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On June 30, 2010, the U.S. EPA announced final disapproval of the Texas Commission of Environmental Quality’s (TCEQ) Flexible Permit Program in the Federal Register stating it does not meet Federal Clean Air Act requirements.  Within 60 days of publication in the Federal Register, stakeholders have an opportunity to appeal the EPA’s decision.  The TCEQ Flexible Permit Program allowed sites to manage operations by staying under an emissions cap rather than setting specific emission limits for individual emissions sources.  It is interesting to note that the disapproval focuses on inadequate monitoring, recordkeeping, and reporting (MRR) issues and inadequate safeguards for Major New Source Review (NSR).  The disapproval does not address site-wide emission caps in flexible permits.  Now all sites authorized via a flexible permit in Texas may potentially be required to convert flexible permits into Texas permits that are SIP-approved and enforceable (e.g., 30 TAC 116 Subchapter B permits).

On June 16, 2010, the TCEQ approved proposed revisions to the flexible permit rules to satisfy the EPA’s objections to the program.  The revisions would impact a site seeking to obtain a new flexible permit or a flexible permit amendment and would add stringent MRR requirements that are similar to the PAL MRR requirements under 40 CFR 52.21.  In addition, emission caps would be limited to like-kind sources and would require permit amendments to add new sources.  The public comment period on the rules ends August 2, 2010 at which point, the TCEQ may finalize the proposed rules and submit them to EPA for review.  It is unknown if the TCEQ Commissioners will approve the new flexible permit rules if the EPA indicates that it will reject them.

In a July 6, 2010 letter to the U.S. EPA, the TCEQ outlined a proposed “two-step” approach to “de-flexing” a flexible permit.  Under this proposal, a site would submit a Permit Alteration to remove an emissions cap and re-distribute the allowable emissions.  Then an amendment or renewal application would be submitted to trigger public notice requirements.  The exercise would also require an audit to assess if there had been a circumvention of New Source Review (NSR) requirements including Prevention of Significant Deterioration (PSD) or Nonattainment NSR.  The EPA has not yet provided feedback on the TCEQ’s proposal.

One option EPA has proposed to assist flexible permit site holders in the review and identification of all applicable Clean Air Act requirements is a voluntary compliance audit program.  If a site voluntarily enters into an agreement with the EPA, a 3rd party audit is required to be performed that requires a source-by-source review of emissions, monitoring, reporting, and recordkeeping requirements.  The program also requires a minimum expenditure for community projects based on classification of sites into four tiers.