Waid Summary - Bill 1126

Qualified Facility Flexibility Under Senate Bill 1126

Senate Bill 1126 (SB 1126) was passed during the 1995 legislative session to give existing facilities additional operational flexibility. This bill changed the definition of "modification of existing facility" in Section 382.003(9) of the Texas Clean Air Act and also changed the criteria in Section 382.0512 that determine whether a change is considered to be a modification. The TCEQ has amended Regulation VI (30 TAC 116) to implement these statutory changes and has recently published a guidance document that provides additional interpretations and guidance on the SB 1126 provisions and the implementing regulations. This memo gives background on SB 1126 and the implementing regulations, explains how the provisions of the bill can be used to provide operational flexibility, and notes limitations on its use.

Revised Definition of Modification:

SB 1126 amended the definition of "modification of existing facility" to allow three additional exemptions:

1. A physical change or change in the method of operation of a facility that does not result in a net increase in allowable emissions or in the emission of an air contaminant not previously emitted, as long as the facility qualifies for this flexibility by its use of BACT
2. A physical or operational change made within the scope of a flexible permit
3. An operational change at a grandfathered natural gas processing, treating, or compression facility as long as emissions are not higher than they would be at maximum design capacity of the facility.
4. This memo will focus on the first of these three new exemptions. This exemption is referred to as qualified facility flexibility.

Qualified Facility Flexibility:

In order to be eligible to use the qualified facility flexibility, the facility must have received a permit or permit amendment within 120 months prior to a change, been constructed under standard exemption within 120 months prior to a change, or use air pollution controls that are at least as effective as the controls that would have been required as BACT if the facility had been permitted 120 months before the change. Air pollution controls may be added to a facility to make it eligible to use the qualified facility flexibility, but the controls added must be equivalent to current BACT, not what BACT would have been 120 months prior to the change, unless the controls are added for reasons other than to qualify the facility (for example, to meet RACT requirements).

A qualified facility may make physical or operational changes without obtaining a permit or other authorization from the TCEQ if the change will not result in a net increase in allowable emissions or in the emission of an air contaminant not previously emitted. In determining whether a net increase in allowable emissions has occurred, the facility may consider the reduction in emissions from the application of air pollution controls to the facility undergoing the change. Previously, in determining whether a change was a modification, the effect of air pollution control equipment on emissions could not be considered.

The facility may also avoid a net emission increase by decreasing emissions from other qualified facilities at the plant site. These emission trades are known as intraplant trades. For example, if a change is desired at Qualified Facility A that would increase emissions, the source can avoid the need to obtain a permit to authorize the change by adding additional controls to decrease emissions at Qualified Facility B.

A qualified facility may also increase emissions of a compound by decreasing emissions of another compound in the same air contaminant category. This type of trade is known as an interchange. In making such interchanges, the compounds being interchanged must belong to the same air contaminant category (e.g. VOC, PM, nitrogen oxides, or sulfur compounds) and there must be no net increase in emissions for the air contaminant category. Also, the decrease in emissions of the other compound must be adjusted by the ratio of the effects screening levels (ESL) of the two compounds to ensure that the environmental effects of the interchange are relatively equivalent. For example, a facility using a solvent containing hexane and toluene could increase emissions of hexane (ESL 1760) as long as toluene (ESL 1880) emissions are reduced by a corresponding amount. The amount of reduction of toluene that must be achieved to offset an increase in hexane emissions of 1 lb/hr would be
(1 lb/hr)(1880/1760) = 1.07 lb/hr

Reporting Requirements:

Although use of SB 1126 does not require authorization or approval by TCEQ, Regulation VI specifies recordkeeping and reporting requirements for such changes. Depending on the status of the facilities to which changes are made and the type of changes made, the facility may be required to undergo pre-change qualification, pre-change notification, post-change notification, or annual reporting. The TCEQ has developed a new form, PI-E (Notification of Changes to Qualified Facilities), for use in reporting.

Pre-change Qualification:

Pre-change qualification is required if the facility is qualified by the use of BACT but the specific control method has not yet been approved by the TCEQ as qualifying BACT. Appendix A of the guidance document includes a compilation of 1986 BACT (for changes to be made in 1996, the facility must use controls that would have been BACT in 1986). Pre-change qualification is also required if the facility does not have established allowable emissions for an air contaminant relevant to the change documented in a MAERT, Form PI-8, or previously submitted Form PI-E. The pre-change qualification must be submitted to the TCEQ 45 days prior to the change. The facility will be qualified after receipt of written notification from the TCEQ that there are no objections or 45 days after the TCEQ has received the PI-E, whichever occurs first.

Pre-change Notification:

Pre-change notification is required if the change involves intraplant trading that exceeds the reportable limit. This notification must be submitted at least 45 days prior to the change. The reportable limit is determined in one of two ways: by using a normalization factor similar to those used in Standard Exemption Number 118 to account for the effects of moving emissions closer to the property line, or by using plant-wide modeling to predict off-site emissions of the pollutants involved in the trade. If the modeling predicts impacts that exceed twice the ESL for the compound involved in the change, pre-change notification is required. Pre-change notification is also required if the MAERT lists only emissions from the air contaminant category and not the individual compounds that are involved in the change (in the example above, limit on VOC but not on hexane or toluene).

Post-change Notification:

Post-change notification is required for changes involving intraplant trades that are within the reportable limit. This notification must be made within 30 days after the change has been made.

Notification of Changes That Affect Permit Special Conditions:

Notification of changes that affect permit special conditions must be made for changes that would result in the violation of a permit special condition. In these cases, the permit must be changed through the alteration process or the notification process.

Annual Reports:

Annual reports are required for changes that do not involve any of the qualification or pre- or post-change notification. A separate PI-E form must be submitted for each change that has been made and not previously reported.

Limitations on the Use of SB 1126:

Facilities that plan to use the flexibility provided by the provisions of SB 1126 must be aware of the limitations on its use. The qualified facility flexibility cannot be used to authorize construction of a new facility. As defined in Section 382.003(6) of the Texas Clean Air Act, the critical characteristic of a facility is that it creates emissions of an air contaminant. For example, SB 1126 could not be used to authorize construction of a new storage tank at an existing plant site, even if its emissions are routed to an existing control device. Also, the provisions of SB 1126 cannot be used to authorize emission of a new air contaminant.

SB 1126 applies only to the Texas "minor new source review" program; it does not supersede federal requirements such as nonattainment or PSD review or other state regulations such as Regulation V. Also, review by the TCEQ of changes made under SB1126 does not constitute approval or disapproval of the changes made. The applicant is responsible to make sure that the change complies with all applicable rules and regulations. Any changes made that are later determined not to meet all applicable requirements for qualified facility flexibility may result in enforcement action.

SB 1126 can be a useful tool to provide additional operational flexibility for existing sources, but any changes made under it must satisfy all of the relevant requirements.

A back-up contact is Doug Price, P.E. email Doug Price.