DATE: December 15, 2011 TO: SJVUAPCD Governing Boar 

# Z HEALTHY AIR LIVING' 

# IN San Joaquin Valley AIR POLLUTION CONTROL DISTRICT

GOVERNING BOARD
J. Steven Worth ley, Chair Supervisor, Tulare County Ann Johnston, Vice Chair Mayor, City of Stockton Tony Barba Supervisor, Kings County Judith G. Case Supervisor, Fresno County Ronn Dominici Supervisor, Madera County Henry Jay Forman, Ph.D. Appointed by Governor Randy Miller Mayor, City of Taft
William O'Brien Supervisor, Stamsloos County Leroy OrneIlas Supervisor, San Joaquin County Alexander C. Sharriffs, M.D. Appointed by Governor Chris Vierra Mayor, City of Ceres
Hub Walsh Supervisor, Merced County Raymond A. Watson Supervisor, Kern County
Vacant Small City Representative, Kings County
Vacant Large City Representative, Tulare County

Seyed Sadredin Executive Director Air Pollution Control Officer
Northern Region Office 4800 Enterprise Way Modesto, CA 95356-8718 1209)557-6400 • FAX 1209)557-6475
Central Region Office 1990 East Gettysburg Avenue Fresno, CA 93726-0244 1559) 230-6000 • FAX 15591 230-6061
Southern Region Office 34946 Flyover Court Bakersfield, CA 93308.9725 (6611392-5500 • FAX 8611392-5585 FROM: Seyed Sadredin, Executive DirectorAPCO Project Coordinator: Errol Villegas RE: ADOPT PROPOSED AMENDMENTS TO RULE 4402 (CRUDE OIL PRODUCTION SUMPS)

RECOMMENDATION:
1 Adopt Revised Proposed Amendments to Rule 4402 (Crude Oil Production Sumps).
2 Authorize the Chair to sign the attached Resolution.

BACKGROUND: Rule 4402 (Crude Oil Production Sumps) limits volatile organic compound (VOC) emissions from sumps, pits, and ponds at facilities that produce, gather, separate, process, and/or store crude oil in an oil field. This rule was last amended in December 1992, as a part of the District rule numbering effort. The amended rule was submitted to the United States Environmental Protection Agency (EPA) as a revision to the State Implementation Plan (SIP) in 2006.
The EPA evaluated the amended rule and determined that while the rule largely meets Clean Air Act requirements, several issues needed to be further evaluated to ensure the rule fully satisfies the requirements of the Act for reasonably available control technology or RACT. The District has conducted a thorough analysis and is proposing amendments that are expected to result in full EPA approval of Rule 4402. The proposed amendments will explicitly prohibit the use of first stage sumps, clarify requirements, update test methods, and add record keeping requirements. District staff have determined that the amendments will not achieve significant emissions reductions or have a significant impact on affected sources since the District has existing requirements in place that affect these sources.

www.vaileyairorgSJVUAPCD Governing Board

ADOPT REVISED PROPOSED AMENDMENTS TO RULE 4402 (CRUDE OIL PRODUCTION SUMPS) December 15, 2011
These existing requirements, including the existing rule, New Source Review permitting, and the District's risk management requirements, have already eliminated or reduced the majority of emissions from this source. Rather than looking at these requirements collectively as a demonstration that Valley sources meet Clean Air Act requirements, the Act still requires each rule to specifically contain the FtACT limits. Although no significant reductions in actual emissions will be achieved, the proposed amendments will satisfy these administrative requirements. This rule addresses VOC emissions from a source category that is relatively small. VOC emissions reductions are generally far less important to the Valley's long-term attainment goals than are oxides of nitrogen (N0x) emissions reductions. As such, the Valley's attainment strategies generally emphasize NOx reductions. The District will continue to seek as much VOC reductions as expeditiously practical, technologically feasible, and as economically reasonable as determined by the Governing Board. DISCUSSION: EPA reviewed Rule 4402 to evaluate compliance with RACT requirements of Clean Air Act (CAA) §182(b)(2) and with the CAA §110(a)(2)(A) requirement for enforceability. EPA finalized a limited approval of Rule 4402 effective on August 8, 2011 with a technical support document (TSD) outlining their evaluation of the rule. In the Federal Register and TSD, EPA suggested staff evaluate rule requirements, exemptions, and test methods to determine if they are still appropriate and applicable for this source category. EPA also suggested the District prohibit first stage sumps and add additional recordkeeping requirements for facilities to justify claimed exemptions. District staff performed extensive evaluations of various aspects of the rule to determine if each section meets RACT requirements, as discussed in the final draft staff report. Overall, the District's evaluation has concluded that the existing rule currently satisfies RACT requirements. However, the District proposes a number of amendments to enhance the existing rule. The proposed rule was made available to the public 30 days prior to this public hearing. Based on feedback and further review of rule language, the District has made several minor revisions to the proposed rule that do not impact the applicability or requirements of the rule. Summary of Proposed Amendments to Rule 4402 District staff proposes to simplify and clarify rule requirements by removing some language from the applicability section, adding six definitions, and deleting Section 7.0 (Compliance Schedule) from the rule. District staff proposes the following amendments, effective on and after January 1, 2013:

2SJVUAPCD Governing Board

ADOPT REVISED PROPOSED AMENDMENTS TO RULE 4402 (CRUDE 0/L PRODUCT/ON SUMPS) December 15, 2011

• Time limits for use of emergency pits • Prohibition of first stage sumps • Recordkeeping requirements to verify qualification for exemptions • Updated test methods for clean produced water These proposed amendments would allow EPA to approve Rule 4402 as RACT. Emission Reduction Analysis Significant additional emission reductions from the proposed amendments are not anticipated since most facilities are already complying with the proposed VOC emission limits or can make minor operating or administrative changes to be in compliance. Cost Effectiveness Analysis Pursuant to California Health & Safety Code Section (CH&SC) 40920.6(a), the District is required to analyze the cost effectiveness of new rules or rule amendments that implement Best Available Retrofit Control Technology (BARCT) or planning requirements to incorporate all feasible measures. The proposed amendments to this rule would only add federal RACT requirements but not BARCT or all feasible measures, and are therefore not subject to the cost effectiveness analysis mandate. Given that operators are generally complying with the new limits currently and there are no significant emission reductions or compliance costs expected from these rule changes, a cost effectiveness analysis has not been performed. Socioeconomic Analysis Pursuant to CH&SC 40728.5(a), "Whenever a district intends to propose the adoption, amendment, or repeal of a rule or regulation that will significantly affect air quality or emissions limitations, that agency shall, to the extent data are available, perform an assessment of the socioeconomic impacts of the adoption, amendment, or repeal of the rule or regulation. This section does not apply to the adoption, amendment, or repeal of any rule or regulation that results in any less restrictive emissions limit if the action does not interfere with the district's adopted plan to attain ambient air quality standards, or does not result in any significant increase in emissions." The source category covers crude oil production sumps pits and ponds in the Valley. The proposed amendments are not expected to have significant costs associated with it. Therefore, staff concludes that there would be no significant socioeconomic impact from this rule. Rule Consistency Analysis Pursuant to CH&SC §40727.2, District staff evaluated the elements of amendments with the corresponding elements of other District rules and federal regulations that apply to
3SJVUAPCD Governing Board

ADOPT REVISED PROPOSED AMENDMENTS TO RULE 4402 (CRUDE OIL PRODUCTION SUMPS) December 15, 2011
the same source category or type of equipment. District staff found that the proposed amendments and requirements of this rule would not conflict with federal rules, regulations, or policies covering similar stationary sources. Environmental Impacts Adoption of the proposed amendments would limit VOC emissions from sumps. As discussed in the final draft staff report, the District proposes to make several minor and administrative changes to further strengthen District Rule 4402. The District performed an environmental analysis of the reasonably foreseeable methods by which compliance with the amended rule will be achieved. The District concludes that implementation of the proposed amendments would not result in foreseeable changes in existing operating practices impacting environmental resources. Staff concludes that there is no substantial evidence in the whole record before the District that the proposed amendments would cause any adverse environmental effects. Thus, the District finds that the project is exempt per the general rule that the California Environmental Quality Act (CEQA) applies only to projects which have the potential for causing a significant effect on the environment (CCR §15061(b)(3)). Rule Development Process As part of the rule development process, District staff hosted a public workshop on October 18, 2011, and held two technical workgroup meetings with industry representatives in September and October 2011. Staff solicited comments from the public, affected sources, trade organizations, California Air Resources Board (ARB), and EPA. Comments received were evaluated and incorporated into the rule as appropriate. The notice of the public hearing for the proposed rule amendments was published in general circulation newspapers in each of the eight San Joaquin Valley counties, and will be made available for review on the District website prior to this public hearing.

FISCAL IMPACTS: District staff expects no fiscal impact to the District to result from this action.

Attachments: Attachment A: Resolution for Revised Proposed Amendments to Rule 4402 — (4 pages)

Attachment B: Revised Proposed Rule 4402 - (8 pages) Attachment C: Final Draft Staff Report with Appendices for Revised Proposed Rule

4402— (88 pages)
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