(a) Emission reduction strategy.
  (1) An emission reduction credit (ERC) may be generated using one of the following strategies or any other method that is approved by the executive director:
    (A) the permanent shutdown of a facility that causes a loss of capability to produce emissions;
    (B) the installation and operation of pollution control equipment that reduces emissions below baseline emissions for the facility;
    (C) a change in a manufacturing process that reduces emissions below baseline emissions for the facility;
    (D) a permanent curtailment in production that reduces the facility's capability to produce emissions; or
    (E) pollution prevention projects that produce surplus emission reductions.
  (2) An ERC may not be generated from the following strategies:
    (A) reductions from the shifting of activity from one facility to another facility at the same site;
    (B) that portion of reductions funded through state or federal programs, unless specifically allowed under that program;
    (C) reductions from a facility without state implementation plan (SIP) emissions; or
    (D) reductions from the shutdown of specific types of inelastic area sources that are driven by population needs. The executive director shall maintain a public list of area source categories determined to be inelastic categories.
      (i) The list of inelastic area source categories will be made available to the public on the commission's website.
      (ii) Any person may submit a written petition requesting that the executive director add or remove a category from the list.
      (iii) Within 60 days of receiving a petition under clause (ii) of this subparagraph, the executive director shall prepare a draft revised list or propose denial of the petition by preparing a draft denial statement supporting denial of the petition.
      (iv) The executive director may on its own motion propose revisions to the list by preparing a draft revised list.
      (v) The executive director's draft revised list, or draft denial statement, under clauses (iii) and (iv) of this subparagraph shall be made available for public comment for 30 days.
      (vi) Within 30 days of the public comment period ending, the executive director shall issue a proposed final list or a proposed final denial statement for consideration and approval by the commission.
      (vii) The commission shall approve, modify, or deny the proposed revisions to the list of inelastic area sources categories made by the executive director under clauses (iii) and (iv) of this subparagraph.
      (viii) The commission shall approve, modify, or remand to the executive director for further consideration a recommendation to deny a petition submitted by the executive director under clause (iii) of this subparagraph.
      (ix) The shutdown of an area source category that falls into one of the categories on the list under clause (i) of this subparagraph is ineligible for emissions reduction credit generation.
(b) ERC baseline emissions.
  (1) The baseline emissions may not exceed the facility's SIP emissions.
  (2) The activity and emission rate used to calculate the facility's historical adjusted emissions must be determined from the same two consecutive calendar years.
    (A) For point sources, the historical adjusted emissions must be based on two consecutive calendar years from the ten consecutive years immediately before the emissions reduction is achieved.
    (B) For area sources, the historical adjusted emissions must be based on two consecutive years from the five consecutive years immediately before the emissions reduction is achieved unless detailed operational records are available for more than five years. The historical adjusted emissions may be determined from two consecutive calendar years up to six to ten consecutive years immediately before the emissions reduction is achieved when detailed operational records are available for those years.
  (3) For a facility in existence less than 24 months or not having two complete calendar years of activity data, a shorter period of not less than 12 months may be considered by the executive director.
(c) ERC calculation.
  (1) The quantity of ERCs is determined by subtracting the facility's strategic emissions from the facility's baseline emissions, as calculated in the following equation.
Attached Graphic
  (2) For area sources generating credits from the permanent shutdown of a facility, the amount of ERCs calculated will be reduced by 15% or 0.1 ton per year, whichever is greater.
  (3) For an area source facility, the amount of ERCs calculated will be adjusted to account for the quality of the data used to quantify the emissions. The adjustment will be:
    (A) no reduction for the same type of records that are required to be maintained for a point source facility; or
    (B) 15% or 0.1 ton per year, whichever is greater, reduction for records supporting alternative methods approved according to §101.302(e)(1)(E) of this title (relating to General Provisions).
  (4) If the facility is subject to both of the adjustments in paragraphs (2) and (3) of this subsection, the total combined adjustment to the amount of ERCs issued will be a reduction of 20% or 0.1 ton per year, whichever is greater.
(d) ERC certification.
  (1) The owner or operator of a facility with potential ERCs shall submit an application form specified by the executive director and signed by an authorized account representative as specified in subparagraphs (A) - (D) of this paragraph.
    (A) Applications will be reviewed to determine the credibility of the reductions. Reductions determined to be creditable will be certified by the executive director and an ERC will be issued to the owner.
    (B) The application for ERCs must be submitted no more than two years after the facility's emissions reduction date, except as provided by subparagraphs (C) and (D) of this paragraph.
    (C) The application for ERCs from all facilities affected by a complete site shutdown of an oil and gas production site may be submitted no more than two years after the site's production well is plugged in accordance with requirements of the Railroad Commission of Texas if the plugging is completed within one year of final production being reported to the Railroad Commission of Texas. Emission credits certified under this exception will be available for use for 72 months from the date well plugging is completed in lieu of the provisions outlined in §101.309(b)(2) of this title (relating to Emission Credit Banking and Trading).
    (D) For an area source facility, the application for ERCs may be submitted as follows.
      (i) For emission reductions that occurred after June 1, 2013 and prior to January 1, 2015, the application for ERCs must be submitted by December 31, 2017.
      (ii) For emissions reductions that occurred between January 1, 2015 and January 1, 2017, the application for ERCs may be submitted up to three years after the facility's emissions reduction date.
      (iii) The application deadline exceptions specified in clauses (i) and (ii) of this subparagraph no longer apply after December 31, 2019.
      (iv) Emission credits certified under the application deadline exceptions specified in clauses (i) and (ii) of this subparagraph or certified for area source emission reductions occurring before and included on an application submitted, but not acted on, before January 1, 2017 shall be available for use for 72 months from the date of the emission reduction in lieu of the provisions outlined in §101.309(b)(2) of this title.
  (2) ERCs must be quantified in accordance with §101.302(e) of this title. The executive director shall have the authority to inspect and request information to assure that the emissions reductions have actually been achieved.
  (3) An application for ERCs must include, but is not limited to, a completed application form specified by the executive director signed by an authorized representative of the applicant along with the following information for each pollutant reduced at each applicable facility:
    (A) a complete description of the emission reduction strategy;
    (B) the amount of ERCs generated;
    (C) for volatile organic compound reductions, a list of the specific compounds reduced;
    (D) documentation, including records for approved or approvable methods to quantify emissions, supporting the activity, emission rate, historical adjusted emissions, SIP emissions, baseline emissions, and strategic emissions;
Cont'd...