South Coast Air Quality Management District

Potential Backstop Rule for Regulation XX - Regional Clean Air Incentives Market (RECLAIM)

SYNOPSIS: 

On May 11, 2001, the Board approved amendments to RECLAIM to help lower and stabilize RTC prices and address California energy issues. The amendments separated large power plants from the rest of the market and required BARCT on power plants. A requirement for control plans was added for larger facilities. The Board expressed support for trading programs and directed staff to begin development of backstop measures that, if necessary, could further enhance the RECLAIM program.

COMMITTEE: 

Stationary Source, October 26, 2001, Reviewed

RECOMMENDED ACTION:

Receive and file.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The RECLAIM program, adopted in October 1993, is an emission trading market with a declining balance. Facilities in RECLAIM are issued annual allocations of NO_x and/or SO_x emissions. The allocations were developed for each facility based on historical emissions, existing rules with future compliance dates and control measures in the 1991 AQMP.

During the year 2000, NO_x RECLAIM Trading Credit (RTCs) prices increased sharply due to the energy crisis and delays in installing pollution control equipment by RECLAIM facilities. In May 2001, the AQMD Board adopted amendments to the RECLAIM program to help stabilize RTC prices and to require larger RECLAIM facilities to submit compliance plans. The objectives of the compliance plans are to require facilities to detail how they anticipate meeting their annual allocations through 2005 and enforce the emission reductions committed to in the plans.

At the May 2001 meeting, the Board also directed staff to evaluate the compliance plans, determine whether additional backstop rules are needed to make-up emissions shortfalls, and provide recommendations to the Board regarding enhancements to the RECLAIM program. This report summarizes potential additional NO_x backstop rules and makes recommendations regarding future amendments to the RECLAIM program.

Summary of Compliance Plans

All RECLAIM facilities required to prepare compliance plans have submitted them to the AQMD. Please refer to Agenda Item 19 - Report on the Rule 2009 and 2009.1 RECLAIM Compliance Plan Submittal. As indicated in this report, other than power plants, the reductions from the facilities required to submit compliance plans will be sufficient to meet the allocation for non-utility RECLAIM facilities for 2001, 2002, 2004 and 2005.

There is a possible shortfall of zero to 319 tons in 2003 from all non-utility RECLAIM facilities (less than three percent of the total RECLAIM allocation for 2003). The 319 tons is a worst-case projection that is based on the submitted compliance plans. Some of the compliance plans do not appear to meet the requirements of the rule and will need to be revised, resulting in more emission reductions. The potential shortfall will be smaller if additional reductions are implemented by facilities submitting forecast reports (in December 2001) or by other RECLAIM facilities. In addition, many of the controls proposed in compliance plans can be operated to achieve additional reductions. There are also opportunities for mobile and area source credit generation that could provide additional RTCs.

Evaluation of Potential Backstop Rules

A variety of potential backstop rules are under evaluation by staff in the event RECLAIM facilities do not demonstrate that sufficient emission reductions will occur to enable overall program compliance. Rules and control measures from the 1991 AQMP that were either partially or fully subsumed under RECLAIM are the basis for potential measures.

The following criteria are used to evaluate and compare potential backstop rules: (1) emission controls relative to an existing rule, (2) potential emission reductions associated with categories of equipment, (3) availability of air pollution control technology for the equipment, (4) number of equipment affected, and (5) cost-effectiveness of controls.

There are seven control measures from the 1991 AQMP and eight rules that were either partially or fully subsumed by the RECLAIM program. (Please refer to Attachment I). The analysis focused on existing source-specific rules since these rules incorporate emission limits that are technically and economically feasible and have been developed through a public process and adopted by the AQMD’s Governing Board. Preliminary analysis of reported RECLAIM emissions data indicates that for the following source-specific rules, approximately 50 to 90 percent of the equipment has reported emission rates higher than emission limits specified in applicable source-specific rules:

• R1109 - Refinery Boilers and Heaters
• R1110.2 - Internal Combustion Engines >50 Brake Horsepower
• R1134 - Gas Turbines
• R1146 - Boilers and Heaters >5 MM Btu/hour
• R1146.1 - Boilers and Heaters 2-5 MM Btu/hour
• R1146.2 - Boilers and Heaters <2 MM Btu/hour

It should be noted that actual emission rates for the above source categories may be lower. (Please refer to Attachment II). Estimates of control costs for categories of equipment at RECLAIM facilities have been prepared for previous RECLAIM staff reports (October 2000 RECLAIM Audit, January 2001 RECLAIM White Paper and May 2001 RECLAIM amendment) and during the adoption of source-specific rules. Cost-effectiveness estimates for these source categories have also been prepared in these staff reports. These estimates indicate that with the exception of Rule 1146.1, all of the above categories have a cost-effectiveness lower than the $15,000 per ton established for the RECLAIM Air Quality Investment Program (AQIP) and Mitigation Fee Program.

Recommendation

At this time, staff is proposing to continue both the monitoring of the development of emission reduction projects in the RECLAIM program and reporting on a monthly basis to the Stationary Source committee on program status. If the forecast reports or other information indicates the likelihood of a significant shortfall in RTCs in 2003 or other year, or if there would be insufficient RTCs for future growth, staff will report back to the Board and propose an amendment to the RECLAIM program. During the development of the 2001 AQMP, staff will also evaluate a measure to seek further reductions from the RECLAIM universe.

Attachments

Attachment I:	Rules and Control Measures Partially or Fully Subsumed Under RECLAIM
Attachment II:	Non-Utility RECLAIM Equipment with Reported Emissions Rates Higher Than Current Emission Limits in Subsumed Rules

Attachment I

Rules and Control Measures Partially or Fully Subsumed Under RECLAIM
 

Attachment II

Non-Utility RECLAIM Equipment with Reported Emissions
Rates Higher Than Current Emission Limits in Subsumed Rules

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