Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 4

inspection of the aforementioned sources to ensure that they comply with all applicable requirements. In addition to this program that applies to all sources, the District implements and enforces requirements of the California Air Resources Board (C ARB )

, and federal requir ements from the CAA and its implementing regulations.

The CAA requires that certain large industrial sources (referred to as “Major Sources”) of air pollution obtain and maintain federally enforceable operating permits under Title V

of the Act. The 1990 Amendments to the federal Clean Air Act establish a national requirement for a federally enforceable operating permit program under the Title V

program. Requirements for Title V permits are found under 40 CFR Part 70. The District implements an U.S. EPA

- approved Title V permitting program through its Rule 900. These permits are intended to incorporate all applicable requirements, and they must meet standards specified by U.S. EPA in terms of form and content 1 . They are renewed on a five year cycle, an d the renewal is subject to the review of U.S. EPA , as well as formal public comment. Because of the complexity and cost associated with the federal standards and process, these permits are required only of sources that meet the federal definition of “Majo r Source” which is emissions

- based and is intended to include large industrial operations.

As mentioned above, f ederal Title V permitting requirements are set forth in District Rule

900. Rule 900 applies to any stationary source with the potential to em it at least 100 tons per year of any regulated air pollutant, or at least 10 tons per year of any hazardous air pollutant (HAP) 2 , or 25 tons per year of any combination of HAPs. A Title V permit includes any limitations, monitoring, testing, recordkeeping , and reporting, that apply to the source as a result of preconstruction review (e.g., PSD), or from other regulations adopted by the U.S. EPA , and the state or local air agency with jurisdiction. In California, the permit must therefore include the rules and regulations of the C ARB

and those regulations that have been approved into the State Implementation Plan (SIP) of the lo cal air district . Unli ke other local operating permits, these permits are enforceable by the U.S. EPA and by independent, third parties resulting from an action in federal court. However, sources with a potential to emit above the major source

thresholds but actual emissions b elow fifty percent of the major source threshold may be able to avoid Title V requirements by complying with the recordkeeping and reporting requirements of Rule 903. Many of the permits issued by the district are exempt from Title V permit requirements as a result of this rule. Rule 903 enables permit holders to electively limit their emissions in a federally enforceable manner to avoid Title V permit requirements.

Federal Regulatory Changes

In 2009, following a decision by the U.S. Supreme Court 3 , U.S. EPA issued an “Endangerment Finding” for GHGs under the CAA. This was the first step towards regulating this group of pollutants under the Act. Then in April of 2010, the

1 Reference 40 CFR Part 70

2 Hazardous air pollutants are listed pursuant to Section 112(b) of the CAA.

3 Massachusetts v. EPA, 549 U.S. 497 (2007)Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 5

Administrator of the U.S. EPA signed new regulations under the CAA with emis sion standards for GHGs from motor vehicles. At the same time, U.S. EPA issued an Interpretive Ruling to clarify that GHGs would not become “regulated pollutants” under the Act until the first compliance date of the effective emission standard.

In May of 2010, the Administrator signed another rule, commonly referred to as the “Tailoring Rule” which adjusted, or “ tailored” the applicability thresholds for federal permitting requirements for GHGs and provided an implementation schedule. The Tailoring Rule was needed because the primary GHG, carbon dioxide (CO 2 ) is emitted at vastly higher rates from most operations and proc esses than the pollutants historically regulated under the CAA. Specifically, the emission threshold for “other regulated pollutants” is 100 tons per year for Title V, and is “any emission rate whatsoever” for other sources under the PSD program. Because of this language e ven a household water heater would emit CO 2 at levels that would trigger Title V and PSD permitting. Obviously household water heaters are clearly not large industrial sources. The Tailoring Rule specifically does three things: (1) it establishes the list of GHG pollutants, along with their global warming potential (GWP), regulated as CO 2 equivalents (CO2e); (2) it establishes thresholds for permitting requirements to apply; and (3) it establishes schedules for the requirements to appl y.

The term “CO2e” means that all GHGs are expressed in CO 2 equivalents based on their global warming potential, or GWP, relative to CO 2 . CO 2 has a GWP of 1. Methane is
twenty

- one times more effective at warming the atmosphere when compared to CO 2 , so
i t has a GWP of 21. To determine the CO2e emissions from a source, the mass emissions of the individual GHG are multiplied by the GWP of that GHG; this is done for each GHG and then all are added together. To complete the example, a source with 1

ton of C O 2 and 1 ton of methane emissions is said to emit 22 tons of CO2e.

Under the Tailoring Rule, GHG permitting happens in two phases, as follows:

I. Beginning on January 2, 2011

, only source s currently subject to the PSD permit ting program would be subject to GHG permitting requirements. Specifically, the applicable requirements of PSD, most notably, GHG BACT requirement, will apply to projects if GHG emissions have the potential to exceed 75,000 tons per year CO2e.

Similarly, any source that is required to have a Title V permit

, due to non

- GHG

emissions

, m ust comply with GHG requirements. Sources must include GHG emission data in their applications and address any applicable GHG requirements when they apply for, renew, or revise their operating permits.

II. Beginning on July 1, 2011 , in addition to the thresholds above, a source must have a PSD permit based solely on its GHG emissions if it is a new source that has the potential to emit at least 100,000 tons per year of CO2e, or if it is an existing source with potential emissions of 100,000 tons per year of CO2e that undertakes a modification with a potential emissions increase of 75,000 tons perStaff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 6

year. Further, any existing source with potential emissions of 100,000 CO2e must also have a Title V pe rmit. The Title V permit must include all applicable GHG requirements.

Note: There is also a “mass

- basis” requirement. This is a separate threshold for GHG emissions that does NOT consider GWP. In addition to meeting the CO2e
thresholds above, the sou rce must also have potential to emit at least 100 tons per year of total GHGs without considering GWP in order to need a PSD or Title V permit if the source is in a specifically listed category, and 250 tons per year if the source is not in one of those sp ecial categories 4

.

On July 20, 2011 the U.S. EPA issued its final ruling deferring, for a period of three years, the application of the PSD and Title V permitting requirements to carbon dioxide (CO 2 ) emissions from biogenergy and other biogenic stationary sources (biogenic CO 2 ). Biogenic CO 2 emissions are defined as emission of CO 2 from a stationary source directly resulting from the combustion or decomposition of biologically

- based materials

other than fossil fuels and mineral sources of carbon. Exampl es of the combustion or decomposition of CO2 are but not limited to:

CO 2 generated from the biological decomposition of waste in landfills, wastewater
treatment or manure management processes;

CO 2 from the combustion of biogas collected from biological dec omposition of waste in landfills, wastewater treatment or manure management processes;

CO 2 from fermentation during ethanol production’

CO 2 from combustion of the biological fraction of municipal solid waste or biosolids;

CO 2 from combustion of the biologi cal fraction of tire

- derived fuel; and

CO 2 derived from combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material.

Currently, as adopted Rule 904 does not exempt biogenic CO 2 process from PSD permitting requirements for GHG. Therefore, the District is submitting Rule 904 for re

adoption effectively changing the adoption date. Because Rule 904 incorporates by reference all the applicable sections of the CFR which pertain to the PSD permitting program the re

- adoption action will effectively incorporate the three year deferral for biogenic CO 2 processes.

III. PROPOSED REGULATORY CHANGES

The District is proposing to revise Rules 900, 903 and 904 to implement Title V permitting requirements and PSD requirements for GHG emissions. On June 28, 2011

t he district adopted Rule 904 effectively incorporating by reference the PSD Permit Program. The proposed revisions include several changes to the above referenced

4 Although it may seem unlikely that a source could emit less than 100 tons per year of GHGs on a mass

basis and emit more tha n 100,000 tons of CO2e, it is in fact possible. Some of the GWP factors are significantly higher than 1,000, especially the refrigerants. So a source could emit 5 tons per year of sulfur hexafluoride (SF6) on a mass

- basis, and have 119,500 tons per year of CO2e emissions, because the GWP of SF6 is 23,900.Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 7

rules. It is important to note th at only major sources of air pollutants will be affected by

the revisions to these rules . These affected major sources will be required to comply with GHG permitting requirements. Currently , the only applicable requirement for

affect ed sources is th e reporting requirement. Because these requirements are incorporated during the time of permit renewal or other action, the District does not anticipate opening existing Title V permits for the sole purpose of incorporating these requirements. The GHG requ irements will be incorporated when a new Title V permit is issued, or when an existing permit is renewed or amended for other reasons. Sources otherwise required to hold Title V permits must still incorporate GHG requirements. In addition, any exiting so urce with the potential to emit at least 100,000 tons per year of CO2e must obtain a Title V permit regardless of whether emissions of other pollutants trigger the permitting requirement. Existing major sources of GHGs which currently do

not have a Title V permit will be required to submit an application for a Title V permit by July 1, 2012. The district has not identified any major source of solely GHGs emissions which will need to comply with this requirement. As an alternative, any sources with

actual GHGs emissions below fifty percent of the major source thresholds may be able to avoid Title V requirements by complying with the recordkeeping and reporting requirements of Rule 903. Under Rule 903, if a source maintains records that its

actual emissi ons are below 50,000 tons per year of CO2e and submits an annual report to the District demonstrating this, the source does not have to obtain a Title V permit even if its PTE exceeds 100,000 tons per year. In addition, under district Rule 902, Request fo r Synthetic Minor Source Status, any major source of GHGs with actual GHGs emissions below the major source threshold may be able to avoid Title V permitting requirements by accepting conditions in the Authority to Construct permit limiting their potential to emit below the GHGs major source threshold. Rule 902 is not proposed for revision; the existing version of this rule is already applicable to GHGs requirements.

A. The proposed revisions for this rule action related to greenhouse gas emissions

are dis cussed in more detail below. Revisions related to PM 10 and PM 2.5 is

discussed in section B.

1. Rule 900 Procedures for Issuing Permits to Operate for Sources Subject to Title

V of the Federal Clean Air Act Amendments of 1990.

Revisions to Rule 900 appear in Section B, Definitions. The definitions in this Section apply throughout Rule 900, Rule 902, and Rule 903, and are derived from related provisions in Part 70 Code of Federal Regulations (CFR), State Operating Permit Programs. GHGs are added as follow s:

a. A new definition of CO 2 Equivalent (CO2e) is being added (please see B.10). This definition is substantially the same as the definition provided by U.S. EPA in their Tailoring Rule revision, 40 CFR Part 71.2, Definitions.Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 8

b. A new definition of Global Warming Potential (GWP) is being added (please see B.18). This definition is conceptually the same as the definition provided by U.S.

EPA in their Tailoring Rule.

c. A new definition of Greenhouse Gases is being added (please see B.19). This definition is substantially the same as the definition provided by U.S. EPA in their Tailoring Rule revision, 40 CFR Part 71.2, Definitions.

d. The definition of Major Source is being revised (please see B.23). This definition

was revised to a dd a provision for the definition of major source to include GHG’s that are subject to regulation as defined in 40 CFR, Part 70.2. This change makes our Title V program applicable to any major source of GHGs. 5

e. The definition of Regulated Air Pollutant i s being revised (please see B.30). This definition was revised to add a provision to include GHGs , which are subject to regulation as defined in 40 CFR, Part 70.2, to the list of regulated air pollutants

.

f. Other editorial changes as applicable.

2. Rule 903 Potential to Emit

Revisions to Rule 903 appear in different Sections of this rule. GHGs are added as

follows:

a. Section A.2, Stationary Source with De Minimis Emissions, is being revised to exclude some recordkeeping and reporting requirements for sources with GHGs emissions less than or equal to 20,000 tons per year in a 12

- month period.

b. Section B, Definitions. The definition of Actual Emissions is being revised to add a provision specifying that the calculation methods, including emission factors

and as sumptions, used to evaluate actual emission should be those approved by

U.S. EPA , CARB, or the district (please see B.2).

c. The definition of Major Source of Regulated Air Pollutants is being revised (please see B.7). This definition was revised to add a p rovision for the definition of major source to include GHG’s that are subject to regulation as defined in 40 CFR, Part 70.2. This change makes our Title V program to be applicable to any major source of GHGs. 6

5 Effective July 20, 2011, the U.S. EPA issued a final ruling deferring the application of the PSD and Title V permitting requirements from CO 2 emissions, for up to three years, from bioenergy and other biogenic stationary sources. In order to capture this change in legislation and any future change related to GHG

emissions the District has placed a condition within the definition conditioning applicability of the program as subject to regulation as defi ned in 40 CFR 70.2 . If the GHG program is cancelled or delayed further then GHG requirement s will, accordingly, not take effect.

6 Currently there is legislation (HR1) which may impact the applicability of the entire Greenhouse Gas program. Therefore, the District has placed a condition within the definition to reflect any future legislative change by conditioning applicability of t he program as subject to regulation as defined in 40 CFR 70.2Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 9

d. The definition of Regulated Air Pollutant is being revised (please see B.12.e.4). This definition was revised to add a provision to include GHGs that are subject to regulation as defined in 40 CFR, Part 70.2, to the list of regulated air pollutants

.

e. Section C, Emission Limitations, sets the maxim um quantity of emissions allowed for a federal enforceable emission limit. These levels are fifty percent of the major source thresholds. Section C.1.a is being revised to set a threshold for applicability of this rule of 50,000 tpy of CO2e. In addition, Section C.2 is being revised to add a provision specifying that in absence of valid continuous emissions monitoring data or source test data, the calculation methods, including emission factors and assumptions, used to evaluate actual emission should be those approved by U.S. EPA , CARB, or the district.

f. Section E, Reporting Requirements. Section E requires sources to submit an annual process statement. Section E.2 is being revised to include an exemption

for sources with annual emissions less than or e qual to 24,999 tons of GHGs.

g. Section F, Alternative Operational Limit and Requirements. Section F contains the list of emission units for which an exemption from Title V applicability is granted, provided that at least 90 percent of the source’s annual e missions are covered by an alternative operational limit. These exemptions were granted evaluating primarily emissions of criteria pollutants. The district will extend these exemptions provided GHGs emissions are below the 50 percent major source

threshol ds. Section F.1.f, describes the alternative operational limit for diesel fueled emergency engines operating at ozone “moderate” nonattainment area. According to district’s evaluation, emergency engines of less than 1,000 bhp which operate no more than 5 ,200 hours per year and use no more than 265,000 gallons of diesel per year generate approximately 30,000 tons per year of CO 2 [265000 gal x 7.1 lb/gal x 19300 Btu/lb x 1 MMBtu/1000000 x 165 lb/MMBtu 7 x 1 ton/2000 lb = 30,000 ton]. Since GHGs emissions ar e below the 50 percent annual threshold, the alternative operational limits can be use for the emergency engines equal to or less than 1,000 bhp.

h. Appendix A, Table 1, Affected Greenhouse Gases Pollutants and Their Global Warming Potential, has been added to this rule.

i. Other editorial changes as applicable.

3. Rule 904 Prevention of Significant Deterioration (PSD) Permit Program

which is in effect August 2, 2010. If the GHG program is cancelled or delayed then GHG requirement will

not take effect.

7 U.S. EPA AP

- 42 Emission Factors, Chapter 3.4, Large Stationary Diesel and All stationary Dual

- fuel Engines, Table 3.4

- 1.Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 10

Revisions to Rule 904 appear in two Sections of the rule. GHG is incorporated into Rule 904 along with any exclusions and deferrals in the following manner.

a. Section C, Incorporation by Reference will change when the rule is adopted as a revision triggering an adoption date that will incorporate U.S. EPA’s fina l rulemaking on the Deferral for CO2 emissions from bioenergy and other biogenic

sources

b. Section C, subsection C.2 clarifies the exemption of GHG analyses by removing

a reference to a definition in Rule 903.

B. The proposed revisions for this rule action related to PM 10 Major Source threshold update are discussed in more detail below.

1. Revisions to Rule 900 appear in Section B, Definitions. The definitions in this Section apply throughout Rule 900, Rule 902, and Rule 903, and are derived from related pr ovisions in Part 70 Code of Federal Regulations (CFR), State Operating Permit Programs. Rule 900 is updated as follows:

a. The definition of Major Source is being revised (please see B.23 of Rule 900) to

reflect the re

- designation from a “moderate” non

- att ainment area to a “serious”

non

- attainment area for PM 10 in 2004 as ordered by the 9 th US District Court of Appeals. The definition reflects the lowered PM 10 major source threshold from 100 tons per year to 70 tons per year which as required of “serious” PM 10 non

attainment areas.

b. A new definition of PM 2.5 Federal Nonattainment Areas is being added (please see B.27). This definition was added to specify the boundaries for the PM 2.5 Nonattainment area within Imperial County.

IV. CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)

There are currently no emission control technology options for directly reducing CO 2 from combustion processes. Therefore BACT for sources such as power plant will likely include an efficiency analysis of the process, and of the facility operations. Examples include process heat/energy recovery, increased insulation, and high

- efficiency lighting, heating, etc. at the facility. It should also be noted that projects subject to BACT for GHG emissions would most likely be required t o mitigate impacts of GHG emissions under the California Environmental Quality Act. The bottom line, however, is that BACT is required as a matter of federal law and regulations.

Rule 900 also will require facilities to obtain Title V permits for GHG emi ssions, or

address GHG

- related requirements in their otherwise applicable Title V permits. Title V permits do not impose any additional environmental requirements; they consolidate all applicable air pollution

- related requirements in one permit. There are , therefore, no anticipated environmental impacts associated with the revisions to all the 900 seriesStaff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 11

r ules presented here as they relate to Title V permits. In any case, these permits would be required by U.S. EPA through its own permit program 8 if the D istrict did not adopt the proposed changes.

Rule 904 incorporates by reference already required requirements under the PSD program. The revisions to Rule 904 simply incorporate the most recently adopted regulations by the U.S. EPA into the existing local rule. Therefore, no anticipated environmental impacts are associated with the revisions to Rule 904.

Overall, adoption of proposed revisions to Rule 900, 903 and Rule 904 will result in the same or slightly more positive impacts on the environment (i.e. , lower emissions of GHGs) compared to impacts that would result if the rule were not adopted, and U.S.

EPA implemented its own program instead. As mentioned above, the proposed revisions to Rules 900 and 903 will trigger Title V permitting if a new major source is identified or if an existing Title V permit is renewed or amended for reasons other than

GHG. E xisting major sources of GHGs which currently do not have a Title V permit will be required to submit an application for a Title V permit by July 1, 2012. The district has not identified any major source of solely GHGs emissions which will need to comply with this requirement.

District staff finds that the prop osed revisions to Rules 900, 903 and 904 are exempt from the California Environmental Quality Act as an action by the regulatory agency for protection of the environment (Class 8 Categorical Exemption, Section 15308, State CEQA Guidelines), and because it can be seen with certainty that there is no possibility that the activity in question may have a significant adverse effect on the environment (Section 15061(b)(3), State CEQA Guidelines).

The California Public Resources Code, Section 21159, requires District’s to perform at

the time of the ado ption of a rule or regulation requiring the installation of pollution control equipment, or a performance standard, or treatment requirement, an environmental analysis of the reasonably foreseeable methods of compliance. Compliance with the requirement o f a Title V permit issued by the District will reduce emissions from sources and will not cause any significant adverse impact on the environment. Therefore, District staff has concluded that no adverse environmental impact will be caused by compliance wi th the proposed revisions to rules 900 and 903.

V. RULE DEVELOPMENT PROCESS

The District conducted a public workshop to collect comments on the proposed rule at the Farm Bureau in El Centro, California. The workshop was held on March 17, 2011. Comments pro vided by the public during the workshop were incorporated into the

prop osed revisions to rules 900, 903 and 904 as appropriate.

8 If the District fails to implement an approved program under 40 CFR Part 70, EPA implements one

under Part 71.Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 12

A Public notice for a public hearing inviting the community to review and comment on the prop osed revisions to rules 900, 903 a nd 904 was published in the Imperial County local newspaper of greatest circulation, the Imperial Valley Press, on November 17,

2011 and on the same day it was made available on the Distinct website.

VI. RECOMMENDATIONS 3

A. APCD ADVISORY BOARD

The Air Pollution Control District Advisory Board met to discuss the proposed Rules

revisions on December 07 , 2011. The APCD Advisory Board recommended the approval of the proposed amended rules the staff report and its findings.

B. STAFF RECOMMENDATION

District staff recommends the adoption of the proposed revisions to Rule 900 Procedures for Issuing Permits to Operate for Sources Subject to Title V of the Federal

Clean Air Act Amendments of 1990, Rule 903 Potential to Emit, and Rule 904

Prevention of Si gnificant Deterioration (PSD) Permit program as they pertain to the

addition of greenhouse gases (GHGs) to the list of regulated pollutants, as well as to revise Rule 900 to add a definition for major source which reflects the threshold for a

PM 10 “serious ” nonattainment area. After considering public comments at today’s hearing, District staff recommends that this Air Board determine that t he adoption of
revised Rule 900, revised Rule 903 and revised Rule 904 are exempt from CEQA and adopt these rules for inclusion in the Imperial County’s State Implementation Plan (SIP).

VII. DECLARATION OF FINDING

The Imperial County Air Pollution Control District Board hereby finds as follows:

The adoption of the proposed revised rule s for the Imperial County, is considered a project within the meaning of Section §21065 of the California Environmental Quality Act (CEQA).

Th e adoption of the staff report and its findings are exempt from the requirements of

Public Resources Code Section 21000 et seq. under the CEQA Guidelines, in the California Code of Regulations Section 15061 (b)(3).

The District is a regulatory agency and the public agency with the principle responsibility for carrying out projects related to air pollution and the con trol thereof.

Clean air is a valuable and essential natural resource.

The proposed revised rule s will serve to reduce the amount of attainment air pollutants

introduced into the ambient air.Staff Report

– December 20, 2011 Public Hearing (Rules 900, 903 & 904) Page 13

The adoption of the proposed revised rule s will serve to enhance and protect the environment by controlling air pollutant sources of attainment pollutants.

There has been no evidence presented to suggest that the implementation of the proposed revised rule s , the staff report, its findings or appe ndices will have an adverse

effect on the environment.

There has been no evidence presented to suggest that the implementation of the proposed revised rule s , the staff report, its findings and appendices will lead to or result in cumulative adverse impact s

.

Health and Safety Code §40702 provides the authority to the District to enact and adopt the proposed revised Rule s

.

The requirements of the proposed revised rule s , the staff report and it s findings are clear and capable of being understood by those pe rsons directly affected by it.

The proposed revised rules, the staff report and its findings do not conflict with or contradict any existing statute, court decision, or state or federal regulation.

The requirements of the proposed revised rule s , the staf f report and its findings are not duplicative of any existing state or federal regulation.

The proposed revised rule s , the staff report, and its findings described herein will not significantly affect air quality or emissions limitations and therefore is exempt from California Health and Safety Code section §40728.5 (d), which requires a socioeconomic impact analysis of the proposed action to be performed.

The Imperial County has a population of less than 500,000 people.