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On June 30, 2010, EPA disapproved Texas’s request to incorporate the flexible permit program into the federally-approved Texas SIP. The Agency determined that the program did not meet the minimum federal Clean Air Act (CAA) requirements for NSR because the proposed flexible permit program allows companies in Texas to group emissions from multiple units under a single cap, rather than include unit-specific emission limits for pollution sources. The TCEQ and EPA want to resolve this situation so that current flexible permit holders can be given the certainty of operating with permits that are SIP approved and meet all the requirements of the CAA. Permit holders have two options available to obtain SIP-approved NSR permits and Title V operating permits:

Option 1: De-flex Application ProcedureTCEQ and EPA are still in the process of finalizing the application guidance as to how to de-flex existing permits; however, the Agencies collectively issued preliminary discussion drafts of a “two-step” and a “four-step” de-flex process. The “four-step” process includes the following steps:

  1. Minor permit revision of the Title V operating permit to commit to restructuring a Subchapter G permit to Subchapter B permit.
  2. Determine federally-applicable requirements
  3. Application and issuance of the NSR SIP approved permit
  4. Revision of the CAA Title V permit.

The challenge of this option is TCEQ and EPA have yet to agree on this de-flex procedure and whether this procedure will guarantee no EPA enforcement. TCEQ is actively working on the practical enforceability aspect of this process by writing new flexible permit rules to force this ongoing compliance by lifting the monitoring and record keeping requirements from the PAL rules and putting them into the flexible permit rules.

Option 2: EPA’s Voluntary Audit Program

The EPA has developed a voluntary Audit Program to help companies with flexible permits obtain air quality permits that meet state and federal requirements and the protections of the CAA. The program includes the following elements:

  • Program will offer a covenant from civil enforcement by the federal government.
  • Audits must be conducted by third-party auditors and should take approximately one year to complete.
  • The company will enter into a Consent Agreement and Final Order with EPA based on the audit findings.
  • Companies will be required to obtain federally-approved state permits from the TCEQ.
  • The Audit Program encourages companies to sponsor local community projects.

The Audit Program was finalized on September 28, 2010 and is available for entry to all interested companies. For companies that enter the program by November 12, 2010, the EPA will waive all gravity penalties contemplated as a result of violations identified through the Audit Program process. Please note, if flexible permit holders do not enter into EPA’s Audit Program by December 27, 2010 or have not provided EPA with plans to obtain a SIP-approved NSR permit and a federally-approved Title V permit, additional enforcement related actions will be contemplated.