## Report on Re ductions Achieved from I nc entive-Based

Emission Re duction Meas ures in the San Joaquin Valley

AP PE NDIX A .3 : 2005 Carl Moyer Me mo rial Air Quality

Standards Attai nm ent Pr og ram Guidelines Part III

Release D ate: Se pt em ber 22, 20 14

He ari ng Dat e: Octo ber 2 3

, 2 014



# Calif or ni a E nvironme nt a l Protection Agen cy



# Air Resources Board

# THE CARL MOYER PROGRAM GUIDELINES

PART III of IV



# AGRICULTURAL ASSISTANCE PROGRAM

Approved November 17, 20051 AGRICULTURAL ASSISTANCE

PROGRAM AGRICULTURAL ASSISTANCE PROGRAM

The Agricultural Assistance Program was created thr ough provisions of Assembly Bill 923 (AB 923, Firebaugh) and went into effect on January 1, 2005. This legislation authorizes local districts to increase the motor vehicle registration fee. One of the projects which may be funded with the monies is compliance with emission reduction requirements for previously unregulated a gricultural sources of air pollution. Unlike the Carl Moyer Program, the Agricultural Ass istance Program does not require the emissions reductions to be surplus. This docum ent presents an overview of the Agricultural Assistance Program, current regulation s, potential project types, application requirements, and methodology for calculating the c ost-effectiveness of total reductions for a project.

I. Background

Local air districts may impose a surcharge on motor vehicle registration fees (up to $4 per vehicle) for air quality improvement strateg ies (California Health and Safety Code (HSC) sections 41081 and 44229). In 2004, AB 923 p rovided districts with the authority to increase the allowable surcharge by up to an add itional $2. Districts receiving the additional $2 surcharge may use the funds to implem ent four specific programs:

• projects funded through the Carl Moyer Program.

• the new purchase, retrofit, repower, or add-on of previously unregulated equipment for agricultural sources.

• school bus purchases through the Lower Emission Sc hool Bus Program.

• an accelerated vehicle retirement or repair progra m.

The Agricultural Assistance Program was created to implement the second program: “the new purchase, retrofit, repower, or add-on of previously unregulated equipment for agricultural sources.”

Districts funds from the two dollar surcharge that are applied to the Agricultural Assistance Program may be used to help agricultural operations meet local and state air quality requirements. Qualified projects are eligi ble for funding for a minimum of three years from the date of adoption of an applicable ru le or standard, or until the compliance date of that rule or standard, whichever is later. Eligible projects are not required to provide surplus emission reductions. The emission benefits of projects funded by the Agricultural Assistance Program are already counted in the emission benefits of individual local or state rules. District funds ap plied to the Agricultural Assistance Program do not count for district match funds in th e Carl Moyer Program.

“Agricultural source of air pollution,” for the pur poses of AB 923 and the Agricultural Assistance Program, is defined in HSC section 39011 .5(a) as a source or group of sources used in the production of crops or raising of fowl or animals located on2 AGRICULTURAL ASSISTANCE

PROGRAM contiguous property and under common ownership or c ontrol. Four categories of emission sources are identified as part of this def inition:

• confined animal facilities (CAFs).

• internal combustion engines, including portable an d off-road engines, unless used to propel instruments of husbandry.

• sources subject to requirements of Title V, the fe deral Operating Permitting Program for major stationary sources.

• sources of emissions otherwise subject to district regulation.

The statutory provisions of AB 923 also require tha t Agricultural Assistance Program projects follow the Carl Moyer Guidelines [ARB, 200 5c]. Project criteria are based on the Carl Moyer Program Guidelines, with modificatio ns to the surplus emission reductions requirements and cost-effectiveness meth odology.

II. Statutory and Regulatory Requirements

A. SB 700

In 2003, Senate Bill 700 (SB 700, Florez) amended a nd added air pollution control requirements in the HSC (sections 39011.5, 39023.3, 40724, 40724.5, 40724.6, 40724.7, 40731, 42301.16, 42301.17, 42301.18, 42310 , and 44559.9) to include requirements for agricultural sources of air pollut ion. Some of the key requirements of this legislation are listed below:

• The legislation created a definition for “agricult ural source of air pollution.” The definition is provided in the preceeding section of this document.

• The legislation removed language exempting agricul tural sources from air quality permits in the HSC in its entirety. As a result, a gricultural operations may be required to obtain air permits from local districts

.

• The legislation established specific agricultural source permitting and exemption requirements for local districts.

• The legislation required certain districts to adop t by regulation a set of measures to reduce emissions from agricultural sources in feder al particulate matter

non-attainment areas.

• The legislation required the ARB to establish a de finition for a “large” CAF, and required certain districts to adopt rules requiring large CAFs to obtain permits and implement emission mitigation measures.

B. Stationary Diesel Engines ATCM

In February 2004, the Board adopted an air toxics c ontrol measure (ATCM) for stationary compression ignition (CI) engines greate r than 50 horsepower [ARB, 2003].3 AGRICULTURAL ASSISTANCE

PROGRAM The Board amended the ATCM in May 2005 [ARB, 2005a] . The control measure requires new CI engines for agricultural operations , including those used to repower agricultural equipment, to meet ARB and federal new off-road engine PM certification standards for engines of the same horsepower and mo del year. The only exception to this requirement is for the installation of Tier 2 engines funds through January 1, 2008, purchased with Carl Moyer Program.

ARB staff is currently working on the development o f in-use stationary diesel agricultural engine requirements to be considered by the Board i n 2006.

C. Diesel-Fueled Portable Engines ATCM

An ATCM for portable diesel engines was adopted by the Board in February 2004 [ARB, 2004]. The control measure requires all diesel-fue led portable engines 50 horsepower and greater to be certified to Tier 1, 2, or 3 fede ral and state off-road engine emission standards by 2010. The ATCM also requires fleets o f portable engines 50 horsepower and greater to meet weighted particulate matter emi ssion standards that become more stringent in 2013, 2017, and 2020.

D. Large Confined Animal Facility Definition

In response to the requirements of SB 700, the Boar d approved a definition for large CAF on June 23, 2005 [ARB, 2005b]. The definition (shown in Table 1) is based on headcount of livestock categories and takes into co nsideration the federal ozone

attainment status of districts as well as livestock population and operational practices of facilities. A recordkeeping component requires the owner or operator of a large CAF to keep a daily record of animals at the facility and to submit the information to the local air district consistent with applicable local rules.

By July 1, 2006, air districts in federal ozone non -attainment areas must adopt rules requiring large CAFs to submit a mitigation plan to reduce air contaminants to the extent

feasible. Each air district in a federal ozone att ainment area must adopt a similar rule by July 1, 2006, unless its district board makes a finding in a public hearing that large

CAFs will not contribute to violations of state or federal standards. Large CAFs have six months from the date of adoption of the distric t rule to submit their mitigation plans to the district; the districts have an additional six months to approve submitted plans. One year after submitting their plans (July 1, 2008), l arge CAFs must comply with the requirements of their mitigation plans.4 AGRICULTURAL ASSISTANCE

PROGRAM Table 1 Large Confined Animal Facility Definition by Livest ock Category (facilities at or exceeding threshold are considere d large)

Livestock Category Non-Attainment Areas* Attainment Areas*
Dairy 1,000 milk producing cows 2,000 milk producin g cows Beef Feedlots 2,500 beef cattle 5,000 beef cattle

Other Cattle Operations 7,500 calves, heifers, or

other cattle 15,000 calves, heifers, or

other cattle Chickens – Broilers 650,000 1,300,000 Chickens – Egg Layers 650,000 1,300,000

Turkeys 100,000 200,000 Swine 3,000 6,000 Sheep and Goats 15,000 30,000
Horses 2,500 5,000
Ducks 650,000 1,300,000
Rabbits, Pheasants, Llamas, Others 30,000 60,000

*Federal 1-hour ozone designation as of January 1, 2004

E. Local Air District Rules

Internal combustion engines: Prior to the adoption of SB 700, most air distric ts specifically exempted agricultural engines from pro hibitory rules for stationary internal combustion engines greater than 50 horsepower. As a result, stationary agricultural engine emissions were largely uncontrolled. These districts have amended (or will amend) their internal combustion engine rules to re move the agricultural operation exemption. In these districts, stationary internal combustion engines used in agricultural operations are now required (or will be required) t o meet the emission standards/limits, permitting conditions, and compliance requirements of the local district.

Large Confined Animal Facilities: As outlined in the previous section, local air di stricts in federal ozone non-attainment areas are required to adopt rules developed to mitigate emissions from large CAFs. Local air districts in federal ozone attainment areas are also required to develop rules to mitigate large CA F emissions unless their district boards make a finding in a public hearing that larg e CAFs will not contribute to

violations of state or federal standards. A number of air districts have or are preparing to adopt regulations to meet these requirements.

Fugitive Dust Control: A number of air districts require agricultural op erations to reduce fugitive dust emissions through local rules. Local rules for particulate matter dust control generally require agricultural operations t o implement a variety of practice-specific options to reduce particulate mat ter. These practices may include methods to reduce the movement of soil during land preparation, cultivation, and5 AGRICULTURAL ASSISTANCE

PROGRAM harvesting, suppression of dust on unpaved roads, a lternatives to burning, and reduction of agricultural chemical applications.

IV. Potential Projects

The statutory provisions of AB 923 include requirem ents for Agricultural Assistance Program eligible projects:

• Projects must involve the new purchase, retrofit, repower, or add-on of equipment.

• Projects must reduce emissions from previously unr egulated sources; that is, sources that are unregulated as of January 1, 2005 (the effective date of the legislation), but are subject to regulation at the time of the grant.

• Projects must be funded within three years of rule adoption or before the compliance date of the rule, whichever is later.

• The ARB must determine that the applicable rule co mplies with HSC sections 40913, 40914, and 40915 pertaining to district atta inment plan measures. District plans must be designed to achieve and maintain the state ambient air quality standards by the earliest practicable date through the use of all feasible measures. ARB routinely reviews district rules for compliance with these requirements and will treat agriculture-related rules the same way.

Criteria for the Agricultural Assistance Program ar e adapted from the 2005 Carl Moyer Program Guidelines and are designed to ensure that the emission reductions expected through the deployment of elect ric motors, reduced-emission engines, or retrofit technologies under this progra m are real, enforceable, and quantifiable. All projects must meet a weighted co st-effectiveness of total reductions criterion of $14,300 per weighted ton of pollutants reduced. In addition, at each district’s discretion, eligible projects may be subject to fun ding or cost-effectiveness of total reductions caps. A project must be in operation fo r at least three years from the time it is first put into operation; ARB may approve a shor ter project life on a case-by-case

basis.

A. New Purchase

The only eligible project for a new agricultural st ationary or portable equipment purchase is a new electric motor. For the purposes of determining emission reductions, the new electric motor is compared to an off-road d iesel engine certified to the current

off-road emission standards.6 AGRICULTURAL ASSISTANCE

PROGRAM B. Repower

1. Repower with Electric Motors

Replacement of uncontrolled or older engines in agr icultural operations with electric motors provides significant emission benefits. Die sel and SI engines may be repowered with electric motors. In addition, selected costs for necessary peripheral equipment associated with the motor (e.g., control panel, mot or leads, service pole with guy wire, connecting electric line) may be included in determ ining the grant amount awarded.

In June 2005, the Public Utilities Commission appro ved a reduced electricity rate and

line extension allowance for Pacific Gas and Electr ic (PG&E) and Southern California Edison (SCE) to be used for conversion of stationar y agricultural internal combustion engines to electric. Individuals enrolling in the PG&E and SCE incentive programs may receive funds through the Agricultural Assistance P rogram for an electric motor replacement of an internal combustion engine. Plea se refer to Part II, Chapter 12: Zero-Emission Technologies in the 2005 Carl Moyer P rogram Guidelines for specific information on these projects.

2. Repower with Emission-Certified Engines

Stationary and portable agricultural engines may be repowered with new off-road engines certified to the current applicable off-roa d emission standards. This provision applies to repowers with diesel and spark-ignited ( SI) engines. Diesel engines may be replaced with cleaner diesel or SI engines. SI eng ines may only be replaced with cleaner SI engines; projects replacing SI engines w ith diesel engines are not eligible for Agricultural Assistance Program funding. Cost-effe ctiveness of total reductions

calculations are based on the rebuild cost of the e ngine being replaced.

3. Repower with SI Engines Meeting Local District Requirements

Very few power systems using SI engines for station ary and portable applications have been certified to meet applicable emission standard s. These power systems are typically assembled by third parties and are not re quired to be certified because they are used in stationary applications. Because under certain conditions SI engines can be significantly cleaner than diesel engines, Agric ultural Assistance Program funds may be used to fund purchases of non-certified SI engin es in some cases. This provision is available until January 1, 2008. This will allow A RB and the districts an opportunity to assess the emission performance and durability of n on-certified SI engines in the field.

Emission reduction calculations are based on the re build cost of the engine being replaced.

Non-certified SI engines purchased through the Agri cultural Assistance Program are required to have best available emission control co mponents, and are subject to local7 AGRICULTURAL ASSISTANCE

PROGRAM district source testing and monitoring requirements . The costs associated for testing and monitoring may not be included in the grant awa rd.

C. Retrofit

A retrofit involves modifications to the engine and /or fuel system such that the retrofitted engine does not have the same specifications as the original engine. Retrofit projects that reduce NOx may be applicable to certain diesel or SI engine families. Emission control technologies that have been verified for us e to reduce NOx and PM emissions in other applications for on-road or off-road diesel o r SI engines may be applicable to stationary and portable agricultural engines. A NO x retrofit for an uncontrolled diesel engine must be verified to reduce emissions to the applicable new engine tier standard or less for a given engine size and not increase pa rticulate matter. An emission-certified stationary or portable engine ma y use a retrofit kit that is verified to reduce NOx or NOx + non-methane hydrocarbon (NMHC) emissions by at least 15 percent from the applicable emission standard. Uncontrolled SI engines may use a

retrofit kit verified to reduce emissions to the cu rrently applicable standard for large SI equipment, or if not feasible, with a retrofit k it verified to reduce emissions to at least 3.0 g/bhp-hr. The emission reductions provided by a retrofit kit must meet local district rule requirements. Emission reduction calculations are based on the emission rates of the existing engine being retrofitted.

D. Non-Engine Projects

The Board has directed the Executive Officer to dev elop project criteria for non-engine agricultural sources where technology is available to ensure the emission reductions are real, quantifiable, and enforceable. However, no s pecific project criteria have been identified currently due to the limited data availa ble on specific control technologies. ARB staff will continue to work closely with the di stricts and interested stakeholders to monitor technological developments to determine whe n and if it is it appropriate to develop project criteria for non-engine sources.

Agricultural Assistance Program funding will not be available for non-engine agricultural projects until ARB staff develop Carl Moyer Program project criteria for these sources. Potential control technologies and regulatory optio ns will be evaluated for suitability under Agricultural Assistance Program requirements. During these evaluations, ARB

staff will consider:

• whether the technology provides real, quantifiable , and enforceable emission

reductions.

• the availability of standardized testing procedure s that will quantify emission reductions from these technologies.

• availability of baseline emission factors.

• potential multi-media issues.8 AGRICULTURAL ASSISTANCE

PROGRAM While engines have a statewide certification or ver ification process to prove the emission levels are achieved in practice, there is no comparable statewide process for stationary or area-wide sources. In developing sta tewide project criteria for non-engine technology ARB staff will consider how to assure re ductions are achieved.

If non-engine agricultural projects include reducti ons of non-combustion PM, the criteria will include a weighting factor for non-combustion PM for use in the cost-effectiveness

of total reductions formula.

The following sections provide background on some p otential non-engine agricultural projects.

1. Livestock Operations

Air emissions of concern from livestock include amm onia, nitrous oxide, methane, carbon dioxide, volatile organic compounds (VOC), h ydrogen sulfide, and particulate matter. The emissions can come from animal housing , storage areas for manure and wastewater, cropland where manure is applied, and d irectly from the cows. Livestock emissions are most significant in the San Joaquin V alley and the South Coast Air Basin.

The South Coast Air Quality Management District ado pted Rule 1127 - Emission

Reductions from Livestock Waste in 2004. This rule requires dairies to clear manure from corrals more frequently and send the manure to an emissions-controlled compost facility, an anaerobic digester, or to agricultural land where manure is approved for spreading as fertilizer.

The San Joaquin Valley Unified Air Pollution Contro l District recently adopted a VOC emission factor to be used for permitting San Joaqu in Valley dairies. The District reviewed important classes of VOC constituents and key dairy processes individually before approving a total dairy emission factor of 1 9.3 lbs/year/head. The District will consider regulations to reduce emissions from dairi es in the near future.

With the upcoming SB 700 deadlines for approving la rge CAF mitigation plans, there is a need for a rapid, objective assessment of which t echnologies are most likely to be successful in California’s unique economic, regulat ory, and environmental conditions. The Dairy Manure Technology Feasibility Assessment Panel, created and hosted by the ARB, was convened in February 2005 to carry out thi s work. Members were drawn from government, industry, academia, and environmen tal and conservation groups.

The Panel evaluated technologies for their potentia l to reduce environmental impacts resulting from air emissions and from releases of n utrients, salts, and pathogens to the environment. The Panel is assessing the ability of the technology to prevent releases of contaminants and is considering their efficacy in r educing environmental impacts, energy production (if any), economic performance (i ncluding saleable products produced by the technology), quality of supporting data, and the development status. The Panel’s draft report is scheduled for release i n early 2006.9 AGRICULTURAL ASSISTANCE

PROGRAM In general, potential technologies may be classifie d into categories including:

• Thermal conversion (including combustion and gasif ication).

• Solid-liquid separation (including dehydration).

• Composting.

• Anaerobic digestion.

• Aerators/mixers.

• Nitrification/denitrification.

• Covers.

• Microbials, enzymes, and other additives.

• Feed management.

• Trapping nutrients in biomass (e.g. crops, plants in constructed wetlands, algae, fish).

• Combination systems (such as wastewater treatment plants).

It is likely that no single technology will solve a ll of the problems associated with dairy manure and each dairy will likely require its own u nique combination of technologies to address the specific problems of that area. Resear ch still needs to be done on VOC emissions to quantify amounts emitted from each por tion of the dairy, and reactivity of the chemical species to form ozone. Without this i nformation and a lack of standard testing procedures, it is difficult to assess how v arious technologies will reduce these emissions, reduce ozone formation, and improve air quality.

2. Other Projects

Non-combustion particulate matter reductions can be achieved through the use of chemical dust suppressants, road paving, and harves ting equipment with catch-frame technology to eliminate the need for sweeping. For some of these projects, multimedia impacts must also be considered.

Another potential project is the evaluation of irri gation pump efficiency. Improvement in pump efficiency through parts replacement and repai r has the potential for emission reductions of NOx, ROG, and PM10 by reduced work by the engine or motor for water
output.

V. Project Criteria

The project criteria below have been designed to pr ovide districts and potential applicants with a list of minimum eligibility requi rements for Agricultural Assistance Program funding. Criteria focus on emission reduct ions, cost-effectiveness of total reductions, and the ability for a project to be com pleted within the timeframe of the program. Additional information about funding elec tric motors for irrigation pumps is available in Part II, Chapter 12: Zero Emission Te chnologies of the 2005 Carl Moyer Program Guidelines.10 AGRICULTURAL ASSISTANCE

PROGRAM Participating districts retain the authority to imp ose additional requirements in order to

address local concerns.

A. General

• The Agricultural Assistance Program may be used to fund projects from previously unregulated agricultural sources of air pollution f or a minimum of three years from the adoption of an applicable rule or until the com pliance date, whichever is later. Emission reductions are not required to be surplus.

• Projects must meet a cost-effectiveness of total r eductions of $14,300 per weighed

ton of NOx + ROG + combustion PM10 reduced calculat ed in accordance with the cost-effectiveness of total reductions methodology discussed in this chapter.

• No project funded by the Agricultural Assistance P rogram shall be used for credit under any federal or state emission averaging banki ng and trading program.

• Agricultural Assistance Program grants can be no g reater than a project’s

incremental cost. The incremental cost is the cost of the project minus the baseline cost. The incremental cost shall be reduced by the value of any current financial incentive that reduces the project price, including tax credits or deductions, grants, or other public financial assistance.

• Projects must have a minimum project life of three years. ARB may approve shorter project life on a case-by-case basis. Projects wit h shorter lives may be subject to additional funding restrictions, such as a lower co st-effectiveness of total reductions limit or a project cost cap.

• The contract term must extend to the end of the pr oject life.

• Potential projects that fall outside of these crit eria may be considered on a case-by-case basis if evidence provided to the air district suggests potential real, quantifiable, and enforceable emission reduction be nefits.

• Air districts must consult with ARB staff to deter mine eligibility of all projects considered for funding on a case-by-case basis. Al l projects considered on a case-by-case basis must receive ARB approval prior to receiving program funding.

• An engine must be rated at greater than 25 hp, whi ch is equivalent to an electric motor greater than 19 kW.

• Projects must operate at least 75 percent of total equipment hours in California.

• The default project life when determining project benefits for new purchases or repowers shall be ten years for electric motors. T he default project life for engines without documentation shall be seven years. A long er project life may be used with11 AGRICULTURAL ASSISTANCE

PROGRAM approval by ARB staff, however, sufficient document ation must be provided to ARB that supports the selected project life based on th e actual remaining useful life.

B. New Purchase

• Engine purchases for new 2005 or later model year agricultural stationary or portable equipment can only be electric motors.

C. Repower

• A repower of an uncontrolled or emission certified (1996+ model year) diesel engine must be with one of the following:

− A new electric motor.

− A new off-road diesel engine certified to the curr ent applicable emission

standards.

− A new off-road spark-ignited (SI) engine certified to the current applicable

emission standards.

− A new SI engine that meets or exceeds local distri ct emission requirements and is subject to and complies with local district perm itting, monitoring, record keeping and reporting requirements. This criterion will sunset on January 1, 2008.

• A repower of an uncontrolled SI engine must be wit h one of the following:

− A new electric motor.

− A new off-road SI engine certified to the current applicable emission standards.

− A new SI engine that meets or exceeds local distri ct emission requirements and is subject to and complies with local district perm itting, monitoring, record keeping and reporting requirements. This criterion will sunset on January 1, 2008.

• A repower of an emissions-controlled SI engine mus t be with one of the following:

− A new electric motor.

− A new off-road SI engine certified to the current applicable emission standards.

− A new SI engine that meets or exceeds local distri ct emission requirements and is subject to and complies with local district perm itting, monitoring, record keeping and reporting requirements, provided that t he new engine provides a

NOx emission reduction of at least 15% from the bas eline engine NOx emissions. This criterion will sunset on January 1 , 2008.

• Electric motors may replace diesel or SI engines. The applicant must have documentation of payment to the local utility compa ny for power installation. This requirement of documentation also applies to new in stallations.

• Off-road diesel engines must be certified for sale in California and must comply with durability and warranty requirements.12 AGRICULTURAL ASSISTANCE

PROGRAM • The use of a non-certified SI engine shall be subj ect to approval by ARB staff. Emissions testing of a non-certified SI engine shal l be conducted using an ARB-approved source testing procedure, such as ARB Test Method 100.

• Non-certified SI engines shall be required to incl ude currently available emission control components such as closed-loop fuel control systems, and three-way catalysts.

• Non-certified SI engines shall be subject to sourc e testing with an ARB-approved testing procedure following local district requirem ents.

• Non-certified SI engines shall be subject to NOx a nd hydrocarbon emission readings using a portable analyzer following local district monitoring requirements.

• The costs associated with source testing and monit oring requirements for non-certified SI engines are not eligible for fundi ng.

D. Retrofit

• A retrofit of an uncontrolled diesel engine that r educes NOx must be with a retrofit kit

that is verified to reduce NOx or NOx+NMHC emission s to the applicable new engine Tier standard or less for a given engine siz e.

• A retrofit of an uncontrolled SI engine that reduc es NOx must be with a retrofit kit

that is verified to reduce NOx+NMHC emissions to th e currently applicable standard for off-road large spark-ignited equipment. If thi s is not feasible, the project must reduce NOx+NMHC emissions to at least 3.0 g/bhp-hr or less.

• A retrofit of an emission-certified (1996+ model y ear) off-road diesel engine that

reduces NOx must be with a retrofit kit that is ver ified to reduce NOx or NOx+NMHC emissions by at least 15 percent from the applicabl e NOx or NOx+NMHC emission

standard.

• Reduced-emission retrofit kits must be verified fo llowing California test procedures and must comply with durability and warranty requir ements.

E. Scrap

• The existing (old) engine must be destroyed and re ndered useless. Engines must have a complete and fully visible and legible engin e serial number in order to be eligible for an engine repower. The destruction of the engine must be documented by district staff seeing the destroyed engine or th e receipt from a qualified vehicle salvage yard (see 2005 Carl Moyer Program Guideline s, Part II, Chapter 2: Fleet Modernization, Salvage Requirements for definition ) . Engines without a visible and legible serial number may be repowered if district staff stamp the engine block with the Agricultural Assistance Program project number and district staff is present to13 AGRICULTURAL ASSISTANCE

PROGRAM personally verify engine removal from the project v ehicle or equipment and the subsequent engine destruction. ARB staff will cons ider alternatives to stamping the engine block on a district-by-district basis.

VI. Cost-Effectiveness of Total Reductions

Projects funded through the Agricultural Assistance Program are not required to achieve surplus emission reductions. The cost-effectivenes s calculations used in the Carl Moyer Program are not appropriate for evaluati ng Agricultural Assistance Program projects because those calculations are based on su rplus emission reductions.

In order to ensure that the technologies and costs of projects funded by the Agricultural Assistance Program are generally comparable to thos e funded by the Carl Moyer Program, ARB staff require Agricultural Assistance Program projects to

meet a “cost-effectiveness of total reductions” cri terion. The cost-effectiveness of total reductions is determined by subtracting the emissio ns of the new engine from the emissions of the old engine. Districts may set mor e restrictive cost-effectiveness of total reductions limits when implementing local programs.

The cost-effectiveness of total reductions is the a nnualized cost divided by the emission reductions as if no regulatory requirement existed:

Annualized Cost ($/year)
Weighted Emission Reductions if no Regulatory Requi rement Existed (tons/yr)

For example, the cost-effectiveness of total reduct ions calculations for an agricultural irrigation pump engine would generally assume a pro ject life of seven years, even if a local rule for agricultural use engines takes effec t in two years.

The cost-effectiveness of total reductions cannot b e compared to the cost-effectiveness of Carl Moyer Program-eligible projects because it includes the total emission reductions associated with a project instead of onl y the surplus emission reductions.

As described in the 2005 Carl Moyer Program Guideli nes, the weighted total emission reductions are estimated by taking the sum of the p roject’s annual emission reductions of NOx, ROG, and combustion PM using the following formula:

Weighted Total Emission Reductions = NOx reductions (tons/yr) + ROG reductions (tons/yr) + 20*[combustion PM reduct ions (tons/yr)]

NOx and ROG emissions are given equal weight; combu stion PM is given a greater weighting due to the higher cost of reducing PM emi ssions.

The annual emission reductions for each pollutant ( NOx, ROG, and combustion PM) are determined by calculating the annual emissions for the baseline technology, and then14 AGRICULTURAL ASSISTANCE

PROGRAM subtracting from it the annual emissions of the red uced technology. Annual emissions may be calculated based on hours of operation or fu el consumption.

Annual Emissions Based on Hours of Operation = Emission Standard (g/bhp-hr) * Engine Horsepower * Load Factor * Activity (hrs/y r) * ton/907,200 g

Annual Emissions Based on Fuel Consumption = Emission Standard (g/bhp-hr) * Energy Consumption Factor (bhp-hr/gal) * Activity ( gal/yr) * ton/907,200 g

The engine load factor is an indicator of the nomin al amount of work done by the engine for a particular application. It is given as a fra ction of the rated horsepower of the engine and varies with engine application. For pr ojects in which the horsepower of the baseline technology and reduced technology differ b y more than 25 percent, the load factor must be adjusted using the following formula :

Replacement Load Factor = Load Factor baseline * hp baseline /hp reduced

It is important to understand the replacement load factor must never exceed 100 percent in cases where the reduced technology e ngine is significantly smaller than the baseline technology engine.

The emission standards and load factors for off-roa d diesel engines and large SI engines in Appendix B of the 2005 Carl Moyer Pro gram Guidelines may be used for these calculations. The default energy consumption factor for a stationary agricultural irrigation pump engine greater than 50 hp is 17.56 bhp-hr/gal.

Annualized cost is the amortization of the one-time incentive grant amount for the life of the project to yield an estimated annual cost. The annualized cost is calculated by multiplying the incremental cost by the capital rec overy factor (CRF).

Annualized cost ($) = CRF * incremental cost

The CRF is the level of earnings reasonably expected by invest ing state funds in various financial instruments over the length of an Agricultural Assistance Program project. The CRF uses an interest rate and project life to determine the rate at which earnings could reasonably be expected if the same f unds were invested over a length of time equaling the project life. The CRF is calcula ted following formula:

Capitol Recovery Factor (CRF) = [(1 + i) n (i)] / [(1 + i) n - 1]

Where

i = discount rate (4%) n = project life (at least 3 years, see project cri teria for default maximums)

The discount rate of 4 percent reflects the prevail ing earning potential for state funds that could reasonably be expected by investing stat e funds in various financial15 AGRICULTURAL ASSISTANCE

PROGRAM instruments over the length of the minimum project life of Agricultural Assistance Program projects

Table B-1 in Appendix B of the 2005 Carl Moyer Prog ram Guidelines lists the CRF for various project lives using a discount rate of 4 pe rcent.

The incremental cost of a project is calculated by subtracting the cost of the baseline technology from the cost of the reduced technology.

Incremental Cost ($) = Cost of Reduced Technology – Cost of Baselin e Technology

Generally, the cost of the baseline technology for a new purchase is the price of a new piece of equipment meeting the current emission sta ndards. The cost of the baseline technology for a repower is the cost of rebuilding the existing engine.

An example of calculating the cost-effectiveness of total reductions is provided below. In this example, a district regulation requires tha t uncontrolled stationary engines used in agricultural operations must be retired from ser vice by January 1, 2008. The project cannot meet the three year surplus emission reducti ons requirement for the Carl Moyer Program, but is eligible for funding through the Ag ricultural Assistance Program.

Example: Engine Repower (diesel to diesel) Based on Hours

Baseline Technology information:

• Baseline Technology (application): 1990 John Deer e C 8.3P

• Engine horsepower (application): 285 hp

• Activity (application): 3,000 hours per year

• Load factor (default): 0.65

• Emission Factors: 7.60 g/bhp-hr NOx; 0.82 g/bhp-h r ROG; 0.274 g/bhp-hr PM10

• Baseline rebuild cost (quote provided with applica tion): $4,000

Reduced Technology information:

• Reduced Technology (application): 2005 John Deere 6081HF70-275

• Engine horsepower (application): 275 hp

• Activity (application): 3,000 hr/yr

• Load factor (calculated): 0.65 * (285 hp/275 hp) = 0.67

• Emission Factors: 4.15 g/bhp-hr NOx; 0.12 g/bhp-h r ROG; 0.088 g/bhp-hr PM10

• New engine cost (quote provided with application): $22,500

Emission Reduction Calculations: Annual NOx baseline technology emissions (7.60 g/bhp-hr * 285 hp * 0.65 * 3,000 hrs)(ton/907 ,200 g) = 4.65 tons/yr NOx Annual NOx reduced technology emissions (4.15 g/bhp-hr * 275 hp * 0.67 * 3,000 hrs)(ton/907 ,200 g) = 2.53 tons/yr NOx16 AGRICULTURAL ASSISTANCE

PROGRAM Annual ROG baseline technology emissions (0.82 g/bhp-hr * 285 hp * 0.65 * 3,000 hrs)(ton/907 ,200 g) = 0.50 tons/yr ROG Annual ROG reduced technology emissions (0.12 g/bhp-hr * 275 hp * 0.67 * 3,000 hrs)(ton/907 ,200 g) = 0.07 tons/yr ROG Annual Combustion PM baseline technology emissions (0.274 g/bhp-hr * 285 hp * 0.65 * 3,000 hrs)(ton/90 7,200 g) = 0.168 tons/yr PM10 Annual Combustion PM reduced technology emissions (0.088 g/bhp-hr * 275 hp * 0.67 * 3,000 hrs)(ton/90 7,200 g) = 0.054 tons/yr PM10

• NOx emission benefits = 4.65 tons/yr – 2.53 tons/ yr = 2.12 tons/yr NOx

• ROG emission benefits = 0.50 tons/yr – 0.07 tons/y r = 0.43 tons/yr ROG

• PM10 emission benefits = 0.168 tons/yr – 0.054 ton s/yr = 0.114 tons/yr PM10

Weighted Total Emission Reductions = 2.12 tons/yr + 0.43 tons/yr + 20(0.114 tons/yr) = 4.83 weighted tons/yr

Project life: 7 years; CRF = 0.167

Incremental Cost = $22,500 - $4,000 = $18,500

Annualized Cost = 0.167 * $18,500 = $3,090/yr

Cost-Effectiveness of Total Reductions: ($/yr)/( weighted tons/yr) = ($3,090)/(4.83 weighte d tons/yr)

= $640/ton of weighted emissions reduced

The cost-effectiveness for this project is less tha n $14,300 per weighted ton of total emissions reduced. This project qualifies for the maximum amount of grant funds requested.

VII. Minimum Project Requirements

A. Application

The minimum application information for stationary and portable agricultural engine projects is in Table 2. Districts may request addi tional information from the applicant.

A disclosure must also be included stating that onc e an applicant submits an application for a specific engine to one district or ARB as par t of a multi-district solicitation, the owner shall not submit an application to any other source of funds, including, but not limited to, other districts or ARB for the same eng ine. Any applicant who is found to have submitted multiple applications for the same e ngine will, at a minimum, be disqualified from funding for that engine from all sources and may also be banned from submitting future applications to any and all Agric ultural Assistance Program and Carl Moyer Program solicitations.17 AGRICULTURAL ASSISTANCE

PROGRAM Table 2 Minimum Application Information for Stationary and Portable

Agricultural Engine Projects Agricultural Assistance Program

Applicant Information Organization, Company or Individual Name

Street Address City, County, State, Zip Code Primary Contact Name Primary Contact Phone Number Person with Contract Signing Authority Person who Filled Out Funding Application Project Address (if different from above)

Equipment Information Equipment Type (portable, stationary, other) Equipment Make Equipment Model Equipment Year Equipment Serial Number Baseline Equipment Fuel New Equipment Vendor (optional)

Activity Information Will the new engine have a functioning hour meter for the life of the project? Annual Hours of Operation or Annual Gallons of Fuel Consumption Percent Operation in California Percent Operation in District Project Life

Electronic Monitoring Unit (EMU) Will a new eligible EMU be installed as part of this project? (yes/no)

EMU Make

EMU Model

EMU Model Year

EMU ID Number EMU Cost (optional) ADDITIONAL INFORMATION –

NEW PURCHASE PROJECTS ONLY

New Electric Motor Make

New Electric Motor Model

New Electric Motor Serial Number New Electric Motor Family

New Electric Motor Year New Electric Horsepower (converted from kilowatts) Projected Year of Purchase of New Equipment

Baseline Cost New Reduced Emission Equipment Cost New Electric Motor Vendor (optional)

ADDITIONAL INFORMATION –

REPOWER PROJECTS ONLY Existing and Newer Engine/Motor Make Existing and Newer Engine/Motor Model Existing and Newer Engine/Motor Year Existing and Newer Engine/Motor Serial Number (if available) Existing and Newer Engine/Motor Fuel Type Existing and Newer Engine/Motor Horsepower Existing and Newer Engine/Motor Tier Existing and Newer Engine/Motor Family Is this project participating in the PG&E AG-ICE or the SCE TOU-PA-ICE Incentive Programs? Is this project engine a currently covered by a Moy er Program contract? Engine Rebuild Cost New Reduced Emission Equipment Cost New Engine Vendor (optional) New Engine Installer (optional)

ADDITIONAL INFORMATION –

RETROFIT PROJECTS ONLY

ARB-Verified Retrofit Device

Retrofit Device Serial Number ARB-Verified NOx Reduction (%) ARB-Verified PM Reduction (%) ARB-Verified ROG Reduction (%)

Retrofit Device Executive Order Verification Level (Level 1,2 or 3)

Retrofit Device Cost Cost of Retrofit Installation (optional) Cost of Retrofit Maintenance for Life of Project (o ptional)18 AGRICULTURAL ASSISTANCE

PROGRAM Third party applications are not allowed. The equi pment owner must sign and agree to the application. However, a third party (e.g. engi ne dealer or distributor) may complete an application or part of an application on an owne r’s behalf. Applications must include a signature section for third parties. The third p arty signature section must include signature and date lines, and blanks for the third party to list how much they are being paid, if anything, to complete the application and what source of funds are being used to pay them. Districts are encouraged to provide tech nical assistance to applicants in completing the application.

B. Reporting and Monitoring

Owners of stationary and portable agricultural engi nes participating in the Agricultural Assistance Program are required to kee p appropriate records for the life of the project and for three years after the project l ife is completed. The district has the authority to conduct periodic checks or solicit ope rating records from the recipient of Agricultural Assistance Program funds. This is to ensure that the engine is being operated as stated in the project application. The recipient must maintain and update operating records throughout the project life and h ave them available to the district upon request. Annual records must contain, at a minimum , total actual hours of operations or

estimated amount of fuel used from actual fuel rece ipts. Actual hours of operations are acceptable for an engine equipped with a non-reset hour meter.

Monitoring may be required to comply with district requirements and to ensure the program incentives are being applied toward the pro ject as specified in the application. To ease the tracking of the equipment over the life of the project, a district registration certificate may be issued to the equipment owner.

Districts providing Agricultural Assistance Program incentive funds must maintain separate record for projects funded through the Car l Moyer Program and the Agricultural Assistance Program.

VIII. References

ARB, 2003. Air Resources Board. Staff Report: In itial Statement of Reasons, Airborne Toxic Control Measure for Stationary Compression Ig nition Engines. http://www.arb.ca.gov/regact/statde/isor.pdf

ARB, 2004. Air Resources Board. Staff Report: In itial Statement of Reasons, Airborne

Toxic Control Measure for Diesel-fueled Portable En gines. http://www.arb.ca.gov/regact/porteng/isor.pdf

ARB 2005a. Air Resources Board. Staff Report: In itial Statement of Reasons for Proposed Revisions to the Airborne Toxic Control Me asure for Stationary Compression Ignition Engines. http://www.arb.ca.gov/regact/statde05/isor.pdf19 AGRICULTURAL ASSISTANCE

PROGRAM ARB, 2005b. Air Resources Board. Staff Report: I nitial Statement of Reasons, Public Hearing to Consider the Large Confined Animal Facil ity Definition. http://www.arb.ca.gov/regact/lcaf05/isor.pdf

ARB 2005c. Air Resources Board. The Carl Moyer Me morial Air Quality Standards Attainment Program Guidelines, Revision 2005.

CASS 2003. California Agricultural Statistics Serv ice. California Agricultural Statistics, 2003. California Agricultural Overview. http://www.nass.usda.gov/ca/bul/agstat/indexcas.htm