(a) Emission reduction strategy.
  (1) A discrete emission reduction credit (DERC) may be generated using one of the following strategies or any other method that is approved by the executive director:
    (A) the installation and operation of pollution control equipment that reduces emissions below the baseline emissions for the facility; or
    (B) a change in the manufacturing process, other than a shutdown or curtailment, that reduces emissions below the baseline emissions for the facility.
  (2) A DERC may not be generated using the following strategies:
    (A) a shutdown or curtailment of an activity at a facility, either permanent or temporary;
    (B) a modification or discontinuation of any activity that is otherwise in violation of a local, state, or federal requirement;
    (C) an emission reduction required to comply with any provision under 42 United States Code (USC), Subchapter I regarding tropospheric ozone, or 42 USC, Subchapter IV-A regarding acid deposition control;
    (D) an emission reduction of hazardous air pollutants, as defined in 42 USC, §7412, from application of a standard promulgated under 42 USC, §7412;
    (E) an emission reduction from the shifting of activity from one facility to another facility at the same site;
    (F) an emission reduction credited or used under any other emissions trading program;
    (G) an emission reduction occurring at a facility that received an alternative emission limitation to meet a state reasonably available control technology requirement, except to the extent that the emissions are reduced below the level that would have been required had the alternative emission limitation not been issued;
    (H) an emission reduction from a facility authorized in a flexible permit, unless the reduction is permanent and enforceable or the generator can demonstrate that the emission reduction was not used to satisfy the conditions for the facilities under the flexible permit;
    (I) that portion of an emission reduction funded through a state or federal program, unless specifically allowed under that program;
    (J) an emission reduction from a facility subject to Division 2, 3, or 6 of this subchapter (relating to Emissions Banking and Trading Allowances; Mass Emissions Cap and Trade Program; and Highly Reactive Volatile Organic Compound Emissions Cap and Trade Program); or
    (K) an emission reduction from a facility without state implementation plan (SIP) emissions if the facility is located in a nonattainment area.
(b) DERC baseline emissions.
  (1) For a facility located in an area designated as nonattainment for a criteria pollutant, and the pollutant being reduced is either the same criteria pollutant or a precursor of that criteria pollutant, the baseline emissions may not exceed the facility's SIP emissions. If the pollutant being reduced is not the same criteria pollutant for which the area is designated nonattainment or a precursor of that criteria pollutant, then baseline emissions are limited as specified in paragraph (3) of this subsection.
  (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 from any two consecutive calendar years from the ten consecutive years immediately before the emissions reduction occurs.
    (B) For area sources, the historical adjusted emissions must be from any two consecutive calendar years from the five consecutive years immediately before the emissions reduction occurs unless detailed operational records are available for more than five years. The historical adjusted emissions for an area source 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 located in an area that is not designated nonattainment for the criteria pollutant being reduced, or the pollutant being reduced is not a precursor of that criteria pollutant, the historical adjusted emissions must be determined from two consecutive calendar years that include or follow the 1990 emission inventory.
  (4) For emission reduction strategies that exceed 12 months, the baseline emissions are established after the first year of generation and are fixed for the life of each unique emission reduction strategy. A new baseline must be established if the commission adopts a SIP revision for the area where the facility is located.
  (5) 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) DERC calculation.
  (1) DERCs are calculated according to the following equation.
Attached Graphic
  (2) For an area source facility, the amount of DERCs calculated will be adjusted based on the quality of the data used to quantify emissions. The adjustment will be:
    (A) no reduction for the same type of records that are required to be maintained by a point source facility; or
    (B) a reduction of 15% or 0.1 ton, whichever is greater, for records supporting approved alternative methods according to §101.372(e)(1)(E) of this title (relating to General Provisions).
  (3) For a facility located in an area designated nonattainment for a criteria pollutant, and the pollutant being reduced is either the same criteria pollutant or a precursor of that criteria pollutant, the sum of the reduction generated under paragraph (1) of this subsection and the total strategy emissions must not be greater than the facility's historical adjusted emissions or SIP emissions, whichever is less.
  (4) For a facility located in an area that is not designated nonattainment for the criteria pollutant being reduced, or the pollutant being reduced is not a precursor of that criteria pollutant, the sum of the reduction generated under paragraph (1) of this subsection and the total strategy emissions must not be greater than the facility's historical adjusted emissions.
(d) DERC certification.
  (1) An application form specified by the executive director and signed by an authorized account representative must be submitted to the executive director no later than 90 days after the end of the generation period and no later than 90 days after completing each 12 months of generation.
  (2) A DERC must be quantified in accordance with §101.372(e) of this title. The executive director shall have the authority to inspect and request information to assure that the emission reductions have actually been achieved.
  (3) An application for DERCs must include, but is not limited to, a completed application form signed by an authorized representative of the applicant along with the following information for each pollutant reduced at each applicable facility:
    (A) the generation period;
    (B) a complete description of the generation activity;
    (C) the amount of DERCs generated;
    (D) for volatile organic compound reductions, a list of the specific compounds reduced;
    (E) documentation, including records for approved or approvable methods to quantify emissions, supporting the activity, emission rate, historical adjusted emissions, SIP emissions, strategy emission rate, and strategy activity;
    (F) for point sources emissions inventory data for the years used to determine the SIP emissions and historical adjusted emissions;
    (G) the most stringent emission rate for the facility, considering all applicable local, state, and federal requirements;
    (H) a complete description of the protocol used to calculate the DERC generated; and
    (I) the actual calculations performed by the generator to determine the amount of DERCs generated.

Source Note: The provisions of this §101.373 adopted to be effective January 17, 2003, 28 TexReg 83; amended to be effective December 2, 2004, 29 TexReg 11038; amended to be effective October 26, 2006, 31 TexReg 8684; amended to be effective June 25, 2015, 40 TexReg 3848; amended to be effective October 12, 2017, 42 TexReg 5441