BOARD MEETING DATE: January 4, 2008
AGENDA NO. 20

PROPOSAL:

Amend Rule 1110.2 - Emissions from Gaseous- and Liquid-Fueled Engines

SYNOPSIS:

Unannounced emission tests by AQMD enforcement staff have discovered that about half of stationary engines tested were out of compliance with their emissions limits, due to poor operating and maintenance procedures and inadequate monitoring required by the rule. The proposed amendments are intended to: 1) improve the compliance record of engines with better monitoring, recordkeeping and reporting; 2) achieve further emission reductions based on the cleanest available technologies; and 3) address rule changes recommended by U.S. EPA Region IX.

COMMITTEE:

Stationary Source, September 28, 2007, Reviewed

RECOMMENDED ACTIONS:

Adopt the attached resolution:

1. Certifying the CEQA Final Environmental Assessment (EA) for the proposed amendments.
2. Amending Rule 1110.2 - Emissions from Gaseous- and Liquid-Fueled Engines.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Two decades ago, stationary internal combustion engines (ICEs) had the highest NOx emissions per unit of fuel burned than any other stationary source. AQMD first regulated these engines with Rule 1110.1, adopted in October 1984, which 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, the August 1990 amendments 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. Additional amendments in 1990, 1994 and 1997 clarified rule language, eliminated the requirement for continuous monitoring of CO, reduced the source testing requirement from once every year to once every three years, and exempted non-road engines, including portable engines. The latest amendment in June 2005 made the previously exempt agricultural engines subject to the rule in accordance with SB 700 (Florez) – Agricultural Operations Permits.

Since 1994, new engines have been required to meet BACT limits that are more stringent than Rule 1110.2.

Compliance Issues

Current Rule 1110.2 requires ICEs to demonstrate emission compliance only once every three years by an emission source test. These tests did not reveal compliance problems because the operator would typically service the engine and pre-test it to assure it is operating properly, and then test the engine at one load under steady-state conditions. Even if the test were to show non-compliance, only major sources (Title V) are required to report the results to AQMD.

Three years (up to 26,000 operating hours) is a long period between compliance checks for ICEs, considering that ICEs typically require oil changes once a month, and tune-ups every two months, including new spark plugs and oxygen sensors. Excess emissions can be caused by ignition system faults, a deteriorating catalyst, oxygen sensor failures, and the air-to-fuel ratio simply falling out of adjustment.

In recent years, AQMD enforcement personnel acquired portable analyzers capable of measuring NOx, CO emissions from combustion equipment. AQMD inspectors have been using the portable analyzers to do unannounced emission tests on various types of combustion equipment. These emission tests have shown that more than half of all natural gas ICEs tested were not in compliance with both their NOx and CO emission limits, due to poor operating and maintenance procedures and inadequate monitoring required by the rule. Both CARB and U.S. EPA have asked AQMD to require additional monitoring of ICEs.

2007 AQMP

Although the air quality in the South Coast Basin will continue to improve in future years, the 2007 AQMP found that significant additional reductions of VOC, NOx, SOx and PM2.5 emissions, beyond those achieved by current regulations, are needed to attain the federal ambient air quality standards and protect public health. A new control measure in the plan, MCS-01 Facility Modernization, will require facilities to replace or retrofit their equipment to achieve emission reductions equivalent to BACT.

Affected Facilities

There are about 860 stationary engines at 400 facilities that are subject to Rule 1110.2. The facilities include schools, hospitals, hotels, commercial buildings, industrial facilities, landfills, wastewater treatment plants and water districts. Most of the engines are natural gas fired, while 66 are biogas engines, and 35 are diesel engines operating on Santa Catalina and San Clemente Islands, on off-shore oil platforms, and at the Snow Summit Ski Resort. About 16% of the engines are at RECLAIM facilities.

Engines inherently have the highest emissions of all combustion sources. Rule 1110.2 requires these emissions to be significantly reduced, but the NOx limits in the rule are still 4 to 5 times higher than allowed by AQMD boiler rules. Nearly half of all engines are subject to BACT emission limits that are more stringent than Rule 1110.2, but even engine BACT NOx limits are about 3 to 4 times higher than boiler BACT NOx limits.

Biogas ICEs

Biogas (digestor or landfill gas) engines are a special case. Because contaminants in the biogas, like siloxane, are incompatible with catalytic after-treatment devices unless the biogas is cleaned up at significant additional cost, biogas engines have generally not been required to install oxidation catalysts and SCR units that natural gas engines use. As a result, the emission limits for new biogas engines are the highest of all engines, even higher than a diesel engine with BACT. Although flaring biogas produces lower emissions, AQMD has permitted higher emitting ICEs to be installed in order to produce some useful energy and reduce facility costs. Using biogas to produce renewable energy is consistent with California’s greenhouse gas reduction efforts.

The larger biogas engine facilities have higher emissions than many power plants. One 15-megawatt (MW) digestor gas engine facility annually emits as much NOx as the largest, 1950-MW power plant in the District. Biogas engine technologies have not evolved substantially with respect to emission controls, because biogas facilities are considered essential public services, are excluded from RECLAIM, and receive free emission offset credits from the District. However, some new technologies are starting to emerge that could significantly reduce emissions from biogas engines.

Biogas engines are not required to install the catalytic after-treatment devices that natural gas engines are required to install, but some biogas engine operators have supplemented biogas use with natural gas for various operational reasons. Some biogas engine operators have reported using as much as 78% natural gas, with much higher emissions than would occur with a dedicated natural gas engine.

Distributed Generation ICEs

Some ICEs have been installed to produce electricity for facilities, and reduce operating costs by reducing electricity use from the grid; this is called distributed generation (DG). Unfortunately, the BACT NOx emission limit for these engines is 0.44 pounds per MW-hour (lbs/MW-hr) while the NOx limit for new large central generating stations is only 0.07 lbs/MW-hr. The average NOx emissions for all power plants, new and old, in 2005 in AQMD were only slightly more at 0.075 lbs/MW-hr, because of effective NOx controls installed on older power plants. DG ICE emissions of CO and VOC are also significantly higher than central power plants.

In compliance with state law, CARB adopted DG emission standards for all types of new DG that are small enough to not require an air district permit. The DG standards, which are required by state law to be equivalent to large central generating stations with BACT, are 0.07 lbs/MW-hr of NOx, 0.10 lbs/MW-hr of CO, and 0.02 lbs/MW-hr of VOC. CARB has certified several microturbines and fuel cells to meet these standards. No ICEs have been certified to these stringent standards. State law also established a goal to have local districts require permitted DG equipment to meet the same emissions levels by the earliest practicable date.

Public Process

Approximately 4,400 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. A Public Workshop was held on February 6, 2007, at the AQMD offices in Diamond Bar. In addition to this workshop, AQMD established and held several meetings with the Rule 1110.2 ICE Working Group. This group was made up of engine manufacturers, control equipment manufacturers, trade organizations and consultants, for the purpose of identifying and evaluating internal combustion engine control technology and monitoring technology. A follow up Public Consultation meeting was noticed and held on September 6, 2007 to discuss the many revisions to Proposed Amended Rule (PAR) 1110.2 that were made in response to comments. Additional revisions have been made since then. A total of 59 comment letters were received both during and after the formal public review period. The comments are addressed in the Staff Report.

Proposal

Staff proposes the following amendments to Rule 1110.2:

Compliance Improvements

• Strengthened source testing requirements, an Inspection and Monitoring Plan, air-to-fuel ratio controllers, and additional CEMS for groups of engines over 1,500 horsepower.

Further Emission Reductions

• Removal of the efficiency correction of the current NOx and VOC emission limits, except for biogas engines.
• New NOx and VOC emission limits equivalent to current Best Available Control Technology (BACT) and a reduction of the CO limit from 2000 ppm to 250 ppm. These limits will become effective for natural gas engines by 2011.

New DG Standards

• New emission standards for new electrical generating engines equivalent to the CARB DG standard for NOx, and CO and VOC standards substantially lower than current BACT
• New engines used at ports to provide cleaner shore power to ships at berth will be exempted prior to 2014.

Biogas Engines

• A 10% limit on natural gas use by biogas engines, based on a facility-wide monthly average, unless the engine meets natural gas engine emission standards or the operator demonstrates that a higher limit is required to prevent biogas flaring or to meet certain operating requirements.
• The same future emission limits as natural gas engines by 2012, but subject to a technology assessment in 2010 to assure that cost-effective technology is commercially available for biogas engines to comply.

Administrative Changes

• To clarify the exemption status of non-road engines, removal of the emission standards for portable engines.
• Removal of exemptions for ski area engines and engines outside South Coast and Salton Sea Air Basins.
• New exemptions for startups, overhauls, and initial commissioning of engines.

Emission Reductions

The improved monitoring and testing is expected to reduce emissions by 1.22 tons per day (tpd) of NOx, 0.50 tpd of VOC, and 17.2 tpd of CO. The lower emission limits going into effect from 2010 through 2012 will further reduce emissions by 0.95 tpd of NOx, 0.19 tpd of VOC, and 2.2 tpd of CO. Of those reductions, biogas engines will contribute 0.62 tpd of NOx, 0.10 tpd of VOC and 0.03 tpd of CO. Additional reductions will be achieved if operators replace some engines with electric motors or decide to purchase electricity rather than generate it with their engines.

Cost-Effectiveness

The average cost-effectiveness of the proposed amendments is $5,650 per ton of emission reductions, but ranges from $54 per ton to $28,800 per ton depending on engine size and type. The highest costs are generally for biogas ICEs, which will be reviewed in more detail during the 2010 technology assessment. Staff expects some demonstrations of promising new and less costly technologies for biogas ICEs to happen before 2010. If successful, the cost-effectiveness could be significantly reduced. For many ICE operators, it will be more cost-effective to replace their engines with electric power.

Key Issues

2012 Biogas Engine Emission Limits

Biogas ICE operators are objecting to the lower emission limits that would take effect in July 2012. Because the proposed limits are potentially technology forcing, the proposed rule will require staff to conduct a technology assessment by July 2010, through a public process, to determine if commercially available and cost-effective technologies are available to comply with the proposed standards. The attached resolution also directs staff to not submit the biogas emission reductions as part of the SIP unless the technology assessment supports the new limits.

Natural Gas Limits for Biogas Engines

Staff originally proposed that each biogas engine be limited to 10% natural gas use. Several biogas engine operators brought up situations that could justify higher natural gas use. As a result, staff has proposed several changes. The 10% limit would be based on a facility average rather than the average for each engine. The operator can apply for a higher natural gas limit if the 10% limit would result in flaring of more biogas, or provide insufficient thermal energy to the plant. Finally, natural gas used during certain situations could be excluded from the calculation, including during rainy weather when sewage treatment plant flows exceed design levels, and during Stage 2 or higher electrical emergencies called by the California Independent System Operator Corporation.

New DG Standards

Staff initially proposed that new ICE electrical generators meet the CARB DG standards. Engine manufacturers objected to this because the current ICE technologies are not able to meet these limits. Alternative clean technologies, such as fuel cells, microturbines, and zero-emission solar photovoltaic, are available that comply with the CARB DG standards. However, recent comments from the Engine Manufacturers Association (EMA) indicated that while advanced engine technologies could meet the proposed CARB NOx limit, somewhat higher CO and VOC limits would be necessary to comply. This convinced staff to revise the proposed CO and VOC limits to 0.20 lbs/MW-hr of CO, and 0.10 lbs/MW-hr of VOC, as recommended by EMA. The limits are still significantly lower than current ICE BACT limits, while providing necessary NOx reduction for PM2.5 and ozone attainment. Furthermore, the proposed revisions would allow ICEs to continue to be a viable compliance option for certain applications where ICEs are a better DG choice (e.g. load following operations).

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 45-day public review and comment period from November 2, 2007 to December 18, 2007. That assessment concluded that PAR 1110.2 would have significant adverse impacts to air quality from PM2.5 emissions during construction and cancer risk impacts from diesel particulate matter from emergency engines; hazards and hazardous materials from LNG and aqueous ammonia storage; and aesthetics. One comment letter was received on the Draft EA during the public comment period. The comment letter and responses to comments are included as an appendix to the Final EA. Although minor changes were made to PAR 1110.2 after circulation of the Draft EA, staff evaluated the changes and found that they would not alter any conclusions made in the Draft EA or substantially increase the severity of an environmental impact analyzed in the Draft EA. Pursuant to CEQA Guidelines §15088.5(c)(2), recirculation is not necessary since the modifications do not result in new avoidable significant effects or meet any other requirement for recirculation. 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 would affect about 400 facilities and 860 stationary engines in AQMD’s four-county region. Approximately half (47%) of the facilities belong to the utilities sector and another 10% each belong to the industries of oil and gas extraction and government. The average annual cost for the affected facilities is projected to be $22 million between 2008 and 2020. Costs vary significantly by industry with the majority of the cost in the utility industry with an average annual cost of $12 million between 2008 and 2020. Of the $22 million total annual cost, $9 million are for increased source testing, inspection, and maintenance requirements; $2.4 million are for increased continuous monitoring requirements; and $11 million are for new emission limits. The majority of the cost for the new emission limits would be for biogas engines. The limits for these engines will be reviewed in more detail during the 2010 technology assessment. The cost could be significantly less if some promising new technologies develop and advance.

AQMP and Legal Mandates

The proposed rule amendments will partially implement the 2007 AQMP control measure MCS-01 Facility Modernization, which requires existing facilities to reduce emissions equivalent to BACT. The goal of the control measure is to achieve the following emission reductions by 2014: 1.6 tons per day (tpd) of NOx, 2.0 tpd of VOC and 0.4 tpd of PM2.5. PAR 1110.2 should initially achieve 0.32 tpd of NOx and 0.09 tpd of VOC that are SIP-creditable, with a potential for an additional 0.63 tpd of NOx and 0.10 tpd of VOC from biogas engines, depending on the outcome of the technology assessment.

Implementation Plan

Staff will conduct outreach efforts on Rule 1110.2 to inform stationary ICE operators of the rule requirements. For agricultural facilities the costs of modifying engines or installing electric motors can be largely offset by funding that is available from the Agricultural Assistance Program (AB 923). This program is the only one of its type that provides state funding for emission reductions required by a local air district rule.

Resource Impact

The proposed Rule 1110.2 amendments will require some additional efforts by AQMD engineering and enforcement staff, but no additional staff is requested at this time.

Attachments  (EXE 10.9mb)

1. Summary of Proposal
2. Rule Development Process
3. Key Contacts List
4. Resolution
5. Proposed Rule Language
6. Protocol for the Periodic Monitoring of Nitrogen Oxides, Carbon Monoxide and Oxygen from Stationary Engines Subject to SCAQMD Rule 1110.2
7. Staff Report
8. Socioeconomic Assessment
9. Final Environmental Assessment