South Coast Air Quality Management District
South Coast Air Quality Management District
BOARD MEETING DATE: March 16, 2001 AGENDA NO. 40
Submittal of MSRC Projects to ARB for Consideration of Use as Offset to Power Facilities
SYNOPSIS:
On March 9, 2001, ARB released a notice requesting applications for projects which would result in the immediate reduction of NOx and PM10. The ARB has made funds available to fund projects, which will generate emission reduction credits that may be used to offset the construction of peaker power plants. The solicitation will close on April 2, 2001. This request is being submitted to the Board now due to the short time line, and is contingent upon approval by the MSRC which is scheduled to meet on March 22, 2001.
COMMITTEE:
Not Applicable
RECOMMENDED ACTION:
Request AQMD approval to act on behalf of the MSRC to submit projects to ARB for consideration in the NOx and PM Emission Reduction Program, contingent on approval by the MSRC.
William G. Kleindienst
Chair, MSRC
Background
California is currently facing an energy crisis. To ensure an adequate supply of electricity to meet near-term energy demand, it is important to add new generation. Small generators know as peaker plants can be brought on-line quickly. A peaker plant is usually less than 50 megawatts.
These power plants could increase NOx emissions statewide by approximately 3-10 tons per day. To balance our energy needs with environmental concerns, Governor Davis issued Executive Order D-24-01. This order directs the California Energy Commission to expedite permitting of these facilities and directs ARB to create an ERC bank to provide, on a temporary basis, the emission offsets needed by these facilities. The ARB is initiating the NOx and PM Emissions Reduction Program to generate real, quantifiable, and enforceable ERCs for the credit bank. The ARB on March 8, 2001, issued a solicitation for projects and program suggestions for the NOx and PM10 emission reduction program. A copy of the Notice is attached as Attachment F.
The ARB notice states that there is particular interest in projects within the boundaries of specific air districts. The South Coast is included on the list. Proposals should be submitted to the ARB by April 2, 2001.
Proposal
The MSRC-TAC is requesting Governing Board approval to submit emission reduction projects to the ARB NOx emission reduction program. The MSRC-TAC requested that this item be considered by the Governing Board in advance of the MSRC consideration, due to the short time frame between issuance of the notice, and the due date of the applications. However, no projects will be submitted until the MSRC reviews and approves this action. The next scheduled MSRC meeting is March 22, 2001. The emission reductions from these projects are available to offset power plant emissions.
The MSRC has no contracting authority, and therefore has requested the assistance of the AQMD. Additionally, should all of the submitted projects be accepted, it would require AQMD novation of contracts from last years’ program to the ARB.
Specifically, the MSRC is requesting submission of three groups of contracts for ARB consideration. The projects and cost effectiveness are listed in the attachments to this board letter. The attachments are in order of preference for consideration by the ARB. They are:
Attachment A
Last year’s projects that were not funded, due to lack of funds.
Attachment B
Projects that have been approved but do not have a completed contract.
Attachment C
MSRC projects currently under contract to be novated to ARB.
ERCs created by the emission reduction program will be sold to offset emissions for peaker power facilities. ARB is setting the market price at $6,000/ton per emission reduced for a period of three years. At the end of the three years, the emission reductions are returned to the AQMD. Therefore, there will only be a short-term loss of these reductions. Finally, the purchase price of the ERCs will be returned to the AQMD for use. The MSRC is requesting that monies received by the AQMD, for MSRC projects, be returned to them for reprogramming pursuant to the MSRC’s annual work programs, which are approved by the AQMD Governing Board.
Benefits to AQMD
This process provides the potential to achieve additional emission reductions in the AQMD. Projects that were not funded due to the lack of MSRC funds now have a second opportunity for cost sharing. Many of the projects could not go forward without some assistance. The Basin will benefit from additional reductions of NOx and PM. Projects that are under contract or in the contracting process, if funded, will allow the MSRC to expand the work program for this year with the dollar savings resulting from the funds returned to MSRC through AQMD.
Access to these additional funds will result in additional NOx and PM emission reductions in the AQMD.
Resource Impacts
Once the projects are submitted, all contracting will be between with the ARB and the project proponent. Therefore, the AQMD will reduce administrative costs due to contract preparation for this year. However, this will be partially offset by costs incurred in assisting ARB with completing the contracts and novating existing contracts to MSRC.
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