BOARD MEETING DATE: March 1, 2002
AGENDA NO. 25

Status Report on Mobile Source Pilot Credit Generation Rules

SYNOPSIS: 

In 2001, the Board adopted six pilot credit generation rules. As part of the adopted resolution, the Board directed staff to provide a status report on implementation of the pilot credit generation programs every six months. The status report includes information regarding EPA approval of the pilot credit generation rules, implementation of the rules, and generation and use of credits.

COMMITTEE: 

Stationary Source and Mobile Source, February 22, 2002, Reviewed

RECOMMENDED ACTION:

1. Receive and file.
   
    
2. Revise reporting schedule to Stationary and Mobile Source Committees from monthly to quarterly and retain the status report to the Board every six months.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

In 2001, the Board adopted six mobile and area source pilot credit generation rules: Rule 1612.1 - Mobile Source Credit Generation Pilot Program, Rule 1631 – Pilot Credit Generation Program for Marine Vessels; Rule 1632 – Pilot Credit Generation Program for Hotelling Operations; Rule 1633 – Pilot Credit Generation for Truck/Trailer Refrigeration Units; Rule 1634 – Pilot Credit Generation Program for Truck Stops; and Rule 2507 – Pilot Credit Generation Program for Agricultural Pumps. As part of the adoption resolution, the Governing Board directed staff to provide a status report each month on the implementation of the pilot credit generation programs to the Stationary and Mobile Source Committees, and a report to the Governing Board every six months.

EPA Approval

All six pilot credit generation rules have been submitted to EPA for inclusion in the State Implementation Plan (SIP). The first five pilot credit generation rules, Rules 1612.1, 1631, 1632, 1633, and 2507 have been approved by ARB and EPA. EPA published their final approval of the five pilot credit generation rules on February 19, 2002. Rule 1634 was submitted to ARB and EPA after its adoption in November 2001. Rule 1634 is currently being reviewed by EPA.

Credit Generation Summary

NO_x emission reductions generated from these pilot credit generation rules can be used in the RECLAIM program either directly or through the RECLAIM Reserve for the Mitigation Fee Program for power producing facilities or Air Quality Investment Program (AQIP) for specific RECLAIM facilities. The AQMD is currently reviewing one application covering repowers for two marine vessels for credit generation under Rule 1631. The table below summarizes credit generation projects funded through the Mitigation Fee Program and AQIP.

Mitigation Fee Program and AQIP

*Based on emission reductions generated up to June 30, 2005

Since May 2001, AQMD has received $21 million with a total of 1,400 tons of NO_x emission reductions requested under the Mitigation Fee Program and $2 million designated for use to pre-fund the AQIP. To date, $4.6 million of Mitigation Fee Program funds and $2 million of AQIP funds have been designated to fund marine vessel repowering projects. Project costs shown in the table reflect total costs for repowers. The resulting cost-effectiveness for each of the projects, which is based on emission reductions generated over the duration of the credit generation project, is less than $7.50 per pound of NO_x. Due to the current cost-effectiveness of the marine vessel repowering projects, the anticipated emission reductions from these projects will exceed the amount obligated for the moneys expended under the Mitigation Fee Program and AQIP. Additional projects will be funded in the near future to fulfill reductions obligated for additional moneys received under the Mitigation Fee Program.

To date, all credit generation projects involve marine vessel repowering under Rule 1631. No projects applicable to the other five Pilot Credit Generation Programs have been funded through the RECLAIM Reserve or submitted for credit generation. The majority of marine vessel repowers funded through the RECLAIM Reserve have not undergone the actual repower. However, one of the two marine vessels identified as part of the Rule 1631 credit generation strategy has been repowered and is currently in service.

Conclusion and Recommendation

Federal and state approval of the five pilot credit generation rules represents a significant milestone in market incentives programs as they are the first mobile source credit generation rules to receive federal approval. These rules will provide an important option to RECLAIM facilities if the demand for RTCs increases and enable AQMD to use these credits to mitigate excess emissions from power plants. Staff recommends that the Board revise the reporting schedule for the Stationary and Mobile Source Committees from monthly to quarterly, and retain the status report to the Governing Board every six months.

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