EPA Releases New PAL Guidance
On February 13, 2020, EPA Assistant Administrator Anne Idsal released a draft “Guidance on Plantwide Applicability Limitation Provisions Under the New Source Review Regulations” (Draft PAL Guidance) for public comment. The Draft PAL Guidance addresses concerns about when EPA or state permitting authorities should use the mandatory and discretionary permit reopening and provides additional guidance on PAL expiration and termination, the so-called PAL “ratchet” upon renewal, monitoring and data substitution, and calculation of baseline actual emissions for replacement units. The Draft PAL Guidance also provides some example PAL contribution and distribution calculations. Comments are due to EPA by March 16, 2020 and may be submitted on the agency website or by emailing EPA.
ANALYSIS
EPA undertook a consultation with various stakeholders pursuant to the presidential memoranda on “Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing” and “Enforcing the Regulatory Reform Agenda.” Based on that consultation, EPA elected to provide guidance on the operation of the PAL program under the federal PSD regulations. State-authorized programs remain bound by the approved state program, although subsequent revisions to those SIP-approved programs would need to be consistent with the Draft PAL Guidance if finalized.
PAL Permit Reopening.
The Draft PAL Guidance begins by addressing concerns that states could use the PAL reopening provisions at 40 CFR 52.21(aa)(8)(ii)(b) to arbitrarily reduce allowable emissions. EPA notes that it does not believe states have abused these provisions, that states may issue SIP rules to reduce emissions and that such an approach may be preferable because most NAAQS and increments have “short-term” averaging periods, while the PAL is an annual total limit and thus does not directly address possible exceedances. EPA states that it does not believe that “a PAL permit reopening would be the selected mechanism” to NAAQS and increment issues in most cases and that it is not aware of any such occurrence. EPA also states its interpretation that any reopening “would be conducted in an open and transparent manner, with opportunity for the source to be involved during the public participation process as required by the regulations,” citing 40 CFR 52.21(aa)(8)(ii)c).
PAL Expiration.
The Draft PAL Guidance states that sources expressed concern about lack of specificity in how PAL emissions are divided among the subject emissions unit upon PAL expiration. EPA noted that it is the source’s election to allow a PAL to expire. Should an expiration occur, EPA states that the regulations allow the source to propose a distribution of the emissions, which “can range from a single emission limit (or ‘cap’) across all units at the same level as the PAL to any combination of emission limits for individual emissions units or groupings of units under the PAL that in aggregate sum to the level of the PAL.” EPA recommends distributing to “groups” of emissions units to provide greater flexibility. EPA recommends, but does not require, continued use of the PAL monitoring methods. Finally, EPA notes that the expiration of a PAL is not a “relaxation” under 52.21(r)(4), but would constitute a “change in the method of operation” of the units if relaxed.
PAL Renewal.
Sources expressed concern about the perceived “automatic ratcheting” downward of a PAL upon renewal if emissions were less than 80% of the PAL level and the corresponding loss of compliance “headroom.” The Draft PAL Guidance clarifies that EPA will look at whether existing emissions, plus the PSD significant emission rates, are within the 80% guideline and, if so, renewal at the existing level may be appropriate. EPA also stated that the permitting authority has discretion to set a PAL limit “at a level determined to be more representative of the source’s baseline actual emissions, or more appropriate considering a list of factors set forth in the regulations” and that this might allow a higher PAL limit in appropriate cases. EPA then reiterated examples from its December 31, 2002 rule of where such action might be appropriate. EPA stresses that the source should submit its rationale as part of the renewal application. Finally, EPA states that “the PAL regulations do not require automatic downward adjustment, or ‘ratcheting,’ of a PAL level at renewal” and that a permitting authority “must justify the proposed PAL level” in the permit record. EPA notes that it expects PALs generally to be renewed at existing levels or existing levels plus a reasonable operation margin (generally equal to the significant emission rate). A decision on PAL limits can be appealed.
PAL Termination.
EPA states that it does not expect such requests to be common and declined to provide any additional guidance.
Monitoring Requirements for PALs.
Sources expressed concern that the “hierarchy” of monitoring methods presented in the PAL regulations could be construed as requiring CEMS or other higher “tier” measures rather than lower tier measures. The Draft PAL Guidance states that if existing Title V measures are adequate, they may be used, but any measurement system may need to be upgraded “to quantify mass emission rates as required under a PAL.” EPA also stresses that applicants may use “any one of the four general monitoring approaches” in the regulations. Draft PAL Guidance, at 9.
Emission factor adjustment. EPA cautions that sources and reviewing authorities should remember “the fact that for PAL monitoring, emissions factors are used to calculation actual emissions in tons per year on a 12-month rolling total basis and not maximum short term emissions” and that adjustment should follow “accepted statistical methods,” citing EPA, Data Quality Assessment: Statistical Methods for Practitioners EPA QA/G-9S (EPA/240/B-06/003), or should undertake source-specific testing. Finally, EPA cautions that when emissions factors are adjusted, the baseline actual emissions also should be adjusted.
Validation testing. The PAL regulations require “verification testing” of significant emissions units relying on emissions factors within 6 months. The Draft PAL Guidance states that existing contemporaneous data, including data from other similar sources, may be used to fulfill this requirement. EPA also states that literature review may be sufficient or that units that routinely operate below “significant” levels may be judged not to require validation testing in appropriate cases.
Missing monitoring data. The PAL regulations require that sources use uncontrolled potential to emit during periods of missing monitoring data “unless another method for determining emissions” is specified in the permit. Sources requested guidance on qualifying methods. The Draft PAL Guidance states that this is case-by-case, notes that the default may not be problematic for some units, and then states that if the emissions and their impact on the compliance margin is significant, the source must propose alternative monitoring for inclusion in the permit. The Draft PAL Guidance suggests looking at analogous provisions in the permit or Part 75 for CEMS. EPA then gave examples it had approved:
CEMS: missing data provisions only if 10% or more was missing, and then used the average of the five highest hourly emissions;
Fuel usage: If fewer than 10% of days are missing, use average of days prior and after missing period; if greater than 10%, use the highest fuel usage during month and report a deviation. If monthly fuel monitoring, use highest month in preceding 12-months and report a deviation.
Baseline Actual Emissions for Replacement Units
EPA clarifies that a “replacement unit” “effectively takes the place of the unit it replaced and thereby carries with it the baseline actual emissions from that replaced unit for purposes of subsequent applicability calculations and permitting actions.”
Advantages of a PAL.
EPA reiterates its belief that a PAL is advantageous:
The key advantage of a PAL is the ability for a source to manage facility-wide emissions without triggering major NSR and without the need to perform project-by-project NSR applicability analysis. As long as actual emissions remain below the PAL, a source can implement timely projects, including modifications to existing emissions units and construction of new emissions units, as needed, to react to market demand or to meet other company business objectives.
EPA slightly qualifies this statement by noting that a state minor NSR permit may still be required. EPA also provides a helpful table on “PAL Contribution based on Emission Unit Status:
PAL Implementation
EPA closes by noting that approximately 70 PAL permits were issued in 20 states and the District of Columbia, 12 were renewed and only 1 expired without renewal.
COMMENTARY
EPA’s Draft PAL Guidance makes a number of useful points. The major benefits for sources from the guidance are as follows:
Clarification that the PAL “80%” test is not an automatic ratchet, that the source may propose an appropriate limit, the permitting authority must provide appropriate compliance space, and that the final limit must be justified and is not automatic. This is helpful because it means that a permitting authority may not simply note that the source is less than 80% and proportionally reduce the PAL limit without further justification.
Clarification that the PAL monitoring “hierarchy” does not require use of the top tier, but any tier, that meets the regulatory requirements.
Clarification that emissions factors may be used and do not necessarily require testing if other testing information or sufficient literature is available to support the limits. This is very useful for sources that are difficult to test (e.g., certain fugitive sources, very wet sources, open burners, etc.). Equally importantly, the draft states that if emissions factors are adjusted, baseline emissions should also be adjusted.
Clarification that the “other method” approved in a permit should be used in preference to the regulatory default of uncontrolled potential to emit where the impact on the source’s compliance status is significant.
Clarification that “replacement units” keep the baseline actual emissions of the unit that they replace.
Useful tables showing how unit’s contribution to the PAL is determined, which allows more “newish” units at a higher emission rate than was commonly thought.
As can be seen, there are several useful aspects to this guidance and industrial sources, in particular, should consider commenting in favor of the Draft PAL Guidance. State permitting authorities will also find that the guidance preserves their flexibility while providing some useful benchmarks for permitting, which will be helpful in strengthening the record for PAL permit actions.