(8a) Emission Reduction Solutions for Houston Ozone Nonattainment Permitting

Recent air quality permitting changes for the Houston-Galveston-Brazoria (HGB) area are increasing pressure to avoid increases of the ozone precursor pollutants VOC (volatile organic compounds) and NOx (nitrogen oxides). Most NOx emissions are a byproduct of fuel combustion. VOC emissions are from a wide variety of industrial source types including organic liquid storage tanks, hydrocarbon processing units, and wastewater treatment systems.

The recent HGB area air permitting changes are creating new challenges to obtain the federal ozone nonattainment air permits needed for authorizing construction of new facilities and expansions of existing facilities with significant VOC and NOx emissions. Conventional solutions to these challenges include purchasing Emission Reduction Credits (ERCs) from the HGB VOC and NOx emission trading market. However, HGB projects are rapidly consuming the available ERCs. As available ERCs grow scarcer and more expensive, there is growing concern for industrial operating companies about the cost and feasibility of permitting future industrial construction and expansion projects in the HGB area.

This presentation will describe potential solutions to these challenges. We will discuss options to reduce NOx and VOC emissions to create ERCs or offset project emissions to avoid federal ozone nonattainment permitting altogether. We will discuss a proactive approach to identify cost-effective emission reduction options and other ways to prepare operating companies for successful air quality permitting of future projects in the HGB area.

Problem Definition

1. Rule change driver: US EPA changed the Houston-Galveston-Brazoria (HGB) area ozone nonattainment air quality permitting rules in August 2019
2. Significance: more industrial construction and expansion projects require federal nonattainment permits for emissions of Volatile Organic Compounds (VOC) & Nitrogen Oxides (NO_X) – especially for oil&gas, chemicals, other heavy industrial
3. Project impacts: when required, obtaining a nonattainment permit from TCEQ is a long-lead process (e.g., 2 years) that can impact project schedule and costs
4. ERCs required: TCEQ-certified emission reduction credits (ERCs) are required to offset project-related VOC/NO_X emission increases before operating any newly constructed/modified equipment
5. ERCs constrained: ERCs can be generated internally within facility or purchased from the TCEQ-managed emission trading market, but HGB area ERC supplies are growing scarce and threatening project feasibility

Options for ERCs and Nonattainment Avoidance

1. Acquire ERCs required for nonattainment permit
   • Conventional approach: purchase required ERCs through emissions broker or direct from another company holding ERCs for sale in HGB area
   • HGB area ERC market availability and/or ERC prices may be problematic
2. Avoid nonattainment permitting by netting
   • Combine NO_X/VOC emission reductions with an expansion/construction project to “net out” of federal nonattainment permitting requirements
   • Avoids both nonattainment permitting and ERC requirements
3. Emission reduction generation options
   • Identify and price emission reduction project options to generate NO_X and VOC netting reductions or ERCs from existing sources in HGB area
   • Generated emission reductions can support either Option 1 or 2 above

Value of Proactive Emission Reduction Options Analysis

1. Identify & rank emission reduction options to achieve...
2. Risk management:
   • Manage risk to future project feasibility, cost, schedule with identified emission reduction generation projects ready when needed
3. Cost savings:
   • Compare emission reduction generation costs to ERC market value
   • ERC market value could justify cost of adding emissions controls
   • Use netting to avoid permitting costs and optimize control spend
4. Speed:
   • Use netting to avoid nonattainment permit delays
   • Be positioned to obtain permits and execute projects when needed

Examples of Potential ERC Generation Projects

1. Organic Liquid Storage tanks: domed roof on EFR, IFR upgrades
2. Flares: vapor recovery, reroute to oxidizer
3. Wastewater systems: enclose, add controls
4. Fired units: replace, retrofit, fuel treatment
5. Other sources: add/replace control device
6. Process changes: solvent/material substitution, heat recovery and integration