R97013A.PDF

ILLINOIS POLLUTION CONTROL BOARD

July 10, 1997

IN MATTER OF:

EMISSIONS REDUCTION MARKET

SYSTEM ADOPTION OF 35 ILL. ADM.

CODE 205 AND AMENDMENTS TO 35

ILL. ADM. CODE 106

)

R97-13

(Rulemaking - Air)

Proposed Rule. First Notice.

OPINION AND ORDER OF THE BOARD (by J. Yi, K.M. Hennessey, and M. McFawn):

This matter is before the Board pursuant to a rulemaking proposal filed by the Illinois

Environmental Protection Agency (IEPA) on October 7, 1996. The IEPA filed its proposal

pursuant to Sections 9.8, 27, and 28 of the Environmental Protection Act (Act) (415 ILCS

5/9.8, 5/27, and 5/28 (1996)). The IEPA's rulemaking proposal has two components. The

first is the addition of 35 Ill. Adm. Code 205 which sets forth regulations creating an

emissions reduction market system (ERMS) program for volatile organic material (VOM) for

the Chicago nonattainment area. As proposed, the ERMS program is one component of the

IEPA's plan designed to achieve a 9% reduction in VOM emissions by 1999 in the Chicago

nonattainment area. The second component of the proposal amends 35 Ill. Adm. Code 106,

the Board's procedural regulations, to provide procedures by which the regulated sources may

appeal IEPA's decisions pertaining to the ERMS program.

To date the Board has held nine days of hearings in this matter. The hearings took

place on January 21 and 22, February 3, 4, 10 and 11, March 10, and April 21 and 22, 1997.

All the hearings were held in Chicago, since the area of the State concerned is the Chicago

nonattainment area. After the last hearing, a pre-first notice public comment period was

established that ended May 16, 1997.

Today the Board acts to send this rulemaking proposal to first notice. Pursuant to

Section 5-40 of the Illinois Administrative Procedure Act (IAPA) (5 ILCS 100/5-40 (1996))

and Section 102.342 of the Board's procedural rules, the IAPA 45-day public comment period

will commence upon publication of today's proposal in the Illinois Register, during which the

Board will accept written comments from any person. Persons interested in providing

comments on this rulemaking proposal should submit such comments in writing to the Clerk of

the Board prior to the expiration of this 45-day period. The Board also directs the hearing

officer to schedule a hearing in this matter to address, including but not limited to: the

findings of the Ozone Transport Assessment Group (OTAG) as discussed on pages 6-7; the

requirements of Section 9.8(c)(3) as discussed on pages 9-15; the definition of the "natural"

used in the definition of "Account Officer" as discussed on page 16; New Source Review

(NSR) Offsets as discussed on pages 17-18; applicability of the ERMS program to landfills as

discussed on page 21; which methods and practices will be used during an appeal as discussed

on page 27; the language of Section 205.330 and Section 205.337(b) as discussed on page 35;

whether allotment trading units (ATUs) should be permanent as discussed on pages 36-37;

adoption of a Maximum Achievable Control Technology (MACT) for industrial categories and

exclusion from the ERMS program as discussed on page 41; emission units achieving Best

Available Technology (BAT) and exclusion from the ERMS program as discussed on pages

41-42; Emission Reduction Generator (ERG) shutdowns as discussed on pages 45-48; and

Emissions Excursion Compensation as discussed on pages 53-54.

GENERAL BACKGROUND

The IEPA's proposal is before the Board as a result of the Clean Air Act (CAA) and

corresponding federal regulations. Section 109 of the CAA (42 U.S.C. 7409) establishes the

national primary and secondary ambient air quality standards (NAAQS). The United States

Environmental Protection Agency (USEPA) promulgated its NAAQS at 40 C.F.R. 50.

Specifically, the NAAQS which is driving IEPA's proposal to reduce VOM is the NAAQS for

ozone (40 C.F.R. 50.9). Based on the NAAQS for ozone, the USEPA, pursuant to Section

107 of the CAA (42 U.S.C. 7407), designated the Chicago area as a severe ozone

nonattainment area.

Section 181 of the CAA (42 U.S.C. 7511) requires the Chicago severe

nonattainment area to achieve overall attainment with the NAAQS for ozone by the year 2007.

As part of achieving the NAAQS for ozone, Section 182 of the CAA (42 U.S.C. 7511(a))

required two separate plan demonstrations to be made by November 1994. The first

demonstration was IEPA's plan for achieving overall attainment in the Chicago nonattainment

area for the NAAQS for ozone. The second demonstration was a plan that contains a 3%

reduction

in emissions from the baseline emissions established for the Chicago nonattainment

area each year starting in 1997.

The Rate-of-Progress (ROP) plan demonstrations are

required for each consecutive 3-year period until overall attainment is achieved. Therefore, in

November 1994, the IEPA was required to demonstrate to the USEPA a plan for overall

attainment of the ozone NAAQS in the Chicago nonattainment area and a plan demonstrating

the first 3% ROP for the Chicago nonattainment area.

The IEPA was not able to provide either demonstration to the USEPA. Instead, the

IEPA and the other Great Lakes states presented findings concerning NO

reduction and VOM

transport modeling, and proposed a regional approach in solving the ozone pollution problem

to the USEPA. In response, the USEPA issued a memorandum on March 2, 1995

(Memorandum). The Memorandum acknowledged the good faith efforts of the IEPA and the

other states in complying with the CAA and provided the states with a two-phase program

approach to ensuring full approval of the CAA attainment demonstrations of Illinois and the

other states. The first phase required the IEPA to submit a plan to implement, by May 1999,

control measures including at least a 9% reduction of ozone precursors starting in 1997 to

The Chicago nonattainment area is comprised of Cook, DuPage, Kane, Lake, McHenry, and

Will Counties, and Aux Sable, Goose Lake, and Oswego Townships. (See 56 Fed. Reg.

56694.)

The 3% reduction is commonly referred to as the Rate-of-Progress or ROP.

The ozone emission baseline for the Chicago nonattainment area was determined in 1990.

satisfy the ROP; a State Implementation Plan (SIP) committing to a schedule for the

submission of the remaining ROP measures; and a SIP commitment to submit the overall

attainment plan by mid-1997. The Memorandum established the end of 1995 as the due date

for the first phase submittals. The second phase included submittals demonstrating compliance

with the ROP and SIP measures for the first phase, the overall NAAQS attainment plan

demonstration, and any other controls necessary to achieve overall attainment.

In addition to establishing the two-phase program, the Memorandum also

acknowledged the transport of ozone and established a collaborative process among the states

in the eastern half of the country to evaluate and address transport of ozone and its precursors

which led to the formation of OTAG. OTAG is comprised of several representatives from the

regulated community, government, and environmental groups. The USEPA envisioned that

OTAG would release its findings by the end of 1996 so that the affected states could take

OTAG's findings into account when making their overall attainment demonstrations for the

NAAQS for ozone. OTAG released its findings during the week of June 23, 1997.

On July 10, 1996, the USEPA issued a "Final Rule Making Findings of Failure To

Submit Required State Implementation Plans for Nonattainment Areas for Ozone" against

Illinois and other states which failed to make the proper submittals pertaining to the first phase

of the program established in the Memorandum. (See 61 Fed. Reg. 36294.) The USEPA

stated that to avoid sanctions the IEPA must submit the plans as required by the first phase of

the Memorandum within 18 months. The IEPA proposed the ERMS program as one

component of its plan to fulfill Illinois' obligations established in the Memorandum and the

USEPA's findings of July 10, 1996.

REGULATORY FRAMEWORK

Section 9.8 of the Act was created by P.A. 89-173, which became effective on July 19,

1995. Based on certain findings of the Illinois General Assembly, Section 9.8 of the Act

grants the IEPA authority to propose an emissions market system. Section 9.8(c) establishes

requirements by which the Board shall adopt regulations implementing an emissions market

system in Illinois. 415 ILCS 5/9.8(c) (1996). Section 9.8(c) of the Act states "that the rules

adopted by the Board shall include provisions that:"

(1)

Assure that compliance with the required emissions reductions under the

market system shall be, at a minimum, as cost-effective as the traditional

regulatory control requirements in the State of Illinois.

The ERMS program is one component of the ROP demonstration. The IEPA stated that

certain federal programs involving mobile sources, such as off-road vehicles, and the IEPA

proposed rule in R97-24, In the Matter of : 9% ROP Plan Control Measures from VOM

Emissions-Tightening Cold Cleaning Requirements: Amendments to 35 Ill. Adm. Code Parts

211, 218 and 219, affecting area sources, are the other components of the 9% ROP

demonstration. (Tr. at 71-74, 107-108, 112-114; Exh. 6.)

(2)

Assure that emissions reductions under the market system will not be

mandated unless it is necessary for the attainment and maintenance of the

National Ambient Air Quality Standard for ozone in the Chicago

nonattainment area, as required of this State by applicable federal law or

regulation.

(3)

Assure that sources subject to the program will not be required to reduce

emissions to an extent that exceeds their proportionate share of the total

emission reductions required of all emission sources, including mobile

and area sources, to attain and maintain the National Ambient Air

Quality Standard for ozone in the Chicago nonattainment area.

(4)

Assure that credit is given or exclusion is granted for those emission

units which have reduced emissions, either voluntarily or through the

application of maximum available control technology or national

emissions standards for hazardous air pollutants, such that those

reductions would be counted as if they had occurred after the initiation

of the program.

(5)

Assure that unusual or abnormal operational patterns can be accounted

for in the determination of any source's baseline from which reductions

would be made.

(6)

Assure that relative economic impact and technical feasibility of

emissions reductions under the banking and trading program, as

compared to other alternatives, is considered.

(7)

Assure that the feasibility of measuring and quantifying emissions is

considered in developing and adopting the banking and trading program.

These requirements are in addition to the requirements of Sections 27 and 28 of the Act (415

ILCS 5/27, 28 (1996)) which must also be met in adopting any regulation.

SUMMARY OF PROPOSED RULE

The proposed Part 205 is designed to regulate stationary point sources that are located

in the Chicago ozone nonattainment area, which are required to obtain a Clean Air Act Permit

Program (CAAPP) permit and have seasonal emissions of at least 10 tons of VOM. Proposed

Part 205 regulates these sources by establishing a historical emissions baseline and then

reducing that baseline by 12%, thereby creating an emissions cap that is 12% below the

historical VOM emissions baseline. The baseline is established by averaging the two highest

seasons of VOM emissions from the source between 1994 and 1996. The sources are then

issued allotment trading units (ATUs) in an amount equal to the reduced baseline. The sources

are required to hold ATUs in the amount equal to their seasonal emissions of VOM. The

proposed Part 205 identifies the seasonal allotment period to be May 1 through September 30.

Sources can either reduce their emissions by 12% or purchase ATUs from the market created

by the proposed rule to meet their emissions needs for each seasonal period. The ERMS

program is designed to be permanent and to be a component of the ROP plan to achieve a 9%

reduction in VOM emissions in the Chicago nonattainment area.

The proposed Part 205 is divided into seven subparts (A through G). Subpart A

contains the general provisions, including sections on severability, purpose, abbreviations,

definitions, and a general description of the rule, and a section which describes the different

regulatory management periods in a year under the proposal. Subpart B sets forth the

applicability of the proposed rule. Subpart C provides how the rule will be administered.

Subpart D establishes the trading unit allotments for each emission source. Subpart E creates

alternative methods by which ATUs may be generated. Subpart F of the rule describes how

the market will be structured and controlled. Subpart G establishes how compliance will be

demonstrated and enforced.

DISCUSSION

This portion of the opinion explains the rule as proposed by the IEPA, summarizes the

issues raised in the post-hearing comments, and then provides the Board's findings and

amendments to the proposal.

The Board has received 16 public comments (PC) in this matter as follows:

PC 1

Comments of the City of Chicago (City)

PC 2

Comments of Commonwealth Edison (CommEd)

PC 3

Testimony of Mr. Lionel Trepanier

PC 4

Comments of Dart Container Corporation (Dart)

PC 5

Comments of Waste Management of Illinois, Inc. (WMII)

PC 6

Comments of the Chemical Industry Council of Illinois (CICI)

PC 7

Comments of Tenneco Plastics Company (Tenneco)

PC 8

Comments of National Solid Waste Management Association

(NSWMA)

PC 9

Comments of the Illinois Environmental Regulatory Group

(IERG)

PC 10

Comments of the ERMS Coalition (Coalition)

PC 11

Comments of Sun Chemical Company (Sun Chemical)

PC 12

Comments of Minnesota Mining and Manufacturing Company

(3M)

PC 13

Comments of the United States Environmental Protection Agency

(USEPA)

PC 14

Comments of the Illinois Environmental Protection Agency

(IEPA)

PC 15

Comments of the Illinois Steel Group (Steel Group)

PC 16

Comments of Mr. Lionel Trepanier

The first three public comments were received prior to the close of hearing. One of

these three is the testimony of one of the participants, Mr. Lionel Trepanier. (PC 3) The

remaining thirteen public comments received after the close of hearing address various issues

of the ERMS proposal.

Before discussing the comments received that address particular sections of the

proposed rules, we will address the comments which concern the statutory requirements of

Section 9.8 of the Act. After we discuss the comments concerning Section 9.8 of the Act, we

will discuss the proposed ERMS program and public comments section by section, then we

will discuss briefly the public comments which are of a more general nature, and will conclude

this portion of the opinion with a discussion of the proposed amendments to Part 106.

Section 9.8(b) of the Act

The Coalition asserts that the IEPA has failed to take into account the findings of

OTAG as required by Section 9.8(b) of the Act (415 ILCS 5.9.8(b) (1996)). (PC 10 at 3.)

Section 9.8(b) of the Act states "[t]he Agency shall design an emission market system that will

assist the State in meeting applicable post-1996 provisions under the CAA of 1990, provide

maximum flexibility for designated sources that reduce emissions, and take into account the

findings of the national ozone transport assessment, existing air quality conditions, and

resultant emissions levels necessary to achieve or maintain attainment." (

Id.

) The Coalition

argues, based on IEPA's testimony, that the findings of OTAG have not been completed, that

"[s]ince the true impact of the proposed rules remain unknown until OTAG completes its

findings on national ozone transport, IEPA's proposal of these rules is premature and in

violation of Section 9.8(b) of the Act." (

Id.

)

The IEPA did not respond in its public comments to the Coalition's comments

concerning the OTAG's findings. However, Mr. Mathur, Bureau Chief of the Air Division at

the IEPA, testified that:

This particular rulemaking is intended to reduce emissions inside as part of the

overall target inside. So at the moment, this rule does not accommodate

emission reductions outside. That will be done as part of the larger exercise

that comes out of OTAG in order to determine what are the strategies that

reduce transported ozone. (Tr. at 76.)

The Board notes that it appears that Mr. Trepanier did not serve the other participants with

his public comments. The Board reminds Mr. Trepanier, as it did at hearing and in hearing

officer orders, that it is not sufficient to serve only the IEPA when filing with the Board since

Mr. Trepanier has been placed on the service list at his request. The Board will strike any

future filings of Mr. Trepanier if they are not properly served to all participants on the service

list for this rulemaking.

In clarifying the IEPA's position, Mr. Mathur stated that the IEPA intends to review this

rulemaking once the OTAG findings have been released and make revisions as required by the

OTAG findings. (Tr. at 77.) Mr. Mathur, in response to questioning, also stated that there

are no OTAG findings to take into account and that any OTAG issues need not be taken into

account since the IEPA has reduced the time period for these reductions to three years and is

not seeking overall attainment with this proposal. (Tr. at 134.)

The IEPA also maintains, through the testimony of Mr. Mathur, that Section

205.110(c), which states that the findings of the national ozone transport assessment will be

taken into account, should remain in the proposed rules. (Tr. at 135.) Mr. Mathur explains

that further reductions, beyond those proposed as part of the 9% ROP, are necessary for the

Chicago nonattainment area to achieve overall attainment with the NAAQS for ozone. (Tr. at

135.) Mr. Mathur states that the IEPA plans to revisit the ERMS program and at that time

evaluate it pursuant to the OTAG findings. (Tr. at 135.)

The Board finds that Section 9.8(b) of the Act requires the IEPA to take into account

the findings of OTAG when designing a program "that will assist the State in meeting

applicable post-1996 provisions under the CAA of 1990," which the 9% ROP is designed to

accomplish. The Board acknowledges that the findings of OTAG were just released and that

the IEPA did not have the benefit of those findings at the time it proposed the rule and when

testifying at hearing. The Board directs the IEPA to consider the recently released findings of

OTAG and provide the Board its evaluation of those findings, as they might relate to this

rulemaking, at hearing scheduled for August 19, 1997. The IEPA's evaluation should include

its rationale for any suggested revisions or any conclusions that no such revisions are

necessary.

Section 9.8(c)(1) of the Act

The Coalition argues that the IEPA is unable to determine if it meets this statutory

requirement, that compliance with the required emissions reductions under the market system

shall be, at a minimum, as cost-effective as the traditional regulatory control requirements.

The Coalition bases this assertion on the fact that IEPA cannot determine the amount of

reductions that will ultimately be required for overall attainment. (PC 10 at 4.) In support,

the Coalition maintains that the IEPA has compared the economic impact and cost-

effectiveness of the ERMS program with traditional command and control rules that, if

implemented, would obtain the VOM reductions needed to achieve Illinois’ emission reduction

goal based solely on an estimated 12% reduction from stationary sources. (

.) However, the

Coalition asserts that the IEPA indicated in its testimony that further reductions may be

necessary but that it will not know until the findings of OTAG are released. (

.) The

Coalition concludes that "[b]ecause IEPA does not yet know the amount of emission reductions

that it will seek from stationary sources under the ERMS rules, it cannot assure that the

required emission reductions under the ERMS rules will be, at a minimum, as cost-effective as

traditional regulatory control." (

Additionally, the Coalition believes that if the Board adopts these rules that any further

reduction requested by the IEPA must assess the economic reasonableness of that further

reduction pursuant to Section 9.8(c)(1) of the Act. (

. at 4-5.) To address this concern, the

Coalition proposes the following change to Section 205.400(d) of the proposed ERMS rules:

(d)

Except as provided in subsections (c) and (e) of this Section and Section

205.405(d) of this Subpart, allotments shall remain at 1999 levels unless

the Agency makes a demonstration to the Board that further reductions

are needed in accordance with the rulemaking provisions of Sections 27

and 28 of the Act.

(i)

If the Agency requests further reductions, in accordance

with Section 9.8 of the Act, the Agency must demonstrate

that the total amount of required emissions reductions

from 1996 forward are, at a minimum, as cost-effective as

implementing traditional regulatory control requirements

in the Chicago nonattainment area in 1996 would have

been.

In response to the Coalition, the IEPA states that it believes that no such economic

comparison will be required if further reductions are pursued under the ERMS program. (PC

14 at 12.) The IEPA asserts that the testimony of its witnesses, Dr. Case and Ms. Dunham,

demonstrated "that the market-based reduction programs like the ERMS program are always at

least as cost-effective as traditional command and control programs designed to achieve the

same level of reduction." (

.) The IEPA concludes that even if further reductions are

needed, the ERMS program will again represent a method at least as cost-effective a method to

achieve these reductions when compared to a command and control rule designed to achieve

the same level of reduction. (

The Board finds that the IEPA proposal can assure that the amount of emission

reductions that it will seek from stationary sources under the ERMS program will be, at a

minimum, as cost-effective as traditional regulatory control for two reasons. First, under the

ERMS program, sources can choose either to purchase ATUs to meet their seasonal emissions

or they may reduce their seasonal emission by whatever means,

i.e.

add on controls, so that

their emissions are equal to their ATU allotment which is their baseline minus 12%. Under

the traditional command and control programs, a source would be required to achieve a 12%

reduction from its baseline emissions without the option of purchasing other source's

reductions in emissions or ATUs. Secondly, the ERMS program allows the generation of

ATUs from other sectors to be used by the sources regulated under the ERMS program to meet

their seasonal emissions which allows sources to seek the most economical means to achieve

compliance whether it is at its facility or other sources from other sectors. Pursuant to the

record in this matter and based on the testimony of Dr. case, Mr. Beckstead and Ms. Dunham

the IEPA has demonstrated that the ERMS program as proposed will be at least as cost-

effective as the traditional command and control program achieving a similar reduction.

However, the Board agrees with the Coalition that the IEPA should be required to

demonstrate that any future reductions pursuant to the ERMS program meets the requirements

of Section 9.8(c)(1) of the Act. However, the Board does not accept the Coalition's suggested

revisions but instead will amend Section 205.400(d) to include a reference to Section 9.8 of

the Act as follows:

Except as provided in subsections (c) and (e) of this Section and Section

205.405(d) of this Subpart, allotments shall remain at 1999 or initial

levels unless the Agency makes a demonstration to the Board that further

reductions are needed in accordance with the rulemaking provisions of

Sections 9.8, 27 and 28 of the Act.

Section 9.8(c)(3) of the Act

Applicability

The IEPA argues that Section 9.8(c)(3) does not apply to this rulemaking because

presently the ERMS program is not part of a plan for overall attainment of the ozone NAAQS,

but rather is part of the State's 9% ROP. The Coalition argues that Section 9.8(c)(3) applies

to this rulemaking. It asserts that if the IEPA is not required to demonstrate compliance with

Section 9.8(c)(3) until it is seeking the final emissions reductions that will achieve overall

attainment, then the ERMS program could be used to require stationary sources to reduce

emissions for years without mobile or area sources reducing their proportionate share. (PC 10

at 8.) The Coalition maintains that for Section 9.8(c)(3) to “have any meaning, it is critical

that all three emission sectors reduce their proportionate share of emissions at the same time.”

(

. at 9.)

The IEPA asserts that Section 9.8(c)(3) will not apply until the IEPA proposes to use

the ERMS program for further reductions as part of a plan to actually achieve overall

attainment of the ozone NAAQS. (Tr. at 158, 159, 1328, 1329-1330; PC 14 at 23-24.) This

interpretation, the IEPA asserts, is supported by the plain language of Section 9.8(c)(3) of the

Act. (PC 14 at 23 ("This section references total emission reductions required to attain and

maintain the standard.”).)

Because the ERMS program is presently not part of a plan to actually reach the ozone

standard, but rather is only part of the 9% ROP plan, the IEPA asserts that Section 9.8(c)(3)

does not apply to this ERMS rulemaking. (Tr. at 50-51, 124-125; PC 14 at 24.) Thus, the

IEPA concludes, while it believes it has demonstrated proportionality for emissions reductions

under the 9% ROP plan, it is not required to make this demonstration at this time. (Tr. at 50-

51, 68, 124-125; PC 14 at 24.)

The Board finds that Section 9.8(c)(3) applies to this ERMS rulemaking. The 9% ROP

plan, of which the ERMS program would be a part, constitutes “emission reductions required .

. . to attain” the NAAQS for ozone. (415 ILCS 5/9.8(c)(3) (1996).) Pursuant to Section

182(c)(2)(B) of the CAA, the 9% ROP plan is a SIP revision intended to demonstrate

reasonable further progress toward overall attainment. (See 42 U.S.C. 7511a(c)(2)(B).) The

CAA defines “reasonable further progress” as follows:

such annual incremental reductions in emissions of the relevant air pollutant as

are required by this part or may reasonably be required by the Administrator for

the purpose of ensuring attainment of the applicable national ambient air quality

standard by the applicable date.

(42 U.S.C. 7501(1) emphasis added. )

The IEPA refers to the 9% ROP plan as a “portion of the attainment demonstration”

and recognizes that it will help the Chicago nonattainment area reach overall attainment. (Tr.

at 123-124, 159.) In addition, the IEPA acknowledges that the proposed ERMS rules meet the

requirements of Section 9.8(c)(2) of the Act - that emissions reductions under the ERMS

program not be mandated unless “necessary for the attainment” of the ozone NAAQS. (PC 14

at 19 (“VOM reductions provided by the ERMS are necessary to help attain the ozone

standard”).)

The Board notes that the 9% ROP plan is different from a SIP revision pursuant to

Section 182(c)(2)(A) of the CAA - that is, a plan that will actually result in overall attainment.

(See 42 U.S.C. 7511a(c)(2)(A).) The language of Section 9.8, however, does not suggest that

Section 9.8(c)(3) necessarily applies only when the IEPA uses the ERMS program in making

the Section 182(c)(2)(A) demonstration. Section 9.8 refers to “achieving compliance with the

ozone attainment provisions of,” “implementation of,” and “meeting applicable post-1996

provisions under” the CAA Amendments of 1990. (415 ILCS 5/9.8(a)(1) and (3), (b)

(1996).) Such broadly worded references suggest that Section 9.8(c)(3) applies here, where

there is not yet a plan for overall attainment, but emissions reductions are being sought under

the ERMS program as part of the IEPA’s efforts to demonstrate reasonable further progress

toward achieving overall attainment.

Moreover, under the IEPA’s interpretation of Section 9.8(c)(3), before it demonstrates

a plan for overall attainment, the IEPA could seek emissions reductions using the ERMS

program as part of reasonable further progress without having to show that sources subject to

the ERMS program would not be required to reduce emissions beyond their proportionate

share. The Board believes such a result would be inconsistent with Section 9.8(c)(3).

Demonstration

The Coalition asserts that the IEPA has not shown that area and mobile sectors will

reduce emissions proportionately under the 9% ROP plan and, as a result, the ERMS rules

should not be adopted at this time. (PC 10 at 7-9.)

As for area sources, the Coalition argues, with respect to the cold cleaning rules, that

“a majority, if not all, cold cleaning operations are components of stationary sources” and that

it is unaware of any “stand-alone cold cleaning operation” in the Chicago nonattainment area.

(

. at 7.) Accordingly, the Coalition argues, while the IEPA refers to the cold cleaning rules

as an area sector emissions reduction, “stationary sources will be the sources, once again,

required to reduce VOM emissions even further.” (

Id.

)

As for mobile sources, the Coalition asserts that the IEPA has not submitted any

evidence regarding the specific federal requirements that will result in mobile source emissions

reductions by 1999. (

Id.

) Further, it suggests that the IEPA’s 9% ROP relies on federal

emissions reduction requirements that will not be promulgated until after 1999. (

Id.

at 7, 9.)

The Coalition states that it “appears unlikely that mobile sources will actually reduce emissions

by 1999.” (

Id.

at 7.)

The Coalition concludes that only stationary sources will actually reduce VOM

emissions by 1999. (

. at 8.) Accordingly, it asserts that the IEPA has not met the

requirements of Section 9.8(c)(3) and requests that the Board delay implementing the proposed

rules "until IEPA can assure that stationary

sources are not reducing emissions to an extent that

exceeds their proportionate share of contribution to VOM emissions in the Chicago

nonattainment area." (

. at 8-9.)

The Board finds the Coalition’s arguments that only stationary sources will be required

to reduce under the IEPA’s 9% ROP unpersuasive for three reasons. First, generally

speaking, if a company’s facility has point and area sources and both types of sources are

required to reduce emissions, it is true that the company is required to reduce emissions for

both types of sources. This is not necessarily inequitable, as suggested by the Coalition.

Rather, if the company has both types of sources contributing to emissions, it should account

for the emissions reductions required of such sources.

Second, the IEPA did identify what it described as federal measures that will result in

mobile source emissions reductions under the 9% ROP plan. These include the Motor Vehicle

Control Program, Detergent Additive Gasoline, Reformulated Gasoline I, Enhanced

Inspection/Maintenance, and Off-Road Small Engine Standards. (Tr. at 112-113, 153-154;

Technical Support Document at 29-30, 33; Exh. 6.)

Third, for its 9% ROP plan, the IEPA states that it is not relying on measures it

expects to be promulgated after 1999. The IEPA did describe what it anticipates will be post-

1999 emissions reduction measures, but added that it “is not in the position to take advantage

of those today because we have a requirement to show a nine percent reduction aggregate from

all the emission sectors by ’99.” (Tr. at 74; Exh. 6.)

The IEPA asserts that it has satisfied the requirements of Section 9.8(c)(3) by

demonstrating that point sources will not be required by the 9% ROP plan to reduce emissions

beyond their proportionate share. (Tr. at 159, 160, 165, 1328-1329; PC14 at 23-25.) The

IEPA’s demonstration is based on four points.

First, the IEPA argues that for each sector’s share of emissions reductions under the

9% ROP plan to be proportionate, it should be within the same percentage range as that

sector’s contribution to 1996 VOM emissions. (Tr. at 125; PC 14 at 24.) For example, if a

sector emitted 22% of the total VOM emissions in 1996, the IEPA asserts that the sector

should be responsible for approximately 22% of the total VOM emissions reductions under the

9% ROP plan. (Tr. at 125, 161; PC14 at 24.)

Second, the IEPA asserts that for sources within the Chicago nonattainment area, the

percentage of 1996 VOM emissions contributed by each sector is as follows: point sources -

22%; area sources - 26%; and mobile sources - 52%. (Tr. at 124-125, 1329, 1331.)

Third, the IEPA claims that each sector’s percentage of VOM emissions reductions

under the 9% ROP plan is as follows: point sources - 20%; area sources - 22%; and mobile

sources - 58%. (Tr. at 125, 161.) Thus, the IEPA argues, each sector’s emissions reductions

are proportionate to its emissions contributions. (Tr. at 160.) Specifically, the IEPA argues

that point sources are not being asked to reduce emissions beyond their proportionate share -

they contributed 22% of the VOM emissions and they will be responsible for 20% of the

emission reductions under the 9% ROP plan. (Tr. at 159, 161.)

Fourth, the IEPA states that its 9% ROP plan relies not only on the ERMS program to

account for VOM emissions reductions from 1997 through 1999, but also on various other

requirements, including federal measures and Illinois’ cold cleaning rules. (Tr. at 71-74, 107-

108, 112-114; Exh. 6 .)

Therefore, the IEPA concludes that “point sources are only required to reduce by an

amount that is proportional to the contribution from this sector to the total emissions pool.”

(PC 14 at 24.)

Before the Board can determine whether the “proportionality” requirement of Section

9.8(c)(3) has been satisfied, the Board requires confirmation and clarification of certain

information provided by the IEPA. The Board requests that the IEPA respond at the August

19, 1997 hearing to the following:

•

The IEPA testified that, to meet the 9% ROP, there must be VOM emissions

reductions of at least 46 tons per day (TPD) - from 781 TPD in 1996 to 735 TPD

in 1999. (Tr. at 112; Exh. 6.) The IEPA also testified that, under the 9% ROP

plan, mobile sources would reduce emissions by 34 TPD and area sources would

reduce by 13 TPD. (Tr. at 1327.) It appears that the only new emissions

reductions from point sources under the 9% ROP plan will result from the ERMS

program - a reduction of 12.6 TPD according to the IEPA. (Tr. at 121-122;

Technical Support Document at 38, 41; Exh. 6.) This would appear to add up to

59.6 TPD of total VOM emission reductions under the 9% ROP plan, or 13.6 TPD

over the target of 46 TPD. Please verify whether the information in this paragraph

is correct. Please correct any inaccurate information and supply supporting

documentation for any corrections.

•

If the preceding calculation is correct, it appears that there is a 13.6 TPD difference

between the 9% ROP target of 735 TPD in emissions and the expected actual

emissions. It is unclear whether this difference can be accounted for by growth, a

contingency, or some other explanation. If it is a contingency, it is unclear whether

a contingency of that size is necessary or required. Moreover, other IEPA evidence

suggests that there is actually a much smaller contingency. (Tr. at 122 (4 TPD

contingency); Exh. 6 (5 TPD contingency).) Please verify how many TPD actual

emissions are expected to be below the 9% ROP target and provide supporting

documentation. Also, please explain why such a difference is necessary and

whether it is required.

•

It also appears that it is from the above figures—12.6 TPD, 13 TPD, and 34 TPD,

totaling 59.6 TPD - that the IEPA determined that each sector’s percentage of total

emissions reductions under the 9% ROP plan would be 20% (point sources), 22%

(area sources), and 58% (mobile sources). (Tr. at 125, 161.) The IEPA stated that

these shares of the reductions (20%, 22%, and 58%, respectively) are proportionate

to or within the same percentage range of each of the sector’s shares of 1996

emissions - 22%, 26%, and 52%, respectively. (

Id.

; PC14 at 24.) By way of

illustration, the IEPA testified that, to equal its share of emissions contributions, the

mobile sector’s share of the emissions reductions would need to be 31 TPD (Tr. at

1327), which is 52% of 59.6 TPD. Please verify whether the information in this

paragraph is correct. Please correct any inaccurate information and supply

supporting documentation for any corrections.

•

Please describe what the IEPA means by the terms “ERMS sources,” “ERMS-

exempt sources,” and “non-ERMS sources.” (Technical Support Document at 34.)

Please describe what the IEPA means by the term “participating sources” when it

states that “ERMS will reduce participating sources’ emissions by 12.6 TPD . . . .”

(

.) Please describe how many TPD of the 12.6 TPD in reductions will be

provided by ERMS sources. Please describe how many TPD, if any, of the 12.6

TPD will be provided by sources other than ERMS sources, describe how the

ERMS program will result in emissions reductions from these other sources, and

describe these other sources (

e.g

., ERMS-exempt sources).

•

The IEPA stated that ERMS-exempt sources accounted for approximately 4% of the

1996 point source emissions and that point sources accounted for 171 TPD of 1996

emissions. (Technical Support Document at 34; Exh. 6.) Four percent of 171 TPD

is 6.84 TPD. The IEPA also stated that ERMS sources accounted for

approximately 61% of the 1996 point source emissions, or 105 TPD of the 171

TPD. (

Id.

) Please verify whether the information in this paragraph is correct.

Please correct any inaccurate information and supply supporting documentation for

any corrections.

•

Finally, in discussing proportionality and what the IEPA describes as the ERMS

sources’ 13.4% share of total 1996 emissions, the IEPA often refers to a 12%

reduction for ERMS sources. (Tr. at 1329, 1331.) It would appear that the 12%

figure is a reference to reductions from the baseline emissions of ERMS sources

under the proposed rules, and not a reference to ERMS sources’ share of the total

emissions reductions under the 9% ROP plan. Please verify whether the

information in this paragraph is correct. Please correct any inaccurate information

and supply supporting documentation for any corrections.

In addition to responding to the above items, the IEPA may provide at the August 19,

1997 hearing any additional information that the IEPA believes will assist the Board in its

determination of whether Section 9.8(c)(3) has been satisfied.

Applicability of the ERMS program to Area and Mobile Sources

Dart argues that Section 9.8(c)(3) requires that the proposed rules be applied to area

and mobile sources, as well as point sources. Dart asserts that the failure of the ERMS rules

to apply to area and mobile sources is inequitable and contrary to the language of Section

9.8(c)(3). (PC 4 at 2-3.) Dart suggests that mobile and area sources account for a significant

percentage of VOM emissions. (

. at 2-3.) Dart also argues that the word “sources” in

Section 9.8(c)(3) “is not limited to point sources, but clearly applies to mobile and area

sources as well.” (

. at 3.) The plain meaning of Section 9.8(c)(3), according to Dart,

dictates that the proposed rules must impose proportionate emissions reductions on point, area,

and mobile sources. (

. at 3.)

The IEPA points out that while area and mobile sources will not be required under the

ERMS program to reduce emissions, those sources will have to reduce emissions under other

requirements in the 9% ROP plan. (Tr. at 165, 509-510.) The IEPA also asserts that Dart’s

interpretation that the word “sources” in Section 9.8(c)(3) applies to all three sectors ignores

other language in the provision—specifically, that the assurance of proportional reductions is

limited to sources “subject to the program,” which the IEPA states are point sources. (PC 14

at 25.)

The Board does not agree that the ERMS program itself must also apply to mobile and

area sources. Section 9.8(c)(3) uses the words “mobile and area sources” when referring to

“total emission reductions required of all emission sources,” not when referring to “sources

subject to the program.” (415 ILCS 5/9.8(c)(3) (1996).)

Future Reductions through the ERMS program

It appears that the Coalition and Dart are requesting that the proposed rules be modified

to address any further emissions reductions under the ERMS program that the IEPA may seek

after the proposed rules are adopted. Dart argues that the proposed rules should provide the

following assurance to point sources: if the ERMS rules do not result in compliance with the

9% ROP requirements, then any additional emissions reductions needed to meet these

requirements must be sought from sources other than point sources. (PC 4 at 3-4.)

To the extent that Dart is suggesting that no further emissions reductions be sought

under the ERMS program from point sources after this rulemaking, the IEPA states that it has

made its "position clear that further reductions may be needed under the ERMS program if

Chicago is to achieve attainment." (PC 14 at 26.)

While opposing adoption of the ERMS program at this time, the Coalition proposes

changes to the proposed rules in the event that the Board adopts the rules. By proposing the

language set forth below, the Coalition intends to ensure that the IEPA “demonstrates that

mobile and area sources are simultaneously reducing their proportionate share of VOM

emissions” prior to any further emissions reductions under the ERMS program in the future.

(PC 10 at 9.) The Coalition proposes that the following be added to Section 205.400(d) of the

proposed rules:

(ii)

If the Agency requests further reductions, in accordance with Section 9.8

of the Act, the Agency must demonstrate that mobile and area sources

are simultaneously reducing their proportionate share of VOM emission

reductions as defined in Section 205.130 of this Part. (

at10.)

The Coalition proposes the following definition for Section 205.130:

“Proportionate share” means the amount of actual emission reductions from

mobile, area and stationary

sources from 1996 forward equal to the amount of

their respective percent of VOM emissions contribution to total VOM emissions

in the Chicago nonattainment area in 1996. (

Id.

)

The Board finds that the issue of further reductions under the ERMS program can be

addressed with a small change to the proposed rules. Section 205.400(d) of the proposed rules

provides that allotments will remain at 1999 or initial levels unless the IEPA makes a

demonstration to the Board through a rulemaking that further reductions are necessary. In this

first notice, the Board has added a reference in this provision to make clear that any such

future rulemaking would be pursuant not only to Sections 27 and 28 of the Act, but also

pursuant to Section 9.8. Thus, the provision as modified ensures that the IEPA cannot require

reductions beyond 12% without demonstrating that the "proportionality" requirement of

Section 9.8(c)(3) has been satisfied.

The opinion now turns to the description of the proposed rule and the summaries of the

comments section by section.

Subpart A General Provisions

Section 205.100 Severability

This section sets forth that the proposal is severable and that if one section is judged

invalid the remaining sections would still be in effect.

Section 205.110 Purpose

This section states the purpose of the proposed regulations. That purpose is two-fold.

First, the proposal is one component of the IEPA’s plan to meet Illinois’ obligation pursuant to

USEPA’s Memorandum and its findings of July 10, 1996. Second, the proposal is designed to

conform to the requirements of an emission reduction market system as promulgated in Section

9.8(c) of the Act.

Section 205.120 Abbreviations and Acronyms

This section provides the abbreviations and acronyms used in Part 205 or references to

other abbreviations from 35 Ill. Adm. Code 211, Definition and General Provisions.

The Board notes that we added an abbreviation for the Clean Air Act.

Section 205.130 Definitions

This section defines many terms specific to Part 205 and incorporates many definitions

from Section 39.5 of the Act (415 ILCS 5/39.5 (1996)) and 35 Ill. Adm. Code 211.

The Board made minor non-substantive changes to the definitions of "allotment,"

"CAAPP," and "Participating source." Additionally, the Board requests the IEPA to define

"natural" in front of "person in the definition of "Account Officer" at the August 19, 1997

hearing or in public comments.

Section 205.140 General System Description

This section explains the intent of Part 205 and sets forth the underlying structure of

Part 205. However, this section does not establish applicability or compliance obligations

pursuant to Part 205.

The Board strikes this section from the proposed rules since it does not provide any

requirements or establish any procedures.

Section 205.150 Emissions Management Periods

This section identifies the seasonal allotment period as May 1 to September 30 and the

subsequent reconciliation period as October 1 to December 31. Subsections (c) and (d) of this

Section establish key compliance requirements for sources required to participate in the

system. Such sources must hold allotment trading units (ATUs), which are equivalent to 200

pounds of VOM emissions, at the end of each reconciliation period in an amount not less than

their VOM emissions during the previous seasonal allotment period.

Furthermore, subsections (c)(2) and (d)(1) define the compliance obligations for a

source that undergoes a major modification after May 1, 1999, or is a new major source

subject to 35 Ill. Adm. Code 203 after May 1, 1999. Such sources are required to hold ATUs

at the end of each reconciliation period after the first seasonal allotment period in which the

major modification or new source contributed to VOM emissions in an amount not less than

1.3 times the VOM emissions from the new emission source or emissions attributable to the

major modification. Additionally, subsection (e) states that if the source complies with this

requirement, it will fulfill its offset requirement for VOM emissions pursuant to 35 Ill. Adm.

Code 203.302(a), 203.602, and 203.701.

The IEPA in its public comment proposes to change subsection (e) to clarify that the

offsets required for a major modification are only for the emissions attributable to the modified

emission unit. (PC 14 at 5.)

The Board finds that the suggested language made by the IEPA in their public

comments clarifies subsection (e). The IEPA's requested change ensures sources that the ratio

of 1.3 to 1 of ATUs is only required of the emission unit involved in the major modification

and that any other emission unit within the facility does not have to meet this requirement.

The Board accepts the proposed changes in Section 205.150(e).

The Coalition has several concerns on the issue of New Source Review (NSR) and the

baseline determinations made pursuant to Section 205.320. (PC 10 at 24.) The Coalition

states that its concerns are the result of the inconsistency between Illinois’ NSR rules (35 Ill.

Adm. Code 203) and the federal rules in the Clean Air Act (CAA). (

.) The Coalition

asserts that permit limits on VOM emissions made prior to the implementation of the ERMS

program in order to comply with the NSR offset requirements, may unfairly restrict the

amount of ATUs it will receive. (

. at 24-25.) Finally, the Coalition is concerned that a

source will lose emissions reduction credits under the ERMS program because Illinois' NSR

regulations and the CAA are not consistent. (

. at 25.)

In response to the Coalition's concern that the Illinois' NSR rules and CAA are

inconsistent, the IEPA states that it is expeditiously working on proposing amendments to

Illinois’ NSR rules to conform the rules with the CAA. (PC 14 at 38.) The IEPA claims that

although the ERMS program is a seasonal program and NSR deals with annual emissions, it

believes that the ERMS program can help sources meet the NSR requirements. (

. at 39-40.)

The IEPA, in response to the Coalition's concerns with permit limits, states that permit

conditions would be considered "applicable requirements" pursuant to Section 205.320,

Baseline Emissions, and thus may increase or decrease the source's baseline determinations.

(

The Board finds that although the Coalition raises a valid issue concerning the

inconsistencies of Illinois' NSR and the CAA we agree with the IEPA that the ERMS program

will assist sources in obtaining offsets for NSR. With regards to the Coalition’s concern that a

source would lose credit for any offsets obtained for NSR prior to the ERMS program, new

language proposed by IERG and the IEPA for Section 205.320, as discussed on page 30 of the

opinion, addresses the Coalition’s concern. As to the Coalition's concern that permit limits

accepted to meet the NSR prior to the ERMS program may not allow for a fair and accurate

representation of a source's baseline emissions, this should be addressed by the allowances in

Section 205.320 as a result of the proposed changes made by IERG and the IEPA discussed

above. The Board, however, requests the participants to further respond at the hearing

scheduled for August 19, 1997,

or in public comments, whether a source should be able to

argue that its baseline should be increased due to achieved NSR offsets or be exempt from the

ERMS program NSR offset requirements.

Subpart B Applicability

Section 205.200 Participating Source

As proposed, a "Participating source" is defined in Section 205.130 as any source

existing prior to May 1, 1999, that is located in the Chicago ozone nonattainment area, is

required to obtain a CAAPP permit, and has seasonal emissions of at least 10 tons of VOM.

Any such source will not be considered a participating source if it shuts down all operations

prior to having conditions relevant to Part 205 incorporated into its CAAPP permit. Such

sources may, however, participate in the ERMS program voluntarily.

Subsection (a) establishes the first seasonal allotment period to be 1999 in which

participating sources are required to hold ATUs to address seasonal VOM emissions.

Subsection (b) provides that sources that increase to 10 tons or more of VOM emissions in any

seasonal allotment period beginning with 1999 are required to hold ATUs to offset seasonal

emissions beginning with the season after the increase occurred. Subsection (c) sets forth that

sources that increase to 10 tons or more of VOM emissions in any seasonal allotment period

beginning with 1999 as a result of a major modification pursuant to 35 Ill. Adm. Code 203,

the source must hold ATUs to offset seasonal emissions beginning with the first season the

source operates the major modification.

In their public comments, IERG and CICI request that the compliance deadline for the

ERMS program be in the year 2000 instead of 1999. (PC 9 at 3, PC 6 at 7.) IERG states that

the IEPA's proposal in Section 205.200(a) requires participating sources to operate pursuant to

a baseline by 1999 and that it is IERG's position that all sources should be given the maximum

time to achieve compliance. (PC 9 at 3.) IERG asserts that the IEPA originally proposed the

regulation with a two phase compliance deadline the first being 1999 for larger sources and the

second being 2000 for smaller sources. (

.) IERG argues that if the compliance deadline is

changed to the year 2000 the same air quality benefits intended by the IEPA will be realized

and the regulated community will be allowed greater flexibility. (

.) Both IERG and CICI

maintain that the regulations are complicated and that additional time will provide greater

efficiency in the ERMS program. (PC 9 at 3, PC 6 at 7.) In determining this issue IERG also

requests that the Board consider practical circumstances. (PC 9 at 3-4.) IERG notes that the

participating sources will not be able to plan until they receive their baseline determinations

from the IEPA in their CAAPP permits. (

. at 4.) IERG states that the IEPA is planning to

issue the CAAPP permits for participating sources by December 31, 1998, and IERG believes

that IEPA's schedule is extremely ambitious. (

.) IERG asserts that participating sources

will not be able to "plan and implement compliance strategies" until they receive their CAAPP

permits and baseline. (

.) IERG does not believe that five months will be sufficient time for

the participating sources to prepare for the seasonal allotment period of May 1 through

September 30. (

.) IERG states that it does not believe that the CAA prohibits the

alternative compliance date. (

. at 5.) Alternatively, IERG proposes a waiver from

excursion compensation for the 1999 seasonal allotment period and suggests that Section

205.620, Emission Excursion Compensation, be amended. (

.) IERG suggests the Board

amend Section 205.620(b)(1) so that it applies after January 1, 2000. (

In response to IERG's and CICI's comments concerning the starting point of the

proposal, 1999 versus 2000, the IEPA states that it does not believe this change is appropriate

and is concerned that this change could result in Illinois being sanctioned by the USEPA. (PC

14 at 21.) The IEPA maintains that the proposal requires a reduction in VOM emissions to

meet the ROP requirement in 1999 for the stationary source sector in order to fulfill Illinois'

obligations under the Memorandum and the July 10, 1996 findings of the USEPA. (

The Board finds that the requested change from 1999 to 2000 is not appropriate

considering the underlying goal of the ERMS program. Pursuant to the Memorandum and the

July 10, 1996 findings of the USEPA, Illinois is required to demonstrate by January 2, 1998,

that it will achieve a 9% reduction in VOM emissions for the Chicago nonattainment area by

1999. (PC 13 at 1.) The USEPA states that "[a]s a result, satisfaction of the requirement for

nine percent emissions reduction by 1999 dictates that the emissions reduction market system

must require its emissions reductions at least by 1999.” (

. at 2.) The Board does

acknowledge the tight timeframe by which sources have once the final baseline determination

has been issued in the CAAPP permit, but feels that most participating sources should know

prior to the issuance of the CAAPP permit what their ultimate baseline determination will be

and can plan accordingly. Additionally, the Board finds that providing a waiver to the

excursion compensation penalty for 1999 appropriate. However, such waiver should only be

applicable to those sources that receive their CAAPP permit after December 31, 1998, and

should not remove the requirement to hold sufficient ATUs at the end of the reconciliation

period equal to the source's seasonal emissions. Therefore, the Board will amend Section

205.620 as follows:

The Agency shall obtain emissions excursion compensation from any

participating source or new participating source that does not hold ATUs in

accordance with Section 205.150(c) or (d) of this Part by the conclusion of the

reconciliation period, unless the participating source or new participating source

had seasonal emissions for the 1999 seasonal period and was not issued a

CAAPP permit prior to January 1, 1999. The participating source or new

participating source which had seasonal emissions for the 1999 seasonal period

and was not issued a CAAPP permit prior to January 1, 1999 must obtain ATUs

at a ratio of 1 to 1. The Agency shall obtain the emission excursion

compensation for all other participating sources or new participating sources

pursuant to the following procedures:

Dart disagrees with the IEPA's position not to seek reductions from sources outside of

the nonattainment area. (PC 4 at 4.) Dart asserts that IEPA states that the NAAQS for ozone

is being violated at the boundary of the Chicago nonattainment area as a result of sources

outside of the nonattainment area. (

.) Dart also asserts that IEPA has testified that it has

assumed a reduction at the boundary line but is not requiring reductions pursuant to this

rulemaking. (

.) Dart argues that the IEPA should seek reductions from outside the

nonattainment area at this time because it would provide greater assurance that the ERMS

program will achieve the desired emissions reductions and meet the NAAQS. (

. at 4-5.)

Dart also notes that Appendix E of the IEPA's Technical Support Document which lists the

expected participating sources does not include some of its competitors and urges the IEPA to

review its emission reports to insure that the ERMS program is uniformly applied. (

. at 5.)

In response to Dart's comments, the IEPA states that it believes that Dart is somewhat

confused about the IEPA’s testimony on this issue. (PC 14 at 19.) The IEPA states that "Dart

believes that it is inconsistent for the IEPA to make assumptions about reductions in

transported ozone without requiring reductions from sources outside of the nonattainment

area." (

.) The IEPA claims that the proposal only mandates the reductions needed to fulfill

the ROP requirement for 1999 and further reductions under the ERMS would require an

amendment to the rule. (

. at 18.) The IEPA claims that the 12% reduction will be needed

no matter what the conclusions are as to the amount of VOM emissions entering the

nonattainment area. (

.) Furthermore, the IEPA states that "the scope of the OTAG process

recognizes the nature of ozone transport issues as regional in nature, rather than localized,"

and that it "believes it is appropriate to await the results from OTAG before forging ahead

with emissions control programs outside of the nonattainment area." (

. at 20.)

The Board finds that it is premature to expand the proposed ERMS program to sources

outside of the Chicago nonattainment area. The Board finds that while the IEPA has assumed

that VOM from outside the nonattainment area will be reduced, it has not been demonstrated

that the ERMS program is the appropriate vehicle to achieve that reduction. Additionally,

there is no indication of the extent of the reductions needed and from where those reductions

should be sought.

Waste Management states that the ERMS program cannot feasibly be applied to

landfills. (PC 5 at 2.)

Waste Management asserts that landfills should not be regulated

because: (1) total landfill emissions are not measurable with reasonable precision and are

almost always grossly overestimated; (2) landfill emissions are not associated with the waste

stream and continue after the facility stops accepting waste; (3) landfills will not be able to

maintain its emissions at a determined baseline and will constantly have to purchase ATUs;

and (4) the unique emission patterns of the landfill cause it to pay emissions fees significantly

The NSWMA public comment endorses the public comments of Waste Management and

therefore will not be discussed separately. (PC 8 at 1.)

above actual emissions and pay emissions fees based on peak landfill emission curve. (

. at

2-3.) Waste Management argues that the ERMS program should apply to landfill gas control

equipment instead of landfills generally. (

. at 3.) Waste Management states that emissions

are readily measurable, and, pursuant pending Federal New Source Performance Standards

(NSPS), the control equipment will have emission guidelines. (

.) Furthermore, Waste

Management asserts landfills will be required to install collection and control systems by

December 1998 and that a MACT standard will be published in 2000. (

.) To conclude,

Waste Management asserts that the most practical application of the ERMS program is to apply

it to the landfill gas control equipment emissions. (

. at 4.)

The IEPA did not respond in its public comments to Waste Management's comments

concerning the applicability of the ERMS program to landfills generally.

The Board finds that it is unclear whether the ERMS program, as proposed, would

apply to any landfill and whether the ERMS program should apply to landfills generally or to

landfill gas control equipment. Waste Management has not indicated whether any of its

landfill sites meet the requirements for a participating source under the proposed ERMS

program. The Board requests Waste Management and the IEPA indicate at the public hearing

scheduled for August 19, 1997, or in public comments, which landfills, if any, that are

operating prior to May 1, 1999, located in the Chicago ozone nonattainment area, that are

required to obtain a CAAPP permit and have baseline emissions of at least 10 tons of VOM, as

specified in Section 205.320(a) of this Part or seasonal emissions of at least 10 tons of VOM in

any seasonal allotment period beginning in 1999.

The Board notes that we added language from the proposed definition of "participating

source" to Section 205.200.

Section 205.205 Exempt Sources

Subsection (a) exempts a source from the ERMS program if it limits its seasonal

emissions of VOM to 15 tons per season or less in its CAAPP permit. If the source is a

participating source for the seasonal allotment period of 1999, the source must apply for the

applicable permit limit by January 1, 1998. If the source is a participating source for any

seasonal allotment period after 1999, the source must apply for the applicable permit limit by

December 1 of the first year its seasonal emission are at least 10 tons.

Subsection (b) exempts sources that elect to achieve a seasonal VOM emissions

reduction of 18 percent or more by 1999. Such sources are required to submit an ERMS

application to establish a baseline level from which this 18% reduction must be achieved. For

each source that is exempt, the IEPA will issue ATUs equivalent to any amount of VOM

emissions reductions achieved by the source in excess of 12%, or at least six percent, into the

Alternative Compliance Market Account (ACMA). Subsection (b) requires sources apply for

applicable permit limits by January 1, 1998.

CICI asserts that a participating source should be allowed to exempt itself by

voluntarily reducing its seasonal emissions by 12% instead of the proposed 18%. (PC 6 at 5.)

CICI states that any reduction in the number of participating sources should be encouraged to

reduce the transaction costs of the ERMS program for the IEPA and the participant. (

CICI notes that the airshed will still receive the same benefit. (

.) CICI states that under the

current proposal of 18%, 6% is being placed in the ACMA which may discourage early

reductions from sources. (

The IEPA did not respond in its public comments to CICI's comments concerning the

requirement of a 18% reduction in order for a source to be excluded from the ERMS program.

At hearing Mr. Chris Romiane, testifying on behalf of the IEPA, stated by way of background

the following:

This exemption from the trading program was requested on behalf of certain

types of sources. The Agency agreed to the exemption if the source would

provide a substantial reduction source-wide. We settled on 18 percent as one

and a half times the 12 percent reduction generally being required from a

market perspective. The agency's preference is that sources participate in the

market, the trading program and make surplus reductions available to the

general market and to other sources. The 18 percent level assures that sources

carefully consider whether they pursue this exemption. However, from an air

quality perspective, the 18 percent exemption does enhance the trading

program's ability to provide a rate of progress required for 1999 which is our

fundamental purpose for the program. So we did accept the source's request

and accommodate them. (Tr. at 954-955.)

Additionally, Mr. Romaine testified in response to questioning that the IEPA considered other

numbers but decided to use 18% as the required reduction. (

. at 955.)

The Board finds that CICI has not provided sufficient reason to change the IEPA's

decision to require 18% reduction in order for a source to exempt itself out of the ERMS

program.

Section 205.210 New Participating Source

Section 205.130 defines a new participating source as a source not operating prior to

May 1, 1999, that is located in the Chicago ozone nonattainment area, is required to obtain a

CAAPP permit, and has or will have seasonal emissions of at least 10 tons of VOM. This

section also specifies that such sources are required to hold ATUs to address seasonal

emissions upon commencing operations.

The Board notes that we added language from the definition of "new participating

source" to Section 205.210.

Section 205.220 Insignificant Emissions Units or Activities

This section excludes emission units or activities identified as insignificant activities in

a source’s CAAPP permit.

Section 205.225 Startup, Malfunction or Breakdown

This section excludes excess VOM emissions attributable to startup, malfunction or

breakdown from the system provided operation during such periods is permitted.

Subpart C Operational Implementation

Section 205.300 Seasonal Emissions Component of the Annual Emissions Report

This section requires sources to submit seasonal VOM emissions data as a component

of their Annual Emission Report that is filed pursuant to 35 Ill. Adm. Code 254. Subsection

(a)(1) requires that such information must be submitted for each preceding seasonal allotment

period by October 31, if the source generates VOM emissions from 10 emission units or less,

and subsection (a)(2) requires the information by November 30, if the source generates VOM

emissions from more than 10 emission units.

Subsection (b) identifies the information that is required to be submitted as part of the

seasonal emissions component of the Annual Emission Report.

The Board notes that we added "CAAPP" to subsection (b) before "permit" to identify

which permit is being discussed.

Section 205.310 ERMS Applications

This section sets forth when the ERMS applications are required and the informational

requirements. Subsection (a) establishes the dates by which participating and new participating

sources are required to submit the applications. Subsection (a)(1) requires participating

sources to submit applications by January 1, 1998. Subsection (a)(2) provides that any new

participating source, a source that increases its VOM to 10 tons per season or more beginning

in 1999, must submit an ERMS application by December 1 of the year following its emissions

increase. Subsection (a)(3) requires a new participating source that undergoes a major

modification to submit an ERMS application at the same time its construction permit is due.

Subsection (b) identifies the information required of each participating source's ERMS

application. Sources must submit information necessary to allow the IEPA to determine the

appropriate baseline emissions level and to establish emissions determination methods and

associated practices. Sources are also required to submit any other information necessary to

demonstrate compliance with Part 205 and Section 39.5 of the Act.

Subsection (c) provides that the ERMS applications shall be considered a significant

modification of the source's CAAPP permit or a revision of its CAAPP application if a

CAAPP permit has not been issued.

Subsection (d) sets forth requirements for the ERMS applications for sources that apply

for exemptions from the ERMS program based on VOM emissions reductions of at least 18%.

These requirements are similar to those of subsection (b) in that sources must submit

information from which its baseline emissions can be determined and to establish appropriate

compliance assurance methods and practices within the source’s permit.

Subsection (e) requires the IEPA to make a preliminary determination as to each

source’s baseline emissions within 120 days of receipt of its ERMS application. The

subsection also provides that this requirement can be fulfilled by the issuance of a draft

CAAPP permit pursuant to the public notice requirements of Section 39.5(8) of the Act. 415

ILCS 5/39.5(8) (1996).

Subsection (f) specifies the information required of sources applying for a major

modification subject to 35 Ill. Adm. Code 203. In addition to the informational requirements

of subsection (b), this subsection requires a certification that the source acknowledge that it

will be required to hold ATUs in an amount not less than 1.3 times its seasonal VOM

emissions pursuant to Section 205.150 and must provide a plan explaining how it will obtain

the required ATUs for the first three seasonal allotment periods in which it is operational.

Subsection (g) provides the information required of new sources, which is substantially

the same as that required of sources in subsection (f) above, except that new participating

sources do not need to supply information to establish baseline emissions as such sources will

not be allotted ATUs. Sources will be able to purchase ATUs in order to fulfill the

requirements of Part 205.

Subsection (h) establishes the information that must be submitted to demonstrate the

baseline emissions for participating sources that have new or modified emission units for which

three years of operating data is not available at the time the application is submitted. Such

sources are only required to submit a written request unless a permit modification is needed.

The Board notes that we added language to subsection (h) to clarify that subsection.

Section 205.315 CAAPP Permits for ERMS Sources

Subsections (a), (b), and (c) establishes the interaction between CAAPP permits and

various provisions of Part 205. The IEPA’s determination as to baseline emissions,

appropriate emissions determination methods and practices, and the appropriateness of

exclusions from further reductions are established by the issuance of a CAAPP permit for each

source. This section provides that these determinations are appealable to the Board pursuant to

the CAAPP permit appeal procedures of Section 40.2 of the Act or by the proposed

amendments to the Board's procedural rules. 415 ILCS 5/40.2 (1996).

Subsections (a) and (c) also address certain implementation issues during the pendency

of an appeal. If the source appeals the IEPA’s baseline determination, the source’s proposed

baseline emissions shall be used during the pendency of the appeal. During this period, the

source will be issued ATUs based on its proposed amount, reduced by 12%, but will not be

allowed to trade ATUs. If the IEPA’s best available technology (BAT) determination is

appealed, the source will be issued ATUs for the proposed BAT emission unit as if the BAT

proposal was accepted, that is, it will receive ATUs without the 12% reduction.

Subsection (e) of this section directs the IEPA to coordinate its action on CAAPP

permits for participating sources, to the extent possible, by grouping permits for purposes of

public notice and public hearings, when necessary.

Subsection (f) specifies the appropriate procedures to transfer permits under the ERMS

program. The Board notes that these procedures are in addition to any other applicable

procedures.

Subsection (g) provides that any multiple season ATU transfer agreement, pursuant to

Section 205.530(a)(2)(B), that has three or more years of transfer remaining shall be identified

in the renewed or modified CAAPP permit.

Subsection (h) provides that any multiple season ATU transfer agreement, pursuant to

Sections 205.410, 205.480 or 205.490, that has three or more years of transfer remaining shall

be identified in a renewed or modified CAAPP permit.

Tenneco requests that the prohibition of the sale of ATUs, pursuant to subsection (a),

during the appeal of a CAAPP permit concerning the IEPA's baseline determination should be

eliminated. (PC 7 at 5.) Tenneco asserts that the proposed rule is overly burdensome and

inconsistent with the appeal of IEPA's BAT determination. (

. at 5-6.) Tenneco states that

during the pendency of an appeal only those ATUs which are part of controversy should be

restricted and not the whole ATU allotment. (

. at 6.)

The IEPA did not respond in its public comments to Tenneco's comments concerning

the prohibition of the sale of ATUs during an appeal of the IEPA's baseline.

The Board finds that sources should be able to use the portion of the ATUs which are

not part of the controversy for compliance or sale. However, the Board also finds that the

ATUs which are being reviewed can not be used for either purposes (

i.e

., sale or compliance).

The Board is basing this decision on the current treatment of permit appeals. An appeal of a

reissued permit only affects those conditions that are appealed and not the whole permit during

the appeal period. The applicant operates under the permit for all those conditions that are not

under review pursuant to the appeal. Here, during the appeal a source will still have to

maintain sufficient ATUs at the end of the reconciliation period and should not be able to use

the ATUs under review for compliance or sale. However, those ATUs which are under

review will not expire two years after issuance as set forth at Section 205.400(b). The ATUs

under review will not expire until two years after the Board’s decision reversing the IEPA

determination or if the Board's decision is appealed, until the Board's decision to reverse the

IEPA's decision is upheld. The source's allotment of ATUs will be reduced to reflect the

IEPA's decision, if upon appeal the Board affirms that decision, when the IEPA issues the

source's allotment for the year following such decision or if the Board's decision is appealed,

until the Board's decision to affirm the IEPA's decision is upheld. The Board will amend

Section 205.315 as follows:

The Agency shall determine the baseline emissions for each participating source

in accordance with Section 205.320 of this Subpart, through its final permit

action on a new or modified CAAPP permit for each such source. The

Agency's baseline emissions determination may be appealed in accordance with

the CAAPP appeal procedures specified in Section 40.2 of the Act. [415 ILCS

5/40.2 (1996).] If the permit conditions establishing a source’s baseline

emissions is appealed, the baseline emissions for the source shall be as proposed

in the source’s ERMS application during the pendency of the appeal. During

the pendency of the appeal, ATUs shall be allotted to the source pursuant to this

baseline emissions amount, reduced in accordance with Section 205.400(c) of

this Part, but such source shall not be allowed to sell or use the portion of the

ATUs that are attributed to the part of the source's proposed baseline emissions

that were denied by the Agency and are under review by the Board to meet its

seasonal emissions. The allotted ATUs that are under review will expire two

years after the date of the final decision which allows the source to use or sell

the ATUs under appeal, instead of two years after the issuance as set forth at

Section 205.400(b).

The Agency shall determine, in accordance with Section 205.405(b) of this

Part, if an emission unit qualifies for exclusion from further reductions in its

final permit action on a new or modified CAAPP permit for each such source.

The Agency’s determination may be appealed in accordance with the CAAPP

appeal procedures specified in Section 40.2 of the Act. If the permit conditions

establishing the Agency’s best available technology determination is appealed,

ATUs shall be allotted to the source for any emission unit for which the

Agency’s best available technology (BAT) determination is being appealed

without the emissions reduction otherwise required by Section 205.400(c) of this

Part during the pendency of the appeal. The source however cannot sell or use

the portion of the ATUs to meet its seasonal emissions that are attributed to the

emission unit(s) that the source proposed as meeting BAT but were not accepted

by the Agency as meeting BAT and are under review by the Board. The

allotted ATUs that are under review will expire two years after the date of the

final decision that determines that those emission units are using BAT instead of

two years after the issuance as set forth at Section 205.400(b).

Additionally, the Board requests the participants address which methods and practices

should be used during an appeal under subsection (b) at hearing on August 19, 1997 or in

public comments.

Dart suggests that the proposed regulations clearly state that any IEPA decisions related

to the implementation of the ERMS program can be appealed pursuant to Section 40.2 of the

Act. (PC 4 at 7.) Dart asserts that the Agency testified that all decisions are appealable but

the regulations do not reflect that testimony. (

.) Dart argues that the Agency should be

required to inform the regulated community that its decisions can be appealed. (

. at 7-8.)

In response to Dart's public comments, IEPA states that Sections 205.315(a), (b) and

quantification methods and practices, and BAT determinations are appealable. (PC 14 at 13.)

The IEPA also notes that the approval or denial of Emission Reduction Generators (Section

205.480(f)), the approval or denial of intersector proposals (Section 205.490(e)), the

authorization to gain special access to ACMA (Section 205.610(h)), and the determination that

an emissions excursion has occurred as provided in Section 205.620(d), are all appeable

pursuant to the proposed procedural rules. (

The Board finds that the appeal procedures set forth in Section 205.315 concerning the

review of items in the source's CAAPP permit are sufficient, except as noted above.

However, the Board finds that the appeal procedures set forth in the proposed amendments to

Part 106 are insufficient. The Board will not adopt the proposed amendments of Part 106 for

First Notice. Instead the Board will rely on the Board's current procedural regulations at 35

Ill. Adm. Code 105 and Section 40 of the Act for the appeal process for the IEPA's decisions

in the ERMS program that are not associated with the CAAPP permit. The IEPA's proposed

amendments to Part 106 creates an arbitrary and capricious standard of review concerning the

IEPA's decision on proposal for an ERG and no standards for the other appeals. The Board

finds that a standard of review should not be whether the IEPA's decision was arbitrary or

capricious. The Appellate Court in ESG Watts v. IPCB and IEPA consolidated with IEPA v.

IPCB, 286 Ill. App. 3d 325, 676 N.E.2d 299, 221 Ill. Dec. 778, stated the following:

Generally the Board does not apply the arbitrary and capricious standard to

decisions made by the Agency. Rather, the Board reviews the information

which the Agency relied on in making its decision. See Alton Packaging Corp.

v. Illinois Pollution Control Board, 162 Ill. App. 3d 731, 516 N.E.2d 275, 114

Ill. Dec. 120 (1987). Thereafter, the Board places the burden on the petitioner

to prove that it is entitled to a permit and that the Agency's reasons for denial

are either insufficient or improper. ESG Watts, Inc. v. Illinois Environmental

Protection Agency, Ill. Pollution Control Bd. Op. 94-243 (Consolidated)

(March 21, 1996).

To require the Board to review the Agency decision under an arbitrary and

capricious standard in this case would essentially remove the procedural

safeguards of the administrative appeal process. The decision of the Agency

would, in effect, be insulated, because the Board's review would be limited to a

determination of whether the action was arbitrary rather than appropriate and

supported by the evidence. Moreover, we are concerned that, due to the time

restraints placed on the Agency, it cannot hold full hearings to develop the

issues of the case. Accordingly, it is essential that the Board provide hearings

and allow the petitioner an opportunity to challenge the validity of the decision

made by the Agency. To require another standard of review would interrupt the

administrative continuum which becomes complete after the ruling of the Board.

Illinois Environmental Protection Agency v. Illinois Pollution Control Board,

138 Ill. App. 3d 550, 486 N.E.2d 293, 93 Ill. Dec. 192 (1985),

aff'd

, 115 Ill.

2d 65, 503 N.E.2d 343, 104 Ill. Dec. 786 (1986).

The Board finds that this reasoning holds true for these decisions as well. Therefore the Board

will use the procedural rules at 35 Ill. Adm. Code Part 105. The Board also notes its proposed

procedural rules provides procedures for the appeal of a final decision by the IEPA which are

not related to a permit. (See In the Matter of: Revisions of the Board's Procedural Rules, 35

Ill. Adm. Code 101-130, October 3, 1996, R97-8.) The Board intends to amend the ERMS

program so that the appeals of final decision by the IEPA are pursuant to the proposed

procedural rules once they are adopted by the Board. The Board invites the IEPA and the

other participants to comment on the proposed procedural rules for ERMS in that rulemaking.

Section 205.318 Certification for Exempt CAAPP Sources

This section requires any source: (1) that is located in the Chicago ozone

nonattainment area; (2) that is required to obtain a CAAPP permit; and (3) has VOM

emissions, but is not a participating source because its baseline emissions are less than 10 tons

of VOM, to submit a certification to the IEPA by January 1, 1998. The certification shall

indicate that it is not required to participate and should contain supporting documentation.

Section 205.320 Baseline Emissions

Subsection (a) establishes the threshold baseline determination for existing sources by

averaging the two seasonal allotment periods with the highest VOM emissions during 1994,

1995, and 1996. Additionally, subsection (a)(2) allows a source to propose replacement years

in its ERMS application within the time frame of 1990 through 1997, if such year is more

reflective of historical operating conditions than in 1994, 1995, or 1996.

Subsection (b) sets forth the baseline determinations for existing sources with baseline

emissions below 10 tons per season, as specified in subsection (a), that increase to 10 tons or

more in any seasonal allotment period beginning with 1999, but is not a major modification.

Pursuant to subsection (b), baseline emissions will be based on a source's VOM emissions for

the first seasonal allotment period with emissions of 10 tons or more.

Subsection (c) provides the baseline determination for any existing source with baseline

emissions below 10 tons per season, as specified in subsection (a) above, that increases to 10

tons or more in any seasonal allotment period, beginning with 1999, constitutes a major

modification. The baseline emissions for such a source shall be based on its seasonal VOM

emissions from the season prior to the submittal date or submittal due date of its application

for the major modification, whichever occurs earlier.

Subsection (d) establishes credit for voluntary over-compliance with applicable

requirements effective in 1996, provided that the over-compliance occurred after 1990. Such

over-compliance will be given credit based on the production level in the baseline years and

the actual emissions level compared to the allowable emissions level in 1996.

Subsection (e) identifies circumstances under which baseline emissions will be

decreased. Subsection (e)(1) provides that if a source is out of compliance with any applicable

requirements in any of the seasonal allotment periods used to determine its baseline, its

baseline emissions will be lowered to reflect the amount of VOM emissions as if the source

was in compliance. Subsection (e)(2) sets forth that if the seasonal allotment periods selected

for baseline emissions do not reflect compliance with requirements effective through 1996 that

became effective after any of the selected seasonal allotment periods as baselines, the source's

baseline emissions will be lowered to reflect the amount of VOM emissions as if the source

were in compliance. Subsection (e)(3) specifies that if in any year selected for baseline

emissions a source's VOM emissions were in excess of the applicable regulations due to a

variance, consent decree, or is operating pursuant to a CAAPP permit compliance schedule,

the baseline emissions will be lowered to reflect the amount of VOM emission as if in

compliance subject to certain requirements. Subsection (e)(4) establishes that if any year used

for baseline determination operated with excess emissions due to startup, malfunction or

breakdown, whether or not such emissions were pursuant to a CAAPP permit, the baseline

emissions will be decreased to exclude the excess emissions.

Subsection (f) provides that for new or modified emission units that receive a

construction permit prior to January 1, 1998, but do not have three years of operational data,

the baseline will be determined using the two seasonal allotment periods with the highest VOM

emissions from the first three complete seasonal allotment periods in which any such emission

unit is operational. Furthermore, subsection (f) provides that ATUs will only be issued after

the baseline determination has been made and that the source is not required to hold ATUs for

the first three seasonal allotment periods in which it is operational.

The IEPA, in its Errata Sheet filed on February 24, 1997, requests that the Board make

changes to subsection (f) to clarify that the adjustment allowed to baseline emissions for

pending projects only applies to VOM emissions from the new emissions unit(s) or VOM

attributable to the modification of an existing unit(s). (Errata at 1.)

The Board finds that the language proposed by the IEPA in its Errata Sheet filed

February 24, 1997, (Errata at 1) clarifies that the requirements in this subsection only pertain

to emissions from a new or modified emission unit that was issued a construction permit prior

The IEPA February 24, 1997 "Errata Sheet" will be referenced to as "Errata at ."

to January 1, 1998. The Board accepts the proposed changes in Section 205.320(f) made by

the IEPA.

The IEPA and IERG, in their public comments, propose to amend Section 205.320 to

address the situation in which a source has achieved emissions reduction credits outside of the

ERMS program to meet the new source review offset requirements who then may have to

purchase ATUs to address the offset requirements of the ERMS program. (PC 14 at 5-6, PC 9

at 7.) IEPA and IERG suggest that the Board add a subsection (g) which would provide that

emissions reduction credits acquired pursuant to written agreement prior to January 1, 1998,

for the purpose of satisfying the offset requirements of 35 Ill. Adm. Code 203 shall be

included in the baseline determination. (PC 14 at 6, PC 9 at 7.)

The Board finds that allowing sources to incorporate already acquired emissions

reduction credits into their baselines when a source is unable to obtain a construction permit

prior to January 1, 1998, should be included in these proposed rules. IERG questioned Mr.

Romaine at the February 10, 1997 hearing and Mr. Romaine said that there was no provision

to protect sources from having to acquire double the amount of emissions under 35 Ill. Adm.

Code Section 203 (Tr. 1-5 at 1032-1033). Therefore, the Board accepts the proposed

language made by the IEPA and IERG with a minor change. In the IEPA’s public comments

(PC 14 at 6), the IEPA forgot to put “source” in Section 205.320(g)(1) after “prior to January

1, 1998, to the . . .” as it is in IERG’s public comment (PC 9 at 7).

The Coalition asserts that a source should be able to use any year between 1990-1997

instead of being limited to only 1994-1996 when determining its baseline emissions. (PC 10 at

11.) The Coalition argues that the 1990 emissions are the baseline for the ROP requirements

and the basis for the amount of reductions in the proposal. (

.) The Coalition argues that

since 1990 is the baseline for reductions any year's emissions after 1990 through 1997 can be

used to determine baseline emissions. (

. at 12.) The Coalition states that IEPA states that

1994 is the first year that they feel comfortable with their emissions data. (

.) The Coalition

argues that "if this is so then how can IEPA justify any reductions made since 1990." (

. at

12.)

The Coalition also asserts that the owners/operators are in a better position than the

IEPA to make a decision as to what is their representative emissions when determining the

ERMS program baseline. (

. at 13.) The Coalition argues that Section 205.320(a) does not

provide a definition of what is representative and the only testimony given by the IEPA

witnesses concerned strikes, natural disasters and unusual equipment failure. (

.) The

Coalition is concerned whether the IEPA would consider lower production levels due to low

sales during the 1994 through 1996 period as "non-representative" years. (

.) The Coalition

concludes that expanding the years for which baseline determinations can be made to include

1990 through 1997 will eliminate an arbitrary application of the proposal. (

. at 14.)

The Coalition states further "that nowhere in the CAAA or RFP

requirements does it

say that an average of 2 years of emission data is needed to calculate the ERMS baselines.

IEPA is using NSR rules to support using a 2 year average." (

.) The Coalition argues that

using a two year average would make sources reduce beyond ROP requirements. (

. at 15.)

The Coalition asserts that averaging two years emissions will always decrease the baseline.

(

.) Therefore, the Coalition argues that a source should be allowed to use one year's

emissions to determine the baseline.

The IEPA asserts that allowing source’s to use the emissions data from 1994 through

1996 and any year from 1990 through 1997 if any year between 1994 through 1996 is non-

representative and averaging the two highest years to determine their baselines provides

enough flexibility and assurances that unusual or abnormal practices will be considered. (PC

14 at 27.) The IEPA states that the reasoning behind the first requirement is because the

ERMS rules are attempting to achieve reductions beyond those achieved with the 15% ROP in

1996. (

.) The IEPA also stated that “[t]he basic principle in establishing baseline emissions

is that they are representative of historical emissions” and using only one year's emissions

would not be representative. (

. at 32.)

In response to concerns raised at hearings that the baseline developed by the proposal

will not provide enough ATUs for facilities to grow, the IEPA states that the ERMS program

is intended to be a cap and trade program, if a facility wants to grow, reductions elsewhere

within that facility need to be made. (

. at 29.) Finally, in response to testimony concerning

facilities whose emissions vary from year to year the IEPA argues that the ERMS program is

better for those facilities than traditional command and control requirements because of the

compliance alternative of purchasing ATUs when necessary to meet the source's emission

needs. (

. at 31-32.)

The Board finds that a source should not be able to use any year between 1990-1997 to

determine baseline and must make a showing that the requested year(s) other than 1994

through 1996 are more representative of its emissions. The ERMS program as proposed by

the IEPA is attempting to achieve further reductions from sources so that there is a decrease in

VOM emissions from 1997 to 1999. It is logical to look at the 1994 through 1996 emissions

in developing a historical baseline emission from which deductions are to be made in order to

obtain an additional 9% reduction beyond the emission levels of 1996 to fulfill the ROP

obligations. The Board finds that the proposed process by which the baseline emissions are

developed provide sources sufficient options to develop its historical baseline emissions.

Additionally, the Board finds that to be able to use only one year instead of averaging two

years would defeat the concept that the baseline is meant to represent the source's historical

emissions.

The Coalition also states that the language in Section 205.320(d) is unclear as to

whether the IEPA will give sources credit for voluntary over-compliance in 1990 or after 1990

when determining the source's baseline. (PC 10 at 18.) The Coalition asserts that credit

"RFP" stands for “reasonable further progress” and is equivalent to ROP.

should be given after the 1990 ozone season because the ERMS program is based on the

reduction of emissions of 1990’s ozone season. (

. at 19.) Therefore the ERMS Coalition

proposes the Board modify Section 205.320(d) to state that voluntary over-compliance be

given for reductions made after September 30, 1990. (

.) To conclude the Coalition states

that the Board should change the proposal to: (1) eliminate the requirement that sources have

to demonstrate that non-representative conditions existed in years 1994 to 1996 in order to use

other years in calculating baseline emissions; (2) eliminate the requirement that sources have to

average two representative years to determine the baseline emissions; and (3) allow for

voluntary over-compliance to be credited if achieved after September 30, 1990 instead of after

1990. (

. at 16-19.) The Coalition proposes language to address these issues. (

. at 16 and

18-19.)

The IEPA did not respond in its public comments to the Coalition's comments

concerning whether sources that voluntarily over-compliance between September 30, 1990 and

January 1, 1991 will be given credit towards its baseline determination.

The Board finds that receiving credits for over-compliance that occurred after

September 30, 1990 instead of December 31, 1990, is appropriate. Based on the record before

the Board, the 1990 base year inventory was developed using 1990 emissions in tons per ozone

season weekday. Therefore, credits for over-compliance can be awarded if achieved after

September 30, 1990 instead of only after December 31, 1990 since those reductions occurred

after the VOM emission season in which the baseline was determined. The Board amends

Section 205.320(d) as follows:

The baseline emissions of any participating source shall be increased for

voluntary over-compliance that occurred after September 30, 1990 and

results in a VOM emissions level that is lower than the level required by

applicable requirements effective in 1996, including limitations in the

source’s permit(s) based on such applicable requirements. Voluntary

over-compliance shall be determined in accordance with the following:

CICI suggests that language be added at Section 205.320 to allow under site specific

circumstances that sources could opt out of the way their baseline is determined within the

proposed rules. (PC 6 at 7.) CICI proposes that this would be similar to the Board’s current

adjusted standard procedures. (

.) CICI states that allowing this would help sources who

may otherwise have to shut down continue to operate. (

The IEPA did not respond in its public comments to CICI's comments concerning

relief from the baseline determinations through the use of the adjusted standard procedures of

Section 28.1 of the Act. 415 ILCS 5/28.1 (1996).

The Board finds that additional language is not needed to preserve a regulated source's

right to file a petition for an adjusted standard pursuant to Section 28.1 of the Act.

Tenneco proposes a new section that specifies that a source’s baseline will be

recalculated when a determination method changes and when the USEPA promulgates a

MACT or NESHAP. (PC 7 at 2-3.) Tenneco asserts that the IEPA should be required to

recalculate a source’s baseline, and thus revise a source’s permit, when an emission

determination method changes or a new MACT or NESHAP is promulgated. (

. at 3.)

The IEPA did not respond in its public comments to Tenneco's comments concerning

the recalculation of baseline emissions if circumstances change.

The Board finds that for any emission unit that meets the new MACT or NESHAP

promulgated after 1999 by the USEPA that that emission unit should be exempted from the

12% reduction as they would if meeting a MACT or NESHAP prior to 1999. Regarding the

concern over new emissions determination methods, the Board notes that there is already a

provision within the proposed rules which address that concern at Section 205.337. Section

205.337 already states that if there are new emissions determination methods then the source

should obtain a revised permit. The Board amends Section 205.405 to allow for sources'

emission unit to be exempt as follows:

The following emission units or activities, if in operation prior to 1999,

shall be excluded from the VOM emissions reductions requirement

specified in Section 205.400(c) and (e) of this Subpart:

Section 205.330 Emissions Determination Methods

This section establishes that a source shall determine VOM emissions during the

seasonal allotment period using methods to demonstrate compliance with the ERMS program.

The section states that the methods shall be as stringent as those required by any applicable

requirement and/or any permit condition. The section also requires the Agency to establish the

emissions determination methods in the source's CAAPP permit. Finally, the section

provides, in subsections (a) through (g), some appropriate methods for emission

determinations. However, this section does not mandate that a particular measurement method

be used for a particular type of emission unit.

Section 205.335 Sampling, Testing, Monitoring and Recordkeeping Practices

This section provides that sources must conduct sampling, perform testing, conduct

monitoring, and maintain records as necessary to support its methods used to determine its

emissions. The section also requires the IEPA to specify the practices applicable to each

source in each source’s CAAPP permit.

Tenneco requests that the ERMS program not require additional emissions

determination methods, or any additional sampling, testing, monitoring, and recordkeeping

practices beyond the requirements of the CAAPP permit program (Title V of the CAA). (PC

7 at 5.) Tenneco asserts that these determination methods, sampling, testing, monitoring, and

recordkeeping practices are sufficient for the ERMS program. (PC7 at 5.) Tenneco proposes

changes to Sections 205.330 and 205.335 to prevent the IEPA from proposing additional

requirements. (PC 7 at 5.)

The IEPA did not respond in its public comments to Tenneco's comments concerning

the requirement of additional methods or practices beyond the requirements of the CAAPP

permit program.

The Board finds that changes to Sections 205.330 and 205.335 to limit the IEPA's

ability to require certain monitoring or recordkeeping practices or testing or sampling methods

in a source's CAAPP permit are unnecessary. Since CAAPP permits are appealable to the

Board and requirements placed in the permits which the source believes to be unnecessary can

be appealed to the Board, we find it unnecessary to limit emissions determination methods, or

any additional sampling, testing, monitoring, and recordkeeping practices to those of the

CAAPP permit program. Additionally, since the ERMS program is new and not contemplated

by the CAAPP permit program, new monitoring or recordkeeping practices or testing or

sampling methods may be necessary.

Section 205.337 Changes in Emissions Determinations Methods and Sampling, Testing

Monitoring and Recordkeeping Practices

Subsection (a) specifies that the methods used for determining seasonal VOM emissions

from a source for purposes of establishing compliance with Part 205 must be generally

consistent with the methods used to establish baseline emissions.

Subsection (b) provides that the use of new emissions determination methods or

practices require a revised permit if the new method or practice differs significantly than that

specified in the source’s CAAPP permit. Subsection (b) requires that a source obtain a revised

CAAPP permit pursuant to Section 39.5 of the Act prior to relying on the modified methods or

practices.

The IEPA in its public comments proposes to change this section to allow for approval

of a modified method or practice and to recalculate the baseline emissions based on the

approved method or practice. (PC 14 at 8.) This change would also be reflected in Section

205.400(d).

The Board finds that the IEPA should correct baseline emissions if new methods or

practices emerge. IEPA stated in their public comments (PC 14 at 7-8) that they should clarify

that they have the authority to correct baselines if there is a new method or practice to

calculate it. The IEPA also stated that “Section 205.400(d) may be interpreted to prohibit

such adjustments to allotments.” So not only did the IEPA add a subsection to Section

205.337(b) to allow them to adjust baselines, but they also amended language to Section

205.400(d) that references Section 205.337(b). Additionally, the Board notes that USEPA had

expressed concern over this issue (PC 13 at 2). Although the IEPA did not state this in their

public comments, it appears that the requested change addresses one of Tenneco’s concern

about baselines (See

page 33 of the opinion). Therefore the Board accepts the proposed

addition of a new subsection (b)(3) as follows:

If the Agency approves the use of a modified method or practice, the

Agency is authorized to determine a corrected baseline and thereafter

issue ATUs pursuant to this corrected baseline.

The Board requests the participants address at the August 19, 1997 hearing or in public

comments the necessity of the language contained in Section 205.330 and Section 205.337 for

purposes of clarity, intent and whether the language in those sections should be interpreted in

the same manner. It appears that the language is intended to be interpreted similarly.

Subpart D Seasonal Emissions Management

Section 205.400 Seasonal Emissions Allotments

This section identifies the criteria for establishing the allotment of ATUs for all

participating sources. Subsection (a) provides that each participating source will receive an

allotment from the IEPA. Subsection (b) provides that each allotment issued by the IEPA

except those issued pursuant to Section 205.480 and 205.490, will be valid for the seasonal

allotment period in which they were issued and the next seasonal allotment period. Subsection

Subsection (d) sets forth that the allotment of ATUs will remain at the 1999 levels

unless there is a change in the baseline determination. Furthermore this subsection states that

if further reductions are necessary the Agency must make a demonstration to the Board in

accordance to the rulemaking provisions of Sections 27 and 28 of the Act.

Subsection (e) provides that if a baseline determination for a participating source is

revised pursuant to Section 205.320(f) the allotment is reduced by 12% unless the emission

unit is excluded from further reductions as set forth in Section 205.405.

Subsection (f) states that new participating sources, sources not operating prior to May

1999, will not receive an allotment but are required to hold ATUs at the end of the

reconciliation period. New participating sources can purchase ATUs from the market.

Subsection (g) provides that sources that are in existence prior to May 1, 1999 and then

become subject to Part 205 as a result of a major modification, will not receive an allotment of

ATUs based on the emissions from the major modification but will be given an allotment

based on the source's baseline emissions as determined by Section 205.320, except as provided

by subsection (h) of this section.

Subsection (h) states that if a participating or new participating source submits an ATU

transfer agreement where by another source is transferring ATUs to the participating or new

participating source and the agreement remains in effect over a three year period, the ATUs

are automatically transferred into the participating or new participating source's transaction

account established pursuant to Section 205.510. Furthermore, if the CAAPP permit for that

source is revised or opened, any multiple season transfer agreement that has three or more

years remaining shall be identified in the reissued or renewed CAAPP permit.

The IEPA requests that subsections (c) and (d) reflect its intent that such sources are

subject to the 12% reduction, unless the source obtains an exemption from this reduction

amount. (Errata at 1.)

The Board finds that the proposed changes are acceptable and are incorporated in the

order. The Board also notes that we added a reference to Section 9.8 of the Act in subsection

(d) as discussed on page 9.

Tenneco asserts that issued ATUs should remain permanent and not expire within two

years of its issuance. (PC 7 at 1.) Tenneco claims that the IEPA has based the ERMS

program on the federal trading program for SO

which has permanent ATUs but has not

explained why the ATUs in the ERMS program are not permanent. (

.) Tenneco also states

that making ATUs permanent will provide relief when ATUs issued pursuant to an emission

reduction generator proposal, which are only valid in the year the emissions are achieved are

not approved in time to use in the year they were achieved. (

.) Tenneco suggests that the

proposed Section 205.400(b) be replaced with "ATUs issued during any seasonal allotment

period are valid until such ATUs are retired." (

.) Tenneco also requests that Section

205.400(d) specify that the IEPA may only propose future reductions of the seasonal allotment

pursuant to the general rulemaking authority under Section 27 and 28 of the Act. (

. at 6.)

The IEPA did not respond in its public comments to Tenneco's comments concerning

ATUs being permanent versus expiring within two years as proposed.

The Board finds that the record before the Board at this time does not support making

ATUs permanent. The fact that the ATUs expire should make the market more active because

sources will not be able to stockpile ATUs. This activity should in turn create a greater

market demand and supply of ATUs for sources to use to meet their seasonal emissions and

provides ATUs for new sources to enter the Chicago nonattainment area. However, the Board

invites the participants to provide further information concerning this issue at hearing

scheduled for August 19, 1997 or in public comments.

The IEPA in response to the testimony of Mr. Burke of the American Lung Association

Metropolitan Chicago (ALAMC), who requested that there should be a 5% reduction from

unused ATUs that are banked, states that a reduction may diminish the benefit to the

environment from banking and the flexibility afforded to sources that is derived from banking.

(PC 14 at 44.) IEPA also states that Mr. Burke has not addressed the effect of reducing the

unused ATUs that are banked on the environment if banking is not utilized by participating

sources and the reduced flexibility for the participating sources. (

. at 45.)

The Board finds that the record does not support making the change requested by

ALAMAC in its testimony.

The Board makes the following amendments to subsection (b) as a result of our

decision to issue ATUs during appeal and toll the expiration during the appeal as discussed on

pages 26-27 and to remove unnecessary language.

Except for ATUs issued pursuant to Sections 205.315(a) and (c),

205.480500

and 205.490510, ATUs issued for any seasonal allotment

period are valid for use during the seasonal allotment period following

issuance and the next succeeding seasonal allotment period. All ATUs

issued by the Agency shall be valid until such ATUs expire or are

retired.

Section 205.405 Exclusions from Further Reductions

This section establishes exclusions for emission units that comply with various emission

standards. Subsection (a) states that sources’ emission units in operation prior to 1999 may be

excluded from the 12% reduction set forth in Section 205.400 (c) and (e) if the emission units

comply with one or more of the following; NESHAP, MACT, are direct combustion units

designed and used for comfort heating purposes, fuel combustion emission units or internal

engines, or emission units for which a LAER demonstration has been approved by the IEPA

on or after November 15, 1990.

Subsection (b) provides that emission units in operation prior to 1999 and are using

BAT shall not be subject to the 12% reduction set forth in Section 205.405 (c) and (e). This

subsection also sets forth the information that is required to be submitted as part of the ERMS

application by the owner or operator who is seeking the best available technology (BAT)

exclusion.

Subsection (c) requires the IEPA to make its determination in a draft CAAPP permit

subject to public notice and participation, accompanied by an explanation of is determination.

The IEPA may make this determination pursuant to an ERMS application or an application for

a modified allotment.

Subsection (d) states that a participating source may apply for an exclusion from further

reductions based on meeting BAT after its baseline determination has been made by submitting

an application for a modified allotment. The subsection provides that if the IEPA determines

that an emission unit is using BAT the source’s allotment shall be modified so that reductions

will not be required from that emission unit.

The Board notes that as discussed on pages 45-46 the Board renumbered certain sections of

the proposal.

The IEPA requests to change the proposed subsection (a) to reflect that there is a one

time reduction in 1999, any reduction will be reflected in the original baseline determination

and allotment. Similarly, in subsections (b) and (d) the IEPA requests that it be changed to

reflect that the one time reduction in 1999 will reflect any sources using BAT prior to 1999.

The Board finds the language of subsection (a) should be consistent with subsection (b)

and that the IEPA changes are appropriate. These changes are incorporated into the attached

order as follows:

VOM emissions from tThe following emission units or activities, if in

operation prior to 1999 or a replacement for such a unit, shall be

excluded from the VOM emissions reductions requirement specified in

Section 205.400(c) and (e) of this Subpart:

When it is determined that an emission unit in operation prior to 1999 or

a replacement for such a unit is or will be using the best available

technology for controlling VOM emissions, VOM emissions from such

emission units shall not be subject to the VOM emissions reductions

requirement specified in Section 205.400(c) or (e) of this Subpart. The

owner or operator of a source may request such exclusion from further

reductions by providing the following information, in addition to the

information required in Section 205.310 of this Part, in its ERMS

application:

d) A participating source may apply for an exclusion from further

reductions based on the application of the best available technology after

its baseline emissions have been determined by submitting an application

for a modified allotment. If the Agency determines that the emission

unit is applying the best available technology in accordance with

subsection (b) of this Section, such source’s allotment shall be modified

such that no reductions will be required beyond the actual emissions

level achieved from the relevant emission unit(s) after the application of

the best available technology.

Dart supports the adoption of the proposed exclusion of emission units that meet the

BAT standard. However, Dart contends that the ERMS program should provide a rebuttable

presumption that a source that has obtained an adjusted standard since 1990 meets the proposed

new BAT standard. (PC 4 at 5.) Dart believes that the IEPA was not intending to force those

sources which have achieved maximum level of emission reductions technologically and cost

effectively to achieve even further reductions through additional technological measures. (

Dart states that a source that has obtained an adjusted standard after 1990 has already

demonstrated to the IEPA and the Board that further reductions in VOM emissions are neither

technologically nor economically feasible. (

. at 6.) In light of this, Dart suggests that the

Board amend the definition of BAT at Section 205.130 to clearly specify that where a source

has obtained a source-specific adjusted standard pursuant to Section 28.1 of the Act (415 ILCS

5/28.1(1996)), the source is automatically granted rebuttable presumption that it meets the

BAT standard. (

. at 7.)

In addition, Dart has asked for clarification as to whether a source with an approved

BAT determination could receive credits to its baseline determination for any over compliance

the source may have realized through its own initiatives over and above compliance with the

technological requirements that meet BAT. (

. at 6.) Dart believes that if it is the IEPA’s

intent that a source cannot receive credit for over compliance with regard to BAT, then the

regulations must clearly reflect the proposed intent. (

. at 6.)

The IEPA disagrees with Dart’s position that the regulations should provide rebuttable

presumption that a source with an adjusted standard meets the BAT standard. (PC 14 at 42.)

The IEPA notes that the standard for granting adjusted standard relief is not based on whether

further reduction of VOM is technically feasible or economically reasonable. (

.) An

adjusted standard may be granted if the factors relating to a subject source are substantially and

significantly different than the factors weighed by the Board in adopting a rule of general

applicability. (

.) The IEPA argues that it cannot be presumed that a source that has

obtained an adjusted standard from such rules of general applicability has demonstrated that

further VOM reductions are not economically reasonable or technically feasible. (

The Board finds that although obtaining an adjusted standard involves the consideration

of such factors as technological feasibility and economic reasonableness, the required

demonstrations are not comparable to a BAT demonstration. As noted in the IEPA’s

testimony, the measures that would have to be evaluated included additions or enhancements to

VOM control devices, changes in raw material, and other process changes. (C. Romaine’s

Testimony at 28.) In this regard, the IEPA notes that it will use USEPA’s “Top-Down BACT

Process” as set forth in USEPA’s NSR Workshop Manual as guidance for evaluating

alternatives to a proposed level of control. Moreover, the outcome of the BAT evaluation is

set by the definition of BAT. In light of this, the Board finds that automatic grant of

rebuttable presumption that an adjusted standard meets the proposed BAT standard is not

justified.

The Board finds that Dart's second issue regarding the sources receiving credits for

over-compliance with respect to BAT is not clear and will not make the suggested changes.

The IEPA proposal allows for upward adjustment of the baseline emissions to account for

voluntary over-compliance in accordance with Section 205.320. The rules give credit for any

VOM emissions that have been reduced after October 1, 1990 (see page 32 of the opinion) that

to go beyond compliance with the applicable rules so that the emission reductions contributes

to ROP in 1999. However, in the case of BAT determination, the issue of over-compliance

does not arise since by definition a BAT represents the emissions level based on maximum

degree of VOM reduction.

Tenneco’s comments address two issues concerning the proposed exclusion

requirements in Section 205.405. First, Tenneco asks the Board to amend Section 205.405(b)

to provide that any emission unit which captures and controls at least 95% of VOM emissions

meets the new BAT standard. (PC 7 at 2.) According to Tenneco, the suggested amendment

would simplify the ERMS program because the Agency would not have to analyze such units

under the new BAT standard. (

Second, Tenneco requests clarification of Section 205.405(a) as it relates to the

exclusion of emission units complying with MACT standards. (

.) Tenneco notes that when

USEPA promulgates a MACT standard for an industrial category, it often determines that

certain units in the category require controls and others do not require controls. (

.) Tenneco

maintains that if a facility implements MACT for an industrial category and pursuant to

MACT does not place controls on certain VOM-emitting units, such units should qualify for

exemption from further reduction or if the facility falls under one industrial category and it

implements MACT for its category, the entire facility must be exempt from further reduction

of VOM. (

The IEPA did not respond in its public comments to Tenneco's comments concerning

whether any emission unit which captures and controls at least 95% of VOM emissions and

any emission unit which meets the MACT standard meets the new BAT standard.

The Board finds that without justification that an emission unit which captures and

controls at least 95% of VOM meets BAT, we will not accept Tenneco's revisions. The Board

notes that the adoption of a numerical criteria may simplify the IEPA's BAT determinations,

however, such criteria must be justified on a technical basis. In this regard, the case-by-case

evaluation as set forth in Section 205.405 is intended to establish a technically justifiable

emission level. The Board's finding does not preclude either the IEPA or any other party from

presenting justification for a numerical standard at the upcoming hearing for future

consideration of the Board.

The Board also finds that Tenneco’s interpretation of the exclusion of emission units

complying with MACT standards at Section 205.405(a)(1) does not appear to reflect the

proposed intent. As such, the Board will not accept the proposed changes by Tenneco. The

IEPA’s testimony indicates that the exclusion is based on applicability of MACT to an

emission unit and not an industrial category. (C. Romaine’s Testimony at 25.) The IEPA

notes that this exclusion was based on Section 9.8(c)(4) of the Act, which clearly specifies that

those emission units which have reduced emissions through the application of MACT or

NESHAP shall be given credit or granted exclusion in the ERMS. However, the Board

requests the IEPA and any other participants to respond to whether emission unit(s) under an

industrial category where a MACT has been demonstrated should receive the same treatment

as when a MACT has been approved for individual emission units at the August 19, 1997,

hearing or in public comments.

The Coalition states that the definition of BAT, as proposed by the Agency, is

ambiguous and gives sources subject to the ERMS program little, if any, guidance as to what

will constitute BAT. (PC 10 at 20.) In this regard, the Coalition notes that the proposal does

not define “maximum degree of reduction.” (

.) Further, the Coalition states that even

though the IEPA admitted that the BAT determination based upon “the best controlled similar

unit” should consider technical or economic feasibility, the proposed intent is not reflected in

the statement of reasons. (

.) The Coalition also notes that while BAT is patterned after

BACT, the definition of BAT does not refer to BACT or that in making a BAT determination,

IEPA will rely upon an analysis of control achieved at other “similar units” upon which BACT

determinations are predicated. (

. at 22.) The Coalition contends that without further

guidance in the actual rules on what constitutes BAT, several members of the coalition, who

have achieved maximum degree of VOM emissions reductions that are technically feasible,

could be penalized for reducing emissions beyond the currently required levels. (

. at 20.)

In order to address its concerns regarding the proposed definition of BAT, the Coalition

has proposed the following changes:

“Best available technology” means an emission level based on the maximum

degree of reduction of VOM emitted which the Agency determines through

application of production processes and available methods, systems and

techniques for control of VOM is technically and economically feasible for the

specific emission unit taking into account energy, environmental and economic

impacts, and considering the features and production process and control

methods, systems and techniques already used for the unit and achieved at other

similar units. In no event shall application of “best available technology” result

in emissions of VOM which exceed the emissions allowed by any standard

established pursuant to Section 111 of the Clean Air Act, if such a standard is

applicable to the category of emission unit nor shall “best available technology”

be more stringent than the level of emissions which result from similar sources

which have met best available control technology standards. (

. at 22.)

The Coalition asserts that the above changes clarify that BAT is patterned after BACT, BAT is

less stringent than BACT and LAER, BAT is not the level of emissions control at the “Best

controlled similar unit,” but the Agency shall rely on such levels while also considering

technical and economic feasibility. (

. at 23.)

The IEPA did not respond in its public comments to the Coalition's requested changes

in the definition of best available technology.

The Board finds that the Coalition raised some valid concerns regarding the definition

of BAT, however upon review, no further amendments are necessary. As stated above, the

Coalition contends that the proposed definition of BAT is ambiguous, the Board notes that the

definition of BAT states clearly that the BAT determinations will be made on a case-by-case

basis. The IEPA clarified that a similar emission unit should have the same economic

circumstances as the emission unit being evaluated for a BAT determination. (Tr. at 1081.)

Therefore, the Board concludes that the “maximum degree of VOM reduction” would be

determined only upon consideration of the various factors set forth in the definition including,

but not limited to, technical and economic feasibility on a case-by-case basis. Thus the Board

finds that the definition of BAT does not need to be amended as suggested concerning this

issue.

With regards to the Coalition's second concern of how BAT relates to BACT, the IEPA

states that although the definition of BAT is derived from the definition of BACT, they are not

the same. (Tr. at 528.) BAT is a component of the ERMS program that focuses on existing

sources, while BACT is a component of the PSD program that applies to proposed new and

modified sources. (

Id.

at 528-529.) BAT requires consideration of the control features

present on a emission unit and the impacts associated with upgrading or replacing those

features. However, the Agency did admit that the emissions level based on a BAT

determination would be at the same level of BACT or less stringent. (Tr. 1-5 at 1072-1095.)

As a result the Board finds that the changes suggested by the Coalition relating to BACT have

merit. However, since this issue has not been addressed by the IEPA and the Coalition has not

addressed whether emission units which have met BACT upon commencement are still

achieving BACT for that emission unit, the Board requests the participants to address this issue

at the hearing scheduled for August 19, 1997. Additionally, instead of adding to the definition

of BAT as suggested by the Coalition, the Board would rather amend Section 205.405(a) by

adding a new subsection (a)(4) that would exclude emission units that will achieve or have

achieved BACT. The Board requests the participants address this approach to amending the

proposed rules to address this issue.

Section 205.410 Participating Source Shutdowns

This section provides procedures for participating sources that shut down all operations

and withdraw their CAAPP permits. Subsection (a) provides that the allotments of such

sources will be allocated with 80% of ATUs issued to the owner or operator of the source and

20% issued to the ACMA. Subsection (b) requires the owner or operator who has shut down a

source and withdrawn its CAAPP permit to file a written request to have its ERMS program

status changed from a participating source to a general participant. Subsection (c) allows the

owner or operator of a participating source which shuts down to authorize the future ATUs to

the transaction account of another participating source, new participating source or general

participant by submitting a transfer agreement authorizing permanent transfer of all future

ATUs. Subsection (c) requires the CAAPP permit of the participating source or new

participating source which receives the permanent transfer to be modified to reflect the

transfer.

CICI and Tenneco requests that a participating source retain 100% of the ATUs if the

source shuts down instead of retaining only 80% with the remaining 20% being placed in the

ACMA. (PC 6 at 6.) CICI states that "[i]f a source is forced to shut down due to regulatory

requirements placed upon it because it is located in a nonattainment area and because it must

compete with sources which need not meet such requirements, the minor amount of

recompense provided by the sale of its baseline emission units could hardly be classified as

unjust enrichment." (

.) Tenneco states that it is not necessary for the IEPA to take 20% of

the ATUs and place them into ACMA. (PC 7 at 4.)

The IEPA did not respond in its public comments to either CICI's or Tenneco's

comments that a source that shut downs should retain 100% of its ATUs. In response to the

ALAMC objections that 20% of a shutdown source goes into the ACMA and 80% is retained

by the source, the IEPA states that the proposed split is a compromise between the regulated

sources and ALAMC. (PC 14 at 45-46.) The IEPA asserts that the split provides assurance

that there will be ATUs available for purchase. (

. at 45.) Additionally, in the prefiled

testimony for the IEPA from Mr. Romaine dated January 9, 1997, it was explained that the

80/20 split was a compromise between two points of view. Mr. Romaine states that the first

point of view is that it is improper for a person to receive credits for its past emissions as a

consequence of a shutdown, as the person had no right to emit in the first place. Mr. Romaine

states that sources are allowed to emit and consume the air quality resource, which belongs to

the people as a whole, in exchange for the benefits provided to the people through a better

economy. However, Mr. Romaine states that when a source permanently shuts down, the

relationship between the emitter and the public ceases to exit and the air resource should revert

to the public. (Exh.32(b) at 18.)

Mr. Romaine states that the second point of view is that the shutdown of a participating

source under the ERMS program should be treated no differently than an emissions reduction

accomplished by a switch from an emitting to a non-emitting process. Mr. Romaine asserts

that "[b]ecause sources do more than shutdown, they relocate, they merge and consolidate,

they go into new markets, etc., it will be critical for businesses to receive allotment trading

unit ("ATUs”) under the ERMS to allow them to continue to invest in the Chicago-area

economy." (Id. at 19.) Mr. Romaine states that the ERMS program will be most effective in

identifying the least-expensive emissions reduction if ATUs are left in private hands and the

sources where ATUs have the most value will receive the shutdown source's ATUs which will

result in the most benefit to the public. (Exh.32(b) at 19.)

Mr. Romaine summarizes that the IEPA finds merit with both positions: "on one hand,

the ERMS should not be an incentive for a source to close its doors, on the other hand, the

ERMS should not prevent continued investment in the local economy by persons after they

shutdown operations at a source or by others looking to invest in the local economy by

building new facilities or modifying existing ones." (

Id.

at 19.)Mr. Romaine concludes that

the IEPA finds it reasonable that some of the ATUs resulting from shutdown contribute to an

air quality improvement or are available to other persons who might be able to benefit from

them. The IEPA solution was to deposit 20% of the ATUs into ACMA and allot 80% to the

source that shuts down. (See generally Exh.32(b) at 19-20.)

The Board finds that none of the parties have stated sufficient reasons to change the

proposed rules that are based on this compromise of the two points of view. CICI's arguments

do not explain why a source should receive the full benefit of the ERMS program after it

ceases to participate. The Board finds merit as did the IEPA in that there are conflicting rights

to the ATUs which are allotted to the sources under the ERMS program which would not exist

otherwise. As such the Board will not change the treatment of the ATUs when a source

shutdown occurs.

Sun Chemical requests the Board to clarify the manner in which participating sources

are to be consolidated under the ERMS program. (PC 11 at 4.) Specifically, Sun Chemical

would like the regulations to reflect that transfer of operations from one facility to another

facility within the nonattainment area should not be considered a "shut down" for purposes of

Section 205.410. (

. at 5.) Sun Chemical asserts that this may discourage the consolidation

of facilities in the nonattainment area thereby forgoing any efficiencies of the consolidation and

any potential environmental benefits. (

The IEPA did not respond in its public comments to Sun Chemical's comments that a

source that consolidates should not be considered as a source shutdown.

The Board finds that a participating source that is consolidated with another

participating source which are under common control of the same persons or persons under

common control should not be considered a shutdown for the purposes of Section 205.410. It

is the Board's intent to use the phrase "are under common control of the same persons or

persons under common control" from the definition of "source" as set forth in Section 39.5(1)

of the Act (415 ILCS 5/39.5(1) (1996)) and used in the CAAPP permit program. The overall

VOM emissions for the Chicago nonattainment area should not be affected if the consolidation

of commonly owned sources are not treated as shutdowns since both sources must be

participating sources. Additionally, the compromise of the 80\20 split of ATUs when a source

shutdown does not apply since the common owner will remain in the ERMS program. The

Board amends Section 205.410 as follows:

If a participating source shuts down all operations at the source, and

withdraws its permit or its permit is revoked or terminates, allotments

issued to such a source for each seasonal allotment period after the

shutdown occurred shall be subject to the following except as provided in

subsection (d):

80 percent of all such ATUs shall continue to be allotted to the

owner or operator of such source or its duly authorized recipient;

and

20 percent of all such ATUs shall be issued to the ACMA.

d) The consolidation of operations of two or more participating sources shall

not be considered a source shutdown for the source that withdraws its

permit or its permit is revoked or terminates if the participating sources

are under common control of the same persons or persons under common

control. In the event of such a consolidation, 100 percent of the

participating source's allotment of ATUs shall be transferred to the

participating source that remains in operation. The transfer of the ATUs,

pursuant to this subsection, shall be done pursuant to subsection (c) of

this Section.

Subpart E Alternative ATU Generation

Section 205.480 Emissions Reduction Generators

This section allows permitted sources in the nonattainment area that are not required to

participate in the ERMS program to generate ATUs based on emissions reductions achieved at

the source. A source which reduces emissions is referred to as an "emissions reduction

generator" (ERG). An ERG that receives ATUs is classified as a general participant.

Subsection (a) provides that an ERG will receive ATUs if: (1) based on the same actual

production rate, VOM emissions at the source for any seasonal allotment period beginning in

1999 are or will be lower due to the use of technology or materials at the source than if

operating at the same production rate at the emissions level allowed by applicable requirements

effective in 1996, provided such reductions occurred after 1990; (2) a source shuts down a

portion or all of its operations after 1996, and the source demonstrates that the VOM emissions

from those activities will not be distributed elsewhere within the Chicago ozone nonattainment

area such as when gasoline stations, auto repair facilities and dry cleaners shut down; and (3) a

source curtails its seasonal production activity resulting in actual VOM emissions reductions,

calculated based on emissions from the two previous seasonal allotment periods, and that the

VOM emissions from the curtailed activity or activities will not be distributed elsewhere within

the Chicago ozone nonattainment area.

Subsection (b) requires 20% of the ATUs be distributed to the ACMA if the reductions

from ERG is the result of a shutdown.

Subsection (c) provides that any proposal based on seasonal emission reductions of 10

tons or more shall be subject to the public notice requirements of Section 39.5 of the Act.

Subsection (d) identifies what information must be submitted in a proposal pursuant to

this Section.

Subsection (e)

allows any such source to modify its permit to reflect its reduced

seasonal VOM emissions level.

Subsection (f) provides procedures for when an ERG does not modify its operating

permit pursuant to subsection (e) or experiences a shutdown pursuant to subsection (a) and has

no actual emissions data. The procedure requires the IEPA to issue preliminary determinations

as to the approval of a proposal. The IEPA cannot make a final determination as to the

source's proposal pursuant to subsection (g) until actual emissions data are obtained.

Subsection (g) establishes the time frames in which the IEPA is allowed to review

proposals submitted pursuant to this section and references the appeal procedures pursuant to

the proposed 35 Ill. Adm. Code 106.940.

The Board's discussion of subsections (a) through (h) reflects the proper headings for this

section as the IEPA requested the Board to correct in its Errata Sheet filed on February 24,

1997.

Subsection (h) specifies when ATUs will be issued based on an ERG proposal, which is

after actual emissions data are evaluated, unless, as explained above, the source has obtained a

modified permit pursuant to subsection (e).

The Board has renumbered the remaining sections to the rulemaking as a result of the

proposed Subpart D and Subpart E using the four hundred (400) series in the numbering

scheme. Different subparts should use different hundred series in their numbering. This

Section 205.480 will be renumbered as "205.500." The rest of the opinion will indicate the

number changes and the order has been changed to reflect this renumbering.

The IEPA requests the Board to amend subsection (a)(1) to include that in order to

qualify as a ERG the VOM emissions at the source must be lower than that required by any

requirements included in the State Implementation Plan. (Errata at 3.) Additionally, the IEPA

requests the Board to correct the subsection headings starting with the second subsection (d)

and continuing on through the section.

The Board finds that emission reductions that a source intends to use for an ERG

should be lower than any requirements effective in 1996 or are lower than those included in

Illinois’ State Implementation Plan (SIP). With the IEPA filing a SIP with the USEPA at the

end of this year, there are other requirements within the SIP for other sources (mobile and

area) to reduce VOM emissions. It would not be beneficial to the environment if emission

reductions were used for an ERG that were not lower than requirements effective in 1996 or

are included in Illinois’ SIP because then those reductions would be counted twice towards

overall attainment. Therefore, the Board accepts the proposed amendments to Section

205.480(a)(1) made by the IEPA in their Errata Sheet filed on February 24, 1997 (Errata at

1).

Sun Chemical requests the Board to amend Section 205.480 (renumbered as Section

205.500) so that sources outside of the nonattainment area may be classified as ERGs. (PC 11

at 6.) Sun Chemical states that the IEPA has recognized that reductions from outside the

nonattainment area are necessary to achieve the NAAQS for ozone and that the USEPA has

recognized the benefits of emission reductions from outside of a nonattainment area. (

Sun Chemical asserts that the IEPA has stated that it will propose amendments to the ERMS

program to allow for emissions reduction generators to be from the attainment area consistent

with the findings of OTAG and the USEPA policy. (

. at 7.) Sun Chemical urges the Board

to revise the proposed language now to allow for ERGs to be located in the attainment area so

that the associated benefits can be realized with the start of the ERMS program rather than

later. (

The Board finds that it would be premature to expand the proposed ERMS program to

sources outside of the Chicago nonattainment area for similar reasons discussed on page 20 of

the opinion. The Board finds that while the IEPA is making assumptions that VOM from

outside the nonattainment area will be reduced, to allow ERGs to be outside of the

nonattainment area could prohibit the State from fulfilling its obligations concerning the 9%

ROP. Sources outside the nonattainment area have not been considered in the State's plan to

achieve the 9% ROP and as such emissions being redistributed into the nonattainment area

could cause an increase in VOM emissions in the nonattainment area which could cause the

VOM emissions to exceed the State's target goal to achieve the 9% ROP.

Sun Chemical also requests the Board to clarify that redistribution of ATUs from the

consolidation of facilities in the nonattainment area may be done through the use of Section

205.480. (

.) Sun Chemical states that Section 205.480(a)(2) (renumbered as Section

205.500(a)(2)) appears to prohibit the issuance of ATUs from a source that shuts down if the

ATUs are redistributed to a participating source in the nonattainment area. (

Similar to its requests for the Board to clarify the manner in which participating sources

are to be consolidated under the ERMS program pursuant to Section 205.410, Participating

Source Shutdowns, Sun Chemical requests that the Board clarify Section 205.480(b)

(renumbered as Section 205.500(b)) so that consolidation of facilities is not considered a

shutdown. (

.) Sun Chemical asserts that this may discourage the consolidation of facilities

in the nonattainment area thereby forgoing any efficiencies of the consolidation and any

potential environmental benefits. (

. at 9.) Additionally, Sun Chemical argues that

consolidated facilities where the facility being expired does not have a CAAPP permit the

company should receive 100% of the ATUs issued for the ERG. (

. at 9.)

The IEPA did not respond in its public comments to Sun Chemicals comments

concerning whether a source that is outside the nonattainment area can participate as an ERG,

whether a source that consolidates should not be considered a source shutdown, and whether a

source should retain a 100% of its ATUs when it shuts down. However, the IEPA provided

testimony that "ATUs can only be issued by the Illinois EPA for an ERG if a source shows

that a real surplus reduction in VOM emissions is being achieved due to improvements in

VOM control measures since 1990 so that the emissions reduction contributes to ROP in the

1999 or a subsequent season or seasons and that the amount of such emissions reduction can be

reliably determined." (Exh. 32(b) at 25.) Furthermore, the IEPA testified that "[f]or a

shutdown or curtailment to be recognized, the underlying activity cannot have been distributed

elsewhere in the Chicago ozone nonattainment area" (Exh.32(b)

at 26.) The IEPA asserts that

"[t]his point must be explicitly considered for an ERG because the emissions from activities at

non-participating sources are not part of the pool of VOM emissions at participating and new

participating sources, which is explicitly addressed by the ERMS." (Exh.32(b) at 26.)

The Board notes that the emissions of an ERG in the nonattainment area are calculated

in the total VOM emissions and if the emissions from the ERG are redistributed to the

participating source that the ERG is being consolidated with, the participating source will only

receive ATUs equal to the amount of redistributed emissions from the ERG. As a result there

should be an overall zero gain of VOM emissions in the nonattainment area. However, the

Board notes that emissions from sources outside the nonattainment area are not part of the

overall VOM emissions so a demonstration of an overall reduction may be impossible if

sources outside of the nonattainment area are allowed to be ERGs. The Board requests the

participants to address this issue at the August 19, 1997 hearing

or in public comments.

Section 205.490 (renumbered as "205.510") Inter-Sector Transactions

This section provides an opportunity to generate ATUs based on VOM emissions

reductions that occur in non-point source sectors, such as from mobile or area sources. Two

types of proposals can be submitted. First, subsection (a) provides that proposals can be based

on emission reductions achieved in accordance with regulations, such as a vehicle scrappage

program. Second, subsection (b) allows proposals to be submitted that include other VOM

emissions reductions projects from area or mobile sources such as an employee commute

option systems.

Tenneco requests the Board to amend Section 205.490 (renumbered as “205.510”) so

that it clearly states that emission sources may receive ATUs for intersector transactions based

on employee commute options program. (PC 7 at 5.) Tenneco asserts that this may be an

incentive for employers to implement an employee commute options program, as suggested

under the repealed Illinois Employee Commute Options Act and related Department of

Transportation regulations. (

The IEPA did not respond in its public comments to Tenneco's comments requesting

that intersector transactions based on employee commute options program be clearly stated as a

option of intersector transactions.

The Board finds that there is no need to expressly state that reductions generated

through an employee commute options program are allowed for Inter-Sector Transactions.

Section 205.490(b) (renumbered as “205.510(b)”) allows for proposals for reductions

generated beyond the mandatory applicable regulations that are not based on any particular

regulation. Section 205.490(c) (renumbered as “205.510(c)") states that no ATUs shall be

issued based on mobile or area source VOM emission reductions unless approved by the IEPA.

There is no indication that Section 205.490 (renumbered as “205.510") prohibits the use of an

employee commute options program. Therefore no amendments are necessary.

The Board notes that it made minor non-substantive additions to subsection (b).

Subpart F Market Transactions

Section 205.500 (renumbered as "205.600") ERMS Databases

This section establishes databases that will be used to implement the ERMS program.

Separate databases will be established for information that is public and information that is

confidential. The public will have access to a bulletin board that will be maintained by the

IEPA. Subsection (a) identifies what information is to be maintained on the bulletin board.

Subsection (b) requires the IEPA to maintain a confidential transaction account database that

will be a closed access system in which information about each account held under the system

will be stored. Subsection (c) provides that the IEPA shall separately maintain a listing of all

ATUs expired or retired within the most recent five years that also includes the expiration or

retirement date.

Both the IEPA and IERG have commented that they have reached an agreement as to

whether the market price should be posted on the database. (PC 14 at 8-9, and PC 8 at 5-6.)

Both have agreed to add the following as a new subsection to Section 205.500(a) (renumbered

as “205.600(a)):

(4)

Posted each week during the reconciliation period and no less than

monthly at all other times, the average price paid for ATUs transferred

the previous week or the previous month, as appropriate.

IERG states that without this information there is no real market price established because

buyers will not have the necessary information to determine their appropriate action. (PC 8 at

5-6.) The IEPA agrees that posting this information may help facilitate the market system.

(PC 14 at 9.)

The Board finds that in order to generate market prices without causing the transaction

costs of the ERMS program to increase for individual sources the database should include the

average price paid for an ATU. Therefore the Board agrees with IERG and IEPA and will

incorporate the requested amendments in the attached order.

Additionally, subsections (d)(3) and (4) were amended by the Board for purposes of

clarification by altering the sentence order.

Section 205.510 (renumbered as "205.610") Application for Transaction Account

All participating sources, new participating sources or general participants are required

to apply for and obtain a transaction account in order to trade in the ERMS market.

Subsection (b) identifies the information required in an application for a transaction account.

Subsection (c) establishes a new class of participant which is identified as "special participant."

A special participant may include any person that buys and retires ATUs. Special participants

are required to register but are not required to obtain a transaction account and are prohibited

from selling ATUs.

Section 205.520 (renumbered as "205.620") Account Officer

Subsection (a) requires each market participant to have an account officer assigned to

its transaction account. Additionally, subsection (a) provides that an account officer, who has

been approved by the IEPA and met certain requirements such as completing a training course,

must certify each transaction and any other document pertaining to the transaction account.

Subsection (b) provides the requirements of the training course. Subsection (c) is a disclaimer

that the IEPA and the State of Illinois do not endorse or guarantee the conduct of the approved

account officers. Subsection (d) creates an expedited approval process for account officers.

Section 205.530 (renumbered as "205.630") ATU Transaction Procedures

This section establishes the procedures for ATU transactions under the system.

Subsection (a) provides the requirements of an ATU transfer. Those requirements include that

a transfer must be properly authorized by the relevant account officers, that multiple year

transfers are allowed, and the ATUs involved must be identified and entered into the

transaction account database. Subsection (b) requires the account officer to report to the IEPA

the price of the ATUs and indicate whether any considerations other than the purchase price

were involved in the transactions.

Subsection (c) sets forth the eligibility requirements for ATU transactions; the ATUs

cannot be retired or expired, the transaction has to involve at least one ATU; the ATUs

involved must be shown on the transaction account database.

Subsection (d) identifies the transaction account database as the "Official Record of the

Transaction" and how account officers may access the transaction account database.

The IEPA requests the Board to correct a typographical error in subsection (a)(3).

(Errata at 4.)

The Board finds that the requested correction by the IEPA clarifies subsection (e)(3)

and is incorporated in the attached order.

Subpart G Performance Accountability

Section 205.600 (renumbered as "205.700") Compliance Accounting

Subsection (a) requires sources to maintain a master file of records needed to verify

compliance with Part 205. Subsection (b) provides for the inspection of these files and the

source's premises by the IEPA. It also requires the IEPA to issue a report of its finding to the

source and make those findings available to the public. Subsection (c) states that nothing in

Part 205 limits or affects the sources' obligation to allow inspections under any other State or

Federal laws or regulations.

Section 205.610 (renumbered as "205.710") Alternative Compliance Market Account

(ACMA). Subsection (a) creates ACMA, which is a secondary source of ATUs for the

affected sources. Subsection (b) provides that the ACMA will primarily be stocked by

depositing one percent of ATUs from each allotment and by retaining a portion of ATUs from

source shut downs pursuant to Sections 205.410(a) and 205.480(b) (renumbered as

“205.500(b)). Additionally, this subsection allows for ATUs to be placed into the ACMA as a

result of voluntary contributions and the IEPA's purchasing of ATUs. There are two methods

to access ACMA, regular access and special access, which are identified in subsections (c) and

(d).

Subsection (c) provides that regular access is available during each reconciliation period

when there is a sufficient positive balance in the ACMA to fulfill the requesting source’s

needs. The subsection requires the IEPA to notify the source within 15 days of receipt of the

source's request to gain access to the ACMA if access is available. Pursuant to this

subsection, under regular access, sources may purchase ATUs at the rate of $1,000 per ATU

or two times the market value, as determined by the IEPA, whichever is less.

Subsection (d) establishes that special access to ACMA is available when there is an

insufficient amount of ATUs in the ACMA to fulfill the requesting source's needs. To access

the ACMA account under the special access provisions set forth in subsection (d), a source

must demonstrate that it was not able to obtain ATUs on the market and that it needs ATUs to

avoid an emissions excursion. Special access is limited to an amount equivalent to one percent

of the aggregate allotment for the next season. Pursuant to special access, sources may

purchase ATUs at the rate of $1,100 per ATU or 2.5 times the market value, as determined by

the IEPA, whichever is less. If special access is obtained an ATU deficit for next season may

result which must be corrected pursuant to subsection (e). Subsection (d) also requires the

IEPA to provide written notice of its determination as to special access and provides an

opportunity for Board review of this determination.

Subsection (e) establishes the procedures by which the deficit created by the use of the

ACMA pursuant to the special access provisions is replenished. To correct this deficit, the

subsection provides that after the conclusion of the reconciliation period, the IEPA will

initially evaluate all transaction accounts to determine if any ATUs have expired and apply

expired ATUs to cover the deficit amount from special ACMA access. As another alternative,

the subsection also provides that the IEPA may credit the ACMA with up to one percent of

ATUs from each source’s allotment from the next seasonal allotment period.

Subsection (f) provides that the IEPA may use the money generated from the sale of

ATUs from the ACMA to generate VOM reductions and purchase ATUs. The subsection also

provides that if the ACMA has a deficit balance the IEPA shall use the money to create further

emission reductions to correct the deficit.

Subsection (g) sets forth that new participating sources, sources that are operational

after May 1999, are limited to access the ACMA until after the seasonal period of 2002 and to

no more than 30% of the ACMA balance at the start of each seasonal period unless ATUs are

available after access by all participating sources. The subsection additionally limits new

participating sources to only 50% of the balance of ACMA if all participating sources have

already accessed ACMA.

Subsection (h) provides that if the IEPA denies special access, any source may appeal

to the Board for review pursuant to the proposed procedural rules.

The IEPA requests that the Board amend this section by adding a new subsection (b)

which provides that ATUs in the ACMA do not expire until purchased. Once purchased the

ATUs must be used for the preceding or next seasonal allotment period. The IEPA states that

this new subsection (b) was originally intended to be part of the proposal but was not included.

(Errata 5-6.) Additionally, the IEPA requests the Board to correct an improper citation in

subsection (e)(3). (

The Board finds that the requested change is appropriate and will be incorporated into

the attached order. The Board finds that the inclusion of provision which causes ATUs in the

ACMA to be permanent until purchased will not effect the overall reduction and provides the

necessary insurance for sources that ATUs will be available in those circumstances when

ATUs will not be available in the market.

At hearing IERG proposed that the cost of an ATU from ACMA should be lower than

what was proposed by the IEPA. (PC 9 at 6.) IERG states in its public comment that the

IEPA has agreed that the price of an ATU for regular access to ACMA should be 1.5 times the

market price and that for special access the price will be 2 times the market price. (

IEPA states that establishing a higher price for ATUs in the ACMA is important to

discourage the use of ACMA instead of the market and to build in the transaction costs

associated with the market which are not associated with purchasing from the ACMA. (PC 14

at 9-10.) The IEPA states that the multipliers agreed to by IERG and itself assures market

viability. (

. at 10-11.)

The Board finds that the agreement to lower the purchase price of ATUs from the

ACMA is acceptable and will be incorporated into the attached order. The Board finds that

the lower cost will still achieve the goals of addressing the reduced transaction coats associated

with purchasing ATUs from the ACMA and discouraging the use of ACMA.

In response to ALAMC comments that the ACMA should be reduced as the overall

12% emission cap is reduced, the IEPA states that at hearing ALAMC stated that this is only

relevant if the 12% cap is reduced which is not being done in this proposal. (PC 14 at 44.)

The Board finds that this issue was addressed at hearing and that nothing further need

to be addressed.

The Board notes that it amended Section 205.610(e)(4) (renumbered as “205.710(e)(4))

to require the IEPA to notify a source if special access is available as follows:

The Agency shall provide written notification, within 15 days of receipt

of any request for special access to the ACMA, allowing or denying

special access to the ACMA to any participating source requesting such

access. If the Agency denies such access, this written notification shall

include its reasons for denying access.

Section 205.620 (renumbered as "205.720") Emissions Excursion Compensation

This section provides the procedures for emissions excursion compensation from

participating sources. An emissions excursion occurs when a source fails to hold the required

number of ATUs at the end of a reconciliation period. After sources submit their seasonal

component of the annual emissions report by the end of November, the IEPA will evaluate the

reports and review the amount of VOM emissions from the previous season for each source.

Subsection (a) provides that if a source does not hold sufficient ATUs to account for its

seasonal VOM emissions from the previous season, the IEPA shall issue an excursion

compensation notice to the source. The source, pursuant to subsection (b), is required to

purchase ATUs from the ACMA in an amount 1.2 times the emissions excursion, which is

increased to 1.5 times the amount of the excursion with the second consecutive excursion.

Additionally, the subsection provides that if the ACMA is deficient, the IEPA shall deduct the

necessary ATUs from the source's next year's seasonal allotment.

Subsection (c) allows a source within 15 days of receipt of the IEPA notice to elect to

have ATUs to cover the excursion compensation amount withheld from its next seasonal

allotment rather than purchasing ATUs from the ACMA.

Pursuant to subsection (d) the IEPA's determination that an emissions excursion

occurred can be reviewed by the Board pursuant to the proposed procedural rules. Subsection

(e) provides that if the Board review is requested, ATUs in an amount equal to the excursion

as set forth in subsection (b), will be set aside from the source’s next allotment if the matter is

not resolved prior to that time. Pursuant to subsection (e), if the Board determines that an

excursion has not occurred, the ATUs will be returned to the source’s transaction account and

if the Board upholds the IEPA's decision, the ATUs withheld will be retired.

Subsection (f) provides that sources that provide emissions excursion compensation will

not be subject to enforcement authority granted to the State or any person under applicable

State or Federal laws or regulations or permit conditions. However, this subsection limits this

provision to emissions excursions.

Tenneco requests that Section 205.620 (renumbered as “205.720”) be amended so that

a source is not required to pay a penalty when acquiring ATUs from the ACMA after the

reconciliation period if the source diligently, but unsuccessfully, attempted to purchase ATUs

from the market or the ACMA. (PC 7 at 4.) Tenneco asserts that sources should not be

penalized if no ATUs were available in the market or the ACMA. (

The IEPA did not respond in its public comments to Tenneco's comments requesting

that there be no penalty for sources who have diligently, but unsuccessfully, attempted to

purchase ATUs from the market or the ACMA.

The Board believes that such circumstance is highly unlikely to happen and will not

amend the regulations to address such a limited possibility without further information. The

Board requests the participants to address this at the August 19, 1997

hearing

or in public

comments.

Section 205.630 (renumbered as "205.730") Excursion Reporting

This section requires a source to submit additional information as required by its permit

pursuant to Section 39.5(7)(f) of the Act if the source experiences more than one emissions

excursion. 415 ILCS 5/39.5(7)(f)(1996).

Section 205.640 (renumbered as "205.740") Enforcement Authority

This section states that Part 205 does not limit the State's or federal government's

authority to seek penalties and injunctive relief for any violation except for Section 205.620(f).

Section 205.650 (renumbered as "205.750") Emergency Conditions

This section provides procedures for sources to follow if they have experienced an

emergency during the seasonal allotment period. Pursuant to subsection (a), sources are

required to notify the IEPA within two days of the emergency by filing an initial emergency

condition report. The initial emergency condition report shall contain information sufficient to

fulfill the notice requirements of Section 39.5(7)(k) of the Act. (415 ILCS 5/39.5(7)(k).)

Subsection (a) also identifies several informational requirements for the final report. Sources

are allowed to supplement the initial emergency condition report within 10 days after the

conclusion of the emergency pursuant to subsection (b).

Subsection (c) requires the IEPA to approve, conditionally approve or reject the final

report within 30 days of receipt. If the IEPA's decision is to concur, the source is not

required to hold ATUs for the excess VOM emissions attributable to the emergency. If the

Agency approves with conditions or rejects the emergency conditions report, the source shall

be required to hold ATUs by the end of the reconciliation period in an amount not less than the

emissions identified as excess in the emergency conditions report or provide emissions

excursion compensation in accordance with Section 205.620 (renumbered as “205.720”), if an

emissions excursion occurred. If the Agency approves with conditions an emergency

conditions report, the Agency must identify in its written notice the amount of VOM emissions

that are not attributable to an emergency. If the Agency approves with conditions or concurs

with a source’s emergency conditions report, the source may raise the emergency as an

affirmative defense pursuant to Section 39.5(7)(k) of the Act (415 ILCS 5/39.5(7)(k)) in any

action brought for noncompliance with this Part or an action brought to review the Agency’s

issuance of an Excursion Compensation Notice, as provided in Section 205.620(d)

(renumbered as “205.720(d)) of this Subpart.

Section 205.660 (renumbered as "205.760") Market System Review Procedures

This section provides the basic elements of an annual review of the ERMS program that

the IEPA will conduct. The review will be made available to the public on May 15 the year

after the seasonal allotment period that is under review.

The Board also received public comments that do not address particular sections or

statutory language. The City stated that it has supported the concept of emissions trading and

believes that the IEPA's proposal is a fair and equitable approach. (PC 1 at 1-2.) In its public

comments, CommEd compares the ERMS program proposal with the SO

trading program and

concludes that the SO

trading program has been a success for the utility industry and since the

ERMS program has a similar structure it will also be successful. (PC 2 at 4.) Mr. Trepanier

filed two public comments, one, as already mentioned, was his pre-filed testimony filed on

April 18, 1997 (PC 3), and another which requests that another public hearing be held so that

he may testify. (PC 16 at 1-2.) In its public comments, 3M states general support for the

IEPA proposal. (PC 12 at 3.) The USEPA states that it shares IEPA's belief that this

approach has the promise of maximizing the flexibility that affected sources have in achieving

these emission reductions and that this approach provides incentives for keeping emissions at a

minimum. (PC 13 at 1.) The USEPA also notes that it has reviewed many drafts and

suggested certain changes such as when there are changes in the methods used to determine

seasonal emissions could warrant changes in the baseline for which the IEPA has agreed. (PC

13 at 2.) Finally, the USEPA reiterates the importance of a timely adoption of the proposal.

(PC 13 at 2.) The Steel Group, in stating its general support for the ERMS program,

specifically urges the Board to adopt the exclusion provisions in Section 205.405. (PC 15 at

1-2.)

Part 106 Procedural Rules

As noted earlier in the opinion the IEPA is also proposing to amend Part 106 of the

Board's procedural rules to provide for an appeal process under the ERMS program for certain

of its final determinations. The Board received no public comments pertaining to the proposed

amendments. As discussed previously, the Board will not be adopting for First Notice the

proposed amendments to Part 106. The Board, as noted previously, finds that the proposed

amendments do not sufficiently state a review standard for certain appeals and states an

arbitrary and capricious standard for review of ERG proposals which the courts have rejected.

Therefore, the Board will use the procedures of 35 Ill. Adm. Code 105 and Section 40 of the

Act until the Board's proposed procedural rules are adopted. As noted previously, the Board's

proposed procedural provides a process to appeal final Agency determinations which are not

part of permitting. As a result, references to the proposed Part 106 sections will be replaced

with references to Part 105. The Board intends to decide these matters expeditiously in order

to keep within the time-frames of the ERMS program.

CONCLUSION

Section 27 of the Act requires the Board to consider the economic reasonableness and

the technical feasibility of the proposed regulations. The IEPA provided extensive information

concerning these issues in its Technical Support Document from pages 79-147 and in the

testimony of its witnesses. Additionally, Section 9.8(c)(1) of the Act requires the IEPA to

demonstrate that the ERMS program is at least economically reasonable as a traditional

command and control program. The Board finds that the proposed rule is economically

reasonable and technically feasible as required by Section 27 of the Act based on this record.

However, the Board makes no decision whether the IEPA has satisfactorily demonstrated that

the proposed ERMS program meets the requirements of Section 9.8 of the Act. Nevertheless

the Board will proceed to first notice. The Board notes, however, that based on the

information requested by the Board from the IEPA concerning the requirements of Section

9.8(c)(3) of the Act, the Board may need to include a provision that assures that sources

subject to the program will not be required to reduce emissions to an extent that exceeds their

proportionate share of the total emission reductions required of all emission sources, including

mobile and area sources, to attain and maintain the NAAQS for ozone in the Chicago

nonattainment area. The Board adopts the proposal as amended for first notice.

ORDER

The Board directs the Clerk to cause the filing of the following with the Secretary of

State for First Notice publication in the

Illinois Register

TITLE 35: ENVIRONMENTAL PROTECTION

SUBTITLE B: AIR POLLUTION

CHAPTER I: POLLUTION CONTROL BOARD

SUBCHAPTER b: ALTERNATIVE REDUCTION PROGRAM

PART 205

EMISSIONS REDUCTION MARKET SYSTEM

SUBPART A: GENERAL PROVISIONS

Section

205.100

Severability

205.110

Purpose

205.120

Abbreviations and Acronyms

205.130

Definitions

205.150

Emissions Management Periods

SUBPART B: APPLICABILITY

Section

205.200

Participating Source

205.205

Exempt Source

205.210

New Participating Source

205.220

Insignificant Emissions Units or Activities

205.225

Startup, Malfunction or Breakdown

SUBPART C: OPERATIONAL IMPLEMENTATION

Section

205.300

Seasonal Emissions Component of the Annual Emissions Report

205.310

ERMS Applications

205.315

CAAPP Permits for ERMS Sources

205.318

Certification for Exempt CAAPP Sources

205.320

Baseline Emissions

205.330

Emissions Determination Methods

205.335

Sampling, Testing, Monitoring and Recordkeeping Practices

205.337

Changes in Emissions Determination Methods and Sampling, Testing,

Monitoring and Recordkeeping Practices

SUBPART D: SEASONAL EMISSIONS MANAGEMENT

Section

205.400

Seasonal Emissions Allotment

205.405

Exclusions from Further Reductions

205.410

Participating Source Shutdowns

SUBPART E: ALTERNATIVE ATU GENERATION

Section

205.500

Emissions Reduction Generator

205.510

Inter-Sector Transaction

SUBPART F: MARKET TRANSACTIONS

Section

205.600

ERMS Database

205.610

Application for Transaction Account

205.620

Account Officer

205.630

ATU Transaction Procedures

SUBPART G: PERFORMANCE ACCOUNTABILITY

Section

205.700

Compliance Accounting

205.710

Alternative Compliance Market Account (ACMA)

205.720

Emissions Excursion Compensation

205.730

Excursion Reporting

205.740

Enforcement Authority

205.750

Emergency Conditions

205.760

Market System Review Procedures

AUTHORITY: Implementing Section 9.8 and authorized by Sections 27 and 28 of the

Environmental Protection Act [415 ILCS 5/9.8, 27 and 28].

SOURCE: Adopted at 21 Ill. Reg. , effective .

SUBPART A: GENERAL PROVISIONS

Section 205.100

Severability

If any Section, subsection, sentence or clause of this Part is judged invalid, such adjudication

shall not affect the validity of this Part as a whole or of any Section, subsection, sentence or

clause thereof not judged invalid.

Section 205.110

Purpose

The purpose of this Part is to implement the Emissions Reduction Market System (ERMS)

regulatory program consistent with the assurances that are specified in Section 9.8 of the

Environmental Protection Act [415 ILCS 5/9.8]. The ERMS is designed, as further specified

in this Part, to achieve the following:

Implement innovative and cost-effective strategies to attain the national ambient

air quality standard (NAAQS) for ozone and to meet the requirements of the

Clean Air Act;

Increase flexibility for participating sources and lessen the economic impacts

associated with implementation of the Clean Air Act;

Take into account the findings of the national ozone transport assessment being

coordinated by the Environmental Council of States with participation by the

United States Environmental Protection Agency and by the Lake Michigan Air

Directors Consortium; and

Assure that stationary sources will not be required to reduce emissions to an

extent that exceeds their proportionate share of the total emissions reductions

required of all sectors, including mobile and area sources.

Section 205.120

Abbreviations and Acronyms

Unless otherwise specified within this Part, the abbreviations used in this Part shall be the

same as those found in 35 Ill. Adm. Code 211. The following abbreviations and acronyms are

used in this Part:

ACMA

Alternative Compliance Market Account

Act

Environmental Protection Act [415 ILCS 5/1 et seq.]

ATU

Allotment Trading Unit

CAA

Clean Air Act as amended in 1990 [42 U.S.C. 7401 et seq.]

CAAPP

Clean Air Act Permit Program

ERMS

Emissions Reduction Market System

LAER

Lowest Achievable Emission Rate

MACT

Maximum Achievable Control Technology

NAAQS

National Ambient Air Quality Standard

NESHAP

National Emission Standards for Hazardous Air Pollutants

RFP

Reasonable Further Progress

ROP

Rate of Progress

VOM

Volatile Organic Material

Section 205.130

Definitions

Unless otherwise specified within this Part, the definitions for the terms used in this Part shall

be the same as those found in Section 39.5 of the Act and in 35 Ill. Adm. Code 211.

"Account officer" means a natural person who has been approved by the Agency, as

specified in Section 205.520, and is subsequently responsible for one or more

Transaction Accounts to which he or she is designated.

"Allotment" means the number of allotment trading units (ATUs) allotted to a source

by the Agency, as established in the source’s CAAPP permit.

"Allotment Trading Unit (ATU)" means a tradable unit that represents 200 lbs of VOM

emissions and is a limited authorization to emit 200 lbs of VOM emissions during the

seasonal allotment period.

“Annual Emissions Report” means the report submitted to the Agency annually

pursuant to 35 Ill. Adm. Code 254.

"Baseline emissions" means a participating source's VOM emissions for the seasonal

allotment period based on historical operations, adjusted so that credit is allowed for

voluntary VOM emissions reductions beyond reductions required by applicable

requirements effective in 1996, as specified in Section 205.320 of this Part. Baseline

emissions shall be the basis of the allotment for each participating source.

“Best available technology” or "BAT" means an emission level based on the maximum

degree of reduction of VOM emitted from or which results from any emission unit,

which the Agency, on a case-by-case basis, taking into account energy, environmental

and economic impacts, determines is achievable for such unit through application of

production processes and available methods, systems, and technique for control of

VOM, considering the features and production process and control methods, systems

and techniques already used for the unit. In no event shall application of “best

available technology” result in emissions of VOM which exceed the emissions allowed

by any standard established pursuant to Section 111 of the Clean Air Act, if such a

standard is applicable to the category of emission unit.

"CAAPP" means the Clean Air Act Permit Program, pursuant to Section 39.5 of the

Act. [415 ILCS 5/39.5(1996)]

"Chicago ozone nonattainment area" means the area composed of Cook, DuPage,

Kane, Lake, McHenry, and Will Counties and Aux Sable Township and Goose Lake

Township in Grundy County and Oswego Township in Kendall County.

"Emergency" means any situation arising from sudden and reasonably unforeseeable

events beyond the control of the source, such as an act of God, that requires immediate

corrective action to restore normal operation.

"Emissions excursion" refers to the event that occurs when a participating source or

new participating source does not hold sufficient ATUs at the end of a reconciliation

period to account for its VOM emissions from the preceding seasonal allotment period,

in accordance with Section 205.150(c) or (d) of this Subpart.

"Excursion Compensation Notice" means an administrative notice issued by the

Agency, pursuant to Section 205.620 of this Part, that notifies the owner or operator of

a participating source or new participating source that the Agency has determined that

the source has had an emissions excursion.

"General participant" means any person, other than a participating source or new

participating source, that obtains a Transaction Account and is allowed to buy and sell

ATUs.

"New participating source" means a source not operating prior to May 1, 1999, located

in the Chicago ozone nonattainment area, that is required to obtain a CAAPP permit

and has or will have seasonal emissions of at least 10 tons of VOM.

"Participating source" means a source operating prior to May 1, 1999, located in the

Chicago ozone nonattainment area, that is required to obtain a CAAPP permit and has

baseline emissions of at least 10 tons, as specified in Section 205.320(a) of this Part or

seasonal emissions of at least 10 tons in any seasonal allotment period beginning in

1999.

"Reconciliation period" means the period from October 1 through December 31 during

which the owner or operator of a participating source or new participating source must

compile actual VOM emissions for the previous seasonal allotment period and may also

buy or sell ATUs so that sufficient ATUs are held by the source by the conclusion of

the reconciliation period.

"Seasonal allotment period" means the period from May 1 through September 30 of

each year.

"Seasonal emissions" means actual VOM emissions at a source that occur during a

seasonal allotment period.

"Sell" means to transfer ATUs to another person through sale, lease, trade or other

means of transfer.

"Special participant" means any person that registers with the Agency and is allowed to

purchase and retire ATUs but not sell ATUs, as specified in Section 205.510 of this

Part.

"Throughput" means the activity of an emission unit during a particular period relevant

to its generation of VOM emissions, including, but not limited to, the amount of

material transferred for a liquid storage operation, the amount of material processed

through or produced by the emission unit, fuel usage, or the weight or volume of

coatings or inks.

"Transaction Account" means an account authorized by the Agency or its designee that

allows an account officer to buy or sell ATUs.

Section 205.150

Emissions Management Periods

The VOM emissions control period is the seasonal allotment period, which is

from May 1 through September 30, annually.

The reconciliation period is from October 1 to December 31, annually. During

each reconciliation period, participating sources and new participating sources

shall:

Compile data of actual VOM emissions during the immediately

preceding seasonal allotment period; and

Submit its seasonal emissions component of its Annual Emissions

Report, in accordance with Section 205.300 of this Part.

At the end of each reconciliation period on and after the dates specified in

Section 205.200 of this Part, each participating source shall:

Hold ATUs in an amount not less than its VOM emissions during the

preceding seasonal allotment period, except as provided in Sections

205.220, 205.225, 205.320(e)(3) or (4) and 205.650 of this Part; or

Hold ATUs in an amount not less than 1.3 times its seasonal emissions

attributable to a major modification during the preceding seasonal

allotment period, if a participating source commences operation of a

major modification pursuant to 35 Ill. Adm. Code 203 after May 1,

1999. Additionally such source must hold ATUs in accordance with

subsection (c)(1) of this Section for VOM emissions not attributable to

this major modification during the preceding seasonal allotment period.

At the end of each reconciliation period on and after the date on which the

source commences operation, as specified in Section 205.210 of this Part, each

new participating source shall:

If the new participating source is a new major source pursuant to 35 Ill.

Adm. Code 203, hold ATUs in an amount not less than 1.3 times its

VOM emissions during the preceding seasonal allotment period; or

If the new participating source is not a new major source pursuant to 35

Ill. Adm. 203, hold ATUs in an amount not less than its VOM emissions

during the preceding seasonal allotment period, except as provided in

Section 205.650 of this Part.

Any participating source that commences operation of a major modification

after May 1, 1999, or any new participating source that is a new major source,

which, at the end of each reconciliation period, holds ATUs in an amount not

less than 1.3 times the VOM emissions emitted by such new or attributable to

this modified unit during the preceding seasonal allotment period shall be

deemed to have satisfied the offset requirements of 35 Ill. Adm. Code

203.302(a), 203.602 and 203.701.

SUBPART B: APPLICABILITY

Section 205.200

Participating Source

The requirements of this Part shall apply to any source operating prior to May 1, 1999, located

in the Chicago ozone nonattainment area, that is required to obtain a CAAPP permit and has

baseline emissions of at least 10 tons, as specified in Section 205.320(a) of this Part or

seasonal emissions of at least 10 tons in any seasonal allotment period beginning in 1999.

Each participating source shall hold ATUs, as specified in Section 205.150(c) of this Part, in

accordance with the following schedule:

For any participating source that has baseline emissions of at least 10 tons of

VOM, as determined in accordance with Section 205.320(a) of this Part,

beginning with the 1999 seasonal allotment period;

For any source that first becomes a participating source because its VOM

emissions increase to 10 tons per season or more in any seasonal allotment

period beginning with 1999 and this emissions increase is not a major

modification pursuant to 35 Ill. Adm. Code 203, beginning with the first

seasonal allotment period after such increased emissions occurred; or

For any source that will first be subject to the requirements of this Part because

of a VOM emissions increase at any time after May 1, 1999 that constitutes a

major modification pursuant to 35 Ill. Adm. Code 203, upon commencing

operation of this modification.

Section 205.205

Exempt Source

Any source that otherwise meets the criteria for participating sources shall be

exempt from the requirements of this Part if the source accepts a 15 tons per

seasonal allotment period limit on its VOM emissions in its CAAPP permit for

each seasonal allotment period in which the source would be required to

participate in the ERMS in accordance with the following:

If the source would be required to participate in the ERMS beginning

with the 1999 seasonal allotment period in accordance with Section

205.200(a) of this Subpart, such source shall apply for the applicable

permit limitation by January 1, 1998; or

If the source is required to participate in the ERMS in any seasonal

allotment period after 1999 because its VOM emissions increase to 10

tons or more in any seasonal allotment period beginning with 1999 in

accordance with Section 205.200(b) of this Subpart, such source shall

apply for the applicable permit limitation by December 1 of the first year

in which its seasonal emissions are at least 10 tons.

Any source that otherwise meets the criteria for participating sources shall be

exempt from the requirements of this Part, except that any such source shall be

required to submit the seasonal emissions component of the Annual Emissions

Report and an ERMS application as specified in Sections 205.300 and

205.310(d) of this Part, respectively, if such source decides to reduce its

seasonal emissions by at least 18 percent beginning in 1999. Any such source

shall accept conditions in its CAAPP permit limiting its seasonal emissions to at

least 18 percent less than its baseline emissions, as determined in accordance

with Section 205.320 of this Part. Any such source shall apply for the

applicable permit limitation(s) by January 1, 1998. ATUs equivalent to any

amount of VOM emissions reductions achieved by the source beyond 12 percent

(at least six percent) shall be issued by the Agency to the ACMA.

Section 205.210

New Participating Source

The requirements of this Part shall apply to any new participating source, a source not

operating prior to May 1, 1999, located in the Chicago ozone nonattainment area, that is

required to obtain a CAAPP permit and has or will have seasonal emissions of at least 10 tons

of VOM. Each new participating source shall hold ATUs, as specified in Section 205.150(d)

of this Part, upon commencing operation.

Section 205.220

Insignificant Emissions Units or Activities

Emission units or activities identified as insignificant activities pursuant to the CAAPP permit

for each participating source are exempt from the requirements of this Part.

Section 205.225

Startup, Malfunction or Breakdown

Participating sources permitted to operate during startup, malfunction or breakdown pursuant

to 35 Ill. Adm. Code 201.262, 270.407 and 270.408 are not required to hold ATUs for excess

VOM emission during startup, malfunction and breakdown as authorized in the source’s

permit.

SUBPART C: OPERATIONAL IMPLEMENTATION

Section 205.300

Seasonal Emissions Component of the Annual Emissions Report

For each year in which the source is operational, the owner or operator of each

participating source and new participating source shall submit, as a component

of its Annual Emissions Report, seasonal emissions information to the Agency

for each seasonal allotment period after the effective date of this Part in

accordance with the following schedule:

For each participating source or new participating source that generates

VOM emissions from less than 10 emission units, by October 31 of each

year; and

For each participating source or new participating source that generates

VOM emissions from 10 or more emission units or activities, by

November 30 of each year.

In addition to any information required pursuant to 35 Ill. Adm. Code 254, the

seasonal emissions component of the Annual Emissions Report shall contain the

following information for the preceding seasonal allotment period for each

emission unit emitting or capable of emitting VOM, except that such

information is not required for emission units or activities excluded pursuant to

Section 205.220 of this Part or for VOM emissions attributable to startup,

malfunction or breakdown, as specified in Section 205.225 of this Part:

Actual seasonal emissions of VOM from the source;

A description of the methods and practices used to determine VOM

emissions, as required by the source’s CAAPP permit, including any

supporting documentation and calculations;

A detailed description of any monitoring methods that differ from the

methods specified in the CAAPP permit for the source, as provided in

Section 205.337 of this Subpart;

If a source has experienced an emergency, as provided in Section

205.650 of this Part, it shall reference the associated emergency

conditions report that has been approved by the Agency;

If a source's baseline emissions have been adjusted because of a

variance, consent order or CAAPP permit compliance schedule, as

provided for in Section 205.320(e)(3) of this Part, it shall provide

documentation quantifying the adjusted VOM emissions amount; and

If a source is operating a new or modified emission unit for which three

years of operational data is not yet available, as specified in Section

205.320(f) of this Subpart, it shall specify seasonal emissions attributable

to the new emission unit or the modification of the emission unit.

Section 205.310

ERMS Applications

The owner or operator of each participating source or new participating source

shall submit to the Agency an ERMS application in accordance with the

following schedule:

For a participating source with baseline emissions of at least 10 tons of

VOM, as determined in accordance with Section 205.320(a) of this

Subpart, by January 1, 1998;

For any source that first becomes a participating source because its VOM

emissions increase to 10 tons or greater during any seasonal allotment

period beginning with 1999, on or before December 1 of the year of the

first seasonal allotment period in which its VOM emissions are at least

10 tons, provided that this emissions increase is not a major modification

pursuant to 35 Ill. Adm. Code 203; or

For a new participating source or for a major modification of any source

existing prior to May 1, 1999, that is subject to 35 Ill. Adm. Code 203

based on VOM emissions, at the time a construction permit application

is submitted or due for the source or modification, whichever occurs

first.

Except as provided in subsection (d) of this Section, each ERMS application for

participating sources shall contain all information required by the Agency

pursuant to Section 39.5 of the Act or reference such information if previously

submitted to the Agency, including the following information:

Data sufficient to establish the appropriate baseline emissions for the

source in accordance with Section 205.320 of this Subpart, including but

not limited to the following:

VOM emissions data and production types and levels from the

baseline emissions year(s), as specified in Section 205.320(a)(1),

(b) or (c) of this Subpart, as appropriate;

If the source is proposing a substitute baseline emissions year(s),

as provided in Section 205.320(a)(2) of this Subpart, a

justification that the year is more representative than 1994, 1995

or 1996, including data on production types and levels from the

proposed substitute year(s) and historical production data, as

needed to justify that the proposed substitute year(s) is

representative; and

If the source is proposing a baseline emissions adjustment based

on voluntary over-compliance, as provided in Section 205.320(d)

of this Subpart, sufficient information for the Agency to

determine the appropriate adjustment;

A description of methods and practices used to determine baseline

emissions and that will be used to determine seasonal emissions for

purposes of demonstrating compliance with this Part, in accordance with

Sections 205.330 and 205.335 of this Subpart;

Identification of any emission unit for which exclusion from further

reductions is sought pursuant to Section 205.405(b) of this Part and

including all of the information required pursuant to Section 205.405(b)

of this Part;

Identification of any emission unit excluded from further reductions

pursuant to Section 205.405(a) of this Part; and

Identification of any new or modified emission unit for which a

construction permit was issued prior to January 1, 1998, but for which

three years of operational data is not available, and the permitted VOM

emissions or the permitted increase in VOM emissions from such

emission unit(s), adjusted for the seasonal allotment period.

Except as provided in subsection (h) of this Section, the ERMS application

submitted by each participating source shall also be an application for a

significant modification of its CAAPP permit or a revision to its CAAPP

application if a CAAPP permit has not yet been issued for the source.

The ERMS application for any source that elects to reduce its seasonal

emissions by at least 18 percent from its baseline emissions, as provided in

Section 205.205(b) of this Part, shall include:

VOM emissions data sufficient to establish the appropriate baseline

emissions for the source in accordance with Section 205.320 of this

Subpart; and

A description of methods and practices used to determine baseline

emissions and that will be used to demonstrate that its seasonal emissions

will be at least 18 percent less than its baseline emissions, in accordance

with Sections 205.330 and 205.335 of this Subpart.

Within 120 days of receipt of an ERMS application, the Agency shall provide

written notification to the source of a preliminary baseline emissions

determination. Public notice of a draft CAAPP permit in accordance with

Section 39.5(8) of the Act shall fulfill this requirement for a preliminary

baseline emissions determination if issued within 120 days. [415 ILCS

5/39.5(8) (1996).]

The ERMS application for each source applying for a major modification, as

provided in subsection (a)(3) of this Section, shall include the information

specified in subsection (b) of this Section and a certification by the owner or

operator recognizing that the source will be required to hold ATUs by the end

of each reconciliation period in accordance with Section 205.150(c)(2) of this

Part, and provide a plan explaining the means by which it will obtain ATUs for

the VOM emissions attributable to the major modification for the first three

seasonal allotment periods in which this major modification is operational.

The ERMS application for each new participating source shall include:

A description of methods and practices that will be used to determine

seasonal emissions for purposes of demonstrating compliance with this

Part, in accordance with Section 205.330 and 205.335 of this Subpart;

A certification by the owner or operator recognizing that the source will

be required to hold ATUs by the end of each reconciliation period in

accordance with Section 205.150(d) of this Part for each seasonal

allotment period in which it is operational; and

If the source is a new major source subject to 35 Ill. Adm. Code 203, a

plan explaining means by which it will obtain such ATUs for the first

three seasonal allotment periods in which it is operational.

The owner or operator of any participating source that has identified a new or

modified emission unit as specified in subsection (b)(5) of this Section, shall

submit a written request, or an application for, a revised emissions baseline and

allotment. Such written request or application shall be submitted by December

1 of the year of the third complete seasonal allotment period in which such

newly constructed emission unit is operational, which submittal shall include

information on the seasonal emissions for these first three seasonal allotment

periods.

Section 205.315