Document M4Nr0eMmO1z76LbBGek43jMn7

Interoffice Communication To From Data Distribution Bradley I. Raffle, June 16, 1981 Houston RECEIVED Legal JUN17 1981 Subject AIR POLLUTION PERMIT ACTIVITIES IN THE WESTLAKE COMPLEX /fs S' INTRODUCTION As all of you know, the current negotiations between Conoco and Concarb concerning the Lake Charles carbon black plant have created a great deal of uncertainty with respect to air pollution permit strategies for the Lake Charles chemical complex and refinery. Of particular concern is the proper allocation of emission reductions associated with the recent shutdown of the Concarb facility. This memorandum summarizes the regulatory provisions govern ing allocation of the Concarb emission reductions. I have concluded that the regulations giVe Conoco the legal flexibility to allocate the Concarb reductions to either the chemical complex or the refinery. It may also be possible for both the refinery and the chemical complex to obtain credit for these reductions. An estimate of these reductions is shown in Table 1. Using this memorandum as a general regulatory guide, chemicals and refinery management should estimate the respective benefits which they would realize from being able to take credit for these emission reductions. These estimates will enable senior management to select a course of action which provides the optimal benefit to Conoco. To be most useful, the analyses which chemicals and refining prepare should be organized as follows: 1) An emissions summary which tabulates the annual tonnages of SO2# particulates, N0X, CO, hydrocarbons and reduced sulfur compounds associated with currently planned projects; 2) A summary of all contemporaneous/creditable emission reductions which have been or can be utilized to offset the planned increases? SAL 00008B271 Distribution June 16, 1981 Page 2 3) An estimate of the costs associated with PSD permitting for each of the planned projects; costs can be divided into three components: Costs involved in satisfying BACT require ments Costs associated with preparing the PSD application Costs attributable to added delay - PSD review can add 3-5 months to the permit approval process for a typical project. In addition to cost elements, your analysis should discuss the added uncertainties associated with PSD review. These uncertainties are related primarily to the possibility of permit denial due to ambient air quality constraints. REGULATORY FRAMEWORK The regulatory provisions which provide the framework for this analysis are the federal PSD regulations of August 7, 1980. 40 CFR 52.21. These regulations impose stringent review procedures on "major modifications". The term "major modification" refers to a plant alteration and expansion project which would result in a "significant net emissions increase" of one or more pollutants. The annual tonnages shown in Table 2 represent the net emissions increase levels that are considered "significant". The regulations establish an elaborate "bubble" procedure for determining the net emissions increase (or decrease) accompanying a proposed modification. First, the applicant must quantify the emissions increase attributable to the proposed modification itself. If emissions from the proposed modification would exceed any of the levels shown in Table 2, the applicant must then quantify certain prior emissions increases and decreases which have occurred at the source. Only those increases and decreases that are "contemporaneous" with the proposed modification are to be considered in this second-step analysis. To be "contemporaneous", a prior increase or decrease must have occurred no more than five years before the proposed modification project is to commence construction. If prior emission decreases at a source are sufficient to offset both the proposed increase and other contemporaneous/ creditable increases, such that the resulting net increase at the source does not exceed an applicable significance SAL 000088272 Distribution June 16, 1981 Page 4 of the Lake Charles Chemical Complex for PSD applicability and bubble purposes. This conclusion is based upon the agency's judgment that the Concarb plant: 1) Is adjacent to the chemical complex; 2) Is under the control of Conoco, Inc., - "in common" with the chemical plant? and 3) Has the same two-digit SIC code as the Lake Charles Chemical Complex.* The significance of the Concarb issue for Chemicals during these negotiations was that the carbon black plant installed a waste heat boiler in 1977 which increased the plant's SO2 emissions by nearly 2,000 tons per year. The only way the Chemical Plant could avoid counting this "contemporaneous" emissions increase (and thereby avoid a lengthy PSD precon struction review for the normal paraffins project) was to limit the SO2 emissions from the normal paraffins modification to less than 40 tons per year (tpy) i.e., the "significant" level for SO2. Limiting the SOa emissions increase to less than 40 tpy for the modified normal paraffins heaters would entail a potentially expensive fuel control -program. Were it not for having to consider the Concarb increase, such a fuel control program would not be needed to avoid PSD review because prior SO2 decreases that have occurred within the Chemical Complex will more than offset the SO2 increases associated with the normal paraffins modification as well as other contemporaneous (non-Concarb) increases of SO2. IMPLICATIONS OF THE PROPOSED CONCARB PURCHASE The transaction being negotiated between Conoco and Concarb would involve the purchase of the Concarb plant by Conoco, Inc., followed by the physical incorporation of the Concarb site into the Lake Charles Refinery. Once the Concarb site was formally annexed to the Refinery, it is my opinion that it would become part of the refinery for purposes of PSD *The SIC Code for carbon black plants is 2895-a division of the Chemicals and Allied products Major Group (#28). SAL 0000882 1 Distribution June 16, 1981 Page 5 applicability. In other words, following the annexation, the former Concarb site would become part of the same "sta tionary source" as the refinery since it would (1) be adjacent to the refinery (2) under common ownership with the refinery and (3) share the same two-digit SIC code with the refinery.* Upon annexation, the chemical complex would no longer be able to take Concarb into account for PSD purposes. At this point, the refinery would be able to take credit for the unused portion of the Concarb decrease. If the creditable NOx reduction were sufficient to offset the N0X increase from the refinery's proposed reformer, refining could with draw its PSD application for the reformer. *The PSD rules provide no meaningful guidance for defining the exact date of "annexation". It is most likely, therefore, that Conoco would be able to establish a date by internal actions. Bradley I. Raffle Attorney BlR/dla Distribution: G. G. Draper R. T. Ferrell R. D. Gamblin R. E. Lehmkuhl R. G. Myers R. W. Seymour I. F. Wagner cc s J. J. Doyle D. D. Ehrlich J. J. Hall M. Hayes D. A. Kuhn J. Ledvina P. Madison J. Neeld SAL 000088275 TABLE 1 Preliminary Estimate of Emissions* Reduction Due to Shutdown Pollutant Particulate Matter (PM) Sulfur Dioxide (SO2) Nitrogen Oxides (NOx) Hydrocarbons (HC) Carbon Monoxide (CO) Hydrogen Sulfide (H2S) Annual Emission Rate (Tons/Yr) (Averaged over 1978-1980) 54 648 546 62 32 4 T *Please note that these are preliminary estimates only. The actual values will have to be developed through negotiations between Conoco and EPA. iI TABLE 2 Significant Emission Levels Carbon monoxide: 100 tons per year (tpy) Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Particulate matter: 25 tpy Ozone: 40 tpy of volatile organic compounds Lead: 0.6 tpy Asbestos: 0.007 tpy * Beryllium: 0.0004 tpy Mercury: 0.1 tpy Vinyl chloride: 1 tpy Hydrogen sulfide (H2S): 10 tpy Fluroides: 3 tpy Sulfuric acid mist: 7 tpy Total reduced sulfur (including H2S): 10 tpy Reduced sulfur compounds (including H2S): 10 tpy SAI- <>00088377