BOARD MEETING DATE: April 6, 2007
AGENDA NO. 31

REPORT:

Stationary Source Committee

SYNOPSIS:

The Stationary Source Committee met Friday, March 23, 2007. Following is a summary of that meeting. The next meeting will be April 27, at 10:30 a.m., in Conference Room CC8.

RECOMMENDED ACTION:

Receive and file.

Ronald O. Loveridge, Acting Chair
Stationary Source Committee

Attendance

The meeting began at 10:30 a.m. Present were Ron Loveridge and Dr. Burke (appointed as an ad hoc member of the committee for this meeting by Ron Loveridge and participated by videoteleconference). Absent were Dennis Yates, Gary Ovitt and Jane Carney.

INFORMATIONAL ITEMS

1. Reg. IX – Standards of Performance for New Stationary Source
   Dr. Laki Tisopulos, Assistant Deputy Executive Officer with the Office of Planning and Rule Development, presented this item which was carried over from the February Stationary Source Committee.  Regulation IX is periodically amended to reflect new or amended standards by reference as set forth in federal New Source Performance Standards (40 CFR Part 60).  These are federal standards that are already in effect that the District has delegated authority to implement.  There is no controversy associated with these amendments and the public hearing is set for the April Board meeting.

1A Request by Ultramar/Valero for Extension of Deadline for Completion of the ReVAP Project
Mohsen Nazemi, Assistant Deputy Executive Officer of Engineering and Compliance, introduced the issue and indicated that Ultramar is the only refinery in the South Coast area that presently uses concentrated hydrogen fluoride (HF). In February 2003, Ultramar entered into a Memorandum of Understanding (MOU) with the District to eliminate the use of concentrated HF by May 9^th, 2007. In early February, Ultramar requested an extension of 53 days until July 1, 2007. Earlier this month, the Administrative Committee approved this extension request with a caveat that there will be no further extension and any further delay will result in a fine. Since that time, the District has received a letter from Ultramar informing us that they will not meet the July 1^st deadline because they had received a request from the California Energy Commission (CEC) to maintain their gasoline production through the summer season. Ultramar has informed the CEC that they have decided to comply with their request without any regard to the MOU with the District. Staff now proposes that the District’s initial recommendation for granting the extension of the MOU deadline be retracted since the circumstances have changed.

Dr. Barry Wallerstein further emphasized that the CEC letter to Ultramar was not a directive. He also indicated that, based on his contact with the CEC Executive Director, the CEC was not aware of the MOU that Ultramar had with the District. Concentrated HF is a dense gas and it could cause harm to thousands of people if there was a significant release. Dr. Wallerstein expressed disappointment and stated he believed that Ultramar could have gone out to procure gasoline contracts. He requested that, in light of the latest development, the Board not extend the deadline in the MOU, as originally recommended by staff, but rather enforce the MOU and to impose penalties. Dr. Wallerstein said he believed that this issue is very serious. About a week ago, there was a small release of HF although no one was injured. He believes that this delay should not be taken lightly. Again, he expressed disappointment that Ultramar did not take steps to secure replacement gasoline supply during their planned shutdown to make final process modifications, in order to prevent any possible spike in gasoline price.

Jason Lee of Valero agreed with Mohsen’s statement that Ultramar had originally requested an extension due to scheduling delays. Mr. Lee stressed that Ultramar had believed that they would meet the extended deadline. He stated that they “were at the startline”. However, they received a letter from the CEC, and it became a tough issue, since it causes a conflict in the timing. Mr. Lee indicated that they had contractors ready to begin, and that has added a complication to the equation. Ultramar is working with their contractor now to ensure that they will be able to resume the project and to complete the project as soon as possible. Mr. Lee said that they are in discussion with the contractor and was unsure about the outcome.

A question was raised by a Committee Member about other refineries using HF. Mr. Nazemi answered that other refineries do not use concentrated HF and they either used a less volatile modified HF or Sulfuric Acid in their alkylation process. ExxonMobil has changed to modified HF many years ago, and other refineries do not use HF at all.

Mr. Lee explained that Ultramar is the newer refinery, and was designed to use concentrated HF, which was the best technology at the time. Other refineries use sulfuric acid and were not designed to use HF.

2. Rule 219 – Equipment Not Requiring a Written Permit Pursuant to Regulation II
   Dr. Laki Tisopulos gave the staff presentation on this item. Rule 219 is an administrative rule that exempts equipment/processes emitting a small amount of emissions, provided they are not toxic. Staff is proposing to harmonize the current exemptions applicable to printing, coating, and adhesive application and laminating equipment by establishing a uniform emissions-based threshold of three pounds per day, in addition to the existing usage-based exemptions that vary depending on the technology used. Equipment/processes that emit less than the proposed three pounds per day threshold will be exempt from permitting irrespective of the technology used (solvent based, water based, UV/EB curable, powder etc.) The proposal would delete the unlimited emissions and usage exemption that is currently applicable to UV/EB curable material. In the spirit of equity and more flexibility, the staff proposal extends the three pound per day emission threshold to roller to roller systems as well. Staff is also recommending that certain equipment and processes, which are individually exempt but in aggregate emit more than four tons per year, be required to obtain a permit. In addition, staff is proposing that passive and intermittently active methane collection systems installed under and around residential building structures be exempt from permitting. In response to public comments received during the public workshop, staff will schedule a consultation meeting prior to the public hearing. Several members of the public at the committee meeting commented and expressed concern about the four ton proposal and the elimination of the unlimited exemption applicable to UV/EB curable material. In response to the comments that the four ton proposal may cap emissions at unreasonably low levels and thus limit growth if based on emissions from the last two years, staff responded that the four tons is an applicability threshold and not a cap, necessarily. If an emissions level is to be established, staff is considering looking into a longer timeframe to capture business cycles. In response to the question whether the amendment will be ready for May or be delayed by a month, staff responded that they are ready with answers to the issues raised. Dr. Wallerstein indicated that staff would like to have the opportunity to hold the consultation meeting and also talk to Rick Pearce to ensure that there are no impacts on the budget process prior to deciding whether a delay is warranted.

3. Report on Staff Recommendation to Implement a Voluntary Certification of Consumer Cleaning Products used at Institutional and Commercial Facilities
   Naveen Berry, Program Supervisor for Office of Planning and Rule Development, presented this item. Consumer cleaning products in 2010 will represent about 16% of the VOC emission inventory. This will be larger than the inventory from light duty motor vehicles. Staff believes the AQMD should take a leadership role in reducing emissions from this significant source category to the extent we have authority and the evidence indicates that there are numerous cleaning products in the marketplace that are well below the emission limits CARB has adopted. Therefore staff is proposing a voluntary certification program for low and near-zero VOC cleaning products patterned after the Clean Air Solvent Certification Program for industrial solvent cleaning products. The certification is a marketing tool manufacturers can use to sell their environmentally preferable products and the more these products are used the more of an air quality benefit is realized. Although the program will focus on cleaning products used by institutional and commercial operators staff proposes to certify products used by consumers under this voluntary program if requested. The products include general purpose cleaners, bathroom cleaners, carpet cleaners, glass cleaners and household cleaners. To be certified products must meet a 10 g/l VOC limit and by testing, meet other requirements for being non-toxic or hazardous. As an option manufacturers can use a 3^rd party certification such as Green Seal to satisfy the consideration of environmental impacts other than VOC content. Staff has held two public meetings on the proposed voluntary program and has received a number of comments that have been considered in the proposal. However, the comments included that AQMD should not have such a program as well as comments that the agency should adopt a regulation instead of a voluntary program. At the April meeting staff will be asking the Board to approve the initiation of the voluntary program.

Luis Cabrales – Coalition for Clean Air
The Coalition supports the staff proposal but believes in addition AQMD should establish an inventory of compliant products and an inventory of the largest cleaning product users as well. He requested that the focus of the program should also include Environmental Justice areas.

4. Rule 1113 – Architectural Coatings
   Dr. Tisopulos presented this item. Last month the Committee heard comments from Zinsser, a paint company and subsidiary of RPM that manufacturers specialty primers. They were having difficulty maintaining sales of their specialty primers because their competitors were able to continue selling higher VOC specialty primers through use of the Alternative Compliance Option (ACO) in Rule 1113 and Zinsser was not able to take advantage of the ACO. Zinsser was requesting among other things that specialty primers be removed from ACO eligibility through rulemaking. Staff was directed to work with Zinsser to verify whether or not they could take advantage off the ACO and report back to the Committee. If Zinsser could not use the ACO it was suggested staff consider a rule amendment. Staff did work with Zinsser and found the ACO would not be adequate for the sales volume Zinsser desires in the AQMD. In addition, staff found that any amendment to the ACO eligibility for specialty primers should also include the categories of general primers, sealers and undercoats and quick dry primers to prevent circumvention. There are eight companies with ACO plans that would be directly affected by such an amendment and although staff will proceed as expeditiously as possible with a rule amendment as directed by Committee members, the Committee should be aware that there will be substantial comment that the amendment will remove the flexibility the industry needs to comply with the stringent AQMD limits.

Michael Jurist - Zinsser
Recommends the Board level the playing field for his company by amending Rule 1113 to remove specialty primers from eligibility in an ACO.

5. Reg. III - Fees
   Larry Bowen, Planning and Rules Manager presented this item. Last year the Board adopted a three-year phased-in fee increase for permitting, annual renewal and annual emission fees. Staff is proposing no changes to these three fee categories but is proposing a CPI adjustment to the other fees. In addition a new fee is proposed to recover legal costs the AQMD would incur for an appeal of a permit issuance. This would be charged to the permit applicant. Staff is also proposing testing fees to recover the AQMD costs for the new voluntary cleaning products program. Finally, the proposal includes corrections and clarifications that have little or no fiscal impact.

Curtis Coleman – representing the California Manufacturers Association
The Association has concerns about the open-ended nature of the proposed fee to defend a permit issuance.

Jill Whynot, Planning and Rules Manager, gave a brief summary of proposed amendments to three of the RECLAIM rules. These are administrative changes and do not seem to be generating any concerns.

Proposed amendments to Rule 2004 provide an exemption from quarterly certification reports when there is no equipment on site. Proposed amendments to Rule 2007 address requirements for traders that do not reside in California and reporting requirements for forward contracts. Proposed rule changes to Rule 2010 address situations with emission violations when changes of operation have occurred.

7. Inland Empire Utilities Energy Center Request for Refund
   Mohsen Nazemi, Assistant Deputy Executive Officer, Engineering and Compliance, presented this item. Inland Empire is an 810 MW power plant which received its initial permit to construct in 2005. The initial permit requested and received Rule 1309.1 Priority Reserve credits for PM10 with a total mitigation fee of about $13 million paid to AQMD for the credit use. As per Inland Empire’s request, a revised permit to construct was issued by AQMD in 2006 to Inland Empire with 25% less emissions of PM10 based upon information provided by Inland Empire. On February 27, 2007, GE Energy on behalf of Inland Empire requested a reimbursement of $3,100,000 dollars to reflect the lower PM10 emissions as a result of the 2006 permit action. The PM10 emissions were reduced by 124 pounds per day due to the permit action.
   
   Rule 1309.1 as amended when the permit was issued provides that the facility pay a “non-refundable” mitigation fee for pollutant credits obtained from the Priority Reserve. If the Board is agreeable to the reimbursement, AQMD must initiate and adopt rule revisions to allow the refund to happen. In addition, AQMD was served under a lawsuit by several parties concerning specific AQMD actions that occurred during the permitting process for the Inland Empire project. Although the suit concluded in favor of AQMD, considerable legal fees were accumulated in connection with the suit. Furthermore, if determined that monies can be returned to Inland Empire, then AQMD staff recommends that the return include the requested adjustment minus the litigation costs incurred by AQMD.
   
   Mike Carroll – Latham and Watkins, representing Inland Empire expressed his view that he thought the reimbursement can be made without the need for any rule amendment referring to the Rule 1309.1 language in effect at the time of permitting. However, upon further discussions he concurred with the recommendation.

8. Authorize Extension of Financial Incentives Program to Assist Dry Cleaners Converting from Perc to Non-Perc, Non-Ozone Forming Alternative Technologies
   Dr. Pom Pom Ganguli, Assistant Deputy Executive Officer/Public Advisor, gave a presentation on staff’s request to authorize the extension of the financial incentives program to assist dry cleaners converting from Perc to non-Perc, non-ozone forming alternative technologies. The Board initially authorized $2 million, and later added $1 million, in funding for drycleaners to assist in converting to non-Perc alternative technologies. All this funding has been fully committed. Information from these two phases of the grant program show a decreasing percentage of cleaners utilizing professional wet cleaning systems and CO2 machines, compared to hydrocarbon machines. Further, it was concluded that most cleaners would switch to hydrocarbon machines regardless of the grant program. Staff is recommending an additional $250,000 in grant funding to assist dry cleaners in converting to professional wet cleaning systems and CO2 machines only.

Peter Sinsheimer of Occidental College, Zion Orpaz, Luis Cabrales of Coalition for Clean Air, Adrian Martinez of Natural Resources Defense Council, and Hans Kim all expressed support for staff’s request. A few of the commentors said that more funding is necessary. Board Member Loveridge recommended that staff should look at additional funding once this money is committed. Dr. Wallerstein agreed with the suggestion.

WRITTEN REPORTS

All written reports were acknowledged by the Committee.

PUBLIC COMMENTS

There were no public comments.

The meeting was adjourned at 12:05 p.m.

Attachments (DOC 121kb)

March 23, 2007 Committee Agenda (without its attachments)