1. Emissions Banking and Trading (EBT) Overview/Update Melissa Ruano Air Quality Division Texas Commission on Environmental Quality Advanced Air Permitting Seminar 2015

2. Presentation Overview Emission Reduction Credits (ERC) Discrete Emission Reduction Credits (DERC) Mass Emissions Cap and Trade (MECT) Program Highly Reactive Volatile Organic Compounds (HRVOC) Emissions Cap and Trade (HECT) Program

3. ERC Program ERCs are: generated from a permanent reduction of a criteria pollutant, excluding lead, or a precursor of a criteria pollutant; certified in tons per year (tpy); generated and used only in nonattainment areas; expire after five years of emission reduction; and must be permanent, enforceable, real, quantifiable, and surplus at time of generation and use.

4. ERCs and Netting Reductions certified as an ERC may be used in netting by the generator per 30 TAC §101.306(a)(4) if:30 TAC §101.306(a)(4) –the ERC has not been used, sold, reserved for use, or otherwise relied upon; and –the ERC is voided and no longer available for trading or other use.

5. Use of ERCs for NSR Offsets Rule Changes An application to use ERCs must be submitted between the date the permit is administratively complete and 90 days prior to the start of operation. An application will not be accepted before the ERC is available in the compliance account for the site where it will be used. If approved, the date the application was submitted is the date of use.

6. The user must submit the application to use ERCs prior to ERC expiration date. Once approved for use, the ERC is good for the life of the facility. Use of ERCs for NSR Offsets

7. ERC Use Limitations Generally, an ERC must be used in the same nonattainment area in which it was generated for the pollutant for which it was generated. There is an exception if the user satisfies the conditions for inter-pollutant or inter-area use of ERCs:inter-pollutantinter-area –requires project-specific photochemical modeling; and –requires TCEQ and EPA approval.

8. DERC Program DERCs are: generated from a temporary reduction of a criteria pollutant, excluding lead, or a precursor of a criteria pollutant; certified in tons; generated in attainment or nonattainment areas; do not expire; and must be quantifiable, surplus, and real at time of generation.

9. Use of DERCs for Permit Exceedance User must demonstrate no adverse impact. Use is limited to one exceedance of no more than 12 months in any 24-month period. In ozone nonattainment areas, the exceedance must be ≤ 10 tons of NO X or ≤ 5 tons of VOCs. In attainment or unclassifiable areas, the exceedance must be no more than the PSD levels in 40 CFR §52.21(b)(23). 40 CFR §52.21(b)(23)

10. Use of DERCs for NSR Offsets Rule Changes The user must submit an application to use DERCs: –at least 90 days before the start of operation; and –at least 90 days prior to each year of operation not covered by a prior application. A DERC cannot be used unless it is available in the account for the site where it will be used.

11. DERC Use Limitations Generally, a DERC must be used in the same area in which it was generated for the pollutant for which it was generated. Limitations for the use of NO X and VOC DERCs generated in attainment areas, nonattainment areas, and covered attainment counties (as defined in 30 TAC §115.10) can be found under §101.372(f).30 TAC §115.10§101.372(f) There is also an exception if user satisfies inter- pollutant or inter-area use of DERCs.

12. Mobile and Area Source Credits The TCEQ is currently reviewing issues related to the generation and use of mobile and area source credits. Refer to §101.306 (Emission Credit Use) and §101.376 (Discrete Emission Credit Use) for the current use requirements.§101.306 §101.376

13. MECT Program Establishes a mandatory cap for NO X emissions. Applies to sites in Houston-Galveston-Brazoria eight-hour ozone nonattainment area (HGB) that are a: –major source of NO X with facilities subject to 30 TAC Chapter 117; or 30 TAC Chapter 117 –minor source of NO X with an uncontrolled design capacity to emit ≥ 10 tpy of NO X from facilities subject to Chapter 117.

14. MECT Program Provides allowances based on historic levels of activity. Once a site is in the Program, it always remains in until permanently shut down.

15. HECT Program Establishes a mandatory cap for HRVOC emissions. HRVOCs are defined as ethylene, propylene, 1,3–butadiene, and all isomers of butene. Applies to vents, flares, and cooling towers in Harris County. Sites that have the potential to emit ≤ 10 tpy of HRVOC from all affected facilities are exempt.

16. HECT Program Provides allowances based on uncontrolled HRVOC emissions and a ratio of each site’s actual HRVOC emissions versus other sites in their industry sector. Once a site is in the Program, it always remains in until permanently shut down.

17. Using Allowances for NSR Offsets New Rule Requirements The facility being offset must be subject to the program (i.e., MECT for MECT facilities; HECT for HECT facilities). MECT allowances can be used for NO X offsets and HECT allowances for VOC offsets. A permanent allowance allocation must be used. The allowances used cannot be banked, traded, or used for any other purpose.

18. Using Allowances for NSR Offsets The user must submit an application at least 30 days before the start of operation. Allowances used for the 1:1 portion: –must be used simultaneously for MECT or HECT compliance; –all allowances set aside will be deducted at the end of each control period; and –may devalue with future regulatory changes.

19. Using Allowances for NSR Offsets Allowances used for the 0.3 portion: –are permanently retained by TCEQ; and –will not devalue.

20. Using Allowances for NSR Offsets Allowances used for offsets may be released if: –an alternative means of compliance for the offset requirement is authorized in the NSR permit; or –the affected facility is permanently shut down (1:1 portion only). If approved, the release will be effective in the control period following the date of the request. Allowances will not be released retroactively.

21. Contact Information Emissions Banking and Trading Web Page Melissa Ruano, Emissions Banking and Trading Melissa.Ruano@tceq.texas.gov Phone: 512-239-4496

22. Questions