United States Environmental Protection Agency, Region 9

Air Division

Technical Support Document

for

EPA’s Notice of Proposed Rulemaking

for the

California State Implementation Plan

Report on Reductions Achieved from Incentive

- Based Emission Reduction Measures in the San Joaquin Valley

Prepared by: Idalia P é rez

August 2015Page 2 of 16 Table of Contents

I. Description of SIP submittal

................................ ................................ ............................... 3

II. Submittal Summary

................................ ................................ ................................ ............ 3

III. Emissions Reductions

................................ ................................ ................................ ......... 4

IV. Criteria for Evaluation of Emission Reductions from Incentive Programs

........................ 5

V. Review of Incentive Program Guidelines

................................ ................................ ........... 6

A. Carl Moyer Program

- General Requirements

................................ ................................ .... 6

B. Carl Moyer Program Off

- Road Equipment: Repower, Replacement, or Retrofit

.............. 9

C. Carl Moyer Program Portable and Stationary Agricultural Sources Repower Projects

... 11

D. Prop 1B Program: On

- Road Vehicle Replacement Projects

................................ ............. 13

VI. EPA’s Recommendations for future Reports

................................ ................................ ... 15Page 3 of 16 I. Descrip tion of SIP submittal

This Technical Support Document (TSD) addresses California Air Resources Board’s ( C ARB)

,

“ Report on Reductions Achieved from Incentive

- Based Emission Reduction Measures in the San Joaquin Valley ” (Emission Reduction Report)

.

• A dopted by ARB : October 2 4

, 201 4

.

• Submitted for inclusion in the State Implementation Plan (SIP) : November 17

, 201 4

.

• Deemed complete by operation of law : May 17 , 201 4

.

II. Submittal Summary

Between 2007 and 2011, California made six SIP submittals to address nonattainment area planning requirements for the 1997 PM 2.5 NAAQS in the San Joaquin Valley ( SJV )

. 1 We refer to these submittals collectively as the “2008 PM 2.5 Plan.” On November 9, 2011, EPA approved all

elements of the 2008 PM 2.5 Plan except for the con tingency measures, which EPA disapproved. 2
As part of this action, EPA approved, inter alia , commitments by C ARB and the San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) to achieve specific amounts of NO
x and PM 2.5 emission reductions b y 2014. 3 The Emission Reduction Report quantifies and

documents the emission reductions achieved in 2014 through disbursement of incentive funds

, which C ARB is using to fulfill part of the aggregate emission reduction commitment in the 2008

PM 2.5 Plan

.

The Emission Reduction Report quantifies emi ssion reductions achieved through the implementation of :

• Carl Moyer Memorial Air Quality Standards Attainment Program Guidelines (Carl Moyer Guidelines):

o Off

- Road Equipment Repower, Replacement, and Retrofit Pro jects

 Part II, Chapter 5, Compression

- Ignition Off

- Road Equipment (2005)

 Part I, Chapter 5, Off

- Road Compression

- Ignition Equipment (2008)

 Part 1, Chapter 7, Off

- Road Compression

- Ignition Equipment (2011)

o Portable and Stationary Agricultural Source Repower Projects

 Part II, Chapter 10, Agricultural Sources (2005)

 Part I, Chapter 10, Agricultural Sources (2008)

 Part I, Chapter 10, Portable and Stationary Agricultural Sources (2011)

• Proposition 1B: Goods Movement Emission Reduction Program (Prop 1B Guidelines )

o On

- Road Vehicle Replacement Projects

 Appendix A, Trucks Serving Ports and Intermodal Rail Yards (2008)

 Appendix B, Other Heavy Duty Diesel Trucks (2008)

 Appendix A, Heavy Duty Diesel Trucks (2010)

1 76 FR 69896 at n. 2 (November 9, 2011).

2 Id . at 69924.

3 76 FR 69896, 69926 (codified at 40 CFR 52.220(c)(356)(ii)(B)( 2 ) and 52.220(c)(392)(ii)(A)( 2 )).Page 4 of 16 The k ey section s of the Emission Reduction Report discussed in this TSD are :

- Section IV

, Demonstration that Incentive

- Based Emission Reduction Measure Meet U.S. EPA Requirement s : describes how the program guidelines ensure that the emission

reductions achieved by projects pursuant to the m are consistent with the CAA and EPA guidance.

- Section V

, Emission Reduction : indicates the tons per day (tpd) of emission reductions

for each category of projects that C ARB identifies in the report.

- Appendix H

, SIP Creditable Incentive Projects in the S an Joaquin Valley : lists all of the projects for which C ARB is seeking emission reduction credit in the report.

Appendix A through Appendix E contain the applicable Carl Moyer and Prop 1B guidelines that we are reviewing as s upporting m aterial but not inc orporating into the SIP

. Appendix C contains the October 23, 2014 revision of the Carl Moyer 2011 Guidelines. It appears that the page reference s in Section IV of the E mission Reduction Report for Carl Moyer 2011 are for the version adopted on April 28, 20 11 but ARB has indicated that the changes between these versions were administrative and did not impact emission reductions in the Emission Reduction Report. 4

III. Emissions Reductions

Section V of the Emission Reduction Report state s that the identified incentive projects have

achieved the following amounts of emission reduction s by 2014 :

Program

Guidelines # of Projects 20 1 4 E m i ss ion R e d u c tions ( t pd)

NO x PM 2.5

Carl M o y e r 832 3 .5 0. 1

Prop 1 B 1454 4 .4 0 .1

TO T A L 2286 7 .8 0 .2

O nly projects with a completed post

- inspection as of December 31, 2013, and active through the entire 2014 calendar year were included. C ARB ensured that the projects included in the Emission Reduction Report had not been previously credited towards the Con tingency Measure

SIP for the 1997 PM 2.5 Standard. See Emission Reduction Report at 23 and Attachments A and B

in U.S. EPA’s Technical Support Document for its Proposed Approval of Clean Air Act Section 172(c)(9) Contingency Measures in the San Joaquin V all ey State Implementation Plan for

Attainment of the 1997 PM2.5 Standards , dated August 15, 2013. Appendix H.1 lists of all of the Carl Moyer Program projects meeting these criteria for which C ARB is seeking SIP credit. The projects are organized by equipmen t category (e.g. Off

- Road Equipment

– Construction), project

t echnology (e.g. repower) and guideline year. Appendix H.2 has similar lists for the projects

4 See email from S Vanderspek at CARB to I Perez at EPA, dated 07/31/2015

.Page 5 of 16 funded pursuant to the Prop 1B guidelines. For each unit for which C ARB is seeking SIP credit

, the ta bles include a unique project identifier, post inspection date, project life, and the NO
x and

PM 2.5 tons per year emission reductions for 2014.

IV. Criteria for Evaluation of Emission Reductions from Incentive Programs

EPA evaluated the Emission Reduction Report in accordance with the following guidance

documents , which provide EPA’s interpretation of the CAA requirements that apply to SIP submittals that rely on discretionary economic incentive programs (EIPs) and other nontraditional emission reduction pr ograms for emission reduction credit

. T hese guidance

documents are non

- binding and do not represent final agency action.

o “ Guidance on Incorporating Voluntary Mobile Source Emission Reduction Programs in State Implementation Plans (SIPs),” Richard D. Wilso n, Acting Assistant Administrator for Air and Radiation, October 24, 1997 [ 1997 VMEP]

.

o “Improving Air Quality with Economic Incentive Programs” January 2001 (EPA

- 452/R

01

- 001) [ 2001 EIP Guidance]

.

o “Guidance on SIP Credits for Emission Reductions from Electric

- Sector Energy Efficiency and Renewab l e Energy Measures,” Brian McLean, Office of Atmospheric Programs, and Steve Page, OAQPS, August 5, 2004 [ 2004 Electric

- Sector Guidance]

.

o “Incorporating Emerging and Voluntary M easure in a State Implementation P lan (SIP),” Stephen D. Page, OAQPS, October 4, 2004 [ 2004 Emerging and Voluntary Measures

Guidance ]

.

o “Guidance on Incorporating Bundled Measures in a State Implementation Plan

, ” Stephen D. Page, OAQPS , and Margo Oge, OTAQ, August 16, 2005 [ 2005 Bundled Measure s Guidance]

.

o “Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State and Tribal Implementation Plans

, ” July 2012 (EPA

- 456/D

- 12

- 001a) [ 2012 EE/RE Guidance]

.

o “Diesel Retrofits: Quantifying and Using Their Emissio n Benefits in SIPs and Conformity: Guidance for State and Local Air and Transportation Agencies,” February 2014 ( EPA

- 420

- B

- 14

- 007 ) [ 2014 Diesel Retrofit s Guidance]

. The CAA explicitly provides for the use of economic incentives as one tool for states to us e to achieve attainment of the NAAQS. See, e.g., CAA section 110(a)(2)(A) (requiring that each SIP “include enforceable emission limitations and other control measures, means, or techniques (including economic incentives such as fees, marketable permits, and auctions of emissions rights), as well as schedules and t imetables for compliance, as may be necessary or appropriate to meet the applicable requirements of [the Act]”) ; see also section 172(c)(6), 183(e)(4). EIPs

use market

- based strategies to encourage the reduction of emissions from stationary, area, and/or

m obile sources in an efficient manner. EPA has promulgated regulations for statutory EIPsPage 6 of 16 required under section 182(g) of the Act and has issued guidance for discretionary EIPs. 5 See 59 FR 16690 (April 7, 1994) (codified at 40 CFR part 51, subpart U) and 2 001 EIP Guidance

. Where a State relies upon a discretionary EIP in a SIP submission, EPA evaluates the programmatic elements of the EIP to determine whether the resulting emission reductions are quantifiable, surplus, enforceable and permanent

. See 2001 EI P Guidance at Section 4.1. These four fundamental “integrity elements,” which apply to all EIPs and other incentive/voluntary measures relied on for SIP purposes, are designed to ensure that such programs and measures satisfy the applicable requirements of the Act. See id

. EPA has generally defined the four fundamental integrity elements for discretionary EIPs and other incentive/voluntary measures as follows:

1. Quantifiable: emissions and emission reductions are quantifiable if they can be

measure d in a manner that is reliable and replicable by different users.

2. Surplus: Emission reductions are surplus if they are not otherwise required by or

assumed in a SIP

- related program ( e.g., an attainment or reasonable further progress plan or a transportation confo rmity demonstration), any other adopted State air quality program, a consent decree, or a federal rule designed to reduce emission of a criteria pollutant or its precursors ( e.g., a new source performance standard or federal mobile source requirement); Additionally, the emission reductions are “surplus” only for the remaining useful life of the vehicle, engine, or equipment being replaced.

3. Enforceable: emission reductions and other required actions are enforceable if they are independently verifiable; p rogram violations are defined; those liable can be identified; the State and EPA may apply penalties and secure appropriate corrective action where applicable; citizens have access to emissions

- related information obtained from participating sources; citiz ens may file suit against a responsible entity for violations; and the required reductions/actions are practicably enforceable consistent with EPA guidance on practical enforceability.

4. Permanent: emission reductions are permanent if the State and EPA can e nsure that the reductions occur for as long as they are relied upon in the SIP ; the time period that the emission reductions are used in the SIP can be no longer than the remaining useful life of the retrofitted or replaced engine, vehicle, or equipment

.
See 2001 EIP Guidance at Section 4.1, 1997 VMEP at pp. 6

- 7, 2004 Emerging and Voluntary Measures Policy at pp. 3

- 4 and 2014 Diesel Retrofit s Guidance at p. 11

. We provide below our evaluation of the Emission Reduction Report and related incentive

program g uidelines for consistency with the requirements of the Act, as interpreted in EPA policy on discretionary EIPs and other nontraditional emission reduction measures.

V. Review of Incentive Program Guidelines

A. Carl Moyer Program

- General Requirements

5 A “discretionary economic incentive program” is “any EIP submitted to the EPA as an implementation plan revision for purposes other than to comply with the statutory requirements of sections 182(g)(3), 182(g)(5), 187(d)(3), or 187(g) of the Act.” 40 CFR § 51.491.Page 7 of 16 The Carl Moyer Program is implemented through a partnership between C ARB and local air

districts. C ARB manages program funds and distributes them to participating air districts for program implementation each year; develops and revises guidelines, protocols, and c riteria for covered projects; and determines methodologies used for evaluating project cost

- effectiveness.

Air dis tricts follow the Moyer Guidelines to select, fund, and monitor projects in their areas. The Guidelines describe requirements for administrati ve procedures, eligibility criteria for projects in different source categories, cost

- effectiveness criteria, and reporting practices. Section IV.A of the Emission Reduction Report describes the general requirements of the Moyer Program guidelines and how these address the four integrity elements.

Quantifi cation

The Emission Reduction Report references and describes the formulas and data inputs that the guidelines require applicants to use to determine annual emissions ( i.e., baseline emissions,

based on existing equipment or new equipment certified by CARB to current emission standards) and annual emission reductions ( i.e., the difference between baseline emissions and reduced emissions from new/upgraded equipment). 6 Specifically, the Emission Reduction Report identifies the portions of the 2005, 2008 and 2011 Carl Moyer Program guidelines that contain the formulas, engine emission factors (including sources of these emission factors), load factors, and conversion factors necessary to calculate project

- re lated emissions and emission reductions. 7 Appendix C of each of these guidelines contains the formulas used to determine annual emissions and annual emission reductions based on activity data 8 , including options for using hours of operation, fuel consumpt ion and/or miles traveled to determine annual usage. 9 All three guidelines require grantees to use documented activity levels, together with the appropriate emission and load factors, to calculate project

- related emission reductions. 10

These general prov isions of the 2005, 2008 and 2011 guidelines , together with the category

specific provisions discussed in sections V.B and V.C below, require grantees to use well

established, publicly available emission factors and calculation methods and thereby ensure t hat

emission reductions from o ff

- r oad e quipment: r epower, r eplacement, or r etrofit projects can be quantified using reliable and replicable methods.

Surplus

The Emission Reduction Report references and describes the requirements in the Carl Moyer guidelines that help ensure that emissions reductions are surplus

. 11 Specifically, the Emission Reduction Report identifies the portions of the 2005, 2008 and 2011 Carl Moyer Program guidelines state that emission reductions can not be required by any federa l, state or local regulation, memorandum of agreement/understanding, settlement agreement, mitigation

6 Emission Reduction Report at 7

- 8, 11

- 12, 15, 19

- 20, and Appendix F.

7 Id

. at 7

- 8.

8 Program requirements concerning activity data are discussed under “ Enforceability ” below.

9 Emission Reduction Report at 7

- 8.

10 Id . at 12.

11 Id

. at 9.Page 8 of 16 requirement, or other legal mandate in order for projects to be funded. 12 All three guidelines also clarify how rule approval dates impact project eligibi lity and execution

. 13

Recordkeeping and reporting 14 ensure that historic and future emission estimates correctly represent emissions occurring in the San Joaquin Valley. Pre

- inspection requirements 15 ensure that the unit to be replaced is still in useable f orm and thus would not have been replaced by normal fleet turnover. These requirements ensure that emission reductions from normal fleet

turnover that have already been accounted for in the future baseline emission inventories underlying a SIP attainment d emonstration are not treated as surplus.

These general provisions of the 2005, 2008 and 2011 guidelines, together with the category

specific provisions discussed in sections V.B and V.C below, ensure that funded incentive projects will achieve emission re ductions that are not already required under the CAA or

state/local law

.

E nforcea b i l ity

The Emission Reduction Report references and describes the s pecific funding criteria in the 2005, 2008 and 2011 Carl Moyer Program guidelines that ensure that emission reductions can be independently verified and enforced by CARB and the District. For a project to be considered for funding, a complete application containing detailed project information must be submitted by the applicant to the District. 16 Once th e District has selected a project for funding, the District must execute a contract with the grantee, and each such contract must include: (1) the name and contact information of the grantee; (2) specified timeframes for “project completion” (the date

the project post

- inspection confirms that the project has become operational) and “project implementation” (the project life used in the project cost

- effectiveness calculation); (3) detailed information on both baseline and new vehicles, equipment, and/or engi nes, including documentation adequate to establish historical annual usage; (4) requirements for the grantee to maintain the vehicle, equipment and/or engine according to the manufacturer’s specifications for the life of the project; (5) annual reporting r equirements; (6) a provision authorizing the District, CARB, and their designees to conduct fiscal audits and to inspect the project engine, vehicle, and/or equipment and associated records during the contract term, and (7) requirements to

maintain and ret ain project records for at least two years after contract expiration or three years after final project payment, whichever is later. 17 To verify equipment activity data, the guidelines include requirements for grantees to either install operational hour me ters or to keep fuel logs, purchase receipts, or ledger entries specific to the funded equipment. 18 The guidelines also include requirements for pre

- and post

- project inspections, to verify that information provided by a project owner is consistent with ac tual operating equipment, and provisions specifying the consequences of contract non

- performance. 19 Finally, information specific to each

12 Emission Reduction Report at 9.

13 Id . at 9.

14 Id

. at 6

- 8

. 15 Id. at 7.

16 Id. at 6.

17 Id. at 6

- 7.

18 Id. at 10

- 11.

19 Id. at 6

- 7.Page 9 of 16 project is available to the public for specified periods of time 20 and may be obtained through submittal of a request un der the California Public Records Act. 21

These general requirements of the 2005, 2008 and 2011 guidelines , together with the category

specific provisions discussed in sections V.B and V.C below, ensure that emission reductions can be independently verified, that the public has access to emissions

- related information, and that required actions are practicably enforceable consistent with EPA guidance on practical enforceability.

Permanen ce
The Emission Reduction Report describes the requirements in t he Carl Moyer guidelines that help ensure that emissions reductions are permanent

. 22 Specifically, the Emission Reduction Report identifies the portions of the 2005, 2008 and 2011 Carl Moyer Program guidelines that require that old engines be destroyed

, tha t grantees document such destruction

, and that contract s contain requirements for two time frames, “project completion” and “project implementation

, ” to ensure that the District and ARB can fully enforce the contract during the life of the Carl Moyer Program

- funded project. 23 These contract provisions 24 enable EPA and the public to evaluate the duration for which the District attributes emission reductions to a particular project and to determine whether that duration adequately covers the period during which the reductions are relied upon in a SIP.

These general provisions of the 2005, 2008 and 2011 guidelines, together with the category

specific provisions discussed in sections V.B and V.C below, ensure that funded incentive projects will achieve emiss ion reductions that are permanent

.

B. Carl Moyer Program Off

- Road Equipment: R epower, R eplacement, or R etrofit

Section IV.B of the Emission Reduction Report describe s the requirements of the Carl Moyer Program guidelines specific to o ff r oad e quipment repowe rs, replacements and retrofits and how

these requirements provide for emission reductions that adequately address the four integrity

elements. S ection IV. B refers to the following as the applicable guidelines for these project
types :

• 2005 Moyer Program G uidelines, Part II, Chapter 5, Compression

- Ignition Off

- Road Equipment

• 2008 Moyer Program Guidelines, Part I, Chapter 5, Off

- Road Compression

- Ignition Equipment

20 The guidelines require the District to keep for each funded project a “project file” (which generally includes a copy of the application, a completed pre

- and post

- inspection form, and the annual reports submitted by the grantee) and to keep each “project file” for a minimum of two years after the end of the contract term or a minimum of three years after final payment, whichever is later. See, e.g., 2011 Carl Moyer Program Guidelines, chapter 3, section V at

3

- 25, section X.6, section AA.3, section BB.1.( G), and section DD.3.

21 See Cal. Gov’t Code sections 6250

- 6276.48.

22 Emission Reduction Report at 11

- 12.

23 Id. at 9

- 10.

24 Id. at 9

- 10.Page 10 of 16 • 2011 Moyer Program Guidelines, Part 1, Chapter 7, Off

- Road Compression

- Ignition Equipment

Section IV. B of the Emission Reduction Report also refers to Chapter 9, Off

- Road Equipment Replacement

, of the 2011 Moyer Program Guidelines.

Quantifi cation

T he Emission Reduction Report identifies the specific tables in the 2005, 2008 and 2011 Carl Moye r Program guidelines that contain the engine emission factors and load factors for different equipment types necessary to calculate emission reductions. 25 The Emission Reduction Report indicates that the 2005 emission factors reflect preliminary emission d ata based on the

OFFROAD model. For the 2008 and 2011 guidelines, the certifi ed emission standards and Tier designation for the engine used to calculate emission reductions must be determined from engine emission standards adopted by ARB and /or U.S. EPA t hrough a public process. 26 Along with the require d activity level documentation 27 and the equations in Appendix C of each of the guidelines, the data in the identified tables ensure that emission reductions from o ff

- r oad

e quipment: r epower, r eplacement, or r etrofit projects can be quantified using reliable and replicable methods.

Surplus

The Emission Reduction Report indicates that the 2005 guidelines includes a list of engine standards that would preclude engines from being surplus if they are subject to th ese and that the 2008 and 2011 guidelines state that no funded projects can count towards a fleet’s regulatory requirement for the duration of the project life

. 28 The Report also discusses the requirements in the 2008 and 2011 guidelines that help ensure th e new units replace existing units that are in use (e.g. requirements that replacement equipment serve the same function and perform the same work equivalent as the old equipment and that horsepower ratings between the new and old units

are similar to each other)

. 29 The se requirements support the surplus criterion for projects funded under these guidelines.

Enforceability

T he Emission Reduction Report identifies additional compliance requirements specific to this

source category. Specifically, the report re ferences the portions of the 2005 guidelines that identify all the information that the applicant must submit in a project application to be eligible for funding for this project t ype and the requirement of a functioning hour meter. 30 For the 2008

g uidelines, the report specifies that baseline activity be based on historical hours of operation on

25 Emission Reduction Report at 11

- 12.

26 See Emission Reduction Report at 11

- 12; 2008 Moyer Program Guidelines, Part I, Section IV.a.(7) at V

- 6 ; and 2011 Moyer Program Guidelines, Part 1, Section D.1.(C) at 7

- 5..

27 Emission Reduction Report at 10

- 11.

28 Id. at 10.

29 Id. at 12

- 13.

30 Id. at 12

- 13.Page 11 of 16 the average of the two previous years’ use or two years of historical fuel usage documentation

and that future reported hours of operation be based only on readings from an installed and fully operational hour meter. 31 For the 2011 guidelines

, the report specifies that reductions be based upon readings from an installed and fully operational hour meter or if fuel usage is used, then future annual fuel usage mu st be based on fuel logs, purchase receipts, or ledger entries specific to the funded equipment. 32 Additionally, the Emission Reduction Report describes the requirement that grantees demonstrate that they owned and operated the old equipment in California for the previous

two years. 33 The se requirements support the enforceability criterion for projects funded pursuant to these guidelines.

Permanen ce
The Emission Reduction Report identifies additional requirements concerning the timeline for destruction of the old unit for this project type

. 34 Recordkeeping and reporting requirements 35
(e.g., the requirement that the grantee demonstrate that it owned and operated the old equipment in California for the previous two years) provide further documentation of the emission

reductions from an Off

- Road CI engine replacement project that occur in the San Joaquin Valley. These requirements support the permanence criterion for o ff

- r oad r epower, r eplacement and

r etrofit projects funded pursuant to the 2005, 2008 and 2011 guidelines.

C. Carl Moyer Program Portable and Stationary Agricultural Source s R epower Projects

Section IV.C of the Emission Reduction Report describe the requirements of the Carl Moyer Program guidelines specific to rep owers of p ortable and s tationary a gricultural Sources and how these requirements provide for emission reductions that adequately address the four integrity elements. Section IV.C refers to the following as the applicable guidelines for these project
types:

• 2005 Moyer Program Guidelines, Part II, Chapter 10, Agricultural Sources

• 2008 Moyer Program Guidelines, Part I, Chapter 10, Agricultural Sources

• 2011 Moyer Program Guidelines, Part I, Chapter 10, Portable and Stationary Agricultural Sources

Quantifi c ation

T he Emission Reduction Report d oes not identif y the specific tables in the 2005, 2008 and 2011 Carl Moyer Program guidelines that contain the engine emission factors and load factors for different equipment types necessary to calculate emission reductions but we note that they are:

• 2005 Moyer Program Guidelines : Appendix B, Tables B

- 12 and B

- 13

31 Emission Reduction Report at 10

- 11.

32 Id. at 11.

33 Id. at 11.

34 Id. at 13

- 14.

35 Id. at 10

- 11.Page 12 of 16 • 2008 Moyer Program Guidelines : Appendix B, Tables B

- 11 and B

- 25

• 2011 Moyer Program Guidelines : Appendix D, Tables D

- 10 and D

- 14

. The Report specifies tha t the guidelines require the use of an hour

- based formula for these types of projects; a fuel

- based formula can be used if two years of historical fuel logs or purchase receipt documentation are provided by the grantee. 36 The Emission Reduction Report also highlights that engines must be certified or that clearly defined alternative documentation and testing are required when certification is unavailable. 37 For projects where an existing engine is replaced by a natural gas engine or electric motor, t he Emiss ion Reduction Report specifies that the quantification protocol ensures that only surplus emission reductions are calculated. 38 Along with the required activity level documentation 39 and the equations in Appendix C of each of the guidelines, the data in the identified tables ensure that emission reductions from portable and stationary agricultural projects can be quantified using reliable and replicable methods.

Surplus

The Emission Reduction Report indicates that this project type is subject to regulation under the CA Stationary Engine Airborne Toxic Control Measure (ATCM), the CA Portable Engine ATCM, or

District Rule 4702. 40 The Report indicates that the 2008 and 2011 guidelines include an implementation document that has the appropriate project lifetimes based on compliance deadlines by project type and year. 41 The Report also clarifies the requirement in the 2011 Guidelines for portable farm equipment which can have a project life for past the compliance dates, but are only considered surplus until the co mpliance date. 42 These requirements support the surplus criterion for projects funded under these guidelines.

Enforceab ility

T he Emission Reduction Report identifies additional compliance requirements specific to this

source category. Specifically, the report references the portions of the 2005 , 2008 and 2011 guidelines that require operational hour meters to verify activity levels. 43 The report also identifies the requirement to keep fuel logs or purchase receipts. 44 These req uirements support the enforceability criterion for projects funded pursuant to these guidelines.

Permanen ce
The Emission Reduction Report references and describes requirements that ensure the destruction of the old unit for this project type. 45 In additio n, the 2005 “Minimum Application

36 Emission Reduction Report at 15.

37 Id. at 15.

38 Id. at 16.

39 Id. at 10

- 11.

40 Id. at 15.

41 Id. at 16.

42 Id. at 16.

43 Id. at 15.

44 Id. at 15.

45 Id. at 16.Page 13 of 16 Information” for this project type require that the application state the percent of time operated in

the District 46 , which provides further documentation that the emission reductions occur in the San Joaquin Valley. The 201 1 guidelines require that engines regulated under the Portable Engine ATCM be registered (or permitted) in the air district to be eligible for repower 47 , which provides further documentation that the emission reductions occur in the San Joaquin Valley.

Thes e requirements support the permanence criterion for o ff

- r oad r epower, r eplacement and

r etrofit projects funded pursuant to the 2005, 2008 and 2011 guidelines.

D. Prop 1B Program: On

- Road Vehicle R eplacement Projects

California voters approved Proposition 1B in November 2006, authoriz ing the Legislature to appropriate $1 billion in bond funding to the C ARB to reduce air pollution emissions and health risks from freight movement along California’s priority trade corrido rs. 48 C ARB staff developed the initial Proposition 1B: Goods Movement Emission Reduction Program Guidelines for Implementation in consultation with stakeholders, including: air districts, metropolitan planning organizations, port authorities, shipping lines , railroad companies, trucking companies, harbor craft owners, freight distributors, terminal operators, local port community advisory groups, community interest groups, and airports. Updates to the Guidelines are based on evaluating advances in technology , changes in equipment costs, regulatory actions, demand for Program funds, and other new information that influences the design of project specifications. 49 Section IV.D of the Emission Reduction Report describes the requirements of the Prop 1B guidelines for

o n r oad v ehicle replacements and how they address the four integrity elements

.

Quantifi cation

The Emission Reduction Report indicates that emission reductions should be calculated using the publicly available “Project Benefits Calculator” and that th e emission factors are based on in

- use testing. 50 The publicly available Project Benefits Calculator uses vehicle miles traveled, which must be recorded and reported 51 , together wit h emission factors to determine emissions. The Report states that emission fa ctors for diesel heavy

- duty trucks are based on in

- use testing of Class 7

and Class 8 diesel trucks and are the same ones used for the California On

- Road Heavy

- Duty Diesel Vehicles (In

- Use) Regulation and used in EMFAC2011. 52 These provisions of the 2008 and 201 0 guidelines require grantees to use well

- established, publicly available emission factors and calculation methods and thereby ensure that emission reductions from o n road vehicle

r eplacement projects can be quantified using reliable and replicable methods.

46 2005 Moyer Program Guidelines, Part II, Table 10

- 4 at X

- 14

47 2011 Moyer Program guidelines, Part I, Section C.7.(B) at 10

- 9.

48 Pro position 1B Program: Goods Movement Emissi on Reduction Program, Final 2013 Guidelines for Implementation, adopted January 25, 2013, at pp. 1

- 12

. Available at http://www.arb.ca.gov/bonds/gmbond/docs/prop_1b_goods_movement_2013_program_guidelines_for_implementat ion.pdf

49 Id

50 Emission Reduct ion Report at 19

- 20

. 51 Id. at 19.

52 Id. at 20.Page 14 of 16 Surplus

The Emission Reduction Report describes the requirements in the Prop 1B guidelines that help ensure that emissions reductions are surplus. 53 Specifically, the Emission Reduction Report identifies the portions of the 2008 and 2010 Prop 1B g uidelines that state that emission

reductions can not be required by any federal, state or local regulation or legal mandate in order for projects to be funded. 54 The Report also describes r ecordkeeping, reporting and application requirements 55 that ensure t hat historic and future emission estimates correctly represent emissions occurring in the San Joaquin Valley. Pre

- inspection requirements described in the Report 56 ensure that the unit to be replaced is still in useable form and thus would not have been

rep laced by normal fleet turnover

– that is, emission reductions from normal fleet turnover that

have already been accounted for in the future baseline emission inventories underlying a SIP attainment demonstration are not treated as surplus.

The se provision s ensure that funded incentive projects will achieve emission reductions that are not already required under the CAA or state/local law

.

Enforceab ility

The Emission Reduction Report references and describes the s pecific funding criteria in the 2008

and 2010 Prop 1B guidelines that ensure that emission reductions can be independently verified and enforced by CARB and the District. Funding is obligated by the District through a contract
with the equipment owner , and each such contract must include requirem ents for recordkeeping, reporting, audits, and other verification mechanisms, including provisions requiring equipment owners to agree to the installation and use of an electronic monitoring device at any time during the

contract term. 57 The requirements fo r pre

- inspections include verification of usage and requirements for photographic documentation

. 58 The reporting requirements include:

• Odometer reading, including the date read.

• Certification of annual California vehicle miles travelled (VMT) since last re port.

• Certification of the required percent operation in California.

• Certification of at least 50 percent of travel within the four California trade corridors as well as the percentage of annual VMT in the Central Valley trade corridor.

The Report also includes the following possible penalties for failing to comply with the terms of the project contract:

• Recovery of all or a portion of program funds.

• Other fiscal penalties on equipment owners based on the severity of the nonperformance.

• Cancellation of the contract.

53 Emission Reduction Report at 20

- 21.

54 Id. at 20.

55 Id. at 17

- 19.

56 Id. at 18.

57 Id. at 18.

58 Id . at 18.Page 15 of 16 • A ban on the equipment owner’s ability to participate in future State incentive

programs. 59

These requirements of the 2008 and 201 0 guidelines ensure that emission reductions can be independently verified and that required actions are practic ably enforceable consistent with EPA guidance on practical enforceability.

Permanen ce
The Emission Reduction Report describes the requirements in the Prop 1B guidelines that help ensure that emissions reductions are permanent

. 60 Specifically, the Emission Reduction Report identifies the portions of the 2008 and 201 0 Prop 1B guidelines that require: (1) a demonstration that both replaced (old) and replacement (new) truck are used similarly in the San Joaquin Valley, and (2) documentation the destruction of t he replaced equipment. 61 Recordkeeping and reporting requirements required by contract 62 (e.g., requirements to certify that at least 50 percent of travel is within the four California trade corridors and to provide the percentage of

annual VMT in the Centra l Valley trade corridor ) provide further documentation of the emission reductions from a Prop 1B truck projects which occur in the San Joaquin Valley. The project life, during which the equipment owner is obligated under contract to maintain and operate fu nded equipment, enable EPA and the public to evaluate the duration for which the District attributes emission reductions to a particular project and to determine whether that duration adequately covers the period for which the reductions are relied upon in a SIP. 63 These provisions of the

2008 and 201 0 guidelines ensure that funded incentive projects will achieve emission reductions that are permanent.

VI. EPA’s Recommendations for future Reports

EPA recommends the following revisions for future Emission Reduction Report

.

• Include enough information on each project for the public and EPA to be able to calculate the emission reductions of each project.

• Include section describing how the public can request more information on emission

reductions.

• Demonstra te that the projects included in such an Emission Reduction Report ha ve not been previously credited for example by providing comparable project ID numbers.

• Both Carl Moyer and Prop 1B guidelines go through periodic reviews and new version of the guidelin es are released without changing the date of the guidelines (e.g. the 2011 Carl Moyer Guidelines were first released on April 28, 2011 and have had revisions on January 6, 2012; March 29, 2012; February 8, 2013; March 27, 2013; October 30, 2013; November 2 6, 2013; April 1, 2014; and July 11, 2014). C ARB should clearly state which version of the guidelines

59 Emission Reduction Report at 19.

60 Id

. at 21

- 22.

61 Id. at 21.

62 Id. at 19.

63 Id. at 22.Page 16 of 16 a re used or explain why the revisions do not impact the integrity of the emission reductions, as compared to the cited guideline.