 
Subchapter B, Section 116.110(a) to authorize the use of a Flexible 
Permit for construction of any new minor facility and minor 
modification of any existing facility. Note that some portions of the 
November 29, 1994, submittal were later repealed and replaced in the 
July 22, 1998, submittal.

B. March 13, 1996 Submittal

    On February 14, 1996, the TNRCC adopted revisions to the Texas SIP 
to modify air permit application procedures and evaluation criteria to 
provide more operational flexibility to facilities. This submittal 
specifically included revisions to the definition of ``modification of 
existing facility'' in the General Definitions for Air Permitting at 30 
TAC Section 116.10(F) to address modifications under Flexible Permits. 
This submittal of 30 TAC Section 116.10(F) for ``modification of 
existing facility'' was later repealed and replaced in the July 22, 
1998, SIP submittal and is therefore not before EPA for review.

C. July 22, 1998 Submittal

    On June 17, 1998, the TNRCC adopted severable revisions that 
included the repeal and replacement of portions of the November 29, 
1994, submittal and the entirety of the March 13, 1996 submittal. 
Specific to Flexible Permits, the July 22, 1998, submittal included a 
new definition of ``modification of existing facility,'' at 30 TAC 
Section 116.10(9)(F); repeal of and new Flexible Permit Definitions at 
30 TAC Section 116.13 and Section 116.110; and amendments to the 30 TAC 
Sections 116.710, 116.711, 116.714, 116.715, 116.721, 116.730, 116.740, 
and 116.750. The definitions in section 116.13 were non-substantive. An 
operations certification requirement for flexible permits was removed 
from 116.110. The amendments to the remaining sections added or 
clarified language regarding BACT, compliance with FCAA Section 112(g), 
or were non-substantive changes.

D. October 25, 1999 Submittal

    On September 2, 1999, the TNRCC adopted revisions to the Texas SIP 
to implement Texas House Bill 801 to establish new procedures for 
public participation in environmental permitting. The TNRCC submitted 
these amendments as revisions to the Texas SIP in a letter dated 
October 25, 1999. The October 25, 1999, submittal included revisions to 
the Flexible Permits public participation provisions at 30 TAC Section 
116.740.

E. September 11, 2000 Submittal

    On August 9, 2000, the TNRCC adopted amendments to 30 TAC Chapters 
101, 106, and 116 to implement the remaining requirements of Senate 
Bill 766 from the 76th Legislature. This included amendments to Chapter 
116, Subchapter G, 30 TAC Sections 116.710, 116.715, 116.721, 116.722, 
and 116.750. The amendments to 30 TAC Chapters 101 and 116 implement 
the remaining requirements of Senate Bill 766 from the 76th 
Legislature. The amendments tripled emission fees for grandfathered 
facilities with emissions in excess of 4,000 tons per year after 
September 1, 2001, updated public participation requirements for the 
issuance of standard permits, and made nonsubstantive changes to other 
related provisions.

F. April 12, 2001 Submittal

    On March 7, 2001, the TNRCC adopted revisions to Subchapter G, 30 
TAC Sections 116.711 and 116.715. The amendments supplement the cap and 
trade program for the Houston/Galveston (HGA) ozone nonattainment area 
by clarifying that any source of emissions of nitrogen oxides 
(NOX) in the HGA area that uses certain permits, including 
flexible permits, must obtain allowances for those emissions if the 
facility, or group of facilities, has a collective design capacity to 
emit ten tons or more of NOX per year and is subject to an 
emission standard in 30 TAC Section Chapter 117 and by allowing the use 
of NOX allowances to meet the correlating portion of 
emissions offset requirements.

G. July 31, 2002 Submittal

    On May 22, 2002, the TNRCC adopted amendments to Chapter 39, Public 
Notice, and Chapter 116, Control of Air Pollution by Permits for New 
Construction or Modification. The adopted changes concern requirements 
of procedures for the permitting of grandfathered facilities and an 
incentive program for the reduction of emissions of nitrogen oxides for 
certain types of facilities.

H. September 4, 2002 Submittal

    On August 21, 2002, the TNRCC adopted revisions re-defining 
``modification of existing facility'' from 30 TAC Section 116.10(9)(F) 
to 30 TAC Section 116.10(11)(F). The revisions also clarified permit 
renewal application content requirements and implemented new compliance 
history evaluation requirements for permit renewals.

I. October 4, 2002 Submittal

    On September 25, 2002, the TCEQ adopted amendments to various fee 
rules in Chapters 101, 106, and 116 including 116.750, Flexible Permit 
Fee, and corresponding revisions to the SIP. The increases were 
established to provide sufficient funding to meet the current 
appropriation levels for air program activities and to meet operational 
funding requirements for the Title V programs of the commission.

J. September 25, 2003 Submittal

    On August 20, 2003, the TCEQ adopted revisions to Subchapter G, 30 
TAC Section 116.715. The revisions require emission reductions to be 
certified as emission reduction credits under 30 TAC Chapter 101, 
Subchapter H, except future internal offsets which will continue to be 
certified under Chapter 116.

[[Page 8371]]

K. July 2, 2010 Submittal

    On June 2, 2010, the TCEQ adopted amendments to the Texas 
regulations concerning Public Notice at 30 TAC Chapter 39; Requests for 
Reconsideration and Contested Case Hearings; Public Notice at 30 TAC 
Chapter 55; and Control of Air Pollution by Permits for New 
Construction or Modification at 30 TAC Chapter 116. This particular 
rule package was submitted to EPA on July 2, 2010, after the EPA's 
final disapproval of the pending package of proposed SIP revisions 
before it, and is not part of the October 21, 2013, submittal, which 
included only the program in effect as of September 13, 2003 and select 
2010 rule amendments.
    The July 2, 2010 submittal included 30 TAC Sections 39.402(a)(4) 
and (a)(5) establishing applicability of public notice provisions for 
new Flexible Permits and amendments to Flexible Permits under 30 TAC 
Chapter 116.
    On December 13, 2012, EPA proposed to approve the July 2, 2010, 
Public Participation SIP Revision. In doing so, EPA severed the 
Flexible Permit public participation provisions at 30 TAC Section 
39.402(a)(4) and (a)(5). We also indicated it was our intent to address 
the revisions to Chapter 39 for Flexible Permits at the time we 
proposed action on the Flexible Permit program. On January 6, 2014, EPA 
finalized our approval of the July 2, 2010, Public Participation SIP 
revision; our final approval severed and did not address the public 
participation provisions at 30 TAC Sections 39.402(a)(4) and (a)(5) 
specific to Flexible Permits. EPA now finds it appropriate to address 
the July 2, 2010, submittal of 30 TAC Section 39.402(a)(4) and (a)(5) 
because we are addressing the entirety of the Flexible Permit program 
and the revisions of the associated Flexible Permits public 
participation provisions at 30 TAC Section 116.740.

L. October 5, 2010 Submittal

    On September 15, 2010, the TCEQ adopted amendments to Section 
116.10(9)(E) to change a portion of the definition for ``modification 
of existing facility''. Only this specific regulatory definition is 
being acted on in this action because it directly affects the flexible 
permit rule. The entire submittal package consisted of new and amended 
sections prepared in response to EPA's disapproval of the TCEQ rules 
that implemented the state's qualified facilities program. The October 
5, 2010, submittal came in after the EPA's final disapproval of July 
15, 2010, and is not part of the October 21, 2013, submittal, which 
included only the program in effect as of September 13, 2003, and 
select 2010 rule amendments.

M. October 21, 2013 Submittal

    On September 24, 2013, the TCEQ adopted and approved for submission 
to EPA the Flexible Permit Program at 30 TAC Chapter 116, Subchapter G. 
The EPA received the formal submission on October 21, 2013. The entire 
SIP submittal included the flexible permit rules first adopted by the 
TCEQ in November 1994 in Chapter 116, Subchapter G to establish the 
flexible permit minor new source review program. Some of the rules were 
repealed and readopted in 1998, and various amendments to the rules 
that were adopted in 1999-2003. The package also contained revisions as 
adopted on December 14, 2010, which included 30 TAC Sections 116.13(3) 
and (5); 116.711(2)(M), and paragraphs (iv) and (vii); 116.715(c)(5)(A) 
& (B), 116.715(6)(A)(i) and (ii), 116.715(d), except the text ``The 
permit shall specify which of the monitoring options under paragraph 
(2)(A)-(E) of this subject shall be used to determine compliance for 
facilities subject to monitoring under this subsection,'' 
116.715(d)(1), 116.715(f); 116.716(a), 116.716(c), 116.716(d) and 
116.716(e), with repeal of earlier Sections 116.716(d) and 116.716(e).
    Further, the submittal included various provisions that EPA 
believes are essential to its approvability. These include: Definitions 
for emission cap and individual emission limitation; discussion on 
maintaining terms, conditions, and representations of any Subchapter B 
permits that will be superseded by or incorporated into the flexible 
permit; inclusion of requirements for monitoring and calculations for 
demonstration of compliance with emission caps and individual emission 
limits; revised requirements for recordkeeping of information and data 
sufficient to demonstrate continuous compliance with emission caps and 
individual emission limits; requirements that monitoring systems used 
to determine compliance with pollutant emissions in terms of mass per 
unit of time must be based on sound science and meet generally 
acceptable scientific procedures for data quality and manipulation; and 
provisions addressing how to develop emission caps based upon 
application of current best available control technology at expected 
maximum capacity. Further, references to insignificant emission factors 
were removed since they are no longer allowed when calculating emission 
caps. And finally, new requirements for developing individual emission 
limitations in flexible permits were also included which require 
permits to identify all facilities subject to either emission caps or 
individual emission limits.
    Table 1 below summarizes the changes that are in the SIP revision 
submittals. A summary of EPA's evaluation of each Section and the basis 
for our proposed conditional approval of the Flexible Permit Program as 
a minor NSR permit program is included in this rulemaking. The 
accompanying Technical Support Document (TSD) includes a detailed 
evaluation of the submittals and our rationale. The TSD may be accessed 
online at www.regulations.gov, Docket No. EPA-R06-OAR-2013-0542.

                 Table 1--Summary of Each Flexible Permit SIP Submittal Affected by This Action
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                                                  Date
           Title of SIP submittal             submitted  to   Date of State          Regulations affected
                                                   EPA          adoption
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Flexible Permits...........................      11/29/1994      11/16/1994  Amendment to 30 TAC Section 116.110
                                                                             Adoption of New 30 TAC Section
                                                                              116.13 and New Subchapter G, 30
                                                                              TAC Sections 116.710, 116.711,
                                                                              116.714, 116.715, 116.716,
                                                                              116.717, 116.718, 116.720,
                                                                              116.721, 116.722, 116.730,
                                                                              116.740, 116.750, and 116.760.
Qualified Facilities and Modifications to         3/13/1996       2/14/1996  Amendment of 30 TAC Section 116.10
 Existing Facilities.                                                         to add new definition of
                                                                              ``modification of existing
                                                                              facility'' at (F).

[[Page 8372]]

 
NSR Rule Amendments; section 112(g) Rule          7/22/1998       6/17/1998  Repeal and new 30 TAC Section
 Review for Chapter 116.                                                      116.10(9)(F), 116.13 and
                                                                              116.110(a)(3) adopted.
                                                                             Amendments to Subchapter G, 30 TAC
                                                                              Sections 116.710, 116.711,
                                                                              116.714, 116.715, 116.721,
                                                                              116.730, 116.740 and 116.750.
Public Participation (HB 801)..............      10/25/1999        9/2/1999  Amendment to Subchapter G, 30 TAC
                                                                              Section 116.740.
Air Permits (SB-766)--Phase II.............       9/11/2000        8/9/2000  Amendments to Subchapter G, 30 TAC
                                                                              Sections 116.710, 116.715,
                                                                              116.721, 116.722, and 116.750.
Emissions Banking and Trading..............       4/12/2001        3/7/2001  Amendments to Subchapter G, 30 TAC
                                                                              Sections 116.711 and 116.715.
House Bill 3040: Shipyard Facilities and           9/4/2002       8/21/2002  Amendment to 30 TAC Section 116.10,
 NSR Maintenance Emissions.                                                   re-designating 30 TAC Sections
                                                                              116.10(9)(F) to 116.10(11)(F).
                                                                             Amendments to Subchapter G, 30 TAC
                                                                              Sections 116.711 and 116.715.
Air Fees...................................       10/4/2002       9/25/2002  Amendments to Subchapter G, 30 TAC
                                                                              Section 116.750.
Offset Certification, New Source Review           9/25/2003       8/20/2003  Amendment to Subchapter G, 30 TAC
 Permitting Processes and Extensions for                                      Section 116.715
 Construction.
Public Notice Applicability to Air Quality         7/2/2010        6/2/2010  New Chapter 39.402(a)(4) and (a)(5)
 Permits and Permit Amendments.                                               establishing applicability of the
                                                                              Chapter 39 public notice
                                                                              provisions to applications for new
                                                                              and amended Flexible Permits.
BACT and Qualified Facility Air Permit            10/5/2010       9/15/2010  Amendments to 30 TAC Section
 Program.                                                                     116.10(9)(E) only in this action.
Flexible Permit Program....................      10/21/2013      12/14/2010  Amendments to 30 TAC Sections
                                                                              116.13(3) and (5);
                                                                              116.711(2)(M)(iv) & (vii);
                                                                              116.715(c)(5)(A) & (B),
                                                                              116.715(c)(6)(A), (c)(6)A)(i) and
                                                                              (ii), 116.715(d), except specific
                                                                              text; 116.715(f), excluding
                                                                              715(f)(2)(A), 116.716(a),
                                                                              116.716(c), (c)(1)(A) and (B),
                                                                              116.716(c)(2), 116.716(c)(3),
                                                                              116.716(c)(4), and 116.716(d)[new]
                                                                              and (e) and the repeal of
                                                                              116.716(d).
Grandfathered Facilities...................       5/22/2002  ..............  Withdrawal 30 TAC Sections 116.793-
                                                                              116.802 and 116.804-116.807,
                                                                              adopted May 22, 2002, except
                                                                              Section 116.794(11), 116.795(f)
                                                                              and 116.799(a), which were
                                                                              returned to the Commission by
                                                                              letter from EPA dated June 29,
                                                                              2011; and Section 116.803, adopted
                                                                              August 21, 2002.
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N. Overview of the Flexible Permit Program and Establishment of the 
Emission Cap

    The Flexible Permit Program is a minor NSR permitting program 
developed to provide additional flexibility to the regulated community. 
As is evident in the preceding Section, the Flexible Permit program has 
been revised and evolved over time and various sections have been 
submitted to EPA for approval but then repealed and withdrawn. To 
provide context to our proposed conditional approval we provide the 
following summary of the key features of the Texas Flexible Permit 
Program, as it exists before us for review and as described in this 
preamble. Importantly, Texas has also submitted an interpretive letter, 
dated December 9, 2013, discussed more fully below, that gives Texas' 
interpretations of provisions of its submittal that, in some cases, EPA 
is relying on in this proposal to conditionally approve the package. 
For more information about the Program, please see the SIP revisions 
submitted by Texas, the interpretive letter, and the accompanying TSD 
for this proposed action, which are available in the docket for this 
action.
    Pursuant to the submitted Flexible Permit Program, only one 
Flexible Permit may be issued for an account site.\3\ See submitted 30 
TAC Section 116.710(a)(1). Therefore, a Flexible Permit cannot cover 
sources at more than one account. See submitted 30 TAC Section 
116.710(a)(4). A person may qualify for a Flexible Permit for 
construction of a new facility at the account site. 30 TAC Section 
116.110(a)(3) and 30 TAC Section 116.710(a)(1). A person may qualify 
for a Flexible Permit for a modification of an existing facility at the 
account site. 30 TAC Sections 116.110(a)(3) and 116.710(a)(1). To 
ensure that there is no confusion when we use the term ``facility'' in 
regard to Texas rules, the EPA is providing the explanation given by 
the TCEQ regarding how TCEQ defines the term. TCEQ has explicitly 
defined the term ``facility'' in accordance with the definition under 
the Texas Health and Safety Code Section 382.003(6) and 30 TAC Section 
116.10(6). The TCEQ translates EPA's term of ``emission unit'' 
(generally) to mean ``facility'' under their rules and provides a 
detailed explanation of the term in its formal comments to the EPA on 
the EPA's earlier proposed disapproval of the Texas Flexible

[[Page 8373]]

Permits Program. The comments are contained in Docket ID No. EPA-R06-
OAR-2005-TX-0032 in www.regulations.gov. Under Major NSR, EPA uses the 
term ``emissions unit'' (generally) when referring to part of a 
``stationary source''.
---------------------------------------------------------------------------

    \3\ ``Account'' for NSR purposes is defined at 30 TAC Section 
101.1(1), second sentence, as ``any combination of sources under 
common ownership or control and located on one or more contiguous 
properties, or properties contiguous except for intervening roads, 
railroads, rights-of-way, waterways, or similar divisions.'' This 
definition is approved as part of the Texas SIP (March 30, 2005 (70 
FR 16129)).
---------------------------------------------------------------------------

    A Flexible Permit holder may make a change, through a NSR SIP case-
by-case permit amendment (codified in the SIP at 30 TAC Section 
116.116(b)) or a Flexible Permit amendment. See submitted 30 TAC 
Section 116.710(a)(2). In lieu of either of these two options, the 
Flexible Permit holder may qualify to make the change by obtaining 
coverage for a minor NSR SIP permit by rule authorization, codified in 
the SIP at 30 TAC Section 116.116(d).
    If the holder of a Flexible Permit wishes to construct a new minor 
facility at the location where the permit is issued, he may qualify for 
a Flexible Permit amendment. See submitted 30 TAC Section 
116.710(a)(3). This is analogous to the minor NSR SIP process of using 
a minor NSR SIP Permit by Rule or a minor NSR SIP permit, for 
authorization to construct a new facility on the site.
    Texas already has an approved NSR SIP under Subchapter B, which 
defines a change to an existing facility as one that would cause a 
change in the method of control of emissions; a change in the character 
of the emissions; or an increase in the emission rate of any air 
contaminant. 30 TAC Section 116.116(b)(1). Such a change is required 
under the SIP to be authorized under a minor NSR SIP permit amendment. 
If the change is a decrease in allowable emissions; or any change from 
a representation in an application, general condition, or special 
condition in a permit that does not cause a change in the method of 
control of emissions; a change in the character of emissions; or an 
increase in the emission rate of any air contaminant (30 TAC Section 
116.116(c)(1)), the change may be authorized without public 
notification requirements through a SIP-approved minor NSR permit 
alteration or by obtaining coverage under an existing minor NSR SIP 
approved permit by rule or standard permit. 30 TAC Section 116.116(b) 
and (d).
    The submitted Program at 30 TAC Section 116.721(a) has the same 
first two SIP-approved definitions for a change to an existing 
facility: One that would cause either a change in the method of control 
of emissions or a change in the character of the emissions. It, 
however, has a different definition for the third type of change. 
Rather than the change being ``an increase in the emission rate,'' it 
is a change that is a ``significant increase in emissions.'' Submitted 
30 TAC Section 116.718 defines a ``significant increase in emissions.'' 
First, the increase in emissions must come from a facility with a 
Flexible Permit and second, there is no significant increase if the 
increase does not exceed either the emission cap or individual emission 
limitation.
    The submitted Flexible Permit program at 30 TAC Chapter 116, 
Subchapter G establishes an aggregated emission limit, based upon the 
application of available technology that limits emissions, as provided 
under the minor NSR SIP and known as best available control technology 
(BACT) \4\ at expected maximum capacity (or a different limitation 
based on the emission level that would result from the application of a 
more stringent required emission control) for each covered facility, 
i.e., an emission cap is determined. The cap for a specific criteria 
pollutant addresses emissions from each covered facility with its 
individually calculated emission rates. The total sum of the covered 
facilities' calculated emission rates is the emission cap. In other 
words, the emission cap is a limit on the potential to emit (PTE).
---------------------------------------------------------------------------

    \4\ Texas adopted a revised NSR State rule on July 27, 1972, to 
add the requirement that a proposed new facility and proposed 
modification utilize at least best available control technology 
(BACT), with consideration to the technical practicability and 
economical reasonableness of reducing or eliminating the emissions 
from the facility. EPA approved the revised 603.16 into the Texas 
SIP, presently codified in the Texas SIP at 30 TAC Section 
116.111(a)(2)(C). For more information, please see the 74 FR 48450 
(September 23, 2009), concerning the Texas Qualified Facilities 
State Program and the General Definitions. The Texas SIP has been 
revised since our initial approval of 30 TAC 116.111(a)(2)(C). The 
Texas PSD Program at 30 TAC 116.160(c)(1)(A) incorporates the 
Federal PSD BACT definition at 40 CFR 52.21(b)(12). EPA approved the 
current Texas PSD program provision on September 15, 2010, as 
revised by the July 16, 2010 SIP submittal. See 75 FR 55978. Upon 
EPA's September 15, 2010, approval of the Texas PSD SIP submittals, 
both EPA and Texas interpreted the SIP BACT provision now codified 
in the SIP at 30 TAC Section 116.111(a)(2)(C) as being a minor NSR 
SIP requirement for minor NSR permits, and thus applicable to the 
Texas Minor NSR Flexible Permits Program.
---------------------------------------------------------------------------

    An emission cap established in a Flexible Permit enables the holder 
to have more operational flexibility than would be allowed under SIP-
approved minor NSR Permits, which impose unit-specific mass emission 
limits. See submitted 30 TAC Section 116.716. Under the submitted 30 
TAC Section 116.716(a), Texas may establish an emission cap for a 
specific pollutant by calculating the total emissions for all of the 
facilities covered by a Flexible Permit, using the application of minor 
NSR SIP BACT at expected maximum capacity for each covered facility. 
Nevertheless, where the existing control for a facility is more 
stringent than the application of minor NSR SIP BACT, e.g., NSPS, 
NESHAPS, or a control strategy rule, then that level of control for 
that facility is used in the calculation methodologies for determining 
the cap. See submitted 30 TAC Section 116.715(c)(9) and (10). 
Alternatively, Texas will also set an individual emission limitation in 
the same Flexible Permit for each pollutant covered by an emission cap 
for the covered facilities to ensure the protection of human health and 
the environment as may be required by a state or federal rule. See 
submitted 30 TAC Section 116.716(b).
    In the version of the Flexible Permit program that was the subject 
of the July 15, 2010, disapproval, the calculation methodologies for 
the cap and the individual emission limitations included allowing for 
inclusion of an ``Insignificant Emissions Factor'' (of up to nine 
percent) in the summation. However, the package submitted for EPA 
approval that we are acting on today revised the definition of emission 
cap to omit such a provision. See submitted (and revised with this 
action) new 30 TAC Section 116.13(3).
    Under the submitted Flexible Permit Program, a pollutant's cap must 
be decreased if one of the facilities (defined by Texas to generally 
mean an ``emissions unit'') under the Flexible Permit shuts down for 
longer than 6 months. See submitted 30 TAC Section 116.716(f)(1), first 
sentence. If a new facility is brought into the Flexible Permit, the 
cap must be readjusted to accommodate its calculated emission rates. 
See submitted 30 TAC Section 116.716(f)(3). The cap must be adjusted 
downward for any facility covered by a Flexible Permit if that facility 
becomes subject to any new State or Federal regulation. See submitted 
30 TAC Section 116.716(f)(4). A readjustment of the cap required by any 
new State or Federal regulation must be made the next time the Flexible 
Permit is either amended or altered. If an amendment to a Flexible 
Permit is not required to meet the new regulation, the permittee must 
submit a request for a permit alteration within sixty days of making 
the change, describing how compliance with the new requirement will be 
demonstrated. See submitted 30 TAC Section 116.716(f)(4), third 
sentence.
    Under submitted 30 TAC Section 116.717, a Flexible Permit may 
include an implementation schedule for the installation of additional 
controls to meet an emissions cap for a pollutant. The section also 
provides that if a schedule to install additional controls is

[[Page 8374]]

included in the Flexible Permit and a facility subject to such a 
schedule is taken out of service, the emission cap contained in the 
Flexible Permit will be readjusted to reflect the period the unit is 
out of service. Unless a special provision in the Flexible Permit 
specifies the method of readjustment of the emission cap, the facility 
must obtain a permit amendment or alteration, as appropriate.

III. What action is EPA proposing?

    The EPA is proposing to conditionally approve the Texas Flexible 
Permit Program, as submitted by Texas on October 21, 2013, and as 
contained in 30 TAC Chapter 116--Control of Air Pollution by Permits 
for New Construction or Modification. This action follows a decision 
made by the Fifth Circuit Court on August 3, 2012, which vacated EPA's 
previous disapproval and remanded it back to the EPA for further 
reconsideration. Texas v. EPA, 690 F.3d 670 (Fifth Cir. 2012). The 
present submittal includes the original SIP package dated November 29, 
1994, which was addressed by the court, and certain specified revisions 
as submitted by TCEQ on October 21, 2013. In addition, the following 
regulations under Chapter 116 including 30 TAC Section 116.110(a)(3) on 
July 22, 1998, and the definition in 30 TAC Section 116.10(11)(F) 
submitted on July 22, 1998, for ``modification of existing facility'' 
are included as part of this package. EPA is also proposing to 
conditionally approve the public participation applicability provisions 
at 30 TAC Section 39.402(a)(4) and (a)(5) submitted on July 2, 2010.
    In order to better understand how the submitted program will be 
implemented, EPA asked for an interpretive letter from the State 
detailing how certain aspects of the program will be operated. Based 
upon our evaluation of the submittals and further informed by the 
letter, EPA has concluded that the Flexible Permit Program as submitted 
October 21, 2013, in conjunction with the conditions included in the 
December 9, 2013, commitment letter, does meet the requirements of the 
CAA section 110(a) which requires each State to include a Minor NSR 
program in its SIP that meets the 40 CFR part 51 Subpart I 
requirements, including legally enforceable procedures for a minor NSR 
program.\5\
---------------------------------------------------------------------------

    \5\ This submittal does not include the submitted rules for 
implementing Section 112(g) of the Clean Air Act that were 
identified and returned by the EPA to the TCEQ on June 29, 2011. 
This submittal also does not include those rules that were withdrawn 
by the TCEQ as identified in the October 21, 2013, submittal cover 
letter. EPA's position on section 112(g) of the CAA is that the EPA 
does not delegate section 112(g) requirements in our MACT 
delegations, nor do we approve them into the SIP. Instead, the State 
must certify to EPA that the state program satisfies all applicable 
requirements.
---------------------------------------------------------------------------

    Table 2 below summarizes each regulatory citation that is affected 
by this action.

                                           Table 2--Summary of Each Regulation That Is Affected by This Action
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Date submitted to EPA
            Section                      Title              as SIP amendment      Date adopted by State                      Comments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Chapter 39: Public Notice
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 39.402................  Applicability to Air    July 2, 2010...........  June 2, 2010...........  30 TAC Section 39.402(a)(4) and 39.402(a)(5)
                                 Quality Permits and                                                       specific to flexible permits only.
                                 Permit Amendments.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Chapter 116: Control of Air Pollution by Permits for New Construction or Modification
                                                                Subchapter A: Definitions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 116.10................  General Definitions...  03/13/1996.............  2/14/1996..............  Definition of ``modification of existing
                                                                                                           facility'' at 30 TAC Section 116.10(F).
                                                        07/22/1998.............  6/17/1998..............  Definition of ``modification of existing
                                                                                                           facility'' at 30 TAC Section 116.10(9)(F).
                                                        9/4/2002...............  8/21/2002..............  Redesignation of the Definition of
                                                                                                           ``modification of existing facility'' from 30
                                                                                                           TAC Section 116.10(9)(F) to 116.10(11)(F).
                                                        10/5/2010..............  9/15/2010..............  Renumbered definition (9)(E) for
                                                                                                           ``modification of existing facility''.
Section 116.13................  Flexible Permit         11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Definitions.
                                                        7/22/1998..............  6/17/1998..............  Resubmitted 116.13 definitions for (1)
                                                                                                           emission cap-emission limit, (2) expected
                                                                                                           maximum capacity, and (3) individual emission
                                                                                                           limitation.
                                                        10/21/2013.............  12/14/2010.............   Revised definition of ``emission
                                                                                                           cap'' at 30 TAC Section 116.13(1).
                                                                                                           Revised definition of ``individual
                                                                                                           emission limitation'' at 30 TAC Section
                                                                                                           116.13(3) and (5). Deleted reference to
                                                                                                           ``insignificant factor'' formally found in 30
                                                                                                           TAC Section 116.13.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Subchapter B: New Source Review Permits
                                                             Division 1: Permit Application
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 116.110...............  Applicability.........  11/29/1994.............  11/16/1994.............  30 TAC Section 116.110(a) specific to flexible
                                                                                                           permits only.
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Section 116.110(a)(3)
                                                                                                           applicability criteria.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Subchapter G: Flexible Permits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 116.710...............  Applicability.........  11/29/1994.............  11/16/1994.............  Initial adoption.

[[Page 8375]]

 
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Section 116.710 subsections
                                                                                                           (a), (b), (c), and (d)--Applicability
                                                                                                           criteria.
                                                        9/11/2000..............  8/9/2000...............  Resubmittal 30 TAC Section 116.710.
Section 116.711...............  Flexible Permit         11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Application.
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Sections 116.711 (1)-(13)--
                                                                                                           Flexible permit application requirements.
                                                        4/12/2001..............  3/7/2001...............  Resubmittal 30 TAC Section 116.711.
                                                        9/4/2002...............  8/21/2002..............  Revised 30 TAC Sections 116.711 (8), (9),
                                                                                                           (10), and (11).
                                                        10/21/2013.............  12/14/2010.............  Revised 30 TAC Section 116.711(2)(M)
                                                                                                           [introductory text], and paragraphs (iv) and
                                                                                                           (vii). It was submitted in the package as 30
                                                                                                           TAC Section 116.711(13)(D) which requires
                                                                                                           permit applicants to provide a description of
                                                                                                           EPNs included in emission cap and 30 TAC
                                                                                                           Section 116.711(13)(E)(vii) which ensures PSD
                                                                                                           terms and conditions are retained in the
                                                                                                           flexible permit.
Section 116.714...............  Application Review      11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Schedule.
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Section 116.714.
Section 116.715...............  General and Special     11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Conditions.
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Section 116.715 subsections (a)
                                                                                                           and (c)(1)-(10)--General conditions applying
                                                                                                           to all flexible permit holders.
                                                        9/11/2000..............  8/9/2000...............  Revised 30 TAC Section 116.715 subsections (a)-
                                                                                                           (d).
                                                        4/12/2001..............  3/7/2001...............  Revised 30 TAC Sections 116.715(a) and
                                                                                                           (c)(3)(A), (c)(3)(B), and (c)(3)C).
                                                        9/4/2002...............  8/21/2002..............  Revised 30 TAC Section 116.715 subsections
                                                                                                           (c)(1) and (c)(4).
                                                        9/25/2003..............  8/20/2003..............  Revised 30 TAC Section 116.715 subsection
                                                                                                           (c)(3)(C)(9).
                                                        10/21/2013.............  12/14/2010.............   Revised 30 TAC Sections
                                                                                                           116.715(c)(5)(A) & (B)--monitoring
                                                                                                           requirements must be specified in permits for
                                                                                                           compliance with emission caps.
                                                                                                           Revised 30 TAC Section
                                                                                                           116.715(c)(6)(A)(i) & (ii)--recordkeeping for
                                                                                                           demonstrating emission cap and individual
                                                                                                           emission limitation calculations.
                                                                                                           Revised 30 TAC Section 116.715(d)(1)--
                                                                                                           monitoring must demonstrate compliance based
                                                                                                           on sound science.
Section 116.716...............  Emission Caps and       11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Individual Emission
                                 Limitations.
                                                        10/21/2013.............  12/14/2010.............  Revised 30 TAC Sections 116.716(a),
                                                                                                           116.716(c), 116.716(d), and 116.716(e) on
                                                                                                           establishing an emission cap and individual
                                                                                                           emission limits.
Section 116.717...............  Implementation          11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Schedule for
                                 Additional Controls.
Section 116.718...............  Significant Emission    11/29/1994.............  11/16/1994.............  Initial adoption.
                                 Increase.
Section 116.720...............  Limitation on Physical  11/29/1994.............  11/16/1994.............  Initial adoption.
                                 and Operational
                                 Changes.
Section 116.721...............  Amendments and          11/29/1994.............  10/19/1994.............  Initial adoption.
                                 Alterations.
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Sections 116.721(a), (b)(2),
                                                                                                           (d)(1), and (d)(2)--Amendments and
                                                                                                           alterations for flexible permits.
                                                        9/11/2000..............  8/9/2000...............  Resubmittal 30 TAC Section 116.721.
Section 116.722...............  Distance Limitations..  11/29/1994.............  10/19/1994.............  Initial adoption.
                                                        9/11/2000..............  8/9/2000...............  Revised reference citation in Section.
Section 116.730...............  Compliance History....  11/29/1994.............  10/19/1994.............  Initial adoption
                                                        10/21/2013.............  12/14/2010.............  30 TAC Section 116.730 withdrawn.
Section 116.740...............  Public Notice and       11/29/1994.............  10/19/1994.............  Initial adoption.
                                 Comment.
                                                        7/22/1998..............  6/17/1998..............  Revised Section.
                                                        10/25/1999.............  9/2/1999...............  Revised 30 TAC Section 116.740(a).
                                                        10/21/2013.............  12/14/2010.............   Revised resubmittal.
                                                                                                           30 TAC Section 116.740(b) withdrawn.
Section 116.750...............  Flexible Permit Fee...  11/29/1994.............  10/19/1994.............  Initial adoption
                                                        7/22/1998..............  6/17/1998..............  Revised 30 TAC Sections 116.750(b)-(d).
                                                        9/11/2000..............  8/9/2000...............  Revised 30 TAC Section 116.750(d).
                                                        10/4/2002..............  9/25/2002..............  Revised 30 TAC Section 116.750(b)-(c).

[[Page 8376]]

 
                                                        10/21/2013.............  12/14/2010.............  Revised resubmittal.
Section 116.760...............  Flexible Permit         11/29/1994.............  10/19/1994.............  Initial adoption.
                                 Renewal.
Section 116.765...............  Compliance Schedule...  10/21/2013.............  12/14/2010.............  Submittal 30 TAC Section 116.765(b) and (c).
--------------------------------------------------------------------------------------------------------------------------------------------------------

A. What is a conditional approval?

    Section 110(k) of the Act governs EPA's actions addressing SIP 
submissions. Where EPA finds that a SIP submission is not fully 
approvable, we may choose to use a conditional approval as provided 
under Section 110(k)(4). In this case EPA may conditionally approve the 
plan based on a commitment from the State to adopt specific corrections 
to the Flexible Permit Program by a date certain, but no later than 1 
year after the approval of the revision. Guidance on the use of 
conditional approvals was addressed by EPA in 1992 in a memorandum from 
John Calcagni.\6\ This guidance was followed in the development by the 
TCEQ of their submittal of October 21, 2013 and was the basis for their 
detailed letter of commitment. A copy of TCEQ's letter of commitment 
and the Calcagni memo are available in the docket to this rulemaking. 
Upon TCEQ fully satisfying their commitment and subsequent final action 
by EPA, the Flexible Permit Program for the first time will become a 
fully approved federally enforceable requirement in the Texas State 
Implementation Plan. The TCEQ, in its letter of December 9, 2013, 
committed to adopt by November 30, 2014, certain changes to the rules 
contained in the SIP submittal.
---------------------------------------------------------------------------

    \6\ John Calcagni's July 1992, Memorandum, ``Processing of State 
Implementation Plan (SIP) Submittals'', to Directors.
---------------------------------------------------------------------------

    Once EPA determines that all the conditions in the commitment 
letter have been met, EPA will publish in the Federal Register a 
determination that converts the conditional approval to a full approval 
and provides a copy of the Flexible Permit Program as revised to meet 
the conditions. However, if the State fails to submit a SIP revision 
reflecting its December 9, 2013, commitments by November 30, 2014, or 
if EPA determines that the submitted SIP revision does not address the 
commitments, then in accordance with 110(k)(4) of the CAA, the 
conditional approval converts to a disapproval action. In that case, 
EPA would issue a letter to the TCEQ converting the conditional 
approval of the Flexible Permit Program to disapproval. Because the 
Flexible Permit Program is a discretionary variation of the SIP 
approved minor program and was not submitted to address a mandatory 
requirement of the Act, disapproval of the program would not trigger 
sanctions under Section 179(b) or start a Federal Implementation Plan 
clock.

B. What are the commitments?

    TCEQ provided a commitment letter on December 9, 2013, to EPA that 
provides that the commission will subsequently submit amended rules 
that are consistent with the rulemaking requirements of the Texas 
Administrative Procedure Act. This action is necessary because some of 
the rules were repealed and readopted in 1998, and amendments to the 
rules were adopted in the 1999 to 2003 timeframe. The rulemaking would 
also include the repeal of text adopted in 2010 but not part of the 
submission by the Commission on September 24, 2013. More specifically, 
Texas will also make rule changes to ensure that all regulatory 
citations in the package are labeled and referenced correctly and 
placed in proper sequence. Without the renumbering and referencing 
effort, incorrect references in the rules could result in applicable 
requirements being overlooked and not being incorporated into Flexible 
Permits during their preparation or modification. Further, the rules 
could cite to incorrect requirements not applying to the entities 
regulated through the Flexible Permit Program. The TCEQ has committed 
to providing a SIP submittal by November 30, 2014, that will reformat, 
reorganize and renumber the Flexible Permit Program into a cohesive 
rule that will ensure that the rules are properly structured within and 
according to the rulemaking requirements of the Texas Administrative 
Procedure Act and the Texas Administrative Code. It will also include 
the repeal of text adopted in 2010 that was not part of the submittal 
adopted by the Commission on September 24, 2013. This commitment letter 
is available in the docket for this rulemaking. All the necessary 
substantive provisions of the flexible permit program were included in 
the submissions and the conditions address formatting and style 
requirements in state law. The changes that Texas will be making will 
not materially alter the submitted program described in this proposal.

IV. EPA's Evaluation of the Texas Flexible Permit Program as a Minor 
NSR Program

    The Act at Section 110(a)(2)(C) requires states to develop and 
submit to EPA for approval into the state SIP, preconstruction review 
programs applicable to new and modified stationary sources of air 
pollutants for attainment and nonattainment areas that cover both major 
and minor new sources and modifications, collectively referred to as 
the New Source Review (NSR) SIP. The CAA NSR SIP program is composed of 
three separate programs: Prevention of Significant Deterioration (PSD), 
Nonattainment New Source Review (NNSR), and Minor NSR. PSD is 
established in part C of title I of the CAA and applies in areas that 
meet the National Ambient Air Quality Standards (NAAQS), i.e., 
``attainment areas'', as well as areas where there is insufficient 
information to determine if the area meets the NAAQS, i.e., 
``unclassifiable areas.'' The NNSR SIP program is established in part D 
of title I of the CAA and applies in areas that are not in attainment 
of the NAAQS, i.e., ``nonattainment areas.'' The Minor NSR SIP program 
addresses construction or modification activities that do not emit, or 
have the potential to emit, more than certain major source thresholds 
and thus do not qualify as ``major'' and applies regardless of the 
designation of the area in which a source is located.
    EPA regulations governing the criteria that states must satisfy for 
EPA approval of the NSR programs as part of the SIP are contained in 40 
CFR 51.160-51.166. Regulations specific to minor NSR programs are 
contained in 40 CFR 51.160-51.164. In addition, there are several 
provisions in 40 CFR Part 51

[[Page 8377]]

that apply generally to all SIP revisions. The TCEQ has developed the 
Flexible Permit Program as a component of the Texas Minor NSR program; 
therefore, we evaluated the Texas Flexible Permit Program as submitted 
in October 21, 2013, and the commitment letter against the federal 
requirements for minor NSR programs. EPA's evaluation is also informed 
by an interpretive letter sent by TCEQ on December 9, 2013, clarifying 
certain aspects of the program. In an earlier Federal Register proposed 
action, EPA articulated its position on the use of interpretive letters 
in evaluating SIPs:

    EPA believes that the use of interpretive letters to clarify 
perceived ambiguity in the provisions in a SIP submission is a 
permissible and sometimes necessary approach under the CAA. Used 
correctly, and with adequate documentation in the Federal Register 
and the docket for the underlying rulemaking action, reliance on 
interpretive letters can serve a useful purpose and still meet the 
enforceability concerns of the Petitioner. Regulated entities, 
regulators, and the public can readily ascertain the existence of 
interpretive letters relied upon in the EPA's approval that would be 
useful to resolve any perceived ambiguity. By virtue of being part 
of the stated basis for the EPA's approval of that provision, the 
interpretive letters necessarily establish the correct 
interpretation of any arguably ambiguous SIP provision. In addition, 
reliance on interpretive letters to address concerns about perceived 
ambiguity can often be the most efficient and timely way to resolve 
concerns about the correct meaning of regulatory provisions. Both 
air agencies and the EPA are required to follow time- and resource-
intensive administrative processes in order to develop and evaluate 
SIP submissions. It is reasonable for the EPA to exercise its 
discretion to use interpretive letters to clarify concerns about the 
meaning regulatory provisions, rather than to require air agencies 
to reinitiate a complete administrative process merely to resolve 
perceived ambiguity in a provision in a SIP submission. In 
particular, the EPA considers this an appropriate approach where 
reliance on such an interpretive letter allows the air agency and 
the EPA to put into place SIP provisions that are necessary to meet 
important CAA objectives and for which unnecessary delay would be 
counterproductive. (78 FR 12460, 12475, February 22, 2013). Texas' 
interpretive letter is in the docket for this action and is 
discussed throughout this notice.

    As we stated above, 40 CFR 51.160 establishes the enforceable 
procedures that all minor NSR programs must include. We will address 
the specific requirements for enforceability in Section A below. 40 CFR 
51.161 establishes the public notice requirements for minor NSR 
programs. We will address the public notice requirements more fully in 
a following Section B. Sections 51.160-51.164 require that a SIP 
revision demonstrate that the adopted rules will not interfere with any 
applicable requirement concerning attainment and reasonable further 
progress, or any other applicable requirement of the CAA. We will 
address the specific requirements for permitting activities that ensure 
attainment more fully in a following Section C.
    EPA notes that in response to its final disapproval on the Flexible 
Permits Rule on July 15, 2010, the TCEQ adopted, on December 14, 2010, 
revised Sections of the Texas Administrative Code which resulted in 
changes to Chapter 116. In recent discussions with EPA, the State 
agreed to submit for our consideration portions of those rules in 
conjunction with the prior submittal addressed in EPA's July 15, 2010, 
action. A discussion of the portion of the applicable December 14, 
2010, rule that was included in the submittal package is also included 
in the section A.(1-5) below.

A. Federal Requirements for Enforceability of the Minor NSR Program

    The Federal requirements for enforceability are found in 42 U.S.C. 
7410(a)(2)(A) and 42 U.S.C. 7410(a)(2)(C) as interpreted by the EPA 
guidance discussed below. The EPA has several regulations that address 
all SIPs and SIP revisions. In addition to the generally applicable 
rules discussed below, the requirement for enforceability of a minor 
NSR program is found at 40 CFR 51.160. This rule specifically requires 
the state or local agency to have the authority to prevent the 
construction of a facility or modification that will cause a violation 
of applicable portions of the control strategy or interfere with 
attainment or maintenance of a NAAQS. To accomplish this goal, the 
state's minor NSR program must include the means by which the state 
agency will review proposed new construction or modification projects 
to determine that such projects will not interfere with the control 
strategy or cause a violation of a NAAQS. The minor NSR program must 
include the following in accordance with 40 CFR 51.160(c):
     The minor NSR program must provide for the submission, by 
the owner or operator of the building, facility, structure or 
installation to be constructed or modified, such information on the 
nature and amounts of emissions to be emitted by it or emitted by 
associated mobile sources; and the design, construction and operation 
of such facility, building, structure, or installation as may be 
necessary to allow the permitting authority to make a determination on 
approvability.
     The minor NSR program must provide that approval of any 
construction or modification must not affect the responsibility of the 
owner or operator to comply with applicable portions of the control 
strategy.
     The minor NSR program must include procedures to identify 
the types and sizes of facilities, buildings, structures, or 
installations which will be subject to review. The minor NSR program 
must also discuss the basis for determining which facilities will be 
subject to review.
     The minor NSR program must also discuss the air quality 
data and the dispersion or other air quality modeling used to make 
approval decisions.
    The Court in its Opinion stated that in disapproving the Texas 
Flexible Permit Program, the EPA failed to explain or tie 
replicability, clarity and, in general, elements of the enforcement 
guidance to standards provided for in the CAA. See, 690 F.3d 670, 683-
4. 42 U.S.C. 7410(a)(2) provides that a SIP must include enforceable 
emission limitations. It is this CAA requirement that the SIP be 
enforceable that provides the legal basis for requiring that a program 
meet criteria necessary for enforceability. Enforceability is required 
by the Act and without it the EPA, the states, and the citizens who 
wish to determine whether or not a regulated entity is in compliance, 
and then to enjoin any violations, will find it difficult to take 
action to ensure compliance. Being able to enforce permits and rules 
adequately provides interested parties the ability to return regulated 
entities to compliance. The collection of penalties both penalizes the 
offender and provides deterrence of future violations. Without adequate 
enforceability, EPA cannot ensure that a program submitted to be 
approved into the SIP will be protective of the NAAQS. See, 42 U.S.C. 
7410(l). Minor sources have the potential to impact the NAAQS. EPA 
acknowledged this in the 1986 rulemaking establishing the current 
version of 40 CFR 51.160-164 (the minor source rules). The EPA stated 
that ``The very fact that such [minor] sources are subject to review 
indicates that it would be appropriate to require that EPA be notified 
of permitting actions on such sources [minor] for oversight purposes. 
Moreover, a large number of minor sources could have a significant 
cumulative effect on air quality.'' See, 51 FR 40656, 40658

[[Page 8378]]

November 7, 1986. These sources \7\ have historically included some of 
the largest refinery and petrochemical companies in the State. These 
large sources very frequently have the need for minor NSR changes to 
their permits. The Appendix to the TSD contains a list of companies 
provided by the TCEQ on December 18, 2013, that currently have or 
historically had coverage under a flexible permit issued prior to the 
rules becoming SIP approved.
---------------------------------------------------------------------------

    \7\ These sources include minor sources as well as major sources 
seeking minor modifications to their facilities.
---------------------------------------------------------------------------

    In addition to ensuring protection of the NAAQS, enforceability is 
required by the Act and in several regulations that are applicable to 
minor source programs as well as to all SIPs and SIP revisions. 42 
U.S.C. 7410(a)(2) provides that a SIP must include enforceable emission 
limitations and control measures, coupled with methods for maintaining 
and analyzing data on air quality. EPA's regulations implementing this 
provision require that: Each plan must set forth legally enforceable 
procedures that enable the State or local agency to determine whether 
the construction or modification of a facility, building, structure or 
installation, or combination of these will result in (1) A violation of 
applicable portions of the control strategy; or (2) Interference with 
attainment or maintenance of a national standard in the State in which 
the proposed source (or modification) is located or in a neighboring 
State. In addition, 42 U.S.C. 7410(a)(2)(C) specifically provides that 
a program be established to provide for the enforcement of emission 
limitations. While the statute provides for considerably broader 
discretion for States to craft minor source programs, it does not in 
any way distinguish the requirement for enforceability between major 
and minor source programs. Indeed, since (as noted above), very large 
major sources obtain many minor source permits for construction and 
modification of emissions units, the collection of such permits at such 
sources should reflect similar levels of enforceability. Congress 
recognized this in establishing the Title V operating permit program, 
which collects all permits into a single comprehensive document, and 
requires the permitting authority to remedy past flaws related to 
permit enforceability. In addition, the following regulatory provisions 
lay out the framework for requirements for enforceability in SIPs, and 
in particular minor source programs. Certainly the statute makes no 
such distinction nor do the regulations. 40 CFR 51.160 provides in 
relevant part that each plan must set forth legally enforceable 
procedures that enable the State or local agency to determine whether 
there is violation of applicable portions of the control strategy. 40 
CFR 51.281 provides, in relevant part, that emission limitations and 
other measures adopted by the state as rules and regulation must be 
enforceable by the State Agency. 40 CFR 51.212(c) provides for an 
enforceable test method for each emission limitation. The Court 
discussed only the requirements found in 40 CFR 51.160-164, relating 
specifically to minor source permitting as applicable in this matter. 
However, all SIPs and SIP revisions must also comply with some 
additional requirements, found in part 51 such as Subparts F, K, L and 
O. Thus, enforceability is a significant element in the Act and our 
regulations.
    EPA has, from time to time, also issued guidance that provides the 
Agency's interpretation of what it means to be enforceable under the 
Act and implementing regulations.
    One of the central documents that sets forth our interpretation is 
the September 23, 1987, Memorandum from J. Craig Potter, Assistant 
Administrator for Air and Radiation, and Thomas L. Adams Jr., Assistant 
Administrator for Enforcement and Compliance Monitoring, entitled 
``Review of State Implementation Plans and Revisions for Enforceability 
and Legal Sufficiency.'' \8\ In the memorandum, we explain that 
submitted rules that are clearly worded, clear as to who must comply, 
and explicit in their applicability to regulated sources are 
appropriate means for achieving the statutory enforcement requirement. 
Appropriate testing, recordkeeping, reporting, and monitoring 
provisions are necessary to establish how compliance will be determined 
and be sufficient to ensure that the NAAQS and PSD increments are 
protected. Attached to this memorandum was an implementation guidance 
which included a section entitled ``SIP APPROVABILITY CHECKLIST--
ENFORCEABILITY'' regarding how to specifically evaluate proposed rules 
and ensure they are enforceable.
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    \8\ See 57 FR 13498, April 16, 1992. This is the General 
Preamble to the 1990 CCA Amendments which was meant to act as 
guidance for the State in making revisions to their NSR programs. It 
references the above memorandum as establishing the enforceability 
criteria for writing rules and permitting. See also Pgs, 13541, 
13548.
---------------------------------------------------------------------------

    On November 3, 1993, EPA's John S. Seitz, Director, Office of Air 
Quality Planning and Standards, issued a memorandum titled ``Approaches 
to Creating Federally-Enforceable Emissions Limits.'' While its purpose 
was to give guidance as to how permitting authorities could create 
permit programs that would allow sources that would otherwise be major 
sources to be considered ``minor'' for the purposes of title V 
permitting and various other requirements of the Act, it also further 
articulates EPA's interpretation of statutes and regulations as it 
relates to creating emissions limits that are legally and practically 
enforceable. It is EPA's longstanding interpretation of 42 U.S.C. 
7410(a)(2) of the CAA that in general federal enforceability has two 
parts: legal enforceability and practical enforceability.
    A requirement is ``legally enforceable'' if some authority (as well 
a citizen) has the right to enforce the restriction. Practical 
enforceability for a source-specific permit will be achieved if the 
permit's provisions specify: (1) A technically accurate limitation and 
the portions of the source subject to the limitation; (2) the time 
period for the limitation (hourly, daily, monthly, and annual limits 
such as rolling annual limits); and (3) the method to determine 
compliance, including appropriate monitoring, recordkeeping, and 
reporting. For rules and general permits that apply to categories of 
sources, practical enforceability additionally requires that the 
provisions: (1) Identify the types or categories of sources that are 
covered by the rule; (2) where coverage is optional, provide for notice 
to the permitting authority of the source's election to be covered by 
the rule; and (3) specify the enforcement consequences relevant to the 
rule. ``Enforceable as a practical matter'' will be achieved if a 
requirement is both legally and practically enforceable.\9\ The above 
cited guidance and Federal Register notices demonstrate that EPA has 
consistently interpreted enforceable requirements of the CAA in the 
manner explained above, i.e., that they must be both legally and 
practically enforceable. We believe the Flexible Permit program before 
us today meets our interpretation of enforceable under the CAA.
    The provisions from the October 21, 2013 submittal needed to ensure 
legal and practical enforceability are discussed in numbers 1-5 below.
---------------------------------------------------------------------------

    \9\ See 67 FR 80186, 80190-80191 December 31, 2002.
---------------------------------------------------------------------------

1. Identifying the New Facilities and/or Modifications for Inclusion in 
a Flexible Permit
    One key feature of an enforceable minor NSR program is the ability 
to

[[Page 8379]]

easily identify the facilities and modifications subject to the 
program. See, 40 CFR 51.160(e). For the Flexible Permit program, the 
establishment and identification of the facilities subject to the 
emission cap is crucial to proper implementation of the program. To 
provide for legally enforceable emission caps, the TCEQ adopted 
amendments to 30 TAC Section 116.711(2)(M) on December 14, 2010, and 
included them in the package submitted for EPA approval on October 21, 
2013. The submitted package requires permit applicants provide a 
complete description of the facilities (with their individually defined 
emission point numbers) included in an emissions cap. The package also 
allows a permit applicant to establish an emission cap for all 
facilities at an account, including every facility at the account, or 
to establish an emission cap comprised of a designated group of 
facilities at the account. Section 116.716(a) allows permit applicants 
full flexibility to designate facilities for inclusion in an emission 
cap as they see fit, without restriction on the type or location of the 
facility, as long as it (1) complies with the definition of account and 
30 TAC Section 116.716(a) as submitted; (2) provides that emission caps 
be established for a pollutant for all facilities at an account or a 
designated group of facilities at an account. Finally, 30 TAC Section 
116.716(c) as submitted, includes text to ensure that the rules include 
procedures for establishing an emissions cap. See 35 TexReg 11936-
11941.
2. Inclusion of Appropriate Monitoring and Recordkeeping Requirements 
in Flexible Permits
    In addition to establishing the facilities and modifications 
subject to the minor NSR program, the SIP must require sufficient 
monitoring, recordkeeping, and reporting (MRR) to demonstrate that the 
source or modification as permitted will not result in a violation of 
the control strategy or an applicable NAAQS and is enforceable. One of 
the rationales for our original disapproval was that the program 
afforded excessively broad discretion to the director regarding whether 
or not to include MRR conditions in a Flexible Permit. See, 75 FR 
41312, 413213. Subsequent to the Fifth Circuit's vacatur of our 
disapproval of the MRR and director's discretion provisions in the 
original Flexible Permit program, EPA, in a separate rulemaking action, 
has more clearly articulated the Agency's long standing interpretation 
of the CAA as it relates to the use of director discretion in SIPs.
    On February 22, 2013, in a proposed action involving how excess 
emissions would be treated in state rules by sources during periods of 
startup, shutdown, or malfunction (SSM), EPA extensively discusses the 
use of director's discretion in SIPs. For the full discussion of this 
issue please see 78 FR 12460, February 22, 2013, and the accompanying 
SSM legal memo: ``Memorandum to Docket EPA-HQ-OAR-2012-0322 Statutory, 
Regulatory, and Policy Context for this Rulemaking February 4, 2013.'' 
In these documents EPA articulates the rationale for its longstanding 
interpretation that the CAA does not allow ``director's discretion'' 
provisions in SIPs if they provide unbounded discretion to determine 
what requirements apply to sources, in ways that would amount to case-
specific revisions of the SIP without meeting the statutory 
requirements of the CAA for SIP revisions. See, 78 FR 12460, 12474.
    The EPA has explained that director's discretion provisions can be 
acceptable if such provisions are sufficiently specific, provide for 
sufficient public process, and are sufficiently bounded, so that it is 
possible to anticipate at the time of the EPA's approval of the SIP 
provision how that provision will actually be applied and that the pre-
authorized exercise of director's discretion will not interfere with 
other CAA requirements, such as providing for attainment and 
maintenance of the NAAQS. See, 78 FR 12460, 12485. In the EPA's 
judgment, the revised Flexible Permit Rule before us today is 
sufficiently bounded, provides for public participation, protects the 
NAAQS, and is enforceable.
    The disapproved package had provided that a source should have 
provisions for measuring emissions of air contaminants ``as determined 
by the Executive Director,'' and imposed no additional substantive 
requirements for such measurements and did not prevent the Director 
from exempting the source from any requirements at all. Thus, it did 
not comport with the requirements specified in EPA's recent notice. The 
revised Flexible Permit Rule, as submitted in October 2013, does not 
contain any provision that could constitute or authorize a complete 
variance or an exemption from monitoring. The State in its interpretive 
letter clearly confirms that its rules do not allow for an exemption 
from monitoring requirements. The requirements for monitoring are 
general in nature but are sufficiently bounded to be approvable. In 
particular, TCEQ adopted amendments to 30 TAC Section 116.715(d)(1) to 
satisfy EPA concerns about the exercise of director's discretion. 
Section 116.715(d)(1) provides that the ``monitoring system must 
accurately determine all emissions of the pollutants in terms of mass 
per unit of time. Any monitoring system authorized for use in the 
permit must be based on sound science and meet generally acceptable 
scientific procedures for data quality and manipulation.'' As explained 
in the TCEQ interpretive letter, this monitoring condition clearly 
constrains the director's discretion. As such, it is consistent with 
the guidelines for director's discretion provisions set forth in the 
EPA guidance just described.
    The newly submitted rule tracks very closely with the monitoring 
provisions set forth in EPA's major source Plantwide Applicability 
Limitation (PAL) provisions in the federal PSD regulations (PAL). EPA's 
PSD PAL provisions at 40 CFR 52.21(aa)(12) specify monitoring 
requirements for PAL permits and requires that all monitoring systems 
authorized for use in a PAL permit must be based on sound science and 
meet generally acceptable scientific procedures for data quality and 
manipulation.
    Moreover, in our original disapproval for the Flexible Permit 
Program, we cited to the PAL rule as an appropriate way to for the 
director to establish monitoring requirements.\10\ As noted above, TCEQ 
also submitted an interpretive letter clarifying how this provision in 
the program operates and demonstrates it is consistent with EPA 
requirements. In sum, these provisions effectively impose necessary 
substantive requirements on MRR provisions.
---------------------------------------------------------------------------

    \10\ See, 75 FR 41312, 41317.
---------------------------------------------------------------------------

    The newly submitted Flexible Permit Program expands the MRR 
provisions to ensure enforceability of the program. 30 TAC Section 
116.715(c)(5)(A) requires each flexible permit to specify requirements 
for monitoring or demonstrating compliance with emission caps and 
individual emission limits in the flexible permit. 30 TAC Section 
116.715(c)(5)(B) requires each flexible permit to specify emission 
calculation methods for calculating annual and short term emissions for 
each pollutant. We find that these provisions of the Flexible Permit 
Program were included in the revised SIP submission by the TCEQ on 
October 21, 2013, See, 35 TexReg 11938-11939. These provisions 
establish that the overall program, and in particular the MRR 
provisions, provide for sufficient public process, and are sufficiently

[[Page 8380]]

bounded. It is possible to anticipate how the provision will actually 
be applied and that the pre-authorized exercise of director's 
discretion will not interfere with other CAA requirements. They also 
ensure that the limits on director's discretion are legally 
enforceable. See 40 CFR 51.160 (requiring that minor source program 
include enforceable procedures.).
3. Additional Elements Specific to Emissions Caps
    EPA has also concluded that the program, as submitted, contains 
other specialized provisions needed to ensure enforceability. Once the 
cap is established the facilities are then able to make changes without 
permit revisions provided the emissions are below the established 
emissions caps. The TCEQ has consistently defined the flexible permit 
program as a new type of minor NSR permit program which functions as an 
alternative to the traditional preconstruction permits that are 
authorized in Chapter 116, Subchapter B, NSR Permits. The TCEQ states 
that flexible permits were designed to exchange flexibility for further 
emission reductions without relaxation of unit specific control 
requirements. In its submittal, the TCEQ has included provisions in 30 
TAC Section 116.715(c)(5)(A) that satisfy the requirements that each 
flexible permit specify requirements for monitoring or demonstrating 
compliance with emission caps and individual emission limits in the 
flexible permit; 30 TAC Section 116.715(c)(5)(B) as submitted satisfies 
the requirement that each flexible permit specify emission calculation 
methods for calculating annual and short term emissions for each 
pollutant; and 30 TAC Section 116.715(d)(1) to satisfy the requirements 
concerning accountability/enforceability. Each of these amendments to 
the Flexible Permit Program was submitted as a SIP revision by the TCEQ 
on October 21, 2013. See, 35 TexReg 11938-11939.
4. Provisions To Ensure the Flexible Permit Program Is a Minor NSR 
Program
    Because the Flexible Permit program can be used for both true minor 
sources and for minor modifications at existing major sources, the 
program must include provisions to ensure that major NSR requirements 
are protected and that the Flexible Permit Program cannot be used to 
circumvent the requirements of either PSD or NNSR review. The TCEQ 
adopted provisions on December 14, 2010, to further clarify the major 
NSR permitting programs. The TCEQ adopted amendments to 30 TAC Section 
116.711(2)(M)(vii) to specify that the flexible permit application must 
identify any terms, conditions, and representations in any Subchapter B 
permit which will be superseded by or incorporated under a flexible 
permit and provide an analysis of how the conditions and control 
requirements of a Subchapter B permit will be carried forward in the 
proposed flexible permit. Texas revised 30 TAC Section 116.716(c)(2) to 
require facilities subject to lowest achievable emission rate (LAER) in 
accordance with Subchapter B, be included in a separate emissions cap 
or provided with individual emission limitations. This provision 
ensures that sources subject to LAER are fully controlled as required 
by federal NSR regulations. Each of these amendments to the Flexible 
Permit Program was submitted as a SIP revision by the TCEQ on October 
21, 2013. Each of these amendments to the Flexible Permit Program 
ensures that the program is for minor NSR actions and that for any 
minor amendments to a major source, the source will retain its major 
source requirements (i.e., cannot be used to circumvent the major 
source requirements). Our evaluation of this issue is also informed by 
the Fifth Circuit Court of Appeals decision in Texas v. EPA, 690 F3d 
670, (5th Cir 2013) in which the Court overturned our disapproval of 
the rule. One of the major rationales of our earlier disapproval was 
that the Program might allow major sources to evade Major NSR. The EPA 
found that the Flexible Permit Program ``has no express regulatory 
prohibition clearly limiting its use to Minor NSR and has no regulatory 
provision clearly prohibiting the use of this submitted Program from 
circumventing the Major NSR SIP requirements.'' See, 75 FR 41312, 
41,313. The Court dismissed EPA's concern and expressly ruled that this 
was a program limited to minor sources only. ``The Flexible Permit 
Program does not allow Major NSR evasion because it affirmatively 
requires compliance with Major NSR''. Texas v. EPA, 690 F3d 670, 678. 
TCEQ included, as part of their October 21, 2013, submittal 30 TAC 
Sections 116.711(8)&(9) which require compliance with PSD and 
Nonattainment review if it is found that those provisions apply.
5. Provisions To Ensure the Flexible Permit Program Demonstrates 
Compliance
    An emissions cap program such as the Flexible Permit Program must 
include provisions for calculating compliance on a 12-month rolling 
average and against applicable short term limits in order to meet the 
requirement of Section 302(k) of the CAA that the source be able to 
demonstrate continuous compliance. Appropriate emission calculations 
will ensure that permit conditions are protective of the control 
strategy and the applicable NAAQS. To provide for this, the TCEQ 
submitted amendments to the Flexible Permit Program on October 21, 
2013, to 30 TAC Section 116.715(c)(5) to address monitoring, 
calculations, and equivalency of methods so that each flexible permit 
shall specify requirements for monitoring or demonstrating compliance 
with emission caps and individual emission limits in the flexible 
permit and revised 30 TAC Section 116.715(c)(6)(A)(i) so that emission 
caps and individual emission limitation calculations are based on a 12-
month rolling average and emission caps and individual emission 
limitation calculations correspond to any short term emission 
limitations.

B. Federal Requirements for Public Notice of Minor NSR Permitting

    The requirements for public notice of minor NSR permitting are 
outlined at 40 CFR 51.160 and 51.161. The legally enforceable approval 
procedures for Minor NSR programs at 40 CFR 51.160 must require the 
permitting authority to provide opportunity for public comment on 
information submitted by sources and the agency's analysis of the 
effects of the proposed source on ambient air, including its proposed 
approval or disapproval. See, 40 CFR 51.161(a). The opportunity for 
public comment must include, at a minimum, a 30-day comment period on 
the information submitted by the applicant and the permitting 
authority's analysis of the effect of the proposed application on air 
quality. This information must be noticed by prominent advertisement in 
the area affected by the proposed source and available for public 
inspection in at least one location in the area affected. See, 40 CFR 
51.161(b).
1. Overview of the Texas Public Participation Process for Applications 
for New Flexible Permits and Flexible Permit Amendments
    The Texas public participation process covers the variety of air 
quality permit applications processed by the TCEQ including 
applications for permits for new major sources or modifications subject 
to PSD or NNSR requirements and minor NSR permit actions such as 
Flexible Permits. EPA has separately reviewed and approved the public 
participation process for major sources and modifications subject to 
PSD/NNSR requirements, PAL permit

[[Page 8381]]

authorizations at existing major sources, new minor sources or minor 
amendments, and permit renewals. See our final rule dated January 6, 
2014, approving the Texas public participation requirements for these 
permit actions as consistent with the requirements of the CAA and 40 
CFR 51.160-51.166. See 79 FR 551. In today's action we are only 
reviewing the Texas public participation program specific to 
applications for new and amended Flexible Permits pursuant to Chapter 
116, Subchapter G. The public participation requirements for Flexible 
Permits are found at 30 TAC Section 116.740, which requires any 
applicant for a new Flexible Permit or amendment to a Flexible Permit 
to comply with the requirements established in Chapter 39 related to 
Public Notice. Among other Sections that apply to both flexible permit 
applications and other applications, Chapter 39 separately applies the 
public participation process to applications for new Flexible Permits 
at 30 TAC Section 39.402(a)(4) and applications for amendments to a 
Flexible Permit at 30 TAC Section 39.402(a)(5). Because the Flexible 
Permits program is a minor NSR authorization, our evaluation of the 
public participation specific to flexible permits will be based on 
minor NSR public participation requirements of 40 CFR 51.161.
    The following process is used to publish notice of an application 
for a new Flexible Permit or an amendment to a Flexible Permit.:
    1. Applicant submits air quality permit application for new or 
amended Flexible Permit to TCEQ. See 30 TAC Section 116.711.
    2. TCEQ reviews the application and determines whether the 
application is administratively complete. During this process, the TCEQ 
has 90 days to determine the application is complete or request 
additional information. See 30 TAC 116.714, which cross-references the 
requirements at30 TAC Section 116.114(a)(1).
    3. Once the application is administratively complete, the applicant 
is required to publish the first notice, the Notice of Receipt of 
Application and Intent to Obtain Permit (NORI), as applicable. See 30 
TAC Section 39.418. The NORI is a unique feature of the Texas Public 
Notice Process. The NORI provides information to the public about the 
receipt of an application and provides basic information about the 
proposed new source or modification such as a description of the 
location and the nature of the proposed activity, a description of the 
public comment process, and the location where materials will be made 
available for review. The NORI does not provide any technical 
information, but rather serves as an indicator of future public notices 
and actions that may be of interest, enabling the public to anticipate 
draft permits. The NORI is required for all new applications for 
Flexible Permits at 30 TAC Section 39.402(a)(4) and most applications 
for amendments to Flexible Permits at 30 TAC 39.402(a)(5). Note that 
certain applications for Flexible Permit amendments are exempted from 
the Chapter 39 public notice provisions as discussed in this proposed 
action at Section IV.B.3.
    4. TCEQ completes the technical review and makes a preliminary 
decision. The TCEQ has 180 days from the date a new Flexible Permit 
application is administratively complete, or 150 days from the date a 
Flexible Permit amendment application is administratively complete, to 
conduct the technical review and make a preliminary decision. See 30 
TAC 116.714, which cross-references the requirements at 30 TAC Section 
116.114(a)(2).
    5. The applicant is required to publish the second notice, the 
Notice of Application and Preliminary Decision (NAPD) when notified by 
TCEQ of the preliminary decision. See 30 TAC Section 39.419. The NAPD 
notice provides the information and notice to the public consistent 
with federal requirements. The NAPD provides details about the 
preliminary decision and draft permit and the location where applicable 
air quality analyses and other technical materials will be made 
available for public review. NAPD is required for all air quality 
permit applications for new Flexible Permits and most Flexible Permit 
applications subject to the Chapter 39 public notice provisions. Note 
that certain applications for Flexible Permit amendments are exempted 
from the Chapter 39 public notice provisions as discussed in Section 
V.A.3. of the TSD accompanying this proposed action at section IV.B.3.
    6. The TCEQ files the Executive Director's (ED) draft permit and 
preliminary decision, the preliminary determination summary and air 
quality analysis with the chief clerk and the clerk posts this 
information on the TCEQ's Web site. See 30 TAC Section 39.419(e).
    7. The comment period runs for 30 days after the last publication 
of the NAPD discussed in Step 5. See 30 TAC Section 55.152(a)(1).
    8. A public meeting is held if the ED determines there is a 
substantial or significant degree of public interest; if the meeting is 
requested by a member of the legislature representing the general area 
of the proposed facility/modification; if a public meeting is otherwise 
required by law. See 30 TAC Section 55.154(c).
    9. The ED prepares a response to all comments received. See 30 TAC 
Section 55.156(b)(1).
    10. The ED files the response to comments with the chief clerk as 
soon as practicable, but not later than 60 days after the end of the 
comment period. See 30 Section TAC Section 55.156(b)(3).
    11. The chief clerk will mail or transmit the ED decision and the 
RTC to the applicant, any person who submitted comments and any person 
on the mailing list for the permit action. See 30 TAC Section 
55.156(c).
    12. The ED will take final action on the permit application within 
150 days of receipt of a Flexible Permit amendment application or 180 
days for a new Flexible Permit application. The TCEQ's one-year clock 
is based on the completion of the technical review and the publication 
of the NAPD as provided in Step 5. See 30 TAC 116.714, which cross-
references the requirements at 30 TAC Section 116.114(c)(3).
2. Analysis of the Submitted Public Participation Rules for Flexible 
Permits as Minor NSR Requirements
    The Texas public participation requirements for Flexible Permit 
applications are outlined at 30 TAC Section 39.402 and apply to the 
following types of permits.
     New flexible permits under Chapter 116, Subchapter G--30 
TAC Section 39.402(a)(4).
     Amendments to flexible permits under Chapter 116, 
Subchapter G when the amendment involves:
    (a) A change in character of emissions or release of an air 
contaminant not previously authorized under the permit (i.e., change in 
control method or an increase in emission rate)--30 TAC Section 
39.402(a)(5)(A);
    (b) The total emissions increase from all facilities to be 
authorized under the amended Flexible Permit at a facility not affected 
by THSC, section 382.020,\11\ exceeds the State's established ``de 
minimis'' levels--30 TAC Section 39.402(a)(5)(B);
---------------------------------------------------------------------------

    \11\ THSC, Sec.  382.020 establishes emission control 
requirements for selected agricultural facilities such as cotton 
gins, corn mills, grain elevators, peanut processing, or rice drying 
facilities.
---------------------------------------------------------------------------

    (c) The total emissions increase from all facilities to be 
authorized under the amended permit at a facility affected by THSC, 
section 382.020, exceeds the State's established ``insignificant'' 
levels

[[Page 8382]]

found in 30 TAC Section 39.402(a)(5)(C); or
    (d) Other minor amendments to Flexible Permits where the Executive 
Director determines reasonable likelihood for interest or impact--30 
TAC Section 39.402(a)(5)(D)(i)-(iv).
    Despite the thresholds established in 30 TAC Sections 
39.402(a)(5)(B) and (C), the TCEQ rules at 30 TAC Section 
39.402(a)(5)(D) vest the TCEQ Executive Director with the authority to 
require public notice for an otherwise exempt Flexible Permit amendment 
if there is (1) reasonable likelihood of significant public interest in 
the activity, (2) reasonable likelihood for emissions impact at a 
nearby receptor, (3) reasonable likelihood of high nuisance potential 
from the operation of the facility, or (4) the application involves a 
facility in the lowest classification under Texas Water Code, Sections 
5.753 and 5.754 and the Compliance History Rules at 30 TAC Chapter 60. 
This type of Director's Discretion is appropriate for a minor source 
program because the exercise of that discretion is bounded by the four 
criteria identified above, and because the discretion allows the 
director to increase requirements rather than to authorize exceptions 
to those requirements. See 78 FR at 12585-86 and the discussion above 
at IV, A, 2.
    The notice requirements for each type of Flexible Permit 
application listed above are generally the same, meaning that an 
application for a new Flexible Permit and an application to amend a 
Flexible Permit will have the same public notice requirements. The 
submitted Texas rules generally provide that all applications for new 
Flexible Permits and applications for qualifying Flexible Permit 
amendments will go through public notice using the Texas NORI and NAPD 
notices. Therefore, the public will receive notice of the application 
and have the opportunity to comment on the draft permit and 
accompanying technical information. Note that the applicant is legally 
responsible for the publication of the NORI and NAPD, using the 
specific notice text provided through regulations by the TCEQ. The 
applicant is also legally responsible for providing copies of the 
public notice documents to the EPA Regional Office, local air pollution 
control agencies with jurisdiction in the county, and air pollution 
control agencies of nearby states that may be impacted by the proposed 
new source or modification. The NORI and NAPD both identify locations 
where materials, including the draft permit and all technical materials 
supporting the decision, will be made available for public review. The 
TCEQ will respond to each comment received when making a final permit 
decision. The TCEQ will also provide opportunity for a public meeting 
on the permit application if requested. On January 6, 2014, the EPA 
approved the Texas Public Participation rule, which includes the 
general notice requirements of the NORI and NAPD as consistent with 
federal requirements at 40 CFR 51.160 and 51.161. See 79 FR 551. See 
docket EPA-R06-OAR-2010-0612 in www. regulations.gov. EPA views the 
public participation applicability provisions at 30 TAC Sections 
39.402(a)(4) and (a)(5) as integral to the functionality and 
implementation of the Texas Flexible Permits Program. As such, it is 
inappropriate to give full approval for these public participation 
provisions that apply to the Texas Flexible Permits Program until the 
underlying program is fully approved. Additionally, fully approving 
these public participation provisions without full approval of the 
underlying Flexible Permits Program may create confusion for the public 
and the regulated community. Therefore, we propose to find it 
appropriate to conditionally approve the notice provisions consistent 
with our actions on the underlying Flexible Permits Program. In today's 
notice we are proposing to conditionally approve the applicability 
requirements at 30 TAC Sections 39.402(a)(4) and (a)(5) that require an 
applicant to follow the NORI and NAPD processes for applications for 
new and amended Flexible Permits.
3. Minor NSR Public Notice Requirements Specific to Two Types of Minor 
NSR Flexible Permit Amendment Applications
    As explained above, the submitted Texas public participation 
provisions create a tiered program, wherein two certain types of Minor 
NSR Flexible Permit amendment applications that have been defined by 
TCEQ as ``de minimis'' or ``insignificant'' will not automatically 
require public notice. The following outlines the specific thresholds 
that qualify as ``de minimis'' or ``insignificant'' under the revised 
rules, and the basis for TCEQ's determination.
i. Identification of the Minor NSR Flexible Permits Emission Thresholds 
and Affected Source Populations
     Thresholds are only used for Flexible Permit amendment 
applications. Applications for new Minor NSR Flexible Permits are 
required by these submitted rules to go through the public procedures 
of the NORI and NAPD. The applications for amendments to Flexible 
Permits are further divided based on the amount of emission increases 
at issue and whether the facility is affected by THSC section 382.020.
     THSC section 382.020 applies to agricultural facilities 
such as corn mill, cotton gin, feed mill, grain elevator, peanut 
processing facility or rice drying facility.
    [cir] 30 TAC Section 39.402(a)(5)(B) provides that if the 
application for the amendment of a Flexible Permit is not for an 
affected agricultural facility then the public notice provided through 
the NORI and NAPD apply, unless the total emissions increase from all 
facilities authorized in the Flexible Permit amendment does not exceed 
any of the following levels established by the State as ``de minimis'' 
levels:
    [ssquf] 50 tons per year (TPY) carbon monoxide (CO)
    [ssquf] 10 TPY sulfur dioxide (SO2)
    [ssquf] 0.6 TPY lead (Pb)
    [ssquf] 5 TPY of NOX, volatile organic compounds (VOC), 
particulate matter (PM), or any other contaminant except carbon 
dioxide, water, nitrogen, methane, ethane, hydrogen, and oxygen.
    [cir] 30 TAC Section 39.402(a)(5)(C) provides that if the amendment 
for a Flexible Permit is for an affected agricultural facility, then 
the public notice requirements of the NORI and NAPD apply, unless the 
total emissions increase from all authorized facilities in the Flexible 
Permit amendment does not exceed any of the following thresholds 
established by the State as ``insignificant'' thresholds:
    [ssquf] 250 TPY CO or NOX
    [ssquf] 25 TPY of VOC, SO2, PM or any other air 
contaminant except carbon dioxide, water, nitrogen, methane, ethane, 
hydrogen, and oxygen.
    [ssquf] A new major stationary source or major modification 
threshold as defined in 30 TAC Section 116.12 of this title
    [ssquf] A new major stationary source or major modification 
threshold, as defined in 40 CFR 52.21 under the PSD requirements
     If the Flexible Permit amendment application includes 
proposed emissions increases of any air contaminant above the 
identified threshold then the amendment application is required to go 
through notice pursuant to Chapter 39 requirements. That means the 
Flexible Permit amendment application will go through the NORI and NAPD 
publication process.
ii. Discussion of the ``De minimis'' and ``Insignificant'' Thresholds 
for Minor NSR Flexible Permit Amendments
    The thresholds established by the State as ``de minimis'' 
thresholds at 30

[[Page 8383]]

TAC Section 39.402(a)(5)(B) apply to all minor NSR Flexible Permit 
amendment applications, except those for affected agricultural 
facilities. The thresholds selected by the State at 30 TAC Section 
39.402(a)(5)(C), and called ``insignificant'' thresholds, apply only to 
minor NSR Flexible Permit amendment applications for affected 
agricultural facilities.
    Within the scope of the Texas Minor NSR program, the ``de minimis'' 
and ``insignificant'' thresholds distinguish those minor Flexible 
Permit amendment applications that require full review from those that 
may not. But, the thresholds do not affect any part of the technical 
review of these minor NSR Flexible Permit amendment applications or the 
requirement to comply with other requirements such as application of 
required control technology, reporting when required to the emissions 
inventory, and analysis of monitoring data. Additionally, being below 
the ``de minimis'' or ``insignificant'' threshold does not override any 
notice or technical requirements for PSD, NNSR or new Minor NSR 
Flexible Permit applications.
    In our January 6, 2014, final rulemaking approving Texas public 
participation, we found that TCEQ provided an adequate demonstration to 
show that their selected ``de minimis'' and ``insignificant'' 
thresholds for Minor NSR permitting are adequate to meet federal 
requirements for Minor NSR. See 79 FR 551. The State's demonstration is 
also applicable to the thresholds as they apply to minor amendments to 
existing Flexible Permits. TCEQ also provided supplemental information 
concerning the Flexible Permit holders' use of these thresholds since 
they were adopted by the State.12 13 The supplemental data 
are also included in the docket for this rulemaking. Our analysis of 
this supplemental information demonstrates that from Fiscal Year 1994 
through Fiscal Year 2013, the TCEQ issued only one Flexible Permit to a 
facility that would be classified as an agricultural facility under 
THSC 382.020. This agricultural facility never applied for a flexible 
permit amendment and has subsequently gone through the de-flex process. 
Consequently, there are no existing Flexible Permits for affected 
agricultural sources; therefore the ``insignificant'' thresholds are 
not available for use for any current flexible permit holders. 
Additionally, this supplemental information demonstrates that prior to 
Texas Fiscal Year 2002, flexible permit amendments issued to non-
agricultural facilities did not go through public notice. Fiscal Year 
2002 represents the time period where TCEQ adopted and implemented the 
``de minimis'' and ``insignificant'' thresholds. Since the time of 
adoption and implementation at the state level of the ``de minimis'' 
and ``insignificant'' thresholds in Fiscal Year 2002, the TCEQ records 
indicate that 326 amendments to flexible permits have been issued. Of 
the 326 applications for amendments to Flexible Permits, 135 
applications have been required to go through notice due to the 
application of the thresholds. Our analysis of this supplemental 
information leads us to conclude that the application of the ``de 
minimis'' and ``insignificant'' thresholds specific to applications for 
Flexible Permit amendments increases the opportunity for public notice 
and participation in Texas. In the TSD for this rulemaking, we have 
included EPA's full analysis of the State's rationale for these 
thresholds and a discussion of the supplemental data provided by TCEQ. 
We propose to find this demonstration meets 40 CFR 51.160 and 51.161.
---------------------------------------------------------------------------

    \12\ Email from Janis Hudson, TCEQ to Adina Wiley, EPA titled 
``Flexible Permit Amendment Applications'' dated September 11, 2013.
    \13\ Email from Janis Hudson, TCEQ to Adina Wiley, EPA, titled 
``Flexible Permit Amendment Applications--Clarification'' dated 
October 23, 2013.
---------------------------------------------------------------------------

4. How do the Texas public notice provisions for applications for new 
and amended flexible permits address the concerns identified in EPA's 
November 26, 2008 proposed limited approval/limited disapproval for 
Texas public participation?
    On November 26, 2008, EPA identified two deficiencies in the Texas 
public participation rules specific to applications for new Flexible 
Permits and amendments to Flexible Permits. See 73 FR 72001, at 72008. 
Below we reiterate the deficiencies and discuss how the revised Texas 
public participation process for applications for new Flexible Permits 
and amendments to Flexible Permits addresses our concerns.
     For initial issuance of a flexible permit to establish a 
minor NSR applicability cap or an increase in a flexible permit cap, 
the rules do not require 30-day notice and comment on information 
submitted by the owner or operator and the agency's analysis of the 
effect of the permit on ambient air quality, including the agency's 
proposed approval or disapproval as required by 40 CFR 51.161.
    The public participation requirements specific to applications for 
new Flexible Permits and amendments to Flexible Permits at 30 TAC 
Sections 39.402(a)(4) and (a)(5) address the deficiency identified on 
November 26, 2008. All applications for new Flexible Permits are 
required at 30 TAC Section 39.402(a)(4) to go through public notice as 
specified in Chapter 39; which means that all applications for new 
Flexible Permits must publish the NORI pursuant to 30 TAC Section 
39.418 and the NAPD pursuant to 30 TAC Section 39.419. The public 
notice process for a new Flexible Permit will run through two different 
publication dates. The first public notice announces the company has 
applied to the TCEQ for a flexible permit. This date is initially 
published first using the NORI. The second public notice announces the 
release of the draft permit. The entire public notice period runs 
through the end of the second 30-day comment period on the draft 
permit. The date may be extended through the date of any public meeting 
that was scheduled wherein the public can review TCEQ's analysis and 
preliminary determination. All applications for amendments to Flexible 
Permits are required at 30 TAC Section 39.402(a)(5) to go through 
public notice as specified in Chapter 39 using the NORI and NAPD 
process if the amendment will exceed the ``de minimis'' or 
``insignificant'' thresholds.
     Where PSD and NNSR terms and conditions are modified or 
eliminated when the permit is incorporated into a flexible permit, the 
rules do not require public participation consistent with 40 CFR 51.161 
and 51.166(q).
    As explained in Section IV.A.4 of this proposed rulemaking, the 
TCEQ adopted amendments to 30 TAC Section 116.711(2)(M)(vii) to specify 
that the flexible permit application must identify any terms, 
conditions, and representations in any Subchapter B permit which will 
be superseded by or incorporated under a flexible permit and provide an 
analysis of how the conditions and control requirements of a Subchapter 
B permit will be carried forward in the proposed flexible permit. This 
amendment to the Flexible Permit Program was submitted as a SIP 
revision by the TCEQ on October 21, 2013, and will ensure that the 
Flexible Permit Program is for minor NSR actions only and will not 
circumvent the major source requirements.
    Section 30 TAC Section 39.402(a)(4) provides that an application 
for a new flexible permit must go through Chapter 39 public notice. 
Therefore, where a new flexible permit application will supersede or 
incorporate any term, condition, and/or representation of a Subchapter 
B permit, this information will be available for review and

[[Page 8384]]

comment during the required NORI and NAPD publication for an 
application for a new flexible permit. Similarly, 30 TAC Section 
39.402(a)(5)(A)-(C) requires that an application for an amendment to a 
flexible permit application must go through Chapter 39 public notice if 
the amendment is for an air contaminant not previously authorized or 
the amendment exceeds the identified ``de minimis'' or 
``insignificant'' thresholds. The TCEQ Executive Director also has the 
discretion under 30 TAC Section 39.402(a)(5)(D) to require notice for 
an application for a Flexible Permit amendment that would not otherwise 
be required to provide notice.
5. Proposed Findings Specific to the Texas Public Participation 
Provisions for the Flexible Permit Program
    EPA proposes to find that TCEQ's public participation program 
requirements specific to applications for new Flexible Permits and 
applications for amendments to Flexible Permits at 30 TAC Sections 
39.402(a)(4) and (5) satisfy the provisions of 40 CFR 51.160(e) and 
51.161. Moreover, we also propose to find that the TCEQ revised rules 
for discretionary public notice for new Flexible Permits and 
applications for amendments to Flexible Permits are approvable, because 
the provisions adequately confine Executive Director discretion by 
authorizing the use of discretion under specified criteria that are 
consistent with the goals and purposes of the Act to provide an 
adequate opportunity for informed public participation. EPA is 
proposing to find that the submitted Texas public participation 
regulations identifying the applicant as the legally responsible party 
also meet the requirements to provide opportunity for public comment 
and for information availability at 40 CFR 51.161, because the NORI and 
NAPD both identify locations where materials, including the draft 
permit and all technical materials supporting the decision will be made 
available for public review and the required information is submitted 
to EPA.
    Finally, as explained above, we propose to find that the submitted 
provisions address all deficiencies specific to public notice for 
Flexible Permits that we previously cited in our November 26, 2008, 
proposed limited approval/limited disapproval of Texas public notice 
requirements. However, EPA views the public participation applicability 
provisions at 30 TAC Sections 39.402(a)(4) and (a)(5) as integral to 
the functionality and implementation of the Texas Flexible Permits 
Program. As such, it is inappropriate to give full approval for these 
public participation provisions that apply to the Texas Flexible 
Permits Program until the underlying program is fully approved. 
Additionally, fully approving these public participation provisions 
without full approval of the underlying Flexible Permits Program may 
create confusion for the public and the regulated community. Therefore, 
we propose to find it appropriate to conditionally approve the notice 
provisions consistent with our actions on the underlying Flexible 
Permits Program. Accordingly, we propose conditional approval of the 
Texas public notice provisions at 30 TAC Sections 39.402(a)(4) and 
(a)(5) for applications for new Flexible Permits and applications for 
amendments to Flexible Permits as submitted on July 2, 2010. 
Additionally, we propose conditional approval of the public 
participation requirement in the Flexible Permit Program at 30 TAC 
Section 116.740 as initially submitted on November 29, 1994; and 
further revised on July 22, 1998; October 25, 1999; and October 21, 
2013.

C. Does proposed approval of the Texas Flexible Permit Program 
interfere with attainment, reasonable further progress, or any other 
applicable requirement of the Act?

    Under Section 110(l) of the CAA, the regulations submitted as a SIP 
revision adopting and implementing the Texas Flexible Permit Program 
must meet the procedural requirements of Section 110(l) by 
demonstrating that the State followed all necessary procedural 
requirements such as providing reasonable notice and public hearing of 
the SIP revision. Additionally, the SIP revision must demonstrate that 
the adopted rules will not interfere with any applicable requirement 
concerning attainment and reasonable further progress, or any other 
applicable requirement of the CAA. We propose to find that the TCEQ 
satisfied all requirements pursuant to Section 110(l). See Section 
IV.A. of the accompanying TSD developed in support of this action 
including the sections Administrative Materials (2.1) and Technical 
Support (2.2).
    The regulation of minor sources is a requirement of the CAA and 
EPA's regulations at 40 CFR 51.160-51.164. As discussed in this 
proposed action and in the accompanying TSD, EPA proposes that the 
Flexible Permit Program as submitted October 21, 2013, satisfies the 
minimum requirements for minor NSR programs, including adequate 
provisions for enforceability and public participation to ensure 
protection of the control strategy and any applicable NAAQS. The 
Flexible Permit Program also contains sufficient safeguards to prevent 
circumvention of major NSR permitting requirements. Therefore, we 
propose that the Flexible Permit Program is protective of the NAAQS and 
applicable control strategy requirements and satisfies the requirements 
of 110(l) of the Act.

D. TCEQ's Interpretive Letter

    Below are excerpts from the December 9, 2013, interpretive letter 
(letter) provided by the TCEQ. This letter was requested by EPA to 
clarify perceived ambiguity in certain provisions in the SIP submission 
and to also describe how the program will be implemented. The full text 
of the letter can be found in the Docket for this action. We believe 
this letter clarifies the following aspects of the Flexible Permit 
Program and supports our determination that the Submittal is 
conditionally approvable.
     EPA asked for clarification on how director discretion is 
used in the rule in establishing monitoring and recordkeeping. The 
letter states that director discretion does not act as a variance to 
the monitoring and recordkeeping requirements. Texas asserts in its 
letter that ``TCEQ does not allow an exemption or waiver from these 
statutory and regulatory monitoring and recordkeeping requirements.'' 
They further assert that the ``monitoring condition is bounded by the 
requirement to be based on sound science and meet generally acceptable 
scientific procedures for data quality and manipulation. The sampling 
methods and procedures are those generally recognized in the field of 
air pollution or new methods or procedures with demonstrated scientific 
applicability.'' Whatever the requirements the Executive Director 
imposes, permit holders must maintain information ``sufficient to 
demonstrate continuous compliance'' with the emission caps and 
individual limits. 30 TAC Section 116.715(c)(6). We agree with TCEQ 
that this ensures the Program's enforceability and conclude that the 
information in the letter supports our proposed conditional approval.
     EPA asked for clarification regarding how pollution 
control equipment should be maintained and operated during startup/
shutdown. The State explained in its letter that the process works as 
follows: ``The Flexible Permit Program (FPP) requires controls to be 
operated during normal facility operation. This rule may be construed 
to require operation of emission controls only during routine facility 
operations, potentially exempting sources during

[[Page 8385]]

startups or shutdowns (not malfunctions), but that is accurate only to 
the extent that the permit only authorizes routine operations. Emission 
limits for startups and shutdowns, appropriately modeled during permit 
development, may be authorized and be subject to a separate emissions 
cap in the flexible permit. The TCEQ does not authorize malfunctions, 
and therefore those emissions are not subject to any use of control 
equipment, although the control equipment must be used where feasible, 
to minimize emissions where possible during periods of unauthorized 
emissions. Excess emissions that occur during unauthorized startups, 
shutdowns or malfunctions are not excused by the FPP.'' We agree with 
TCEQ that this interpretation of their rule adequately addresses 
startups, shutdowns, and malfunctions and conclude that the information 
in the letter supports our proposed conditional approval. EPA asked for 
clarification on how the Texas SIP approved alternative permitting 
mechanisms may be used to alter a flexible permit. Also we wanted to 
understand in detail that any such changes, using alternative permit 
mechanisms (Standard permits or Permits by Rule (PBR)), would not be 
allowed if they violate the terms of an existing flexible permit. For 
example, if the flexible permit contains a 100 tpy cap then a facility 
(see Section II.M. regarding an explanation of how TCEQ defines 
``facility'') should not be able to use a PBR to get authorization to 
increase emissions by 10 tons without amending the flexible permit. The 
State responded, in part, that ``Either of these authorizations may be 
used for facilities that are subject to a flexible permit cap, but the 
Standard Permit or PBR limits must be contained within the flexible 
permit cap, and cannot be used to relax or minimize any existing permit 
condition (such as recordkeeping, monitoring, reporting, testing, BACT, 
etc.). If one of these authorizations was allowed without being part of 
the emissions subject to the cap, such an approach would circumvent the 
basis used to establish the flexible permit, and could potentially 
affect the control technology, monitoring and testing requirements that 
were used to establish the emission cap.'' In addition, Texas explained 
that ``standard permits and PBRs cannot be used to alter compliance 
obligations in a flexible permit. Further, if more than one state or 
federal rule or regulation or permit conditions are applicable, the 
most stringent limit or condition shall govern and be the standard by 
which compliance shall be demonstrated''. We agree with TCEQ that this 
clarification about how alternative permitting mechanisms may be used 
to alter a flexible permit resolves our concern and conclude that the 
information in the letter supports our proposed conditional approval. 
EPA asked for clarification on the relationship between an issued 
permit and the permit application. Specifically, do the Texas rules 
require the permit application be updated with the permit terms so 
there is never a situation where compliance with the permit application 
would not be the same as compliance with the permit? In response Texas 
stated, ``The permit application, and all the representations in it, is 
part of the permit when it is issued and as such is enforceable. If 
more than one state or federal rule or regulation or flexible permit 
condition are applicable, then the most stringent limit or condition 
shall govern and be the standard by which compliance shall be 
demonstrated. The permit application is not updated after permit 
issuance except as necessary to demonstrate that the facilities can 
comply with the performance specified in the permit.'' In addition, 
Texas stated, ``As is the case with all TCEQ air quality permits, the 
permit application, which is part of the issued permit, continues to be 
read together with any permit changes made via an alteration or 
amendment.'' We agree with TCEQ that this clarification about the 
relationship between an issued permit and the permit application 
resolves our concern and conclude that the information in the letter 
supports our proposed conditional approval.
     EPA asked for clarification on how the State uses BACT to 
create the emissions cap. We specifically requested an interpretation 
on how BACT will be established and implemented for facilities (see 
discussion on TCEQ's definition of ``facility'') constructed prior to 
1972 (commonly referred to as grandfathered facilities); facilities 
constructed after 1971 that will be under an emissions cap; and 
facilities that are subject to PSD permit requirements. In relevant 
part, Texas stated that with regard to grandfathered facilities, there 
are no longer any grandfathered facilities, for state permitting 
purposes, in Texas. At the time the Texas Clean Air Act (TCAA) was 
amended in 2001 to require these facilities to be permitted (or shut 
down), each had to install BACT that was at least ten years old. For 
facilities constructed after 1971, the TCEQ's NSR permit rules require 
new or modified major or minor sources meet BACT regardless of whether 
there is or will be a cap in a minor NSR permit. The cap is established 
using a current BACT analysis, and, although minor sources may not have 
to add controls, removal of existing controls (which would be 
backsliding under the SIP) is not allowed. Therefore, all facilities 
under the cap must meet overall/collective BACT. When a new facility is 
authorized, the new facility must meet the current BACT level at the 
time it is authorized regardless of whether it is subject to an 
emissions cap. For facilities that are subject to a cap, BACT is 
evaluated for any new facility that is proposed to be added to what is 
already authorized under the cap. When existing facilities are 
modified, and the existing facilities are authorized under an existing 
emissions cap, BACT is reviewed and the cap is adjusted accordingly. 
Emission limitation caps are developed based on the potential to emit 
after the application of BACT (or, if applicable, lowest achievable 
emission rate) emission controls. Further, allowable emission limits, 
expressed as a cap for an individual facility, are expressed in terms 
of annual (tons per year) or short-term (e.g., pounds per hour) units. 
BACT is typically expressed in terms of a mass emission calculation, 
such as pounds per million British thermal units (lb/MMBtu) or parts 
per million (ppm). Establishment of caps after application of the 
appropriate control technology does not relax the control technology.'' 
We agree with TCEQ that this clarification about how BACT is used to 
create an emissions cap resolves our concern and conclude that the 
information in the letter supports our proposed conditional approval.
     EPA asked for clarification on how the Flexible Permit 
Program relates to major source permitting. In response Texas stated, 
``facilities subject to PSD or non-attainment NSR requirements must 
meet control technology determined in accordance with SIP approved 30 
TAC Chapter 116, Subchapter B requirements and removal, avoidance or 
circumvention of control equipment is not allowed for facilities 
subject to PSD or non-attainment NSR. We agree with TCEQ that this 
interpretation further supports that the Flexible Permit Program does 
not allow circumvention of major NSR and conclude that the information 
in the letter supports our proposed conditional approval.

E. Summary of EPA's Evaluation of the Flexible Permit Program as a 
Minor NSR Program

    For the reasons presented above, EPA finds that the Flexible Permit 
Program,

[[Page 8386]]

as submitted on October 21, 2013, is limited to minor NSR permitting. 
EPA finds that the program satisfies the federal requirements for minor 
NSR programs and contains sufficient enforceable safeguards to ensure 
that the NAAQS and applicable control strategies are protected. 
Further, the Flexible Permit Program prevents circumvention of major 
NSR requirements by stating at 30 TAC Section 116.716(c)(1)(A) that if 
a new source or modification subject to either a flexible permit or 
flexible permit amendment is subject to major NSR requirements, either 
PSD or NNSR, under 30 TAC Chapter 116, Subchapter B, then the major NSR 
permitting requirements will apply.
    Therefore, the EPA is proposing to conditionally approve the 
Flexible Permit Program based on the commitment from the TCEQ to adopt 
and submit Flexible Permit Program SIP revisions by November 30, 2014, 
that will reformat and organize the full program into a cohesive, 
understandable, and enforceable program as TCEQ proposed to do in its 
December 9, 2013, commitment letter.

V. Proposed Action

    EPA proposes to conditionally approve the Texas Flexible Permit 
Program that was originally submitted as a revision to the Texas Minor 
NSR SIP Permit Program on November 29, 1994. We also proposed to 
conditionally approve the Texas Flexible Permit Program as further 
amended on March 13, 1996; July 22, 1998; October 25, 1999; September 
11, 2000; April 12, 2001; July 31, 2002, September 4, 2002; October 4, 
2002; September 25, 2003; July 2, 2010; October 5, 2010; and October 
21, 2013. Our proposed conditional approval of the Texas Flexible 
Permit Program is conditioned on the TCEQ adopting and submitting a SIP 
revision addressing the December 9, 2013, commitment letter provided by 
the TCEQ. The commitment states that TCEQ will submit amended rules 
that are properly structured and consistent, as discussed earlier, with 
the actions taken by the Commission on September 24, 2013, and with 
rulemaking requirements of the Texas Administrative Procedure Act by 
November 30, 2014. EPA has made the preliminary determination that the 
Flexible Permit Program is conditionally approvable as a minor NSR 
permit program in accordance with the CAA Section 110 and part C, and 
EPA regulations at 40 CFR 51.160-51.164 for the reasons presented above 
and in our accompanying TSD. EPA invites the public to make comments on 
all aspects of the EPA proposed conditional approval of the Texas 
Flexible Permit Program, and to submit them by the Date listed above.
    EPA proposes to conditionally approve the specific revisions to the 
Texas SIP identified below.
     Revisions to 30 TAC Section 39.402(a)(4) and (a)(5)--
Applicability to applications for new and amended Flexible Permits--
submitted July 2, 2010.
     Revisions to 30 TAC Section 116.10--General Definitions--
submitted March 13, 1996; Repealed, adopted and submitted July 22, 
1998; Redesignated and submitted October 4, 2002; Amended 
116.10(9)(E)--submitted October 5, 2010.
     Revisions to 30 TAC Section 116.13--Flexible Permit 
Definitions--submitted November 29, 1994; Repealed, adopted and 
submitted July 22, 1998; Adopted revisions submitted October 21, 2013.
     Revisions to 30 TAC Section 116.110--Applicability--
submitted November 29, 1994; Section 116.110(a)(3) Repealed, adopted 
and submitted July 22, 1998.
     Revisions to 30 TAC Section 116.710--Applicability--
submitted November 29, 1994; Revised and submitted July 22, 1998; 
Revised and submitted September 11, 2000.
     Revisions to 30 TAC Section 116.711--Flexible Permit 
Application--submitted November 29, 1994; Revised and submitted July 
22, 1998; Added, redesignated and submitted April 12, 2001; Designated, 
added, revised and submitted September 4, 2002; and Adopted revisions 
submitted October 21, 2013.
     Revisions to 30 TAC Section 116.714--Application Review 
Schedule--submitted November 29, 1994; Revised and submitted July 22, 
1998.
     Revisions to 30 TAC Section 116.715--General and Special 
Conditions--Submitted November 29, 1994; Revised and submitted July 22, 
1998; Revised and submitted September 11, 2000; Revised and submitted 
April 12, 2001; Revised and submitted September 4, 2002; Revised and 
submitted September 25, 2003.
     Revisions to 30 TAC Section 116.716--Emission Caps and 
Individual Emission Limitations--submitted November 29, 1994; and 
Adopted revisions submitted October 21, 2013.
     Revisions to 30 TAC Section 116.717--Implementation 
Schedule for Additional Controls--submitted November 29, 1994.
     Revisions to 30 TAC Section 116.718--Significant Emission 
Increase--submitted November 29, 1994.
     Revisions to 30 TAC Section 116.720--Limitation on 
Physical and Operational Changes--submitted November 29, 1994.
     Revisions to 30 TAC Section 116.721--Amendments and 
Alterations--submitted November 29, 1994; Revised and submitted July 
22, 1998; Revised and submitted September 11, 2000.
     Revisions to 30 TAC Section 116.722--Distance 
Limitations--submitted November 29, 1994; Revised and submitted 
September 11, 2000.
     30 TAC Section 116.730--Compliance History--submitted 
November 29, 1994; Withdrawn October 21, 2013.
     Revisions to 30 TAC Section 116.740(a)--Public Notice and 
Comment--submitted November 29, 1994; Designated, added and submitted 
July 22, 1998; Revised and submitted October 25, 1999; and Adopted 
revisions submitted October 21, 2013.
     Revisions to 30 TAC Section 116.750--Flexible Permit Fee--
submitted November 29, 1994; Revised and submitted July 22, 1998; 
Revised and submitted September 11, 2000; Revised and submitted October 
4, 2002; and Adopted revisions submitted October 21, 2013.
     Revisions to 30 TAC Section 116.760 Flexible Permit 
Renewal--submitted November 29, 1994.
     Revisions to 30 TAC Section 116.765--Compliance Schedule--
submitted October 21, 2013.
    Those regulatory sections that were identified as being withdrawn 
by the TCEQ in the October 21, 2013, submittal and identified in the 
cover letter to the package are also identified below:
     30 TAC Section 116.711(3) (last sentence only) and (11), 
as amended August 21, 2002, and all earlier versions withdrawn October 
21, 2013.
     Adopted revisions submitted October 21, 2013. 30 TAC 
Section 116.715(a), only with regard to the text ``or Subchapter C of 
this chapter (relating to Hazardous Air Pollutants: Regulations 
Governing Constructed or Reconstructed Major Sources (FCAA Section 
112(g), 40 CFR Part 63))'', as amended August 21, 2002, and all earlier 
versions withdrawn on October 21, 2013.
     30 TAC Section 116.715(c)(6) as amended August 20, 2003, 
and all earlier versions withdrawn October 21, 2013. 30 TAC Section 
116.716(a) and (d), as adopted November 16, 1994, withdrawn October 21, 
2013.

[[Page 8387]]

     30 TAC Section 116.730 adopted November 16, 1994, and 
repealed and readopted June 17, 1998.
     30 TAC Section 116.740(b), adopted June 17, 1998, and 
amended September 2, 1999, withdrawn October 21, 2013. 30 TAC Section 
116.803, adopted August 21, 2002, withdrawn October 21, 2013.
    If the conditional approval of the Texas Flexible Permit Program is 
finalized following EPA's review of comments received and the TCEQ 
satisfies the terms of the commitment letter, the TCEQ will then submit 
a SIP revision to the EPA for review which must contain all the terms 
of the commitment letter. If the EPA determines that the TCEQ has met 
all the conditions, we will make such a finding in the Federal 
Register.

VI. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP 
submission that complies with the provisions of the CAA and applicable 
Federal regulations. See, 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in 
reviewing SIP submissions, 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 Executive Order 
12866 (58 FR 51735, October 4, 1993);
     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, this rule does not have tribal implications as 
specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the state, and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide, 
Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate 
matter, Reporting and recordkeeping requirements, Sulfur oxides, 
Volatile organic compounds and Incorporation by reference.

    Authority:  42 U.S.C. 7401 et seq.

    Dated: January 29, 2014.
Ron Curry,
Regional Administrator, Region 6.
[FR Doc. 2014-03119 Filed 2-11-14; 8:45 am]
BILLING CODE 6560-50-P