BOARD MEETING DATE: May 3, 2002
AGENDA NO. 26

Stationary Source Committee

SYNOPSIS: 

The Stationary Source Committee met on March 22, 2002, and April 26, 2002. Attached are the summaries of the two meetings.

RECOMMENDED ACTION:

Receive and file.

Jane Carney, Acting Chair
Stationary Source Committee

Attendance
The meeting began at 10:35 a.m. Present were Jon Mikels (departed at 11:00 a.m.), Jane Carney, Cynthia Verdugo-Peralta (arrived at 10:40 a.m.), Leonard Paulitz (arrived at 10:55 a.m.), William Burke was appointed to the committee by Jane Carney, (Dr. Burke viewed the meeting by videoteleconference). Absent were Norma Glover and Ron Loveridge, Committee Chair.

INFORMATIONAL ITEMS

1. Rule 1309.1 – Priority Reserve
   Larry Bowen, Planning & Rules Manager, presented this item. Rule 1309.1 establishes a source of emission reduction credits (ERCs) for essential public services and selected other sources when ERCs are not available and provided certain conditions are met. To address the energy crisis, the AQMD Board amended Rule 1309.1 in April and November of 2001, to allow qualifying electrical generating facilities (EGFs) access to the Priority Reserve and allocated ERCs from the AQMD NSR account to fund these projects. The November rulemaking identified specific projects that were expected to access the Priority Reserve. One of those identified was the THUMS Long Beach Project. However, the language in the rule inadvertently excluded this critical public service project from eligibility. The proposed amendment is to correct this situation and allow the project access to the priority reserve. There are no excess emissions nor any environmental or socioeconomic impacts associated with this amendment. Representatives from THUMS and the City of Long Beach gave a brief overview of the project and fully supported the proposed amendments.
   
    
2. Reg. III – Fees
   Larry Bowen, Planning & Rules Manager, presented this item. The proposed amendments to Regulation III and the AQMD FY 2002-2003 Budget was presented to the Stationary Source Committee in March. It has also been reviewed at the Administrative Committee and at the Board Budget Workshop in April. The proposal recommends a 2.5% fee increase corresponding to the increase to the California Consumer Price Index, adjustment of selected processing fees to better reflect actual costs and minor language clarifications. As a result of comments received during the notice period, there are recommended amendments to the noticed proposal.
   
   Regarding the time and material charges for the upper schedules of the HRA/AQA Fees, there has been addition of language identifying those circumstances where the time and material charges may be triggered. Charging of the time and material fees would also require approval by the Executive Officer. (Ms. Carney requested for a list of what criteria will be used to trigger additional T & M charges, and Mr. Bowen indicated that he will provide her with the requested information.) Secondly, since the time and material charges for the HRA/AQA Fees and the Change of Operator Fees for RECLAIM facilities with more than 65 permits exceed the CPI, implementation will be over two years. Finally, language has been added to Rule 301 clarifying staff’s interpretation that equipment subject to and operating without the required filing specified in Rule 222 shall pay an increased filing and operating fee.
   
    
3. Update on Rule 1168 - Adhesive Applications
   Larry Bowen, Planning & Rules Manager, presented this item. Staff presented an update of the proposed rulemaking on Rule 1168 at the March Stationary Source Committee Meeting. As a result of input and data received during the public review and workshop process, the initial staff proposal was being amended and additional public consultation meetings were scheduled to discuss the amended proposal. After receiving additional comments from these activities, staff is recommending the Board set a June 7 Public Hearing for amendments to Rule 1168. The amendments are summarized as follows:

• Phase out the use of the toxic compounds methylene chloride, ethylene dichloride, chloroform, perchloroethylene, and trichloroethylene in adhesives by 2004, with the exception of methylene chloride used in the solvent welding of acrylic and polycarbonate, that would have until 2005. A one-year product sell through provision for methylene chloride is also recommended.
• Adhesives used for automotive top and trim applications would have an interim limit of 550 grams per liter of VOC until 2004 and a final limit of 250 grams per liter thereafter.
• Cements and primers used for plastic pipe applications will maintain the current interim limits until 2005 and then a final limit of 250 grams per liter of VOC would apply thereafter. Annual technology progress reports are also required of the manufacturers.
• Adhesives used for shoe and leather repair would be exempt until 2008 and a 250 gram per liter of VOC limit would apply thereafter.
• A one-year product sell through provision is also recommended for top and trim, plastic pipe and shoe and leather repair.
• Exemptions are proposed for adhesives used for prescription orthotics and prosthetics and thin metal laminating.

4. Report on Initiative #1 White Paper
   Elaine Chang, Deputy Executive Officer, Planning, Rule Development & Area Sources, presented findings and recommendations for implementing Strategic Alliance Initiative #1 - Modernization of the Emission Reduction (ERC) System. Analysis of the existing ERC system indicated that mechanisms are needed to stabilize the availability and cost of ERCs in the open market. Since emission reductions in the AQMD's NSR Account are currently stable, recommendations focus on enhancing the ERC open market. Based on input received from the ERC System Working Group and the public, the AQMD staff is proposing to modernize the ERC system by allowing additional use of short-term credits such as mobile and area source credits, and allowing ERC sharing by enabling a source to split a stream of ERCs, and creating an emissions budget in the State Implementation Plan (SIP Offset Budget). In addition, the AQMD staff is proposing additional enhancements to optimize credit generation and use in the open market. The AQMD staff is recommending that the Governing Board direct staff to pursue rulemaking to implement the proposal to modernize the ERC system and continue working with the EPA and CARB and other stakeholders to resolve key issues. In addition, it is recommended that the amount of emission reductions in the open market and the AQMD's NSR Account be monitored and updates provided to the Governing Board.
   
    
5. BACT Guidelines Report
   Howard Lange, Air Quality Engineer, Science and Technology Advancement, presented this item. This report provides new listings added to Part B, LAER/BACT Determinations for Major Polluting Facilities of the BACT Guidelines in the last six months. Twelve new BACT determinations ere listed under Section 1, "New AQMD BACT Determinations"; and two existing Section 1 listings were updated with source test data that further substantiate their control levels. Six new BACT determinations were listed under Section 2, "New Non-AQMD LAER/BACT Determinations". The new and updated Section 1 listings were in the following categories of equipment: Metal Hearing Furnace, Tank Degassing System, Fiber Impregnation System, Internal Combustion Engines-Compression Ignition (Diesel) and Boiler. The new Section 2 listings were in the following categories of equipment: Gas Turbine, Water Treating-Air Stripping, Resin Manufacturing, Drum Reclamation Furnace, Burnoff Furnace and Steel Rolling Mill.

All written reports were acknowledged by the Committee.

Cynthia Verdugo-Peralta requested an update on RECLAIM implementation. Mohsen Nazemi, Assistant Deputy Executive Officer, Engineering and Compliance, gave a brief overview. Ms. Verdugo-Peralta expressed concern over whether or not an ERC shortage may occur if power plants are brought back into the RECLAIM program. Mr. Nazemi responded that staff will be taking a closer look at the end of the compliance year when actual emissions rather than projected emissions will be known, and will continue to monitor the mitigation program progress.

The meeting was adjourned at 11:30 a.m.

Attachment

April 26, 2002 Committee Agenda (without its attachments)

Summary of March 22, 2002
Stationary Source Committee Meeting

Attendance
The meeting began at 10:50 a.m. Present were Norma Glover, acting Committee Chair, Jon Mikels, Leonard Paulitz, Cynthia Verdugo-Peralta and Jane Carney. Absent was Ron Loveridge, Committee Chair.

INFORMATIONAL ITEMS

1. Rule 1168 – Adhesive Applications
   Larry Bowen, Manager, Planning, Rule Development & Area Sources, presented this item. The purpose of Rule 1168 is to adjust VOC limits and compliance dates for adhesives which are used in shoe repair and marine and automotive trim, extend final compliance dates for adhesives and primers and phase out the use of Methylene Chloride and other toxic adhesives. Proposed amendments to Rule 1168 would establish a 550 gram per liter VOC limit until January 2004 and 250 thereafter for automotive and marine top and trim adhesives. For shoe repair adhesives there would be no limit imposed until January 2005, with the 250 gram per liter limit at that time. These adhesives would not be allowed to be manufactured after the compliance date, with a one-year provision to sell inventory. VOC limits for plastic pipe cements and primers would be postponed until January 2005. The phase out of toxic compounds is being proposed by January 2004 with the exception of methylene chloride with one additional year.
   
   Staff continues to work with industry on remaining issues. This item will go to the Board for consideration in June.
   
    
2. Reg. III - Fees
   Larry Bowen, Planning & Rules Manager, gave a brief presentation on proposed amendments to Reg. III. Reg. III funds about 65% of the District budget, which includes permit, emission, and annual renewal fees. The proposal would include a 2.5% adjustment for fees and amend the public notification fees to reflect actual costs. This item will go to the Board in May. Public comment related to Reg. III was provided by Greg Adams of LA County Sanitation District indicating that as a member of Local Government & Small Business Assistance Advisory Group he will be submitting a letter requesting to reduce variance cost for small businesses.
   
    
3. Status Report on Rule 1133 – Emission Reductions from Composting Operations
   Dr. Elaine Chang, Deputy Executive Officer, Planning, Rule Development & Area Sources presented this item. Composting operations primarily include two industries, green-waste and bio-solid co-composting. Staff has analyzed three scenarios, which include full and partial enclosures and aerated static pile (ASP). Based on their findings, staff recommends a two-phase approach. Co-composting operations would require new and existing facilities to register and report annually. New co-composting facilities with greater than 100,000 tons per year throughput would be required to enclose their active piles and use ASP for curing piles. Green-waste operations would also have this same requirement. Staff is recommending state funding to control green-waste emissions. A composting technical advisory group is being established to develop more cost-effective control options. The phase I rule development will go to the Governing Board in the fall of 2002.
   
   Dr. Wallerstein commented that if everything was affordable, there could be higher emissions reductions. The problem occurs when you evaluate revenues and the affordability of the controls, including the expense of enclosing the facilities, it doesn’t compute to being affordable. That is why staff recommends looking at different funding approaches with the Legislative Committee.
   
   Jane Carney, inquired about the extent of odor control with partial enclosure. Dr. Julia Lester responded that most of the hydrocarbon emissions are occurring in the active phase. It’s not as good as complete enclosure, but it’s very close. Norma Glover expressed the Committee’s appreciation for all of Dr. Lester’s hard work.
   
    
4. Status Report on Rule 1421 - Control of Perchloroethylene Emissions from Dry Cleaning Systems
   Jill Whynot, Manager, Planning, Rule Development & Area Sources, presented this status update. At the last Stationary Source Committee meeting there was a lengthy discussion on the background of the rule, all the alternatives and the different issues involved. Staff has developed a proposal that recognizes the key concerns expressed by industry and also looks at the need to reduce perc usage to reduce health risk from dry cleaners.
   
   The draft rule proposes that perc equipment be replaced with a non-perc alternative on its normal replacement schedule, not to exceed fifteen years. The proposed rule includes a transition phase, which will be two or three years before mandatory transitions will be required. Staff proposes effective January 2003, all new facilities or a facility large enough to add new equipment, be required to use a non-perc alternative. In the meantime, while facilities are still using perc, two additional maintenance requirements are being proposed. Facilities would be required to remove and clean cooling coils, along with replacing gaskets every two years. Additional reporting requirements are being proposed to facilitate public notices required under AB 2588 – Toxic Hot Spots.
   
   In an independent action, staff will be recommending the Board consider a financial assistance program for early compliance by dry cleaners. Recommended funding is from the air quality assistance fund. Cynthia Verdugo-Peralta expressed concern over the depletion of the fund, and using the funds primarily for one industry.
   
   Staff continues to work with industry on remaining issues. This item is scheduled to go to the Board for consideration in May. (Subsequent to the Committee Meeting, the hearing date was extended to July 2002.)
   
    
5. Merits of a Centralized Market for RECLAIM
   Jill Whynot, Manager, Planning, Rule Development & Area Sources, presented this item. RTC prices increased in 2000, which led to the RECLAIM rule amendments in May of 2001. The May RECLAIM amendments included many items to improve trading information availability. The Board Resolution directed staff to evaluate the merits of a centralized market. Since the May amendments, a working group has identified and implemented many improvements to the existing posting and processing system.
   
   The RECLAIM market working group has been discussing the current market, potential alternative structures, and how improvement could be made. The group reviewed the original market plan and trading history. The majority of working group members and staff recommend keeping the current RECLAIM trading market and allow time to see the effects of the May 2001 rule changes.
   
   The report will go to the Governing Board in May. The report will include information on types of markets and market characteristics, as well as a discussion on the benefits and costs of different types of systems. Staff worked with the working group members and also surveyed the facilities that were most active in RECLAIM trading. There are benefits to a centralized market, but extensive and expensive changes would be necessary. While information availability would be enhanced with a central market, some flexibility for non-standard trades would be diminished. Outside economists have reviewed previous information and some participated in the working group. The draft report will be reviewed by economists, as well as working group members before going to the Board in May.
   
   Jon Mikels expressed concern over potentially high start-up costs for a central market. Cynthia Verdugo-Peralta commented that companies are calling her with concerns about timeliness. Dr. Wallerstein requested a list of those companies so that staff can investigate specific problems. These companies may not be aware of some of the services provided.
   
    
6. Update on Contract to Co-sponsor Cool Communities Project at LA Zoo
   Jill Whynot, Manager, Planning, Rule Development & Area Sources, presented this item. Several agencies are involved in this energy efficiency project at the LA Zoo. Staff is requesting that the Board authorize $25,000 to co-fund the project, specifically to pay for roofing materials for a large parking lot as part of the sponsorship of this project.
   
    
7. Rule 2020 – RECLAIM Reserve
   Jill Whynot, Manager, Planning, Rule Development & Area Sources, gave a brief overview. Rule 2020 sets up procedures for use of NOx emission reductions under the Pilot Credit Generation Rules, the use of credits under RECLAIM AQIP, the Mitigation Fee Program, and the State Emission Reduction Credit Bank. This rule requires annual review and is scheduled to go to the Board in April. Subsequent reports will be included with the RECLAIM annual report.

All written reports were acknowledged by the Committee.

The meeting was adjourned at 12:30 p.m.

Attachment

March 22, 2002 Committee Agenda (without its attachments)

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