I attended a meeting on July 30 with the Texas Intrastate Pipeline 
Association where TNRCC personnel made a presentation on the implementation 
of the grandfather legislation and Charlie Child attended a meeting on August 
7 where TNRCC also made a presentation on the grandfather legislation. 

The following existing authorization options are available for grandfathered 
sources: old Standard Exemptions, Voluntary Emission Reduction Permits 
(VERP), regular permits or Permits By Rule.  The grandfather legislation, 
which is still in the rulemaking process, is for permitting grandfathered 
sources that have not been authorized by the existing options.  These 
programs are discussed below.

Old Standard Exemptions
As you know, ETS has implemented a program to authorize grandfathered 
emission sources under old Standard Exemptions (now Permits by Rule) wherever 
possible so they would not be subject to the grandfather regulations. TNRCC 
indicated at the meeting that you would have until the deadlines for 
submitting applications (9/1/03 in east Texas and 9/1/04 in West Texas) to 
authorize the sources under old St. Ex.  Keep in mind that this program is 
not part of the TNRCC regulations-it is being implemented under a verbal 
agreement with the TNRCC and could change at any moment.  TNRCC recommended 
that PI-7 forms be submitted for all locations that are included on their 
1997 list of emission sources (Note: the list is based on TNRCC's listing of 
1997 emissions inventories and Ruth has distributed this list to the 
appropriate DESs). For locations not on this list, internal records would be 
sufficient and nothing needs to be submitted to TNRCC (unless required under 
the conditions of the St.Ex.). One thing to keep in mind is that TNRCC is 
revising the rules governing Permits by Rule/St. Ex. with increased 
recordkeeping requirements so that any emission sources authorized by St.Ex. 
will be subject to the new recordkeeping rules (scheduled to be finalized on 
9/26/01).  It is recommended that the Standard Exemption submittals be 
received by the TNRCC as soon as possible.  In addition to engines, old 
Standard Exemptions or existing Permits By Rule should be used for the 
remaining grandfathered sources (tanks, heaters, etc.).

Grandfather Legislation
The grandfather legislation includes a specific permit for reciprocating 
engines.  Other grandfather sources must obtain an "Existing Facility Permit" 
under the legislation.  Unlike the Voluntary Emission Reduction Permits 
(VERP) program, there is no amnesty granted for modifications uncovered 
during the permitting process.  Discovery of a modification may result in 
enforcement action.  In addition, the source is no longer eligible for a 
grandfather permit and must obtain a regular permit or Permit By Rule and be 
subject to BACT (~2 g/bhp-hr).  In order to take advantage of the VERP 
program amnesty provision, TNRCC is urging industry to submit VERP 
applications by the August 31, 2001 deadline.

Under the grandfather legislation, grandfathered reciprocating engines in 
East Texas are subject to 50% reductions of NOx and may be subject to 50% 
reductions of VOC. Recips in West Texas are subject to up to 20% reductions 
of NOx and VOC. The reductions will be determined on a case-by case basis by 
the permit engineer reviewing the application. Although previously there was 
hope that no reductions would be required in West Texas, at the August 7 
meeting TNRCC indicated that they would require at least 1% reductions in 
West Texas. TNRCC has not decided how to deal with VOC reductions but one 
TNRCC staff member did mention he was aware that oxidation catalysts could 
reduce VOC emissions on engines.

In the August 7 meeting, TNRCC indicated that the reductions for recips will 
be calculated from a baseline of the average actual emissions in 1997-9. This 
was not the intent of the legislation and the legislators will be contacted 
by our industry organizations to attempt to change this. My thinking is that 
the reductions will likely be based on a "before" hourly grams/hp-hr rate 
from stack testing (or maybe AP-42) and an "after" hourly emissions rate 
based on stack testing. 

The reductions required from recips can be averaged across a pipeline, but 
reductions mandated by a regulation cannot be included. Reductions from a 
shutdown of an emission source can be included in the average, and it was 
suggested that reductions since 1997 could be included, but this has not been 
determined. It is highly unlikely that that TNRCC will allow reductions in 
East Texas to be averaged with reductions in West Texas.

Grandfathered emission sources other than recips are subject to 10-year old 
BACT. When discussing whether there would be any relief for smaller emission 
sources such as grandfathered valves or flanges, the TNRCC attorney indicated 
that there is no lower threshold and that all emissions sources must be 
authorized either by the existing authorizations or grandfather permits by 
the deadlines in  this legislation. See the notes above about the locations 
that TNRCC expects paperwork to be submitted for St. Ex.

The control/reduction deadlines for reducing emissions from all grandfathered 
emission sources is 3/1/07 in East Texas and 3/1/08 in West Texas. However 
TNRCC indicated that controls will likely be required prior to these dates. 
When you receive your permit for grandfathered sources, they anticipate that 
you will have 18 months to install controls. Since the applications are due 
on 9/1/03 and 9/1/04, and  TNRCC has one year to process applications (but it 
could be less), you should anticipate being required to install controls in 
2005-2007. The application fee may be $450.

The grandfather rule will be proposed on October 24, 2001 and should be 
finalized in March 2002. 

If you have any questions contact me or Ruth Jensen (402-398-7716)


Marc N. Phillips
Director, Regulatory Technical Analysis
713-646-7646 (cell 713-594-6919)
marc.phillips@enron.com