BOARD MEETING DATE: March 2, 2007
AGENDA NO. 25
Stationary Source Committee
SYNOPSIS:
The Stationary Source Committee met Friday, February 23, 2007. Following is a summary of that meeting. The next meeting will be March 23, 2007 at 10:30 a.m., in Conference Room CC8.
RECOMMENDED ACTION:
Receive and file.
Dennis Yates, Chair
Stationary Source Committee
Attendance
The meeting began at 10:30 a.m. Present were Dennis Yates, Gary Ovitt, Jane Carney, Ronald Loveridge (left at 11:15 a.m.) and Dr. Burke (attended by videoteleconference).
INFORMATIONAL ITEMS
1. Update on AQMP
Dr. Laki Tisopulos, Assistant Deputy Executive Officer with the Office of Planning, Rule Development and Area Sources gave the update on the stationary source control measures of the Draft 2007 AQMP. The presentation focused on the four control measures that are considered the most controversial based on the volume of public comments received. The first control measure, EGM-01, which seeks to reduce emissions from new and redevelopment projects is fashioned after a similar regulation the San Joaquin Valley APCD has adopted, received significant opposition from industry and business community, while the environmental community is very supportive. Staff was able to reach consensus with the business community on a revised approach and is currently working with the environmental community. The revised approach will be reflected in the revised Draft AQMP that will be released shortly. Relative to CMB-03- Space Heaters, industry commented that the proposed emission limits were not technically feasible. Staff is revising the control measure to provide more flexibility by establishing a revised limit and offering more time for implementation. CMB-04-Natural Gas Specification, has attracted opposition challenging the District’s authority, necessity of the control measure and its potential impact on the natural gas supply to the region. Staff acknowledged that while there are no natural gas quality issues in the Basin at the present time, the inclusion of the control measure in the AQMP is necessary as a place holder to ensure there are no adverse environmental impacts from the importation of lower quality natural gas in the future. Staff received a significant volume of comments on control measure MSC-01- Facility Modernization. The key comments focused on how to pre-determine equipment life and support for tax credits to assist with the implementation of the control measure. Staff intends to establish a working group as part of the rule development process to address all implementation issues identified and commits to work with the stake holders to aggressively pursue tax credit legislation. Dr. Tisopulos concluded by summarizing that based on the attainment strategy outlined, the District’s commitment for emission reductions is 2 percent and 16 percent of the overall reduction commitment, for NOx and VOC, respectively, for the 8-hour ozone standard, while the remainder belongs to CARB and USEPA.
“Committee Member Jane Carney left the meeting during discussion related to CMB-04-Natural Gas Specification due to a possible conflict of interest. Ms. Carney announced that Maruhachi Ceramics of America, Inc. is a source of income for her.”
2. Discussion of Issues Regarding Specialty Primers Subject to Rule 1113 -
Architectural Coatings (agenda #6)
Dr. Laki Tisopulos presented this item. The specialty primer category in Rule 1113 is for primers that seal fire, smoke or water damage and condition chalky surfaces. The category was established in 1999 with a 350 g/l limit that was scheduled to go to 100 g/l on July 1, 2006. Based on staff analysis and comments received, most notably by Zinsser, staff recommended and the Board amended Rule 1113 to extend the 100 g/l compliance date for the specialty primers to June 1, 2007 and impose an interim limit of 250 g/l. Zinsser has been developing compliant products at 100 g/l using an exempt solvent that is more costly than conventional coating solvents. Zinsser alleges that a major competitor produces a higher VOC product but complies through use of the Alternative Compliance Option provision and because consumers and distributors will preferentially choose the higher VOC product because of the lower cost, Zinsser will lose market share. They want the AQMD to do something about this and have suggested that we remove the interim limit from the rule or remove specialty primers category from the list of those eligible for the Alternative Compliance Option. The Alternative Compliance Option was established through encouragement from the industry to allow some compliance flexibility during the transitional period when many coating category VOC limits were being reduced concurrently. Staff would not recommend reducing flexibility and does not recommend rolling back the limits for the following reasons. Emission impacts from the use of specialty primers are much greater than staff anticipated in 1999 and may be a result of product substitution for conventional primers that have historically had lower VOC limits and are now at 100 g/l. Staff has identified numerous compliant products that are available in the marketplace now. The cost impacts of compliant specialty primers are not all that out of line with the cost of the higher VOC products and are well below cost effectiveness guidelines. CARB’s survey of 2004 sales indicates that there is a significant number of products at a significant volume in the market already complying with the future effective VOC limit of 100 g/l. Given these circumstances, it would be very difficult for our Board to make an infeasibility finding, required for any rollback under the SIP settlement agreement reached with the environmental community. Removing specialty primers from averaging would also be very difficult since the Board will be removing compliance flexibility. Staff believes that Zinsser may not have fully explored the Alternative Compliance Option with other companies under their parent company umbrella (RPM International).
Tim Reilly of Zinsser – Primer sales in total have stayed relatively flat over the years although specialty primer sales have increased somewhat. It would be expected that total primer sales would remain relatively flat over the next few years as well. Staff responded this supports the concern that the higher VOC specialty primers are being substituted for the lower VOC conventional primers even though conditions may not warrant the use of a specialty primer.
Michael Jurist of Zinsser – Zinsser has pursued the Alternative Compliance Option but RPM companies operate as separate entities and based on their analysis there are not enough sales of super–compliant products among all the RPM companies that are willing to share these credits to offset the excess emissions from the Zinsser specialty primers. So, this is not an option for their company.
To level the playing field Zinsser recommends reinstatement of the 350g/l limit, defer the 100g/l limit at least a year until July 1, 2008, eliminate specialty primers from the Alternative Compliance Option and reduce the sell through provision from 3 years to 1 year until July 1, 2009.
Zinsser recognizes some of the issues and concerns the AQMD may have with rolling back the limits and if that cannot be done, to at least remove specialty primers for the Alternative Compliance Option to place Zinsser on a level playing field with other specialty primer manufacturers producing solvent-borne formulations.
Mayor Yates and other members of the Stationary Source Committee expressed concern about the uneven playing field the averaging has introduced relative to Zinsser and directed staff to work with Zinsser to determine if RPM-wide averaging would be a viable option for Zinsser and if not, to consider a rule amendment to remove specialty primers as an eligible category for the averaging compliance option.
3. Rule 445 – PM Emissions from Wood-Burning Fireplaces and Wood Stoves
(agenda #2)
Lee Lockie, Director of Area Sources presented an overview of Proposed Rule 445, Wood Burning Appliances. As described in the presentation, Proposed Rule 445 would require the phase in of cleaner fireplace technology in new construction, inform the public when it is not advisable to burn wood due to poor air quality conditions, and, as a contingency measure in areas with high PM2.5 levels remaining by year 2012, require the replacement of older wood stoves and fireplace inserts with cleaner technologies during property transfers. Ms. Lockie also noted that the proposed rule has an education and outreach component that would require hearth appliance retailers and wood sellers to provide information to customers on proper burning techniques and the AQMD wood burning curtailment program at the point of sale. Dr. Burke and Mayor Yates questioned the need for the rule and enforceability of a number of key elements of the regulation and stated that the effort may better be accomplished through a voluntary outreach and education program. Board member Jane Carney stated that a regulation may be necessary to address PM 2.5 emissions and to ensure that outreach materials are distributed at the point of sale.
During the public comment period, a representative from the California Realtors Association expressed concern that the property transfer requirements, if implemented in 2012, would not be effective in contributing to attainment of the federal annual average PM2.5 standard by 2015. A representative from the Hearth Patio and Barbeque Association (HPBA) expressed support for the rule and stated that these types of programs have already been implemented in many other regions. The HPBA also stated that additional time is necessary to ensure that the program, particularly the curtailment element, is adequately tailored to the southern California area.
Board Member Carney asked if the property transfer requirement for the high PM 2.5 areas should be triggered instead by an exceedance of the PM 2.5 standard. Dr. Tisopulos explained that the requirement is designed to be implemented 3 years in advance of the deadline as a protective measure.
Based on input received from the committee and the public, staff may recommend that the Governing Board, at their March, 2007 meeting, set the Public Hearing for May, 2007, allowing 60 days for further public review.
4. RECLAIM Program Compliance Year 2005 Annual Audit Report (agenda #7)
Mohsen Nazemi, Assistant Deputy Executive Officer of Engineering and Compliance stated that this is the Annual Audit Report for the twelfth year implementation of the RECLAIM program. The report findings are that the aggregate emissions were below aggregate Allocations for the 2005 Compliance year, with 100 percent of SOx facilities and 98 percent of NOx facilities complying with their individual facility Allocations. The total value of RECLAIM Trading Credit (RTC) trades during Calendar Year 2006 was $83 million, with foreign entities participating in the trading market for the first time in 2006. The average annual price of Compliance Year 2010 NOx RTCs exceeded the $15,000 per ton threshold established by the Governing Board in Rule 2015(b)(6) triggering an evaluation and review of the compliance and enforcement aspects of the RECLAIM program. He further explained that staff believes the calculated average price is the result of the inconsistent manner in which costs of infinite-year block trades (trades of RTCs commencing in a specified year and continuing in perpetuity) are reported. The staff recommendations for this item are for the Governing Board to:
- Approve the Annual RECLAIM Audit Report for the 2005 Compliance Year;
- Conclude that, based on the existing calculation methodology, the average annual RTC price for Compliance Year 2010 NOx RTCs traded in Calendar Year 2006 exceeded $15,000 per ton;
- Direct staff to prepare an evaluation and review of the compliance and enforcement aspects of the RECLAIM program within six months; and
- Direct staff to evaluate and propose a recommended methodology for monitoring prices for infinite-year blocks of RTCs.
During the public comment period, Christine Grandstaff of Cantor Fitzgerald stated that trades of discrete lots of Compliance Year 2010 RTCs are rare and the average price for that year is probably based on only one or a few trades and concurred with the opinion that the high calculated average price is due to the manner in which prices for infinite-year block trades are reported to AQMD. Therefore, finding that the average price exceeded $15,000 per ton and directing staff to investigate compliance aspects of the program would send a false negative signal to the market. To avoid this negative impact on the market, Ms. Grandstaff recommended that the Board direct staff to develop a standardized method of reporting prices for infinite-year block trades but not direct staff to find that the average price of Compliance Year 2010 RTCs traded in Calendar Year 2006 exceeded $15,000 per ton or to investigate compliance aspects of the program.
5. Reg. IX – Standards of Performance for New Stationary Sources
Due to time constraints, this item was carried over to the March meeting.
6. Report on Staff Recommendation to Implement a Voluntary Certification of
Consumer Cleaning Products used at Institutional and Commercial Facilities
Due to time constraints, this item was carried over to the March meeting.
7. Report on the Cost of Installation and Status of Implementation of the
Monitoring Requirements of Rule 1118
Due to time constraints, this item was carried over to the March meeting.
8. AB2588 Annual Report
Presentation waived.
9. Rule 2004 – Requirements
Rule 2007 – Trading Requirements
Rule 2010 – Administrative Remedies and SanctionsDue to time constraints, this item was carried over to the March meeting.
WRITTEN REPORTS
All written reports were acknowledged by the Committee.
PUBLIC COMMENTS
There were no public comments.
The meeting was adjourned at 12:10 p.m.
Attachments
(DOC 71kb)
February 23, 2007 Committee Agenda (without its attachments)