New Jersey continues to be one of the most proactive states to regulate air emissions. Over the years, New Jersey has been supported by the efforts of the Ozone Transport Commission (OTC) and, more recently, support has come from the Regional Greenhouse Gas Initiative (RGGI). Both organizations concentrate on air issues in the Northeast and work together to develop model rules and policies. In this issue, we will address several of the New Jersey Department of Environmental Protection’s (DEP) air-related activities and a related United States Environmental Protection Agency (USEPA) action that took place this summer.

DEP’s Draft Greenhouse Gas Cap & Trade Regulations

New Jersey is one of 10 states participating in the RGGI, which means that the state will participate in the Northeast and mid-Atlantic power plant emissions cap & trade CO2 program. This program works by conducting an auction of a limited amount of CO2 allowances, with the amount declining over time. RGGI released a set of model regulations establishing the cap & trade program back in August 2006 and, this July, the DEP issued proposed regulations for its own CO2 cap & trade program for fossil-fuel-fi red electric generators. While the DEP will not have these rules adopted by the fi rst CO2 auction, New Jersey expects to participate in the second auction. Furthermore, while the mandatory cap & trade program currently only applies to electric generators, anyone generating CO2 emissions may want to follow this program to determine whether CO2 emissions are potential revenue-generating assets or expenses.

These proposed regulations substantially are based on the RGGI model but add a New Jersey-specifi c spin by maximizing the opportunities in the model regulations to provide fl exibility in: 1) applicability and source exemptions; 2) allowance allocations; 3) allowance set-asides; and 4) permitting. The DEP program will apply to any fossil-fuel-fi red electricgenerating unit 25 MWS or larger, but exempts electric- generating units that sell less than 10 percent of their electric output to the grid. The program requires each covered source, within two months of the end of a control period, to have suffi cient allowances in its compliance account to cover the amount of its reported emissions for that control period. The fi rst control period will begin January 1, 2009, and will last for three to four years. Covered sources are allowed to use offset allowances to meet a portion of their compliance obligations, and the proposed rules also allow for the use of certain alternative fuels. In addition, New Jersey’s proposed rules will allow 99 percent of New Jersey’s CO2 allowances to be sold at auction, less any allowances sold or allocated directly to certain covered units.

The DEP considers this proposed cap & trade program a revision to the State Implementation Plan (SIP). While this program currently affects only electric plants, it should be seen as a prelude to future regulations affecting other types of facilities emitting CO2.

Greenhouse gas inventory

New Jersey made great strides in its effort to reduce greenhouse gas (GHG) emissions in 2007, with the issuance of Gov. Jon S. Corzine’s Executive Order 54 (EO #54) and the passage of the Global Warming Response Act (GWRA), which require a reduction of New Jersey’s GHG emissions to 1990 levels by 2020 and an additional reduction by 2050. EO #54 and the GWRA also require the DEP to publish an inventory of GHG emissions and issue a plan for public comment to identify legislative and regulatory measures to reduce GHG emissions by 20 percent by 2020. Reporting of GHG emissions and associated information, including the use of certain fuels, is also required.

This year, as required by EO #54 and the GWRA, New Jersey took the fi rst step and published an updated GHG emissions inventory with projections of emissions to the year 2020. This inventory establishes the baseline (1990) to measure the reductions needed by 2020. In addition, the methods used to estimate the emissions, improved with any additional data and information as available, will be used to provide the 2006 value to serve as the baseline for the requirement of EO #54 and the GWRA that emissions be further reduced by 2050.

Upcoming GHG-Related Reporting Affecting Some Sources That Are Not Currently Subject to Cap & Trade

What more can we expect this year with respect to New Jersey’s GHG initiative? Well, for one thing the GHG emissions monitoring and reporting program mandated by the GWRA is slated to be ready in draft form for public comment sometime this fall. We expect that major facilities will be required to report in their Emission Statement all GHG gases, with zero thresholds for non-CO2 gases. Other sources most likely will be required to report non-CO2 sources based on 2,500 tons/year of CO2 equivalent.

Changes to right-to-know reporting requirements also are expected. The threshold for reporting non- CO2 GHGs will probably be reduced. The Department hopes to require reporting of 2009 GHG related emissions in 2010. The data received pursuant to these proposed regulations hopefully will be then used to update the GHG inventory. It seems likely that all GHG sources eventually may be involved in this cap & trade program. 

Other GHG Happenings

Also this fall, New Jersey will be issuing the report required by the GWRA that will include the state’s plan on how it will reduce GHG emissions 20 percent by 2020.

PM-2.5 State Implementation Plan Proposal Requires More Emission Controls

New Jersey’s proposed SIP to meet the 1997 annual PM-2.5 fi ne particulate matter National Ambient Air Quality Standard (NAAQ) requires stationary sources to control emissions using Reasonably Available Control Technology (RACT) from the following seven source categories: 1) Petroleum Refi neries; 2) Glass and Fiberglass; 3) Industrial/Commercial/Institutional Boilers 25 MMBtu or greater; 4) Municipal Waste Combustors; 5) High Electrical Demand Day Units; 6) Stationary Diesel Engines; and 7) Sources emitting 10 TPY of NOx or VOCs operating under a Facility Specifi c Emission Limit or an Alternative Emission Limit. The rules that identify the new emission limits and requirements are provided in the Department’s recently proposed NOx & VOC RACT Rule and Sulfur proposal, which is discussed below.

PM-2.5 is the smallest fi ne particle that is regulated and it is associated with possible lung impairment. New Jersey and its neighboring states meet the current daily standard of 65 ug/m3. The intent of these rules is for New Jersey to attain the annual standard of 15 ug/m3 in 2009, so that a demonstration may be made to the USEPA in 2010. The DEP also is looking ahead as it is considering that: 1) a daily standard of 35 ug/m3 must be met in 2014; 2) the internal annual state goal is 12 ug/m3 (a 20 percent reduction); 3) Regional Haze is subject to its fi rst milestone in 2018; 4) Air Toxics and diesel efforts are ongoing; and, of course, 5) the fi rst GHG goal is 2020. The efforts to comply with the 1997 PM 2.5 annual standard are building blocks towards these other goals and emission reduction requirements.

The public comment period ended on August 15. The DEP will respond to USEPA and the public comments. Then, the USEPA will be reviewing this SIP to determine if it is adequate to enable the DEP to meet the PM-2.5 NAAQS by 2009. Of course, the DEP relied to some extent on the mandates in the federal Clean Air Interstate Rule (CAIR) to achieve some of the emissions reductions in this PM-2.5 SIP. Because CAIR recently was struck down by the federal appeals court, it will be interesting to see what additional methods of achieving those reductions will be necessary.

EPA PM-2.5 New Source Review Rule

Any new or modifi ed project at a “major source” must now be assessed for compliance with the PM-2.5 New Source Review rule. PM-2.5 is handled differently than any of the other regulated pollutants subject to New Source Review.1 When evaluating PM-2.5 emission increases, PM-2.5 as well as PM-2.5 precursors must be addressed. Therefore, if your facility is a “major source”2 that proposes to increase emissions of PM- 2.5 by 10 tons per year (tpy), SO2 by 40 tpy, or NOx by 40 tpy, then Prevention of Signifi cant Deterioration permitting is required if the area is in attainment for PM-2.5. Permit requirements include modeling to demonstrate acceptable impacts of PM-2.5 and the precursor emissions, and preconstruction monitoring also may be required. If the facility is located in a nonattainment area, the applicability triggers are the same, but nonattainment New Source Review permitting is required, including being required to limit the new emissions to the Lowest Achievable Emission Rate (LAER), obtaining offsets for PM-2.5, as potentially the precursors SO2 and NOx as well.3

Implementation of these new rules promises to be challenging as there is much uncertainty as to how the rules will actually be implemented. For example, not all sources have quantifi ed their condensable particulate matter. In acknowledgement of that fact, the condensable particulate matter will not have to be counted for PSD/NSR applicability until January 2011. However, this transition period is being challenged, and it is likely that many states (New Jersey in particular) will override the federal rule and include condensable PM-2.5 in their determinations.

In addition, PM-2.5 offsets are in very short supply in most of the nonattainment areas. Furthermore, while interpollutant trading of the PM-2.5, NOx, and SO2 will be allowed on a regional and statewide basis, the amount of NOx and SO2 needed to offset a ton of PM- 2.5 is 200:1 and 40:1 respectively. Therefore, if offset requirements are going to be triggered for a project, it will be diffi cult to obtain the necessary offsets, and signifi cant advance planning and strategies need to be developed. Finally, instead of using the Department’s Subchapter 18 to administer the PM-2.5 NSR program, applicants must use Appendix S of the federal regulations.4

New Proposed Emission Limits for NOx, VOC and Sulfur Dioxide, and Related Emission Statement and Penalty Regulation Amendments

In order to comply with the SIP and move towards ozone attainment, the DEP again has proposed NOx and VOC RACT and Sulfur Dioxide source control regulations. These rules have been on the drawing board for awhile. The DEP held workgroup sessions that were kicked off by then DEP Commissioner Brad Campbell. While Commissioner Campbell raised expectations that more signifi cant emission reductions would be required from mobile sources to meet SIP requirements, DEP again is heavily relying on NOx and VOC emission reductions from stationary sources including: 1) power companies; 2) storage tank terminals; 3) mid- and smallsized industrial and commercial boilers; 4) refi neries; 5) asphalt plants and asphalt paving; 6) glass plants; 7) offset lithographic and letterpress printing; 8) sewage sludge incinerators; 9) municipal solid waste incinerators; and 10) limits on combustion turbines and boilers serving electrical generating units on High Electric Demand Days. Compliance dates were established on a source category basis, extending over a maximum 10- year period, depending on what is needed to achieve compliance as determined by the DEP.

In addition, any source with a previously approved Alternative VOC emission limit, or an Alternative or Facility Specifi c NOx emission rate will be required to comply with the new RACT rules or apply for alternative rates within only 60 days of the rule adoption. Such alternative plans or facility specifi c rates will only be effective for a 10-year term. Finally, the DEP is taking this opportunity to require sulfur dioxide emissions reductions, which will contribute to meeting the 1997 PM-2.5 NAAQS standard.

Most of the proposed VOC and NOx limits follow the OTC model rules or the USEPA’s Control Technology Guidelines (CTGs), which are the federal models that states use to propose RACT requirements. There are some exceptions in these rules. For example, the DEP goes beyond the CTG for offset lithographic printing and letterpress printing, indicating that by simply allowing an additional year to modify equipment in order to comply with this more stringent standard, the rule proposal still represents RACT. In addition, the DEP acknowledges that it has exceeded federal requirements in many instances, rationalizing that it needs the additional reductions in order to meet the federal ambient air quality standards.

The DEP proposed the requirements on units used on High Electrical Demand Days in order to meet an OTC Memorandum of Understanding requiring emission reductions of 19.8 tons per day of NOx. For boilers greater than 1000 MMBtu/hr fi ring No. 2 oil, DEP reviewed stack-test reports and determined that some boilers could achieve emissions lower than the most stringent rates proposed by the OTC. Accordingly, DEP is proposing even more stringent standards.

Over 200 new industrial/commercial/institutional boilers are expected to be subject to new maximum NOx emissions for boilers of 25-50 MMBtu/hr. These sources previously were unregulated. Compliance with applicable emission limits must be achieved in 2010 or 2011, depending on whether physical modifi cations to the boiler are required. Although all municipal waste incinerators comply with federal NOx standards, the DEP believes that by installing selective non-catalytic reduction or “optimizing” existing units, emissions can be signifi cantly reduced. Most of the proposed VOC storage tank rules apply to Range III Floating Roof tanks that store high vapor pressure VOCs, such as gasoline. Signifi cant new operational and reporting requirements are proposed for these tanks. In addition, all VOC storage tanks are subject to at least annual inspections, using DEP forms, which must be maintained during the life of the tank.

If these rules apply to your facility, we encourage you to closely review this rule proposal. Comments are due on October 3 and a public hearing is scheduled for September 26, 2008.