BOARD MEETING DATE: April 9, 1999 AGENDA NO. 22
PROPOSAL:
Report on the Effectiveness of Regulation XIII - New Source Review
SYNOPSIS:
This report, submitted to the Board pursuant to subdivision (b) of Rule 1310 - Analysis and Reporting, provides information on the effectiveness of Regulation XIII - New Source Review (NSR), in meeting state and federal NSR requirements. This report presents data for August 1997 to July 1998 for state and federal law compliance.
COMMITTEE:
Stationary Source, March 19, 1999, Reviewed
RECOMMENDED ACTION:
Receive and file.
Barry R. Wallerstein, D.Env.
Executive Officer
INTRODUCTION
Regulation XIII - New Source Review (NSR) governs the permitting of new, modified, and relocated sources within AQMD, provided such sources are not subject to Regulation XX - Regional Clean Air Incentives Market (RECLAIM). Rule 1310 - Analysis and Reporting, requires the submittal of an annual report to the AQMD Governing Board on the effectiveness of Regulation XIII in meeting state and federal NSR requirements.
The last annual report on the effectiveness of Regulation XIII – NSR, was submitted to the Board on March 13, 1998 and covered the period from October 1990 to July 1997 for state compliance and the period of August 1996 to July 1997 for federal compliance. This report provides information from August 1997 to July 1998 for both state and federal compliance with applicable NSR requirements.
BACKGROUND
AQMD’s NSR program has evolved since 1976, in response to state and federal legal requirements, and the changing needs of the local economy and the environment. The latest adjustment to the NSR program was made in December 1995, when Regulation XIII was amended by the Board to balance the needs of local business and air quality. While the non-RECLAIM NSR program is non-traditional and flexible, it must comply with the governing principles of NSR contained in the federal CAA and the California Health and Safety Code. At a minimum, the AQMD's NSR program must achieve equivalent emission reductions to what would have been achieved by the implementation of state and federal NSR requirements. The AQMD’s program is designed to meet the state and federal statutory requirements for NSR and to ensure that the construction and operation of new or modified sources do not interfere with progress towards attainment of the NAAQS. Presented below are the specific requirements of federal and state law.
Federal Law
Federal law requires the use of Lowest Achievable Emissions Rate (LAER) and offsets. Effective November 15, 1992, Section 182(e)(1) and (2) of the federal CAA required a 1.5-to-1 or a 1.2-to-1 external offset ratio and a 1.3-to-1 internal offset ratio for VOC or NOx sources that emit or have the potential to emit 10 tons or more per year. [ Section 182(e) of the CAA specifically defines a "major source" and a "major stationary source" as follows "... any stationary source or group of sources located within a contiguous area and under common control that emits or have the potential to emit, at least 10 tons per year of volatile organic compounds." Section 182 (f)(1) of the CAA also states that "the ... provisions required ... major stationary sources of volatile organic compounds shall also apply to major stationary sources ... of oxides of nitrogen."] The South Coast Air Basin (Basin) is the only extreme ozone nonattainment area in the nation. An extreme ozone nonattainment area may qualify for the 1.2-to-1 offset ratio if it requires all existing major sources to use federally defined BACT [CAA Section 182(e)(1)] which is a federal requirement for ozone attainment areas.
Section 182(e) states that "for purposes of satisfying the offset requirements pursuant to this part, the ratio of total emission reductions of VOCs to all increased emissions of such air pollutant shall be at least 1.5-to-1 ... ." Because the statute uses the term "total emission reductions" the offset ratio requirements of Section 182(e)(1) can be met on an aggregate basis, provided the information is substantiated by an emissions tracking system. The AQMD’s NSR program meets the federal offset requirements in an aggregate form. All the information provided in this report is substantiated by data retrieved from the AQMD’s NSR Tracking System.
State Law
State law requires the use of BACT for new and modified sources (Health and Safety Code Sections 40440(b)(1) and 40920.5) and "no net increase in emissions" from certain permitted new or modified sources based on their potential to emit and the nonattainment classification of the area in which they are located.
Based on their classification, the Basin and Southeast Desert Air Basin (SEDAB) must comply with the requirements for extreme and severe non-attainment areas for ozone precursors (i.e., VOC and NOx) . Both the Basin and the SEDAB [ SEDAB was recently changed to the Riverside County portion of the Salton Sea Air Basin (SSAB) and the non-Palo Verde Valley, Riverside County portion of the Mojave Desert Air Basin.] must comply with the requirements for serious nonattainment areas for PM10 and its precursors. For CO, the Basin and the SEDAB must comply with the requirements for serious nonattainment areas and moderate nonattainment areas, respectively. The AQMD demonstrates compliance with the "no net emission increase" requirements of state law for the period from August 1997 to July 1998 by demonstrating compliance with the requirements for extreme ozone non-attainment areas (VOC and NOx) and with the requirements for serious nonattainment areas for PM10, SOx and CO.
State Law Methodology
The previous report to the Board, submitted March 13, 1998, amended the calculation methodology for state law compliance. Prior to that change, the AQMD utilized "permitted" emissions to report emissions subject to the "no net emission increase" requirement of state law. The AQMD now uses "actual" emission levels to represent emission increases subject to state NSR requirements. The methodology using "permitted" emission levels had produced a deficit in the NSR equivalency program for nitrogen oxides (NOx ) emissions in the past. Since creditable emission reduction are based on actual emission decreases, ARB staff agreed with the AQMD staff that reporting emission increases with the use of "actual" emissions is an acceptable methodology for demonstrating compliance with the "no net emission increase" requirement of state law. The revision of the methodology resulted in a demonstration of equivalency that fully meets the requirements of state law.
The AQMD presently uses permitted emissions to estimate "actual" emissions increases with a ratio of 0.80 to calculate "actual" emissions from permitted emissions. This ratio was derived based on analysis conducted by AQMD staff. ARB staff have reviewed the analysis, and agreed on the methodology. Further details of this analysis and review process may be found in the attachment.
AQMD Approach
BACT and offsetting emission increases are the primary requirements of federal and state NSR requirements. AQMD's BACT standards are equivalent to, and in many cases are more stringent than, LAER and BACT, respectively, as defined by federal and state laws. Therefore, the principal measure to determine equivalency with state and federal NSR laws is the requirement to offset emission increases. This report demonstrates compliance with federal and state NSR requirements by an aggregate demonstration of equivalency for federal and state offset requirements.
FEDERAL OFFSET REQUIREMENTS
The data and information presented in this report is limited to the supply and demand for creditable emission reductions and offsets for sources for which the AQMD has taken responsibility to provide offsets (i.e., previous Community Bank, Priority Reserve and emission increases exempted from offsets pursuant to Rule 1304). Emission increases mitigated by the applicant through the purchase of external offset or by internal mitigation are not included here. Therefore, the estimates of total supply and demand of creditable emission reductions and offsets, respectively, refers to the total supply and demand for sources for which the AQMD is directly responsible to meet the offset requirements.
The analysis performed to generate the data presented in this report was based on the emission thresholds that define a "major polluting facility" in the Basin. [ The thresholds that define major polluting facilities in the Basin are more stringent than the thresholds that define major polluting facilities in the SEDAB. Therefore, the analysis is conservative since it may over estimate the emission increases subject to federal offset requirements.]
Table 1-1 presents the cumulative creditable emission reductions available to offset the emission increases subject to federal NSR. Table 1-2 presents the emission increases for which AQMD is accountable to comply with federal NSR requirements for the period from August 1, 1997 to July 31, 1998. Table 1-2 also presents the balance of creditable emission reductions available for future compliance with federal offset requirements.
Table 1-1
Creditable Emission Reductions for Federal NSR Compliance
(August 1997 - July 1998)
| Source | VOC | NOx | SOX | CO | PM10 |
| (tons/day) | (tons/day) | (tons/day) | (tons/day) | (tons/day) | |
| Orphan shutdowns | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| BACT Discount of ERCs | 1.6 | 0.0 | 0.0 | 0.0 | 0.6 |
| NSR Balance as of August 1997 [ Balance of Creditable Emissions Reductions presented in Table 1-2, pg. 6, of the document entitled Effectiveness of Regulation XIII – New Source Review, report to the AQMD governing Board, March 13, 1998.] |
105.3 | 22.9 | 18.7 | 32.0 | 41.4 |
| Total | 106.9 | 22.9 | 18.7 | 32.0 | 42.0 |
Source of Creditable Emission Reductions
The sources of creditable emission reductions used by AQMD to demonstrate compliance with federal and state NSR requirements are described below.
Orphan Shutdowns
Orphan shutdowns are emission decreases from stationary sources that go out of business, permanently cease emitting activities, and do not apply for ERCs. These emission decreases are retained by the AQMD to fund the NSR program. No orphan shutdowns were identified during this reporting period.
BACT Discount of ERCs
Emission reductions from shutdowns for which ERCs are issued are discounted to BACT levels. The amount discounted is credited to the NSR account as a creditable emission reduction, since they are in excess of the federal NSR requirements. The emissions shown in Table 1-1 represent data for the period August 1997 to July 1998.
NSR Balances
Discounting negative NSR balances in 1990 generated this source of creditable emission reductions. Negative NSR balances represented a facility’s emission reduction credit balance. Negative NSR balances were generated by emission reductions (which were the result of equipment or facility modifications or shutdowns) that were credited to a facility’s NSR account and not issued as a certificate. As part of the 1990 amendments to Regulation XIII, the AQMD reduced these credit balances by 80 percent to generate emission reductions to fund the Community Bank, Priority Reserve and Rule 1304 exemptions.
The NSR balance reported in Table 1-1 represent the creditable emissions reductions balance as of August 1997 as calculated in the previous annual NSR report of March 1998.
Table 1-2
Emission Increases for Which AQMD is Accountable [ Based on a 1.5 to 1
Offset Factor.] Compared with
Creditable Emission Reductions for Federal NSR Compliance
(August 1997 to July 1998)
| Source Amount (tons/day) | VOC | NOx | SOx | CO | PM10 |
| (tons/day) | (tons/day) | (tons/day) | (tons/day) | (tons/day) | |
| Community Bank | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Priority Reserve | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Exempt Emissions (Rule 1304) |
0.8 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total Emission Increases | 0.8 | 0.0 | 0.0 | 0.0 | 0.0 |
| Creditable Emission Reductions (from Table 1-1) |
106.9 | 22.9 | 18.7 | 32.0 | 42.0 |
| Balance | 106.1 | 22.9 | 18.7 | 32.0 | 42.0 |
Source of Creditable Emission Reductions
AQMD’s non-traditional NSR program provides an exception from the offset requirements of Regulation XIII for new or modified sources that meet the requirements to obtain exemptions under Rule 1304. However, the federal CAA does not recognize such exemptions, and requires the AQMD to account for these emission increases with the creditable emission reductions discussed earlier in this report.
Community Bank
Until February 1996 no offsets were required for projects whose emission increases, for that project, were below a specified threshold of 30 lb/day VOC, 40 lb/day NOx, 60 lb/day SOx, 220 lb/day CO, and 30 lb/day PM10. This feature was replaced with a facility exemption for small emission sources effective February 1, 1996. The facility exemption provides an exemption from offsets for facilities emitting less than or equal to 4 tons per year.
Priority Reserve
No offsets are required for essential public service projects that increase emissions from new and modified sources. Essential public services are defined in Rule 1302 and include landfills, sewage treatment plants and similar operations.
Other Exemptions
Several offset exemptions are provided in Rule 1304 in keeping with AQMD’s policy for fair and equitable treatment of businesses. While a complete explanation may be found in earlier staff reports for Regulation XIII revisions, most of these exemptions are either beneficial to the environment or driven by severe economic needs.
Compliance with Federal NSR Requirements
As presented in Table 1-2, the AQMD’s NSR program meets the offset requirements of federal law. Since the AQMD’s BACT standards are equivalent to federally-defined LAER and the program contains and implements all the federal NSR requirements for major sources (Rule 1303), the AQMD’s program is hereby deemed equivalent to and in compliance with all federal NSR requirements.
STATE "NO NET EMISSION INCREASE" REQUIREMENTS
The analysis presented here is based on the fact that the "no net emission increase" requirement for extreme nonattainment pollutants is applicable only to VOC and NOx. The "no net emission increase" requirements for serious non-attainment pollutants are applicable to PM10, SOx and CO.
Table 1-3 presents the cumulative creditable emission reductions available for compliance with the state’s "no net emission increase" requirement for the period from August 1, 1997 to July 31, 1998. Table 1-4 presents the cumulative amount of emission increases subject to the state’s "no net emission increase" requirements for the same period for sources for which the AQMD was responsible to meet the state’s offset requirement. Explanation for the source categories may be found earlier under the heading "Federal offset Requirements."
Table 1-3
Creditable Emission Reductions for State NSR Compliance
(August 1997 to July 1998)
| Source Amount (tons/day) | VOC | NOx | SOx | CO | PM10 |
| (tons/day) | (tons/day) | (tons/day) | (tons/day) | (tons/day) | |
| Orphan Shutdowns | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| BACT Discount of ERCs | 1.6 | 0.0 | 0.0 | 0.0 | 0.6 |
| Balance [ Creditable Emissions Reductions balance presented in Table 1-4, pg. 10, of the document entitled Report on Effectiveness of Regulation XIII – New Source Review , March 13, 1998.] | 61.4 | 6.8 | 18.9 | 30.4 | 41.4 |
| Total | 63.0 | 6.8 | 18.9 | 30.4 | 42.0 |
Table 1-4
Emission Increases for Which AQMD is Accountable Compared to Creditable
Emission Reductions for State NSR Compliance [ All new and modified VOC and NO x sources
(regardless of their potential to emit), and all new and modified SO x , CO and PM10
sources that emit, or have the potential to emit 15 tons or more per year.]
(August 1997 to July 1998)
| Source Amount (tons/day) | VOC | NOx | SO x | CO | PM10 |
| (tons/day) | (tons/day) | (tons/day) | (tons/day) | (tons/day) | |
| Community Bank | 0.3 | 0.2 | 0.0 | 0.0 | 0.0 |
| Priority Reserve | 0.2 | 0.2 | 0.0 | 0.0 | 0.0 |
| Exempt Emissions(Rule 1304) | 9.0 | 1.5 | 0.0 | 1.3 | 0.0 |
| Total Emission Increases | 9.5 | 1.9 | 0.0 | 1.3 | 0.0 |
| Creditable Emission Reductions (from Table 1-3) |
63.0 | 6.8 | 18.9 | 30.4 | 42.0 |
| Balance | 53.5 | 4.9 | 18.9 | 29.1 | 42.0 |
Table 1-4, presents emission increases subject to the State’s "no net emission increase" requirement compared to creditable emission reductions. The emission increases reported above are based on the revised methodology, which calls for the use of "actual" emissions. AQMD calculates "actual" emission as a percentage of "permitted" emissions. Emission increases using "permitted" emissions were extracted from the NSR Tracking system and reduced by 20 percent to represent "actual" emissions. Based on previous analysis, AQMD believes that estimating "actual" emissions as 80 percent of "permitted" emission yields a conservative estimate. Therefore, AQMD staff is confident that the AQMD’s NSR program fully meets the NSR requirements of State law.
Compliance with State Law Requirements
As presented in Table 1-4, the AQMD’s NSR program meets the offset requirements of state law for the period of August 1997 to July 1998.
CONCLUSION & RECOMMENDATION
AQMD’s NSR program meets all federal and state NSR requirements. Available NOx creditable emission reductions for compliance with the State offset requirements are low and may represent a problem in the future. Therefore, AQMD staff propose to analyze the program in detail to find solutions to meet the State NSR requirements.
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