2010-14653. Audit Program for Texas Flexible Permit Holders

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Notice of Clean Air Act voluntary compliance audit program for flexible permit holders in the State of Texas; request for public comment.

SUMMARY:

EPA is offering holders of Texas flexible air permits an opportunity to participate in a voluntary compliance audit program (hereinafter “Audit Program”) that is intended to expeditiously identify the Federally-enforceable Clean Air Act (CAA) unit specific emission limitations, operating parameter requirements, and monitoring, reporting, and recordkeeping (MMR) requirements for determining compliance for all units covered by a facility's flexible permit. EPA believes that the program will generate environmental benefits for the public in Texas as well as a measure of regulatory stability for holders of Texas flexible permits. EPA is requesting informal comment on the Audit Program. EPA will respond generally to comments received and reserves its right to make modifications to implementation of the Audit Program at its discretion, as warranted.

DATES:

All comments should be submitted by July 2, 2010. Executed audit agreements may be submitted no later than October 15, 2010.

ADDRESSES:

Submit comments on the Audit Program, identified by Docket ID No. EPA-R06-OAR-2010-0510, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the on-line instructions for submitting comments.
• U.S. EPA Region 6 “Contact Us” Web site: http://epa.gov/​region6/​r6coment.htm. Please click on “6EN” (Enforcement) and select “CAA Enforcement” before submitting comments.
• E-mail: Mr. John Jones at [e-mail].
• Fax.: Mr. John Jones, Air Enforcement Section (6EN-AA), at fax number [phone].
• Mail: Mr. John Jones, Air Enforcement Section (6EN-AA), Environmental Protection Agency, 1445 Ross Avenue, Suite 1200, Dallas, Texas 75202-2733.
• Hand or Courier Delivery: Mr. John Jones, Air Enforcement Section (6EN-AA), Environmental Protection Agency, 1445 Ross Avenue, Suite 1200, Dallas, Texas 75202-2733. Such deliveries are accepted only between the hours of 8:00 a.m. and 4:00 p.m. weekdays, except for legal holidays.

Instructions: Direct comments to Docket ID No. EPA-R06-OAR-2010-0510.

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 comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your submittal. In an effort to consolidate comments received, EPA prefers that information be submitted via http://www.regulations.gov. If you send a submittal by e-mail directly to EPA without going through http://www.regulations.gov,, your e-mail address will be automatically captured and included as part of the submittal that is placed in the public docket and made available on the Internet. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket, visit the EPA Docket Center homepage at http://www.epa.gov/​epahome/​dockets.htm.

Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically at http://www.regulations.gov or in hard copy at the Air Enforcement Section (6EN-AA), Environmental Protection Agency, 1445 Ross Avenue, Suite 700, Dallas, Texas 75202-2733. The file will be made available by appointment for public inspection in the Region 6 FOIA Review Room between the hours of 8:30 a.m. and 4:30 p.m. weekdays except for legal holidays. Contact the person listed in the paragraph below to make an appointment. If possible, please make the appointment at least two working days in advance of your visit. There will be a 15 cent per page fee for making photocopies of documents. On the day of the visit, please check in at the EPA Region 6 reception area at 1445 Ross Avenue, Suite 700, Dallas, Texas, 75202-2733.

FOR FURTHER INFORMATION CONTACT:

For information on the Audit Program for Texas flexible permit holders, please contact Mr. John Jones, Air Enforcement Section (6EN-AA), Environmental Protection Agency, Region 6, 1445 Ross Avenue, Suite 700, Dallas, Texas 75202-2733, telephone [phone]; fax number [phone]; e-mail address [e-mail].

SUPPLEMENTARY INFORMATION:

Audit Program Overview

Texas flexible permits have never been incorporated into the Federally approved State Implementation Plan (“SIP”), and thus, only contain applicable State permit requirements. Flexible permits are not the appropriate mechanisms for embodying Federal requirements, and are not independently Federally-enforceable. On September 25, 2007, EPA sent notice letters to all facilities that were issued a flexible permit informing them that flexible permits were pertinent only to Texas State air permit requirements and that facilities were “obligated to comply with the Federal requirements applicable to (their) plant, in addition to any particular requirements of (their) flexible permit.” Moreover, on September 23, 2009, EPA proposed the disapproval of the Texas flexible permit program as an amendment to the Texas SIP because it does not meet Federal Nonattainment New Source Review or Prevention of Significant Deterioration (hereafter collectively referred to as “NSR”) requirements. EPA followed that proposal with several objections to Title V permits that relied on flexible permits to encompass Federal NSR requirements because the terms of the Texas flexible permit are not incorporated into the Federally approved Texas SIP.

Under the Audit Program, participants would need to commission a comprehensive third-party audit to determine all Federally applicable unit-specific limitations and requirements and to evaluate the Federal CAA compliance status of emission units covered under the facility's Texas flexible permit.

The third-party auditor would identify for each emission unit regulated under the source's flexible permit all current Federally applicable CAA requirements, including: (1) Emission limitations/standards; (2) operational limitations/special conditions; (3) MRR requirements; and (4) specific references for all Federal requirements identified (e.g., permit number, specific Maximum Achievable Control Technology, State Implementation Plan citation). The auditor will also need to review and assess the adequacy of the current flexible permit MRR requirements to evaluate compliance with Federally enforceable unit-specific emission limitations. Where deficiencies exist, the auditor will provide recommendations for more effective or supplemental MRR.

To the extent that it is determined that a source is not in compliance with NSR requirements with respect to a particular emission unit, the auditor will include an evaluation of the current (2010) Lowest Achievable Emissions Rate or Best Available Control Technology (hereinafter collectively referred to as “LAER/BACT”) for that emissions unit and will recommend an applicable LAER/BACT limit for that emissions unit. Identification of non-compliance with NSR requirements through the Audit Program may require further discussion with EPA regarding a path forward for bringing that emission unit into permanent, consistent compliance with the CAA and appropriate resolution of civil penalties.

The primary deliverable from the third-party audit will be a detailed audit report that describes the audit process and its conclusions, including clearly organized summary tables of all applicable CAA requirements for each emissions unit that will provide the basis for necessary permitting revisions by the Texas Commission on Environmental Quality (TCEQ). In addition to identifying all applicable unit specific emission limitations, special conditions, operating parameters, and MMR requirements, the auditor will evaluate the CAA compliance status of the emissions units included under the Texas flexible permit.

The audit participant will then have an opportunity to comment on the results of the third-party audit, and to propose to EPA alternative emission unit requirements. The parties may elect to negotiate emission unit requirements in the post-audit period.

The emission unit requirements agreed upon during the post-audit negotiation with EPA would be memorialized in a Consent Agreement and Final Order (“CAFO”) with EPA. The CAFO would set forth the agreed upon emission unit requirements and would require their inclusion in an amended Title V permit and appropriate Federally-enforceable non-Title V permits (e.g., NSR, Texas SIP permits).

As part of the Audit Program, the audit participant will also agree to work with its surrounding community to develop community project(s) focused on improving, protecting, mitigating, and/or reducing community risks to public health or the environment that could have been caused by potential violations by the audit participant. The details of the community projects will be fully described in the CAFO memorializing the results of the audit.

Participation in the Audit Program is purely voluntary, and this is not a rulemaking by the Agency. Interested parties are required to submit an executed audit agreement to enroll in this program. Participants choosing to enroll in the Audit Program will be required to meet the specific requirements of the third-party audit set forth in this Notice and memorialized in an audit agreement signed by the audit participant and EPA. It is important to emphasize that although participation in this Audit Program is voluntary, participants who successfully complete the program will receive appropriate covenants in resolution of non-compliance.

Persons who have not secured independently Federally-enforceable construction and/or operating permits for all CAA applicable requirements, through participation in this program or through other appropriate mechanisms, may be the subject of Federal enforcement action. Nothing in this notice should be read to preclude EPA from taking enforcement action where it determines such action is appropriate to address non-compliance.

Texas Flexible Permit Program History

In the period from 1996 through 2002, the State of Texas proposed a series of modifications to its Federal CAA SIP intended to make its flexible permit program part of the SIP. The flexible permit program, currently codified at 30 TAC 116.710, allows groups of emission sources to be clustered together and issued permit limitations as if they were a single emission source.

EPA has never approved the Texas flexible permit program for inclusion in the SIP. On September 25, 2007, EPA issued a letter to all flexible permit holders making the following points:

• Permits issued under the Texas flexible permit rules reflect Texas State requirements and not necessarily the Federally-applicable requirements.
• Texas flexible permit holders are obligated to comply with the applicable Federal requirements (e.g., New Source Performance Standards (NSPS), National Emission Standards for Hazardous Air Pollutants (NESHAP), Prevention of Significant Deterioration (PSD), and Non-attainment New Source Review (NNSR), terms and conditions of permits approved under the Federally approved Texas SIP).
• EPA would consider enforcement against sources for failure to comply with applicable Federal requirements on a case-by-case basis, including against emission sources that were modified or constructed without the issuance of a Federally-enforceable permit.

As of the date of this notice, EPA has yet to issue a final approval or disapproval of the Texas flexible permit program. Nonetheless, we offer the Audit Program at this time as a vehicle for flexible permit holders wishing to proactively address the status of emission units operating under the Texas flexible permit program. The Audit Program is entirely voluntary and does not pre-judge the ongoing EPA review of the Texas flexible permit program.

Audit Program Implementation

Participants in the Audit Program shall conduct an independent third-party audit of all emission units covered by the source's Texas flexible permit to identify each emission unit's CAA compliance status, and to identify/re-establish all of an emission unit's Federally applicable requirements as discussed under the Audit Program Overview. The final CAFO will require that the facility submit applications for Title V and appropriate Federally-enforceable non-Title V permits to the State of Texas in order to memorialize the requirements derived from the audit process for each emission unit.

The Audit Program shall be implemented in the following steps:

(1) Submittal of an executed audit agreement by the audit participant. This agreement will memorialize the specific requirements of the independent third-party audit, as well as the company's commitment to work with its community to develop a community project(s). EPA will have 15 days to object to the third-party auditor selected by an audit participant. Any EPA objections shall be based on concerns regarding the independence of the auditor. Executed audit agreements under the Audit Program will be received for a period of 120 days after publication in the Federal Register.

(2) Audit participant and community development of significant community project(s). During the performance of the audit, the audit participant shall work with the community surrounding the facility to develop community projects(s). Within 180 days of signing the audit agreement, the audit participant will submit to EPA a final community project proposal for approval. The community project proposal shall include a detailed description of the project(s) and a schedule for project(s) implementation (projects must be completed within one year of the CAFO date), a clear discussion of air nexus, and a discussion of the community involvement and outreach conducted as the project was developed.

(3) Completion of audit report. No later than, 160 days after the effective date of the audit agreement, the independent third-party auditor shall submit an audit report to the audit participant and EPA. This report will include an analysis of the CAA compliance status of all emission units covered by the audit participant's Texas flexible permit as well as a table containing all of the applicable emission unit requirements for each unit. For the purpose of providing transparency to the community on the audit process, the Auditor will work with the audit participant to prepare a version of the audit report with any CBI removed. The non-CBI versions of the audit reports will be made available to the public by EPA.

(4) Audit participant's comments regarding the audit report. Not later than 250 days after the effective date of the audit agreement, the audit participant shall submit its comments, if any, regarding the audit report to EPA. The audit participant may specifically address its concerns regarding the CAA compliance determinations and the emission unit requirements identified in the audit report. For purposes of providing transparency to the community on the audit process, the audit participant will also prepare a version of the comments on the audit report with any CBI removed. The audit participant's comments regarding the audit reports will be made available to the public by EPA.

(5) Resolution of NSR non-compliance. One of the major objectives of the third-party auditor will be the evaluation of the changes and modifications made during the period of the Texas flexible permit for compliance with applicable Federal NSR requirements. Identification of non-compliance with the NSR program may require the installation of LAER/BACT and will require further discussion with EPA regarding a path forward for bringing non-compliant emission units into permanent, consistent compliance and appropriate resolution of civil penalties.

(6) Filing of a Consent Agreement and Final Order (CAFO) with the Region 6 Judicial Officer. The CAFO would memorialize the audit participant's commitment to seek the inclusion of agreed upon emission unit requirements in its Title V permit and appropriate Federally-enforceable non-Title V permits. No later than 30 days after the effective date of the CAFO, the audit participant will apply to the appropriate permitting authority for a modification of its existing Title V permit to include emission unit requirements (as defined in the model audit agreement below), a compliance plan, a compliance certification, and, if warranted, a compliance schedule as outlined in 30 TAC 122 § 132(e)(4). In addition, the audit participant shall apply for modifications or for new non-Title V permits memorializing the emission unit requirements set forth in the CAFO. The resolution of emission unit requirements for some flexible permit emission units, but not all, will not be allowed under this program. For agreeing to evaluate and address (where necessary) non-compliance at all emission units covered by its flexible permit, a source will receive a covenant-not-to-sue regarding civil liability for possible past violations of the CAA provided that CAA compliant emission unit specific requirements are incorporate into a Federally-enforceable permit. The audit participant may be subject to civil penalties where it is determined that there was non-compliance with NSR.

The proposed CAFO shall be made available for public comment for a period of 30 days. EPA will consider any public comments, and as appropriate seek to work with the audit participant to revise the CAFO based on such public comments. After the end of the CAFO public comment period and after any revisions are made, EPA will seek finalization of the CAFO by the Region 6 Judicial Officer. The Agency reserves its right to modify the CAFO. The offering of the CAFO for public comment does not explicitly create an obligation for EPA response or inclusion of such comments in the final CAFO or elsewhere, nor does this create any rights for public objection to the final CAFO.

The required text of the audit agreement is available for download in either a Word version file or as a portable document format (pdf) file at http://www.regulations.gov. The text of the audit agreement is not subject to negotiation. However, EPA may refine the text of the audit agreement upon receiving feedback during public comment and provide an updated agreement in the docket within 45 days following the close of public comment. Entities wishing to participate shall submit: An executed copy of the audit agreement with specific site details filled into the provided blanks; a list of emission units covered under its Texas flexible permit; a copy of its current Texas flexible permit, and all permits that applied to the facility prior to the issuance of the Texas flexible permit.

Conclusion: The above represents a short summary of the Audit Program. The Texas Flexible Permit Audit Agreement is available in the public docket for this notice at http://www.regulations.gov,, and represents the full requirements of the program.

EPA is proposing the Audit Program to ensure that Texas flexible permit holders have a path forward to secure compliance with the requirements of the CAA. As EPA has stated that Texas flexible permits are not independently Federally-enforceable permits, industry representatives have expressed concern regarding the legal ramifications of operating facilities and making facility changes at facilities that do not have independently Federally-enforceable permits. Representatives of citizens living in areas near facilities regulated under flexible permits are concerned that in some instances flexible permits allow facilities to emit more harmful pollution than would be allowed under Federal law. We believe the Audit Program has the potential to result in beneficial reductions in the levels of air pollutants being emitted by flexible permit holders as well as providing industry a regulatory framework for continuing operations until independently Federally-enforceable permitting authorizations can be obtained.

Dated: June 10, 2010.

Al Armendariz,

Regional Administrator, Region 6.