Back

PROPOSAL:

Best Available Control Technology Guidelines Update

SYNOPSIS:

This item was continued from the June 12, 1998 Board Meeting and addresses the spray booth BACT Guidelines, potential changes to the New Source Review regulation, alternative options to the existing BACT Guidelines process, and potential impacts and their mitigation for non-major sources and small businesses.

COMMITTEE:

None

RECOMMENDED ACTION:

1. Approve the concept of a new format for BACT Guidelines updates, as proposed, and direct staff to return back with a proposed format in November 1998 and with the first report on BACT Guidelines updates by March 1999;

2. Direct staff to work with U.S. EPA on the federal New Source Review Reform proposal, and provide periodic progress reports to the Home Rule Advisory Group;

3. Report back to the Board on the status of spray booth permits, add-on control technology for spray booths, and the impact of LAER requirements on non-major sources including small business, as defined in Regulation XIII – New Source Review, on a semi-annual basis; and

4. Receive and File this report.

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

Background

In issuing pre-construction or operating permits for major and non-major sources, the AQMD Executive Officer is required to apply BACT, defined in AQMD Regulation XIII – New Source Review, which must be as stringent as LAER, defined in the Clean Air Act. Under Regulation XIII, the Executive Officer is also required to periodically publish the BACT requirements for commonly permitted equipment. To fulfill this requirement, the AQMD first published the BACT Guidelines in 1983 and has revised them several times since then. The most recent series of updates began in 1996 and information on BACT Guidelines was provided to the Board in July and December 1997, and April, May, and June 1998. The Guidelines currently cover at least 259 commonly permitted equipment categories and provides valuable information and advice to permit applicants on technological requirements for new source permits.

On June 12, 1998 the Board received and filed the BACT Guidelines update reflecting LAER/BACT for gas turbines and continued the spray booth portion of the agenda. After hearing public testimony and U.S. EPA’s testimony on this issue, the Board also directed staff to:

• continue to issue permits, with LAER determined on a case-by-case basis, as quickly as possible;

• work in conjunction with U.S EPA, CARB, industry, environmental and community organizations, and the public to investigate a number of technical, socioeconomic, and small business related issues;

• investigate alternative options to the existing BACT Guidelines update process; and

• report back to the Board by October 1998.

Staff has held extensive meetings and consultations with various over the past four months to develop the proposal outlined below. Each item represents staff’s independent technical and legal opinion, consistent with all federal, state, and local regulatory requirements. The U.S. EPA has reservations about some of these proposals as noted under each item, and staff will continue to seek resolution of these issues with U.S. EPA.

Alternative to Existing BACT Guidelines Update Process

In response to the Board directive, staff has developed a proposed alternative format for the BACT Guidelines, and Board approval is recommended to proceed along these conceptual lines, as detailed below.

Although AQMD Rule 1303(a) requires the Executive Officer to periodically publish BACT Guidelines for commonly permitted sources, such Guidelines are advisory only. Individual permit applications remain subject to current LAER/BACT at the time of permit processing. LAER requirements are technology driven and represent the most stringent emission limitation or control technique that has been achieved in practice for the category or class of source. The purpose of the BACT Guidelines is to provide information only – not to limit or specify the actual permitting requirements for a particular new source. Due to the evolving nature of technology and applications of new technology, it is important that AQMD LAER determinations be current and that the BACT Guidelines contain up-to-date information for use by applicants.

The current BACT Guidelines format and the process of reporting changes to the Board has at times been contentious. It has appeared to some that BACT determinations are discretionary and subject to Governing Board approval, although LAER/BACT determinations are clearly mandated by AQMD, state, and federal requirements. Moreover, permitting situations may differ substantially from each other, requiring differing LAER/BACT determinations from one case to another. Finally, permit applicants and permitting staffs are required to consider the applicability of new technologies that have been achieved-in-practice or proven to meet the LAER criteria, even if the BACT Guidelines have not yet been updated with such information. The last situation can, and has, resulted in U.S. EPA enforcement actions against permit holders in the AQMD jurisdiction and elsewhere.

At the state and federal levels, information regarding LAER is provided in a Clearinghouse, which contains details of permit requirements for new source permits issued by state and local agencies. There are certain advantages to providing information on control technologies used in recent BACT determinations. First, the listing approach provides the most recent and up-to-date information to the applicant, since such update process would be much faster and less contentious. This allows for correct LAER determinations that would minimize U.S. EPA enforcement actions against sources receiving AQMD permits. This also provides a greater level of certainty to business operators. Second, the Guidelines would provide information on less stringent as well as more stringent emission limits imposed on specific cases, and the characteristics of such permitted equipment. This information helps the applicant to determine the level of controls that have been achieved in practice for a particular source or category. Third, the listing approach does not appear to be a rigid rule or limit; the applicant is free to pursue all feasible control technologies in certain applications. Fourth, the updates will be presented to the Board to receive and file, and the Board will have sufficient opportunity to review the BACT Guidelines listings and direct staff to include additional information that may help future BACT determinations.

In view of the above discussion, staff recommends that the present BACT Guidelines format be replaced with a listing of information regarding BACT determinations for new source permits issued by the AQMD staff. Such updates would also include technical information on new or improved emission control technologies that may qualify as LAER/BACT. This information should help the permit applicant and the AQMD staffs to determine BACT for each individual permit application, subject to public review. The AQMD BACT Guidelines will enhance and augment the statewide listing of permit actions in the CAPCOA Clearinghouse, and the federal listing in the U.S. EPA LAER Clearinghouse. The AQMD staff intends to work closely with both CARB and U.S. EPA to coordinate and standardize the format and content of such permit listings to aid the regulated public.

It is recommended that the Board direct staff to develop appropriate formats for the BACT Guidelines listings in consultation with the public and other agencies involved, and present the BACT Guidelines updates of 1997 and 1998 in this new format by March 1999. Following Board approval, the updates will continuously reflect the most recent BACT determinations, as permits are issued. Staff also recommends that quarterly summary reports on BACT Guidelines updates be brought to the Board as informational items to receive and file. This will provide new, up-to-date information to businesses planning to expand, relocate, or start new operations, and help avoid U.S. EPA enforcement actions against sources receiving AQMD permits on account of LAER determinations.

It is important to note that an applicant who does not accept staff BACT determination has ample opportunity to review and appeal such findings through a Regulation XII hearing petition before the Governing Board, an appeal to the AQMD Hearing Board, and finally a challenge in a court of law.

The U.S. EPA, Region IX office has agreed to work with the AQMD staff and the public to improve and enhance the national LAER Clearinghouse, for both content and timeliness of information regarding LAER. The CARB staff has also expressed interest and willingness towards working to improve the efficiency and usefulness of the CAPCOA Clearinghouse that would reflect AQMD permitting information in future.

Spray Booth BACT Determination

In conjunction with the above recommendation to replace the existing format of the BACT Guidelines, staff would like to provide information on BACT determinations for spray booth permits through future updates of the BACT Guidelines in the new format. This is intended to include information on add-on controls that have been achieved in practice in specific industrial applications. Due to the wide and varied use of spray booths in various coating industries, and the advent of new and innovative emission control technologies, the BACT Guidelines updates would provide the most comprehensive up-to-date information on add-on control technologies.

In accordance with the Board directive of June 1998, staff has further investigated spray booth BACT issues with respect to add-on controls for different substrate coating applications. A complete description of add-on control technology and analysis of pending permit applications as of May 1998 was presented in the Staff Report for the June 1998 Board Meeting, Agenda No. 39. This analysis has been continued, as reported in Permitting Analysis, and augmented with a detailed socioeconomic study, as reported in Socioeconomic Assessment, in this Board letter. It should be noted, however, that under federal and state law, technological feasibility plays the key role in the determination of the source category for which add-on controls have been achieved in practice; there is only limited ability to consider economic affordability of such control systems. The definitions of LAER in federal law and BACT in state law do not explicitly include any reference to cost considerations, contrary to the definitions of "Reasonably Available Control Technology" which is required for existing sources. According to a U.S. EPA policy guidance memorandum, if, due to excessive cost, no sources in an industry could be built and operated with control technology that is technically feasible, then such controls may not constitute LAER for such industry [Calcagni memo, February 28, 1989]. According to U.S. EPA, if an emission rate has been achieved by a source in an industry, the cost to achieve such emission rate may be considered only to the extent that there is compelling evidence of unusual cost for an individual permit applicant [Id].

A review of the June 1998 Staff Report data on spray booth coating operations using add-on controls indicates that controls have not yet been achieved in practice for small spray booth operations with potential to emit 39 lb/day of VOCs or less, except for totally enclosed downdraft automotive spray booths, where this level is 22 lb/day. Therefore, it is staff’s opinion that permit applications with VOC emissions of 39 lb/day or less, averaged monthly, from all spray booths subject to BACT analysis, be considered a group for which add-on controls have not yet been achieved in practice. BACT for such sources would be low-VOC coating materials at or below current AQMD rule limits for existing sources. It is important to note that the reported emission levels reflect the data available today, and is subject to change as new information on permitted or operating sources become available. Future applicants are urged to review the AQMD BACT Guidelines, the CAPCOA Clearinghouse, and the U.S. EPA LAER Clearinghouse for latest information on add-on controls and their applicability to particular industries and substrates.

The data presented in the June 1998 Staff Report on BACT Guidelines Update includes several examples of control technology used in metal coating and aerospace industries along with three examples in wood coating operations. While these examples are being analyzed for publication in the next BACT Guidelines update in a new format, it appears that add-on controls have been achieved in practice for various coating sources of various sizes.

For example, for wood coating industries, staff has obtained information indicating that control technology is being used at a wood manufacturing plant to control 345 lb/day of VOC emissions entering an adsorber and thermal oxidizer. Therefore, permit applications with VOC emissions of 345 lb/day or more from wood substrate coating operations must consider such add-on controls that have been achieved in practice and would likely be determined to require controls. Further analysis would be required to determine the technical feasibility and control efficiency in specific permitting situations utilizing this control technology. For smaller wood coating facilities, an individual permit-specific analysis would be required to determine if this or other control technology could be effectively transferred and utilized.

For metal coating operators, there are several examples of spray booth operators using add-on controls to reduce VOC emissions, at a pre-controlled emission level of 39 lb/day or more. Individual analysis of specific permitting situation is necessary to assess if add-on controls or equivalent emission reductions are achieved in practice and technically feasible to meet LAER or BACT requirements. Add-on controls would be required if such technology has been achieved in practice by similar sources in that source category or technology can be transferred from other sources in a technically feasible manner.

To date, U.S. EPA has stated that LAER is add-on controls for all spray booth permit applications with VOC emissions of 39 lb/day or more, from any industry including wood coating operations. The U.S. EPA representatives maintain that all spray booth operations belong to a single category relative to the applicability of add-on controls as LAER and believe that technology can be transferred from one substrate coating to another substrate coating industry in the context of LAER. However, the U.S. EPA, Region IX staff is willing to work with the AQMD staff to resolve technical issues regarding BACT specification on individual spray booth permits applications. The AQMD staff intends to determine BACT on a case-by-case basis, employing all consideration of costs allowed by law, and will work with U.S. EPA closely in an attempt to minimize the potential for federal enforcement action against sources receiving AQMD permits.

Analysis of Pending Permit Applications

The Board letter for Agenda No. 39 of the June 12, 1998 Board meeting identified 29 companies with pending permit applications that could be potentially affected by the requirement to install and operate add-on controls for certain spray booths. As directed by the Board staff has used independent judgment to analyze and process such applications as quickly as possible. The permitting status of pending spray booth permits applications from all 29 facilities previously identified, and an additional company inadvertently omitted (facility DD), is shown in Table I below.

In Table I, the operation type shows the coating substrate or industry category for their spray booth operation and the airflow rate (CFM) correlates well with the cost of add-on control equipment. Also reported are the potential VOC emissions increases from the spray booths subject to LAER/BACT analysis (may not be total VOC emissions at that facility) and the present permitting status. The facilities shown by shaded lines are potentially subject to the installation and operations of add-on controls as LAER, at this time. Such facilities are further analyzed in the Socioeconomic Report enclosed in this Board package.

Table I: Status of Spray Booth Permit Applications identified in June 12, 1998 Staff Report

As of September 1998, 9 companies were expected to consider installation and operation of add-on controls to satisfy LAER/BACT requirements according to staff’s analysis of the information submitted in their permit application. The remaining 21 companies had either accepted an emission limit of 39 lb/day or lower, or canceled, or modified, or withdrawn the previous applications such that they were not subject to LAER/BACT requirements. Due to the dynamic nature of permitting activities, this status is time-dependent and subject to change. The Socioeconomic Assessment provides further details on each one of these 9 facilities, their operations, and potential costs associated with VOC control equipment.

Regarding potential impacts of the LAER/BACT requirement, Facility A in Table I represents a small business operator (non-major source) that uses fiberglass products and is potentially subject to the add-on control requirement. Staff is actively pursuing alternate options for this company, including the use of ‘superclean’ VOC materials and/or other low-VOC materials that might enable this company to stay below 39 lb/day of VOC emissions, where add-on controls do not constitute LAER or BACT. Staff is also trying to ascertain whether add-on controls have been achieved-in-practice for this type of fiberglass coating operator at such emission levels. Facility D may not be subject to LAER/BACT requirements as there may not be any emissions increase at that facility. Staff has not yet completed these investigations.

Among companies that accepted an emissions limitation to avoid the installation of expensive control technology, a telephone survey was conducted to assess if such limitations will impede or hinder their normal business growth. The results, as reported in the attached Socioeconomic Report, indicated that out of seven facilities surveyed, only one facility expects to feel constrained by the emissions limitation about 2-3 years from now, while growth can be handled by the remaining operators by various means. However, it is possible that the emission caps may inhibit growth of coating operators, if add-on controls are not affordable, in the future.

AQMD staff also constructed a long-term permitting scenario, based on historical permitting activities over a recent 12-month period from May 1997 through April 1998. All actual spray booth permit applications issued in this period were again analyzed for BACT applicability for add-on controls based on staff’s recent permitting experience, and the present LAER/BACT information. This exercise indicated that a maximum of 21 facilities out of a total of 510 facilities would have been potentially faced with the installation of add-on controls, if these applications were processed today. Although some operators may have chosen alternative options to control equipment installation, staff estimates that the long-term scenario represents a potential upper bound on the extent of impact of the LAER/BACT requirement of add-on controls. The Socioeconomic Assessment provides further details on the projected impact of installation of control equipment on 21 facilities per year, if that were to occur. Special attention was paid to the estimation of capital and operating costs, as described below.

Socioeconomic Assessment

This study used information developed through the permitting analysis described above, in conjunction with cost figures and estimates developed through a public process. A task force composed of facility operators, control equipment suppliers, and AQMD staff met and developed basic cost evaluation criteria over several weeks. Vendor quotes were then obtained regarding control equipment costs that addressed those specific spray booth design and operation criteria. These vendor quotes were then averaged and used to project various fixed and variable costs for add-on controls at specific sites under consideration. Costs of add-on controls depended on exhaust airflow rates, solvent loading, and the needs of individual facilities.

The results of the study for the 9 facilities with pending permit applications, is shown in Table II. It can be seen that the cost-effectiveness for this group varied from $1,600 to $29,800 per ton of VOCs reduced, except for one facility’s figure being estimated at $110,700 per ton. The cost-effectiveness calculations were carried out using standard AQMD procedures: a 4% rate of return on investment, discounted cash flow method (bringing all costs and pollution reductions to present time), and a 10 year equipment life. An affordability study was conducted on this group assuming 7-year loans at 15% market interest rates were obtained to buy control equipment. As shown in Table III, the annual cost to industries, including capital and operating costs, on account of the add-on controls, varied from 0.2% to 4.2% of the estimated annual sales for 7 of the 9 facilities. Add-on control costs, on an annual basis were 11.3% and 96%, respectively, of the annual sales for the remaining two facilities. Staff does not support installation of add-on controls for Facility A on technical grounds, apart from the findings of excessive costs in this study.

Table II - Cost-Effectiveness of Add-on Controls for Facilities

*Actual Vendor Quotes Specific to Facility

Table III - Affordability of Add-on Controls for Facilities

Potential Changes to Regulation XIII – New Source Review

Staff has investigated potential changes to the AQMD’s New Source Review (NSR) regulation that governs permitting actions, consistent with state and federal laws and statutes. Potential changes were reviewed and discussed with the U.S. EPA, CARB, and affected industry at several public consultation meetings. In general, public opinion was not supportive of launching rule developments at this time to revise AQMD’s NSR regulation due to several reasons outlined below.

• U.S. EPA has started a national process to review and amend its NSR regulations that may afford additional flexibility to the federal NSR requirements. This national policy or federal rule is expected to be finalized in 1999, and it may be appropriate for AQMD to initiate rule development at that time to revise the AQMD NSR program to take advantage of new flexibilities.

• The spray booth issue is mainly related to major polluting facilities in the wood furniture industry. The LAER requirements and LAER criteria for such sources stem from the federal Clean Air Act and cannot be modified by AQMD’s NSR regulation.

• It is important to obtain U.S. EPA approval for SIP amendments regarding potential NSR changes, as they affect many other AQMD programs such as RECLAIM and Title V. This issue is of particular importance to many major sources in Southern California that may otherwise face potential U.S. EPA enforcement actions.

• U.S. EPA may view proposals to change the non-major source requirements as undermining the previously approved NSR regulation which would also affect the major sources with increased burden on local businesses.

SBREFA & Section 507 of Clean Air Act

Staff has analyzed potential applicability of the provisions of the Small Business Regulatory Enforcement Fairness Act (SBREFA) [5 USCA Section 601 et seq.] to determine if the LAER determinations are subject to such provisions. SBREFA is a federal law enacted in 1996 which strengthens the Regulatory Flexibility Act (RFA), which became law in 1980 and required federal agencies to identify and address the effects of federal rules on small entities. The RFA requires that a federal agency conduct a regulatory flexibility analysis in its rulemaking, unless the agency can determine that the rule will not impose a significant economic impact on a substantial number of small entities. The agency must describe any significant alternatives to the proposed rule, which accomplish the same objectives and minimize any significant economic impact on small business. "Rule" is defined broadly in SBREFA as including an agency statement of general or particular applicability and future effect designed to implement, interpret or prescribe law or policy [5 USCA Section 551(4)]. District staff has concluded that U.S. EPA is required to conduct the regulatory flexibility analysis specified in SBREFA when adopting or amending a rule or amending the SIP. Thus, SBREFA would apply to U.S. EPA review of a proposed SIP revision submitted by the District.

U.S. EPA’s position is that SBREFA is not applicable to LAER determinations. The U.S. EPA, Region IX has informed the AQMD that it is their opinion that the provisions of SBREFA applies to federal rulemaking action by the U.S. EPA. Since LAER is imposed on individual permits by the local permitting authority, it does not consist of or imply federal rulemaking by U.S. EPA. Therefore, it is their initial position that such provisions are inapplicable in this instance.

The Small Business Office of the U.S. EPA has expressed interest in review of relevant information and documentation on the Spray Booth LAER issue to determine their future recommendations. The information developed by staff in this Board package is being forwarded to the Small Business Office of the U.S. EPA for further consideration. Staff will apprise the Board of future developments as they occur with respect to U.S. EPA’s position regarding the provisions of SBREFA.

Section 507 of the Clean Air Act requires that each state adopt a plan for establishing a small business compliance assistance program. A requirement of this program is that the state have procedures for consideration of requests from a small business stationary source for modification of any work practice or technological method of compliance. A major stationary source is not eligible and does not fall within the Section 507 definition of a small business stationary source. Under the Clean Air Act, a source in an "extreme" nonattainment area (i.e., SCAQMD), which emits 10 tons of VOCs or NOx per year, is a major source and Section 507 is not applicable to such a source. In order to have Section 507 apply, it would be necessary to amend the Regulation XIII definition of major source and no longer require LAER for small business.

AQMP & Legal Mandate

In non-attainment areas, federal LAER is required for new and modified major sources [Section 173(a)(2) of the federal Clean Air Act; 42 U. S. C. Section 7503(a)(2)]. LAER is defined in Title 40 of the Code of Federal Regulations, section 51.165(a)(1)(xiii) as the most stringent emission limitation which is (1) contained in the implementation plan of any state for such class or category of stationary source, unless the owner or operator of the proposed stationary source demonstrates that such limitations are not achievable, or, (2) achieved in practice by such class or category of stationary sources. The AQMD implemented the mandate for LAER by adopting the requirements for BACT for new, modified, and relocated installations in Regulation XIII - New Source Review, and Regulation XX -Regional Clean Air Incentives Market (RECLAIM). California Health and Safety Code Section 40440(b)(1) also requires the AQMD to use state BACT which is defined the same way as LAER for new and modified sources.

Implementation Plan

Staff will continue to implement BACT in conformity with both the requirements of federal LAER and Regulations XIII and XX. Work will continue towards updating the remaining BACT requirements, in close cooperation with the SRC and affected and interested parties. All permit holders and interested parties will be kept informed of developments in this area through mail, outreach, and Internet postings on the AQMD Home Page.

Resource Impacts

AQMD resources are sufficient to implement the changes to the BACT Guidelines with no impact on the budget.

Attachments

Summary of BACT Guidelines Update
BACT Guidelines Development Process
Key Contacts
Socioeconomic Report

/ / /