August 28^th, 2014

BY EMAIL (Inahara.Jill@deq.state.or.us) AND FACSIMILE (503-229-5675)

Jill Inahara

Oregon DEQ, Air Quality Division

811 SW Sixth Ave.

Portland, OR 97204

Subject:  Comments on DEQ’s Proposed Air Quality Permitting Rules

Dear Ms. Inahara:

The Oregon Forest Industries Council (OFIC) is a trade association representing more than 50 Oregon forestland owners and forest products manufacturing-related firms. Its members own more than 90% of Oregon's private large-owner forestland base. Essentially all of our manufacturing members could be affected by the proposed rulemaking package.

Thank you for the opportunity to comment on DEQ’s proposed revisions to the Oregon Air Quality Permitting rules. OFIC agrees with the goals stated in the rules of clarifying and updating the Oregon air permitting program. However, we believe that such changes must be made carefully and in coordination with the affected stakeholders so as to minimize the possibility of unintended consequences. To the extent that the rules significantly change the structure of the Oregon air program (e.g., Division 224, State Minor New Source Review), we encourage DEQ to hold off on making changes at this time until there can be greater dialog. However, to the extent that there are clear changes that have been vetted with all potentially affected facilities, we encourage DEQ to proceed. However, we believe that there are important changes that should be made. This letter outlines issues of particular importance to Oregon’s forest products companies.

Associated Oregon Industries (AOI) is submitting comments on these matters. OFIC is an AOI member, and we support those comments in their entirety.

In addition to AOI’s comments, OFIC would like to emphasize the following points:

Revisions to Opacity & Grain Loading Requirements

OFIC wishes to express its appreciation for the outreach that DEQ performed to ensure that OFIC’s members were aware of the proposed changes to the grain loading and opacity requirements and DEQ’s willingness to address industry specific concerns. OFIC continues to question the need for the increased stringency that the Department is proposing. We believe that the Department has never shown a true need for these changes. However, we believe that the currently proposed versions of the rule changes are significantly improved over the initial proposals.

Regulation of Greenhouse Gases and Biogenic CO₂

First, let me lead off this comment by noting that the Oregon forest products industry leads the effort for addressing climate change. OFIC’s members are responsible for vast swathes of forestland remaining healthy, productive and growing. Every year these forestlands sequester carbon while also providing carbon neutral fuel and building products that will retain sequestered carbon for decades to come. No single industry is more dedicated than the forest products industry to maintaining low levels of carbon in the atmosphere.

Given all that the forest product industry does to address greenhouse gases (GHGs), OFIC wants to express its disappointment in the Department for pursuing a path in the wake of the Supreme Court decision in UARG v. EPA that defies the law and common sense. In June, the highest court in the land held that EPA’s Tailoring Rule, which required the regulation of GHGs under the PSD program, violates the Clean Air Act (CAA). In July EPA issued guidance stating that it would no longer implement the portion of the Tailoring Rule requiring sources to undergo PSD permitting based on their GHG emissions being over the 250/100,000 ton thresholds. EPA also stated that it would no longer enforce State Implementation Plan (SIP) requirements imposing such a requirement and that it would work with states to implement the Supreme Court decision. DEQ stated in its July re-notice of the proposed rules that it did not consider the Supreme Court to affect Oregon law. However, DEQ did not discuss the fact that it initially requested that the Environmental Quality Commission (EQC) adopt the federal Tailoring Rule specifically in order to make Oregon compliant with the Clean Air Act. DEQ requested that the EQC adopt the rules at issue based on the following explanation:

 This rulemaking is necessary for DEQ to regulate greenhouse gas sources in Oregon and to maintain an EPA-approvable State Implementation Plan--a federally-approved plan detailing how states meet the Clean Air Act requirements. EPA has determined that unless Oregon’s PSD program is modified, Oregon’s SIP would not meet Clean Air Act requirements because it does not address greenhouse gas-emitting sources. Since Oregon did not have greenhouse gas rules adopted by Jan. 2, 2011, EPA, in cooperation with DEQ, imposed a Federal Implementation Plan in Oregon; EPA will issue greenhouse gas PSD permits for facilities in Oregon until DEQ’s rules are adopted, after which EPA may delegate authority to Oregon to implement the federal rules for greenhouse gas PSD permit issuance until EPA approves state rules. Dick Pedersen Memo to EQC (3/31/2011).

As this passage makes clear, DEQ represented to the EQC that the rule changes were necessary for the state of Oregon to be compliant with the federal Clean Air Act and no driver other than federal Clean Air Act compliance was stated. DEQ reiterated this position in the following response to a public comment which was similarly provided to the EQC as a basis for adopting the federal Tailoring Rule into DEQ’s PSD and Title V programs:

“DEQ is required to implement greenhouse gas rules in order to receive approval of the State Implementation Plan and ensure withdrawal of the Federal Implementation Plan. If the federal rules change, EQC can consider revising Oregon’s rules at that time either through a temporary or regular rulemaking.” Attachment B to EQC Rulemaking Proposal, April 20-21, 2011 EQC Meeting, at 35.

Given that the sole reason provided by the Department to the EQC for adoption of the Tailoring Rule was that it was necessary in order to comply with the Clean Air Act, it seems disingenuous for the Department to now state that the Supreme Court’s holding that a portion of those rules violates the Clean Air Act has no bearing or impact on the Oregon program. Given this regulatory and judicial history, OFIC believes that the Department lacks authority to enforce or apply those portions of the Tailoring Rule that the Supreme Court struck down.

OFIC urges the Department to revise its rules to reflect the current status of the law, i.e., to clarify that sources cannot trigger PSD or Title V permitting based solely on their GHG emissions. We request that DEQ issue a temporary rule to implement this fix immediately, followed by a permanent rule to allow long term clarification. Failure to do so will expose small biomass-fired boilers across the state to the overwhelming burdens of PSD analysis without any commensurate environmental benefit.

Definition of “Greenhouse Gases”

OFIC supports the proposed clarification to the definition of “greenhouse gases” firmly establishing that sources’ biogenic CO₂ was not a regulated air pollutant between May 1, 2011 and July 20, 2014.

OFIC strongly objects to the Department proposal to permanently make biogenic CO₂ a regulated air pollutant going forward. The current definition of “greenhouse gas,” which was added to the rules in 2011, states that biogenic CO₂ is not a GHG except to the extent required by federal law. DEQ has proposed to remove this language entirely thus making biogenic CO₂ permanently a GHG in Oregon. This could have substantial potential impact to OFIC members, many of whom rely on biomass for a significant percentage of their fuel. We can think of no reason for the Department to change this rule to force biogenic CO₂ into being a regulated GHG. Policy considerations dictate that DEQ should do everything possible to encourage biomass combustion in order to address climate change concerns. For example, EPA recently issued a guidance document entitled Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production acknowledging that the use of biomass to generate energy is likely always going to be the best available technology for reducing GHGs due to the enormous benefits realized by displacing fossil fuel through the use of carbon-neutral biomass.

OFIC recognizes that the approach to biogenic CO₂ is in flux, just as it was in May 2011 when the EQC adopted the current rule stating that biogenic CO₂ is only regulated as a GHG in Oregon if required by federal law. EPA is actively working on an approach to minimize or eliminate the regulation of biogenic CO₂. For precisely that reason, the Department should maintain the current language saying that biogenic CO₂ is only regulated to the extent required by federal law. The Department should not proceed with the proposed language that would force the regulation of biogenic CO₂ even once EPA adopts its much anticipated accounting framework for biogenic CO₂. DEQ’s proposed revisions would harm the wood products industry and harm the environment.

Definition of Categorically Insignificant--Small Gas Fired

OFIC objects to the Department’s proposed revisions to the categorically insignificant activity category of natural gas and propane equipment less than or equal to 2.0 MMBtu per hour. The Department has proposed language that would prohibit a facility from being able to manage any of its natural gas fired units as categorically insignificant if any single gas-fired piece of equipment anywhere on site is rated at more than 2.0 MMBtu per hour. As a result of this proposed language, a forest products company with a 30 MMBtu per hour natural gas fired boiler would be required to treat a tiny gas-fired comfort heater as a fully regulated emissions source while a 650 MMBtu per hour coal-fired power plant would not. There is no sound policy underlying such a distinction.

In addition, the proposed rule language would require that a source inventory every single gas-fired appliance on site (including water heaters, comfort heaters, cook stoves, decorative fireplaces) in order to determine whether their emissions could conceivably exceed 1 ton per year of any pollutant. This alone is an enormous administrative task regardless of the outcome. If the collective plant-wide emissions could conceivably exceed 1 ton per year, then all of these devices, right down to the smallest hot water heater, would have to be fully permitted and the installation of a new hot water heater would require the Department’s full permitting review. There is no reasonable policy purpose underlying this proposed rule change. The Department has said that the policy driver for this rule change is that if there were enough gas-fired hot water heaters at a plant, they might have the potential to significantly impact air quality. This abstract (and, frankly, ludicrous) concern is not adequate to justify the tremendous permitting burden that would be imposed on sources and the tremendous bureaucratic burden that would be imposed on DEQ in processing the hot water heater construction applications required of these sources. The Department has had this categorically insignificant activity unchanged in its rules for 22 years and we do not see any new development that would justify its revision.

OFIC notes that Oregon’s existing categorically insignificant activity is already substantially more stringent than what is defined as insignificant in Washington. For a source in Washington, any combustion source firing natural gas, butane, propane or LPG is considered insignificant if it is rated at less than 5 MMBtu per hour. No assessment is required under Washington law of how many of these units are on site. Washington’s listing of these units as categorically insignificant was upheld by the Ninth Circuit and so clearly there is a legitimate legal basis for these higher insignificance thresholds.

Definition of Categorically Insignificant--Small Diesel Fired

OFIC similarly objects to the Department’s proposed revisions to the categorically insignificant activity category of distillate, kerosene and gasoline-fired equipment less than or equal to 0.4 MMBtu per hour. The Department has proposed language that would prohibit a facility from being able to manage any of its distillate, kerosene or gasoline-fired units as categorically insignificant if any single piece of liquid fuel-fired equipment anywhere on the mill site is rated at more than 0.4 MMBtu per hour. As a result of this proposed language, a forest products company with a 30 MMBtu per hour natural gas fired boiler with distillate backup in case of curtailment would be required to treat a tiny kerosene-fired comfort heater with next to no emissions as a fully regulated emissions source. Ironically, a 650 MMBtu per hour coal-fired power plant would not need to treat the same tiny kerosene-fired comfort heater as a fully regulated unit. As with the gas-fired units, there is no sound policy underlying such a distinction.

In addition, the proposed rule language would require that a source inventory every single distillate, kerosene and gasoline-fired device on site--no matter how small--in order to determine whether their emissions, in aggregate, could conceivably exceed 1 ton per year of any pollutant. This alone is an enormous administrative task regardless of the outcome. If the aggregate emissions could conceivably exceed 1 ton per year, then all of those devices, right down to the comfort heater in the pipe shop, would have to be fully permitted and the installation or modification of a heater would require the Department’s full permitting review. There is no reasonable policy purpose served by this proposed rule change. The Department has said that the policy driver is that if there were enough distillate, kerosene and gasoline-fired comfort heaters and similar devices at a plant, they might somehow result in a significant impact to air quality. This concern is simply not realistic and is certainly inadequate to justify the tremendous permitting burden that would be imposed on sources and the tremendous bureaucratic burden that would be imposed on DEQ in processing the comfort heater construction applications and inspecting each little heater during compliance inspections. The Department has had this categorically insignificant activity unchanged in its rules for 22 years and we do not see any new development that would justify its revision. The burden placed on the sources and the Department are not justified by any material environmental benefit that DEQ failed to identify 22 years ago when it adopted this provision.

OFIC notes that the existing categorically insignificant activity is already substantially more limited than what is defined as insignificant in Washington. For a source in Washington, any combustion source firing kerosene or distillate is considered insignificant if it is rated at less than 1 MMBtu per hour and this increases to 5 MMBtu per hour for space heaters and hot water heaters. Washington’s listing of these units as categorically insignificant was upheld by the Ninth Circuit and so clearly there is a legitimate legal basis for these higher insignificance thresholds.

Definition of Categorically Insignificant--Oil/Water Separators

OFIC similarly objects to the Department’s proposed revisions to the categorically insignificant activity category of emissions from oil/water separators. The Department has proposed language that would require a facility to begin monitoring emissions from, and seek construction approval for, any oil/water separator at a plant where the throughput of the plant’s effluent treatment system is 400,000 gallons per year or more. Forest products facilities typically have very large plant sites that often include log yards and similar broad expanses. Many are located in areas that receive heavy rainfall. Between log sprinkling water in the summer and storm water in the other months, the effluent treatment systems serving these areas will typically have a throughput of greater than 400,000 gallons per year. The emissions off of an oil/water separator would be attributable to the trace amounts of hydraulic oil or distillate that would make it into the device. The vapor pressure for this organic material would be very low and thus only negligibly volatile. Therefore, emissions would be so low as to be difficult to estimate. However, the Department’s proposed revisions would make these oil/water separators subject to full monitoring and reporting requirements, including the requirement to track their emissions as part of the mill’s emissions inventory. Furthermore, the plant would have to seek, and the Department would have to approve, any installation of an additional oil/water separator or a modification to an existing oil/water separator. Such an outcome is meritless. We have been unable to obtain from the Department any justification for what significant environmental harm is being addressed by the requirement that a source obtain construction approval from the air division before installing an oil/water separator or how the environment will be protected by requiring that same source to track and report the ounces per year (if that) of volatile emissions from that same separator. We request that the Department drop this revision from the final rules proposed to the EQC.

Definition of “Adjacent”

OFIC requests that the Department use this opening of OAR 340-200-0020 to incorporate the recent holdings of the Sixth Circuit and the D.C. Circuit into the Oregon regulations defining the term “adjacent.” In 2012, the Sixth Circuit rejected EPA’s position that a determination of whether two facilities are “adjacent” rides in material part on whether those facilities are interdependent. Instead, the Sixth Circuit held that it was unreasonable to read the term “adjacent” to refer to interdependence as opposed to simply physical proximity. Summit Petroleum v. EPA, 690 F.3d 733 (6th Cir. 2012). EPA subsequently issued guidance saying that the Summit Petroleum holding was limited to the states in the 6th Circuit. This guidance was challenged to the D.C. Circuit which held in May of this year that the Sixth Circuit’s decision applied nationally and that EPA cannot direct otherwise (“EPA was obligated to respond to the Summit Petroleum decision in a manner that eliminated regional inconsistency, not preserved it.”). National Environmental Development Associations v. EPA.

Consistent with these two decisions, we urge the Department to revise its definition of “adjacent” to read “two facilities that are nearby each other” and to eliminate the suggestion that interdependence is an appropriate criterion for evaluating adjacency. When DEQ porposed the current definition of “adjacent” in 2001, the agency stated:

 The proposed rules include a definition that relates adjacent to the location and interrelationship of facilities. The definition of adjacent will save the Department time when determining whether two facilities constitute one or two sources. The Department’s definition of adjacent is intended to be equal to the Environmental Protection Agency’s guidance on this issue. DEQ Public Notice Document, Jan. 26, 2001 (emphasis added).

Given that the Department represented to the EQC and the public that the intent of the definition was to make it consistent with EPA’s guidance, and EPA’s guidance has been soundly rejected by the courts, DEQ should revise its definition of “adjacent” accordingly.

Emission Unit Specific Netting Basis

OFIC is concerned that DEQ is proposing an unworkable change to the definition of “major modification” moved out of OAR 340-200-0020 and into OAR 340-224-0025. The proposed changes to the definition require that as part of the process of determining whether a major modification has occurred, the source “subtract the unit’s portion of the netting basis from its post-change potential to emit...” This new language wrongly assumes that a source is able to identify the portion of the netting basis that is specific to each emission unit.

OFIC members have typically been in existence since prior to 1978 and so hold baseline and netting basis. This netting basis derives from the baseline emission rates documented and agreed to between the Department and the source as far back as 30 years ago. While the netting basis is clearly carried in the permit and review report, there is often no record of how the netting basis is assigned on an emission unit specific basis. Therefore, the calculation that DEQ is proposing to require, cannot be performed.

OFIC is also greatly concerned that the proposed language significantly increases the stringency of the definition of “major modification.” The current rule language says that a source “must account for all accumulated increases in actual emissions due to physical changes or changes in method of operation occurring at the source since the applicable baseline period…” DEQ seeks to effectively write this highlighted language out of the rule by saying that for existing equipment modified since the baseline period that source must be judged not by the increase “due to” the physical change or change in method of operation, but, rather, the increase between netting basis and potential to emit of any unit that is changed. This proposed language is intended to greatly increase the emissions attributable to a physical change by shifting the comparison from the emissions increase arising from the actual change to the emissions difference between the post-change potential to emit and what the unit was emitting in the baseline period (typically 1978). Even if a source could identify the emission unit specific portion of the netting basis, this comparison distorts the clear language of the existing rule. The proposal is a substantial increase in stringency that could severely impact Oregon’s forest products industry. Notwithstanding this fact, DEQ is presenting the rule as clarification that has no commensurate change in stringency. We object to this characterization by DEQ as misleading and object to the proposed language as an inappropriate increase in stringency that is not possible to implement.

Designation of Sustainment Areas

As noted at the outset of this letter, OFIC is greatly concerned about the substantial increase in complexity that DEQ is introducing to the new source review regulations. OFIC believes that if the proposed revisions are adopted, Oregon will have the most complicated new source review regulations in the country. We do not believe that these have been well vetted with the regulatory community in a detailed manner that would allow for meaningful dialog. Until that occurs, we strongly recommend that the Department not proceed with its proposed revisions to Division 224.

Among the many radical changes to Oregon’s established regulatory structure is the addition of so-called “Sustainment” areas to both the major and minor New Source Review rules. OFIC urges the Department to not complicate the Oregon regulatory structure with the addition of Sustainment Areas, a concept that has no basis in the federal program or any other state program of which we are aware. What DEQ is proposing to do will change areas that have never been determined by EPA to be nonattainment into employment pariahs. As proposed in OAR 340-224-0045, a major new source seeking to locate in a designated Sustainment Area--i.e., an area that has never been designated as nonattainment--would have to comply with all the extremely stringent PSD permitting requirements plus demonstrate a net air quality benefit. “Net air quality benefit” is a penalty imposed on sources wanting to locate in designated nonattainment areas. We note that no source has ever been able to meet Oregon’s unique requirements for demonstrating a net air quality benefit absent a legislatively mandated alternative process that most facilities are not eligible to utilize. Therefore, this new Sustainment Area designation and the proposed set of unprecedented regulatory requirements will make it difficult to impossible for these areas to attract or expand business and, therefore, employment. Ironically, Lakeview, the one area that DEQ proposes to designate as a Sustainment Area, is a poster child for why DEQ should not be adopting these rules. Lakeview’s air quality challenges are driven by wood stove smoke and no amount of additional regulation could change the town’s air quality status. Yet the only way to attract natural gas to the town or to improve employment so that people can afford to replace their wood stoves with newer low emitting models is if employment can expand. Therefore, DEQ’s Sustainment proposal is likely to be the very thing that makes it impossible for the town to actually improve its air quality.

In addition, since February 2013, the Town of Lakeview, Lake County, and DEQ have been actively engaged in US EPA’s PM Advance Program thereby hopefully eliminating the need for the Sustainment Area concept to be applied to Lakeview. The PM Advance Program is a voluntary program whereby local jurisdictions in geographies like Lakeview that have exceeded either the daily or annual National Ambient Air Quality Standards (NAAQS) for fine particulate can request EPA to allow the local jurisdiction and the State regulatory entity to develop a fine particulate emissions reduction plan with the objective being to achieve compliance with the fine particulate NAAQS within a five year period.

The Lakeview PM Advance Plan is nearly complete. After the adoption of new air ordinances by both the Town of Lakeview and Lake County, DEQ will be submitting the final Lakeview PM Advance Plan to US EPA Region X. One of the first fine particulate emission reduction activities that will be completed is scheduled to begin in the first quarter of 2015. The South Central Oregon Economic Development District will be administering a project whereby seven hundred fifty thousand dollars ($750,000) of Oregon Lottery dollars acquired by the Governor’s Regional Solutions Team will be used to replace non-certified woodstoves and complete home weatherization improvements. The adoption of new ordinances and this initial wave of woodstove change-outs and home weatherization projects are just the first fine particulate emission reduction strategies to be implemented. But, these efforts will be followed by other emission reduction strategies over the next five years without DEQ imposing any additional regulations. If the Lakeview PM Advance Plan is successfully implemented and other jurisdictions utilize the PM Advance option, there is no need for DEQ to be imposing additional regulations by way of establishing a “Sustainment Area” designation for the Lakeview area or any other local jurisdiction.

OFIC does not object to the concepts underlying the proposed Reattainment Area rules. However, we are greatly concerned about the additional complexity that the Department’s approach entails. We agree that the current PSEL rule (OAR 340-222-0041(3)(b)(A)) should be revised so that minor sources are not required to demonstrate a net air quality benefit as a condition to increase their PSEL by a significant emission rate or more above netting basis. As noted above, it has been shown that this demonstration is extraordinarily difficult to impossible to make (and we are not confident that the changes proposed as part of this rulemaking change that problem). However, we believe that a much simpler means of achieving that same goal is to amend OAR 340-222-0041(3)(b)(A) to read “…the applicant must obtain offsets and demonstrate a net air quality benefit in accordance with OAR 340-225-0090 or demonstrate that the impacts are less than the significant impact levels at all receptors within the sustainment area.” We do not believe that there is any need to create a whole new section of the regulations to accomplish this relatively straightforward improvement. We support retaining the PSEL rule as it currently is structured with this improvement. That is simpler than the Department’s creation of pages of new rules and relies upon a tried and true regulatory mechanism.

Thank you for your consideration of OFIC’s comments. We recognize that developing a rulemaking package of this enormous magnitude is a challenge and we hope that these comments assist in deciding what language is ultimately presented to the EQC for adoption and what language is held back for further stakeholder discussion. We also hope that in the future DEQ will choose to involve stakeholders such as OFIC’s members in the development of the rules from the outset rather than presenting large swaths of regulatory language after the Department has finished its deliberations. We believe that a much better product can result from a more collaborative process.

Please do not hesitate to call me at (503) 586-1245 if you have any questions about these comments.

Sincerely,

Lincoln Cannon

Director, Forest Resources & Taxation

Oregon Forest Industries Council

PO Box 12826

Salem, Oregon 97309