The purpose ofthis rule is to:

(1) Maintain the District’s ability to continue through December 31, 2030 to

issue permits to major sources that obtain offset credits from the Priority

Reserve under Rule 1309.1 and/or that are exempt from offsets under Rule

1304;

(2) Memorialize in rule form the procedures to be followed by the Executive

Officer for:

(A) Establishing the District’s NSR program equivalency with federal

NSR offset requirements for such major sources; and

(B) Demonstrating that sufficient emission reductions, including

previously-untracked emission reductions, existed beyondregulatory requirements under federal law to be used as offset

credits to establish that the District’s NSR program is equivalent

with federal NSR offset requirements for major sources that are

exempt from offsets under Rule 1304 or obtain offset credits from

the Priority Reserve under Rule 1309.1.

(b) Definitions

(1) COMMUNITY BANK means the Community Bank as established by

Rule 1309.1 — Community Bank, as adopted June 28, 1990 and by Rule

1309.1 — Community Bank And Priority Reserve, as amended May 3,

1991, and became unavailable to applications deemed complete after the

December 7, 1995 amendments to Rule 1309.1 — Priority Reserve, which

eliminated the Community Bank.

)J11’ V1tTQ1CK1 rklrD I’ A Q1 +k.

... i.-..

emit from permitted major and minor stationary sources of a

nonattainment air contaminant subject to tracking pursuant to paragraph(c)(2) of this rule that are offset from the Priority Reserve or exempt from

offsets pursuant to Rule 1304 minus the aggregate emissions reductions of

1315 - 1
(4) ORPHAN REDUCTION means any reduction in actual emissions from a

permitted source within the District resulting from a physical change to

the source and/or a change to the method of operation of the source

provided the change is reflected in a revised permit for the source and

provided such reduction is not otherwise required by rule, regulation, law,

approved Air Quality Management Plan Control Measure, or the State

Implementation Plan and does not result in issuance of an ERC.

(5) ORPHAN SHUTDOWN means any reduction in actual emissions from a

permitted source within the District resulting from removal of the source

from service and inactivation of the permit without subsequent

reinstatement of such permit provided such reduction is not otherwise

required by rule, regulation, law, approved Air Quality Management Plan

Control Measure, or the State Implementation Plan and does not result in

issuance of an ERC.

(6) PRIORITY RESERVE means the Priority Reserve as established by the

June 28, 1990 adoption of Rule 1309.1

— Community Bank and as

amended by the May 3, 1991 amendments to Rule 1309.1

— Community

Bank and Priority Reserve and by the December 7, 1995 and subsequent

amendments to Rule 1309.1

— Priority Reserve.

(7) SHORTFALL means a negative net balance in any of the District offset

accounts described in paragraph (c)(1) of this rule as demonstrated

through an FDE prepared pursuant to paragraph (d)(3) of this rule or

‘projected pursuant to subdivision (e) ofthis rule.

(c) Offset Accounts for Federal NSR Equivalency

(1) District Offset Accounts for Federal Nonattainment Air Contaminants

The Executive Officer shall maintain a separate District offset account for

each federal nonattainment air contaminant excluding PM2.5. The

District offset accounts were established as of October 1, 1990 with valid

emission reductions that had occurred prior to that date, as reflected in

various facilities’ negative NSR account balances and that were

1315-2
used for purposes of demonstrating equivalency between federal NSR

offset requirements and the District’s NSR program. Additional District

offset accounts are to be established by the Executive Officer in the event

that additional federal nonattainment air contaminants other than PM2.5 or

their precursors become subject to federal nonattainment NSR offsetrequirements, unless by rule the District establishes that Rule 1304 and

Rule 1309.1 do not apply to such contaminants or their precursors. If the

United States Environmental Protection Agency (EPA) re-designates the

District’s attainment status from nonattainment to attainment for a specific

air contaminant the Executive Officer may discontinue tracking and

reporting the associated District offset account for that air contaminant

provided there is a showing in the maintenance plan that the continued useof emissions offsets for that air contaminant is not necessary to maintain

attainment for that air contaminant. The District’s NSR program shall be

considered equivalent to federal nonattainment NSR offset requirements

for a nonattainment air contaminant so long as the procedures specified in

this rule are followed and the balance in the District offset account for that

air contaminant remains positive.

TABLE A

Initial District Offset Account Balances

Air Contaminant Initial Account Balance

(tons per day)

Volatile Organic Compounds (VOC) 38.46

Nitrogen Oxides (NOx) 23.92Sulfur Oxides (SOx) 8.04

Carbon Monoxide (CO) 8.45Particulate Matter (PMIO) 2.67

1315 -3
requirements of federal nonattainment NSR:

(A) Emission offsets from the Priority Reserve or Community Bank

pursuant to Rule 1309.1; and

(B) Exemptions from the offset requirements of Rule 1303

—

Requirements pursuant to Rule 1304— Exemptions.

The applicable offset ratios for offsets tracked by the Executive Officer

pursuant to this paragraph is 1.2-to-I .0 for extreme nonattainment air

contaminants and their precursors and is 1.0-to-1.0 for all other

nonattainment air contaminants.

(3) Tracking of Offset Account Credits for Federal NSR Equivalency

(A) The Executive Officer shall track and verify the amount of the

following types of emission reductions that have occurred since

October 1, 1990 to the District offset accounts:

(i) Orphan shutdowns;

(ii) Orphan reductions;

(iii) ERCs provided as emission offsets for sources located at

minor facilities;

(iv) The difference between the quantity of ERCs provided for

a source located at a major polluting facility at a 1.2-to-i.0

offset ratio pursuant to Rule 1303(b)(2)(A) and the quantity

of ERCs required to offset the emission increases at a ratio

of 1 .0-to-i .0 for all non-attainment air contaminants except

extreme nonattainment air contaminants and their

precursors.

(v) The amount of emission reductions associated with a

facility’s NSR balance, Community Bank and Priority

Reserve allocations, and offset exemptions that is

subtracted from the emission reductions quantified pursuant

to Rule 1306(c) as part of the Executive Officer’s

evaluation of an ERC banking application; and

1315-4
where the Executive Officer demonstrates and EPA

concurs that the subtracted amount is not otherwise

required by rule, regulation, law, approved Air Quality

Management Plan Control Measure, or the State

Implementation Plan. This clause is not applicable to

emission reductions that occur in the Riverside County

portion of the Salton Sea Air Basin (SSAB) or the non-Palo

Verde, Riverside County portion of the Mojave Desert Air

Basin (MDAB).

(B) The Executive Officer shall quantify and deposit emission

reductions that are tracked pursuant to subparagraph (c)(3)(A) of

this rule into the District offset accounts according to the following

procedures:

(i) From orphan sources tracked pursuant to clauses

(c)(3)(A)(i) or (c)(3)(A)(ii) of this rule at eighty percent of

the total or change in the source’s NSR permitted emission

levels, respectively; and

(ii) From ERCs tracked pursuant to clauses (c)(3)(A)(iii),

(c)(3)(A)(iv), (c)(3)(A)(v), and (c)(3)(A)(vi) of this rule in

the amounts specified pursuant to those clauses.

(C) The Executive Officer may choose not to track all potential sources

of credits in any reporting period if the Executive Officer

determines that sufficient credits remain in the District offset

accounts to demonstrate equivalency in each reporting period.

(4) Surplus at the Time of Use

All credits deposited into the District offset accounts pursuant to clauses(c)(3)(A)(i), (c)(3)(A)(ii), and (c)(3)(A)(vi) of this rule shall be discounted

by the Executive Officer to ensure that they remain surplus at the time of

use. Such discounting shall be performed annually and shall be based on

the percentage reduction in overall permitted emissions projected to beachieved as a result of implementation of control requirements that

1315 - 5
following sequence for each reporting period as defined in paragraph

(d)(1) ofthis rule:

(A) Apply the surplus at the time of use discount described in

paragraph (c)(4) of this rule to the offsets tracked pursuant to

subparagraph (c)(3)(A) of this rule remaining in the District Offset

Account, if any;

(B) Subtract as much of the aggregate District Offset Account debits

tracked and quantified pursuant to paragraph (c)(2) of this rule

from the unused Table

A initial balance remaining in the

corresponding District Offset Account, if any, as possible without

resulting in a negative District Offset Account balance;

(C) Subtract the aggregate District Offset Account debits tracked and

quantified pursuant to paragraph (c)(2) of this rule remaining after

conducting the subtraction specified in subparagraph (c)(5)(A) of

this rule, if any, from the corresponding District Offset Account

balance; and

(D) Add the emission reductions tracked pursuant to subparagraph

(c)(3)(A) of this rule for the current reporting period to the

corresponding District Offset Account Balance.

The PDE for each reporting period through the 2005 reporting period shall

follow the tracking sequence identified in subparagraphs (c)(5)(A),

(c)(5)(B), and (c)(5)(C) and the PDE for each reporting period

commencing with the 2006 reporting period shall follow the tracking

sequence identified in subparagraphs (c)(5)(A) and (c)(5)(C). The FDE

for each reporting period shall be completed by adding the results of

subparagraph (c)(5)(A) tracking to the PDE results for the same reporting

period.

(6) Federal Offset Criteria

Offset account credits used to offset debits pursuant to Rule 1304 or Rule

1309.1, as specified in paragraph (c)(2), are real as specified in

subparagraphs (c)(3)(A) and (c)(3)(B), surplus as specified in paragraphs

44

1315-6
p

(1) Reporting Periods

The Executive Officer shall aggregate and track offsets debited from andoffsets deposited to the District offset accounts into the following

reporting periods for purposes of making periodic determinations ofequivalency:

(A) October 1, 1990 through July31, 1995;

(B) Each of the consecutive twelve-month periods commencing with

August 1995 through July 1996 and concluding with August 2003

through July 2004;

(C) August 2004 through December 2005;

(D) Each calendar year from 2006 through 2009; and

(E) Each calendar year from 2010 through 2030.

(2) Preliminary Determinations of Equivalency

Commencing with the calendar year 2010 reporting period, and for each

reporting period thereafter, the Executive Officer shall, no later than

twelve months after the completion of the reporting period, complete a

Preliminary Determination of Equivalency (PDE) with federalnonattainment NSR offset requirements. The Executive Officer shall

report the PDE to the District’s Governing Board and EPA no later than

the second regularly-scheduled monthly Governing Board meeting after

the completion deadline for the PDE. The PDE is a conservative

assessment of the District offset account balances without accounting for

orphan and other credits that become available during the subject reporting

period. Each PDE shall include the debit accounting elements identified

in paragraph (c)(2) of this rule and the running balances in the District

offset accounts at the beginning and at the end of the subject reporting

period.

(3) Final Determinations of Equivalency

Commencing with the calendar year 2010 reporting period, and for eachreporting period thereafter, the Executive Officer shall complete a Final

1315-7
the second regularly-scheduled monthly Governing Board meeting after

the completion deadline for the FDE for any account(s) for which the PDE

did not demonstrate equivalence. Each FDE shall include both the debit

and the credit accounting elements identified in paragraphs (c)(2) and

(c)(3) of this rule, respectively, and the running balances in the District

offset accounts at the beginning and at the end of the subject reporting

period. The Executive Officer shall report the FDE for any account(s) for

which the PDE did demonstrate equivalence no later than the reporting

deadline for the subsequent reporting period’s PDE specified in paragraph

(d)(2) ofthis rule.

(4) Early FDE Subsuming PDE

In lieu of preparing both a PDE and an FDE for a single reporting period,

the Executive Officer may opt to include the PDE in the FDE for the same

reporting period. Such FDEs are subject to the same completion and

reporting deadlines as are the PDEs that they subsume.

(e) Projections of District Offset Account Balances

Each PDE report and each FDE report the Executive Officer prepares and

presents to the Governing Board and EPA shall also include projections of the

District offset account balances at the end of each of the two subsequent reporting

periods. The Executive Officer shall make the projections of the District offset

account balances based upon the average of the total annual debits and the

average of the total annual credits for the five reporting periods most recently

included in a PDE or an FDE. Although these projections are to be reported with

the results of the PDEs and FDEs, they are separate from the determinations of

equivalency and do not constitute an element of the determinations of

equivalency.

1315-8
(

) Discontinue funding the Priority Reserve for any air contaminant

that the most recent FDE has demonstrated does not have a

positive balance in its District offset account no later than the

completion deadline for the FDE specified in paragraph (d)(3) of

this rule. The Executive Officer may resume funding the Priority

Reserve upon completion of an FDE demonstrating that theshortfall no longer exists.

(B) Discontinue issuing permits to construct and permits to operate

that are subject to paragraph (c)(2) Offset Account debits resulting

in the further use of Rule 1304 exemptions or Priority Reserve

offsets from Rule 1309.1 for the air contaminant that has a shortfall

to sources that are major sources of that air contaminant

commencing no later than the completion deadline for the FDE

demonstrating the shortfall. Additionally, the Executive Officershall place all major source applications that would otherwise

qualify for an offset exemption pursuant to Rule 1304 or to access

the Priority Reserve for the air contaminant that has a shortfall on

hold until the results of an FDE demonstrating that the shortfall has

been rectified have been reported to and approved by the

Governing Board unless the applicant elects to provide sufficient

ERCs to offset the emissions increase pursuant to Rule 1303(b)(2).

The Executive Officer may resume issuance of such permits uponcompletion of an FDE demonstrating that the shortfall no longer

exists.

(2) Report to the Governing Board: Rectification of a Shortfall

If an FDE demonstrates that a shortfall exists in any of the District offsetaccounts, or the most recent projected District offset balances calculated

pursuant to subdivision (e) of this rule predict that such a shortfall will

exist, the Executive Officer shall prepare a report to the Governing Board

recommending appropriate action to rectify the shortfall. The Executive

Officer shall present this report to the Governing Board no later than six

1315-9
backstop provisions by making a demonstration that the District remains

in compliance with federal nonattainment NSR offset requirements on an

aggregate basis:

(A) Provide additional credits to the District offset account(s) that have

a shortfall within six months of the FDE that demonstrated the

shortfall or the subdivision (e) projection that predicted it. The

Executive Officer may obtain such credits by purchasing them, by

funding emission reduction projects using quantification protocols

approved by EPA, by applying BACT (federal LAER) in excess of

federal requirements, or by other methods approved by EPA;

and/or

(B) Propose amendments to Rule 1304 and/or Rule 1309.1 to eliminate

certain offset exemptions or to eliminate certain sources’ eligibility

to receive offsets from the Priority Reserve, respectively.

The report shall also include a proposed timeline for implementation of

the actions it recommends.

(g) California Environmental Quality Act Backntop Provinionn

(1) Net Emiion Increasc

at Major and Minor Facilitien

-l l

In addition to the tracking aernis provided to

noureen at major polluting facilities pursuant to paragraph (c)(2) ofthin rule, the Executive Officer shall track all increases in potential

to emit that occur at major and minor facilities pursuant to Rule

1304 or Rule 1309.1. Increases in potential to emit at minor

facilities tracked pursuant to thin paragraph shall not constitute

debits from the District offset ac

(B) Calculation ofNet Emission Inc

The Executive Officer shall calculate the cumulative net emission

increase of each nonattainment air contaminant that is tracked

pursuant to paragraphs (c)(2) and (c)(3) of thin rule from [date of

1315-10
The Executive Officer

s report to the Governing Board of each

FDE commencing with the FDE for the calendar year 2011

reporting period ha11 include the cumulative net omission

increases from [date of adoption] through the end of the reporting

period analyzed by the FDE calculated pursuant to paragraph

(d)(3) of this rule. In cases where, pursuant to paragraph (d)(3) of

this rule, the Executive Officer reports the credit accounting

elements identified in paragraph (c)(3) of this rule with the PDE

for the subsequent reporting period, the Executive Officer shall

also report the cumulative net emission increase(s) for the same air

contaminant(s) with the PDE for the subsequent reporting period.

Although net emission increases are to be reported with the results

ofthe FDEs, they are separate from the FDEs and do not constitute

an element ofthe FDEs.

(2) Projections of Cumulative Net Emission Increases

Each PDE report and each FDE report the Executive Officer prepares and

presents to the Governing Board and EPA commencing with the reports analyzing the 2011 reporting period shall also include projections of the

cumulative net emission increases at the end of each ofthe two subsequent reporting periods. The Executive Officer shall make the projections of the

cumulative net emission increases from both major sources and minor

sources based upon the average of the aggregate increase in potential to

emit of each nonattainmont air contaminant subject to tracking pursuant to paragraph (c)(2) of this rule and the average of the aggregate emissions

reductions of the same nonattainment air contaminant for the five

reporting periods most recently included in a PDE or an FDE or each of

the reporting periods commencing with the 2011 reporting period, whichever is fewer reporting periods. Although those projections are to be

reported with the results of the PDEs and FDEs, they ro separate from the

determinations of equivalency and do not constitute an element of the

1315-11
paragraph (g)(2) of this rule to exceed the paragraph (g)(4) threshold for

that air contaminant, the Executive Officer shall discontinue issuing

permits to construct and permits to operate that rely on further use of Rule

1301 exemptions or Rule 1309.1 Priority Reserve offsets for that air

contaminant to major and mmor sources of that air contaminant Such

permit itmunce shall cease no later than the paragraph (d)(2) PDE

completion deadline or the paragraph (d)(3) FDE completion deadline

applicnble to the PDE or FDE with vhioh the paragraph (g)(4) threshold

exceedane- or projected oxceodanco will be reported to the Governing

Board. Te Executive Officer shall not resume issuing such permits

unless and until the corresponding cumulative net emission increase

returns to a level nt least ten percent below the threshold for the venr in

rp fl

VV11II* SALIIAbb&12 aij a,1

IA 1..T..

——4

. cumulative .L emission merease tflresfloiu uuu upuu rn grov’tfl

assumptions in the 2007 AQMP for [date of adoption] through December

of 2011 and each subsequent year through 2030 are presented in Table B.

,

TABLE B

Cumulative Net Emission Increase Thresholds

(tons per day)

[date of

adoption] VOC NO* PMIO

through

December of

2011 OO4 O24

2 28 OO O4O

2013 394

2-l4 444 444 0.-74

1315-12
0790

2046 04 048 409

2017 &85 0768 072-1- -h29

204-8 10.12 0.-6 0724 1,48

2019 1 1.39 0784 072

2020 12.67 0792 040 4-.86

2021 13.94 4-700 04 2705

2022 15.21 4-08 046 244

2023 16.48 4-45 049

2024 17Th 4-2 042 276

2025 18.98 4-739 445 28

2026 20.23 4- 048 03

2027 21.49 4-62 054

2028 22--71 4- 045

2029 23.99 445 0

2034 25.24 -96 061

!1.s Q+.-.+ i.,-....1. +;,-.., oi,.... Q..i.....;÷÷,.i., i,...,

m. r’

, xeuuuve ,I-.nI1

.uomi paragraphs (b)(2) or 3ubdiviion (g) and (h nf thi’ ruip tn thA California Mr Roource Board or to EPA for inciuion “ -.

+h V÷+ T...,,,i.,...

(i) Sunset Date for Permit issuance

This rule shall expire on January 1, 2031.

1315 - 13

•1-

•

‘.