San Joaquin Valley d AIR POLLUTION CONTROL DlSlRlCT 

GOVERNING BOARD 

Leroy Omellas. Chair DATE: October 16, 2008 

Supervisor, San Joaquin County 

Chris Vierra, Vice Chair TO: SJVUAPCD Governing Boar 

Councilmember, City of Ceres 

Tony Barba FROM: Seyed Sadredin, Executive 

Supervisor. Kings County Project Coordinator: Manuel Salinas 

Judith G. Case 

Supervisor. Fresno County 

Ronn Dominici 

Supervisor, Madera County 

Michael G. Nelson 

Supervisor, Merced County 

William O'Brien 

Supervisor, Stanislaus County 

Henrv . T. Perea 

Councilmember, City of Fresno 

John G. Telles, M.D. 

Appointed by Governor 

Raymond A. Watson 

Supervisor, Kern County 

J. Steven Worthley 

Supervisor, Tulare County 

Vacant 

Appointed by Governor 

Vacant 

Large City 

Vacant 

Small City, Central Region 

Vacant 

Small City, Southern Region 

RE: ADOPT PROPOSED AMENDMENTS TO RULE 4306 

(BOILERS, STEAM GENERATORS, AND PROCESS 

HEATERS - PHASE 3) AND RULE 4307 (BOILERS, 

STEAM GENERATORS, AND PROCESS HEATERS - 

2.0 MMBTUIHR TO 5.0 MMBTUIHR) AND PROPOSED 

NEW RULE 4320 (ADVANCED EMISSION REDUC'TION 

OPTIONS FOR BOILERS, STEAM GENERATORS, AND 

PROCESS HEATERS GREATER THAN 5.0 MMBTUIHR) 

RECOMMENDATION: 

1. Approve, and authorize the Chair to sign, the Negative 

Declaration prepared for Rule 4306 (Boilers, Steam Generators, 

and Process Heaters - Phase 3) and Rule 4320 (Advanced 

Emission Reduction Options For Boilers, Steam Generators, and 

Process Heaters Greater Than 5.0 MWIBtulhr). 

2. Adopt proposed amendments to Rule 4306 (Boilers, Steam 

Generators, and Process Heaters - Phase 3) and Rule 4307 

(Boilers, Steam Generators, and Process Heaters - 2.0 MMBtuIhr 

to 5.0 NlNIBtuIhr), and proposed new Rule 4320 (Advanced 

Emission Reduction Options For Boilers, Steam Generators, and 

Process Heaters Greater Than 5.0 MIVIBtuIhr). 

Seyed Sadredin 

Executive Oirector 

Air Pollution Control Officer 

3. Authorize the Chair to sign the attached Resolution. 

Northern Region Office 

4800 Enterprise Way 

Modesto, CA 95356-8718 

BACKGROUND: 

(209) 557-6400 FAX (209) 557-6475 Due40 the Valley's geography, topography, and meteorology, the 

Central Region Office challenges that we face in meeting the federal health-based ambient air 

1990 East Gettysburg Avenue 

Fresno, CA 93726.0244 qua,lity standards for ozone and fine particulates are unmatched by any 

~559~~30~~000~~~~~559~~30-~0~i other region. The District's 2007 Ozone Plan calls for another 75 

percent reduction in oxides of nitrogen (NOx) emissions. In 2007, the 

Southern Region Office 

2700 M Street, Suite 275 District had to seek an "Extreme" nonattainment classification for ozone 

Bakersfield, CA 93301-2373 

(661) 3264900 FAX (661) 3264985 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

because enough reductions could not be identified with available technology. This 

shortfall in the needed reductions is commonly referred to as a "black box" and the 

District is legally bound to identify control measures needed to erase this shortfall. In 

implementing the Ozone and the PM2.5 plans, the District committed itself to leaving no 

stone unturned in identifying technologically and economically feasible measures that 

will brirlg the District into attainment in an expeditious manner. 

Public health concerns and legal mandates provide ample justification for promulgating 

strong measures. However, in crafting today's recommendations, the District staff also 

gave great weight to ensuring the economic feasibility of the proposed regulations. In 

addressing the economic feasibility issues, it is important to note that today's 

recommendations represent the third or fourth generation of rules impacting many of the 

businesses affected by these regulations. In fact, just last year, many businesses 

completed expe~isive retrofits and replacements that were mandated by the District in 

the current version of these regulations. 

Today's recommendations call for the most effective controls 'that are available and are 

technologically feasible. The proposed regulations also provide businesses with costeffective options to comply. If adopted, Rule 4307 and Rule 4320 would be the most 

stringent regulation in the country for the subject type of units, while offering affected 

businesses cost-effective compliance options. Specifically, the rule includes an 

innovative provision that allows operators who have previously installed Reasonably 

Available Control Technology (RACT) and are now faced with inordinately high retrofit 

costs to comply by funding District-administered emission reduction incentive projects. 

This will allow businesses to make case-by-case decisions based on their own unique 

economic and logistical circumstances while enabling the District to move forward with 

procuring reductions that are necessary to protect public health. 

Today's recommendations satisfy the District's control measure commitments in both 

the District's 2007 Ozone Plan and the District's 2008 PM2.5 Plan. The proposed 

amendments and new rule would establish more stringent emission limits for oxides of 

nitrogen (NOx) and impose limits for oxides of sulfur (SOX) and particulate matter with 

diameter of less than 10 microns (PMIO), which would generally be achieved through 

the use of low sulfur or gaseous fuels. Overall, the proposed amendments are 

estimated to generate a total 4.5 tonsfday of NOx, which is a 47% reduction from the 

Rule 4320 NOx baseline and a 64% reduction from the Rule 4307 baseline of affected 

units. Also Rule 4320 would produce reductions of 3.6 tonsfday of SOX, which is a 74% 

reduction from the affected units. 

DISCUSSION: 

Boilers, steam generators and process heaters are used throughout the Valley in many 

different industries. The District's permits system lists nearly 1,200 units affected by this 

rule project. Boilers are used in a variety of manufacturing plants, hospitals, refineries, 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

schools, and large office buildings. Steam generators, particularly the larger units, are 

primarily used in the oil production industry to generate steam for heavy oil production 

enhancement. Process heaters provide heat for industrial and commercial processes 

including food production and manufacturing. 

Control Technologies and Options 

Control of NOx from boilers, steam generators, and process Iieaters is typically achieved 

by using either improved combustion technology such as ultra low-NOx burners (ULNB) 

and conventional low-NOx burners (LNB), or exhaust gas control technology such as 

selective catalytic reduction (SCR). 

The most stringent NOx limits proposed in Rule 4320 are technologically feasible by using 

SCR or a combination of SCR and ULNB. Most of the units subject to Rule 4320 have 

undergone several generations of NOx controls, and consequently, certain applications of 

SCR may not be feasible due to economic considerations andlor space limitations. In 

consideration of the high costs for some units subject to Rule 4320, the rule includes an 

annual emissions fee option. Operators have the option of paying an annual emissions 

fee based on the actual emissions of the unit during the previous calendar year. These 

fees would be used by the District to achieve cost effective NOx reductions. The first 

payment would be due in 201 0 for the 2009 emissions. Payments would continue 

annually until the unit demonstrated compliance with appropriate limits. 

The 12 ppmv and 9 ppmv NOx limits in Rule 4307 and 4320 are achievable with ULNB, 

although some operators prefer the operational flexibility offered by the combination of 

LNB and SCR. The 30 ppmv NOx limit in Rule 4307 for schools and low-use units is 

normally achievable with readily available low-NOx burners and flue gas recirculation 

systems. 

Summary of Proposed Rule 4320 

Rule 4320 would impose new advanced NOx, SOX and PM control options that go well 

beyond Reasonably Available Control Technology (RACT), on larger units based on 

their size, fuel type, and fuel usage. Numerous discussions were held with operators to 

discuss possible compliance schedules and emission levels. Enhanced Schedules 

were included which generate additional reductions while giving operators slightly 

longer compliance timelines. The rule also includes special Staged Enhanced 

Schedules that first require interim Initial Emission Limits be achieved with a lower Final 

Emission Standards to be met at a later date. These schedules would produce required 

reductions at the earliest possible date with even greater reductions in the future. 

Because the affected units have typically had several levels of NOx controls, obtaining 

additional reductions can require expensive systems. Although the technology is 

available, for certain units, those technologies are not economically feasible. Therefore, 

the rule provides an option allowing payment of an emissions fee rather than installation 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

of additional NOx controls. To comply with federal requirements, the fee would be 

based on the total actual emissions. The fees would be used by the District to fund 

projects which could achieve cost effective reductions. Fees would be paid annually 

and continue until the unit complies with the applicable limit. The affected sources will 

have the option, on an annual basis, to stop the fee option and install controls specified 

in the rule. 

Particulate emissions from these sources is primarily generated from the fuel sulfur 

content so the rule proposes PM2.5 controls based on fuel sulfur limits or SOX limits on 

exhaust gases. Most of these units are fired on PUC-quality natural gas which is 

considered to be a reasonable level of SOX control. Units firing on field gas, refinery 

gas, or digester gas would either meet similar fuel sulfur levels or install an exhaust gas 

control. Extended compliance schedules have been provided for some larger units that 

are currently in compliance with NOx limits but need appropriate time to design and 

install the additional SOX controls. 

Summary of Proposed Amendments to Rule 4306 

Units subject to Rule 4306 would also be subject to Rule 4320, when it is adopted. Rule 

4306 amendments are administrative changes to address EPA concerns and make 

Rule 4306 approvable for inclusion in the State Implementation Plan (SIP). Specifically, 

Section 5.3.4 of Rule 4306 would be modified to clarify that the exemption from BACT 

and offset requirements when adding start-up or shutdown conditions in the Permit to 

Operate (PTO) is not automatic but depends on Rule 2201 language. 

Summary of the Proposed Amendments to Rule 4307 

Amendments to Rule 4307 apply to smaller units and generate NOx emissions 

reductions by removing or altering existing exemptions from the rule. The total 

exemption for units used at schools would be removed, as well as the limited exemption 

for atmospheric units used in oilfields or refineries, and glycol reboilers. The low use 

unit threshold would drop from a limit of 5.0 billion Btu per year heat input to no more 

than 1.8 billion Btu per calendar year. After July I, 2015 these units must meet all 

applicable requirements of the rule. 

New and replacement units would have to meet lower 9 or 12 ppmv NOx limits. This 

provision allows operators to lengthen useful life of units that recently upgraded to meet 

the current limits. SOX and PM2.5 requirements would be similar to Rule 4320 but 

these units are typically fired on Public Utility Corrlmission quality natural gas so the 

provisions serve as backstop language with little cost and nominal err~ission reductions. 

Compliance Schedule 

The proposed amendments set compliance schedules between 201 1 and 2014 based 

on the corrlplexity of the control system to be installed and the final emission level to be 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

achieved. In setting the compliance schedule for this rule project, District staff 

considered the existing controls and emission levels and gave earlier compliance dates 

to units that could reach intermediate levels with less system modifications. Lower 

emission limits requiring more significant physical modifications and controls were 

placed in later years on Enhanced schedules. 

A Staged Enhanced schedule was also created for units that could meet an initial lower 

emission level and a final, more stringent, emission level at a later date. 

Cost Effectiveness Analysis 

Cost effectiveness will depend on the current level of controls, unit size, fuel usage and 

final emission levels. Some units have previously installed state-of-the-art controls and 

are in compliance with the most stringent emission limits and will therefore have no 

additional compliance costs. For larger, full time units, SCR costs may be as low as 

$1 1,000 per ton and as high as $200,000 per ton for smaller units. To address 

concerns about these costs, there is an option for an annual emissions fee, which was 

discussed above. Compliance dates for some of the lower emission limits have been 

extended to allow additional time for development of new, lower-cost burners. 

While staff does not expect the majority of conipliance costs to be infeasible, for 

situations with unusually high costs, Rule 4320 provides an annual fee option at $9,350 

per ton. -The Advanced Emission Reduction Option annual emission fee is the first of its 

kind and will achieve reductions without excessive cost. 

Rule 4307 would require replacement of existiug burners for some units. The cost 

effectiveness for units that would now be required to meet 'the rule emission limit ranges 

from about $1 0,000 to $23,000 per ton of NOx reduced, depending on the size of the 

unit and its hours of operation. The cost effectiveness analysis is attached as Appendix 

C of the Final Draft Staff Report. 

The majority of these units are fired on PUC-quality natural gas or are able to meet the 

fuel sulfur limits based on existing controls so they will have no compliance costs. The 

remaining units would have to add sulfur controls at costs of approximately $89,000 per 

ton. An extended compliance schedule is provided to allow 'the necessary design and 

construction of these controls. 

Issues and Responses 

District staff has worked closely with stakeholders throughout the rule development 

process. Written public comment periods were held after each workshop. Comments 

have been sunimal-ized and a District response included in staff reports in Appendix A. 

The major issues are summarized below. 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

COMMENT: For the larger boilers, steam generators, and process heaters, the 

District should recognize the great variety of units and operational constraints 

existing in the Valley. A "one-size-fits-all" approach to emission limits will not 

work. The Valley is entering into a new era in which the most effective emission 

controls can only be applied by allowing corr~panies to incrementally reduce 

emissions as most appropriate, based on their unique equipment configuration 

and process demands. Implementing new rules over a sufficient time period 

would allow firms to make the necessary changes while ratcheting down 

emissions. We would strongly encourage the District to include all these 

concepts as "advanced emission reduction options." 

RESPONSE: District staff agrees that further emission reductions from this 

category rely on applying sophisticated and expensive control technology to units 

that are already well controlled. Staff also agrees that the different categories of 

boilers, steam generators and process heaters should be treated differently 

within the District's regulations. In Rule 4320, staff incorporated the Advanced 

Emission Reduction Option (AERO) concepts suggested by industry and 

proposed sever] major technology-based control categories, as well as an option 

for complying through paynient of fees that will be used to achieve economically 

feasible NOx reductions. 

COMMENT: The proposed NOx emission limit of 5 ppmv appears arbitrary and 

capricious. Currently, there appears to be only one NOx control method that is 

technologically feasible, which can achieve 5 ppmv NOx - selective catalytic 

reduction. By proposiug such a low emission limit, it would appear that the 

District is endorsing one technology over another. The NOx emission limit 

should not be lower than 9 ppmv NOx. The 9 ppmv level has been demonstrated 

as technologically feasible with the District's BACT determinations and has been 

achieved at several steam generator installations throughout the air basin. 

RESPONSE: District staff have carefully considered the technological and 

economic feasibility of numerous candidate controls, and have incorporated as 

much flexibility into Rule 4320 as is possible. In order to maximize emission 

reductions, however, the proposed NOx limits necessarily reflect a limited range 

of technology choices. District staff worked closely with stakeholders to tailor the 

compliance schedules to achieve the maximum NOx reductions as expeditiously 

as possible, while providing the time needed to identify the most economically 

feasible compliance options. Operators also have the option to pay the AERO 

NOx fee, which woi-~ld allow the District to fund NOx reduction projects. 

COMMENT: Compliance with these low NOx limits will not be economically 

feasible in some cases, and this will force stakeholders to pay the AERO fee 

instead of adding NOx controls to their equipment. This fee should not exceed 

the actual costs the District will have to pay to obtain NOx reductions. Also, this 
SJVUA PCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

fee should not be required in advance of any compliance deadlines; payment 

should coincide wit11 the cornpliance deadlines. 

RESPONSE: The emission fee rate in Proposed Rule 4320 is the same as in 

Rule 951 0 (Indirect Source Review), and reflects the actual cost for the District to 

obtain NOx emission reductions. The fee option is a lower cost option for 

operators who (1) believe that the controls are just too expensive, or (2) would 

like extra time for burner technology to mature and produce lower-cost control 

options. Operators also have the third option of reducing their annual fees by 

reducing their NOx err~issions with additional controls that do not fully meet the 

final NOx limits in the rule. Fee payments are scheduled so that the District can 

obtain timely emission reductions. 

COMMENT: The Refiners Council appreciates the cooperation of District staff in 

addressing the refining industry concerns, including with respect to additional 

particulate matter limits and the final compliance deadlines. The Refiners 

Council still maintains, however, that the NOx limits are, in fact, unachievable 

through ultra low-NOx Burner technology and that SCR costs are prohibitively 

expensive. 

RESPONSE: District staff will continue to work with the Refiners Council on the 

concept of a rule specifically addressing refinery units. The alternative refinery 

specific rule would replace and supersede Rule 4320 should the refiners wish to 

pursue development of an alternative rule. 

COMMENT: According to Rule 4320, operators who have a two-step, "Staged 

Enhanced" compliance schedule and who do not attain the NOx limits before the 

deadlines would be out of compliance. Operators should be able to stay 

compliant by starting to pay the fee if emission compliance can not be 

economically achievable. 

RESPONSE: District staff added g provision to proposed Rule 4320 to allow 

operators of units designated under the "Staged Enhanced" Schedule to pay the 

emissions fee if they meet the irritial emissions limit but not the final emissions 

limit. This is in recognition of the difficulty that some units may have in meeting 

the final limit in an economic fashion but still ensures equity with those units that 

are initially designated for the fee option. 

COMIVIENT: The first draft of Rule 4320 contained emission limits for particulate 

matter and sulfur that would have required add-on emission controls, such as 

electrostatic precipitators. The expected amount of reductions was very small 

compared to the very significant costs to install the controls on these gas-fired 

units. 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16. 2008 

RESPONSE: District staff determined that the majority of the PM from gas-fired 

units would be secondary PMIO generated from the NOx and SOX emissions. 

District staff ultimately based the proposed particulate matter requirements on 

the District's BACT Clearinghouse, which indicated that for oil field steam 

generators the District's achieved-in-practice BACT for PM 10 and SOX is the 

combustion of natural gas, liquefied petroleum gas (LPG), or wastelrecovered 

gas that is treated to remove 95% by weight of sulfur compounds. In addition to 

the proposed PMIO and SOX control requirements, District staff added another 

compliance option using fuel sulfur limits. District staff worked together with 

stakeholders in designating the fuel sulfur limits. 

Socioeconomic Analysis 

State law req~.~ires the District to analyze the socioeconomic impacts of any proposed 

rule amendment that significantly affects air quality or strengthens an emission 

limitation. The socioeconomic report is attached as Appendix D to the final draft staff 

report. The final socioeconomic report will be presented to the District Governing Board in 

order to disclose any expected economic impacts. 

Rule Consistency Analysis 

Pursuant to California Health & Safety Code Section 40727.2, District staff have 

prepared a rule consistency analysis, Appendix El that compares the elements of new 

Rule 4320 with ttie corresponding elements of other District rules, federal regulations 

and guidelines that apply to the same source category or type of equipment. 

Environmental Impacts 

The proposed amendments to Rule 4306 and Rule 4307 and proposed new Rule 4320 

have undergone enviror~mental review in accordance with the requirements of the 

California Environmental Quality Act. A proposed negative declaration has been issued 

by the District and made available for public review and comment. Upon approval of 

this project, a Notice of Determination will be filed for Rule 4320 and the amendments to 

Rule 4306. 

District staff has investigated the likely environmental impacts of proposed amendments 

to Rule 4307. Based on the lack of evidence to the contrary, District staff has 

concluded that the proposed rule will not have any significant adverse effects on the 

environment. Staff recommends filing a Notice of Exemption under the provisions of 

Public Resource Code 15061 (b)(3). 

Rule Development Process 

District staff conducted public workshops in October 2007 and March and July 2008 to 

present and discuss the proposed amendments to Rules 4306, and the provisions of 
SJVUAPCD Governing Board 

ADOPT PROPOSED AMENDMENTS TO RULE 4306 AND RULE 4307, AND PROPOSED NEW RULE 

4320 

October 16, 2008 

Rule 4320. District staff solicited information from affected source operators, 

consultants, vendors, and manufacturers of control technologies, and trade associations 

on the technological feasib~lity and cost information used in developing the proposed 

amendments and new rule. The corr~ments received during the public workshop 

process have been incorporated in the draft rules, as appropriate. 

FISCAL IMPACT: 

District staff expects no fiscal. impact to result from this action 

Attachments: 

Negative Declaration for Proposed Amendments to Rule 4306 and Proposed New Rule 4320 (23 

pages) 

Resolution for Proposed Amendments to Rule 4306 and Rule 4307 (6 pages) 

Proposed Amendments to Rule 4306 (20 pages) 

Proposed Amendments to Rule 4307 (16 pages) 

Proposed Rule 4320 (20 pages) 

Final Draft Staff Report with Appendices for Proposed Amendments to Rule 4306 and Rule 4307 

and Proposed New Rule 4320 (108 pages)