United States
                             Environmental Protection
                        Air and Radiation
            .October 1991

             rV  n
               £L    2  (such as in-
     dustrial facilities) may elect to par-
     ticipate in the Acid Rain SO2
     Program by opting in.
       The Act also calls for a 2-million
     ton reduction in NOx emissions by
     the year 2000. A significant portion
     of this reduction will  be achieved
     by utility boilers, which will be re-
     quired to install low-NOx burner
     technologies and meet new emis-
     sions requirements.
       These requirements will also be
     implemented in two phases. For
     Phase I, EPA will establish emis-
     sions limitations for two types of
     .utility boilers (tangentially fired
     and dry bottom, wall-fired boilers).
     For Phase II, regulations for all
     other types of coal-fired boilers will
     be issued by 1997, and  must be met
     beginning in  the year 2000 by all
     units not subject to the Phase INOX
     limits. Regulations for tangentially
 fired and dry bottom, wall-fired
 boilers not covered in Phase I may
 be tightened at this time.
  The innovative, market-based
 SC*2 allowance trading component
 of the Acid Rain Program allows
 utilities  to  adopt  the most
 cost-effective strategy to reduce
 SC*2 emissions at units in their sys-
'tem. The Acid  Rain Program
 operating permit spells out the
 specific program requirements and
 compliance options chosen by each
 source.  Affected utilities also will
 be required to install systems that
 continuously monitor emissions of
 SOz, NOx, and other related pol-
 lutants in order to track progress,
 ensure compliance, and provide
 credibility to the trading program.
 In any year that compliance is not
 achieved, excess emissions penal-
 ties will  apply, and sources will be
 required to submit a plan to EPA
 that specifies how the excess SOi
 emissions will be offset.

      Acid Rain Program is being
 A implemented through operat-
ing permits. Each operating permit
                                        Printed on Recycled Paper.

will specify the enforceable re-
quirements that will apply to each
affected unit at a source. The acid
rain permitting requirements will
afford flexible planning oppor-
tunities to help minimize the costs
of compliance. All affected sources
must submit operating permit ap-
plications to either EPA or, during
Phase II, the state  permitting
authority approved by EPA.
  Each permit will also specify the
source's basic allowance allocation
and NOx limitation. These may
vary from the statutory require-
ments  if the source elects one or
more optional method of com-
pliance in its operational plan. This
plan, known as the  compliance
plan, describes how the source will
meet the acid rain requirements.
Permits must  be granted before
each unifs total annual allowance
allocation can be determined (see
the Allowance System Rule).
  The proposed Permits Rule also
outlines the requirements for cer-
tifying designated representatives
for  affected sources, the informa-
tion needed to complete permit
applications, schedules for submit-
ting permit materials, permit
processing procedures, duration of
permit terms,  permit appeal and
revision  procedures, and. the
program's periodic compliance cer-
tification reporting requirements.

What Sources Must
Obtain Permits?
Tn  general, most electric utility
iplants with one or more units that
emit SOa and NOx must obtain an
acid rain permit in order to operate.
Nonutility sources of emissions are
not  required to obtain permits un-
less they voluntarily opt in to the
  Phase I permits must be obtained
for each source with one or more
units that
  • Are listed in Appendix A of the
    rule, entitled "Existing Phase I
    Affected Units."
  • Are Phase I units that become
    designated as affected  units
    during Phase I under a com-
    pliance plan developed by a
    unit listed in Appendix A of the
   • Choose  to opt  in  to  the

   Phase II permits must be ob-
tained for each source with one or
more units that:
   • Are listed in Appendix A.
   • Are listed in Appendix B of the
    rule, entitled "Existing Phase II
    Affected Units."
   • Are new units (new units are
    those that began commercial
    operation on or after Novem-
    ber 15,1990, or that increased
    electrical generation from less
    than 25 megawatts to 25
    megawatts or more).
   • Choose  to opt  in  to  the

Who Represents  the
Sources in Permitting
   The owners and operators of
   each regulated source must
select one person to represent the
source in permitting matters  and
may select a second person to act as
an alternate for the first. These two
persons are known as the desig-
nated representatives. • Both the
designated representative and the
alternate must be identified and ap-
proved by agreement of the owners
and operators of a source up front
in the  "certificate  of repre-
sentation."   The owners and
operators and the designated  rep-
resentative are fully responsible for
any actions  the alternate takes.
From this point on in this summary,
"designated  representative" shall
denote the person representing the
owners and operators of a utility in
matters with EPA, whether it be the
designated representative or the al-
  No permits will be issued  to a
source until  its designated repre-
sentative has been chosen and cer-
tified as provided by the rule.
Sources that  consist of more than
one affected unit must still appoint
only  one   designated  repre-
 sentative. Use of designated repre-
 sentatives ensures that EPA will noi -
 receive conflicting submissions,
 from the same source.
   The designated representati
 responsible for submitting to
 and state permitting authorities all
 acid rain program submissions for
 the source, .including allowance
 transfers, emissions monitoring
•'reports, compliance certifications,
 excess emission offset plans, permit
 applications,,.permit revisions, and
 any other information necessary
 for the implementation of the Acid
 Rain Program.
   In addition, the designated rep-
 resentative: must sign and certify
 the truth arid accuracy of each sub-
 mission. AU_submissions made by
 the designated' representative are
 binding .orV'.every owner and
 operator of.:the source.
   The designated representative
 for a source-may be changed at any
 time by agreement of its owners
 and operators. All actions under-
 taken by the  previous designated
 representative before EPA receives
 the certificate of representation for
 his or her replacement,  however,
 are binding.

 What Information
 Should Be
 Included in Permit
 "p PA has developed standardized
 Xj forms that must be completed
 when applying for an acid rain per-
 mit.  The forms request designated
 representative    information,
 general source  information, and
 specific  unit information. The
 standardized  forms should ensure
 national consistency in permit
 application requirements and help
 facilitate a  national  allowance
  •If, for example, one  state re-
 quired considerably more informa-
 tion about the source  or  more
 detailed compliance plans prior to
 issuing an acid rain permit than^S
 another, the source might^^-.
 counter delays in obtaining permit
 approval, thereby adding to the

source's incremental "cost" of per-
mitting and obtaining allowances.
~tandardized   forms  should
 revent such problems from aris-
  The use of standardized forms
also lends itself to computerization
of the application process. EPA is
currently investigating the pos-
siblity of instituting a nonman-
datory   electronic   reporting
procedure for sources that would
make the permitting system more

How Do Compliance
Plans Work?
   Each regulated source must
   develop a compliance plan for
each affected unit describing  the
steps the unit will take to ensure
compliance  with the  Acid Rain
Program. The plan can be struc-
tured around one or more of  the
following options:
  • Standard Compliance Option:
    The plan must indicate that the
    unit will hold enough allow-
    ances to cover its annual SO2 .
    emissions and will be operated
    in compliance with the ap-
    plicable Npx emissions limita-
   > Phase I - Substitution Plan: A
    Phase I unit may reassign all or
   'some ofits Phase ISO2 emis-
    sions reduction requirements
    to one or more existing units
    (substitution units), which
    would otherwise not be regu-
    lated until Phase n, that agree
    to fulfill the original unit's
    Phase I  requirements.  The
   substitution unit consequently
   becomes a designated affected
   unit for Phase I, and .as such
   also must meet the SOz and
    NOx limitations of Phase I of
    the program. All of the units
   involved in a substitution plan
   must have  the same desig-
   nated representative^
    Phase I - Extension Plan: A
   Phase I affected unit (including
   any unit that becomes affected
   in Phase I under another com-
pliance plan as a designated
affected unit) may apply for a
2-year extension of Phase ISO2
limitations.  Extensions- will
only be granted to units that
use a "qualifying Phase I tech-
nology" (a technology that can
be demonstrated to remove at
least 90 percent of the fuel's
SO2 emissions), or that reas-
sign their emissions reduction
obligations to another unit that
uses such a technology during
Each extension unit will be
given extra SO2 emissions al-
lowances to cover the SOz  it
emits beyond its basic Phase I
allocation during 1995 and
1996. As provided by the Act,
EPA will only award a limited
number of allowances to cover
extension plans  and  will
process extension applications
in the order  that they are
The proposed rule specifies
that the "order of receipt" will
be determined  by a telephone
queuing procedure, but asks
for comments  on alternative
Phase I - Reduced Utilization
Plan: An affected Phase I unit
may meet its emissions reduc-
tion requirements by reducing
electricity generation. The unit
can compensate for planned
reduced  output  by  (1)
designating a non-Phase  I
SOz-emitting unit or units to
increase generation (compen-
sating unit);  (2) adopting
verifiable energy conservation
or improved unit  efficiency
measures; or (3) designating
sulfur-free generation to com-
pensate for the  reduction. EPA
will grant allowances to com-
pensating units based on their
1985 emissions rates and their
"baselines" (average annual
fuel use from 1985 to 1987).
Because both the original and
the compensating unit or units
must hold enough allowances
to cover their SOz emissions,
allowances may be transferred
  from the original unit to the
  compensating unit or units to
  cover emissions beyond their
  granted allowances. The units
  named in a Reduced Utiliza-
  tion Plan do not have to have
  the same designated repre-
 ' sentative as the original Phase
  I unit.
• Phase II - Repowering Extension:
  Phase n affected units may ob-
  tain a 4-year extension of the
  Phase n  emissions reduction
  deadline if they repower with
  a qualified clean coal technol-
  ogy.  Repowering requires re-
  placement of  an  existing
  coal-fired boiler with (1) one of
  seven technologies listed in the
  Act; (2) a derivative  of one of
  those technologies; or (3) a
  technology determined by the
  EPA Administrator and  the
  Secretary of Energy to be
  capable of controlling multiple
  combustion emissions simul-
  taneously -with improved
  boiler or generation efficiency
  and with significantly greater
  waste reduction than technol-
  ogy commonly used in 1990.
  Qualified repowering tech-
  nologies include  atmospheric
  or  pressurized fluidized  bed
  combustion,    integrated
  gasification  combined  cycles,
  direct and indirect coal-fired
  turbines, and  integrated
  gasification fuel  cells. Units
  that want to obtain a repower-
  ing extension  must submit a
  petition to EPA for conditional
  approval  of their repowering
  technology. Moreover, a com-
  pliance plan outlining when
  repowering activities will
  occur and other  information
  must be submitted to the per-
  mitting authority. If the  unit
  proceeds with repowering and
  later determines  that  the
  prospect is  infeasible,  it  will
  not be held liable for violation
  of the Act for failing to repower
  as long as it acted "in good faith."

'• NOx Emissions Averaging Plan:
  Units that are subject to NOX

  regulations during Phase! and
  all Phase n affected units may
  enter into an averaging plan if
  they have the same owner or
  operator and designated rep-
  resentative. The emissions
  averaging plan must identify
  all of the units involved, their
  combined annual NOx emis-
  sions limitation, and the in-
  dividual levels  of NOx each
  unit proposes to emit annually.
  With this option, emissions
  generated by individual units
  above the required rates can be
  compensated for by other units
  in the utility system as long as
  the combined emissions do not
  exceed the limitations.
 The use of standardized
 forms should ensure
 national consistency In
 permit application
 * NOx Alternative Emissions
  Limitations Plan: A unit can re-
  quest an alternative, less strin-
  gent NOx emissions limitation
  if it can demonstrate that the
  otherwise applicable NOX
  limitation cannot be met at the
  unit  using  the technology
  upon which the regulatory
  limitation was based.
  limit, the unit must confirm
  that the control equipment
  upon which the unit was based
  was properly designed, in-
  stalled, and operated.
 • Phase 1 - NOx Compliance Dead-
  line Extension Plan: Units
  regulated under Phase I for
  NOx emissions can apply for a
  15-month Phase I compliance
/deadline extension if equip-
  ment needed to meet the NOx
  requirement   cannot   be
  obtained and installed by
  January 1,1995, because it is in
  inadequate supply.
 • Opt-in Plan: Units that are not
  regulated under the Act may
    wish to become affected units
    for SO2 in order to participate
    in  the allowance trading
    program. These units must
    submit applications under re-
    quirements that  will  be
    promulgated in  the Opt-in
  In addition, special plans are re-
quired for .the following situations:
  • New Unit Plan:  New units are
    regulated under Phase II of the
    Program. Permit applica-
    tions for new units must in-
    clude  a  plan,   which
    indicates when the unit
    will  commence  operation.
    Accounting for emissions
 .   at  new units  begins  on
    January 1, 2000, or upon
    commencement of opera-
    tion, whichever is later.
  • Common-Stack Plans: In situa-
    tions where a source does not
    independently monitor the
    emissions of units that share a
    common emissions  stack,
    these separate units will be
    regulated  as a single unit.
    (This requirement does not
    apply where each unit has a
    separate certified emissions
    monitor). These units must in-
    dicate that they share a com-
    mon  stack in their emissions
    and compliance plans.
    If emissions from common
    stack units exceed the com-
    bined total of the allowances
    held for those units, then the
    units will be held liable for fail-
    ing to comply with the Act. If
    one of the units is regulated
    under Phase I of the program,
    the other units not otherwise
    regulated in Phase I must be
    designated as Phase I affected
    units under either a substitution
    plan or as opt-in units and are
    assigned emissions allowances.

  Units may specify more than one
of the compliance options in their
compliance plans and may seek
conditional preappproval  of  the
options. In.this manner, the unit is
given flexibility to select the ap-
propriate compliance option at a
later date, when more informatione
is available. The unit's designated :
representative simply informs EPA -.
of its choice, and the permit is
ministratively amended to i
this change.
  Units may specify
  more than one of the
  compliance options in
  their compliance
  Multiunit plans involving
separate sources or separately
owned and operated units (such as
Phase I extension control unit plans
and  reduced utilization plans)
generally may have different desig-
nated representatives  (except as
noted earlier). The compliance
plans   must   be   properly
cross-referenced in the permit for
each source and signed  by  each
designated representative in-
volved.              '

What Does the
Permitting Authority Do
with the Application?
     When the permitting authority
     receives a source's permit ap-
plication, the permit writer deter-
mines  if  the application  and
compliance plans are complete. If
they are incomplete, the permit
writer will request additional infor-
mation.  (Delays in submitting in-
formation can result in a denial of
the application and a violation of
the permit requirements.)
  Once  all of the necessary infor-
mation has been obtained, the per-
mit writer prepares a proposed
permit and a statement describing
the legal and factual basis of the
permit   requirements.  These
materials are  provided  to the
source, and are made available to
the public.
  .A comment period is then  hdfe
during which time the public WP
comment on the proposed permit

and request a public hearing. After
all comments are received, the per-
Imit is issued or the application is
denied.  This action constitutes the
permitting decision and is subject
to appeal by the source or the
  During Phase I of the program,
EPA's Regional Offices are respon-
sible for issuing acid rain permits.
For Phase n, states are required to
develop  and implement permit
programs for approval by EPA pur-
suant to the general permitting re-
quirements specified under Tide V
of the Clean Air Act.
  EPA will process Phase n permit
applications  for sources located in
those states that do not have EPA
approved permit programs by July
1,1996. In these cases, EPA will fol-
low its Phase I  permitting proce-
dures.  States  with approved
programs will process Phase n per-
mit  applications and submit
proposed permits to  EPA for
review.  Permits will be issued by
states following the EPA review, as-
suming that EPA does not have any
substantive objections.

When Should the Permit
Materials  Be Submitted?
   EPA has developed a schedule
   that  dictates  when permit
materials must  be submitted in
both Phase I and Phase n of the
Acid Rain Program. During Phase
I, the following deadlines apply:
  * Phase I  permit applications
    and  proposed compliance
    plans must  be submitted by
    February 15,1993.
  • Designated Representative
    Certificates of Representation
    for Phase I  sources must be
    postmarked  no later than the
    date the  permit application is
  • Compliance  option forms can
    be submitted with the permit
    application, or can be  sub-
    mitted as. proposed permit
    revisions. Sources considering
    a Phase I extension will be able
    to submit an "early ranking"
     application prior to submis-
     sion of the application to deter-
     mine whether they will receive
     allowances from the reserve.

   During  Phase n, the  following
v deadlines apply:
   • SOz permit applications and
     proposed compliance plans
     must  be  postmarked  by
     January 1,1996.
   • NOx permit applications and
     proposed compliance plans
     must be submitted by January
   • Designated  Representative
     Certificates of Representation
     must be postmarked no later
     than with the permit applica-
   • New unit plans must be sub-
     mitted by January 1,1998, or 24
     months before the unit com-
     mences operation (whichever
     is later).
   • Compliance option forms can
     be submitted with the permit
     application,  or can be sub-
     mitted as a permit revision.

 How Long Does the
 Permit Last?
    Each acid rain permit will be ef-
    fective for 5 years. Phase I per-
 mits will be issued in 1993, but will
 be effective  throughout Phase I,
 from January 1, 1995, through
 December  31, 1999. This delay in
 the Phase I permit effective date has
 been proposed to minimize the
 need for Phase I permit reapplica-
 tions in 1998 (5 years after the initial
 permits will be issued).
   States may also similarly delay
 the effective dates of permits they
 issue for Phase n, and have them
 begin  in the  year 2000.  This may
 also be possible under the various
 state permit  programs approved
 under Title V of the Dean Air Act.
 States are  encouraged to put af-
 fected sources on a permitting cycle
 that coincides with the  add rain
 permitting cycle, when issuing per-
 mits for other air program require-
 ments    (such    as    State
 Implementation Plans).
How Can Permitting
Decisions Be Appealed?
    Any person challenging a. per-
    mitting decision must file a
petition for review with the Ad-
ministrator.  This  petition  must
show that the Agency's factual
findings  or legal conclusions are
"clearly erroneous," or that policy
determinations underlying the
decision are "arbitrary and capri-
cious." The EPA Administrator will
determine if the review should be
  Appeals of state permitting
decision in Phase II of the program
would be  governed by  the ad-
ministrative arid judicial review
procedures specified in  the ap-
proved permitting program.  If the
state has  issued the permit, it will
conduct the appeal  process unless
the decision being  appealed was
made by  EPA.  Decisions made by
EPA include, but are .hot limited to
(1) denial by the EPA Administrator
of an acid rain permit, (2) approval
or disapproval of an excess emis-
sions offset plan, and (3) deter-
mination of whether a proposed
technology constitutes a qualifying
repowering technology.  .
  When the state conducts an ap-
peal, it must notify EPA of the ap-
peal as well as the decision that is
reached.  State permit programs
must afford EPA the right to inter-
vene in any acid rain permit ad-
ministrative or judicial appeal
conducted by the state.

How Can the Permit Be
  In many cases, permit revisions
  may be necessary.  Three types of
permit revision procedures are
specified in the proposed  rule: (1)
permit modifications including fast
track permit modifications; (2) ad-
ministrative permit amendments;
and (3) automatic permit amend-
  The permit modification proce-
dure would apply to, among other
things, any proposed relaxation of
a monitoring requirement; a relaxa-

                Principles of Acid Rain Permits
     National Consistency
The acid rain permitting procass furnishes militias with tha flexibility to select from
a number of compliance options and devise the most cost-effective compliance plan
possible. The standardized permitting forma ensure consistency on a nationwide
basis. Finally, the appointment of a designated representative provides the program
with the requisite accountability to perform well.
tion of an approved emission offset
plan; the proposed use of a new
method of compliance, a change in
the compliance option that results
in a previously unaffected unit be-
coming affected; changes to a Phase
I extension plan; or a decision by a
state permitting authority inter-
preting, modifying, or voiding any
permit  provision.    Permit
modifications would involve prior
public notice and comment.
  EPA has proposed two fast track
options. Under the first option, the
designated representative for the
unit involved would submit the
proposed permit modification to
EPA. EPA would have 30 days to
rule on the revision. If EPA decides
to approve the revision, it would
notify members of  the public that
were interested in  the initial per-
mitting action (e.g., commenters on
the  original permit)  of the
proposed change. These interested
persons would have 15 days to
comment  on  the  proposed
  If no objections were  raised
during this comment period, the
permit modification would be-
come effective. If objections occur,
the  proposed revision would have
to go through the  full  permit
modification procedure.
    With  the second fast track
  modification option, the permittee
  would publicize the proposed per-
  mit modification in a journal or
  newspaper of national and general
  circulation, as well as give notice to
  the interested parties. The public
  would have 30 days to comment to
  EPA. The permittee would submit
  its proposed modification to EPA,
  and the Agency  would  have 30
  days after the close of the comment
•  period  to rule on  the proposed
  modification. EPA may choose one
  or both approaches  in  its  final
    The  administrative  permit
  amendments  procedure would
  apply to simple alterations to a per-
  mit, such as corrections  of typo-
  graphical errors, address  or name
    In addition,  other specific
  changes, such as incorporating an
  approved excess  emissions offset
  plan, activation of a compliance op-
  tion that was already conditionally
  approved in the original permitting
  action, and changes to the desig-
  nated representative if a new cer-
  tificate of representation has been
  filed,  will be handled as ad-
  ministrative permit amendments
  for the Acid Rain Program. Ad-
  ministrative amendments will be
 made by the permitting authority
 with subsequent public notice.    * •«.
   As provided in the Act, automatic :
 permit amendments will occur,;
 whenever an emissions allowa^fc-
 transaction is properly registe^F
 with EPA on the Allowance Track-
 ing System. Once the transaction
 has been recorded by EPA, the,per-
 mit for a unit selling the allowances
 will be deemed to be automatically
 amended to reflect  that its al-
 lowance pool and consequent SG>2
 emissions limitation, has" been
 diminished by the quantity of al-
 lowances sold.
   Similarly, the permit for trie unit
 buying the allowances will auto-
 matically be deemed  to be
 amended to reflect the correspond-
 ing increase in allowances and SO2
 emissions limitation. The  permit
 will not actually be rewritten to ef-
 fect these automatic amendments,
 however. Rather the applicable SOz
 emissions limitation will have to be
 determined at the end of each
 calendar year by looking at the
 unit's Allowance Tracking System
 account.                 '.''

 For More Information

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