1 Final Staff Report with Appendices for Proposed Rule 9610 

### SAN JOAQUIN VALLEY UNI FIED AIR POLLUTION CONTROL DISTRICT

FINAL STAFF REPORT

Proposed Rule 9610 (State Implementation Plan Credit for Emission Reductions Generated through Incentive Programs)

June 20, 2013

Prepared by: Jeannine Tackett, Senior Air Quality Specialist Anna Myers, Senior Air Quality Specialist

Reviewed by: Jessi Fierro, Stra tegies and Incentives Manager Todd DeYoung, Strategies and Incentives Manager Errol Villegas, Strategies and Incentives Manager Samir Sheikh, Director of Strategies and Incentives



### I. SUMMARY

The San Joaquin Valley Unified Air Pollution C ontrol District (Distric t) currently operates one of the largest and most well-respected in centive programs in California. Since 1992, the District’s incentive programs hav e provided over $500 m illion in incentive funds, resulting in over 100,000 tons of lif etime emission reductions. Each District incentive investment is matched by inve stments on the part of the participating businesses, public agencies, and residents, who together have also invested over $400 million on these projects. These combined efforts have accelerated the adoption of cleaner technologies beyond what is achieved by stringent regulations alone, and in

sectors for which the Distric t has limited regulatory authorit y (mobile sources). The significant reductions seen through these vol untary incentive programs have resulted in significant improvements to air quality and public health, and have advanced the Valley

towards attainment of incr easingly stringent federal air quality standards (also called
National Ambient Air Qua lity Standards, or NAAQS).

The District has been lauded for its efficient and effective use of incentive funding and programs, and has become a model for gr ant programs throughout the state. In addition to locally-generated funding source s, support from fede ral and state sources has been critical in bringing much-needed incentive funds to the Valley.

Although incentive programs resu lt in real air quality benefit s, the U. S. Environmental Protection Agency (EPA) has not historically granted credit to the District for incentivebased emission reductions in State Implem entation Plans (SIPs) . When given SIP credit, incentive-based emission reductions can be used alongside regulatory-based

emission reductions to meet certain federal Clean Air Act (CAA) requirements, such asSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

2 Final Staff Report with Appendices for Proposed Rule 9610 demonstrating attainment, fulfilling commitm ents for long-term measures under CAA §182(e)(5) (“black box reductions”), meeting r easonable further progress (RFP) or rate of progress (ROP) emission reduction milest ones, or satisfying contingency measure requirements. District Rule 9610 (State Implementation Plan Credit for Emission Reductions Generated through Incentive Progr ams) will establish a mechanism through

which incentive-based emission reduc tions can receive SIP credit.



### II. PROJECT BACKGROUND

A. The Need for Incentive Programs in SIPs

EPA periodically reviews and establishes heal th-based NAAQS for ozone, particulates, and other pollutants. Once a standard is set, EPA designates areas as attainment or nonattainment. EPA also adopts implementation rules which, with the CAA, establish required components for attainment plans. By meeting planning and attainment requirements, local air districts avoid feder al sanctions and improve public health.

Traditional regulatory controls are a core component of the District’s attainment strategies. Since 1992, the District has adopted over 500 new rules and amendments, reflecting technologies and methods far beyond minimum control levels. Although new opportunities for stronger regul atory controls continue to become increasingly scarce,

the District evaluates all source s of air pollutant emissions for new emission reductions opportunities in each attainment plan.

Federal law requires reasonably available control technology (RACT), reasonably available control measures (RACM), best av ailable control technology (BACT), and/or best available control measures (BACM), depending on the requirements associated with a particular attainment plan. In addi tion, an attainment plan as a whole must

demonstrate sufficient emission reductions to achieve attainment, to meet reasonable further progress (RFP) milestones, and sa tisfy contingency measure emission reductions requirements.

Given the significant emission reductions already being achieved in the Valley through adopted regulatory strategies an d the significant investment necessary to achieve new emission reductions from stationary sources, the Valley is at the point of diminishing returns from achieving additional reducti ons through the adoption of new regulatory controls. Yet the Valley continues to face significant challenges under current and upcoming federal air quality st andards. The District thus pursues comprehensive, multifaceted strategies that reach beyond traditi onal regulations to include incentive programs, technology advancem ent efforts, and more.

For regulatory measures contained in a ttainment plans, the District is able to incorporate future reductions that are projected through implementation of such measures into the plan. A similar mechani sm has been lacking for pr ojected reductionsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

3 Final Staff Report with Appendices for Proposed Rule 9610 achieved through incentive-based measures. Wi th the significant growth in the District’s incentive-based programs and di minishing opportunities for further reducing emissions through regulatory measures on st ationary sources, the lack of a similar SIP-creditability mechanism for incentive-based measures is now a major deficit in developing attainment plans.

Emission reductions from non-regulatory strat egies, such as incentives, have generally not been accounted for or given full credit in attainment plans to meet federal CAA requirements. Establishing a framework fo r these programs to receive SIP credit is important for ensuring the continued succe ss of both incentive programs and the District’s attainment plans. While other mechanisms are available to account for incentive-based measures in SIPs, this rule establishes a clear framework to achieve this goal.

B. Interagency Development of SIP Credit for Incentives

In developing the 2007 Ozone Plan , the District and ARB recognized the need for

additional emission reductions from sources outside of the Dis trict’s regulatory authority to meet the stringent 1997 8- hour ozone standard, particularly from mobile sources. Subsequently, the plan called for signific antly increased incentive funding to help

accelerate attainment of the standard. Since then, the District has advocated to increase incentive funding for the Valley, result ing in significantly increased funding the last several years. The District has seen a ten-fold increase in funding for incentive programs since 2006. Recognizing the im portance of incentive-based emission reductions in addressing increasingly stringe nt federal standards, the District and EPA have been working together to develop an ad ministrative framework for providing

federal SIP credit for incentive programs.

As part of this effort, the District and t he United States Departm ent of Agriculture (USDA) Natural Resources Conservation Se rvice (NRCS) collaborated to ensure that both agencies’ incentive programs meet EPA’s cr iteria for incentive based reductions to

be SIP-creditable. In Dece mber 2010, the District, EPA, the California Air Resources Board (ARB), and USDA NRCS signed a memorandum of understanding (MOU) establishing a general framework to ensure t hat reductions in emissions resulting from the voluntary incentives receive SIP credit (A ppendix A). All parties involved agreed to work collaboratively to develop a mechani sm to provide SIP credit for emission reductions from federal, state, and local incentive programs that meet the EPA integrity principles (also referred to as SIP-creditab ility criteria) of being surplus, quantifiable, enforceable, and permanent.

NRCS and EPA continued to work together to develop a mechanism pursuant to the CAA to quantify SIP credit for emission reductions from farm equipment, achieved through voluntary incentive progr ams at the state/lo cal level. As a result of these continued efforts, EPA and NRCS signed Implementation Princi ples for Addressing Agricultural Equipment under the Clean Air Act, in July 2012 (Appendix B)

.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

4 Final Staff Report with Appendices for Proposed Rule 9610 C. Upcoming ARB Regulation for Agricultural Equipment

The 2007 San Joaquin Valley 8-Hour Ozone St ate Implementation Plan, approved by EPA, contained an ARB commitment to present to their Board a regulation for off-road mobile agricultural equipment in 2013. T he regulation would move California towards meeting ambient air quality st andards for the Valley by utilizing the cleanest available technologies. Specifically, the approved SIP includes a goal to achieve emission reductions of 5-10 tons per day (tpd) of oxides of nitrogen (NOx) from mobile agricultural equipment in the Valley by 2017 to accelerate progress toward attainment of

the federal 1997 ozone standard.

ARB’s rulemaking, Proposed Regulation for State Im plementation Plan Credit from Mobile Agricultural Equipm ent in the San Joaquin Valley , will be submitted for approval to their Board in October 2013. The propos ed regulation will provide a mechanism to ensure that the agricultural industry’s voluntar y participation in ince ntive programs in the Valley is recognized by EPA. ARB’s pr oposed regulation will def ine the criteria and process that ARB will use to determine that the reductions from the use of incentives generated from federal, state, and local funds spent on qualifying mobile agricultural equipment projects are surplus, quantif iable, enforceable, and permanent, and are therefore eligible for SIP credit. Although there are many similarities between ARB’s and the District’s approaches, ARB’s regulati on for mobile agricultural equipment is separate from District Rule 9610.

D. Related EPA Guidance

There are several EPA guidance documents related to SIP credit for innovative emission reductions programs. These doc uments are guidance, as opposed to regulatory mandates that must be followed. Also, some of this guidance primarily relates to purely voluntary programs with li ttle or no enforcement mechanisms, not the

enforceable incentive programs encompassed in Rule 9610.

Voluntary Mobile Source Emission Reduct ion Programs in State Implementation

Plans (1997) In this guideline, EPA notes t hat SIP credit is appropriate fo r voluntary mobile source emission reduction programs (VMEP). These measures have the potential to contribute emission reductions needed for progress towa rd attainment and maintenance of the NAAQS. This guideline describes the terms and conditions for establishing and implementing VMEPs, and the basic framew ork for ensuring that VMEPs become eligible for SIP credit. Generally, a State would submit a SIP which:

1) Identifies and de scribes a VMEP; 2) Contains projections of emission reduc tions attributable to the program, along

with relevant technical support documentation; 3) Commits to monitor, evaluate, and repor t the resulting emissions effect of the voluntary measure; andSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

5 Final Staff Report with Appendices for Proposed Rule 9610 4) Commits to remedy in a timely ma nner any SIP credit shortfall if the VMEP program does not achieve projec ted emission reductions.

Under this guideline, EPA set a limit on the amount of emission reductions allowed for VMEPs in a SIP. The limit is set at three per cent (3%) of the total projected future year emission reductions required to attain the appr opriate NAAQS. Further, where emission reductions are expected to exceed the 3% lim it, EPA would anticipate the state to use the Economic Incentive Program (EIP) to take credit for sa id emission reductions.

Improving Air Quality with Economic Incentive Programs (2001) EPA encourages the developmen t and submittal of discretio nary EIPs to increase flexibility, stimulate the use of less costly, innovative emission reduction measures, and provide greater in centives for developing and implementi ng pollution preven tion strategies, possibly with fewer resources. For incentiv e-based emission reductions to be given SIP credit, the EIP guidance require s emissions reductions from in centive projects to satisfy four SIP-creditability “integr ity principles:” surplus, quantifiable, enforceable, and permanent. EIP measures ar e not subject to a SIP-credi t limitation, as voluntary

measures are.

Incorporating Emerging and Voluntary Measures in a St ate Implementation Plan (2004) This guidance encourages the development of voluntary and emerging measures to meet SIP requirements. A voluntary measure is a measure or strategy that (unlike

traditional measures or EIPs ) is not enforceable against an individual source. An emerging measure is a measure or strat egy that (unlike traditi onal measures or EIPs) does not have a high level of certainty for quantification purposes. A measure can be both a voluntary and an em erging measure.

This guidance provides some flexibility in meeting established SIP requirements for enforceability and quantification; provides a clear process by which new approaches can be developed and evaluated; establishes appropriate limit ations which govern the conditions under which these new approaches c an be applied; and provides provisional pollutant reduction credit upfront for a ttainment, RFP, ROP, or maintenance requirements to encourage the substantial investment required to implement new pollutant reduction approaches.

EPA set a limit on the amount of SIP credit allowed to be cl aimed for these voluntary and/or emerging measures to six percent (6%) of the total amount of emission reductions required for the ROP, RFP, attainment, or maintenance demonstration purposes. The limit is presum ptive in that EPA believes it may approve measures into a
SIP in excess of 6% where a clear and convin cing justification is made by the State as to why a higher limit should apply in their ca se. Any request for a higher limit will be reviewed by EPA on a case-by-case basis; any approval of emerging measures under this policy will be conducted through full not ice-and-comment rulemaking in the context of a particular state SIP revision.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

6 Final Staff Report with Appendices for Proposed Rule 9610 Incorporating Voluntary Stationary Source Emission Reduction Programs into State Implementation Plans (2001) This guideline is the EPA final policy regarding the granting of explicit SIP credits for voluntary stationary source emission reducti on programs under section 110 of the Clean Air Act. This policy is a complement to t he voluntary mobile source emissions reduction policy that has been in place since Oct ober, 1997. Voluntary measures are an

alternative to traditional command and cont rol approaches that have the potential to encourage new, untried and cost-effectiv e approaches to reduce emissions. Economic incentive programs differ from vo luntary measures in that under a State’s EIP, emission reductions (or actions leading to emission reductions) must either be

identifiable and enforceabl e against a specific source or the EIP submittal must include fully adopted contingency measures and contai ns a State commitment to automatically implement contingency measures, if neces sary; the State will only count emission reductions on a retrospective basis; or the State has used the control strategy in a similar situation, has achieved positive re sults, and gets preliminary approval from the relevant EPA Regional Office to use the provision.

EPA limits the amount of emission reductions allowed in a stationar y source voluntary measures program to three percent (3%) of needed reductions for ROP, RFP, or attainment demonstration purposes. This is not 3% of an ar ea’s total emission inventory. For example, if a State projects emissions in the attainment year to be 100 tons per day over the emissions needed to show attainment, the State could take credit for emission reductions from stationary source voluntary measures of up to 3 tons per day. In the case of maintenance demonstrat ions, voluntary measures can account for

no more than 3% of the reductions needed to demonstrate maintenance of the NAAQS. These maintenance-related voluntary measures would be in addition to those measures that were previously adopted for attain ment or RFP/ROP det ermination purposes.

E. Successful Incentive Progr ams Implemented in the Valley

The District operates one of the largest and mo st well-respected incentive programs in California. The District’s incentive pr ograms have been developed around several core principles, including cost-effectiveness, int egrity, effective progr am administration, excellent customer service, efficient use of District res ources, fiscal transparency, and public accountability.

To ensure public funds are spent appropriately and as intended, the District’s incentive program is regularly audited by outside agencies, incl uding professional accountancy corporations on behalf of the federal government, ARB, the California Department of Finance (DOF), and the California Bureau of State Audits. These comprehensive and rigorous independent audits focus on every as pect of District administered incentive programs, including internal programmatic a nd fiscal policies and procedures as well asSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

7 Final Staff Report with Appendices for Proposed Rule 9610 field validation of projects. A recent AR B audit noted that the District’s incentive program is “efficiently and effectively achi eving their emission r eduction objectives”. 1

The District is a statewide leader in in centive programs, with several elements being

held as models for other air districts thr oughout California. As a result, ARB has routinely called upon the Distr ict to administer statewide incentive programs on their

behalf and on behalf of other local ai r districts. Recent exam ples include administering the Lower Emission School Bus Program on behalf of ARB and 18 other air districts, the statewide Agricultural Utility Terrain Vehi cle (UTV) program and the statewide School Bus Retrofit Program.

The District also works closely with other agencies, such as NRCS, to implement incentive programs in the Valley. The ma jority of the Distric t’s incentive grant programs are based on incent ive program guidelines de veloped through a public process and adopted by ARB, such as t he Carl Moyer Memorial Air Quality Standards Attainment Program (Carl Mo yer Program) and Proposition 1B: Goods

Movement Emission Reduction Program (Proposition 1B). The District also has a strong working relationship with NRCS, with both agencies im plementing programs to replace agricultural equipment.

In addition to locally-generated funding source s, support from federal and state sources has been critical in bringing much-needed incent ive funds to the Valley. Other public agencies, including ARB and the USDA NRCS, also implement effective incentive programs to reduce emissions in the Valley. Since 2009, the District has successfully partnered with the NRCS to f und the replacement of mob ile agricultural equipment within the Valley. This part nership between the District, NRCS and Valley agricultural

stakeholders addresses the commit ment made by ARB in their 2007 San Joaquin Valley 8-Hour Ozone St ate Implementation Plan of achieving emission reductions of 5- 10 tons per day of NOx from mobile agric ultural equipment in the Valley by 2017 to accelerate progress towards attainment of EPA’s 1997 ozone standard. Due to this partnership and the investment of Valley agricultural stak eholders, the programs are on pace to exceed this commitment several ye ars in advance of the 2017 target.

Although the District’s incent ive program process can vary from program to program, per the applicable guidelin es, the general incentive process is as follows:

 Application completeness: District revi ews received application for completeness and mails a letter to the applicant regarding application status

 Pre-inspection: Once the application is deemed complete, pre-inspection is conducted by the District or a contracted agent:

1 ARB: 2011 San Joaquin Valley APCD Incentive Progra m Review and Audit Reports (January 2013). Retrieved May 2013 from http://www.arb.ca.gov/msprog/moyer/ audits/2011/san_joaquin_valley.htmSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

8 Final Staff Report with Appendices for Proposed Rule 9610 o The engine, equipment, or practice is physically inspected to verify the condition of the engine and/or equipmen t, all unique identifiers such as Vehicle Identification Number (VIN) and Engine Serial Numbers (ESN) are recorded, and it is confirmed that the engine and/or equipment is operational.

o Photographs are taken of the en gine, equipment, or practice and an inspection report is completed.

o The inspection report and photographs are then reviewed by District staff to verify the information on the application.

 Usage documentation: For applicable proj ect types, usage documentation from the applicant is then requested and used to calculate the projected emissions reductions, cost-effectiveness, and incentive amount to be issued by the District.

 Resolve outstanding NOVs: Applicants f ound to be in violation of any District rules or that have any outstanding Noti ce of Violations (NOV) during the application process will not be issued a contract for an incentive project until such time that all outstanding i ssues are resolved.

 Execute contract: All parties sign the contract and the applicant, now referred to as the grantee, is notified to start their project. All acti vities related to the project are now covered under legally binding, enforceable contract provisions.

 Claim for Payment: The grantee pur chases and/or installs the new engine/equipment and submit s a Claim for Payment (CFP) packet. The District’s receipt of the CFP triggers a post-inspection to be scheduled.

 Post-inspection: A District employee or contracted agent inspects the new engine/equipment in the applicant’ s possession and documents critical information with photographs. The dismantling facility is also inspected to confirm that the old engine/equipment has been properly destroyed, as illustrated in Figure 1.

 Payment: After the District reviews the in spection reports and verifies the old and new engine/equipment informati on, the CFP is paid.

 Contractual reporting requirements: The grantee is required to annually report to the District actual usage fo r the previous year, provide proof of insurance, and certify that they still ow n the engine/equipment for the duration of years required in the contract. The number of years r equired to report varies by project type, from one year to 20 years.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

9 Final Staff Report with Appendices for Proposed Rule 9610 Figure 1 Photographs of the dismantling of a tractor

1. Carl Moyer Memorial Air Qualit y Standards Attainment Program

The Carl Moyer Program is a grant program that funds the in cremental cost of installing/operating cleaner-t han-required engines and equipment. Adopted in 1999 by ARB and governed by CH&SC §44275-44299.2, this program provides incentives to help obtain early or extra emission reduction s, especially from emission sources in environmental justice communities and ar eas disproportionately impacted by air pollution with a primary objective of obt aining cost-effective and surplus emission

reductions.

ARB’s manages program funds, develops and maintains guidelines, and determines cost-effectiveness methodologies. The Carl Moyer Program Guidelines (developed publicly and available at http://www.arb.ca.gov/msprog/ moyer/guidelines/current.htm )

ensure that emission reductions funded thr ough the program are permanent, surplus, quantifiable, and enforceable (see Tabl e 1 of this staff report).

Air districts use ARB’s Carl Moyer Program Guidelines to sele ct, fund, and monitor projects in their jurisdiction. The program guidelines allow for mult iple funding options,

and each air district is allowed to choose which options to administer each year. Currently, the District provides funding for the following options under the Carl Moyer Program:

 Heavy-Duty Off-Road Vehicles – repow er, retrofit, and replacement options

 Stationary Agricultural Sources – repow er and new electric purchase options

 Locomotives – repower and alter nate technology switcher options

 Heavy-Duty On-Road Vehicles – retrofit and replacement optionsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

10 Final Staff Report with Appendices for Proposed Rule 9610 As allowed in the Carl Moyer Program Gu idelines, ARB can issue a case-by-case determination for a specific incentive project that follows alternative procedures, but still

meets the four int egrity principles requirements.

2. Proposition 1B: Goods Movemen t Emission Reduction Program

In November 2006, California voter approval of Proposition 1B authorized $1 billion in bond funding to reduce air pollution associat ed with the movement of freight along California’s major trade corridors. The pr ogram supplements ARB’s diesel regulations by funding early compliance or providi ng extra emission reductions beyond those required by current rules. Subsequent legi slation established st andards and procedures for the expenditure of these funds. Gover nor Schwarzenegger’s Ex ecutive Order S-02- 07 provides further direction to ensure a ccountability and transparency in administering bond-funded progr ams.

ARB developed the Proposition 1B: Goods Movement Emission Reduction Program Guidelines for Implementation (Proposition 1B Guidelines) (available at http://www.arb.ca.gov /bonds/gmbond/gmbond.htm ) in consultation with stakeholders, including: air districts, me tropolitan planning organizations, port authorities, industry, and community interest groups. The Propositi on 1B Guidelines’ robust administrative requirements establish transparency and a ccountability measures , and ensure that

emission reductions are enforceable throughout the project life.

Through the Proposition 1B progr am, the District provides incentive funds to reduce emissions from eligible heavy-duty trucks traveling through California’s major trade corridors and locomotives. Available funding opt ions include retrofit, repower, replace, and a tiered truck transaction, which involves retrofitting and replacing two different trucks. The District has conducted a comp rehensive outreach and marketing campaign for Proposition 1B to ensure that the Valley ’s Proposition 1B funds are fully liquidated

and the emission reduction benefits of the program are realized.

3. Combustion Systems Improvement of Mobile Engines

In 2009, the NRCS established the California Ai r Quality Initiative to provide financial assistance to address air quality concerns th rough the Environmental Quality Incentives Program. Through this initiati ve, NRCS provides incentive funds to assist farmers to replace, repower, or retrofit diesel power ed agricultural equipmen t with the goal of ensuring the resulting reductions meet the SI P creditability criteria of being surplus, quantifiable, enforceable, and permanent (see Table 1 of this staff report).

NRCS based its robust administrative requi rements on the Carl Moyer Program

Guidelines to ensure that emission reducti ons are enforceable, are achieved throughout the life of a project, and all integrity principles are me t. The NRCS Combustion System Improvement of Mobile Engines incentiv e program guidelines are available at ftp://ftp-SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

11 Final Staff Report with Appendices for Proposed Rule 9610 fc.sc.egov.usda.gov/CA/pr ograms/AQI/2012_Combustion_S ystems_Improvement_Polic y_and_Procedures.pdf

.

The Combustion Systems Improv ement of Mobile Engines in centive program is unique from other incentive programs in that NRCS is explicitly prohibited from identifying grantees by name. As directed by the Farm Bill (Food Security Act of 1985 (7 U.S.C. § 608d(2))), NRCS must maintain the confiden tiality of information provided by an agricultural producer participating in the NRCS Combustion System s Improvement of Mobile Engines incentive program. The information is exem pt from mandatory disclosure and may not be used in judicial or administrative proceedings without the consent of the person involved.

Since 2009, the NRCS program, in combi nation with the District’s program, has provided over $105 million in incentives for agricultural equipment replacement. Eligible participants are owners of land in agricultura l or forest production or persons who are engaged in livestock, agriculture, or forest production on eligible land and that have a

natural resource concern on the land.

Applications are accepted on a continuous basis with periodi c application ranking cutoffs. Applications are ranked for fundi ng based upon ranking cr iteria developed with input from Local Work Groups, Stakeholder s, and the State Technical Advisory Committee (STAC). The ranki ng score of a project is based on multiple factors including but not limited to:

 Whether or not the project location is in an area that has an EPA NAAQS nonattainment designation for PM2. 5, PM10 and Ozone and what type of designation that area has (for example “extreme” nonattainment).

 If there are currently any local or state agriculturally based air emission regulatory requirements for the area that the project is located.

 The emission level of the baseline equipm ent/engine and the em ission factors of the new/replacement equipment/engine.

 The amount of NOx, ROG, and PM that is projected to be r educed by funding the project.

The ranking criteria ensure t hat the projects with the great est amount of reductions, resulting in the highest air quality benefit will be selected for funding.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

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12 Final Staff Report with Appendices for Proposed Rule 9610 

### III. PROPOSED RULE 9610

A. Overview

Rule 9610 is an administrative mechanism to take SIP credit for incentive-based emission reductions. The key components of the District’s Rule 9610 SIP-crediting process include:

 Incentive Program Guidelines for specific program s, developed through a public process with opportunity for public commenting and EPA concurrence.

 A Manual of Procedures , which assures that all incentive program guidelines used for SIP creditability are publicly available and maintained in a centralized

location on the District’s website.

 Annual Demonstration Reports , to quantify the amount of emissions reductions achieved by incentive programs meeti ng the requirements in Rule 9610 and compares these reductions to SIP commitments.

The purpose of Rule 9610 is to serve as an administrative mechanism for the District to receive credit towards SIP requirements for emission reductions achieved in the Valley through incentive programs administered by the District, NRCS, and ARB. Through program implementation and reporting, the goal is to rece ive credit for incentive-based emission reductions that satisfy E PA’s four integrity principles:

 Surplus: emission reductions are not otherwise required by any federal, state, or local regulation or other l egal mandate. These emission reductions must also be in excess of the baseline inventories underlyi ng a SIP attainment dem onstration.

 Quantifiable: emission reductions can be re liably determined and replicated through the use of well-est ablished, publicly availabl e emission factors and calculation methodologies.

 Enforceable: based on the following:

 The emission reductions must be i ndependently and practicably verifiable through inspections, monitoring, and/or other mechanisms;

 Incentive program violations are defi ned through legally binding contracts, including identifying party or parties re sponsible for ensuring that emission reductions are achieved;

 Grantees are obligated to provide all records needed to demonstrate that emission reductions are achieved; and

 The public has access to all emissi on-related information for reductions

claimed in the annual demonstration r eport, as outlined in Section 4.0 of

Rule 9610.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

13 Final Staff Report with Appendices for Proposed Rule 9610  Permanent: for the lifetime of the pr oject, assured by actions taken to physically destroy, or permanently disable baseli ne equipment or vehicles, or to permanently amend practices to ensure the reduction of emissions for the duration of the pr oject life.

Table 1: Incentive Program Demons tration of Integrity Principles Carl Moyer Proposition 1B NRCS Surplus Accounts for compliance dates

and emissions reductions claimed by adopted regulations. Minimum project life requirements (generally threeyears) ensure overall costeffectiveness, that the program

does not fund actions taken to comply with regulatory deadlines, and that emission

reductions are real for the project life. ARB verifies the project’s compliance with state diesel regulations. Funded

trucks noted as such in the state’s online regulation reporting database to

ensure that the new truck

will not be used towards compliance during the project life. Off-road agricultural equipment is not currently subject to regulations mandating use of cleaner engines.

Quantifiable Calculation methodology, formulas, and emission factors in guidelines and approved through a public process. Emission control technologies certified or verified by ARB (or, for some categories, by EPA or

the International Maritime Organization). Reductions quantified with ARB’s Project Benefits Calculator, publically

available at http://www.arb.ca.gov/bon ds/gmbond/gmbond.htm and regularly updated by

ARB. NRCS quantifies

emissions reductions using established Carl Moyer Program

calculation methodologies and

emission factors.

Enforceable Enforceable contracts, based on program guideline requirements, signed by the District and grantee to ensure projects fully accomplished and integrity principles met. Provisions include, but are not limited to, grantee usage reporting,

destruction of the baseline equipment/engine, and allowance for District project audit at any time during project

life. Enforceable contracts, based on program guidelines, signed by the District and grantee to ensure projects fully accomplished and integrity principles are met. Provisions include, but are not limited to, grantee usage reporting, operating location requirements for the new vehicle,

destruction of baseline engine, and allowance for District project audit at any time during project life. Enforceable contracts signed by both NRCS and grantee to ensure projects fully accomplished and integrity principles are

met. Provisions safeguard funding and
reductions. Should a grantee breach, NRCS receives liquidated damages and funds another project.

Permanent District post inspections of new equipment and verification that baseline equipment destroyed. District post inspections of new equipment and

verification that baseline equipment destroyed. NRCS post inspections of new equipment and

verification that baseline equipment destroyed.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

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14 Final Staff Report with Appendices for Proposed Rule 9610 B. Use of Projected Incen tive Program Reductions SIPs

Within individual attainment plans, t he District may identify an incentive-based emissions reduction commitment for a specific future year or years, and utilize Rule 9610 as a potential administrative mechanism for demonstrating progress towards such a commitment. Depending on the need, this co mmitment may represent the emissions reductions needed for attainment, RFP, c ontingency, or other Clean Air Act requirements. This Rule 9610 commitment will be limited to an amount of emissions reductions deemed reasonable in light of se cured or reasonably anticipated funding and the estimated availability of emissions reductions projects and willing participants, based on historical participation and estimates of remaining equipment. The Rule 9610

emissions reductions need and the reasonabl eness of Rule 9610 emissions reductions projection will be documented with in the attainment plan.

The District will identify all relevant attain ment plan(s) commitments for Rule 9610 in annual demonstration reports compiled pursuant to Rule 9610. The District will show

that the total emissi ons reductions from SIP-creditable incentive programs meets, at a minimum, the attainment plan commitments fo r each year for which there is such a commitment. In this way, the District will, in a transparent process, verify that all attainment plan needs associat ed with Rule 9610 have been met.

Emission reductions credited through Rule 9610 will not replace the need for or CAA requirements associated with regulatory controls . In each attainment plan, the District

will continue to evaluate r egulatory opportunities to satisfy any applicable RACT/RACM or BACT/BACM requirements. However, onc e all reasonable regulatory options are exhausted, crediting incentiv e-based reductions through Rule 9610 will help the District assure that the attainment plan as a whole achieves sufficient SI P-creditable emissions reductions to achieve attainment, to meet RFP milestones, and satisfy contingency

measure emissions reducti ons requirements.

In addition, where Rule 9610 emissions redu ctions from on-road mobile sources are credited in a SIP for RFP or attainment, fe deral transportation conformity requirements (40 CFR 93 Subpart A) will continue to be met.

C. Revisions to Proposed Rule 9610

Clarifications have been added to Proposed Rule 9610 based on recent comments, discussions, and collaborations with EPA re garding the May 21, 2013 version of Proposed Rule 9610. These changes clarify the rule and reduce redundancy, and do not change the meaning, intent, or requirements of rule language.

Section 2.0 Definitions

 For consistency with other acronyms def ined in Section 2.0, the definition for EQIP (Section 2.10) was reorganized.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

15 Final Staff Report with Appendices for Proposed Rule 9610 Section 3.0 Incentive Program Guidelines

 For identified Carl Moyer Guidelines in Section 3.1.1, each project type was

subdivided into subsections of 3.1.1 to bet ter clarify which specific project types

are allowed under the Carl Moyer Guidelines.

 The word “replacement” was moved from Section 3.1.1.1 to Section 3.1.1.2, since Carl Moyer Program Guidelines for the replacement of On-Road HeavyDuty Vehicles is specific to Fleet Moderni zation activities, as identified in Section

3.1.1.2. This clarif ies the existing intention of the ru le and program applicability.

 Section 3.1.1.5 was removed, and the s pecific Carl Moyer Incentive Program

Guidelines that had been incl uded in that section we re distributed throughout Sections 3.1.1.1 through 3.1. 1.4 to improve clarity.

 The language in Sections 3.1.2 ( NRCS EQIP guidelines) and 3.1.3 (ARB Proposition 1B Incentive Program guidelines) was updated to improve transparency by identifying specific vers ions of the guidelines used, thereby making it easier for stakeholders to find relevant documents.

 The term “reductions” was added to Secti on 3.2 to clarify that the annual demonstration report will in clude a quantification of emissions reduced.

 Section 3.2.2 already referenced the SIP submittal and approval process through

reference to Section 7.0 of the rule. Therefore, this section was reworded to remove redundant language.

Section 4.0 Annual Demonstration Report

 The term “reductions” was added to Secti on 4.5.8 to clarify that the annual demonstration report will incl ude a quantification of emissi ons reduced. This is consistent with the original intent of the rule as demonstrated in the May 21, 2013 draft annual demonstration report, its appendi ces, and the accompanying annual demonstration report data sheet, each m ade available for public review and

comment.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

16 Final Staff Report with Appendices for Proposed Rule 9610 D. Proposed Rule 9610

The following is a summary of rule l anguage with explanations on intent, and interpretation of rule language.

Section 1.0 Purpose The purpose of Rule 9610 is to serve as an administrative mechanism for the District toreceive SIP credit for emission reductions achieved in the Valley through incentivebased programs. The purpose stat ement in the first draft rule further clarified that the incentive programs may be administered by the District or by other public agencies, which could include, but would not be limited to, NRCS and ARB. Proposed rule language has been updated to specify that programs must be administered by the District, ARB, or NRCS to be considered for SIP credit under Rule 9610. Any incentivebased emission reductions submi tted for SIP credit must meet the requirements for SIPcredibility as defined in rule language.

Section 2.0 Definitions The Definitions section of this rule prov ides clarity and support for the requirements presented within the rule. While some definiti ons come from existing District regulations and state and federal guidance do cuments, many of the defin itions are unique to this rule. To assist with the understanding of ru le terminology, the following is a discussion

of the definitions that ma y be unique to this rule.

Case-by-Case Determinations. Case-by- case determinations are alternative procedures approved by ARB for specific projec ts, as authorized under the Carl Moyer Program Guidelines. An air district may r equest ARB review of a project or other Carl Moyer Program element on a case-by-case determination as provided for in the guidelines. ARB may approve such a project or other program elem ent if the outcome of this approval would result in emission re ductions that are surplus, quantifiable, enforceable, and permanent, and is not prohibited by law.

All case-by-case determinations submitted fo r review to ARB are made available to the public via web posting at ARB’s Carl Mo yer Program website, and the District is required by the Carl Moyer guidelines to keep a copy of the determination in the project file. Less than one percent of District admin istered incentive programs involve case-bycase determinations.

Enforceable. For the purposes of this rule , emission reductions are enforceable if the incentive program includes provisions for ens uring the following: em ission reductions are verifiable, incentive progr am violations are defined thro ugh legally binding contracts, grantees are obligated to provide all records needed to demonstrate that emission reductions are achieved, and the public has a ccess to all emissions-related information

for reductions claimed.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

17 Final Staff Report with Appendices for Proposed Rule 9610 Funding Source. As defined by Rule 9610, a funding source is a source of funding used to implement incentive program s, including, but not limited to, federal, state, and local sources. Funding sources for District-admin istered incentive-based projects include, but are not limited to Proposit ion 1B, the Carl Moyer Prog ram, the federal Diesel Emissions Reductions Act (DERA), AB 923 (w hich authorized a $2-per vehicle DMV fee), and AB 118 (Air Quality Improvement Pr ogram (AQIP)). Another funding source is the NRCS Combustion Systems Improvement of Mobile E ngines incentive program. The District is engaged at the st ate and federal levels to craft policy and funding targets that account for the Valley’s unique chal lenges and need to accelerate emission reductions, particularly from sources not under the District’s regulatory authority. Toward that end, the District works closely with the Valley’s legislative delegation to ensure that the Valley’s needs are well repr esented in discussions of where to focus funding throughout the state and region as a whole.

Grantee. A grantee is a person, business, association, p ublic agency, or other entity

that enters into a contract with the District, NRCS, or ARB to reduce emissions under an incentive program. An example of a gr antee could be a truck fleet business that

contracts with the District to retrofit an older truck engine, or perhaps a small farmer who enters into a contract to replace an agricultural irrigation pump engine.

Implementation Date. For the purposes of this rule, the implementation date for a project is the date on which the new or replacement equipm ent, vehicle, or practice funded through an incentive program is put in to service. For incentive projects administered by the District, this date is determined and verified by the final sales invoice provided by the grantee to the Distric t during the incentive project process.

Incentive Program. An inc entive program is a program that reduces emissions by promoting the adoption of lower emitting equi pment, vehicles, or practices through the distribution of financial incentives to a gr antee. Examples of incentive programs include, but are not limited to, the Carl Moyer Program, the NRCS Combustion Systems Improvement of Mobile Engines incentiv e program, the Proposit ion 1B Program, and

other District administered inc entive programs. Additionally, incentive programs may be administered by a public agency other t han the agency that creat ed the program; for example, the District administers incent ive programs using f unds and ARB developed guidelines from the Ca rl Moyer Program.

Incentive Program Guidelines. Incentiv e program guidelines are administrative procedures, quantification method ologies, eligibility crit eria for projects, cost effectiveness criteria, reporting practices, and/or other procedures and methodologies used to implement incentive programs. Fo r incentive-based emission reductions to qualify as SIP-creditabl e, the incentive program guidelines must meet the criteria as presented in Section 3.0 of Rule 9610.

Inspection. For purposes of this rule, an insp ection refers to a physical inspection of the equipment, vehicle, or practice. This def inition clarifies requirements under theSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

18 Final Staff Report with Appendices for Proposed Rule 9610 definitions of Contract and Enforceable, as well as annual report requirements under Section 4.6 (Project Monito ring and Enforcement).

Permanent. Draft rule language defined per manent as being ensured by permanently (for the project life) disabl ing, physically destroying, or otherwise ensuring the reduction of emissions in the Valley from existing or baseline equipment or vehicles. Proposed rule language has been updated to remove ambiguous language in order to avoid a potential misunderstanding that incentive programs could allow higher emitting equipment to move outside the Valley. Pr oposed rule language now clarifies that the baseline equipment or vehicl es must be physically destroyed or permanently disabled, or practices must be permanently amended to ensure the reduction of emissions for the duration of the pr oject life.

Quantifiable. For the purposes of this rule, emission re ductions are quantifiable if they can be reliably determined through the use of well-established, publicly available

emission factors and calcul ation methodologies.

SIP. State Implement ation Plan; the draft rule language provided a definition specific for this rule. Proposed rule language has been updated to be c onsistent with CAA Section 110(a).

SIP-Creditable Emission Reduction. For purposes of this rule, reductions of emissions achieved through incentive pr ograms that are Surplus, Q uantifiable, Enforceable, and Permanent, in accordance with Rule 9610.

SIP Shortfall. For purposes of this rule , a SIP shortfall is when a commitment made pursuant to Section 7.0 in an adopted SIP to achieve a certain amount of SIP-creditable

emission reductions is not achieved. This definition of SIP S hortfall has been updated in the proposed rule to point to Section 7.0 requirements for SIP commitments.

Surplus. For the purposes of this rule, em ission reductions are surplus when they are not otherwise required by regulations and ar e in excess of the baseline emission inventories underlying a SIP a ttainment demonstration.

Section 3.0 Incentive Program Guidelines

Section 3.0 of the rule prov ides incentive program guideli nes used for SIP-creditable

incentive-based emission reductions. In the April 2013 version of the rule Section 3.1 had each subsection dedicated to a specific incentive program guideline and identified specific units within each guide line that would qualify for SI P-creditable incentive-based emission reductions, including a section that allowed for t he future use of incentive program guidelines not identified in the ru le provided such guidelines are reviewed through a public process with a specificati on that guidelines developed to reduce emissions from mobile sources are developed in consultation with ARB. And Section 3.2 of draft rule language provided requi rements for the Manual of Procedures.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

19 Final Staff Report with Appendices for Proposed Rule 9610 The May 2013 proposed rule language included updates as described below.

Section 3.1 specifies that the SIP-credit able emission reductions will be quantified in accordance with incentive progr am guidelines that provide for SIP-creditable emission reductions. This section specifically ident ifies project types and associated guidelines that are pre-qualified by EPA as meeting SIP-creditability r equirements. Section 3.1 is divided into the following subsections, wit h each subsection identifying the specific versions of the approved incentive program guidelines, including date of guideline amendment or adoption:

 Section 3.1.1 is specific to the use of Carl Moyer Program Guidelines for incentive projects funded by either the Carl Moyer Program or non Carl Moyer funding sources and lists project types that qualify under these guidelines including On-Road Heavy-Duty Vehicle replacement, new vehicle purchase, repower, or retrofit; On-Road Heavy-Duty Vehicle fleet modernization; Off-Road Compression-Ignition Equipm ent repower, retrofit, or replacement; and Portable and Stationary Agricultural Source repow er, new purchase of electric motor or

retrofit.

 Section 3.1.2 is specific to t he NRCS Combustion System Improvement

Conservation Practice Standard 372 and as sociated NRCS Program Combustion System Improvement of Mob ile Engines Guidelines for incentive projects funded by EQIP funds.

 Section 3.1.3 is specific to the Proposition 1B Goods Movement Emission Reduction Program Guidelines for incent ive projects funded by Proposition 1B funds or non-Proposition 1B funds, fo r Heavy-Duty Diesel Trucks repower, replacement, PM retrofit, or PM + NOx retrofit.

Section 3.2 is a new section to the proposed rule. Under this section the District may quantify emissions under this rule in accord ance with incentive progr am guidelines not specifically identified in Sect ion 3.1, provided the District submits to EPA, pursuant to Section 7.0, a demonstration that each such guideline pr ovides for SIP-creditable emission reductions. Incentive program guide lines subject to these procedures may include ARB Carl Moyer Program Guidelin es, NRCS Combustion System Improvement

Conservation Practice Standard 372 and as sociated NRCS Program Combustion System Improvement of Mob ile Engines Guidelines, and ARB Proposition 1B Goods

Movement Emission Reduction Program Guidelines:

 Section 3.2.1 requires t hat incentive program guidel ines developed to reduce emissions from mobile sources be developed in consultation with ARB.

 Section 3.2.2 states that notwithstanding Sections 3.1 and 3.2, case-by-case determinations may be used to quantify SIP-creditable emission reductions, provided that they are re viewed through a public process and submitted to EPA for approval into the SIP, as outlined in Section 7.0.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

20 Final Staff Report with Appendices for Proposed Rule 9610 Section 3.3 provides requirements for the development and maintenance of a Manual of
Procedures for SIP-creditable incentive-based emission reductions claimed pursuant to

this rule. The Manual of Procedures assures that all incentive program guidelines used for SIP creditability are publicly available and maintained in a centralized location on the District’s website. To increase public understanding and awarene ss of the guidelines and the role they play in the SIP-creditabili ty of emission reductions, the website will also contain a description of how each inc entive program guideline ensures that the incentive program emission reduc tions are SIP-creditable.

Section 4.0 Annual Demonstration Report

Section 4.0 provides specific requirement s and guidelines for the content of the annual demonstration report that the APCO will submit to ARB and EPA to claim SIP credit for

incentive-based emission reductions.

Section 4.1 requires that the annual demonstr ation report contain a description of the incentive program guidelines used for impl ementation of incent ive programs generating
claimed SIP-creditable emission reductions. The required descrip tion will include a discussion of how the incentive program guide lines ensure that t he emission reductions
are SIP-creditable. This de scription will include a list of any guidelines that are being

used for the first time under this rule. This level of transparency is further supported by Section 3.3, whereby a Manual of Procedur es that includes all incentive program guidelines in it is maintained on the Distr ict’s website; and Section 5.3, whereby previously submitted annual dem onstration reports containing th is description shall also

be maintained on the District’s website.

Section 4.2 requires the reporting of SI P-creditable emissi on reductions generated through incentive programs, as implemented in preceding years. This accounting of

SIP-creditable emission reductions woul d be summarized by pollutant, years the emission reductions are occurring (project lif e), cost effectiveness, funding amount, incentive program guideline(s) , and project type. This requirement is intended to
include all SIP-credit able emission reductions being claim ed in the SIP for that annual demonstration report. The term “preceding years” is not intended to include SIPcreditable emission reductions from past annual demonstration reports that are no longer applicable. For exampl e, if a project life of a SI P project has ended in 2015 and the final reporting of those SIP-creditable em ission reductions are accounted for in the

2016 annual demonstration r eport, then the 2017 annual dem onstration report would

not include the reductions from that project.

Section 4.3 provides the requirement t hat any adjustments to emission reductions claimed in prior annual demons tration reports be reported in the annual demonstration report for the year the adjustments are made and shall provide the cause for the adjustments. An example may include the adopt ion of new local, state, or federal requirements that might affect the surplus nature of emi ssion reductions achieved by incentive programs.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

21 Final Staff Report with Appendices for Proposed Rule 9610 Section 4.4 requires the annual demonstrat ion report to identify SIP commitments identified in District adopted SI Ps (by year, pollutant, and magnitude), which the District has satisfied, in whole or in part, thr ough SIP-creditable emission reductions. Section 4.4 also requires the District to identify and quantify SIP commitment shortfalls, if any, and remedies for addressing said shortfalls.

Section 4.5 (Project Information) outlines incentive project specific information to be provided in the annual demonstration r eport. The annual demonstration report will include the following information as applicable:

 Project identification

 Project location

 Project type

 Project life

 Implementation date

 Funding amount

 Incentive program guideline(s

 Quantified emissions

 Description of both the baseline and the new equipment, vehicles, or practices : the annual demonstration report sha ll include the description of both the baseline and new equipment, vehicles , or practices as applicable:

o Make and model of equipment or vehicle

o Equipment or vehicle rating or horsepower

o Model year

o Historical and projected annual usage

 Additional project details : as necessary to demons trate the SIP-creditable

emission reductions claimed in the annual demonstration report. This additional information may vary based on the inc entive program gui delines used to administer the project, and pr ovides the District with a mechanism to request any

additional information to ensure that t he emission reductions are SIP-creditable prior to claiming the emission reducti ons in the annual demons tration report.

Section 4.6 (Project Monitoring and En forcement) includes requirements for the reporting of monitoring and enforcement activi ties of incentive project contracts. Incentive program guidelines have specific , and sometimes unique, requirements for project monitoring and enfor cement practices to be implemented by the public agency administering the incentive program; however, incentive projects t hat result in SIPcreditable incentive-based emission reductions at least contain porti ons that fulfill the requirements of this rule. Section 4. 6 requires the annual demonstration report to contain a summary of monitoring and enforce ment activities conducted, including a summary of project audits, usage reports, inspections, and other project monitoring activities; and an identification of projects that do not satisfy c ontractual requirements including enforcement actions and rem edies such as penalties and additional contractual requirements. This rule require ment ensures transparency on behalf of the public agency administering the incentive program with regar ds to confirming thatSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

22 Final Staff Report with Appendices for Proposed Rule 9610 incentive-based emission reductions claime d in the annual demonstration report are enforceable and permanent, as defined in the rule.

Section 4.7 (Incentive Progr am Evaluation) requires the District to perform a retrospective assessment of the performance of its incentive program to evaluate overall incentive program performance and develop recommendations for future enhancements to incentive progr am implementation. The EPA Improving Air Quality with Economic Incentive Programs guideline suggests that air districts taking SIP credit for incentive-based emission reductions per form this assessment and report to EPA on at least a triennial basis. By incorporating this process, requirements, and report into the annual demonstration report, the District is going above and beyond EPA guidance. The District has incorporat ed the other requirements of the EPA guidance throughout the rule. These requirements include: a public process (incorporated into Section 5.0), reporting of the amount of emi ssion reductions actually rea lized through the incentive program (incorporated into Sections 4. 2 and 4.3), and reporting of the effects on

incentive-based emission reductions in atta inment of SIP commitments (incorporated into Section 4.4).

Section 5.0 Annual Demons tration Report Process Section 5.0 provides the framework for the frequency, deadlines, and public process of the annual demonstration report. The APC O is required to submit an annual demonstration report to ARB and EPA for conc urrence no later than August 31 of each year after releasing the draft annual demonstra tion report to the public and presenting it to the District Governing Board. Rule la nguage also provides the requirement that previously submitted annual demonstration reports sha ll be made available on the
District’s website. Refer to Section 3.3 for more details about the on-line documentation of incentive program guidelines.

The draft rule required that the most recent three final annual demonstration reports be available on the Districts website, as appropriate. Proposed rule language has been updated to remove this three report minimu m. See the proposed rule for specific language.

Section 6.0 Recordkeeping Requirements Section 6.1 requires that all documents created and/or used in implementing the requirements for the annual demonstration report be kept and maintained as required by the applicable incentive program guidelin es. Additionally, consistent with the
California Public Records Act and other re lated requirements, such records shall be made available for public review, as will be discussed in the annual demonstration report.

Section 6.2 provides language acknowledging the legal limitations placed on the NRCS Program Combustion System Im provement of Mobile Engines incentive program by the Federal Food Security Act of 1985 (7 U.S.C. § 608d(2)). This limit ation specifically prohibits NRCS from discl osure of records.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

23 Final Staff Report with Appendices for Proposed Rule 9610 Section 7.0 Use of Projected Incen tive Program Reductions in SIPs Draft rule language previously called this se ction “Use of Projected Incentive Program Reductions as Control Strategies in SIPs.” In draft rule language Se ction 7.0 stated that the District may identify SI P-creditable emission reducti on commitments in District adopted SIPs to address federal CAA requi rements with the caveat that the

commitments shall be limited to the amount of emission reductions that the District reasonably projects to be achieved and that such commitments shall be accounted for

in the annual demons tration report.

Proposed rule language has an updated section title and also has been updated to clarify that where the District intends to rely on projec tions of SIP-creditable emission reductions under Rule 9610 to satisfy federal CAA SIP requirements, the District shall identify the specific amounts of SIP-creditable emission reductions for a particular year or years in the relevant SIP. Each SIP submission in which the District relies on such projections shall contain a demonstrati on that the applicable incentive program guidelines continues to provide for SIP-cred itable emission reductions. In addition to this clarification, new Section 7.4 requires that if either the District or EPA find that there is a SIP shortfall for a particular year, the District will adopt and submit to EPA, by specified dates, substitute rules and meas ures that will achieve equivalent emission reductions as expeditiously as prac ticable and no later than any applicable implementation deadline in the CAA or EPA’ s implementing regulations. Rules and measures may include a variety of means of identifying and quantifying additional needed emission reductions, includi ng additional control strat egies; surplus and not-yetcredited reductions from adopted control stra tegies; or incentive-based reductions.



### IV. RULE DEVELOPMEN T PROCESS AND RELATED
REQUIREMENTS

The District worked closely with EPA, ARB, and NRCS to develop proposed new Rule 9610 and supporting components such as the annual demonstration report and the Manual of Procedures web page.

A. Public Workshop for Rule 9610

The District hosted a public workshop to present, discuss, and hear comments on the draft rule and draft staff repor t on April 9, 2013. The draf t rule and staff report were made available on the District’s website prio r to the public workshop, and a two week comment period followed the public workshop . All comments received on or before April 23, 2013 were considered and incorporat ed into the draft rule or staff report.

B. Public Hearing for Rule 9610

In accordance with California Health and Safety Code (CH&SC) Section 40725, the proposed rule and final draft staff report were publicly noticed prior to the GoverningSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

24 Final Staff Report with Appendices for Proposed Rule 9610 Board public hearing to consider adoption of New Rule 9610. The proposed rule, final draft staff report, 2013 Draft Annual Dem onstration Report, and other supporting documents were made available for public co mment on May 21, 2013. No comments were received during the subsequent two-week comment period. The public is also invited to provide comments during the public hear ing for proposed adoption of this rule.

C. CEQA

Pursuant to California Code of Regulations ( CCR) Section15060(c)(3), this project is not subject to California Environmental Quality Act (CEQA) because it is not a project as

defined in Section 15378.



### V. REFERENCES

California Air Resources Board [ARB], (2013, January 2), Incentive Program; Program Review Report, San Joaquin Valley Air Po llution Control District Fiscal Years 2006-07 through 2009-10 , Sacramento: CA

California Air Resources Board [ARB], 2010, Proposition 1B: Goods Movement Emission Reduction Program Proposed Update to Guidelines fo r Implementation Staff Report, Sacramento: CA.

California Air Resources Board [ARB], 2011, The Carl Moyer Program Guidelines

, Sacramento: CA.

San Joaquin Valley Air Pollution Control District [SJVAPCD], (2012, December 20). 2012 PM2.5 Plan [Pm2.5 Plan], Fresno: CA.

San Joaquin Valley Air Pollution Control District [SJVAPCD], (2012, May 2), Consider New Approach for Receiving Federal Credit for Emissions Reductions Achieved Through District Incentive Programs Towards Meeting Dis trict Obligations Under the State Implantation Plan, Fresno: CA: San Joaquin Valley Air Pollution Control

District. Retrieved from http://www.valleyair.org/Board_meet ings/GB/agenda_minutes/Agenda/2012/May/ StudySession/FinalGBItem5-SIPcr editfoincentives_05-02-12.pdf

San Joaquin Valley Air Pollution Control District [SJVAPCD] , (2007, April 30). 2007 Ozone Plan [Ozone Plan], Fresno: CA.

San Joaquin Valley Air Pollution Control District [SJVAPCD], (2010, December 7) SIP Credibility of the Off-Road Agricultural Equipment Replacement Incentive Programs, Fresno: CA.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

25 Final Staff Report with Appendices for Proposed Rule 9610 United States Environmental Protection Agency [EPA], 2001, Draft Economic Incentive Program Guidance (EPA-452/D-99-001), Washington DC

United States Environmental Protection Agency [EPA], 2001, Improving Air Quality with Economic Incentive Programs (EPA-452/R-01-001), Washington DC

United States Environmental Protection Agency [EPA], 2004, Incorporating Emerging and Voluntary Measures in a St ate Implementation Plan (SIP) , North Carolina.

United States Environmental Protection Agency [EPA], 2001, Incorporating Voluntary Stationary Source Emission Reduction Programs into State Implementation Plans – Final Policy

United States Environmental Protection Agen cy [EPA], San Joaquin Valley Air Pollution Control District [SJVAPCD], United States Department of Agriculture [USDA], and California Air Resources Board [ARB], 2010, Statement of PrinciplesSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Final Staff Report: Rule 9610 June 20, 2013

26 Final Staff Report with Appendices for Proposed Rule 9610 This page intentionally blank.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix A: Statement of Principles June 20, 2013

A-1 Final Staff Report with Appendices for Proposed Rule 9610 

# Appendix A

Statement of Principles Outlining the Approach to SIP-Creditability of Voluntary Incentive Programs

June 20, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix A: Statement of Principles June 20, 2013

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Appendix A: Statement of Principles June 20, 2013

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Appendix B: Implementation Principles June 20, 2013

B-1 Final Staff Report with Appendices for Proposed Rule 9610 

# Appendix B

Implementation Principles for A ddressing Agriculture Equipment
under the Clean Air Act

June 20, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix B: Implementation Principles June 20, 2013

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Appendix B: Implementation Principles June 20, 2013

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Appendix C: Comments and Res ponses June 20, 2013

C-1 Final Staff Report with Appendices for Proposed Rule 9610 

# Appendix C

Summary of Significant Comments and Responses

June 20, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

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Appendix C: Comments and Res ponses June 20, 2013

C-3 Final Staff Report with Appendices for Proposed Rule 9610 SUMMARY OF SIGNIFICANT COMMENTS FOR THE

PROPOSED NEW RULE 9610 DATED May 21, 2013

EPA REGION IX COMMENTS

1. COMMENT: Revise the Purpose of the rule to include a requirement that

emission reductions from incentive programs become creditable for SIP purposes upon EPA approval of a SIP subm ission that satisfies the applicable requirement of the clean air act and this rule.

RESPONSE: See response to EPA Comment 13 from the comments submitted for the April 9, 2013 draft rule below.

2. COMMENT: Update Section 3.1 to further cl arify the approved guidelines.

RESPONSE: Section 3.1 has been updated as requested; please refer to proposed rule language.

3. COMMENT: Update Section 3.2. Add l anguage requiring public review to
Section 3.2.1. Make Section 3.2.2 into a new Section 3.3 and update language to require additional public review o f, and EPA approval into the SIP, for all

incentive-based emission reductions clai med in the annual demonstration report for case-by-case determinations.

RESPONSE: Section 3.2.1 is consistent with current practices for development of incentive program guidelines; ther efore, adding language to require public review is redundant. Section 3.2.2 already referenced the SIP submittal approval process through reference to Section 7.0 of the rule. Therefore this section was reworded to remove redundant language.

4. COMMENT: Update Section 3.3 to add language that updates the manual of procedures to specifically address only t hose incentive program guidelines used to quantify emission reductions.

RESPONSE: The Manual of Procedures website identifies all incentive program guidelines available for use to claim SIP credit under Sections 3.1 and 3.2 of the rule; as such, identifying all incentiv e program guidelines is the appropriate action. No change will be made to rule language.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-4 Final Staff Report with Appendices for Proposed Rule 9610 5. COMMENT: Update Section 3.2 to add language t hat clarifies that the listed guidelines allowed for usage for claiming SIP credit would include subsequent versions of said guidelines.

RESPONSE: The current rule language already allows for subsequent versions of said guidelines. Theref ore, the requested revision is redundant to the current rule language.

ARB COMMENTS

6. COMMENT: The ARB supports the District’s proposed Rule 9610. The proposed rule recognizes that incentives complement regulatory programs and that emission reductions achieved by inc entive programs should be included in the SIP, and provides an administrative framework to repor t to the EPA that

emission reductions achieved from incentiv e programs are surplus, quantifiable, enforceable, and permanent, making them elig ible for SIP credit. The stringent criteria established by ARB in the progr am guidelines for the Carl Moyer and Proposition 1B programs provide the necessary technical foundation for calculating the SIP benef its of incentive programs. T he rule would provide credit for projects funded under guidelines devel oped by the USDA NRCS. Also, the rule allows for the possibility of addition al incentive program guidelines to be developed by the District in consultation with ARB.

RESPONSE: The District thanks the ARB fo r their continued support and recognition of the import ance of this project.

STAKEHOLDER COMMENTS

One comment letter was received after the comment period deadline. This letter was from Earthjustice (EJ).

7. COMMENT: The update to the Draft rule does not address approv ability of the District’s program with r egards to enforceability and emission reductions being surplus. (EJ)

RESPONSE: Please see responses to EPA Comment 4 and EJ Comments 24

and 25 from the comments submitted for t he April 9, 2013 draft rule below.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-5 Final Staff Report with Appendices for Proposed Rule 9610 SUMMARY OF SIGNIFICANT COMMENTS FOR THE

DRAFT NEW RULE 9610

DATED APRIL 9, 2013

EPA REGION IX STAFF COMMENTS

1. COMMENT: Please revise rule language to re move the statement “and other public agencies” and replace it with “NRCS and CARB.” The existing language could allow program implementation by agencies with insufficient resources and air pollution authority, or t hat otherwise fail to fulfill f ederal requirements such as those in CAA §110(a)(2)(E).

RESPONSE: Proposed rule language and final draft staff report have been updated.

2. COMMENT: To avoid the misunderstanding that incentive programs could allow higher emitting equipment to move outside the Valley, please revise the definition of permanent to specify that equipment or vehicles would be permanently retrofit, and limit applicability to equipment and vehicles.

RESPONSE: The term “permanently retrofit” was not added to rule language

because the contracts between the Distr ict, ARB, or NRCS and the grantee include provisions to ensure that the installed equipment for retrofits remains installed and in operating condition on the equipment or vehicle during the duration of the pr oject life.

3. COMMENT: Definition of the term “SIP” is inconsistent with the Federal
definition in CAA section 302(q). One way to address this would be to define “Adopted SIP” (instead of “SIP”) here, add a separate definition for “Applicable
SIP” consistent with C AA section 302(q), and ensure appropriate use of these two terms throughout the rule.

RESPONSE: To be consistent with the CAA, the District has updated the
definition of “SIP” to be cons istent with CAA Section 110(a).

4. COMMENT: For clarity, please revise the defin ition of Surplus to clarify the

emission reductions are not accounted fo r in future baseline inventories underlying a SIP attainment demonstrati on. Then delete the definition 2.25 because it would no longer be necessary.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-6 Final Staff Report with Appendices for Proposed Rule 9610 RESPONSE: Proposed rule language regarding baseline inventories has been updated and Section 2.25 has been removed fr om rule language accordingly.

5. COMMENT: Please ensure that the latest Ca lifornia program guidelines, emission factors and assumptions are used when reductions are quantified, and

that the calculation of emission reducti ons specifies the geographic areas (since, e.g., counties have separate on-road em issions budgets) and time period for which they apply.

RESPONSE: Proposed rule language has been updated to clarify that the latest program guidelines will be used relevant to when the contract is entered into. See Section 3.0 for specific language. Incentive Program Guidelines dictate the calculation methodologies including a ssumptions; therefore, it would be redundant to add that language to rule language.

Any need for geographic information would be limited to reductions credited in the plan for RFP or attainment, and fo r on-road mobile only, so requiring geographic information for all incentive programs would be overbroad. In addition, any future use of on-road mobile incentive program reductions in the SIP will be governed by 40 CFR 93 Subpart A, so there is no need to replicate those requirements in 9610.

6. COMMENT: EPA may need assistance clarifying that the guidelines identified in Section 3.0 demonstrate that they fulf ill relevant nationa l requirements.

RESPONSE: The District, ARB, and NRCS ar e committed to work with EPA on

this task.

7. COMMENT: The use of alternative inc entive program guidelines in Sections 3.1.4, 3.1.1.11, and 3.1.3.6 provide broad director’s discretion inconsistent with long-standing national policy as recently reiterated, for example, in EPA’s proposed rulemaking regarding excess em issions (78 FR 12460, February 22, 2013). These paragraphs could be deleted; caveated as subject to 3%/6% limits for voluntary/emerging measures; or modified to add the requirement that program guidelines must be approv ed by EPA into the SIP.

RESPONSE: Based on continuing discussions with EPA on these issues, rule language has been updated in Sections 3. 0 and 7.0. Beyond Rule 9610, 3%/6% limits for voluntary/emerging measures are also available per EPA guidance (see discussion in the staff repor t). Section 3.1.1.11 and 3. 1.3.6 have been deleted from rule language.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-7 Final Staff Report with Appendices for Proposed Rule 9610 8. COMMENT: Because they rely on director’s discr etion, the rule must clarify that projects with case-by-case determinat ions do not generate SIP-creditable

emission reductions.

RESPONSE: Section 3.2 has been updated to de scribe the process by which

the District will submit case -by-case determinations to EPA for approval into the

SIP.

9. COMMENT: To clarify the obligation to addre ss any shortfalls consistent with national policy, please update Section 4.4 to state the District will identify specific commitments in adopted SIPs and/or appl icable SIPs which the District has satisfied in whole or in part through SI P creditable emission reductions achieved in accordance to Section 4.2. Clarify that such commitments may include

emission reductions commitments to meet CAA requirements. The District shall identify and quantify SIP shortfalls fr om incentive program commitments, describe the specific remedies to be im plemented by the District consistent with
associated SIP creditable emission r eductions commitments to remedy the

shortfall.

RESPONSE: Based on continuing discussions with EPA on these issues, rule language (Section 7.0) has been updated.

10. COMMENT: We suggest a new subsection, such as a Section 4.8 clarifying that

SIP-creditable emission reductions from on-road mobile sources as identified in the annual demonstration report may be av ailable for use in transportation conformity determinations if such SIP-cr editable emission reductions satisfy the requirements of Rule 9610 and are included in a motor vehicle emissions budget that EPA has approved into a SIP or found to be adequate or otherwise meet federal conformity requirement s pursuant to 40 CFR part 93.

RESPONSE: The suggested section has not been added to the rule, since this situation is already governed by 40 CFR 93.122(a)(3 and 4) and other sections of the federal transportation conformity r egulation. See also the response to

Comment 5.

11. COMMENT: To clarify the obligation to addre ss any shortfalls consistent with national policy, please revise Secti on 7.0 to replace ambiguous language regarding the identification of SIP-creditable emission reductions in SIPs with specific language requiring t he District to identify spec ific SIP-creditable emission reductions for specific year(s), and langua ge clarifying that if EPA finds a SIP shortfall, the District will adopt and submit to EPA, no later than two years after any such finding, substitute rules and/or measures that will achieve equivalentSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-8 Final Staff Report with Appendices for Proposed Rule 9610 emission reductions in a timely ma nner and no later than any applicable implementation deadline and no later t han any applicable implementation
deadline in the CAA or EPA’s implementing regulations.

RESPONSE: Based on continuing discussions with EPA on these issues, rule language (Section 7.4) has been updated with more specific language about how

and when shortfalls are to be remedied.

12. COMMENT: We recommend adding language to Se ction 1.0 clarifying that emissions reduced from incentive pr ograms will become cr editable for SIP purposes upon EPA approval of a SIP submi ssion that satisfies the provisions of Rule 9610 and identifies specific amounts of emission reductions to be credited toward a specific SIP purpose.

RESPONSE: The rule identifies the process for identifying and receiving SIPcredit for incentive-based emissions reductions.

13. COMMENT: We recommend that the definition of “SIP shortfall” be revised to link it to Section 7.0 requirements.

RESPONSE: The definition of SIP Shortfall has been updated. Please see proposed rule language.

14. COMMENT: We recommend clarifying that par agraph 4.5.9 requires separate reporting for each piece of equi pment even if a proj ect consists of many pieces of equipment.

RESPONSE: Section 4.5.9 of proposed rule language has been updated to

include this clarification.

15. COMMENT: For clarity, please include all “Project Types” in each Carl Moyer chapter which are eligible for SIP credi t. For example, pa ragraph 3.1.1.4 lists “repower,” “retrofit” or “repl acement,” while Carl Moyer chapter 7 also lists “new equipment purchase.” As written, we understand that “new equipment purchase” would not be eligible for SI P credit under Rule 9610. Note that the Carl Moyer guidelines define “Project Type” within the Carl Moyer Program which does not correspond to the definition of “Project Type” in Section 2.21 of Rule 9610.

RESPONSE: The definition of Project Type is s pecific to this rule language to provide consistency between various in centive program guidelines in theSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-9 Final Staff Report with Appendices for Proposed Rule 9610 District’s annual demonstration report. Secti on 2.21 clarifies t hat the project type is defined in each applicable in centive program guideline.

16. COMMENT: We recommend deleting paragraph 3.2.3 since case-by-case determinations are, by definition, case-b y-case, and thus are not appropriate as generally-applicable guidelines.

RESPONSE: Case-by-case is defined in Sect ion 2.4 and is now addressed in
Section 3.2.

17. COMMENT: Project information should i dentify each case-by-case

determination.

RESPONSE: See response to Comment 16.

18. COMMENT: We recommend clarifying Section 4. 7 to explain that assessing the ability of the program to provide reducti ons that are initially anticipated and to require that a summary of the public comments and District responses about the draft report be included.

RESPONSE: Section 4.7 includes a retros pective assessment of the performance of the District’s incentive programs to evaluate overall performance and develop recommendations for futu re enhancements. Additionally, a summary of the public process for t he Annual Demonstration Report will be

included in the assessment.

19. COMMENT: For further transparency, consider requiring all reports be made

available online.

RESPONSE: Rule language has been updated to remove the three report minimum requirement.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-10 Final Staff Report with Appendices for Proposed Rule 9610 STAKEHOLDER COMMENTS

Comments were submitted dur ing the public workshop and for a two-week commenting period following the public workshop. Comments were submitted by the following

stakeholders:

Coalition for Clean Air (CCA)

Earth Justice 1 (EJ) E & B Natural Resources (E&B) West Kern Water (WKW)

20. COMMENT: What was the process for dev eloping the definition of SIP

creditable emission reductions? Is it based on EPA guidance or language in the Clean Air Act? (EJ)

RESPONSE: The definition of SIP-creditabl e emission reductions is based on the Clean Air Act and EPA guidance. The District has worked closely with EPA to develop a process under Rule 9610 that ensures the SIP- creditability of

reductions claimed under Rule 9610. Refer to the References section of the final draft staff report for the list of EPA guidance documents.

21. COMMENT: How can the public participate in the process to ensure that

emissions reductions occur? What role c an the public play in this process (i.e. enforcement) if emissions reductions do not occur as anticipated? (CCA, EJ)

RESPONSE: As noted in the rule, program guidelines and the Manual of Procedures will be publically available. Incentive guidelines are updated through a public process, whereby the public has opportunities to provide comments and participate in the development of said guidelines. In addition, the annual demonstration reports will provide all emissions-rela ted information for reductions claimed in the report, so that all em issions reductions can be independently verified. The annual demonstration reports will compare achieved reductions to
SIP commitments and will ident ify remedies for addressing any shortfalls. The annual demonstration report will be made ava ilable to the public before submittal

to ARB and EPA.

22. COMMENT: Are the emission reductions claime d in the annual demonstration report for SIP credit based on actual emissi on reductions or estimations of the emission reductions based on funding? (WKW)

1 On behalf of the National Parks Conservation Asso ciation and Medical Advocates for Healthy Air.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-11 Final Staff Report with Appendices for Proposed Rule 9610 RESPONSE: Emission reductions claimed fo r SIP-credit in the annual demonstration reports w ould be based on actual em ission reductions.

23. COMMENT: Will the SIP-creditabl e emission reductions be from incentive programs for agricultural sources only, or will other sources be allowed to participate?

RESPONSE: SIP-creditable emission reductions are not limited to agricultural sources; many emission reductions from incentive program w ould be from mobile

sources.

24. COMMENT: The Clean Air Act does not allow SI Ps to be built upon emission

reductions that are not enforceable. T hese incentive-based emission reductions do not meet the CAA’s longs tanding requirement that em ission reductions relied upon in SIPs be enforceable. CAA stat utory requirements are not open for redefinition by the District, or even EPA. The annual demonstration report offered as a backstop to assure emission reductions are achieved is similarly unenforceable. (EJ)

RESPONSE: Economic incentive programs are enforced through legally-binding contracts, as noted in EPA guidance (suc h as the 2001 Improving Air Quality with Economic Incentive Programs). In addition, as explained in the rule (Section 2.8 and related requirements), Rule 9610 insure s that SIP-creditable incentive-based reductions can be independently veri fied and that all emissions-related information is publically available.

25. COMMENT: The District is proposing that SIPs could be merely a description of the amount of money that is available to subsidize emission reductions. Instead of trying to make the inc entive programs creditable by changing the definition of what is required for such credit and using in centives as a substitute for regulatory requirements, the District should promul gate the regulatory requirements and use subsidies to incentivize early adoption/compliance. (EJ)

RESPONSE: The commenter appears to mis understand the concept of Rule 9610 with relation to SIPs. As explained in the final draft staf f report, incentivebased emission reductions would not be used to replace regulatory requirements. In fact, the District has adopted and implemented many of the nation’s toughest regulations, exceedi ng minimum federal requirements. Incentives and regulations are not an ei ther-or scenario – both are playing an important role in providing cost-effect ive emissions reductions and improving Valley air quality.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix C: Comments and Res ponses June 20, 2013

C-12 Final Staff Report with Appendices for Proposed Rule 9610 26. COMMENT: The District insists on pursuing t hese emission reductions on a project-by-project basis; instead, it c an adopt source-specific rules that are subject to enforcement by EPA and the public. (EJ)

RESPONSE: See response to Comment 25.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-1 Final Staff Report with Appendices for Proposed Rule 9610 

# Appendix D

Manual of Procedures for Proposed Rule 9610 (State Im plementation Plan Credit for Emission Reductions Generated through Incentive Programs)

June 20, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-2 Final Staff Report with Appendices for Proposed Rule 9610 This page intentionally blank.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-3 Final Staff Report with Appendices for Proposed Rule 9610 Manual of Procedures for Proposed Rule 9610 (State Implemen tation Plan Credit for Emission Reductions Generated through Incentive Programs

Pursuant to Section 3.3 of Proposed Rule 9610, the District will develop and maintain a
Manual of Procedures for SIP-creditable in centive-based emission reductions claimed through this rule. The Manual of Procedur es assures that all incentive program guidelines used for SIP creditability are publicly available, and maintained in a

centralized location on the District’s websit e. To increase public understanding and awareness of the guidelines and the role they play in SI P-creditable of emission reductions, the website will also contain a description of how each incentive program guideline ensures that the in centive program emission redu ctions are SIP-creditable.

The following is the design and contents of the Manual of Procedur es web page that will be presented and maintained on the Districts website after adoption of the proposed

rule.



### Manual of Procedures

The on-going mission of the San Joaquin Valley Unified Air Pollution Control District (District) is to improve air qualit y and protect the health of residents in the San Joaquin Valley air basin (Valley). Incentive programs achieve emission reductions beyond those achieved by r egulations alone by accelerating the adoption of cleaner technologies. Since 1992, the District’s incentive programs have provided over $500 milli on in incentive funds, resulting in over 100,000 tons

of lifetime emission reductions.

SIP-Creditability of Incentiv e-Based Emission Reductions

When given State Implementat ion Plan (SIP) credit, incentive-based emission reductions can be used to complement regulatory-based emission reductions to assist meeting federal Clean Air Act (C AA) requirements. District Rule 9610 (State Implementation Plan Credit for Emission Reductions Generated through Incentive Programs) est ablishes a process through which incentive-based

emission reductions can receive federal SIP credit. For incentive-based emission reductions to receive SIP-credit, the District must dem onstrate that the emission reductions are Surplus, Quantif iable, Enforceable, and Permanent.

The following is a brief discussion of each of these elements as applicable to the

District and incentive-bas ed emission reductions.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-4 Final Staff Report with Appendices for Proposed Rule 9610 Surplus The District funds incentive projects based on incentive program guidelines

that ensure that the resu lting emission reductions are not otherwise required by any federal, state, or local regul ation or other legal mandate. The

emission reductions must also be in excess of the SIP baseline emission inventories underlying a SIP demonstration; m eaning the base year, attainment year, and interim year emissi ons inventories as reported in a SIP that serve as a primary starting point for modeling and other SIP analyses.

Quantifiable The District evaluates the potential reduc tions that would be achieved by replacing the old equipm ent with the new equipment using the established

calculation methods and emissions fa ctors in the appropriate program guidelines. To be quantifiable, emi ssion reductions must be reliably determined and replicated through the use of well-established emission factors and calculation methodologies, as outlined in applicable incentive program guidelines. Using well-estab lished emission factors and calculation methodologies ensure that the emissi on reductions can be replicated.

Enforceable

Emission reductions are enforceable if the incentive programs include the following provisions:

o The emission reductions must be independently and practicably

verifiable for the duration of the project life through inspections, monitoring, and/or other mechanisms;

o Incentive program violations ar e defined through legally binding contracts, including ident ifying party or parties responsible for ensuring that emission reductions are achieved;

o Grantees are obligated to provide all records needed to demonstrate that emission reductions are achieved; and

o The public has access to all emissi on-related information for reductions

claimed in the annual demonstration report.

Permanent For purposes of SIP-creditability of incentive-based emission reductions, permanent is defined as permanent for the lifetime of the project. Permanence is ensured by actions taken to physically destroy or permanently disable, existing or baseline equipm ent, practices, or vehicles.

Mobile Sources

A large portion of the proj ects that are currently being funded are from mobile sources. These projects provide a uni que challenge in that they may opreate onlySAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-5 Final Staff Report with Appendices for Proposed Rule 9610 a percentage of time within t he San Joaquin Valley. To ensure that SIP-creditable emissions reductions are only reported for the amount occuring in the San Joaquin Valley, the Dist rict requires that percent use in the District is reported at the time an application for funding is subm itted. This information is also reported by the grantee each year during the proj ect life through the annual Usage Report Surveys that every grantee is contractua lly required to complete and submitt to

the District.

Each program guideline addr esses California operation within it’s specific methodology but percent use in the San Jo aquin Valley is not adjusted for within the program guideline methodolgies. The Dist rict uses the percent use in the San Joaquin Valley reported by the grantee to adjust the total emissions reductions for each project prior to reporting SIP-credi table emissions r eductions with Rule 9610. The formula for adjusting for percent use in the San Joaquin Valley is as

follows:

Total Lifetime NOx Reduced (tons) * (Per cent Operation in SJV/100) = NOx Lifetime Reduced Adjusted Percent Operation (tons)

(5.59 tons/life) * ( 90%/100) = 5.03 tons

The formula is repeated for each pollutant being reported.

Incentive Program Guidelines

Carl Moyer Memorial Air Quality Stan dards Attainment Program Guidelines

The Carl Moyer Memorial Air Qualit y Standards Attainment Program (Carl Moyer Program) has been successfully implemented through the cooperative
efforts of the California Air Resource s Board (ARB) and air districts in California. As directed by the Califor nia Health and Safety Code (CH&SC), ARB’s role is to oversee the Carl Moyer Program by managing program funds, developing and maintaini ng guidelines, and determining costeffectiveness methodologies. Air dist ricts use the Carl Moyer Program Guidelines to select, fund, and monitor projects in their jurisdiction by providing grants to public and private entities for the incr emental cost of cleaner-than-required engi nes and/or equipment.

The guidelines include robust administra tive requirements to ensure that

emission reductions are enforceable and ar e achieved throughout the life of a project. The District has used the Carl Moyer Program Guidelines to develop the practices that are curr ently in place to ensure all emissions are surplus, quantifiable, enforceable, and permanen t, and that emission reductions are
SIP-creditable.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-6 Final Staff Report with Appendices for Proposed Rule 9610 Carl Moyer Guidelines:

 2011 Carl Moyer Program Gui delines (approved 4/28/2011): http://www.arb.ca.gov/msprog/ moyer/guidelines/current.htm

.

o Sample Calculations: http://www.arb.ca.gov/msprog/ moyer/guidelines/2011gl/suppdoc s/examcalcs2011.pdf

 2008 Carl Moyer Program Gui delines (approved 3/27/2008): http://www.arb.ca.gov/msprog/ moyer/guidelines/current.htm

o Sample Calculat ions (Appendix E): http://www.arb.ca.gov/msprog/ moyer/guidelines/cmp_guidelines _part4.pdf

 2005 Carl Moyer Program Gui delines (approved 11/17/2005): http://www.arb.ca.gov/msprog/ moyer/archive/archive.htm

o Sample Calculat ions (Appendix D): http://www.arb.ca.gov/msprog/mo yer/archive/2005_Carl_Moyer _Guidelines_Part4.pdf

The following is a summary of how Carl Moyer Guidelines ensure emissions

reductions are SIP-creditable.

Surplus The Carl Moyer Program Guidelines ens ure that projects are surplus to regulations by only allowing projects to be selected that are not required by any federal, State or local regulation, memorandum of agreement/understanding wit h a regulatory agency, settlement agreement, mitigation requirement, or other legal m andate. For example, the guidelines have accounted for each adopted regul ation to determine the compliance dates of any affected engines and emission benefits claimed by each regulation have been determined. Minimum project lives are established in each component to ensure t hat the program does not fund actions taken to comply with regulatory deadlines. The mi nimum project life requirement also

ensures the overall cost-effectiveness of the program and that the emission

reductions are real for the life of the project. The below summary provides more detail about how the Carl Moyer Program Guidelines ensure that the SIP-creditability integrity criter ia of “Surplus” is fulfilled:

 Requirement that emission reductions generated by incentive programs are not required by other regulation

o (Moyer Guidelines Chapter 2, Pr oject Criteria A, H, I, MM).

 Protocols for quantifying maximum project life and maximum emission reductions which account for upcom ing regulatory deadlines for a given source categorySAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-7 Final Staff Report with Appendices for Proposed Rule 9610 o (Moyer Guidelines Chapter 2, Project Criteria B, I and MM).

 Assurance that baseline equipment was in use

o (Moyer Guidelines Chapter 3, Section Z.6(B) and AA.2.).

 Assurance that new/upgraded equipment is not already accounted for in future-year inventories underlyi ng a SIP attainment demonstration by natural fleet turnover, finite equipment life or incentives

o The definition of surplus in t he Moyer guidelines requires that

the emission reductions achi eved are above and beyond those required under existing regulations that are incorporated into a SIP. As part of the SIP devel opment process, ARB reviews the Moyer project mix to ensure that the amount of emission reductions credited to program ar e not included in the future year inventories specific to each individual attainment

demonstration.

 Procedures that ensure that old equi pment was used in the geographic

area of interest

o (Moyer Guidelines, Chapter 2, Se ction S and Chapter 3, Section Z.6.(B)).

Quantifiable The District evaluates the potential reduc tions that would be achieved by replacing the old equipm ent with the new equipment using the established calculation methodologies and emissions fa ctors in the program guidelines. The calculation methodology, including calculation formulas, assumptions, emission factors and sample calculations are part of the Carl Moyer Program Guidelines and have been approved through a public process. To ensure that real, quantifiable emission reductions are achieved over the lif e of a project, the program guidelines require that emi ssion control technologies be certified or verified by ARB (certification or ve rification by the EPA or International Maritime Organization may be allowed fo r some source categories for which

ARB does not have a certification or verification program). The below summary provides more detail about how the Carl Moyer Program Guidelines

ensure that the SIP-cr editability integrity criteria of “Quantifiable” is fulfilled:

 Emissions data needed to calculat e emission reductions must be publicly available current and accurate. This should include appropriate emission factors, l oad factors, and other conversion

factors.

o Moyer Guidelines, Appendix D (Publ icly Available) and Chapter 1, Section E.7 (Allows ARB Ex ecutive Officer to modify the Guidelines under a public process, to keep them effective and up-to-date.)

 Guidelines include necessary formula s and instructions to calculate emissions based on above data, and ex plicit instructions to ensure appropriate data are used in calculationsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-8 Final Staff Report with Appendices for Proposed Rule 9610 o Moyer Guidelines, Appendix C (contains formulas and instructions)

o Moyer Guidelines, Suppl emental document, “Sample Calculations” (contains formulas and instructions)

o Requirement Moyer Guidelines, Appendix C, Section B.5, and Supplemental document, “Sampl e Calculations” (contains explicit instructions regarding inputs)

 Requirement to provide activity dat a sufficient to determine actual

emission reductions.

o Moyer Guidelines, Chapter 3, Section Z.6.(B)

 Requirement to demonstrate the per centage of emission reductions that occur in the geographic area of interest, and ar e therefore SIP

creditable

o Moyer Guidelines, Section S.

o Moyer Guidelines, Section Z.6.(B)

 Requirement to periodically audit comple ted projects to verify emission reduction projections are fulfilled

o Moyer Guidelines Chapter 2, Sections Z.10.

o Moyer Guidelines Chapter 3, Sections EE.

Enforceable Emission reductions and other required actions are enforceable if: they are independently verifiable; program viol ations and those liable are defined;

information needed to determine emission reductions is available to the public; and they are practicably enforceable in accordance with other EPA guidance on practicable enforceability . The below summary provides more detail about how the Carl Moyer Progr am Guidelines ens ure that the SIPcreditability integrity criteria of “Enforceable” is fulfilled:

 Require grantees to provide all ne cessary recordkeeping and reporting needed to verify emissions reductions

o Moyer Guidelines, Chapter 3, Section Z.9 and DD

 Require inspections to ensure in centive program information is

consistent with actual operating equipment

o Moyer Guidelines Chapter 3, Sections AA and BB.

 Identify liable parties and liabili ty associated with contract noncompliance

o Moyer Guidelines Chapter 3, Section Z.11.

Permanent
To ensure that the SIP-creditable emissions reductions are permanent, actions such as pre-inspections and post inspections of the new equipment and verification that the baseline equi pment has been destroyed through the required process as descri bed in the program guidelin es are performed. The below summary provides more deta il about how the Carl Moyer ProgramSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-9 Final Staff Report with Appendices for Proposed Rule 9610 Guidelines ensure that the SIP-creditability integrity cr iteria of “Permanent” is

fulfilled:

 Data needed to determine and track location of activity

o Moyer Guidelines, Chapter 3, Section DD

 Provisions for ensuring that the project was co mpleted, including the verification of dispositi on of baseline equipment.

o Moyer Guidelines Chapter 3, Sections AA and BB

Proposition 1B Goods Movement Guidelines

Proposition 1B Goods Movement Gui delines were developed by ARB in consultation with stakeholders, includi ng: air districts, metropolitan planning organizations, port authorities, shi pping lines, railroad companies, trucking companies, harbor craft owners, freight distributors, terminal operators, local port community advisory groups, communi ty interest groups, and airports. The guidelines include robust administra tive requirements to ensure that emission reductions are surplus, quantif iable, enforceable, and permanent.

Proposition 1B Guidelines:

 2013 Proposition 1B: Goods Movem ent Emission Reduction Program Guidelines (approved 1/25/2013): http://www.arb.ca.gov/bonds /gmbond/gmbond.htm.

o Sample Calculations and Pr oject Calculator coming soon

 2010 Proposition 1B: Goods Movement Emission Reduction Program Guidelines (appr oved 03/25/2010): http://www.arb.ca.gov/bonds/g mbond/archives/archives.htm

o Sample Calculations http://www.arb.ca.gov/bonds /gmbond/docs/prop_1b_goods_mo
vement_2008-09_calculato r_directions.pdf

o Project calculator in Excel fo rmat can be found under Technical

Tools and Documents on ARB’s website at: http://www.arb.ca.gov /bonds/gmbond/gmbond.htm

 2008 Proposition 1B: Goods Movement Emission Reduction Program Guidelines (appr oved 02/28/2008): http://www.arb.ca.gov/bonds/g mbond/archives/archives.htm

o Sample Calculations http://www.arb.ca.gov/bonds/gmbo nd/docs/calculator_directions _031108.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-10 Final Staff Report with Appendices for Proposed Rule 9610 o Project Calculator in Excel fo rmat can be found under Technical

Tools and Documents on ARB’s website at: http://www.arb.ca.gov/bonds/gmb ond/archives/archives.htm

The following is a summary of how Proposit ion 1B Guidelines ensure emissions

reductions are SIP-creditable.

Surplus The Proposition 1B program supplements AR B’s diesel regulations by funding early compliance or providing extra emission reductions beyond those required by current rules. The program guidelines require that the District ensure all trucks being considered to receive funding have had ARB verify compliance with the state’s diesel regul ations and further require that any

trucks under contract with the district be noted as such in the state’s online regulation reporting database. This ensures that the new truck will not be used towards compliance during the proj ect life ensuring th at the emissions reductions are surplus. Chapter 6 Section E discusses the requirements that fleets remain in compliance with t he Truck and Bus Regul ation and that program funded equipment cannot be used towards compliance with the regulation.

Quantifiable The District evaluates the potential r eductions that would be achieved by replacing the old equipment with t he new equipment using the Project Benefits Calculator created by ARB. The calculator is avai lable to the public

on ARB’s website at http://www.arb.ca.gov/bonds/gmbond/gmbond.htm and is updated by ARB on a regular basis. Chapter 2 Section C Discusses Proposition 1B program emission reduction calculations.

Enforceable

The District has created enforceable cont racts, based on requirements in the Proposition 1B Program guidelines, which are signed by both District management and the grantee to ensure that projects are fully accomplished and the integrity criteria ar e met. The legally bind ing contracts include, but are not limited to, usage reporting requi rements for the gr antee, operating location requirements for the new vehicl e, the destruction r equirements of the baseline equipment/engine, and an allo wance for the District to conduct an audit of the project at any time duri ng the project life. Appendix A of Proposition 1B Program guidelines deta ils contract requirements for truck projects.

Permanent
To ensure that the SIP-creditable emissions reductions are permanent, actions such as post inspections of t he new equipment and verification that the baseline equipment has been destroyed through the required process as described in the program guidelines are performed. Chapter 4 Section A ofSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-11 Final Staff Report with Appendices for Proposed Rule 9610 the Proposition 1B program discu sses scrap and post inspection requirements.

United States Department of Agricultur e Natural Resource Conservation Service Combustion System Imrpovement of Mobile Engines Guidelines

The United States Department of Ag riculture (USDA) Natural Resource Conservation Service (NRCS) Combusti on System Improvement of Mobile Engines Guidelines (Guidelines) implements robust administrative requirements for incentive projects bas ed on those in the Carl Moyer Program

Guidelines to ensure that emission r eductions are surplus, quantifiable, enforceable, and permanent.

NRCS Guidelines:

 NRCS General Manual, Title 450, Pa rt 401 – Conservation Practice

Standards: http://directives.sc.egov.usda.gov/viewerFS.aspx?hid=19430

 NRCS Environmental Quality Inc entives Program (EQIP) FY 2013 EQIP Program Information. Nati onal Air Quality Initiative: ftp://ftpfc.sc.egov.usda.gov/CA/programs/ EQIP/2013/2013_EQIP_Air_Quality _Initiative_ProgDesc.pdf

.

 NRCS Conservation Practice Standard 372 – Combustion System Improvement (approved September 2010): http://efotg.sc.egov.usda.gov/r eferences/public/CA/372-std-09- 2010.pdf

 NRCS Combustion System Im provement 372 Operation & Maintenance (approved September 2010): http://efotg.sc.egov.usda.gov/treemenu.aspx

 NRCS Conservation Practice Standar d 372 – Environmental Quality Incentive Program California Air Quality Emission Reductions from Replacing Engines FY 2012 Guidelines, Policies, and Procedures (approved December 2011, updated May 2, 2012): ftp://ftpfc.sc.egov.usda.gov/CA/program s/AQI/2012_Combustion_Systems_Im provement_Policy_and_Procedures.pdf

 NRCS Conservation Practice Standard 372 – Worksheets: calculation, emission factors, certification, and destruction certification: ftp://ftpfc.sc.egov.usda.gov/CA/programs/ EQIP/2013/2013_EQIP_Air_Quality _Initiative_Attachments.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-12 Final Staff Report with Appendices for Proposed Rule 9610  NRCS Conservation Practice Standar d 372 – Conservation Practice Specification: http://efotg.sc.egov.usda.gov/references/public/CA/372- spec-09-2010.doc

.

 NRCS Interim Conservation Practice Standard 723 – Combustion System Air Emission m anagement (approved May 2009): http://efotg.sc.egov.usda.gov/ref erences/public/CA/CA-Interim-723- Combustion-Systems- AQ-Management_May_2009.pdf

 NRCS General Manual, Title 450, Part 407 – Documentation, Certification, and Spot Che cking (amended October 2009): http://directives.sc.egov.usda.gov /RollupViewer.aspx?hid=25728

The following is a summary of how NRCS Guidelines ensure emissions

reductions are SIP-creditable.

Surplus Under the NAQI, page 3 of the CA-NRCS program guidelines specifies that

SIP creditable emissions reductions are “a chieved from contra cts or parts of

contracts funded under the ai r quality initiative [that ] are not required by any federal, state, or local regulati on, settlement agreement, mitigation requirement, or other legal mandate.” A rule or r egulation does not currently exist for off-road mobile agricultural equipment, so the emission reductions resulting from replacing existing mob ile off-road agricultural engines funded under the NAQI per Conservation Practi ce Standard (CPS) 372 - Combustion Systems Improvement are surplus. The FY 2013 National Air Quality Initiative Programs Descripti on is posted on-line at: ftp://ftpfc.sc.egov.usda.gov/CA/programs/EQIP /2013/2013_EQIP_Air_Quality_Initiati ve_ProgDesc.pdf . The 2012 CA-NRCS progra m guidelines are posted online at: ftp://ftpfc.sc.egov.usda.gov/CA/programs/ AQI/2012_Combustion_Systems_Improve ment_Policy_and_Procedures.pdf

Quantifiable The District provided technical assist ance to CA-NRCS in developing their calculation methodologies. The methodol ogies from the Carl Moyer Program are the basis for components incl uded in CPS-372 and its supporting documents for the NAQI, including the CA-NRCS program guidelines. The District provided technical assistance to CA-NRCS in developing their calculation methodologies, which are cons istent with the Carl Moyer Program.
The NRCS Field Office Technical Gui de places a ten-year lifespan for projects implemented under CPS 372 – Combustion System Improvement,

which is also consistent with the Ca rl Moyer program. A conservation practice lifespan is the minimum time (i n years) the implemented practice is expected to be fully functional fo r its intended purpose (NRCS GeneralSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-13 Final Staff Report with Appendices for Proposed Rule 9610 Manual, Title 450, Part 401.15) http://directives.sc.egov.usda.gov/viewerFS.aspx?hid=19430

.

A list of California NRCS practice st andard life-spans are posted on-line at: http://efotg.sc.egov.usda.gov/references /public/CA/List_of_Practices_Lifespa ns_2012-12_CA_Numeric.xlsx

The emission reductions for each pr oject are calcul ated using the methodologies outlined in the Carl Mo yer Guidelines. Additionally, all equipment engines are inspected to verify they are certified to ARB standards before they are paid out. All equipment engines are cross-referenced against

an ARB executive order that verifies t he emission of every equipment engine.

The NRCS calculation works heets and emission factors are posted on-line at:ftp://ftpfc.sc.egov.usda.gov/CA/programs/EQIP /2013/2013_EQIP_Air_Quality_Initiati ve_Attachments.pdf

Enforceable The NRCS inspects equipment in proposal s prior to contract development to verify the existing mobile off-road agr icultural equipment is operational per CPS-372 specifications. Destruction of existing equipment is certified by the disposal operator and participant and date-stamped photos are provided.
Certification worksheet is posted on-line at: ftp://ftpfc.sc.egov.usda.gov/CA/programs/EQIP /2013/2013_EQIP_Air_Quality_Initiati ve_Attachments.pdf. On an annual basis NRCS reviews at least 5% of all active projects. From these projec t reviews NRCS verifies that the new equipment is still operational. http://directives.sc.egov.usda. gov/RollupViewer.aspx?hid=25728 . Per Subpart C, 512.22, participants have contro l of the land for the length of the proposed contract through deed, lease, or other written authori zation. If the applicant does not own the land, the landow ner must give written consent to install, operate, and maintain the practi ce through the lifespan of the practice. This is conducted through a partnership with the USDA Farm Service Agency, who is responsible for progr am eligibility support.

Subpart F covers Contract Administ ration and provides for recovering liquidated damages for certain deviations to a contract. Handling contract violations are addressed in Subpart H wher e violations of contract terms must be corrected by the participant within a r easonable period of time to comply. If the violation continues, the contract may be terminated and future program participation def erred.

Permanent NRCS eligibility is based on the county that the tractor resides in; in this case

the tractor has to reside within one of the eight counties of the San JoaquinSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-14 Final Staff Report with Appendices for Proposed Rule 9610 Valley. Under the NAQI, the NRCS prioritizes applications based on a county’s non-attainment des ignation within California. Applications received from attainment areas are not elig ible. Currently, only the emission reductions originating from within the eight San Joaquin Valley counties are seeking SIP credit under this proposal. The destruction of the existing mobile off-road engines and equipment are ve rified per CPS 372 specifications, posted on-line at: http://efotg.sc.egov.usda.gov/references/public/CA/372- spec-09-2010.doc . Destruction certification wo rksheets are posted on-line at:ftp://ftpfc.sc.egov.usda.gov/CA/programs/EQIP /2013/2013_EQIP_Air_Quality_Initiati ve_Attachments.pdf. The NRCS also has a stipulation that the tractor has to

be tied to the land where it is in use. This requires that the tractor be used 100% of the time in the San Joaqui n Valley. Under the NAQI, NRCS staff verifies by site visit the operational c ondition of the existi ng mobile off-road agricultural equipment. Destruction of the existing equipment and emissions certification verifications are performed to determine contract compliance.

The NRCS Combustion Systems Improvem ent of Mobile Engines incentive program is unique from other incentive programs in that NRCS is explicitly prohibited from identifying gr antees by name. As directed by the Farm Bill (Food Security Act of 1985 (7 U.S.C. § 608d(2))), NRCS must maintain the confidentiality of information provided by an agricultural producer participating in the NRCS Combustion Systems Improvem ent of Mobile Engines incentive program. The information is exempt fr om mandatory disclosure and may not be used in judicial or administrative proc eedings without the consent of the person

involved.

Terminology

Each program guideline varies in the us e of terms for calculation methodolgies and project information. The following table identifies the variat ions between Rule 9610 terminology and the program guideline terminology.

Rule 9610 Prop 1B Moyer NRCS Description

Project

Identification Project

Name Project

Identification Project

Identification Unique identification number given to a project by the implementing agency

Project Type Project Option Component, Component Option, and Primary Function Primary

Function Describes the type of project and equipment being funded
Old Engine

Year Engine

Model Year Model Year Engine Year (baseline) Manufacturers model year of the old engine

Annual Miles CA VMT Miles Traveled N/A Miles travel per year for on-road

vehiclesSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-15 Final Staff Report with Appendices for Proposed Rule 9610 Rule 9610 Prop 1B Moyer NRCS Description

New GVWR GVWR GVWR N/A Gross Vehicle Weight Rating applicable to on-road vehicles only

Cost New Equipment/

Vehicle Total Project Cost ($) Cost of Reduced Technology Cost of New Engine or Equipment The total amount of money to purchase the new replacement vehicle, engine or equipment.

Does not account for amount of grant funding.

Funding

Amount Prop 1B Investment Funding Amount Payment Amount of grant money provided to implement incentive project.

Previously Submitted Annua l Demonstration Reports

The District’s annual demonstration report submitted to EPA and ARB serves as the reporting mechanism to claim credit in the SIP for incentive-based emission reductions in the Valley that are surp lus, quantifiable, enforceable, and permanent. The draft annual demonstration report is made available to the public and presented to the District Governing Board prior to submittal to EPA and ARB no later than August 31 of each year.

The annual demonstration repor t provides a description of program guidelines

used and how each ensures emission reducti ons are SIP-creditable, accounting

of emission reductions achieved thr ough implemented incentive projects, provides a summary of SIP commitm ents for which SIP- creditable emission reductions will be used to satisfy; provides project specific information, summaries of District project monito rng and enforcement activities; and a retrospecitve evaluation of the Distric t’s incentive program performance with recommendations for improv ements as appropriate.

2013 Draft Annual Dem onstration Report

Additional Resources

Proposed District Rule 9610

Proposed Staff Report with Appendice s for adoption of Rule 9610

District Grant and Incentive ProgramsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Manual of Procedures June 20, 2013

D-16 Final Staff Report with Appendices for Proposed Rule 9610 This page intentionally blank.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix E: ARB Letter of Support for Proposed Rule 9610 June 20, 2013

E-1 Final Staff Report with Appendices for Proposed Rule 9610 

# Appendix E

ARB Letter of Support for Proposed Rule 9610

June 20, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix E: ARB Letter of Support for Proposed Rule 9610 June 20, 2013

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