South Coast Air Quality Management District
South Coast Air Quality Management District
BOARD MEETING DATE: April 20, 2001 AGENDA NO. 40
Amend Rule 1309.1 – Priority Reserve
SYNOPSIS:
The proposed amendments will allow new electric generating facilities to temporarily access the AQMD's Priority Reserve account to offset their PM10 emission increases provided they meet specific criteria and pay appropriate mitigation fees.
COMMITTEE:
Stationary Source, February 23, 2001, Reviewed
RECOMMENDED ACTION:
Adopt the attached resolution:
- Certifying the Final Environmental Assessment (EA) for Proposed Amended Rule 1309.1 – Priority Reserve; and
- Amending Rule 1309.1 – Priority Reserve
Barry R. Wallerstein, D.Env.
Executive Officer
Background
California is experiencing a shortage of electrical generation. Governor Davis has proposed that California streamline efforts to bring an additional 20,000 megawatts online by July 2004, starting with 5,000 additional megawatts by July 2001 and 5,000 more megawatts by July 2002.
Staff has identified over 2,700 megawatts of proposed, pending electrical generating facilities (EGFs) in the District. Additional projects beyond those currently identified are likely. Staff just recently learned of a new generating units proposed for the Coachella Valley.
One of the key regulatory requirements that EGFs must meet is obtaining sufficient PM-10 offsets. There are approximately 2,100 pounds per day of PM-10 ERCs available as of March 2001 only some of which are available for sale. The combined demand for the currently identified projects is over 2,200 pounds per day. However, including projects that are currently on a conceptual phase would increase the PM-10 ERC demand to 4,900 pounds per day.
The District maintains an emissions bank called the priority reserve to provide offsets for essential public services. The priority reserve was established with the 1990 amendments to New Source Review and is funded from the District account for small emitters and exempt sources. The Priority Reserve receives 125 pounds per day of PM-10 credits quarterly and currently has a balance of over 3,000 pounds per day.
The state of California has recently created a Emission Reduction Credit Bank for natural gas turbine powerplant peaking sources. The bank can be used to provide PM-10 credits on a lease basis for three years. This bank is only for peaking units and the funding amount is limited to only 123 pounds per day of PM-10. This bank is insufficient to meet the needs of the identified and proposed peaking units and does not apply to base-load EGFs.
Absent some additional regulatory assistance, there are insufficient PM-10 credits to permit the identified and future electrical generating facilities.
Proposal
The proposed amendments allow EGFs temporary access to the Priority Reserve account for meeting NSR offset requirements for PM-10. EGFs will still be subject to all other aspects of NSR including modeling, offsets for non-RECLAIM pollutants (other than PM-10), RECLAIM, and BACT or LAER. All other applicable SCAQMD rules and regulations such as toxics and prohibitory rules would continue to apply to EGFs.
The following requirements would apply to EGFs receiving PM-10 credits from the priority reserve:
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Modifying all of the EGF's sources to BARCT for PM-10 (if applicable) not later than 3 years after issuance of the permit for the new source(s), and |
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Paying a non-refundable mitigation fee of $25,000 per pound per day for each pound of PM-10 obtained from the priority reserve, and |
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Submitting a complete application for a permit during calendar years 2000, 2001, 2002, or 2003 and the EGF becoming fully operational within 3 years after permitting. |
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Making a good faith effort to obtain PM-10 offsets including PM-10 ERCs, state emissions bank or SIP approved credit generation programs(limited to rates not to exceed the mitigation fee). |
Subsequent to the set hearing package, a few technical clarifications have been made to the rule. In addition, an aggregate total of 400 pounds per day of PM-10 has been set aside for use exclusively by essential public services during years 2000-2003.
The fee paid for PM-10 credits from the priority reserve shall be used by the Executive Officer to fund projects that will reduce PM-10 emissions in the SCAQMD. Given the relative dearth of available offsets from stationary sources, mobile and area source projects may be likely candidates for funding. Potential projects could include cold ironing of marine vessels at dock, clean diesel and particulate traps on diesel engines, conversion of diesel engines to alternative fuels, reduction in PM-10 precursors, and others.
Key Policy Issues
In response to comments received from essential public services that allowing EGFs access to the Priority Reserve will effectively deplete the account and adversely impact future construction by essential public services, an aggregate total of 400 lbs/day of PM-10 is proposed to be designated from the Priority Reserve for use exclusively by essential public services. This will ensure that EGFs cannot use the entire Priority Reserve balance and recognize the need for credits by essential public services. In addition, the adoption resolution also directs the staff to closely monitor the transaction activity of Priority Reserve and report back to the Governing Board with recommendations in the event the Priority Reserve account balance falls below 500 pounds per day.
CEQA Analysis
District staff has reviewed the proposed Rule 1309.1 pursuant to state CEQA Guidelines Section 15002 (k)(2). A Draft Environmental Assessment (EA) with no significant adverse impacts has been prepared because, although the Draft EA concluded that the proposed rule amendments have the potential to adversely affect air quality, the impacts will not be significant. The Draft EA was circulated for a 30-day public review and comment period which ended March 15, 2001. Four comment letters were received and the responses to the comments are incorporated into the Final EA for the proposed project.
Socioeconomic Impacts
District staff has also conducted a socioeconomic impacts analysis which concluded that the mitigation fee will be a small part of the total capital costs of the proposed new or modifying EGFs and will not result in any adverse socioeconomic impacts. Electricity rates are projected to increase between $0.0002 and 0.0017 per kilowatt-hour for the three utilities affected based on the mitigation fee costs.
AQMP and Legal Mandates
The California Health and Safety Code requires the AQMD to adopt an Air Quality Management Plan to meet state and federal ambient air quality standards in the South Coast Air Basin. In addition, the California Health and Safety Code requires that the AQMD adopt rules and regulations that carry out the objectives of the AQMP. While Proposed Amended Rule 1309.1 is not a control measure included in the AQMP, its requirements do not interfere with the AQMP objectives.
Implementation Plan
All known affected sources have been noticed on the proposed amendments. No major implementation problems are anticipated at this time. Additional actions will be taken as needed consistent with the rule requirements.
Resource Impacts
The proposed amendments are not anticipated to have a significant impact on staff resources.
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