South Coast Air Quality Management District
South Coast Air Quality Management District
BOARD MEETING DATE: February 16, 2001 AGENDA NO. 38
Amend Rule 1303(b)(2) – Emission Offsets
SYNOPSIS:
The proposed amendments address Emission Reduction Credits issued for compounds that are no longer considered VOCs (de-listed compounds). Approximately 13% of currently certified VOC ERCs are for de-listed compounds. The proposal will devalue the entire universe of VOC ERCs by an amount sufficient to account for the remaining de-listed compounds following a 90-day transaction period after adoption to allow voluntary retirement of delisted ERCs. The devalued portion of ERCs will be reissued to original owners and be eligible for uses other than providing Regulation XIII offsets, inter-pollutant trading, or any SIP purpose. An alternative proposal, originally presented to the Board at the October 2000 meeting, would invalidate only the ERCs for delisted compounds. This option is also available for consideration.
COMMITTEE:
Stationary Source, January 26, 2001, Reviewed
RECOMMENDED ACTION:
Adopt the attached resolution:
- Certifying the Final Environmental Assessment (EA) for Proposed Amended Rule 1303 – Requirements; and
- Amending Rule 1303(b)(2) – Emission Offsets.
Barry R. Wallerstein, D.Env.
Executive Officer
Background
Emission reduction credits (ERCs) are issued for real and permanent reductions in emissions from equipment shutdown, modification, or over-control. ERCs are part of the offset system needed to mitigate emission increases from new and modified sources pursuant to state and federal law in non-attainment areas.
There are about 27,000 pounds per day of ERCs currently in the SCAQMD inventory for reduction of VOCs. Staff has recently determined that about 3,400 pounds of the inventory were issued for compounds, which were, but are no longer considered to be, VOCs. This determination was based on a review of active VOC ERCs by staff, using the available data. Staff anticipates that some of the ERCs will be transferred out of the basin within the next 90 days.
U.S. EPA recently disapproved portions of Ventura County Air Pollution Control District’s (VCAPCD) New Source Review regulation because it did not require that emission offsets be surplus at the time of use (Federal Register, December 7, 2000, pages 76567-76572). The EPA action was based on Section 173 (c) of the Clean Air Act. Given U.S. EPA's recent decisions, there is a specter of federal enforcement action against projects using de-listed ERCs.
This amendment to address de-listed ERCs was originally brought to the Board at the October 2000 meeting. Public hearing on staff’s proposal was continued to February 2001 and is included in this Board package as Alternative A. At that time, staff's proposal was to invalidate the currently de-listed ERCs as well as any compounds that may be de-listed at a future date.
Proposal
Since October 2000, based on input from the regulated public, ARB and U.S. EPA, staff has developed another proposal, included here as Alternative B. The proposed amendments under Alternative B provide 90 days for holders of ERCs issued for three de-listed compounds, perchloroethylene (perc), acetone, and 1,1,1-trichloroethane, to retire them. Within 60 days after that 90-day period, all active ERCs (de-listed and all others) would be discounted by an amount to account for the de-listed ERCs. Based on the inventory as of January 10, 2001 and the transactions to be completed within the 90-day period, the discount rate is expected to range from 10 to 15 percent.
New discounted certificates will be re-issued to all holders of VOC ERCs. The difference between the old and the new value of ERCs will also be re-issued to all VOC ERC holders to be used for purposes other than providing Regulation XIII offsets in the South Coast Air District, inter-pollutant trading, or for any SIP purposes. These certificates will be labeled accordingly.
Alternative B constitutes staff’s main recommendation. However, staff’s original proposal (Alternative A) invalidating all de-listed ERCs which was continued from the October 2000 Board meeting is also available for Board’s consideration.
CEQA Analysis
AQMD staff has reviewed the proposed amendments pursuant to CEQA Guidelines §15002 (k)(1), the first step of a three-step process for deciding which document to prepare for a project subject to CEQA. Since it can be seen with certainty that the proposed amendments would have no potential to generate significant adverse environmental impacts, they are exempt from CEQA pursuant to state CEQA Guidelines §15061(b)(3) - Review for Exemption.
A Notice of Exemption has been prepared pursuant to state CEQA Guidelines §15062 - Notice of Exemption. The Notice of Exemption will be filed with the county clerks of Los Angeles, Orange, Riverside and San Bernardino counties immediately following the adoption of the proposed amendments.
Socioeconomic Impacts
There are approximately 268 companies holding VOC ERCs. Twenty-six of them have delisted compounds in their holdings. Under the proposed Alternative B, the electric, gas, and sanitary services sector is projected to share 22 percent of the total devalued VOC ERCs, followed by the chemical and allied products sector (10 percent). Under the October 2000 proposal, the majority (27 percent) of the impact would be borne by the other transportation equipment sector (SIC 372-79) where aerospace companies belong. The total value of VOC ERCs for the three delisted compounds (perchloroethylene, 1,1,1 trichloroethane, and acetone) is at $4 million based on the average $1,500 per pound of VOC ERC. However, limited use of delisted VOC ERCs could potentially mitigate the estimated loss.
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. The requirements of Proposed Amended Rule 1303 are consistent with these requirements.
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
There will be a limited, short-term impact on District’s Engineering & Compliance staff resources as a result of the proposed amendments. About 500 ERCs will need to be recalled and re-issued with the appropriate discount within a 60-day period. Staff will be examining ways to streamline the process such that the resource impacts can be minimized.
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