Title V and NSR Offsets:
Observations from the Experts
William Wong, South Coast Air Quality Management District
Joseph Hower, P.E., DEE, ENVIRON International Corporation
Jocelyn Niebur Thompson, Weston Benshoof, Rochefort, Rubalcava
MacCuish LLP
What is Title V?
Title V - The Big Picture
1990 CAAA
EPA
Title I
Urban Smog
Title II
Mobile Sources
Administering Agency
Title V
Permit
Title III
Air Toxics
Title IV
Acid Rain
Title VI
Ozone Layer
Facility
Title VII
Enforcement
What is Title V?
Permit to Operate
Permit D1
Old Permits
Conditions
Permit D2
Scenario 2
Scenario 1
Permit D3
Facility PTO
State Air
Rules
Federal
Program
Title V Permit
Title V Applicability
Title V Major Source Thresholds - PTE
Pollutant
Classification
Threshold (tpy)
Ozone
Marginal
100 (NOx or VOC)
Moderate
100 (NOx or VOC)
Serious
50 (NOx or VOC)
Severe
25 (NOx or VOC)
Extreme
10 (NOx or VOC)
HAPs
10 individual / 25 total
Synthetic Minor permits
Title V Imposes Many Hardships
 Longer Permit Modification Schedules
- Project delays particularly for combined programs
 Additional Monitoring, Recordkeeping, and Reporting
- Deviation Reporting
 Compliance Certifications
 More Scrutiny
 Public and EPA Notice Requirements
 The only good thing about Title V is that it allows emissions
over the thresholds
Becoming a Non-Major Source
 True Minor
 Categorical Exemptions
- Asbestos Demo And Removal
- Residential Wood Heaters
 Physical Demolition
 SIC Code Groupings
 Prohibitory Rules
 Non-federally Enforceable Control Equipment
(Temporary)
 Actuals <50% Of PTE Thresholds
- Compliance With SCAQMD Rule 3008
Synthetic Minor Permits
 Title V is triggered based on Potential emissions, not
actuals
 Many facilities operate far below their potential
 A way out of Title V for many facilities
 Must Accept a Cap On Emissions
 Annual limits vs. monthly
 Specific language is important
 Monitoring and Reporting Requirements
 Can Trigger NSR if the cap is later exceeded
FE vs. non-FE provisions in permits
DOES YOUR TITLE V PERMIT CONTAIN SOME LOCAL SEASONING?
Health & Safety Code Section 42301.12 (a) requires that any
Title V permit issued by a district:

“Identify in the permit, to the greatest extent feasible, permit terms
and conditions which are federally enforceable and those which
are not federally enforceable.” 42301.12(a)(3)

Federally enforceable conditions are those “imposed pursuant to a
federal requirement or because the source has requested [that they
be federally enforceable].” 42301.12(a)(3)(A)

“[B]ase the reopening [of the Title V permit] upon the federal criteria
for reopening and limit the reopening to only the federal
component of the Title V permit.”
FE vs. non-FE provisions in permits
In Re Riverside Cement Co.
Background
•
Riverside Cement Co. appealed the Executive Officer’s
deletion from its Title V permit of an erroneous permit
condition imposed pursuant to then expired Rule 2009.1,
which had not been submitted to EPA and was therefore not
federally enforceable.
•
The Hearing Board, sua sponte, questioned whether the
Executive Officer was required to first give notice to EPA
pursuant to the District’s Rule 3003(j), which requires notice for
any Title V permit revision that is not administrative.
•
In a split 3-2 decision, the Hearing Board decided on other
grounds that the Executive Officer’s action was improper.
FE vs. non-FE provisions in permits - Bill
DISTRICT POSITION

EPA should have no interest in non-federally
enforceable conditions placed in Title V permits.
EPA POSITION (?)

Because the District’s Rule 203, which prohibits
operation contrary to permit conditions, is SIPapproved, all District permit conditions are
federally-enforceable.
Permit Shield
 Clean Air Act §504; 40 CFR §(f)
 Offers limited protection from enforcement for
requirements not included in permit conditions
 Optional program:
- Air district not required to include in Title V program
- If included in program, permit applicant may choose
whether to apply
 Practice varies among districts
 Permit must explicitly exclude the requirement
 Circumstances when permit shield would be beneficial
Compliance Certifications – Types
 Deviation Reports
 Semiannual Monitoring Reports
 Annual Compliance Certifications
Compliance Certifications –
Deviation Reports
 Prompt reporting of deviations from permit requirements
(40 CFR § 70.6 (a)(3)(iii)(B))
 “Prompt” is defined by the local jurisdiction
 Reporting deadline may be affected by:
-
Emergencies
Breakdowns
Excess emissions
Other
Compliance Certifications –
Semiannual Monitoring Reports
 Reports of any required monitoring must be submitted at
least every 6 months
 All deviations must be clearly identified
 Reports must be certified by responsible official
 40 CFR §70.6(a)(3)(iii)(A)
Compliance Certifications Annual Compliance Certification
 Compliance certifications must be submitted at least
annually
 Include detailed inventory of permit terms and conditions
 Identify methods used to determine compliance
 As to each requirement, specify whether compliance was
continuous or intermittent
 Identify each deviation from permit terms
 40 CFR §70.6(c)(5)
Compliance Certifications –
What is “Reasonable Inquiry”?
 Mandatory compliance certification language:
“Based on information and belief formed after reasonable
inquiry, the statements and information in the [application,
report or compliance certification] are true, accurate and
complete.” 40 CFR §70.5(d)
 No definition of “reasonable inquiry”
 Agency tendency to apply hindsight, e.g., if a violation is
later found, the inquiry must not have been reasonable
 Implementation tips
Compliance Certifications - Other
 NSR Permitting – Federal CAA Requirement
- Applicability: NSR permitting for a major emitting facility
- Scope: Major stationary sources within the state
- Status: In compliance or on a schedule of compliance with
applicable emissions limits under the CAA
- CAA § 173(a)(3); included in local SIP-approved NSR rules
 NSR Permitting – Additional Local Requirements
-
Applicability: NSR permitting for any sources
Scope: All sources at the facility submitting the application
Status: Compliance with all district rules
E.g., SCAQMD Rule 1303 (b)(4)
Is a variance or abatement order sufficient compliance?
Offsets and New Source Review
AIR POLLUTION CREDITS – AN ENDANGERED SPECIES??
 Background
The Federal Offset System: “A key method for controlling air
pollution without impeding new economic activity is
through "offsetting." Under this strategy, the relevant air
pollution control authority, whether it be the EPA or a state
or local agency, will permit the creation of a new source
of emissions only if the new polluter is able to secure an
offsetting reduction in emissions from preexisting polluters
at least equal to the amount of pollution the new source
could potentially generate.” Santa Barbara County APCD
v. U.S. EPA, 31 F.3d 1179, 1181 (DC Cir. 1994)
New Source Review
 CAA Section 173 provides that the District must show that “by
the time the source is to commence operation, sufficient
offsetting emission reductions have been obtained, such that
total allowable emissions from existing sources in the region,
from new or modified sources which are not major emitting
facilities, and from the proposed source will be sufficiently less
than total emissions from existing sources . . . prior to the
application for such permit to construct or modify so as to
represent (when considered together with the [required] plan
provisions . . .) reasonable further progress . . ..”
 CAA Section 171(3) defines “reasonable further progress” as
such “annual incremental reductions in emissions of the
relevant air pollutant as are required . . . for the purpose of
ensuring attainment of the applicable [NAAQS] by the
applicable date.”
New Source Review
The District has demonstrated to EPA that its more stringent NSR program,
while deviating from certain specific EPA requirements, nevertheless
overall achieves “reasonable further progress” and is equivalent to the
federal program.
 District offsets minor sources as well as non-major modifications to major
sources
 Minor sources are subject to state BACT or LAER taking into account cost
considerations
 ERC’s are adjusted for BACT.
 District offset ratio 1.2 : 1 for all pollutants; EPA requires 1: 1 offset for all nonextreme pollutants, currently VOC’s and NOx as ozone precursors.

EPA has rescinded 1 hour ozone standard in lieu of 8-hour standard and
reclassified the District from extreme to serious-17. The District as well as other
states have sued EPA in the case, SCAQMD v. EPA (D.C. Cir) No. 04-1200. A
decision is expected within the next few months.
New Source Review
The State Offset System
 “Each district with moderate air pollution or worse shall
include in its attainment plan “[a] stationary source control
program designed to achieve no net increase in emissions of
nonattainment pollutants or their precursors from new or
modified stationary sources which emit or have the potential
to emit [at specified thresholds ]”
(Health & Safety Codes Sections 40918 et seq.)

CARB has also allowed the District to establish equivalency
to the state offset requirement programmatically.
 Federal requirements for offsets are more stringent than state
requirements, and thus District treats federal offsets as
meeting state requirements.
New Source Review
Creation of external offsets (ERC’s)
 District Rule 1309(b)(4) requires ERC’s to be based on emission
reductions that are real, quantifiable, permanent, federally
enforceable, and not greater than current BACT (surrogate for being
surplus at time of use)
Industry has complained that the BACT discount removes any incentive
to reduce emissions to create credits.
 Alternative means of credit generation:
- District Regulation XVI (SIP-approved)*:
 Provides for the creation of mobile source offsets (MSERC’s)
-
All effectively expired (except Rule 1632 for ship hotelling operations, which
expires in 2010).
 Rule 2507: (SIP-approved)
Provides for the creation of area source credits (ASC’s) through the
electrification of agricultural pumps
- To be used only as RECLAIM Trading Credits or RTC’s.
- Effectively expired until EPA, ARB, and the District decide whether these
“credits” are still surplus.
-
*See USA v. Vista Paint Corp., No. 92-55160, 1992 US App. LEXIS 24747 (9th Cir. (Sept. 24,
1992)
New Source Review
MAXIMIZING CURRENT USE OF CREDITS
Amended Rule 1309 (2002) (Not SIP-approved)
 Provides for the creation of short term credits or STC’s ( in effect yearly
ERC’s through 2010 and permanent thereafter.)
 STC’s include SIP-approved MSERC’s and ASC’s
Amended Rule 1309(h) (1995) (SIP-approved)
 Allows for the creation of interpollutant offsets on a case by case basis.
Amended Rule 1309(i) 1995) (SIP-approved)
 Allows for the creation of inter-basin or inter-district offsets
Rule 1303(b) (SIP-approved)
 Allows netting out of the offset requirement when the proposed source
yields no net emission increase at a facility.
 QUERY: ARE EMISSION REDUCTIONS DISCOUNTED?
Rule 1304(c)(2) (SIP-approved)
 Allows for an offset exemption for concurrent facility modifications
 Emission reductions are discounted but not BACT-discounted
New Source Review
Rule 1303(b) (SIP-approved)
 Allows netting out of the offset requirement when the
proposed source yields no net emission increase at a
facility.
Query: are emission reductions discounted?
Rule 1304(c)(2) (SIP-approved)
 Allows for an offset exemption for concurrent facility
modifications
 Emission reductions are discounted but not BACTdiscounted
Getting Credits from the District Bank:
 Rule 1309.1: (2002 amendments SIP-approved)
- Provides designated sources with access to District’s
internal bank of offsets
New Source Review
SB288 – Protect California Air Act of 2003
(Health & Safety Code section 42500 et seq.)




Enacted to counter EPA’s NSR Reform
Freezes each agency’s NSR rules as of Dec. 30, 2002
Allows agencies to make NSR more stringent
Allows agencies to relax NSR only if it meets specified requirements (e.g.
substantial hardship) and is approved by CARB
Query: Does SB288 apply to offset requirements?
 CAPCOA: No; CARB: Yes
 NRDC has petitioned CARB to find District’s Rule 1315 -Federal NSR Tracking
System and 2006 amendments to Rule 1309.1 (extending thermal power
plant access to Priority Reserve Credits) to violate SB 288
 Neither rule affects the amount of offsets required for NSR purposes
 Early review by CARB of proposed rules disclosed no SB 288 concerns
Questions or Comments
Joseph Hower, P.E., DEE
Managing Principal
ENVIRON International Corporation
(213) 943-6319, jhower@environcorp.com
Jocelyn Niebur Thompson
Partner
McClintock, Weston, Benshoof, Rochefort, Rubalcava & MacCuish,
LLP
(213) 576-1104, jocelyn@wbcounsel.com
William Wong
Senior Deputy Counsel
South Coast Air Quality Management District
(909) 396-2000, wwong@aqmd.gov