News & Articles

2003 EASTERN GAS COMPRESSION ROUNDTABLE

Current Air Quality Compliance Issues

Harry F. Klodowski, Esq.

SYNOPSIS

This program covers current and anticipated issues in environmental compliance dealing with Air Quality requirements, including permitting of new and existing compressor stations and pipeline facilities, current enforcement initiatives, and new regulatory developments.

TABLE OF CONTENTS

A. The Big Picture in the Northeast

1. The NOX SIP Call/Section 126 Proceeding
2. The Federal Large Engine Rule
3. OTC Activity
a. Pennsylvania: The Small Sources of NOx Rule
b. Other States

B. Operating Permit Issues

C. Construction Permits/NSR PSD Rules

D. MACT

1. MACT Hammer Deadlines
2. Internal Combustion Engines ("ICE")
3. Stationary Combustion Turbines


AIR QUALITY

A. THE BIG PICTURE

There are a number of air pollution control initiatives in the Northeast at the federal, regional and state levels that will affect gas transmission industry emission sources, including compressor stations. The most immediate pertain to control of ground level ozone. They include the following:

1. The NOX SIP Call/Section 126 Proceeding to decrease NOX emissions in most states east of the Mississippi River has survived most legal challenges. The state NOX budgets for large boilers and turbines, and emission limits for current kilns will probably take effect in 2004 in most states.

Pennsylvania's "Chapter 145" rule implements the NOX SIP call, and Pennsylvania maintains these rules will be enforced in May, 2003, due to a Philadelphia attainment deadline in 2004. Ohio made its version of the NOX SIP Call rule available for public comment in November, 2001, and EPA approved it in January, 2003.

A number of other states have taken action to meet the SIP deadline.

2. Federal Large Engine Rule. As part of the NOX SIP Call and Section 126 Proceeding, in October, 1998, EPA proposed rules on large compressor station engines in "Part 98" rules setting strict emission limits and requiring CEM on large reciprocating engines (more than 2400 hp). EPA did not publish a final rule with the NOX Allowance System due to an adverse court decision on the large engine part of the rule Michigan v. EPA, (3rd Cir. 3/31/00).

EPA republished a large engine rule on February 22, 2002, at 67 FR 8396. The new proposal is significantly different from the previous proposal in that EPA has not proposed source by source emission limits for engines, but is calculating a statewide emissions budget or cap. The EPA proposed to assign a 90% emissions decrease, on average, for large natural gas-fired rich-burn, diesel and dual fuel IC engines. EPA proposed to assign a percent reduction from 82-91% for large natural gas-fired lean-burn IC engines. Because the NOx SIP Call emissions inventory does not distinguish between rich and lean-burn IC engines, if different control levels are used for each in the final rulemaking as this proposal suggests, it will be necessary to estimate emissions in each category to calculate the emissions reductions. EPA proposed to assume that 2/3 of the emissions from large natural gas-fired IC engines are from lean-burn operation, with 1/3 being from rich-burn.

The Agency invited comment on the control level and associated cost-effectiveness calculations on all IC engine types. The Industry submitted comments to support an 80% emissions decrease from lean-burn engines.

EPA issued an important guidance to the states on regulation of ICE by memo of 8/22/02. This memo says:

a. EPA does not require emission limits on each exhaust stack: "Where States choose to regulate large IC engines, EPA encourages the States to allow owners and operators of large IC engines the flexibility to achieve the NOx tons/season reductions by selecting from among a variety of technologies or a combination of technologies applied to various sizes and types of IC engines. Flexibility would be helpful as companies take into account that individual engines or engine models may respond differently to control equipment. That is, while certain controls are known to have a specific average control effectiveness for an engine population, some individual engines that install the controls would be expected to be above and some below that average control level, simply because it is an average."

b. CEMs are not required: "Acceptable monitoring is not limited to those monitoring methods such as continuous or predictive emissions measurement system that rely on automated data collection from instruments. Non-automated monitoring may provide a reasonable assurance of compliance for IC engines provided such periodic monitoring is sufficient to yield reliable data for the relevant time periods determined by the emission standard."

c. Installation of LEC should be exempt from construction permit requirements: "Unless information regarding a specific case indicates otherwise, installation of combustion modification technology for the purpose of reducing NOx emissions at natural gas-fired lean-burn IC engines can be presumed, by its nature, to be environmentally beneficial. This presumption arises from EPA's experience that combustion modification technology is an effective pollution control technology when applied to new and modified natural gas-fired lean-burn IC engines. Therefore, under EPA's PCP exclusion policy, the combustion modification controls may be exempted from NSR provided that the safeguards and procedural steps contained in the exclusion policy memorandum are met."

NOTE: This reasoning applies to all LEC installations, not just large engines!

d. Early reductions such as RACT controls should be accounted for: "Because this methodology uses the uncontrolled value, any emission reduction from a large IC engine may be considered for credit toward meeting the NOx SIP Call requirements. Credible reductions may include emission controls in place during or prior to 1995 as well as after 1995 for the large engines. The applicable control requirements must be adopted as part of the SIP and must yield enforceable and demonstrable reductions."

Pennsylvania began its rulemaking on a new large engine rule in 2002 (25 Pa. Code § 145.111) as part of the Small Sources of NOx Rule. 32 Pa Bulletin 5178. The specific provisions are discussed in detail below.

3. OTC Activity. The 13 state Ozone Transport Commission continues to ask member states to pass rules requiring additional reduction of VOC and NOX emissions. The OTC version of the reciprocating engine control rule applies to engines above 200 horsepower and is at the OTC website at www.sso.org/otc/. OTC has no rulemaking power and each state must pass implementing regulations.

a. Pennsylvania: Small Sources of NOx Rule. On October 19, 2002, the Pennsylvania Environmental Quality Board and the Department of Environmental Protection proposed a new regulation imposing NOx emission controls on a large number of small industrial NOx sources. The purpose of the regulation is to reduce ozone transport in the eastern United States under the NOx SIP Call and meet requirements for the Philadelphia Area Ozone SIP.

Proposed 25 Pa. Code §129 reduces NOx emissions from small industrial boilers, turbines and internal combustion engines ("ICE") in the counties of Bucks, Chester , Delaware, Montgomery and Philadelphia. Proposed §145 reduces NOx emissions for large stationary internal combustion engines and cement kilns throughout Pennsylvania. Both sections apply through the Ozone Season, from May 1 through September 30.

Under proposed §129, no later than May 1, 2005, owners of boilers, stationary combustion turbines and stationary internal combustion engines ("ICE") in the five Philadelphia area counties must ensure that NOx emissions do not exceed the lower of their permit limits or the following each year:

Affected Source Requirements Alternate Standard

Combustion Turbines:
100-250 mmBtu/hr

Natural or Noncommercial
Gas 42 ppmvd (combined cycle)
Corrected to 15% 02 55 ppmvd (single cycle)
Oil 65 ppmvd (combined cycle)
Corrected to 15% O2 75 ppmvd (single cycle)
OR 60% reduction from 1990 emission rates
Combustion Turbines:
greater than 250
mmBtu/hr 0.17 lb NOx per million Btu

ICE: 1000-2400 hp:

Spark Ignition 1.5 g NOx per brake hp/hr
OR 80% reduction from 1990 emission rates

Compression Ignition 2.3 g NOx per brake hp/hr

Proposed §145applies to owners of engines emitting greater than 1 ton/day NOx in 1995 or any later year, rich and lean burn ICEs 2400 bhp or more, diesel ICEs 3,000 bhp or more and dual-fuel ICEs 4,400 bhp or more. From May 1 through September 30, owners must show rich-burn, diesel or dual-fuel engine NOx emissions have been reduced by 90% and lean-burn emissions reduced by 91% from the 1990 emission rate.

The Air Quality Technical Advisory Committee ("AQTAC") agreed to send this rule to the EQB for consideration and public comment only if DEP specifically asked for comments on:

1. Technical feasibility of meeting the mandatory emission limits;
2. Cost of controls to affected sources;
3. Lack of trading or other flexible means to comply; and
4. Year-round, statewide application.

This rule reflects a desire to push NOx controls down to smaller sources without consideration of cost or a realistic evaluation of the results. The proposed rule and supplemental information is available on DEP's website.

The gas transmission industry filed Comments on December 26, 2002. The industry's comments were:

1. Revisions to Chapter 145 should not be adopted until EPA promulgates the Phase II NOx SIP Call Regulation.

2. The proposed Chapter 145 revisions are not consistent with guidance EPA has issued for state plans that regulate engines under the NOx SIP Call.

3. Revisions to Chapter 145 are not needed to meet EPA's regulations under the NOx SIP Call because Pennsylvania has already reduced NOx emissions from IC engines to meet the NOx SIP Call budget.

4. The proposed revisions to Chapter 129 will not be effective in achieving additional NOx reductions from IC engines in the Philadelphia non-attainment area.

5. The proposed emissions levels are not achievable for most lean-burn engines in gas transmission.

6. The emission limits should consider the variability in engine population and associated control performance.

7. The proposals offer no flexibility such as emission trading which is allowed in Pennsylvania's regulations for facilities included in Phase I of the NOx SIP Call and which is recommended in the Ozone Transport Commission's model rule.

8. The compliance schedule is not adequate to allow retrofit of all units in a time frame that is reasonable and that will not jeopardize natural gas supply for electrical generation and other uses.

9. The monitoring, record-keeping and reporting requirements are overly stringent and burdensome.

10. The proposed regulations are more stringent than reciprocating IC engine NOx control regulations in adjoining states.

b. Other States: New York proposed a 1.5 gr/bhp limit for engines above 200 hp in New York City and 400 hp in the rest of New York state. I will review the current status of state rules at the Gas Roundtable.

B. OPERATING PERMIT ISSUES

Many gas compressor stations received their original Title V permits in 1997 and are now up for renewal. The big issues are new federally applicable requirements (e.g. MACT), testing frequency and reporting obligations.

The scope of Title V has changed since 1997 due to different interpretations of authority to impose controls, and lawsuits that have gone both for and against EPA. For example, the interpretation of the Pennsylvania RACT regulations has changed and current thinking is that RACT by itself cannot justify annual or hourly emission limits on existing equipment. RACT is a technology or work practice, and does not authorize emission limits in pounds per hour or tons per year. In 1994 EPA and DEP took the position that emission limits must be proposed as part of RACT.

1997 era permits probably contain far more monitoring provisions than current Title V permits, in part due to the decision in Appalachian Power v. EPA (D.C. Cir. 4/14/2000). The court held EPA's "Periodic Monitoring Guidance" released in 1998 (requiring, among other things, monitoring of every emissions point) was invalid because it had not been promulgated as a rule. In permits that the author has negotiated, twice a year testing of small natural gas combustion sources was deleted from the permit when appealed after this decision, and twice a year testing for large sources was reduced to once a year. Now that there is monitoring data from these sources it may be possible to reduce monitoring frequency in the renewal permit. Some state agencies allow for seasonal use, for example, by requiring quarterly testing in any quarter the engine runs more than 750 hours.

EPA began an initiative to require more detailed annual compliance certifications in 2001, based on the court decision in NRDC v. EPA, 194 F.3d 130 (D.C. Cir. 10/29/99), where the Court held that annual compliance certifications must identify whether compliance, and not the compliance monitoring data, was continuous or intermittent for each relevant term of the permit. In a number of Regions, EPA has advised permittees that Annual Compliance Report forms published by the states are deficient and more detailed reports are required. EPA could require use of a more detailed report through a Notice and Comment rulemaking, but seems intent on extorting longer reports through the threat of enforcement action.

Finally, EPA has taken the position that sources must report twice a year, whether or not there are any deviations to report. States that want CEMs on new engines could justify it under MACT, but EPA's August 8, 2002, memo indicates CEMs are not required on existing engines.

C. CONSTRUCTION PERMITS/NSR REFORM

The time to process construction permit applications has increased in most states over the last few years. One result is the increase in "General Permit" rules that create permits that do not require much agency action, discussed below. Federal NSR rules remain mired in a morass of case by case factual evaluations rather than published objective criteria. The Bush Administration has begun to release part of its air pollution initiative.

Part of its NSR reform package was published on December 31, 2002 at 67 FR 80185. The EPA proposed a Final and Direct Final Rule on areas of change in the NSR program. The goals are to reduce burden, maximize operating flexibility, improve environmental quality, provide additional certainty and promote administrative efficiency. The five areas of change are in baseline actual emissions, actual-to-projected-actual emissions methodology, Plantwide Applicability Limitations, Clean Units and Pollution Control Projects. Citizens groups and Northeastern states immediately filed suit to stop this perceived rollback of the Clean Air Act.

1. NSR Trigger or "Applicability": EPA proposed two changes to the existing major NSR regulations that affect calculations of emissions increases to determine whether physical or operational method changes trigger the major NSR requirements. The five areas are:

a. Baseline Actual Emissions: Under the proposed rule, the relevant terminology for calculating pre-change emissions for most applications is "baseline actual emissions" as opposed to "actual emissions." Any consecutive 24-month period within the preceding 10 years may be used to determine the baseline actual emissions.

For electric utility steam generating units, ("EUSGU"s), the baseline actual emissions is the average rate in tpy that the unit actually emitted the pollutant during a 2 year (consecutive 24-month) period within the 5 yeas immediately preceding actual construction. The option to allow use of an alternative time period that is more representative of normal source operation, as determined by the reviewing authority, remains available.

b. Actual-to-Projected-Actual Applicability Test: The rule replaces the existing Actual-to-Potential applicability test with an Actual-to-Projected-Actual applicability test to determine whether a physical or operational change at an existing emissions unit results in an emissions increase. This change applies only in three areas, modifications, netting and establishing the plantwide applicability limitations emission cap.

The Actual-to-Potential method remains available, at the owner's option, under the new Actual-to-Projected-Actual applicability test. Where the owner elects to utilize the former Actual-to-Potential applicability test, an owner is not subject to record-keeping requirements.

The new test does not apply to EUSGUs. They will retain their existing procedures for determining baseline actual emissions.

c. Plantwide Applicability Limitations ("PAL"): A PAL is a voluntary option that affords owners the ability to manage facility-wide emissions without triggering major NSR review. The PAL is based upon actual, plantwide emissions. If all emissions from a facility are below a plantwide actual emissions cap, the owner may avoid the major NSR permitting process when altering the facility or individual emissions units.

In exchange for this flexibility, the owner must monitor emissions from all emissions units under the PAL. This change allows an owner to alter a facility without first obtaining a federal NSR permit or going through a netting review. Thus, changes to the facility can be made quickly.

d. Clean Units: When a facility owner participates in major NSR review and installs BACT or LAER, the owner may make changes to the Clean Unit without triggering an additional major NSR review. However, the change of the Clean Unit must not cause the need for a change in the emissions limitations or work practice requirements in the permit, adopted in conjunction with BACT or LAER. Also, the project must not alter any physical or operational characteristic that formed the basis for the BACT or LAER determination.

If the project does any of the aforementioned things, the owner loses Clean Unit status, but the owner may proceed with the project without triggering major NSR review if the increase is not a significant net emissions increase. Emissions units that have not participated in major NSR review may qualify for Clean Unit status if they demonstrate emissions control levels comparable to BACT or LAER. Clean Unit status is valid for up to 10 years.

e. Pollution Control Projects (PCPs): The proposed rule contains a new list of environmentally beneficial technologies that qualify as PCPs for various sources. PCP installation is not subject to major modification provisions. The installation qualifies for the exclusion automatically where the PCP is listed and does not adversely impact air quality (does not violate NAAQS, PSD increment, or AQRV identified for a Federal Class I area by a Federal Land Manager and for which information is available to the public). Non-listed PCPs may also qualify for the exclusion where the reviewing authority determines on a case specific basis that the non-listed PCP is environmentally beneficial when used for a particular application.

The final rule includes a section that outlines how a major modification is determined under the major NSR applicability provisions and clarifies where the provisions are located in the revised rules (Sections 51.165(a)(2), 51.166(a)(7), and 52.21(a)(2)). The final rule provides a variety of revised definitions such as that of "major modification," meaning any physical or other change in the method of operation of a major stationary source that would result in: (1) a significant emissions increase of a regulated NSR pollutant; and (2) a significant net emissions increase of that pollutant from the major stationary source.

D. MACT RULES FOR COMPRESSOR ENGINES

Four rules to limit emissions of toxic air pollutants from natural gas industry operations under the NESHAPs or MACT rules are published or in development.

Two of the rules were published on June 17, 1999, at 64 FR 32609. They are the "Part HH" rule for oil and natural gas production activities, 40 CRF § 63.760 and the "Part HHH" rule for Natural Gas Transmission and Storage, 40 CFR § 63.1270. A correction was published on June 29, 2001 at 66 Fed. Reg. 34548, as a direct final rule and an appeal was filed by the American Gas Association in the District of Columbia Circuit in August, 2001. This lawsuit was withdrawn when EPA published a correction on 09/27/01 at 66 Fed. Reg. 49279. The EPA changes pertain to calculation of PTE, Custody Transfer, Throughput Formula, Exemption of Performance Testing of flares, Calculation of uncontrolled emissions and Reporting and Inspection requirements.

The two remaining rules were published recently. They are the Subpart ZZZZ rule for reciprocating Internal Combustion Engines ("ICE"), published on December 19, 2002 at 67 FR 77829 and the Subpart YYYY rule for combustion turbines, published on January 14, 2003 at 68 FR 1887. Each of these rules is discussed below.

Because the ICE and CT MACT Standards were not published in time to meet a Congressional deadline, the "MACT Hammer" will apply to these rules.

1. MACT Hammer. On April 5, 2002, EPA published final amendments to the MACT "Hammer" Provisions. Part I applications were due from all affected sources for which EPA had failed to issue MACT by May 15, 2002. The more involved Part II applications were to be due within 24 months or by May 15, 2004. On June 4, 2002, the Sierra Club filed suit challenging the final rule. EPA and the Sierra Club reached as settlement agreement as announced in the Federal Register on August 26, 2002, at 67 FR 54804. As part of the settlement, EPA agreed to propose reducing the time period for Part II applications from May 2004 to May 2003.

In the August 26, 2002, Federal Register Notice, EPA maintained that the one year time period is sufficient for proposed MACT standards to be issued prior to the May 2003 deadline for Part II applications. EPA asserted that the issuance of the proposed standards should serve to reduce the burden associated with the preparation of the Part II applications. However, EPA confirmed that the issuance of a proposed MACT standard does not eliminate the requirement of the Part II case-by-case application for those industry sources for which no MACT standard has been finalized. Thus, if an affected source is in an industry subject to MACT in which a standard has not been proposed, or has been proposed but not finalized by the deadline for the Part II application, that source must submit a part II case-by-case application. The Part II permit applications are not simple matters.

On December 9, 2002, EPA published a second version of final amendments to the MACT "Hammer" provisions in the Federal Register at 67 FR 72875. These new amendments are the result of EPA's new "final" settlement with the Sierra Club, filed with the D.C. Circuit Court of Appeals on November 26, 2002. The new proposal links submission of the Part 2 MACT permit application to the EPA's schedule for promulgation of MACT standards. They establish specific deadlines for submission of Part 2 applications for all affected sources in a given category or subcategory. The Part 2 application for standards scheduled to be issued before May 15, 2003 must be submitted on or before May 15, 2003. The Part 2 applications for standards scheduled to be issued after May 15, 2003 must be submitted 60 days after the respective scheduled promulgation date.

The new rule also requires states to establish case-by-case MACT standards for sources when EPA does not promulgate the applicable MACT standard before a permit is issued to the source. Case-by-case MACTs require states to establish emission limits on a facility-by-facility basis, after a facility submits its Part 2 application.

Based upon this schedule, Part II Applications for Combustion Turbines are due on or before October 30, 2003 and Part II Applications for reciprocating Internal Combustion Engines (ICE) is due on or before April 28, 2004.

2. Internal Combustion Engines. On December 19, 2002, EPA published a proposed rule to reduce toxic air emissions from ICE at 67 FR 77829. The comment period ended on February 10, 2003. The proposed standards apply to all new and certain existing, stationary reciprocating internal combustion engines above 500 hp that are located at major sources.

For new and existing spark ignition 4-stroke rich-burn engines ("4SRB"), facilities may install non-selective catalytic reduction systems (NSCR) to reduce formaldehyde and other air toxic emissions. Formaldehyde emissions must be reduced by 75% or more. Alternatively, facilities may use other systems to reduce emissions. In this case, formaldehyde emissions must be reduced to 350 ppbvd or less.

For new spark ignition 2-stroke ("2SLB") and 4-stroke lean-burn ("4SLB") engines and for compression ignition engines, facilities may reduce CO emissions via a control device known as a carbon monoxide catalytic oxidation system. Facilities choosing this method must reduce 2SLB emissions by 60%, 4SLB emissions by 93% and compression ignition emissions by 70%. Alternatively, facilities may choose other means to reduce emissions, but must reduce formaldehyde emissions in 2SLB engines to 17ppmvd, in 4SLB to 14ppmvd and in compression ignition to 580 ppb.

3. Stationary Combustion Turbines. On January 14, 2003, EPA published a proposed rule for stationary combustion turbines at 68 FR 1887. Comments are due by February 13, 2003. The proposed rule affects two of the six subcategories of stationary combustion turbines, any stationary combustion turbine > 1.0 MW built after January 14, 2003, the date of publication in the Federal Register and existing lean premix stationary combustion turbines > 1.0 MW.

Sources may comply with the rule in two ways. First, the facility may install controls known as carbon monoxide catalytic oxidation systems to reduce both carbon monoxide and formaldehyde emissions. Sources choosing this option must reduce carbon monoxide emissions by 95% or more. Second, sources may choose to utilize other means to reduce emissions. If they do so, formaldehyde emissions must be reduced to 43 ppbvd or less at 15% 02.

Three subcategories, existing diffusion flame, limited use and landfill/digester gas < 1 MW combustion turbines, have no requirements. Emergency stationary combustion turbines must meet the initial notification requirements only and are otherwise exempt.