BOARD MEETING DATE: December 5, 2003
AGENDA NO. 29

Amend Rule 1113 - Architectural Coatings

SYNOPSIS: 

The proposed amendments to Rule 1113 will further reduce VOC emissions from architectural coatings by setting future effective limits for several specialty coating categories, and will implement the coatings portion of Control Measure CTS-07 of the 2003 Air Quality Management Plan (AQMP).

COMMITTEE: 

Stationary Source, September 26, 2003, October 24, 2003, November 21, 2003 Reviewed

RECOMMENDED ACTION:

Adopt the attached resolution:

1. Certifying the Final Environmental Assessment (EA) for Proposed Amended Rule 1113 - Architectural Coatings, and
   
2. Adopting proposed amendments to Rule 1113 - Architectural Coatings.
   

Barry R. Wallerstein, D. Env.
Executive Officer

Background
Architectural coatings are one of the largest non-mobile sources of VOC emissions in the South Coast Air Quality Management District (AQMD). Rule 1113 is applicable to manufacturers, distributors, and end-users of architectural coatings. These coatings are used to enhance the appearance of and to protect homes, office buildings, factories and other structures, and their appurtenances on a variety of substrates. The coatings may be applied primarily by brush, roller, or spray guns; and those applying those coatings include homeowners, painting contractors, or maintenance personnel. Rule 1113 was first adopted in 1977, and has undergone numerous amendments since then.

PAR 1113 - Architectural Coatings has been developed to implement Phase III of Control Measure CTS-07 of the 2003 AQMP and the federally approved 1999 Amendment to the 1997 Ozone SIP Revision for the South Coast Air Basin. In addition as part of a federal consent decree between the AQMD and the Natural Resources Defense Council, the Coalition for Clean air and Communities for a Better Environment, the AQMD is required to implement CTS-07 (P3). The control measure proposes to further reduce VOC emissions from various architectural coating categories and thinning and cleanup solvents used in the architectural and industrial maintenance coating industry. The reduction in VOC emissions from the use of cleanup solvents to implement CTS-07 was addressed in a separate amendment to Rule 1171 - Solvent Cleaning Operations on November 7, 2003.

Rule 1113 was last amended on December 6, 2002 to re-adopt court invalidated May 1999 amendments.

Also, following the May 14, 1999 amendments to Rule 1113, CARB developed a suggested control measure (SCM) for architectural coatings that was largely based on the interim VOC limits and the averaging provision of Rule 1113 as adopted in May 1999. The SCM, which has January 1, 2003 as the main compliance date for most coating categories and January 1, 2004 for industrial maintenance coatings, has been adopted by 22 of the 35 local air districts in California that have an architectural coating rule.

Proposal
The proposed amendments will lower the current VOC limit for the following specialty coating categories: clear wood finishes including varnishes and sanding sealers, roof coatings, stains, and waterproofing sealers including concrete and masonry sealers. The proposed VOC limits and effective dates are as follows:

• January 1, 2005 for roof coatings (EPA Energy Star certified roof coatings of 100 g/l or less can be sold until January 1, 2007)
  
• July 1, 2006 for clear wood finishes and waterproofing sealers
  
• July 1, 2007 for exterior stains

The exemption for quart containers or less from having a VOC limit is proposed to be eliminated for the coating category of clear wood finishes, effective July 1, 2006. Based on comments from industry, staff has also included an alternate proposal for your consideration that phases out the exemption in July 1, 2008, and in the interim, establishes maximum VOC limits for clear wood coatings in those containers.

The staff recommendation to eliminate the exemption in 2006 and the alternative proposal to phase it out in 2008 are Version 1 and Version 2, respectively, of the proposed rule in Attachment F. Additional amendments include expansion of coating categories allowed to participate in the Averaging Compliance Option, clarification of coating categorization, an addition of varnish to the technology assessment requirement, expansion of the small manufacturer's exemption and other minor administrative amendments.

Emission Inventory and Emission Reduction
The emission inventory of architectural coatings is calculated from the CARB 2001 Architectural Coatings Survey. The survey is based on reported sales of architectural coatings in California. The share of statewide sales in the AQMD is based upon the percentage of the California population within the AQMD jurisdiction. The inventory for the AQMD was determined to be 5.53 tons per day of VOC for the coating categories proposed for amendment.

The emission reductions are also determined from the survey data by calculating the expected emissions on a solids basis as if all coatings comply with the proposed limits and comparing that to the current inventory. The difference is the emission reduction and it is expected to be 3.73 tons per day of VOC.

Cost-Effectiveness
Staff has estimated the cost-effectiveness to be in the range of $4,229 to $11,405 per ton of VOC reduced. The low end of the range was determined based on the retail cost of compliant coatings reported by coating manufacturers surveyed by staff. The upper end of the range was derived by estimating the increased cost at the retail level due to the increase in cost of raw materials, reformulation, testing and packaging a new product prior to commercialization. The range of cost-effectiveness is within that for other VOC rules adopted by the AQMD Board.

Issues
There are a number of specific comments that have been addressed in the Final Staff Report and Attachment D. The issues fall into three major categories. These are availability of compliant products, time for manufacturers to reformulate existing products into compliant products and elimination of the small container exemption. The proposed limits are based upon coatings currently available in the marketplace. Based upon the CARB 2001 Survey data, there are many compliant coatings offered by many manufacturers for each category and the current market penetration based on sales ranges from eleven percent for stains to fifty-one percent for roof coatings. Notwithstanding, staff is recommending a 2 ½ to 3 ½ year future effective date for most of the categories to allow other manufacturers time to develop additional compliant products. In addition, manufacturers will have an additional three-year product sell through period and the Averaging Compliance Option that can provide additional flexibility to transition to compliant products.

Regarding the small container exemption for clear wood finishes, there appears to be no justification for such an unlimited exemption and its continuance is actually counter-productive to air quality goals. The CARB Survey data indicates a relatively high percentage of sales of products complying with the proposed limits in the larger containers. However, quite the opposite is true for sales in the smaller containers. A large percentage of products sold in the small containers do not even meet current limits that would otherwise be applicable except for the small container exemption. To further compound the matter more than 40% of total gallonage sold of clear wood finishes is in small containers and, based upon small container sales reported to the AQMD, the volume of these small container sales has increased significantly in the last two years. Elimination of the exemption alone for clear wood finishes will achieve close to a ton per day of emission reductions. Staff has prepared two proposals to deal with this small container exemption. The first proposal eliminates the exemption for small container clear wood finishes effective July 1, 2006. The alternative proposal provides an additional two-years for the phase out of the exemption with interim VOC limits for those clear wood finishes sold in small containers.

CEQA
Pursuant to the CEQA and AQMD Rule 110, AQMD has prepared an EA for the proposed amendments to Rule 1113. The Draft EA finding no significant impacts was circulated for a 30-day public review and comment period from September 25, 2003 to October 24, 2003. Three comment letters were received on the Draft EA and responses to the comment letters have been incorporated into the Final EA for the proposed project.

Socioeconomic Analysis
Proposed amendments to Rule 1113 would potentially impact manufacturers and end users of architectural coatings. The former belongs to the industry of chemical and allied products (SIC 2851 or NAICS 325510), and the latter are a part of the industry of painting and paper hanging (SIC 1721 or NAICS 235210) and do-it-yourself consumers and homeowners. The total annualized cost of the proposed amendments is projected to be $14.76 million using the high-end cost estimate. It is estimated that approximately 503 jobs could be forgone annually from the future projected growth in the four-county area between 2005 and 2020.

AQMP and Legal Mandates
The 2003 AQMP estimates architectural coating emissions for the Summer Planning Inventory at 60.0 tons per day in 1997, reducing to 28.3 tpd by the year 2010 without additional controls on architectural coatings. Control Measure CTS-07 was included in the 1994 and 1997 AQMPs as well as the 1999 amendment to the 1997 Ozone SIP. This control measure proposed to reduce the VOC emissions through the establishment of lower VOC-limits and the expansion of the applicability of Rule 1113. At that time, the proposed reduction target for this control measure was set at 75 percent. Control Measure CTS-07 has been implemented, in part, with the amendments to Rule 1113 in 1996 and 2002 which have achieved greater than 50 percent emission reduction from this source category.

These proposed Rule 1113 amendments will implement a portion of Phase III of the control measure. The current proposal primarily relies on commercially available low-VOC formulations for clear wood finishes, roof coatings, stains, and waterproofing sealers already being sold and used in the market place. The currently available resins systems can be used to reformulate existing coatings within the 13 month to 42 month implementation period.

Implementations and Resources

Existing AQMD resources will be sufficient to implement the proposed changes to this rule with minimal impact on the budget.

Attachments (23,260 KB)

1. Summary of Proposed Amendment
2. Rule Development Flow Chart
3. Key Contacts
4. Key Issues and Responses
5. Resolution
6. Rule Language
7. Staff Report
        Appendix A - List of Available Products
        Appendix B - Emissions Calculations
        Appendix C - Comparative Analysis
        Appendix D - Comment Letters Received and Responses to      Comments
        Appendix E - Technical Data Sheets and Material Safety Data Sheets
8. Socioeconomic Report
9. CEQA

ATTACHMENT A

ATTACHMENT B

RULE DEVELOPMENT PROCESS
PROPOSED AMENDED RULE 1113 - Architectural Coatings

ATTACHMENT C

ATTACHMENT D

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