ENVIRONMENTAL
PROTECTION
AGENCY
40
CFR
Part
52
[
EPA­
R06­
OAR­
2005­
TX­
0033;
FRL
­
]

Approval
and
Promulgation
of
State
Implementation
Plans;
Texas;
Highly
Reactive
Volatile
Organic
Compound
Emissions
Cap
and
Trade
Program
for
the
Houston/
Galveston/
Brazoria
Ozone
Nonattainment
Area
AGENCY:
Environmental
Protection
Agency
(
EPA).

ACTION:
Final
Rule.

SUMMARY:
EPA
is
approving
revisions
to
the
Texas
State
Implementation
Plan
concerning
the
Highly
Reactive
Volatile
Organic
Compound
Emissions
Cap
and
Trade
Program
for
the
Houston/
Galveston/
Brazoria
ozone
nonattainment
area.

DATE:
This
rule
is
effective
on
[
FEDERAL
REGISTER
OFFICE:
Insert
date
30
days
from
date
of
publication
in
the
Federal
Register].

ADDRESSES:
EPA
has
established
a
docket
for
this
action
under
Docket
ID
No.
EPA­
R06­

OAR­
2005­
TX­
0033.
All
documents
in
the
docket
are
listed
on
the
www.
regulations.
gov
web
site.
Although
listed
in
the
index,
some
information
is
not
publicly
available,
e.
g.,
CBI
or
other
information
whose
disclosure
is
restricted
by
statute.
Certain
other
material,
such
as
copyrighted
material,
is
not
placed
on
the
Internet
and
will
be
publicly
available
only
in
hard
copy
form.
2
Publicly
available
docket
materials
are
available
either
electronically
through
www.
regulations.
gov
or
in
hard
copy
at
the
Air
Permitting
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:
30am
and
4:
30pm
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
related
to
this
SIP
revision,
and
which
is
part
of
the
EPA
docket,
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:
Adina
Wiley,
Air
Permitting
Section
(

6PDR
EPA
Region
6,
1445
Ross
Avenue,
Dallas,
Texas
75202­
2733,
telephone
214­
665­
2115,

wiley.
adina@
epa.
gov.

SUPPLEMENTARY
INFORMATION:
3
Throughout
this
document
wherever
"
we,"
"
us,"
or
"
our"
is
used,
we
mean
EPA.

Outline:

I.
What
action
is
EPA
taking?

II.
What
is
the
background
for
this
action?

III.
What
are
EPA's
responses
to
comments
received
on
the
proposed
action?

IV.
What
does
Federal
approval
of
a
State
regulation
mean
to
me?

V.
Statutory
and
Executive
Order
Reviews
I.
What
action
is
EPA
taking?

EPA
is
approving
the
Highly
Reactive
Volatile
Organic
Compound
Emissions
Cap
and
Trade
(
HECT)
Economic
Incentive
Program
(
EIP),
published
at
Texas
Administrative
Code
(
TAC)
Title
30,
Chapter
101
General
Air
Quality
Rules,
Subchapter
H
Emissions
Banking
and
Trading,
Division
6,
sections
101.390
 
101.394,
101.396,
101.399
 
101.401,
and
101.403.

These
revisions
were
adopted
by
the
Texas
Commission
on
Environmental
Quality
(
TCEQ)
on
December
01,
2004,
and
submitted
to
EPA
on
December
17,
2004,
as
a
revision
to
the
State
Implementation
Plan
(
SIP).
As
discussed
in
our
proposed
action
at
70
FR
58144,
we
conclude
that
the
HECT
program
is
consistent
with
section
110(
l)
of
the
Clean
Air
Act.
We
proposed
approval
of
the
HECT
program
as
an
element
of
the
Texas
SIP
for
the
Houston/
Galveston/
Brazoria
(
HGB)
ozone
nonattainment
area
on
October
5,
2005
(
70
FR
58138).
4
II.
What
is
the
background
for
this
action?

The
HECT
program
was
adopted
as
a
state
regulation
on
December
01,
2004.
The
TCEQ
developed
the
program
as
part
of
its
mid­
course
review
of
the
1­
hour
ozone
attainment
plan
for
the
HGB
ozone
nonattainment
area.
The
mid­
course
review
showed
that
ozone
reductions
comparable
to
those
achieved
by
the
90
percent
reduction
in
industrial
nitrogen
oxide
(
NOx)

emissions
and
the
enforceable
commitments
for
an
additional
42
tons
per
day
of
NOx
reductions
required
in
the
November
2001
(
66
FR
57160)
approved
SIP
could
be
achieved
through
a
combination
of
80
percent
reduction
in
industrial
NOx
emissions
and
additional
targeted
control
of
certain
highly­
reactive
volatile
organic
compounds
(
HRVOCs).
TCEQ
has
chosen
to
revise
its
attainment
strategy
accordingly,
decreasing
the
emphasis
on
NOx
control
and
requiring
additional
reductions
of
HRVOCs.

In
our
proposed
approval
of
the
HECT
program,
we
stated
that
final
action
on
the
HECT
would
not
occur
until
we
published
final
approval
of
the
attainment
demonstration,
which
is
being
processed
concurrently
with
this
approval.
For
a
further
discussion
of
the
attainment
demonstration
and
EPA's
responses
to
comments
on
this
action,
please
see
our
action
on
the
attainment
demonstration
(
EPA­
R06­
OAR­
2005­
TX­
0018),
which
is
being
published
elsewhere
in
today's
Federal
Register.

III.
What
are
EPA's
responses
to
comments
received
on
the
proposed
action?
5
EPA's
responses
to
comments
submitted
by
Galveston­
Houston
Association
for
Smog
Prevention
(
GHASP),
Environmental
Defense
(
Texas
Office),
the
Lone
Star
Chapter
of
the
Sierra
Club,
and
Public
Citizen
(
Texas
Office)
on
November
4,
2005,
are
as
follows.
EPA
has
summarized
the
comments
below;
the
complete
comments
can
be
found
in
the
administrative
record
for
this
action
(
EPA­
R06­
OAR­
2005­
TX­
0033).
While
the
comments
generally
discuss
VOC
trading
programs,
we
are
only
addressing
comments
specific
to
HRVOCs
and
the
HECT.
1
Comment
1:
The
EPA
uses
the
term
"
less­
reactive
VOC",
but
the
TCEQ
term
"
other
VOC"
(
OVOC)
is
preferable.
Some
of
the
other
VOCs
are
actually
highly
reactive
on
a
molar
basis,
but
are
not
emitted
as
widely
or
in
as
great
a
quantity
as
the
designated
HRVOCs.

Response
to
Comment
1:
We
agree
that
the
term
"
other
VOC"
(
OVOC)
will
more
accurately
define
VOCs
that
are
not
categorized
by
TCEQ
as
highly­
reactive.
We
are
using
the
term
OVOC
instead
of
"
less­
reactive
VOC"
in
our
final
actions
on
the
HGB
attainment
demonstration
and
associated
rulemakings.

1
During
the
comment
period,
EPA
did
not
receive
comments
regarding
environmental
justice
and
the
HECT
program.
However,
during
the
finalization
process
we
have
reevaluated
our
interpretation
of
the
definition
of
Environmental
Justice
as
found
in
Executive
Order
12898.
In
our
proposed
approval
of
the
HECT
program,
we
stated
that
"
environmental
justice
concerns
arise
when
a
trading
program
could
result
in
disproportionate
impacts
on
communities
populated
by
racial
minorities,
people
with
low
incomes,
or
Tribes."
On
further
review,
we
believe
the
following
description
is
more
consistent
with
E.
O.
12898:
"
Environmental
justice
concerns
can
arise
when
a
final
rule,
such
as
a
trading
program,
could
result
in
disproportionate
burdens
on
particular
communities,
including
minority
or
low
income
communities."
This
revised
language
does
not
alter
our
determination
that
the
HECT
program
does
not
raise
environmental
justice
concerns.
6
Comment
2:
There
are
problems
with
the
inventory
of
VOC
and
HRVOC
emissions
in
the
HGB
nonattainment
area.

Response
to
Comment
2:
While
EPA
acknowledges
that
there
have
been
past
VOC
emission
inventory
problems
from
sources
associated
with
the
petrochemical
industry
(
see
our
proposed
approval
of
the
revisions
to
the
HGB
attainment
demonstration,
70
FR
58119),
EPA
believes
that
the
emission
inventory
developed
by
TCEQ
for
the
HGB
nonattainment
area
is
an
acceptable
approach
to
characterizing
the
emissions
in
the
HGB
nonattainment
area.
In
addition,

we
are
incorporating
by
reference
our
responses
to
comments
provided
in
our
approval
of
the
attainment
demonstration
for
the
HGB
ozone
nonattainment
area
(
EPA­
R06­
OAR­
2005­
TX­

0018).
Those
responses
more
specifically
address
the
commenters'
concerns
regarding
the
development
and
use
of
the
imputed
inventory,
characterization
of
other
VOCs
in
the
inventory,

and
appropriate
emissions
monitoring
techniques
for
flares,
fugitive
emissions,
and
upsets.
Also,

as
will
be
discussed
more
fully
in
our
responses
to
Comments
3
and
4,
the
implementation
of
the
HECT
and
the
associated
monitoring
and
reporting
requirements
will
serve
to
improve
the
emissions
inventory
for
HRVOCs
in
the
HGB
nonattainment
area.

Comment
3:
The
VOC
and
HRVOC
trading
programs
use
unreliable
data,
which
cannot
be
replicably
measured.
There
are
problems
with
current
methods
for
measurement
of
HRVOC
and
VOC
emissions;
therefore,
the
VOC
and
HRVOC
trading
programs
do
not
meet
EPA's
EIP
Guidance
for
quantification.

Response
to
Comment
3:
EPA
disagrees.
The
proposed
HECT
rule,
at
70
FR
58138,

describes
the
basis
for
EPA's
conclusion
that
the
HECT
rule
satisfies
the
EIP
Guidance
7
("
Improving
Air
Quality
with
Economic
Incentive
Programs"
EPA­
452/
R­
01­
001,
January
2001)

criteria
on
quantifiability,
which
are
found
in
Chapter
4
("
Fundamental
Principles
of
All
EIPs").

Emissions
and
emission
reductions
attributed
to
an
EIP
are
quantifiable
if
they
can
be
reliably
and
replicably
measured:
the
source
must
be
able
to
reliably
calculate
the
amount
of
emissions
and
emission
reductions
from
the
EIP
strategy,
and
must
be
able
to
replicate
the
calculations.
Under
the
HECT
program,
sources
address
the
element
of
quantification
by
using
a
quantification
protocol
that
has
been
approved
by
TCEQ
and
EPA.
Both
agencies
have
important
roles
in
ensuring
these
protocols
provide
reliable
and
replicable
emission
measurements.
The
approved
quantification
protocols
for
calculating
annual
HRVOC
emissions
for
compliance
with
the
HECT
program
are
contained
in
sections
115.725
and
115.764
of
30
TAC
Chapter
115,
Control
of
Air
Pollution
from
Volatile
Organic
Compounds.
Additionally,

VOC
emission
reduction
credits
(
ERCs)
that
are
eligible
for
conversion
into
HECT
allowances
must
also
be
quantified
using
the
monitoring
and
testing
methods
required
in
sections
115.725
and
115.764
and
certified
under
the
Emission
Credit
Banking
and
Trading
program.
The
monitoring
and
testing
protocols
in
sections
115.725
and
115.764
all
require
continuous
monitoring
systems;
EPA
considers
continuous
monitoring
systems
reliable
and
replicable
(
see
Section
5.3(
a)
of
the
EIP
Guidance).
If
the
monitoring
and
testing
data
required
under
sections
115.725
and
115.764
are
unavailable,
sources
can
calculate
HRVOC
emissions
for
HECT
compliance
during
this
time
period
through
continuous
monitoring
data,
periodic
monitoring
data,
testing
data,
data
from
manufacturers,
and
engineering
calculations.
This
measurement
hierarchy
agrees
with
the
emission
measurement
protocol
hierarchy
that
EPA
recommends
in
the
EIP
Guidance
(
see
Section
5.2(
d)).
8
Comment
4:
TCEQ
and
EPA
lack
confidence
in
current
methods
for
measuring
emissions.
This
lack
of
confidence
increases
the
risks
associated
with
a
market­
based
trading
program,
until
the
TCEQ
is
able
to
reconcile
ambient
monitoring
with
industry
emission
inventories.
For
example,
trading
could
exacerbate
the
challenge
of
identifying
the
cause
of
any
program
failures
because
comparisons
of
ambient
monitoring
trend
data
to
emission
inventory
data
will
require
consideration
of
the
timing
and
magnitude
of
trades.

Response
to
Comment
4:
EPA
disagrees.
We
have
discussed
above
in
response
to
Comments
2
and
3
our
conclusion
that
the
methods
used
for
measuring
emissions
under
the
HECT
program
are
consistent
with
EPA
policy
and
guidance,
and
that
the
emissions
inventory
developed
by
TCEQ
is
an
acceptable
approach
to
characterizing
the
emissions
in
the
HGB
nonattainment
area.
Further,
to
the
extent
there
are
concerns
related
to
differences
between
ambient
monitoring
data
and
the
HGB
industrial
emissions
inventory,
the
operation
of
the
HECT
will
serve
to
increase
rather
than
decrease
the
level
of
certainty.
Specifically,
the
use
of
approved
quantification
methods
required
under
the
HECT
will
extend
monitoring
to
vent
gas
streams,
flares,
and
cooling
tower
heat
exchanges
systems
that
might
not
have
been
adequately
monitored
before.
Accordingly,
accounting
for
actual
emissions
under
the
HECT
 
which
is
required
of
each
source
subject
to
this
program
 
should
improve
the
industrial
emissions
inventory.

Comment
5:
The
EPA
should
find
that
it
is
premature
for
TCEQ
to
allow
trading
of
unquantifiable
emissions
of
VOCs
in
the
HGB
nonattainment
area.
If
either
the
source
or
the
9
recipient
incorrectly
estimates
the
emissions
involved
in
a
trade,
the
region
is
at
risk
of
a
net
increase
in
emissions
as
a
result
of
the
trade.
Until
refineries
and
chemical
plants
are
able
to
routinely
quantify
their
VOC
emissions,
EPA
should
not
allow
trading
of
these
VOC
emissions.

Response
to
Comment
5:
EPA
disagrees
that
VOC
emissions
should
be
ineligible
for
trading
in
the
HGB
nonattainment
area.
EPA
believes
that
allowing
the
petrochemical
industry
to
trade
VOC
emissions
under
the
HECT
program
is
appropriate
because
the
TCEQ
has
made
changes
in
regulatory
requirements
to
require
that
certain
sources
of
VOC
emissions
comply
with
continuous
emissions
monitoring
requirements
by
the
end
of
2006.
Additionally,
as
discussed
in
the
EIP
Guidance,
we
have
concluded
that
cap
and
trade
programs
can
be
effective
ways
to
reduce
emissions,
especially
from
large
stationary
sources.
Each
trade
is
part
of
a
system
designed
to
significantly
reduce
emissions
of
the
pollutants
subject
to
the
cap.
EPA
also
believes
that
allowing
the
petrochemical
industry
to
trade
HRVOC
emissions
under
the
HECT
program
is
appropriate
notwithstanding
the
commenter's
concern
about
emissions
estimates,

because
the
HECT
program
satisfies
the
EIP
Guidance
criteria
for
quantification.
In
the
HECT
program,
sources
trading
HECT
allowances
must
quantify
their
emissions
using
the
approved
protocols
in
30
TAC
Chapter
115.
The
use
of
approved
protocols
ensures
that
sources
correctly
estimate
their
excess
allowances
or
the
amount
of
allowances
needed
to
cover
actual
emissions.

Additionally,
TCEQ
included
a
five
percent
safety
margin
in
setting
the
overall
level
of
annual
emissions
allowed
under
the
HECT,
which
should
produce
a
net
annual
average
HRVOC
emissions
decrease
in
the
HGB
nonattainment
area
below
the
level
set
by
the
cap.
10
Comment
6:
EPA
should
not
approve
the
exclusion
of
emissions
above
the
short­
term
limit
from
the
annual
cap
if
a
trading
program
is
approved.

Response
to
Comment
6:
EPA
disagrees.
We
requested
specific
comment
on
this
feature
of
the
program
because,
as
noted
by
us
and
the
commenters,
it
departs
from
past
practices
with
cap
and
trade
programs.
The
commenters
made
one
specific
point
in
this
regard,
which
we
address
in
Comment
7.
Our
response
to
the
more
general
comment
follows.

A
key
feature
of
the
HGB
attainment
strategy
is
the
two­
part
approach
to
HRVOC
emissions.
Routine
HRVOC
emissions
are
targeted
and
reduced
through
an
annual
cap­

andtrade
program,
while
the
non­
routine
emissions
from
emission
events,
maintenance,
start­
up
and
shutdown
are
controlled
through
a
short­
term
limit
of
1200
lb/
hour.
When
exceedances
of
the
short­
term
limit
occur,
the
hourly
emissions
above
1200
lb/
hr
are
not
counted
toward
compliance
with
the
annual
cap
but
are
still
subject
to
enforcement
as
a
violation
of
the
short­
term
limit.

EPA
expects
that
the
root
cause
of
the
conditions
giving
rise
to
any
particular
exceedance
of
the
short­
term
limit
will
be
identified
and
corrected
as
expeditiously
as
practicable.
The
source
is
still
required
to
use
good
air
pollution
control
practices
consistent
with
the
applicable
NSPS
(
40
CFR
60.11(
d))
and
MACT
standards
or
other
applicable
Federal
or
State
programs.

TCEQ
concluded
that
separating
the
two
control
elements
was
an
appropriate
means
of
protecting
smaller
sources
subject
to
the
HECT
from
depending
on
market
availability
of
allowances
or
facing
enforcement
action
if
all
emissions
from
an
exceptionally
large
release
exhausted
their
HECT
allowances.
Additionally,
this
separation
of
the
annual
cap
and
the
short
11
term
limit
establishes
a
clear
procedure
for
handling
emissions
during
non­
routine
events.
We
believe
the
annual
cap
in
conjunction
with
the
short­
term
limit
will
achieve
the
goals
of
the
attainment
demonstration
as
indicated
by
TCEQ's
modeling
analysis.
Please
see
our
action
and
TSD
on
the
attainment
demonstration
(
EPA­
R06­
OAR­
2005­
TX­
0018)
for
further
explanation.

An
additional
advantage
of
separating
these
two
control
elements
is
that
counting
all
emissions
toward
the
annual
cap
could
result
in
a
loss
of
the
incentives
and
cost­
effectiveness
associated
with
cap­
and
trade
programs.
In
EPA's
experience
with
cap
and
trade
programs,

some
sources
will
always
overcontrol
emissions,
which
they
in
turn
will
most
likely
sell
to
other
sources
that
cannot
achieve
such
reductions
without
making
greater
expenditures.
Through
the
functioning
of
the
cap
and
trade
market,
reductions
will
tend
to
be
made
by
the
sources
able
to
make
them
in
the
most
cost­
effective
manner,
and
therefore
the
program
will
tend
to
promote
the
achievement
of
the
maximum
amount
of
emission
reductions
per
dollar
of
resources
expended.

In
the
HGB
area,
however,
an
additional
important
factor
is
present,
in
that
a
significant
number
of
sources
have
the
potential
for
large
emissions
events
or
"
spikes."
In
such
circumstances,
if
a
cap
and
trade
program
counts
all
emissions
towards
the
cap,
then
overcontrolling
sources
will
tend
to
retain
all
of
their
reductions
as
insurance
against
the
possibility
of
consuming
their
entire
annual
allowance
through
an
unforeseeable
emissions
event.

Therefore,
eligible
reductions
will
not
be
traded
as
allowances,
which
will
impair
the
market
function
of
the
cap
and
trade
program
and
thereby
weaken
its
tendency
to
cost
effectively
achieve
emission
reductions.
The
two­
part
structure
of
the
Texas
program
offsets
this
disadvantage.
12
Comment
7:
EPA's
analysis
suggests
that
the
HECT
program
could
lead
to
results
that
flout
the
intent
of
an
EIP.
An
example
would
be
a
company
that
invests
in
efforts
to
dramatically
reduce
its
routine
HRVOC
emissions
below
its
annual
cap,
but
fails
to
invest
in
efforts
to
reduce
its
risk
of
a
major
upset.
This
company
could
be
the
largest
single
emitter
of
HRVOCs
in
a
year
while
also
being
a
major
seller
of
HECT
allowances.

Response
to
Comment
7:
EPA
disagrees.
The
proposed
HECT
rule,
at
70
FR
58143,

describes
EPA's
analysis
and
our
determination
that,
on
balance,
the
HECT
program
is
approvable.
The
intent
of
the
HECT
is
to
reduce
routine
emissions
of
HRVOCs.
The
scenario
presented
by
the
commenters
actually
supports
the
design
of
the
HECT,
in
that
the
routine
HRVOC
emissions
have
been
controlled
because
the
company
has
been
able
to
"
dramatically
reduce"
these
emissions
below
the
facility's
annual
allocation
level.
The
emissions
associated
with
a
major
upset
that
are
exempted
from
the
annual
cap
(
emissions
above
1200
lb/
hr)
would
be
violations
of
the
short­
term
emissions
limit
and
subject
to
enforcement.
We
believe
that
this
two­
part
approach
to
control
of
HRVOC
emissions
recognizes
the
uniqueness
of
the
HGB
nonattainment
area
and
is
appropriate
to
demonstrate
attainment.
Additional
information
on
our
analysis
of
the
attainment
demonstration
is
available
in
the
rulemaking
docket
for
this
action
(
EPA­
R06­
OAR­
2005­
TX­
0018).

As
noted
in
our
proposed
approval,
the
exemption
of
hourly
limit
exceedances
from
the
annual
cap
is
not
provided
for
in
EPA's
EIP
Guidance,
but
the
scenario
provided
by
the
commenters
is
unlikely
to
occur.
Based
on
the
final
HECT
allocation
scheme
updated
March
20,
13
2006,
the
largest
allocation
is
441.9
tons.
This
allocation
is
approximately
equivalent
to
100.9
lb/
hr,
assuming
the
facility
will
operate
with
the
allocation
as
an
hourly
average
to
represent
routine
emissions.
Therefore,
the
largest
HECT
allocation
will
be
approximately
twelve
times
smaller
than
the
1200
lb/
hr
short­
term
limit.
For
every
other
source
under
the
HECT,
the
disparity
would
be
even
greater.
Based
on
this
difference
between
the
short­
term
limit
and
presumed
routine
emissions
levels,
no
source
would
be
able
to
operate
at
the
hourly
limit
for
an
extended
period
of
time
without
pushing
its
emissions
total
close
to
or
above
the
annual
cap
 
in
which
case
it
would
not
be
able
to
sell
allowances.
Therefore,
as
discussed
in
our
proposal,
only
truly
non­
routine
emissions
will
exceed
the
hourly
limit.
Such
exceedances
are
subject
to
enforcement
as
a
violation
of
the
1200
lb/
hr
limit.
Thus,
two
factors
militate
against
the
existence
of
the
commenters'
hypothetical
high­
emitting
allowance
seller:
(
1)
the
improbability
of
a
source
operating
for
long
above
the
hourly
limit
without
consuming
a
large
part
of
its
annual
allocation,
and
(
2)
the
fact
that
each
time
it
did
exceed
the
hourly
limit,
it
could
be
subject
to
enforcement.
Because
we
find
that
the
result
cited
by
the
commenters
is
unlikely
to
occur,
we
continue
to
believe
that
the
relative
advantages
and
disadvantages
of
the
structure
of
the
HECT
program
support
approval.

Also,
while
the
structure
of
the
HECT
and
the
HRVOC
rules
anticipates
that
emission
events
will
not
be
completely
eradicated,
EPA
believes
that
in
combination
these
programs
provide
sufficient
disincentives
that
sources
will
sufficiently
reduce
the
frequency
and
magnitude
of
large
emissions
events
such
that
emission
events
would
not
be
expected
to
impact
peak
ozone
levels.
The
University
of
Texas
report
"
Variable
Industrial
VOC
Emissions
and
Their
Impact
on
Ozone
Formation
in
the
Houston
Galveston
Area,"
April
16,
2004,
estimated
from
historic
14
information
that
it
is
probable
that
at
least
one
event
will
occur
annually
at
a
time
and
location
to
impact
peak
ozone.
TCEQ
determined,
and
EPA
concurs,
that
it
is
therefore
necessary
to
reduce
the
frequency
of
emission
events
so
that
emission
events
do
not
interfere
with
attainment
of
the
1­
hour
NAAQS,
which
only
allows
an
average
of
one
exceedance
per
year.
Based
on
this
study,

we
believe
the
hourly
emission
limit
will
achieve
this
goal.
Because
facilities
would
be
expected
to
take
action
to
avoid
emissions
events
exceeding
the
short­
term
limit
of
1200
lbs/
hr,
we
anticipate
that
the
frequency
of
such
events
in
the
future
will
be
lower
than
in
the
past
and
on
average
less
than
1
event
per
year
impacting
peak
ozone
should
be
expected.
The
University
of
Texas
study
also
supports
our
belief
that
even
if
the
scenario
presented
by
the
commenters
does
actually
occur,
it
is
unlikely
to
impact
attainment
of
the
1­
hour
ozone
NAAQS.

Comment
8:
If
EPA
approves
the
exclusion
of
emissions
above
the
short­
term
cap
from
the
annual
cap,
it
should
at
least
condition
its
approval
on
the
TCEQ
adopting
a
requirement
that
a
company
may
not
be
a
net
seller
of
HECT
allowances
in
the
same
year
that
it
makes
use
of
the
exclusion.

Response
to
Comment
8:
EPA
disagrees.
The
condition
described
by
the
commenters
is
not
necessary
to
ensure
that
the
HECT
functions
properly.
As
described
in
our
response
to
Comment
7
above,
it
is
unlikely
that
a
source
would
be
a
net
seller
of
allowances
and
also
exempt
emissions
above
the
hourly
limit
from
its
annual
cap.
15
Comment
9:
If
EPA
approves
the
HECT
program
as
adopted
by
the
TCEQ,
EPA
should
commit
to
independently
auditing
the
program
annually
during
its
first
several
years
to
determine
whether
implementation
of
the
rule
meets
EIP
Guidance.

Response
to
Comment
9:
EPA
disagrees
that
an
independent
audit
of
the
HECT
is
necessary.
As
proposed
by
EPA
(
70
FR
58138),
the
HECT
does
have
a
formal
audit
provision
that
provides
sufficient
oversight
to
identify
and
address
potential
areas
of
concern.
The
audit
provision
is
in
section
101.403(
a)
of
the
HECT
rules
and
requires
TCEQ
to
conduct
an
audit
every
three
years,
beginning
in
2007.
The
audit
will
evaluate
the
impact
of
the
program
on
the
State's
ozone
attainment
demonstration,
the
availability
and
cost
of
allowances,
compliance
by
the
participants,
and
any
other
elements
the
TCEQ
Executive
Director
may
choose
to
include.

The
TCEQ
Executive
Director
will
recommend
measures
to
remedy
any
problems
identified
during
the
audit,
including
discontinuing
allowances
trading.
The
audit
data
and
results
must
be
completed
and
submitted
to
EPA
and
made
available
for
public
inspection
within
six
months
from
the
beginning
of
the
audit.
EPA
will
receive
the
audit
reports
and
will
have
the
opportunity
through
the
SIP
process
to
require
any
necessary
changes.
Additionally,
facilities
that
do
not
have
enough
allowances
to
cover
their
actual
HRVOC
emissions
during
a
control
period
will
have
their
allowances
for
the
next
control
period
reduced
by
an
amount
equal
to
the
emissions
exceeding
the
allowances,
plus
an
additional
ten
percent
of
the
exceedance.
Also,
the
TCEQ
Executive
Director
has
the
authority
to
initiate
enforcement
actions
if
necessary
to
correct
violations
of
the
HECT
program.
16
The
HECT
audit
provisions
described
above
are
consistent
with
EPA's
expectations
for
evaluating
the
results
of
an
economic
incentive
program
(
EIP),
as
outlined
in
section
5.3(
b)
of
the
EIP
Guidance.
Section
5.3(
b)
explains
that
an
appropriate
schedule
for
program
evaluations
is
at
least
every
three
years,
which
coincides
with
other
periodic
reporting
requirements
such
as
those
applicable
to
emission
inventory
requirements
required
by
the
CAA.
EPA
believes
that
the
triennial
HECT
audit
schedule
and
the
required
annual
report
(
section
101.403(
b))
that
summarizes
all
HECT
trades
completed
in
the
most
recent
control
period
will
be
sufficient
to
ensure
the
HECT
does
not
jeopardize
the
HGB
area's
attainment
strategy.

EPA's
response
to
Texas
Industry
Project
(
TIP)
comments
made
on
November
4,
2005,

is
as
follows:

Comment:
TIP
supports
EPA's
proposed
approval
of
the
HECT
program
and
urges
EPA
to
finalize
its
approval
as
soon
as
practicable.

Response:
EPA
acknowledges
the
support
of
TIP
for
our
approval
of
the
HECT
program.

EPA's
response
to
comments
made
by
the
BCCA
Appeal
Group
(
BCCAAG)
on
November
4,
2005,
is
as
follows:

Comment
1:
BCCAAG
supports
EPA's
proposed
approval
of
the
HECT
program
and
urges
EPA
to
finalize
its
approval
as
soon
as
practicable.
17
Comment
2:
BCCAAG
supports
the
establishment
of
a
separate
short­
term
limit
on
HRVOC
emissions,
and
the
exclusion
of
short­
term
limit
exceedances
from
the
HECT
program.

Response
to
Comment
1
and
2:
EPA
acknowledges
the
support
of
BCCAAG
for
our
approval
of
the
HECT
program
and
the
specific
feature
of
the
HECT
that
allows
exceedances
of
the
short­
term
limit
to
be
exempt
from
the
HECT.

We
note
that
BCCAAG
also
submitted
a
set
of
comments
on
November
4,
2005,
that
were
specific
to
our
proposed
action
on
the
revisions
to
the
HGB
attainment
demonstration.
On
page
8
of
this
submittal,
the
commenter
references
the
HECT,
but
gives
no
additional
information
relevant
to
our
rulemaking
on
the
HECT.
We
are
addressing
this
separate
BCCAAG
submittal
in
our
action
on
the
attainment
demonstration
(
EPA­
R06­
2005­
TX­
0018).

IV.
What
does
Federal
approval
of
a
State
regulation
mean
to
me?

Enforcement
of
the
State
regulation
before
and
after
it
is
incorporated
into
the
Federally
approved
SIP
is
primarily
a
State
function.
However,
once
the
regulation
is
Federally
approved,

EPA
and
the
public
may
take
enforcement
action
against
violators
of
these
regulations.

V.
Statutory
and
Executive
Order
Reviews
18
Under
Executive
Order
12866
(
58
FR
51735,
October
4,
1993),
this
action
is
not
a
"
significant
regulatory
action"
and
therefore
is
not
subject
to
review
by
the
Office
of
Management
and
Budget.
For
this
reason,
this
action
is
also
not
subject
to
Executive
Order
13211,
"
Actions
Concerning
Regulations
That
Significantly
Affect
Energy
Supply,
Distribution,

or
Use"
(
66
FR
28355,
May
22,
2001).
This
action
merely
approves
state
law
as
meeting
Federal
requirements
and
imposes
no
additional
requirements
beyond
those
imposed
by
state
law.

Accordingly,
the
Administrator
certifies
that
this
rule
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities
under
the
Regulatory
Flexibility
Act
(
5
U.
S.
C.

601
et
seq.).
Because
this
rule
approves
pre­
existing
requirements
under
state
law
and
does
not
impose
any
additional
enforceable
duty
beyond
that
required
by
state
law,
it
does
not
contain
any
unfunded
mandate
or
significantly
or
uniquely
affect
small
governments,
as
described
in
the
Unfunded
Mandates
Reform
Act
of
1995
(
Public
Law
104­
4).

This
rule
also
does
not
have
tribal
implications
because
it
will
not
have
a
substantial
direct
effect
on
one
or
more
Indian
tribes,
on
the
relationship
between
the
Federal
Government
and
Indian
tribes,
or
on
the
distribution
of
power
and
responsibilities
between
the
Federal
Government
and
Indian
tribes,
as
specified
by
Executive
Order
13175
(
65
FR
67249,
November
9,
2000).
This
action
also
does
not
have
Federalism
implications
because
it
does
not
have
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,
or
on
the
distribution
of
power
and
responsibilities
among
the
various
levels
of
government,
as
specified
in
Executive
Order
13132
(
64
FR
43255,
August
10,
1999).
This
action
merely
approves
a
state
rule
implementing
a
Federal
standard,
and
does
not
alter
the
relationship
or
the
distribution
of
power
and
responsibilities
established
in
the
CAA.
This
rule
19
also
is
not
subject
to
Executive
Order
13045
A
Protection
of
Children
from
Environmental
Health
Risks
and
Safety
Risks
@

(
62
FR
19885,
April
23,
1997),
because
it
is
not
economically
significant.

In
reviewing
SIP
submissions,
EPA
=

s
role
is
to
approve
state
choices,
provided
that
they
meet
the
criteria
of
the
CAA.
In
this
context,
in
the
absence
of
a
prior
existing
requirement
for
the
State
to
use
voluntary
consensus
standards
(
VCS),
EPA
has
no
authority
to
disapprove
a
SIP
submission
for
failure
to
use
VCS.
It
would
thus
be
inconsistent
with
applicable
law
for
EPA,

when
it
reviews
a
SIP
submission,
to
use
VCS
in
place
of
a
SIP
submission
that
otherwise
satisfies
the
provisions
of
the
CAA.
Thus,
the
requirements
of
section
12(
d)
of
the
National
Technology
Transfer
and
Advancement
Act
of
1995
(
15
U.
S.
C.
272
note)
do
not
apply.
This
rule
does
not
impose
an
information
collection
burden
under
the
provisions
of
the
Paperwork
Reduction
Act
of
1995
(
44
U.
S.
C.
3501
et
seq.).

The
Congressional
Review
Act,
5
U.
S.
C.
section
801
et
seq.,
as
added
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
of
1996,
generally
provides
that
before
a
rule
may
take
effect,
the
agency
promulgating
the
rule
must
submit
a
rule
report,
which
includes
a
copy
of
the
rule,
to
each
House
of
the
Congress
and
to
the
Comptroller
General
of
the
United
States.
EPA
will
submit
a
report
containing
this
rule
and
other
required
information
to
the
U.
S.

Senate,
the
U.
S.
House
of
Representatives,
and
the
Comptroller
General
of
the
United
States
prior
to
publication
of
the
rule
in
the
Federal
Register.
A
major
rule
cannot
take
effect
until
60
days
after
it
is
published
in
the
Federal
Register.
This
action
is
not
a
A
major
rule
@

as
defined
by
5
U.
S.
C.
section
804(
2).
20
Under
section
307(
b)(
1)
of
the
CAA,
petitions
for
judicial
review
of
this
action
must
be
filed
in
the
United
States
Court
of
Appeals
for
the
appropriate
circuit
by
[
FEDERAL
REGISTER
OFFICE:
insert
date
60
days
from
date
of
publication
of
this
document
in
the
Federal
Register].
Filing
a
petition
for
reconsideration
by
the
Administrator
of
this
final
rule
does
not
affect
the
finality
of
this
rule
for
the
purposes
of
judicial
review
nor
does
it
extend
the
time
within
which
a
petition
for
judicial
review
may
be
filed,
and
shall
not
postpone
the
effectiveness
of
such
rule
or
action.
This
action
may
not
be
challenged
later
in
proceedings
to
enforce
its
requirements.
(
See
section
307(
b)(
2).)

List
of
Subjects
40
CFR
Part
52
Environmental
protection,
Air
pollution
control,
Intergovernmental
relations,
Nitrogen
oxides,
Ozone,
Reporting
and
recordkeeping
requirements,
Volatile
organic
compounds.

Dated:
August
24,
2006
Richard
E.
Greene,

Regional
Administrator,
Region
6.
21
40
CFR
part
52
is
amended
as
follows:

PART
52­­[
AMENDED]

1.
The
authority
citation
for
Part
52
continues
to
read
as
follows:

Authority:
42
U.
S.
C.
7401
et
seq.

Subpart
SS
­
Texas
2.
The
table
in
§
52.2270(
c)
entitled
"
EPA
Approved
Regulations
in
the
Texas
SIP"
is
amended
under
Chapter
101
 
General
Air
Quality
Rules,
Subchapter
H
 
Emissions
Banking
and
Trading,
by
adding
in
numerical
order
a
new
centered
heading
"
Division
6
 
Highly­
Reactive
Volatile
Organic
Compound
Emissions
Cap
and
Trade
Program"
followed
by
new
entries
for
sections
101.390,
101.391,
101.392,
101.393,
101.394,
101.396,
101.399,
101.400,
101.401
and
101.403.

The
additions
read
as
follows:

§
52.2270
Identification
of
plan.

*
*
*
*
*

(
c)
*
*
*
22
EPA
Approved
Regulations
in
the
Texas
SIP
State
Citation
Title/
Subject
State
approval/
submittal
date
EPA
approval
date
Explanation
Chapter
101
 
General
Air
Quality
Rules
*
*
*
*
*
*
*
Subchapter
H
 
Emissions
Banking
and
Trading
*
*
*
*
*
*
*
Division
6
 
Highly­
Reactive
Volatile
Organic
Compound
Emissions
Cap
and
Trade
Program
Section
101.390
Definitions
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.391
Applicability
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.392
Exemptions
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.393
General
Provisions
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.394
Allocation
of
Allowances
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.396
Allowance
Deductions
12/
01/
04
[
Insert
date
of
FR
publication]
23
[
Insert
FR
page
number
where
document
begins]
Section
101.399
Allowance
Banking
and
Trading
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.400
Reporting
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.401
Level
of
Activity
Certification
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
Section
101.403
Program
Audits
and
Reports
12/
01/
04
[
Insert
date
of
FR
publication]
[
Insert
FR
page
number
where
document
begins]
*
*
*
*
*
*
*
