SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

FINAL DRAFT STAFF REPORT

PROPOSED AMENDMENTS TO RULE 2201 (NEW AND MODIFIED STATIONARY SOURCE REVIE W RULE)

Prepared by: Carlos Garcia, Senior Air Quality Engi neer Reviewed by: David Warner, Director of Permit Servi ces

April 21, 2011

I. SUMMARY

As required under the federal Clean Air Act, the U. S. Environmental Protection Agency (EPA) set new national ambient air quality standard s for particulate matter less than 2.5 micrometers (PM2.5) to protect against public healt h impacts. Consequently, the EPA determined that the San Joaquin Valley Air Pollutio n Control District (District) was in

nonattainment of the PM2.5 standards. This set int o motion several actions for the District to take which included adoption of the Dis trict’s 2008 PM2.5 Plan which outlines the path to attainment of the federal PM2.5 standar d. The Clean Air Act and applicable regulations require that PM2.5 nonattainment areas, such as our valley, incorporate permitting requirements into their New Source Revie w (NSR) rules. The District’s NSR program ensures that the emissions of new or modifi ed stationary sources are mitigated

and do not interfere with the District’s efforts to meet air quality standards. With this proposed rule development for Rule 2201, District s taff is proposing amendments to our NSR rule to implement mandatory provisions of the f ederal nonattainment PM2.5 permitting program requirements.

Furthermore, the District amended Rule 2201 in Sept ember 2006 to add permitting requirements for agricultural sources (per SB 700, Florez) in the valley by directly referencing related portions of the California Heal th and Safety Code (CH&SC). EPA found this exemption to be ambiguous, since the ref erenced code is not contained in the State Implementation Plan, and therefore found it t o be a deficiency in Rule 2201. Consequently, the District will revise Rule 2201 to explicitly add the language describing the applicability of offsets for agricultural sourc es in Rule 2201, section 4.6.9. The direct addition of the agricultural offset exemption langu age in Rule 2201 to address EPA’s limited disapproval will provide a clearer descript ion of the exemption and does not change the intent of the rule or the methods with w hich the District permits agricultural sources. It should be noted that EPA also found p artial disapproval issues with agricultural source permitting exemption language i n Rule 2020, “Exemptions”, but this rule is being addressed in a separate rule amendmen t action.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 2 Final Draft Staff Report

for Rule 2201 Two workshops have been held under this rule develo pment project to discuss, present

and take comments on the Draft Rule 2201 amendments . Due to mandatory timelines for incorporating the federal PM2.5 requirements, the p roposed rule amendments will be considered for adoption by our Governing Board on A pril 21, 2011.

II. DESCRIPTION OF RULE 2201 (NEW AND MODIFIED STAT IONARY SOURCE REVIEW RULE)

The District’s NSR rule provides a regulatory mecha nism for allowing continued economic growth while minimizing the amount of emis sion increases due to this growth. District Rule 2201 applies to all new stationary so urces and all modifications to existing stationary sources that are subject to District per mit requirements. However, there are certain permitting exemptions allowed for smaller s ources of emissions which are identified in Rules 2201 and Rule 2020 (Exemptions)

.

The District’s NSR program is designed to meet both the state and federal NSR requirements for nonattainment areas and applies to new and modified stationary sources that emit nitrogen oxides (NOx), volatile o rganic compounds (VOC), particulate matter with an aerodynamic diameter of less than te n microns (PM-10), sulfur oxides (SOx), carbon monoxide (CO), and other pollutants s ubject to District permitting requirements pursuant to District Rule 2010 (Permit s Required).

Key features of Rule 2201 include:

• Best Available Control Technology (BACT): mandate s emission controls to

minimize emission increases above de minimis values ;

• Emission offsets: requires emissions above specif ied offset threshold levels to be mitigated with either concurrent reductions or past reductions which have been banked as emission reduction credits (ERC);

• Public notification: a 30 or 45 day notice period prior to issuance of an Authority to Construct (ATC) to garner comments on projects that result in emissions above specified levels;

• Required elements for Authority to Construct, Perm it to Operate and administrative requirements for the processing of NSR applications

.

Rule 2201, New and Modified Stationary Source Revie w Rule, provides the mechanism for the San Joaquin Valley Unified Air Pollution Co ntrol District (District) to issue permits to new and expanding businesses. Its primary purpo se is to minimize and mitigate emissions associated with new growth. The District ’s NSR program is designed to meet both the state and federal NSR requirements for non attainment areas, and applies to new and modified stationary sources that emit NOx, CO, VOC, SOx, PM10, PM2.5 (with this modification) and other pollutants subje ct to District permit.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 3 Final Draft Staff Report

for Rule 2201 III. DISCUSSION OF PROPOSED RULE AMENDMENTS

A. Implementation of the New Source Review Program for Particulate Matter Less than 2.5 Micrometers (PM2.5)

1. Background

The EPA set new national ambient air quality standa rds (NAAQS) for particulate matter less than 2.5 micrometers (PM2.5) to protect against public health impacts. Subsequently, the EPA determined that the San Joaquin Valley Air Basin was designated nonattainment for the 1997 PM2 .5 NAAQS, and EPA also designated the Valley as nonattainment for the 2006 PM2.5 NAAQS on November 13, 2009 (effective December 14, 2009). A dditionally, the SJVAB is designated as nonattainment under the PM2.5 Califor nia state standards (CCR Title 17 Section 60210).

The federal Clean Air Act and applicable regulation s require that PM2.5 nonattainment areas, such as our valley, incorporat e certain requirements into their New Source Review (NSR) rules for sources tha t emit PM2.5 and other pollutants that contribute to PM2.5. EPA issued fi nal rules called Implementation of the New Source Review Program for Particulate Ma tter Less than 2.5 Microns (PM2.5 NSR Implementation Rule) requirements on May 16, 2008 (73 FR28321). The PM2.5 NSR Implementation Rule expla ins how to apply NSR to PM2.5 emissions sources and establishes the major s ource threshold, significant emissions rate, offset ratios, interpollutant emiss ion offset ratios, and offset applicability of PM2.5 precursors.

District staff is proposing amendments to its NSR r ule to meet these federal requirements. Submittal of the PM2.5 NSR program re quirements is due to EPA before May 16, 2011.

Currently, PM2.5 permitting requirements are being implemented through District policy, APR 1140, which outlines interim federal NS R requirements for PM2.5 for new major sources and federal major modifications. These requirements are specified in 40 CFR Part 51.165 and the EPA Emissio n Offset Interpretive Ruling (Part 51 - Appendix S) and are effective as of July 15, 2008. District Policy APR 1140, Interim New Source Review Requirements for PM 2.5, will continue to apply until Rule 2201 has been amended by the Distr ict’s Governing Board to incorporate the federal NSR provisions for PM2.5.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 4 Final Draft Staff Report

for Rule 2201 2. Major Source Thresholds

The federal NSR permitting program relies on emissi ons thresholds to determine when program requirements apply to new facilities. If a new facility will emit target air pollutants in amounts greater than the m ajor source threshold, the facility is considered a major source. Sources are defined as a major source for nonattainment NSR provisions if they have the poten tial to emit of 100 or more tons per year of PM2.5.

3. Significant Emissions Rates

The federal NSR program applies significant emissio n rate thresholds to determine when NSR requirements apply to existing m ajor facilities. Significance

thresholds are used to determine the emissions for a proposed project at an existing facility is considered a federal major mod ification (as defined in Rule 2201 section 3.18.1.4).

The PM2.5 NSR Implementation Rule outlines the foll owing significant threshold emissions rate in tons per year (tpy) for direct PM 2.5 and precursor pollutants:

• Direct PM2.5 emissions at 10 tpy

• SO2 emissions at 40 tpy

• NOx emissions at 40 tpy

The District will include the mandatory requirement for sulfur dioxide (SOx) and nitrogen oxides (NOx) to be regulated as precursors to PM2.5. However,

because the District’s PM2.5 Plan did not demonstra te that volatile organic compounds (VOC) and ammonia are significant contrib utors to the formation of PM2.5 precursors in the SJVAB, they can not be cons idered precursors for NSR

purposes.

4. PM2.5 Offset Ratios

The offset ratios established in EPA’s PM2.5 NSR Im plementation Rule are 1 to 1, so one pound of emissions reduction is required for one pound of emissions increase of PM2.5 or PM2.5 precursors.

5. PM2.5 Interpollutant Emission Offset Ratios

The federal PM2.5 NSR Implementation Rule allows pr ovisions for interpollutant trading of emission offsets. In the federal rule, default interpollutant offset ratios were assigned for NOx to primary PM2.5 at a 100 to 1 ratio (100 tons NOx for 1 ton PM2.5) and for SOx to primary PM2.5 at a 40 to 1 ratio. Ratios for other pollutants were not specifically established but st ates have an option to add them if the interpollutant ratios are established i n attainment demonstration plans and approved into the State Implementation Plan (SI P).San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 5 Final Draft Staff Report

for Rule 2201 The EPA’s interpollutant offset ratios established in the PM2.5 NSR Implementation Rule are to be used unless states ch oose to incorporate other ratios that are substantiated through modeling or o ther technical demonstrations to be more representative for specific geographic a reas such as the valley.

EPA acknowledges that variations that occur across geographic regions can vary the relationship between pollutants. Thus, the Dist rict is proposing to submit different trading ratios as outlined by EPA which i nclude, but is not limited to:

• The relative magnitude of emissions of direct PM2. 5 and precursor gases (e.g., SO2 and NOX) within the geographic are a of interest.

• The relative contribution to local PM2.5 nonattain ment of directly emitted PM2.5 and individual precursors from the va rious sources or source categories under consideration as part of a potential interpollutant trade.

• The meteorological conditions and topography of th e area, which result in different source-receptor relationships a cross pollutants

within the local area.

Through preliminary analysis, the District believes that the interpollutant offset ratios set by EPA are much greater than would be ac tually needed for sources to adequately offset their PM2.5 emissions increases i n the valley.

At the December 2010 workshop for Rule 2201, the Di strict stated that it may propose new interpollutant offset ratios for inclus ion into the SIP through amendments to Rule 2201 or through the PM2.5 plan.

At this time, the District is proposing to prepare and send to EPA for approval alternative interpollutant ratios for SOx for PM2.5 and NOx for PM2.5 that are more appropriate for the valley, through amendments to the 2008 PM2.5 Plan SIP process. Therefore, Section 4.13.3.2 was added to allow the use of any EPA approved interpollutant offset ratios. This se ction is intended to allow the use of the District’s interpollutant offset ratios once they are approved by EPA

into the SIP.

The District is proposing to move rapidly on this i ssue, and will workshop the proposed PM2.5 interpollutant ratios by second quar ter 2011, with the intent of taking them before the governing board for their co nsideration and approval by third quarter 2011.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 6 Final Draft Staff Report

for Rule 2201 B. Title V Program

EPA established the major source threshold for PM2. 5 at 100 tons per year. Sources with potential emissions over the threshold would b e subject to federal permitting requirements under Title V.

No changes to the District’s Title V rule, Rule 252 0 (Federally Mandated Operating Permits), are needed because the major source defin ition refers to the definition in Rule 2201 which will include the 100 tpy major source th reshold level for PM2.5.

C. Rule 2530 (Federally Enforceable Potential to Em it)

The primary purpose of Rule 2530 is to provide faci lities whose emissions are consistently low certain mechanisms to escape Title V permitting requirements.

Facilities that maintain sufficient records to demo nstrate that actual emissions from the facility are less than 50 percent of all major sour ce emissions thresholds are considered to have a “federally enforceable potential to emit” that is less than the District’s major source, or Title V, thresholds.

PM2.5 emissions constitute a portion of PM10 emissi ons. For example, PM2.5 emissions from sources of combustion generally account for mo re than 90% of the PM10 emissions. Non-combustion sources generally have a much smalle r fraction of PM2.5. If a stationary source is not considered a major source for PM 10 , which threshold is 70 tons per year, then the source can not be a major source for PM2.5 since the PM2.5 major source threshold is established at the higher level of 100 tons per year. The District will utilize the PM10 Title V permitting exemption thresholds in Rul e 2530 as a conservative measure to assure a federally enforceable limit on PM2.5 emiss ions also exists.

In other words, facilities found to be exempt from Title V permitting because they maintain

annual emissions of less than 35 tons of PM10 each year are automatically known to be exempt based on their PM2.5 emissions as well, as t heir PM2.5 emissions are obviously below 50 tons per year. Therefore, no change is ne cessary in Rule 2530.

D. 2008 PM2.5 Plan: Pre-baseline Usage of Emission Reductions Credits (PM2.5 Caps)

The rule amendments will also include limits, or ca ps, to the quantity of certain emission reduction credits (ERCs) that can be used as mitiga tion for new sources. The limits are specified in the District’s 2008 PM2.5 Plan and may be included in subsequent EPA approved attainment plans, and apply to so-called “ pre-baseline” ERCs. Pre-baseline ERCs are those that pre-date the applicable baselin e period for each of the District’s SIP approved attainment plans. The plans specify c aps for each pollutant, and the NSR rule will incorporate language that references these limits. These caps have been established through a very conservative process, an d we do not expect that ERC usageSan Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 7 Final Draft Staff Report

for Rule 2201 will exceed the caps. However, if the quantity of pre-baseline ERCs that get used as offsets reaches the caps, use of pre-baseline offse ts will be curtailed until the respective plans can be revisited to extend the cap s.

The District’s 2008 PM2.5 Plan outlines the strateg y for achieving the NAAQS for PM2.5 (1997 Standard). Pre-baseline ERCs are consi dered as growth and must be included in the PM2.5 plan to the extent that these credits will be used as offsets or netting prior to the attainment of the PM2.5 standa rds by 2015. Therefore, a cap on the amount of pre-baseline credits that can be used is required to assure that the use of pre-baseline ERCs do not interfere with the attainm ent effort and the applicable rate of progress. The District committed to amending our R ules and Regulations to require tracking and enforcement of the cap within 12 month s after EPA approval of this Plan.

The 2008 PM2.5 Plan has been submitted to EPA for a pproval, and it should be noted that on November 30, 2010, EPA issued it’s proposal of limited approval and limited disapproval of the plan (75 FR74518).

As shown in Tables D-1 through D-4 of appendix D of the District’s 2008 PM2.5 Plan, the expected pre-baseline offset usage after 2005 t hrough 2014, was estimated as

follows:

NOx ..................................... 4.8 tons/day VOC ..................................... 9.8 tons/day PM2.5.................................... 0.9 tons/day SOx ...................................... 1.7 tons/day

References to these caps, and the related tracking and enforcement provisions, are incorporated into Rule 2201, Section 7.5.

As currently written in Rule 2201, Section 7.5 allo ws the District to directly incorporate future pre-baseline emission reduction caps contain ed in District-adopted and EPA SIP approved attainment plans.

E. Agricultural Permitting and EPA Approval and Dis approval of Rule 2201

In January of 2004, new state laws took effect pert aining to the permitting of agricultural operations in the State of California (SB 700, Flor ez). In part, these laws removed the long-standing state air permitting exemption for ag ricultural operations and replaced it with a set of rules requiring agricultural sources with emissions over one-half a district’s major source thresholds to obtain permits, and requ iring air districts to make certain findings before requiring permits of agricultural s ources with emissions less than those thresholds. See California Heath and Safety Code ( CH&SC), Section 42301.16.

In addition, SB 700 enacted CH&SC Section 42301.18( c). This section prohibits districts from requiring minor agricultural sources to offset their emissions increasesSan Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 8 Final Draft Staff Report

for Rule 2201 unless certain criteria are met, which criteria wou ld then allow the same types of agricultural sources to bank credits after generati ng voluntary emissions reductions. On May 11, 2010, EPA published in the Federal Regis ter (75 FR26102) a final limited approval and limited disapproval of District Rule 2 201 and Rule 2020 (Exemptions). The EPA’s final approval/disapproval was effective on June 10, 2010. The EPA’s final limited disapproval triggered an 18-month sanction clock requiring the District to submit a SIP approval revision of Rule 2201 by December 10 , 2011. Unless the rule deficiency is corrected and a SIP approvable rule is submitted by the District before the sanction deadline expires, EPA will impose federal sanctions which include withholding highway funds and an increase emission offset ration requir ement for stationary sources within the San Joaquin Valley. In addition to the 18-mont h sanction, the District could face a Federal Implementation Plan by EPA if the District fails to submit a fully approvable SIP revision of Rule 2020 within 24 months by June 10, 2012.

EPA found that the limited permitting exemption for agricultural sources of emissions found in section 4.6.9 of the rule was inappropriat ely ambiguous due to a reference to state law, which law is not in the SIP. To correct the rule deficiency, EPA recommended replacing the statutory reference to th e CH&SC with a clear description of the sources covered by the exemption.

Specifically, current Rule 2201, Section 4.6.9, say s that the following sources are exempt from permitting offset requirements:

Agricultural sources, to the extent provided by Cal ifornia Health and Safety Code, Section 42301.18(c), except that nothing in t his section shall circumvent the requirements of section 42301.16(a).

Staff is proposing to remove the ambiguity caused b y the reference to state law by restating that emissions offsets shall not be requi red for:

4.6.9 Agricultural Sources, for criteria pollutant s for that source if emissions

reductions from that source would not meet the crit eria for real, permanent, quantifiable, and enforceable emission r eductions.

4.6.9.1 In no case shall the offset exemption in se ction 4.6.9 apply to an agricultural source that is also a major stationary source for the pollutant for which the offset exemption is sought.

To support the new language above, staff recommends the addition of a definition for “Agricultural Source” to Section 3.0 (Definitions) of Rule 2201 as follows:

3.5 Agricultural Source: equipment or operations t hat emit air contaminants and that are used in the production of crops or the raising of fowl or animals.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 9 Final Draft Staff Report

for Rule 2201 These changes remove the ambiguity caused by refere ncing the state law but do not change the applicability of the exemption in any wa y because applying the referenced

state law would lead to the same result.

It should be noted that the White Paper on SB 700 p roduced by the California Air Pollution Control Officers Association (CAPCOA) int erprets the language we have captured in Section 4.6.9 as saying that the Distri ct may not require offsets for minor agricultural sources unless we can issue emissions reduction credits to the same

source-types.

It should also be noted that SB 288 prohibits chang es to certain permitting requirements such that they relax those requirement s in place on December 30, 2002. As discussed later in this report (section IV) and more thoroughly in the District’s September 21, 2006 final staff report for Rule 2201 and 2020, this is not a change in requirements at all, but merely an incorporation of existing state law requirements. In addition, all agricultural operations were exempt f rom permits by state law in 2002, and remained exempt until state law changed in 2004. T herefore, neither this change, nor the one discussed below, could relax any permitting requirements that existed on December 30, 2002, and so SB 288 is not violated.

F. Proposed Rule Amendments

The following changes are proposed for Draft Rule 2 201:

• Section 3.4: PM2.5 was added to the list of affect ed pollutants applicable to NSR.

• Section 3.5: An agricultural source definition was added to support the offset exemption in section 4.6.9.

• Section 3.18.1.4: Added the federal major modifica tion significance thresholds for PM2.5 which include direct PM2.5 and the precursors of SOx and NOx. Ammonia and VOC were not included as precursors.

• Section 3.24: Added the federal major source thres hold for PM2.5. The threshold for major sources of PM2.5 is 200,000 pounds per ye ar (100 tons per year).

• Section 3.28: PM2.5 was defined as particulate ma tter with an aerodynamic diameter smaller than or equal to a nominal 2.5 mic rons.

• Section 3.31: NOx and SOx are included as precurso rs for the nitrate fraction and sulfate fraction for PM2.5, respectively.

• Section 4.5.4: Added the following language that requires PM2.5 offsets: “Offsets shall be required for PM2.5 and PM2.5 precursor emi ssion increases for such increases that constitute new major sources or fede ral major modifications.”San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 10 Final Draft Staff Report

for Rule 2201 In the initial version of this modification of Rule 2201 (12/14/2010), The District proposed to use language that would require major P M2.5 projects to offset their emissions using “surplus at time of use” creditable emissions reduction for offsetting purposes, consistent with the federal offsetting re quirements. This would follow the existing federal offsetting requirements and would remove the need to include PM2.5 emissions in the Annual Offset Equivalency De monstration tracking processes of Sections 7.1 through 7.4 of Rule 2201.

However, stakeholders commenting on this draft of t he rule were unanimously opposed to this concept because of the inherent dis couragement of the development of innovative air pollution controls an d techniques.

The District agrees that requiring “surplus at time of use credits” creates a disincentive for the creation of ERCs, since there is no certainty that the reductions will be valid at the time they are used. Companies have indicated to the District in the past that they were not willing to invest in in novative and voluntary emissions reduction technologies if there was no certainty th at the credits created would be valid at the time they were needed. We also agree t hat this issue was the reason that we negotiated the offset equivalency program w ith EPA.

Section 7 of Rule 2201 specifies the tracking and r eporting actions involved with the annual equivalency demonstration and steps to be ta ken to correct any ERC shortfalls. This section also details the required actions to be taken if an ERC shortfall occurred. Rule 2201 has a self-implement ing offset shortfall remedy procedure which entails following the federal offse tting requirements directly, until the shortfall is eliminated. The system is designe d to be invisible to permittees unless equivalency cannot be demonstrated and the i ndicated remedies must be implemented.

Nothing in this section, or in the underlying agree ment, prohibits that application of the equivalency tracking system to PM2.5 emissions. Therefore, the District is proposing to amend section 4.5.4 to eliminate the s urplus at time of use requirement, and instead demonstrate through sectio n 7 that we have, on an annual basis, required sufficient surplus at time of use P M2.5 emission reductions to satisfy federal PM2.5 offsetting requirements. We will, up on adoption of this rule, add PM2.5 to subsequent annual offset equivalency repor ts.

• Section 4.6.9: Remove the CH&SC 42301.18(c) refer ence in Section 4.6.9 and add the specific language specified above that agricult ural sources are provided some limited exemption from offsetting emissions increas es. Agricultural sources subject to major source permitting, including federal major modifications, would need to provide offsets for the corresponding pollutants. T his clarifies EPA’s limited disapproval issues, and does not change the Distric t’s current practices and methods of permitting agricultural sources.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 11 Final Draft Staff Report

for Rule 2201 • Section 4.8.2 added the following language: “For PM2.5 and PM2.5 precursor offsets for new major sources and federal major mod ifications, the offset ratio shall

be 1.0.” Again, this requirement is to remain consistent wit h the federal PM2.5 permitting requirements.

• Section 4.13.3.2: This section was added to allow a source to provide interpollutant

offsets for PM2.5 emissions increases. As currentl y proposed, the interpollutant offset ratios are those set by EPA (see section III .A.5) until such time that the

District demonstrates and submits alternative ratio s to EPA, and EPA approves

them into the SIP.

IV. PROTECT CALIFORNIA AIR ACT OF 2003 - SENATE BIL L 288

California Health and Safety Code sections 42500 th rough 42507 (SB 288) mandates that a District’s New Source Review (NSR) rules can not be made less stringent, in a variety of specified areas, than the rules that exi sted on December 30, 2002 1 . This legislation was crafted and signed into law specifi cally to prevent Districts from implementing any Federal NSR reforms that would hav e relaxed California’s stringent NSR requirements. The state Air Resources Board (A RB) has provided guidance on the implementation of SB 288, and has concluded tha t there are four components of

NSR that are affected:

1. NSR applicability determinations. 2. The definitions of “modification”, “major modifi cation”, “routine maintenance”, and “repair or maintenance”. 3. The calculation methodology, thresholds, or othe r procedures of new source review. ARB further interprets this to apply to ba seline determinations, calculating emissions changes, offset amounts requi red and major source and major modification thresholds. 4. The definitions and requirements of NSR regulati ons, including, on a programwide basis, the requirement to obtain offsets 2

.

The proposed NSR rule amendments outlined in this r eport implement required federal provisions to add new requirements for PM2.5 and to reword, but not change implementation or meaning, a limited offsetting exe mption. Neither of these changes relaxes existing District NSR requirements.

1 There are some narrowly defined exceptions to thes e “anti-backsliding” provisions, but none apply to this rule amendment and therefore the exceptions will no t be discussed further in this staff report.

2 While the District believes that this final compon ent is an overly broad legal interpretation of the legislation, and inconsistent with the development and intent of the legislation, we believe the Distr ict’s proposed amendments are complying with ARB’s interp retation on this issue. However, we will reserve our right to challenge ARB on this issue at a later date, or if ARB uses this interpretation to contra vene any of the District’s proposed NSR amendments.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 12 Final Draft Staff Report

for Rule 2201 V. RULE DEVELOPMENT PROCESS

EPA’s Final Rule To Implement the PM2.5 National Am bient Air Quality Standard; Final Rule (effective January 30, 2006) provides states t hree years to submit an approvable NSR program for the PM2.5 standard. Thus for this r equirement, EPA mandates that our NSR program needs to be submitted into the SIP before May 16, 2011 (73 FR 28321).

Two workshops for public input to proposed amendmen ts to Rule 2201 have been completed. District Staff conducted the first work shop meeting on December 14, 2010 and the second workshop on February 10, 2011 to pre sent, discuss and take comments on the proposed rulemaking. The District considered written comments received from the public, affected sources, ARB, an d EPA during the public workshop process which were addressed in the previous staff report for Rule 2201. For the first workshop, comments have been incorporated into the draft rules as appropriate. There

were no written comments received for the second wo rkshop to address in this final draft staff report.

Adoption by our Governing Board is scheduled for Ap ril 21, 2011, after which Rule 2201

will be forwarded to EPA for inclusion into the SIP

.

VI. COST EFFECTIVENESS AND SOCIOECONOMIC IMPACT ANA LYSIS

Pursuant to CH&SC Section 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). The draft amendments do not add BARCT requirements and therefore are not subject to the cost effective ness analysis mandate.

Additionally, state law requires the District to an alyze the socioeconomic impacts of any proposed rule amendment that significantly affects air quality or strengthens an

emission limitation. The draft amendments will have neither effect, and is therefore not subject to the socioeconomic analysis mandate.

VII. RULE CONSISTENCY ANALYSIS

Pursuant to CH&SC Section 40727.2 (g) a rule consis tency analysis of the draft rule is not required. The draft rule does not strengthen e mission limits or impose more stringent monitoring, reporting, or recordkeeping r equirements.San Joaquin Valley Unified Air Pollution Control Di strict

Final Draft Staff Report: Rule 2201 April 21, 201 1

Page 13 Final Draft Staff Report

for Rule 2201 VIII. ENVIRONMENTAL ASSESSMENT

Pursuant to §15061 of the Guidelines for Implementa tion of the California Environmental Quality Act (CEQA), District staff in vestigated the likely environmental impacts of the proposed amendments to Rule 2201. Th e purpose of this rule-amending project is to add the federal PM2.5 new source revi ew requirements, which include establishing the PM2.5 major source permitting thre sholds, offset ratios, and PM2.5 precursor offset applicability. Additionally, the amendments will include some language changes to improve clarity and assure SIP approval of the limited offset exemption for minor agricultural sources. Draft amendments are ba sed on federal requirements and do not change the meaning of current rule language. As such, District staff concludes that it can be seen with certainty that the propose d amendments to the rule will not have any significant adverse effect on the environm ent. Staff will recommend filing a Notice of Exemption under the provisions of Califor nia Code of Regulations section 15061(b)(3).