BOARD MEETING DATE: June 6, 2003
AGENDA NO. 23

Annual Audit Report for Area Source Credit Rule 2506

SYNOPSIS:

Rule 2506 - Area Source Credits for NOx and SOx requires staff to present an annual audit report to the Board describing area source credit activity for the preceding year. During this reporting period, there have been no new Area Source Credit Applications received by the AQMD and no new activities with regard to trading and use of Area Source Credits issued to Southern California Edison.

RECOMMENDED ACTION:

1. Approve the Annual Audit Report.
2. Receive and file; authorize staff to forward the report to CARB and U.S. EPA.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The Board adopted Rule 2506 - Area Source Credits (ASCs) for NOx and SOx on April 11, 1997. This rule established a voluntary emission reduction credit program for unpermitted sources in order to accelerate the introduction of lower-emitting technologies and provide regulated companies with alternative methods of compliance with AQMD regulations. Rule 2506 provides for the issuance of marketable ASCs to entities who voluntarily reduce emissions of oxides of nitrogen (NO_x) and oxides of sulfur (SO_x) from area sources. Regulated companies could convert ASCs into RECLAIM Trading Credits (RTCs) or use them as an alternative means of compliance with other AQMD regulations that allow use of ASCs, such as Rule 2202 – On-Road Motor Vehicle Mitigation Options. The rule created a mechanism to generate emission reductions from stationary sources that do not require AQMD operating permits and are surplus to SIP commitments or applicable rules and regulations. It should be noted that this rule has not been approved or disapproved by the U.S. EPA.

Rule 2506 requires an annual program audit to verify that the program objectives are met. As described in the previous audit report, AQMD had received two ASC Plans: one from Vinyard Systems, Inc., which was denied by AQMD due to insufficient data, and the second from Southern California Edison (SCE), which was approved in November 2000.

Annual Audit Report

There have been no new ASC applications received by the AQMD, and no new activities with regard to SCE's ASC/RTC trading. For FY 2002-03, 136,368 lbs. of NOx RTC’s were issued to SCE. On August 7, 2002, SCE submitted its annual written certification of the continued existence and operation on site of each electric motor that replaced the ICEs listed in their ASC plan. In addition, there have been no changes made to the AQMD-approved ASC Plan and the operation continues to be in accordance with the conditions in the Plan.

As indicated in the previous audit report, credit generation for NOx from diesel-fired agricultural pumps has been subsumed by Rule 2507 - Pilot Credit Generation Program for Agricultural Pumps.

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