Report:

Second Annual RECLAIM Program Audit Report

Synopsis:

In accordance with Rule 2015 - Backstop Provisions, the second annual report on the NOx and SOx RECLAIM program has been prepared and is presented for public hearing. The report assesses emission reductions, average annual price and availability of RECLAIM Trading Credits (RTCs), job impacts, compliance issues and other measures of performance.

Committee:

Stationary Source, January 24, 1997, Reviewed.

Recommended Action:

Approve the attached report.

James M. Lents, Ph.D.
Executive Officer

Background

On October 15, 1993, the AQMD Governing Board adopted the RECLAIM program. The goal of RECLAIM is to provide facilities with added flexibility in meeting emission reduction requirements while lowering the cost of compliance. The RECLAIM program is designed to meet all state and federal requirements for clean air programs as well as other performance criteria for air quality improvement, enforcement, implementation costs, job impacts and protection of public health.

Since RECLAIM represents a significant departure from traditional command-and-control regulations, the RECLAIM rules provide for periodic program audits in order to verify that the program objectives are being met. Rule 2015 requires annual audits focusing on specific issues, as well as more comprehensive three-year audits. The results of the audits will be used to determine whether any program modifications are appropriate.

The second annual RECLAIM program audit report has been prepared by AQMD staff. The period covered by the audit includes the second compliance year of program implementation for all RECLAIM facilities. The first compliance year was also considered in instances where its inclusion resulted in a more meaningful analysis. Pursuant to Rule 2015, the audit report is presented for a public hearing, and will be included in AQMD's annual performance report to the California legislature.

Audit Findings

The audit findings indicate that the implementation of RECLAIM during the second compliance year was highly successful. Specifically, the analysis demonstrates that:

• RECLAIM is continuing to meet its emission reduction goals. Aggregate actual emissions from RECLAIM facilities were below allocations for the second compliance year.

• The supply of RTCs is sufficient to meet demand for both the NOx and SOx market. It is anticipated that a combination of factors, including complete implementation of RECLAIM’s monitoring and reporting procedures and the implementation of new credit generation programs, will ensure an adequate supply of RTCs.

• An active trading market for RTCs has developed. More than $20 million of RTCs have been traded since the adoption of RECLAIM with $9.9 million in trades occurring in 1996, and sufficient RTCs are available to meet the demand of RECLAIM facilities. Average prices, excluding RTCs which were transferred with a price of $0 (such as transfers between facilities of common ownership), are well below the backstop price of $15,000 per ton established in Rule 2015 and are summarized below:
  
  • $154 per ton for 1996 NOx RTCs;
  • $1,729 per ton for 2010 NOx RTCs;
  • $142 per ton for 1996 SOx RTCs; and
  • $2,117 per ton for 2010 SOx RTCs.

• As of the end of 1996, the RECLAIM Universe consisted of 330 facilities. The universe changes in the second compliance year included one opt-in, three inclusions (two facilities included in the SOx market were already participating in the NOx market), six exclusions, and ten shutdowns. RECLAIM was not cited as a contributing factor by any of the shutdown facilities. Therefore, the fear expressed by some during program development that RECLAIM would encourage business flight was disproven.

• RECLAIM has had minimal impact on employment. RECLAIM was cited by five facility operators as the cause of 49 lost jobs. Five facilities attributed ten jobs gained to RECLAIM. Jobs lost due to RECLAIM represent only 0.03% of the jobs at RECLAIM facilities.

• Ninety-two percent of facilities complied with their allocations during the second compliance year whereas 86% of facilities complied with their allocations for the first compliance year. Most instances of non-compliance with allocations were mainly due to miscalculations and a lack of understanding of the proper use and application of RTCs and the missing data procedures (MDP). Some facilities encountered delays in meeting compliance deadlines for installing monitoring and reporting devices such as CEMS and Remote Terminal Units (RTUs). As required by the rules, these facilities had estimated emissions which resulted in conservative emissions estimations according to MDP. Staff will perform additional outreach efforts to ensure a better understanding of rule requirements, and also take enforcement action as appropriate. AQMD staff has also worked with RECLAIM participants to resolve specific concerns through rule amendments and implementation guidance documents.

• Staff has conducted an extensive public outreach effort for RECLAIM participants during the second compliance year. This outreach included:

• Three forums and workshops (excluding those associated with rule amendments);
  • Periodic industry-specific working groups;
  • Periodic meetings with industry associations;
  • Written guidance documents and informational mailings.

  The outreach focus has evolved to address implementation issues with the participation of industry-specific working groups. This effort has been effective in explaining and clarifying rule requirements and resolving facility concerns in a timely manner.

• RECLAIM continues to meet the requirement for equivalency with the AQMP. Allocation levels have changed slightly since program adoption based on updated control technology reviews and other new information, as well as changes to the RECLAIM Universe. However, these changes would also have occurred under command-and-control rules and therefore do not affect the ability of RECLAIM to achieve reductions equivalent to the AQMP as required by Health and Safety Code Section 39616.

AQMD staff will continue to monitor and assess the performance of the RECLAIM program and work closely with RECLAIM participants to ensure continued program success.

Attachment

Second Annual RECLAIM Program Audit Report

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