BOARD MEETING DATE: June 3, 2005
AGENDA NO. 41

Amend Rule 1110.2 -Emissions from Gaseous and Liquid-Fueled Engines and Rescind Rule 1110.1 - Emissions from Stationary Internal Combustion Engines

SYNOPSIS:

SB 700 eliminates the exemption from the permit system for agricultural operations and requires air districts to implement BARCT for agricultural engines. Amendments are proposed to Rule 1110.2 in order to comply with SB 700. Proposed amendments include removing the exemption for stationary non-emergency, agricultural internal combustion engines, except for orchard wind machines, and requiring them to comply on a tiered compliance schedule. Proposed amended Rule 1110.2 has superceded the requirements of Rule 1110.1, so staff recommends that Rule 1110.1 be rescinded.

COMMITTEE:

Stationary Source, April 22, 2005, Reviewed

RECOMMENDED ACTIONS:

Adopt the attached resolution:

1. Certifying the CEQA Final Environmental Assessment (EA) for the proposed amendments and rescission.
    
2. Amending Rule 1110.2 -Emissions from Gaseous and Liquid-Fueled Engines and Rescinding Rule 1110.1 - Emissions from Stationary Internal Combustion Engines.
    
3. Finding that AQMD permits are necessary for all agricultural engines subject to Rule 1110.2 and directing staff to start the process for amending Rule 219, as necessary.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Stationary internal combustion engines (ICEs) had higher NOx emissions per unit fuel burned than any other source, but were not regulated until AQMD Rule 1110.1, (adopted on October 26, 1984), required NOx and CO emission reductions from stationary, gaseous-fueled ICEs. In August 1990, Rule 1110.2 was adopted to require additional reductions of NOx and VOC, and to extend the requirements to liquid-fueled ICEs and portable ICEs. For all stationary and portable engines over 50 bhp, it required that either 1) NOx emissions be reduced over 90% to one of two compliance limits specified by the rule, or; 2) the engines be permanently removed from service or replaced with electric motors. It was amended in September 1990 to clarify rule language. It was then amended in August and December of 1994 to modify the CO monitoring requirements and to clarify rule language. The latest amendment in November of 1997 eliminated the requirement for continuous monitoring of CO, reduced the source testing requirement from once every year to once every three years, and exempted nonroad engines, which includes portable engines. Agricultural engines are exempt from both rules. As of December 31, 2004, Rule 1110.1 has been superceded by Rule 1110.2

Until recently, local air districts were prohibited by State law from requiring permits for agricultural operations such as farms, orchards, ranches, dairies and other confined animal feeding operations. As a result, unregulated stationary agricultural ICEs emit up to 80 times more NOx than ICEs operated by other industries.

Because of the need in California to reduce emissions from and require permits for agricultural operations, Senate Bill 700 (Florez) – Agricultural Operations Air Quality was enacted into law on January 1, 2004. It eliminated the statewide permit exemption for agricultural operations and required district rules to be adopted to reduce emissions from agricultural engines and other equipment. The proposed amendments to AQMD’s Rule 1110.2 are intended to address these requirements.

In accordance with Assembly Bill 923 (Firebaugh) – Air Pollution, the Board authorized on February 4, 2005 the use of up to $4 million of state vehicle registration funds for the use of agricultural sources complying with AQMD rules. No other industry can access state funds to comply with Rule 1110.2, or any other stationary source rule.

Affected Facilities

There are thousands of engines and many hundreds of facilities subject to Rule 1110.2, but the main effects of proposed amended Rule 1110.2 (PAR1110.2) will be on agricultural facilities with stationary non-emergency ICEs over 50 brake horsepower. A recent AQMD survey of agricultural operations found only 12 agricultural facilities with 20 such stationary ICEs. However, taking into account the survey response rate, the agricultural facilities and ICEs that may be subject to Rule 1110.2 could be as high as 24 and 40, respectively. These stationary, non-emergency ICEs are a mix of uncontrolled diesel and natural gas engines used primarily as water pumps.

Public Process

Approximately 3,650 public workshop notices were mailed to potentially affected sources and agencies, and the notice of public workshop was published in each county within AQMD’s jurisdictional boundaries. Notifications were also sent to agricultural industry associations and SB 700 working group members to ensure a broad distribution to potentially affected facilities. A Public Workshop was held on February 1, 2005, at the AQMD offices in Diamond Bar. In addition to this workshop, AQMD staff has provided PAR 1110.2 updates at monthly SB 700 working group meetings held on January 20, 2005, March 10, 2005 and April 19, 2005. A total of 13 comment letters were received both during and after the formal public review period. Comments expressed at the public workshop and in the comment letters are addressed in the Staff Report.

Proposal

Staff proposes the following amendments to Rule 1110.2: eliminate the agricultural engine exemption; consistent with state directives, prohibit the use of portable generators for supplying electric power to the grid or to a building, facility, stationary source or stationary equipment except in an emergency affecting grid stability; and clean up and simplify the rule by removing rule language that is no longer needed. PAR 1110.2 would become effective January 1, 2006 to comply with the SB 700 provisions. To allow agricultural operators to take advantage of current and future funding sources, the staff proposal establishes a compliance schedule that extends from 2008 to 2010, depending on the age of the engines. A limited exemption has been added to the set hearing version of the rule for agricultural engines that cannot be electrified or funded by the AB 923 program for agricultural sources.

Since Rule 1110.2 has superceded Rule 1110.1, staff proposes to rescind Rule 1110.1.

Because it will be very difficult to enforce Rule 1110.2 unless the affected ICEs are required to have permits, staff recommends that the Board make findings required by SB 700 that: 1) an AQMD permit is necessary for all agricultural engines subject to Rule 1110.2 to impose and enforce reductions of NOx and VOC emissions that cause or contribute to the exceedance of ozone and particulate ambient air quality standards; and 2) the requirement to obtain a permit is not significantly more burdensome for agricultural engine operators than the permit for other similar sources of air pollution. Permits are necessary to allow AQMD staff to identify the location of sources, impose conditions necessary to ensure compliance with Rule 1110.2, and recover costs necessary for effective enforcement. In addition, agricultural sources will not experience greater costs than other comparable regulated sources, and they will be eligible for certain financial assistance that is not available to other sources.

Emission Reductions

The proposed amendments to Rule 1110.2 will result in emission reductions from stationary, non-emergency ICEs in agricultural operations. The emission reductions will be achieved by replacing diesel engines with an electric motor or a controlled natural gas or propane fired engine, or adding emission controls to existing natural gas engines. The proposed amendments will result in emission reductions of 0.389 tons/day of NOx, 0.0219 tons/day of ROG, 0.271 tons/day of CO and 0.0187 tons/day of PM.

Cost-Effectiveness

State Health and Safety Code (H&SC) Section 40724 requires that the cost-effectiveness to control agricultural ICEs be similar to the cost-effectiveness for other ICEs and be compared to the proposed control measures in the district’s AQMP. On this basis the proposed amendments are cost-effective. The costs to the agricultural ICE operators will actually be less than to other ICE operators because the state AB 923 funding program will pay most of the capital costs to comply with PAR 1110.2. It is anticipated that diesel ICE operators will actually save money in the long run by replacing their engines with electric motors.

Key Issues

The California Farm Bureau Federation has requested: 1) more time to comply; 2) to be able to replace old diesels with new diesel; 3) to not have new engines subject to BACT; and 4) AQMD staff periodically report to the Board on the Agricultural Assistance Program. Staff has provided additional time to comply and agrees to report periodically to the Stationary Source Committee. Staff feels the other requests are not appropriate because they would result in much higher emissions than required for other ICEs and would be contrary to SB 700 which explicitly requires Best Available Retrofit Control Technology for agricultural ICEs that is similar to the standards for other stationary ICEs, provided that the cost effectiveness is comparable.

California Environmental Quality Act (CEQA) Analysis

The proposed amendments to Rule 1110.2 are considered a "project" as defined by the California Environmental Quality Act (CEQA), and the AQMD is the designated lead agency. Pursuant to the CEQA Guidelines and AQMD Rule 110, the AQMD has prepared an Environmental Assessment (EA) evaluating potential significant adverse environmental impacts associated with implementing the proposed amendments to this rule. The Draft EA was circulated for a 30-day public review and comment period from March 18, 2005 to April 19, 2005, and concluded that PAR 1110.2 would not have any significant adverse effects on the environment. No public comment letters were received on the Draft EA, and minor modifications were made to the Draft EA so it is now a Final EA. Changes to the project description are minor and do not change the conclusions made in the Draft EA or increase the environmental impact analyzed in the Draft EA. Pursuant to CEQA Guidelines §15073.5(c)(2), recirculation is not necessary since the information provided does not result in new avoidable significant effects. The Final EA is included as part of the attached package for the public hearing on the proposed amendments.

Socioeconomic Impact Assessment

The proposed amendments to Rule 1110.2 would mainly affect agricultural operations in the counties of Orange, Riverside and San Bernardino. These agricultural facilities belong to the industries of fruit and tree nut production (Standard Industrial Classification (SIC) 0179 or North American Industry Classification System (NAICS) 111336); ornamental floriculture (SIC 0181 or NAICS 111422) and nursery products (SIC 0181 or NAICS 111421); general farms (primarily crop farms) (SIC 0191 or NAICS 111998); and dairy farms (SIC 0241 or NAICS 112120). Of the estimated 24 affected facilities, 2 are in Orange County, 12 are in Riverside County and 10 are in San Bernardino County.

The affected facilities which operate existing stationary agricultural engines would comply with the proposed amendments of Rule 1110.2 by replacing their engines with a controlled spark ignition (SI) engine and non-selective catalytic reduction system (NSCR) or an electric motor, or by adding an NSCR to an existing SI engine.

The total annual cost of PAR 1110.2 is estimated at $316,000 per year, but with the available state funding, the cost to agricultural facilities is reduced to $40,000 per year.

Further, staff analysis shows that bringing into the permitting system ICEs subject to Rule 1110.2 and operated by agricultural sources that are less than half of the major source emissions thresholds is no more burdensome than for other regulated industrial sectors. Agricultural sources will not experience greater costs than other comparable regulated sources, and they will be eligible for certain financial assistance that is not available to other sources.

AQMP and Legal Mandates

The proposed requirements for agricultural ICEs are mandated by SB 700 and are to be adopted no later than July 1, 2005 and implemented no later than January 1, 2006. The proposed emission reductions were not in the 2003 AQMP as a control measure, but they will help achieve the overall emission reductions that the AQMP shows are needed.

Implementation Plan

Staff will conduct outreach efforts on Rule 1110.2 to inform the general public of the requirements for non-emergency, stationary and portable internal combustion engines over 50 brake horsepower.

Resource Impact

The proposed Rule 1110.2 amendments and proposed rescission of Rule 1110.1 will require some additional efforts by AQMD staff, but no additional staff are requested at this time.

Attachments

1. Summary of Proposal
2. Rule Development Process
3. Key Contacts List
4. Resolution
5. Proposed Rule Language
6. Staff Report
7. Final Environmental Assessment

ATTACHMENT A

SUMMARY OF PROPOSAL

Rescind Rule 1110.1 – Emissions from Stationary Internal Combustion Engines

Rule 1110.2 has superceded requirements of Rule 1110.1. Therefore, staff recommends that Rule 1110.1 be rescinded.

Proposed Amendments to Rule 1110.2 – Emissions from Gaseous and Liquid Fueled Internal Combustion Engines

1. Remove exemption for non-emergency, stationary agricultural engines.
2. Add exemption for orchard wind machines.
3. For portable engines, prohibit use of a portable generator for grid or building power, except in an emergency.
4. Require stationary, non-emergency, agricultural engines to comply on the following schedule:

ATTACHMENT B

RULE DEVELOPMENT PROCESS

California Citrus Mutual
California Farm Bureau Federation
Engine Manufacturers Association
Environ International Corporation
Los Angeles County Farm Bureau
Milk Producers Council
Orange County Farm Bureau
Pacific Egg & Poultry Association
Regional Water Quality Control Boards
Riverside County Farm Bureau
San Bernardino County Farm Bureau
Scott Bros Dairy
Western United Dairymen

ATTACHMENT D

RESOLUTION

                    A Resolution of the Governing Board of the South Coast Air Quality Management District (AQMD) certifying the Final Environmental Assessment for Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines.

                    A Resolution of the Governing Board of the AQMD amending Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and rescinding Rule 1110.1 - Emissions from Stationary Internal Combustion Engines.

                    WHEREAS, the AQMD Governing Board has determined with certainty that the proposed amendments to Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and proposed rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines are considered a "project" pursuant to the terms of the California Environmental Quality Act (CEQA); and

                    WHEREAS, the AQMD has had its regulatory program certified pursuant to Public Resources Code Section 21080.5 and has conducted CEQA review pursuant to such program (AQMD Rule 110); and

                    WHEREAS, the AQMD staff has prepared a Draft EA pursuant to its certified regulatory program and state CEQA Guidelines Section 15252, setting forth the potential environmental consequences of Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and proposed rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines; and,

                    WHEREAS, the AQMD staff has determined in the Draft EA that potential adverse environmental impacts were not significant; and

                    WHEREAS, the Draft EA was circulated for a 30-day public review and comment period, no comments were received, and minor modifications were made such that the Draft EA is now a Final EA; and

                    WHEREAS, it is necessary that the adequacy of the Final EA be determined by the Governing Board prior to its adoption; and

                    WHEREAS, the AQMD is not required to prepare a Statement of Findings, a Statement of Overriding Considerations, or a Mitigation Monitoring Plan because the proposed project is not expected to generate significant adverse environmental impacts; and

                    WHEREAS, the AQMD Governing Board, voting on Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines, considered, and hereby certifies the Final EA; and

                    WHEREAS, the AQMD Governing Board obtains its authority to adopt, amend, or rescind rules and regulations from Sections 40000, 40001, 40440, and 40720-40728 of the California Health and Safety Code; and

                    WHEREAS, the AQMD Governing Board has determined that: 1) an AQMD permit is necessary for all agricultural engines subject to Rule 1110.2 to impose and enforce reductions of NOx and VOC emissions that cause or contribute to the exceedance of ozone and particulate ambient air quality standards; and 2) the requirement to obtain a permit is not significantly more burdensome for agricultural engine operators than the permit for other similar sources of air pollution; and

                    WHEREAS, the AQMD Governing Board has determined that a need exists to adopt the Proposed Amended Rule 1110.2 - Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines to achieve emission reductions that are necessary according to the 2003 Air Quality Management Plan; and

                    WHEREAS, the AQMD Governing Board has determined that there is a problem that Proposed Amended Rule 1110.2 - Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines will help alleviate; namely, that the basin does not meet the ambient air quality standards for ozone, and the proposed amended rule will promote the attainment of this standard; and

                    WHEREAS, the AQMD Governing Board has determined that Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines is written or displayed so that its meaning can be easily understood by the persons directly affected by it; and

                    WHEREAS, Health and Safety Code §40727.2 requires the AQMD to prepare a written analysis of federal pollution control requirements applicable to the same source type being regulated whenever it adopts or amends a rule, and AQMD’s analysis is included in the staff report; and

                    WHEREAS, the AQMD Governing Board has determined that Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines is in harmony with, and not in conflict with or contradictory to, existing statutes, court decisions, or federal or state regulations; and

                    WHEREAS, the AQMD Governing Board has determined that Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines do not impose the same requirements as any existing state or federal regulations, and the proposed amended rule and rescission of the rule is necessary and proper to execute the powers and duties granted to, and imposed upon, the AQMD; and

                    WHEREAS, the AQMD Governing Board in amending and rescinding these regulations, references the following statutes which the AQMD hereby implements, interprets or makes specific: California Health and Safety Code Sections 40001, 40440, 40702 and 40724 (SB 700), and the Federal Clean Air Act Section 172(c)(i); and

                    WHEREAS, the AQMD Governing Board has determined that the proposed amendments to Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines, which will require stationary, non-emergency, agricultural engines to comply with Rule 1110.2 and implement Best Available Retrofit Control Technology for agricultural sources, are in accordance with California Health and Safety Code Section 40724 (SB 700 - Agricultural Operations Air Quality); and

                    WHEREAS, the AQMD Governing Board has determined that Rule 1110.1 - Emissions from Stationary Internal Combustion Engines may be rescinded because all of its requirements have been superceded by Rule 1110.2; and

                    WHEREAS, the AQMD Governing Board has determined that the socioeconomic assessment for Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines is consistent with the provisions of Health and Safety Code Sections 40440.8, 40728.5 and 40920.6; and

                    WHEREAS, the AQMD Governing Board has determined that Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines will result in increased costs to the industry, yet are not expected to be significant as described in the socioeconomic assessment; and

                    WHEREAS, the AQMD Governing Board specifies the manager of Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines as the custodian of the documents or other materials which constitute the record of proceedings upon which the adoption of this proposed amendment is based, which are located at the South Coast Air Quality Management District, 21865 Copley Drive, Diamond Bar, California 91765; and

                    WHEREAS, a public hearing has been properly noticed in accordance with the provisions of Health and Safety Code Section 40725; and

                    WHEREAS, the AQMD Governing Board has held a public hearing in accordance with all provisions of law; and

                    NOW, THEREFORE, BE IT RESOLVED that the AQMD Governing Board hereby certifies, pursuant to the authority granted by law, the Final Environmental Assessment for Proposed Amended Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and Proposed Rescission of Rule 1110.1 - Emissions from Stationary Internal Combustion Engines.

                    BE IT FURTHER RESOLVED that the AQMD Governing Board hereby amends, pursuant to the authority granted by law, Rule 1110.2 – Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines and rescinds Rule 1110.1 - Emissions from Stationary Internal Combustion Engines, as set forth in the attached, and incorporated herein by this reference.

                    BE IT FURTHER RESOLVED that the AQMD Governing Board, pursuant to Health and Safety Code Section 42301.16, makes the following findings for agricultural engines subject to Rule 1110.2 - Emissions from Gaseous and Liquid-Fueled Internal Combustion Engines at agricultural facilities with actual emissions that are less than one-half of all the applicable district emissions thresholds for a major source:
1) such engines are not subject to the requirements of Health and Safety Code Section 40724.6 for large confined animal facilities; 2) AQMD permits are necessary for such engines in order to impose and enforce reductions of air pollutant emissions that cause or contribute to violations of state and federal ambient air quality standards in AQMD; and
3) the requirement for an AQMD permit for such engines would not impose a burden on agricultural facilities that is significantly more burdensome than permits required for other similar sources of air pollution.

                    BE IT FURTHER RESOLVED that the AQMD Governing Board is directing staff to prepare an amendment to Rule 219–Equipment Not Requiring a Written Permit Pursuant to Regulation III that will require agricultural engines subject to Rule 1110.2 to have an AQMD permit and bring it to a public hearing for Board consideration prior to the implementation date of Rule 1110.2 for agricultural operations.

                    BE IT FURTHER RESOLVED that the AQMD Governing Board is directing staff to also prepare, in conjunction with the amendment to Rule 219, an amendment to Regulation XIII – Fees to extend the discounted permit fee schedule currently included in Rule 312 - Special Permitting Fees for Agricultural Sources to those additional internal combustion engines operated by agricultural facilities that are required to obtain an AQMD operating permit.

                    BE IT FURTHER RESOLVED that the AQMD Governing Board hereby directs staff to periodically report to the Stationary Source Committee on whether qualified agricultural facilities are receiving funding from the Agricultural Assistance Program.

DATE: _______________                                _________________________________
                                                                                 CLERK OF THE BOARDS

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