[Federal Register: April 14, 2010 (Volume 75, Number 71)]
[Rules and Regulations]
[Page 19467-19493]
[DOCID:fr14ap10-22]

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Part II

Environmental Protection Agency

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40 CFR Part 52

Approval and Promulgation of Implementation Plans; Texas; Revisions to
the New Source Review (NSR) State Implementation Plan (SIP);
Modification of Existing Qualified Facilities Program and General
Definitions; Final Rule

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R06-OAR-2005-TX-0025; FRL-9135-7]

Approval and Promulgation of Implementation Plans; Texas;
Revisions to the New Source Review (NSR) State Implementation Plan
(SIP); Modification of Existing Qualified Facilities Program and
General Definitions

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final Rule.

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SUMMARY: EPA is taking final action to disapprove revisions to the SIP
submitted by the State of Texas that relate to the Modification of
Existing Qualified Facilities (the Qualified Facilities Program or the
Program). EPA is disapproving the Texas Qualified Facilities Program
because it does not meet the Minor NSR SIP requirements nor does it
meet the NSR SIP requirements for a substitute Major NSR SIP revision.
    EPA is also approving three definitions that are severable from the
Qualified Facilities submittals. These three definitions we are
approving are, ``grandfathered facility,'' ``maximum allowable emission
rate table (MAERT),'' and ``new facility.'' Moreover, we are making an
administrative correction to the SIP-approved definition of
``facility.''
    We are taking this action under section 110, part C, and part D of
the Federal Clean Air Act (the Act or CAA).

DATES: This rule is effective on May 14, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-R06-OAR-2005-TX-0025. All documents in the docket are listed on
the http://www.regulations.gov Web site. Although listed in the index,
some information is not publicly available, e.g., confidential business
information or other information whose disclosure is restricted by
statute. Certain other material, such as copyrighted material, is not
placed on the Internet and will be publicly available only in hard copy
form. Publicly available docket materials are available either
electronically through http://www.regulations.gov or in hard copy at
the Air Permits Section (6PD-R), 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 FOR FURTHER
INFORMATION CONTACT 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.
    The State submittal, which is part of the EPA record, is also
available for public inspection at the State Air Agency listed below
during official business hours by appointment: Texas Commission on
Environmental Quality, Office of Air Quality, 12124 Park 35 Circle,
Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: Mr. Stanley M. Spruiell, Air Permits
Section (6PD-R), Environmental Protection Agency, Region 6, 1445 Ross
Avenue, Suite 700, Dallas, Texas 75202-2733, telephone<PHONE_NUMBER>;
fax number<PHONE_NUMBER>; e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document, the following
terms have the meanings described below:
     ``we,'' ``us,'' and ``our'' refer to EPA.
     ``Act'' or ``CAA'' means Federal Clean Air Act.
     ``40 CFR'' means Title 40 of the Code of Federal
Regulations--Protection of Environment.
     ``SIP'' means State Implementation Plan as established
under section 110 of the Act.
     ``NSR'' means new source review, a phrase intended to
encompass the statutory and regulatory programs that regulate the
construction and modification of stationary sources as provided under
CAA section 110(a)(2)(C), CAA Title I, parts C and D, and 40 CFR 51.160
through 51.166.
     ``Minor NSR'' means NSR established under section 110 of
the Act and 40 CFR 51.160.
     ``Major NSR'' means any new or modified source that is
subject to NNSR and/or PSD.
     ``NNSR'' means nonattainment NSR established under Title
I, section 110 and part D of the Act and 40 CFR 51.165.
     ``PSD'' means prevention of significant deterioration of
air quality established under Title I, section 110 and part C of the
Act and 40 CFR 51.166.
     ``Program'' means the SIP revision submittals from the
TCEQ concerning the Texas Qualified Facilities Program.
     ``NAAQS'' means any national ambient air quality standard
established under 40 CFR part 50.

Table of Contents

I. What Action Is EPA Taking?
II. What Submittals Is EPA Taking No Action On?
    A. Subparagraph (F) under the definition of ``federally
enforceable''
    B. Definition of ``best available control technology (BACT)''
    C. Subparagraphs (A) and (B) of the submitted definition of
``modification of existing facility''
    D. Subparagraph (G) of the submitted definition of
``modification of existing facility''
    E. Trading Provision in 30 TAC 116.116(f)
III. What Is the Background for This Action?
    A. Summary of Our Proposed Action
    B. Summary of the Submittals Addressed in this Final Action
    C. Other Relevant Actions on the Texas Permitting SIP Revision
Submittals
IV. What Are the Grounds for This Disapproval Action of the Texas
Qualified Facilities Program?
    A. Why the Qualified Facilities Program Submittal Is Unclear
Whether It Is for a Major or Minor NSR SIP Revision
    B. Why the Submitted Texas Qualified Facilities Program Is Not
Approvable as a Substitute Major NSR SIP Revision
    C. Why the Submitted Texas Qualified Facilities Program Is Not
Approvable as a Minor NSR SIP Revision
    D. Definition of ``facility''
V. Response to Comments
    A. General Comments
    B. Comment That This Action Is Inconsistent With the CAA
    C. Comments Addressing Whether the Qualified Facilities Rules
Allow Sources to ``Net Out'' of Major and Minor NSR Through Rules
that Are Not Adequate To Protect the NAAQS and State Control
Strategies
    D. Comments Addressing Whether the Qualified Facilities Rules
Are Practically Enforceable
    E. Comments Addressing Whether the Qualified Facilities Rules
Meet Federal Requirements for Major NSR
    F. Comments Addressing Whether the Qualified Facilities Rules
Meet Federal Requirements for Minor NSR
    G. Comments Addressing Whether Existing Qualified Facilities
Have Undergone an Air Quality Analysis
    H. Comments on the Definitions of ``Grandfathered Facility,''
``Maximum Allowable Emission Rate Table,'' and ``New Facility''
    I. Comments on the Definitions of ``Actual Emissions,''
``Allowable Emissions,'' ``Modification of Existing Facility'' at
(E), and ``Qualified Facility''
    J. Comments on the Definition of ``Best Available Control
Technology'' (``BACT'')
    K. Comments on Severable Portions of the Definition of
``Modification of Existing Facility'' at 30 TAC 116.10(11)(A) and
(B)
    L. Comments on the Definition of Severable Subsection of
``Modification of

Existing Facility'' at 30 TAC 116.10(11)(G)
    M. Comments on the Reinstatement of the Previously Approved
Definition of ``Facility''
    N. Comments on the Definition of the Term ``Air Quality Account
Number''
    O. Comments on Whether the Qualified Facilities Rules Meet NSR
Public Participation Requirements
VI. Final Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Taking?

    EPA is taking final action to disapprove the Texas Qualified
Facilities Program, as submitted by Texas on March 13, 1996, and July
22, 1998, in Title 30 of the Texas Administrative Code (30 TAC) at 30
TAC Chapter 116--Control of Air Pollution by Permits for New
Construction or Modification. This includes the following regulations
under Chapter 116: 30 TAC 116.116(e), 30 TAC 116.117, 30 TAC 116.118,
and the following definitions under 30 TAC 116.10--General Definitions:
30 TAC 116.10(1)--definition of ``actual emissions,'' 30 TAC
116.10(2)--definition of ``allowable emissions,'' 30 TAC 116.10(11)(E)
under the definition of ``modification of existing facility,'' and 30
TAC 116.10(16)--definition of ``qualified facility.'' These regulations
and definitions do not meet the requirements of the Act and EPA's NSR
regulations. It is EPA's position that none of these identified
elements for the submitted Qualified Facilities Program is severable
from each other.
    Secondly, in an action separate from the above action on the
submitted Texas Qualified Facilities Program, we are approving the
following severable definitions: 30 TAC 116.10(8)--definition of
``grandfathered facility,'' 30 TAC 116.10(10)--definition of ``maximum
allowable emission rate table (MAERT),'' and 30 TAC 116.10(12)--
definition of ``new facility.'' It is EPA's position that these
definitions are severable from those in the submitted Texas Qualified
Facilities Program; moreover, each is severable from each other.
    EPA proposed the above actions on September 23, 2009 (74 FR 48450).
We accepted comments from the public on this proposal from September
23, 2009, until November 23, 2009. A summary of the comments received
and our evaluation thereof is discussed in section V below. In the
proposal and in the Technical Support Document (TSD), we described our
basis for the actions identified above. The reader should refer to the
proposal, the TSD, section IV of this preamble, and the Response to
Comments in section V of this preamble for additional information
relating to our final action.
    We are disapproving the submitted Texas Qualified Facilities
Program as not meeting the requirements for a substitute Major NSR SIP
revision. Our grounds for disapproval as a substitute Major NSR SIP
revision include the following:
     It is not clearly limited to Minor NSR thereby allowing
major modifications to occur without a Major NSR permit;
     It has no regulatory provisions clearly prohibiting the
use of this Program from circumventing the Major NSR SIP requirements
thereby allowing changes at existing facilities to avoid the
requirement to obtain preconstruction permit authorizations for
projects that would otherwise require a Major NSR preconstruction
permit;
     It does not require that first an applicability
determination be made whether the modification is subject to Major NSR
thereby exempting new major stationary sources and major modifications
from the EPA Major NSR SIP requirements;
     It does not include a demonstration from the TCEQ, as
required by 40 CFR 51.166(a)(7)(iv), showing how the use of
``modification'' is at least as stringent as the definition of
``modification'' in the EPA Major NSR SIP program
     It does not include the requirement to make Major NSR
applicability determinations based on actual emissions and on emissions
increases and decreases (netting) that occur within a major stationary
source;
     It fails to meet the statutory and regulatory requirements
for a SIP revision;
     It is not consistent with applicable statutory and
regulatory requirements as interpreted in EPA policy and guidance on
SIP revisions; and
     EPA lacks sufficient available information to determine
that the requested relaxation to the Texas Major NSR SIP will not
interfere with any applicable requirement concerning attainment and
reasonable further progress (RFP), or any other applicable requirement
of the Act.
    In addition to the failures to protect Major NSR SIP requirements,
EPA cannot find that the submitted Program, as an exemption to the
State's Minor NSR SIP program, will ensure noninterference with NAAQS
attainment, and there will not be a violation of applicable portions of
a Texas SIP control strategy, as required by section 110(a)(2)(D) and
40 CFR 51.160(a)-(b). EPA cannot approve the exempting of certain
modifications from obtaining a Minor NSR SIP permit as part of the
Texas Minor NSR SIP because the Act and EPA regulations are not met and
the State has not shown that the sources will have only a de minimis
effect. The Program fails to include legally enforceable procedures to
ensure that the State will not permit a modification that will violate
the control strategies or interfere with NAAQS attainment. Our grounds
for disapproval as a Minor NSR SIP revision include the following:
     It is not clearly limited to Minor NSR thereby allowing
major modifications to occur without a Major NSR permit;
     It has no regulatory provisions clearly prohibiting the
use of this Program from circumventing the Major NSR SIP requirements
thereby allowing sources to avoid the requirement to obtain
preconstruction permit authorizations for projects that would otherwise
require a Major NSR preconstruction permit;
     It does not require that first an applicability
determination be made whether the modification is subject to Major NSR
thereby exempting new major stationary sources and major modifications
from the EPA Major NSR SIP requirements;
     It fails to meet the statutory and regulatory requirements
for a SIP revision;
     It is not consistent with applicable statutory and
regulatory requirements as interpreted in EPA policy and guidance on
SIP revisions;
     It is not an enforceable Minor NSR permitting program;
     It lacks legally enforceable safeguards to ensure that the
exempted changes will not violate a Texas control strategy and will not
interfere with NAAQS attainment;
     EPA lacks sufficient available information to determine
that the requested relaxation to the Texas Minor NSR SIP will not
interfere with any applicable requirement concerning attainment and
RFP, or any other applicable requirement of the Act.
    The provisions in these submittals relating to the Texas Qualified
Facilities State Program that include the Chapter 116 regulatory
provisions and the nonseverable definitions in the General Definitions
were not submitted to meet a mandatory requirement of the Act.
Therefore, this final action to disapprove the submitted Texas
Qualified Facilities State Program does not trigger a sanctions or
Federal Implementation Plan clock. See CAA section 179(a).

II. What Submittals Is EPA Taking No Action On?

A. Subparagraph (F) Under the Definition of ``Federally Enforceable''

    On September 18, 2002 (67 FR 58697), EPA approved the definition of
``federally enforceable'' in 30 TAC 116.10(7), introductory paragraph
and subparagraphs (A) through (E), as submitted July 22, 1998. We
proposed to take no action on the submitted severable new subparagraph
(F) under the SIP-approved definition of ``federally enforceable,''
submitted September 11, 2000, because it is outside the scope of the
SIP. See 74 FR 48450, at 48466. EPA is not finalizing action today on
the proposal concerning the submitted 30 TAC 116.10(7)(F). This
subparagraph (F) is severable from the final rulemaking on the
Qualified Facilities Program

B. Definition of ``Best Available Control Technology (BACT)''

    On September 23, 2009, EPA proposed to disapprove the definition
``best available control technology (BACT)'' under 30 TAC 1161.10(3).
74 FR 48450, at 48463-48464. EPA is still reviewing approvability of
this definition; therefore, we are not taking final action on the
proposal today. This definition is severable from the final rulemaking
on the Qualified Facilities Program. We will take final action on the
definition of BACT when we take action on Texas's submission concerning
NSR Reform (Rule Project Number 2005-010-116-PR), which also addresses
BACT. See 74 FR 48450, at 48472.\1\ Under the Consent Decree entered on
January 21, 2010 in BCCA Appeal Group v. EPA, Case No. 3:08-cv-01491-N
(N.D. Tex), EPA's final action concerning NSR Reform will be finalized
by August 31, 2010.
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    \1\ EPA made this determination in a separate proposed action
published at 74 FR 48467, September 23, 2009. This proposal relates
to Prevention of Significant Deterioration (PSD), Nonattainment NSR
(NNSR) for the 1997 8-Hour Ozone Standard, NSR Reform, and a
Standard Permit.
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C. Subparagraphs (A) and (B) of the Submitted Definition of
``Modification of Existing Facility''

    Also, on September 23, 2009, EPA proposed to disapprove 30 TAC
116.10(11) subparagraphs (A) and (B) of the submitted definition of
``modification of existing facility,'' which are severable from the
other submissions addressed in this notice but not severable from each
other. 74 FR 48450, at 48464-48465. EPA is not taking final action
today on the proposed disapproval of these submitted subparagraphs
under the submitted definition of ``modification of existing facility''
at 30 TAC 116.0(11)(A) and (B). We are still reviewing the proposed
disapproval of these subparagraphs 30 TAC 116.10(11)(A) and (B) which
relate to ``insignificant increases.'' These subparagraphs are
severable from this final rulemaking on the Qualified Facilities
Program. We will take final action on 30 TAC 116.10(11)(A) and (B) when
we act on Texas's submission concerning Air Permits (SB 766) Phase II
(Rule Project Number 99029B-116-A1). Under the Settlement Agreement in
BCCA Appeal Group v. EPA, Case No. 3:08-cv-01491-N (N.D. Tex), that
action will be finalized by December 31, 2012. Additionally, we have
received petitions requesting EPA review of the State's implementation
of Texas Commission on Environmental Quality's (TCEQ) permit by rule
(PBR) program under Subchapter K (30 TAC Chapter 106).\2\ EPA intends
to review TCEQ's PBR program and its implementation in response to
those petitions.
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    \2\ Petitions, August 28, 2008, from the Environmental Integrity
Project on behalf of the Galveston-Houston Association for Smog
Prevention, Environmental Integrity Project, Texas Campaign for the
Environment, Sierra Club, and Public Citizen; and January 5, 2009,
supplementing the August 28, 2008, petition (the supplemental
petition added the Environmental Defense Fund as an additional
petitioner).
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D. Subparagraph (G) of the Submitted Definition of ``Modification of
Existing Facility''

    On September 23, 2009, EPA proposed to disapprove the subparagraph
(G) at 30 TAC 116.10(11) of the submitted definition of ``modification
of existing facility.'' See 74 FR 48450, at 48465. EPA is not taking
final action today on the proposed disapproval of the submitted
subparagraph (G) of the definition of ``modification of existing
facility.'' We are still reviewing the proposed disapproval of this
definition. This subparagraph states that changes to certain natural
gas processing, treating, or compression facilities are not
modifications if the change does not result in an annual emissions rate
of any air contaminant in excess of the volume emitted at the maximum
design capacity for grandfathered facilities. This definition is
severable from this rulemaking on the Qualified Facilities Program. See
74 FR 48450, at 48452. We will take final action on 30 TAC
116.10(11)(G) when we act on Texas's submission concerning Air Permits
(SB 766) Phase II (Rule Project Number 99029B-116-A1). Under the
Settlement Agreement in BCCA Appeal Group v. EPA, Case No. 3:08-cv-
01491-N (N.D. Tex), that action will be finalized by December 31, 2012.

E. Trading Provision in 30 TAC 116.116(f)

    EPA proposed to take no action on the submitted portion of 30 TAC
116.116(f) that includes, among other things, a trading provision
containing a cross-reference that is no longer in Texas's rules. See 74
FR 48450, at 48465-48466. EPA is not taking final action today on this
submitted portion because we are still reviewing approvability of the
provision. This portion of the provision is severable from this
rulemaking on the Qualified Facilities Program. We will take final
action on 30 TAC 116.116(f) when we take action on Texas's submission
concerning NSR Rules Revisions; 112(g) Revisions (Rule Project No.
98001-116-AI). Under the Settlement Agreement in BCCA Appeal Group v.
EPA, Case No. 3:08-cv-01491-N (N.D. Tex), that action will be finalized
by October 31, 2011.

III. What Is the Background?

A. Summary of Our Proposed Action

    Also on September 23, 2009 (74 FR 48450), EPA proposed to
disapprove revisions to the SIP submitted by the State of Texas that
relate to the Modification of Qualified Facilities. These affected
provisions include regulatory provisions at 30 TAC 116.116(e) and
definitions of ``actual emissions,'' ``allowable emissions,'' a
nonseverable portion of the definition at subparagraph (E) of
``modification of existing facility,'' and ``qualified facility'' under
Texas's General Definitions in Chapter 116, Control of Air Pollution by
Permits for New Construction or Modification. See 30 TAC 116.10(1),
(2), (11)(E), and (16), respectively. EPA finds that these submitted
provisions and definitions in the submittals affecting the Texas
Qualified Facilities Program are not severable from each other.
    In the September 23, 2009, EPA also proposed to take action on
revisions to the SIP submitted by Texas that relate to the General
Definitions in Chapter 116. EPA proposed to approve three of these
submitted definitions, ``grandfathered facility,'' ``maximum allowable
emissions rate table (MAERT),'' and ``new facility'' at 30 TAC
116.10(8), (10), and (12), respectively. These definitions are
severable from the Qualified Facilities Program.
    EPA proposed to make an administrative correction to the severable
submittal for the SIP-approved

definition of ``facility'' under 30 TAC 116.10(6). Consistent with our
proposal, EPA is finalizing this administrative correction in today's
action. Specifically, EPA corrects a typographical error at 72 FR 49198
(August 28, 2007), to clarify that the definition of ``facility,'' as
codified at 30 TAC 116.10(6), was approved as part of the Texas SIP in
2006 and remains part of the Texas SIP. 74 FR 48450, at 48465.
    See Sections I and IV for further information on EPA's final action
on the above submittals.
    Further, EPA proposed to disapprove the following severable
definitions: (1) the submitted definition of ``best available control
technology (BACT)'' and (2) subparagraphs (A) and (B) of the submitted
definition of ``modification of existing facility,'' which are
severable from the other submissions but not severable from each other,
and (3) subparagraph (G) of the submitted definition of ``modification
of existing facility.'' EPA proposed to take no action on the severable
submitted subparagraph (F) for the SIP-approved severable definition of
``federally enforceable'' under 30 TAC 116.10(7) because the submitted
paragraph relates to a federal program that is implemented separately
from the SIP. In addition, EPA proposed to take no action on the
severable submitted portion of a provision at 30 TAC 116.116(f) that
includes, among other things, a trading provision containing a cross-
reference that no longer is in Texas's rules. See Section II for
further information on why EPA is not taking final action today on
these submittals.

B. Summary of the Submittals Addressed in this Final Action

    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 this action is discussed in Sections IV through VI of this
preamble. The Technical Support Document includes a detailed evaluation
of the submittals.

                     Table 1--Summary of Each SIP Submittal That is Affected by This Action.
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                                                        Submittal
             Section                     Title            dates      Description of change     Proposed action
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30 TAC 116.10...................  General Definitions
30 TAC 116.10(1)................  Definition of          3/13/1996  Added new definition...  Disapproval.
                                   ``actual
                                   emissions''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (1).
30 TAC 116.10(2)................  Definition of          3/13/1996  Added new definition...  Disapproval.
                                   ``allowable
                                   emissions''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (2).
                                                         9/11/2000  Revised paragraphs
                                                                     (2)(A) through (D).
30 TAC 116.10(6)................  Definition of          3/13/1996  Added new definition...  Administrative
                                   ``facility''.                                              correction to
                                                                                clarify the
                                                                                definition of
                                                                                ``facility'' is in
                                                                                the SIP.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (4).
                                                                     Approved 9/6/2006 (71
                                                                     FR 52698).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (6).
                                                                     Inadvertently
                                                                     identified as non-SIP
                                                                     provision in 8/28/2007
                                                                     SIP revision.
30 TAC 116.10(8)................  Definition of          3/13/1996  Added new definition...  Approval.
                                   ``grandfathered
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (6).
                                                         7/31/2002  Revised definition.....
                                                          9/4/2002  Redesignated to
                                                                     paragraph (8).
30 TAC 116.10(10)...............  Definition of          3/13/1996  Added new definition...  Approval.
                                   ``maximum
                                   allowable emission
                                   rate table''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (8).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (10).
30 TAC 116.10(11)...............  Definition of          3/13/1996  Added new definition...  Disapproval of
                                   ``modification of                                          subparagraph (E).
                                   existing
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (9).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (11).
30 TAC 116.10(12)...............  Definition of ``new    3/13/1996  Added new definition...  Approval.
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (10).
                                                         9/04/2002  Redesignated to
                                                                     paragraph (12).
30 TAC 116.10(16)...............  Definition of          3/13/1996  Added new definition...  Disapproval.
                                   ``qualified
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (14).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (16).
30 TAC 116.116..................  Changes to             3/13/1996  Added subsection (e)...  Disapproval.
                                   Facilities.
                                                         7/22/1998  Repealed and a new       Disapproval.
                                                                     116.116(e) submitted.

30 TAC 116.117..................  Documentation and      3/13/1996  Added new section......  Disapproval.
                                   Notification of
                                   Changes to
                                   Qualified
                                   Facilities.
                                                         7/22/1998  Repealed and a new
                                                                     116.117 resubmitted.
30 TAC 116.118..................  Pre-Change             3/13/1996  Added new section......  Disapproval.
                                   Qualification.
                                                         7/22/1998  Repealed and a new
                                                                     116.118 submitted.
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C. Other Proposed Relevant Actions on the Texas Permitting SIP Revision
Submittals

    The Settlement Agreement in BCCA Appeal Group v. EPA, Case No.
3:08-cv-01491-N (N.D. Tex), as amended, currently provides that EPA
will take final action on the State's Public Participation SIP revision
submittal on October 29, 2010. EPA intends to take final action on the
submitted Texas Flexible Permits State Program by June 30, 2010, and
the NSR SIP by August 31, 2010, as provided in the Consent Decree
entered on January 21, 2010 in BCCA Appeal Group v. EPA, Case No. 3:08-
cv-01491-N (N.D. Tex).
    Additionally, EPA acknowledges and appreciates that TCEQ is
developing a proposed rulemaking package to address EPA's concerns with
the current Qualified Facilities rules. We will, of course, consider
any rule changes if and when they are submitted to EPA for review.
However, the rules before us today are those of the current Qualified
Facilities program, and we have concluded that the current program is
not approvable for the reasons set out in this notice.

IV. What Are the Grounds for This Disapproval Action of the Texas
Qualified Facilities Program?

    EPA is disapproving revisions to the SIP submitted by the State of
Texas that relate to the Modification of Qualified Facilities,
identified in the above Table 1. Sources are reminded that they remain
subject to the requirements of the Federally- approved Texas SIP and
may be subject to enforcement actions for violations of the SIP. See
EPA's Revised Guidance on Enforcement During Pending SIP Revisions,
(March 1, 1991). However, because the Qualified Facilities Program is a
permitting exemption, not a permit amendment, this final disapproval
action does not affect Federal enforceability of Major and Minor NSR
SIP permits.
    The provisions affected by this disapproval action include
regulatory provisions at 30 TAC 116.116(e), 116.117, and 116.118; and
definitions at 30 TAC 116.10(1), (2), (11)(E), and (16) under 30 TAC
Chapter 116, Control of Air Pollution by Permits for New Construction
or Modification. EPA finds that these submitted provisions and
definitions in the submittals affecting the Texas Qualified Facilities
Program are not severable from each other. Specifically, EPA is making
the following findings and taking the following actions as described
below:

A. Why the Qualified Facilities Program Submittal Is Unclear Whether it
Is for a Major or Minor NSR SIP Revision

    While the TCEQ and other commenters asserted that the program was
intended to be limited to Minor NSR, we continue to be concerned that
the program is not explicitly limited to Minor NSR. Specifically, EPA
finds that the submittals contain no applicability statement or
regulatory provision that limits applicability to minor modifications.
The Program is analogous to two other Minor NSR programs in Texas's SIP
because although they do not exempt facilities from NSR, as does the
Qualified Facilities Program, they do exempt facilities from obtaining
source-specific (i.e., case-by-case) permits. However, both of the
State's other Minor NSR programs include an applicability statement and
a regulatory provision that expressly limits applicability to minor
modifications.\3\ Moreover, the Texas Clean Air Act clearly prohibits
the use of these two other Minor NSR programs for Major NSR. See Texas
Health and Safety Code 382.05196 and .057. Therefore, the absence of
these provisions in the Qualified Facilities rules creates an
unacceptable ambiguity in the SIP. Without a clear statement of
applicability of the Program, the Program as submitted is confusing to
the public, regulated sources, government agencies, or a court, because
it can be interpreted as an alternative to evaluating the new
modification as a major modification under Major NSR requirements.
Because of the overbroad nature of the regulatory language in the
State's SIP revision submittal, we find that the State has failed to
limit its submitted Program only to Minor NSR. See 74 FR 48450, at
48456-48457 and Section V.E.1 below for further information.
---------------------------------------------------------------------------

    \3\ The Standard Permits rules require a Major NSR applicability
determination at 30 TAC 116.610(b), and prohibit circumvention of
Major NSR at 30 TAC 116.610(c). Likewise, the Permits by Rule
provisions require a Major NSR applicability determination at 30 TAC
106.4(a)(3), and prohibit circumvention of Major NSR at 30 TAC
106.4(b).
---------------------------------------------------------------------------

    Consequently, we evaluated this submitted Program as being a
substitute for the Texas Major NSR SIP. We also evaluated it for
approvability as a Minor NSR SIP. Accordingly, we evaluated whether the
submitted Program meets the requirements for a Major NSR SIP revision,
the general requirements for regulating construction of any stationary
sources contained in Section 110(a)(2)(C) of the CAA, and the
applicable statutory and regulatory requirements for an approvable SIP
revision. See 74 FR 48450, at 48457.

B. Why the Submitted Texas Qualified Facilities Program Is Not
Approvable as a Substitute Major NSR SIP Revision

    EPA finds that the State failed to submit information sufficient to
demonstrate that the submitted Program's regulatory text explicitly
prevents the circumvention of Major NSR. Therefore, EPA is disapproving
the Program as not meeting the Major NSR SIP requirements to prevent
circumvention of Major NSR. See 74 FR 48450, at 48458; Sections V.C.2.
and E. below for further information.
    EPA finds that that the State failed to submit information
sufficient to demonstrate that the submitted Program's regulatory text
requires an evaluation of Major Source NSR applicability before a
change is exempted from permitting. Therefore, EPA is disapproving the
Program as not meeting the Major NSR SIP requirements that require the
Major NSR applicability requirements be met. See

74 FR 48450, at 48458; Section V.C.2 below for further information.
    We find that the Program is deficient for Major NSR netting for two
main reasons. First, the Program may allow an emission increase to net
out by taking into account emission decreases outside of the major
stationary source and, in other circumstances, allow an evaluation of
emissions of a subset of units at a major stationary source. Therefore,
the Program does not meet the CAA's definition of ``modification'' and
the Major NSR SIP requirements and is inconsistent with Alabama Power
v. Costle, 636 F.2d 323, 401-403 (DC Cir. 1980) and Asarco v. EPA, 578
F.2d 320 (DC Cir. 1978). 74 FR 48450, at 48458-48459; Section V.C.1
below. Second, the Program authorizes existing allowable emissions,
rather than actual emissions, to be used as a baseline to determine
applicability. This use of allowables is inconsistent with the
requirements of the Act for Major NSR and is contrary to New York v.
EPA, 413 F.3d 3, 38-40 (DC Cir. 2005) (``New York I''). 74 FR 48450, at
48459; Section V.C.1 below.
    EPA finds that it lacks sufficient available information to
determine, pursuant to section 110(l) that the requested relaxation to
the Texas NSR SIP would not interfere with any applicable requirement
concerning attainment and RFP, or any other applicable CAA requirement.
See 74 FR 48450, at 48459 for further information.

C. Why the Submitted Texas Qualified Facilities Program Is Not
Approvable as a Minor NSR SIP Revision

    EPA finds that the Program is not clearly limited to Minor NSR. The
submitted Program also does not prevent circumvention of the Major NSR
SIP requirements. The Program lacks requirements necessary for
enforcement of the applicable emissions limitations, including a permit
application and issuance process. Overall, the Program fails to include
sufficient legally enforceable safeguards to ensure that the NAAQS and
control strategies are protected. Furthermore, the Program provides a
de minimis exemption from the Texas Minor NSR SIP, and therefore, it is
a SIP relaxation, which creates a risk of interference with NAAQS
attainment, RFP, or any other requirement of the Act. EPA lacks
sufficient information to determine that this SIP relaxation would not
interfere with these requirements. 74 FR 48450, at 48463. Additionally,
the legal test for whether a de minimis threshold can be approved is
whether it is consistent with the need for a plan to include legally
enforceable procedures to ensure that the State will not permit a
source that will violate the control strategy or interfere with NAAQS
attainment, as required by 40 CFR 51.160(a)-(b). 74 FR 48450, at 48460.
The State failed to demonstrate that this exemption will not permit
changes that will violate the Texas control strategies or interfere
with NAAQS attainment. Therefore, we are disapproving the submitted
Qualified Facilities Program as a Minor NSR SIP revision because it
does not meet sections 110(a)(2)(C) and 110(l) of the Act and 40 CFR
51.160.
    The Qualified Facilities Program does not ensure protection of the
NAAQS and prevent violations of any State control strategy. First, the
Program fails to ensure that all participating Qualified Facilities
must have obtained a Texas NSR SIP permit. Without the assurance that
all Qualified Facilities have obtained a Texas NSR SIP permit, EPA
cannot determine that all Qualified Facilities must have Federally
enforceable emission limitations based on the chosen control
technology, and that the Qualified Facility will not interfere with
attainment and maintenance of the NAAQS or violate any control
strategy. Therefore, EPA finds that the Qualified Facilities Program is
inadequate to ensure that all Qualified Facilities have an appropriate
allowable limit to prevent interference with attainment and maintenance
of the NAAQS or violations of any State control strategy that is
required by the Texas NSR SIP. See Section V.G.1 for further
information. In addition, the Program does not require the owner or
operator to maintain the information and analysis showing how it
concluded that there will be no adverse impact on ambient air quality
before undertaking the change. Therefore, EPA finds that the Qualified
Facilities Program is inadequate to ensure that all changes under the
Program that are exempted from permitting will not prevent interference
with attainment and maintenance of the NAAQS or violations of any State
control strategy that is required by the Texas NSR SIP. 74 FR 48450, at
48462; Section V.F.1.
    Regarding the State's use of minor source netting in the Qualified
Facilities Program, EPA makes the following findings:
    The Qualified Facilities Program is inadequate because it fails to
provide clear and enforceable requirements for a basic netting program.
Therefore, this Program, as submitted, does not meet the fundamental
requirements for an approvable Minor NSR netting program. To analyze
the Program's Minor NSR netting for approvability, we used the
fundamental principles of Major NSR and NSR netting because these
principles are designed to ensure that there is no interference with
the NAAQS and control strategies.\4\ The Major NSR netting program
requires the following: (1) An identified contemporaneous period, (2)
the reductions must be contemporaneous and creditable, (3) the
reductions must be of the same pollutant as the change, (4) the
reductions must be real, (5) the reductions must be permanent, and (6)
the reductions must be quantifiable. See 40 CFR 51.165(a)(1)(vi) (the
definition of ``net emissions increase''); 40 CFR 51.166(b)(3). To be
considered creditable, the reduction's old level of emissions must
exceed the new level of emissions, the reduction must be enforceable as
a practical matter at and after the time the actual change begins, and
the reduction must have approximately the same qualitative significance
for public health and welfare as that attributed to the increase from
the particular change. See 74 FR 48450, at 48461.
---------------------------------------------------------------------------

    \4\ However, our analysis of the netting provisions in the
Qualified Facilities Program under Minor NSR is not intended to
create a binding Agency position on evaluating the approvability of
Minor NSR netting.
---------------------------------------------------------------------------

    As discussed below, the Program's netting provisions do not meet
all of the requirements; therefore, the Qualified Facilities netting is
disapproved as a Minor NSR netting program.
     The Program fails to define a contemporaneous or other
period for the netting and that the emission reductions must occur
within that specified period. 74 FR 48450, at 48461; Section V.C.1
below.
     Emissions reductions under the Qualified Facilities
program are not enforceable as a practical matter at and after the time
of the actual change begins; and therefore, not sufficiently
creditable. First, the Program fails to ensure a separate netting
analysis is performed for each proposed change because the rules are
not clear that reductions can only be relied upon once. Therefore, we
find that the Program fails to prevent double counting; and
consequently these types of reductions are not creditable. Second, the
Program does not require that each Qualified Facility involved in the
netting transaction must submit a permit application and obtain a
permit revision reflecting all of the changes made to reduce emissions
(relied upon in the netting analysis) as well as reflecting the change
itself that increased emissions. As a result, emissions reductions are
not enforceable; and therefore, not

sufficiently creditable. 74 FR 48450, at 48462; Section V.C.1.
     EPA proposed to find that the State's ``interchange''
methodology, submitted 30 TAC 116.116(e)(3), is consistent with the
Federal requirement that reductions must be of the same pollutant as
the change.\5\ 74 FR 48450, at 48461. However, after evaluation of
received comments, EPA finds that the term ``sulfur compounds'' in 30
TAC 116.116(e)(3)(F), is broad enough to include hydrogen sulfide.
Hydrogen sulfide is a regulated NSR pollutant (see 40 CFR
52.21(b)(23)(i) and 52.21(i)(5)(i)) and, in certain instances, may
require separate analysis from sulfur oxides in a netting analysis.
Therefore, the interchange methodology may not ensure the health
impacts of all sulfur compounds will be equal. The State failed to
demonstrate that such use of hydrogen sulfide would protect the sulfur
dioxides NAAQS. Additionally, this provision allows PM-2.5 to be
interchanged with PM-10. However, because PM-10 and PM-2.5 are two
separate pollutants and the State failed to demonstrate that such use
of PM-10 would protect the PM-2.5 NAAQS, this interchange is
inappropriate. Therefore, this provision is unapprovable for the sulfur
dioxides and PM NAAQS. Section V.C.1 below.
---------------------------------------------------------------------------

    \5\ See 40 CFR 51.165(a)(1)(vi)(A) and 51.166(b)(3)(i), which
define net emissions increase ``with respect to any regulated NSR
pollutant.'' Emphasis added.
---------------------------------------------------------------------------

     The Program also lacks any provisions that require the
reductions to be permanent. Specifically, the submitted Program does
not include provisions that either prohibit future increases at the
Qualified Facility, or ensure that any future increase at a Qualified
Facility at which a previous netting reduction occurred is analyzed in
totality to assure that the NAAQS remains protected from the original
increase. 74 FR 48450, at 48461; Section V.C.1 below.
    Section 30 TAC 116.117(b) lacks any provisions that require a
permit application to be submitted to TCEQ for a change under the
Program. There are no provisions in 30 TAC 116.117(b) that clearly
indicate that TCEQ must issue a revised permit for the changes made by
all of the participating Qualified Facilities. Thus, EPA finds that the
Program is not approvable because it lacks this requirement and
therefore is not enforceable. See 74 FR 48450, at 48462, Section V.D.1
below.
    The Qualified Facilities SIP submittal is a relaxation under CAA
section 110(l) because it provides an exemption from NSR permitting not
previously available to facilities. As such, this revision creates a
risk of interference with NAAQS attainment, RFP, or any other
requirement of the Act. EPA lacks information sufficient to make a
determination that the requested SIP revision relaxation does not
interfere with any applicable requirements concerning attainment and
RFP, or any other applicable requirement of the Act, as required by
section 110(l). See 74 FR 48450, at 48463.
    For the reasons discussed above in this section and as further
discussed below in Section V (Response to Comments), EPA is
disapproving the submitted Qualified Facilities Program as not meeting
section 110(a)(2)(C) and 110(l) of that Act and 40 CFR 51.160. See 74
FR 48450, at 48462.

D. Definition of ``Facility''

    EPA proposed to make an administrative correction to the severable
submittal for the SIP-approved definition of ``facility'' under 30 TAC
116.10(6). Consistent with our proposal, EPA is finalizing this
administrative correction in today's action. Specifically, EPA corrects
a typographical error at 72 FR 49198 to clarify that the definition of
``facility,'' as codified at 30 TAC 116.10(6), was approved as part of
the Texas SIP in 2006 and remains part of the Texas SIP. 74 FR 48450,
at 48465.
    However, EPA wishes to note that each part of the Texas NSR program
depends greatly upon the definition of ``facility'' that is applicable
to it and upon how that definition is used in context within each part
of the program. There are instances where a specific part of the Texas
NSR program does not meet the Act and EPA regulations due to the
definition of ``facility'' that applies to that part of the program.
For example Texas's PSD non-PAL rules explicitly limit the definition
of ``facility'' to ``emissions unit,'' but the NNSR non-PAL rules fail
to include such a limitation. 74 FR 48450, at 48475; compare 30 TAC
116.10(6) to 30 TAC 116.160(c)(3). TCEQ did not provide information to
demonstrate that the lack of this explicit limitation in the NNSR SIP
non-PALs revision is at least as stringent as the revised Major NSR SIP
requirements. 74 FR 48450, at 48455; Section V.M. below.

V. Response to Comments

    In response to our September 23, 2009, proposal, we received
comments from the following: Sierra Club--Houston Regional Group;
Sierra Club Membership Services (including 2,062 individual comment
letters); Harris County Public Health and Environmental Services; Texas
Commission on Environmental Quality; Members of the Texas House of
Representatives; Office of the Mayor--City of Houston, Texas;
University of Texas at Austin School of Law--Environmental Clinic;
Baker Botts, L.L.P., on behalf of BCCA Appeal Group; Baker Botts,
L.L.P., on behalf of Texas Industrial Project; Bracewell & Guiliani,
L.L.P., on behalf of the Electric Reliability Coordinating Council;
Gulf Coast Lignite Coalition; Texas Chemical Council.

A. General Comments

1. Comments Generally Supporting Proposal
    Comment: Harris County Public Health & Environmental Services
(HCPHES) acknowledges that EPA takes issue with the TCEQ regulations
because of the lack of specificity regarding definitions and general
lack of checks and balances to ensure that Federal requirements are met
during the State's permitting processes, and because they do not meet
the Minor NSR SIP and Major NSR SIP, including the Major NSR
Nonattainment SIP requirements. Those concerns, currently unaddressed
by the TCEQ, have ultimately resulted in EPA's proposed disapproval of
portions of the TCEQ's most recent SIP submittal. HCPHES views a TCEQ
program that meets the Federal requirements as being critical to
ensuring that air quality in the Houston Galveston Brazoria (HGB) area
returns to levels compliant with the NAAQS. HCPHES is very concerned
that the TCEQ programs fall short of Federal requirements and
encourages EPA to aggressively pursue the timely correction of these
deficiencies to ensure the health, safety, and well being of the
citizens of Harris County. HCPHES supports EPA's conclusion to
disapprove portions of the SIP as proposed until such time as TCEQ
addresses all of the specifics noted in the Federal Register.
    Comment: Several members of the Texas House of Representatives
support EPA's proposed disapproval of the Qualified Facilities Program.
While the Qualified Facilities Program was a legislative creation,
these members of the Texas House recognize that the statutory language
and associated regulations are inconsistent with current CAA
requirements regarding modifications and public participation.
Particular concerns are:
     Inadequate TCEQ oversight. The rules authorize many
changes at facilities without any pre-approval by TCEQ or procedures
for denial for

cause. These off-permit changes are difficult to track and enforce and
may threaten ambient air quality.
     The lack of understandable and traceable permits. Texas
industry, regulators, and the public should be able to obtain a permit,
read it, and know what quantity of what pollutants the facility is
authorized to emit. The off-permit changes authorized through the
Qualified Facilities rules prevent such transparency.
    Comment: Houston Regional Group of the Sierra Club (Sierra Club)
supports EPA's analysis and agrees that all of the September 23, 2009,
proposals (including the Qualified Facilities Program) should be
disapproved. The commenter generally supported EPA's proposed
disapproval of the Qualified Facilities Program; Flexible Permits
Program; and Texas Major and Minor NSR SIP for 1997 8-hour and 1-hour
ozone NAAQS, Prevention of Significant Deterioration (PSD) SIP, and
Standard Permit for Pollution Control Projects. The commenter provided
additional comments on our proposed disapproval of the Flexible Permits
Program, which EPA will address in its separate action on the Flexible
Permits Program.
    Response: Generally, these comments support EPA's analysis of
Texas's Qualified Facilities Program as discussed in detail at 74 FR
48450, at 48455-48463, and further support EPA's action to disapprove
the Qualified Facilities submission.
    Comment: The Sierra Club Membership Services (SCMS) sent numerous
similar letters via e-mail that relate to this action. These comments
include 1,789 identical letters (sent via e-mail), which included the
following comments:
     The TCEQ is broken and the commenters applaud EPA's
proposed ruling that major portions of the TCEQ air permitting program
does not adhere to the CAA and should be thrown out;
     While agreeing that the proposed disapprovals are a good
first step, the commenters state that EPA should take bold actions as
follows:

--Halting any new air pollution permits being issued by TCEQ utilizing
TCEQ's current illegal policy;
--Creating a moratorium on the operations of any new coal fired power
plants in Texas until TCEQ cleans up its act by operating under the
Federal CAA;
--Requiring coal companies clean up their old, dirty plants--no
exceptions, no bailouts, and no special treatment--by reviewing all
permits issued since TCEQ adopted its illegal policies and requiring
that these entities resubmit their applications in accordance with the
Federal CAA; and
--Put stronger rules in place in order to reduce global-warming
emissions and to make sure new laws and rules do not allow existing
coal plants to continue polluting with global warming emissions.

     The commenters further state that Texas: (1) Has more
proposed coal and pet coke fired power plants than any other state in
the nation; (2) Is number 1 in carbon emissions; and (3) Is on the list
for the largest increase in emissions over the past five years.
     The commenters do not want coal to stand in the way of a
clean energy future in Texas. Strong rules are needed to make sure the
coal industry is held responsible for their mess and that no permits
are issued under TCEQ's illegal permitting process. Strong regulations
are vital to cleaning up the energy industry and putting Texas on a
path to clean energy technology that boosts economic growth, creates
jobs in Texas, and protects the air quality, health, and communities.
    In addition, SCMS sent 273 similar letters (sent via e-mail) that
contained additional comments. These additional comments include the
following:
     Commenters suggest that Texas rely on wind power, solar
energy, and natural gas as clean alternatives to coal.
     Other comments expressed general concerns related to:
Impacts on global warming, lack of commitment by TCEQ to protect air
quality, the need for clean energy efficient growth, impacts of upon
human health, endangerment of wildlife, impacts on creation of future
jobs in Texas, plus numerous other similar concerns.
    Response: To the extent the SCMS letters comment on the proposed
disapproval of the Qualified Facility program, they support EPA's
action to disapprove the Qualified Facilities submission. The remaining
comments are outside the scope of our proposed action relating to the
Qualified Facilities Program.
    Comment: The Environmental Clinic, the University of Texas at
Austin School of Law (UT Environmental Clinic) commented that EPA
should disapprove several other sections of 30 TAC Chapter 116.
    Response: This final rulemaking only addresses the Qualified
Facilities Program. Therefore, issues related to other portions of
Texas's regulations are outside the scope of this rulemaking.
2. Comments Generally Opposing Proposal
    Comment: TCEQ provided several general comments on the proposal.
The TCEQ commented that the Qualified Facilities Program was developed
by the 74th Texas Legislature through Senate Bill (SB) 1126, which
became effective May 19, 1995. SB 1126 amended the Texas Clean Air Act
by revising the definition of ``modification of existing facility,''
which changed the factors used to determine whether a modification for
State permitting (i.e. Minor NSR) has occurred. In 1996, 30 TAC Chapter
116 was revised to incorporate this legislative directive. These
changes provide that modifications may be made to existing facilities
without triggering the State's Minor NSR requirements whenever: (1) The
facility to be modified has received a permit, permit amendment, or has
been exempted from permitting requirements no earlier than 120 months
from when the change will occur; or (2) uses air pollution control
methods that are at least as effective as the Minor NSR SIP best
available control technology (BACT) that the Commission required 120
months before the change will occur. Such facilities are designated as
``qualified facilities.''
    TCEQ has always considered the Qualified Facilities Program to be
applicable only to Minor NSR and not applicable to Major NSR, although
this is not specifically stated in the rule. In summary, under the
Qualified Facilities Program, TCEQ: (1) Determines Federal
applicability as a first step in processing a Qualified Facilities
request; and uses actual emissions, not allowable emission rates; (2)
applies Federal NSR requirements when triggered; (3) does not
circumvent Federal requirements applicable to major stationary sources
or major modifications; (4) considers the use of ``modification'' to be
separate and severable from the Federal definition of ``modification''
as reflected in the SIP-approved Major NSR Program; and (5) does not
violate the approved SIP with regard to Major NSR or Minor NSR Program
requirements.
    Comment: The Texas Chemical Council (TCC) comments that it would be
short-cited to analyze the three programs (Qualified Facilities,
Flexible Permits, and NSR Reform) apart from the dramatic improvements
in the air quality in Texas in the past 15 years. TCC goes on to
describe these improvements. TCC supports full approval of Qualified
Facilities. The Qualified Facilities Program is not intended to shield
a source from major NSR. The Program is a robust, Federally enforceable
program. The Qualified

Facilities Program is authorized by the TCAA, promotes flexibility, and
allows sources to make certain changes without triggering NSR. If Major
NSR is triggered, a facility cannot be a Qualified Facility. The
definition of a Qualified Facility makes it clear that a Qualified
Facility is an existing facility. A Qualified Facility may make a
physical change in or change the operation of that facility as long as
the change does not result in a net increase in allowable emissions of
any air contaminant and does not result in the emission of any air
contaminant not previously emitted. Additionally, the facility must be
using equipment at least as effective as the BACT required by TCEQ. TCC
supports full approval of the three Texas air permitting program
submittals. The SIP revisions submitted to EPA by TCEQ over the last 15
years are critical components to Texas air permitting program. Texas
should not be punished for EPA's failure to act within the statutory
timeframe in the CAA. EPA offers little or no legal justification for
proposing disapproval of these programs. EPA's proposed action will
have an enormous impact on the country's largest industrial state. The
SIP revision submittals for these programs are at least as stringent as
the applicable Federal requirements and should be fully approved.
    Comment: Bracewell & Giuliani LLP, counsel to the Electric
Reliability Coordinating Council (ERCC), commented that Qualified
Facilities provides incentives to implement pollution reduction
measures at existing facilities. EPA's proposed disapproval does not
provide any evidence that this authorization is actually used for major
modifications or in fact interferes with air quality improvements.
Discontinuance of this program could deter or delay many pollution
reduction measures because the cost and resources associated with a
full notice and comment case-by-case permit would outweigh the economic
benefits of the additional controls. EPA should determine that the
Qualified Facilities Program satisfies the CAA requirements for a state
minor source program and retract the SIP disapproval and approve this
SIP revision. EPA should recognize the validity of permits issued under
the Texas permitting program and refrain from taking enforcement
actions to address EPA concerns.
    Comment: Jackson Walker, LLP, counsel to Gulf Coast Lignite
Coalition GCLC, provided the following general comments on all three
proposed disapprovals (Qualified Facilities, Flexible Permits, and NSR
Reform): (1) Commenters disagree with all the proposed disapprovals
because the SIP as implemented by TCEQ meets or exceeds CAA
requirements and has met the goals of the CAA; (2) EPA has a history of
focusing on results; so, EPA should look beyond immaterial differences
in the rule provisions and focus on the positive results that Texas has
achieved under the TCAA and the State's submittals; (3) Texas sources
have relied on the submitted rules for as long as 15 years in some
cases. To disapprove the submittals after so long puts too much burden
on the regulated community, creates regulatory uncertainty, hurts the
vulnerable economy by potentially increasing compliance costs, and may
discourage future business expansion; and (4) GCLC requests that EPA
work collaboratively, not combatively, with TCEQ to resolve any issues
under the CAA.
    Comment: Baker Botts, LLP, counsel for Texas Industry Project (TIP)
and Business Coalition for Clean Air (BCCA) provided the following
comments. TIP and BCCA support full approval of Qualified Facilities
because the submittal will strengthen Texas's permitting program. EPA
should work expeditiously with TCEQ to approve the Qualified Facilities
Program. Further, under Texas's integrated air permitting regime, air
quality in the state is demonstrating strong, sustained improvement.
Commenters describe the air quality improvements in Texas in the recent
past. Finally, commenters describe their understanding of how the
Qualified Facilities Program operates. Qualified Facilities is a Minor
NSR applicability trigger that allows existing emissions facilities
that employ BACT to make changes without Minor NSR review as long as
the changes do not result in net emissions increases. The Qualified
Facilities Program is authorized by the TCAA and applies only to
existing facilities. The term ``facility'' is analogous to the Federal
definition of ``emissions unit,'' under Texas's Title V program. See 30
TAC 122.10(8). The Texas Legislature created the Qualified Facilities
Program as an incentive for sites to implement BACT. To be
``qualified,'' the source must (1) have a permit or permit amendment or
exempt from pre-construction permit requirements no earlier than 120
months before the change will occur, or (2) use air pollution control
methods that are at least as effective as the BACT that was required or
would have been required for the same class or type of facility by a
permit issued 120 months before the change will occur. See 30 TAC
116.116(e). A qualified facility may lose its status as ``qualified''
if its permit, exemption, or control method falls outside the 10-year
window. See Texas Nat'l Res. Conservation Comm'n, Modification of
Existing Facilities under Senate Bill 1126: Guidance for Air Quality,
(April 1996), 5 [hereinafter Modification of Existing Facilities
Guidance].
    Comment: Texas Oil & Gas Association (TxOGA) is encouraged that EPA
is taking action to provide certainty in the regulatory process for
businesses. TxOGA supports the ongoing goal of improved air quality;
however, commenters do not believe that the proposed disapproval does
anything to improve air quality in Texas. Further, the proposal may
discourage future business expansion in Texas.
    Response: EPA understands TCEQ's explanation of the origination of
the Program in SB 1126. Nonetheless, the Qualified Facilities Program
must meet all Federal requirements under the CAA in order to be
approvable. The fact that EPA failed to act on the Qualified Facilities
Program SIP revision within the statutory timeframe does not dictate
the action EPA must take on the Program at this time. We cannot approve
a program that fails to meet the requirements of the CAA. As discussed
throughout our proposal and this final notice, the current Qualified
Facilities Program fails to meet all requirements. We disagree with
commenters that the Qualified Facilities Program is exclusively a Minor
NSR program, based upon the ambiguities in the Program's rules.
Furthermore, EPA need not prove that the Program is actually used for
major modifications. EPA is required to review a SIP revision
submission for its compliance with the Act and EPA regulations. CAA
110(k)(3); Natural Resources Defense Council, Inc. v. Browner, 57 F.3d
1122, 1123 (DC Cir. 1995); American Cyanamid v. EPA, 810 F.2d 493, 495
(5th Cir. 1987). This includes an analysis of the submitted regulations
for their legal interpretation. The Program's rules are ambiguous and
therefore do not adequately prohibit use under Major NSR. We recognize
that TCEQ considers the Program to be a Minor NSR Program; however, the
State admits that its rules are insufficient to limit the Program to
Minor NSR. See 74 FR 48450, at 48456-48457; Section V.F. below for
further information.
    EPA enforcement of Federal requirements in Texas is outside the
scope of this rulemaking. Additionally, comments on the Flexible
Permits Program and the NSR Reform submittal are outside the scope of
this notice. EPA will address the comments on its

proposed disapprovals of Flexible Permits and NSR Reform in separate
actions on these programs.

B. Comments That This Action Is Inconsistent With the CAA

    Comment: ERCC commented that EPA's proposed disapprovals are not
rationally supported by case law and are inconsistent with the CAA.
Congress placed primary responsibility for developing SIPs on the
states, so permitting programs among states can vary greatly. EPA
determines whether the state SIP satisfies the minimum requirements of
the CAA. Union Electric Co. v. EPA, 427 U.S. 246 (1976), rehearing
denied 429 U.S. 873 (1976); Train v. NRDC, 421 U.S. 60 (1975); Florida
Power and Light Co. v. Costle, 650 F.2d 586 (5th Cir. 1979); 71 FR
48696, 486700 (August 21, 2006) (Proposed rule to promulgate a FIP
under the CAA for tribes in Indian country). The Fifth Circuit Court of
Appeals recently stated that ``EPA has no authority to question the
wisdom of a State's choice of emission limitations if they are part of
a SIP that otherwise satisfies the standards set for in 42 U.S.C.
7410(a)(2).'' Clean Coalition v. TXU Power, 536 F.3d 469 Fn.3 (5th Cir.
Tex. 2008). Texas's permitting programs are based on the recognized
Minor NSR flexibility and consistent with prior EPA approvals of other
state SIPs. EPA must review other approved state programs to ensure
that Texas's sources are not put at a competitive disadvantage. See
Memorandum from John Seitz, Director, OAQPS, SIP Consistency Process
(April 4, 10, 1996). EPA's proposed disapprovals could have dramatic
impact on industries in Texas. EPA should solicit comments from all EPA
regions on whether the proposed actions are inconsistent with other
state SIPs and compare the stringency of the Texas programs to those of
other states. ERCC is confident that EPA will realize that the Texas
programs are consistent and possibly more stringent than other
permitting programs throughout the country.
    Response: EPA continues to recognize that permitting programs among
states can vary greatly and provide some flexibility for Minor NSR SIP
programs. However, in order to be approved as part of the SIP, the
Qualified Facilities Program must meet all applicable Federal
requirements. Here, the commenter's reliance on the Fifth Circuit's
dicta in Clean Coalition is misplaced because the Qualified Facilities
Program does not meet the standard set in 42 U.S.C. 7410(a)(2)(C).
Section 42 U.S.C. 7410(a)(2)(C) requires the State to have a permitting
program that complies with PSD and Nonattainment New Source Review
(NNSR) permit requirements (at 42 U.S.C. 7475 and 7503, respectively),
as well as Minor NSR permit requirements. As part of the State's
permitting program, the Qualified Facilities Program fails to meet
these requirements of the Act. As discussed throughout our proposal and
this final action, the submitted Program fails to meet all requirements
for an approvable permitting program, including submitting information
sufficient to demonstrate that the Program is restricted only to Minor
NSR. Commenters argue that the Qualified Facilities Program is
consistent with other SIP approved programs; however, they fail to cite
any specific examples.

C. Comments Addressing Whether the Qualified Facilities Rules Allow
Sources to ``Net Out'' of Major and Minor NSR Through Rules That Are
Not Adequate To Protect the NAAQS and State Control Strategies

1. Comments Generally Supporting Proposal
    Comment: UT Environmental Clinic commented that the Qualified
Facilities Program fails to meet the netting requirements for several
reasons. The commenter notes that the Qualified Facilities Program
netting calculations can be based on allowable emissions. Allowables
netting violates Major NSR because it is inconsistent with State of New
York v. EPA, 413 F.3d 3, 40 (DC Cir. 2005) and violates the CAA; it
violates Minor NSR because it fails to require an evaluation of the
actual emissions impacts on maintenance of the NAAQS.
    Response: Generally, these comments support EPA's analysis of
Texas's Qualified Facilities Program as a substitute for a Major NSR
SIP program as discussed in detail at 74 FR 48450, at 48459, and
further support EPA's action to disapprove the Qualified Facilities
submission.
    We find that the Program authorizes existing allowable, rather than
actual emissions, to be used as a baseline to determine applicability.
This use of allowables violates the Act for Major NSR SIP requirements
and is contrary to New York v. EPA, 413 F.3d 3, 38-40 (DC Cir. 2005)
(``New York I''). 74 FR 48450, at 48459. Under the submitted Program,
the project's increases in emissions are calculated based upon its
projected allowable emissions. The baseline uses the permitted
allowable emission rate (lowered by any applicable state or Federal
requirement) if the facility ``qualified'' under 30 TAC
116.10(11)(E)(i). If the facility ``qualified'' under 30 TAC
116.10(11)(E)(ii), the baseline uses the actual emission rate (minus
any applicable state or Federal requirement). In the applicability
netting analysis, the baseline for all the other participating minor
and major existing Qualified Facilities is calculated in the same way.
The emission reductions are calculated similarly, i.e., reductions
beyond the permitted allowable or actual emission rates (minus the
applicable state and Federal requirements). Thus, this submitted
Program allows an evaluation using allowable, not actual emissions, as
the baseline to calculate the project's proposed emission increase and
for many of the netting emission reductions, thereby in many cases
possibly circumventing the major modification applicability
requirements under the Major NSR rules. Therefore, the Program fails to
meet the CAA and Major NSR requirements to use baseline actual
emissions for major source netting as the starting point from which the
amount of creditable emission increases or decreases is determined. 74
FR 48450, at 48459.
    EPA agrees that the reductions in the Program's netting are not
based on actual emissions. Such netting may be permissible for a Minor
NSR Program; provided that the netting provisions assure protection of
the NAAQS and the SIP control strategies as required by section
110(a)(2)(C) of the CAA. Allowables netting is acceptable because CAA
section 110(a)(2)(c) does not explicitly prohibit the use of allowables
netting for Minor NSR programs. However, Texas failed to submit
sufficient information to demonstrate that the use of allowable
emissions in a Minor NSR netting program continues to protect the NAAQS
and control strategies; therefore, EPA cannot determine if this
requirement is met. Today's rulemaking disapproves netting under the
Qualified Facilities Program as a Minor NSR program, in part because
the Program fails to ensure that ambient air is protected in
consideration of all changes in the netting.
    Comment: UT Environmental Clinic commented that the definitions in
section 116.10 do not adequately specify how to calculate emissions
reductions for purposes of the netting analysis. For example, the Texas
definition of actual emissions is the ``highest rate'' actually
achieved within the past 10 years. It is unclear whether this is the
highest emission rate achieved at a single point in time or averaged
over some period.
    Response: We disagree that the reductions are not quantifiable. The

netting is based on the most stringent of the permitted emissions rate
(which includes the highest achievable actual emission rate) or any
applicable state or Federal rule. Nothing in the State's definition of
``actual emissions'' implies at all that there is any averaging
involved in the calculations. The reduction is based upon the highest
rate the facility achieved at a single point in time, looking back the
past 10 years.
    While we proposed to find that the reductions were quantifiable, we
requested comments on two aspects of the Program as it relates to this
principle. 74 FR 48450, at 48461-48462. First, we requested comment on
whether the regulatory provisions at 30 TAC 116.10(1) and (2) provide
clear direction on the appropriate calculation procedures sufficient to
ensure the reductions are quantifiable. As stated above, we disagree
with the commenter's argument that the definitions in section 116.10 do
not adequately specify how to calculate emissions reductions for
purposes of the netting analysis.
    Second, the submitted rules provide that a Qualified Facility nets
its emissions increase on the same basis as its allowable emissions
limitation. 30 TAC 116.116(e)(3)(A). We requested comment on whether
netting on such a basis is sufficiently quantifiable, and whether any
additional provisions are necessary to ensure that the entire emissions
increase is properly netted against reductions from the other Qualified
Facility. We did not receive any comments on this second aspect of
quantifiability under the Program. Because no comments were submitted
showing the basis was not sufficiently quantifiable, we continue to
believe that netting for a Minor NSR SIP program on the adequacy of the
Program's netting of emissions increases on the same basis as its
allowable emissions limitation, is sufficiently quantifiable.
    Comment: UT Environmental Clinic commented that the Qualified
Facilities rules allow all emission reductions at the same account
number to be considered in the net emission calculation. In fact, the
rules could be read to allow the ``offsetting'' of emissions above
allowables by decreases in emissions at any ``different facility.'' 30
TAC 116.110(3). Because an account number can include multiple sources,
the Texas rules allow consideration of emission decreases from outside
the major stationary source in violation of 42 U.S.C. 7411(a).
    Response: Generally, these comments support EPA's analysis of
Texas's Qualified Facilities Program as a substitute for a Major NSR
SIP program as discussed in detail at 74 FR 48450, at 48458-48459, and
further support EPA's action to disapprove the Qualified Facilities
submission.
    We find the Program is deficient for Major NSR netting because it
may allow an emission increase to net out by taking into account
emission decreases outside of the major stationary source \6\ and, in
other circumstances, allow an evaluation of emissions of a subset of
units at a major stationary source.\7\ The State failed to submit
information sufficient to demonstrate that the Program includes the
necessary replicability and accountability to prevent such
circumvention. Therefore, the Program does not meet the CAA's
definition of ``modification'' and the Major NSR SIP requirements and
is inconsistent with Alabama Power v. Costle, 636 F.2d 323, 401-403 (DC
Cir. 1980) and Asarco v. EPA, 578 F.2d 320 (DC Cir. 1978). 74 FR 48450,
at 48458-48459.
---------------------------------------------------------------------------

    \6\ The Texas SIP defines an ``account'' to include an entire
company site, which could include more than one plant and certainly
more than one major stationary source. SIP rule 30 TAC 101.1(1),
second sentence.
    \7\ Under the submitted Program, not all emission points, units,
facilities, major stationary sources, or minor modifications at the
site or their increases in emissions are required to be evaluated in
the applicability netting analysis. So the Program fails to require
the evaluation of emissions changes at the entire major stationary
source correctly as required by the Major NSR SIP regulations. 74 FR
48459.
---------------------------------------------------------------------------

    Comment: UT Environmental Clinic commented that the Qualified
Facilities netting rules only allow consideration of the increase in
allowable emissions from the Qualified Facility undergoing a change,
but consider the decreases from any other Qualified Facilities at the
same account number. There is no consideration of all the emission
increases so there is no adequate impacts analysis from the source.
    Response: Generally, these comments support EPA's analysis of
Texas's Qualified Facilities Program as a substitute for a Major NSR
SIP program as discussed in detail at 74 FR 48450, at 48458-48459, and
further support EPA's action to disapprove the Qualified Facilities
submission.
    Major NSR netting is based upon all contemporaneous increases and
decreases at the same major stationary source that occur within a
reasonable period that the states must define in their approved SIPs.
The submitted Program's netting is not based upon all contemporaneous
increases at the same major stationary source and not all decreases at
the same major stationary source. However, the State contends that the
Program is not intended to apply for Major NSR netting but only for
Minor NSR netting. Moreover, the Program is not intended to allow
contemporaneous netting. Instead, one looks to the increases from the
proposed change and to decreases made at the same time as the proposed
change. Such an approach, if fully delineated in the State's Program
rules, would satisfy the minimum requirements for an approvable Minor
NSR netting program provided that the ambient air is protected in
consideration of all changes in the netting. Today's rulemaking
disapproves netting under the Qualified Facilities Program as a Minor
NSR program, in part because the Program fails to ensure that ambient
air is protected.
    Comment: UT Environmental Clinic commented that the Qualified
Facilities rules do not define a contemporaneous period nor require
that emission reductions occur within a specified period. EPA notes in
the Federal Register that Texas intended that any relied-upon
reductions occur simultaneously with the increase. However, the
commenter argues that nothing in the rule requires this.
    Response: We agree with the comment insofar as it asserts that the
Program fails to define a contemporaneous period or require that
emission reductions occur within a specified period. EPA finds that,
while Texas intended that any relied-upon reductions occur
simultaneously at the time of the increase,\8\ the Program is deficient
because it does not expressly define the applicable period in which the
reductions must occur. See our response to the previous comment. 74 FR
48450, at 48461.
---------------------------------------------------------------------------

    \8\ See 21 Tex. Reg. 1573 (February 27, 1996).
---------------------------------------------------------------------------

    Comment: UT Environmental Clinic commented that because the
Qualified Facilities rules allow reductions to be based upon allowable
emissions, they do not ensure that reductions are real.
    Response: We disagree that just because the reductions are based
upon allowable emissions, these reductions are not real. For example,
reviewing authority may presume that source-specific allowable
emissions may be equivalent to the actual emissions. See 40 CFR
51.165(a)(1)(xii)(C) and 51.166(b)(21)(iii). The commenter fails to
discuss why the use of allowable emissions makes the reductions not
real.
    Comment: The UT Environmental Clinic commented that the rules fail
to ensure that netted reductions are permanent.
    Response: We agree with the commenter that the Program lacks any
provisions that require that the

reductions are permanent. For reductions to meet the netting
requirement to be permanent, the rules must include a prohibition
against future increases at the Qualified Facility, or include
regulatory language that assures that any future increase at a
Qualified Facility at which a previous netting reduction occurred is
analyzed in totality to assure that the NAAQS remains protected from
the original increase. However, the submitted Program does not include
such provisions. Consequently, the Qualified Facilities rules are
inadequate because they fail to ensure that the reductions are
permanent.
    Comment: UT Environmental Clinic commented that the rules do not
prevent double counting of emission reductions.
    Response: For an additional separate project, it appears that the
state intended that the reductions must occur at the time of that
additional project that will need to obtain additional reductions to
net out. If the regulatory text was consistent with this approach, this
limitation would prevent double counting of the netting reductions. The
State's intent is that the holder of the permit is required to perform
a new, separate netting analysis and rely upon reductions not relied
upon in the first netting analysis. See 74 FR 48450, at 48461 (citing
21 Tex. Reg. 1573 (February 27, 1996); page 154 of the 1996 SIP
revision submittal). We agree that the rules are not clear that a
subsequent change at a Qualified Facility that previously relied upon
netting must conduct a separate netting analysis that relies upon
reductions that were not relied upon in the first netting analysis. EPA
cannot find any provisions in the Program to ensure a separate netting
analysis performed for each proposed change. Therefore, the Program
fails to prevent double counting; and consequently these types of
netting reductions are not enforceable as a practical matter at and
after the time of the actual change begins; and therefore, not
sufficiently creditable. 74 FR 48450, at 48461.
    Comment: UT Environmental Clinic commented that the Qualified
Facilities rules fail to ensure that the emission reductions are
enforceable. Facilities provide notice of changes to Qualified
Facilities on Form PI-E, which is not enforceable, and Qualified
Facility changes that affect permitted facilities are not required to
be incorporated into a permit until renewal or amendment. TCEQ noted in
its Qualified Facility guidance that the form is not Federally
enforceable ``but is simply a form to provide information to
demonstrate that the change meets qualified facility flexibility.''
Consequently, Qualified Facility reductions are allowed to remain
unenforceable for years. Further, Texas rules make it unclear whether
emission reductions are ever made enforceable because a portion of the
definition of ``allowable emissions'' states that ``[t]he allowable
emissions for a qualified facility shall not be adjusted by the
voluntary installation of controls.'' 30 TAC 116.10(2)(F). This portion
of the definition of ``allowable emissions'' states that ``[t]he
allowable emissions for a qualified facility shall not be adjusted by
the voluntary installation of controls.'' Additionally, there are no
monitoring requirements in the Qualified Facilities rules to track
compliance with commitments to reduce emissions of limitations on
emissions increases.
    Response: We agree that the Qualified Facilities rules fail to
ensure that the emission reductions relied upon in a netting analysis
are enforceable. We noted at 74 FR 48450, at 48462 that the rules do
not require permits for these relied-upon reductions. We also agree
that the Program does not require monitoring because no permit is
required for each change. See Section V.D.1 below.
    We disagree that 30 TAC 116.10(2)(F) makes the rules vague as to
enforceability. This provision of the rule is defining how to calculate
the baseline from which reductions occur. When calculating the
allowable emissions for a Qualified Facility participating in the
Program, one cannot count any reductions occurring as a result of the
voluntary installation of controls. However, a facility can become
``qualified'' to use the Program by voluntarily installing controls.
The reductions achieved by this voluntary installation of controls are
not counted in the Qualified Facility's allowable emissions.
    Comment: UT Environmental Clinic states that the Qualified
Facilities rules do not ensure that emission reductions have the same
health and welfare effects as the emission increase. Because the
program allows the emission increase to be offset inside and outside
the facility, it allows for emission increases close to the fence line,
potentially affecting health and welfare of the surrounding community.
    Moreover, the Qualified Facilities Program allows Qualified
Facilities to offset emissions increases of one pollutant with emission
decreases of another pollutant, as long as the pollutants are in the
same ``air contaminant category.'' The interchange methodology
established by TCEQ \9\ to ensure that compounds within the VOCs air
contaminant category, as interchanged, will have an equivalent impact
on air quality, is not included in the Texas rules or statute. The rule
merely defines an ``air contaminant category'' as a group of related
compounds, such as volatile organic compounds, particulate matter,
nitrogen oxides, and sulfur compounds. 30 TAC 116.116(e)(3)(F). Clearly
emissions of all sulfur compounds, say sulfur dioxide and hydrogen
sulfide, are not equal in terms of health impacts. Likewise, the health
impacts of fine PM emissions are of significantly greater concern than
the impacts of larger particles.
---------------------------------------------------------------------------

    \9\ See 74 FR 48455, n.3.
---------------------------------------------------------------------------

    Response: With regard to VOCs and nitrogen oxides, EPA disagrees
with the comment above that the Program is deficient because the
State's rules allow an offset of an emission increase pollutant with
emission decrease of another pollutant, as long as the pollutants are
in the same ``air contaminant category.'' The State's interchange
methodology goes beyond the fundamental principle to determine whether
the interchange of different compounds within the same air contaminant
category will result in an equivalent decrease in emissions; e.g., one
VOC for another VOC; for VOCs and nitrogen oxides. See 74 FR 48450, at
48461.
    On the other hand, the term ``sulfur compounds'' in 30 TAC
116.116(e)(3)(F), is broad enough to include hydrogen sulfide. The
State failed to demonstrate that use of hydrogen sulfide would protect
the sulfur dioxides NAAQS. Therefore, we agree with the commenter that
the interchange methodology does not ensure the health impacts of all
sulfur compounds will be equal. With regard to the comment concerning
particulate matter, the definition of ``air contaminant category''
allows PM-2.5 to be interchanged with PM-10. However, because PM-10 and
PM-2.5 are two separate pollutants and the State failed to demonstrate
that such use of PM-10 would protect the PM-2.5 NAAQS, this interchange
is inappropriate. Therefore, we agree that the interchange methodology
does not ensure the health impacts of all particulate matter will be
equal.
    We, however, disagree with the comment above that the Program fails
to ensure that emission reductions have the same health and welfare
effects as the emission increases. The State has established a
methodology to use whenever there is a different location of emissions
because of the intraplant

trading. For example, where the netting has the effect of moving
emissions closer to the plant property line than the Qualified Facility
to be changed, the State uses this methodology to analyze whether there
could be an increase in off-site impacts. See 30 TAC 116.117(b)(5). We
continue to believe that this will ensure the reductions have
approximately the same qualitative significance for public health and
welfare, which is required to ensure the reductions are creditable.
Nevertheless, as stated above, we are disapproving the Qualified
Facilities netting program as a substitute for a Major NSR SIP program
and as a Minor NSR SIP program because the Program is inadequate to
protect ambient air quality.
    Comment: The UT Environmental Clinic commented that the Qualified
Facilities netting Program does not adequately protect air quality
under Minor NSR. Specifically, the Qualified Facilities netting
provisions do not meet Federal netting standards, which are in place
precisely to ensure that air quality is protected. The Program's
failure to meet almost all of those basic netting requirements renders
the rules inadequate.
    Response: Generally, these comments support EPA's analysis of
Texas's Qualified Facilities Program as a Minor NSR SIP program as
discussed in detail at 74 FR 48450, at 48460-48462, and further support
EPA's action to disapprove the Qualified Facilities submission.
    Comment: The UT Environmental Clinic commented that the Program is
clearly inadequate to ensure protection of the NAAQS and to prevent
violations of control strategies. The rules cannot be approved as an
exemption from Minor NSR permitting because they in no way ensure that
the emission increases authorized pursuant to the rules will have a de
minimis impact on air quality.
    Response: We agree with the commenter that the Program is
inadequate to ensure protection of the NAAQS for several reasons. As
discussed below in Section V.G.1, we find that the Qualified Facilities
rules are not clear that all Qualified Facilities must have obtained a
Texas NSR SIP permit. Without the assurance that all Qualified
Facilities have obtained a Texas NSR SIP permit, EPA cannot make the
finding that each permit for a Qualified Facility includes an emission
limitation based on the chosen control technology, with a determination
that the Qualified Facility will not interfere with attainment and
maintenance of the NAAQS or violate any control strategy. Therefore,
the Program fails to ensure that all Qualified Facilities can operate
up to a permitted allowable limit such that they do not interfere with
attainment and maintenance of the NAAQS and do not violate any State
control strategy, as required by the Texas NSR SIP.
    Additionally, the Program fails to ensure that the NAAQS are
protected because 30 TAC 116.117 lacks language requiring the owner or
operator to maintain the information and analysis showing how it
concluded that there will be no adverse impact on ambient air quality
before undertaking the change.
    We agree with the commenter that the Program does not qualify as a
de minimis exemption from Minor NSR. The State has not provided
sufficient information to demonstrate that the exempted changes from
the Minor NSR requirements will have only a de minimis effect. See
Section V.D.1 below for more information.
2. Comments Generally Opposing Proposal
    Comment: TCEQ commented that the Qualified Facilities Program can
only be used if a physical or operational change complies with Federal
NSR requirements. In order to make a physical or operational change to
a Qualified Facility, an owner or operator must demonstrate that the
change does not result in a net increase in allowable emissions of any
air contaminant previously authorized under state minor source review.
30 TAC 116.116(e)(1). Keeping in mind the State definition of
``facility,'' 30 TAC 116.116(e)(2) and (3) allow a Qualified Facility
to demonstrate that a state modification has not occurred by comparing
allowable emissions to allowable emissions before and after a proposed
change. Allowable emissions (both hourly and annual rates) are one of
the criteria to provide ``state qualified'' flexibility because the
facilities must exist and be authorized, and thereby have undergone
appropriate permit review. In addition, no existing level of control
can be reduced. 30 TAC 116.116(e)(8). The commenter states that for
major sources, in addition to State requirements, the evaluation of
emissions related to physical and/or operational changes is conducted
on a baseline actual to either a projected actual or potential to emit
base if applicable. 30 TAC 116.116(e)(4). This comparison is used to
determine if an emission increase above the appropriate significance
threshold for a particular Federal permitting program has occurred.
From the Federal NSR standpoint, if a proposed physical or operational
change would result in an emissions increase that exceeds a
significance threshold, the appropriate analysis (netting) is
triggered. If the results of the netting analysis indicate that a major
modification has occurred, the appropriate Federal program(s) is
triggered and Federal authorization must be obtained. In such a case,
the Qualified Facilities Program would not be an applicable
authorization pathway, and a State Minor NSR amendment must be
obtained, along with the appropriate Federal NSR authorization. The
exemption from the definition of ``modification of an existing
facility'' under the Qualified Facilities Program does not relieve an
owner or operator from conducting an evaluation to determine if a
Federal major modification has occurred. TCEQ states that from the
Federal standpoint, only the project's emission increases are evaluated
(without consideration of emission decreases) to determine if a Federal
applicability analysis (netting) has been triggered. If the project
increases equal or exceed the netting threshold for the pollutant and
this program, then a full contemporaneous netting exercise is conducted
in an effort to determine if the modification is a major modification.
If the project is a major modification, then the appropriate Federal
NSR program, either PSD or nonattainment review, is triggered. A permit
holder cannot use the ``no net emissions increase'' concept that is
described in the Qualified Facilities Program rules as a mechanism to
avoid a Federal NSR applicability analysis (netting).
    Comment: TxOGA commented that the Qualified Facilities Program
establishes an allowables-based trigger and has no effect on a permit
holder's compliance obligations under Federal requirements. Texas rules
clearly require compliance with Federal requirements. 30 TAC
116.117(a)(4) and (d). This interpretation is also supported by TCEQ
guidance.
    Comment: The TCC commented in response to EPA's assertion that a
Major NSR applicability determination must be based on actual
emissions, not allowables. TCC argues that the Qualified Facilities
rules do not circumvent any Federal requirements for major stationary
sources. TCC reiterates that a qualified facility must demonstrate that
the change does not result in a net increase in allowables, the source
must follow notification requirements, and the source cannot relax
controls at the qualified facility.
    Response: We acknowledge TCEQ's description of how the State
intends to implement the Qualified Facilities Program; however, we have
determined

that TCEQ's current rules are insufficient to prevent circumvention of
Major NSR. EPA disagrees with the comments from TxOGA and TCC. The
submitted Program lacks specific requirements that would require an
owner or operator who proposes a change under the Qualified Facilities
program to first conduct a Major NSR applicability analysis (netting)
prior to receiving (or asserting) authorization under the Qualified
Facilities Program.
    Comment: TCEQ commented that for facilities undergoing an
intraplant trade, where the allowable emissions at one facility are
increased while allowable emissions at another facility are reduced an
allowable-to-allowable comparison is used only to determine if a new
emissions increase has occurred for State purposes. The emissions are
reviewed simultaneously, which is more stringent than the Federal
requirement that only requires contemporaneous emissions. If a net
emissions increase has occurred, an owner or operator cannot use the
Qualified Facilities Program to authorize the proposed project, and
must find another State mechanism to obtain proper authorization. In
addition, the commenter states that the owner or operator must submit
pre-change notification if the intraplant trade moves emissions from
the interior of a plant site closer to a property line. This gives TCEQ
staff the ability to evaluate public protectiveness and evaluate any
potential changes in off property impacts as they relate to all
contaminants and pollutants with national standards, i.e. the NAAQS.
This intraplant trade capability only exists to the extent that the
project is a Minor NSR action, and does not apply if a major
modification has been triggered under Federal NSR requirements.
    Response: EPA disagrees with the commenter that under the Texas
rules the Program's intraplant trading does not apply if a major
modification has been triggered. As stated above, the program fails to
require a Major NSR applicability analysis and is insufficient to
prevent circumvention of Major NSR. Intraplant trading based on
allowables to allowables netting is prohibited under Major NSR. See
State of New York et al., v. EPA, 413 F.3d 3, 40 (DC Cir. 2005).
However, such netting may be permissible for a Minor NSR program,
provided that the netting provisions assure protection of the NAAQS.
See 74 FR 48450, at 48462. As discussed above, Texas's Qualified
Facilities Program does not meet this requirement. EPA also finds that
the Program does not adequately define a contemporaneous (or
simultaneous) period or require that emission reductions occur within a
specified period. As discussed above, we find that the Program fails to
meet the Minor NSR netting requirement for a defined period in which
the reductions must occur.
    Comment: TIP and BCCA commented that the Qualified Facilities
program exceeds Federal benchmarks for allowable-based Minor NSR
triggers. This program is one of the mechanisms that EPA encouraged in
its Flexible Air Permitting Rule (FAP) (74 FR 51418, 15423). Further,
the program is more stringent than the Federal FAP Program because it
requires up-to-date BACT. The Qualified Facilities Program is also
comparable to the proposed allowables-based minor NSR trigger in EPA's
proposed Indian Country rule, in which EPA allows the use of allowables
to allowables netting. To justify the use of an allowables test, EPA
distinguished the definition of ``modification'' under Minor NSR from
that used for Major NSR. 71 FR 48696, 48701 (citing State of New York,
et al., v. EPA (DC Cir. Jun. 24, 2005)). The Qualified Facilities rules
meet these criteria and are more stringent than the Federal model
because it only extends this flexibility to well-controlled facilities.
    The commenter reiterates that the Qualified Facilities Program does
not effect a permit holder's obligation to comply with Federal
requirements. An allowables-based trigger is permissible because the
CAA and Federal regulations do not mandate a method for determining
minor NSR. The Environmental Appeals Board confirmed that there is no
mandated methodology for the emissions test used for minor NSR. In re
Tennessee Valley Authority, 9 EAD 357, 461 (EAB September 15, 2000).
Again, EPA employed an allowables-to-allowables test in its proposed
Indian Country rule. States have great flexibility to determine
applicability for Minor NSR and that includes the authority to use an
allowables-based trigger. TCEQ rules articulate an overriding
obligation to comply with Federal requirements. 30 TAC 116.117(a)(4)
and (d). Therefore, the current Qualified Facilities rules prevent
circumvention of Major NSR.
    Response: EPA disagrees with the commenter. This rulemaking
disapproves netting under the Qualified Facilities Program for Major
NSR, in part because the Program fails to first require a Major NSR
applicability demonstration to show that a proposed change does not
trigger Major NSR before the source can take advantage of the Program.
In contrast to the Qualified Facilities Program, under the proposed
Indian Country rule, 40 CFR 49.153 would explicitly require the
proposed new source or modification to determine applicability to Major
NSR before taking advantage of the program. The source could only use
allowables netting under the proposed Indian County rule after a Major
NSR applicability determination. See 71 FR 48696, at 48705, 48728-
48729. The Qualified Facilities rules are deficient because they lack
such a requirement. Further, as described above, the Program fails to
meet several other netting requirements for an approvable Minor NSR
netting program.
    EPA's FAP rule is an Operating permit under Title V, not Title I.
74 FR 51418, 51419. While the FAP rule recognizes the use of advance
approval programs under Minor NSR, the use of such programs must ensure
environmental protection and compliance with applicable laws. ``[FAPs]
cannot circumvent, modify, or contravene any applicable requirement
and, instead, by their design must assure compliance with each one as
it would become applicable to any authorized changes.'' See 74 FR
51418, 51422. Further, advance approval under the FAP must be made at
the time of permit issuance, and consider the alternate operating
scenarios for air quality impacts, control technology, compliances with
applicable requirements, etc. Under Major and Minor NSR, advance
approval must ensure compliance with control strategy and non-
interference with attainment and maintenance of NAAQS for each
operating scenario as required by 40 CFR 51.160. We do not see how the
Texas Qualified Facility Rule meets these requirements.

D. Comments Addressing Whether the Qualified Facilities Rules Are
Practically Enforceable

1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic commented that the rules fail
to ensure that netted reductions are enforceable.
    Response: We agree with the commenter that the Program is
unenforceable because it fails to explicitly require that a permit
application must be submitted for the change and for any relied-upon
emissions reductions in the netting analysis. Because the Program is an
exemption from a preconstruction permit, and does not require a permit,
the Program must qualify as a de minimis exemption to be approvable. We
find that the Program does not

qualify as a de minimis exemption from Minor NSR. The legal test for
whether a de minimis threshold can be approved is whether it is
consistent with the need for a plan to include legally enforceable
procedures to ensure that the State will not permit a source that will
violate the control strategy or interfere with NAAQS attainment, as
required by 40 CFR 51.160(a)-b). 74 FR 48450, at 48460. The State
failed to demonstrate that this exemption will not permit changes that
will violate the Texas control strategies or interfere with NAAQS
attainment. Therefore all of the requirements under 40 CFR 51.160(a)-
(b) apply to the Program.
    Additionally, the Program allows too long of a lag time before a
revised permit is issued in certain circumstances that can lead to a
violation of a NAAQS, RFP, or control strategy without the TCEQ
becoming aware of it in a timely manner. We proposed that the lag time
for reporting a change under the Program should be no longer than six
months, rather than a year, but we requested comment on whether six
months is an acceptable lapse of time to ensure noninterference with
the NAAQS and control strategies. 74 FR 48450, at 48462. We received no
comments on this issue except that TCEQ stated they will consider this
change during rulemaking. Therefore, we find that the Program allows
too long of a lag time before reporting ``qualified'' changes.
    Comment: The UT Environmental Clinic commented that the Program is
clearly inadequate to ensure protection of the NAAQS and PSD increments
and to prevent violations of control strategies.
    Response: EPA agrees a Minor NSR SIP must include legally
enforceable procedures enabling the State to determine whether
construction or modification would violate a control strategy or
interfere with attainment or maintenance of the NAAQS. 40 CFR
51.160(a)-(b). Furthermore, any Minor NSR SIP revision submittal that
is a SIP relaxation, such as this Qualified Facilities Program, must
meet section 110(l). The Qualified Facilities SIP submittal is a
relaxation under CAA section 110(l) because it provides an exemption
from NSR permitting not previously available to sources. This SIP
relaxation creates a risk of interference with NAAQS attainment, RFP,
or any other requirement of the Act. EPA lacks sufficient available
information to determine that this SIP relaxation would not interfere
with any applicable requirement concerning attainment and RFP, or any
other requirement of the Act. See 74 FR 48450, at 48463.
2. Comments Generally Opposing Proposal
    Comment: ERCC commented that the Qualified Facilities Program is
enforceable for several reasons. The program's regulations include
enforceable registration and recordkeeping requirements. Documentation
must be maintained for all Qualified Facility changes that describes
the change and demonstrates compliance with the Qualified Facility
Program as well as state and Federal law. See 30 TAC 116.117(a). TCEQ
regulations also require that, at a minimum, an annual submission is
made to the agency documenting any qualified facility changes not
incorporated into a facility permit. See 30 TAC 116.117(b). Pre-change
qualification and approval are required for certain changes including:
changes that affect BACT or where MAERT is not available (30 TAC
116.118); certain intraplant trading (30 TAC 116.117(4)); or if the
change will affect compliance with a permit condition (30 TAC
116.117(3)). EPA's general comments questioning the proper permit
application or registration for qualified facility authorization are
unclear given the minor source nature of the program and its function
as an exemption from a preconstruction permit. See 74 FR 48450, at
48462. The Program adequately imposes recordkeeping, reporting,
notification and approval regulations to satisfy the minor NSR
enforceability requirements.
    Comment: TIP and BCCA also commented in response to EPA's argument
that the Qualified Facilities Program is not enforceable because
changes are not reflected in a permit. The program is a minor NSR
triggering program. Instead of permit revision, a facility qualified to
invoke the program must notify TCEQ of changes under the Qualified
Facilities rules. 30 TAC 116.118. The commenters explain the scenarios
when notification is required and the requirements for effective
notification under the rules. Commenters also state that if a change
implicates a permit special condition, the permit holder must revise
its permit special condition using the procedures specified in Chapter
116, New Source Review. 30 TAC 116.116(b)(3).
    Comment: The TxOGA commented that the Qualified Facilities Program
is a minor NSR triggering provision that requires facilities to retain
documentation and notify TCEQ of changes under the program. A facility
must be qualified at the time the change is to occur. The program is
enforceable because the rules contain notification and recordkeeping
requirements.
    Response: EPA disagrees with the commenters. The Program does not
meet the Federal requirements for practical enforceability. To be
approvable, a Minor NSR program must include enforceable emissions
limits. See 74 FR 48450, at 48462. The Program is not clear that each
Qualified Facility involved in the netting transaction must submit a
permit application and obtain a permit revision reflecting all of the
changes made to reduce emissions (relied upon in the netting analysis)
as well as reflecting the change itself that increased emissions. See
74 FR 48450, at 48462. Therefore, the Program is unenforceable.
Additionally, the Program allows too long of a lag time before a
revised permit is issued in certain circumstances that can lead to a
violation of a NAAQS, RFP, or control strategy without the TCEQ
becoming aware of it in a timely manner. Because the Program is an
exemption from a preconstruction permit, and does not require a permit,
the Program must qualify as a de minimis exemption to be approvable. We
find that the Program does not qualify as an approvable de minimis
exemption from Minor NSR. See 74 FR 48450, at 48462; Section V.D.1.
above. Therefore all of the requirements under 40 CFR 51.160(a)-(b)
apply to the Program. As described throughout this notice, the
Qualified Facilities Program fails to meet all of these requirements.
See 74 FR 48450, at 48460. As stated above, the Program fails to
require a permit that reflects all of the changes that occurred in the
netting process and provides enforceable emissions limits. The
notification and recordkeeping requirements, while beneficial, are not
sufficient under Federal requirements to ensure enforceability.

E. Comments Addressing Whether the Qualified Facilities Rules Meet
Federal Requirements for Major New Source Review

1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic comments that nothing in the
Qualified Facility statute or rules limits applicability to minor
modifications. The rules require documentation at the plant site
sufficient to comply with Nonattainment NSR and PSD, but do not clarify
that changes that constitute a major modification cannot be made
through a Qualified Facility change.
    The commenter further stated that because the Qualified Facilities
rules can be used to authorize major

modifications, the rules fail to meet the substantive requirements of
Nonattainment NSR and PSD. For emission increases associated with PSD,
the Qualified Facilities rules fail to require: (1) Best Available
Control Technology; (2) an air quality analysis of impacts on the NAAQS
and PSD increments; and (3) additional impact analysis associated with
the implementation of the new source or modification. For emission
increases associated with Nonattainment NSR, the Qualified Facilities
rules fail to require: (1) Lowest Achievable Emission Rate; (2)
emission offsets; and (3) demonstration of compliance by other
facilities in the State.
    Response: These comments are consistent with EPA's analysis
concluding that Texas's Qualified Facilities Program does not meet
Major NSR Substantive requirements as discussed at 74 FR 48450, at
48458-48459.
    EPA agrees that the Program is deficient because it lacks
provisions that require a Major NSR applicability determination for a
change at a Qualified Facility before it is exempted from the
permitting requirements. The Program's regulations do not contain any
emission limitations, applicability statement, or regulatory provision
restricting the change to Minor NSR. This lack of such express
provisions distinguishes the Qualified Facilities Program from the
Texas Minor NSR SIP rules for Permits by Rule in Chapter 106 and
Standard Permits in Chapter 116, Subchapter F. The Standard Permits
rules require a Major NSR applicability determination at 30 TAC
116.610(b), and prohibit circumvention of Major NSR at 30 TAC
116.610(c). Likewise, the Permits by Rule provisions require a Major
NSR applicability determination at 30 TAC 106.4(a)(3), and prohibit
circumvention of Major NSR at 30 TAC 106.4(b). The absence of these
provisions in the Qualified Facilities rules creates an unacceptable
ambiguity in the SIP. Therefore, the Program could allow circumvention
of Major NSR. See 74 FR 48450, at 48456-48458.
    EPA also agrees that the Program fails to address the required air
quality impacts analysis. The comments concerning BACT, LAER, emissions
offsets and a demonstration of compliance by other facilities in the
State go beyond EPA's analysis in the proposal and are outside the
scope of this rulemaking.
    Additionally, section 110(l) of the Act prohibits EPA from
approving any revision of a SIP if the revision would interfere with
any requirement concerning attainment and RFP, or any other requirement
of the Act. There is not sufficient available information to enable EPA
to determine that the submitted Program would not interfere with any
requirement concerning attainment and RFP, or any other requirement of
the Act. See 74 FR 48450, at 48459; and response above.
    Comment: The Office of the Mayor, City of Houston, Texas,
recognizes that the Qualified Facilities Program has no regulatory
provisions that clearly prevent the Program from circumventing Major
NSR SIP requirements thereby allowing changes at existing facilities to
avoid the requirement to obtain preconstruction authorizations.
Therefore, major sources of emissions are making major modifications to
their facilities without going through the permitting process. The
commenter states that this is a fatal flaw in the program, it is
inconsistent with the CAA and should not be included in the SIP.
    Response: The comments by the Office of the Mayor, City of Houston,
Texas, are consistent with EPA's conclusions as discussed at 74 FR
48450, at 48456-48457 and response above.
2. Comments Generally Opposing Proposal
    Comment: The TCC comments that Qualified Facilities is a Minor NSR
Program because TCEQ's rules clearly require sources making changes
under the Program to submit specific documentation, including
``sufficient information as necessary to show that the project will
comply with 40 CFR 116.150 and 116.151 of this title (relating to
Nonattainment Review) and 40 CFR 116.160-116.163 of this title
(relating to Prevention of Significant Deterioration Review) and with
Subchapter C of this Chapter 116 (relating to Hazardous Air Pollutants:
Regulations Governing Constructed or Reconstructed Major Sources (CAA
112(g), 40 CFR Part 63)).'' 30 TAC 116.117(a)(4).\10\
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    \10\ In a separate SIP submittal dated February 1, 2006, Texas
recodified the provisions of Subchapter C into Subchapter E. TCEQ's
rules also state that nothing in the rules governing the Program
shall limit the applicability of any Federal requirement. 30 TAC
116.117(d).
---------------------------------------------------------------------------

    Response: As stated in the above, TCEQ's rules for Qualified
Facilities are insufficient to prevent circumvention of major NSR. See
74 FR 48450, at 48456-48458.
    Comment: ERCC commented that the Qualified Facilities Program is
limited to Minor NSR. Qualified Facilities mandates compliance with 40
CFR 51.165 and 51.166, by clearly stating that any change authorized by
Qualified Facilities shall not ``limit the application of otherwise
applicable state or Federal requirements.'' TCAA 382.0512(c). TCEQ
regulations require that Qualified Facilities changes must be
documented minor source modifications. See 30 TAC 116.117(a)(4); 30 TAC
116.117(d). EPA's dismissal of Section 116.117(a)(4) as a recordkeeping
provision is unjustified. 74 FR 48450, at 48457. This Qualified
Facilities regulatory reference to the PSD and NNSR programs requires
the regulated entity to document that the change is in compliance with
the Federal major source permitting programs and in compliance with
state and Federal law.
    Response: As stated above, the Qualified Facilities rules are
insufficient to prevent circumvention of Major NSR. 74 FR 48450, at
48456-48458.
    Although there are recordkeeping requirements in the Program at
submitted 40 TAC 116.117(a)(4) requiring owners and operators to
maintain documentation containing sufficient information as may be
necessary to demonstrate that the project will comply with the Federal
CAA, Title I, parts C and D, these are the same general provisions as
those in the SIP at 30 TAC 116.111(a)(2)(H) and (I) for Minor and Major
NSR SIP permits. These recordkeeping requirements, although necessary
for NSR SIP approvability, cannot substitute for clear and enforceable
provisions, consistent with Texas's other Minor NSR programs, that
limit applicability in the submitted Program to Minor NSR only. 74 FR
48450, at 48456-48457.
    Comment: TIP and BCCA comment that sources cannot use the Qualified
Facilities Program to circumvent Major NSR. 30 TAC 116.117(a)(4) and
(d); Modification of Existing Facilities Guidance, at 2. Senate Bill
1126, which authorized the Qualified Facilities program, does not
supersede any Federal requirements. Further, ``[i]f a change made under
the qualified facility flexibility would result in the violation of a
permit special condition, the permit holder must revise the permit
special conditions to stay in compliance with the permit,'' through
either the permit alteration process under 30 TAC 116.116(c) or the
notification process of 30 TAC 116.117(d). Modification of Existing
Facilities Guidance, at 9. Therefore, any changes to a facility must
comply with Federal NSR and PSD rules. To further show that the current
Qualified Facilities rules are sufficient to prevent circumvention,
commenter cites to EPA's proposed Indian Country rule and recently
approved state SIPs that do not contain explicit language

calling for a major NSR applicability determination before use of the
minor NSR tools. Alaska Admin. Code tit. 18, Sec.  50.502, approved 72
FR 45378 (August 14, 2007); 7 Del. Code Regs. Sec.  1102, 65 FR 2048
(January 13, 2000) (granting limited approval based on EPA's concerns
about public participation provisions). Further, no Federal requirement
mandates such language. Therefore, it is arbitrary for EPA to require
Texas to include additional language. CleanCoalition v. TXU Power, 536
F.3d 469, 472 (5th Cir. 2008).
    Response: As stated above, EPA finds that the Qualified Facilities
regulatory provisions are inadequate to prevent circumvention of Major
NSR and limit the Program to minor modifications. TCEQ's rules and
guidance are not clear on their face that circumvention of Major NSR
requirements is prohibited. EPA does not understand how the permit
alteration and notification requirements are relevant to the issue of
circumvention of Major NSR. EPA disagrees with the commenter's analogy
to the proposed Indian Country Minor NSR rule. Today's rulemaking
disapproves the Qualified Facility Program for Major NSR, in part
because the Program fails to first require a Major NSR applicability
demonstration to show that a proposed change does not trigger Major NSR
before the source can take advantage of the Program. In contrast, under
the proposed Indian Country rule, 40 CFR 49.153 would explicitly
require the proposed new source or modification to determine
applicability to Major NSR before taking advantage of the program. 71
FR 48696, at 48705, 48728-48729. The source could only use allowables
netting under the proposed Indian Country rule after it determined that
Major NSR does not apply to the project. The Qualified Facilities rules
are deficient because they lack such a requirement, i.e., that Major
NSR does not apply to the change.
    Comment: The ERCC commented that EPA sent a comment letter on the
Qualified Facilities proposed rule and agreed that it ``adequately
addresses the applicability of major sources and major modifications
with respect to PSD and NA permitting requirements.'' 21 Tex. Reg. 1569
(February 27, 1996).
    Response: We acknowledge our 1995 comment letter stating that Texas
adequately satisfied our concern that the Qualified Facilities Program,
as proposed, would not circumvent or supersede any Major NSR SIP
requirements. Since we sent that letter, however, the Texas Legislature
has revised the Texas Clean Air Act significantly. Specifically, in
1999, the Texas legislature added an explicit statutory prohibition
against the use of an Exemption or Permit by Rule or a Standard Permit
for major modifications. See Texas Health and Safety Code 382.05196 and
.057. These 1999 legislative actions required a new legal review of the
statutory definition for ``modification of existing facility'' to see
if it was still limited to minor modifications. It is EPA's
interpretation that the 1999 legislative changes made this statutory
definition ambiguous. 74 FR 48450, at 48456-48457.

F. Comments Addressing Whether the Qualified Facilities Rules Meet
Federal Requirements for Minor New Source Review

1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic commented that the CAA
requires SIPs to include a program for ``regulation of the modification
and construction of any stationary source.'' 42 U.S.C. 110(a)(2)(C).
The program must prohibit any sources, including minor sources, from
emitting pollution in amounts that contribute significantly to
nonattainment and maintenance of the NAAQS or interfere with measures
included in the SIP. 42 U.S.C. 110(a)(2)(D)(i)(I)-(II). EPA has
recognized the valuable role that Minor NSR programs play in ensuring
that air quality is protected from emissions that are not subject to
Major NSR. Technical Support Document for the Prevention of Significant
Deterioration and Nonattainment Area New Source Review Regulations,
U.S. EPA, Nov. 2002, at I-5-I-12. The Qualified Facilities Program is
deficient as a Minor NSR program because:
     The Qualified Facility rules do not require enforceable
limits. Qualified Facilities provide notification of ``qualified''
changes on form PI-E,\11\ which TCEQ acknowledges is not enforceable.
Texas Commission on Environmental Quality Guidance for Air Quality,
Qualified Changes Under Senate Bill 1126 (Dec. 2000), 27 [hereinafter
Qualified Facilities Guidance]. Without enforceable limits, facilities
can use emission reductions as part of a netting analysis and
subsequently increase those emissions or rely on these reductions to
offset other increases. Some Qualified Facility representations are
consolidated into a preexisting permit upon revision or renewal at the
discretion of the source. Even if representations in the PI-E were
enforceable, there are no monitoring or reporting requirements to
demonstrate compliance. 30 TAC 116.117(a). See 74 FR 48450 (Sept. 23,
2009), Docket, Technical Support Document, pg. 22.
---------------------------------------------------------------------------

    \11\ 30 TAC Sec.  116.117(b). See regulation text on pages 23-24
of the TSD for this action, which refer to 30 TAC 116.117(b)(2) and
(4).
---------------------------------------------------------------------------

     The Qualified Facility Rules do not include a pre-approval
mechanism for all authorized emission increases. The rules have no
mechanism that prevents implementation of Qualified Facility changes
that may violate a control strategy or interfere with attainment or
maintenance of the NAAQS. The Program only requires Qualified