Back

REPORT:

Annual RECLAIM Audit Report for the 1996 Compliance Year

SYNOPSIS:

The annual report on the NOx and SOx RECLAIM program is prepared in accordance with Rule 2015 - Backstop Provisions. The report assesses emission reductions, average annual price and availability of RECLAIM Trading Credits, job impacts, compliance issues, and other measures of performance for the third year of this program.

COMMITTEE:

Stationary Source, February 20, 1998, Reviewed

RECOMMENDED ACTION:

Approve the attached report.

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

Background

The AQMD Governing Board adopted the RECLAIM program on October 15, 1993. 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 annual 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 a more comprehensive three-year audit. The results of the audits will be used to determine whether any program modifications are appropriate. In addition, Health & Safety Code §40440.2 directs AQMD to present a progress report based upon the annual audits to its Governing Board on or before July 1, 1998.

The annual audit for the 1996 compliance year (RECLAIM’s third year of implementation) has been prepared by AQMD staff. 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. A separate document satisfying the Rule 2015 requirement for a three-year audit and the Health & Safety Code §40440.2 requirement for a progress report will be presented to the Governing Board in a public hearing May 8, 1998. The three-year audit will provide a more comprehensive analysis of the program from adoption through December 1997.

Audit Findings

The audit findings indicate that the implementation of RECLAIM met its objective during the 1996 compliance year. 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 1996 compliance year.
  

• An active trading market for RTCs has developed. More than $42 million of RTCs have been traded since the adoption of RECLAIM with over $21 million in trades occurring in calendar year 1997, 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:
  

• $227 per ton for 1997 NOx RTCs;

• $1,880 per ton for 2010 NOx RTCs;

• $64 per ton for 1997 SOx RTCs; and

• $2,385 per ton for 2010 SOx RTCs.
  

• As of the end of the 1996 compliance year, the RECLAIM Universe consisted of 329 facilities. The only universe changes in the 1996 compliance year were six shutdowns. RECLAIM was not cited as a contributing factor by any of the shut down facilities. Therefore, the fear expressed by some during program development that RECLAIM would encourage business flight has not been realized.
  

• RECLAIM has had minimal impact on employment. RECLAIM was cited by one facility operator as the cause of two lost jobs and one facility attributed one job gained to RECLAIM during the 1996 compliance year.
  

• The majority of facilities complied with their allocations during the 1996 compliance year; with 49 of the 329 facilities exceeding their allocations. Most instances of non-compliance with allocations were mainly due to miscalculations, a lack of understanding of the proper use and application of RTCs and the missing data procedures (MDP), or problems encountered in electronic submittal of emissions data. This issue is being further evaluated as part of the analysis for the three-year audit that will be submitted to the Board in May 1998. Corrective measures, as appropriate, will be recommended at that time.
  

• 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 §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.

Attachments

Annual RECLAIM Audit Report for the 1996 Compliance Year

/ / /