Final Draft Staff Report with Appendices for Proposed Amendments to Rule 4307 SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

FINAL DRAFT STAFF REPORT

April 21, 2011

Proposed Amendments to Rule 4307 (Boilers, Steam Generators, and Process Heaters – 2 .0 MMBtu/hr to 5.0 MMBtu/hr)

Prepared by: Sandra Lowe-Leseth, Air Quality Engine er, Rules

Reviewed by: Patrick Houlihan, Senior Compliance In spector, Compliance

Derek Fukuda, Air Quality Engineer, Permits Joven Nazareno, Senior Air Quality Engineer, Rules George Heinen, Supervising Air Quality Engineer, Ru les Errol Villegas, Program Manager, Strategies and Inc entives Samir Sheikh, Director, Strategies and Incentives

I. SUMMARY

A. Reasons for Rule Development and Implementation

California grows and processes about 80 percent of the world’s almonds and virtually 100 percent of the almonds consumed in the US. Due to Salmonella outbreaks traced to California almonds in 2001 and 2004, the Food an d Drug Administration (FDA) has imposed pasteurization requirements to reduce the p otential for pathogen (bacteria that can make humans ill) contamination. The units that are the focus of this rule project are used to remove pathogens from the surface of raw al monds without “cooking” or otherwise affecting the nuts.

In October 2008, Paramount Farms, Incorporated, the largest almond processor in the US, installed an almond pasteurization unit at its Lost Hills processing facility. The unit’s burners, however, do not meet the District R ule 4307 oxides of nitrogen (NOx)

limit. Paramount Farms asked for and received two one-year variances from the District’s Hearing Board. After the second varianc e hearing, the Rule Development Section was asked to research tree nut pasteurizer units and, if warranted, to consider a rule amendment incorporating tree nut pasteurizers into Rule 4307. District staff has reviewed the available information, visited the fac ility in question and has determined that a rule amendment is appropriate.

Based on the additional research, District staff ha s estimated for a facility to install this low-NOx technology and comply with the existing rul e requirements, the unit would

achieve an emissions reduction of 0.003 tons of NOx per day, but at a cost effectiveness of greater than $250,000 per ton of N Ox reduced. This specific situation and associated compliance cost was not considered d uring the last rule amendment.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

2 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 The proposed rule amendments will allow this existi ng facility to continue meeting the strict FDA pasteurization requirements and comply with Rul e 4307 requirements. New pasteurization units would be evaluated on a case-b y-case basis within the context of the District’s permitting process.

B. Description of the Project

The purpose of this rule project is to amend Rule 4 307 to specifically incorporate tree nut pasteurizers as a separate type of unit. In ad dressing these pasteurizers, the District is protecting public health by balancing t he emissions from this unit and the potential health risks associated with un-pasteuriz ed tree nuts.

C. Rule Development Process

The proposed rule and final draft staff report will be published and mailed to affected sources and interested parties prior to a public he aring to consider the adoption of proposed amendments to Rule 4307 by the District Go verning Board.

II. CLIMATE CHANGE

The California Global Warming Solutions Act of 2006 (AB 32) created a comprehensive, multi-year program to reduce greenhouse gas (GHG) e missions in California, with the overall goal of restoring emissions to 1990 levels by the year 2020. In the coming years, ARB and the Legislature will be developing p olicies and programs to implement

AB 32. The District believes that the evidence and the rationale that climate change is occurring is compelling and convincing. In additio n to the long-term consequences of climate change, the District is concerned with the potential ramifications of more moderate but imminent changes in weather patterns. The Valley depends heavily on agriculture for its economy and has developed agric ultural practices based on the last several decades of weather patterns. Unanticipated and large fluctuations in these patterns could have a devastating effect on the Val ley’s economy.

While there are many win-win strategies that can re duce both GHG and criteria/toxic pollutant emissions, when faced with situations tha t involve tradeoffs between the two, District staff believes that the more immediate pub lic health concerns that may arise from an increase in criteria or toxic pollutant emi ssions should take precedence.

III. BACKGROUND

In 2001, a major Salmonella outbreak was linked to almonds and ultimately trace d back to the handler and the grower. In the spring of 20 04, a second major Salmonella outbreak occurred in Oregon that was linked to raw almonds purchased at a particular

retailer. As a result of the two Salmonella outbreaks, the FDA now requires that allSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

3 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 almonds be pasteurized before being sold to consume rs in North America. 1 A number of other commonly consumed foods, such as milk, jui ce, eggs and canned foods are pasteurized in order to ensure safety by removing p athogens.

The almond pasteurization plan became mandatory for the California almond industry on September 1, 2007. The FDA, along with a techni cal review panel comprised of almond scientific experts, is responsible for evalu ating and approving the treatment processes that demonstrate effectiveness in achievi ng a reduction of possible contamination in almonds while not impacting their quality and sensory (e.g., taste and texture) attributes. 2

Like almond handlers, pistachio handlers will most likely be required to pasteurize their product as a direct consequence of a major Salmonella outbreak traced to pistachios in 2009. It is expected that the pistachio pasteuriza tion provision will be promulgated

within 12 to 30 months. This means that an additio nal three to seven tree nut pasteurizers could be built in the Valley. Emissio ns from new units would be evaluated on a case-by-case basis and within the context of t he District’s New Source Review

rule.

IV. CURRENT RULE 4307 AND PROPOSED AMENDMENTS

A. Current Rule 4307

Rule 4307 was adopted in December 2005, and it was last amended on October 2008. The rule applies to any gaseous fuel or liquid fuel fired boiler, steam generator, or process heater with a total rated heat input of at least 2. 0 million Btu per hour (MMBtu/hr) up to and including 5.0 MMBtu/hr. The current rule limits emi ssion of NOx, carbon monoxide (CO), and particulate matter (PM). NOx limits are 30 or 40 parts per million by weight (ppm) for gaseous and liquid fuel-fired units, respective ly. For new or replacement units, NOx is nine or twelve parts per million, depending on t he type of unit. CO is limited to 400 ppm. PM is controlled through fuel selection. Ope rators may choose PUC-quality natural gas, commercial propane, butane, liquefied petroleum gas, or a combination of such gases, or other low-sulfur fuel. If the opera tor chooses a high sulfur fuel, SOx is required to be controlled by either 95% or to no mo re than nine parts per million by volume (ppmv).

For detailed requirements, please refer to current Rule 4307, which is available on the District’s website at www.valleyair.org.

1 Almond Board of California website http://www.almondboard.com/FoodProfessionals/Docume nts/Pasteurization_Sheet%205.22.09.pdf

2 Almond Board of California website http://www.almondboard.com/FoodProfessionals/Docume nts/Pasteurization_Sheet%205.22.09.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

4 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 B. Proposed Amendments to Rule 4307

1. Section 3.0 – Definitions

A definition would be added for tree nut pasteurize r. The definition of EPA would be modified the standard format for acronyms that puts the spelled-out name in front of the

acronym.

2. Section 5.0 – Requirements

The San Joaquin Valley is home to some of the large st tree nut (almond and pistachio) processing operations in the entire nation. To pro tect consumers, the United States Food and Drug Administration (FDA) imposed pathogen redu ction requirements for tree nut processing operations to reduce the potential for c ontamination from pathogens such as

Salmonella . A variety of pathogen reduction measures are emp loyed by tree nut processing operations, with the majority of facilit ies utilizing chemicals, blanching, or roasting processes not subject to Rule 4307, and se veral facilities are utilizing steam pasteurization to satisfy FDA requirements. These pasteurizer units are costly, complex systems that sometimes include small burners. The Paramount Farms almond pasteurizer unit is a two-part unit. The first par t uses steam to add moisture to the surface of the shelled almonds. The second part of the unit quickly heats the almond surface to kill pathogens.

District staff is proposing that tree nut pasteuriz ers be fired on natural gas as a NOx control. This strategy is similar to the requireme nts imposed on vegetable dehydrators in District Rule 4309, a rule that has been approve d by EPA into the California State Implementation Plan (SIP). During natural gas curt ailments, units would either not be used or meet the requirements of Section 4.6. Sect ion 4.6 outlines limitations for a unit that fires on alternative fuels during natural gas curtailments. As detailed in Section VII of this report, imposing a 30 ppm NOx emission limi t for the single existing unit affected by the rule is extremely expensive because any chan ge to the process triggers a revalidation of the sterilization process. Since the pasteurizer is already operating, the requirement can take effect on the date of rule ado ption; therefore no commencement date is needed for this provision.

Section 5.4.4 would be modified to clarify that a l onger start-up or shutdown duration may be approved, if the operator receives approval from the APCO, ARB, and EPA.

3. Section 6.0 – Administrative Requirements

The records section would be modified. The operato r of a tree nut pasteurizer would be required to keep records showing that the unit is b eing operated and maintained as recommended by the pasteurizer’s manufacturer as we ll as being able to demonstrate that the fuel utilized by the unit meets the specif ications of PUC quality natural gas.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

5 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 V. IMPACT OF PROPOSED AMENDMENTS ON OTHER DISTRICT

COMMITMENTS

A. Impact of Proposed Amendments on District Attain ment Strategies

This rule project is not a control measure in any a ttainment plan and is not expected to reduce or increase emissions from the single existi ng tree nut pasteurizer. For these reasons, District staff has concluded that attainme nt of any ambient air quality standard will not be affected by this rule project. The pro posed amendments will not affect either

the District’s 2007 Ozone Plan or the Districts 200 8 PM2.5 Plan (particulate matter with aerodynamic diameter of 2.5 micrometers or less) be cause no emission limits have been changed, nor are the amendments expected to af fect emissions from this source
category.

The federal Clean Air Act (Act) requires that attai nment plans meet reasonable further progress (RFP) by achieving incremental emission re ductions to ensure attainment of the National Ambient Air Quality Standards (NAAQS) by the attainment date. The Act does not identify specific emission reduction bench marks that must be met for particulate matter attainment plans. EPA has inter preted the Act’s RFP requirement using the concept of achieving (generally) linear p rogress toward the standard. The

District’s 2008 PM2.5 Plan contains an RFP demonstr ation. However, the proposed

amendments do not have emission reductions associat ed with them, so it is not expected that the RFP will be affected by the chang es in the rule.

B. Consideration for the Condensable Fraction of PM 2.5

Certain high-temperature processes emit gaseous pol lutants that rapidly condense into particle form in the ambient air. After January 1, 2011, areas that are nonattainment for the National Ambient Air Quality Standard (NAAQS) f or particulate matter that is 2.5 microns or less in diameter (PM2.5) are to consider the condensable fraction of directly emitted PM2.5 for purposes of establishing the emis sions limits for:

• Reasonable Further Progress (RFP), in which an are a shows continuous reductions of directly emitted PM2.5 and precursors , with sufficient emissions reductions to demonstrate attainment by the applica ble deadline, and

• Reasonably Available Control Technology (RACT) and Reasonably Available Control Measures (RACM), in which a nonattainment a rea shows that it is adopting technologies and measures are reasonably a vailable, considering technical and economic feasibility; sufficient to d emonstrate expeditious attainment; and meet RFP. (reference: 40 CFR 51.1002(c))

The District established emissions limits for its a ttainment, RFP, and RACT/RACM

demonstrations in the 2008 PM2.5 Plan for the PM2.5 NAAQS as set by EPA in 1997. The District continues to evaluate condensable part iculates and other directly emitted PM2.5 to improve its PM2.5 emissions inventory for future attainment plan efforts.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

6 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 This amendment to Rule 4307 was neither included in , nor does it impede, the

emissions limits set in the 2008 PM2.5 Plan . The District is not currently aware of significant condensable PM2.5 emissions or related condensable PM2.5 emissions control technologies for the sources affected by th is amendment. Therefore, the District has satisfied any applicable requirement to conside r condensable particulates from this

source at this time.

VI. BASELINE EMISSION INVENTORY AND EMISSION REDUCT IONS

There is one almond pasteurization unit currently o perating that would be affected by the amendments. The unit is fired on natural gas a nd rated at 4.4 MMBtu/hr. There is no baseline inventory for this source category. Di strict staff assumed typical uncontrolled burners were installed in the pasteuri zer. The unit was assumed to operate between 5,000 and 8,500 hours per year and the average percent of maximum heat input between 70 percent and 90 percent of max imum heat input. District staff used 0.092 pounds of NOx per MMBtu as the uncontrol led emission factor. Using these assumptions, the estimated uncontrolled emissions f rom this unit are about 1.0 to 1.5 tons NOx per year.

The unit is already firing on natural gas, so there is no change to the unit and by extension, no emission reductions associated with the proposed amendments. Additionally, there is no increase in emissions to implement this rule; th erefore, there is no emission impact for this project

VII. COSTS AND COST EFFECTIVENESS ANALYSIS

The California Health and Safety Code Section 40920 .6(a) requires the District to conduct both an absolute cost effectiveness analysi s and an incremental cost effectiveness analysis of available emission contro l options before adopting each Best Available Retrofit Control Technology (BARCT) rule. The purpose of conducting a cost effectiveness analysis is to evaluate the economic reasonableness of the pollution control measure or rule. The analysis also serves as a guideline in developing the control requirements of a rule.

Absolute cost effectiveness of a control option is the added annual compliance cost in dollars per year divided by the emission reduction achieved in tons VOC reduced per year. Incremental cost effectiveness is intended t o measure the change in costs, in dollars per year, and emissions reductions, in tons of pollutant reduced per year, between two progressively more effective control op tions or technologies. Incremental cost effectiveness compares the differences in cost s and the differences in emissions reductions of the two candidate control options. I ncremental cost effectiveness does not reveal the emission reduction potential of the control options, merely the additional cost of adding the next most effective control to a given control measure. Unlike theSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

7 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 absolute cost effective analysis that identifies th e control option with the greatest emission reduction; incremental cost effectiveness does not present a meaningful

correlation between emissions reductions and cost e ffectiveness. Therefore, the relative values produced in the incremental cost ef fectiveness analysis and the absolute cost effectiveness values are not comparable and ca nnot be evaluated using similar

standards.

The pasteurizer at Paramount Farms is already in co mpliance with the proposed provisions of Rule 4307 and therefore, no additiona l costs to the operator are associated with the proposed requirements. Absolut e cost effectiveness cannot be

calculated because there are no associated emission reductions, meaning that the $0 cost would be divided by zero, which is mathematica lly undefined.

The incremental cost effectiveness is the differenc e in cost between successively more effective controls. The next-most stringent option after natural gas firing is to require the current unit to replace the current burners with 30 ppm low-NOx burners. Paramount Farms submitted cost data for retrofitting their cu rrent unit. A theoretical replacement unit (which has not been built, nor tested to deter mine if it would pasteurize to the required level of pathogen reduction) would cost $2 60,000. Because any change to a validated sterilization process triggers re-validat ion under FDA regulations, costs of materials and testing for the re-validation of the sterilization process are included as

one-time retrofit costs. Paramount Farms indicated that the testing and materials for revalidation would be an additional $1.2 million to $ 5.0 million. Added to the replacement cost, the total one-time retrofit costs of $1.46 to $5.26 million. Annualized over 10 years
at 10% rate of return, the annualized incremental c ost is $238,000 to $856,000.

In order to determine incremental cost effectivenes s, an estimate of emission reductions from the proposed requirement to the next-most effe ctive control is needed. District staff estimated a range of additional NOx reduction s for this unit using the same assumptions as for the baseline inventory. Distric t staff used 0.092 pounds of NOx per

MMBtu as the uncontrolled emission factor and 0.036 pounds NOx per MMBtu for the controlled emission factor. Using the same range f or hours used and percent of maximum heat input as for the baseline emissions es timation above, the estimated emission reductions are 0.43 tons per year to 0.94 tons per year. The incremental cost effectiveness is $252,000 to $908,000 per additiona l ton of NOx reduced. The

calculation is shown in Table 1.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

8 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 Table 1 – Incremental Cost Effectiveness Analysis R esults

One-time

Retrofit Cost ($) Annualized

Cost ($/yr) Incremental Cost

Effectiveness at

min reductions ($/add’l ton NOx) Incremental Cost

Effectiveness at

max reductions ($/add’l ton NOx)

Total (retrofit + re-valid min) $1,460,000 $237,542 $550,886 $252,039

Total retrofit + re-valid max) $5,260,000 $855,802 $1,984,699 $908,032

Because the incremental cost is greater than $250,0 00 per additional ton of NOx reduced, District staff has determined that requiri ng the affected unit be retrofitted with a 30 ppm burner is not reasonable for the existing un it.

VIII. SOCIOECONOMIC IMPACT ANALYSIS

Pursuant to state law, District staff is required t o perform a socioeconomic impact analysis prior to adoption, amendment, or repeal of a rule that has significant impacts on air quality or that will strengthen emission lim itations. The proposed amendments to Rule 4307 would cost $0 to comply; therefore there is no socioeconomic impact from the proposed amendments.

IX. ENVIRONMENTAL IMPACTS

Pursuant to the California Environmental Quality Ac t (CEQA), District staff reviewed the possible environmental impacts of the proposed amen dments and determined that air quality and perhaps greenhouse gas emissions are th e only potentially affected environmental resources. The proposed amendments d o not impose regulatory requirements resulting in an increase in fuel combu stion, thus implementation of the proposed project would neither increase greenhouse gas emissions nor affect criteria pollutant emissions.

District staff concludes that there is no substanti al evidence in the whole record before the District that the proposed amendments to Rule 4 307 would cause any adverse

effects on the environment. The District finds tha t the project is exempt per the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment (CEQA Guidelines Section 15061(b)(3)). For these reasons, staff is proposing to file a Notice of Exemption up on Board adoption of the proposed

amendments to Rule 4307.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

9 Final Draft Staff Report with Appendices for

Proposed Amendments to Rule 4307 X. RULE CONSISTENCY ANALYSIS

Prior to adopting, amending, or repealing a rule or regulation, California Health and Safety Code Section 40727.2 requires a written anal ysis that identifies and compares requirements of the proposed rule with correspondin g, existing and proposed District rules and corresponding United States Environmental Protection Agency (EPA) rules, regulations, and guidelines. Based on the analysis , District staff concludes that the proposed amendments to Rule 4307 are consistent wit h other District rules and are not in conflict with these rules. Further, the proposed r ule amendments are consistent with EPA rules, regulations, and guidelines that apply to th e same source category. The analysis is presented in Appendix A of the Final Draft Staff Re port.

XI. REFERENCES

1. U.S. Environmental Protection Agency “Clean Air Fine Particulate Implementation Rule” Federal Register Volume 72 pag es 20586 – 20667; April
25, 2007.

2. U.S. Department of Agriculture/Agricultural Mark eting Service “Almonds Grown in California: Outgoing Quality Control Requirements” Federal Register Volume 72 pages 15021 – 15036; March 30, 2007.

3. Bob Klein, Manager, Administrative Committee for Pistachios, phone conversation November 2, 2010.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Draft Staff Report: Rule 4307 (Boilers, Stea m Generators, and Process Heaters – 2.0 MMBtu/hr to 5.0 MMBtu/hr) April 21, 2011

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