SAN JOAQUIN VALLEY U NIFIED AIR POLLUTION CONTROL DISTRICT

FINAL STAFF REPORT

Rule 4694 (Wine Fermentation and Storage Tanks)

December 15, 2005

Prepared by: Daniel T. Barber, Ph.D., Air Quality Specialist

Reviewed by: George Heinen, Supervising Air Quality Engineer

Samir Sheikh, Permit Services Manager Ted Strauss, Supervising Air Quality Inspector Maria Stobbe, Planning Manager

I. SUMMARY

A. Reasons for Rule Development and Implementation

The San Joaquin Valley Air Basin (SJVAB) is classified as an extreme ozone

nonattainment area and a serious PM10 nonattainment area for the health

- based air quality standards established by the federal Clean Air Act. The SJVAB is also
classified as severe nonattainment for the California ozone standard and

nonattainment for the California PM10 standard.

This rulemaking project is part of the District’s ozone and particulate matter attainment strategies. As such, this project is subject to the following state and federal requirements:

1 Ozone and PM10 attainment plans need to implement control measures as expeditiously as practicable, and provide for attainment. Clean Air Act (CAA) Section 172(c)(1)

2 Ozon e attainment plans need to assure that reasonably available control technology (RACT) for volatile organic compounds (VOC) and NOx is in use at major sources and on source categories subject to control technology guidelines. CAA Sections 182(b)(2), 182(f)

3 PM10 attainment plans for serious PM10 nonattainment areas need to assure that the best available control measures (BACM) for the control of PM10 shall be implemented no later than 4 years after the date the area is classified (or reclassified) as a Ser ious Area. CAA Section 189(b)(1)(B)

4 BACM provisions in attainment plans should include the application of best available control technology (BACT) to existing major stationary sources. (Federal Register 8/18/94)The control requirements for major

station ary sources of PM10 also apply to PM10 precursors (precursors for PM10 in the SJV are VOC, NOx, SOx). CAA Section 189(e)5 Ozone attainment plans should provi de for best available retrofit control technology (BARCT) for existing permitted sources. California Health & Safety Code (H&SC) Section 40919(a)(3)

6 Ozone attainment plans should include “all feasible control measures.” H&SC Section 40914(a)(2)

To s atisfy the attainment goals of the ozone and PM plans, this rulemaking project will seek to obtain as much emission reduction from the source category as is expeditiously practicable, technologically feasible, and economically reasonable, as determined by the District’s Governing Board. The rulemaking project is also intended to satisfy the state and federal requirements identified

above.

B. Description of the Project

The District’s 2003 PM10 Plan and the 1

- hour Ozone Plan identify the need for

control measures to reduce VOC emissions from wineries. These plans identify wine fermentation and wine aging as two winery processes that produce significant VOC emissions. This project, Rule 4694 (Wine Fermentation and Storage Tanks), focuses on developing a c ontrol measure to reduce VOC emissions from tanks used in wine fermentation and wine storage. District staff will continue to investigate the feasibility of developing control measures to reduce VOC emissions associated with wine aging. In addition, Dist rict staff will begin investigating VOC emissions associated with the production, storage, and aging of other alcohol containing products, such as brandy and distilled spirits.

II. BACKGROUND

A. Current District Regulations

The District’s prohibitory r ules do not currently regulate wine fermentation and wine aging. Rule 4623 (Storage of Organic Liquids) limits VOC emissions from the storage of organic liquids, however, Section 4.1.4, exempts tanks used in wine fermentation and for storage of resulting products, by

- products, and spirits.

On March 15, 2002, Rule 4623 was submitted to the EPA along with other

revisions to California’s State Implementation Plan for Achieving and Maintaining the National Ambient Air Quality Standards (SIP). On April 25, 20 03, the EPA published in the Federal Register a proposed simultaneous limited approval and limited disapproval of Rule 4623, citing deficiencies in Rule 4623 that conflict with Section 110 of the Federal Clean Air Act (FCAA). Although not identified as a rule deficiency, EPA also expressed concern that Rule 4623 added an exemption for tanks used in wine fermentation and storage of resulting products, by

products, and spirits. EPA considers VOC emissions from this source category to be significant and reco mmended further study and analysis.III. DISCUSSION

A. General Process Description

Wine is an alcoholic beverage pro duced by fermentation of sugars in fruit juices, primarily grape juice. In general, wines are classified into two types according to alcohol content: table wines (7 to 14 percent alcohol, by volume) and dessert wines (17 to 22 percent alcohol, by volume). Dessert wines may achieve their higher alcohol content by the addition of distilled spirits (fortified wine) or by fermentation of higher sugar content juices. Table wines are further subdivided into still and sparkling categories, depending on the CO 2 content retained in the bottled wine. Sparkling wines are often classified by the method used to achieve

the CO 2 content in the wine. Still table wines are further divided, based on color, into three groups: red, white, and rosé (or blush). In terms of overall production, still table wines represent the majority of table wines produced within the San Joaquin Valley. Consequently, the following discussion will focus on production

of still table wines.

Wine making involves three major steps: grapes are harvested, crushed, and then fermented. For this rule making processes, District staff is primarily interested in the wine fermentation step, which is typically a batch process. Other sources of fugitive emissions associated with wine production are bul k wine handling and bottling processes. Limited data are available to assist District staff in characterizing fugitive emissions from these activities. However, it appears that fugitive emissions from these sources warrant further consideration.

For tax ation purposes, the U.S. Department of the Treasury, Alcohol and Tobacco Tax Bureau (TTB) requires winery operators to file monthly reports detailing production, processing, and storage activities. According to the TTB,

losses associated with wine handlin g and bottling routinely occur. Annual production losses vary, but in general, losses on the order of three (3) to five (5) percent could be within the norm. Applying a three (3) percent loss to the District’s 2002 wine production (337,968,011 gallons), equates to a loss of 1,216,685 gallons of ethanol, which translates into potential annual emissions of about 4,500 tons of VOCs. The Wine Institute has commented that loses are

between 0.5% and 3%. District staff has not found information that would assi st in assessing how closely these potential losses reflect actual losses within the
SJVAB.B. Source Description

The District’s 2003 PM10 Plan, and 1

- hour Ozone Plan identify the need to address emissions of volatile organic compounds (VOC) from wine fermentation and wine aging processes occurring in the SJVAB. The 2003 PM10 Plan estimates that ethanol emissions from wine fermentation, bulk

- wine storage, and barrel aging of wine and brandy averaged 7.0 tons per day (TPD) in 1999. The

1

- hour Ozone Pla n estimates baseline ethanol emissions from wine fermentation

and bulk

- wine storage will be 2.1 tons per day in 2010, and projects emission reductions of 0.7 tons per day for a wine fermentation and storage control

measure.

Seventy percent of the State of California’s wine production occurs within the SJVAB. The majority of wine production in the SJVAB occurs at large wineries, with annual wine production capacities of tens of millions of gallons. In 2002, 18 wineries in the District had annual permitted production volumes ranging from 5 million to greater than 50 million gallons. These 18 wineries accounted for 95% of the District’s emissions from wine fermentation. Of the 109 wineries operating in the SJVAB in 2002, 70% of the wineries had annual prod uction volumes of less than 200,000 gallons, and 58% of the wineries had annual production volumes of less than 2,000 gallons.

C. Emissions Inventory

An emissions inventory has two components, the amount of emissions per unit of activity and the total am ount of activity. In the case of wine fermentation, the unit of activity is gallons of must fermented into wine. Because of processing differences, red wine fermentation produces about 2.5 times more VOC

emissions than white wine fermentation. Red wine has an emissions factor of

6.2

- lb VOC/1,000 gallons, and white wine has an emissions factor of 2.5

- lb/1000 gallons of fermented must.

Statistics characterizing the total amount of wine fermentation occurring in the SJVAB were obtained from The U.S. Depart ment of the Treasury, Alcohol and Tobacco Tax Bureau (TTB). In 2002, 337,968,011 gallons of wine were
fermented in the SJVAB. TTB statistics are for total wine fermentation and do not report volumes of red wine and white wine produced. To estimate the

v olumes of red wine and white wine produced in the District during 2002, the TTB statistics were apportioned into volumes of red and white wine produced, using ARB methodology. ARB methodology uses the percentages of grapes crushed

for red wine and white w ine, as reported in the California Grape Crush Report. In 2002, 60% of the grapes were crushed for red wine and 40% of the grapes were crushed for white wine production. Using these percentages, total gallons of wine fermented in the District would be ap portioned into approximately 198 million gallons of red wine and 140 million gallons of white wine. The emissions inventory can be estimated by applying the respective emissionfactors to gallons of red wine and white wine fermented in the District. Based on

2002 fermentation data, the emissions inventory for wine fermentation is

estimated to contain 613 tons VOC emissions from red wine fermentation and
175 tons VOC emissions from white wine fermentation. Total annual VOC

emissions from wine fermentation in the SJVAB are an estimated 788 tons per

year.

The Wine Institute has stated that use of the Crush Report statistics overstates the emissions inventory. The Wine Institute has opined that the Crush Report does not account for red grape varieties that a re fermented into blush wines, whose emissions are similar to white wines. A Wine Institute survey of 7 large wineries in the SJVAB shows that about 40% of their production was red wine and about 60% was white wine. Using the Wine Institute’s percentages , the emissions inventory for wine fermentation would be estimated to contain 398

tons VOC emissions from red wine fermentation and 262 tons from white wine fermentation, annually. Total annual VOC emissions from wine fermentation would be 660 tons per ye ar, based on Wine Institute survey data.

In the absence of definitive data on the amount of red wine and white wine produced in the District, the annual VOC emissions from wine fermentation are presented in this report as a range from 660 to 788 tons. Averaged over 365 days, daily emissions range from 1.8 to 2.2 tons per day. Wine fermentation is seasonal, corresponding to the grape harvest. In the SJVAB, fermentation typically occurs over a 90 to 120 period, resulting in seasonal daily averages of

7. 3 to 8.8 tons per day, or 5.5 to 6.6 tons per day for the respective fermentation period.

In 2002, 75% of annual fermentation emissions occurred during September and October. This period coincides with when the SJVAB experiences the greatest

exceedance o f the NAAQS for one

- hour ozone, in both frequency and magnitude. Additional information on emissions can be found in Appendix B, Emissions Reduction Analysis

.

IV. EMISSIONS CONTROL

The US EPA’s RACT/BACT/LAER Clearinghouse (RBLC) database contains

case

- specific information on the "Best Available" air pollution technologies that have been required to reduce the emission of air pollutants from stationary sources (e.g., power plants, steel mills, chemical plants, etc.). This information has been provided by State and local permitting agencies. The RBLC contains no examples of controlling wine fermentation emissions. Additional literature searches produced no examples of fermentation emission control being implemented worldwide.

The District has prepared a BACT guideline for Ethanol Fermentation ProcessTanks (Guideline 4.12.4) for ethanol production from corn fermentation.

Guideline 4.12.4 establishes a 99.5% VOC emissions control efficiency using a

fermentation

- wet scrubber vented to a CO 2 recovery pla nt with a condenser and high

- pressure scrubber; or equivalent.

Differences between wine fermentation and ethanol for fuel production necessitates consideration of alternative control technologies. Of specific

concern is treatment of the wastewater from t he wet scrubber. During corn fermentation, wastewater from the wet scrubber is conveyed back to a slurry tank and reused in the manufacturing process. Wine is a food product and lacks a similar production process. As a control technology for wine fermen tation, wet scrubbers would require alternative wastewater treatment or disposal methods.

Guideline 4.12.4 identifies thermal oxidation with 98% VOC control as an alternative technology. Thermal oxidizers have been successfully used in

different industri al settings operating in the District and are readily available. District staff considers regenerative thermal oxidizers to be an acceptable control technology for use in controlling VOC emissions from wine fermenters.

In 1990, a demonstration program ev aluating control of ethanol emissions from wine fermenters was conducted at the E. & J. Gallo Winery in Fresno, California . The study used a prototype emissions capture system. The design of the VOC capture system allowed fermentation emissions to vent naturally through a manway located at the top of the tank. The VOC capture system consisted of an emissions collection hood, located above the manway, connected by ductwork to a VOC control device. The collection hood was larger than the manway and was

s uspended above the opening, creating an air gap between the tank and the hood. The design included a fan with a flow

- rate sufficient to pull emissions into the collection hood and force the emissions through the ductwork to the

emissions control device. Based on results reported in the Gallo study, District staff considers it reasonable to expect similar emissions collection systems to have a capture efficiency of at least 90%.

Achieving an emissions capture efficiency of 90% and an emissions destruction efficiency of 95% would result in an overall emissions reduction efficiency of 86%. A report submitted to the District by the Wine Institute includes a conceptual design for collection system that eliminates the air gap, achieving a closed capture system . A closed capture system is expected to have a capture efficiency of 100%.A. Fermentation Emissions Control Technology

Ethanol is the primary VOC produced during wine fermentation. Many different types of established technologies can be used to cont rol ethanol emissions. Five types of VOC controls are:

1. Oxidation (conversion of the VOC to CO 2 );

2. Absorption (“scrubbers”, which transfer the VOC in air emissions to a liquid waste stream);

3. Adsorption (often using activated carbon, which transfer s the VOC in the air onto a solid substrate);

4. Condensation (conversion of the VOC gases into liquids); and

5. Biological control systems (e.g., bio

- filters or bio

- scrubbers)

Another option for controlling ethanol emissions from fermentation is reducti on in fermentation temperatures. Temperature control as a method of reducing fermentation emissions is based on the relationship between fermentation temperature and evaporative ethanol loss.

General information on available control technologies follows.

Adsorption Vapor Recovery

Adsorption vapor recovery is accomplished by passing the VOC

- laden gas through beds containing adsorbents that have a high surface area to weight ratio. Typical adsorbents are activated carbon, zeolite , or organic polymers. As the gas stream passes through the bed, organic compounds adsorb weakly onto the adsorbent’s surface. Adsorption of the hydrocarbon molecules proceeds until the
available surface area is filled or saturated with VOC molecules. T he VOC molecules are retained until the regeneration step, or disposal of the spent

adsorbent.

Desorbing or removing captured VOCs regenerates the adsorbent. Decreasing the pressure, reducing the hydrocarbon concentration around the adsorbent or

increasin g the temperature of the bed can perform regeneration. A combination of these steps can also be used for regeneration. There are three basic types of adsorption systems available to recover or remove hydrocarbon vapors from an air stream. Two of these sy stems regenerate the adsorbent in

- situ for reuse. The third system requires removal of the adsorbent to another site for regeneration.

The two systems that provide in

- situ regeneration are: Pressure Swing Regenerated Systems and Thermally Regenerated Syste ms. The third type of system, which requires removal of the absorbent to another site for regeneration or disposal, is a once through single use or canister system. Canister systems can usually be purchased directly from the manufacturer.

Thermal Oxidati on (Incineration)A thermal oxidizer (TO) destroys VOCs by the process of combustion. A basic

TO system consists of a combustion chamber, burner, stack, and combustion controls. All hydrocarbons are oxidized to carbon dioxide and water vapor by the

prop er mix of temperature, residence time and turbulence within the reactor chamber. Combustion of the contaminated gas stream occurs at high temperatures, normally 650 o C to 870 o C (1,200 o F to 1,600 o F) when treating low

concentration streams. TO systems can be divided into recuperative or regenerative systems; based on methods used to increase operating efficiencies by capturing heat from the combustion process. Recuperative TO systems increase fuel efficiency by use of

a gas pre

- heating section and a heat r ecovery section. Heat recovery can be as high as 70%. A regenerative system provides extremely high thermal

- energy recovery; up to 95% of heat energy can be recovered. Regenerative TO systems

use a ceramic heat

- exchange bed to preheat process air to with in 5% of the oxidation temperature. PM10 and VOC conversion efficiencies range from 97% to 99.9% for recuperative and 95% to 99% for regenerative TO systems.

Catalytic Thermal Oxidation

A catalytic thermal oxidizer (CTO) is essentially a thermal oxidati on unit with a catalyst module. These units are similar in design to recuperative units, except that VOCs are oxidized using precious metal or metal

- oxide

- based catalysts instead of open flames. Operating at about half the temperature of thermal

oxidizers , catalytic units have smaller footprints and relatively low operating costs. Other industries have demonstrated typical VOC removal efficiencies of up to 98%.

Wet Scrubbing

The basic process involved in wet scrubbing is contacting a polluted gas stream with a liquid solution. During operation, gas flows upward through a packed column while scrubbing liquid flows down (by gravity) over the packing material.

The counter

- flow d esign principle offers optimal mass transfer. Gaseous contaminants are entrained in the liquid and the decontaminated gas stream flows out of the scrubber. Many scrubbing applications achieve emission

reduction efficiencies of 99.9%. In a pilot study co nducted by ARB in 1987, wet scrubbing demonstrated greater than 90% reduction in ethanol emissions.

Condensation, Refrigeration, and Cryogenic Systems

Condensation, refrigeration, and cryogenic systems remove organic vapor by condensing the target gases on cold surfaces. These cold conditions can be created by passing cold water through an indirect heat exchanger, by spraying cold liquid into an open chamber with the gas stream, by using a refrigerant to create very cold coils, or by injecting cryogenic gases such as liquid nitrogen into the gas stream. The concentration of VOCs is reduced to the level equivalent tothe vapor pressures of the compounds at the operating temperature.

Removal efficiencies attainable with this approach depend strongly on th e outlet gas temperature. For cold

- water

- based condensation systems, the outlet gas temperature is usually in the 40 to 50°F range, and the VOC removal efficiencies are in the 90% to 99% range depending on the vapor pressures of the specific compounds. F or refrigerant and cryogenic systems, the removal efficiencies can be considerably above 99% due to the extremely low vapor pressures of essentially all VOC compounds at the very low operating temperatures of

- 70°F

to less than

- 200°F.

Biological Oxidati on

Biological oxidation systems are a relatively new means of air pollution control. VOCs can be removed by forcing them to absorb into an aqueous liquid or moist media inoculated with microorganisms that consume the dissolved and/or adsorbed organic com pounds. The control systems usually consist of an irrigated packed bed that hosts the microorganisms (biofilters). A presaturator is often placed ahead of the biological system to increase the gas stream relative humidity to more than 95%. The gas strea m temperatures are maintained at less than approximately 105°F to avoid harming the organisms and to prevent
excessive moisture loss from the media.

Biological oxidation systems are used primarily for very low concentration VOC

laden gas streams. The VOC inlet concentrations are often less than 500 ppm and sometimes less than 100 ppm. The overall VOC destruction efficiencies are

often above 95%.

Temperature Control

As demonstrated by the stoichiometric model developed by professors Williams and Boulton, UC Davis, ethanol loss during fermentation is driven by total sugar conversion and fermentation temperature. Lowering fermentation temperatures

could result in lower ethanol emissions. However, there is a lack of empirical data supporting accurate characterization of the resulting emission reduction or establishment of the appropriate fermentation temperature limits. Actual emission reductions would be determined by complex interactions including

factors such as non

- isothermal fermentation, presence of the pomace cap in red wine fermentation, and starting and ending Brix levels. A draft technical assessment document prepared by ARB presents a hypothetical 15 percent and 30 percent reduction in ethanol emissions from red wine and white wine fermentations respectively. The authors note, however, that emission reductions of that magnitude would probably be achieved in only a few isolated cases.

Because of the lack of empirical data and the uncertainty of achievable emissions reductions, temperature control is not considered a viable VOC control option at this time.B. RACT/BARCT for Fermentation Emissions Control

The San Joaquin Valley Unified Air Pollution Control D istrict is the first district in the nation to propose controlling VOC emissions from wine fermentation tanks. Thus, there is no existing rule or regulation establishing RACT, BARCT, or BACT for the source category. For the past two

- years District staff has worked to

characterize fermentation tank emissions and their control. A detailed discussion of fermentation emissions and potential emission reductions are presented in Appendix B. In establishing potential VOC control requirements, District staff

co nsidered both technical feasibility and cost effectiveness. A detailed discussion of cost effectiveness is presented in Appendix C.

Staff has concluded that while there is a definite link between tank volume and fermentation emissions, process throughp ut and type of wine being produced are the major determining factors. Thus, cost effectiveness varies widely with tank size and throughput. District staff considered basing VOC control requirements on a combination of wine type and throughput. The Distr ict’s Permits database indicates that the 13 largest wineries have a combined fermentation volume of 484,270,568 gallons. Dividing this figure by the industry’s total wine production for 2002 (337,968,011 gallons), shows that the wine industry could have about 40% excess fermentation tank capacity. With this level of excess capacity, VOC control requirements based on throughput limits would not likely result in real

emission reductions.

District staff concluded that to achieve real reductions it would be best to structure VOC control requirements based on tank size, and provide exemptions for wine type, and fermenters that are unlikely to achieve a throughput that would

be considered economical to control. As indicated in Appendix C , Table

- 1 and

Table

- 2, it is possible to demonstrate a theoretical combination of tank size, wine type, and throughput that results in a cost effective controls. For fermenters processing red wine cost effective control could begin at 50,000 gallons. For fermenters processing white wine cost effective control could begin at 300,000 gallons. The critical factor for those determinations is the assumed number of batches being processed. Both estimates assume each tank processes the
maximum theoretical number of batches. For re d wines, the theoretical maximum was an assumed 12 to 18 batches per year. For white wines, the theoretical maximum was an assumed 6 to 9 batches per year. Theoretical maximums are seldom realized. Average batches processed per tank range

from 5 to 6 ba tches for red wine and 2 to 3 batches for white wine. Cost effectiveness is very sensitive to process rate, so actual cost effectiveness would be higher than indicated in cost effectiveness analysis presented in Appendix C

for Scenario

- 1.

The analysis in

Scenario

- 3 uses an average of 5 to 6 batches per year for red wine and is considered to be reflective of actual process parameters. It had beenpreviously concluded that control of white wine fermenters processing 6 to 9

batches of wine per year was marg inally cost effective for tanks 300,000 gallons or larger. Thus, white wine fermenters processing only 2 to 3 batches per year
were not evaluated in Scenario

- 3. The VOC control requirements presented in the previous draft rule were developed in considera tion of Scenario

- 3.

Staff structured VOC control requirements in the previous draft rule taking in consideration wine type, tank size and cost of controls. Exemptions for wine type and fermenter size were provided. The draft would require operators to install and operate VOC controls on red wine fermenters that have an internal volume of at least 50,000 gallons. The VOC control system would achieve a combined capture and control efficiency of 86%. District staff considers these requirements

to consti tute BACT/BARCT for wine fermentation tanks. Achievable emission reductions from the proposed control requirements range from 474 to 308 tons VOC per year, and are summarized in Table

- 1.

Table

- 1: Previous Draft Rule 4694 Emission Reductions

Baseline f or a Ratio of

60% Red Wine and

40% White Wine (788 tons/year) Baseline for a Ratio of

40% Red Wine and

60% White Wine. (660 tons/year) Exemption/Activity Annual Tons Annual Tons Small Winery

- Red Wine

Fermentation 21.5 13.9

Small Winery

– White Wine

Fermentation 9.6 14.4

Wine Fermenters Exclusively Fermenting

White Wine 166 248

Red Wine Fermenters < 50,000 gallons 12.3 8.0

Wood or Concrete

Fermenters 18.4 11.9

Transfer of Wine at 4 0 Brix 9.9 6.4 Total Exemptions 237.3 302.2 Adjusted Baseline 550.9 357.9

Achievable Reductions at 86% Capture & Control 474 308

As discussed in Section VI of this report, there is considerable uncertainty associated with technical feasibility and cost effectiveness of controlling wine fermenters. To provide time for industry and the District to better understand those issues, staf

f is proposing a market

- based approach for Rule 4694. Operators would be required to achieve a 35% reduction in their totalfermentation emissions. Only small wineries would be exempt from fermentation

VOC control requirements. As presented in Table

- 2, exempting small wineries would result in uncontrolled emissions of 43 to 36 tons per year. These emissions were subtracted from the baseline emissions, resulting in an adjusted baseline of 745 to 624 tons per year. A 35% reduction of the baseline emissio ns would result in achievable emission reductions of 261 to 218 tons per year, and average daily emissions of 0.72 to 0.6 tons per day. This level of emissions reduction is consistent with the District’s attainment plans for the source category

and is rea sonable given the cost of control estimates and degree of uncertainty about potential impact on product quality.

Technical uncertainties and cost effectiveness are expected to be resolved as winery operators install fermentation emission controls. Until there are better data on technical feasibility and cost of control, District staff considers the 35%

reduction in total fermentation emissions to constitute RACT for wine

fermentation tanks.

Table

- 2: Current Draft Rule 4694 Emission Reductions

Baseline for a Ratio of

60% Red Wine and

40% White Wine (788 tons/year) Baseline for a Ratio of

40% Red Wine and

60% White Wine (660 tons/year) Exemption/Activity Annual Tons Annual Tons Small Winery Exemption 43 36

Adjusted Baseline 745 624

Achievable Reductions at
35% Control 260.8 218.4

C. Storage Tank Emissions Control Technology

VOC’s are emitted from wine handling and storage operations as volatilized ethanol. Wine is produced in the San Joaquin Valley by fermentation during the

“ crush” season, an approximate 12

- week period coinciding with the grape harvest (late August to mid

- November). Subsequently, the wine is transferred a number of times between storage tanks to perform various polishing operations such as “racking” (decantat ion for separation of sediment), filtration, malolactic fermentation (breakdown of malic acid to lactic acid and carbon dioxide), and bottling operations. Since the bottling process is a year

- round operation, each
batch of wine will have a definite reside nce time in storage, prior to bottling, which includes the time spent in performing the various post

- fermentation polishing processes. The post

- fermentation polishing operations result in “working losses” from the storage tanks since they require draining and filling the tanks several times. Storage prior to bottling generates “breathing losses” fromthe tanks.

Since ethanol in water constitutes an organic liquid, the US EPA TANKS program can be utilized to determine the estimated VOC (ethanol) emission s. However, obtaining accurate results from the TANKS program requires that the organic liquid be accurately characterized in terms of vapor pressure of the liquid and the composition of the equilibrium vapor phase. Since ethanol and water are highly pol ar compounds, they form a non

- ideal mixture, i.e., the mixture does not follow Raoult’s law, and, as a result, direct estimation of vapor pressure and equilibrium vapor phase concentration, based on pure component properties, is not practical and experimen

tal data are required.

To effectively utilize TANKS to estimate VOC emissions from wine storage, experimental data supplied by the Wine Institute for the vapor pressure of ethanol over wine can be utilized, along with the assumption that water will

behave ideally (a good assumption since the liquid phase is over 95% water on a molar basis). Use of the above data to calculate storage tank emissions is demonstrated by calculating a specific emission factor for VOC emissions from wine storage based on a “typ ical” San Joaquin Valley wine storage scenario:

Calculation Procedure:

1 Characterize wine in terms of molecular weight of liquid and vapor phase and the total vapor pressure over wine.

2 Input data, along with tank parameters into Tanks 4.0. Output from Tanks 4.0 is total vapor phase emissions (including water) in lb/year.

3 Back calculate ethanol emissions from vapor phase ethanol concentration.

Assumptions:

1 The average ethanol (EtOH) concentration of stored wine is 12 vol% (most

wine is 10

- 12 %, u se upper end of range to account for fortified wines which can be as high as 20%).

2 Average wine storage temperature is 50 o F since wine storage is typically refrigerated.

3 Post fermentation, average wine handling for storage and post fermentation treatment is equivalent to 6 turns of the average storage 1

.

4 Specific gravity of ethanol is 0.79784 @ 50 o F or 6.65 lb/gal (Perry’s Chemical Engineer’s Handbook, 5th Edition, Table 3

- 112).

5 Specific gravity of 12 vol % ethanol in water is 0.98145 @ 50 o F or 8.18 lb/gal (Perry’s Chemical Engineer’s Handbook, 5th Edition, Table 3

- 112).6 Density of water is 8.34 lb/gal.

7 Partial pressure of ethanol over wine with 12% ethanol.

8 Water behaves ideally according to Raoult’s Law, i.e., partial pressure of water in the vapor phase is the product of the liquid phase water mole fraction and the vapor pressure of pure water at the system temperature.

9 Average post fermentation storage is 6 months, October through March.

10 Average storage tank is a nominal 300,000 gallons (based on an industry

typical range of 100,000 to 600,000 gallon capacity for storage tanks).

11 The storage tank is equipped with a pressure

- vacuum valve.

Calculations:

1. Calculate molar fractions and average molecular weights for liquid and vapor phases:

Liquid Phase Molecular Weight (calculation basis 1000 gallons of 12 vol% wine)

Lb

- mols EtOH = 1000 gal wine x .12 gal EtOH/ga l wine x 6.65 lb EtOH/gal

EtOH x 1mol EtOH/46.02 lb EtOH

Lb

- mols EtOH = 17.3 lb

- mols EtOH

Lb

- mols H2O = 1000 gal wine x .88 gal H2O/gal wine x 8.34 lb H2O/gal
H2O
x 1mol H2O/18.02 lb H2O

Lb

- mols H2O = 407.3 lb

- mols H2O

Total Mols in 1000 gal wine = 17.3 + 407.3 = 424.6 mols

Xa = liquid mol fraction EtOH = 17.3/424.6 = 0.041

Xw = liquid mol fraction H2O = 407.3/424.6 = 0.959

Average Molecular weight of liquid = (0.041 x 46.02) + (0.959 x 18.02)

= 19.17

Vapor Phase Molecular Weight and Total Vapor Pressure Over WineTotal vapor pressure over wine is the sum of the partial pressure of EtOH

plus the partial pressure of water:

Total Pressure (Pt) = Partial Pressure EtOH (Pa) + Partial Pressure Water (Pw)

Pa is tak en from Attachment I for 12 vol% wine.

Pw = Liquid Mol Fraction Water x Vapor Pressure Pure Water at System Temperature (VPw)

or,

Pw = 0.959 x VPw , where VPw is taken from The Steam Tables, J.

Keenan et al.

The mol fraction EtOH in the vapor phase is then calculated as:

Ya = Pa / Pt ,and the average molecular weight (AMW) of the vapor phase

is then calculated as:

AMW = (Ya x Molecular Weight EtOH) + ((1

- Ya) x Molecular Weight Water) = (Ya x 46.02) + ((1

- Y

a) x 18.02)

Performing the above calculations for temperatures ranging from 40 o F to 100 o F yields the following Table

- 3:

Table

- 3: Characterization of Vapor Phase Over 12 vol% Wine

o F Pa(in wine)

Psia Pw

psia Pt(wine)

psia Ya AMW

40 0.0463 0.1217 0.1630 0.2840 25.97

50 0.0669 0.1780 0.2376 0.2816 25.90

60 0.0953 0.2563 0.3411 0.2794 25.84

70 0.1340 0.3632 0.4823 0.2778 25.80

80 0.1860 0.5073 0.6725 0.2766 25.76

90 0.2552 0.6988 0.9253 0.2758 25.74

100 0.3461 0.9503 1.2574 0.2752 25.73

Since the average storage temperature has been determined to be 50 o F, the vapor phase is characterized by an EtOH mol fraction of 0.2816 and an average molecular weight of 25.90 per the calculations above.

2. Calculate Expected Vapor Emissions Via Tanks 4 .0 based on the above

characterization:Input total vapor pressure for 12 vol% wine (from table above), and the average

molecular weights for vapor and liquid determined above, into TANKS. In order to simulate an average temperature of 50 o F, the calculation was performed using meteorological data for Fort Wayne, Indiana, which has an average annual temperature near 50 o F.

Output from the above indicates annual vapor emissions of 221.3 lb/year.

3. Back

- calculate the EtOH emissions:

EtOH em issions = (221.3 lb

- vapor/year) x (1 mol vapor/25.90 lb) x (0.2816 mol

EtOH/Mol Vapor) x (46.02 lb EtOH/mol EtOH)

EtOH emissions = 111.7 lb for six month storage of 300,000 gal of wine at 12 vol

% ethanol

Emission Factor = 111.7/300 = 0.372 lb EtOH/1000 gal wine stored.

In 2002, 337,968,011 gallons of wine was fermented in the District. Storing all of the 2002 wine fermentation in the District until bottled, would result in annual storage emissions of 63 tons of VOC, as illustrated as follows:

lb 2000 ton 1

stored gal 1000 EtOH lb 0.372

Year EtOH gal 1 337,968,01 ions EtOH Emiss x x =

Not all wine fermented in the District is bottled in the District, thus actual storage emissions are likely lower than estimated. According to District Permit To Operate application data, there are over 4,000 tanks potentially used for storing

bulk wine in the District.

D. Effect of Pressure

- Vacuum Relief Valve on Wine Storage Tank

Emissions

To assess the affect of pressure

- vacuum relief valves and ambient temperature swings on wine storage tank em issions, two runs with Tanks 4.0 were performed. Both analyses are based on a 100,000

- gallon storage tank installed in Fort Myers, FL, which has an ambient temperature of near 75 o F. This should provide a conservatively high estimate of tank breathing los ses, since it is assumed there is no temperature control on the tank, and the tank is subject to the full daily swing in ambient temperature. The tank is assumed filled to two feet below the

roof seam.

One analysis is based on the tank having a pressure

- vacuum relief valve with the default settings. A breathing loss of 65.19 lb/year (water and ethanol) was calculated per Tank 4.0. A second analysis was performed using the same assumptions, except the pressure

- vacuum relief valve was deleted. Thisanaly

sis resulted in a breathing loss of 68.29 lb/year (water and ethanol). Comparison of the results indicates use of a pressure vacuum relief valve reduced emissions by 3.1 lb/year. Ethanol emissions of 1.6 lb for annual storage of 100,000 gallons of wine w ere calculated per the following:

EtOH mol EtOH lb 46.02

vapor mol EtOH mol 0.2816

lb 25.90 vapor mol 1

year vapor lb 3.1 emissions EtOH x x x =

The resulting emissions factor is 1.6 lb EtOH/100,000 gallon capacity storage tank per year.

According to the District’ s permit database, the thirteen largest wineries in the District have 4085 storage tanks, with an average storage capacity of 145,000 gallons. Emission reductions of 3.3 tons per year resulting from use of pressure

vacuum relief valves were calculated acc ording to the following:

lb 2,000 ton 1 tanks 4,085 tank/year gallon 000 EtOH/100, lb 1.6 emissions EtOH x x =

E. RACT for Wine Storage Tank Emissions Control

Two operational practices currently in place on bulk wine storage tanks in use at large wineries in the District are use of pressure

- vacuum relief valves and temperature control. District staff considers use of pressure

- relief valves, and temperature control to constitute RACT for bulk wine storage tanks.

V. WINE INDUSTRY CONCER NS

Throughout the rule development pro cess, the Wine Institute has opposed provisions that would require operators to control VOC emissions from wine fermentation tanks. The Wine Institute challenges the technical feasibility and cost effectiveness of controlling VOC emissions from wine ferme ntation. The Wine Institute has requested that development of Rule 4694 be postponed until the technical issues are more fully understood. The Wine Institute cites the following as technical and operational risks associated with implementing VOC
capture and control systems on wine fermentation tanks:

1 There is an increased risk of contaminating individual fermentation batches

and cross

- contamination between fermenters because of the common ducting installed between fermenters to collect VOC emissions.

2 The ductwork results in an increased risk of microbial contamination.

3 The control system may alter the fundamental characteristics of the wine, resulting in product devaluation.

District staff believes that it is technically feasible to reduce emissions from winefermentation, without affecting product quality. VOC emission collection

systems and VOC destruction devices are well known technologies in use in

other industries that use fermentation processes, e.g. pharmaceuticals. District staff has found no evidence demonstrating that controlling fermentation emissions would have any affect on product quality.

The Wine Institute also recommended that rule development be abandoned on the basis that cost of controlling wine fermentation emissions is too expensive. An engineering study prepared for the Wine Institute estimates a cost of $30,962,000 for a proposed installation of VOC controls at the Gallo

- Livingston winery. That repo rt estimates cost effectiveness at $120,479/ton VOC controlled

at that location.

District staff has reviewed the Wine Institute report and believes that the report significantly over estimates the cost of control. In brief, the District’s analysis

conc ludes:

1 The estimate includes significant costs that are specific to the Gallo

Livingston facility or to Gallo facilities in particular. (Estimated Impact $6,729,000)

2 The design is based on a worst

– case approach for all potential operating

scenarios. No design optimization or simplification has been carried out, nor have operations improvements been considered. (Estimated Impact $7,263,000)

3 Capacities of the estimated capture and control systems are unnecessarily large. The District estimates that the size of the control systems could be reduced by at least 37%. (Estimated impact $1,851,000)

4 Estimated operating costs have not taken full advantage of the efficiencies of the proposed equipment and over estimates operational labor requirements. (E stimated impact $293,400/year)

Based on an adjusted estimate, the capacity of the 60 tanks included in this estimate, and the industry’s reported 4 to 5 turns per tank per season, the District estimates cost effectiveness ranging from $42,000/ton

- VOC to $53,000/ton

- VOC

for a non

- site specific installation of this size. Details of District staff’s cost of control analysis are presented in Appendix C, Cost Effectiveness Analysis.

VI. MARKET

- BASED APPROACH

District staff believes that it is technically feasible to reduce emissions from wine fermentation without affecting product quality. VOC emission collection systems and VOC destruction devices are well known technologies in use in other

industries that u se fermentation processes and that must meet stringent federal safety standards, e.g. pharmaceuticals. However, there is limited data specific to controlling VOC emissions from wine fermentation. As presented in Appendix C,Cost Effectiveness Analysis, o f this draft staff report, three cost effectiveness

scenarios were considered. These estimates show costs of controlling VOC emissions from red wine fermentation ranging and average of $27,000/ton

- VOC reduced to $120,479/ton

- VOC reduced. Cost effectivene ss of controlling white wine fermentation emissions were higher, because of the lower emissions associated with white wine fermentation. These three scenarios present a wide range in the cost effectiveness of controlling VOC emissions from wine

fermentati on. Actual average cost of control is expected to be somewhere in

between. The lack of experience in controlling emissions from wine fermentation and cost effectiveness are intrinsically linked. Control system designs are not optimal, translating into hi gher costs of control. Likewise, it is understandable that the wine industry’s lack of experience in controlling emissions from wine fermentation translates into concerns about product quality. Other industries have learned how to cost effectively contro l their air emissions without affecting product quality. It is reasonable to expect that the wine industry will do likewise. To achieve attainment of state and federal ambient air quality standards by 2010, the District cannot delay mitigating emissions from wine fermentation.

The District has restructured Rule 4694 to incorporate a market

- based approach that achieves emission reductions consistent with the plan, expedites obtaining emission reductions from wine fermentation, and provides the wine industry time to develop expertise in controlling fermentation emissions without devaluating product quality. The restructured rule would require operators of wineries emitting at least 10 tons VOC emissions annually from wine fermentation to reduce or mitigate 35% of their total wine fermentation emissions. The 10

- ton emissions threshold captures wineries respo nsible for about 95% of the fermentation emissions in the District. Thus, the exemption results in an adjusted
annual emissions baseline of 624 to 745 tons of VOC emissions from wine

fermentation.

Requiring operators to achieve a 35% reduction in ferment ation emissions, or equivalent reductions through mitigation measures would result in annual VOC emission reductions of 218 to 261 tons. When these reductions are averaged over 365 days per year, daily average emission reductions equal 0.6 to 0.72 tons

pe r day. This level of reduction would achieve the emission reduction commitments contained in the District’s air quality attainment plans.

Operators could achieve the 35% reduction in facility

- wide fermentation emissions by any combination of the followin g means:

1 Installing and operating VOC control systems on fermenters;

2 Obtaining surplus emission reductions from other emission sources; and

3 Paying into an Air Quality Impact Mitigation fund that would be administered by the District to obtain surplu s emission reductions from other sources within

the District.A. Emission Reductions Versus a Command & Control Approach

The previous draft of Rule 4694 was structured as a command and control rule. Operators would be required to equip red wine fermente rs subject to the rule with a VOC control system having a combined capture and control efficiency of 86%. Provisions within the rule would exempt small wineries, all white wine fermentation tanks, and fermentation tanks constructed primarily of wood or

co ncrete from VOC control requirements. Also, the rule would allow fermenting must to be transferred to an uncontrolled tank, after reaching 4 o Brix, or less. As presented in Table

- 1, on page 11 of this staff report, these exemptions and

allowed activities would result in uncontrolled emissions ranging from 237 to 302 tons per year. These emissions were subtracted from the fermentation emissions baseline, resulting in adjusted baseline of 551 to 358 tons per year. Applying an 86% capture and control effic iency to the adjusted baseline would result in achievable emission reductions of 474 to 308 tons per year, and average daily emission reductions of 1.3 to .84 tons per day.

The current draft of Rule 4694 is structured as a market

- based rule. Operators

wo uld be required to achieve a 35% reduction in their fermentation emissions. Only small wineries would be exempt from fermentation VOC control requirements. As presented in Table

- 2, on page 12 of this staff report, exempting small wineries would result in uncontrolled emissions of 43 to 36 tons per year. These emissions were subtracted from the baseline emissions, resulting in an adjusted baseline of 745 to 624 tons per year. A 35% reduction of

the baseline emissions would result in achievable emission r eductions of 261 to 218 tons per year, and average daily emissions of 0.72 to 0.6 tons per day. This level of emissions reduction is consistent with the District’s attainment plans for the source category and is reasonable given the cost of control estima tes and degree of uncertainty about potential impact on product quality.

B. Benefits to Air Quality

Emissions controls for this source category have yet to be established,

worldwide. Technical uncertainties and cost effectiveness of controlling wine

fer mentation emissions remain unresolved. Structuring Draft Rule 4694, as a

market

- based rule provides winery operators flexibility to develop cost effective fermentation emissions control technology, over time, while achieving

commitments contained in the D istrict’s Ozone and PM Plans for emission reductions from this source category. Achieving the Plan commitments satisfies
the District’s committment in the SIP. The rule is structured to reduce at least the 0.7 tpd commitment in the approved PM10 Plan and the percent reduction committed to in the yet to be approved 1

- hr Ozone Plan. The current draft rule will provide environmental benefit by obtaining emission reductions sooner than would be probable with adoption of a conventional command and control rul e. The concept is consistent with US EPA guidance for control measuresincorporating a market

- based approach.

If the draft rule were adopted December 2005, operators would demonstrate compliance beginning July 1, 2007. This would be accomplished by in stalling fermentation controls, controlling other emission sources, or paying into a District managed Air Quality Impact Mitigation Fund, that would be used by the District to obtain surplus emission reductions. If structured as a conventional command

and control rule, the only option is to install controls on wine fermentation tanks. Given that the technology has not been applied to wine fermentation substantial time will be required for design and engineering. The likely timeline for installing

control s on fermentation tanks would be six months planning, 18 months engineering, and 12 months construction. Given the seasonal nature of wine fermentation, benefits to air quality would not be realized until the 2010

fermentation season.

Structuring Rule 4694 consistent with a market

- based approach will obtain

reductions from emission sources that would not be readily controlled through traditional regulation. As previously stated, the current draft rule would allow operators to mitigate fermentation emissions by obtaining surplus emission reductions. Surplus emissions are emissions that have not been committed to or required by any local, state or federal permit, rule, regulation, law, ordinance, or an approved air quality plan. Thus, s urplus reductions would come from sources not readily controlled by traditional regulations.

Structuring Rule 4694 consistent with a market

- based approach would achieve emission reductions in excess of the required 35% reduction in baseline

emissions. Em ission reductions occurring offsite require an offset ratio of 1.2 tons. This is a 20% premium for operators employing this provision. The uncertainty of the grape harvest is expected to result in emission reductions exceeding the 35% reduction requireme nt. The volume of wine fermentation that occurs within a given year is intrinsically linked to the grape harvest. Operators cannot accurately predict their actual emissions. To guard against potential determination of violation of the rule, and to simpl y the process of demonstrating compliance, with the 35% VOC emission reduction requirement, operators are expected to obtain emission reductions in excess to the rule requirements. The

three

- year compliance plan provision and annual compliance demonstrati on will enable the District to quantify these additional reductions.C. Localized Impact of Emissions Shifts

Proposed Rule 4694 would allow winery operators to mitigate fermentation emissions by controlling emission sources located off the winery premis es. To evaluate the potential localized health impacts associated with shifting emission reductions to offsite locations, District staff prepared a health risk assessment for each of the thirteen wineries currently undergoing the District’s permitting

pro cess. These wineries are the 13 largest wineries in the District. The risk assessment was prepared in accordance with the requirements of AB 2588, Air Toxic Hot Spots Information and Assessment Act of 1987. This HRA was

conducted in accordance with the Office of Environmental Health Hazard Assessment (OEHHA) Health Risk Assessment Guidelines.

Emissions of toxic air contaminants from wine fermentation were identified and the resulting potential ambient air concentrations calculated. These

concentrations have been used to arrive at conservative estimates of increase carcinogenic risk that might occur as a result of continuous exposure over a 70

- year lifetime. In a similar fashion, concentrations of compounds with a non

carcinogenic adverse health effects were used to calculate the hazard indices (ratio of expected exposure to an acceptable exposure). A hazard index less than 1.0 is not considered to be a significant health risk. A hazard index greater than 1.0 is considered to be a significant risk and would result in the District consulting with the Office of Environmental Health Hazard Assessment (OEHHA) to determine the significance on a case

- by

- case basis.

Based on the results from the health risk assessment, it is not expected that any winery ope rating in the San Joaquin Valley would pose a significant risk. (A significant risk is considered to be a risk of 10 in one million cancer case or greater than or equal to one for either the acute or chronic hazard index.) Details of the analysis are pre sented in Appendix E.

D. Sources of Alternative Emissions

Proposed Rule 4694 would allow operators to mitigate fermentation emissions by controlling alternative emission sources. A list of potential alternative emission sources, including the respective project life, cost per project, and annual emission reductions is presented in Appendix G. It should be noted that project life, as presented in Table

- 1 and Table

- 2, is the basis for determining cost effectiveness only, and does not necessarily reflect t he actual life of an emission reduction. Emission reductions from stationary sources are expected to be permanent. The District will assess emission reduction durations at the time of project review.VII. PROPOSED RULE 4694

A. Summary of Proposed R ule

The proposed rule is summarized in the following paragraphs.

Section 1.0 Purpose

The purpose of the rule is to reduce emissions of volatile organic compounds (VOC) from the fermentation and bulk storage of wine, or achieve equivalent

emission reduct ions from alternative emission sources.

Section 2.0 Applicability

The rule would apply to all wineries operating in the District.

Section 3.0 Definitions

Definitions of terms having specific application to the rule are provided.

Section 4.0 Exemptions

Wineries producing less than 10 tons VOC emissions from wine fermentation would be exempt from the rule’s control requirements. Wineries seeking exemption would be limited by their District Permit

- to

- Operate to emitting less
than 10 tons VOC emissions f rom wine fermentation per year, and would be subject to the rule’s recordkeeping requirements and applicable District reporting requirements.

As stated in Appendix B, Emissions Reduction Analysis , the 10

- ton exemption threshold would exempt 91 of the 10 9 wineries operating in the District. The remaining 18 wineries, subject to the emission reduction requirements of the rule, account for about 95% of the wine fermentation emissions occurring in the District. Thus, the exemption results in an adjusted an nual emissions baseline of

624 to 745 tons of VOC emissions from wine fermentation.

Section 5.0 VOC Control Requirements

Section 5.1 Fermentation Tank VOC Emission Control Requirements

Wineries subject to the rule’s emission control provisions would be required to reduce their baseline VOC emissions from wine fermentation by 35 percent, annually.

Wine fermentation is dependent upon the grape harvest and fluctuates seasonally. Therefore, the baseline fermentation emissions would beestablished as the a verage uncontrolled fermentation emissions occurring at the

winery during the previous three

- year period. New wineries may not have three years of historical production data. For wineries lacking three years of fermentation data, the baseline would be es tablished using available fermentation data. Given the seasonal fluctuation in wine fermentation, and that an average may not reflect previous or planned growth, operators could voluntarily establish a baseline higher than the three

- year average, but not higher than the emission limits established in the facilities Permit to Operate. The baseline would be reestablished every three years.

Operators could comply with the fermentation emissions reduction requirement using any combination of the following methods:

Control VOC Emissions From Wine Fermentation

Operators may install VOC controls on their fermentation tank. The rule would not specify the control technology to be used in reducing fermentation emissions. Nor would the rule specify the percent capture and control efficiency of the VOC control system. This provides operators flexibility to pursue emissions reductions that are optimum for their operation, in terms of process operations and cost

effectiveness. Emission reductions would be made e nforceable as conditions of the emissions source Permit To Operate. Failure to operate the VOC control system consistent with the source’s Permit To Operate would be an enforceable

violation.

Mitigate Fermentation VOC Emissions by Controlling Other Emiss ions
Sources

Operators could mitigate their fermentation emissions by obtaining surplus emission reductions from other emission sources operating in the District. Surplus emissions would be emissions that have not been committed to or required by any local, state or f ederal permit, rule, regulation, law, ordinance, or an approved air quality plan.

Surplus emissions could be obtained from any VOC or NOx emissions source. If the emissions source operates exclusively on the winery premises, the emissions

reduction ratio would be 1.0 ton of pollutant controlled per 1.0 ton of VOC emitted from wine fermentation. If the emissions source does not operate exclusively on the winery premises, the emissions reduction ratio would be 1.2 ton of pollutant controlled per 1.0 ton of VOC emitted from wine fermentation. If the emission units were subject to District Rule 2010 (Permits Required), the reduction in surplus emissions would be made enforceable as a condition of the source’s Permit to Operate. Failure to operate the VOC c ontrol system consistent with the source’s Permit to Operate would be an enforceable violation. If the emissions units were not subject to District Rule 2010, the reduction in surplus emissions would be made enforceable by a legally binding contractbetwe en the winery operator, the emissions source provider, and the District.

Failure to operate the VOC control system consistent with the contract would be

considered an enforceable violation.

Operators would be required to obtain surplus reductions having a minimum duration of three years in aggregate. Surplus emission reductions with duration greater than three years would be allowed for the life of the emissions reduction. For fermentation tanks subject to emission controls from New Source Review requir ements, the maximum allowable emission reduction credit would be the lesser of either the actual emission reduction generated by the NSR review control, or 35% of the uncontrolled emissions. Pay the District to Obtain Emissions mitigations for the Winery

Operators may comply by paying the District a fee that would be used by the District to obtain surplus emission reductions. The fee would be of an amount sufficient to cover the District’s cost of obtaining emission reductions that would

last at least thr ee years in aggregate. In addition, operators would pay the District an administrative fee, covering the District’s cost of operating the mitigation program.

For the compliance period beginning January 1, 2007, the mitigation fee would

be established at a rate of $11,788 per ton. The administrative fee would be established at 4% of the mitigation fee. The mitigation fee and administrative fee structures would be adjusted periodically to cover the District’s actual cost of obtaining emission reductions.

Fermentation Emissions Baseline

Each winery’s baseline would be established as the average of the previous three years of fermentation VOC emissions. The baseline would be reestablished every three years, based on the previous three years of operation. Wineries with less than three years historical fermentation data would establish their baseline as the average emissions calculated using the available data. Operators would also have the option of selecting a baseline higher than the

three

- year average , but less than the emissions limits established in the facility’s Permit to Operate.

Section 5.1 Storage Tank Emissions Control Requirements

Storage tanks having an internal volume of 5,000 gallons of greater would be required to be equipped and operate d with a pressure

- vacuum relief valve and the temperature of the stored wine would be maintained at or below 75 o

Fahrenheit. Pressure

- vacuum relief valves would have to operate within 10% of the working pressure of the tank and operate in accordance with the manufacture’s instructions. Temperature of the stored wine would be recorded weekly, and operators would have 60 days after fermentation to achieve thestorage temperature.

Section 6.0 Administrative Requirements

This section would establish the adm inistrative framework for complying with the

rule.

Section 6.1 Three

- year Compliance Plan

Beginning July 1, 2006 and every three years thereafter, operators would submit a plan to the District detailing how they will comply with the rule. Key elements o f the plan include the results and supporting documentation for the following details: a) Baseline fermentation emissions, b) required annual emission reductions, c) annual fermentation emission reductions to be achieved, d) annual

alternative emission re ductions to be achieved, e) emission offsets, if applicable, and f) annual emission reductions to be acquired by payment into a District operated air quality impact mitigation fund. The plan would identify each emissions unit, and the planned reductions. The plan would include any applicable contracts for emission reductions.

Section 6.2 Three

- year Compliance Plan Verification

By no later than July 1, 2007 and every three years thereafter, operators would submit to the District verification that they have taken appropriate actions to implement the emission reduction measures identified in their Three

- year Compliance Plan.

Sec tion 6.3 Annual Compliance Plan

Commencing no later than February 1, 2008, and annually thereafter, operators shall submit to the District an Annual Compliance Plan Demonstration that shows compliance with the applicable requirements. Two compliance scen arios are possible:

1 If annual wine production resulted in fermentation emission less than or equal to the baseline emissions, the operator demonstrates that they at least achieved the emission reduction stated in their plan.

2 If annual wine producti on resulted in fermentation emissions exceeding the baseline emissions, the operator demonstrates that in addition to obtaining reductions equal to 35% of the baseline emissions, they also obtained a 35%

reduction in all fermentation emissions above the ba seline. Operators who exceeded their baseline emissions have until April 1, of that year to obtain reductions necessary to offset the excess emission reductions.

Operators can obtain the additional reductions from operators who achieveemission reducti ons above their emission reduction requirement, install additional

emission controls, or make additional payment to the District’s Air Quality Impact Mitigation Fund. Operators failing to implement their compliance plan, or failing to obtain the required emission reductions would be found to be in violation of the rule requirements.

Section 6.4 Monitoring and Recordkeeping

The rule would require operators to keep records sufficient to demonstrate that the required emission reductions were achieved. Reco rds would include all contracts executed in acquiring offsite emissions reductions, all records documenting performance of the emissions control systems, records used to calculate emissions from each batch of wine fermented at the facility, and storage tem peratures of bulk wine. Operators claiming exemption would be required to maintain annual production records of total gallons of red wine and white wine fermented at the winery.

Section 6.5 Air Quality Impact Mitigation Fund Fee Review

The section requi res that the fees paid to the fund be sufficient to cover the District’s cost of obtaining the emission reductions, plus the District’s cost of administering the program. Fees structures would be evaluated annually. An analysis shall be performed that de tails the cost effectiveness of the projects funded to date; the rule effectiveness of achieving the required emission reductions to date; the availability of off

- site emission reduction project; and the cost effectiveness of those projects. The APCO shal l provide a draft revised cost effectiveness based on the analysis. The process shall include at least one public workshop.

Section 6.6 Test Methods

This section establishes test methods to be used to determine emissions and emission reductions. Emission units identified in District prohibitory rules would comply with test methods specified in the applicable rule. Emission units not currently identified i n a District rule would be required to use methods approved by the District, US EPA and ARB. The section includes methods specific to VOC control and specific to NOx control.

Section 6.7 Compliance Testing

This section is similar to Section 6.6. If the emissions unit is identified in an existing District prohibitory rule, operators comply with the testing requirements specified in the applicable rule. If the emissions unit is not identified in an existing District rule, the operator would comply with t esting requirement approved by the APCO, US EPA, and ARB.Section 7.0 Compliance Schedule

The compliance schedule is presented in Table

- 1 of Draft Rule 4694. In brief:

1 Operators would have until July 1, 2006 to submit their initial compliance plan. Baseline emissions would be established using fermentation production from the years, 2003, 2004, and 2005. The initial compliance plan would be for the period of 2007 through 2010. Baseline emissions and a new compliance plan

would be reestablished ever y three years thereafter.

2 Commencing July 1, 2007, and every three years thereafter, operators would verify that the elements of their compliance plan had been implemented.

3 Commencing February 1, 2008, and annually thereafter, operators would

dem onstrate compliance with the rule.

4 Commencing April 1, 2008, and annually thereafter, operators whose production resulted in emissions above the baseline, would demonstrate that they obtained the required 35% reduction in baseline emissions, plus redu ced emissions from their excess production by 35%.

B. Determination of Air Quality Impact Fund Fee Structure

Section 6.1.5.3 provisions would allow operators to mitigate their fermentation emissions by payment into the District’ s Air Quality Impact Mitigation Fund. The fund would be used by the District to obtain emission reductions in behalf of fund contributors. As of January 1, 2006 the fund rate is established at $11,778 per

ton and the District’s administrative fee is esta blished at 4%.

The initial fund rate is based on the Carl Moyer proposed VAVR guidelines to accelerate removal of older, higher emitting vehicles from the road. The District may pursue other stationary or mobile source reduction projects that would have different cost effectiveness values. The cost per vehicle estimate presented here, however, provides reasonable assurance that funding will be sufficient to obtain the necessary reductions. The District’s assumptions and methodology for establishing the current fund fee rate is presented below.

Assumptions

1 Emission reduction factor: 0.04 tons of combined VOC and NOx emissions per vehicle per year. The emission factor is calculated as a weighted average based on the model year distribution for 103 car s removed by the Bay Area Air Quality Management District (BAAQMD) vehicle buy back program and ARB’s emission factors for the included model years.

2 Emission reduction duration: 3 yearsEmission reductions for retired vehicles have a lifetime of only three years. The District assumes that a high emitting vehicle would have been replaced through natural attrition within a three

- year period.

3 Cost per car = $1,333 Costs for operating voluntary vehicle removal programs vary depending

on several facto rs, i.e., cash incentives paid to vehicle owners and cost of vehicle retirement (crushing/scrapping). This estimate assumes an incentive of $1,100 paid to the vehicle owner and a cost of $233 for vehicle dismantling.

4 Capitalization factor = 0.3535 Assumes cost of retirement is amortized for three years at 3% interest

5 Number of retired vehicles: 100 Used for illustrative purposes only, actual number of vehicles retired will depend on public response to the program.

Calculations: Note: the $11 ,778/ton fee presented in the staff report was derived using spreadsheets, the values of which are truncated here and presented for illustrative purposes only.

1. Annual Emission Reductions (AER)



### EF Vehicles No. AER X =

Where,

AER = Annual emission reductions in tons

No. Vehicles = Number of vehicles removed from service

EF = Annual emission reduction per vehicle removed from service

vehicle tons/year 0.04 Vehicles 100 AER X =

AER = 4 tons per year

2. Total Emission Reductions (TER)

years 3 Year tons 4 TER X =

TER = 12 tons

3. Annualized Cost of Vehicle Retirement0.3535 vehicle $1,333 Vehicles 100 Cost Annualized X X =

Annualized C ost = $47,122

4. Cost Effectiveness

tons/year 4 ar $47,122/ye tiveness Cost Effec =

Cost Effectiveness = $11,778/ton of air pollution reducedExample Calculation of AQIMF Fee Payment

The following is an example of how operators would calculate payment into the
AQIMF.

Assumptions

1 Winery Baseline Fermentation Emissions = 100 tons per year

2 Fermentation Emission Reductions = 10 tons per year

3 Certified Emission Reductions = 15 tons per year 4 Compliance plan duration = 3 years

5 Fund Fee Rate = $11,778

6 Administrative Fee = 4%

7 Administrative Fee Factor = 1.04

Calculations

Required Annual Emission Reductions = 35% of Baseline Fermentation

Emissions

RAER = 35% x

100 tons/year = 35 tons/year

DOER = RAER

– FER

– CER DOER = 35 tons/year

– 10 tons/year

– 15 tons/year = 5 tons/year

DOER for compliance period = 5 tons/year x 3 years DOER for compliance period = 15 tons

AQIMF Payment = DOER x Fund Fee Rate x

Administ rative Fee Factor AQIMF payment = 15 tons x $11,778/ton x 1.04 AQIMF payment = $183,737

VIII. RULE DEVELOPMENT PRO CESS

District staff conducted a public scoping meeting on January 26, 2004. At the scoping meeting, District staff presented the objective s of the proposed rulemaking project, and solicited comments and suggestions, which were then used to develop the draft rule and staff report. District staff conducted the first series of workshops on October 21, and 27, 2004; staff presented the first dr aft of Rule 4694 and received public comment.

Based on public comments and additional information developed after the first workshop, District staff revised the draft rule and staff report. A second workshop was conducted on June 28, 2005. On J uly 14, 2005, District staff conducted an industry focus group meeting to gather information supportingassessment of the socioeconomic impact the draft rule. Following the second

workshop and the socioeconomic focus group, public comments provided by the Wine Institute indicated that the technical issues associated with controlling wine
fermentation emissions were still unresolved. The Wine Institute also submitted a copy of a socioeconomic analysis prepared for the Wine Institute by MKF Group LLP. The report prepared by MKF Group used cost of control data prepared by Eichleay Engineers for the Wine Institute. District staff subsequently met with representatives from the wine industry to better understand the

technical issues and discuss our cost effect iveness analysis. Consistent with the District’s rule development procedures, the District’s consultant prepared an independent socioeconomic analysis of the draft rule.

In proposing the current draft rule, District staff considered all public comments

, all reports prepared by consultants to the District, and staff’s technical findings and analyses. Staff believes that it is technically feasible to control wine fermentation emissions in a cost effective manner, without detriment to product quality. Ho wever, the wine industry needs time to gain the experience necessary to incorporate fermentation emission controls into their wine production processes. District has restructured Draft Rule 4694 to incorporate a market

based approach that achieves emissio n reductions consistent with the plan, expedites obtaining emission reductions from wine fermentation, and provides the wine industry time to develop expertise in controlling fermentation emissions without devaluating product quality.

The third workshop w as conducted October 11, 2005. After close of comment period, the draft rule and staff report were revised, as appropriate. Proposed Rule 4694 will be submitted to the District Governing Board for Receive and File during their November 17, 2005 meeting. Public hearing for consideration of adoption of the proposed rule by the District Governing Board is planned for
December 15, 2005.

Staff has had numerous discussions with representatives from the wine industry, U.S. EPA, and environmental organizations throughout the rule development process. The market

- based format of the rule has resulted in questions about equivalency with conventional command and control rules. Because of the required adoption schedule, it has not been possible to completely resolv e some issues at this time. Staff is committed to resolving the remaining issues during the implementation phase, through education and continued dialogue with all interested parties. Major outstanding issues pertain to defining RACT for the
source categ ory and showing compliance with the EPA’s EIP guidance

document.IX. COST EFFECTIVENESS

As presented in Appendix C, Cost Effectiveness Analysis, of this draft staff report, three cost effectiveness scenarios were considered:

1 Scenario

- 1, estimates average cost effectiveness for controlling VOC emissions from red wine at $27,000/ton

- VOC reduced and average cost effectiveness for controlling VOC emissions from white wine at $82,000/ton

VOC reduced.

2 Scenario

- 2 estimates cost effectiveness for cont rolling VOC emissions from red wine fermentation at $120,479/ton

- VOC reduced.

3 Scenario

- 3 estimates average cost effectiveness for controlling VOC emissions from red wine fermentation ranges from $42,200/ton

- VOC to $52,900/ton

- VOC reduced.

There are no known examples of the application of VOC emission controls to wine fermentation, making accurate determination of cost effectiveness difficult.

Scenario

- 1 likely understates the cost of control because it assumes that tanks process the maximum number o f batches possible, which is seldom achieved in practice. Senario

- 2 likely overstates the cost of control because the estimate includes significant site

- specific costs, and the control system design is not optimized. Scenario

- 3 corrects for Scenario

- II a ssumptions. Staff considers

Scenario

- III to represent the likely cost of controlling fermentation emissions.

As presented in Section VI, of this staff report, the rule has been revised to incorporate a market

- based approach, which provides operators flex ibility to chose either to install VOC controls on their fermentation tanks; mitigate their fermentation emissions by controlling surplus emissions, or other pay into a District Air Quality Impact Mitigation Fund (AQIMF). Monies paid to the AQIMF

would be used by the District to secure emission reduction equal to or greater than operator’s emissions reduction obligation. Given that the initial AQIMF fee rate would be established at $11,778 per ton, it is reasonable to expect that an operator will not purs ue control options more expensive than the AQIMF fee rate. Thus, the current cost of control is considered $11,778 per ton of VOC reduced. Cost of obtaining surplus emissions could increase overtime, resulting in higher operator costs, which should provi de an incentive for the industry to control VOC

emissions from wine fermentation.

X. SOCIOECONOMIC ANALYS IS

Pursuant to state law, District staff is required to perform an assessment of the socioeconomic impacts prior to the adoption, amendment, or repeal of a rule that will have significant air quality benefits or that will strengthen emission limitations.As a part of the District’s socioeconomic analysis process, on July 14, 2005,

District staff conducted an industry focus group meeting to gather information supporting assessment of the socioeconomic impact the draft rule.

Given the wide range in estimated costs of control, and the lack of an inventory of fermenter tanks, by size category and their associated emissions, the District’s

socioeconomic consultant was directed to evaluate three cost scenarios.

Scenario

- 1 was for control costs ranging from $10,00 0 to $20,000 per ton VOC

reduced. Scenario

- 2 was for control costs ranging from $40,000 to $50,000 per

ton VOC reduced. Scenario

- 3 was for control costs ranging from $100,000 to $125,000 per ton VOC reduced. The socioeconomic report appears in Appendix D and was presented at the final workshop on October 11, 2005. In brief, the cost of compliance associated with the market

- based approach presented in the current draft rule, expressed as a percent of affected wineries’ profit is estimated

at about 2.6%. This level is well below the 10% significance threshold used to gauge a rule’s potential socioeconomic impact on the District’s economy.

XI. ENVIRONMENTAL IMPACT S

Proposed Rule 4694 has undergone environmental review in accordance with the requirement s of the California Environmental Quality Act. A proposed negative declaration has been issued by the District and made available for public review and comment. The public review period ended on November 2,

2005. No Comments were received.

XII. Rule Consistency Analysis

Pursuant to California Health & Safety Code Section 40727.2, District staff has determined that Draft Rule 4694 is in harmony with, and not in conflict with or contradictory to, existing statutes, court decisions, or state or fed eral regulations that apply to the same type of equipment or source category. The analysis is presented in Appendix F.

XIII. REFERENCES

Akton Associates, A Demonstration Program, Ethanol Emissions Control from Wine Fermentation Tanks Utilizing Carbon A dsorption Technology, 1990

Art Caput, Wine Institute, Letter to the District, July 18, 2005

Art Caputi, The Wine Institute; Bob Calvin, Canandaigua Winery, Telephone Conversations with Daniel Barber, San Joaquin Valley Air Pollution Control District, 200 4Bateman, David, U.S. Department of the Treasury, Alcohol and Tobacco Tax

Bureau, (2004) Telephone Conversation with Daniel Barber, Ph.D., San Joaquin Valley Air Pollution Control District.

California Air Resources Board, Emissions Inventory Procedural Manual, Sec. 5.1, Updated May, 2004

California Department of Alcoholic Beverage Control, Licenses Database, 2002

Eichleay Engineers, Fermenter VOC Emissions Control Cost Estimate, Eichleay

Pr oject No. 30892 & 303913, June 30, 2005 Robert P. Koch, Wine Institute, Letter to the District, November 22, 2004.

MKF Group LLP, Socio

- Economic Assessment of Proposed Rule 4694, July 29,

2005.

Staff discussions with Bob Calvin of Canandaigua Winery, Aug ust 2005.

The Wine Institute, correspondence with District staff, August 2005

The Wine Institute, Survey of Fermenter Usage Patterns for Nine Large Wineries in the Central Valley. June 2004.

U.S. Department of the Treasury, Alcohol and Tobacco Tax Bure au, 2002
Alcohol Production Statistics