## Bay Area Air Quality Management District

939 Ellis Street San Francisco, California 94109



## Staff Report

Proposed Amendments to Regulation 8, Rule 28: Episodic Releases from Pressure Relief Devices at Petroleum Refineries and Chemical Plants

November 2005

Prepared By

Victor Douglas Senior Air Quality Engineer

Alexander Crockett Assistant CounselTABLE OF CONTENTS

I. EXECUTIVE SU MMARY .............................................................................1

II. BACKGROUND ...........................................................................................3

A. Types of Pressure Relief De vices ..................................................................................4

B. Emissions fr om PRDs......................................................................................................5

C. Detecting and Characterizi ng Emissions fr om PRDs ..................................................6

D. PRDs Currently In Serv ice In The Bay Area ..................................................................8

III. REGULATORY HISTORY...........................................................................8

A. 1980 – Adoption of a P RD Leak Sta ndard .....................................................................8

B. 1997 – Addition of Prevention Measures and Targeted PRD Control Requirements9

C. Other District Regulations Applicable to P RDs..........................................................15

IV. RULE EVAL UATION.................................................................................16

A. Areas for Improvement of Current Rule ......................................................................18

B. Potential For Additional C ontrol of PRD Emissions ..................................................21

V. PROPOSED AM ENDMEN TS ....................................................................23

VI. EMISSIONS...............................................................................................24

A. Current Emissi ons Summary........................................................................................25

B. Emission Reductions Since Adoption of the Current Rule in 1997..........................26

C. Potential Further Em issions Re ductions ....................................................................29

VII. ECONOMIC IM PACTS ...........................................................................30

A. Costs That Would Be Incurred by Affected Facilities ................................................30

B. Incremental Cost Effectiv eness....................................................................................39

C. Socioeconomic Impacts................................................................................................40

VIII. ENVIRONMENTAL IMPACTS................................................................40IX. REGULATORY IMPACT S.........................................................................41

X. RULE DEVELOPMENT PROC ESS...........................................................41

A. PRD Audit – May, 2002 ..................................................................................................41

B. Technical Assessment Docu ment – Decem ber 2002 .................................................41

C. Technical Workgroup Meet ing – May 9, 2005 .............................................................42

D. Public Workshop Meeting – September 14, 2005 .......................................................43

E. Informal Office Meetings with Inte rested Parties – Septembe r 2005 .......................44

F. Further Technical Workgroup M eeting – Octobe r 20, 2005.......................................44

G. Changes to the Proposal in Response to P ublic Input.............................................44

XI. CONCLUSION S ........................................................................................45

XII. RESPONSE TO PUBL IC COMME NTS.....................................................47

XIII REFERENCE S ..........................................................................................58Regulation 8, Rule 28 Staff Report November, 2005 1 I. EXECUTIVE SUMMARY

This Staff Report outlines the rule devel opment efforts by the Staff of the Bay Area Air Quality Management District with r egard to pressure relief devices at petroleum refineries and chemical plants, which are subject to District Regulation 8, Rule 28. The Staff Report provides the technical analysis and policy rationale behind the proposed amendments to Regulation 8, Rule 28.

Pressure relief devices, or “PRDs”, are safety devices used to protect pressurized equipment from overpressu res caused by upset conditions. If equipment experiences an upset, the PRD will allow any excess pressure to be vented rather than building up and potent ially causing a rupture or other catastrophic failure. The District committ ed in Further Study Measure 8 in the 2001 Ozone Attainment Plan to examini ng these devices to determine if hydrocarbon emissions from petroleum re fineries could be further reduced by requiring additional controls on refinery PRDs.

To fulfill the commitment of Further Study Measure 8, District staff has reviewed the performance of Regulation 8, Rule 28. This review has shown that in general the current rule has been very effective. The Rule aims to phase out all atmospheric PRDs i eventually by requiring them to be routed to a control system (such as a safety flare or vapor re covery system) when new equipment is installed or when existing equi pment is modified. The Rule also targets existing “bad actor” PRDs that have demonstrat ed a propensity for repeated releases, and requires them to be controlled immediat ely. Finally, for all PRDs, the Rule requires facilities to implement Prevent ion Measures designed to prevent or
minimize releases.

The rule has resulted in a significant reduction in PRD emissions. When the current Rule was adopted in 1997, emi ssions from PRDs were found to be approximately 27 to 150 tons per year. Since the current rule has been in place, emissions have averaged 20.5 tons per y ear. Furthermore, since the rule’s requirement to implement Prevention M easures took effect, emissions have averaged only 12.4 tons per year.

Notwithstanding these successes, staff has identified severa l areas where the current rule could be improved. The rule requires that facilit ies report releases over 10 pounds to the Distric t, but it does not explic itly require emissions monitoring or set standards for monitoring equipment. As a result, some facilities are not monitoring their P RDs well, and have the potential for releases to go undetected. In addition, the rule is somewhat ambiguous about what “sources” it covers, and has some other undefined terms and ambiguous or unclear language. Staff is proposing that the Board of Directors adopt amendments to
the current rule to address these issues.

i Atmospheric pressure relief devices (PRDs) vent directly to the atmospher e. Many PRDs vent to containment and processing such as a gas recovery system, to a thermal oxidizer, or to a flare.Regulation 8, Rule 28 Staff Report November, 2005 2 Beyond these proposals, staff also c onsidered whether it would be reasonable and appropriate to require refineries to c ontrol all existing atmospheric PRDs now, rather than waiting for them to be phased out over time as equipment is modified or replaced, as t he current rule requires. Staff has found that such a requirement be prohibitively costly, with re fineries having to incur costs of over $1 million per ton of emissions prevented, which is orders of magnitude greater than what the District normally considers cost -effective. Staff is therefore not recommending additional controls beyond those already required in the rule.

Finally, Staff also examined whether the District should require all PRDs to be vented to control systems as a safety measure to reduce the chance of accidental releases of acutely hazardous mate rials. Such industrial safety issues were not part of the mandate of Further Study Measure 8, wh ich was aimed at reducing emissions of ozone precursors. Staff nevertheless investigated them because of a strong concern for worker and community safety. Staff found that a comprehensive overlapping web of industria l safety laws and regulations already exists, which requires operators to “des ign and maintain a safe facility taking such steps as are necessary to prevent releases,” in the language of the federal Clean Air Act. Staff believes that additi onal District regulati on in the area of process safety would be duplicative of existing regulations and would not be well directed towards reducing community and worker risks. This conclusion reaffirms the determination of the Boar d of Directors’ Ad Hoc Committee on
Accidental Emissions in connection with t he adoption of the current rule that additional District requirements aimed at pr ocess safety would not be appropriate in Regulation 8, Rule 28. Safety at pet roleum refineries and chemical plants is a high priority, however, and the Distric t will continue to consult with local authorities to assure that adequate r egulatory safeguards are in place.

Summary of Proposed Amendments:

Based on this review, staff proposes t he following amendments to Regulation 8,
Rule 28:

1. Require facilities to ensure that they have the capability to detect and quantify all release events, including small releases of 10 pounds (the reporting threshold), and require facilit ies to demonstrate this capability to the District;

2. Require data recording and record keeping for venting and emissions verification;

3. Clearly define the equipment subject to the rule as the process unit to ensure that the original intent of the rule – to regulate all PRDs on an individual source (i.e., process unit) in the same manner – is clarified;

4. Require facilities to report to the Dis trict their analysis of the root causes and potential corrective actions after each PRD release event;Regulation 8, Rule 28 Staff Report November, 2005 3 5. Make minor, non-substantive changes to the rule such as deleting obsolete references to “turnar ounds,” moving requirements where appropriate, and clarifying various sections of the rule.

Rule Development Process:

During this rulemaking effo rt, staff hosted two technical workgroup meetings, as well as a public workshop in Rodeo, a comm unity adjacent to a refinery. Staff also met informally with representatives of refineries, chemical plants, community groups, the Western States Petroleum Association and Contra Costa County Health Services. Staff has considered this public input and has incorporated it into the proposed amendment s, where appropriate.

Economic Analysis:

The proposed amendments are aimed primarily at im proving the clarity and enforceability of the current rule. They do not add additional substantive requirements or require the addition of new control equipment. The proposed
amendments thus will not impose any significant additional costs on affected facilities beyond what is requi red under the current rule. Some facilities may not currently have adequate monitoring equipment to satisfy the rule’s requirements, in part because those requirements are not explicitly spelled out in the current rule. Such facilities may have to inst all additional monitoring equipment to do so, but these are not costs imposed by t he proposed amendments, and in any case they are expected to be minimal.

Environmental Impacts:

Pursuant to the California Environmental Quality Act (CEQA), the District has had an initial study for the proposed amendment s prepared by Environmental Audit, Inc. The initial study indicated ther e are no potential significant adverse environmental impacts associated with the proposed amendments. Staff is proposing that the Board of Directors adopt a CEQA Negative Declaration for the proposed amendments.

Conclusions:

The proposed amendments will ens ure that all facilities have the capability to detect PRD releases. They will also clarify t he rule so that it can be more easily understood and enforced. Additional costs to affected facilities will be minimal. Staff therefore recommends that the B oard of Directors adopt the proposed amendments along with the CEQA Negative Declaration.

II. BACKGROUND

Pressure relief devices are a means to safely relieve excessive pressures to prevent process equipment, piping, and other components from rupturing or causing other safety hazards. PRDs are designed to vent, or “lift”, at a prescribed “set pressure” to relieve ex cess pressure before it can exceed safeRegulation 8, Rule 28 Staff Report November, 2005 4 operating and/or equipment design levels. In new refinery construction, PRDs in VOC service must relieve to a control syst em that recovers the process gases or routes them to a disposal system such as a safety flare or thermal oxidizer. However, many older installations still have PRDs that vent directly to the atmosphere, resulting in the emission of VOCs and/or other material when the PRDs lift or if the valves leak at pressures below the set point. These PRDs are called “atmospheric” PRDs and are the subj ect of Regulation 8, Rule 28.

A. Types of Pressure Relief Devices

PRDs can be classified into the following general categories:

Pressure Relief Valves: The basic pressure relief valve must open automatically and quickly during a rise in system pre ssure beyond a specified set pressure, must close with minimal leakage when no rmal operating pressure is restored, and must be highly reliable. A pressure re lief valve typically consists of a valve inlet or nozzle mounted on the pressuriz ed system, a disc held against the nozzle to prevent flow under normal operating conditions, a spring to hold the disc closed, and a body/bonnet to c ontain the operating elements. (1) The spring load is adjustable to vary the pressure at which the valve will open. This design is illustrated in Figure 2.1. (2) Figure 2.2 is a photo of pressure relief valves.

Figure 2.1 Spring-Loaded Pressure Relief Valve

Bonnet

Spring Disc Holder

Bushing

Disc Body

NozzleRegulation 8, Rule 28 Staff Report November, 2005 5 Figure 2.2 Seven 6” Diameter Pressure Relief Devices and Exhaust “Horns” Valero Refinery

Thermal Relief Valves: Thermal relief valves protect liquid pipelines from overpressurizing. Since the compressibility of liquid is minor, releases from thermal relief valves are normally small. These va lves close as soon as the pressure in the closed system is reliev ed. These valves are generally vented to process drains, back into a pipeline, or into the atmosphere.

Rupture Disks: A rupture disk is a thin me tal disk or diaphragm set between flanges often located on the pressure side of the relief valve or downstream from a block valve. Rupture disks are used to protect relief valves from the process pressure. They are designed to burst at the relief valve setting. Owing to their “one-time” use, rupture disks are app licable for relief devices where the component will be taken out of service after a release, for repairs or retrofits. Because they can only be used once, they are installed with block valves that will ensure that the piping can be closed once the emergency is contained. Rupture disks can also be used in place of relief valves in certain applications.

B. Emissions from PRDs

PRDs emit air pollutants when they “lift” to relieve pressure in the equipment they are serving. Such releases are often re ferred to as “episodic” releases because they occur only during process ups ets when the PRD opens to relieve overpressures. In general, episodic emissi ons from PRDs can vary greatly, from a few pounds to many tons of material. Also, the duration of releases can vary greatly – from as little as seconds to as much as a day. Emissions may not correlate with the duration of venti ng because the components equipped withRegulation 8, Rule 28 Staff Report November, 2005 6 PRDs process a range of materi als and operate under a wide range of

pressures.

PRDs can also release material through l eaks. Emissions from leaks are often referred to as “fugitive” emissions, and are addressed in District Regulation 8, Rule 18: Equipment Leaks, which requires periodic leak inspections of all PRDs.

C. Detecting and Characteriz ing Emissions from PRDs

Facility operators rely on a va riety of indicators to determine whether or not a PRD has vented and what kind of release was involved.

Telltale Indicators :
A telltale indicator, a physical device pl aced on the PRD’s exhaust outlet in such a way that it will be moved or otherwise impacted if any ma terial is vented out of the PRD, is one method of determini ng whether a PRD has experienced a release. Operators can readily determine whether there has been a release by simply looking at the device to see whether it has been activated. Some
common telltale indicators are:

 Socks – Socks are pieces of cloth or other material placed over the exhaust of a PRD such that when the PRD releases, the sock is blown off by the releasing gas. If the sock is abs ent, that is a telltale sign that there
has been a release.

 Flags – Flags are brightly colored meta l tabs that are activated during a venting and become visible and can be easily seen by an operator.

 Rupture Disks – As mentioned above, rupt ure disks are thin metal diaphragms held between flanges. When the PRD releases, the disk will rupture. A ruptured disk is a telltal e sign that there has been a release.

Telltale indicators are very useful in determining whether there has been a release. However, they do not provide any information about the release, such as when it occurred, how l ong it lasted, how much material was involved, or the nature of the material released.

Other Indicators :
In addition to a telltale indicator, ther e are other ways to determine whether a PRD has lifted. These include:

 Audible indicators – When PRDs vent, they normally make a loud
distinctive sound.

 Pressure indicators – PRDs are pressure relieving devices that are set at a specific pressure. When a process has an overpressure that causes a PRD to lift, it normally leaves a char acteristic “pressure signature” that
indicates that a release occurred. This pressure signature is marked by rising pressure as the system appr oaches the PRD’s set point, then a leveling off of the pressure as the PRD opens to vent the accumulated gases, and then falling pressure after the PRD closes and the processRegulation 8, Rule 28 Staff Report November, 2005 7 returns to a more stable state. M onitoring the pressure within the system can thus provide a good indicator that a release has occurred. Pressure monitoring is most useful when there is a device that measures the actual pressure at the PRD. In many situations, however, the monitoring is in the vessel or equipment protected by t he PRD, and the actual pressure experienced by the PRD must be calculated based on engineering
calculations.

 Temperature – Temperature can be used as a way to indicate the release of a PRD. As temperature incr eases, pressure will also increase, triggering a release. A decrease in temperature indicates pressure relief.

 Flowrates – Process flowrate can also indi cate the venting of a PRD. An initial increase in a process flowrate from a vessel indicates a pressure increase. A leveling off or decrease in the flowrate would indicate flow being released at another point, such as at a PRD. Although the process flowrate is a surrogate indicator, this information taken along with pressure readings can be used to indicate and quantify a release event.

None of these mechanisms, by itself, provides an ideal record of a release. For example, an audible indicator may be missed if there is nobody in the vicinity to hear it, or if the sound is ma sked by other noises at the fa cility. Indications from a pressure, temperature or flowrate moni tor may be missed if t he operator is not actively watching the monitor at the time of the release or if the monitor is not equipped with an alarm or notification system . Telltale indicators, as mentioned above, do not quantify the ty pe or quantity of a releas e, and may indicate a release where none has occurred, such as when a sock is blown off in bad weather. Used in combination, how ever, these mechanisms can create a comprehensive monitoring system that will reliably detect and alert operators of any PRD releases.

Such monitoring systems can also reli ably characterize PRD releases and provide the information that must be repor ted to the District under Rule 8-28 for any release over 10 pounds, such as the type and quantity of the emission. ii This information can normally be obtained by reviewing operating data from the equipment involved in the release. For ex ample, a review of operating pressure may reveal a PRD release “pressure signature” described above: pressure increasing at a certain time, then leveli ng off at the PRD’s set point, and then decreasing after a short time. By revi ewing the type of ma terial that the equipment was processing at the time, t he pressure at which the PRD opened, the size of the PRD opening, the time period over which the PRD was open, and other factors, one can characterize the release fairly accurately.

Leak Detection:

PRDs can easily be inspected for leak-ti ghtness with a portable analyzer that is placed near the PRD to detect any vapors that are leaking out. Using such

ii Current requirements of Rule 8-28 are discussed in Section III. B. 2.Regulation 8, Rule 28 Staff Report November, 2005 8 equipment, facility staff and District inspectors can determine if any PRDs are leaking, and if so to what extent. Fac ilities are required by Rule 8-18 to inspect all PRDs regularly, and District inspectors conduct their own inspections to verify compliance.

D. PRDs Currently In Service In The Bay Area

There are 324 atmospheric PRDs located at the five Bay Area refineries. Of the 324 PRDs, approximately 50 are either rupture disks or pressure relief valve / rupture disk combinations, with the rema ining being pressure relief valves. Approximately ten of the PRDs are equipped with socks as telltale indicators and the vast majority have some type of pressure monitoring, although some monitoring devices are remotely loca ted and do not direct ly measure the pressure experienced at the PRD. T able 2.1 summarizes the total number of atmospheric PRDs located at each refinery.

Table 2.1 Population of Atmospheric PRDs at Each Refinery

Refinery Atmospheric PRDs
Chevron-Texaco 41 ConocoPhillips 12
Shell 107
Tesoro 99
Valero 65
Total 324

Chemical Plants in the Bay Area also us e PRDs on various process units. These PRDs usually service components c ontaining non-hydrocarbon compounds, and have experienced only five reportable releases (over 10 pounds) since the 1997 amendments to Rule 8-28, involving only 2 t ons of material in total. Further Study Measure 8 and the cu rrent rule development effort are focused on hydrocarbon emissions from PRDs at refineries.

III. REGULATORY HISTORY

Control of emissions from PRDs has been a focus of the District’s regulatory attention for over 25 years. This secti on provides an overview of how Regulation 8-28 has evolved over the years into its current form, in order to provide some context for the proposed amendments.

A. 1980 – Adoption of a PRD Leak Standard

Rule 8-28 was originally adopted July 16, 1980, and regulated fugitive emissions (leaks). The rule established a leak standard of 10,000 parts per million for PRDs, but it did not place any restricti ons on PRD venting as long as the venting was reported and the PRD reseated (clo sed) after releasing any excessRegulation 8, Rule 28 Staff Report November, 2005 9 pressure. The rule also required quarterl y leak inspections for accessible PRDs and annual inspections for inaccessible P RDs. Since adoption in 1980, minor
amendments were made to the rule in 1981, 1982, 1983, and 1994.

B. 1997 – Addition of Prevention Measu res and Targeted PRD Control Requirements

In the 1990s, the District undertook a comprehensive review and overhaul of Rule 8-28, which changed the focus of the ru le from fugitive emissions from leaks to episodic emissions from PRDs v enting to prevent equipment overpressurization. District staff spent a c onsiderable amount of time over a number of years on this effort, and the District’ s Board of Directors convened an ad-hoc
committee to look into PRD-related iss ues and provide direction at the Board level. That process, and the amendment s that resulted from it in 1997, are
outlined below.

1. The Rulemaking Process

1991 Clean Air Plan Control Measure C1:

The District’s efforts to overhaul Rule 8-28 began with Control Measure C1 in the 1991 Clean Air Plan. Measure C1 directed st aff to examine Rule 8-28 further in
order to determine whether there were any additional opportunities to reduce emissions of ozone precursors (effectivel y, hydrocarbons). Upon adoption of the 1991 Clean Air Plan, staff began to work on the issue.

Concern Over Acutely Hazardous Materials Releases:

As this process was underway, concern ar ose over the potential for releases of “Acutely Hazardous Materials” – highly to xic substances such as chlorine and ammonia, and flammable gases that coul d ignite and cause an explosion – as a result of recent industrial accidents. This concern led the Board of Directors to establish an Ad Hoc Committee on Acci dental Emissions (“Ad Hoc Committee”). iii The charge of the Ad Hoc Committee wa s to assess the need for any additional District regulation, above and beyond exis ting laws and regulations addressing environmental impacts from industrial accidents. The charge of the Ad Hoc Committee was set forth in the following “Policy on the Accidental Release of Acutely Hazardous Materials,” which was approved by the full Board of Directors on February 16, 1994:

The District Board will consider adoption of procedures or regulations designed to minimize the possibility of public exposure to accidental releases of Ac utely Hazardous Materials by supplementing or supporting, not duplic ating, current federal, state and local regulations designed to prevent or minimize such
releases.

iii Of the current membership of the Board of Director s, Director Harold C. Brown Jr. served on the Ad Hoc Committee.Regulation 8, Rule 28 Staff Report November, 2005 10 The creation of the Ad Hoc Committ ee, and its mission of addressing the potential for industrial accidents, led st aff to expand the focus of their ongoing efforts to implement Control Measure C1 from the 1991 Clean Air Plan. District staff, along with members of the public, industry representatives, and other interested persons, participated in a number of Ad Hoc Committee meetings from 1993 through 1996. The Committee looked in great detail at all types of emissions from PRDs, including acutely hazardous materials as well as other materials that may not be considered ac utely hazardous but are still of concern from an ambient air quality perspective ( e.g. , ozone precursors).

The Committee examined existing legal framework covering environmental and public health impacts from industrial accident s. In addition to presentations from District staff, the Committee heard testim ony from a large number of agencies with jurisdiction over these issues, including:

• The United States Environm ental Protection Agency;

• The California Environment al Protection Agency;

• The Contra Costa County Health Services Department, and in particular the Department’s Hazardous Materials Division;

• The San Francisco Bay Regional Water Quality Control Board;

• The California Occupational Safety and Health Administration;

• The United States Coast Guard;

• The California State Lands Commission;

• The California Public Utilities Commission;

• The Contra Costa County Fire Protection Department;

• The Richmond Fire Department; and

• The California State Fire Marshal Association.

These investigations highlighted the comp rehensive nature of existing laws and regulations addressing industrial safety and the prevention of accidental releases of acutely hazardous materials. The cent erpiece of these legal requirements is Section 112(r) of the federal Clean Air Act (42 U.S.C. § 7412(r)), which requires that owners and operators of industrial facilities handling acutely hazardous materials “design and maintain a safe fac ility taking such steps as are necessary to prevent releases. . . .” This Cl ean Air Act requirement complements the requirement in Section 5(a) of the federal Occupational Safety and Health Act (29 U.S.C. § 654(a)) that employers ensure t hat their workplaces are “free from recognized hazards that are causing or are likely to cause death or serious physical harm” to employees. The Cl ean Air Act requirement broadens the Occupational Safety and Health Act requi rement and forces facilities to address risks to off-site communities in addition to risks to employees of the facility. These authorities establish the basic legal requirements that each facility must take whatever steps necessary to render their operations safe to workers and to neighboring communities.Regulation 8, Rule 28 Staff Report November, 2005 11 Clean Air Act Section 112(r) also est ablished a mechanism to ensure that facilities are taking the steps necessary to make their operations safe. Section 112(r) requires that any facility handli ng acutely hazardous materials above certain threshold quantities must dev elop a risk management program that includes: (i) an assessment of all hazards associated with a facility’s operations, including absolute “worst-case” accidental re leases; (ii) an integrated prevention program containing procedures to prevent accidents from occurring; (iii) an emergency response plan setting forth proc edures to respond to accidents; and (iv) preparation of a Risk Management Plan (“RMP”) document summarizing the program, which must be submitted to the agency with oversight for facility safety (which in the Bay Area is the local city or county hazardous materials agency).

At the state level, the California Accidental Release Prevention (“CalARP”) Program imposes similar requirements. The CalARP requirements, which are set forth in Health & Safety Code Se ctions 25531-25543.3, impl ement the federal program in California and are intended to further t he twin goals of “reducing regulated substances accident risks and e liminating duplicatio n of regulatory programs . . . .” (Health & Safety C ode § 25531(e).) To that end, the CalARP Program requires the prepar ation of a Risk Management Prevention Program (“RMPP”) that satisfies the federal RMP requirements as well as certain additional California-specific requirements. The Gover nor’s Office of Emergency Services (“OES”) administers the CalARP program and has adopted implementing regulations in Title 19, Div ision 2, Chapter 4. 5 of the California Code of Regulations.

The RMPP process is implem ented at the local level by cities and counties. These “administering agencies” (also k nown as “Certified Unified Program Agencies” or “CUPAs”) are specifically di rected to coordinate t heir efforts with the local air quality management district (H ealth & Safety Code § 25533(b)), and may
authorize the local air district to conduct a technical review of a facility’s RMP (Health & Safety Code § 25535(a)). In addition, many cities and counties have adopted ordinances imposing their own city- or county-specific requirements. One example the Ad Hoc Committee revi ewed in detail was the Santa Clara County Toxic Gas Ordinance (Ordinance No. NS-517.44).

Finally, in addition to the legal framew ork outlined above, the Ad Hoc Committee also investigated the cooperat ive efforts of the various agencies with jurisdiction over acutely hazardous materials issues to coordinate their regulatory activities. One prime example was the Contra Costa County Hazardous Materials Interagency Task Force, or “HIT Team.” The HIT Team (which continues to operate today) is a coalition of agencie s with responsibility for public and environmental health and safety that hav e joined in a cooperative and voluntary effort to enhance their level of service. The agencies represent federal, state, regional and local government s in the San Francisco Bay Area; local agencies are from Contra Costa County. T he Task Force provides members with a continuing forum to coordinate and impr ove efforts in accident prevention;Regulation 8, Rule 28 Staff Report November, 2005 12 emergency response; communication, out reach, and public participation; and efficiency, including the identification of both gaps and overlaps in policies and programs to protect the public ’s health and safety. District staff participates in
the HIT Team and adds thei r expertise and support to furthering the Team’s
mission.

Given the level of existi ng regulation regarding accident al releases of acutely hazardous materials, and mindful of the Committee’s charge t hat the Board did not want to duplicate ex isting federal, state, and local regulatory efforts unnecessarily, Staff ultimately concluded t hat no additional District regulation in the are was needed. Staff concluded t hat additional regulation would be duplicative and would disrupt the exis ting regulatory system, and that the District’s efforts would be better spent in participating with the other agencies to share District staff’s knowl edge, information, and expertise. (3) Based on these conclusions, the Ad Hoc Committee did not recommend any additional District regulation aimed at preventing industria l accidents, over and above what was already being done by other agencies.

The Ad Hoc Committee process did reaffi rm the need for additional regulation on PRD releases to address air quality issues from emissions t hat are not acutely hazardous. For example, situations where hydrocarbons are emitted at petroleum refineries from the top of a ta ll stack, where they are not near an ignition source and will dissipate into t he atmosphere, do not present acute health hazards to employees and neighbors of the refinery. Such emissions can still be very important from an ambient air quality pers pective, however, because they contribute to ozone formation. Hy drocarbons, along with oxides of nitrogen (“NOx”), are the main focus of the District’ s efforts to control ozone. The Ad Hoc Committee therefore recommended moving forward with efforts to address episodic emissions of hydrocarbons from PRDs, as contemplated by Control Measure C1 from the 1991 Clean Air Plan.

Regulatory Approaches Considered:

Based on this direction from the Ad Ho c Committee, staff then went forward with its rulemaking efforts along those lines . Staff conducted meetings with the regulated community and interested mem bers of the public, prepared a Rule Effectiveness Study and a Technical Assessment Document, and ultimately proposed the current Rule to Board of Directors in December of 1997. During this process staff considered three approaches to controlling episodic PRD emissions (in addition to the opti on of doing nothing). The approaches considered were the following:

● Prevention Measures Only, With No Controls :
This approach would have required a ffected facilities to implement a Process Hazards Analysis to identif y and analyze potentially hazardous
scenarios. For each hazar d identified, the facilit y would be required to implement at least three “Preventi on Measures” designed to minimize theRegulation 8, Rule 28 Staff Report November, 2005 13 potential for releases. This approac h would not have required any PRDs to be vented to control equipment.

● Blanket Control Requirement :
This approach would have required all PRDs to be vented to a control system, such as a flare or a vapor re covery system. Affected facilities would have to pipe all of their existing PRDs to a control system, so that if any of them experienced a release, the emissions would either be captured or returned to the refinery’s process or be incinerated before they reached the atmosphere.

● Targeted Control Requirement :
This approach was essentially a hybr id of the prevention measures approach and the blanket control appr oach. It embodied the goal of eventually eliminating all PRD emissi ons to the atmosphere, but did not require all existing PRDs to be contro lled immediately. Instead, it was designed to phase out atmospheric PRDs over time as the equipment they serve is replaced. It required facilit ies to vent PRDs on all new equipment to control systems, and to vent PRDs on existing equipment to control systems when the equipment is “m odified” – that is, expanded or upgraded. In addition, this approach atte mpted to target the “bad actors” among the existing PRD population – t hose in service on potentially unstable processes that have a higher potential for an upset that might lead to over-pressurization and result in a PRD release. The approach required any process unit that exper ienced a PRD release twice within a five year period to be controlled withi n a year, without waiting for upgrade or overhaul. These targeted control requirements were in addition to the prevention measures outlined above, which would be required for all
PRDs.

Staff evaluated the cost of each of these approaches and the emissions reductions each one could be expected to ac hieve. Staff found that the blanket control approach would be the most effect ive at reducing emissions, because it would essentially eliminate all PRD releas es to the atmospher e. But staff found that it would be prohibitively expensive given the extensive capital improvements that would be necessary in relation to the amounts of emissions reductions involved. Staff calculated that requiri ng controls would likely require each affected facility to construct a new flar e system, at a total annualized cost of approximately $27 million, or approximately $40,000 per ton of emissions
reductions.

By contrast, staff found that the tar geted control approach would be far more cost-effective, because it would not r equire expensive control systems for the bulk of PRDs that have low hydrocarbon em issions potential. Yet it still would obtain significant emissions reduction benefits because it would control the problem PRDs that are the worst cont ributors of smog-forming emissions, andRegulation 8, Rule 28 Staff Report November, 2005 14 would minimize the likelihood of releases from all PRDs. St aff found that this approach could obtain emissions reductions at around half the co st-per-ton of the blanket control approach, and potentially as little as $3,450 per ton. Staff therefore identified the ta rgeted control approach as t he preferred alternative, and proposed amendments to the Board of Dir ectors to codify that approach. The Board adopted the amendments on De cember 9, 1997, and made minor technical amendments in March of 1998.

2. Current Requirements of Regulation 8, Rule 28

The current version of Regulation 8, Rule 28 that t he Board adopted in 1997 (with minor subsequent amendm ents) implements this ta rgeted control approach in the following manner.

New Sources
When a facility installs a new source, Ru le 8-28 requires that any PRDs on the equipment must meet Distr ict Best Available Control Technology (BACT) requirements, as defined in Regulat ion 2, Rule 2 and the District BACT Guidelines. BACT requires PRDs to be vented to a fuel gas recovery system, furnace, or flare with a control efficiency of at least 98 percen t. This means that no new PRD may vent directly to the atmosphere.

Existing Sources

For existing sources with atmospheric PRDs , Rule 8-28 requires that the facility meet the BACT requirements – i.e. , venting all PRDs on t he source to a control system – when the equipment undergoes a majo r modification. This provision means existing atmospheric PRDs will eventually be phased out as existing equipment is upgraded. T here is no set timetable for equipment upgrades, and some equipment may remain in service for a long time before it undergoes a “major modification”, but ultimately when equipment is upgraded, any atmospheric PRDs will have to be vented to a control system.

The rule also requires existing source s with atmospheric PRDs to implement Prevention Measures designed to prevent or minimize any releases. These
Prevention Measures include: enhanci ng training, equipment, inspection, maintenance and monitoring procedures; inst alling process flow, temperature, level, and pressure indicators with interlocks; implementing documented and verified routine inspection and maintenanc e programs; using inherently safer designs; and installing deluge systems to cool and condense emissions before they can reach the atmosphere.

Finally, for existing sources, the rule al so targets process units that show a propensity for releases. If a source exper iences a release from a PRD over 10 pounds, it must: (1) conduct a failure anal ysis to discovery the cause of the release; (2) review the prevention meas ures for the source and address anyRegulation 8, Rule 28 Staff Report November, 2005 15 deficiencies; (3) evaluate whether it would be technologically feasible and costeffective to vent the PRDs on the sour ce to a control system; and (4) install telltale indicators on all of the PRDs on that source to ensure that any further releases are detected. If the same sour ce experiences a second release within 5 years, that source must have all of it s PRDs vented to a control system within one year. In this manner, the rule require s facilities to target their efforts to control existing PRDs towards sources that demonstrate a propensity for upsets
and releases.

Reporting Requirements for Refineries and Chemical Plants

All Release Events (PRD releases over 10 pounds) at petroleum refineries or chemical plants must be repor ted to the District by the next working day. PRDs must be inspected within five days of a Re lease Event to ensure that they have re-seated properly and are not leaking. Within 30 days, the facility must report :

 the date, time, and duration of the Release Event;

 the device that experienced the Release Event;

 the District-assigned episode number;

 the type and size of device;

 the type and amount of material released;

 any information used to estimate duration and amount released;

 the cause of the release;

 the schedule for implementation of m easures to prevent re-occurrence;
and

 the results of the fugitive emission inspection.

The requirement to report this informati on implies that facilities must monitor
PRDs to determine whether a Release Event has occurred and if so, the duration, cause, type and am ount of material released must be quantified. There are currently, however, no explicit m onitoring requirements in the rule.

C. Other District Regulati ons Applicable to PRDs

There are three other Distric t regulations that are directly applicable to PRDs: Regulation 8, Rule 5 (Rule 8-5); Regul ation 8, Rule 18 (Rule 8-18); and Regulation 8, Rule 22 (Rule 8-22).

Rule 8-5: Storage of Organic Liquids

Rule 8-5 requires the pressure vacuum va lves (a type of PRD) on tanks used to store organic liquids be set at a pressu re within 10 percent of the maximum working pressure of the tank and that the valves be properly installed and maintained in good working order.

Rule 8-18: Equipment Leaks

Rule 8-18 addresses fugitive emissions of VOCs from various components, including PRDs, at petroleum refineries, chemical plants, gasoline bulk terminalsRegulation 8, Rule 28 Staff Report November, 2005 16 and bulk plants. Fugitive emissions ar e those that escape from non-airtight fittings or connections. Rule 8-18 prohibi ts VOC leaks from PRDs over 500 ppm, subject to certain qualifications.

Rule 8-22: Valves and Flanges at Chemical Plants

Rule 8-22 addresses fugitive emissions of VOCs from small chemical plants. When fugitive emissions rules were amended in 1990, large chemical plants were made subject to the more stringent ru les for petroleum refineries. Rule 8- 22 was maintained for small (fewer than 100 valves) chemical plants.

IV. RULE EVALUATION

In the San Francisco Bay Area 2001 Oz one Attainment Plan for the One-hour National Ozone Standard, the District committ ed to study several activities at petroleum refineries to determine if additi onal reductions in emissions of ozone precursors could be achieved. One co mmitment, set forth in Further Study Measure 8, was to evaluate the potentia l for obtaining further ozone-precursor ( i.e. , hydrocarbon) reductions at refineries by venting more refinery PRDs to control systems.

Staff has evaluated the effectiveness of the current rule and has concluded that overall, Rule 8-28 has been very effect ive and has resulted in a significant reduction in hydrocarbon emissions from PRDs. As noted above, the Rule is designed to phase out atmospheric PRDs by requiring them to be vented to control systems when new equi pment is installed and when existing equipment is modified. For existing atmospheric P RDs that have not yet been phased out, the rule requires operators to implement Pr evention Measures designed to prevent
or minimize releases. The rule also targets “bad actors” out of the current population of existing atmospheric PRDs – i.e. , those demonstrating a high potential to have an upset that leads to a release – by requiring any source that experiences multiple releases to vent a ll of its PRDs to a control system within one year. In this way, the rule balanc es the desire to hav e state-of-the-art equipment in place on all equipment, with t he reality that there are very many existing atmospheric PRDs and it would be highly burdensome to require them all to be upgraded immediately.

The merits of this targeted approach in reducing emissions are clearly evident when PRD emissions before prevention m easures were required are compared to emissions after the prevention meas ures were required. The average annual emissions before the requi rement became effective were 32.4 tons; average annual emissions after the implementati on of the prevention measures is
12.4 tons. iv This difference represents an overall reduction in annual average emissions of 61 percent. Further, the average amount of emissions per release

iv Annual average emissions values are PRD populat ion weighted. Since July 1, 1998, there have been 31.0 PRD-months befor e the prevention measures were implemented and 57.9 PRDmonths after the prevention measures were implemented.Regulation 8, Rule 28 Staff Report November, 2005 17 was 3.4 tons before the prev ention measures were requi red; after the prevention measures requirement went into effec t, the average was 3.3 tons. Before the prevention measures, there were six releas e events with emissions of five tons or more; since were required, there hav e been only three. (A full emissionreduction analysis is provided in Section VI.)

These successes notwithstanding, staff has concluded that t here are several areas where the rule can be improved. Staff has reached this conclusion after several years of rule evaluation effo rts. Beginning at the end of 2001 and continuing through mid-2002, District staff conducted an audit of PRDs located at the five Bay Area refineries. Staff revi ewed data made available by the refineries that would indicate PRD venting, such as pressure, temperatur e, and flow data. The goals of the audit included (1) identifying all PRDs that vent directly to the atmosphere at units common to all refineries ( e.g. , hydrotreaters and hydrocrackers), (2) verifying the PRD set points, and (3) determining to what degree of confidence the District can es tablish whether the PRDs at the refineries experienced releases during the audit period.

The 2002 Audit concluded that for many PRDs, the refineries do not have a means of adequately monitoring PRD releases. In some cases, the facilities do not have equipment capable of monitoring parameters that would indicate a release has occurred. Often, operators si mply rely on sound to detect releases. In other cases, the facilities may hav e monitoring equipment, but it does not present an accurate picture of whether the PRD released, for example because pressure monitors are remote from t he PRD and do not reflect actual pressure conditions at the PRD itself. In still ot hers, the facilities may have monitoring equipment, but it records data in one -minute averages, which may miss short ventings. The Audit further concluded that the refineries do not routinely record data on operating paramet ers that could be used to indicate releases, and where they do record such data, in some cases they do not retain it for any length of
time. The audit also discovered two sm all PRD releases during the audit period that had not been detected by refinery staff. These were both below the 10 pound reporting threshold and so did not tri gger any requirements of the rule. But the existence of undetec ted small releases raises a concern that the refineries may have failed to detect some larger releases as well.

After completion of the PRD Audit, st aff then proceeded to draft a Technical Assessment Document, which was publis hed in December, 2002. The draft
Technical Assessment Document reiterat ed the findings of the PRD Audit report and recommended several actions to improv e Rule 8-28, including the addition of an explicit monitoring requirement to ens ure that all PRD ventings are detected
and addressed.

Based on these investigations and subs equent rule evaluation work, Staff has identified the following areas where Rule 8-28 could be improved.Regulation 8, Rule 28 Staff Report November, 2005 18 A. Areas for Improvement of Current Rule

Detecting and Characterizing Releases

Section 8-28-401 of Rule 28 r equires that facilities report all releases of over 10 pounds of any air pollutant from a PRD. Facilitie s must provide detailed information about each release, such as t he duration of the release and the type and amount of material released, along with the data and assumptions used in calculating this information. However, there is no explicit requirement that facilities have equipment installed to enable them to detect all such releases and collect the information that must be r eported, and there is no standard by which to determine compliance. As a result, fa cilities are using a variety of different monitoring approaches for their various processes and equipment, which vary greatly in their ability to detect and quantif y releases. For example, the vast majority of PRDs have some sort of pressure monitoring of the system being served by the PRD, but few of them actually measure the pressure at the PRD itself. Some monitoring systems are not sensitive enough to detect small releases, and may not be detecting rel eases near the 10 pound threshold that triggers the reporting requirem ent. For these reasons, staff believes that facilities need to ensure that they have the capabilit y to detect, characterize, and record all PRD releases, and that they need to dem onstrate this capability to the District.

Data Recording and Retention

In cases where facilities do currently hav e monitoring equipment in place that can detect PRD releases, monitoring data are often not recorded or retained. The lack of data retention for some PRDs make s it difficult for District Enforcement staff to independently verify the pressure and venting history of those devices. Enforcement would be enhanced if meas urements and recordings of the pressures experienced by the PRD were ma intained for an explicit period of time in the rule. The time period shoul d be long enough to allow a facility and/or District staff to go back and review the deta ils of an incident some time after the fact, in situations where it was not immediately obvious that there were issues of interest to be investigated

.

Definition of Equipment Subject to the Rule

Several provisions of Rule 8-28 use the term “source.” These include the provision that requires the installati on a telltale indicator on each PRD on a refinery “source” within 120 days following a release event from that source (§ 8-28-304.1); and the provision that requires each PRD on a “source” to be piped to an emissions control device follo wing a second release within five years from any PRD on the “source” (§ 8-28-304.2).

However, the term “source” as it is used in the rule can be interpreted in various ways, which can lead to confusion on how the rule is to be implemented. Typically, petroleum refineries have a va st array of interconnected pieces of process equipment and a large number of pumps, compressors, and piping to move petroleum products between the various stages of refining. Because theseRegulation 8, Rule 28 Staff Report November, 2005 19 equipment typically do not operate in isol ation, various equipment and groups of equipment have been defined as “sources” ov er time for different regulatory purposes. For example, in one contex t “source” may be used to refer to an individual piece of equipment, such as a pressure vessel. In other contexts, “source” may be used to refer to an ent ire process unit, which may be made up of a large number of pressure vessels, piping, and related equipment. The rule does not explicitly indicate which defin ition should be used in the context of Regulation 8-28, and the general definitions in other regulatory provisions ( e.g.

, Regulation 1, Rule 1) are not spec ific enough to provide further guidance.

The lack of a clear definition of “source” can lead to confusion in how the rule is applied, given that all PRDs on a “s ource” need to be fitted with a telltale indicator after a first release event and must be piped to an emissions control device if there is a second release event wit hin five years. If “source” is defined narrowly, for example as an individual pressure vessel, these requirements are triggered only for the PRDs on that particu lar vessel. If “source” is interpreted broadly, for example as an entire pr ocess unit comprised of multiple interconnected vessels, then these require ments will be triggered for all of the PRDs anywhere on that process unit, wh ich would likely be a larger number. v

Staff has reviewed the hist ory of the 1997 rule amendm ents that included these requirements and has determined that the int ent of District staff in proposing the amendments, and the intent of the Board in adopti ng those amendments, was that “source” was to be defined broadly to encompass an entire process unit. (4, 5)

The rationale for this definition is that Section 304 is targeted towards the “bad actors” – sources that are identified problems because they have demonstrated a propensity for repeat releases – and it is most appropriate to look to the entire process unit to determine which are the “ bad actors.” This is true for several reasons. First, a problem that causes a process upset resulting in an overpressure and PRD release will not necessa rily be limited to a single pressure vessel. A fire in a process unit, for ex ample, could lead to an upset in any pressure system anywhere on the unit. Second, even problems that arise a single pressure system could subsequently spread to other pressure systems within the process unit, for example as in creased process rates in one part of the unit feed higher volumes of material t han normal, or material at a higher temperature than normal, into downstr eam equipment causing a further upset there. Third, many of the Prevention Measures th at must be implemented to prevent or minimize releases are im plemented on a process-unit basis. If for
whatever reason those Prev ention Measures are not working as effectively as they should, the entire process unit on which the Prevention Measures are

v A “process unit” is generally understood to be a di screte component of the refining process that may contain one or more vessels and other pieces of equipment. Generally, it is physically distinct from other process units and can be isol ated from the others process units and shut down if necessary. The equipment making up a proc ess unit is normally closely grouped together physically and controlled from a common control r oom. The entire process unit is normally shut down as a unit for maintenance turnarounds. Dist rict permitting staff often (but not always) assign Source Numbers to refinery sources on a process-unit basis.Regulation 8, Rule 28 Staff Report November, 2005 20 implemented should be considered suspect. For all of these reasons, it makes
the most sense to look at the entire process unit when assessing which sources are considered problematic as a result of a history of frequent releases. Staff continues to believe that this approach is the most appropria te and that “source” should be explicitly defined to encompass a ll of the PRDs on an entire process unit. Providing an explicit definition to make the meaning of the rule clear would simply be a clarification of the existi ng requirements, and would not impose any additional requirements.

Defining “source” for purposes of Rule 8-28 differently than elsewhere in District regulations could cause further confus ion, however. The term would have different meanings depending on the context in which it is used. A different term should be substituted for “source” in Rule 8-28 to avoid any potential for confusion. “Process unit” would be appr opriate, as it describes the concept
involved.

Definition of “Telltale Indicator”

The rule as currently written requires affected facilities to install “telltale indicators” whenever a source experiences a PRD release. Although facilities may have a general concept of w hat a telltale indicator is, it is not clear that there is a specific definition that is comm only accepted among those affected by this
Rule. To ensure that there is a clear understanding of what a telltale indicator is and how to comply with the associated prov isions, this term should be explicitly defined.

Reporting of Failure Analyses

Section 8-28-304.1 of the Rule requires a ffected facilities to undertake a failure analysis after experiencing a release event. This failure analysis must include an additional Process Hazards Analysis in which the facility must review its Prevention Measures for the equipment in volved, as well as an analysis of the feasibility and cost-effectiveness of venting the PRDs on the source to a control system. The current rule requires that th is failure analysis be completed, but it does not require that the analysis be submi tted to the District or be retained for any period of time. Facilities should be r equired to submit the information to the District, or should be required to retain it and make it available on request, to allow District inspectors to readily verify compliance with this requirement.

Non-Substantive Amendments and Clarifications

Finally, the District’s review identified several areas where the current language of the rule has become obsol ete or is confusing in some way. These are not
areas where the substantiv e requirements of the rule need to be changed. All that is needed are minor, non-s ubstantive changes to make the rule more clear
and workable.Regulation 8, Rule 28 Staff Report November, 2005 21 B. Potential For Additional Control of PRD Emissions

The District has long believed that idea lly, all atmospheric PRDs should be replumbed to control systems, which is t he Best Available Control Technology. vi

This belief was the basis of the tar geted control approach that was adopted in 1997, which is intended eventually to phas e out all atmospheric PRDs. The District did not require all existing atmos pheric PRDs to be controlled immediately only because the large costs involved m eant that it would not have been costeffective compared to the emissions reduc tions that could be achieved. Instead, the District adopted the current target ed approach, which focuses on the few problem PRDs with a high potential to contribute to ozone formation without requiring control on the bulk of the PRD population that is not a significant ozone

concern.

In Further Study Measure 8, the Distr ict committed to reevaluating its 1997 determination and examining whether additional reductions in refinery hydrocarbon emissions could be achieved by requiring additional refinery PRDs to be controlled. To do so, staff evaluat ed the emissions reductions that could be achieved from additional control requirements, as well as the costs that would be associated with such requirements. Sta ff has determined that requiring affected facilities to install control systems with capacity to handle all 324 existing atmospheric PRDs would likely cost between $1 million and $3. 2 million per ton of emissions reductions achieved. These costs are roughly two orders of magnitude greater ( i.e. , 100 times greater) than w hat the District normally considers to be cost-effective. Staff has therefore concluded that a blanket rule requiring all PRDs to be controlled w ould not be a cost-effective means to achieve Further Study Measure 8’s goal of reducing emissions of ozone precursors from petroleum refineries. From the perspective of achieving additional reductions in ozone precursors, it would be preferable to maintain the current targeted approach and seek further reductions in other areas where the same level of benefit could be achieved at far less cost. (Full details of Staff’s analyses of emissions reductions and asso ciated costs are set forth in detail below in Sections VI and VII.)

Beyond reductions in ozone-precursor em issions, staff also considered the potential benefits of a blank et control rule in preventing or minimizing catastrophic industrial accidents. T hese issues are beyond the mandate of Further Study Measure 8, which is an ozone control measure from the 2001 Ozone Attainment Plan, an ozone planni ng document. Staff nevertheless examined catastrophic accidental release issues because of the importance of community and worker safety, and because t here was significant public interest in these issues voiced during the rule development process. PRDs are safety devices designed to vent material in a pr essure vessel quickly in order to prevent the vessel itself from rupt uring or exploding. But by venting the material to

vi “Best Available Control Technology,” or BACT, is a regulatory term used to refer to the current state of the art in emissions control technology.Regulation 8, Rule 28 Staff Report November, 2005 22 relieve the pressure, PRDs can be imp licated as the pathway through which acutely hazardous materials inside the ve ssel can reach the atmosphere. Piping PRDs to a control system could thus potent ially help prevent or minimize certain types of impacts from industrial accident s. Staff, therefor e, examined whether amendments to Rule 8-28 could help enhance facility safety.

Staff reviewed the existing regulatory env ironment covering facility safety and the prevention of hazards from accidental rel eases of acutely hazardous materials. Staff have reached the same conclusion t hat the Board’s Ad Hoc Committee on
Accidental Releases reached in c onnection with the 1997 Amendments: The current system of federal, st ate, and local laws and regul ations provides a robust and comprehensive regulatory safety net designed to ensure that regulated entities “design and maintain a safe facilit y taking such steps as are necessary to prevent releases,” in the words of Clean Air Act section 112(r). Staff found that the system has even been enhanced by further developments beyond what existed in 1997. Notably, C ontra Costa County, the home of four of the five Bay Area refineries and multiple chemical plants, adopted a landmark Industrial Safety Ordinance in December of 1998 (with subsequent amendments in 2000). vii ( See Contra Costa County Code, Title 4, Chapter 450-8.) The Industrial Safety Ordinance requires all affected facilities to develop a Safety Program to prevent releases, using inherently safer systems wherever feasible. The Ordinance requires each facility to document its Safety Program in a Safety Plan, which is then reviewed by the County and circulat ed to the public for comment. If the facility’s compliance is determined to be deficient in any way – including with respect to the requirement to use all feasible inherently safer systems – the County can require the facility to revise its Safety Program to comply. In this way the Industrial Safety Ordinance provides yet another mechanism to ensure that facilities conduct their operations in a sa fe manner. Staff believes that these comprehensive and overlapping mechanisms, taken as a whole, provide a sound framework for preventing accidental releas es of acutely hazardous materials, through PRDs or via any other avenue.

Staff has therefore concl uded that adding additional contro l requirements to Rule 8-28 as a process safety measure is not warranted. Adopting Rule 8-28 amendments as a safety requirement, as opposed to a smog-c ontrol requirement as was contemplated by Further Study M easure 8, would be duplicative of these comprehensive safety requirements that are already in place. Duplicative regulation would be unwise as a matter of policy, and it is pr ohibited by Section 40727(b)(5) of the Health & Safety Code, which requires that the Board of Directors make a finding of non-duplicat ion of existing regulations before adopting or amending a District rule.

Furthermore, even if the District were regulating in a vacuum without these existing safety requirements, requiring a ll PRDs to be controlled as a safety

vii District Director Mark DeSaulnier sponsored t he Industrial Safety Ordinance in his capacity as Contra Costa County Supervisor for District IV.Regulation 8, Rule 28 Staff Report November, 2005 23 measure would not be an advisable regulator y approach. A blanket District rule requiring control of all PRDs would be a crude instrument that would both overregulate and under-regulate the problem. Such an approach would over-regulate the problem because it would require facilit ies to control PRDs on all processes, even those that have a very low potential for releases, or that serve low-volatility or low-toxicity substances that present very little acute risk to workers and neighbors should a release occur. There would be little to gain by controlling such low-risk PRDs, and the costs involved would essentially be wasted. By the same token, such an approach would under-regulate the problem because it would address only the potential for harm fr om air contaminants that are emitted from the operation through PRDs. It woul d not address safety risks from other categories of accidental releases, such as toxic liquids that could impact surfaceor ground-waters. Similarly, it would not address the possibilit y of accidental air emissions from mechanisms other than PRD lifts, such as ruptures in pipes or other equipment that woul d allow emissions directly into the atmosphere regardless of whether PRDs were vented to control systems. Staff therefore believes that a blanket requi rement that all existing at mospheric PRDs must be controlled would not be the most effect ive approach to addressing accidental
release issues.

For all of these reasons, staff is not propos ing that the Board of Directors adopt a blanket requirement that all existing atmospheric PRDs be vented to control systems.

V. PROPOSED AMENDMENTS

The rule review described above illuminated several areas in which the rule could be made more effective. St aff is therefore proposing th at the Board of Directors adopt certain amendments to the curr ent rule. The proposed amendments
would:

• Explicitly require a monitoring system for all atmospheric PRDs. Section 8-28-503 in the proposed amendments est ablishes an explicit monitoring requirement. The requirement specif ies that any monitoring system shall be designed, installed, operated and ma intained so that operators are notified of releases as defined in t he rule, and that the system can quantify them. This requirement is proposed to become effective June 1, 2007.

• Require facilities to demonstrate that they have adequate monitoring systems in place for all of their atmospheric PRDs subject to the rule. Section 8-28-407 is proposed to require facilities to submit a monitoring demonstration report that will enable st aff to enforce the monitoring requirements. The report will require descriptions of the monitoring equipment, operating parameters and engi neering calculations used to quantify releases.

• Require data recording and record keeping for venting and emissions verification. Section 8-28-502 is pr oposed to require that records ofRegulation 8, Rule 28 Staff Report November, 2005 24 pressure relief devices, prevention measures, equipment served, inspections, and monitoring equipment are kept and made available for inspection. Some of these records were required to be kept under Section 8-28-403, which is proposed for deletion.

• Clearly define the equipment subject to Section 304 of the rule to ensure that the original intent of the rule – to regulate all PRDs on process units that demonstrate a propensity for releases – is preserved. A definition of “process unit” is proposed in Secti on 8-28-216 and the term replaces the term “source” in Section 8-28-304.

• Add a definition of “telltale indicato r.” Facilities are required to install telltale indicators after a first releas e event, but the term is not defined. Defining the term will prevent any confusi on over exactly what is required under such circumstances. The definition is in Section 8-28-217.

• Require facilities to identify all process units equipped with atmospheric PRDs and provide an inventory of all PRDs serving them. In order for staff to clearly understand all of t he equipment subject to the rule, proposed Section 8-28-408 would require fa cilities to submit a list of all process units equipped with PRDs, ident ify all the PRDs on each process unit, and state when the first turnar ound occurred at each process unit after 1998. The latter information is necessary to determine when the requirements of Section 304 came into effect for each process unit.

• Make minor, non-substantive changes to the rule, such as, deleting obsolete references to “turnar ounds”; moving requirements where appropriate; and clarifying various sections of the rule. Initial compliance dates (the first turnaround after July 1, 1998) have been deleted in the proposed amendments; and the requirement to conduct a Process Hazards Analysis, an administrative requirement, has been moved from Section 8-28-304 to proposed Section 8-28-406.

VI. EMISSIONS

Episodic emissions from excess pressure in facilities’ process units occur at the exhaust of the atmospheric PRD. These pr essure releases result from problems in the process that could result in cata strophic failure of the process equipment if the pressure is not released in a c ontrolled manner. Smaller amounts of emissions can also occur during normal pressure conditions if a PRD leaks.Regulation 8, Rule 28 Staff Report November, 2005 25 A. Current Emissions Summary

1. Episodic Emissions

There have been 43 release events reported by the five Bay Area refineries since the current version of the Rule took effect in 1998 (through September 2005).
These 43 release events vented an estima ted 144 tons of VO C emissions in total. This record represents an average of 6.1 release events per year over this period, involving an average of 20.5 tons of emissions per year. The average
release event involved 3.3 t ons of emissions. Emissions during this period are summarized in Table 6.1 on a year-by-year basis.

Table 6.1 Summary of Annual Emissions from PRDs Total tonnage, 1998-2005 (rounded to the nearest whole number)



### 3 5

1 7

8 2 9

2 3

0 3 1



## 0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0

J u l 9 8 -

Jun 99 J u l 9 9 -

Jun 00 J u l 0 0 -

Jun 01 J u l 0 1 -

Jun 02 J u l 0 2 -

Jun 03 J u l 0 3 -

Jun 04 J u l 0 4 -

Jun 05

In citing annual average emissions figures , it must be noted that although annual averages can provide a useful metric for assessing the scope of PRD releases within the Bay Area in general, they are of more limited value in assessing the amount of emissions to be expected fr om PRDs on any given day. PRDs normally go for long periods of time wit hout ever opening, interspersed with short periods of significant emissions – some times as much as tens or hundreds of tons – when there is a process overpressure . This is the reas on that the current rule requires controls on those PRDs wit h a high propensity for releases, even though control requirements are not cost-effective when looked at from an annual-average-emissions standpoint: A PRD t hat has one very large release perRegulation 8, Rule 28 Staff Report November, 2005 26 year will have low annual average emissions, but it should still be controlled to prevent the significant ozone impact that would occur on the particular day that
the release occurs.

It must also be noted that these em issions figures may be somewhat underestimated because of the potential t hat some releases may not have been discovered and reported to the District. As noted above, when staff audited refineries’ current PRD practices t hey found that some PRDs do not have comprehensive monitoring systems and ma y have experienced some releases that were never detected. The refinerie s are confident that they have detected most (if not all) of the releases that hav e occurred, however. If any releases did go undetected, it is most likel y that they were smaller ev ents, as it would be hard not to detect a large release even wit hout a comprehensive monitoring system. In addition, the emissions summaries do not account for emissions of less than 10 pounds because these small releases ar e not required to be reported to the District. But again, these are sma ll events and the annual total of these emissions is not expected to be significan t. Staff, therefore, believes that the data on current levels of PRD emissi ons are sufficiently reliable.

2. Fugitive Emissions

As noted above, the fugitive emissions requirements applicable to PRDs were
moved to Rule 8-18 in connection with the 1997 rule amendments. Rule 8-18 currently establishes a very stringent 500 ppm leak standard, and requires periodic inspections to ensure PRDs are complying. Emissions from PRD leaks are currently estimated at approximately 10 pounds per day (a s of 2003). This is a very substantial reduction from the 3300 pounds per day that staff estimated from leaks during the 1997 rule development process. The reduction can be attributed to several developments, includi ng the tightening of t he Rule 8-18 leak standard to 500 ppm and changes to the EPA method for calculating emissions from leaks. Staff believe s that these reductions are further evidence of the success of the District’s VOC emission rules, although in this case the success is attributable to Rule 8-18, not Rule 8-28.

B. Emission Reductions Since Adopt ion of the Current Rule in 1997

In assessing current emissions from PRDs, staff also examined the effect of the requirement that facilities implement Prevention Measur es pursuant to Section 8- 28-303 of the 1997 amendment s. That section required each affected facility to take a number of steps to reduce the c hance of PRD releases, such as operator training, improved equipment, inherent ly safer process designs, enhanced maintenance protocols, and monitoring syst ems. Affected facilities had to implement these Preventi on Measures during the fi rst “turnaround” (scheduled shutdown for routine maintenance) after t he amendments took effect in 1998. To assess the effectiveness of this Prev ention Measures requirement, staff compared emissions before the Prevention Measures requirement went intoRegulation 8, Rule 28 Staff Report November, 2005 27 effect ( i.e. , before the first post-1998 maint enance turnaround for each process unit) and after the requirement was triggered ( i.e. , after the first post-1998 turnaround). viii The results of this evaluat ion are presented in Table 6.2.

Figure 6.2 Comparison of PRD Release Event Emissions Before and After the Prevention Measures Requirement Took Effect Total tonnage, 1998 – 2005 (rounded to the nearest whole number)

3 1

1 6

8 2 9

0 0 5

1 0 0 2 3

0 3 1

0 0 5 1 0 1 5 2 0 2 5 3 0 3 5

J u l 9 8 -

Jun 99 J u l 9 9 -

Jun 00 J u l 0 0 -

Jun 01 J u l 0 1 -

Jun 02 J u l 0 2 -

Jun 03 J u l 0 3 -

Jun 04 J u l 0 4 -

Jun 05

* The large emissions spike shown for 2004-2005 was pr imarily the result of two large releases at an alkylation unit at the Tesoro Refinery that vented 9.3 tons and 20.4 tons of hydrocarbons, respectively. Under Section 8-28-304.2, the P RDs on that unit will now be required to be vented to controls so that any further re leases will not reach the atmosphere.

The results of this comparison show the effectiveness of the Prevention Measures requirement in reducing PRD emissions. Before the Prevention Measures requirement came into effec t, emissions averaged 32. 4 tons/year from these PRDs; after the Prevention Measur es were required, the annual average

viii To make this comparison, staff looked at each process unit equipped with atmospheric PRDs and determined when the Prevention Measures require ment went into effect – the date of the process unit’s first maintenance turnaround afte r July 1, 1998. Staff then compared the frequency and size of releases from that pr ocess unit before the Prevention Measures requirement took effect with the frequency and size of releases after the Prevention Measures requirement took effect. Staff then aggregated t he data for all PRDs District-wide to obtain an overall comparison between emissions before and after the Prevention Measures requirement took effect. = Emissions before Prevention Measures were required = Emissions after the Prevention M easures requirement took effect 31 *Regulation 8, Rule 28 Staff Report November, 2005 28 has dropped to 12.4 tons per year. Furt hermore, overall amount of material released has decreased; with a total of 83. 8 tons released before the prevention measures were required co mpared with 60.1 tons after the Prevention Measures were required. The number of signifi cant releases has declined. Before prevention measures were required, there were six release events greater than five tons; since the prevention measures requirement became effective, there have been only three. The dist ribution of release events by size is set forth in Table 6.3, and shows that the most common type of release before the Prevention Measures requirement came into effect was 1,000 to 10,000 pounds, whereas the most common type after t he Prevention Measures requirement came into effect has been in the 10- to 100-pound range.

Table 6.3
Release Events Distributed by Amount of VOCs Released

Size of Release (pounds emitted) Number of Releases
Before Prevention
Measures Number of Releases
After Prevention
Measures

10 – 100 2 6

100 – 1000 6 2
1000 – 10,000 11 7
10,000 – 100,000 6 3

Staff believes that these demonstrated dec lines in the number of PRD releases, the amount of emissions per release, and overall PRD emissions, demonstrate the effectiveness of the Prevention Measur es requirement in the current rule.

Staff also looked back even further and compared recent PRD emissions rates with historical emissions data pr epared in connection with the 1997 Amendments. In the proc ess of developing the Am endments, Staff documented 51 reported releases in the three y ears from 1993 through 1995 totaling an estimated 459 tons of emissions, which included a single very large event in
1993 that involved an estimated 371 tons. These figures represent an average of 17 release events per year during th is period. On a mass basis, average emissions were 153 tons per year w hen the very large 459 ton release is included, or 27.2 tons per y ear if that single event is treated as an outlier and excluded from the calculation. (6) These historical emissi ons rates are significantly larger than the rates the region has experience since t he 1997 amendments went into effect, both in terms of the num ber of releases per year and mass of emissions released per year. Releas e events dropped from an average of 17 per year in 1993-95 to an average of 6 per y ear since July of 1998. Total annual emissions dropped from an aver age of 27.2 tons per year or 153 tons per year in 1993-95 (depending on whether the very large 459 ton release is included) to anRegulation 8, Rule 28 Staff Report November, 2005 29 average of 17.9 tons per y ear since July of 1998. These comparisons further highlight Rule 8-28’s successful tr ack record in reducing emissions. ix

C. Potential Further Emissions Reductions

Staff evaluated the emissions reducti ons that could be expected in two scenarios: (i) requiring a demonstration that every facility has comprehensive monitoring equipment in place for all P RDs in atmospheric service; and (ii) requiring all atmospheric PRDs to be vented to a control system with a destruction efficiency of 95 per cent or greater. For each scenario, staff evaluated
emissions reductions based on the 20.5 tons per year average emissions that the region has experienced overall since 1998, and also based on the smaller 12.4 tons per year average emissions that have occurred since the Prevention Measures requirement went into effect.

1. Reductions from Monitoring Demonstration

Establishing explicit standards for monitoring will allow the District to ensure that all facilities are adequately monitoring all at mospheric PRDs. Ensuring that such monitoring is in place will ensure that fac ilities are fully aware of release events, which will allow operators to better target their release prevention and mitigation efforts and will ensure that repeat-rel ease “bad actors” are identified and subjected to additional control requirements. These effects, in turn, are expected to lead to fewer release events and reduced emissions.

US EPA has estimated from time to time in various rulemakings that enhanced monitoring can result in a ten to twenty percent emissions reduction. Here, staff believes that the proposal to add an explic it monitoring requirement should more appropriately use a five percent emissi ons reduction factor, because many PRDs are already subject to some form of m onitoring and it appears that most releases – and especially the larger ones – are being detected.

Using the 20.5 tons-per-year average em issions figures from the period 1998- 2005, a five percent reduction would re sult in emissions reductions of approximately 1.0 tons per year. Using the 12.4 tons-per-year average from the period after the Prevention M easures requirement came into effect, a five percent reduction would result in emissions reductions of 0.62 tons per year.

ix

It must be recognized that other factors besides the adoption of the 1997 Amendments likely contributed to some of the observed emission r eductions. For example, the Pacific Refining facility closed in 1997, taking a number of PRDs out of service and removing them as potential emissions sources. Any emissions reductions from independent influences such as this would have occurred even if the 1997 Amendments had never been adopted.Regulation 8, Rule 28 Staff Report November, 2005 30 2. Reductions from Controlling Additional PRDs

Facilities can achieve a 98 per cent reduction in emissions by venting releases to a control system such as a flare or reco very system. Using the 20.5 tons per year overall average annual emissions sinc e 1998, a blanket c ontrol requirement could therefore be expected to result in emissions reductions of 20.1 tons per year. Using the 12.4 tons-per-year average since the Pr evention Measures requirements came into effect, a blanket control requirement could be expected to result in emissions reductions of 12.2 tons per year.

VII. ECONOMIC IMPACTS

This section presents the economic im pacts of the propo sed amendments, and also addresses the economic feasibility of a blanket requirement that all atmospheric PRDs be controlled immediately.

A. Costs That Would Be Incurred by Affected Facilities

1. Demonstration Reports

The proposed rule amendments require that each affected refinery prepare and submit to the District a “Monitoring Syst em Demonstration R eport.” This report would provide information that would demonstrate that the refineries have adequate monitoring systems in place for all of their atmospheric PRDs subject to the rule. Section 8-28-407 is propos ed to require facilities to submit a monitoring demonstration report that will enable staff to enforce the monitoring requirements. The report will require de scriptions of the monitoring equipment, operating parameters and engi neering calculations used to detect and quantify releases. Staff estimates that prepar ing the needed information for inclusion in the report for each PRD would take about tw o man-hours per PRD. (Most of this information is already available and must be utilized in the event of a release event and the subsequent repor t to the District.) The hourly labor cost is estimated to be approximately $100 per hour . Because there are 324 PRDs in total at the five Bay Area refineries, staff estimates the total one time cost of this provision to be about $64,800.

The proposed amendments also require each a ffected refinery to provide a listing of each process unit equipped with atmospher ic PRDs and the associated PRDs. This information is already generally available and would not require any additional man-hours to generat e. Preparation of the report for submission should take no longer than one hour for each re finery. Staff, therefore, estimates the cost associated with this provision to be approximately $100 per refinery; this translates to $500 District-wide.

The total costs of the demonstration reporting requi rements are therefore expected to be approximately $65,300.Regulation 8, Rule 28 Staff Report November, 2005 31 2. Monitoring Equipment

The current rule implicitly requires that facilities monitor their PRDs so that they will know when they have a release that has to be reported in accordance with Section 8-28-401. A require ment to report release information implies a duty to investigate whether releases have occurred, which cannot be done without monitoring. The proposed amendments would simply make the monitoring requirement explicit. Simply making the requirement explicit should not involve any additional costs beyond what is current ly required. Indeed, staff has found that most PRDs already have sufficient monitoring equipment to satisfy the requirements being proposed.

Staff recognizes that some facilitie s do not currently have comprehensive monitoring systems for all PRDs, however. Staff has therefore evaluated the costs of implementing monitoring systems, even though they are not technically additional costs imposed by the pr oposed amendments, and even though the many PRDs that already have compr ehensive monitoring systems in place will
not need to incur such costs.

Staff evaluated several types of equipment that could be used to implement a monitoring system that would satisfy the proposed monitoring requirements. Staff’s evaluation was based on conversa tions with refinery personnel and cost quotes from vendors. The cost of installing of a telltale indicator, such as a sock, would range from $500 to $1000 per PRD. Costs for installation of pressure sensing devices to provide pressure monitoring capability would likely range between $1,000 and $1,500 per PRD. (7 8 9 10) Staff does not believe that any facility will be unduly burdened by such costs. Moreover, staff believes that any such costs would be more than justified in situations where facilities are not currently monitoring their PRDs.

3. Controlling Additional PRDs

Staff also examined what it would cost to expand the Rule to require all existing atmospheric PRDs to be retrofitted and vented to control systems. Staff
examined costs under two scenarios:

(1) Refineries would have to install additional control systems to handle the PRD emissions (the more likely scenario); and

(2) Refineries would be able to use spar e capacity in existing control systems to handle the additional PRD emissions, and would not have to install new equipment (a more conservative but far less likely scenario).

Staff has found that under ei ther scenario, requiring all PRDs to be controlled would not be cost effective. Each scenario is described in more detail below.Regulation 8, Rule 28 Staff Report November, 2005 32 Cost of Installing New Control Systems:

Most if not all affected facilities would be required to install a new control system (or multiple systems) if t hey were required to control all existing atmospheric PRDs. PRDs are designed to vent lar ge amounts of material very quickly in order to protect equipment from overpre ssures. As a result, control systems handling PRD emissions (safety flares , predominantly) have to be designed to handle large amounts of material from eac h PRD. Moreover, to accommodate all foreseeable upset conditions that might trigger PRD releases, such systems need to be able to handle emissions from mu ltiple PRDs simultaneously. As a result, requiring all PRDs to be controlled would require a very significant amount of control capacity. Staff does not be lieve that affected facilities have spare capacity in their existing systems to handl e all of their atmospheric PRDs, and would thus have to install new flare system s instead. Staff has concluded that it would cost approximately $192.5 million Distr ict-wide to install new flare systems with a capacity great enough to handle all existing atmospheric PRDs.

Staff derived this $192.5 million estimate from two sources: (1) a cost study undertaken Jacobs Engineering, Inc. (“J acobs Engineering”), a large refinery engineering and construction contract or, in connection with the 1997 Amendments; and (2) a recent cost estimate performed by the Shell refinery in Martinez pursuant to Distr ict Regulation 8-28-304.1.

Jacobs Engineering Estimate:

Jacobs Engineering concluded that it would cost approximately $20 million to install a new flare system capable of handling 50 PRDs. (11) This estimate was based on an accuracy range of +/- 30 percent, which translates to a cost range of approximately $14 million to $26 million. A summary of the Jacobs Engineering estimate is set forth in Table 7.1, broken out by line-item.Regulation 8, Rule 28 Staff Report November, 2005 33 Table 7.1 Jacobs Engineering Cost Estimate for a Safety Flare Recovery System to
Handle 50 PRDs

Component Descriptions Cost Estimates 50 PRDs and relief lines, 3⁄4” to 8” $1,180,000 Relief Headers and Knockout Drum $2,970,500 Flare Gas Recovery system $4,864,000 Flare $3,553,000 Pipeway adjustment $ 662,050 Subtotal $13,229,550 Shipping $ 123,000 Sales Tax $ 508,000 Engineering $2,790,000 Contingency $3,094,000 Total $19,744,550

Staff updated the Jacobs Engineering esti mate to 2005 dollars by adjusting the costs for inflation. Staff looked at a number of annual inflation measures, as set forth in Table 7.2. Staff ultimately us ed an average of 1.39 percent to convert to
2005 dollars.

Table 7.2 Various Inflation Adjustment Factors: 1993 to 2005

Bureau of Labor Statistics Consumer Price Index (12) 1.38 Solomon & Associates Plant Replacement Value (13) 1.26
Turner Construction Cost Index (14) 1.54 Average Inflation Factor 1.39

Adjusted for inflation, the Jacobs Engi neering estimate for a flare system capable of handling 50 PRDs is $27.5 million in 2005 dollars, with a plus or minus 30 percent confidence range of $19.2 m illion to $35.7 million in 2005 dollars.

Given the age of the Jacobs Engineering estimate, staff also compared the
estimate with current construction and ma terials costs to assess whether the estimate, adjusted for inflation, continues to provide a reliable picture of what it would actually cost to install a flare system today. Staff contacted contractors with experience in design and construction of flare systems, as well as affected facilities that have recently installed fl ares and/or similar equipment. In some cases, these contacts were able to re view the Jacobs Engineering study and provide an overall opinion on whether the methodology was generally valid and whether the cost inputs used, adjusted fo r inflation, generally reflect current realities. In other cases, they were abl e to give current cost data for individual components of a flare system (including l abor and/or materials), which allowedRegulation 8, Rule 28 Staff Report November, 2005 34 District staff to compare the Jacobs Engi neering estimate with current realities on a line-item by line-item basis. Se veral examples dem onstrate how these inquiries served to validate the Jacobs Engineering estimates.

• Flare, Knockout Drum, and Water Seal:

Staff first compared the Jacobs Engineeri ng estimates for the various materials and equipment needed for a flare system with t he current costs for such items. Staff contacted John Zink, Inc., a flar e manufacturing contractor, who provided current cost information for a 200-foot self supported flare, a k nockout drum built right into the bottom of the flare base, and a water seal. The company estimated that this equipment would cost roughly $500,000 today. (15) This estimate corresponds very closely with the Jacobs Engineering estimate, which comes to $505,960 (in 2005 dollars) for a flare, knockout drum, and water seal.

• Thermal Incinerator

Staff also examined cost estimates publis hed by the United States Environmental Protection Agency (“EPA”) for a therma l incinerator and associated piping. (16) A
thermal incinerator is a control device that combusts hydrocarbon vapors before they are emitted to the atmo sphere in a manner similar to a flare. This similarity makes it a good comparator to a flare. EPA estimates that the cost of the thermal incinerator itself ( without the lines to connect it to the PRDs and all of the other parts of the complete syst em) would cost between $25 and $90 per standard cubic foot per minute (scfm) of capacity. For a 60, 000 scfm system that could handle 50 PRDs – the capacity used in the Jacobs Engineering estimate – the total cost would be $1,500,000 to $5,400,000. The analogous Jacobs Engineering estimate for the flare equi pment is $3,633,500 (in 2005 dollars), which is squarely within the range of EPA’s estimate.

• Piping:

Staff also examined the costs of installi ng piping to carry PRD emissions to the flare system, which is another large portion of the costs of a new flare system. Staff examined the piping costs that the Tesoro refinery incurred when they had two releases within five years and had to pipe certain PRDs to a control system under Section 8-28-304.2 of the current rule. In Tesoro’s experience, it cost approximately $30,000 to $32,500 per 100 linear feet of pipe. (17) This is slightly higher than the Jacobs Engineering piping es timate, which ranged from $9,750 to $24,310 in 2005 dollars, but is well within an order of magnitude. Again, this recent experience corresponds well with the estimates drawn from the work Jacobs Engineering did in c onnection with the 1997 Amendments.

• Labor Inputs:

To examine whether the estimates of labor inputs that Jacobs Engineering used are accurate, Staff contacted Rex Kenyon & Associates, a maintenance consulting services company. Kenyon provided labor estimates for a large number of particular tasks that would be involved in installing a flare system. Kenyon has generated these estimates fr om trades estimating manuals, and has compiled them into Excel spreadsheet esti mating tool which District staff used toRegulation 8, Rule 28 Staff Report November, 2005 35 compare the Kenyon estimates of cu rrent labor inputs with the Jacobs Engineering estimates. (18) Staff identified 32 tasks included in the Jacobs Engineering Estimate that had direct com parators in the Kenyon estimates. Of these 32 common tasks, the Jacobs estima te was lower for 20 of them (ranging from 39 percent to 96 percent of the Keny on estimates) and higher for 11 of them (ranging from 111 percent to 229 percent of the Kenyon estimates), with one task being exactly the same. This comparison shows that the labor estimates that Jacobs Engineering used continue to be valid today for estimating the costs involved in installing a new flare system.

Given this close correlation between t he cost inputs used in the Jacobs Engineering estimate (as adjusted for in flation) and current costs for similar inputs, Staff believe that the Jacobs Engineering cost estimate, adjusted for inflation, provides a reliable estimate of what it would cost to install a new flare system today.

Shell Estimate:

The District also examined an estimate prepared by Shell for installing a new flare to handle PRD emissions at its refi nery in Martinez. Shell prepared this estimate pursuant to Section 8-28-304.1 of the Rule, which requires facilities to analyze the cost-effectiveness of contro lling PRDs that experience release events. In connection with this requi rement, Shell examined the costs of installing a new flare, liquid knockout drum, flare gas recovery, major headers, and individual sub-headers servicing individual PRDs. Shell estimated that it would cost the refinery $50 million for a syst em that could serve 39 PRDs in one area of the refinery and $25 million for a syst em that could serve ten PRDs in another area of the refinery. Shell es timated that it w ould need two separate flare systems because the relatively l ong distance between th e two areas and the relatively low design pressures involv ed made it unreasonable to expect that a single flare system could serve both areas. (19)

This estimate is slightly higher than the Jacobs Engineering estimate of $27.5 million (in 2005 dollars) for a system capable of handling 50 PRDs, but it is within a factor of two of that estimate.

Costs to Control All PRDs District-Wide:

Staff then used the estimates referenced above to estimate what it would cost to control all PRDs District-wide. Using t he more conservative estimate of $27.5 million for a system to handle 50 PRDs, Sta ff then looked at how many new flare systems would be needed to control all 324 PRDs currently in atmospheric service around the Bay Area. Staff a ssumed that one new flare system with a capacity to handle 50 PRDs would be sufficient to control the PRDs at three of the refineries, and that two new flare systems would be required at each of the remaining two refineries because they have around 100 PRDs each. Staff therefore estimated that seven new fl are systems would be needed in total toRegulation 8, Rule 28 Staff Report November, 2005 36 control the PRDs at all five refineries. x These calculations are summarized in
Table 7.4.

Table 7.4 Flare Systems Required to Control P RDs at the Five Bay Area Refineries

Refinery Atmospheric PRDs Additional Flare Systems Needed
Chevron-Texaco 41 1 ConocoPhillips 12 1
Shell 107 2
Tesoro 99 2
Valero 65 1
Totals 324 7

At approximately $27.5 milli on per flare system, contro lling all 324 PRDs with flares would thus result in a total c apital cost of approx imately $192.5 million District-wide. As with any estimate, ther e is some uncertainty inherent in this number. Staff is confident that it is reasonably accurate, however, and certainly is accurate to within an order of magnitude.

Costs of Using Existing Control Systems : Staff also examined the costs of piping existing atmospheric PRDs to existing control systems. As noted abov e, it is highly unrealistic to assume that there is currently excess capacity to handle all 324 PRDs throughout the District: PRDs are designed to release large volumes of ma terial in a short period of time, and control systems need to be capable of hand ling combined emissions from many PRDs simultaneously in case of an upset involving multiple units. Furthermore,
to the extent that there is existing excess capacity, the current rule contemplates that any such existing excess capacit y would be reserved for handling “bad actor” PRDs that have repeat releases and trigger the control requirements. It would be preferable to target any existing excess capacity to these PRDs, rather than use it for PRDs that may have a ve ry low potential for release. Staff therefore believes that alt hough there is most likely some spare capacity, it is unrealistic to assume that all existing PRDs can be vented to existing control systems. Staff have nevertheless analyzed the costs of controlling all existing PRDs assuming that sufficient spare capac ity exists as an ultra-conservative estimate of the very least it could po ssibly cost to control all existing PRDs.

x There is a certain level of approximation inher ent in these calculations, because PRDs do not exist at facilities in neat multiples of 50. St aff believes that such approximation is appropriate, however, because the experience of refineries wi th fewer than 50 PRDs – which will be able to install a smaller flare system and incur fewer co sts – will balance out the experience of facilities that have more than 50 PRDs and will require a larger flare system at greater cost. Notably, the two refineries that staff estimate will need two flare systems have very close to 100 PRDs each (99 and 107), almost exactly double the 50 PRDs t hat staff used as the basis for their cost estimate. Staff therefore believes that their assumptions are supportable and appropriate for this
cost estimation exercise.Regulation 8, Rule 28 Staff Report November, 2005 37 Staff first examined the experience of one refinery that was able to reroute emissions from eight PRDs back into it s process unit in a closed loop, without having to send them to a fl are or vapor recovery system. The refinery was able to do so because unlike most PRDs, the devices involved served a liquid-packed unit, which (unlike gaseous equipment) c an alleviate an overpressure without having to vent a lot of material. The refi nery found that it could pipe the PRDs to a knockout drum to recover liquids vented from the PRDs, and then vent the relatively small amount of remaining v apors back into the system without risking any over-pressure problems. The re finery was able to accomplish this modification at a cost of $2 million for eight PRDs. (20) Extrapolating this experience District-wide – which is not a reasonable assumption given that only a small subset of PRDs is lik ely to be eligible for such treatment – the cost would be $81 million for all 324 PRDs.

Staff also reviewed an estimate by another refinery for piping PRDs to existing control capacity, which was prepared pursuant to Se ction 8-28-304.1 of the current rule. The refinery estimated that it would be able to vent an individual PRD to an existing flare system at a cost of $75,000. (21) The refinery noted that existing spare capacity was limited, making it unreasonable to assume that all PRDs could be treated this way. Assuming they all could, however, this estimate
would translate into a District-wide co st of $24.3 million for all 324 existing atmospheric PRDs.

Assuming there was existing capacity for all PRDs District-wide, the only costs that facilities would incur would be the cost of installing piping to carry emissions from the PRD to the control device. Based on the estimates outlined above of $9,750 to $32,500 for 100 linear feet of pi ping per PRD, which was the average length of piping used in the Jacobs E ngineering analysis, the costs of piping alone would be approximately $1.6 million to $5.3 million for 50 PRDs. For the 324 atmospheric PRDs District-wide, this corresponds to a total cost of $10.5 million to $34.8 million.

Based on these estimates, Staff has conc luded that even if facilities had existing capacity to control all existing atmospher ic PRDs, it would still cost $10.5 million to $81 million to control all PRDs District-wi de. Again, staff does not believe that this is a realistic estimate given that it is highly unlikely that facilities have sufficient existing capacity for 324 PRDs.

Cost Effectiveness :

Based on the cost estimates of the vari ous control scenarios outlined above, and
the emissions reductions t hat would be expected from each of them, staff has calculated the cost-effectivene ss of each option. Staff am ortized the costs over a 10 and 20-year period at sev en percent to determine the annualized costs. Staff then compared the annualized costs wit h the anticipated annual emissionsRegulation 8, Rule 28 Staff Report November, 2005 38 reductions based on the 20.5 tons-per-y ear emissions average since 1998 and based on the lower 12.4 tons-per-year av erage since the Prevention Measures requirements took effect. The results of these calculations are set forth below.

Cost-Effectiveness If New Control Systems Required:

For new flare systems to control all existing atmospheric PRDs, the costeffectiveness calculations are as follows.

Estimated total cost District-wide: $192.5 million Cost annualized over 10 year s: $26.8 million per year Cost annualized over 20 year s: $17.9 million per year

Estimated emissions reduction efficiency: 98% Tons of reductions from 20.5 tons- per-year baseline: 20.1 tons per year Tons of reductions from 12.4 tons- per-year baseline: 12.2 tons per year

Based on these calculations, the co st-effectiveness of flare systems under different scenarios is set forth in Table 7.5.

Table 7.5 Cost Effectiveness Calculati ons for New Control Systems

Annualization Period Cost-Effectiveness Based on 20.5 tpy of
emissions Cost-Effectiveness Based on 12.4 tpy of
emissions 10 years $1.3 million per ton $2.2 million per ton 20 years $890,000 per ton $1.5 million per ton

Cost-Effectiveness Assuming Existing Spare Control Capacity:

If there were existing flare or vapor-re covery capacity to handle all existing atmospheric PRDs, and all that was needed was piping from the PRDs to the existing flares or vapor recovery systems, the cost-effectiveness calculations are as follows.

Estimated total cost Distric t-wide: $10.5 million - $81 million Cost annualized over 10 years: $1. 5 million - $11.4 million per year Cost annualized over 20 years: $977,000 - $7.6 million per year

Estimated emissions reduction efficiency: 98% Tons of reductions from 20.5 tons- per-year baseline: 20.1 tons per year Tons of reductions from 12.4 tons- per-year baseline: 12.2 tons per yearRegulation 8, Rule 28 Staff Report November, 2005 39 Based on these calculations, the cost -effectiveness of simply piping PRD emissions to existing flare or vapor-recove ry capacity, assuming such capacity is available, is set forth in Table 7.6 for the different scenarios evaluated.

Table 7.6 Cost Effectiveness Calculations Assuming Existing Spare Capacity

Annualization Period Cost-Effectiveness Based on 20.5 tpy of
emissions Cost-Effectiveness Based on 12.4 tpy of
emissions

10 year $75,000 - $567,000 per ton $123,000 - $934,000 per ton

20 year $49,000 - $378,000 per ton $80,000 - $623,000 per ton

In each of these cases, the costs a ssociated with controlling all existing atmospheric PRDs would be far higher t han what the District normally considers to be cost-effective. To give some perspective, the cost s associated with the
1997 amendments were estimated to be $20,000 per ton of VOC emissions, which is at the high end of cost effect iveness for District regulatory proposals. Because of the very high cost, staff is not recommending t hat all PRDs be required to be piped to control systems.

B. Incremental Cost Effectiveness

Under California Health and Safety Code Se ction 40920.6, the District is required to perform an incremental cost analysi s for a proposed rule under certain circumstances. To perform this analysis, the District must (1) identify one or more control options achieving the em issions reduction objectives for the proposed rule, (2) determine the cost effectiveness for each option, and (3) calculate the incremental cost effect iveness for each option. To determine incremental costs, the District must calc ulate the difference in the dollar costs divided by the difference in emissi on reduction potentials between each progressively more stringent control option as compared to the next less expensive option.

As explained above, staff ex amined two options in connection with the proposed amendments: an option to enhance the clar ity and enforceability of the current rule, and an option to require all existing P RDs to be controlled. The first option would require facilities to demonstrate that they have the ability to detect release events and report them as required by t he rule, which staff estimates will cost $65,300. Amortized over 10 or 20 years, this cost comes to approximately $9,300 or $6,200 in annualized co sts, District-wide. The second option would require all PRDs to be controlled, and would cost between $26.8 million a year (annualized over 10 years) or $17.9 million (annualized ov er 20 years), assuming new control systems would be required. The incremental difference inRegulation 8, Rule 28 Staff Report November, 2005 40 annualized costs would ther efore be $26.8 million or $17.9 million, depending on which amortization period is used.

It is difficult to estimate the emissions reductions associated with monitoring and reporting requirements because they do not di rectly lead to emissions reductions. At the same time, comprehensive moni toring and reporting are necessary to ensure adequate compliance with the rule, so these requirements are essential to all the reductions expected from a regul ation. Staff recognizes these inherent difficulties in analyzing the cost-effectiv eness of such requirements, but has nevertheless estimated a five percent emissions reduction factor from these requirements. A five percent reducti on would generate 1.0 tons per year in emissions reductions if the 20.5 tons-per-y ear baseline is used, or 0.62 tons per year if the 12.4 tons-per-year baseline is used. The emissions reductions that could be achieved by controlling all PRDs would be 20.1 tons or 12.2 tons, depending on which baseline is used. The incremental difference in emissions reductions would therefore be 19.1 tons or 11.5 tons depending on which
baseline is used.

Based on these incremental emissions reductions and incremental costs, the incremental cost-effectiveness of the second option would be $1.08 million - $1.40 million per ton if the 20.5-ton emissions baseline is used or $1.56 - $2.33 million per ton if the 12.4- ton baseline is used.

Under the unlikely scenario that no additi onal control systems would be required, the same calculations generate an incr emental cost-effectiveness of $50,800 - $598,000 per ton if the 20. 5 ton emissions baseline is used, and $83,900 - $988,000 per ton if the 12.4 ton baseline is used.

C. Socioeconomic Impacts

Section 40728.5 of the Health and Safety Code requires an air district to assess the socioeconomic impacts of the adoption, amendment, or repeal of a rule if the rule is one that “will significantly affect air quality or emissions limitations.” Applied Economic Development of Be rkeley, California has prepared a socioeconomic analysis. The analysis conc ludes that the affected facilities should be able to absorb the costs of co mpliance with the pr oposed rule without significant economic dislocation or loss of jobs. The socioeconomic analysis is attached as Appendix A.

VIII. ENVIRONMENTAL IMPACTS

Pursuant to the California Environmental Quality Act, the District has had an initial study for the propos ed amendments prepared by Envi ronmental Audit, Inc. The initial study indicated there are no potential significant adverse environmental impacts asso ciated with the proposed am endments. The District intends to file a negative declaration for the proposed amendments to this rule.Regulation 8, Rule 28 Staff Report November, 2005 41 IX. REGULATORY IMPACTS

California Health and Safety Code Sect ion 40727.2 requires the District to identify existing federal air pollution c ontrol requirements for the equipment or source type affected by the proposed rule or regulation. The District must then note any differences between these exis ting requirements and the requirements imposed by the proposal. Regulation 8, Rule 28: Episodic Releases from Pressure Relief Devices at Petroleum Re fineries and Chemical Plants applies to emissions from atmospheric pressure re lief devices located at refineries and chemical plants. The proposal does not expand the applicability or the current rule. No federal air pollution control requi rement or other District rule regulates episodic emissions from pressure relief devices.

X. RULE DEVELOPMENT PROCESS

In developing the proposed amendments to Ru le 8-28, District Staff went through an extensive rule development process to solicit and receive input from affected facilities, interested organizations, and other members of the pub lic. This section
summarizes that work.

A. PRD Audit – May, 2002

Staff’s rule development efforts commenc ed with a detailed examination of the current rule. Staff began by conducting an audit of PRDs at all five petroleum refineries in the Bay Area to invest igate whether those facilities have been detecting and reporting PRD releases as r equired by the Rule. The audit did not find any definitive evidence of reportable releases (over 10 pounds) that had gone undetected or unrepor ted. Staff could not c onclude that all reportable releases have been detected, however, because the refineries did not have comprehensive data available for many of their PRDs, either because they do not monitor the PRDs or because they do not maintain data for any length of time. Indeed, staff discovered several small re leases of which the facility was not aware. These involved less than 10 pounds of material so they are exempt from the Rule and would not have had to be report ed, but they highlight the possibility that reportable releases could have gone undetected as well. Staff concluded from this review that the potential exis ts for reportable releases to go undetected by refinery operators, and recommended t hat Regulation 8-28 should contain explicit monitoring and recordkeeping require ments to alleviate this problem.

B. Technical Assessment Document – December 2002

Staff then conducted a technical assessment of the current Ru le that assessed options for further improvements. The resulting Technical Assessment Document (“TAD”) echoed the findings of t he PRD Audit that facilities are not monitoring all of their PRDs sufficiently to ensure that any reportable release is detected and reported to the District. The TAD recommended that an explicitRegulation 8, Rule 28 Staff Report November, 2005 42 monitoring requirement be added to the rule to ensure that all releases can be detected and quantified, among other ideas.

C. Technical Workgroup Meeting – May 9, 2005

Staff next convened a public workgroup meet ing to discuss the findings of the
Rule Audit and Technical Assessment Do cument and potentia l improvements to the rule. The workgroup meeting was held on May 9, 2005, at the District’s offices, and was attended by representatives of the five Bay Area refineries, the Western States Petroleum Associati on (“WSPA”), and Communities for a Better Environment (“CBE”), as well as by sta ff of the District and the California Air Resources Board. The workgroup discu ssed the following regulatory concepts:

• Clarification of the term “source” as used in the rule. Representatives of WSPA and the refineries suggested that “source” should be limited to pressure-related equipment, while repr esentatives of C BE suggested that “source” should be defined to incl ude any equipment that could be affected by a process upset, even if it is not pressure-related.

• Making explicit the duty to monitor fo r PRD releases. All parties were in general agreement that the rule should explicitly require monitoring to
detect and characterize PRD releas es. Representatives of CBE contended that current monitoring syst ems are deficient and that the refineries’ reported information on releases underestimates actual emissions. Representatives of t he refineries contended that current monitoring is sufficient to detect a ll releases, but agreed that further improvements could be made.

• Requiring telltale indicators on all PRDs. Representatives of WSPA and the refineries contended that pressure monitoring systems are preferable to telltale indicators as methods to detect and quantify releases. They suggested that facilities be given a choice to use telltale indicators or pressure monitors, instead of allo wing pressure monitors only where telltale indicators are infeasible.

• Requiring additional controls on PRDs, beyond what is already required by the Rule. Representatives of C BE suggested that the District should require all PRDs to be piped to c ontrol systems, and t hat the District should at least go back and review its previous analyses on what level of controls should be required to determi ne if its earlier conclusions are still
valid.

• Removal of obsolete provisions and other minor non-substantive
amendments.Regulation 8, Rule 28 Staff Report November, 2005 43 D. Public Workshop Meeting – September 14, 2005

Staff then took this input and devel oped a draft of the proposed rule amendments, along with a dra ft staff report. Staff disseminated these documents among interested parties and the pub lic, and then convened an early-evening public workshop meeting in R odeo, Contra Costa County, to receive public input on them. The meeting was attended by repr esentatives of the refineries, WSPA, Dow Chemical, CBE, the Contra Costa County Health Services Department, and the District, as well as a number of in terested individuals. The discussion focused on the following principal areas.

• Success of current approach. Repres entatives of WSPA noted that the current version of the rule has wo rked well in reducing the frequency and severity of PRD releases.

• Definition of “source”. Represent atives of CBE agai n commented that “source” should not be limited to pr essure-related equipment, but should include all equipment in a given process unit. They claimed that this was the intent of the current version of the rule, and that limiting “source” to pressure-related equipment would amount to backsliding.

• Additional control requirements. Representatives of CBE and several members of the public suggested that the District should require all PRDs to be piped to controls. Representativ es of CBE commented that such a requirement would be cost-effectiv e, and suggested that staff need to conduct further analysis on that issue. They and other commenters also
stated that all PRDs should be c ontrolled regardless of costs. Representatives of CBE cl aimed that the “Precauti onary Principle” states that all feasible pollution prevent ion measures should be implemented regardless of the costs and that application of that principle here would require controls on all PRDs. Se veral commenters suggested that a blanket control requirement could be made less onerous by phasing it in over a long lead time.

• Acutely hazardous materials. Repres entatives of CBE stated that staff should consider requiring controls on a ll PRDs to reduce the likelihood of a catastrophic release of acutely hazar dous materials that could affect workers and nearby residents. They stated that allowing any PRDs to vent to the atmosphere presents an unacceptable risk.

• Fugitive emissions. Representativ es of CBE commented that staff needs to consider the potential for reduced f ugitive emissions (leaks) from PRDs that would result from requiring a ll PRDs to be controlled. They
commented that this is an additional benefit to a blanket control requirement that staff needs to consider.

At the conclusion of the meeting staff al so invited the public to submit written comments on the draft rule and staff report, and several entities did so.Regulation 8, Rule 28 Staff Report November, 2005 44 E. Informal Office Meetings with In terested Parties – September 2005

Staff also met individually during this time period (immediately before and after the public workshop) with r epresentatives from the re fineries and WSPA, CBE, Contra Costa County Health Services Department, and Dow Chemical to discuss the proposed regulations. Following up on t hese meetings, each of these entities (except Dow Chemical) also submitted written comments on the public workshop draft summarizing their positions.

F. Further Technical Workgr oup Meeting – October 20, 2005

Staff also held a further technical work group meeting to discuss additional costeffectiveness information on which Staff w anted to receive input. Staff also sought additional input on how the term “source” should be defined, and on how to specify minimum requirements for monitoring systems for PRD releases. Some participants also voiced a desire to have the District prohibit the use of atmospheric PRDs altogether.

G. Changes to the Proposal in Response to Public Input

In response to the public input received dur ing this process, Staff took further action in several areas, including the following.

• Telltale indicators and monitoring: Several parties suggested that pressure monitoring systems are better than telltale indicators in many instances. Staff agrees with thes e commenters, and has removed the preference for telltale indicators that it initially proposed. The current proposal would allow affected facilit ies to choose whichever system of monitoring they deem most appropriate, as long as it meets the standards set forth in Section 8-28-503. In addition, Staff has made the monitoring requirement more generic so that it can accommodate situations where pressure is not the principal indica tor of whether the PRD has released and if so how much material was involved. Any monitoring system will require a demonstration (in a report to the District) of its ability to effectively monitor PRD releases.

• “Source” Definition. Staff initially proposed that “source” be defined as all equipment within a pressure-related system. Commenters pointed out that the intent of the current rule is that “source” is a broader term encompassing all equipment within a gi ven process unit, because of the potential for a process upset leading to a PRD release is not limited to a particular pressure-related system s within a process unit. Staff researched the intent of the current ru le further and determined that this is correct. Staff reviewed the rationale behi nd the intent of the current rule and believes that it is sound from a technical and policy perspective, and so has changed its proposal. Staff now proposes to define “source” as aRegulation 8, Rule 28 Staff Report November, 2005 45 process unit, the definition that was intended in t he 1997 amendments and has added a definition of “process unit” to clarify the intent of the rule.

• Further cost analysis. In respons e to comments that staff should reevaluate the costs and benefit s of piping all PRDs to control systems, staff conducted additional cost analysis, and done additional work to verify costs used for the 1997 amendments. St aff contacted major engineering firms to estimate costs from pipi ng and controls regarding the Jacobs Engineering report prepared in connec tion with the 1997 amendments and found that the costs, as adjusted fo r inflation to 2005 dollar values, are valid. Engineering firms contacted to validate costs are listed in the Reference Section at the end of this staff report.

• Further catastrophic release analysis. In response to comments that staff should consider provisions directed at preventing catastrophic releases of acutely hazardous materials, staff has reviewed the existing requirements and the work of the Board’s Ad Hoc Committee on Accidental Releases in the 1990s. There are numerous federal , state and local ordinances that create programs to plan, prevent and mitigate accidents and releases of materials as a result of accidents. The District has been involved in the development of these progr ams for various Bay Area facilities, including refineries. Of note is the Contra Co sta County Industrial Safety Ordinance (ISO), adopted in 1998. The ISO r equires process hazards analyses, implementation of action items from t hose analyses, review of prevention measures and root cause analyses w hen accidents occur, strengthening existing review, inspection, auditing, and safety requirements, including public input on results of inspecti ons and audits, and expansion of federal and state programs to additional industria l processes. These issues are addressed in detail in Section IV.B of the Staff Report.

• Fugitive Emissions. Comments suggested that staff should assess fugitive emissions from PRDs. Fugiti ve emissions from leaks at pressure relief devices were estimated to be 3300 pounds (1.65 tons) per day in 1997. Because of the requirements in Rule 8-28 and in Rule 8-18: Equipment Leaks, inspection programs and stricter standards imposed since 1997 have reduced emissions to approximately 10 pounds per day.

Detailed responses to all of the comment s received -in response to the public hearing notice and final draft rule are provided in Appendix B.

XI. CONCLUSIONS

The 1997 amendments to Regulation 8, Rule 28 have been successful in preventing releases, reducing emissions, and requiring control of those pressure relief devices that need it most. The rule has required refiners to consider these releases and integrate control technologies into their future plant modifications.Regulation 8, Rule 28 Staff Report November, 2005 46 The proposed amendments to Regulation 8, Rule 28 meet the commitment made as part of 2001 Ozone Attainment Plan Furt her Study Measure 8. The proposed
amendments will enhance the District’s ability to enforce the rule and enhance the operator’s ability to detect releases . The proposed amendm ents also clarify the rule so that it can be more easily understood.

Pursuant to the California Health and Safety Code Section 40727, before adopting, amending, or repealing a rule the Board must make findings of necessity, authority, clarity, consist ency, non-duplication and reference. The proposed regulation is:

• Necessary to supplement the District’s ability to enforce the regulation and ensure that all provisions in the regulation are complied with;

• Authorized by California Health and Safety Code Section 40702;

• Clear, in that the new r egulation specifically delineat es the affected industries, compliance options and administrativ e and monitoring requirements for industry subject to this rule,

• Consistent with other District rules, and not in conflict wit h state or federal law,

• Non-duplicative of other stat utes, rules or regulations, and

• The proposed regulation properly refer ences the applicable District rules and test methods and does not reference other existing law.

A socioeconomic analysis prepared by A pplied Development Economics has found that the proposed am endments would not have a significant economic impact or cause regional job loss. A California Environmental Quality Act analysis prepared by Environmental Audit, Inc., concludes that the proposed amendments would not result in any adver se environmental impacts. A Negative Declaration for the proposed amendment s has been prepared and was circulated for comment. All public noticing requirem ents for adoption of this rule have been
met.

Staff recommends the adoption of the proposed amendments to Regulation 8, Rule 28: Episodic Releases from Pr essure Relief Devices at Petroleum Refineries and Chemical Plants, and approval of a CEQA Negative Declaration.Regulation 8, Rule 28 Staff Report November, 2005 47 XII. RESPONSE TO PUBLIC COMMENTS

Staff published the proposed amendments to Regulation 8, Rule 28, on November 7, 2005, and solicited comment s from interested parties. Staff received comments from the Western St ates Petroleum Association (“WSPA”) (through its attorneys Pillsbury Winthrop Shaw Pittman LLP); Shell Oil Products US Martinez Refinery (“Shell”) (which submitted a comment letter and also an email comment); and Tesoro Refi ning & Marketing Co. (Tesoro). xi Staff has considered all of the comments and has t he following responses. The comments and responses are grouped by issue area, in no particular order.

Comment 1 : Commenters expressed support for the targeted approach in the current rule, which aims to control “bad actor” sources that experience multiple releases within a 5 year period. (Tesor o comment letter at p. 3.) Commenters expressed significant differences in opini on on how to define a “s ource” that is a bad actor (as discussed further below), but there has be en general agreement that throughout the rulemaking process that the approach of identifying “bad actors” that have a propensity for repeated releases is appropriate.

Response : Staff agrees that the target ed approach is appropriate, and is not proposing any changes to the requirement that the PRDs on a source that experiences repeated releases must be vented to a control system.

Comment 2 : Several commenters suggested that releases caused by mechanical failures should not be count ed when determining which sources are “bad actors.” (Shell Comment Letter at p. 1; WSPA Comment Letter at p. 5, fn. 5.) Presumably, these commenters would prefer to count only releases caused by operator error or some other type of negligent conduct.

Response : Staff disagrees with this commen t. Staff believes that any source that experiences multiple release ev ents within a five-year period should be considered a “bad actor,” regardless of the reasons for the releases.

Comment 3 : A number of commenters contended that the term “source” used to define the “bad actors” regulated under the current rule should be defined as a pressure-related system of equipment, and not as an entire Process Unit as the current rule does. Commenters support ed their position by contending that process upsets resulting in overpressure s and ultimately in PRD releases are limited to individual pressure system s and cannot cascade from one pressure system to another, contrary to statements in the Staff Report. Commenters also

xi After the close of the public comment period, st aff also received a “proprietary and confidential” letter from the Valero Refining Company. As the letter was not received during the public comment period and it purports to be a confidentia l communication that the District cannot make public, Staff do not believe this letter to be a public comment that the Dist rict must consider and respond to. But the relevant points raised in the le tter are essentially the same as those raised in other public comments, and so Staff are responding to the substance of the points Valero raised through these Responses.Regulation 8, Rule 28 Staff Report November, 2005 48 contended that the PRD rel ease Prevention Measures required by the current rule are always implemented on a pr essure-system basis and never on a Process-Unit-wide basis, contrary to stat ements in the Staff Report. Based on these points, the commenters concluded that there is no te chnical justification for defining “source” as “Process Unit”. (T esoro Comment Letter at pp. 3-5; WSPA Comment Letter at pp. 5-7.)

Response : Staff continues to believe that it is more appropriate to treat the
entire Process Unit as the “bad actor” that needs to be controlled if it demonstrates a propensity for releases. St aff disagrees that upsets that cause PRD releases are necessarily limited to individual pressure-related systems. To the contrary, in many situat ions a process upset or similar problem that ultimately results in a PRD release could potentially a ffect any or all of the pressure-related systems within a Process Unit. Using t he more limited definition of “source” proposed by these commenter s – an individual pressure-related system instead of the entire Process Unit – would ther efore allow some “bad actor” units with a demonstrated history of multiple releases to go uncontrolled.

One prime example that illustrates wh y these commenters’ arguments are misplaced is the No. 50 Crude Unit at t he Tesoro refinery. Tesoro has had recurring upsets at this Process Unit that have affected multiple pressure systems. According to Tesoro, the problems have arisen when the crude feed pumps experience abrupt rate changes, which causes a “pressure transient throughout the crude train.” ( See Letter from Alan A. Savage III, Environmental Manager, Tesoro Golden Eagle Refinery, to Christine Schaufelberger, Director of Enforcement, BAAQMD, December 11, 2002. ) The first time this happened after the provisions of the 1997 Rule took effe ct, the upset caused PRDs to release on one pressure-related system, the first stage desalter. (See District Episode Nos. 03R32 and 03S04.) Then, the next time it happened the upset caused PRDs to
release on a different pressure-related system, the second stage desalter. (See District Episode Nos. 03U11 and 03U68.) Teso ro took the position advocated by the refineries now: that the 50 Crude Unit was not a “bad actor” with a history of multiple releases because the repeat re leases occurred on separate pressurerelated systems – even t hough they were caused by a common, recurring problem. Tesoro therefore did not vent any of the PRDs involved to control systems, leaving both pressure system s unregulated even though the Unit had a demonstrated history of f eed pump problems causing pr essure transients and resulting in releases. Further problems then caused more releases at the first stage desalter again. (See District Ep isode Nos. 03Y27, 04A38, and 04F12.)
Tesoro conceded that it had to control that pressure system, but it continued to maintain that the second stage desalter was a different “source” and thus exempt from the control requirement because it was a different pressure system. Again, that approach – which the re fineries are urging here – would have left the second stage desalter unregulated, even with a demonstrated hi story of feed pump problems creating pressure transients that can cause PRD releases from thatRegulation 8, Rule 28 Staff Report November, 2005 49 pressure system. xii This is just one example from the record of releases since the current rule took effect that illustra tes why it would be inappropriate to define “source” more narrowly as limited to indi vidual pressure-related systems. To do so would exempt repeated upsets from the regulat ion where they happen to affect different pressure systems within a common Process Unit.

The commenters are similarly incorrect that the Prevention Measures designed to prevent or minimize releases are applied only on a pressure-system basis. The record indicates that many of the Prevention Measures apply to the entire Process Unit, not simply individual pressure systems. For example, one common type of Prevention Measure is to ensure t hat Unit operators are adequately trained on how to respond to upset conditions before they can result in a PRD release. This type of Prev ention Measure applies to all pressure systems within a Process Unit, and if it should fail as a result of inadequate training the failure could result in a re lease on any of the pr essure systems within the Process Unit. And again, this type of failure has actually happened in the record staff has examined. For exam ple, operator trai ning is one of the Prevention Measures the Tesoro refinery identified for its #1 HDS Process Unit. ( See Avon Refinery Atmospheric PSV Prevent ion Measures Report, July 14, 2000.) That Prevention Measure failed w hen maintenance workers were left in charge of the Process Unit while they were working on the Unit’s computer control system. The maintenance workers lacked adequate training to understand the significance of process ala rms, and as a result they ignored a high-level alarm on the Unit ’s prefractionator surge drum, which overfilled and caused a PRD release. ( See District Episode No. 02N76.) The upset happened to occur in this particular vessel on this particular day, but the problem that led to the PRD release – operators failing to respond to alarms properly – was a Process-Unit-wide problem. It could hav e led to a release from any of the pressure systems within the Process Unit if they had happened to experience upsets on that particular day. Again, this is just one of many examples in the record of PRD Prevention Measures repor ts the District has compiled since the current rule was adopted.

These examples, as well as many more lik e them in the record the District has examined, show why the ru le cannot be limited to individual pressure-related systems. The causes of re lease events are not limited to individual pressurerelated systems, and so a regulation limited to individual pressure-related systems would be too narrow.

Comment 4 : Several commenters also cont ended that the term “source” in the current version of the rule that was adopted in 1997 was intended to be limited to pressure-related equipment, not an entir e Process Unit. These commenters

xii Tesoro eventually controlled the P RDs on both pressure systems. Bu t it maintains that it did so because there were multiple releases on each i ndividual system, not because it viewed the pump problem and ensuing pressure transients as a r epeat upset affecting the Process Unit. ( See Tesoro Comment Letter at 1.)Regulation 8, Rule 28 Staff Report November, 2005 50 argue that the District shoul d adopt the narrower definition of “source” to conform to what they contend was the original in tent in 1997. (Tesoro Comment Letter at p. 4; WSPA Comment Letter in its entirety. xiii )

Response : Staff disagrees that the intent behind the current version of the rule adopted in 1997 was to limit t he definition of “source” to individual pressurerelated systems. The regulatory l anguage adopted in 1997 uses the ambiguous term “source,” which could be used to refer to either a Process Unit or a narrower grouping of equipment. But the Sta ff Report that accompanied the 1997 Amendments and the presentation made at the Public Heari ng make it clear that the rule was intended to regulate all PRDs on a Process Unit, requiring telltale indicators after a first release event and requiring controls after a second release event within 5 years. The issue was in itially raised by a public comment, which stated that the control requirements tr iggered by a second release event within five years “should apply to a second release from any PRD serving the same process unit , not merely the same PRD nor even those in parallel service.” Staff agreed, and made clear t hat where there is a second release within 5 years from any PRD serving the same process unit, “ any PRD serving the same source (process unit) must be vented to control.” (1997 Staff Report, p. 30, Comment 18 & Response (emphasis added).) Staff also made this interpretation clear at the public hearing at which the Board of Directors adopted the current version of the rule, explaining that in the event of a se cond release within 5 y ears, “ultimately, the refinery will be r equired to vent all of the devices associated with the process
unit to a gas recovery system or safety flare.” (Testimony of Barry Young, Principal Air Quality Engineer, De cember 9, 1997 (emphasis added).)

The commenters are correct in pointing out that staff used some language that was less than perfectly clear in certai n places in the 1997 Staff Report when referring to the PRD groupings that the ru le applies to. For example, in some places the 1997 Staff Report uses the term “parallel service”, and in some places it suggests that only the i ndividual PRD that experiences two releases must be controlled, and nothing more. ( See WSPA Comment Letter at p. 7.) But all of
those statements were made in discussions of other issues unrelated to the issue of what was intended by the term “source”. The only place in the 1997 Staff Report where that issue is squarely addr essed is in the Response to Comments cited above, where Staff were unambiguously clear that the term was intended to mean “Process Unit.” Taken in conjunc tion with the discussion at the Public Hearing, there is only one conclusion that can be drawn from the record: the
intent behind the 1997 Amendment s was that the “sources” covered by Section 304 of the Rule are entire Pr ocess Units, not simply individual pressure-related systems within Process Units.

xiii WSPA appears to be confused about the year in which the current rule was adopted. The material provisions of the current rule were adopted in 1997. Minor typographical revisions were adopted in 1998, but they did not im pact any of the issues involved in the current proposal or any of the points raised by the commenters.Regulation 8, Rule 28 Staff Report November, 2005 51 The commenters are also correct in poi nting out that the language that staff ultimately proposed for Section 8-28-304.2 in 1997 was less than perfectly clear, stating that upon a second release event wit hin five years on the same “source”, “the facility shall vent all the pressure re lief devices that vent the second Release Event, including those in parallel servic e,” to a control system. (WSPA Comment Letter at 7.) This language is ambiguous and confusing. It suggests that the group of PRDs that have to be contro lled after the second release event “includ[es] those in parallel servic e,” which implies that the group is larger than those in parallel service – i.e. , all those on the Process Unit. But it does not explicitly use the term “Process Unit,” or even the similar term “source” that is used elsewhere in Section 304. As a re sult, it is impossible to determine conclusively from the language of the regulation by itself what must be controlled. Faced with such ambiguity, one must look to the statements m ade on the subject in the Staff Report and at the Public Hearing. As outlined above, those statements clearly demonstrate that the intent was that all PRDs on a Process
Unit must be controlled w hen the Process Unit experiences two release events within five years.

Comment 5 : Several commenters claimed t hat applying the regulation to
Process Units is inconsistent with the District’s past practice. (WSPA Comment Letter at 8-9; Tesoro Comment Letter, pp. 1-2.) One commenter contended that it is “inequitable” to apply the rule to Process Units in light of the District’s purportedly inconsistent past practice. (Tesoro Comment Letter, pp. 1-2.)

Response : The District’s past practice has been to interpret “source” as “Process Unit”, as was intended when the rule was adopted in 1997. This practice was first documented just two m onths after the current rule was adopted, on February 9, 1998, when W SPA representatives met with District staff to explain that WSPA believed that usi ng a “Process Unit” definition was too burdensome. The refineries contended then – as they do now – that the term “source” was overly broad, and asked that it be narrowed to cover only those
PRDs on the individual vessel or other piece of equipment involved in a release,
not on the entire Process Unit. District st aff disagreed (as Staff continues to do now), and declined to propose narrowi ng the regulation when minor nonsubstantive amendments were adopted in March of 1998. xiv

The District then applied this same interpretation in 1999 at the Benicia Refinery (operated by Exxon at the time, and now operated by Valero). There, Exxon experienced a PRD release at one of the three towers at its Crude Light Ends Unit, which are each a separate pressu re system. Exxon approached the District
to ask whether it had to install telltale indi cators on all of the PRDs on the Unit, or

xiv One commenter appears to suggest that the District’s failure to clarify explicitly that “source”
was intended to mean Process Unit in the 1998 revisi ons indicates that the District acquiesced in WSPA’s desire to have a narrower definition. (WSPA Comment Letter at p. 7.) But the District’s refusal to adopt WSPA’s positi on shows that the District disagreed with WSPA’s arguments for the narrower definition, not that the District agreed.Regulation 8, Rule 28 Staff Report November, 2005 52 only those on the pressure system where the release occurred. The District
made clear that telltale indicators were required on the entire Un it, and that in the event of a second release event within 5 years all 4 of the PRDs on the Unit
would have to be controlled. xv ( See letter from William de Boisblanc, Director, BAAQMD Permit Services Division, to Eric R. Hengst, Exxon Company, USA, August 16, 1999.)

Finally, the District is also applying this interpretation currently with Tesoro’s Alkylation Unit. The Process Unit has experienced the two release events that trigger the requirement to control the P RDs on the Unit. The District will require Tesoro to control all of the PRDs on t he Unit by May 1, 2006, one year after the
second release event occurred.

The commenters are correct that the Tesoro refinery used the narrower interpretation in connection with the repeat ed releases at the 50 Crude Unit (described above in connection with Comment 3), and the District did not take action to enforce the broader definition. But the fa ilure of an agency to take enforcement action in a parti cular situation where a facility has not complied with a regulation does not re-write the regul ation to excuse the non-compliance,
whatever the reason. And as descri bed above, the 50 Crude Unit is a prime example of why the regulation should not be limited to regulating individual pressure systems. The pump problems and resulting pressure transients that were causing the PRD releases there were affecting multiple pressure systems. Addressing only the individual pressure systems that experienced multiple releases allowed the potential for further releases at the other pressure systems affected by the pump problems and resulting pressure transients. Thus, to the
extent this situation was an example of inconsistent app lication of the regulation,
it should be considered as an aberration to be corrected and not as evidence of what was intended by the rule. Indeed, the situation further demonstrates why the language of the rule should be clarified to make its meaning unambiguous.

Comment 6 : One commenter also contended that an early draft version of the current proposed amendments that was ci rculated in connection with a public workshop meeting in August of this year proposed to define “source” as “process component”. The commenter pointed out that the definition of “process component” in that early draft was e ssentially limited to pressure-related equipment and did not encom pass the entire Process Unit. The commenter noted that the draft staff report accompanyi ng that workshop draft stated that the

xv Valero now contends that there were 8 addi tional PRDs on equipment “associated with” the Virgin Light Ends Unit for which the District di d not require controls. (WSPA Comment Letter at p. 9.) But Valero never brought this issue to the Distri ct’s attention in 1999. Valero simply asked if it had to address all of the PRDs on the Virgin Light Ends Unit, or simply those on the pressure system that had the release. Faced with that question, the Di strict applied the “Process Unit” approach and responded that all of the PRDs on t he Unit needed to be addressed. Had Valero informed the District that ther e was additional equipment that was also part of the Process Unit,
the District would have c oncluded that it had to be addressed as well.Regulation 8, Rule 28 Staff Report November, 2005 53 term “source” was intended to be limited to pressure-related equipment. The
commenter contended that thes e drafts suggest that “source” in the current rule should be limited to pressure-related syst ems. (WSPA Comment Letter at pp. 8- 9.)

Response : The commenter is correct that st aff initially concluded that “process component” was a more appropriate definiti on for “source”. But this was only a preliminary assessment contained in a public workshop draft, which staff prepared in order to publish their initia l assessment of the issue and to allow interested parties to comment on it. T hat is exactly what happened. As detailed in Section X of the Staff Report, the di scussion at the public workshop revealed that the intent of the curr ent rule was to regulate all the PRDs on a Process Unit, because the upsets that tri gger PRD releases are not limited to particular pressure-related systems. ( See generally Comments 3 and 4 above and the Responses thereto.) After the public workshop meeting, Staff went back and
researched the issue in more detail and c oncluded that this was correct: “source” should properly be defined as “Process Un it” as was intended in the 1997 Amendments. Given this situation, Staff’ s erroneous initial determination in the workshop draft does not suggest that the definition of “source” should be limited to individual pressure systems.

Comment 7 : Commenters stated t hat controlling all PRDs on a Process Unit when the Process Unit experiences two releases within 5 years is costly, and contended that doing so will likel y require the refineries to construct new flare systems. These commenters contended that the costs of such control systems are not justified by the re sulting emissions reduction benefits. Most of these comments were couched in terms of “c ost effectiveness” and suggested that controlling all the PRDs on a problem Process Unit would not be “cost effective.” Commenters also stated that sta ff have not conducted an adequate costeffectiveness analysis as required by Califor nia law for the use of “Process Unit” as the definition, either in 1997 when the rule was init ially adopted or in connection with the current proposed amendm ents. (Tesoro Comment Letter at pp. 3-5; WSPA Comment Letter at pp. 10- 15; Shell Comment Letter at p. 1.)

Response : Staff recognizes that requiring P RDs to be vented to control systems on “bad actor” Process Units that experienc e two release events within five years may require refineries to incur substantia l costs. As explained in the Staff Report, venting PRDs to c ontrol systems is costly, r egardless of whether a new control system needs to be installed. Bu t for “bad actor” Process Units, such expenditures would achieve important corresponding air quality benefits. Controlling the PRDs on these units will eliminate potentially enormous episodic releases at volatile processes that have demonstrated a propensity for recurring problems. Historically, such releases have resulted in emissions of tens and even hundreds of tons of oz one precursors in a single day – amounts that are very significant from the perspective of preventing violati ons of the applicable ambient air quality standards for ozone. W here there is a substantial risk of aRegulation 8, Rule 28 Staff Report November, 2005 54 release that could contribute to a violat ion of a public health standard, even very large costs could be justified under cert ain circumstances. “Bad actor” Process Units that have a demonstrated propens ity for releases present such
circumstances.

It is important to note that this conclusion holds for “bad actor” units that have demonstrated a propensity for repeat releases , but it is much more tenuous with respect to the bulk of the PRD population t hat has not shown a high release risk. Where PRDs have a very low potentia l for upsets and releases, and hence present a far lower ozone concern, it is not possible to justify very large expenditures on control equipment. For this reason, staff continues to believe
that a blanket contro l requirement that all existing PRDs be vented to a control system would not be justifi ed given the costs involved, whereas the targeted approach requiring controls only on “bad acto r” Process Units is worth the costs
involved.

With respect to the comments to the e ffect that targeting “bad actor” Process Units “does not meet standard tests for cost effectiveness” (Tesoro Comment Letter at p. 1; see also WSPA Comment Letter at pp. 10-15.), the commenters have apparently misunderstood t he concept of cost-effectiveness. There is no such thing as a “standard test for cost -effectiveness.” Cost-effectiveness is a useful tool for comparing alternative emission reduction strategies to determine which alternative can achieve the same goal at the least cost. It is not a bar to adopting certain regulations simply becaus e they may be expensive. To the
extent that the c oncept is applicable here, it would be to compare the rule’s current approach with alternat ive approaches that would ac hieve the same result in controlling episodic emissions fr om the “bad actor” PRDs that have demonstrated a propensity for r epeat releases (although this is a hypothetical exercise because no such alternative appr oaches have been identified). It is not appropriate to use “cost-effectiveness” ex pressed in terms of annual emissions to compare a regulation aimed at episodic emissions with other regulations that address steady-state emissions produced day in and day out at a constant rate, as most District regulations do. Th is is because episodic releases occur relatively rarely and thus do not present large totals on an annual basis. They may still be a large problem on a daily basis, however, because they can emit large amounts of material in a short time. Using the concept of “costeffectiveness” as these commenters sugges t ignores these benefits of controlling episodic releases.

Finally, with respect to the formal cost-effectiveness analysis required by California law, the targeted control appr oach set forth in the current rule – regulating “bad actor” Process Units that ex perience multiple releases within five years – was supported by the cost-effe ctiveness analysis that was conducted in connection with the adoption of the current rule in 1997. Staff has conducted a further formal cost-effectiveness anal ysis for the changes that are being proposed to the rule, but the analysis did not revisit the issue with respect to theRegulation 8, Rule 28 Staff Report November, 2005 55 targeted control approach because staff is not proposing any changes to this approach. Staff’s response to the comment s that the “Process Unit” clarification constitutes a change from the existing rule is set forth above in connection with Comment 4.

Comment 8 : Commenters contended that applying the regulation to entire Process Units involves certain negativ e environmental effects because of the natural gas usage and other aspects of flare systems that may be required for “bad actor” Units that demonstrate a pr opensity for repeat releases. These
commenters stated that the District has not conducted a CEQA analysis of these impacts. (Tesoro Comment Letter at pp. 4, 5; WSPA Comment Letter at pp. 15- 18.)

Response : Staff recognizes that there are certain environmental impacts associated with flares. Such impacts ar e outweighed by the potential for very large releases from “bad actor” process uni ts that show a propensity for upsets, however. For example, a small negative impact from emissions from pilot or purge gas used in a flare on a daily bas is would be outweighed by the large positive impacts from having a flare in place when a PRD vents a large volume of material to relieve a process overpressure . Staff therefore be lieves that overall, this rule has a positive effect on the environment.

With respect to the legal requirements of CEQA, the current rule was adopted pursuant to a negative declaration in 1997 that found that the requirement to
control PRDs on a Process Un it that experiences multiple releases would have no significant adverse environmental impac ts. The District is not changing that requirement in any way, and so there are no additional or different environmental impacts to be analyzed. The District has prepared a CEQA in itial study that evaluates the effects of the changes to t he rule that staff ar e proposing. This CEQA document does not address the impacts of the targeted control approach that requires repeat-release Process Units to be controlled because that is not something that is being proposed in this rulemaking. Staff’s response to the comments that the “Process Unit” clarif ication constitutes a change from the existing rule is set forth above in connection with Comment 4.

Comment 9 : Several commenters identified certain items of equipment at certain refineries that t he commenters claim would be inappropriately grouped together for regulatory pur poses under the “Process Unit” definition. These commenters were concerned that if they have two releases from such equipment within 5 years, the rule woul d unfairly require them to c ontrol all of the PRDs on all of the equipment involved. (Tesoro Comment Letter pp. 4-5, Summary Points 1 & 5; Shell Comment Lette r at p. 1; Valero communication referenced in footnote 1 above.)

Response : How the regulation applies to i ndividual pieces of equipment at individual facilities is necessarily a fact -specific determinati on that must be madeRegulation 8, Rule 28 Staff Report November, 2005 56 on a case-by-case basis after a full invest igation of all relevant circumstances. Staff are not in a position in the contex t of a rulemaking effort to provide a conclusive determination of how the regul ation will work in hypothetical future situations. As a result, Staff cannot provide a meaningful response to these comments regarding particular Process Un its at particular refineries.

As a general principle, however, Staff intends to apply the regulation in a reasonable manner, and does not in tend to require controls in situations where it would be ill-advised from an air quality per spective. Staff has built in a mechanism to achieve this goal in Section 8-28- 409 of the proposed amendments, which requires each refinery to submit to the District a list of the Process Units that are equi pped with PRDs, as the refineries would define them. Staff will then have an opportunity to det ermine how to define the equipment subject to the rule in an appropriate manner so that the unreasonable outcomes these refineries fear will be avoided. If it is truly not possible to avoid significant unreasonable outcomes with the current “P rocess Unit” approach, it will always remain possible to propose further am endments to address any problems that
become evident as the rule is implemented, while avoiding the pitfalls associated with the refineries’ narrower approach that are outlined above.

Comment 10 : One commenter noted that the curr ent rule contains an exception to the requirement to im plement at least three re dundant Prevention Measures for each PRD that allows facilities to implement fewer than three prevention measures for a particular PRD on the condi tion that the control requirements are triggered after a single release rather t han after two releases. The proposed amendments delete the option of having fewer than three prevention measures, but do not provide a future compliance dat e. The commenter stated that the lack of a future compliance date means that in some cases facilities may be out of compliance immediately upon adoption. (Shell e-mail comment.)

Response : Staff has made a change to t he proposed amendments to correct this oversight, which would provide a si x month period to allow facilities to implement three prevention measures for each PRD. This revision is not a substantive change to the proposed am endments, and does not require a new public notice and comment peri od or continuation of the public hearing in order to be adopted.

Comment 11 : Although no public commenter raised this issue, District staff
have discovered that one release event that occurred since the current rule took effect was inadvertently left out of the baseline emissions inventory Staff used to
calculate the emissions reductions ex pected from the rule (and related calculations) in the original version of the Staff Report.

Response : Staff have corrected the oversi ght and have calculated the correct numbers. These numbers are set forth in the revised version that is being made available in connection with this Response to Public Comments. None of theseRegulation 8, Rule 28 Staff Report November, 2005 57 changes affects the conclusions reached in the Staff Report or the proposed
amendments to the rule.Regulation 8, Rule 28 Staff Report November, 2005 58 XIII REFERENCES

1 Crosby ® Pressure Relief Valve Engineer ing Handbook, Technical Document No. TP-V300, May 1997.

2 Crosby ® Series Technical Brochure: JOS-E, JBS-E, JLT-JPS-E, JLT-JBS-E, JOS-H-E; Spring Loaded Pressure Relief Valves; 2005

3 Testimony of Mr. Jim Karas, BAAQMD Air Quality Engineering Manager, Meeting of BAAQMD Ad Hoc Committee on Accidental Releases, October 26,
1995.

4 Final Staff Report, Control of Epis odic Releases Of VOCs From Pressure Relief Devices at Petroleum Refi neries, Dec. 9, 1997, p. 30.

5 Testimony of Mr. Barry Young, Princi pal Air Quality Engineer, Public Meeting of the BAAQMD Board of Directors, Dec. 9, 1997.

6 Final Staff Report, Control of Episodi c Releases of VOCs from Pressure Relief Devices at Petroleum Refiner ies, December 9, 1997, page 11.

7 Kathy Wheeler, Shell – Telephone conversation with District staff, June 1, 2005.

8 Lisa Polos, ConocoPhillips – Telephone conversation with District staff, June 2, 2005.

9 Omega Engineering, Inc. – Tel ephone conversation with District staff, June 1, 2005.

10 John Parker, Accutech Industrial Solu tions – Presentation to District staff, June 21, 2005.

11 Jacobs Engineering Group Inc., Pressure Valve Cost Study, prepared for Western States Pretroleum A ss’n, Concord, CA (July 1993).

12 Bureau of Labor Statisti cs: Consumer Price Index for the San FranciscoOakland-San Jose, CA Metropolitan Area: Series Id: CUURA422SA0, CUUSA422SA0.

13 Solomon Associates: http://www.solomononline.com/

.

14 Turner Construction Company, Cost Index.Regulation 8, Rule 28 Staff Report November, 2005 59 15 Bob Ferraro, Regional Sales Manager, John Zink Company, Email, Subject: Order of Magnitude Cost Estimate s for refinery relief systems; September 23, 2005.

16 United States Environment al Protection Agency: “Air Pollution Control Technology Fact Sheet, Thermal Inciner ation, August 14, 2003; Document Number EPA-452/F-03-022.

17 Mike DeLeon, Tesoro – Telephone conversation with District Staff, October 13, 2005.

18 Cost Estimating Spreadsheet, Rex Kenyon & Associates (undated, provided Oct. 11, 2005).

19 Atmospheric Relief Valve Cost Estimates, Shell Martinez Refinery (Rev. 5: February 2005)

20 Mike DeLeon, Tesoro – Telephone conversation with District staff, May 26, 2005.

21 Letter from Clark Hopper, Environm ental Manager, Valero Refining Co., to Kelly Wee, Director Of Enforcement, BAAQMD, August 28, 2003, p. 3.

### SOCIOECONOMIC

ANALYSIS

PROPOSED RULE



## REGULATION 8, RULE 28:

EPISODIC RELEASES FROM

PRESSURE RELIEF DEVICES AT

PETROLEUM REFINERIES AND

CHEMICAL PLANTS

November 2005

Prepared for

Bay Area Air Quality
Management District

Prepared by

Applied Development Economics 2029 University Avenue • Berkeley, California 94704 • (510) 548-5912 1029 J Street, Suite 310 • Sacramen to, California 95814 • (916) 441-0323
www.adeusa.com

## CONTENTS

1. Executive Summary.................................................................. 2

2. Description of Proposed Rule................................................ 4

3. Impact of Proposed Rule Amendments ............................... 7

3.1 Methodology................................................................... 7

3.2 Regional demographic Trends...................................... 8

3.3 Regional Economic Trends .......................................... 9

3.4 Description of Affected Industries............................ 11

3.5 Compliance Costs......................................................... 13

3.6 Business Response to Compliance Costs ................. 14

3.7 Impact Analysis ............................................................ 14

3.8 Impact on Small Businesses........................................ 15



## TABLES

Table 1: Population Growth: San Francisco Bay Area 9
Table 2: Employment Profile of the San Francisco Bay Area, 1994 – 2004 11
Table 3: Employment Trends: Industries Affected by Proposed Amendments, 2001 – 2004 12
Table 4: Economic Characteristics of Impacted Oil Refineries in the San Francisco Bay Area 12
Table 5: Employment at Im pacted Sites Relative to the Bay Area as a Whole 13
Table 6: Impact of Proposed Changes on Estimated Profits at Bay Area Oil Refineries 152 

## 1. EXECUTIVE SUMMARY

INTRODUCTION

This report describes the soci oeconomic impacts of proposed amendments to Regulation 8, Rule 28 in order achieve and maintain state ambient air quality standards for ozone, and reduce episodic releases from atmospheric pressure relief devices in petroleum refineries. Following this summary, the report summarizes the proposed rule requirements and describes the methodology for the socioeconomic analysis. The report also describes the economic characteristics of sites affected by the proposed rule amendments along with the socioeconomic impacts of th e proposed amendments. The proposed amendments will assist the BAAQMD in meeting its commitments to improving air quality in the region by improving the clarity and enforceability of Regulation 8, Rule

28.



### SUMMARY

The proposed rule affects Pressure Relief Devices (PRD) at the five oil refineries in the San Francisco Bay Area region. It is estimated that the refineries employ about 1,935 workers and provide a total payroll of $557 million per year. The refineries are estimated to generate sales of $9.8 billion per year and to realize net income of about 7 percent of sales, or $689 million per year.

Compliance with the proposed rule amendments would require refineries to submit reports identifying all of their affected equipment and demonstrating that they have the capability to detect and record a Release Event from any of their PRDs. Compliance is expected to cost approximately $65,300 District-wide.

The socioeconomic analysis evaluates the compliance costs in

relation to the financial character istics of the affected facilities to determine the significance of the economic impact of the proposed rule amendments. The compliance cost represents approximately 0.01 percent of profits for the affected3 facilities, well below the 10 percent threshold of significance for such impacts. The analysis concludes that the affected

refineries should be able to absorb these costs without significant economic dislocation or job losses. The analysis also addresses the issue of potential impacts to small

businesses but concludes that the affected refineries do not meet the criteria to be considered small business operations.4 

## 2. DESCRIPTION OF PROPOSED RULE

CURRENT STATUS OF THE RULE

Regulation 8, Rule 28, which addresses episodic emissions of both organic and inorganic compounds from Pressure Relief Devices (PRD) located at petrol eum refineries and chemical plants, was last amended in 1 998. For petroleum refineries, the rule requires that facilities report to the District any releases over 10 pounds from a PRD and that certain

substantive measures be taken to reduce the likelihood of releases. For chemical plants, the rule requires only release reporting (releases of 10 pounds or more). The existing rule requirements are summarized below:

1) New and Modified Sources : PRDs at new and modified sources at petroleum refineries must vent to a fuel gas recovery system, furnace, or flare with a control efficiency of at least 98

percent

2) Existing Sources : Any PRD in organic compound service at an existing source at a petroleum refinery must implement specified prevention procedures to minimize releases. 1

3) Releases from PRDs : Within 90 days of a reportable Release Event a facility must:

a. Conduct a process hazard analysis including

an evaluation of the cost effectiveness and technological feasibility of controls

b. Implement prevention measures (to the extent they have not already been implemented)

c. Conduct a failure analysis to discover the cause of the release and prevent recurrences

1 The prevention measure procedures include: 1) establis hing training, equipment, inspection, maintenance and
monitoring requirements; and 2) implementing prevention measures such as process flow, temperature, level,
and pressure indicators with interlocks; document ed and verified routine inspection and maintenance
programs; inherently safer de sign; and deluge systems.5 All PRDs on the source that experienced the Release Event must be equipped with a telltale

indicator and evaluated for control within 120 days of the Release Event. All PRDs on any source that experiences two or more Release Events within five years must be vented to a

control device.

4) Reporting Requirements for Refineries and

Chemical Plants : Following all Release Events: 1) the Event must be reported by the next working day; 2) the associated PRDs must be inspected within five days; and, 3) a report must be submitted to the District within 30 days. 2

The requirement to report this information implies that facilities must monitor PRDs to

determine whether a Release Event has occurred and if so, the duration, cause, type and amount of material released. There is no explicit monitoring requirement in the rule, however.



### PROPOSED RULE AMENDMENTS

In 2005, building upon the District’s 2002 audit of PRDs located at the five refineries located in the San Francisco Bay Area (Bay Area), District staff evaluated the rule and developed a set of recommendations to improve its effectiveness. Based upon those recommendations, staff is proposing the following amendments to the Rule:

1. Require facilities to ensure that they have the capability to detect and quantify all release events, including small releases of 10 pounds (the reporting threshold), and require facilities to demonstrate this capability to the District;

2. Require data recording and recordkeeping for venting and emissions verification;

2 The report must include: 1) date, time, and duration of Release Event; 2) device that experienced the Event;
3) District-assigned release number; 4) type and size of device; 5) type and amount of material released; 6)

information used to estimate duration and amount released ; 7) cause of release; 8) schedule prevention of reoccurrence action; and, 9) result s of fugitive emission inspection.6 3. Clearly define the equipment subject to the rule as the process unit to ensure that the original intent of the rule – to regulate all PRDs on an individual source (i.e., process unit) in the same manner – is clarified;

4. Require facilities to report to the District their analysis of the root causes and potential corrective actions after each PRD release event;

5. Make minor, non-substantive changes to the rule such as deleting obsolete references to “turnarounds,” moving requirements where appropriate, and clarifying various
sections of the rule.



### EMISSIONS REDUCTIONS

Since the 1998 amendments took effect, there have been 42 Release Events reported by the five Bay Area refineries according to Release Event Reports submitted to the District. These 42 Release Events vented 125 tons of VOC emissions, according to the refineries’ calculations. The 125 tons of reported VOC emissions transla tes to average emissions of approximately 17.9 tons per year.

Ensuring that facilities are using comprehensive monitoring systems will ensure that facilities are fully aware of release events, which will allow operators to better target their releaseprevention and mitigation efforts and will ensure that repeatrelease “bad actors” and identified and subjected to additional control requirements. These effects, in turn, are expected to

lead to fewer release events and reduced emissions.

US EPA has estimated from time to time in various rulemakings that enhanced monitoring can result in a ten to twenty percent emissions reduction. Here, staff believes that the proposal to add an explicit monitoring requirement should more appropriately to use a five percent emissions reduction factor, because many PRDs are already subject some form of monitoring and it appears that most releases – and especially the larger ones – are being detected.

Using the 17.9 tons-per-year av erage emissions figures from the period 1998-2005, a 5% reduction would result in approximately 0.9 fewer tons of emissions per year.7 

## 3. IMPACT OF PROPOSED RULE AMENDMENTS

This section of the socioeconomic analysis describes demographic and economic trends in the San Francisco Bay Area (Bay Area) region. Fo llowing an overview of the methodology for the socioeconomic analysis, the first part of this section compares the Bay Area against California and provides a context for understanding demographic and economic changes that have occurred within the Bay Area

between 1994 and 2004. After an overview of Bay Area industries, we focus on SIC 2911, Petroleum Refining (NAICS 32411) and how the proposed changes to Rule 8-28 concerning episodic releases from pressure relief devices (PRDs) would impact the refineries in the Bay Area. For the purposes of this report, the Bay Area region is defined as Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma Counties.



### 3.1 METHODOLOGY

The socioeconomic analysis of the proposed rule amendments concerning episodic releases of PRDs involves the use of information provided directly by BAAQMD, as well as secondary data used to describe the industries affected by the proposed rule amendments.

Based on conversations with BAAQMD staff, ADE determined that the impacts would affect the oil refineries in the BAAQMD region: Chevr on, Shell, Conoco Phillips, Valero, and Tesoro.

With this information we began to prepare an economic description of the industry grou ps of which the affected sites are part, as well as to analyze data on the number of jobs, sales levels, the typical profit ratios and other economic indicators for Bay Area oil refineries. ADE also reviewed and summarized documents available to the public such as annual reports for publicly traded companies.

With the annual reports and data from the US Economic Census, ADE was able to estimate revenues and profit ratios for many of the sites affected by the proposed PRD rule8 amendments. In calculating aggregate revenues generated by Bay Area refineries, ADE first estimated an average revenue figure for a refinery based on revenues generated over the four-year period between 2000 and 2003. Using annual reports and publicly available data, ADE calculated ratios of profit per dollar of sales for the refineries. To estimate employment, ADE used employment data from Dun &

Bradstreet.

The result of the socioeconomic analysis shows what proportion of profit the compliance costs represent. Based on a given threshold of significance, ADE discusses in the report whether the affected sites ar e likely to reduce jobs as a means of recouping the cost of compliance or as a result of reducing business operations. To the extent that such job losses appear likely, the indirect multiplier effects of the job losses area estimated using a regional IMPLAN input-output

model.



### 3.2 REGIONAL DEMOGRAPHIC TRENDS

The Bay Area experienced moderate population growth from 1994 to 2004. Between 1994 and 1999, the nine-county region increased by 7 percent, from 6.2 million in 1994 to 6.6 million in 1999. From 1994 to 2004, the population increase

was from 6.2 million to 6.8 million for an increase of 11 percent. At the same time, California had population growth of 14 percent.

Within the Bay Area, the greatest percentage increase occurred in Contra Costa County. From 1994 to 2004 Contra Costa increased its population by 18 percent. All other Bay Area counties had population increases equal to, or slower than, the State. The smallest percentage increase occurred in Marin and San Mateo Counties where population grew 5 percent from 1994 to 2004. Table 1 shows the population changes that have occurred in the Bay Area and

California from 1994 to 2004.9 TABLE 1
Population Growth: San Francisco Bay Area

Population Percent Change

1994 1999 2004 94 – 99 99 – 04 94 – 04

California 30,889,182 32,971, 834 35,300,654 7% 7% 14% Bay Area 6,189,000 6,646, 167 6,865,370 7% 3% 11% Alameda County 1,302,462 1, 406,046 1,470,456 8% 5% 13% Contra Costa County 844,076 914,645 992,608 8% 9% 18% Marin County 228,718 236,955 239,209 4% 1% 5% Napa County 111,083 118,088 126,283 6% 7% 14% San Francisco County 729,024 771,122 772,985 6% 0% 6% San Mateo County 667,218 712,376 702,017 7% -1% 5% Santa Clara County 1,544,523 1,672,977 1,701,831 8% 2% 10% Solano County 356,652 377,601 399,826 6% 6% 12% Sonoma County 405,244 436,357 460,155 8% 5% 14% Source: Applied Development Economics, based on household population estimates from The California Department of Finance



### 3.3 REGIONAL ECONOMIC TRENDS

The Bay Area is one of the world’s greatest regional economies. It benefits from pre-eminent knowledge-based industries, with competitive strength flowing from an unmatched culture of entrepreneurship, world-leading research institutions, and some of the nation’s best educated and most highly skilled workforce. With these remarkable advantages, it has led through innovation in a wide range of

research and industrial fields.

Many of the Bay Area’s most prominent industries are manufacturing related. Bay Area manufacturers are often high profile companies with world-renowned recognition. From small to large, Bay Area industry has been dynamic, creating wealth and jobs in both the export sector and local serving industries.

The economic base is typically comprised of export industries within the manufacturing, minerals-resource extraction, and agricultural sectors. There are also the “local support industries” such as retail or service sectors, the progress of which is a function of the economic base and demographic changes, and more so the latter than the former. As population increases in a given area, demand for services –10 such as realtors, teachers, healthcare – increases, as does demand for basic retail items like groceries, gas for commuting, or clothing at the local apparel shops.

The industries affected by the proposed PRD rule amendments are a prominent part of the region’s economic base. Mainly engaged in export related business, the oil refineries are classified as manufacturers. In the Bay Area, manufacturing jobs have decreased over the last decade. In 1994, manufacturing accounted for 14 percent of all Bay Area employment. By 2004, manufacturing declined 11 percent to account for 11 percent of all Bay Area employment.

As of 2004, the professional and business services sector was the largest employer in the region, at 520,200 jobs or 16 percent of all private and public sector jobs. This is a change from 1994 when professional and business services accounted for 15 percent of all Bay Area employment. During the same period, professional and business services increased 17 percent. The next largest industry in the Bay Area is public service, or government, with 460,300 jobs. In 2004, government accounted for 14 percent of all Bay Area employment. From 1994 to 2004, government had one of the lowest growth rates of all industries at 4 percent. Two other industries came close to manufacturing in total employment. Retail trade and education & health care both made up 11 percent of total employment and had only a few hundred or few thousand jobs less than manufacturing. Unlike manufacturing, both retail trade and education & health care had significant job gains from 1994 to 2004. All other industries made up less than manufacturing in total employment in 2004. Table 2 shows Bay Area industry

sectors and their trends from 1994 to 2004.11 Table 2 Employment Profile of the San Francisco Bay Area, 1994 - 2004

Industry 1994 1999 2004 % of Total Employment in
2004

Farm 25,800 28,600 21,300 1% Natural Resources & Mining 4,300 3,600 2,300 0%
Construction 109, 300 171,400 181,000 6% Manufacturing 405,400 459,400 359,700 11%
Wholesale Trade 118,500 107,100 121,900 4%
Retail Trade 300,200 339,000 337,900 11% Transportation & Warehousing & Utilities 115,500 124,700 102,900 3%
Information 89,200 122,100 111,600 3%
Financial Activities 193,300 197,400 209,800 7%

Professional and Business Services 445,400 626,100 520,200 16%

Education & Health Ca re 293,800 335,000 359,200 11% Leisure and Hospital ity 250,000 289,500 304,400 10%
Other Services 100,100 108,800 109,700 3%
Government 444,500 449,800 460,300 14%

Total 2,895,300 3,362,500 3,202,200 100%

Source: Applied Development Economics from data supplied by the Labor Market Information Division of the California Employment Development Department



### 3.4 DESCRIPTION OF AFFECTED

INDUSTRIES

The proposed PRD rule amendments affect industries in SIC 2911, Oil Refining (NAICS 32411 – oil refineries). What follows is a description of this industry, along with economic trends for oil refineries in the Bay Area, and it provides a comparison between 2001 and 2004. Data in Table 3 are for all sources, not just the five major oil refineries in the Bay Area. As shown in Table 3, employment in oil refineries increased by 2 percent in the four years from 2001 to 2004. This is at the same time that Bay Area manufacturing jobs decreased 22 percent. In Califor nia, oil refineries declined 5 percent during the same period and manufacturing jobs declined 14 percent.12 Table 3 Employment Trends: Industries Affected by Proposed Amendments, 2001 - 2004

2001 2002 2003 2004 Change
from
2001 to

2004 % Change
from
2001 to

2004

San Francisco Bay Area

Manufacturing 460,992 402,895 362,089 357, 385 -103,607 -22%

Petroleum refineries 7,086 7,271 7,248 7,196 110 2%

California

Manufacturing 1,780,544 1,633,958 1,532,287 1,536,787 -243,757 -14%

Petroleum refineries 13,447 12,878 13,149 12,776 -671 -5% Source: Applied Development Economics from data supplied by the Labor Market Information Division of the California Employment Development Department

Table 4 identifies the economic characteristics of the refineries affected by the proposed PRD rule amendments.

This table shows that the refine ries are estimated to employ 1,935 workers. These sites have an estimated aggregate payroll of $172 million, and estimated revenues of $9.8 billion. In calculating aggregate revenues generated by Bay Area refineries, the consultant estimated an average revenue figure per refinery based on revenues generated by that refinery in 2004 using annual reports. Then, the consultant

summed the refineries’ estimated revenue to arrive at the aggregate amount of $9.8 billion.

Table 4 Economic Characteristics of Impacted Oil Refineries in the San Francisco Bay Area

No. of Oil
Refineries Estimated
Sales Estimated Employment Estimated Payroll

5 $9,837,599,000 1,935 $172,194,000 Source: U.S. Economic Census 2002; California Employment Development Department Quarterly Census of Employment and Wages

As Table 5 shows, the affected sources represent 27 percent of all employment within their respective industry in the Bay Area. Overall, there are an estimated 7,196 petroleum refining employees in the Bay Area. Of the 7,196 workers, 1,935 work in the affected refineri es, or 27 percent. In all of California, there were 12,776 workers in SIC 2911 (NAICS13 32411), meaning that the affected Bay Area refineries equal 15 percent of the state oil refinery workforce.

Table 5 Employment at Impacted Sites Rela tive to the Bay Area as a Whole

No. of Oil
Refineries Estimated Employment Affected Oil
Refineries as a % of Bay Area Total Affected Oil
Refineries as a % of

California Total

5 1,935 27% 15% Source: Calculations by Applied Development Economics



### 3.5 COMPLIANCE COSTS

The proposed rule amendments require that each affected refinery prepare and submit to the District a “Monitoring System Demonstration Report.” This report would provide

information that would demonstrate that the refineries have adequate monitoring systems in place for all of their atmospheric PRDs subject to th e rule. Section 8-28-407 is proposed to require facilities to submit a monitoring demonstration report that will enable staff to enforce the monitoring requirements. The report will require descriptions of the monitoring equipment, operating parameters and engineering calculations used to quantify

emissions releases. District Staff have estimated that preparing the needed information for inclusion in the report for each PRD would take about two man-hours per PRD. (Most of this information if already available and must be

utilized in the event of a re lease event and the subsequent report to the District.) The hour labor cost is estimated to be approximately $100 per hour. Because there are 324 PRDs in total at the five Bay Area refineries, the District estimates that the total one time cost of this provision to be about $64,800.

The proposed amendments also require each affected refinery to provide a listing of each process unit equipped with atmospheric PRDs and the associated PRDs. This information is already generally available and would not require any additional man-hours to generate. Preparation of the report for submission should take no longer than an hour for each refinery. District Staff have therefore estimated the14 cost associated with this prov ision to be approximately $100 per refinery; this translates to $500 District-wide.

District staff have also recognized that some facilities may have to install additional monitoring equipment to be able to demonstrate that they can detect releases as required by the rule, which could cost approximately $1,500 per PRD. The requirement to have such equipment is already an implied requirement of the existing rule, however. The current proposal simply makes the requirement explicit and establishes minimum standards for such equipment. As such, any costs facilities will incur for new equipment are not attributable to the proposed amendments. Moreover, District staff expect these costs to be relatively small, as few PRDs will need additional equipment.

Therefore, the total one time compliance cost that would result from the proposed amendments would be approximately $65,300.



### 3.6 BUSINESS RESPONSE TO

COMPLIANCE COSTS

Sites impacted by the proposed PRD rule amendments may respond in a variety of ways when faced with new regulatory costs. These responses may range from simply absorbing the costs and accepting a lower rate of return to shutting down the business operation all together. Businesses may also seek to pass the costs on to their customers in the form of higher prices, although, in general, throughout the oil industry prices are set in global markets and individual producers or refineries are not in a position to affect prices. More likely, they may renew efforts to increase productivity and reduce costs elsewhere in their operation in order to recoup the regulatory costs and maintain profit levels.



### 3.7 IMPACT ANALYSIS

The businesses’ responses to increased compliance costs hinge on the effect of the costs on the profits generated at the affected sites. An impact on estimated profits greater than 10 percent implies that the source would experience serious economic effects because of the compliance cost. When15 compliance costs are greater than 10 percent of estimated profits, companies typically respond to the impact by laying off some workers, closing parts of manufacturing facilities or, in the most drastic case, possibly closing the manufacturing facility.

Using the cost estimates developed for the proposed PRD rule amendments, ADE calculated the socioeconomic impacts of the proposed actions. In calculating impacts on profits, ADE used return on sales ratios identified by media reports and in annual reports of companies directly affected by the proposal. Based on this information, we estimate that the affected refineries generated a combined profit of $688
million on $9.8 billion in revenues.

Table 7 compares the estimated costs of the proposed PRD rule amendments and their impact on profits. Affected refineries will incur an initial cost of approximately $ 65,300. This cost represents an estimated 0.01 percent of profits for the oil refineries affected by the proposed PRD rule amendments. This cost impact is far below the 10% of profits above which facilities would experience serious

economic effects.

Table 6 Impact of Proposed Changes on Estimated Profits at Bay Area Oil Refineries

Impacted Refineries Estimated Profits Generated Cost of Compliance Cost as a % of profits
5 $688,632,000 $65,300 0.01

Source: Calculations by ADE, based on a 7 percent profit margin for oil refiners

Furthermore, even if facilities had to incur costs for installing additional monitoring equipment of 5 times this cost, and these costs were considered to be required by the proposed amendments rather than required under the current rule, the cost of compliance would still be only 0.05 percent of profits. Even under this conservative assumption, the impact would still be far below the 10% significant impact threshold.



### 3.8 IMPACT ON SMALL BUSINESSES

In addition to analyzing the employment impacts the proposed PRD rule amendments, state legislation requires16 that the socioeconomic analysis assess whether small businesses are disproportionately affected by air quality rules.

For purposes of qualifying small businesses for bid preferences on state contracts and other benefits, the State of California defines small businesses in the following manner:

 Must be independently owned and operated;

 Cannot be dominant in its field of operation;

 Must have its principal office located in California

 Must have its owners (or officers in the case of a corporation) domiciled in California; and,

 Together with its affiliates, be either:

• A business with 100 or fewer employees, and an average gross receipts of $10 million or less over the previous tax years, or

• A manufacturer with 100 or fewer employees

The refineries that are affected by the proposed PRD rule amendments are not independently-owned and operated businesses. These refineries are owned by publicly-traded global corporations whose headquarters are generally outside of California. In addition, ea ch of the refineries that are affected by the proposed PRD rule amendments employ, on average, 387 workers (and far more when affiliates are included), and their average revenue is approximately $1.9 billion. Thus, by the standards established by the State of California, these sources are not small businesses. Based on this discussion, it is determined that the proposed PRD rule amendments do not disproportionately affect small businesses because the sources impacted by the proposed changes do not meet California’s definition of small business.