Adopted Sections 
 An agency may take final action on a section 30 days after a proposal has been 
published in the Texas Register. The section becomes effective 20 days after the 
agency files the correct document with the Texas Register, unless a later date 
is specified or unless a federal statute or regulation requires implementation 
of the action on shorter notice. 
 If an agency adopts the section without any changes to the proposed text, only 
the preamble of the notice and statement of legal authority will be published. 
If an agency adopts the section with changes to the proposed text, the proposal 
will be republished with the changes. 
 
   
  TITLE 7. BANKING AND SECURITIES 
 Part I. State Finance Commission 
  Chapter 3. Banking Section 
  
  Subchapter A. Securities Activities and Subsidiaries 
 
  7 TAC sec.3.7 
 
  The Finance Commission of Texas adopts an amendment to  sec.3.7, without 
changes to the proposed text as published in the September 4, 1992, issue of the 
Texas Register  (17 TexReg 6079). 
 This amendment is proposed to correct a typographical error in the existing 
rule. The Finance Commission is empowered to promulgate rules regarding the 
operations of bank subsidiary corporations under the Texas Banking Code, Article 
342-513. 
 The rule allows bank subsidiary corporations to engage in those activities in 
which a bank holding company may engage under federal law. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under the Texas Banking Code, Article 342-513, which 
provides the Finance Commission with the authority to promulgate general rules 
and regulations not inconsistent with the constitution and statutes of Texas. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 23, 1993. 
 TRD-9319471 
  Ann Graham 
 General Counsel 
 Department of Banking 
    Effective date: March 17, 1993 
 Proposal publication date: September 4, 1992 
 For further information, please call: (512) 475-1300 
         
               
  TITLE 22. EXAMINING BOARDS 
 Part I. Texas Board of Architectural Examiners 
  Chapter 3. Landscape Architects 
  
  Subchapter C. Written Examinations 
 
  22 TAC sec.3.46 
 
  The Texas Board of Architectural Examiners adopts an amendment to sec.3.46, 
concerning scoring, without changes to the proposed text as published in the 
December 25, 1992, issue of the  Texas Register (17 TexReg 9067). 
 This amendment is necessary to comply with a contractural agent of exam 
security for purchase and grading the national exam used in the registration 
process. 
 This amendment will delete the provision that allowed reproduction of the 
graphic performance problems. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under Texas Civil Statutes, Article 249c, which 
provide the Texas Board of Architectural Examiners with the authority to 
promulgate rules. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319561 
  Robert H. Norris 
 Executive Director 
 Texas Board of Architectural Examiners 
    Effective date: March 19, 1993 
 Proposal publication date: December 25, 1992 
 For further information, please call: (512) 458-1363 
         
           Chapter 5. Interior Designers 
  
  Subchapter B. Registration 
 
  22 TAC sec.5.31 
 
  The Texas Board of Architectural Examiners adopts an amendment to sec.5.31, 
concerning the registration of applicants, without changes to the proposed text 
as published in the December 25, 1992, issue of the Texas Register  (17 TexReg 
9067). 
 The amendment is necessary in order to explain subsection (a) regarding 
requisite qualifications for registration. 
 The amendment will function to clarify the requirements and more fully describe 
the qualifications under this subsection. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under Texas Civil Statutes, Article 249e, which 
provide the Texas Board of Architectural Examiners with the authority to 
promulgate rules. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 25, 1993. 
 TRD-9319518 
  Robert H. Norris 
 Executive Director 
 Texas Board of Architectural Examiners 
    Effective date: March 18, 1993 
 Proposal publication date: December 25, 1992 
 For further information, please call: (512) 458-1363 
         
             Part XXI. Texas State Board of Examiners of Psychologists 
  Chapter 461. General Rulings 
  
  22 TAC sec.461.14 
 
  The Texas State Board of Examiners of Psychologists adopts an amendment to 
sec.461.14, concerning conflict between state and federal laws, with changes to 
the proposed text as published in the October 27, 1992, issue of the Texas 
Register (17 TexReg 7572). 
 The Board determined that clarification was needed to clarify that in the event 
of a conflict between the Board's rules and Ethical Principles, the Board's 
rules control. 
 The amendment will clarify to the public which rules or statutes apply in the 
case of a conflict. 
 Section 2c of the Psychologists' Certification and Licensing Act states that 
"the practice of psychology is based...on the standards of ethics established by 
the profession." Consumers of psychology in the State of Texas are better served 
when psychologists follow the ethical principles of the professional rather than 
the rulings of a specific board. 
 Jeannerret and Associates, Inc. commented against the amendment. 
 The ethical principles are in the process of becoming a part of the Board's 
rules. The Board reviewed the Ethical Code of the American Psychological 
Association and will adopt it as a Board Rule with two changes. The Board felt 
that these changes better serve the consumers of psychological services and 
therefore wanted their rule to take precedence over the national ethics code. 
 The amendment is adopted under Texas Civil Statutes, Article 4512c, which 
provide the Texas State Board of Examiners of Psychologists with the authority 
to make all rules not inconsistent with the Constitution and laws of this State, 
which are reasonably necessary for the proper performance of its duties and 
regulations of proceedings before it. 
 
 
  sec.461.14. Conflict between State and Federal Laws.  In the event of conflict 
among state or federal statutes of psychologists and Board Rules, state or 
federal statute(s) control. In the event of conflict between Board Rules and the 
Ethical Principles of Psychologists, the Board's Rules control. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319517 
  Patricia S. Tweedy 
 Executive Director 
 Texas State Board of Examiners of Psychologists 
    Effective date: March 18, 1993 
 Proposal publication date: October 27, 1992 
 For further information, please call: (512) 835-2036 
         
           Chapter 463. Applications 
  
  22 TAC sec.463.6 
 
  The Texas State Board of Examiners of Psychologists adopts an amendment to 
sec.463.6 concerning experience, with changes to the proposed text as published 
in the October 27, 1992, issue of the Texas Register (17 TexReg 7572). 
 The amendment is needed in order to clarify that the Board requires two full 
time equivalent psychologists and interns to be on staff; clarify how consortia 
may be created in order to be acceptable to the Board; and clarify the status of 
persons under the supervision of a psychologist under an Agreed Order or Order 
of the Board. 
 The amendment will clarify the Board's requirements for licensure so that 
potential applicants will place themselves in appropriate work settings to 
obtain experience that will be acceptable to the Board. 
 There was concern that the requirement of a minimum of two full-time equivalent 
psychologists, two full-time equivalent interns, and one half-time psychologist 
be on staff would eliminate many programs as viable internship settings for 
industrial/organizational psychologists. 
 Jeannerret and Associates, Inc. commented against the amendment. 
 Paragraph (11)(C) specifically exempts individuals enrolled in an 
industrial/organizational doctoral degree program from this requirement. 
 The amendment is adopted under Texas Civil Statutes, Article 4512c which 
provide the Texas State Board of Examiners of Psychologists with the authority 
to make all rules not inconsistent with the Constitution and laws of this State, 
which are reasonably necessary for the proper performance of its duties and 
regulations of proceedings before it. 
 
 
  sec.463.6. Experience.  Supervision may be obtained only in a full-time or 
half-time setting. 
 
  (1)-(10) (No change.) 
   
  (11) For applications for licensure received after August 31, 1995, the one 
year of pre-doctoral experience must be an internship certified by the Director 
of internship training and must be satisfied by either: 
 
  (A) (No change.) 
   
  (B) the successful completion of an organized internship meeting the following 
criteria: 
 
  (i) (No change.) 
   
  (ii) the internship agency had a clearly designated staff psychologist who was 
responsible for the integrity and quality of the training program and who was 
actively licensed/certified by the State Board of Examiners in Psychology and 
present at the training facility for a minimum of 20 hours a week; 
   
  (iii) the internship agency had two or more full-time equivalent psychologists 
on the staff as primary supervisors, at least one of whom was actively licensed 
as a psychologists by the State Board of Examiners in Psychology; 
   
  (iv)-(viii) (No change.) 
   
  (ix) the internship agency had a minimum of two full-time equivalent interns 
at the internship level of training during applicant's training period; 
   
  (x) the internship level psychology trainees have title such as "intern," 
"resident," fellow," or other designation of trainee status; 
   
  (xi)-(xii) (No change.) 
   
  (xiii) consortia may be created if they follow the guidelines of the current 
American Psychological Association Committee on Accreditation Handbook. 
     
  (C) (No change.) 
     
  (12) All applicants obtaining experience for the purpose of certification and 
licensure must adhere to the Board's supervision guidelines currently in effect 
in sec.465.18 of this title (relating to Time Period for Appealing a Decision) 
regardless of setting. 
   
  (13) Experience received from a psychologist who is simultaneous under an 
Agreed Order or Order of the Board does not qualify for licensure consideration, 
regardless of setting. The psychologist must inform all supervisees of the 
Agreed Order or Order and assist his/her supervisees in finding appropriate 
alternate supervision. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319515 
  Patricia S. Tweedy 
 Executive Director 
 Texas State Board of Examiners of Psychologists 
    Effective date: March 18, 1993 
 Proposal publication date: October 27, 1992 
 For further information, please call: (512) 835-2036 
         
           
  22 TAC sec.463.14 
 
  The Texas State Board of Examiners of Psychologists adopts an amendment to 
sec.463.14 concerning cutoff scores, without changes to the proposed text as 
published in the October 27, 1992, issue of the Texas Register  (17 TexReg 
7574). 
 The amendment sets the cutoff scores for both the Examination for the 
Professional Practice of Psychology and Board Jurisprudence Examination. 
 The amendment informs the public and applicants of the minimum acceptable 
scores for the Examination for the Professional Practice of Psychology and 
Jursiprudence Examination for doctoral and masters level applicants. 
 Comment was received that using a specified percentage correct without regard 
to the psychometrics or the content domain sampling structure of the specific 
test is inappropriate; and that there is no empirical or rational basis for the 
use of 70% as the minimum passing score, other than the argument of "tradition." 
 Jeannerret and Associates, Inc. commented against the amendment. 
 At the Annual Meeting of the Association of State and Provincial Psychology 
Boards, the delegates voted to recommend a uniform pass point of 140 (70% of 200 
items) for the Examination for the Professional Practice of Psychology. 
 The amendment is adopted under Texas Civil Statutes, Article 4512c, which 
provide the Texas State Board of Examiners of Psychologists with the authority 
to make all rules not inconsistent with the Constitution and laws of this State, 
which are reasonably necessary for the proper performance of its duties and 
regulations of proceedings before it. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319516 
  Patricia S. Tweedy 
 Executive Director 
 Texas State Board of Examiners of Psychologists 
    Effective date: March 18, 1993 
 Proposal publication date: October 27, 1992 
 For further information, please call: (512) 835-2036 
         
             
  TITLE 28. INSURANCE 
 PART I. Texas Department of Insurance 
  Chapter 5. Property and Casualty Insurance 
  
  Subchapter C. Texas Medical Liability Insurance Underwriting Association 
 
  28 TAC sec.sec.5.2001-5.2004 
 
  The State Board of Insurance of the Texas Department of Insurance adopts 
amendments to sec.sec.5.2001-52004, concerning membership in, and meeting of, 
the Texas Medical Liability Insurance Underwriting Association, without changes 
to the proposed text as published in the September 4, 1992, issue of the Texas 
Register (17 TexReg 6093). 
 The amendments are necessary to conform the plan of operation of the 
association with legislation which amended the Insurance Code, Article 21.49-3. 
This litigation changed the composition of the board of directors and the timing 
of its election. The rules conform the timing of the annual meeting of the 
association with the election and selection of board members. The amendments are 
further designed to make the plan of operation clear in its meaning and to 
improve the administration of the association. 
 The amendment to sec.5.2001(b)(6) and sec.5.2002(a) is to clarify that the 
writing of either automobile liability, or liability other than automobile 
insurance, not both, makes an insurer a member. The amendment to sec.5.2002(c) 
(2)(A) is to conform the plan of operation to changes enacted by the Texas 
Legislature, House Bill 2, 72nd Legislature (1991). The amendment to sec.5. 
2003(b)(2) allows the investment of the association's funds in bonds of the 
United States of America. This amendment corrects an oversight in the writing of 
the original plan of operation, which prevented the association from investing 
in United States government bonds. Such investment would allow the association 
to take advantage of long term interest rates during periods when an interest 
rate advantage exists. The amendment to sec.5.2003(d)(3)(A) more clearly 
describes and limits the maximum aggregate assessment per policyholder. This is 
consistent with previous interpretations used by the association and the Texas 
Department of Insurance. Earned premium is a more accurate measurement of annual 
premium, and, by citing calendar year, matches the statutory reporting period of 
the association. The amendment to sec.5.2004(a)(4) (C)(vi) makes the rule 
applicable to any health care professional with hospital staff privileges, 
regardless of his or her speciality. The amendment to sec.5.2004(a)(4)(C)(vii) 
and sec.5.2004(a)(4)(D) makes the rule applicable to any allied health care 
professional with hospital staff privileges, regardless of specialty, and also 
makes the rule applicable to independent contractors as well as employees. The 
amendment to sec.5.2004(b)(4)(iii) clarifies that the personnel utilized by the 
association in conjunction with insurance matters such as underwriting are 
authorized representatives, not licensed insurance agents. 
 No comments were received regarding adoption of the amendments. 
 The amendments to the plan of operation are adopted under the Insurance Code, 
Articles 21.49-3 and 1.04, and Texas Civil Statutes, Article 6252-13a, sec.4 and 
sec.5. The Insurance Code, Article 21.49-3, sec.3(c), authorizes the State Board 
of Insurance to promulgate a plan of operation of the Texas Medical Liability 
Insurance Underwriting Association. Article 1.04(b) authorizes the State Board 
of Insurance to determine rules and regulations in accordance with the laws of 
this state for uniform application. Texas Civil Statutes, Article 6252-13a, 
sec.4 and sec.5 authorize and require each state agency to adopt rules of 
practice setting forth the nature and requirement of available procedures, and 
prescribe the procedures for adoption of rules by a state administrative agency. 
The proposed amendments affect regulation of the Texas Medical Liability 
Insurance Underwriting Association through the promulgation of a plan of 
operation under the Insurance Code, Article 21.49-3. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 25, 1993. 
 TRD-9319532 
  Linda K. von Quintus-Dorn 
 Chief Clerk 
 Texas Department of Insurance 
    Effective date: March 18, 1993 
 Proposal publication date: September 4, 1992 
 For further information, please call: (512) 463-6327 
         
               
  TITLE 31. NATURAL RESOURCES AND CONSERVATION 
 Part III. Texas Air Control Board 
  Chapter 101. General Rules 
  
  31 TAC sec.101.1, sec.101.29 
 
  The Texas Air Control Board (TACB) adopts an amendment to sec.101.1, 
concerning Definitions, and a new sec.101.29, concerning Emissions Banking, with 
changes to the proposed text as published in the September 11, 1992, issue of 
the Texas Register (17 TexReg 6259). The revisions to sec.101.1 were made in 
response to the need for an emissions banking program which has intensified with 
the more stringent new source review (NSR) requirements for new and modified 
sources in ozone nonattainment areas. The NSR rules were mandated by Title I of 
the 1990 Federal Clean Air Act (FCAA) Amendments, and their effective date was 
November 15, 1992. The amendments are intended to be in effect as soon as 
possible after that date and will apply only to designated ozone nonattainment 
areas within Texas. 
 The amendments to sec.101.1 add three new definitions to support the banking 
rule, add one new definition for "stationary source," and modify two other 
existing definitions for consistency with NSR requirements of the FCAA. The new 
sec.101.29 establishes an emissions banking program to support the emissions 
offset provisions in the FCAA. 
 Public hearings were held in Houston and in Beaumont on September 30, 1992; in 
El Paso on October 7, 1992; in Arlington on October 8, 1992; and in Austin on 
October 22, 1992, to consider the proposal. Testimony was received from 78 
commenters during the comment period which ended on October 30, 1992. The 
following discussion initially addresses the more general comments and then 
addresses the comments which deal with specific definitions in sec.101.1 and 
subsections of the new sec.101.29. 
 A major issue raised in the public testimony was whether or not the banking 
proposal should be adopted or rejected. The numerous and varied comments fell 
into three basic categories. The first category, commenters who favored 
adoption, included industry and the nonattainment area economic organizations 
charged with attracting new business to the area. The second category, 
commenters who opposed adoption, included the environmental watch groups and 
individuals affiliated with those watch groups. The third category included 
commenters who felt that an emissions bank is inevitable and, therefore, wanted 
a banking program which was as good as possible. The United States Environmental 
Protection Agency (EPA), supported the emissions banking proposal and stated 
that with Texas' adoption of revised NSR rules, as required by the FCAA, more 
sources are expected to fall under the nonattainment NSR program. New or 
modified sources will need to obtain emissions reductions from existing sources 
to offset their projected emissions increases. EPA stated that a banking program 
helps companies locate potential sources of offsets, thus helping them to meet 
the requirements of the revised NSR provisions. EPA, therefore, supported Texas' 
efforts to develop offset banking programs. 
 Economic development organizations strongly supported the emissions banking 
proposal, although, some entities recommended changes. The Greater Houston 
Partnership (Partnership), Greater Fort Bend Economic Development Council (Fort 
Bend EDC), Destec Energy (Destec), City of Missouri City (Missouri City), and 
City of Houston (Houston) supported the establishment of an emissions banking 
program. Since the TACB promulgated regulations earlier this year implementing 
the federal requirements which place further restrictions on new source 
construction and modifications to existing sources, these commenters recommended 
that the proposed banking rule be implemented as soon as practicable and with 
the greatest degree of flexibility possible to allow the nonattainment areas to 
attract new industry while meeting the goals of the federal and state clean air 
acts. Missouri City asked that the implementation of those regulations go 
forward in the most expedient and cost-effective manner. Houston supported the 
banking proposal as an essential step in bringing marketplace forces to bear in 
addressing the air quality problems in their nonattainment region. 
 Industry representatives strongly supported the emissions banking proposal, 
although, some companies recommended changes. The Dow Chemical Company, Texas 
Operations (Dow); Texas Mid-Continent Oil and Gas Association (TMOGA); Star 
Enterprise (Star); Texas Utilities Services, Inc.; ENTEX Gas; Enterprise 
Products Company (Enterprise); Texas Instruments (TI); Vought Aircraft Company 
(Vought); Amoco Oil Company, Texas City refinery (Amoco); ISK Biotech (Biotech) 
; Houston Lighting & Power (HL&P); Monsanto Corporation (Monsanto); Gulf States 
Utilities Company (GSU); and El Paso Refinery strongly supported the 
implementation of effective emissions banking rules as an essential element in 
the process of attaining the ozone air quality standard while preserving the 
economic viability of the ozone nonattainment areas. Dow recommended that the 
TACB develop and implement more comprehensive banking rules than the limited-
scope proposed rule to address, among other issues, the important need to 
include all emission reduction credits (ERC) in the TACB attainment 
demonstrations, whether the ERCs are saved in a formal or informal bank, and 
options regarding the lifetime of offset ERCs. Star stated that the proposal is 
consistent with other types of considerations like the marketable permits 
programs being considered in California and other states. 
 Enterprise stated that they will be directly and substantially impacted by the 
TACB implementation of the FCAA provisions, particularly those provisions which 
will require emissions offsets or netting for the construction of new and 
expanded facilities. Enterprise stated that they foresee continued growth of 
their business in large part due to the demand for clean fuels that are required 
to meet federal air quality milestones. Amoco complimented the TACB for 
developing a rule which creates market-based incentives for emissions 
reductions. El Paso Refinery stated that it is good to see some of the 
environmental regulations moving toward giving industry a target, in other 
words, an emission limit to meet, and then allowing industry flexibility in how 
to meet that limit. 
 There was one organization which did not give a firm stand about approval or 
rejection of this proposal. The San Jacinto Area American Lung Association (San 
Jacinto ALA) believed that the emissions banking rule would not result in a 
significant step forward in its efforts to reduce the levels of air pollution in 
nonattainment areas of the state or to protect Texas residents from the adverse 
health effects of exposure to air pollutants. The commenter stated, however, 
that because the establishment of such a program is allowed in the FCAA and 
because this proposed program has such strong appeal to the business community 
of the state at this time, it seemed clear that the TACB will go forward with 
it. 
 Most of the environment watch groups or special interests groups, and 
individuals are strongly opposed to the rule. The Golden Triangle Group of the 
Sierra Club (Golden Triangle Sierra), Clean Air & Water, Inc. (CA&W), Texas 
Campaign for the Environment (Texas Campaign), and 19 individuals requested that 
the TACB reject the emissions banking proposal. Texas Campaign requested that 
the TACB return the grant money awarded by the EPA to the Marketable Permits 
Advisory Committee (MPAC). One individual stated that if industry favors this 
banking proposal so much, the TACB methodology should be questioned. Another 
individual requested that the TACB reject emissions banking even if there were 
safeguards to prevent abuses. 
 As stated in the preamble and by numerous commenters, Texas' adoption of 
revised NSR rules was required by the 1990 FCAA Amendments and will cause more 
sources to fall under the nonattainment NSR permit review. Those new or modified 
sources will need to obtain emissions reductions from existing sources to offset 
their projected emissions increases. This banking program will help companies 
locate potential sources of offsets, thus assisting them in meeting the 
requirements of the revised NSR provisions. This rule is an essential element in 
the process of attaining the ozone air quality standard while preserving the 
economic viability of the ozone nonattainment areas. It is a mechanism which 
will allow flexibility in addressing Title I of the FCAA Amendments for ozone 
nonattainment areas in Texas and is consistent with banking programs which are 
already established in several states. Furthermore, the bank provides reduction 
incentives by enhancing a facility's ability to market its reduction credits. 
The concept of emissions credit banking is not a new idea, as there have been 
banking programs in other states for the past 10 years. The bank provides an 
administrative mechanism to assist sources in identifying available credits for 
use as offsets. The bank will provide a mechanism that would simplify the 
transaction process by having the TACB pre-approve the reductions which are 
inherent to the permitting process in nonattainment areas. 
 There were several commenters who responded to various aspects of the role of 
the TACB MPAC and the purpose of the proposal. The Partnership stated that 
substantial confusion exists concerning the role of the MPAC and the banking 
rule. The Partnership stated that the proposed rule is merely an administrative 
mechanism to assist sources in identifying available credits for use as offsets, 
no more, no less. Further, the Partnership stated that many of the critics of 
the banking program believe the rule is creating a marketable permit system and 
is an attempt to circumvent the work of the MPAC. The Partnership believes that 
these charges are untrue and misrepresent the work of the MPAC, especially in 
light of current permitting rules which allow a source in the Houston area to 
reach agreement with another source in the nonattainment area to provide 
offsets. The banking rule neither inhibits nor encourages this practice. The 
bank will merely provide an administrative mechanism that would simplify the 
transaction process by having the TACB pre-approve the reductions. Meanwhile, 
the MPAC has selected four specific projects to develop over the next several 
months to include a nitrogen oxide (NO  [sub]x) Reasonably Available Control 
Technology (RACT) trading program, a clean air trust fund, an old vehicle 
scrappage program, and alternative fuel conversions for motor vehicles. The 
Partnership stated that the MPAC continues to pursue these programs and its work 
will be unaffected by the banking rule. 
 Allen Beinke, Jenkens & Gilchrist (Beinke) stated that they have been 
participating in the MPAC meetings for the last few months. Beinke stated this 
task force has been focusing on the nature of the administrative body that would 
have control over the Clean Air Trust Fund. Beinke was very impressed with the 
efforts of the TACB staff to develop an emission reduction credit and banking 
program that will benefit both the environment and the economic climate in 
Texas. 
 The Lone Star Chapter of the Sierra Club (Lone Star Sierra) stated that they 
are not really against emission banking, because they are participating in the 
marketable permit study, but that this proposal "hijacks" the MPAC work. The El 
Paso Group of the Sierra Club (El Paso Sierra) stated that they were not 
completely opposed to an emissions banking program, but that the rule is a very 
simplistic approach for emission banking. El Paso Sierra believed that the TACB 
should allow the MPAC, which the board established in the summer of 1992, to 
study the issues and to make its recommendations prior to approval of any plan. 
 The Galveston-Houston Association for Smog Prevention (GHASP) stated that they 
were totally against the banking rule because the MPAC study was currently 
determining the need for a banking system and this rule would undermine the 
study. GHASP felt that the banking rule has prejudiced the outcome of the study 
by answering the question before any research has been done. GHASP stated that 
the public participation, which was gathered by the MPAC on August 12, 1992, was 
for show only and the TACB had broken a bond with the public by letting the 
staff actions tell the public that the TACB does not want to hear what the 
public has to say or seriously consider their input. GHASP finally stated that 
if the TACB adopts the rule, then the TACB should return the MPAC grant money to 
EPA and apologize for deceiving the public about their ability to influence the 
TACB actions. GHASP felt that the TACB is bowing to pressure from industry and 
the Partnership to give industry a break, while the citizens will be required to 
contribute almost the entire 15% volatile organic compound (VOC) reductions 
through the vehicle inspection and maintenance program. 
 As stated by the Partnership, the MPAC has been working on many other aspects 
of the marketable permits concept, such as a NO [sub]x RACT trading program, a 
clean air trust fund, an old vehicle scrappage program, and alternative fuel 
conversions for motor vehicles. The MPAC will continue to pursue these programs 
and its work will be unaffected by the banking rule. The MPAC will also review 
and make improvements to this rule after it has been in operation for a period 
of time. The TACB disagrees with the other commenters who felt that public 
participation in the marketable permits process, which was gathered on August 
12, 1992, was for show only and that the TACB had broken a bond with the public 
by letting the staff actions tell the public that the TACB does not want to hear 
what the public has to say or seriously consider their input. Any public comment 
is valid and will be seriously considered in the rulemaking process. In 
addition, all public comments have been shared with the MPAC so that they are 
analyzed in both the marketable permits and the banking review processes. The 
banking rule is a key ingredient in a marketable permits program and has been 
utilized in other states. It provides a market-based incentive for emissions 
reductions supported by EPA, the FCAA Amendments, and the Governor of Texas; it 
supports progress toward attainment of the National Ambient Air Quality 
Standards (NAAQS); and it allows the economic entities in each nonattainment 
area to attract industry even with the more stringent NSR rules. 
 A sub-issue of the adopt-or-reject issue was that of rewriting the proposal to 
focus on the cleanup of the air and opposition to the idea of selling pollution 
credits. All comments regarding this sub-issue were received from environmental 
watch groups and individuals. The Coalition Advocating a Safe Environment (CASE) 
and one individual stated that the FCAA was written with the intent of being 
strict to protect people from hazardous air. The Galveston Regional Group of the 
Sierra Club (Galveston Sierra), Golden Triangle Sierra, El Paso Sierra, and 21 
individuals requested that the TACB rewrite the proposal to focus on cleaning 
our air, not continued pollution. The Red River Chapter of the Sierra Club (Red 
River Sierra) requested that the TACB develop an integrated and far-sighted 
policy for encouraging companies to clean up their pollution as soon as 
possible. Texas Campaign and an individual stated that the TACB's responsibility 
is to the people of Texas, not to the industry of Texas. American Lung 
Association of Houston (Houston ALA) stated that the FCAA requires that 
nonattainment areas achieve the national air quality standards as expeditiously 
as practicable, which means the attainment deadlines are an outer limit rather 
than a minimum time frame. Houston ALA also recommended that the state only 
credit those emissions reductions that would have already occurred under the 
FCAA, i.e., reductions that are permanent and verifiable. 
 One individual stated that the citizens in nonattainment areas deserve clean 
air, because they do not have personal choices over the air they breathe other 
than to move out of the area. Another individual requested a complete revamping 
of the TACB program concerning air pollution from every source. The individual 
requested the TACB to get back to a zero base, rather than adding more 
convoluted regulations. 
 Red River Sierra requested the rejection of the industry-initiated proposal to 
set up a market system for pollution rights. Galveston Sierra asserted that it 
is sheer negligence on the part of the state and its regulatory agencies to 
accept, in a state statute, that any such right to pollute ever has, should now, 
or ever will exist. CA&W, Texas Campaign, GHASP, and several of the individual 
commenters stated that the TACB should not approve the buying and selling of the 
right to pollute. CA&W stated that this proposal produces a profit for 
pollution, i.e., a profit for things that have been required of industries. CA&W 
believes that certain industries will applaud this rule because they have been 
reducing emissions which they can now sell for a profit. CA&W further stated 
that some refineries and petrochemical industries in the Beaumont area were the 
first ones in the state and happen to be the filthiest, most worn-out polluting 
plants in the area. The plants are just now being refurbished and with a 
baseline date of 1990, a lot of these required things can go into the emissions 
bank. 
 Amoco stated that in the course of the public hearings, this proposed rule was 
assailed by some critics as conveying a fictitious "right to pollute." Amoco 
disagreed with that perception and stated that they believe the proposed 
regulation allows conveyance of a "right to economic growth." Biotech 
recommended that the TACB clarify in the final rule that the proposed banking 
system is simply a more open and efficient way to handle the offset trades which 
already must occur under existing nonattainment rules. These rules do not create 
a new pseudo property which allows companies to buy and sell pollution rights, 
as some have alleged. 
 Destec stated that conceptually, offset trading as a market incentive is an 
extremely useful tool, if properly designed. It needs to include specific 
elements to support the process of doing business, while producing a desired 
environmental improvement. The move from the Draconian command and control 
relations are clearly necessary and the market incentive program has great 
merit; however, the most insidious form of command and control is to have a set 
of market incentives that are not achievable and allow for no growth. Destec 
argued that if the citizens were allowed to vote on no-growth command and 
control regulations, the impact of which could be more clearly measured, they 
would probably not approve them because they could see the adverse socioeconomic 
impact. This must be kept in mind when writing these regulations and presenting 
them as market incentive regulations. The banking rule is focused on the cleanup 
of the air in each nonattainment area and does not grant a "right to pollute." 
With the signing of the 1990 FCAA Amendments, the people and industry in ozone 
nonattainment areas have been tasked to shoulder a very heavy burden. One of the 
heaviest burdens is compliance with very strict NSR rules. These NSR rules 
dictate that industry will be required to ensure that a net reduction in air 
emissions occurs in a nonattainment area before they will be allowed to build or 
modify a source which increases emissions. For the severe nonattainment areas, 
the required reduction is 30% more than the increase. For the serious 
nonattainment areas, the net reduction is 20%, and for moderate nonattainment 
areas, the net reduction is 15%. Industry historically has been able to escape 
the net reduction (offset) clause by using concomitant internal reductions 
(netting out) applied toward reducing the projected emissions increase, thereby 
not triggering the minimum emissions increase threshold for NSR rules. The 1990 
FCAA Amendments also drastically lowered the minimum emissions increase 
threshold and expanded the years of concern to a contemporaneous five-year 
period rather than netting out within an individual proposed change. As a 
result, the state anticipates a great increase in the number of projects which 
trigger the NSR rules, many of which will be the result of relatively small 
increases. In addition, any project which is built under NSR rules is required 
to implement the lowest achievable emissions rate (LAER) control technology 
which means even further emissions reductions in the area. Without the emissions 
reduction bank, industry will be reluctant to release their internal emissions 
reductions and instead retain them for internal netting purposes. The staff 
believes that the emissions bank will encourage industry to deposit many of 
those reductions, thereby allowing the net offset and LAER reductions to occur. 
The end result of a high bank transaction activity will be a resultant lowering 
of actual air emissions in each nonattainment area. In response to the comments 
of the TACB getting back to a zero base, rather than adding more regulations, 
the staff believes that if we rely on our historical command and control 
regulations, industry will do their best to meet the minimum requirements of 
those regulations. However, if we move to market-based regulations, industry 
will be encouraged to do more than just the minimum. 
 One individual recommended keeping the air emission credits, which are going to 
be sold, within the seller's property boundaries. The individual also stated 
that the TACB should maintain the programs that currently exist, before taking 
on more. This process of internal netting (using credits within the property 
boundaries) does not require greater than one-to-one offsets or LAER. Allowing 
the emissions to be traded across the entire nonattainment area will result in 
greater net reduction within the area than if limited to netting and is 
consistent with the 1990 FCAA Amendments. 
 Another sub-issue of the adopt-or-reject issue was that of determining the 
impact of the banking rule upon attainment of the NAAQS in each of the 
nonattainment areas. Most comments regarding this sub-issue were received from 
environmental watch groups and individuals; although, one comment came from a 
government agency in one of the nonattainment areas. 
 El Paso City-County Health and Environmental District (El Paso City-County) was 
concerned with the air quality problems that El Paso has had for many years. The 
commenter stated that the area continues to violate air quality standards for 
ozone, carbon monoxide (CO), and inhalable dust (PM  [sub]10) even though they 
have implemented some of the strictest controls of any city in Texas. They 
further stated that they will continue to implement additional controls as 
required by EPA and the TACB, but that they were opposed to the banking of any 
emissions for El Paso until compliance with the NAAQS can be demonstrated. El 
Paso City-County believes that compliance with the NAAQS must be demonstrated by 
ambient monitoring data and not by modeling for those pollutants or precursors 
to ozone, such as hydrocarbons (HC) and NO [sub]x. The commenter stated that 
their population should not continue to be exposed to unhealthy air from any 
pollutant; therefore, a reduction of HC or NO [sub]x should be considered 
forgotten and not held in the banks. They believe this is necessary so that, in 
a future time, these reductions cannot accumulate and continue to cause the area 
to be in noncompliance. The commenter asked the TACB not to implement the 
emissions banking system for HC and NO [sub]x in El Paso until NAAQS is 
demonstrated by ambient monitoring data. 
 Galveston Sierra and Golden Triangle Sierra stated that the TACB should 
determine the impact of emissions banking on efforts to attain the NAAQS before 
adopting any banking rule. CASE questioned how the state intends for the area to 
meet air quality standards and how the state plans to help Southeast Texas meet 
these standards in the future. Sixteen individuals stated that the TACB should 
determine the impact of emissions banking on efforts to attain the NAAQS before 
adopting any banking proposal. 
 Determination of the impact of the banking rule upon attainment of the NAAQS 
for ozone is an issue for the development of the SIP for ozone nonattainment 
areas and is not an issue in the banking rule. The two methods by which the 
staff can determine the impact are through the use of the Urban Airshed Model 
(UAM) and by ambient monitoring. The TACB staff is currently using the UAM to 
determine the impact of changes of emissions in each nonattainment area. The 
results of this modeling effort will give indications regarding the 
effectiveness of the banking rule along with numerous other control measures 
being considered for each nonattainment area. In the case of ambient monitoring, 
the success of any control measure, including a banking program for offset 
purposes, will be revealed only after the control measure is implemented and 
begins to effect reductions. The staff, therefore, does not recommend that the 
banking rule be held in abeyance until after the results of the UAM are known or 
until ambient monitoring results is analyzed. 
 The Partnership recognizes that with a banking program comes the responsibility 
for the business community to produce actual emissions reductions and to assure 
that these reductions are accurately accounted. The Partnership believes the 
TACB has the expertise to verify emission reductions deposited in the bank. The 
TACB already performs this analysis when a company uses reductions for offsets 
on either an internal or external basis. The staff has procedures to assure 
emission reductions are permanent, quantifiable, surplus, and enforceable as 
required by EPA. The commenter believes that the staff has the expertise to 
continue this verification without compromising the integrity of the system. 
Houston stated that the banking proposal will minimize the impact on the TACB 
staff during the first year of operation. 
 Biotech stated that the 1990 FCAA Amendments substantially modified the rules 
governing new source permit review in nonattainment areas. The TACB has 
recognized that the new nonattainment rules will cause a substantial increase in 
the number of nonattainment type air permits. The current system for 
verification and enforcement of emissions offsets is cumbersome and inefficient. 
This system was manageable when the TACB processed fewer than 10 nonattainment 
permits a year. However, if the TACB's nonattainment work load jumps to over 100 
permits a year as anticipated, this review process will present a severe 
impediment to timely permit review. Clearly, a system to pre-verify emissions 
reductions and bank these emissions makes a lot of sense. By separating the two 
primary tasks (emissions reduction verification and NSR), this system should 
make both the agency and regulated community more efficient. GHASP agreed that 
the TACB must be the emissions banking authority and keep the records; although, 
GHASP has concerns that the TACB does not have the personnel and resources to 
fully track industry self-reported information. 
 GSU stated that the emissions bank is a good idea because it will serve as a 
clearinghouse for emission reductions enabling the TACB to more easily track and 
more accurately certify and account for emission offsets. It is important to 
note here that offsets are already a part of federal NSR programs in all 
nonattainment areas. Dow recognized that the previous recommendations will 
entail a significant increase in agency and industry resources devoted to ERCs 
and banking. However, Dow also firmly believed that this work load increase 
would be less than would otherwise be needed later under the combined 
requirements of the proposed banking rules and TACB's permitting provisions 
pertaining to ERCs. Dow's recommended approach eliminates the enormous potential 
for confusion and delay that would be shifted, under the TACB's proposed rule, 
into the new source permitting process. 
 The TACB understands that an increased work load will result from the addition 
of emissions reduction certification and tracking requirements. However, the 
TACB has requested staff resources for the 1994-1995 biennium to assist with the 
implementation of such efforts. Additional staff will be added to areas, such as 
permits and emissions inventory, which will be most affected by the banking 
proposal. The TACB staff is also determining the effect of the emissions trading 
programs on the agency and is working with the legislature for additional 
funding to operate the emissions trading programs. This rule was written with 
provisions in sec.101.29(e), concerning ERC Certification or Registration, to 
minimize the personnel impacts during the first year of operation. One of the 
tasks required by the banking proposal is certification of the actual reductions 
made by industry. This task is currently required of the permits staff as they 
review the internal netting calculations and the external offset calculations. 
In addition, sec.101.29(e) limits the size of each certified bank account and 
sets the minimum level of the deposit to be certified to minimize the impact on 
the permits staff. Another task which will be required is tracking emissions 
reductions in the point source data base (PSDB) files, which will require adding 
some data fields to the PSDB. Adding those fields and tracking the new 
information will actually improve the task of developing a SIP for each 
nonattainment area. Therefore, the staff believes that there are ancillary 
benefits from adding banking requirements. 
 Texas Campaign opposed the banking proposal because it is not required by the 
FCAA Amendments. Biotech stated that the TACB should also clarify that this 
system is almost entirely voluntary. Offset trades are already a necessary part 
of a nonattainment permit. The banking system will provide one way for companies 
to exchange offsets. It is Biotech's understanding that the system will not 
displace offset trades between companies which do not go through the bank (i.e., 
the existing case-by-case system). An exception within the new rule is offsets 
for shutdowns. As proposed, these offsets must be banked within six months of 
the shutdown to be creditable. Although Biotech does not believe this new 
requirement is unreasonable, it clearly represents a significant new 
restriction. 
 Although the staff agrees that the 1990 FCAA Amendments do not require a 
banking program, the FCAA Amendments and the EPA encourage banking and stress 
economic incentives as a viable means of reducing air emissions. The supportive 
guidance is published in the EPA's "Emissions Trading Policy Statement" (Federal 
Register, December 4, 1986), EPA's nonattainment NSR permit requirements (40 CFR 
51.165), EPA's "Emissions Offset Interpretive Ruling" (40 CFR 51, Appendix S), 
and EPA's "General Preamble for the Implementation of Title I" (Federal Register 
, April 16, 1992). The General Preamble requires states to treat ERCs as part of 
the emissions inventory for SIP planning purposes, which implies that a method, 
such as banking, is needed to account for the emissions reductions which have 
been made by industry. Regarding the shutdown provision of the proposal, the EPA 
"Emissions Offset Interpretative Ruling" will not allow a shutdown to be 
creditable for an external offset trade, unless the shutdown is immediately 
contemporaneous to the trade of those shutdown emissions for a new project or 
the shutdown trading policy is specifically detailed in a state banking rule. 
Therefore, even though the banking proposal is not required by the FCAA 
Amendments, the lack of a banking proposal will seriously hamper the development 
of SIPs in those areas where the TACB needs to account for those emissions 
reductions as part of the demonstration of reasonable further progress toward 
attainment. The staff agrees that the proposed rule language is vague regarding 
the issue of this being a voluntary program, with the exception of the statement 
in sec.101.29(g)(2) concerning mandatory banking of credits from shutdown for 
external offset purposes. The language in sec.101. 29(l)(1) is changed to 
plainly state that the banking program is voluntary. 
 Lone Star Sierra gave an example of a company which recently changed it's 
reported emissions estimates by a factor of 300% and stated that this is an 
example of what can happen without a standardized method of estimating 
emissions. Lone Star Sierra then asked how the TACB will give credit for 
estimates with this much uncertainty. El Paso Sierra stated that air emissions 
cannot be accurately measured or even estimated, thereby opening the plan to 
abuse. Texas Campaign stated that the banking system lacks credibility in that 
there is no way to verify industry's baseline emissions or reductions, and that 
the TACB will have to rely on industry to provide volume of emissions they emit 
and have reduced. Texas Campaign further stated that there is a built-in 
financial incentive for industries to fudge the numbers, and the TACB is 
proposing to allow industry to guess their emissions and then sell or trade the 
right to pollute as if accurate quantities were known. One individual stated 
that they did not trust industry to guess it's emissions and then to sell or 
trade it's right to pollute. Two other individuals stated that they felt it was 
impossible to accurately measure air emissions from industrial sources and that 
these sources are highly unlikely to honestly estimate the emissions. The staff 
believes that the uncertainty in reporting emissions has been drastically 
reduced by the October 16, 1992, change to the General Rules, sec.101.10, 
concerning Emissions Inventory Requirements. One new emissions inventory 
requirement is the initial and annual reporting of actual emissions with 
continuous emissions monitors (CEM) as the preferred method to determine 
emissions. Another requirement is a certifying statement signed by the owner(s) 
or operator(s) of the emissions source. Failure to submit emissions inventory 
data, as required, or submitting data which is known to be false, shall result 
in formal enforcement action and possible criminal penalties against the 
company. Furthermore, the banking proposal requires emission reductions to be 
based on actual, preferably measured emissions which are then certified by the 
TACB staff. 
 One individual stated that industry in Victoria releases its pollutants in the 
middle of the night to avoid monitoring. The staff believes that the issue of a 
company releasing its pollutants at night to avoid monitoring is not related to 
the banking proposal. However, this situation has been referred to the TACB 
Region 5 office in Corpus Christi for investigation. 
 San Jacinto ALA felt that no ERCs should be traded to businesses who are out of 
compliance with their permit requirements or in violation of TACB Board Orders. 
ERC trading to businesses who are out of compliance is covered adequately as 
part of the permitting process as defined in sec.116.12, concerning Review and 
Renewal of Permits, and sec.116.14, concerning Compliance History Requirements. 
A compliance history exclusion provision will not be added to the proposed 
banking rules. 
 Red River Sierra stated that a market system in pollution rights does not make 
good economic sense. Red River Sierra gave an example that pollution induced 
health care costs in the Los Angeles basin total an estimated $10 billion per 
year. CASE stated that while jobs are important, industry has to learn to work 
within the FCAA limits. CASE believes that we should attract cleaner industries 
with air which meets the NAAQS. Enterprise, a substantial contributor to the 
Houston area economy, believes that for lack of an emissions banking program, 
companies such as Enterprise were now to be disadvantaged by having built new, 
low-polluting facilities and prevented from increasing the capacity to produce 
environmentally beneficial products in the Houston area. One individual pointed 
out that previous laws requiring pollution control did not cause unemployment, 
but rather, increased employment. CA&W stated that this proposal could encourage 
industry to leave the area for less strict regions. Texas Campaign believed that 
citizens in nonattainment areas are shouldering the burden for clean air, 
through new smog checks and other FCAA requirements, while industry will 
actually make money by increasing emissions. 
 The staff agrees that the banking rule is a trade-off between the costs of air 
pollution, such as higher health care costs and potential loss of business, and 
the benefits, such as a better economy and cleaner air. Regarding health care 
costs, an improved air quality will directly result in lower health care costs, 
therefore, any program must have the basic goal of improving the air quality. 
Regarding potential loss of business, making the task of doing business in a 
nonattainment area so high that a business cannot afford to operate there may 
cause the business to take flight and therefore fewer jobs and a poorer economy. 
This trade-off is especially important when an industry which is directly 
impacted produces environmental products which help clean the air. Finally, the 
cost of cleaning the air must be equitably shared between the sources of the 
pollution, e.g., automobiles and industry. The staff believes that the banking 
rule does not discriminate against the consumer by allowing industry some 
flexibility, nor against industry by driving business away, while it still 
provides a positive net improvement to air quality. 
 The Partnership and the Fort Bend EDC stated that with the major source and 
major modification rule changes, ozone nonattainment areas need flexibility to 
assist business to meet these more stringent requirements. The Partnership and 
Missouri City believe that the bank will allow regional economic development 
groups to clearly identify available offsets and potential businesses seeking to 
locate in nonattainment areas to secure those offsets. The Partnership and 
Missouri City also stated that the emissions bank will allow nonattainment areas 
to avoid what other areas have suffered, namely, business flight due to 
unnecessarily burdensome regulations. The Partnership, the Fort Bend EDC, 
Houston, and GSU believe that areas with established emissions banks, such as 
other states (New Jersey, Pennsylvania, Missouri, and Colorado) and cities (San 
Francisco, San Diego, Los Angeles, Louisville, and Seattle) will be a step ahead 
of regions without a bank to identify offsets and attract new business. Houston 
stated that the banking proposal encourages innovative marketplace solutions to 
air quality problems, and does not require a choice between clean air or new 
jobs. 
 Chevron U.S.A. Products Company (Chevron), EGA, GSU, HL&P, Monsanto, Star, and 
TMOGA stated that with offset requirements for future VOC or NO [sub]x emissions 
increases in Texas' ozone nonattainment areas, emissions banking is necessary 
for the long term viability and economic development, and essential for industry 
to be able to modernize, expand capacity, add additional processes or tankage, 
or build new facilities. Chevron and Star further stated that without the bank, 
it would be impossible for small family or independent businesses to enter an 
ozone nonattainment area. Biotech stated that a public banking system should 
also insure a more efficient usage of the limited pool of offsets within a 
nonattainment area by allowing the open market to set the distribution of the 
offsets. 
 Destec stated that advocates for the most stringent control possible will say 
that businesses try to avoid the social obligations and pursue profit in the 
community. Business extremists, on the other hand, would argue that the jobs are 
more important than the slight inconvenience of smog. Destec believes that both 
sides are wrong, and that the TACB needs to find the rational middle ground with 
a set of regulations that provide for both controlled economics and a controlled 
environment. Destec stated that the most practical way to do this is to provide 
market incentives for industry to improve by modifying it's operations, not by 
leaving. Destec stated that recently, the New Jersey Chemical Council announced 
that 8.0% of it's chemical processing jobs between 1980 and 1990 were lost 
compared to the 2.0% national average. New Jersey attributed that, in part, to 
the regulations that had been promulgated in the state. The staff believes that 
this banking rule has found the middle ground regarding the issue of a 
controlled environment versus a controlled economy. Without an emissions banking 
program, industry seeking to locate or expand in a nonattainment area would have 
a difficult time finding sufficient offsets to satisfy the NSR requirements. By 
making this program voluntary, the market incentives will induce industry to 
implement better controls on it's emissions and deposit those emission 
reductions into the bank. As the deposits are withdrawn from the bank, the 
offset ratio will show a net improvement of the air quality. As one commenter 
stated, clean air regulations can provide more jobs, and the decisions for 
cleaner air or a better economy do not have to be mutually exclusive. This rule 
is adopted as an economically viable, yet environmentally sensible program in 
ozone nonattainment areas. 
 Lone Star Sierra stated that NO [sub]x contributes to the formation of ozone 
smog which seems to form in a plume and that this discrete plume means that NO 
[sub]x emissions are not equally contributing to the formation of ozone. Lone 
Star Sierra suggested that the trading of NO  [sub]x emissions be from sources 
in the same geographical area, no more than five air miles apart, so that trades 
do not adversely effect the ozone plume. 
 The staff agrees that NO [sub]x contributes to the formation of ozone, but that 
there are many complex variables which determine to what extent NO  [sub]x 
affects ozone formation. Some of the variables include the relative 
concentrations of VOC and NO [sub]x, the proximity of other VOC and NO [sub]x 
sources, the wind speed and direction in the vicinity of the NO [sub]x source, 
the height of the atmospheric mixing layer, and the height of the NO [sub]x 
emission point in relation to the height of the mixing layer. The actual effect 
of any specific NO [sub]x emission source toward the production of ozone may be 
determined through the use of the UAM. Although the UAM is currently being 
prepared for nonattainment area analyses, the TACB will not know the 
contributions of NO [sub]x emissions toward the production of ozone for several 
months. Even then, the UAM would have to be run (a very difficult, time 
consuming, and expensive exercise) to determine the effect of a proposed NO 
[sub]x trade on the overall nonattainment air quality. Restrictions on NO [sub]x 
offsets may be considered in future rulemaking based on the UAM results. 
Therefore, there will not be any distance restrictions placed on NO [sub]x 
trading in the rule. 
 EGA stated that NO [sub]x offset requirements for new sources should be 
implemented only when a mechanism for obtaining such offsets exists. EGA also 
stated that they welcome any opportunity to assist in developing workable offset 
banking and trading programs. The state regulations concerning the NO [sub]x 
offset requirements were promulgated in May 1992 and became effective on 
November 15, 1992. The primary purpose of the banking proposal, as stated in 
sec.101.29(a) and (h), is to provide a mechanism for obtaining the required 
offsets for both VOC and NO  [sub]x. Section 101.29(h) states that ERCs can only 
be withdrawn for the purpose of providing offsets for new or modified sources. 
Another potential use of NO point=4.02p  [sub]x ERCs would be to substitute 
those credits in the place of NO [sub]x RACT. The TACB staff is exploring that 
option as part of future revisions to the NO  [sub]x RACT rules and the 
emissions banking rules. However, the staff does not recommend changing the 
banking proposal at this time. 
 Lone Star Sierra requested that all NO [sub]x emissions trades be verified by 
CEM. One individual suggested that factories be emissions-tested just like cars. 
The individual stated that there should be specific guidelines for industry and 
that industry should be held to those guidelines. One individual stated that a 
banking system must be based on a demonstrated potential to reduce measured 
polluting emissions. The individual further stated that only actually measured 
VOC and NO [sub]x emissions determined by either the TACB staff assay or an 
independent accredited laboratory using valid quality controlled procedures 
should be used in tradings. The individual finally stated that a valid permit is 
not evidence of actual (as measured) VOC and NO point=4.02p  [sub]x emissions 
and that mechanisms for emissions determinations, monitoring, and enforcement 
must be precisely disclosed in writing as an integral part of any contract. 
 The staff agrees that a CEM system would be the best method to verify emissions 
reductions and that the next best method is to perform sampling using valid, 
quality controlled procedures. This belief is reflected in sec.101. 29(e) which 
states: "The emissions reduction amounts shall be determined based on actual 
monitoring results, when available, or otherwise calculated using good 
engineering practices." The existing rules require CEMs only in certain cases. 
Current TACB permitting policy requires emissions determinations, monitoring, 
and enforcement as an integral part of any permit. As the staff develops the 
rules and regulations to implement the provisions of the FCAA Amendments for NO 
point=4.02p  [sub]x RACT, Title III (Air Toxics), and Title V (Operating 
Permits), CEMs will be required in more and more applications. The banking rule 
will not be modified to require CEMs as the exclusive method of verifying 
emissions reductions. 
 The American Lung Association of Texas (Texas ALA) stated that while the 
overall concept of emissions banking or trading to support the emissions offset 
requirements of the FCAA Amendments is not new, the execution of similar banking 
programs are rife with examples of paper trades which did not achieve any 
additional air pollution reduction. This is the concern of the Texas ALA with 
regard to the Texas program. The staff emphasizes that the rule does not allow 
the trading of paper emissions. Section 101.29(f) states that: "A qualified 
reduction is a reduction in emissions of an applicable pollutant from an 
eligible source located in a designated area, which results in an actual and 
permanent emissions decrease ...." The staff agrees with the commenter that 
paper trades will not help any nonattainment area make progress toward 
attainment of the ozone NAAQS and, therefore, should not be allowed. 
 Lone Star Sierra stated that it is important that credits taken for early toxic 
emissions reductions not come back to haunt us as toxic emissions in the banking 
program. The staff agrees that early toxic emissions reductions made under the 
provisions of the FCAA Amendments Title III, concerning Air Toxics, should not 
be used as part of an emissions trading program. The purpose of the early toxic 
emissions reduction program is to provide an extension of the maximum achievable 
control technology (MACT) compliance schedule, not to provide offsets for new 
sources in ozone nonattainment areas. The staff, therefore, does not recommend 
allowing an early toxic reduction to qualify as an ERC in  sec.101.29(f). 
 Lone Star Sierra stated that the Texas Legislature passed a bill which was 
intended to help clean up the air by encouraging the use of alternative fuels. 
Lone Star Sierra believed that if the TACB allows industry to "hijack" these 
improvements for continued toxic and smog pollution, the legislative intent will 
have been circumvented. Lone Star Sierra suggested that one way to avoid this 
problem would be to require a greater offset ratio when trading mobile source 
emissions reductions for fixed source emissions increases. 
 The staff disagrees that the banking rule violates the legislative intent 
regarding the use of alternative fuels. The provisions for alternatively-fueled 
mobile sources in sec.101.29(c) and (f)(6) were included in this proposal as a 
notice of intent to encourage early development of the alternative fuel 
infrastructure, such as fueling stations, and to encourage conversion of fleets 
beyond those specified by the Legislature to convert to alternative fuels. The 
actual methodology of calculating the amount of credit, determining the length 
of time the credit is viable, and in what manner in which the credit may be used 
has not been specified in this proposed rule. The MPAC is developing the 
methodology for the alternative fuels credit use and will recommend revisions to 
the banking rules at a later date. 
 Lone Star Sierra and two individuals expressed a concern that fugitive 
emissions are not easy to quantify because of a lack of standardized estimation, 
measurement, and monitoring techniques. Lone Star Sierra felt that fugitive 
emissions should not be allowed in the banking rules until we have a way to 
accurately assess them. Lone Star Sierra, Golden Triangle Sierra, and 17 
individuals suggested that a scientific/engineering panel be convened to 
determine a consensus on a standardized and accurate method of estimation of 
fugitive emission losses. One other individual requested that the panel be 
composed of analytical chemists not working for the petrochemical companies. 
 Red River Sierra stated that toxics and smog-forming petrochemical vapors are 
difficult to measure and monitor, and no standard method has yet been devised by 
any state to accurately estimate even the quantity of leaks from industrial 
plants. Red River Sierra also stated that one cannot sell that which cannot be 
measured or quantified. Two individuals requested that the TACB ensure that 
measurements of fugitive emissions can be accurately done before agreeing to any 
program to sell "pollution rights." 
 One individual stated that emissions arising from start-up, shutdown, and 
maintenance may not be part of any emissions trading program, and that the 
current plant "estimated" (guessed) emissions are merely delusional and 
speculative and cannot be the basis of any form of banking. 
 The staff agrees that fugitive emissions are not easy to quantify because of a 
lack of standardized estimation, measurement, and monitoring techniques. Within 
this state, fugitive emission monitoring is covered by the TACB fugitive 
monitoring program (28M) at this time, and monitoring at a specific source could 
be improved by implementing the more stringent intensive, directed monitoring 
program (28MID). The issue is not whether the implementation of 28MID by a 
source will make a net reduction in the emissions, but rather a question of how 
much that reduction will be. In addition, progress in the improvement of the 
fugitive estimation, measurement, and monitoring techniques is occurring by 
scientific/engineering personnel under the auspices of the EPA. As part of this 
banking proposal, any emissions reduction certification would be performed by 
the TACB permits engineering staff who will use all the data available in order 
to make a valid engineering decision. Not all fugitive emissions reductions will 
be disallowed by this banking program, but they will be limited to only those 
which have a preponderance of valid engineering data. 
 CASE stated that if the TACB adopts a rule to bank emissions, the TACB will be 
removing the incentive to replace old technology with new technology because, 
with this bank, industry will be preserving the very chemicals that put us in 
the nonattainment category. CASE further stated that industry should be 
encouraged to reduce emissions; however, this proposal allows industry to use 
the reductions within the next one to five years and never have to worry about 
improving the quality of air beyond the legal limits. CASE also suggested that 
larger companies would use this "bank," not to help new industry come into the 
area, but to aid them in maintaining current levels, without the pain of 
implementing newer technology, where possible. Finally, CASE stated that the 
larger companies, who have high emission levels due to size of production 
activity, could jeopardize neighborhoods further if allowed to purchase credits 
from this bank to expand. Two individuals stated that the proposal ignores the 
fact of unhealthy air and focuses on an almost perpetual trading scheme of 
pollution rights allowing companies to continue to pollute when making plant 
improvements. 
 Enterprise stated that the creation of a banking program is especially 
important, because most of the company's facilities were built within the past 
15 years and, therefore, employed from their inception the most modern and 
effective emissions control technologies and design features. As a result, 
Enterprise does not have available the internal emissions reduction 
opportunities that companies with older facilities and less effective emissions 
controls find readily at hand to generate the credits required for expansion 
under the new law. There is, essentially, no emissions "fat" in Enterprise's 
facilities, so if the company cannot look outside itself for reductions to 
support the construction of new and expanded plants, Enterprise's operations 
cannot continue to grow in the Houston area. 
 Biotech stated that offset trades have been and will continue to be an 
important part of the SIP process. What the new rules will do is add efficiency 
and predictability to the processing of new source nonattainment permit 
applications. Biotech requested the TACB to clarify that sources seeking a 
nonattainment permit are subject to review of their emissions based upon a LAER 
technology standard. LAER is the most stringent emissions abatement standard 
available under the FCAA Amendments and, because of this standard, plants built 
under a nonattainment permit are the cleanest, most efficient plants in the 
market. Biotech stated that the banking system will not promote delays in the 
reduction of emissions by industry. Instead, because of the streamlined 
nonattainment permitting process, it should promote the replacement of older, 
dirtier plants with newer, cleaner plants. 
 Fort Bend EDC stated that the emissions bank would provide a means of assessing 
the availability of offsets for both local industries and industries considering 
locating in the Houston area. The mandated offset ratio of 1.3:1 guarantees that 
emissions are reduced. This program requires the reduction of pollution rather 
than merely trading the right to pollute. Yet, at the same time, it allows a 
nonattainment area to contribute to the economic growth of Texas by providing 
jobs and wealth to the state's economy. HL&P stated that the federally-mandated 
offset ratio of 1.3:1 ensures that emissions are, in fact, reduced, not merely 
traded. The flexibility afforded by this scheme with respect to voluntary 
participation, maintenance of reductions for internal netting, and choice of 
reduction technology is commended. HL&P stated that this will be an attractive 
incentive for industries who would consider locating in Houston. 
 EGA stated that new independent power producer (IPP) facilities use state-of-
the-art emission controls and emit much lower levels of pollutants than older, 
existing utility sources which they often replace. For example, from 1985 
through 1988, emission rates from utility fossil fuel boilers in Massachusetts 
averaged over 13 tons of NO [sub]x per megawatt hour (MWh). By comparison, the 
Ocean State Power plant, a new IPP facility, has NO [sub]x emissions of 1.1 tons 
per MWh. For each megawatt generated, the Ocean State plant emits less than one-
tenth as much NO  [sub]x as the average Massachusetts electric utility. 
 The staff disagrees that the banking rule will remove the incentive to replace 
old technology with new technology and create a perpetual trading scheme of 
pollution rights or a shell game. As stated in the rule in sec.101. 29(h), the 
only time a company can use the banked credits is to satisfy the requirement for 
an offset of emissions under the NSR rules. When a company triggers the NSR 
rules, they not only must ensure a net reduction of 15-30% in the nonattainment 
area, but they must also construct the new source using LAER technology. LAER 
technology is by definition the best technology available without regard to 
cost. The staff also disagrees that large companies will use the bank to 
maintain current emissions levels, rather than help new industry locate in the 
area. In accordance with current TACB permitting rules, the large companies can 
hold those emissions reductions for internal use to avoid triggering the NSR 
rules. Once a company banks the reductions, it would have to use them in the NSR 
process and pay the offset and LAER price. In addition, once emissions 
reductions are placed in the bank, the TACB will discount the credit by 3.0% per 
year until the credits are withdrawn to assist in achieving reasonable further 
progress towards attainment of the NAAQS. 
 The staff agrees that without safeguards a large emissions source could 
jeopardize neighborhood air quality by purchasing additional credits from the 
bank and increasing it's production activity. The staff believes that an 
adequate safeguard exists in the permitting process. If the company uses credits 
from the bank, then it must meet the requirements of the nonattainment review 
permit process. This process not only will require the modification be 
constructed with LAER technology, but also will require the permit revision to 
go through a health effects screening process. This screening process will keep 
the ground level concentrations of pollutants at the plant boundary within 
levels that safeguard public health and property. If necessary, additional 
controls will be added to safeguard the public health and property. As stated in 
the industry and economic development agency comments, the staff believes that 
this rule will provide an incentive for companies to bank reductions of their 
air emissions so that new industry can locate in the area or existing industry 
can expand. The staff also believes that industry will voluntarily implement 
state-of-the-art technology in hopes of benefiting from that effort by being 
able to sell the banked credits and also to improve the air quality in it's 
neighborhood. 
 Texas Campaign stated that it's nonattainment area needs to have an overall 
reduction of emissions, not an offset program that keeps emissions levels at 
current or higher rates. Houston stated that the banking rule requires actual 
emissions reductions prior to any approval of a transaction occurring. 
Therefore, Houston stated, the banking rule will not allow backsliding from air 
reduction goals, but will encourage additional emissions reductions to achieve 
marketable credit reductions. Monsanto stated that this rule is a voluntary 
program and allows banking of excess reductions, not just required reductions, 
which is important. Monsanto also stated that even though companies will be 
drawing credits from the bank for economic development, the companies are still 
reducing overall emissions because of the offset provisions that require a 
greater than one-for-one trade-off. The staff disagrees that an offset program 
will keep emissions levels at current or higher rates, because, by definition, 
an offset program requires an emissions increase to be offset by a larger 
emissions reduction. In addition, any source which is constructed under the 
nonattainment review rules, using banked emissions credits for offset purposes, 
will require LAER technology in addition to the offset. Therefore, the tangible 
benefits of more banking transactions are lower emissions from modernized plants 
which are located in areas with fewer total emissions. 
 Lone Star Sierra stated that the banking program is valuable in serving 
industry needs, but that the program should not be made available free of 
charge, paid for by the citizens of the state, or paid for by the rest of 
industry not participating in the program. Lone Star Sierra suggested a sliding 
fee based on the size of the offset, such as $100 per ton, to be paid upon 
registration of any credits for internal or external offsetting purposes. San 
Jacinto ALA urged the TACB to set up the program so that it pays its own way at 
the TACB, because the state estimated that it will incur costs of approximately 
$15,000 to implement the program and annual costs of at least $45,000 to 
administer. San Jacinto ALA proposed that user fees, application fees, and 
transfer fees be established which will fully cover these costs, that program 
costs be reviewed annually, and that the fee structure be revised if needed to 
meet the expenses involved in running the program. Golden Triangle Sierra stated 
that it does not believe that it is the responsibility of taxpayers and the TACB 
to finance the proposed emissions banking system and recommended that 
participating industry members pay for each use. 
 Monsanto stated that because the TACB is 100% fee-funded, industries are really 
the ones bearing the cost of this program. Monsanto also stated that the TACB is 
currently running a surplus on the fees that are collected; therefore, this 
should not really be an economic burden on the agency budget. The staff agrees 
with all the commenters regarding the necessity of banking transaction fees. 
Because the TACB is fee-funded, industry should bear the cost of this and the 
other TACB programs which affect them, however, the TACB does not have 
legislative authority to collect and spend banking fees. Therefore, the banking 
program will be administered with existing resources until additional funding is 
available. The rule will not be amended to collect banking fees, but a fee 
structure and methodology will be developed by the MPAC during future 
rulemaking. The MPAC may choose to petition the Legislature for authority to 
apply any fees collected toward the management of the emissions trading program. 
 EGA stated that as the regulations are currently understood, the potential pool 
of available NO [sub]x offsets would be limited primarily to offsets created by 
existing utilities which "over control" below RACT requirements. Under present 
law, there are no requirements that utilities make offsets available to IPPs. 
EGA recommended that states adopt SIP provisions which develop and reserve or 
otherwise guarantee that offsets will be available to new IPPs. Moreover, in 
states that delay RACT, no baseline will exist against which to measure the 
amount of any offset that results from "over control." Additionally, the narrow 
pool of sources for NO  [sub]x offsets leaves little opportunity for market 
forces to regulate the price. Lack of certainty as to the price and availability 
of NO [sub]x offsets will inevitably delay FCAA Amendments permits for new IPP 
projects. This will, in turn, result in delays or denial of project financing 
and the loss of jobs. In revising their SIPs, states should consider the fact 
that this lack of certainty may cause them to lose the significant environmental 
benefits of replacing older plants with new IPP facilities which use state-of-
the-art emission controls. The staff believes that this comment is not within 
the scope of this rulemaking. The current rule creates the mechanism by which 
ERCs can be generated, deposited, and withdrawn, but it does not guarantee that 
a utility or any other entity which has generated ERCs will sell or trade those 
ERCs to an IPP. Furthermore, the staff is not delaying the development of NO 
[sub]x RACT rules, but rather is working diligently to promulgate NO point=4.02p  
[sub]x RACT rules within the next few months. The proposed NO [sub]x RACT rules 
should help alleviate the uncertainty of IPPs regarding the availability and 
market price of NO point=4.02p  [sub]x credits. 
 Southern Union Gas (Southern) requested that the TACB fully explain how it has 
determined that natural gas-fueled stationary engines are the leading cause of 
NO [sub]x in Texas. The commenter stated that according to official TACB 
comments, natural gas-fueled stationary engines contribute the majority of NO 
[sub]x emissions in Texas. Southern seriously doubted this conclusion. In 
December of 1988, the TACB issued a report entitled "Air Quality in Texas." Page 
15 of this report stated that: "Texas has never had a violation of the NAAQS for 
nitrogen dioxide (NO  [sub]2)-nor does it appear likely one will occur." 
Southern stated that this report went on to say that: "The need to consider 
control of NO [sub]2 for its effect on ozone is not clear at this time." The 
commenter felt that the TACB's "Air Quality in Texas" report apparently 
contradicts this recent determination that natural gas fueled stationary engines 
contribute the majority of NO [sub]x emissions in Texas. The staff believes that 
this issue of which source produces the most NO [sub]x within Texas is 
irrelevant to the subject of emissions banking. The staff recommends this issue 
be studied as part of the NO point=4.02p  [sub]x RACT rule development. 
 Southern stated that the TACB should consider the incremental "fuel cycle" 
effects of supply-side and demand-side energy alternatives to ensure a level 
playing field between natural gas and electric utility sectors. Coal is still 
the dominant fuel used in this country to generate electricity and nearly half 
of the coal-fired plants are not equipped with scrubbers. Although natural gas 
slightly exceeds coal in Texas for electrical power generation (much of which is 
non-utility cogeneration), the amount of coal-fired power plants without 
scrubbers is also higher than the national average. Natural gas end-use 
technologies, such as cogeneration, compete with such power plants. Southern 
recommended that if cogeneration and other on-site engine drive alternatives to 
electric motors incrementally reduce emissions, then proportional credits should 
be awarded. Conversely, if incremental emissions are increased, incremental 
credits based on proposed offsets should be required. The staff believes that 
this issue is not directly related to the subject of emissions banking. The 
staff believes that electric drive motors produce less pollution than would a 
similarly sized natural gas engine at the facility of an emissions source. In 
addition, the difficulty of calculating the corresponding emission credits is 
too great, assuming that the natural gas engine is cleaner than a utility 
producing a proportional amount of electricity. Texas utilities do burn more 
natural gas than coal, and some of this coal is low sulfur western coal which 
has not required the use of scrubbers in the past. Therefore, any increase in 
electricity requirements would probably be met by natural gas-fired boilers or 
combined cycle cogeneration plants and not from coal-fired units. The issue of 
calculating the emissions credits from cogeneration and other on-site engine 
drive alternatives to electric motors will be studied as part of the NO [sub]x 
RACT rule development. 
 El Paso City-County expects a disastrous environmental impact from growth in 
the area due to the North American Free Trade Agreement, especially in the air 
quality. It further stated that this impact will be very obvious in uncontrolled 
growth in the number of vehicles coming to the area. Fifty-six percent of the 
VOCs in El Paso are from mobile sources, 9.0% from stationary sources, and 35% 
from area sources. With this in mind, El Paso City-County stated that the 
biggest impact will be from mobile sources, many of which are uncontrolled. The 
staff believes that this issue is not pertinent to the banking rule. 
 GHASP objected to the proposed definitions because they undermine clean air 
attainment in a timely fashion. The staff disagrees that the definitions 
undermine clean air attainment because the definitions "actual emissions," 
"potential to emit," and "stationary source" were taken almost verbatim from the 
Code of Federal Regulations, 40 CFR 51.165. The definitions "emissions banking," 
"emissions reduction credit," and "emissions reduction credit certificate" 
simply define the terms used in the banking proposal. These definitions will not 
be deleted as a result of this comment. 
 One of the TACB staff suggested that the parenthetical statement "applies only 
to nonattainment area, NSR rules pursuant to FCAA provisions" be removed from 
the definitions "emissions banking," "emissions reduction credit," and 
"emissions reduction credit certificate" because the definitions are not 
mandated by the FCAA Amendments. 
 The staff agrees that the definitions are not federally mandated, and has 
removed the parenthetical statement from the banking definitions. 
 GHASP believed that all upsets and other releases that are not part of normal 
operations must also be included in the definition of "actual emissions, " 
because the emissions will be underestimated without the inclusion of upsets and 
other releases. GHASP also requested that all actual emissions be measured, not 
estimated. The definition was taken almost verbatim from 40 CFR 51.165. The 
staff believes that adding upsets and other releases to the federal definition 
of "actual emissions" would be inappropriate and may not be approved by EPA 
during the SIP review process. 
 EPA recommended that the definition of "actual emissions" include the phrase 
"e.g., when the allowable limit is reflective of actual emissions," to the end 
of the sentence, "The Executive Director may presume that the source-specific 
allowable emissions for the unit are equivalent to the actual emissions." EPA 
recommended the additional wording to clarify when this presumption can be used. 
The staff agrees with the suggested clarification and the language has been 
modified to add the clarifying statement. 
 GHASP objected in the definition of "emissions banking" to the transfer of 
credits, except from one facility to another in the same company. The staff 
disagrees that the transfer of credits should be limited between facilities of 
the same company. This type of transfer is allowed under existing regulations 
regarding external offsetting in nonattainment areas so that a new or modified 
source can satisfy the requirements of the nonattainment review rules. The 
concept of emissions banking is based on the premise that emissions credits can 
be traded between companies, which provides an economic incentive for making 
greater emissions reductions than are required. The "emissions banking" 
definition will not be deleted or modified in this manner. 
 Red Star Yeast & Products (Red Star) stated that in sec.101.29(e) the term 
"bank" is unclear and appears to refer to an individual account instead of the 
administrator of the program. Red Star recommended that the term "bank" be 
defined. The term "bank" as used in this proposal refers to a set of accounts 
which contain certified ERCs. There will be two bank accounts in each 
nonattainment area, one for VOC ERCs and one for NO [sub]x ERCs, for a total of 
eight bank accounts. However, a definition cannot be added to this proposal 
without an additional public hearing. The staff will consider a definition of 
the term "bank" in the next revision of the banking rules. 
 GHASP objected to the definition of "potential to emit" because only federally 
enforceable limitations can be treated as part of the design limitation and 
argued that state design limitations must be allowed since they may be more 
stringent than federal limitations. The staff disagrees with the commenter 
regarding state design limitations, because state limitations which are 
specified in a nonattainment area NSR permit are federally enforceable. 
 Southern stated that the TACB should revise the phrase "potential to emit" to 
not assume that all point sources are base loaded. For example, a 300 horsepower 
engine puts out 19 grams of NO point=4.02p  [sub]x (0.042 pounds) per 
horsepower-hour while powering a refrigerant compressor 2,000 "equivalent full 
load" hours per season. Therefore, actual NO point=4.02p  [sub]x emissions 
equate to 12.6 tons per year (tpy). However, due to the phrase "potential to 
emit," it is automatically assumed that the engine is operated continuously 
(8,760 hours per year) and will be charged with emissions of 55.2 tpy. 
Consequently, the owner of this system will opt for electric motors or be 
subject to hundreds of thousands of dollars of additional first-time expenses 
for CEMs, several thousands of dollars of additional yearly operating expenses 
for maintaining CEMs, and the need to purchase and/or develop NO [sub]x offsets 
with no guidance on how, when, or where to go about this process. The definition 
"potential to emit" was taken almost verbatim from 40 CFR 51.165. The staff 
believes that making a change to the federal definition of "potential to emit" 
for a special situation would be inappropriate and may not be approved by EPA 
during the SIP review process. In addition, permitting conditions placed on a 
source are based on "actual emissions" which, by definition, are representative 
of normal source operation and "allowable emissions" which can be adjusted 
through the application of federally enforceable limits in the permit process. 
Therefore, the staff does not recommend that the proposed definition be changed. 
 Southern requested the TACB to reevaluate the cause and effect relationship 
between NO [sub]x, VOC, and ozone and use relationship as the stated basis for 
developing NO [sub]x emissions offsets and credits. Southern stated that 
according to the July 2, 1992, issue of the Clean Air Report, "lowering 
industrial emissions beyond the current level of control may prove to be 
counterproductive and actually increase ozone concentrations in certain areas." 
 Southern felt that the TACB's apparent concentration on NO point=4.02p  [sub]x 
reduction versus VOC reduction, although allowed by EPA, may unjustly 
discriminate against certain technologies. In addition, Southern believes that 
the impact of TACB's regulations has the potential of permanently tilting the 
playing field in favor of electric utilities. 
 The staff disagrees that the banking rule is discriminating against certain 
technologies. The state regulations concerning the NO [sub]x offset requirements 
were promulgated as required by the FCAA Amendments in May 1992 and became 
effective on November 15, 1992. The primary purpose of the banking proposal, as 
stated in sec.101.29(a) and (h), is to provide a mechanism for obtaining the 
required offsets for both VOC and NO [sub]x. The proposed banking rules, 
sec.101.29(h), state that ERCs can only be withdrawn for the purpose of 
providing offsets for new or modified sources. Another potential use of NO  
[sub]x ERCs would be to substitute those credits in the place of NO [sub]x RACT. 
The TACB staff is exploring that option as part of future revisions to the NO 
[sub]x RACT rules and the emissions banking rules. However, the staff does not 
recommend changing the banking rule at this time. 
 Beinke stated that the rule, as proposed, limits the compounds that are 
eligible for banking to VOCs, as defined in sec.101.1, and to NO [sub]x. Beinke 
stated that in the definition of VOC, certain compounds that are widely used by 
many of it's clients and which may contribute to ozone depletion are not 
eligible for ERCs. The compound 1,1,1 trichloroethane (TCA) is an example of a 
compound which contributes to ozone depletion, is widely used in nonattainment 
areas, but is not included in the banking program. Beinke believes that because 
EPA has targeted TCA for massive reductions over the next several years, it 
seems reasonable that the reduction incentives offered by the banking program 
would contribute to this effort. As a result, Beinke believes that eligible 
compounds for ERCs should be expanded to include TCA and other compounds that 
are currently excluded from the VOC definition. 
 Vought stated that even though TCA is an exempt VOC, the 1990 Emissions 
Inventory for stationary sources included TCA emission sources, for example, 
vapor degreasers, that use TCA. Given the current emphasis being placed by EPA 
on elimination of ozone depleting substances, TCA has been targeted for 
reduction by the EPA Industrial Toxics Reduction Program and eventual 
elimination during this decade. Industry, in order to respond to these EPA 
initiatives, will spend millions of dollars in research, development, and 
capital equipment qualifying and placing into service aqueous emulsion cleaners 
and other ozone-friendly TCA substitutes. Vought stated that this proposed 
emissions banking program will not allow credits to be issued to an industry for 
the phase-out of TCA degreasers. Thus, in the Dallas/Fort Worth nonattainment 
area, a significant decrease in emissions will be attributable to the phase-out 
of TCA vapor degreasers, and this decrease will have a positive effect on 
bringing the Dallas/Fort Worth area into attainment for ozone. Vought suggested 
that if the SIP data base uses stationary source data which contains TCA 
emissions, then these emissions should be creditable under the TACB'S proposed 
emissions banking rules. Vought also questioned whether any reductions in TCA 
emissions will be creditable toward the 15% VOC reduction by 1996. 
 The Dallas Environmental Advisory Committee expressed a concern that TCA is 
excluded from the proposed rules, and stated that the TACB should establish 
scientifically-based general criteria for ozone depleting compounds (ODCs) that 
will provide for the inclusion of compounds such as TCA in the emissions banking 
program. The staff disagrees that TCA and other nonreactive ODCs should be 
included in this banking rule. The intent of the proposal is to provide a means 
for new or expanding industry in ozone nonattainment areas to acquire emissions 
offsets which are required in the nonattainment review permitting process. The 
emissions offsets are required to reduce the amount of reactive VOC emissions 
which contribute to the production of tropospheric ozone, not the amount of 
nonreactive VOC which contribute to the depletion of stratospheric ozone. The 
ODCs, such as TCA, are not included in the definition of VOC because they are 
essentially nonreactive in the tropospheric ozone chemical process. Therefore, 
their reduction will not contribute to bringing an ozone nonattainment area into 
attainment. The UAM does not use the nonreactive VOCs in the modeling 
calculations, and the EPA will not grant credit for ODC reduction toward the 15% 
VOC reduction. The rule will not be changed to allow the nonreactive ODCs in the 
bank, but the issue may be studied by the MPAC as another venue of the emissions 
trading program. 
 TMOGA and Chevron stated that sec.101.29(a) disallows interpollutant trading 
between NO [sub]x and VOC, although, the pollutant of concern is ozone, which is 
formed by the chemical reaction of NO [sub]x and VOC. To encourage responsible 
industrial modernization and growth, industry should be allowed to seek the most 
cost-effective methods. Furthermore, when MACT is applied in the near future, 
very few VOC emissions offsets will be available. Therefore, the rule should be 
changed to allow NO  [sub]x and VOC interpollutant trading unless and until 
further UAM studies show that such interpollutant trading does not benefit our 
ozone situation. TI also stated that interpollutant trading should be allowed 
since both VOC and NO [sub]x are identified as ozone precursors. Star stated 
that it's area has a high VOC to NO [sub]x ratio, thus, both VOC and NO [sub]x 
reductions will probably be required to attain the ozone standard. The City of 
Fort Worth requested that interpollutant trading between VOC and NO [sub]x be 
allowed because both pollutants are identified as precursors to ozone formation. 
On the other hand, GHASP stated that VOC and NO [sub]x should not be intertraded 
because of the uncertainty of how much of each pollutant will reduce the ozone 
level. The staff agrees that the UAM will indicate the beneficial or detrimental 
effects of NO [sub]x reductions toward the reduction of ozone in each 
nonattainment area. Until the UAM modeling is completed for each nonattainment 
area, the staff cannot make a realistic determination as to whether or not a VOC 
reduction can be beneficially traded and used to offset a NO [sub]x increase, or 
vice versa. In any event, EPA guidance regarding the development of SIPs in 
ozone nonattainment areas will not allow interpollutant trading until after 
November 1996. Therefore, the staff does not recommend changing the banking rule 
to allow interpollutant trading at this time. 
 One individual stated the assumption that all VOCs are equal as oxidant 
producers and its relationship to environmental toxicity is not valid. The 
individual believed that a banking system should be weighted to reduce the most 
toxic chemicals first. Lone Star Sierra stated that all VOCs are not equal, and 
this proposal treats them as equal. El Paso Sierra believes that the banking 
proposal has not adequately considered the difference between toxicity, 
reactivity, and volatility. The staff agrees that a banking system should 
ideally be weighted to reduce the worst chemicals first and account for their 
differences between toxicity, reactivity, and volatility. These factors are 
considered in the permitting process which will verify that the use of banked 
emission credits for offsetting purposes will not result in a condition of air 
pollution. The best method to determine the effects of the different 
characteristics of VOCs involved in various trading scenarios is the UAM, which 
would be a very lengthy and costly process. The staff, therefore, recommends 
that the banking rule not inhibit VOC trading because of differences in VOC 
characteristics at this time, but that the MPAC address this issue for future 
rulemaking. 
 Red Star noted that EPA guidance, dated December 4, 1986, states that sulfur 
dioxide, particulate matter, CO, and lead emissions are also eligible for 
banking programs. Red Star recommended that the TACB should consider their 
inclusion in the banking program. The intent of the banking proposal is to 
provide a mechanism for new or modified sources in ozone nonattainment areas to 
acquire ERCs for use as emissions offsets in a nonattainment permit review. The 
FCAA does not require emissions offsets as a requirement of nonattainment permit 
reviews for criteria pollutants other than ozone, and furthermore, the state has 
limited potential applicability because there are few non-ozone nonattainment 
areas. The staff recommends that the development of banking programs for the 
other criteria pollutants be addressed by the MPAC at a later time. 
 TI strongly agreed with the banking proposal that emission reductions can be 
aggregated from different sources under common ownership within contiguous ozone 
nonattainment counties. However, TI suggested the section be reworded to improve 
clarity. The staff believes that sec.101.29(b) is clear when combined with 
sec.101.29(c), which states that sources eligible to participate in the 
emissions banking program for a designated ozone nonattainment area include any 
stationary source, any area source, and any mobile source registered in the 
designated area. The staff does not recommend that this section be reworded. 
 Red River Sierra stated that this proposal would allow industrial plants 
located in low-pollution areas, such as Wichita Falls, to sell their rights to 
plants located in high-pollution areas, such as Houston, Dallas, El Paso, and 
Beaumont. The staff disagrees because sec.101.29(b) states that eligible sources 
must be located in federally designated ozone nonattainment areas, and 
sec.101.29(i) prohibits trading ERCs between different designated ozone 
nonattainment areas. Wichita Falls and other attainment areas would not be 
allowed to participate in the banking program. 
 Houston opposed any limitation of reduction credits to the local jurisdiction 
in which they were generated, since this would significantly limit any potential 
transactions and the impact of the banking program. Houston does support the 
limitation of credits to each specific nonattainment area, i.e., no trading 
between nonattainment areas. The banking rule does not limit reduction credits 
to the local jurisdiction, such as city or county, in which they were generated. 
The reduction credits are only limited to the confines of the federally 
designated ozone nonattainment areas. 
 El Paso Electric Company (EPE) discussed the geography of the El Paso area and 
stated that the three distinct air emission inputs to the El Paso airshed 
include El Paso emissions, Juarez emissions, and New Mexico emissions. EPE 
requested that the El Paso/Dona Ana County, New Mexico/Juarez airshed be viewed 
as a single entity, including appropriate regulatory consideration of emissions 
from all three airshed areas. EPE realizes the complexity of incorporating 
interstate and international emissions into the TACB regulatory framework; 
however, regulatory consideration of all emissions within the total airshed, 
realized by implementing a creative regulatory approach, represents the only 
logical way for El Paso to attain compliance with the ozone NAAQS. EPE believes 
that the banking rule in its current form, does not represent a viable or cost-
effective strategy to achieve attainment, because the rule only allows emissions 
banking in one of the three areas which contribute emissions to the total 
airshed. Logically, the TACB should allow the banking of legitimate reductions 
from all three areas. To remedy the concerns EPE has with the banking rule, it 
first suggested that the proposed rule be modified to allow the banking of 
emissions through verifiable agreements of international parties. Such 
agreements could be evaluated and approved by the TACB Executive Director on a 
case-by-case basis. Second, with regard to emission reductions achieved from 
sources in New Mexico that are part of the total airshed, the proposed rule 
should allow the banking of such reductions if a federally enforceable provision 
requiring reduction is included in the New Mexico air permit for the facility. 
The staff agrees that the total El Paso ozone nonattainment area is unique and 
that the most effective method of achieving compliance will entail a combination 
of international and interstate agreements and rules. However, the banking rule 
did not cover international and interstate situations, and therefore, cannot be 
amended to add international and interstate rules at this time. Additionally, 
New Mexico does not have a designated ozone nonattainment area adjacent to El 
Paso. This would preclude the trading of emissions credits between El Paso and 
New Mexico. The staff recommends that the MPAC consider this situation in later 
rulemaking. 
 Houston strongly supported the inclusion of stationary, area, and mobile 
sources in the banking program, because including all the sources increases the 
flexibility and impact from a banking program. TMOGA and Chevron stated that the 
provision of sec.101.29(c), pertaining to mobile source eligibility encourages 
innovation and the use of cost-effective approaches to gain credits. 
 Lone Star Sierra and Houston ALA stated that another area of concern is the 
ability of the TACB to quantify and verify mobile source emissions reductions. 
They believe the science of quantifying mobile source emissions is much more 
primitive than that for stationary sources, and if mobile sources reduction are 
allowed into the program, the ERC should be challenged to reflect the 
uncertainty in the emissions reductions calculation. Lone Star Sierra requested 
that sec.101.29(c)(3) be deleted to remove mobile sources from the list of 
eligible trading sources. The Texas ALA stated concern that ERCs from scrappage 
programs are accessible for five years, because the majority of these old 
vehicles would have been off the road prior to that time, anyway. The Texas ALA 
also stated that ERC from transportation control measures, such as trip 
reduction strategies, will be very difficult to quantify and even more difficult 
to enforce. 
 EPA stated that if the TACB allows emission reductions from area and mobile 
sources, the TACB will need to ensure that the banking of those reductions are 
accounted for in the attainment demonstration plans. Since emissions growth from 
area and mobile sources is largely unregulated and attainment plans are not yet 
in place, the TACB may want to consider appropriate discount factors to apply to 
these reductions. Also, the TACB will need to make the emission reductions from 
these sources federally enforceable through a SIP revision. The staff agrees 
that any emissions reductions from banking should be accounted for in the 
attainment demonstration SIPs and that the reductions should be federally 
enforceable through SIP revisions. The provisions for mobile source credits in 
sec.101.29(c) and sec.101.29(f)(6) were included in this rule as a notice of 
intent to encourage early development of the infrastructure, such as fueling 
stations, and to encourage innovative ideas in the reduction of mobile source 
emissions. The actual methodology of calculating the amount of credit, 
determining the length of time the credit is viable, and determining what manner 
the credits may be used has not been specified in this rule. The MPAC is 
developing the methodology for mobile source credits use and will recommend 
banking rule revisions at a later date. The staff does not recommend prohibiting 
mobile source initiatives from the banking rule. 
 TU Services, Vought, and ENTEX stated that a credit should be usable more than 
five years. TI suggested 10 years. The purpose of emissions banking is to allow 
for economic growth in nonattainment areas while still reducing emissions. 
Businesses will need emission credits in order to expand an existing plant or 
open a new business. TU Services stated that before making the capital 
investment for a business, there must be some assurance that it will be able to 
remain in operation for the useful life of the facility, which may be 20 or 30 
years. The business must have the opportunity of having a 20 or 30-year stream 
of credits to operate the plant. EGA and Destec stated that sec.101.29(d) is 
vague and pointed out that projects are typically financed for 15 years. 
 Dow stated that the program will discourage, rather than encourage, early 
emission reductions and industrial modernization by unnecessarily limiting the 
life of ERCs to a period which is too short to enable their reasonable trading 
and use. The proposed program further discourages early reductions by not 
certifying non-shutdown ERCs until withdrawal, thus clouding their potential 
value to a user. Dow and TU Services have concluded that EPA rules and policies 
allow states to adopt, or not adopt, a lifetime limit on ERCs used for offset 
purposes. Dow recommends that the TACB eliminate the five-year limit on the 
lifetime of ERCs and suggests an unlimited lifetime or at a minimum a 10-year 
life, in order to encourage sources to make earlier reductions and to assure 
that an adequate supply of ERCs exists to maintain the viability of the Houston-
Galveston area economy. Dow states that the lifetime of an ERC must be 
sufficient to include time for certification by TACB, negotiation of an ERC sale 
(if traded), inclusion in a permit application for a new project, the TACB 
review of and action on the permit application, possible public hearings, and up 
to 18 months after permit issuance until the commencement of project 
construction. TMOGA requested that the rule clarify that banked emissions may be 
used within or beyond the five-year life provided that the source submits an 
administratively complete permit application within five years. This provision 
is necessary due to the often long and unpredictable time periods needed to 
obtain construction permits. 
 Phillips opposed the issuance of ERCs with expiration dates. ERCs branded with 
an expiration date will create a strong disincentive for industry to participate 
in early reduction programs such as Clean Texas 2000 or EPA's Industrial Toxics 
Project. ERCs with expiration dates will, in essence, penalize "cleaner" 
companies who are proactive in reducing emissions. A "use it or lose it" policy 
such as this could force industry to delay making any reductions until required 
to do so by regulation or until it is absolutely necessary in order for a new 
project to obtain approval. Regulations are already in effect which require off-
sets. Both Dow and Phillips believed that the provisions of sec.101.29(j)(1) 
regarding 3.0% per year depreciation of credits and offset ratios provide 
sufficient demonstration of reasonable further progress towards ozone 
attainment. 
 Star asserted that once a credit is certified it should remain in the bank 
until used or sold. It did not support placing a five-year moratorium on the 
sale or use of certified credits. As part of this proposal, industry will 
voluntarily make real reductions in VOC and NO [sub]x beyond those required by 
permit or regulation beginning January 1, 1990. In addition, due to the SIP and 
regulatory changes to comply with the ozone standard, there will be substantial 
additional NO [sub]x and VOC reductions in the area. 
 San Jacinto ALA stated that any efforts to extend the length of time that ERCs 
are available for use as an offset should be rejected. Lone Star Sierra felt 
that the federal practice of a five-year life span does not have to be extended 
to the banking program and that a shorter life span would avoid pollution 
perpetuation and enhance speedy compliance with air quality standards in 
nonattainment areas. Lone Star Sierra suggested that a three-year life span for 
emissions reduction credits would be in the interest of health and the 
environment. An individual stated that in order to maintain the focus on 
cleaning up the air, there should be an age limitation on how long a "right (to 
pollute)" can exist. Another individual stated that retroactive reductions made 
before the rule is issued should have a one-year limit. 
 The TACB staff agrees that the five-year lifetime of ERCs is not required by 
EPA or federal regulations. EPA has long maintained the ability of states to be 
more stringent than EPA rules to allow states the flexibility in making rules to 
fit their needs. The staff has selected the five-year life for ERCs to maintain 
consistency with definitions regarding a contemporaneous period and to ensure 
that credits are not carried forward indefinitely. The limited life of credits 
will assist the TACB and industry in meeting the goal of attainment and 
maintaining attainment status once it is reached. The staff believes that five 
years is sufficient time for deposits to be made, trades negotiated, and the 
withdrawal to take place and be submitted with a permit application. If the ERC 
has been withdrawn within five years of their occurrence, the TACB will consider 
the credit as having been used. The processing of a permit application can take 
place after if the application for use of the ERC is submitted within the five-
year life of the credit. The staff has added language to clarify that once ERCs 
are withdrawn from the bank, they will remain usable for the lifetime of the new 
facility or modification. 
 TMOGA and Chevron requested clarification of when the five-year life starts for 
pre-bank emissions credits. TMOGA requested that the beginning of the five-year 
ERC life be the effective date of this rule. Life for pre-banked ERCs will be 
the same as all banked emissions to maintain consistency and progress towards 
attainment. Pre-banked ERCs would expire five years after the actual reduction 
occurred. 
 AF Disposal stated that the proposed revision to ERCs, allowing them to be 
available for a period of only five years, would be detrimental to the reuse of 
Carswell Air Force Base. AF Disposal projects that it will take 10 or more years 
to completely redevelop the base. If the limit is only five years, it would be 
forced to sell this asset to another company for use elsewhere. This could 
possibly extend the redevelopment period which would be extremely harmful to the 
local communities surrounding Carswell. The staff believes that five years is 
sufficient time to deposit the credits and submit an application for use of the 
credits. If five years is insufficient time to submit an application, sources 
would need to take advantage of ERCs that are deposited at a later date. 
 Dow stated that the proposed program will create substantial uncertainty as to 
whether banked ERCs are of value (i.e., creditable), because the proposed 
program will not certify shutdown ERCs of less than 50 tpy, the program will not 
certify other ERCs (non-shutdowns) until withdrawal, and when a balance of 1,000 
tpy or more is present in the bank, the program will not certify any ERCs. Dow 
further stated that up-front certification will avoid the possibility that an 
ERC would be disapproved by the agency in the permitting process and, thereby, 
disrupt and delay future permitting. 
 Chevron, Destec, TMOGA, and Star stated that the minimum certification levels 
of 50 tpy VOC or 100 tpy NO [sub]x will effectively limit the banking program to 
emissions reductions incurred only by very large facilities and virtually closes 
out smaller industries and family businesses from being able to generate 
bankable emissions. Chevron requested that the rule be changed to bank (certify) 
all credits greater than or equal to 1 tpy, Red Star proposed a 10 tpy limit, 
while Destec and TI believed there should be no lower limit. 
 Chevron, Star, and TU Services stated that limiting the size of the banks to 
the range of 700 to 1,000 tpy may result in many credits never getting into the 
bank before their useful life ends in five years. Therefore, the company may 
never have the opportunity to use or to sell the credits, which is very unfair 
to those who are not first in line to get into the bank. Many companies may 
never want to sell their ERCs, but may want to bank at one location and draw 
from the bank at another location, within the same nonattainment area. Further, 
the cap may artificially inflate the cost of ERCs, rather than allowing the free 
market to set a reasonable and fair price. Therefore, the rule should be changed 
such that the TACB will bank all qualified reductions. 
 Phillips strongly disagreed with emission reduction certification being allowed 
only when a bank balance drops below 700 tpy and can only result from the 
shutdown of processes which emitted in excess of 50 tpy VOC or 100 tpy NO 
[sub]x. Phillips and ENTEX also opposed a certification of non-shutdown 
reductions only when a withdrawal of credits has been requested. 
 The Partnership felt that for an emissions bank to be of most value to a local 
community, the maximum participation level should be encouraged. It believed 
that the artificial caps placed on certification proposed in sec.101. 29(e) will 
limit the ability of smaller companies to receive the economic benefit of having 
certified credits for sale in the marketplace. The Partnership requested that 
the caps and limits be removed as soon as practicable. Fort Worth requested that 
the minimum limit of 50 tpy for VOC and 100 tpy for NO [sub]x be eliminated 
because of the limited emissions from stationary sources in excess of those 
amounts in the Dallas/Fort Worth nonattainment area. 
 Texas Campaign stated that the TACB currently has a staff shortage, cannot 
adequately police industry now, and should not consider taking on new 
responsibilities that will burden staff resources even further. Monsanto stated 
that the rule avoids an overload on the agency staff by setting a cap on the 
bank and by setting limits on what can be put into it. Houston and Monsanto 
requested that the TACB review the staffing requirements of the banking program 
after the initial year of operation and make appropriate adjustments to the 
minimum certification levels. 
 When the banking program was proposed, the staff recognized the potential 
overload which could be placed on the TACB staff. The staff believed that the 
minimum levels of reductions which were set for certification, when coupled with 
the 700 to 1,000 tpy balance set on each bank, would provide adequate working 
capital for each bank to operate without overloading the certification staff. In 
addition, shutdown reductions were selected as the reduction of choice to 
certify because they are relatively straightforward. The staff intent was not to 
allow a single large reduction to be certified and to monopolize the bank. All 
uncertified reductions will still be registered with the bank and can still be 
traded at whatever prices the market will dictate. The staff agrees that 
uncertified credits will not have the same guaranteed value as pre-certified 
credits because they will be certified during the permit process after they have 
been traded. As a result of the comments and data regarding the relative size of 
anticipated deposits, sec.101.29(e) is modified to allow certification of non-
shutdown credits and that the certification limit of 50 tpy of VOC and 100 tpy 
of NO [sub]x be lowered to 10 tpy, which is the lower limit for annual emissions 
inventory reporting. The staff also recommends that the certification be 
prioritized based upon the ease and accuracy of which the emissions reductions 
can be certified. The staff also recommends that the 700-1,000 tpy limit on each 
bank be reviewed in future rulemaking after the banking program has been in 
operation for a period of time. Finally, the staff recommends that the MPAC 
determine the best organizational structure, appropriate staffing levels, and 
optimum funding method to operate the banking program. 
 Lone Star Sierra stated that some industries have requested unlimited life span 
for credits and the ability to reach back beyond 1990 for shutdown credits. Lone 
Star Sierra believes that this would not help promote attainment in the 
nonattainment areas and would allow circumvention of the 1990 FCAA Amendments. 
 Houston ALA believes that all emission reductions available for credits should 
have occurred after the initiation of the program. Texas Campaign stated that 
shutdowns should not be allowed to count as credits, regardless of the time 
frame. 
 Dow and Phillips believe that the program will penalize sources that have 
effected early reductions by unnecessarily restricting banking of ERCs to: non-
shutdown reductions occurring after the effective date of the banking 
regulation; and shutdowns occurring after January 1, 1990. Dow has concluded 
that EPA rules and policies give states the option to elect or not elect to 
allow sources to use pre-enactment ERCs for netting and/or offsets. Dow 
recommended that the TACB allow eligibility of pre-banking rule and pre-1990 
emission reductions as ERCs. TMOGA applauds the provision of sec.101.29(f)(1) 
pertaining to eligibility of permanent shutdown credits dating back to January 
1, 1990. The staff specified that in order for pre-bank shutdown to be 
creditable, the shutdown had to occur after January 1, 1990, and the emissions 
had to have been reported in the 1990 emissions inventory. The 1990 emissions 
inventory will be used as the baseline on which to calculate the emissions 
reductions necessary to reach attainment in each ozone nonattainment area. To 
allow a pre-1990 shutdown to be deposited in the bank, would mean the emissions 
would have to be added to the inventory as growth. 
 This growth would then have to be netted out by additional reductions elsewhere 
in the nonattainment area and accounted for in the attainment demonstration SIP. 
Post-1990 shutdowns which are credited to the bank will show a net air emissions 
decrease, as a result of the offset requirements and, consequently, are not 
added to the emissions inventory as growth. Therefore, the staff recommends that 
pre-1990 shutdown reductions which are creditable in the banking program remain 
limited to post-1990 shutdowns. 
 Phillips commented that, although it does not appear to be explicitly stated 
anywhere in this rule, the company understands that emission reductions which 
occurred at a grandfathered source are not eligible for emissions banking. 
Phillips believes that reductions from a grandfathered source are as effective 
as those from a permitted source. Emissions reductions from a grandfathered 
source are not exempt from the banking rule, as long as those reductions meet 
the qualifications of sec.101.29(f) which require that they be actual, 
permanent, below that required by applicable law, regulation, or permit, and 
federally enforceable. 
 EPA stated that "board order" should be added to the list of restrictions which 
includes federal and state law, regulation, or permit in sec.101.29(f). EPA 
requested that the state address for the public record why restrictions on hours 
of operation were not included with restrictions on production rate. The staff 
agrees and "board order" is added to the list of restrictions in the first 
sentence of sec.101.29(f). The staff also agrees that restrictions on hours of 
operation should be included with the restrictions on production rate in 
sec.101.29(f)(5). 
 Red Star questioned whether a source which was constructed after the reporting 
date for the 1990 Emissions Inventory are eligible for banking. Section 
101.29(f)(1) is changed to read "1990 or later emissions inventory." 
 El Paso Refinery urged the TACB to allow non-shutdown emissions reductions to 
be calculated back to the January 1, 1990, deadline date for shutdown emissions. 
As the proposed regulation is now written, non-shutdown emissions would not be 
allowed to be banked until the rule becomes final. The staff specified that non-
shutdown reductions would not be creditable until the regulation becomes final 
because of the difficulty in back-calculating non-shutdown emissions reductions 
which have occurred in the past. Shutdown reductions are inherently simpler to 
quantify, especially if the emissions inventory data was based on actual 
measurements. Non-shutdown emissions reductions which occur before the effective 
date of the regulation can still be used by industry for internal netting 
purposes. Non-shutdown emissions reductions which occurred prior to the 
effective date of the regulation will not be certified. 
 TMOGA strongly requested that the TACB consider allowing the purchase and 
retirement of "junker vehicles" as a qualified reduction credit. These junker 
vehicles generate a large part of the mobile source NO [sub]x and VOC emissions 
in the Houston-Galveston and Beaumont-Port Arthur areas. Red Star recommended 
that the TACB also grant ERCs for old gasoline fueled vehicles removed from 
service. The ERC would be equal to the difference between the emissions from the 
vehicles and the emissions from new vehicles. 
 Texas Campaign stated that auto emissions should not be considered as credits 
for industry, because people will pay to have their cars emit less only to give 
industry the ability to pollute more. One individual stated that for motor 
vehicles, "old" by years or miles, does not mean "worst air polluters" on the 
road, for example, California Air Resources Board data shows that 10 to 20% of 
new vehicles are super polluters. The individual suggested that only vehicles 
with "on-road" measured emissions data shall be eligible for a banking program. 
A vehicle scrap-page program is currently being developed by the MPAC. 
 Houston requested that sec.101.29(f)(6) be amended to include the use of 
"clean" diesel and reformulated gasoline as options, in order to maximize 
impacts and options in achieving air quality improvements through the mobile 
source banking program. Reformulated gasoline is an FCAA-mandated requirement in 
Houston and, therefore, would not be a creditable reduction for banking. Clean 
diesel would have to be classified as an alternative fuel to be creditable. 
 EPA stated that sec.101.29(f)(7) should be changed to read: "any other actual 
emissions reduction which the Executive Director and/or EPA approves as a 
qualified reduction." or sec.101.29(f) should be changed to read: "The reduced 
emissions level must be federally enforceable for the reduction to qualify." The 
second sentence of sec.101.29(f) is changed to read "federally enforceable." 
 Houston stated that sec.101.29(f)(7) should be amended to allow regulatory 
action at a regional level which exceeds mandated requirements. An example would 
be the adoption of an enhanced vehicle inspection and maintenance program where 
only a basic program is required. In these instances, the credits would be 
allocated to the implementing agency for their use. The MPAC is currently 
developing a community banking proposal. 
 Chevron, Star, and TMOGA stated that sec.101.29(g)(1) requires certifying or 
banking pre-bank reductions within six months of the rule's effective date. If 
the TACB staff delays even one month after rule effectiveness in issuing the 
approved format for banking per sec.101.29(l)(1), this timing requirement will 
be insufficient for business and industry to prepare adequate banking 
applications. This will result in undue burden on industry and unnecessary TACB 
staff time in reviewing banking applications that are insufficiently or 
inadequately prepared. Chevron and Star stated that the rule should be changed 
to require that banking applications for pre-bank reductions be submitted within 
six months of rule effectiveness or six months of the TACB issuing the final 
approved format per sec.101.29(l)(1), whichever is later. TMOGA suggested the 
time be lengthened to one year. The staff agrees that a delay in the development 
of an approved format for use in applying for an ERC deposit would impact the 
ability of industry to adequately prepare banking applications. The staff 
believes that it is incumbent upon the TACB to develop the form in a timely 
manner and recommends that form development be expedited by the TACB staff. The 
staff also recommends that the language be changed to make the six-month time 
period begin after the rule is effective or the form is developed, whichever is 
later. The staff does not believe that extending the time period to one year is 
a viable option, because of the SIP deadlines. Any pre-bank ERCs which are 
deposited must be accounted for in the November 1993 SIP submittals. Therefore, 
there will not be an extension to one year. 
 TMOGA and Chevron requested clarification of the word "external" in sec.101. 
29(g)(2) which discusses banking credits for shutdown for external offset 
purposes. TMOGA requested that the word "external" be clarified to mean outside 
the contiguous property, under one private or corporate owner or operator. Red 
Star requested clarification of the meaning of "associated emissions increase" 
in sec.101.29(g)(2). Red Star also stated that the time allowed for ERC use for 
an "associated emissions increase" must be longer than six months, because many 
facility modifications, reconstructions, etc require more than six months. Red 
Star suggested that the TACB extend the proposed time to 12 months based on EPA 
guidance (51 FR 43849, December 4, 1986) which states that ERCs may be used for 
replacement facilities if the permit application is filed within 12 months after 
the original shutdown. Lone Star Sierra recommended that sec.101.29(g)(2) be 
amended to delete the phrase "unless the shutdown occurs within six months of an 
associated emissions increase which will use the reduction credit." The 
definition of "external" means a facility or operation which is outside the 
contiguous property under one private or corporate owner or operator. This is 
the same definition of external which is commonly used in the TACB permitting 
process regarding internal netting versus external offsetting. The term 
"associated emissions increase" refers to a situation where a shutdown credit is 
externally traded. EPA guidance in April 1992 clarified a policy that a shutdown 
credit may not be traded externally to another source, unless the associated 
emissions increase occurs in the same general time frame as the shutdown is 
achieved or the shutdown credit is deposited into an emissions bank. The banking 
proposal established the same general time frame as within six months of the 
shutdown. The time frame will not be extended beyond the six-month period, nor 
will the six-month period be deleted. 
 GSU stated that the emission reduction credit bank should be used as an 
alternate method of compliance with future emission reductions under the SIP, 
for example, revisions to Regulation VII, concerning Control of Air Pollution 
From Nitrogen Compounds. As currently proposed, ERCs will only be available to 
new sources or sources undergoing modifications under NSR review. GSU stated 
that, in many cases, modifications and control retrofits to comply with future 
state and federal emission reductions under the SIP will not require 
modifications as defined under NSR. Since ERCs can only be earned by reducing 
emissions below levels required by state or federal regulations, these credits 
should also be made available to industries attempting to comply with these same 
state and federal regulations. Emission credits earned by an industry through 
the over-control of emissions could aid other industries in the area to ease 
their cost of compliance, allow for other pollution reduction programs, and 
provide incentives for facility modernization which would benefit both the 
environment and long-term economic vitality of area industries. The primary 
purpose of the banking rule, as stated in sec.101.29(a) and (h), is to provide a 
mechanism for obtaining the required offsets for VOC and NO [sub]x in ozone 
nonattainment areas. The proposal states in sec.101. 29(h) that ERCs can only be 
withdrawn for the purpose of providing offsets for new sources or sources 
undergoing modification. The staff agrees that another potential use of ERCs 
would be as an alternative compliance method for emissions reductions required 
in the SIP. The TACB staff is exploring that option as part of future revisions 
to the NO [sub]x RACT rules and the emissions banking rules. 
 TMOGA stated that the TACB should allow ERCs generated in one ozone 
nonattainment area to be used in a different, lower-designated ozone 
nonattainment area if the emissions from the generating area contribute to the 
ozone problem in the lower-designated area. TMOGA stated that there is evidence 
which suggests that the "transport phenomenon" between the Houston-Galveston 
severe area and the Beaumont-Port Arthur serious area creates such a condition 
most of the time. TMOGA stated that Congress considered this question when 
drafting the 1990 FCAA Amendments and resolved it in the FCAA Amendments, Title 
I, sec.173(c)(1), which states: "except that the State may allow...a source to 
obtain such emission reductions in another nonattainment area if, (A) the other 
area has an equal or higher nonattainment classification than the area in which 
the source is located, and (B) emissions from such other area contribute to a 
violation of the NAAQS in the nonattainment area in which the source is 
located." TMOGA believed sec.101.29(i) is confusing because it is titled 
"Withdrawals between adjacent nonattainment areas" but it addresses "different 
designated ozone nonattainment area(s)." For consistency, TMOGA suggested that 
the TACB retitle this provision, "Withdrawals between different designated ozone 
nonattainment areas" and then address adjacent nonattainment areas within the 
text. The staff agrees that the FCAA Amendments allow trading between 
nonattainment areas whenever certain conditions of ozone transport are in 
effect, and that the Houston-Galveston and Beaumont-Port Arthur ozone 
nonattainment areas potentially meet the transport conditions. However, data 
from the air monitoring networks in those areas indicate that the transport 
occurs from Houston to Beaumont and also from Beaumont to Houston. The staff is 
using the UAM to make a determination regarding the transport situation; 
however, the results of the UAM will not be available for several months. The 
staff does not recommend that the banking proposal be modified to allow 
transport region trading until the UAM results are considered. The staff agrees 
that the title and the text of sec.101.29(i) is confusing and recommends that it 
be retitled and the wording be changed to emphasize the prohibition regarding 
trading between adjacent areas. 
 Red Star questioned if trades can be made between states if the sites are 
within the same nonattainment area. Red Star stated that EPA guidance appears to 
allow this, although, it would require an individual SIP modification. Although 
the Lake Charles, Louisiana area is designated ozone nonattainment, the TACB has 
not made arrangements at this time to allow trades between states. This issue 
will be considered by the MPAC for future rulemaking regarding the banking 
provisions. 
 Chevron, Partnership, TMOGA, Star, TU Services, Biotech, EGA, and Destec 
opposed the 3.0% per year depreciation of ERCs for various reasons, claiming it 
is a disincentive to banking, that companies that reduce early will carry more 
of the burden of reasonable further progress (RFP), that offsets already provide 
RFP, that it erodes the ability for small businesses to enter the nonattainment 
area, and that it reduces the usefulness and flexibility of the banking program. 
San Jacinto ALA, Lone Star Sierra, and an individual supported depreciation to 
enhance progress towards attainment and suggested depreciations of 5.0 to 80%. 
Lone Star Sierra stated that a precedent for depreciation has been set in 
California. Monsanto stated that the proposed depreciation is in keeping with 
the Title I nonattainment provisions of the FCAA Amendments. The staff has 
proposed a depreciation rate of 3.0% per year for consistency with reasonable 
further progress goals. Any depreciation of the bank in this manner would reduce 
the amount of reductions required through additional rulemaking and improve the 
progress of each nonattainment area towards reaching attainment. The existence 
of a bank is incentive for its use. The staff has elected to use its voluntary 
efforts towards establishment of a bank as a method of achieving additional 
progress toward the attainment of the ozone standard in the nonattainment areas 
and the proposed depreciation rate will not be changed. 
 Chevron and Biotech stated that ERCs cannot be certified until they are banked 
and that credits for RFP may not be realized until several years after the 
reductions occur. The staff disagrees that depreciation of the bank will not be 
realized for several years after the reductions occur. The rule requires banking 
to occur within six months of the time reduction occurs. Once the ERC is banked, 
the TACB can depreciate the credit one year after the actual reduction occurred. 
As a result, the longest delay between a reduction and an RFP credit would be 
one year. 
 EPA suggested that the TACB clarify whether the annual reduction is 3.0% of the 
initial ERC value or 3.0% of the previous year's value. To be consistent with 
the FCAA Amendments RFP requirements, it needs to be 3.0% of the initial ERC 
value. Red Star suggested that the source need only make application for 
withdrawal of the credits before the annual depreciation to avoid penalties. The 
staff agrees with EPA and recommends language to clarify that the depreciation 
be based on the initial ERC value and occurs on the anniversary of the date the 
reduction occurred. The proposal stated that the withdrawal must have occurred 
before the anniversary of the reduction in order to avoid depreciation. This is 
consistent with EPA's requirements for RFP. 
 EPA suggested that the TACB may want to specify what happens to ERCs once they 
expire. EPA believes that expired ERCs will be deleted from the emissions 
inventory and credited towards the RFP demonstration. EPA states that credits 
that have been withdrawn from the bank for offsets cannot also be used for an 
RFP demonstration. EPA suggested that the TACB may want to restrict deposits of 
those credits generated from reductions that are anticipated to be mandated. The 
staff agrees that expired credits will be deleted from the emissions inventory 
and credited towards the RFP determination. The TACB agrees that ERCs that have 
been withdrawn for offsets cannot also be used for RFP. The TACB cannot add 
restrictions to deposits regarding reductions that are anticipated to be 
mandated until future rulemaking. However, there is a great disincentive for 
facilities to bank credits that will be lost once anticipated rulemaking is 
complete. 
 Destec and TMOGA objected to the withdrawal of credits when rules requiring 
those reductions occur. They believe that banked ERCs should be protected. The 
staff disagrees that banked emissions should be protected against withdrawal 
resulting from future regulation requirements. If banked emissions were to be 
protected, additional regulatory requirements would need to be developed to 
account for those ERCs that remained in the bank. 
 Chevron stated that the rule does not identify the point in a permit 
application process at which emissions are removed from the bank. This will lead 
to further confusion on the amount of available credits. Chevron suggested that 
the rule be changed to clarify that credits will be removed from the bank as 
soon as the ERC certificate is submitted to the TACB with a permit application. 
The staff agrees that the proposal does not specify the point at which ERCs are 
removed from the bank. In sec.101.29(l)(3), the Executive Director has 30 
calendar days to review an application for withdrawal, and upon notification of 
approval, the ERC certificate shall be submitted to the Executive Director. The 
staff believes that after withdrawal is approved by the TACB, the certificate 
should be submitted to the TACB as part of the permit application for which the 
credits will be used. The emissions credits are then removed from the bank, and 
a new certificate is issued for any remaining credits at this time. Section 
101.29(l)(3) is revised to state that the ERCs will be removed from the bank at 
the time the ERC certificate is submitted as part of the permit application. 
 TMOGA and Chevron requested that the TACB clarify whether a portion of a 
certificate may be purchased or if the entire certificate must be purchased. 
TMOGA requested that the rule be clarified to allow purchase of only a portion 
of the ERCs on a certificate because requiring the entire certificate to be 
purchased puts undue burden on small businesses and small industrial facilities 
who may need fewer tpy of emissions credits. Star stated that the rule should 
allow for the purchase or use of a portion of a certificate. The rule states in 
sec.101.29(k)(1), regarding Transfers, that the certificate may be freely 
transferable, in whole or in part, and may be sold or conveyed in any manner in 
accordance with the laws of the State of Texas. 
 Red Star recommended that the rule state that if a business entity legally 
dissolves without dispensing their ERCs, those ERCs become the property of the 
TACB. The regulation should also specify that the TACB dispense with the ERCs 
within one year after obtaining right to them or by the five-year expiration 
date since the company would have dispensed of the ERCs before they expired. 
Southern requested that the TACB establish and include monetary values for NO 
[sub]x and VOC credits in its proposed regulations, as well as fully-explained 
methodologies for calculating potential ERCs in its proposed regulations. 
Language regarding the legal dissolution of entities holding ERCs and monetary 
values for ERCs was not contained in the proposed rule and cannot be added at 
this time. The staff recommends that the MPAC consider these suggestions in 
subsequent rulemaking. 
 The MPAC stated that sec.101.29(k)(1) refers to transferring certificates, but 
what is really being transferred is credits, and recommended that the language 
be changed to reflect that. Second, the section requires notification to the 
Executive Director "within 30 days of any transfer." Since the TACB is the 
registrar of credits, a transfer should only take place when the TACB transfers 
credits on its registry. The action of the buyer and seller is merely an 
agreement to transfer credits. This is like a stock transaction, where stock is 
actually transferred when it is transferred on the stockholder records of the 
corporation and a new stock certificate is issued. The rule should be consistent 
with this. Third, the section should be amended to require that the transferor 
disclose the cash price and/or any other consideration contracted for or 
received in return for the transfer of the credits to the transferee. This is 
vital to the efficient working of a market system. Prices must be generally 
available and known to the potential market participants in order for them to 
make efficient economic decisions. This is consistent with the operations of the 
stock markets and commodities markets and is possibly the most valuable 
contribution of this rule toward decreasing pollution. The staff agrees that 
sec.101.29(k)(1) should state that credits are being transferred, rather than 
certificates and the rule language is changed to reflect that. The staff also 
agrees that the transfer of credits takes place when the TACB transfers credits 
on its registry and the rule language is changed to reflect that. The suggestion 
that the transferor be required to disclose the price and other considerations 
received as a result of the transfer was not included in the proposed language 
and, therefore, cannot be implemented at this time. However, sec.101.29(l)(3) 
states that an application for withdrawal shall be submitted in a format 
approved by the Executive Director, which logically could include price 
information. The staff will ask the MPAC to help the staff develop an 
application withdrawal form which would address this request. 
 The Partnership stated that the TACB should assure that the banking of emission 
reductions is purely voluntary and that failure to bank those credits will not 
impact a source's ability to use those reductions on an internal basis. In 
support of this concept, the Partnership requests that the fourth sentence of 
sec.101.29(l)(1) be rewritten as follows: "However, such a reduction will still 
be available for internal netting purposes or for internal or external 
offsetting purposes." This statement explicitly clarifies that the only penalty 
for failing to timely bank an emissions reduction is that the source is 
foreclosed from using the bank in the future for that particular reduction. 
However, the source will still be able to use the reduction for internal netting 
or internal/external offsets as is currently allowed today. Vought stated that 
they were confused regarding use of a non-creditable reduction for internal 
netting purposes. Dow believes that the proposed banking rules, if adopted, must 
explicitly state that the bank governs only voluntary submittals by sources to 
the bank and does not preclude, supersede, or otherwise affect sources' rights 
to save and use "unbanked" ERCs as specified by Regulation VI, sec.116.3(c). The 
banking rules must also state that they do not set precedent or agency policy 
with respect to the creditability or use of "unbanked" ERCs under Regulation VI, 
sec.116.3(c). The staff believes that the commenters have raised two separate 
issues which must be clarified. First, if a reduction was not registered with 
the bank in a timely manner, should that reduction be available for both 
internal netting and internal offsetting purposes? The staff believes that the 
reduction should be readily available for internal netting purposes as specified 
in the current Regulation VI, regarding permits. The staff does not believe that 
the reduction would be used for internal offset purposes, because the company 
will use the internal netting process to avoid the offset requirements of 
nonattainment area permit reviews. Therefore, if the company does not have a 
sufficient amount of reductions to accomplish an internal netting process, then 
the company probably would not have an additional amount of reductions to 
accomplish an internal offset process. The staff, therefore, believes internal 
offsetting with unregistered reductions is a policy issue which should be 
addressed with the TACB permitting staff and does not recommend changing the 
rule language to specifically allow internal offsetting. 
 The second issue concerns whether a company should be allowed to use 
unregistered reductions to perform external offset trading as is allowed by the 
current permits regulation. The staff believes that if the banking proposal 
prohibits the use of unregistered reductions for external offset trading, i.e., 
mandates that external offset trading must be performed with banked reductions, 
then the banking program would no longer be voluntary. Therefore, the rule 
language in sec.101.29(l)(1) will specify that unregistered reductions will be 
available for external offsetting purposes. 
 Dow was concerned that there is presently no clear procedure for the TACB to 
explicitly account for all ERCs in attainment demonstrations at the source where 
they were created. Without such a procedure, ERCs could be rendered invalid for 
use as emission offsets. This would create shortages of the ERCs which are 
essential to the economic viability of the nonattainment areas. Dow believes 
that a more comprehensive banking rule would address this need by requiring 
mandatory banking of all ERCs that a source would intend to use in future 
netting and offsetting transactions. The collection of all ERCs in a 
comprehensive bank would prevent "double counting" of ERCs and would make all 
ERCs available to be properly accounted for in state attainment demonstrations. 
Dow recommended that the TACB require mandatory banking of all ERCs that a 
source would intend to use in future netting and offset transactions. The staff 
agrees that a comprehensive bank in which all emission reductions were 
registered would properly account for those reductions in the SIP process. 
However, the banking proposal did not mandate registration of all emissions 
reductions and, therefore, cannot be changed at this time to make registration 
mandatory. This issue may be considered in future banking rulemaking. 
 EPA stated that it was its understanding that under the State Freedom of 
Information Act, information concerning banked reductions must be available to 
the public even if the information is not computerized. Chevron and TMOGA 
requested that sec.101.29(m) be clarified such that the TACB regional office for 
the given ozone nonattainment area and the TACB Austin office will both provide 
public access to ensure that anyone can easily view the data base. 
 The staff agrees that the banking information must be available to the public, 
even if it is not computerized. The staff also agrees that the information 
should be available at both the TACB Austin offices and each TACB regional 
office associated with the ozone nonattainment areas. The language is changed to 
reflect the availability of the banking information. 
 EGA recommended each bank or clearinghouse identify ERCs available from plant 
closures and control technology applications beyond RACT, including demand-side 
management programs and mobile source reductions. 
 The ERC data base will include all emissions reductions that have been 
registered or certified. 
 In compliance with the Americans With Disabilities Act, this document may be 
requested in alternate formats by contacting Air Quality Planning Program staff 
at (512) 908-1457, (512) 908-1500 FAX or 1 (800) RELAY-TX (TDD), or by writing 
or visiting at 12124 Park 35 Circle, Austin, Texas 78753. 
 The amendment and new section are adopted under the Texas Clean Air Act (TCAA), 
sec.382.17, Texas Health and Safety Code (Vernon 1990), which provides TACB with 
the authority to adopt rules consistent with the policy and purposes of the 
TCAA. 
 
 
  sec.101.1. Definitions.  Unless specifically defined in the Texas Clean Air 
Act (TCAA) or in the rules of the Board, the terms used by the Board have the 
meanings commonly ascribed to them in the field of air pollution control. In 
addition to the terms which are defined by the TCAA, the following words and 
terms, when used in this chapter, shall have the following meanings, unless the 
context clearly indicates otherwise. 
   
     Actual emissions (applies only to nonattainment area, new source review 
rules pursuant to Federal Clean Air Act provisions) -Actual emissions as of a 
particular date shall equal the average rate, in tons per year, at which the 
unit actually emitted the pollutant during a two-year period which precedes the 
particular date and which is representative of normal source operation. The 
Executive Director shall allow the use of a different time period upon a 
determination that it is more representative of normal source operation. Actual 
emissions shall be calculated using the unit's actual operating hours, 
production rates, and types of materials processed, stored, or combusted during 
the selected time period. The Executive Director may presume that the source-
specific allowable emissions for the unit are equivalent to the actual 
emissions, e.g., when the allowable limit is reflective of actual emissions. For 
any emissions unit which has not begun normal operations on the particular date, 
actual emissions shall equal the potential to emit of the unit on that date. 
   
     Emissions banking -A system for recording emissions reduction credits so 
they may be used or transferred for future use. 
   
     Emissions reduction credit-Any emissions reduction which has been banked in 
accordance with sec.101.29 of this title (relating to Emissions Banking). 
   
     Emissions reduction credit certificate-The certificate issued by the 
Executive Director which indicates the amount of qualified reduction available 
for use as offsets and the length of time the reduction is eligible for use. 
   
     Potential to emit (applies only to nonattainment area, new source review 
rules pursuant to Federal Clean Air Act provisions)-The maximum capacity of a 
facility/stationary source to emit a pollutant under its physical and 
operational design. Any physical or enforceable operational limitation on the 
capacity of the facility/stationary source to emit a pollutant, including air 
pollution control equipment and restrictions on hours of operation or on the 
type or amount of material combusted, stored, or processed, shall be treated as 
part of its design only if the limitation or the effect it would have on 
emissions is federally enforceable. Secondary emissions, as defined in 40 Code 
of Federal Regulations, 51.165(viii), do not count in determining the potential 
to emit of a stationary source. 
   
     Stationary source (applies only to nonattainment area, new source review 
rules pursuant to Federal Clean Air Act provisions) -Any building, structure, 
facility, or installation which emits or may emit any air pollutant subject to 
regulation under the Federal Clean Air Act. 
 
   
  sec.101.29. Emissions Banking. 
 
  (a) Applicable Pollutants. Qualified reductions of volatile organic compounds 
(VOC) as defined in sec.101. 1 of this title (relating to Definitions) and 
nitrogen oxides (NO  [sub]x) shall be eligible for deposit in the bank. 
Interpollutant trading, for example, using a NO point=4.52p  [sub]x credit to 
offset a VOC emission is not allowed. 
   
  (b) Applicable Areas. The only geographical areas in which eligible sources 
may participate in the emissions banking program are the federally designated 
ozone nonattainment areas. 
   
  (c) Eligible Source. The following sources are eligible to participate in the 
emissions banking program for a designated ozone nonattainment area: 
 
  (1) any stationary source; 
   
  (2) any area source; and 
   
  (3) any mobile source registered in the designated ozone nonattainment area. 
     
  (d) Length of Time Available as an Offset. A certified Emissions Reduction 
Credit (ERC) is available for use to fulfill an offset requirement during the 
five-year period after the reduction was actually achieved. The banking 
applicant shall identify the date the reduction was actually achieved. The ERC 
certificate shall indicate the expiration date for the certified reduction. If 
an ERC is withdrawn from the bank prior to the five-year expiration and 
submitted with a complete permit application for use as an offset, the ERC 
remains usable for the lifetime of the new facility or modification proposed for 
offset. 
   
  (e) ERC Certification or Registration. 
 
  (1) ERCs will be certified for any emissions reduction of a minimum of 10 tons 
per year (tpy) VOC or 10 tpy NO  [sub]x, and which has been registered in 
accordance with this section, in the following priority order: 
 
  (A) reductions resulting from shutdowns; 
   
  (B) reductions from facilities with two years of continuous emissions 
monitoring data prior to the reduction and a permit allowable limit with a 
provision for continuous emissions monitoring; 
   
  (C)  reductions from facilities that have had a permit issued, amended, or 
renewed which included a review of the reduced source(s) no more than two years 
prior to the reduction; 
   
  (D) reductions from facilities with standardized calculating methods such as 
storage tanks, loading operations, coating operations, and alternative solvents; 
   
  (E) any other reductions as resources are available to complete the 
certification. 
     
  (2)  When each bank has a minimum balance of 1,000 tpy of certified emissions 
reductions of a given pollutant in a given nonattainment area, the remaining 
emissions reductions applications will be registered, but not certified. 
Whenever any bank balance drops below 700 tpy, registered emissions reductions 
will be certified in the order they were received, with consideration to the 
priority provided in paragraph (1) of this subsection, to return the bank 
balance to a minimum of 1,000 tpy. 
   
  (3) The emission reduction amounts shall be determined and certified based on 
actual monitoring results, when available, or otherwise calculated using good 
engineering practices. An ERC certificate will be issued by the Executive 
Director which indicates the amount of certified emissions reduction which is 
available for use as offsets and the length of time the reduction is eligible 
for use. 
     
  (f)  Qualified Reduction. A qualified reduction is a reduction in emissions of 
an applicable pollutant from an eligible source located in an applicable area, 
which results in an actual and permanent emissions decrease below that required 
by applicable state or federal law, regulation, board order, or permit. The 
reduced emissions level must be federally enforceable for the reduction to 
qualify. Emissions reductions may come from any eligible sources, including 
stationary, area, and mobile sources. Applications for mobile source reductions 
will be certified beginning January 1, 1994. The Executive Director shall have 
the authority to inspect and request information to assure that the emissions 
reduction has been actually achieved. Qualified reductions include, but are not 
limited, to the following: 
 
  (1) an actual emissions reduction resulting from a permanent shutdown of 
equipment after January 1, 1990, and which causes a loss of capability to 
produce emissions that were reported in the 1990 or later emissions inventory; 
   
  (2) an actual emissions reduction resulting from the installation of a level 
of control greater than that which is required by regulation, permit, Board 
order, or State Implementation Plan (SIP) provision if the applicant accepts a 
permit provision specifying a lower level of emissions; 
   
  (3) an actual emissions reduction resulting from the installation of different 
processes or equipment which emit less than the previous processes or equipment 
that performed the same function if the applicant accepts a permit provision 
specifying a lower level of emissions; 
   
  (4) an actual emissions reduction resulting from more effective operation and 
maintenance of abatement and process equipment if the applicant accepts a permit 
provision specifying a lower level of emissions; 
   
  (5) an actual emissions reduction resulting from a reduction in production 
rates, or a restriction on hours of operations, if the applicant accepts a 
permit provision specifying a lower level of emissions, a limit at that 
production rate, or restricted operating hours; 
   
  (6) an actual emissions reduction resulting from the utilization of 
alternative fuel vehicles beyond that which is required by law, regulation, or 
permit which has occurred after January 1, 1992; and 
   
  (7) any other actual emissions reduction which the Executive Director or 
United States Environmental Protection Agency approves as a qualified reduction. 
     
  (g)  Deposits. There are special deposit timelines regarding pre-bank 
reductions and shutdowns. 
 
  (1) Depositing pre-bank reductions. Applications to deposit a qualified 
emissions reduction resulting from a shutdown which occurred between January 1, 
1990, and the effective date of this regulation, must be received within six 
months after the effective date of this regulation or within six months of TACB 
issuing the final approved format identified in subsection (l)(1) of this 
section, whichever is later. All other emissions reductions shall have occurred 
after the effective date of this regulation to qualify for a credit. The SIP 
revisions, permit revisions, or regulatory amendments, which have occurred prior 
to the deposit registration, shall be the basis for determining the eligibility 
of the emissions reductions to be banked. 
   
  (2) Mandatory Banking of Credits From Shutdown For External Offset Purposes. 
An emissions reduction due to the shutdown of a source must be banked to be used 
as an external offset, unless the shutdown occurs within six months of an 
associated emissions increase which will use the reduction credit. 
     
  (h) Withdrawal of Credits. Certified emissions reduction credits can be 
withdrawn only for use within the same designated ozone nonattainment area and 
for the following purposes: 
 
  (1) providing offsets for new sources; or 
   
  (2) providing offsets for modifications to an existing source. 
     
  (i) Trading between adjacent nonattainment areas in transport regions. ERCs 
generated in one designated ozone nonattainment area cannot be traded to an 
adjacent ozone nonattainment area. 
   
  (j) Depreciation. The Executive Director is prohibited from depreciating any 
ERC, except under the following circumstances: 
 
  (1) the credit will incur an annual 3.0% depreciation on the anniversary of 
the date the reduction occurred based on the initial ERC value as a 
demonstration of reasonable further progress toward ozone attainment; or 
   
  (2) the ERC certificate has expired; or 
   
  (3) regulatory changes were promulgated after the ERC certificate has been 
issued which would have required reductions from the source that created the 
qualifying reduction. The credit shall be reduced by the amount affected by the 
regulatory change. 
     
  (k) ERC Use. The use of ERCs will be accomplished either through transfers or 
withdrawals. 
 
  (1) Transfer. The credit may be freely transferable, in whole or in part, and 
may be sold or conveyed in any manner in accordance with the laws of the State 
of Texas. The Executive Director shall be notified within 30 days of any 
transfer of the credit to another party. The old certificate shall be submitted 
to the Executive Director, who shall then issue a new certificate indicating the 
new owner. In the case of a partial transfer, the Executive Director shall issue 
a new certificate to the new owner as well as a revised certificate to the 
current owner reflecting the available credits to each owner. 
   
  (2) Withdrawal. Only the owner of the certificate is eligible to withdraw 
deposits from the bank. Once a certificate has been issued, the ERC shall be 
valid for the time period indicated on the certificate, unless the certificate 
has been depreciated in accordance with subsection (j) of this section. 
     
  (l) Program Administration. The administration of the emissions banking 
program includes deposit registration, deposit certification, and ERC 
withdrawal. 
 
  (1)  Deposit Registration. A deposit registration of a qualified emissions 
reduction in the ERC bank is voluntary. Deposit registrations should be 
submitted in an approved format to the Executive Director. In order to use the 
bank, an emissions reduction must be registered within six months of achieving 
the actual emissions reduction, with the exception of the pre-bank reductions 
identified in subsection (g)(1) of this section. Failure to file in a timely 
manner will result in forfeiture of the ability to bank the emissions reduction. 
However, such a reduction will still be available for netting or offsetting 
purposes. The Executive Director shall annotate the deposit registration with 
the date of receipt. If the Executive Director determines that the emissions 
reduction does not qualify for registration, the applicant shall be notified, 
within 60 calendar days of receipt of the registration, with a letter which 
states the reasons for registration denial. 
   
  (2)  Deposit Certification. The Executive Director will certify emissions 
reduction credits in accordance with the guidelines stated in subsection (e) of 
this section. The applicant shall be notified in writing of the Executive 
Director's certification decision. If the decision is to grant the ERC as 
registered, the ERC certificate shall be mailed to the owner. If the decision is 
to grant less credit than the deposit registration or to deny certification, the 
letter shall state the specific reasons for the decision. The applicant will 
then have 30 days to respond in writing to the Executive Director. If the 
Executive Director affirms the certification decision, the applicant may appeal 
to the Board. The Board, at its option, may hear the appeal directly or may 
appoint a hearing examiner to obtain evidence from the applicant and staff and 
provide an advisory opinion to the Board. Such a hearing shall be conducted in 
accordance with the rules of evidence, but need not meet all the formal 
procedures for a contested case hearing. If called, the hearing shall be held 
within 60 days of the Executive Director's receipt of the applicant appeal. The 
hearing examiner report shall be submitted to the Board within 30 days of the 
close of the hearing. 
   
  (3) ERC Withdrawal. The owner of an ERC certificate shall submit an 
application for withdrawal in a format approved by the Executive Director. The 
Executive Director shall have 30 calendar days to review the application. Upon 
notification of approval, the old certificate shall be submitted to the 
Executive Director as part of the nonattainment review permit application that 
requires offsets. The Executive Director shall remove the credits from the bank 
and issue a new certificate if any reduction credit is remaining. If the 
Executive Director denies the application, the applicant may appeal to the 
Board. The appeal will be handled in accordance with the procedures for appeal 
of decisions affecting deposit applications. 
     
  (m) Public Access. It is the goal of the TACB to establish a computerized data 
base which will allow the public to ascertain the amount of reductions which are 
registered or banked in each designated ozone nonattainment area. In lieu of a 
computerized data base, a paper copy of the amount of reductions which are 
registered or banked will be available at the Austin TACB office and the TACB 
regional office associated with each ozone nonattainment area. The registry 
shall not contain proprietary information. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 22, 1993. 
 TRD-9319354 
  Lane Hartsock 
 Deputy Director, Air Quality Planning 
 Texas Air Control Board 
    Effective date: March 15, 1993 
 Proposal publication date: September 11, 1992 
 For further information, please call: (512) 908-1451 
         
                 
  TITLE 40. SOCIAL SERVICES AND ASSISTANCE 
 Part IX. Texas Department on Aging 
  Chapter 255. State Delivery Systems 
  
  40 TAC sec.255.35 
 
  The Texas Department on Aging adopts the repeal of sec.255.35 concerning 
staffing of area agencies on aging, without changes to the proposed text as 
published in the January 1, 1993, issue of the Texas Register (18 TexReg 38). 
 Section 255.35 has been revised in its entirety and resubmitted for proposed 
adoption under sec.255.35 of this chapter concerning area agency on aging 
operations. 
 Without adoption of this repeal, duplication of rules will occur. 
 No comments were received regarding adoption of the repeal. 
 The repeal is adopted under the Human Resources Code, Chapter 101, which 
provides the Texas Department on Aging with the authority to promulgate rules 
governing the operation of the department. 
 
  
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319490 
  Mary Sapp 
 Executive Director 
 Texas Department on Aging 
    Effective date: March 17, 1993 
 Proposal publication date: January 1, 1993 
 For further information, please call: (512) 444-2727 
         
         
  40 TAC sec.255.36 
 
  The Texas Department on Aging adopts the repeal of sec.255.36, concerning 
operating an area agency on aging, without changes to the proposed text as 
published in the January 1, 1993, issue of the Texas Register (18 TexReg 47). 
 Section 255.36 has been revised in its entirety and resubmitted for proposed 
adoption under sec.255.36 of this chapter dealing with policies and procedures 
for approval of direct services applications by area agencies on aging. 
 Without adoption of this repeal, recodification of these rules could not be 
accomplished. 
 No comments were received regarding adoption of the repeal. 
 The repeal is adopted under the Human Resources Code, Chapter 101, which 
provides the Texas Department on Aging with the authority to promulgate rules 
governing the operation of the department. 
 
 
  sec.255.36. Operating an Area Agency on Aging. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319491 
  Mary Sapp 
 Executive Director 
 Texas Department on Aging 
    Effective date: March 17, 1993 
 Proposal publication date: January 1, 1993 
 For further information, please call: (512) 444-2727 
         
         
  40 TAC sec.255.36 
 
  The Texas Department on Aging adopts the new sec.255.36 concerning policies 
and procedures for approval of direct services applications by area agencies on 
aging, with changes in the proposed text as published in the January 1, 1993, 
issue of the Texas Register (18 TexReg 48). 
 The justification for the new procedures for approval of direct services is 
that it establishes simplified procedures and reduced documentation to support 
these applications by area agencies. 
 The rule will function to improve understanding of the processes used by the 
Department to analyze and validate applications by area agencies to provide 
direct services. 
 During the public comment period, comments were received from the Department 
Board operations committee which recommended a change to the wording in 
subsection (c)(1)(B)(vi) relating to transportation as a direct service. 
 This recommendation was incorporated into the language of the adopted rule. 
 The new section is adopted under the Human Resources Code, Chapter 101, which 
provides the Texas Department on Aging with the authority to promulgate rules 
governing the operation of the Department. 
 
 
  sec.255.36. Policies and Procedures For Approval of Direct Services 
Applications By Area Agencies on Aging. 
 
  (a)-(b) (No change.) 
   
  (c) Processing direct service applications. 
 
  (1) (No change.) 
 
  (A) (No change.) 
   
  (B) administrative functions; 
 
  (i)-(v) (No change.) 
   
  (vi) other appropriate services provided by a grantee agency; 
     
  (C) (No change.) 
     
  (2) (No change.) 
     
  (d)-(e) (No change.) 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319496 
  Mary Sapp 
 Executive Director 
 Texas Department on Aging 
    Effective date: March 17, 1993 
 Proposal publication date: January 1, 1993 
 For further information, please call: (512) 444-2727 
         
             Chapter 289. Procedures for Approval of Area Agency Requests to 
Provide Services Directly. 
  
  40 TAC sec.sec.289.1, 289.5, 289.7, 289.11, 289.13, 289.17 
 
  The Texas Department on Aging adopts the repeal of sec. sec.289.1, 289.5, 289. 
7, 289.9, 289.11, 289.13, and 289.17 concerning procedures for approval of area 
agency requests to provide services directly, without changes to the proposed 
text as published in the January 1, 1993, issue of the Texas Register  (18 
TexReg 56). 
 Chapter 289 has been revised in its entirety and resubmitted for proposed 
adoption under sec.255.36 of this title dealing with procedures for approval of 
area agency requests to provide services directly. 
 Without adoption of this repeal, recodification of the rules could not be 
accomplished. 
 No comments were received regarding adoption of the repeals. 
 The repeals are adopted under the Human Resources Code, Chapter 101, which 
provides the Texas Department on Aging with the authority to promulgate rules 
governing the operation of the department. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319492 
  Mary Sapp 
 Executive Director 
 Texas Department on Aging 
    Effective date: March 17, 1993 
 Proposal publication date: January 1, 1993 
 For further information, please call: (512) 444-2727 
         
         Chapter 291. Area Agency on Aging Program Development Services 
  
  40 TAC sec.sec.291.1, 291.2, 291.3, 291.4, 291.5, 291.6 
 
  The Texas Department on Aging adopts the repeal of sec. sec.291.1, 291.2, 291. 
3, 291.4, 291.5, and 291.6 concerning procedures for area agency on aging 
program development, without changes to the proposed text as published in the 
January 1, 1993, issue of the Texas Register (18 TexReg 57). 
 Chapter 291 has been revised in its entirety and resubmitted for proposed 
adoption under sec.255.37 of this title dealing with procedures for approval of 
area agency requests to conduct program development activities. 
 Without adoption of the repeals, recodification of the rules could not be 
accomplished. 
 No comments were received regarding adoption of the repeals. 
 The repeals are adopted under the Human Resources Code, Chapter 101, which 
provides the Texas Department on Aging with the authority to promulgate rules 
governing the operation of the department. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 24, 1993. 
 TRD-9319493 
  Mary Sapp 
 Executive Director 
 Texas Department on Aging 
    Effective date: March 17, 1993 
 Proposal publication date: January 1, 1993 
 For further information, please call: (512) 444-2727 
         
    Texas Department of Insurance Exempt Filing  
  Notification Pursuant to the Insurance Code, Chapter 5, Subchapter L 
 
  (Editor's Note: As required by the Insurance Code, Article 5.96 and 5. 97, the 
Texas Register publishes notices of actions taken by the State Board of 
Insurance pursuant to Chapter 5, Subchapter L, of the Code. Board action taken 
under these articles is not subject to the Administrative Procedure and Texas 
Register Act. 
 These actions become effective 15 days after the date of publication or on a 
later specified date. 
 The text of the material being adopted will not be published, but may be 
examined in the offices of the State Board of Insurance, 333 Guadalupe, Austin. 
) 
   
  The State Board of Insurance, of the Texas Department of Insurance, at a Board 
meeting scheduled for 9 a.m. January 28, 1993, in Room 100 of the Texas 
Department of Insurance Building, 333 Guadalupe Street in Austin, adopted a 
proposal filed on behalf of the Texas Workers' Compensation Insurance Facility 
(the Facility). The Facility proposed amendments to the rules and regulations 
governing the Employers' Rejected Risk Fund. The amendments were proposed in a 
petition (Reference Number W-1192-67), filed by the Facility on November 5, 1992 
and published in the December 22, 1992, issue of the Texas Register (17 TexReg 
9023). 
 According to the Facility's petition, the adopted amendments are designed to 
accomplish three objectives: first, to provide more flexibility in structuring 
deposit premium and payment plan terms; second, to differentiate between interim 
reporting plans and installment payment plans; and third, to clarify that 
interest is to be charged only on that premium which is deferred under 
installment plans and not charged on premium which is paid on monthly reporting 
plans. 
 The State Board has jurisdiction over this matter pursuant to the Insurance 
Code, Articles 5.76-2 and 5.96. 
 The full text of the amendments adopted by The State Board of Insurance is 
filed with the Chief Clerk under Reference Number W-1192-67, and is incorporated 
by reference by Board Order 60206. 
 This notification is made pursuant to the Texas Insurance Code, Article 5. 96, 
which exempts if from the requirements of the Administrative Procedures and 
Texas Register Act. 
   
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 25, 1993. 
 TRD-9319535 
  Linda K. von Quintus-Dorn 
 Chief Clerk 
 Texas Department of Insurance 
    Effective date: April 1, 1993 
 Proposal publication date: December 22, 1992 
 For further information, please call: (512) 463-6327 
         
   
  The State Board of Insurance of the Texas Department of Insurance, at a Board 
meeting held at 9 a.m. on February 18, 1993, in Room 100 of the Texas Department 
of Insurance Building, 333 Guadalupe Street, Austin adopted amendments proposed 
by the Texas Automobile Insurance Service Office (TAISO). TAISO's petition 
proposed amendments to the Texas Automobile Liability Experience Rating Plan 
(the Plan). One of the changes amends Definition 17 ("Adjusted Loss Ratio") in 
Section I ("Special Definitions") of the Plan to correct an error that occurred 
when new definitions were added and some remaining ones were renumbered. The 
other change amends Section II ("Eligibility Requirements and Miscellaneous 
Rating Rules") of the Plan, to add to Rule 2 ("Experience Period"), two words 
that were omitted in error when the Plan was revised effective November 1, 1987. 
TAISO's petition (Reference Number A-1192-69) was published in the January 15, 
1993, issue of the Texas Register (18 TexReg 296). 
 The State Board of Insurance has jurisdiction over this matter pursuant to the 
Insurance Code, Articles 5.06 and 5.96. 
 The amendments as adopted by the State Board of Insurance are shown in exhibits 
B and D, which were filed with the Chief Clerk under Reference Number A-1192-69, 
and are incorporated by reference into Board Order Number 60207. 
 This notification is made pursuant to the Texas Insurance Code, Article 5. 96, 
which exempts it from the requirements of the Administrative Procedure and Texas 
Register Act. 
 Consistent with the Texas Insurance Code, Article 5.96(h), the Department will 
notify all insurers writing automobile insurance of this adoption by letter 
summarizing the Board's action. 
   
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on February 25, 1993. 
 TRD-9319534 
  Linda K. von Quintus-Dorn 
 Chief Clerk 
 Texas Department of Insurance 
    Effective date: March 20, 1993 
 Proposal publication date: January 15, 1993 
 For further information, please call: (512) 463-6327