PROPOSAL:

Pre-Approve Stationary and Mobile Source Emission Reduction Proposals for Rule 2501 - Air Quality Investment Program (AQIP)

SYNOPSIS:

On August 8, 1997, the Board approved issuance of an RFP to solicit proposals to reduce emissions from stationary and mobile sources for the AQIP. AQMD staff has received three proposals and verified that the proposals meet the eligibility criteria for providing Rule 2501 emission reductions. This action is to pre-approve proposals that meet the eligibility criteria. Certified pre-approved proposals will await selection for implementation as the emission reductions are needed and based on monies collected. Certified pre-approved proposals will establish the participation fee that Regulation IV and XI businesses seeking an alternative to a compliance limitation must pay to purchase AQIP emission reductions.

COMMITTEE:

Administrative Committee, November 21, 1997, Recommended for Approval

RECOMMENDED ACTION:

Pre-approve the recommended proposals for the Rule 2501 - AQIP.

Barry R. Wallerstein, D.Env.
Acting Executive Officer

Background

In May 1997, the AQMD’s Governing Board adopted Rule 2501 - Air Quality Investment Program (AQIP). Rule 2501 allows businesses to voluntarily purchase pre-verified emission reductions from the AQIP Reserve as an alternative means of compliance with AQMD Regulations IV and XI, and Rule 2202.

On August 8, 1997, the Governing Board approved RFP #9798-06 to solicit proposals to reduce VOC, NOx, CO, SOx, and/or PM10 emissions from stationary and mobile sources for the AQIP Reserve. Rule 2501 requires that all AQIP proposals meet a specified eligibility requirement to ensure emission reductions are real, quantifiable, surplus, permanent, and enforceable. Proposals that meet the eligibility criteria are placed into two categories: Category I and Category II. Category I proposals must generate emission reductions within 36 months from the date the proposal is selected for implementation and must quantify the emission reductions using an approved Emission Quantification Protocol. Only emission reductions from Category I proposals can be used in the AQIP Reserve for Regulation IV and XI sources. Category II proposals represent those control strategies that will provide an air quality benefit and/or will achieve surplus emission reductions. Category II proposals must be implemented within a maximum of 60 months from the date the proposal is selected for implementation.

Rule 2501 established the process in which proposals are selected for implementation. Every six months, proposals that meet the eligibility criteria will be presented to the Governing Board for pre-approval. The certified pre-approved Category I proposals will establish the Technology Fee (T_fee) for Regulation IV and XI businesses seeking alternative compliance. Additional monies collected through the Premium (10% of the T_fee for small businesses and 20% of the T_fee for sources other than small businesses) will be used to fund Category II projects. The participation fee for Rule 2202 sources is established pursuant to Rule 311 - Air Quality Investment Fee. Certified pre-approved proposals will await selection for implementation as their emission reductions are needed and based on monies collected.

T_fee Calculation Methodology

The T_fee is a pollutant-specific average of the implementation costs for all Category I proposals that is weighted by emissions. Twice a year, the T_fee will be established.

For example, the certified pre-approved Category I proposals identified in this Board letter will be used to establish the T_fee effective January through June 1998. The T_fee is calculated for three cost groups based on the implementation cost (dollars per ton of emissions reduced) of the proposals as specified by Rule 2501, Section 5 of Appendix A:

• Group A T_fee: Average implementation cost for proposals less than $10,000 per ton of pollutant reduced;

• Group B T_fee: Average implementation cost for proposals greater than or equal to $10,000 and less than $20,000 per ton of pollutant reduced;

• Group C T_fee: Average implementation cost for proposals greater than or equal to $20,000 per ton of pollutant reduced.

Within each cost group, a T_fee will be established for each pollutant.

Selection of Pre-Approved Proposals

Upon Governing Board approval, the proposals will be placed on a pre-approved list and will await selection for implementation. Based on the need for the type and amount of emission reductions from AQIP Investors, the Executive Officer will select Category I proposals from the pre-approved list. The selection of proposals will be, first, proposals in Group A, then proposals in Group B, and finally proposals in Group C. Within each grouping, proposals are further prioritized based on Certified Disabled Veteran Business Enterprise (DVBE)/Joint Ventures and Local Business Enterprises (points are allowed when proposals are not funded in whole or in part by EPA Grant funds). The Executive Officer will use the criteria for selection as specified in Section IV, Part (D)(1)(c) of RFP 9798-06, such as the type and the amount of emission reductions needed, the ability to achieve concurrent or multiple pollutant emission reductions, as well as the viability of partial or full implementation of the proposals and the associated implementation cost for partial and/or full implementation of the proposals.

Proposals Received

The AQMD staff received three proposals for the Rule 2501 AQIP. All proposals received are designated as Category I Control Strategy Proposals. Thus, no Category II proposals were received. The three proposals are from: Emission Reduction Incentive Group (ERIG) for VOC emission reduction credits from stationary process change; Market-Based Solutions (MBS) for VOC, NOx, and CO reductions from car scrapping; and PowerLight Corporation for VOC, NOx, CO, and PM emission reductions from electrification of diesel-powered ground support equipment with 50% of power supply from solar energy.

Based on the AQMD staff review, the three proposals meet the Initial Proposal Evaluation and Technical Evaluation Criteria under the Proposal Evaluation/Contractor Selection Criteria. It should be noted that each of the three proposals received equal points (5 points for Local Business Enterprise); thus, there is no further prioritization within the T_fee groupings. The AQMD staff is recommending that the Governing Board pre-approve the three proposals for the Rule 2501 AQIP. Table 1 (on the following page) summarizes the aforementioned Category I proposals.

Table 1 - Summary of 1997 AQIP Category I Proposals

¹ Emission reductions available in 1998; available upon selection of proposal.

² Emission reductions available in 1998; available 90 days upon selection of proposal.

³ Emission reductions available in three equal increments in 1998, 1999, and 2000; available 120 days upon selection of proposal.

⁴ Emission reductions available in 1998; available 9 months upon selection of proposal. Emission reductions are in excess of emission reductions required under local, state and federal requirements.

T_fee - January 1, 1998 - June 30, 1998

The AQMD staff estimated the T_fee that Regulation IV and XI businesses seeking an alternative to a compliance limitation must pay to purchase emission reductions, as shown in Table 2. Since no proposals have an implementation cost greater than $20,000, there is no T_fee for Group C proposals. In addition, although PowerLight anticipates SOx emission reductions from implementation of their project, these emission reductions cannot be quantified at this time, and are therefore not included.

Table 2 - T_fee and Available Emission Reductions

Effective January 1, 1998 - June 30, 1998

Proposition 209 Compliance

On August 28, 1997, Proposition 209 went into effect when a stay of enforcement was lifted. Proposition 209 prohibits granting of preferential treatment based upon race, ethnicity, color, sex or national origin in the operation of public employment, public education, or public contracting. On October 10, 1997, the District’s Board adopted an Interim Contracting & Purchasing Policy and Consultant Selection Policy. The Interim Policy eliminates the granting of preference points based upon race or gender and only requires a good faith effort to subcontract with minority and women-owned businesses if subcontacts are to be let, when contracts are funded in whole or in part by EPA grant funds. Proposition 209 does not prohibit actions necessary to maintain eligibility for federal funding. In addition, in compliance with federal requirements, local preference points are allowed only if the contract does not involve federal funding. This contract award will be based on the interim policy. The remainder of the District’s Contracting and Purchasing Policy and Consultant Selection Policy remains unchanged.

Outreach

In accordance with the AQMD’s consulting and contracting policies, a public notice advertising the RFQ and inviting bids was published in the following publications:

1.	Antelope Valley Press	10.	La Opinion	19.	Precinct Reporter
2.	Black Voice News	11.	La Voz	20.	Rafu Shimpo
3.	Chinese Daily News	12.	Los Angeles Daily News	21.	Riverside Press Enterprise
4.	Eastern Group Publications	13.	Los Angeles Sentinel	22.	San Bernardino Sun
5.	El Chicano	14.	Los Angeles Times	23.	Santa Clarita Signal
6.	Excelsior, The	15.	M/W/DVBE Source	24.	State of California Contracts
7.	Inland Empire Hispanic News	16.	Orange County Register		Register
8.	Inland Valley Daily Bulletin	17.	Palm Springs Desert Sun
9.	Korea Central Daily	18.	Philippine News

Additionally, potential bidders were identified using the Los Angeles County MTA Directory of Certified Minority, Women, Disadvantaged and Disabled Veterans Business Enterprises; the Inland Area Opportunity Pages Ethnic/Women Business & Professional Directory; AQMD’s own electronic listing of certified minority vendors; and AQMD Purchasing’s mailing list. Copies of the RFQ were mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations; and placed on the Internet at AQMD’s Web site [http://www.aqmd.gov, "Business and Job Opportunities" icon] and AQMD’s 24-hour telephone message line for bidders (909) 396-2724. In addition, public service announcements were sent to local radio, TV and cable stations. Further personal outreach efforts by staff were made to various minority businesses and chambers of commerce to inform and invite prospective bidders to submit proposals.

Resource Impacts

Pre-approval of the recommended proposals for Rule 2501 AQIP will have no impacts on the AQMD’s resources. Proposals will be selected based on the monies submitted by sources choosing alternative means of compliance with emission reduction requirements. Upon selection of proposals, the AQMD may periodically verify emission reductions through compliance audits.

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