October 13, 1995

South Coast Air Quality

Management District Board

Proposed Amended Rule 1610 would provide additional flexibility in the generation of mobile source emission reduction credits (MSERCs) and would also increase the credit life of MSERCs generated under this rule. The proposed amendments will make Rule 1610 consistent with Rule 1501.1. Specifically, the proposed amendments would extend the life of Rule 1610 MSERCs from three to five years and allow for the generation of MSERCs for carbon monoxide and particulate matter. In addition, amendments are proposed regarding definitions and regarding increased flexibility in the use of Rule 1610 MSERCs for Regulation XI rules with future compliance dates and Regulation XIII.

Staff held a public workshop on August 3, 1995 and a public consultation meeting on September 21, 1995 to solicit input on the proposed amendments. Many of the issues raised at the public workshop and consultation meeting are administrative in nature and have been addressed to a large extent in the revised rule provisions. However, three issues; credit banking, unrestricted trading of credits, and application of discount factors; are under further evaluation as part of the Inter-Credit Trading Study. Pending the findings of that study, further amendments to Rule 1610 may be proposed, if necessary. These issues are discussed in greater detail in the Staff Report. It should be noted that subsequent to the Set Hearing Package, particulate matter emission rates were received from the Air Resources Board and incorporated into the rule language. In the proposed amended rule, revisions since the Set Hearing Package are shown in double underline for additions and in strikeout for deletions.

Pursuant to the AQMD's Certified Regulatory Program and the California Environmental Quality Act (CEQA), the AQMD has prepared an Addendum to the previously certified Final Environmental Assessment (EA) for Rule 1610. Since the proposed amendments do not require major revisions to the previous EA and do not result in new significant environmental effects or a substantial increase in the severity of previously identified significant effects, an Addendum is the appropriate document. Pursuant to CEQA Guidelines Section 15164, an addendum need not be circulated for public review, but shall be considered with the Final EA by the decision-making body.

The attachments to this package contain Governing Board Resolution (Attachment A), an outline of the rule development process (Attachment B), Proposed Rule 1610 along with a draft staff report and the socioeconomic assessment (Attachments C), and the previously certified Final EA and the Addendum (Attachment D). Attachment D is provided to the Board and requesters only at this time due to the bulk of material. The previously certified Final EA and the Addendum are available to other members of the public at the AQMD Public Information Center.

THEREFORE IT IS RECOMMENDED THAT YOUR BOARD

--Certify the Addendum to the Final Environmental Assessment for Proposed Amended Rule 1610 - Old Vehicle Scrapping, as proposed, in accordance with the attached Resolution.

--Adopt Amended Rule 1610 - Old Vehicle Scrapping

Respectfully,

James M. Lents, Ph.D.

Executive Officer

BRW:CSL:HH

Attachments

ATTACHMENT A

GOVERNING BOARD RESOLUTION

RESOLUTION NO. 95-

A Resolution of the Governing Board of the South Coast Air Quality Management District Certifying the Addendum to the Final Environmental Assessment for Rule 1610 - Old Vehicle Scrapping and Amending Rule 1610 - Old Vehicle Scrapping.

WHEREAS, the Governing Board of the South Coast Air Quality Management District finds and determines that Proposed Amended Rule 1610 - Old Vehicle Scrapping, is considered a "project" pursuant to the terms of the California Environmental Quality Act (CEQA); and

WHEREAS, the South Coast Air Quality Management District has had its regulatory program certified pursuant to Public Resources Code Section 21080.5 and is conducting CEQA review pursuant to such program; and

WHEREAS, the District has previously prepared a Final Environmental Assessment (EA) (SCAQMD No. 921113KN), pursuant to the District's Certified Regulatory Program, setting forth the potential environmental consequences of Rule 1610 - Old Vehicle Scrapping, and that the Final EA, including responses to comments on the Draft EA, and the Mitigation Monitoring and Reporting Plan were certified by the Governing Board of the South Coast Air Quality Management District on January 8, 1993, and recertified by the Governing Board of the South Coast Air Quality Management District on February 11, 1994; and

WHEREAS, the staff has evaluated Proposed Amended Rule 1610 and determined that only minor technical changes or additions are necessary to make the previously certified Final EA for Rule 1610 adequate under CEQA, therefore an Addendum to the Final EA, which is not required to be circulated for public review, has been prepared in accordance with the requirements of CEQA Guidelines Section 15164; and,

WHEREAS, it is necessary that the adequacy of the Addendum to the Final EA environmental document be determined by the Governing Board of the South Coast Air Quality Management District prior to its adoption; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District voting on this resolution has reviewed and considered the Addendum to the Final EA for the Rule 1610 amendments; and,

WHEREAS, the South Coast Air Quality Management District has determined that no significant project specific or cumulative adverse environmental impacts will result from the project, that no mitigation measures are required, and, therefore, no changes to the original Mitigation Monitoring and Reporting Plan previously adopted for Rule 1610 are required and have not been prepared; and

WHEREAS the Governing Board of the South Coast Air Quality Management District has determined that no additional socioeconomic analyses are warranted since the emission control costs and cost-effectiveness values will not change from the analyses performed as part of the consideration of Rule 1610 as adopted by the Governing Board on January 8, 1993; and

WHEREAS the Governing Board of the South Coast Air Quality Management District voting on this Resolution has reviewed and considered the staff's findings related to cost-effectiveness of Proposed Amended Rule 1610 - Old Vehicle Scrapping, as set forth in the staff report made public with the agenda package for this meeting; and

WHEREAS Proposed Amended Rule 1610 - Old Vehicle Scrapping is not a control measure in the 1994 Air Quality Management Plan and thus, was not ranked by cost-effectiveness relative to other AQMP control measures in the 1994 Air Quality Management Plan; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District determines that there is a problem that Proposed Amended Rule 1610 - Old Vehicle Scrapping, as proposed to be amended, will alleviate, i.e., exceedences of state and federal ozone ambient air quality standards in the South Coast Air Basin, and that proposed amendments to Rule 1610 will promote the attainment and maintenance of state and federal ambient air quality standards for ozone, since this rule generally provides a more cost effective approach for compliance with a broad range of rules contained in Regulation XI, Regulation XIII, Regulation XV, and Regulation XX; and

WHEREAS, a public hearing has been properly noticed in accordance with the provisions of Health and Safety Code Section 40725; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District has determined that a need exists to adopt Proposed Amended Rule 1610 - Old Vehicle Scrapping, to achieve consistency between Rule 1610 and recently adopted Rules 1501.1, 1612, and 1620 in terms of use and applicability of mobile source emission reduction credits; and

WHEREAS, it is recognized that older on-road motor vehicles which have poor fuel efficiency emit higher amounts of greenhouse gases into the atmosphere; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District obtains its authority to adopt, amend, or repeal rules and regulations from Sections 40000, 40001, 40440, 40441, 40463, 40702, and 40725 through 40728 of the California Health and Safety Code; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District has determined that Proposed Amended Rule 1610 - Old Vehicle Scrapping, as proposed to be amended, is written or displayed so that its meaning can be easily understood by the persons directly affected by it; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District has determined that Proposed Amended Rule 1610 - Old Vehicle Scrapping, as proposed to be amended, is in harmony with, and not in conflict with or contradictory to, existing statutes, court decisions, or state or federal regulations; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District has determined that Proposed Amended Rule 1610 - Old Vehicle Scrapping does not impose the same requirements as any existing state or federal regulation and is necessary and proper to execute the power and duties granted to, and imposed upon the District; and

WHEREAS, the Governing Board of the South Coast Air Quality Management District by adopting this regulation is implementing, interpreting, or making specific the provisions of Health and Safety Code Section 40001 (rules to achieve ambient air quality standards) and 40440 (a) and (c) (rules to carry out the Air Quality Management Plan and rules which are also efficient and cost-effective); and

WHEREAS, the Governing Board of the South Coast Air Quality Management District has held a public hearing in accordance with all provisions of law;

NOW, THEREFORE, BE IT RESOLVED, that the Governing Board of the South Coast Air Quality Management District does hereby certify that the Addendum to the Final EA for Rule 1610 has been presented to the District Governing Board, whose members reviewed, considered, and approved the information therein prior to acting on Proposed Amended Rule 1610 - Old Vehicle Scrapping.

BE IT FURTHER RESOLVED that no significant impacts from the proposed amendments to Rule 1610 have been identified, no additional mitigation measures are required to be set forth in the Mitigation Monitoring and Reporting Plan (Public Resources Code Section 21081.6) prepared for the adoption of Rule 1610;

BE IT FURTHER RESOLVED that because no significant impacts from the proposed amendments to Rule 1610 have been identified, no Findings or Statement of Overriding considerations are required for Proposed Amended Rule 1610 - Old Vehicle Scrapping.

BE IT FURTHER RESOLVED that the implementation of the Proposed Amended Rule 1610 - Old Vehicle Scrapping, will provide greater flexibility for sources to comply with other District regulations.

BE IT FURTHER RESOLVED, that the Governing Board of the South Coast Air Quality Management District does hereby adopt pursuant to the authority granted by law, Proposed Amended Rule 1610 - Old Vehicle Scrapping, as set forth in the attached and incorporated herein by this reference.

BE IT FURTHER RESOLVED, that the Governing Board of the South Coast Air Quality Management District directs staff to amend the Scrappers Code of Conduct to include voluntary actions to promote the removal of older, less fuel efficient vehicle as part of Proposed Amended Rule 1610 - Old Vehicle Scrapping, and to work with the licensed scrappers to identify these older, less fuel efficient vehicles to promote the reduction in greenhouse gases.

Attachments

DATE:
CLERK OF THE DISTRICT BOARD

ATTACHMENT B

RULE DEVELOPMENT PROCESS

ATTACHMENT C

PROPOSED AMENDED RULE 1610 -
OLD VEHICLE SCRAPPING

(Adopted January 8, 1993)(Amended January 14, 1994)
(Amended February 11, 1994)

September 22, 1995

(PAR1610)

PROPOSED AMENDED RULE 1610. OLD-VEHICLE SCRAPPING

(a) Purpose

The purpose of this rule is to reduce motor vehicle reactive volatile organic compounds (ROC) (VOC), and nitrogen oxides (NOx), carbon monoxide (CO), and particulate matter (PM) exhaust emissions by issuing mobile source emission reduction credits in exchange for the scrapping of old, high emitting vehicles. Procurement of old vehicles could be accomplished by persons voluntarily giving up their vehicle for scrapping upon receiving an incentive payment. This rule provides a mechanism through which stationary source emissions can be brought into compliance with District regulations through mobile source emission reductions. Mobile source emission reduction credits generated would be applied towards compliance with designated rules with future compliance dates within District Regulation XI, Source Specific Standards; Regulation XV, Trip Reduction/Indirect Source; Regulation XIII, New Source Review; Regulation XX, Regional Clean Air Incentives Market (RECLAIM); or any other District regulations that allow the use of credits. The value of these credits would be based on old vehicles having at least three years useful remaining life prior to scrapping. The value of these credits is based on old vehicles having at least three years useful remaining life prior to scrapping.

(b) Definitions

For purposes of this rule, the following definitions shall apply:

(1) MOBILE SOURCE EMISSION REDUCTION CREDITS (MSERCs) means credit for real, quantified emission reductions, approved by the Executive Officer or designee, that can be used to comply with: stationary source emission reductions as required by District Regulation XI, Source Specific Standards as authorized by this rule.

(2) NITROGEN OXIDES (NOx) means the sum of nitric oxides and nitrogen dioxides emitted, collectively expressed as nitrogen dioxide emissions.

(3) OLD-VEHICLE means 1981 and earlier model-year passenger cars and light-duty trucks.

(4) OLD-VEHICLE SCRAPPING PROGRAM means a program in which old vehicles are scrapped in exchange for MSERCs.

(5) REACTIVE ORGANIC COMPOUND (ROC) means any gaseous chemical compound which contains the element carbon; excluding carbon monoxide, carbon dioxide, carbonic acid, carbonates and metallic carbides; and excluding methane, 1,1,1-trichloroethane, methylene chloride, trifluoromethane (FC-23), trichlorotrifluoroethane (CFC-113), dichlorodifluoromethane (CFC-12), trichlorofluoromethane (CFC-11), chlorodifluoromethane (HCFC-22), dichlorotetrafluoroethane (CFC-114), chloropentafluoroethane (CFC-115), dichlorotrifluoroethane (HCFC-123), tetrafluoroethane (HCFC-134a), dichlorofluoroethane (HCFC-141b), and chlorodifluoroethane (HCFC-142b).

(6) (5) SCAQMD LICENSED SCRAPPER means an entity which is subject to District Regulation XI and certified by the Executive Officer or designee to earn generate MSERCs in exchange for by scrapping vehicles, as authorized by this rule.

(7) (6) SCRAPPING means the process by which a motor vehicle is permanently removed from service.

(7) VOLATILE ORGANIC COMPOUND (VOC) means any volatile compound of carbon, excluding: methane, carbon monoxide, carbon dioxide, carbonic acid, metallic carbides or carbonates, ammonium carbonate, and exempt compounds as defined in District Rule 102.

(c) SCAQMD Licensed Scrapper Certification Requirements

(1) Certification as an SCAQMD licensed scrapper shall be limited to: ROC VOC, or NOx, CO, or PM stationary emission sources subject to District Regulation XI, Source Specific Standards, rules with future compliance dates; Regulation XIII, New Source Review; Regulation XV, Trip Reduction/Indirect Source; or Regulation XX, RECLAIM .

(2) SCAQMD licensed scrappers shall have vehicles scrapped only by auto dismantlers that are licensed by the California Department of Motor Vehicles.

(3) All scrapping plans approved pursuant to paragraph (c)(5) shall require the scrapping of a minimum of 10050 old vehicles within six months of the date of approval of the scrapping plan,. MSERCs may not be issued for any old vehicles scrapped pursuant to a plan approved after the effective date of this amendment if at least fifty one hundred old vehicles have not been scrapped pursuant to the plan within six months of plan approval. Notwithstanding the foregoing, the minimum shall be 10 for the motion picture industry and in cases where the Executive Officer or designee determines that the minimum of 10050 should be lowered because hardship has been demonstrated, e.g., if the amount of MSERCs that a facility needs is less than the number of MSERCs generated when 10050 vehicles are scrapped.

(4) Entities intending to seek certification as an SCAQMD licensed scrapper shall submit a scrapping plan to the Executive Officer or designee at least one month prior to planned initiation of vehicle scrapping. The scrapping plan shall be submitted on forms specified by the Executive Officer or designee, and contain the following specific information including, but not limited to:

(A) information demonstrating the ability to comply with all provisions of this rule relating to vehicle selection, visual and functional inspection, disposal, and recordkeeping.

(B) the name and address of the California Department of Motor Vehicles licensed auto dismantler used to comply with paragraph (c)(2) (hereafter referred to as the DMV licensed auto dismantler), and a written statement from the auto dismantler certifying compliance with: local water conservation regulations; state, county, and city energy and hazardous materials response regulations; and local water agency soil, surface, and ground water contamination regulations.

(C) anticipated initiation and ending dates for scrapping program, an estimate of the number of vehicles that are planned for scrappage, and the anticipated intended use of the MSERCs.

(5) Certification as an SCAQMD licensed scrapper shall occur with written approval of the scrapping plan by the Executive Officer or designee. Approval of the scrapping plan shall be based on information denoted in paragraph (c)(3) and subparagraphs (c)(4)(A) and (c)(4)(B). The Executive Officer or designee shall have one month to approve or disapprove the scrapping plan and shall disapprove the scrapping plan unless it complies with paragraph (c)(3) and subparagraphs (c)(4)(A) and (c)(4)(B). The Executive Officer or designee shall also disapprove the scrapping plan if the additional air pollutant emissions, caused by scrapping vehicles in connection with this rule, exceed District significance thresholds.

(d) Notice Requirements for Vehicle Scrapping

SCAQMD licensed scrappers shall submit written notice to the Executive Officer or designee at least two weeks prior to vehicle scrapping, indicating date, location, and estimated number of vehicles to be scrapped.

(e) Vehicle Disposal Requirements

(1) At a minimum, scrapping shall entail the permanent destruction of the following vehicle components:

(A) Vehicle Identification Number

(B) License Plates

(C) Cylinder Block

(D) Body/Frame

(2) Vehicle components listed in subparagraphs (e)(1)(A) through (e)(1)(D) shall be permanently destroyed within 4590 days subsequent to possession of the old vehicle by the SCAQMD licensed scrapper or DMV licensed auto dismantler. Removal of reusable components, e.g., doors, fenders, bumpers, and disassembled engine components is allowed during the above 4590-day period.

(3) All activities associated with scrapping vehicles, including but not limited to the disposal of vehicle fluids and vehicle components, shall comply with applicable federal, state, and local laws, regulations, codes, and permitting requirements.

(f) Vehicle Selection Requirements

(1) Only 1981 and earlier model-year passenger cars and light-duty trucks ("old vehicles") shall be eligible for MSERCs through the old-vehicle scrapping program.

(2) To be eligible for MSERCs, old vehicles to be scrapped shall meet all of the following requirements.

(A) For at least two continuous years prior to scrapping, registration with the California Department of Motor Vehicles to one or more addresses located in the District.

(B) For at least two continuous years prior to scrapping, registration with Department of Motor Vehicles as an operable vehicle, except that registration as a nonoperable vehicle for up to two months cumulatively, occurring at least three months prior to scrapping, shall be acceptable under this subparagraph. Smog checks must be performed as required by Department of Motor Vehicles in order for the vehicle to be considered registered.

(C) Any person submitting a second or successive vehicle to any one Licensed Scrapper shall provide proof of continuous vehicle ownership and continuous registration as an operable vehicle in the District since January 1, 1992 for the two most recent years as provided in subparagraph (f)(4)(A) and shall meet all functional and registration requirements of the Rule.

(D) The vehicle owner shall provide California Certificate of Title or DMV application for duplicate title.

(3) The requirements contained in subparagraph (f)(2)(B) shall be established through an inspection of Department of Motor Vehicles registration records by the SCAQMD Licensed Scrapper.

(4) The requirements contained in subparagraph (f)(2)(A) shall be established through a SCAQMD Licensed Scrapper inspection of documentation supplied by the vehicle owner(s). This documentation shall include the following.

(A) For vehicles that have been owned by one person for two continuous years prior to scrapping, the current vehicle registration card plus one additional document dated at least two years prior to scrapping shall be required. This additional document may be a previous vehicle registration card, a utility statement, a credit card statement, insurance invoice, a California Certificate of Title, California Drivers License, California Identification Card, canceled checks, or equivalent as determined by the Executive Officer or designee and shall contain certain information that has been preprinted by the original issuer of the document, including:

(i) at least one registered owner's name

(ii) registered owner's address that is located in the District

(iii) date prepared

(B) For vehicles with more than one owner during the two year period prior to scrapping, vehicle registration cards, or California Certificate of Titles for the current owner and each previous owner, or equivalent documentation as determined by the Executive Officer or designee shall be required, documenting verifying that the vehicle has been continuously registered to address(es) located in the District for the two year period prior to scrapping.

(g) Vehicle Visual and Functional Inspection

In order to be eligible for MSERCs, each vehicle to be scrapped shall pass a visual and functional inspection upon delivery to the DMV licensed auto dismantler. Inspections shall be conducted by the SCAQMD licensed scrapper. The following elements shall be included in the inspection.

(1) Vehicle must have been driven under its own power to scrapping site. If a SCAQMD Licensed Scrapper and/or District personnel has knowledge prior to the scrapping of a vehicle that (1) the vehicle was towed or pushed for any portion of the trip to the scrapping site, or (2) one or more items described in subparagraphs (g)(2)(A) through (g)(2)(C) occurred while the vehicle was being driven to the scrapping site, then the vehicle shall not be accepted for scrapping.

(2) The vehicle owner, or a person authorized by the vehicle owner, shall switch off the engine, restart the engine, and drive the vehicle in forward and reverse as directed by the SCAQMD Licensed Scrapper and/or District personnel, and perform any other tests indicating operability if the preceding test procedure has not established operability, as directed by SCAQMD Licensed Scrapper and/or District personnel. The vehicle shall not be accepted by the SCAQMD Licensed Scrapper if the following occur:

(A) non-operation of the starter motor

(B) non-operation of the ignition switch

(C) non-operation of the vehicle transmission

(3) Vehicle identification numbers from the California Certificate of Title (if available), current vehicle registration card, and vehicle must be matched.

(4) Person(s) delivering vehicle to scrapping site must be verified as the vehicle owner(s). Additionally, the vehicle must not have any liens.

(5) The presence of the vehicle components originally supplied when the vehicle was new or functionally equivalent replacement components must be visually verified. The component inspection shall include, but not be limited to, the following:

(A) Exhaust system

(B) Bumpers

(C) Doors

(D) Fenders

(E) Side and quarter panels

(F) Hood and trunk lid

(G) Windshields and windows

(H) Seats

(I) Instrumentation and gauges

(h) Mobile Source Emission Reduction Credits Per Scrapped Vehicle

(1) Mobile source emission reduction credits shall be issued each year over a three year period, upon approval of the application pursuant to subdivision (k). The MSERCs shall be calculated according to the following formula:

MSERC = 3 x [((SCRAP - REPLACE) x MILESC)/454]/DF

Where:

MSERC = Mobile Source Emission Reduction Credit (total pounds per year of pollutant)

SCRAP = Emission rate of scrapped vehicle in grams per mile, according to paragraph (h)(2), based on the model-year of the scrapped vehicle.

MILESC = Average annual mileage corresponding to model-year of scrapped vehicle, according to paragraph (h)(3).

REPLACE = Average in-use vehicle emission rate in grams per mile for year in which vehicle is scrapped, according to paragraph (h)(4)

DF = Discount Factor, for the purpose of generating credits, equal to 1.2, except that the Discount factor shall be 1.0 for compliance with Rule 1501.1 or Rule 1303.

(2) Emission Rates of Scrapped Vehicle for VOC, NOx, CO and PM (grams/mile):

Model-year Group ROC VOC NOx CO PM

Pre-1972 12.4 4.0 69.5 0.04

1972-1974 9.7 3.8 46.4 0.04

1975-1981 3.9 3.0 36.1 0.01

(3) Average Annual Mileage of Scrapped Vehicles (miles)

Year Annual Mileage

Pre-1972 4,900
1972-1974 5,300
1975-1981 6,400

(4) Average In-use Motor Vehicle Emission Rate (grams/mile) for 1993 calendar year, for VOC, NOx, CO and PM:

ROC VOC NOx CO PM Usage

1.8 1.2 13.6 0.01 Average Vehicle Replaces Pre-1972 Vehicle
1.8 1.2 13.6 0.01 Average Vehicle Replaces 1972-1974 Vehicle
1.6 1.2 13.6 0.01 Average Vehicle Replaces 1975-1981 Vehicle

(5) MSERCs shall be valid for a period of one year subsequent to issuance by the Executive Officer, and shall not be traded to other SCAQMD licensed scrappers.

(6) (5) Emission rates and annual mileage rates as shown in subparagraphs (h)(2)(A), (h)(3), and (h)(4)(A), and (h)(6)(A) are based on ARB's EMFAC 7F emission factor model and BURDEN 7F vehicle activity model. These rates may be updated and published upon concurrence by ARB and District staffs, based on a revision to ARB's emission factor model.

(7) (6) ROC and NOx MSERCs per scrapped vehicle, as of January 14, 1994 October 13, 1995, shall be the following:

(i) (A)Using a 1.2 Discount Factor, ROC VOC, and NOx, CO and PM

Mobile Source Emission Reduction Credits Per Scrapped Vehicle

(total pounds per year)

Vehicle Model-Year ROC VOC NOx CO PM

Pre-1972 92 275285 25 75 1500 0.8
1972-1974 78 233 25 75 950 0.9
1975-1981 27 80 21 63 800 0

(ii) (B) Using a 1.0 Discount Factor, VOC, NOx, CO, and PM

Mobile Source Emission Reduction Credits Per Scrapped Vehicle

(total pounds)

Vehicle Model-Year VOC NOx CO PM

Pre-1972 330342 90 1800 1.0
1972-1974 279 90 1140 1.1
1975-1981 96 75 960 0

(7) MSERCs generated from vehicle scrapping activities on or after April 14, 1995 shall be valid for five years from the date of application approval pursuant to subdivision (k), with the limitation that no more than one-third of the MSERCs may be consumed within one year from the date of approval and not more than two-thirds of the MSERCs may be consumed within two years from the date of approval. This paragraph shall not affect the credit life and issuance dates of MSERCs generated from vehicle scrapping activities occurring prior to April 14, 1995.

(8) MSERCs shall not be traded among stationary source facilities except as permitted by Rule 1501.1 or Regulation XX.

(i) Use of MSERCs

(1) SCAQMD licensed scrappers may use MSERCs as an alternative method of compliance with the following rules, except as specified in paragraph (i)(2), pursuant to a plan approved under subdivision (k) MSERCs may be used for any of the following applications:

(A) ROC Related Rules

1102(f)(3) Petroleum Solvent Dry Cleaners

1106.1(c)(1), (c)(2) Pleasure Craft Coating Operations

1113(c)(2) Architectural Coatings

1124(b)(1)(A), (b)(1)(C)* (c)(1)(A), (c)(1)(E) Aerospace Assembly and Component Manufacturing Operations

1128(c)(2), (c)(5), (c)(6) Paper, Fabric, and Film Coating Operations

1130.1(c)(1), (c)(2), (c)(3) Screen Printing Operations

1136(b)(1)(A) Wood Products Coatings

1142(c)(1)(B) Marine Tank Vessel Operations

1153(d) Commercial Bakery Ovens

1168(b)(1) Control of Volatile Organic Compound Emissions from Adhesive Application

1171(c)(1)(A)(ii) Solvent Cleaning Operations

1173 Fugitive Emissions of Volatile Organic Compounds

1176 Sumps and Wastewater Separators

As RECLAIM Trading Credits in accordance with Rule 2008.

*Rule 1610 supersedes 1124(i), except that Mobile Offset Plans under review by the Executive Officer at the time of Rule 1610 adoption shall be processed by the Executive Officer according to Rule 1124.

(B) NOx Related Rules

1109(b)(1)(B)(i), (b)(1)(B)(ii) Emissions of Oxides of Nitrogen for Boilers and Process Heaters in Petroleum Refineries

1110.1(d)(4)(C), (d)(5)(B) Emissions from Stationary Internal Combustion Engines

1110.2(e)(1), (e)(2), (e)(4), (e)(6) Emissions from Gaseous- and Liquid-Fueled Internal Combustion Engines

1134(d) Emissions of Oxides of Nitrogen from Stationary Gas Turbines

1135(c) Emissions of Oxides of Nitrogen from Electric Power Generating Systems

1146(f)(5) Emissions of Oxides of Nitrogen from Industrial, Institutional, and Commercial Boilers, Steam Generators, and Process Heaters

1146.1(e) Emissions of Oxides of Nitrogen from Small Industrial, Institutional, and Commercial Boilers, Steam Generators, and Process Heaters

As an alternative method of compliance with District Regulation XI rules that have future compliance dates. MSERCs shall not be used to offset emission increases caused by the removal of emission control equipment or replacement of compliant with noncompliant materials subject to Regulation XI.

(C) As an alternative method of compliance with District Regulation XV rules that allow the use of MSERCs. MSERCs generated from vehicle scrapping activities occurring before October 13, 1995, may be used by any entity pursuant to this subparagraph.

(D) As New Source Review (NSR) offsets for emission increases at new or modified facilities that are subject to Rule 1303 (b)(2) pursuant to provisions in Regulation XIII. Pursuant to Rule 504, no variance or series of variances, including emergency and interim variances, shall be granted for a period in excess of 90 days from the initial granting of a variance, from a permit condition implementing a Regulation XIII offset requirement if such permit condition is based upon the use of MSERCs.

(E) For voluntary retirement of MSERCs for air quality benefits.

(F) As an alternative method of compliance with any other District regulations which allow the use of credits.

(2) For the purpose of using MSERCs pursuant to subparagraphs (i)(1)(A) and (i)(1)(B), a discount factor equal to 1.2 shall be applied. For the purpose of using MSERCs pursuant to subparagraphs (i)(1)(C) and (i)(1)(D), a discount factor equal to 1.0 shall be applied. For all other uses pursuant to subparagraph (i)(1)(F), a discount factor equal to 1.0 shall be applied unless specified otherwise in District regulations.

(23) MSERCs shall not be used to offset emissions resulting from (i) the removal of control equipment or (ii) the use of materials which would not be allowed under applicable District rules as of the date the scrapping plan referenced in subdivision (c) is approved. Scrapping plans currently being implemented as of October 13, 1995, for the purpose of delaying compliance of Regulation XI rules shall be permitted to complete their implementation.

(4) MSERCs may only be transferred as permitted by Rule 1501.1 or Regulation XX, except that SCAQMD Licensed Scrappers that are not subject to either District Regulation XI or Rule 1301(b)(2) may also transfer MSERCs to other entities that were SCAQMD Licensed Scrappers as of the date the MSERCs were generated.

(5) MSERCs shall only be consumed in the air basin corresponding to the registered address of the old vehicle, prior to the DMV licensed auto dismantler or SCAQMD Licensed Scrapper taking possession of the vehicle.

(j) Recordkeeping Requirements

(1) SCAQMD licensed scrappers shall maintain a copy of the scrapping plan described in subdivision (c) and the notices given pursuant to subdivision (d) for one year following termination of vehicle scrapping.

(2) The following information shall also be collected and maintained in written records by the SCAQMD licensed scrapper for one year following termination of vehicle scrapping:

(A) Starting and ending dates of the old-vehicle scrapping program.

(B) Number of vehicles scrapped.

(C) Dates vehicles were scrapped.

(D) Complete name, address, and telephone number of the person conducting the old-vehicle scrapping program.

(E) Complete name, address, and telephone number of the auto dismantler and any program subcontractors.

(F) A detailed description of project organizational structure and logistical arrangements, including location(s) of collection and disposal facilities, and scrapping procedure including disposal procedures for all vehicle components and fluids.

(3) SCAQMD licensed scrappers shall be responsible for storing and maintaining computer accessible data records of scrapped vehicles.

(4) The computer hardware, software, and communications protocol, to be used for storing and maintaining computer accessible data records, shall be specified by the Executive Officer or designee for compatibility with existing District computer related equipment.

(5) Data records for each scrapped vehicle shall include the following:

(A) Vehicle make

(B) Vehicle model

(C) Vehicle model-year

(D) Vehicle license plate number

(E) Vehicle identification number

(F) Vehicle mileage

(G) Scrapped vehicle owner's name, address, telephone number, and driver license number

(H) Date of scrapping

(I) ROC VOC, and NOx, CO, and PM mobile source emission reduction credit

(J) Name of person(s) conducting vehicle visual and functional inspection as required by subdivision (g), with employer's name, address, and telephone number.

(6) Data records shall be made accessible to the Executive Officer or designee during and subsequent to the old-vehicle scrapping program for at least one year.

(7) In addition to data records pursuant to (j)(45), for each vehicle scrapped, the SCAQMD licensed scrapper shall maintain and make accessible to the Executive Officer or designee upon request the following for a period of one year subsequent to the old-vehicle scrapping program:

(A) A duplicate copy of Report of Vehicle to be Dismantled and Notice of Acquisition (California Department of Motor Vehicles Registration 42 Form) validated by line date stamping on the front of the form.

(B) Copy of documentation, pursuant to paragraphs (f)(3) and (f)(4), and subparagraph (f)(2)(D).

(C) Copy of California Certificate of Title or DMV application for duplicate title for each scrapped vehicle.

(k) Compliance Plan Issuance of MSERCs

(1) SCAQMD licensed scrappers shall submit an compliance plan application to the Executive Officer or designee every six months following certification as an SCAQMD licensed scrapper. The purpose of the compliance plan application is to document the number of vehicles scrapped and MSERCs earned during the six month period, and demonstrate compliance with rule requirements, and specify the use of the MSERCs.

(2) The application compliance plan shall contain the following information for each six month period:

(A) Data records for vehicles scrapped;

(B) Total MSERCs claimed for scrap program period;

(C) Identification of the specific rule for which the alternative method of compliance is sought;

(3) MSERCs shall be issued after the Executive Officer or designee has approved the application pursuant to paragraph (k)(1). The application shall be disapproved unless it demonstrates the SCAQMD licensed scrapper has complied with all applicable provisions in this regulation, as determined by the Executive Officer or designee.

(4) For the purposes of assessing fees, the application shall be deemed a plan, and the fees shall be assessed in accordance with the provisions of Rule 306.

(l) Compliance Plan

(1) In order to use MSERCs for the application listed in subparagraphs (i)(1)(B), (i)(1)(D), and (i)(1)(F), the user shall submit a Rule 1610 compliance plan to the Executive Officer or designee. The purpose of the compliance plan is to demonstrate compliance with rule requirements, and specify the use of the MSERCs.

(2) The compliance plan shall contain the following information:

(A) Total MSERCs (attach certificates)

(B) Identification of the specific rule for which the alternative method of compliance is sought;

(CD) The period of time for the alternative method of compliance;

(DE) Number of MSERCs used to substantiate the alternative method of compliance;

(EF) A quantification of emissions that would result from noncompliance with the rule identified in (k)(2)(C) subparagraph (l)(2)(B), and documentation supporting the emissions quantification.

(3) Supporting documentation (applicable for MSERC usage for Regulation XI rules) shall include, but is not limited to:

(A) a listing of equipment and/or materials that are the source of noncompliant ROC VOC, or NOx, CO, or PM emissions associated with the rule identified in subparagraph (l)(2)(B) (k)(2)(C).

(B) a description and operating conditions of equipment listed in subparagraph (l)(3)(A) (k)(3)(A) and/or composition and rate of use of materials listed in subparagraph (l)(3)(A) (k)(3)(A).

(C) emission rates associated with the use of equipment and/or materials listed in subparagraph (l)(3)(A) (k)(3)(A).

(D) a listing of equipment and/or materials that would result in compliance with the rule identified in subparagraph (l)(2)(B) (k)(2)(C).

(E) a description and operating conditions of equipment listed in subparagraph (l)(3)(D) (k)(3)(D) and/or composition and rate of use of materials listed in subparagraph (l)(3)(D) (k)(3)(D).

(F) emission rates associated with the use of equipment and/or materials listed in subparagraph (l)(3)(D) (k)(3)(D).

(4) The compliance plan shall be written on a form to be specified by the Executive Officer or designee.

(5) The Executive Officer or designee shall have up to 6 months to approve or disapprove the compliance plan. The plan shall be disapproved unless it demonstrates that an equivalent amount of emissions reductions are obtained through the alternative method of compliance, and that the SCAQMD licensed scrapper has complied with all provisions in this regulation.

(6) MSERCs may not be used The SCAQMD licensed scrapper cannot use MSERCs as an alternative method of compliance with Regulation XI rules listed under subdivision (i) until the Executive Officer or designee has approved the compliance plan.

(7) The user must renew the compliance plan prior to the expiration of the MSERCs upon which the plan is based.

(lm) Compliance Auditing and Enforcement

(1) The Executive Officer or designee may audit any files and/or records created to comply with recordkeeping requirements.

(2) The Executive Officer or designee shall reserve the right to inspect facilities, including auto dismantlers, for compliance with the requirements specified in this rule. District inspectors shall be afforded immediate access to scrapping/dismantling facilities on request.

(3) Violation of any provision of this rule, including falsification of information in the scrapping plan, application, or compliance plan compliance report, shall be grounds for the Executive Officer or designee to disallow or void any MSERCs resulting from or associated with the violation, by disapproving or seeking revocation of the compliance plan (as appropriate), and shall be subject to the penalties specified in the Health and Safety Code for violation of District rules.

(n) Requirements for Public Notice

Following a completeness determination of the scrapping plan for the use of MSERCs as NSR offsets only, as provided in subparagraph (i)(1)(D) (h)(1)(D), the Executive Officer or designee shall:

(1) perform the evaluations required to determine compliance with this regulation and make a preliminary written decision, as appropriate, as to whether or not MSERCs, to be used as emission reduction credits (ERCs), should be approved or disapproved. The decision shall be supported by a succinct written analysis; and

(2) publish a notice by prominent advertisement in at least one newspaper of general circulation in the District stating the preliminary decision of the Executive Officer or designee and where the public may inspect the information. The notice shall provide 30 days from the date of publication for the public to submit written comments on the preliminary decision; and

(3) at the time notice of the preliminary decision is published, make available for public inspection at the District office the information submitted by the applicant, the supporting analysis for the preliminary decision, and the preliminary decision to grant or deny MSERCs and the reasons therefore. The confidentiality of trade secrets shall be maintained in accordance with Section 6254.7 of the Government Code.

(o) Appeal of Disapproval of MSERC Issuance

An applicant may, within 30 days of receipt of notice of disapproval, request the Hearing Board to hold a hearing on whether the scrapping application was properly refused.

SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

Final Staff Report
Proposed Amended Rule 1610 - Old Vehicle Scrapping

Consisting of:

Rule Development Assessment

SocioEconomic Impact Assessment

September 1995

Deputy Executive Officer

Planning, Transportation and Information Management

Barry R. Wallerstein, D. Env.

Director

Planning and Policy

Chung S. Liu, D. Env.

Manager

Planning and Policy

Henry Hogo

AUTHORS:

Planning and Policy
David Coel - Program Supervisor

Vasken Yardemian - Transportation Specialist

Larry Irwin - Air Quality Specialist

Francis Goh - Program Supervisor

Reviewed by:

Frances Keeler - Deputy District Counsel II

SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

GOVERNING BOARD

Chairman: JON D. MIKELS

San Bernardino County Representative

Vice Chairman: WILLIAM A. BURKE, Ed.D.

Speaker of the Assembly Appointee

MEMBERS:

MICHAEL D. ANTONOVICH

Los Angeles County Representative

MARVIN BRAUDE

Cities Representative, Los Angeles County, Western Region

CANDACE HAGGARD

Cities Representative, Orange County

HUGH HEWITT

Governor's Appointee

MEE HAE LEE

Senate Rules Committee Appointee

RONALD O. LOVERIDGE

Cities Representative, Riverside County

LEONARD PAULITZ

Cities Representative, San Bernardino County

JAMES SILVA

Orange County Representative

NELL SOTO

Cities Representative, Los Angeles County, Eastern Region

S. ROY WILSON

Riverside County Representative

EXECUTIVE OFFICER

JAMES M. LENTS, Ph.D.TABLE OF CONTENTS

INTRODUCTION 1

BACKGROUND 1

SUMMARY OF VEHICLE SCRAPPING ACTIVITY 2

PROPOSED RULE AMENDMENTS 2

SOCIOECONOMIC ASSESSMENT OF PROPOSED

AMENDED RULE 1610 9

PUBLIC COMMENTS 13

SUMMARY AND DRAFT FINDINGS 33

I. INTRODUCTION

The South Coast Air Quality Management District (District) is proposing amendments to Rule 1610, Old Vehicle Scrapping, which will provide additional flexibility to meet air quality standards in the South Coast Air Basin. Rule 1610 permits the issuance of mobile source emission reduction credits (MSERC) for the scrapping of older, higher emitting vehicles. The proposed modifications to Rule 1610 primarily consist of expanding its applicability as an alternative method of compliance with Regulation XIII and Regulation XV, as well as redefining the applicability of Rule 1610 MSERCs for Regulation XI rules with future compliance dates. In addition, Proposed Amended Rule 1610 extends the life of MSERCs to five years (with certain restrictions), and allows the issuance of carbon monoxide (CO) and particulate matter (PM) MSERCs.

II. BACKGROUND

On January 8, 1993, the District adopted Rule 1610 to provide an alternative method of compliance with selected Regulation XI rule requirements. Specifically, the rule provides a mechanism which allows stationary sources to generate ROC and NOx MSERCs when pre-1982 model-year passenger cars and light-duty trucks are scrapped. The original MSERCs were used to offset emission impacts resulting from a delay in compliance with selected Regulation XI rules.

At its public meeting on February 11, 1994, the District Governing Board adopted amendments to Rule 1610. Modifications were made to safeguard against the issuance of MSERCs for vehicles that have little or no useful remaining life. Other amendments modified vehicle eligibility requirements in order to streamline efforts by SCAQMD Licensed Scrappers to identify and procure old vehicles. Finally, the Governing Board issued a "Code of Conduct" for SCAQMD licensed scrappers, to be a voluntary part of the scrapping plan. The purpose of the Code of Conduct is to ensure that vehicles of potentially historic value, as determined by car collector club representatives, are set aside for potential resale.

III. SUMMARY OF VEHICLE SCRAPPING ACTIVITY

A total of 5,999 vehicles have been scrapped under Rule 1610, from January 1993 through July 1995, by a total of nine SCAQMD licensed scrappers. Over 97 percent of the vehicles were scrapped as an alternative compliance with Rule 1142, Marine Tank Vessel Operations. The scrapping of these vehicles resulted in mobile source emission reductions of 941 tons of VOC, 270 tons of NOx and 4,728 tons of CO. These emission reductions are based on the total emissions reduced over the assumed three-years remaining useful life of each vehicle scrapped. Since Rule 1610 requires that 1.2 pounds of VOC or NOx be reduced for each pound of credit, the resultant MSERCs generated for Regulation XI compliance were 784 tons of VOC and 225 tons of NOx, yielding a net air quality benefit of 157 tons of VOC and 45 tons of NOx.

Procurement of old vehicles was accomplished by persons voluntarily providing their vehicles for scrapping upon receiving an incentive payment. For nearly all of the pre-1972 vehicles scrapped, the incentive payment was $700 per vehicle. For 1972 to 1974 model-year vehicles, 94 percent were purchased for $600 each. The cost-effectiveness of Rule 1610 is calculated by the total cost of the program (primarily incentive payments) divided by the total emission reduction benefit. This resulted in a combined cost-effectiveness value of $4,800 per ton of VOC+NOx reduced.

IV. PROPOSED RULE AMENDMENTS

The proposed rule amendments reflect modifications to the existing Rule 1610 that will provide consistency in the generation, use and the life of MSERCs with similar rule provisions in Rule 1501.1, which was adopted in April 1995. Rule 1501.1 provides companies with alternative means of compliance with Rule 1501 (the "rideshare rule") provided that these alternatives produce equivalent emission reductions of VOC, NOx and CO. One of the alternative emissions reduction strategies is old vehicle scrapping, which the District already implements through Rule 1610.

The implementation of a scrapping program for Rule 1501.1 compliance purposes must follow the requirements of Rule 1610, with the following exceptions. First, Rule 1501.1 allows any person to implement an old vehicle scrapping program. Second, Rule 1501.1 allows facilities choosing the old vehicle scrapping alternative to obtain CO MSERCs (Currently, Rule 1610 only has provisions for the issuance of VOC and NOx MSERCs). Third, MSERCs generated for Rule 1501 compliance purposes are not discounted. Finally, Rule 1501.1 allows the MSERCs generated by Rule 1610 to be valid for five years from the date of compliance plan approval, with the limitation that no more than one-third of the MSERCs may be consumed within one year from the date of approval, and not more than two-thirds of the MSERCs may be consumed within two years from the date of approval (Rule 1610 currently requires the issuance of MSERCs to be spread out over a three year period, with a credit life of one year). The proposed revisions to Rule 1610 will make it consistent with Rule 1501.1 with regard to the above Rule 1501.1 requirements.

Additionally, amendments are proposed to Rule 1610 in terms of MSERC usage and Regulation XI applicability in order to make it consistent with other credit rules currently being developed recently adopted. These include Proposed Rule 1612 (PR 1612) -- Credits for Clean On-Road Vehicles, and Proposed Rule 1620 (PR 1612) -- Credits for Clean Off-Road Mobile Equipment. MSERCs generated from Rule 1610 implementation will be permitted as an alternative method of compliance with Regulation XIII -- New Source Review, and with any Regulation XI rule with future compliance dates, except that MSERCs cannot be used to offset emission increases caused by the removal of control equipment or the use of noncompliant coatings. Also, for consistency with PR Rule 1612, PR Rule 1620, and Rule 1501.1, proposed modifications to Rule 1610 allow the issuance of particulate matter (PM) and CO MSERCs. Finally, various technical clarifications are being proposed to streamline Rule 1610 implementation.

A brief summary of principal rule changes and rationale is provided below.

1. Proposed Rule Amendment: Paragraph (b)(5), the definition of Reactive Organic Compound (ROC) has been deleted and replaced by paragraph (b)(7), Volatile Organic Compound (VOC).

Rationale: This modification provides clarification to the applicability of MSERCs to make Rule 1610 consistent with Rules 1501.1, and Proposed Rules 1612, and 1620.

2. Proposed Rule Amendment: Paragraph (c)(1) has been modified to allow facilities entities subject to Regulation XIII, Regulation XX, and Rule 1501.1 to be certified as SCAQMD Licensed Scrappers (in addition to Regulation XI facilities).

Rationale: This modification is being proposed for consistency with Rules 1501.1, and proposed Rules 1612 and 1620. It should be noted that for the purposes of Rule 1610 implementation, any person allowed to scrap vehicles to generate credits pursuant to Rule 1501.1 may become an SCAQMD Licensed Scrapper.

3. Proposed Rule Amendment: Subparagraph (c)(4)(C) was modified to delete various scrapping plan information requirements.

Rationale: The deletion was made to eliminate requests for information that are not necessary for scrapping programs implemented for compliance with Rule 1501.1.

4. Proposed Rule Amendment: Subparagraph (f)(2)(C) has been modified to require that persons submitting second or successive vehicles to any one Licensed Scrapper shall provide proof of continuous registration as an operable vehicle in the District for the two most recent years of operation since January 1, 1992, in addition to providing proof of continuous vehicle ownership for that time period.

Rationale: The intent of this modification will provide additional deterrence targeted at persons attempting to resurrect non-operational vehicles for submission into Rule 1610 scrapping programs. The owner(s) of these vehicles would have to satisfy stringent vehicle eligibility criteria in terms of continuous ownership and registration as an operable vehicle since January 1, 1992.for more than three and one-half years prior to scrapping. In addition, providing proof for the two most recent years of operation is proposed in replacement of the specific date in the current rule language.

5. Proposed Rule Amendment: Subparagraph (f)(4)(B) has been modified to allow the Executive Officer or designee to accept documentation that is equivalent to the certificate of title, in order to verify registration address history for vehicles with two or more owners within the last two years prior to scrapping.

Rationale: Rule 1610 currently requires certificates of title from all previous owners of old vehicle, for the two year period prior to scrapping to verify address history for vehicles with two or more owners. This modification is being proposed because the DMV can provide acceptable equivalent verification of address history for this situation.

6. Proposed Rule Amendment: The formulas in paragraph (h)(1) have been modified to quantify total MSERCs rather than yearly MSERCs, and to indicate that a 1.0 discount factor shall be used for compliance with Rule 1501.1 and Regulation XIII. In addition, pParagraph (h)(7) has been added to specify that MSERCs are valid for five years from the date of application approval rather than three years, with the limitation that not more than one-third of the MSERCs can be consumed within the first year after issuance and not more than two-thirds of MSERCs can be consumed within the first two years after issuance.

Rationale: The total number of MSERCs issued has not changed and is based on three years useful remaining life of vehicles prior to scrapping; however, the life of these MSERCs has been extended to 5 years with restrictions pertaining to the number of MSERCs that can be consumed within the first two years of credit life. The same approach has already been adopted by another other air districts in California. The change in discount factor to 1.0 was made for consistency with Rule 1501.1 and Proposed Rules 1612 and 1620.

7. Proposed Rule Amendment: Paragraphs (h)(2), (h)(4) and (h)(6) have been modified to include: CO and PM emission rates of scrapped vehicles for each of three model-year groups, an average in-use motor vehicle CO and PM emission rate for 1993 calendar year, and CO and PM MSERCs per scrapped vehicle for each vehicle model-year group. In addition, MSERCs are calculated to reflect the total pounds rather than pounds per year. Finally, MSERCs per scrapped vehicle are shown for discount factors equal to 1.2 and 1.0.

Rationale: Paragraphs (h)(2), (h)(4) and (h)(6) have been modified to include the CO and PM pollutant emission rates used to derive the CO and PM MSERCs issued per vehicle scrapped. The total VOC, NOx, CO and PM MSERCs per scrapped vehicle are calculated so that the company may use them as needed in the five year credit life span, with the limitation that no more than one-third of the MSERCs may be consumed within one year from the date of approval and not more than two-thirds of the MSERCs may be consumed within two years from the date of approval. MSERCs based on discount factors of 1.2 and 1.0 are shown for consistency with paragraph (h)(1).

8. Proposed Rule Amendment: Paragraph (h)(8) has been added to allow trading of MSERCs as permitted by Rule 1501.1 and Regulation XX.

Rationale: The intent of this modification is to only allow trading of MSERCs that will ultimately be used for compliance with Rule 1501.1 or Regulation XX. MSERCs generated prior to April 14, 1995 for compliance with Regulation XI can be used for Rule 1501.1 purposes by any entity.

Any new or current MSERCs to be used for Regulation XI or Regulation XIII may only be generated or consumed by the same entity. This issue will be further studied as part of the inter-credit trading study. This provision of Rule 1610 will be reassessed at the conclusion of this study.

8 9. Proposed Rule Amendment: Paragraph (i) has been modified to allow Rule 1610 MSERCs to be used an alternative method of compliance with Regulation XI rules that have future compliance dates, Rule 1501.1, Regulation XIII rules, Regulation XX rules, any other District regulation which allows the use of credits, or for voluntary retirement.

Rationale: This rule amendment makes Rule 1610 consistent with Rule 1501.1, PRRule 1612, and PRRule 1620 in terms of its applicability.

9. Proposed Rule Amendment: The definition of discount factor in subdivision (h) was modified to specify a 1.0 discount factor upon generation of the MSERC(s). In addition, paragraph (i)(2) has been added to allow for the application of a discount factor other than 1.0 depending on the use of the MSERC(s). Specifically, a 1.2 discount factor would be applied for credits used for compliance with Regulation XI and Regulation XX rules and a 1.0 discount factor would be applied for credits used for compliance with Rule 1501.1 or Regulation XIII.

Rationale: This modification provides for the generation of undiscounted MSERCs upon generation, and the application of a discount factor other than 1.0 when the use is specified. Note that the use of the MSERCs may not be specified at the time of its generation. The application of a 1.0 discount factor for credits designated for Rule 1501.1 compliance was made for consistency with Rule 1501.1.

10. Proposed Rule Amendment: Paragraph (i)(4) has been added which allows for the transfer of MSERCs as permitted by Rule 1501.1 or Regulation XX, except that SCAQMD Licensed Scrappers that are not subject to either District Regulation XI or Rule 1301(b)(2) may also transfer MSERCs to other entities that were SCAQMD Licensed Scrappers as of the date the MSERCs were generated.

Rationale: This modification was made to make Rule 1610 consistent with credit trading provisions in Rule 1501.1 and Regulation XX. In addition, this language allows MSERCs to be traded among SCAQMD Licensed Scrappers provided that the recipient of the credits was an SCAQMD Licensed Scrapper as of the date the MSERCs were generated. This allows entities that could otherwise generate credits under their own SCAQMD Scrapper License to instead purchase MSERCs from a contractor or other entity that is not subject to Regulation XI or Rule 1303 (b)(2).

10 11. Proposed Rule Amendment: Subdivision (k) has been modified to separate the issuance and designated use of MSERCs. In addition, the application is considered a plan and a processing fee is assessed according to the provisions of Rule 306.

Rationale: This modification is being proposed so that Licensed Scrappers will have the flexibility to generate MSERCs for multiple uses and decide later how best to allocate the consumption of MSERCs among these uses. In addition, a potential user of MSERCs may contact an SCAQMD Licensed Scrapper to obtain MSERCs rather than separately implementing a vehicle scrapping program (Rule 1501.1 compliance only). This will result in lower overall program costs, since the allocation of MSERCs for a particular rule often depends on economic conditions associated with the affected operating facility.

11 12. Proposed Rule Amendment: Subdivision (l) has been added to require the submission of compliance plans only if the MSERCs are used as an alternative method of compliance with Regulation XI rules or Regulations XIII rules. Compliance plans will not be required if the MSERCs will be used for compliance with Regulation XV rules or Regulation XX rules.

Rationale: The compliance plan and the associated fee is not justified when the MSERCs are being used for Regulation XV compliance since Regulation XV facilities are already assessed a filing fee for using vehicle scrapping as an alternative method of compliance. A compliance plan is not required for Regulation XX rules since this usage simply entails the conversion of an MSERC into an RTC.

12 13. Proposed Rule Amendment: Subdivision (n) has been added regarding the publishing of a public notice with respect to a preliminary written decision to issue MSERCs to be used as NSR offsets.

Rationale: This subdivision was added for compliance with the Health and Safety Code, with regard to the issuance of NSR offsets.

13 14. Proposed Rule Amendment: Subdivision (o) has been added regarding the request to hold a hearing on whether a scrapping application was properly refused.

Rationale: This subdivision was added for compliance with the Health and Safety Code Section 40713.

15. Proposed Rule Amendment: The number of VOC MSERCs issued for the scrapping of pre-1972 model-year passenger cars and light-duty trucks has been increased from 330 pounds to 342 pounds, utilizing a discount factor equal to 1.0. Corresponding changes were made utilizing a discount factor equal to 1.2.

Rationale: This is a technical correction, based on input from ARB. The increased amount of VOC MSERCs will be available for vehicles scrapped subsequent to the adoption of this rule amendment.

In addition to the proposed rule language amendments, the "Code of Conduct" for licensed scrappers will be revised to include voluntary actions to promote the accelerated removal of older, poorer fuel efficient vehicles in order to reduce emissions of greenhouse gases into the atmosphere.

V. SOCIOECONOMIC ASSESSMENT OF PROPOSED AMENDED RULE 1610

Rule 1610 (Old Vehicle Scrapping) provides facilities subject to various SCAQMD Regulation XI rules, the option of using mobile source emissions reduction credits (MSERCs) to offset emissions reductions required by those rules. Under Rule 1610, stationary sources can generate VOC and NOx MSERCs when pre-1982 model year passenger cars and light duty trucks are scrapped in accordance with the rule. Proposed Amendments to Rule 1610 will provide additional flexibility to meet air quality standards by extending the life of MSERCs from 3 to 5 years, allowing for the generation of carbon monoxide (CO) and particulate matter (PM) MSERCs, and allowing Rule 1610 MSERCs to also be used by Regulation XIII--New Source Review or any other SCAQMD regulation which allows the use of credits (including Regulation XV--Trip Reduction/Indirect Source and Regulation XX--RECLAIM).

Because the rule provides a voluntary alternative to complying with existing rules, it would not have an effect on air quality or emissions limitations. However, as an alternative compliance to Rule 1501, the scrappage of old vehicles will provide equivalent emission reductions. The state law requirements for preparing a socioeconomic impact assessment are not applicable (H&S Sections 40728.5, 40440.8). The SCAQMD has, nevertheless, prepared a qualitative assessment of likely socioeconomic impacts of the proposed rules.

Affected Facilities

Facilities subject to various provisions of SCAQMD Regulations XIII, XV and XX are eligible to use the MSERCs generated under Proposed Amended Rule 1610. The affected facilities belong to nearly every sector of the economy.

Between January 1993 and February 1995, over 97 percent of MSERCs from the vehicles scrapped were used to offset the required emission reductions under Rule 1142--Marine Tank Vessel Operations. Industries directly affected by Rule 1142 include Petroleum Products (SIC 29) and Transportation Services (SIC 44). The future use of MSERCs is expected to increase since the proposed amendments will broaden the use of MSERCs to any SCAQMD regulation which allows the use of those credits.

Impact on Employment and the Economy

Since Proposed Amended Rule 1610 is an optional program, affected facilities are likely to make use of them only if the costs of generating MSERCs is lower than that of other available controls needed to comply with applicable source specific SCAQMD regulations. The proposed amendments are, therefore, likely to reduce the economic impacts of the applicable rules if the cost-effectiveness of any applicable provision in these rules is lower than that of generating MSERCs. Facilities which have problems meeting the requirements of Regulation XV, or finding acceptable compliant products or control equipment to meet future compliance dates may choose to buy credits to obtain additional time to comply. These facilities can receive maximum benefit from the use of MSERCs because the proposed amended rule allows the generation of credits for CO and PM pollutants, as opposed to the current rule which only allows VOC and NOx MSERCs.

Proposed Amended Rule 1610 is likely to have several secondary impacts. There will be increased demand for the services of auto dismantlers and related services (SIC 5093). There will also likely be an increase in the prices of used cars as more and more of those cars are removed from service.

The proposed rules may also result in a delay in demand for other control equipment and/or reformulated products which a source may use for compliance with source specific regulations. The decrease in demand for control equipment may postpone the use of new emissions control techniques for the affected sources. As a result, industries which supply those products (mostly the manufacturing sector) may also be affected.

Range of Costs

The cost of MSERCs will depend on the demand for pre-1982 cars and the market prices for those cars. Between January 1993 and February 1995, MSERCs were generated at costs that ranged from $500 to $1,500 per vehicle. Table 1 compares the average cost-effectiveness of Proposed Amended Rule 1610 with other SCAQMD regulations. The cost-effectiveness of existing Rule 1610 is based on the sum of VOC and NOx emission reductions and the costs (primarily incentive payments) of vehicles scrapped. Under the proposed amendments, the combined cost-effectiveness is projected to be better since CO emission reductions will also be accounted for. The combined cost-effectiveness is estimated at $2,280 per ton of VOC+NOx+1/7CO reduced (1990 dollars). Negligible PM emission reductions are anticipated.

Alternatives, Emission Reduction Potential, and Necessity of Rule Amendment

The 1994 AQMP ranks all proposed control measures by cost-effectiveness. It is generally recommended that the most cost-effective action be taken first. The 1994 AQMP which analyzes and ranks all control measures and their cost-effectiveness is incorporated herein by reference as though set forth in full. The proposed amendments to Rule 1610 are not part of any control measure identified in the 1994 AQMP and are, therefore, not within the identified ranking. The proposed amendments to Rule 1610 will not reduce potential emissions beyond those set forth in the rules for which MSERCs are allowed to be applied. The emission reduction potential and necessity of these amendments are discussed in Sections III and IV of the staff report.

Rule Adoption Relative to the Cost-Effectiveness Schedule

On October 14, 1994, the Governing Board adopted a resolution that requires staff to address whether proposed rules being considered for adoption are being presented in rank order by cost-effectiveness as defined in the 1994 AQMP. The proposed amendments are not covered by the 1994 AQMP. Instead, these amendments are based on requests from several public and private organizations to provide additional flexibility and reduce compliance costs of SCAQMD regulations. Since Rule 1610 is a voluntary program allowing alternative compliance to a range of rules the ranking of its cost-effectiveness may vary depending upon the rule for which it is being substituted. As a voluntary rule it will only be used when it is more cost-effective than the specific prohibitory or regulatory rule for which it is being substituted.

Table 1.

Average Cost-Effectiveness of Selected

District Rules and Proposed Amended Rule 1610

Rule Pollutant Cost-Effectiveness+

(1990 $/ton)

1109 NOx $7,400

1110.2 NOx $3,960

1134 NOx $5,830

1135 NOx $4,000

1153 VOC $1,700 - $2,200

REG XV VOC+NOx+1/7CO $31,500

Existing 1610 VOC+NOx $4,375*

PAR 1610 VOC+NOx+1/7CO $2,280*

+ The lower the cost per ton is the higher the cost-effectiveness of the control is.

* The cost-effectiveness values do not include the 1.2 discount factor or PM credits.

In summary, Proposed Amended Rule 1610 is likely to lower the compliance cost for firms facing source specific or other regulations with a lower cost-effectiveness. The proposed rule may also have secondary, but as yet unknown, effects on the price of used cars in the Basin.

VI. PUBLIC COMMENTS

The District Staff held a public workshop on August 3, 1995 to solicit public input and comments on Proposed Amended Rule 1610, Old Vehicle Scrapping. A total of 20 persons attended the workshop. Both oral and written comments were presented at the workshop or submitted prior to the close of the comment period (August 10, 1995). Because of the issues raised at the workshop, a public consultation meeting was held on September 21 to solicit further written comments. The following is section provides staff's responses to all comments received on Proposed Amended Rule 1610. A list of all commentators is shown below.

List of Commentators

Commentator # Commentator

1. Chevron U.S.A. Products Company

1a. California Air Resources Board

2. Commuter Services Group

3. Old Vehicle Clearinghouse

4. City of Los Angeles

5. City of Riverside

5a. Southern California Gas Company

5b. Specialty Equipment Market Association

6. Unocal Corporation

7. U.S. Environmental Protection Agency

Comment #1-1 Rule 1610 provides for the use of MSERCs as an alternative method of compliance with Regulation XI rules that have future compliance dates. However, in order for the MSERCs to be issued, their use ( i.e., the specific rule for which the MSERCs will be used as an alternative method of compliance) must be specified. It would be more cost-effective for SCAQMD Licensed Scrappers to bank MSERCs for future use, so that the precise amount of MSERCs may be consumed in each instance where the credits are needed for compliance with a Regulation XI rule with a future compliance date.

Response #1-1 The proposed amendments to Rule 1610 would extend the credit life of new MSERCs to five years. Limited banking is allowed with the condition that no more than one-third of MSERCs be consumed in the first year and no more than two-thirds of MSERCs be consumed in the second year. The issue of MSERC banking is being evaluated by staff as part of the inter-credit trading study to be completed this fall. Upon completion of this study, Rule 1610 will be revised if necessary.

Comment #1-2 The proposed amendments to Rule 1610 expand the number of rules where MSERCs can be used as an alternative means of compliance and increases the life of the credits, based on future vehicle scrapping activities. However, these proposed amendments make no provisions for the use of "existing" MSERCs. Therefore, it is requested that the District consider expanding Rule 1610's flexibility by including provisions which would make the proposed changes in the use and life of credits retroactively apply to existing MSERCs.

Response #1-2 At the present time, staff is recommending to maintain the restrictions on credit life of "existing" MSERCs that were in effect at the time the vehicles were originally scrapped. ("Existing" means those MSERCs that have been issued as well as MSERCs that are scheduled to be issued as a result of previous vehicle scrapping activities.) The assumption is that vehicles scrapped to date were needed to comply with Regulation XI rules. However, existing Rule 1610 MSERCs may be consumed by any entity as an alternative compliance pursuant to Rule 1501.1. It should be noted that staff is studying the issue of allowing MSERCs as an alternative method of compliance with existing emission limits as part of the inter-credit trading study.

Comment #1-3 As currently proposed, amendments to Rule 1610 disallow trading of MSERCs between SCAQMD Licensed Scrappers except as allowed under Rule 1501.1. It is unclear why trading would be restricted to only one applicable rule. It is recommended that this provision be modified to allow MSERCs trading to non-Scrapper businesses.

Response #1-3 The issue of unrestricted MSERC trading between any entity for compliance of rules other than Regulation XV is being evaluated by staff as part of the inter-credit trading study to be completed this fall. Upon completion of this study, Rule 1610 will be revised if necessary. Nevertheless, in an effort to provide additional flexibility with regard to MSERC trading, a modification was made to the rule language. This modification allows for the trading of MSERCs from SCAQMD Licensed Scrappers that are not subject to either District Regulation XI or Rule 1301(b)(2) to other entities that were SCAQMD Licensed Scrappers as of the date the MSERCs were generated. See also response to comment #1-2.

Comment #1-4 The discount factor should not be applied in Rule 1610. Rather, it should be applied when the MSERC is used.

Response #1-4 Rule 1610 has been modified to allow the application of a 1.0 discount factor at the time of MSERC generation, and the application of a 1.0 or 1.2 discount factor, depending on the use, at the time of consumption. Staff believes that this modification satisfactorily addresses this comment.

Comment #1-5 Chevron is concerned that existing MSERCs are not going to have their life extended for up to 5 years. We have many MSERCs that will not be used, making it ever harder for taking pro-active companies to take risks in market-based regulations.

Response #1-5 Chevron obtained the full amount of MSERCs and associated benefits (i.e., the ability to use these MSERCs as an alternative method of compliance with Rule 1142) that they were entitled to as a result of their vehicle scrapping activities. Staff recognizes Chevron's proactive undertakings in vehicle scrapping programs, and Rule 1610 recognizes these critical efforts by providing the mechanisms to generate MSERCs. However, to continue these proactive efforts, the proposed amendments would stimulate further vehicle scrapping activities which will generate MSERCs with longer life. It should be noted that the amendments to Rule 1610 will not affect Chevron's use these existing MSERCs for 1142 compliance purposes. The commentator is referred to response to comment #1-2.

Comment #1a-1 In its present form, Rule 1610 does not contain a mechanism for banking the MSERCs generated through old vehicle scrapping (when MSERCs are converted to Regulation XIII ERCs). We recommend that the District reference its banking provisions in Regulation XIII as a method to bank MSERCs. We also recommend that the District ensure that its banking system meets State banking requirements established pursuant to Health and Safety Code sections 40709 through 40713.

Response #1a-1 District staff does not believe that it is necessary for Rule 1610 to reference banking provisions in Regulation XIII, since the banking provisions of Regulation XIII would be implemented when the MSERCs are converted to ERCs.

Comment #1a-2 Section (h)(1) of Proposed Amended Rule 1610 provides a formula to calculate the MSERC value per scrapped vehicle. The District staff proposes to eliminate the "unit of time" dimension of the MSERC. This formula does not agree with the formula in the Air Resources Board's Mobile Source Emission Reduction Credits Guidelines for the Generation and use of Mobile Source Emission Reduction Credits.

Response #1a-2 The "unit of time" dimension is retained, since paragraph (h)(7) of the proposed amendments to Rule 1610 provides that MSERCs generated will be valid for up to five years, except that no more than one-third of the MSERCs may be consumed within one year from the date of (MSERC) approval and not more than two-thirds of the MSERCs may be consumed within two years from the date of approval.

Comment #1a-3 Subparagraphs (h)(2)(B) and (h)(4)(B) refer to the particulate matter (PM) emission rates for scrapped vehicles and replacement vehicles by stating the "emission rates for PM should be obtained from the Executive Officer or designee." The PM emission rates should be obtained from the ARB. We therefore recommend changing the language to reflect this requirement.

Response #1a-3 PM emission rates, recently obtained from the Air Resources Board Mobile Source Division, have been incorporated into the rule language.

Comment #1a-4 Paragraph (h)(7) specifies that MSERCs are valid for five years from the date of compliance plan approval. The only limitation is that one-third may be used in the first year from the date of approval, and no more than two-thirds may be used in the second year from the date of approval. This provision of the rule should be changed to state that no more than one-third of the total MSERCs should be used in any one year.

Response #1a-5 The provision that no-more than one-third or the MSERCs may be used in the first year from the date of approval, and no more than two-thirds may be used during the first two years from the date of approval is included in the amendments to Rule 1610 for consistency with Rule 1501.1 and to provide more flexibility. The District did not receive any comments or other input from ARB relative to this limitation on the use of MSERCs during the development and adoption of Rule 1501.1. However, the District intends to reexamine this issue in a broad sense in the on-going inter-credit trading study.

Comment #1a-5 It is recommended that the time period for maintaining vehicle scrapping records for an SCAQMD Licensed Scrapper be increased from one year to five years following the termination of vehicle scrapping activities.

Response #1a-5 District staff believes that it is sufficient to require a one year period rather five years, for maintaining scrapping records by the SCAQMD Scrapper after vehicle scrapping activities have terminated. This is because the vehicle data records, as well as related documentation submitted by the SCAQMD Licensed Scrapper at the request of the District, are planned to be maintained indefinitely at the District.

Comment #2-1 The proposed amendments to Rule 1610 allow auto dismantlers and SCAQMD Licensed Scrappers to be the same entity. This poses two problems. First, it will create economic incentives for dismantlers to use some cars they receive in their normal course of operations, perform minimum work to rejuvenate them, and then qualify them as eligible for Rule 1501.1. This would undermine the air improvement program. Second, if a dismantler chooses to become an SCAQMD Licensed Scrapper, the dismantlers may view a firm such as ours (another Scrapper) as potential competition, and may decline to process vehicles for us. Such an actual experience gives rise to our concern that dismantlers may use their market position to exclude what they perceive as potential competition. To minimize the possibility for abuse, our recommendation is that dismantlers be precluded from also becoming SCAQMD Licensed Scrappers.

Response #2-1 Rule 1501.1 (adopted April 1995) allows any person to become an SCAQMD Licensed Scrapper, including DMV licensed auto dismantlers. Rule 1610 is being amended to be consistent with Rule 1501.1 in this area with regard to MSERCs generated for compliance with Rule 1501.1. Staff notes your concern regarding auto dismantlers becoming SCAQMD Licensed Scrappers; however, the District does not want to preclude anyone from becoming a licensed scrapper to ensure that an adequate vehicle scrapping market develops. It should be noted that the District will take efforts to monitor Rule 1610 vehicle scrapping activities, whether it is being performed by auto dismantlers or other entities, to ensure proper enforcement of applicable Rule 1610 provisions, in order to prevent the issuance of MSERCs for ineligible vehicles.

Comment #2-2 Because of the requirement that second or subsequent vehicles submitted by the same owner must be owned by that owner, it is highly improbable that a single owner will sell more than one vehicle into Rule 1610 vehicle scrapping programs. This restriction should be relaxed. Rule 1610 should allow the purchase of legitimate vehicles from an auto dealer to be eligible for vehicle scrapping. If the vehicle is legitimate, i.e., complies with other vehicle eligibility criteria for registration, usability, etc., then why preclude these vehicle from Rule 1610 scrapping programs?

Response #2-2 The purpose of the Rule 1610 provision regarding second and subsequent vehicles submitted by the same owner is to prevent the resurrection of vehicles that are already non-operational, for the purpose of obtaining MSERCs. This is a real concern since District staff has received input in the past from the public indicating that this practice may occur.

Comment #2-3 The Regulation XV Task Force designed the 1501.1 alternatives to the rideshare rule. Old-Vehicle Scrapping was one of the alternatives. The rationale was that old-vehicle scrapping would provide for net improvements in air quality. Proposed Amended Rule 1610 affords a huge loophole for some companies to market their surplus NOx credits to Rule 1501.1 companies, resulting in windfall gains from excess credits having huge market value. The result is no net gain in air quality in the transition.

Response #2-3 Air quality will not be negatively affected because the NOx MSERCs represent surplus emission reductions (i.e., emission reductions that were not otherwise required by local, state, of federal regulations).

Comment #3-1 Rule 1610 should allow total fungibility of MSERCs for all its intended uses. It should allow MSERCs to be banked, debited, or otherwise held undesignated to allow for unhindered trading.

Response #3-1 Amendments to Rule 1610 will effectively allow for the issuance of undesignated MSERCs, so that potential MSERC consumers will have additional flexibility for their use. MSERC banking will be evaluated as part of the inter-credit trading study, to be completed this fall.

Comment #3-2 Rule 1610 should generate all MSERCs as stand-alone credits, with no discount factor (DF). The discount factor could be applied only when the MSERC is applied to a specific rule. A single-denomination MSERC would then be easier to track electronically.

Response #3-2 At this time it is more practical to apply the DF within Rule 1610, depending on its ultimate use. Depending on the results from the inter-credit trading study as well as future experience with credit trading rules, District staff may recommend DF application in the rule where MSERCs are consumed. Proposed Amended Rule 1610 has been modified to allow for all MSERCs to be generated with a Discount Factor equal to 1.0. At the time of usage, a Discount Factor equal to 1.2 may be applied depending on the specific use.

Comment #3-3 The amendments to Rule 1610 should allow any entity to generate MSERCs and allow the credits to be traded or used by any party for compliance with any rule which allows the use of credits as an alternative method of compliance.

Response #3-3 The amendments to Rule 1610 allow any person to generate MSERCs and be consumed by any entity as an alternative method of compliance for Rule 1501.1 only. In addition, SCAQMD Licensed Scrappers that are not subject to either District Regulation XI or Rule 1303(b)(2) may also transfer MSERCs to other entities that were SCAQMD Licensed Scrappers as of the date the MSERCs were generated. Complete flexibility on the use of MSERCs will be studied as part of the inter-credit trading study.

Comment #3-4 The provision restricting scrapping programs to 100 or more vehicles, unless a hardship is demonstrated (i.e., if the amount of credits needed corresponds to fewer than 100 vehicles scrapped) should be deleted. Many facilities could demonstrate a need to scrap less than 100 vehicles. Approval on a hardship situation on a case by case basis would place an unnecessary burden on District staff.

Response #3-4 Staff is proposing to modify this provision of Rule 1610 to lower the minimum number of vehicles to 50. In addition, an entity has the ability to obtain MSERCs from a licensed-scrapper without having to perform the actual scrapping. Thus if an entity needs less than 50 vehicles worth of MSERCs, that entity may be able to obtain the needed credits. If a case by case determination of hardship proves to be a burden on District staff resources, then additional amendments to Rule 1610 may be proposed in the future.

Comment #3-5 Language should be inserted in Rule 1610 that would allow the Executive Officer or designee to grant approval to accept a notice of less than two weeks. Additionally, a scrapper can only provide notice on the estimated number of vehicle to be scrapped since appointments are frequently canceled or missed.

Response #3-5 With regard to previous scrapping programs, the two week notice has generally worked well based on input from SCAQMD Licensed Scrappers and District enforcement personnel. Therefore, no change in the two week notice language is proposed with regard to exception to the two week time period. However, a modification is being proposed to allow SCAQMD Licensed Scrappers to provide an estimated number of vehicles to be scrapped.

Comment #3-6 The time period for destroying vehicle components as required in Rule 1610 should be increased from 45 days to 90 days. The ARB guidelines allow 90 days.

Response #3-6 District staff is proposing to change the time period allowed for destroying specified vehicle components (e.g., license plate, vehicle identification number, cylinder block, and body/frame) to 90 days.

Comment #3-7 The amendments to Rule 1610 should remove the requirement for a current vehicle registration card as one required document to prove District residence for the last two years. Current registration is already confirmed via DMV record review. The owner should be able to supply any one of the listed acceptable documents dated within twelve months of vehicle delivery and another dated at least two year prior to delivery.

Response #3-7 The vehicle registration card provides written proof to the SCAQMD Licensed Scrapper that the vehicle is currently registered to an address in the District. It should be noted that not all SCAQMD Licensed Scrappers have direct access to vehicle registration address information. Also, according to the Department of Motor Vehicles (DMV), vehicle owners must carry the vehicle registration card inside the vehicle.

Comment #3-8 "Windows" should be removed from the list of vehicle components that must be present when the vehicle is submitted for scrapping.

Response #3-8 District staff believes that "windows" should remain on the list of components that must be present on the vehicle when it is presented for scrapping. This requirement, in combination with other Rule 1610 provisions, will help deter the resurrection of non-operational vehicles for submission into vehicle scrapping programs.

Comment #3-9 Rule 1610 needs to clearly state that MSERCs generated under scrapping plans approved prior to October 13, 1995, can be used to allow companies to continue delaying compliance with any Regulation XI rules that had a compliance date subsequent to the date of scrapping plan approval.

Response #3-9 This comment has been addressed in the proposed amendments to Rule 1610 in paragraph (i)(3).

Comment #3-10 The reference in paragraph (j)(7), regarding data records for each scrapped vehicle, should be (j)(5) rather than (j)(4).

Response #3-10 District staff has modified the proposed amendments to Rule 1610 to incorporate this comment.

Comment #3-11 When presenting the vehicle for scrapping, the owner should be allowed to provide The SCAQMD Licensed Scrapper should be allowed to retain, for recordkeeping purposes, the DMV title or DMV application for duplicate title for each scrapped vehicle.

Response #3-11 District staff has modified the proposed amendments to Rule 1610 to incorporate this comment.

Comment #3-12 Information requirements in the scrapping plan should specify the ""anticipated initiation date" for the scrapping program, rather than the "initiation date."

Response #3-12 Proposed Amended Rule 1612 has been modified to address this comment.

Comment #3-13 The District should allow MSERCs, where a use has not been specifically designated in Proposed Amended Rule 1610, to be used as an alternative method of compliance with any other District regulation that permits the use of MSERCs, with the application of a discount factor of 1.2.

Response #3-13 Proposed Amended Rule 1610 has been modified to address this comment.

Comment #4-1 A scrapper and a dismantler can be one and the same entity. This creates a problem with quantifying emission reductions, because the dismantler can set aside a portion of the normal (baseline) flow of old vehicles for the generation of MSERCs, thereby generating credits for vehicles that would be scrapped regardless of Rule 1610. Therefore, the proposed amendments to Rule 1610 should include a mechanism (i.e., a discount factor) that accounts for the difference between the natural retirement old vehicles through attrition, and the accelerated retirement of vehicle for the generation of credits.

Response #4-1 The commentator is referred to the response to comment #2-1. Also, it should be noted that Rule 1610 does contain a discount factor, as well as vehicle eligibility requirements which only allow the generation of MSERCs for vehicles that are operable and intact.

Comment #4-2 The number of SCAQMD Licensed Scrappers is limited under the current Rule 1610 to those stationary sources subject to Regulation XI, Source Specific Standards. Allowing MSERCs generated from old-vehicle scrappage programs to be used for compliance with Regulation XV would increase the number of potential scrappers from nine to several thousand if every Regulation XV facility were licensed to conduct scrappage programs. The District should ensure that adequate monitoring exists to guarantee that the anticipated emission reductions from this program are actually achieved.

Response #4-2 The District has already taken the necessary measures to ensure proper enforcement of Rule 1610. In past vehicle scrapping programs, District personnel have inspected a significant number of vehicles that have been submitted for scrapping, and have audited hundreds of data records that have been submitted to the District by licensed scrappers. The District will continue these enforcement procedures subsequent to the adoption of Rule 1610 amendments. With regard to the potential increase in the number of licensed scrappers, initial input from the interested parties appears to indicate that the number of licensed scrappers may increase to about 30 from the nine currently licensed scrappers. For the most part, these "new" licensed scrappers would be conducting scrapping programs on behalf of companies interested in scrapping vehicles for compliance with Regulation XV.

Comment #4-3 The Preliminary Draft Staff Report does not provide estimates for the number of additional facilities or the projected increase in the number of vehicles to be scrapped for MSERCs that will participate in vehicle scrapping programs as a result of the proposed amendments to Rule 1610. Because this information is absent, it is difficult to determine the potential impact of in-migration of vehicles into the District for scrappage. Although the program would require vehicles to be registered within the District for two years prior to scrapping them for credits, the incentive to import and stockpile them for two years would still exist. The District could eliminate this incentive by requiring proof of insurance for the two years prior to scrapping. This requirement would also provide additional assurance that the vehicle was operational for the previous two years, since there is minimal incentive to insure a vehicle that is not driven.

Response #4-3 Since Rule 1610 is a market-based rule, projections of the number of additional facilities or vehicles that will participate in old vehicle scrapping programs are speculative. Input from Regulation XV companies indicates that some companies will participate in vehicle scrapping programs due to lower costs of compliance, while other companies may not participate because their rideshare programs are construed (by their employees) to be a permanent employee benefit. When Rule 1610 was originally adopted, a requirement to provide proof of insurance was included. The provision was subsequently removed because it was an unnecessary hindrance to the scrappage program. With regard to the potential stockpiling of out-of-state vehicles for scrapping, the District believes that the rule adequately deters this activity because of the two year continuous registration requirement. The District will continue to monitor the types of vehicles being submitted in the scrappage programs, and determine if such activities are actually occurring.

Comment #4-4 The District should address the potential for in-migration of old vehicles to supply affordable transportation within the District, in addition to vehicle in-migration to supply old-vehicle scrappage for MSERCs. As increasing numbers of vehicles are retired through the scrappage program, the demand for older vehicles will increase to meet the local need for affordable transportation.

Response #4-4 The District believes that this issue is more relevant with regard to the implementation of State Implementation Plan (SIP) measure M-1, which calls for a program to retire 75,000 vehicles per year in the South Coast Air Basin from 1999 through 2010, with a smaller number of vehicles to be retired annually between 1996 and 1998. The estimated number of 75,000 vehicles per year is significantly larger than the 5,999 vehicles scrapped over the last two and a half years under Rule 1610. ARB plans to study this issue as part of its implementation of SIP Measure M-1. Staff will forward the comment to ARB for their consideration in developing SIP Measure M-1.

Comment #4-5 The District should revisit the assumption that a vehicle scrapped under Rule 1610 has a remaining useful life of three years, given the minimal functional requirements that an old vehicle must demonstrate to qualify for scrappage.

Response #4-5 The useful life assumption is derived from the ARB Mobile Source Emission Reduction Credit Guidelines, which provide guidance to air quality districts regarding the design of emission reduction credit rules. We will recommend that ARB reevaluate the useful remaining life assumption as part of their implementation of SIP measure M-1. Any changes that ARB recommends in the useful remaining life assumptions will be evaluated for incorporation in Rule 1610.

Comment #4-6 Retroactive credit for CO and PM for previously generated MSERCs would compromise the emission benefits of the scrappage program, particularly if a 1.0 discount factor is used (i.e., for Regulation XV compliance) and would be inconsistent with the policies of Rules 1612 and 1620.

Response #4-6 Staff believes that allowing retroactive credits for CO and PM for previously generated MSERCs will not compromise emission benefits of the scrappage program. Existing CO MSERCs generated under Rule 1610 are surplus credits which the facility does not need to comply with Regulation XI rules. Allowing companies to use existing credits for Regulation XV purposes would provide a greater source of credits and provide greater flexibility for Regulation XV companies to meet their emission reduction targets.

Comment #5-1 In the interest of possibly scrapping vehicles for Rule 1501.1 compliance, what is the cost of implementing an old vehicle scrapping program?

Response #5-1 Rule 1610 is a market-driven rule, where the incentive provided to the vehicle owner to obtain the old vehicle for scrapping is determined by the SCAQMD Licensed Scrapper. Past market incentives have been mostly in the range of $600 to $700 per vehicle. Administrative costs are estimated to be $100 per vehicle. Scrapping Plan fees are $1,000 and semiannual Compliance Plan fees typically range from $800 to $1,200 depending on the number of vehicles scrapped.

Comment #5-2 Will the potential cost of vehicle scrapping be put together in future workshops?

Response #5-2 A Rule 1610 status report, detailing vehicle scrapping implementation costs, is available. It was presented to the Governing Board in May 1995.

Comment #5-3 What is the mechanism by which the public is notified about vehicle scrapping programs?

Response #5-3 Public notification of vehicle scrapping programs is left to the SCAQMD Licensed Scrapper. In the past, print media and radio advertising have been utilized.

Comment #5-4 Will there be an increase in credits issued for efforts to pre-screen vehicles to identify the grossest polluting vehicles for scrapping?

Response #5-4 Rule 1610 is based on average emissions from pre-1982 vehicles and the "emissions from an average vehicle" as being a replacement vehicle. The reason for this approach is that, in pre-screening vehicles, there is an incentive to tamper with vehicle to obtain greater credit. The calculation methodology employed in the rule is based on emission factors from ARB's emission inventory model. Nearly all of the vehicles scrapped are among the grossest emitters in the in-use vehicle fleet, because they are non-catalyst vehicles or, if they have an emission control system, it is usually in a very deteriorated state.

Comment #5a-1 The proposed amendments to Rule 1610 creates a loophole with regard to the banking of MSERCs, since an entity scrapping vehicles may not wish to report this activity until they decide that the credits are needed.

Response #5a-1 Proposed Amended Rule 1610 requires that all vehicle scrapping activity be reported every six months. If any vehicle scrapping activity goes unreported, then MSERCs will not be generated for those vehicles.

Comment #5b-1 Why have the scrapping plan requirements changed in terms of specifying the use of the credits and the ending date?

Response #5b-1 The changes in the scrapping plan requirements were made for consistency with recently adopted Rule 1612 and 1620. These rules have procedures to generate credits without having to specify their use for a specific rule. When the person who needs the MSERCs submits a compliance plan, the Regulation XI, XIII, or XV rule for which those credits will be used, are specified at that time. This allows entities to generate MSERCs without having to specify a specific rule for which those credits will be used. The ending date is proposed to be deleted from the scrapping plan because future scrapping programs will most likely be on-going programs for the purpose of generating MSERCs for Rule 1501.1 compliance.

Comment #5b-2 The program should be amended to use measured emissions in calculating credits. Regarding paragraph (f)(1), the rule should be amended to scrap gross emitters regardless of model year. BAR, as part of the new I/M program, will be identifying gross emitters through various means including remote sensing devices, loaded mode dynamometer testing, and high emitter profiles.

Response #5b-2 Allowing additional MSERCs for higher polluting vehicles provides an incentive for vehicle owners to slightly (and very easily) modify their vehicle for higher emissions. This is one of the reasons why model year groupings are used as part of the vehicle eligibility criteria, in order to determine when a vehicle qualifies for MSERCs. The District will be following this issue as the ARB conducts its evaluation of Measure M-1 in the State Implementation Plan.

Comment #5b-3 Regarding subparagraph (e)(1)(C), the rule should allow the recycling of the engine block and frame, as established in vehicle codes 5050 and 5051, California Air Resources Board Resolution 93-9, and Senate Bill 501 recently passed by both the California Assembly and Senate in Sacramento. Accommodating the legitimate interests of vehicle collectors and SEMA members will not have any measurable impact on air quality since such vehicles are better maintained and driven much fewer miles.

Response #5b-3 The requirement that the body/frame and the engine block be destroyed is to provide additional assurance that the scrapped vehicle will not be resurrected. Every other part on the scrapped vehicle may be reused. It should be noted that the District has not received any data from the public indicating that the price and/or availability of parts for collector cars is being impacted by Rule 1610 vehicle scrapping programs. This is most likely due to the small number of old vehicles scrapped as a result of Rule 1610. Also, the District believes that the interests of vehicle collectors, in terms of parts availability, are being served through the implementation of the Code of Conduct for SCAQMD Licensed Scrappers, which was adopted as a voluntary part of the Scrapping Plan, during the February 1994 amendments to Rule 1610. As a result of this Code of Conduct, 109 complete vehicles, identified by automobile hobbyists, were saved from scrapping, The District has received positive public input in response to the Code of Conduct.

Comment #5b-4 The three year credit life should be maintained. It corresponds to the length of time that the vehicle would have been operating in the absence of scrapping.

Response #5b-4 The five year credit life is part of the proposed amendments to Rule 1610, for consistency with recently adopted Rule 1501.1. It should be noted that the amount of MSERCs issued will still be based on the assumed three years remaining life of the scrapped vehicle.

Comment #6-1 Credit fungibility should be increased, especially when a single company generates credits for more than one use, such as Rules 1142 and 1501.1. In situations where projected MSERC needs are highly uncertain, the credits should be allowed to be kept "undesignated" until such time when they could be designated with a little more certainty.

Response #6-1 The commentator is referred to the response to comment #3-1.

Comment #6-2 Existing MSERCs are issued annually for three years and must be used in the year issued. Under the proposed amendments to Rule 1610, new MSERCs are issued immediately and can be used over a five year period. Old credits should be directly convertible to new credits, except that credits which have expired should not be resurrected.

Response #6-2 The commentator is referred to the response to comment #1-2.

Comment #6-3 Regarding nonrevivable junk slips, last year a bill passed that instituted a "nonrepairable vehicle" designation. It's virtually the same as a nonrevivable junk slip that is normally used by law enforcement. This would allow a little more flexibility as to how to dispose of a vehicle once they are to be retired.

Response #6-3 Since DMV has not implemented the nonrepairable vehicle designation, it is not completely clear whether this designation will be equivalent to the nonrevivable junk slip designation. District staff will be following this issue to determine what effect it may have on future rule amendments.

Comment #7-1 EPA recommends adding two definitions to subdivision (b)(: (1) auto dismantlers, and (2) functional inspections. In subdivision (b), the proposal states that SCAQMD licensed scrappers shall have vehicles scrapped only by auto dismantlers licensed by the California DMV. Because there are several hundred auto dismantlers licensed in the State, licensed not with the concept to scrap old vehicles permanently, but rather to recycle as many parts as possible, clear definition is recommended to guarantee proper vehicle disposal. Functional inspection definition is also recommended to add to subdivision (b) definitions because there is no distinct clarification of what that implies.

Response #7-1 District staff does not believe it is necessary to define DMV licensed auto dismantler. The identification of an auto dismantler as DMV licensed has not been a problem in the course of implementing Rule 1610. District staff does not believe that "functional inspection" needs to be defined since paragraphs (g)(1) and (g)(2) detail functional inspection requirements.

Comment #7-2 Subdivision (g) Vehicle Visual and Functional Inspection lays out criteria scrapped vehicles need to meet to pass the visual and functional inspection. It is not clear what the functional tests are. Whether it is when the vehicle owner is starting, restarting the engine, or a District authorized person performing other tests to establish operability.

Response #7-2 The District is not concerned about who actually starts or restarts the engine, provided that the SCAQMD Licensed Scrapper observes these functional tests, and then disqualifies those vehicles that fail them.

Comment #7-3 Paragraphs (e)(1) and (e)(3), Vehicle Disposal Requirements, is not clear when referring to activities associated with scrapping vehicles, particularly vehicle components. Does this include vehicle exhaust emission components? If so, what pre-1981 exhaust emission components are subject to the rule:

Response #7-3 Paragraph (e)(1) and (e)(2) clearly states that the vehicle identification number, license plates, cylinder block, and body/frame be destroyed with 90 days subsequent to scrapping. Exhaust emission components are not mentioned.

Comment #7-4 Paragraph (h)(1) references a discount factor which is used in the calculation of mobile source emission reduction credits (MSERCs) and includes the statement "...except that the Discount factor shall be 1.0 for compliance with Rule 1501.1 or Rule 1303." This language is inconsistent with District staff's statement in the staff report for proposed Rule 1612 that "Application of the discount factor helps account for the uncertainties associated with trading emission reduction credits from mobile to stationary sources." Given that the use of MSERCs for new source review (NSR) offsets is mobile to stationary source trading, the 1.2 discount factor as well as the applicable offset ratios (considering NSR offset aggregate demonstrations) should be applied in the instance where any 1600 series rule-generated MSERC is used to meet NSR offset requirements.

Response #7-4 Regulation XIII, which contains the NSR requirements, already requires a 1.2 offset ratio upon the use of the credit. Therefore, applying an additional 1.2 offset ratio (or discount factor) in Rule 1610 is unnecessary and would result in double discounting of the emission reductions generated from vehicle scrapping, when the credit is used for NSR offsets. In addition, this issue will be revisited during the inter-credit trading study.

Comment #7-5 Subparagraph (f)(4)(B) includes a statement about "equivalent documentation as determined by the Executive Officer or designee" to demonstrate two years of vehicle ownership. EPA recommends rewording this provision so that the equivalent documentation is specified.

Response #7-5 The District included the "equivalent documentation" provision to provide flexibility with regard to how address history could be verified, for vehicles with more than one owner during the two year period prior to scrapping. More than likely, this equivalent document will have to originate from DMV; however, the District would like to remain flexible with regard to what qualifies as "equivalent documentation."

Comment #7-6 Paragraph (j)(6) specifies that records are to be kept for at least one year. EPA suggests that this provision be changed to require records be kept for the term of the credits.

Response #7-6 The commentator is referred to the response to comment 1a-5.

Comment #7-7 The District has essentially provided no technical justification for the extension of the credit term beyond three years. The rationale provided in the staff report is inadequate.

Response #7-7 The District is proposing a five year credit life to be as flexible as reasonably possible regarding the use of the credits, and provide consistency with recently adopted Rule 1501.1. Both Proposed Amended Rule 1610 and Rule 1501.1 are based on the precedent set at the Bay Area Air Quality Management District, which also provided a five year life for vehicle scrapping credits. With regard to technical justification, an analysis performed by ARB focusing on California Department of Motor Vehicle (DMV) data led to the conclusion that the average remaining life of vehicles 15 years or older is 5 to 6 years. This is stated in ARB's Proposed Principles for Old Vehicle Buy-Back Programs, dated March 1991, and repeated in their February 1994 guidance document entitled "Guidelines for the Generation and Use of Mobile Source Emission Credit." To put this in the proper context, the ARB recommends, and the District concurs, that the valuation of credits should be based on an assumed three years useful remaining life of the vehicle, since more than likely old vehicle buy-back programs will not attract the "average" old vehicle. Nevertheless, in the interest of providing maximum flexibility regarding the use of the credits, and the previous analyses of DMV data performed by ARB regarding the useful remaining life of older vehicles, the District believes it is reasonable to provide for a five year credit life.

VII. SUMMARY AND DRAFT FINDINGS

Summary

Proposed Amended Rule 1610 is part of the District's strategy to attain federal and state ambient air quality standards. Long-term air quality benefits are expected by attaining and maintaining the ambient air quality standards for ozone. Improved air quality will ultimately reduce negative public health impacts from this criteria pollutant.

Proposed Amended Rule 1610 is technologically feasible and cost-effective, while reducing VOC, NOx, CO and PM, and the rule addresses concerns raised by the public, wherever possible. Therefore, staff recommends the adoption of Proposed Amended Rule 1610.

These findings are being made in compliance with state law requirements.

DRAFT FINDINGS REQUIRED BY THE CALIFORNIA HEALTH AND SAFETY CODE

Health and Safety Code Section 40727 requires the District to adopt written findings of necessity, authority, clarity, consistency, non-duplication and reference.

Necessity - As set forth in the adopted Air Quality Management Plan (AQMP), the emission reductions associated with Proposed Amended Rule 1610 are needed for the following reasons:

a) State and federal health-based ambient air quality standards for ozone are regularly and significantly violated in the South Coast Air Basin. The extensive reduction of VOC and NOx emissions (precursors to ozone formation) and CO, including the reductions from Proposed Amended Rule 1610, is needed to meet federal and state air quality standards.

b) By exceeding state and federal air quality standards, the health of people within the South Coast Air Basin is impaired.

c) By exceeding state and federal air quality standards, the quality of life is reduced in the South Coast Air Basin in numerous respects.

d) The "California Clean Air Act" (CH&SC Section 40910 et seq.) requires that the District make every effort to attain federal and state ambient air quality standards as soon as practicable. Proposed Amended Rule 1610 makes progress toward that goal.

e) Proposed Amended Rule 1610 is intended to provide an alternative means of compliance with District regulations.

Authority - The District Board obtains its authority to adopt, amend, or repeal rules and regulation from Health & Safety Code Sections 40000, 40001, 40440, 40441, 40463, 40702, 40725 through 40728, and 40910 through 40920.

Clarity - The District Board determines that Proposed Amended Rule 1610 is written or displayed so that its meaning can be easily understood by persons directly affected by it.

Consistency - The District Board determines that Proposed Amended Rule 1610 is in harmony with, and not in conflict with or contradictory to, existing federal or state statutes, court decisions, or regulations.

Non-Duplication - Proposed Amended Rule 1610 does not impose the same requirements as any existing state of federal regulation and are necessary and proper to execute the powers and duties granted to, and imposed upon, the District.

Reference - In adopting this Proposed Amended Rule, the Board references the following statutes which the District hereby implements, interprets or makes specific: H&S Code Sections 40001 (rules to achieve ambient air quality standards), and 40440(a) (rules to carry out AQMP).

ATTACHMENT D

FINAL ADDENDUM TO THE
FINAL ENVIRONMENTAL ANALYSIS FOR RULE 1610

Attachment D is provided to the Board and requesters only at this time due to the bulk of material. The previously certified Final EA and the Addendum are available to other members of the public at the AQMD Public Information Center.