BOARD MEETING DATE: August 6, 2004
AGENDA NO. 28
Stationary Source Committee
SYNOPSIS:
The Stationary Source Committee met Friday, July 23, 2004. Following is a summary of that meeting. The next meeting will be August 27, at 10:30 a.m., in Conference Room CC8.
RECOMMENDED ACTION:
Receive and file.
Ronald Loveridge, Chairman
Stationary Source Committee
Attendance
The meeting began at 10:50a.m. Present were Ronald Loveridge, Chairman (left at 11:10), Jane Carney, (Acting Chair upon Ronald Loveridge’s departure) and Dennis Yates. William Burke was appointed as an ad hoc member of the committee for this meeting by Ronald Loveridge and participated by Videoteleconference. Absent were Bill Postmus and William Craycraft.
ACTION ITEM
- Fireworks Emissions and Air Quality Issues White Paper and Proposed Disney Resorts Letter of Agreement
Carol Coy, Deputy Executive Officer, Engineering and Compliance, summarized the July Board action to return this issue to the Stationary Source Committee with the authority to approve a proposed Letter of Agreement with Disneyland that memorializes the Resort’s commitments to: 1) continue use of their newly implemented air launch system for all aerial firework displays, and, 2) continue research, development, and implementation of alternative low smoke firework technologies for use beginning in the summers of 2005 and 2007. Public concerns regarding visible emissions (smoke), odors, particulate fall out, potential health impacts, and the lack of air quality regulations regarding firework displays were recapped, along with data illustrating the regional increase in PM10 following Independence Day firework celebrations. Disney Resort’s continuing efforts to reduce smoke emissions and offsite impacts through display modifications were detailed as well as staff observations of the new Air Launch technology and resultant elimination of black powder smoke from the aerial firework lift charges. Staff highlighted their continuing recommendation to approve the proposed Letter of Agreement as it is a voluntary agreement, Disney Resorts concurs, they are the largest user of fireworks in the AQMD, have residents close by with periodic complaints occurring, and the Letter clarifies to the public the improvements that can be expected over the next several years.
Manny Grace, Senior Vice President Counsel with the Walt Disney Company, reiterated the Disney commitment to their firework smoke mitigation efforts and the proposed Letter of Agreement which was prepared by Disney representatives and endorsed by AQMD staff. Mark Hollingworth, Manager of the Disneyland Resort Entertainment Division, reported on their pioneering smoke reduction projects and presented video clips showing side-by-side images of air launched pyrotechnics versus the smoky conventional black powder lift products as well as reformulated low-smoke firework materials versus traditional black powder-based fireworks.
Committee members commented on the vast technology advancement demonstrated in the images, voted unanimously to approve the proposed Letter, and requested a letter from the Committee to Disney be prepared commending them for the pioneering efforts they have undertaken.
INFORMATIONAL ITEMS
- Rule 1121 – Control of Nitrogen Oxides from Residential-type, Natural-Gas-Fired Water Heaters
- Rule Forecast Report & Advance Calendar
Jill Whynot, Planning & Rules Manager, gave a brief update on proposed amendments to Rule 1121 which covers water heaters. The December 1999 amendments to the rule lowered the NOx standard from 40 ng/J to 20 ng/J by July 1, 2002 and to 10 ng/J by January 1, 2005. All four manufacturers used an option in the rule to pay mitigation fees in lieu of meeting the 20 ng/J standard. Staff is recommending extending the mitigation fee program and delaying the dates for meeting the final limit.
Manufacturers have had several other regulatory standards to meet and need more time to develop and test low NOx water heaters. Staff proposes a one year delay for conventional water heaters £ 50 gallon capacity (94% of units), a two year delay for conventional water heaters > 50 gallons (4%), and a three year delay for power vented and direct vented units (2%). The mitigation fee would be increased and extended until these dates. Industry representatives would like a full exemption from the rule limits for power and direct vented units, but staff has not received specific enough information to justify an exemption.
Emission reductions will be delayed by up to 0.5 tons/day in the first few years, but after the year 2015, emission reductions will exceed the projected reductions estimated for the current rule.
The set hearing is scheduled for August 6, 2004 and will serve as a notice of intent to make infeasibility findings, as required by the Settlement Agreement for the 1999 AQMP amendment. The public hearing is scheduled for September 3, 2004.
Mr. Yates commented that consumers will pay the increase in the mitigation fees and for the higher costs of the low NOx water heaters. There were no public comments.
- Rule 1469.1 – Spraying Operations Using Toxic Chemicals and Relationship to Air Toxic Control Measure
Elaine Chang, Deputy Executive Officer, gave a briefing on the Rule Forecast Report. This item is usually a written report to the committee, but a presentation was given to highlight a new process. The Small Business Subcommittee of the Home Rule Advisory Group has raised the issue that staff resources are sometimes used to develop rules that other agencies are also working on or areas, such as environmental justice, which are not specifically required. Examples of potential duplicative efforts include Rule 1470 on diesel internal combustion engines and Rule 1469 which covers metal plating. CARB is currently working on a metal plating rule, with their adoption approximately two years after AQMD’s rule.
The process agreed upon was to use the Rule Forecast Report as the process to bring items to the Board’s attention and to seek their direction before initiating rule development. The rule forecast report will contain a brief summary of rules that could be duplicative, and staff’s rationale to delay or move forward. Rule 1469.1 is the test case.
Dr. Chang explained that during development of Rule 1469, ambient sampling near two facilities that conduct spraying operations showed high levels of chrome. A measure to evaluate this type of operation was included in the 2003 Addendum to the Air Toxic Control Plan. The state is working on an Air Toxic Control Measure (ATCM) for thermal spraying. Thermal spraying is a different process than wet spraying and would not be included in Proposed Rule 1469.1. The state ATCM is scheduled for consideration by the end of this year.
Preliminary investigation shows that few facilities conduct both thermal and wet spraying. Information summarizing the number of facilities and types of industries potentially subject to the ATCM or Proposed Rule 1469.1 was discussed. Staff recommends initiating rule development to address local needs for reducing toxic emissions that would not be covered by the state ATCM.
A working group meeting was held recently to discuss with stakeholders the intent to bring this item to the Board and seek direction before moving forward. If the Board approves the recommendation in the Rule Forecast Report, staff will initiate rule development. The outcome is not predetermined whether there would be a rule or the content of a rule.
Bill LaMarr, representing the Small Business Alliance, asked for clarification that Proposed Rule 1469.1 was previously Rule 1468, which was confirmed. Mr. LaMarr expressed concern that there is more work to be done to determine whether a rule is needed and that the costs for small businesses may be too high. Some metal platers have recently incurred costs under Rule 1469 and may not be able to afford more controls. He suggested that this issue be referred to the Task Force which is being formed to look at AQMD programs, and that staff do more research before making a recommendation to initiate rule development.
Bill Pearce, from Boeing, asked that staff consider that the aerospace NESHAP already covers spray operations from many facilities. If a rule is developed, adequate time should be given for the process. He noted that in some situations at Boeing it has been cost effective to add controls on wet spraying operations and in other cases it has been very expensive.
Ms. Carney asked for clarification regarding the process for Board input. Dr. Chang explained that if the Board approves the Rule Forecast Report, staff would begin work on Proposed Rule 1469.1. The thermal spray rule would follow after the state ATCM. Ms. Carney also asked if any chrome platers used wet spraying. Staff responded that some do. Mr. LaMarr added that staff should prioritize efforts due to resource and budget constraints. Ms. Carney asked that staff report to the committee earlier in the rule development process than is normally done.
- Status Report on RECLAIM Amendments
Elaine Chang, Deputy Executive Officer, provided a comprehensive briefing on RECLAIM. Staff is recommending an informational hearing at the September board meeting to discuss many of the issues involved with this rule amendment.
RECLAIM has over 300 facilities participating in the market system for NOx. The original program was based on reductions anticipated from many rules and 1991 AQMP control measures. The proposed amendments would implement a control measure from the 2003 AQMP and requirements in state law to ensure that RECLAIM is equivalent to command and control rules with respect to Best Available Retrofit Control Technology (BARCT). State law defines BARCT as an emission limit that takes into account technical feasibility and cost.
This proposed amendment addresses NOx, and would not apply to SOx. The AQMP State Implementation Plan (SIP) commitment is 3 tons per day. The current market has 34 tons per day of RTCs, with refineries and power plants holding more than half the credits. Actual emissions in 2002 are about 30 tons per day, so a reduction of 3 tons per day per the AQMP would leave unused credits compared to recent actual emission levels.
When considering BARCT, staff used a number of criteria, as described in the handouts. Each equipment category was evaluated, and new BARCT levels could be applied to 6 categories. Power plants have already reduced emissions to BARCT, but the program has not been adjusted to reflect this. Many equipment categories do not have further reductions recommended. The technologies used would include low NOx burners and SCR, which are widely used currently.
A chart was presented that illustrated that under RECLAIM facilities can choose whether to add controls on each piece of equipment. For boilers and heaters that would have been subject to Rules 1146 or 1146.1, there is a range of current emission levels, from well below to at or above what would have been required. Over 150 boilers have not yet reduced to the previous rule limits, which are allowed under RECLAIM. This illustrates that there is additional reduction potential from this equipment. Staff recommends a 15 ppm level be used for this category for determining overall reductions. Each facility operator could chose to add controls, purchase credits, or reduce emissions from other equipment. Ms. Carney asked if staff would provide cost effectiveness information for each category. Ms. Chang replied that this would occur.
Several approaches were investigated to translate BARCT emission levels to mass emission reductions for the program. Two were discussed at the meeting. The allocation approach results in 5.4 tons per day reduction, while the AQMP approach (including a 10 percent compliance margin) gives 7.4 tons per day. Both approaches are similar to how original allocations were determined for different years of the RECLAIM program. The difference is how growth is estimated.
Staff recommends a two-step reduction, with 5.4 tons reduced by 2008 and 7.4 tons per day by 2010. The latter step would have market protection mechanisms and adjustments for prices above certain thresholds. A graph was presented showing different RECLAIM allocation adjustments – the current rule, the AQMP (industry) proposal, and the staff recommendations.
There are two main issues that staff will highlight for the Board in September – the amount of reductions and how those reductions will occur. Regarding the amount of reductions, the technology and emission levels are not disputed. There are several issues related to the cost effectiveness, including use of the Discounted Cash Flow (DCF) method or the Levelized Cash Flow (LCF) method, the equipment life, and whether to use a cost threshold.
Staff uses the DCF method which converts all costs to a present value. The LCF method is proposed by industry. This method is similar to mortgages, where costs are spread equally over time. The LCF method tends to give estimates that are 10 to 30 percent higher than DCF for the same capital and installation costs. The Board approved use of the DCF method, and it has been used over the years as the standard method for relative comparison of different rules or control measures. Other agencies use the LCF method which industry feels is more representative.
Staff typically uses 10 years in the cost calculations, but this is because 10 years represents a typical equipment life. For some refinery equipment, staff is using 25 years, when appropriate. Twenty-five years was used in the recent amendments to Rule 1105.1. Industry would like a standard 10 year period, but staff disagrees. Using 10 years would increase cost calculations.
The third issue related to emission reductions is whether it is appropriate to set a cost threshold for RECLAIM BARCT or other rules. Industry would like to set $15,000 or $10,000 as a threshold. Staff would prefer to retain flexibility. Some rules that affect small businesses have lower thresholds than rules proposed for large industries such as refineries. Affordability varies by industry, so one level may not be appropriate. Staff is checking with CARB to determine if setting a threshold for BARCT would be legal.
The other main issue is how to reduce emissions. Initial staff recommendations are for an equal reduction across the market. Some industry representatives are recommending that it would be more equitable for each facility to be evaluated and to have different reduction requirements. The challenge is that RTC holdings are being reduced, and some RTCs are held by brokers, and not associated with specific equipment. If individual equipment is evaluated, there is still a question about what activity level to use. Using peak year for each facility could lead to over allocation. BARCT adjustments need to be evaluated every three years per CARB. Looking at each facility individually every three years may lead to more market uncertainty.
Staff will develop a white paper and recommends discussion of these issues at the September informational hearing. Monthly briefings will be made to the Stationary Source Committee, as needed. In September, amendments to Rule 2007 will be proposed to maintain the current trading restrictions for power plants. Once amendments are made to implement BARCT, the restrictions will be removed.
An attorney representing Cal Portland Cement expressed their concern that an overall reduction would be detrimental to their company. In the next 6-7 months, they will have installed BARCT on all major NOx emitting equipment at their facility. They will have to buy credits to operate at maximum capacity because their peak year was lower than design capacity and all facility allocations were reduced 28 percent from 2000 to 2003. They suggest that a facility-specific approach be used and that their holdings not be reduced further.
A representative from Exxon Mobil commented that extra time for the rule process was a good idea. This company has concerns about the cost effectiveness and the two-step proposal. RECLAIM has worked well by reducing emissions and being cost-effective so far. It was suggested that a 10 percent reduction across the board would likely be met with less objection. Staff should evaluate whether state law requires a larger reduction. It was stated that the Board can determine what is cost effective.
WRITTEN REPORTS
All written reports were acknowledged by the Committee.
The meeting was adjourned at 12:10 p.m.
July 23, 2004 Committee Agenda (without its attachments)
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