ATTACHMENT H



### SOUTH COAST AIR QUALIT Y MANAGEMENT DISTRICT

Staff Report Proposed Rule 1147

– NOx Reductions From Miscellaneous Sources

September 2011

Deputy Executive Officer Planning, Rule Development, and Area Sources Elaine Chang, Dr. PH

Assistant Deputy Executive Officer Planning, Rule Development, and Area Sources Laki Tisopulos, Ph.D., P.E.

Planning and Rules Manager Planning, Rule Development, and Area Sources

Joe Cassmassi

Authors: Wayne Barcikowski

– Air Quality Specialist Sue Lieu , Ph.D.

– Program Supervisor

Reviewed by: Gary Quinn, P.E.

– Program Supervisor William Wong

– Principal Deputy District Counsel

Barbara Baird

– District CounselSOUTH COAST AIR QUAL ITY MANAGEMENT DISTR ICT

GOVERNING BOARD

Chairman: WILLIAM A. BURKE, Ed.D

. Speaker of the Assembly Appointee

Vice C hairman: DENNIS YATES Mayor, City of Chino Cities Representative, San Bernardino County

MEMBERS:

MICHAEL D. ANTONOVICH Supervisor, Fifth District Los Angeles County Representative

JOHN J. BENOIT Supervisor , Fourth District Riverside County Representative

MICHAEL CACCIOTI Council Member, City of South Pasadena Cities Representative, Los Angeles County/Eastern Region

JANE W. CARNEY Senate Rules Committee Appointee

JOSIE GONZALES Supervisor, Fifth D istrict San Bernardino County Representative

RONALD O. LOVERIDGE Mayor, City of Riverside Cities Representative, Riverside County

JOSEPH K. LYOU, PH.D. Governor’s Appointee

JUDITH MITCHELL Council Member, City of Rolling Hills Estates Cities Repr esentative, L os Angeles County/Western Region

SHAWN NELSON Supervisor, Fourth District Orange County Representative

JAN PERRY Council Member, City of Los Angeles City of Los Angeles

MIGUEL PULIDO Mayor, City of Santa Ana Cities Representative, County of Orange

EXECUTIVE OFFICER:

BARRY R. WALLERSTEIN, D.Env.i 

### TABLE OF CONTENTS

TABLE OF CONTENTS i

EXECUTIVE SUMMARY ES

- 1

CHAPTER 1: BACKGROUND

INTRODUCTION 1

- 1

REGULATORY HISTORY 1

- 1

AFFECTED INDUSTRIES 1

- 2

PUBLIC PROCESS 1

- 2

CHAPTER 2 : SUMMARY OF PROPOSED RULE 1147

PROPOSED RULE REQUIREMENTS 2

- 1

CHAPTER 3: IMPACT ASSESSMENT

IMPACT ANALYSIS 3

- 1

COST EFFECTIVENESS 3

- 1

CALIFORNIA ENVIRONME NTAL QUALITY ACT (CE QA) ANALYSIS 3

- 1

DRAFT FINDINGS UNDER CALIFORNIA HEALTH AND SAFETY (H&S) CODE 40727 3

- 2

SOCIOECONOMIC ASSESSMENT 3

- 2

INCRE MENTAL CO ST EFFECTIVENESS 3

- 3

COMPARATIVE ANALYSIS 3

- 3

PUBLIC COMM ENTS AND KEY ISSUES 3

- 3

REFERENCES R

- 1

APPENDIX A : BACT DETERMINATIONS AND SOURCE TESTS A

- 1

APPENDIX B : DRAFT TECHN OLOGY ASSESSMENT WORK STAT EMENT B

- 1

### EXECUTIVE SUMMARYP A R 1147 Staff Report

ES

- 1 September 2011 

### EXECUTIVE SUMMARY

To respond to compliance challenges currently being experienced, staff has developed an

amendment of Rule 1147

– NOx Reductions from Miscellaneous Sources

. The proposed

amended rule (PAR 1147 ) is intended to provide relief to the regulated community by extending the compliance dates and providing other flexibility and clarification that will ultimately reduce implementation co sts and facilitate compliance. PAR 1147 will result in delayed emis sions reductions but will achieve the same NOx reductions by 2014 as the

current SIP approved rule.

Rule 1147 was adopted on December 5, 2008 and is a vital component of our attainment strategy to meet the federal PM2.5 ambient air quality standard by 20 14 as well as meet

the ozone standard. Rule 1147 is based on two control measures from the 2007 Air Quality Management Plan (AQMP): NOx reductions from Non

- RECLAIM Ovens, Dryers and Furnaces (CMB

- 01) and Facility Modernization (MSC

- 01). Rule 1147

establ ished nitrogen oxide (NOx) emission limits for a wide variety of combustion equipment and affects both new and existing (in

- use) combustion equipment.

Under Rule 1147, equipment requiring AQMD permits that are not regulated by other

NOx rules must meet a n emission limit of 30 to 60 parts per million (ppm) of NOx depending upon equipment type and process temperature. Compliance dates for emission limits are based on the date of equipment manufacture and emission limits are applicable to older equipment fi rst. Owners of existing equipment are provided at least 15 years of use before they must meet rule emission limits and the first units that must meet the emission limits are at least 25 years old

. S mall sources , regardless of equipment age, are not subje ct to ru le emission limits until 2017 and specific categories of new units have later compliance dates.

Rule 1147 also establishes test methods and provides alternate compliance options including a process for certification of equipment NOx emissions throu gh an A QMD approved testing program. Certification eliminates the requirement for end

- users to test their equipment. Other rule requirements include equipment maintenance and recordkeeping

.

The key elements of the proposed amendment are as follows:

 Dela y effective dates by one to two years,

 Remove the requirement for the installation of time meters,

 Limit the req uirement to install fuel meters only to units where owners elect to demonstrate compliance using the “ pound per million Btu ” compliance unit ver sus parts per million

,P A R 1 147 Staff Report

ES

- 2 September 2011  Provide compliance flexibility to small emitters (one pound per day or less) by clarifying recordkeeping that will easily allow them to identify units eligible for the five year delay of the compliance date (2017 and later)

,

 Provide larger emitters with alternate compliance opportunities including a mitigation fee option to delay compliance three years with reduced fee for small business, and

 Provide additional flexibility in demonstrating compliance through streamlined

source testin g requirements which also reduce cost to affected businesses,

 Commit to conducting a technology assessment prior to the effective date for small

sources

. In developing this amendment, staff has worked extensively with all stakeholders. S taff

has held six Task Force meetings with representatives from affected businesses, manufacturers, trade organizations and other interested parties. Staff has also had separate meetings with manufacturers and distributors of equipment and burner systems

. In addition, st aff has met individually with and visited local businesses to observe operations and equipment affected by Rule 1147. Staff is committed to continued discussion with industry through the Rule 1147 Task Force on issues affecting small businesses including availability of low NOx burners for unique applications and specific

processes.

The majority of the comments made at the Public Workshop and Task Force meetings for PAR 1147 supported the proposed delay of compliance dates and limits on the use of

meters . However, some consultants commented that the compliance delay was not needed and the AQMD should have made a greater effort to educate businesses affected by Rule 1147. A more enhanced outreach program to the regulated community continues to be a high priority for the AQMD.

T he comments on the proposed amendments received at the workshop and meetings typically fit into two categories. One set of comments dealt with implementation of the rule and asked for clarification or simplification of rule requi rements. In response, staff has proposed a number of changes relating to equipment identification, maintenance, recordkeeping, an d source testing requirements, which ultimately can result in cost savings compared to the original rule

. In addition, PAR 11 47 includes a mitigation fee option that allows business with equipment emissions greater than one pound per day to delay compliance by three years but will provide emission reductions from other sources during that three year period

. Together with AQMD e fforts to streamline the permit modification process

, PAR 1147 will help businesses comply with rule requirements

. The second category of comments received addressed issues beyond the scope of the current proposal which is crafted to respond to the exist ing compliance challenge. These

comments included proposals for new alternative industry

- specific rules, questioningP A R 1 147 Staff Report

ES

- 3 September 2011 availability of low NOx replacement burners, requests for exemption from the rule for small sources, requests to reevaluate rule cost and cost effectiveness and a request to require a cost effectiveness analysis for every piece of equipment subject to the rule. To address many of these issues and as previously stated, PAR 1147 commits the District to conduct a technology assessment for smal ler sources with emissions of one pound per day or less no later than 18 months prior to the first effective compliance date for these smaller sources (July 1, 2017). A draft work statement for the PAR 1147 t echnology

assessment , including an independent third party review, is included in Appendix B of this report. Regardless, staff will continue to monitor implem entation of the rule to identify and resolve compliance issues and may propose future amendment if necessary

.

### CHAPTER 1: BACKG ROUND

INTRODUCTION

REGULATORY HISTORY

AFFECTED INDUSTRIES

PUBLIC PROCESSP A R 1147 Staff Report

1

- 1 September 2011 

### INTRODUCTION

The California Health and Safety Code requires the AQMD to adopt an Air Quality Management Plan to meet state and federal ambient air quality standards and adopt rul es and regulations that carry out the objectives of the AQMP. The Health and Safety Code also requires the AQMD to implement all feasible measures to reduce air pollution. The

NOx reductions from Rule 1147 are essential for achiev ing compliance with fede ral and state ambient air quality standards for PM2.5, PM10 and ozone.
To respond to compliance challenges currently being experienced, staff is recommending delay of the NOx emission limit compliance dates for equipment subject to Rule 1147.

While PAR 1147 will result in delayed emission reductions, the delay will not impact the 2014 NOx emission commitment currently in the SIP approved rule. The proposed rule also limits the requirements for fuel and time meters. PAR 1147 will also reduce compliance co st due to emissions testing, clarify existing requirements , require a technology assessment and add a mitigation fee option with lower fees for small

businesses

. S mall sources (less than 1 pound per day) are not subject to rule emission

limits until 201 7.



### REGULATORY HISTORY

Rule 1147

– NOx Reductions from Miscellaneous Sources, was adopted by the AQMD Governing Board on December 5, 2008. Rule 1147 is a vital component of our attainment strategy to meet the federal PM2.5 ambient air quality standard by 2014 as well as meet the ozone standard. Rule 1147 incorporates two control measures of the 2007 Air Quality Management Plan (AQMP): NOx Reductions from Non

- RECLAIM Ovens, Dryers and Furnaces (CMB

- 01) and Facility Modernization (MSC

- 01).

Control measur e MCS

- 01 proposed that equipment operators meet best available control technology (BACT) emission limits at the end of the equipment’s useful life. Control

measure CMB

- 01 proposed emission NOx limits in the range of 20 ppm to 60 ppm (referenced to 3% oxyg en) for ovens, dryers, kilns, furnaces and other miscellaneous combustion equipment. Emission reductions from the equipment addressed by Rule 1147

and control measure CMB

- 01 of the 2007 AQMP were proposed in prior AQMPs (e.g.,

control measure 97CMB

- 092 fr om the 1997 AQMP).

Rule 1147 established nitrogen oxide (NOx) emission limits for a wide variety of combustion equipment and affects both new and existing (in

- use) combustion equipment. Rule 1147 requires equipment with AQMD permits that are not regulat ed by other NOx

rules to meet an emission limit of 30 to 60 parts per million (ppm) of NOx depending upon equipment type and process temperature. Compliance dates for emission limits are based on the date of equipment manufacture and emission limits are a pplicable to older equipment first. Owners of existing equipment are provided at least 15 years of useP A R 1147 Staff Report

1

- 2 September 2011 before they must meet rule emission limits. Most of the equipment will comply with rule emission limits when it is 20 to 30 years old. In addition, ow ners of small units and units

with em issions of one pound per day or less will comply with emission limits later starting in 2017.

Rule 1147 also established test methods and provides alternate compliance options including a process for certification of equipment NOx emissions through an AQMD approved testing program. Other rule requirements include equipment maintenance and recordkeeping.



### AFFECTED INDUSTRIES

A wide variety of processes use equipment that is regulated by Rule 1147. These processes inc lude, but are not limited to, food products preparation, printing, textile processing, product coating; and material processing. A large fraction of the equipment subject to Rule 1147 heats air that is then directed to a process chamber and transfers heat to process materials. Other processes heat materials directly such kilns, process tanks and metallurgical furnaces.

Proposed Amended Rule (PAR) 1147 affects manufacturers (NAICS 31

- 33), distributors and wholesalers (NAICS 42) of combustion equipment, as well as owners and operators of ovens, dryers, furnac es, and other equipment in the D istrict (NAICS 21, 23, 31

- 33, 42, 44, 45, 48, 49, 51

- 56, 61, 62, 71, 72, 81, and 92). The units affected by the proposed rule are used in industrial, commercial and insti tutional settings for a wide variety of processes. Some examples of the processes regulated by the rule include metal casting and forging, coating and curing operations, asphalt manufacturing, baking and printing.

Staff originally estimated approximately 6,600 units subject to the emission limits of Rule 1147 are located at approximately 3,000 facilities. Staff estimated that about 1,600 units at about 800 facilities affected by PR1147 were estimated to meet the NOx emission

limits of Rule1147. This leav es about 2,200 facilities that are expected to require retrofit of burners in their equipment. Staff estimated as many as 2,500 permitted units with NOx emission limits greater than one pound per day and an additional 2,500 permitted units

with NOx emissi on limits of less than one pound per day will require modification to comply with the emission limits.



### PUBLIC PROCESS

For this rule amendment , staff has held six Task Force meetings with representatives from affected businesses, manufacturers, trade org anizations and other interested parties. Staff

also had many meetings with manufacturers and distributors of equipment and burner
systems . In addition, staff has met individually with and visited local businesses toP A R 1147 Staff Report

1

- 3 September 2011 observe operations and equipment affec ted by Rule 1147. A Public Workshop and CEQA scoping meeting for PAR 1147 was held on January 26, 2011

.

### CHAPTER 2: SUMMARY OF PROPOSED RULE 1147

PR OPOSED AMENDED RULE REQUIREMENTSP A R 1147 Staff Report

2

- 1 September 2011 

### PROPOSED AMENDED RULE REQUIREMENTS

To respond to compliance c hallenges currently being experienced, staff is recommending that Rule 1147 be amended. The key elements of the amendment can be summarized as

follows:

 Delay effective dates by one to two years,

 Remove the requirement for the installation of time meters

 Limit the requirement for fuel meters to units where owners elect to demonstrate compliance using pound per milli on Btu versus parts per million

,

 Provide compliance flexibility to small emitters (one pound per day or less) by clarifying recordkeeping that will easily allow them to identify units eligible for

the five year delay of the compliance date

,

 Provide additional flexibility in demonstrating compliance through streamlined source testing requirements which also reduce cost to affected businesses,

 Pr ovide alternate compliance opportunities including a mitigation fee option to delay compliance three years, and

 Commit to conducting a technology assessment prior to the compliance date for

small emitters

. The proposed amendment will provide additional fle xibility and reduce cost to affected

businesses . The following paragraphs describe in more detail the proposed amendment.

S taff is recommending delay of the compliance dates by one to two years for existing (in

use) permitted equipment. The following tab le provides a summary of the existing Rule 1147 compliance dates for in

- use equ ipment and the proposed changes.

PAR 1147 also delays, until 2017 through 2019, the compliance dates for existing (in

- use)

small equipment and low emitters 5 years later than the schedule in the table. In addition, PAR 1147 delays the emission limit compliance dates for specific types of new equipment consistent with the delay for in

- use equipment identified in the table. These proposed changes are found in paragraphs (g)(4), (g)(5) and (g)(6) of PAR 1147. This

allow s businesses to install these specific types of new equipment today and not comply

with rule emission limits until the unit is 15 years old.

The proposed rule amendment also limits the requirement for meters in paragraph (c)(8)

. Meters will be required only for units when the owner elects to comply with the NOx emission limit expressed in pounds per million Btu of fuel.P A R 1147 Staff Report

2

- 2 September 2011 Current and Proposed Compliance Schedule for In

- Use Units

Equipment Category(ies) Complian ce Dates in Existing Rule Proposed Compliance Dates

Remediation UNIT Upon combustion modification or change of location for units manufactured prior to 1998 Beginning January 1,

2011 Begin ning March 1,

2012

Tar Pot Permit Application Beginning January 1

, 2012 Beginning January 1,

2013

Afterburner, degassing unit, catalytic oxidizer, thermal oxidizer, vapor incinerator, evaporator, food oven, fryer, heated process tank, parts washer or spray booth make

- up air heater manufactured prior to 1998 July 1, 20 13 July 1, 2014

Other UNIT manufactured prior to

1986 July 1, 2010 July 1, 2012

Other UNIT manufactured prior to

1992 July 1, 2011 July 1, 2012

Other UNIT manufactured prior to

1998 July 1, 2012 July 1, 2013

Any UNIT manufactured after 1997 July 1 of t he year the unit is 15 years old July 1 of the year the

unit is 15 years old

PAR 1147 provides additional options to reduce cost and assist facility compliance and permit processing including: eliminating some test requirements, providing flexibility fo r testing multiple units of same type of equipment , units with dual purpose burners (burners designed as afterburners with heat recovery t hat provide s heat for drying , baking

, heat setting or curing in the same unit) or units in series (e.g., oven and aft erburner), extending the application date for facilities with five or more units to request an alternate compliance schedule (paragraph (c)(14) , and providing additional flexibility through a

new mitigation fee option to delay compliance by three years for larger sources

. Although these test options are not designed to be an economic incentive program, t he additional test options in PAR 1147 would comply with U.S. EPA guidance in "Improving Air Quality with Economic Incentive Programs

, ” January 2001 (EPA

- 452/R

01

- 001)

. AQMD Rule 1147 is a new rule and adding t hese test options is necessary in order to effectively regulate these type s of equipment for the first time

. These options areP A R 1147 Staff Report

2

- 3 September 2011 ne cessary in order to test units which cannot be tested individually ( e .g., similar equipment with common exhaust and dual chambered equipment such as burn

- off furnaces and crematories where the individual chambers cannot be tested). While these test options provide the operator with additional flexibility in source testing a group of

units using a common exhaust stack, it should be noted that AQMD policy and past practice dictates that in the event test results indicate an exceed ance of rule emission limits, each unit i n the group of units tested wi ll be determined to exceed the rule

emission limit

. Source testing requirements are revised to require high and low fire testing for low temperature units only. Staff has determined that testing high temperature processes at different firing rates is not required to assure the lowest emission burners have been

installed. In addition the firing rate for testing at low fire has bee n raised from 25% to

35 % in order to provide flexibility for equipment and operations with a limited firing

range. Th ese change s will not affect the e mission reductions achieved by the rule.

PAR 1147 also clarifies and provides additional options for businesses to identify equipment with emissions of one pound per day or less that are eligible for a later compliance date starting in 2017. Equipment el igibl e for a later compliance date pursuant to paragraph (c)(6) will be identified through recordkeeping in addition to permit conditions or process limitations that result in emissions of one pound per day or less. A variety of permit conditions have bee n used by AQMD to identify equipment that is not subject to BACT or offsets because they have emissions of one pound per day or less. During the last decade AQMD has used operating limits with time or fuel meters or equipment rating to identify equipment with emissions of one pound per day or less. However, other permit conditions are also used and the following list provides a summary of the types of conditions found in AQMD permits:

 A permit condition of one pound per day or less.

 The unit rated heat capacity specified on the permit.

 A condition in the unit permit with a process limit resulting in one pound per day or less of NOx emissions including but not limited to fuel use, material throug hput or operating schedule. A person owning or operating a unit subject to this type of

condition maintain s records of unit fuel use, material throughput , operating hours or other relevant process activity

.

 A p ermit condition limit ing the number of operating hour s per day or month and recordkeeping. E missions are calculated as the unit’s maximum hourly emission rate in pounds multiplied by hours of operation. The maximum hourly emission

rate is equal to the rated heat input capacity of the unit multiplied by the unit’s emissions at the rated heat input c apacity

.P A R 1147 Staff Report

2

- 4 September 2011  A permit condition limit ing daily or monthly fuel use and recordkeeping. Emissions are calculated as the process emission rate per unit of fuel multiplied by

the amount of fuel used

.
PAR 1147 identifies a variety of options for units to qualify for th e five

- year compliance delay including the above types of permit conditions. To qualify for the five

- year extension, the owner/operator must keep detailed operating records for the unit. These operating records may consist of gas use, operating hours, or other process parameters. An owner or operator of a unit may choose to add a time or fuel meter to assist recordkeeping for a unit. Addition of a meter does not require a permit modification. However, if the unit’s permit does not have one of the above types of conditions, the owner/operator may request such a modification to the permit and install a time or fuel meter to help demonstrate the unit qualifies for the later compliance date. In addition, the owner/operator may use monthly recordkeeping to qualify for the 5 year extension if they

have installed a meter.

A mitigation fee compliance option was developed in response to industry concerns regarding the wide variety of equipment regulated by the rule and integration of low NOx technology into un ique applications. The proposed mitigation fee compliance option will provide businesses with larger units that are not eligible for the 5 year compliance extension an option to delay compliance three years . An owner of a unit with emissions greater than one pound per day can request a three year compliance delay in exchange for

a fee that will be used by the AQMD to generate concurrent emission reductions. This option can be used to provide a delay for unique applications or processes which require

addi tional time to incorporate low NOx technology and could also be used to provide additional time to phase in compliance for multiple units at a facility

. T o request the mitigation fee option, the unit(s) owner or operator will submit a completed one page

f orm (Form 400A), supporting information and pay the compliance plan filing fee identified in AQMD Rule 306.

The mitigation fee is based on the fee from the AQMD minor source BACT guidelines

and small businesses , as defined in the rule, receive a 50% discou nt on the fee. The fees for the mitigation option will be collected in advance to fund or co

- fund projects with

concurrent emission reductions. Emission reductions can could be achieved through a variety of demonstration projects including but not limite d to replacement of commercial leaf blowers with electric units, automobile scrapping, co

- funding with Carl Moyer or similar programs or purchasing of emission reduction credits or mobile source emission

reduction credits for the relevant three year period

. AQMD has now determined that the fees will be used to fund replacement of commercial leaf blowers. This use will provide

sufficient emission reductions to compensate for this delay.

O f the potential projects for achieving emission reduction s
, AQMD staf f is proposing to use Rule 1147 mitigation fees to fund replacement of gasoline

- powered commercial leaf

blowers with electric units. The leaf blower exchange program in the AQMD has beenP A R 1147 Staff Report

2

- 5 September 2011 very successful and can achieve the necessary emission reductions. In previous years, AQMD has exchanged 1,500 leaf blowers per year and the demand for electric blowers is much greater. Staff estimates that the mitigation fee option could result in emissions forgone of 0.175 to 0.350 tons/day NOx in 2014 . This is 5% to 10% of the Rule 1147 NOx reductions projected for 2014. A n exchange of 1,400 to 2,800 leaf blower units per year from 2012 to 2014 will result in equivalent emission reductions of 0.175 to 0.350 tons per day respectively in 2014. Staff has calculated tha t the expected mitigation fees

received will be sufficient to fund the exchange of this number of leaf blowers and that there is sufficient demand to support the exchange.

In addition, to address concerns expressed by the regulated community about the

avai lability of compliant low

- NOx burner technology for unique applications , PAR 1147 requires the District to perform a technology assessment 18 months prior to the date that small and low emission units must comply with NOx emission limits. A draft work

sta tement for the PAR 1147 technology assessment, including an independent third party review, is included in Appendix B. PAR 1147 also includes administrative changes to clarify rule requirements including testing, identification of equipment rating

, record keeping and exemptions. These proposed changes are in response to requests and

comments from affected businesses and consultants.

### CHAPTER 3: IMPACT ASSESSMENT

IMPACT ANALYSIS

COST EFFECTIVENESS

CALIFORNIA ENVIRONME NTAL QUALITY ACT (CE QA) A NALYSIS

SOCIOECONOMIC ASSESS MENT

INCREMENTAL COST EFFECTIVENESS

COMPARATIVE ANALYSIS

PUBLIC COMMENTS AND KEY ISSUESP A R 1147 Staff Report

3

- 1 September 2011 

### IMPACT ANALYSIS

The proposed amendment will result in emission reductions delayed of 1.4, 0.7, 0.06, 0.12 and 0.6 tons per day in 2011, 20 12, 2015, 2016 and 2017

, respectively. Emission

reductions are delayed from 2015 through 2017 because units with emissions of one pound per day or less have five years more than units with emissions greater than one pound per day. A delay for units with emissions greater than one pound per day also provides a delay for lower emitting units. However, PAR 1147 will achieve the same reductions as the existing rule in 2013, 2014, 2018 and later years. All units will meet the Rule 1147 NOx limits by 2023. T he following table illustrates the changes in emission reductions by year from adoption of PAR 1147.

PAR 1147 Emission Reductions (Tons/day)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Rule 1147 0.7 0.7 0.7 0.7 0.7 0.06 0.06 0.06 0.06 0.06

PAR 114 7 1.4 1.4 0.7 0.12 0.12 0.06



### COST EFFECTIVENESS

As PAR 1147 provides delays of compliance dates and other flexibility that do not affect emission limits, there is no additional cost for this amendment and a cost effectiveness analysis was not prepare d for the proposed amendment. In addition, many components of PAR 1147 are designed to reduce cost to affected businesses. The mitigation fee option will result in costs for facilities selecting that option, but it is expected that facilities will only s elect that option if it is economically beneficial for them. However, the issue of

cost and cost effectiveness of the existing rule has been raised at the Public Workshop and Task Force meetings and is therefore discussed in the section of this report on public

comments and key issues.



### CALIFORNIA ENVIRONME NTAL QUALITY ACT (CE QA) ANALYSIS

Pursuant to California Environmental Quality Act (CEQA) Guidelines §15252 and §15162 and SCAQMD Rule 110, the SCAQMD prepared a Draft Subsequent

Environmental Assessment (SEA) for proposed amended Rule 1147. The Draft SEA concluded that the proposed project has the potential to generate significant adverse operational air quality impacts. Further, it was concluded that the proposed project would not generate significant adverse environmental impacts to any other environmental topic

areas. The Draft SEA was released for a 45

- day public review and comment period from April 6, 2011 to May 20, 2011. One comment letter was received during the public comment period relative to the analysis presented in the Draft SEA. No comments in this letter identified other potentially significant adverse impacts from the proposed project.P A R 1147 Staff Report

3

- 2 September 2011 Responses to the comments received have been prepared and the comment letter and its

responses are included as Appendix C of the SEA.

Since the release of the Draft SEA, a mitigation fee compliance option along with other minor changes have been added to PAR 1147 and the SEA has been modified to include an analysis of potential impacts that could be generated by these modifications to PAR 1147. However, none of these modifications alter any conclusions reached in the Draft SEA, nor provide new information of substantial environmental importance relative to the draft document. Further, the modificati ons do not constitute significant new information that would require recirculation of the Draft SEA pursuant to CEQA Guidelines §15088.5. Therefore, the document is a now a Final SEA and is included as an attachment to this Governing Board package.

Pursua nt to California Environmental Quality Act (CEQA) Guidelines §15252 and §15162 and SCAQMD Rule 110, the SCAQMD prepared a Draft Subsequent Environmental Assessment (SEA) for proposed amended Rule 1147. The Draft SEA concluded that the proposed project has the potential to generate significant adverse operational air quality impacts. Further, it was concluded that the proposed project would not generate significant adverse environmental impacts to any other environmental topic

areas. The Draft SEA was rel eased for a 45

- day public review and comment period from April 6, 2011 to May 20, 2011. One comment letter was received during the public comment period relative to the analysis presented in the Draft SEA. None of the

individual comments in this comment letter identified other potentially significant adverse impacts from the proposed project. Responses to the comments received will be prepared and the comment letter and its responses will be included as Appendix C of the SEA.

Since the release of the D raft SEA, a mitigation fee compliance option and other minor changes have been added to PAR 1147. The proposed modifications will be evaluated and the SEA will be modified, as necessary, to include an analysis of potential impacts that could be generated by the proposed modifications to PAR 1147. The purpose of the analysis of the proposed modifications is to determine whether or not they alter any conclusions reached in the Draft SEA or provide new information of substantial importance that could require recirculation of the Draft SEA pursuant to CEQA Guidelines §15088.5.



### SOCIOECONOMIC ASSESS MENT

The proposed amendments extend the compliance schedule, resulting in delayed costs for the affected units. In addition, the compliance schedule for low emitters (no more than 1 pound a day) is also delayed. Low emitters are eligible fo r a five

- year delay when

identified through permit conditions or recordkeeping. Those with more than 1 pound a day emissions may also elect to pay a mitiga tion fee in exchange for a n additional three

year compliance delay . The three year mitigation fee delay would be an individual

business decision

.P A R 1147 Staff Report

3

- 3 September 2011 Units that elect to comply with emission limits in pounds per million BTU (units with variable firing rate) would now be required to only install fuel meters under the proposed amendments, as opposed to the requirement to install both time and fuel meters under the existing rule. Furthermore, there would be no meter requirement for u nits with emission

limits in PPM

. Therefore, compar ed the existing rule, the proposed amendments will result in cost savings. The remaining amendments are administrative and would have few effects on

costs.

There are three CEQA alternatives to the proposed amendments. Alternative A is the No Project Alte rnative where the proposed amendments would not be adopted. Alternative B, a less stringent alternative than the proposed amendments, would have an additional delay in the compliance schedule of two to three years beyond the proposed amendments.

Alternat ive C is more stringent than the proposed amendments in that it has less of a delay in the compliance schedule than the proposed amendments. Compared to the existing Rule 1147, Alternative C has delays in compliance schedule from 6 months to 1.5 years.

Co mpared to the No Project Alternative, Alternative B would have more delayed costs and achieve more savings than Alternative C and the proposed amendments. Affected facilities would face fewer delayed costs and have fewer savings under Alternative C than

t hose under the proposed amendments because the former has a shorter delay in the compliance schedule than the latter.



### DRAFT FINDINGS UNDER CALIFORNIA HEALTH AN D SAFETY (H&S)

CODE 40727

California H&S Code §40727 requires that prior to adopting, amending o r repealing a rule or regulation, the AQMD Governing Board shall make findings of necessity, authority, clarity, consistency, non

- duplication, and reference based on relevant information presented at the public hearing and in the staff report.

Necessity

A need exists to amend Rule 1147 to provide the regulated community with additional

time to address compliance challenges due to , in part, the an economic downturn the region is experiencing and to minimize the cost impacts of the rule by limiting the requir ements for fuel and time meters only to those applications that are necessary to demonstrate compliance.

Authority

The AQMD Governing Board has authority to amend existing Rule 1147 pursuant to California H&S Code §§ 39002, 40000, 40001, 40440, 40441, 40 702, 40725 through 40728, and 41508.

ClarityP A R 1147 Staff Report

3

- 4 September 2011 The proposed amended rule is written or displayed so that its meaning can be easily understood by the persons directly affected.

Consistency

The proposed amended rule is in harmony with and not in conflict wit h or contradictory to, existing statutes, court decisions or state or federal regulations.

Non

- Duplication

The proposed amended rule will not impose the same requirements as any existing state or federal regulations. The amendments are necessary and prop er to execute the powers and duties granted to, and imposed upon, AQMD.

Reference

By adopting the proposed amended rule, the AQMD Governing Board will be implementing, interpreting and making specific the provisions of the California H&S Code §§ 39002, 4 0001, 40440(a), 40702, and 40725 through 40728.5.



### INCREMENTAL COST EFFECTIVENESS

California H&S Code § 40920.6 requires an incremental cost effectiveness analysis for BARCT rules or emission reduction strategies when there is more than one control option

w hich would achieve the emission reduction objective of the proposed amendments, relative to ozone, CO, SOx, NOx, and their precursors. The proposed amendment does not include new BARCT requirements; therefore this provision does not apply to the proposed amendment.



### COMPARATIVE ANALYSIS

A comparative analysis, as required by H&S Code §40727.2, is applicable when an amended rule or regulation imposes, or has the potential to impose, a new emissions limit, or other air pollution control requirements. The pro posed amendment does not impose new requirements and a comparative analysis is not required.



### PUBLIC COMMENTS AND KEY ISSUES

The majority of the comments made at the Public Workshop and Task Force meetings for PAR 1147 supported the proposed delay of compli ance dates and limits on the use of meters. However, some consultants commented that the compliance delay was not needed and the AQMD should have made a greater effort to educate businesses affected by Rule 1147. A more enhanced outreach program to the r egulated community continues to be a high priority for the AQMD.

T he comments on the proposed amendments received at the workshop and meetings typically fit into two categories. One set of comments dealt with implementation of the

rule and asked for cla rification or simplification of rule requirements. In response, staff has proposed a number of administrative changes relating to equipment identification,P A R 1147 Staff Report

3

- 5 September 2011 maintenance, recordkeeping, and source testing requirements. Staff has also proposed to

streamline some test requirements and provide flexibility in how equipment is tested

, which ultimately can result in cost saving s compared to the original rule

. In addition to
the 5

- year extension the rule provides to the smaller emitters, PAR 1147 includes a mitig ation fee option that would allow larger emitters to delay compliance by three years. Together with AQMD efforts to streamline the permit modification process

, PAR 1147

will help businesses comply with rule requirements

. The second category of comments received addressed issues beyond the scope of the

current proposal which is crafted to respond to the existing compliance challenge. These comments included development of new industry

- specific rules, questioning availability of low NOx replacement burner s, requests for exemption from the rule for small sources, and request s to reevaluate rule cost effectiveness and require a cost effectiveness analysis for every piece of equipment subject to the rule

. To address many of these issues and a s previously sta ted, PAR 1147 requires the District conduct a technology assessment for smaller sources with emissions of one pound per day or less no later than 18 months prior to the first effective compliance date for these smaller sources (July 1, 2017). Regardless, these issues were not limited solely to small sources. The following discussion provides
responses to these and other comments affecting both large and small sources.

Equipment or Industry Specific Rules

– A number of individuals requested the AQMD replac e Rule 1147 with equipment or industry specific rules. Alternatively, some also requested that Rule 1147 be divided into more categories of equipment. These comments reflect similar comments made during rule development in 2007 and 2008. The decision

to regulate these sources through one rule is based on a number of factors. In Control

Measure CMB

- 01 of the 2007 AQMP, the AQMD committed to achieving most of the emission reductions (3.5 tons/day) from these remaining unregulated combustion sources by 201 4. The most effective way to provide all affected business the maximum amount of time to prepare for equipment changes to achieve these reductions was adoption of one rule as early as possible.

In addition, the processes regulated under Rule 1147 are simi lar from the standpoint that they operate under the same heat transfer principle s. Regardless of the type of business or equipment, all Rule 1147 equipment either heat solid materials directly or provide large

volumes of heated air for drying and curing

. While the functions of the equipment vary, the principles involved in providing heat are the same. Melting or heating asphalt, metal, and plastic or curing coatings uses the same physical heat transfer processes as incineration, sintering, calcining, coo king food, or drying cloth or printed materials. A burner either directly provides convective and radiant heat to solid material or an air stream or provides heat indirectly through a heat exchanger or tube that heats air or

material.

The most important factor in determining an appropriate emission level is the process temperature, which was reflected in the Rule 1147 emission limits. The similarities in the heat transfer process and the importance of process temperature support the use of one

rule enco mpassing many types of industries.P A R 1147 Staff Report

3

- 6 September 2011 During the initial rule development Rule 1147 included more equipment categories. However, when some proposed emission limits changed, Rule 1147 task force members suggested to combine categories with similar emission limits. This led to the equipment categories identified in the rule today.

It should be acknowledged, however, that while rule 1147 compliant low NOx burners are designed to operate under the same heat transfer principles, their physical

characteristics (size and configuration) may differ depending upon the industry that they

serve. While there are many rule

- compliant burners available, staff is committed to work with all stakeholders to ensure burners are available for all industry sectors prior to the effective dates and will be prepared to make industry specific adjustments if warranted by

the circumstances.

Low

- NOx Burner Technology

– Lo w

- NOx burners for ovens, dryers, furnaces and

heaters can achieve less than 10 ppm NOx (at a reference level of 3% oxygen) in low temperature applications such as ovens and dryers . In high temperature applications, burners for furnaces, kilns

, metal heat

- treating and afterburners typically achieve NOx emission levels of 30 to 60 ppm. These emission levels have been a chieved in practice

since the 1980s . The manufacturers of burners for these processes all use similar approaches to achieve low NOx levels.

The principal technique to reduce NOx involves premixing of fuel and air before combustion takes place. This res ults in a lower and more uniform flame temperature

, which reduces formation of NOx. Some premix burners also use staged combustion with

a fuel rich zone to start combustion and stabilize the flame and a fuel lean zone to complete combustion and reduce the peak flame temperature. Many burners also combine these techniques with a form of flue gas recirculation (FGR) in which the burner

flame induces recirculation in the combustion chamber so that a small amount of exhaust

is mixed with fuel and air prior to burning. FGR has been used effectively for many

decades to reduce NOx emissions.

Burners may also be designed to spread flames over a larger area to reduce hot spots and

lower NOx emissions. A good example of this is r adiant premix burners with ceramic,

sintered metal or metal fiber heads that spread the flame , lower peak flame temperature and NOx, and produce more radiant heat . These burners can be run with low heat output where the burner head glows red or with higher heat output in a blue flame mode

, which produces less radiant heat and more convective heat but maintains NOx emissions in the 10 to 30 ppm range. The following figures illustrate four types of premix low NOx gas fired burners. Each type of burner uses different techniques to reduce emi ssions but is used in a wide variety of applications.P A R 1147 Staff Report

3

- 7 September 2011 Nozzle Mixing Built in Blower Radiant Panel Metal Fiber

Efficiency of Low NOx Burners

– Statements by industry representatives were made at the Rule 1147 Public Workshop and Task Force meetings that low NOx burners are less efficient and use more fuel than the burners in older equipment. However, the examples provided as evidence were misleading. In fact, during the last decade California gas utilities have provided efficien cy rebates to businesses that replace old “atmospheric” burner equipment and early model low NOx burners with new equipment using more

efficient low NOx burners.

Discussions of efficiency need to be clear about what is meant by “efficiency

. ” Is it the

p ercentage of available energy released from the fuel by that specific burner, the amount

of heat transferred to the material being heated , or the total system efficiency? The equipment regulated by Rule 1147 either heat solid materials directly or heat a ir which is used to heat or dry a product. The total efficiency of these processes are affected by many factors including the amount of primary air mixed with fuel, the amount of secondary air used by the burner during combustion, the nature of the materi al(s) being heated, and the amount of additional air drawn through the system for the heating or drying process or for maintaining temperature uniformity. When any burner is replaced, these systems need to be adjusted. This requirement is not unique to l ower NOx burners. Burners wear out and need to be replaced. If the same burner is not available or the business owner chooses a different model or vender, the system will require adjustment of fans, dampers and the new burner(s) to maintain efficiency.

Modern low NOx burners are more efficient because they produce more energy from the same amount of fuel. This efficiency is best illustrated by the significantly lower emissions of carbon monoxide and unburned hydrocarbons in the exhaust of these

burners . In addition, replacing an old indirect air heating unit (using a heat exchanger) with a new direct air heating unit that complies with both Rule 1147 and occupational exposure limits can reduce fuel consumption more than 20%.

Most of the examples provid ed to support the claim that new burners in existing systems are less efficient were installation of a higher output burner compared to the existing burner. However, installing a higher capacity burner does not mean the equipment uses

more fuel. The foll owing written comment from one of the attendees of the Public Workshop explains the flaw in this logic: “if you are replacing a” ... “2.0 (mmBTU) burner with an(other manufacturers)” ... “burner you will possibly need to apply a 2.5

mm BTU unit because that is the closest size you can use without doing an actual ovenP A R 1147 Staff Report

3

- 8 September 2011 capacity survey. The real point is that the burner will only use what the oven demands. If

it ran on 1.65 mm

BTU’s before the change o ut it will still run on 1.65 mm BTU’s. The “larger” burner is a result of supplier convenience, not the related efficiency of the burner process

. ” Thus, the burner will still use the same amount of fuel.

As discussed above, S s taff acknowledges that burner replacements will also require adjustment of other components in a system to maintain efficiency including blowers ( fans ) and dampers regulating air flow through the system. System fans or dampers (intake and exhaust) will need adjustment to compensate for the increased flow of air through the burner. However, dec reasing fan speeds to compensate for additional air through the burner also reduces electricity cost and damper adjustments are relatively simple compared with other changes required for a retrofit. Rebates from electric utilities

are also available when the new low NOx burner fan is more efficient than the fan for the

old burner.

Burner Availability

- Staff has reexamined the issue of availability of compliant burner systems and the information used to establish the NOx limits. Staff reviewed burners

ava ilable for a number of manufacturers and found that for the categories of equipment covered by Rule 1147, there were at a minimum three manufacturers providing burners for each category. In many cases, there were more than three manufacturers providing

co mpliant burners for a category of equipment subject to Rule 1147. Manufacturers provide a number of burner sizes in each product line. Each burner is designed to be used in a specific heat output range. A typical small burner from many companies can be used at a maximum of 1 million Btu per hour or at one tenth of the maximum (100,000 Btu/hr).

A summary of the variety of burners available by process category is provided in the following table

. There are also electric burners, heaters and dryers for pr ocesses such as smokehouses, small roasters and spray booths. In addition, a unit with small burner and a much larger afterburner (oven, roaster, smoker, furnace, etc.) could comply with the PAR 1147 NOx limit without changing the small primary burner by using the new weighted average emissions test.

Low NOx Burner Availability

Equipment

Vendor Oven Dryer Furnace Booth Makeup

Air After

burner Metal

Heating Metal

Melting Kiln Asphalt

A 7 7 3 5 2 2 1 1 3

B 3 3 2 3 3 3 2 2 4

C 1 1 1 1 1

D 1 1 1 1 5 2 3 1

E 1 1 1 3 1 1 1

F 1 1 1 1 2P A R 1147 Staff Report

3

- 9 September 2011 In addition, a number of equipment vendors have approached the AQMD regarding new compliant burners and have stated they want to certify their burner emissions. These vendors have new burners in development for spray booths, dryers, crematories, coffee

roasters , and heated process tanks, parts washers and food ovens. One manufacturer of burners for spray booths, heaters and dryers for autobody and other coating operations has developed a lower cost burner f or smaller operations. The manufacturer of this burner is currently undergoing certification of its product in booths and dryers from several manufacturers for both new and retrofit applications. Regardless, as stated previously,

staff is committed to co ntinue to work with all stakeholders to ensure that compliant burners are available for all applications prior to the effective dates and will be prepared to propose industry specific adjustments if warranted by the circumstances.

Rule 1147 Emission Limits

- Appendix A of this report includes charts identifying the

BACT decisions and source test s used as the basis for Rule 1147 emission limits. Some of the BACT decisions still in use today date back to 1988 (BACT in 1990 for

smokehouses is an electric burn er for the smoke generator and a boiler for providing

steam heat

– 30 ppm NOx ) but most were established between 1998 and 2006. Some BACT limits are based on information from other agencies. For example, the BACT limit of 30 ppm NOx for spray booths, mak eup air units and other equipment where workers may be exposed is based on the occupational exposure limit for that equipment.

T he processes regulated under Rule 1147 either heat solid materials directly or provide large volumes of heated air for drying an d curing materials. Afterburners and related devices incinerate vapors, particulates and toxics, but do this using a burner to provide

heat to the incineration device. While processes vary, the principles involved in providing heat are the same. A burne r either directly provides convective and radiant heat to solid material or an air stream or provides heat indirectly through a heat exchanger or

tube that heats air or material.

An examination of the BACT determinations and source tests for permit appli cations indicate that low temperature processes, including ovens, dryers, and make up air heaters achieve emissions of 10 to 30 ppm NOx and high temperature processes such as metal melting , other furnaces, afterburners and kilns can achieve between 40 and 60 ppm. The emission limits in Rule 1147 represent the high end of the range established as BACT for these processes and are significantly less stringent than the limits for boilers, water heaters, and turbines (6 to 20 ppm at 3% oxygen).

Cost and Cost Ef

fectiveness

- Most of the comments on cost or cost effectiveness focused on equipment with emissions less than one pound per day. One pound per day of NOx is equal to the daily NOx emissions of about 550 new cars or 1,030 new residential

water heaters. I n Rule 1147, one pound per day of NOx emissions is used as the criteria to extend the compliance date five years for small equipment and low emitters. This five

year extension means that small sources and low emitters have until 2017 at the earliest to

co mply with emission limits.P A R 1147 Staff Report

3

- 10 September 2011 Initially comments received at public meetings regarding cost effectiveness focused on extreme cases where the primary burner in a unit is very small but the process required a large afterburner to control VOC, particulate or t oxic emissions (i.e., smokehouses and coffee roasters). Other examples included units that are only used a few hours every day.

Some consultants have suggested that the cost effectiveness for these processes is in the

hundreds of thousands to millions of dollars per ton.

Staff does not agree with these assertions because t here are small cost effective low NOx

radiant burners for the above applications and electric burners are also a viable low cost

a lternative

. In fact, since 1990, BACT for a smokehous e smoke generator is an electric

burner

. A third alternative for small primary burners coupled with a much larger

afterburner , as is found in smokehouses and coffee roasters is the new weighte d emission

test in PAR 1147. If the unit’s total emissions are equivalent to those for compliant burners, the owner would not have to replace the small primary burner

. Because the replacement of the heating unit in a process is done at the end of its useful life, it is not appropriate to include many of the other anc illary costs suggested in meetings and written comments . Maintenance is required for both old and new technologies and source tests are not required after the first year, so it is not appropriate to include these as recurring costs. In addition, regardle ss of replacement with a noncompliant or a low emission unit at the end

- of

- life , the owner must pay local building and safety fees so this cost has not been included in cost effectiveness calculation s

. AQMD staff has surveyed local cities and counties to identify the range of permit fees that business owners can expect. Typical local permit fees for modifications to a Rule 1147 affected unit are in the range of $190 to $648. If a modification is valued at more than $25,000, then fees range from $233 to $ 1,874. These fee totals include plumbing and mechanical plan check, building permit, permit issuance and other related fees. Note that p lan submittals and associated fees are typically included in a contractor’s price along with equipment and installatio n costs. As such, these costs are included in the cost estimates provided by installers to the AQMD for rule adoption and this amendment.

In addition, replacing a heating system at the end of its useful life when it is not required by Rule 1147 require s a n AQMD permit modifica tion and associated fee

. The permit modification is triggered when i dentical replacement units are not available . Most units more than 10 years old cannot be replaced with identical units because manufacturers routinely change their products. However, for Rule 1147 required replacements, the AQMD fee has been reduced to an administrative fee, so there is a si gnificant costs savings which has not been included in cost effectiveness calculation s

. In addition , the

cost savings of the administrative AQMD fee compared to standard permit fees is approximately the cost of a source test. Further, a business which buys a certified unit will not require a source test. Compliance expenses such as testing are included in the

socioeconomic ana lysis and are not part of the cost effectiveness calculation.

In some cases, a retrofit or replacement of old equipment can trigger a requirement for the

owner to meet current building and fire code requirements and this cost may not be covered by the lo cal utility . However, in situations where utility equipment do es not meetP A R 1147 Staff Report

3

- 11 September 2011 current code , t hey represent a risk which would come with other costs such as higher insurance premiums. Such costs would not be attributed to this rulemaking because they

occur wh enever old equipment is replaced at the end of its useful life

. Heating units used in spray booths, dryers, ovens and other units affected by Rule 1147 are expected to last 10 to 15 years depending upon the type of unit and use. Rule 1147 requires repla cement of small units when they are 20 to 30 years old starting in 2017. Because Rule 1147 requires replacement of heating systems at the end of their useful life, the appropriate equipment cost is the difference between a new compliant system and a

new n on

- compliant replacement

. In order to provide perspective on the cost and cost effectiveness for Rule 1147, an analysis of the cost effectiveness for a typical small emitter is provided in the following example. Using a typical emission reduction from a small source of one

- half of a pound (0.5 lb/day) and a facility operating schedule of 5 days a week, then the emission reduction over 15 years for this is very clo se to one ton (1,950 pounds). A number of consultants and equipment providers have indicate d that the typical cost for retrofitting or replacing a unit with these emissions is between $11,000 and $19,000 and the average is about $15,000. With an emission reduction of one ton, t his example results in a cost effectiveness of $11,000 to $19,000 pe r ton for the typical retrofit of a small source with an average cost effectiveness of $15,000 per ton

. However, because a new burner system is installed at the end of the useful life of the old burner(s), the true cost is the increased

cost for the Rule 1147 compliant components compared with non

- compliant replacement s

. Based on this cost difference, the cost effectiveness is significantly lower than $15,000 per ton. For example, the cost difference between a new noncompliant unit and a new compliant un it might be $5,000 dollars and the cost effectiveness would then be $5,000 per ton.

In addition , there are also potential cost savings when replacing older equipment including fuel cost. M any of the smaller equipment with emissions less than one pound

per day have older atmospheric burners or use systems with heat exchangers ( indirect heating ). New burners premix air and fuel to improve combustion efficiency and reduce emissions. The increased fuel efficiency of a new system can pay for itself over the l ife of equipment. In addition, replacing an indi rect heating system (exhaust to air heat exchanger) with a direct air heating unit that meets Rule 1147 and occupational exposure

limits will increase efficiency and reduce fuel cost by 20% or more. Over 15 years, an average monthly fuel cost savings of $50 based on a monthly fuel cost of $200 to $300 for a small unit will result in a total savings of $9,000 over the life of the equipment.

When potential fuel cost savings of $9,000 are included in the calc ulations for the above retrofit example with an emission reduction of 0.5 pound per day, then the cost

eff ectiveness improves to an average of $6 ,000 per ton (with a range of $2,000

- $10,000 per ton)

. In addition, when the calculation procedure uses the price difference between compliant and noncompliant replacements as the cost, the cost effectiveness improves

even more

.P A R 1147 Staff Report

3

- 12 September 2011 Another example of the cost effectiveness for Rule 1147 is when replacing heating units

in typical spray booths used by small auto body repair shops or other small coating operations with low usage. NOx emissions for these operations are typically about 0.13 pounds per day which means they will be replaced when they are 20 to 30 years old

. The se older spray booths use indirect air heati ng units where heated air is provided to the booth by a fan blowing air past a heat exchanger. This type of unit is at most about 80% efficient. One fifth or more of the energy from combustion goes out the exhaust stack.

New replacement indirect air he aters can be installed for as little as $6,000 ($5,0 00 + $1,000 installation). However, m any non

- compliant replacements can be significantly more costly . The average cost for installing a Rule 1147 compliant direct air heating replacement is about $15,00 0. If the higher fuel cost of an indirect air heating unit is added to the lifetime cost of the unit ($50 or more per month depending upon use), the total lifetime cost (15 years) to the business is the same as buying a new rule compliant

direct air heati ng unit with lower emissions ( $6,000 + $9,000 = $15,000) . If the cost of the direct heating replacement at the high end of the typical cost range is used for the replacement cost ($19,000)

, and the replacement reduces NOx emissions by an average of

0.1 po und per day, then the cost effectiveness over 15 years is about $20,500 per ton ($4,000 / 0.195 ton).

Questions were also raised in task force meetings about the AQMDs authority to use different cost effectiveness levels in rule adoptions. Air pollution districts in California have the authority to pass rules in their own jurisdictions and each consider cost and cost effectiveness in their decisions. The above examples of cost effectiveness for Rule 1147 as adopted are well within the range of cost effe ctiveness for NOx rules adopted by the AQMD Governing Board. The cost effectiveness for the last amendment of AQMD Rule 1146.2 in May 2006 for small boilers 300,000 Btu/hour to 400,000 Btu/hour was about $22,000 per ton. For the September 2008 amendment of AQMD Rule 1146.1 (small boilers 2 to 5 million Btu per hour), the range of the cost effectiveness was $14,400 to $33,500 per ton . In addition, the recent amendment of the AQMD SOx RECLAIM program had cost effectiveness up to $50,000 per ton. Other air pollution districts in California have passed NOx control rules with cost effectiveness as high as $60,000 per

ton (e.g., San Joaquin Valley Air Pollution Control District)

. Not only is the typical cost effectiveness for small sources regulated by PAR 114 7 within the range of the cost effectiveness for recent NOx rule amendments passed by the AQMD, it is similar to the AQMD BACT cost effectiveness guideline for minor sources. The current AQMD minor source BACT cost effectiveness criteria for NOx and VOC

r espectively are about $25,000 and $26,500 dollars per ton (adjusted to 2011 equipment costs pursuant to AQMD BACT Guidelines).

### REFERENCESP A R 1147 Staff Report

R

- 1 September 2011 

### REFERENCES

Eclipse Incorporated, 20 11

. http://www.eclipsenet.com , last accessed July 12, 2011

E PA, 2002. EPA Air Pollution Control Cost Manual, Sixth Edition (EPA

- 452

- 02

- 001) , United Stated Environmental Protection Agency, January 2002

Maxon Corporation, 2011

. http://www.maxoncorp.com last accessed July 12, 2011

.

North American Manufacturing Com pany, 20 11

. http://www.namfg.com

, last accessed June 30,

2011

.

SCAQMD, 2008. Staff Repot: Proposed Amended Rule 1146

- Emissions of Oxides of Nitrogen from Industrial, Institutional, and Commercial Boilers, Steam Generators, and Process Heaters

. South Coast Air Quality Management District, September 2008.

SCAQMD, 2007. Air Quality Management Plan, Final 2007 AQMP Appendix IV

- A, District’s Stationary and Mobile Source Control Measures , South Coast Air Quality Management District,

June 2007.

SCAQMD, 20 06. Staff Repo r t: Proposed Amended Rule 1146.2

- Emissions of Oxides of Nitrogen from Large Water Heaters and Small Boilers . South Coast Air Quality Management District, May 2006.

SCAQMD, 2005. Staff Report: P roposed Amended Rule 1146.2

- Emissions of Oxides of Nitrogen from Large Water Heaters and Small Boilers . South Coast Air Quality Management District, January 2005.

SCAQMD, 1999. Staff Report: Proposed Amended Rule 1121

- Control of Nitrogen Oxides From Residential Type Natural Gas

- Fired Water H eaters . South Coast Ai r Quality Management District, November 1999.

SCAQMD, 1997. Final Staff Repot for: Proposed Rule 1146.2

- Emissions of Oxides of Nitrogen from Large Water Heaters and Small Boilers

. South Coast Air Quality Man agement District, De cember 1997

.

SCAQMD, 1996. 1997 Air Quality Management Plan, Appendix IV

- A, Stationary and Mobile

Source Control Measures , South Coast Air Quality Management District, November 1996.P A R 1147 Staff Report

A

- 1 September 2011 

### Appen dix A

– BACT D eterminations and Source TestsP A R 1147 Staff Report

A

- 2 September 2011 Fi gure A

- 1

Figure A

- 2

Figure A

- 3P A R 1147 Staff Report

A

- 3 September 2011 Figure A

- 4

Figure A

- 5P A R 1147 Staff Report

A

- 4 September 2011 Figure A

- 6P A R 1147 Staff Report

B

- 1 

### Appen dix B

– Draft Techn ology Assessment Work StatementP A R 1147 Staff Report

B

- 2 

### Draft Work Statement for R ule 1147 Techn ology Assessment

The T echn ology A ssessment for PAR 1147 would be do ne in cooperation with industry

, trade

associations and the public

. T o that end, staff intends to continue to hold task force meetings periodically during the implementation phase of Rule 1147, and, specifically ask for the regulated community ’s input in identifying processes and equipment of concern to be further evaluated as part of the T echnology A ssessment. It is envisioned that t he T echn ology A ssessment would include at minimum the following elements:

1. Study Background and Objectives

2. Processes and Equ ipment of Concern

3. Evaluation Methodology

4. Findings

a. Review of Compliant and Non

- Compliant Equipment

b. Cost of Compliant and Non

- Compliant Equipment

c. Installation Costs

d. Operating Costs of Compliant and Non

- Compliant Equipment over the Expected Life

e. Emissions

5. Con clusions and Recommendations

a. Cost Effectiveness and Affordability

b. Equipment Availability

c. Recommendations

Final Report Preparation Process

Following the initial stakeholder input and its independent analysis of th e issues, staff will firs t prepare a prelimi nary draft of the Technology Assessment report and present it to the stakeholders for their review and comment. A draft report will then be prepared incorporating stakeholder input.

S taff will also solicit a third party expert ’s review prior to finalizi ng the Technology Assessment. A final Technology Assessment report will then be prepared incorporating the third party expert’s input.

An RFP would be issued by the AQMD to identify the third party that will conduct the review of

th e Draft Report for th e Techn ology Assessment. As part of the review of the Draft Report, the contractor would evaluate available and potential low NOx burners and control systems, the cost differential between standard and low NOx units, fuel and utility costs and potential s avings, and emissions for typical units. The contractor would also analyze cost effectiveness of low NOx systems relative to non

- compliant burners and cost impacts on selected industries.

In addition to periodic stakeholder meetings, staff also commits to providing the Stationary Source Committee with periodic status updates.P A R 1147 Staff Report

B

- 3 This Page Intentionally Left Blank