March 7, 2001

 

Ms. Toni Booker

LDEQ-OES

Permits Division

P.O. Box 82135

Baton Rouge, LA 70884-2135

 

Via Facsimile (225) 765-0222 and First Class Mail

 

RE:     Comments Filed on Behalf of the Louisiana Environmental Action Network (LEAN) and Inez Cooper concerning Proposed Emission Reduction Credits for Dow Chemical Company, Plaquemine, Iberville Parish, Louisiana Review Nos. 12685, 27321 and AI1409[1]

 

I.                   Introduction

In relation to its Title V Permit Modification, Dow Chemical Company ("Dow") has submitted to the Louisiana Department of Environmental Quality ("DEQ") a request that DEQ credit Dow for more than 2,500 tons of volatile organic compound emission reductions to be deposited in DEQ’s Emission Reduction Credit Bank.  If allowed, these reductions would be available for offsetting future increases in emissions, and in particular, to justify increased emissions caused by Dow’s “Engage” plant modification.    While in theory, offsets should result in a net reduction of air emissions, there will be no net reductions from Dow.  Instead, the offsets allow Dow to expand and increase emissions in an area that already violates minimum federal standards for health protection. 

Louisiana’s offset system breaks down because, as the U.S. Environmental Protection Agency (“EPA”) has recognized, DEQ's offset program violates federal law.  Moreover, given the inadequate recordkeeping employed by DEQ in managing its illegal offset "bank," credits are "double dipped" and used more than once to justify emission increases or to attain a milestone.  Indeed, many of the credits Dow now seeks to certify have been required or used before.  In addition, many of Dow’s credits are not valid as a matter of state and federal law. 

Until DEQ's offset program is reformed to comply with the minimum standards of the Clean Air Act, DEQ must not "bank" any emission reduction credits nor permit their use for the further emission of pollution into the environment.  Furthermore, the burden is on Dow and DEQ to demonstrate the validity of Dow's proposed credits.  Dow and DEQ have not meet that burden and thus, the credits must not be certified.  On the record before DEQ, it would be arbitrary, capricious and illegal for DEQ to grant Dow’s application for credits.  Accordingly, Dow’s application to bank these credits must be denied.

II.                DEQ's "Bank" of emission offset credits violates federal law.

 

In July 1999, EPA approved Louisiana's regulations on the banking and use of credits for voluntary emission reduction with the understanding that the credits would be “surplus” at the their time of use.  63 Fed.Reg. 44192, 44200.  In other words, past credits must be reduced or eliminated when changes in law render emission reductions mandatory rather than voluntary.  Since EPA’s approval, however, DEQ has clarified that it "intended, interprets and has applied [its regulations] to prohibit such a reduction in quantity of emission reduction credits" and instead only requires that credits be surplus "when generated" to be valid for crediting.  Letter from Bliss Higgins, Assistant Secretary of DEQ, to Carl Edlund, EPA Region VI (10/5/00), at 1.[2]  Clearly, therefore, DEQ’s emission banking system violates federal law.

Federal law requires that emission reduction credits be surplus at the time of use.  Specifically, the Clean Air Act provides that "emission reductions otherwise required by this chapter shall not be creditable as emission reductions for purposes of any such offset requirement."  42 U.S.C. § 7503(c)(2). 

EPA has already announced its opinion that Louisiana's "banking" program is illegal.  Specifically EPA explained:

Under Clean Air Act section 173(c)(2), ERCs must be surplus at the time they are used as offsets.  EPA approved Louisiana's permitting and banking regulations (L.A.C. 33:III.504.F.10 and 623.B.1) on the basis that the regulations required that ERC's must be surplus at the time of use as offsets.  Any other interpretation of the State's regulations would not have been consistent with Section 173(c)(2) of the Act, which requires that "emissions reductions otherwise required by the Act" cannot be used as offsets."

 

In re Operating Permit, Formaldehyde Plant Borden Chemical Inc., Petition No. 6-01-1, at p. 18 (U.S. EPA, Dec. 22, 2000).[3]  Therefore "even if an ERC certificate has been validly issued, LDEQ must certify the ERCs as surplus at the time the credits are used to account for any new federal or state statutes, regulations, or permits which establish new baseline emission limits."  Id. at 19.

DEQ has acknowledged that its regulations do not meet the standard announced by EPA. Letter from Bliss Higgins, Assistant Secretary of DEQ, to Carl Edlund, EPA Region VI (10/5/00), at 2.  DEQ admits that its Emission Reduction Banking System establishes definitions and procedures for calculating credits that set forth a "surplus when generated" approach and further provides for the protection of credits once approved (LAC 33:III.605, 607.G and 621).  Such an interpretation harms public health by permitting emissions to exceed the maximum allowed under federal law.  Clearly, DEQ's "bank" is illegal and DEQ may not use the bank until its Emission Reduction Banking System is revised to meet minimum federal standards

III.             DEQ has mismanaged the bank.

 

      EPA has specifically found that "it is difficult to access data documenting the amount of valid CAA offset credits in Louisiana's bank and that there are insufficiencies in the banking database."   Joint Motion for Voluntary Remand, LEAN, et al. v. U.S. EPA, 99-60570 (5^th Cir. October 9, 2000).

DEQ's management provides a confusing array of documents and numbers that show an overall uncertainty as to what is, and what isn't, in the bank.  In fact, DEQ itself often does not know what is in the bank and what is not.  For example, on March 15, 2000, DEQ submitted to the 19th Judicial District Court a document entitled "VOC Emissions Reduction Credits Banked in The Baton Rouge Ozone Nonattainment Area As of March 13, 2000," which revealed DEQ’s lack of record-keeping. Barry Brooks of DEQ certified the list as being a true copy of the books, records, papers, or other documents that were in the custody of DEQ and as being a reflection of the data known by DEQ as of that date.  According to DEQ, a total of 6,787.2 emission reduction credits were available for use as offsets or netting, including 4,051.7 listed credits for Dow.  However, in the Louisiana emission reduction database, dated one day before DEQ's submission of this document to the court, there were no Dow credits listed.  In fact, many of the applications now being put forth by Dow are the exact credits that were already certified as being banked. 

This submission by DEQ to a court of law of an obviously inaccurate document destroys DEQ's credibility as the administrator of the bank.  This action demonstrates that DEQ's bank is "broken." DEQ cannot even keep track of what credits are in, or not in, the bank.

Given DEQ's inability to keep track of Bank credits or to provide the public with adequate information to determine the validity of credits, DEQ and Dow must affirmatively demonstrate that the credits at issue here are valid.  DEQ and Dow have not met that burden.         

IV.              until LEGALLY REQUIRED COntingency Measures are Implemented, no transactions should be allowed THAT AFFECT THE EMISSION REDUCTION CREDIT bank.

 

Under the Louisiana Administrative Code § 621(B)(1), when a "milestone" has been missed, the state shall confiscate the amount of credits needed to satisfy the missed milestone.   Therefore, if Louisiana fails to attain the national standard for ozone or if it fails to make reasonable further progress, the Bank must be used to offset such failure.  Furthermore, EPA approved the Emission Reduction Bank as Louisiana’s contingency measure for its State Implementation Plan.  63 Fed. Reg. 44192.  Under the Clean Air Act, sections 172(c)(9) and 182(c)(9), contingency measures must take effect without further action by EPA or DEQ.  42 U.S.C. 7502(c)(9), 7511a(c)(9).

In a letter dated May 10, 2000, Governor Murphy J. Foster stated that "the Baton Rouge nonattainment area failed to attain the 1-hour ozone standard by the required date of November 1999."  Yet, despite the contingency measure being required to take effect immediately upon failure to attain the standard under federal law, the credits have not been confiscated and the Bank has not been reduced.  Until DEQ performs its legal duty to confiscate credits, DEQ must not allow any new transactions that affect the bank.

V.                 The DOW emission reduction credits are not valid.

 

A.     DOW's applications involve credits previously used for the 15 Percent Rate-of-Progress Requirement and as such are invalid.

 

Section 182(b)(1) of the Clean Air Act requires all ozone nonattainment areas classified as moderate and above to submit a SIP revision describing, in part, how these areas will achieve an actual reduction in emissions of volatile organic compounds ("VOC") of at least 15 percent during the first six years after enactment of the Act from November 15, 1990 to November 15, 1996.  In order to satisfy this requirement, Louisiana's SIP revision included control measures that would be implemented to meet the total required reductions.  As approved on October, 22 1996, these control measures included "Vents to Flare," "Tank Fitting Controls" and "Fugitive Emissions Controls."  DEQ is now proposing to engage in "double dipping" and use the same credits again to justify increased emissions in an area that already violated minimum health standards.

Vents to Flare

EPA credited emission reductions from L.A.C.33.III § 2115 towards the 15 percent rate-of-progress requirement as being permanent and enforceable.  Louisiana estimated a reduction in emissions of 3.7 tons per day between 1990 and 1996 based on this rule.  Louisiana's Plan includes Dow as one of the four listed companies at which reductions have occurred and for which Louisiana is taking credit.  Dow is listed as incorporating process changes into its polyethylene facility accounting for a 0.2 tons per day reduction of emissions, purported to be an overall reduction of 100 tons per year.  These were done in accordance with state permits 2008-M1 and 2008-M2. 

Yet, Dow is now double dipping and asking to use these same reductions again as credits in VOC Application 6 and VOC Application 11.  Per L.A.C. 33.III § 607 and CAA § 173(c)(2), only reductions that are voluntary and surplus may be used as offsets.

Tank Fitting Controls

Louisiana added requirements to its VOC storage regulation (LAC 33:III.2103) to control emissions from guidepole wells and stilling well systems in external floating roof storage tanks.  In its 15% Rate of Progress Plan, the State takes credit for the reductions resulting from compliance, listing Dow as one of five facilities that would implement controls.  Dow is credited as contributing 86 tons per year toward the ROP Plan in Louisiana's report.  However, the state permit from which these reductions are enforceable or "taken" is not listed.

Many of Dow's VOC applications take credit for reductions resulting from modification or replacement of tanks.  Pursuant to L.A.C. 33.III § 607 and CAA § 173(c)(2), these reductions are not voluntary or surplus and may not be used as emission reduction credits.

Fugitive Emissions Controls

This control measure, LAC 33:III.2122, tightens leak detection and repair requirements for several types of industries, including polymer manufacturing.  DEQ, with this control measure, neither lists the facilities from which it expects reductions to be credited nor states the expected amount.  Instead, it lists all facilities within the Baton Rouge nonattainment area as contributing 3,794 tons of credits toward its 15 % Rate of Progress. 

Any Dow application which relies on fugitive emission controls will be ineligible for use as offsets if already used.  Therefore, until these reductions are properly identified and marked as being contributed toward the ROP Plan, no applications may be credited or used as offsets.

B.     DOW's applications do not meet the surplus requirements of the Clean Air Act and are therefore invalid for banking or use.

 

Section 173(c)(2) of the CAA states:  "emission reductions otherwise required by this chapter shall not be creditable as emission reductions for purposes of any such offset requirement."  42 U.S.C. § 7503(c)(2).  As noted previously, this section requires that credits be surplus when they are used by the offsetting facility, rather than when they are banked.  Many of the Dow applications do not meet this requirement as they involve modifications or replacements that are now legally required.

This type of non-surplus application can be seen in applications 8 and 10.  These applications involve the installation of two 5 million gallon capacity tanks (EC-3 and EC-4) to replace Environmental Wastewater Ponds EC-1 and EC-2 at the Dow facility.  The Environmental Ponds were closed in 1992.  Specifically, EC-1 was closed and taken out of service on September 29, 1992 and EC-2 was taken out of service on October 30, 1992.

In September 20, 1995, LAC 33:III.2153, Subchapter M, Limiting Volatile Organic Compound Emissions from Industrial Wastewater was promulgated.  Under the rule, "VOC wastewater" stream from an affected source category with either a VOC concentration greater than or equal to 10,000 ppm or to a VOC concentration greater than or equal to 1,000 ppm and a flow rate greater than or equal to 10 liters per minute (2.64 gpm) would have to be controlled.  However, wastewater components are exempt from the control requirements of the rule if, by November 15, 1996, the overall VOC emissions from the wastewater of affected source categories is at least 90 percent less than the 1990 baseline emissions inventory. 

Under LAC 33:III.2153.G.4, Dow submitted Notice of Exemption and Submittal of Control Plan requesting exemption status.  Since 1990, Dow claims to have reduced VOC emissions by nearly 95% in its wastewater operations because of the aforementioned replacement of the wastewater ponds with the tanks.  DEQ approved Dow's exemption provided, however, that Dow maintains a greater than 90% reduction in wastewater emissions.

Therefore, the 90% emission level is actually a requirement imposed upon Dow as a condition of Dow’s avoidance of the VOC wastewater rule and Dow cannot legally bank that portion of the emission reduction.  If Dow is currently operating at a consistent 93.6% efficiency, the only surplus potentially created is the 3.6% above the 90% required. 

These type of "sleight-of-hand" credits, where reductions appear to surplus but are, in reality, reductions that would have been and are required, are illegal.  Granting such credits would violate the law and DEQ’s duty to ensure cleaner air for the citizens of Louisiana.

C.     THE Applications fail to meet Louisiana regulations and are therefore invalid.

 

In order to be banked, the proposed reductions must meet the requirements of the Emission Reduction Banking System, Louisiana Administrative Code, Title 33, Part  III, Chapter 6, and, as these are VOC applications, will often involve Chapter 21, Control of Emission of Organic Compounds .

 Application 4 provides an example of how the requirements of Chapter 6 are not being met.  New emissions must be compared to the average emissions of two consecutive years of operation at the plant to determine how much of the reduction may be banked.  Any reductions may, if surplus, be banked with DEQ.  The two consecutive years must occur within the baseline period as established by DEQ.  Specifically, the baseline period "shall be a time period of at least two consecutive years within the five years immediately preceding the date the emission reduction occurred."  § 605. 

In Application 4, Dow used reports generated in April of 1988 and 1989 to average the emissions from the plant.  Reports generated at these times would reflect data collected from April 1987 to April 1988 and April 1988 to April 1989.  However, the emission reductions occurred in June of 1994, so the five-year period only extends back to June of 1989.  Therefore, the data used by Dow to compare average emissions is invalid, rendering this application invalid.

Another example of misapplication of the regulations is found in Application 9.  In this application, Dow requests credit for reduced emissions from its Dock II site.  Dow concluded that the Dock II facility was not subject to the Marine Vapor Recovery Rules (“MVRR”) (L.A.C. 33:III.2108), since the emissions associated with the ship and barge loading at the site were less than 100 tons per year.  Dow has applied to bank the reductions made from complying with the Marine Vapor Recovery Rule at Dock II.  However, Dow's combined docking facilities do not meet the exemption requirements and are required to comply with the MVRR. 

The Marine Vapor Recovery regulations do not give any suggestion that docking sites may be subdivided for regulation purposes.  Instead, the rules state that an affected facility is any marine loading operation with an uncontrolled emission of 100 tons per year.  A facility is "the combination of all structures, buildings, equipment and other operations located on one or more contiguous or adjacent properties owned or operated by the same person."  L.A.C. 33.III:605.  Accordingly, Dow must consider all of its dock sites at the Iberville site as one in determining whether reductions are required.   Because the facility was required to make the reductions, Dock II cannot now be separated out by Dow for emission reduction credit and the application is invalid.

VI.              Conclusion

DEQ has violated federal law concerning the use of the emission reduction credit bank and has mismanaged Louisiana's bank.  Iberville Parish has not met the federal based standard for ozone, and bank credits must be confiscated.  Credits sought by Dow represent reductions that are legally required and thus not voluntary, and are invalid under federal and state law.  Considering all these factors, until DEQ's emission reduction credit program is reformed to conform to minimum requirements of federal law, DEQ must deny Dow's application to double dip and put additional credits in DEQ's illegal bank.

 

Respectfully Submitted for Inez Cooper by:

 

                                          

Todd Coomes, Law Student

Tulane Environmental Law Clinic

 

 

 

Respectfully submitted for Inez Cooper and LEAN by:

 

 

 

Suzanne S. Dickey, Supervising Attorney

Tulane Environmental Law Clinic