1 Final Staff Report with Appendices for

Amendments to Rule 4308 SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

FINAL STAFF REPORT

Amendments to Rule 4308 (Boilers, Steam Generators, and Process Heaters – 0 .075 MMBtu/hr

to less than 2.0 MMBtu/hr)

November 14, 2013

Prepared by: Chelsea Gonzales, Air Quality Speciali st

Reviewed by: Anna Myers, Senior Air Quality Special ist Stanley Tom, Senior Air Quality Engineer Mike Oldershaw, Air Quality Compliance Manager

Jessi Fierro, Program Manager, Strategies and Ince ntives Errol Villegas, Program Manager, Strategies and In centives

Samir Sheikh, Director, Strategies and Incentives

I. SUMMARY

The purpose of this rule amending project is to ful fill a commitment from the San Joaquin Valley Air Pollution Control District’s (Di strict’s) 2012 PM2.5 Plan by making the requirements of Rule 4308 (Boilers, Steam Generator s, and Process Heaters – 0.075 MMBtu/hr to less than 2.0 MMBtu/hr) more stringent and to improve rule clarity. Rule 4308 is the District’s point-of-sale rule that redu ces oxides of nitrogen (NOx) and carbon monoxide (CO) emissions from boilers, steam generat ors, and process heaters with a rated heat input capacity of 0.075 to less than 2.0 million British thermal units per hour (MMBtu/hr).

During plan development, the District identified an opportunity to lower the NOx emission limit for natural gas-fired instantaneous water heaters with a rated heat input of 0.075-0.4 MMBtu/hr (instantaneous units) from 55 pa rts per million by volume (ppmv) to 20 ppmv. The 20 ppmv compliant instantaneous units are readily available throughout California (including the San Joaquin Valley (Valle y)) and are cost effective; as such, the District is lowering the NOx emission limit for the se units through this rule amendment project. The District is also clarifying the appli cability of Rule 4308 by adding specific exemption language for hot water pressure washers t hat are currently exempt from the

rule.

Rule amendments will contribute to the Valley’s pro gress towards attainment of federal air quality standards for particulate matter that i s 2.5 microns or less in diameter (PM2.5) and ozone by reducing NOx, which is a precu rsor for both PM2.5 and ozone. Amendments to Rule 4308 will reduce 1.82 tons per y ear (tpy) of NOx emissions fromSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4308 November 14, 2013

2 Final Staff Report with Appendices for

Amendments to Rule 4308 instantaneous units upon full rule implementation. In addition, this rule amendment will ensure that Rule 4308 is as stringent as similar ru les in other California air districts and satisfies Reasonably Available Control Technology ( RACT) requirements.

II. PROJECT BACKGROUND

A. Source Category

As a point-of-sale rule, Rule 4308 applies to any p erson who supplies, sells, offers for sale, installs, or solicits the installation of boi lers, steam generators, and process heaters with a rated heat input of 0.075 MMBtu/hr t o less than 2.0 MMBtu/hr. These units are used in commercial settings and some larg er homes. Affected persons include water heater manufacturers, plumbing wholes alers, supply stores, plumbers, contractors, and end-users. This point-of-sale app roach allows the District to achieve NOx emission reductions without forcing immediate r eplacement of existing units to comply with rule requirements and thus placing an u ndo financial burden on the

consumer.

The most significant rule amendment applies specifi cally to instantaneous units. Instantaneous units, also known as tankless water h eaters, generate hot water only as it is needed. They do not produce the standby energy losses associated with storage, or tank-style, water heaters since they only heat wate r when it flows through a heat exchanger, and are thus promoted as energy efficien t devices. 1 Instantaneous units of this size range are used in settings including, but not limited to, apartment buildings, large homes, small businesses, commercial buildings , manufacturing facilities, government facilities, restaurants, hotels, hospita ls, educational institutions, and religious organizations.

Instantaneous units have an estimated lifetime of 2 0 years. 2 Therefore, the emissions reduced from these units will occur over 20 years, from 2015 through 2034, as existing instantaneous units are replaced with newer instant aneous units, new instantaneous units are purchased for new developments, and some end-users switch from tank-style

to instantaneous units.

B. Number of Units Affected by Rule Amendments

Since rule implementation will occur from 2015 thro ugh 2034, the District projected the number of instantaneous units in the Valley in 2034 . The District estimates that there will be 1,678 instantaneous units in 2034. To dete rmine the number of units in the Valley affected by the rule amendments, the Distric t calculated an average population-

1 Rinnai Tankless Water Heaters. (2013). Retrieved A pril 17, 2013 from http://www.rinnai.us/tankless-waterheater/how-tankless-works

2 United States Department of Energy [DOE]: Tankless or Demand-Type Water Heaters. (2012). Retrieved Ju ne 11,

2013 from http://energy.gov/energysaver/articles/tankless-or- demand-type-water-heatersSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 to-unit ratio of one natural gas-fired unit with a rated heat input of 0.075-0.4 MMBtu/hr for every 385 people, using population data from th e South Coast Air Quality Management District (SCAQMD) 3 and their estimate for the total number of units i n this size category. 4 Using this ratio and a population estimate of 4.3 3 million people in the Valley in 2015, 5 the District estimates that there will be 11,247 n atural gas-fired units with a rated heat input of 0.075-0.4 MMBtu/hr in th e Valley in 2015.

Only a fraction of the 11,247 natural gas-fired wat er heaters are instantaneous units, as most of the natural gas units sold are storage wate r heaters. The Department of Energy’s 2009 Water Heater Market Profile estimated that of water heaters sold 3% are natural gas-fired instantaneous units, 48% are natu ral gas-fired storage units, and the remaining 49% are electric units. 6 Natural gas-fired instantaneous units make up 5.9 % of the natural gas-fired water heater market; as su ch, the District estimates that there will be 664 instantaneous units in the Valley in 20 15.

An increasing number of commercial developments and large residences are being built

with instantaneous water heaters due to the increas ed fuel and energy efficiency that these units provide over typical tank-style water h eaters. Similarly, some existing commercial businesses and residents are replacing t ank-style units with instantaneous units because of the added efficiency benefits. Va rious sources estimate that in future years, instantaneous water heaters will have an ann ual growth rate of 4-10%. 7,8 To remain conservative, the District assumes an annual 5% growth rate for the inventory of instantaneous units in the Valley. Using the annua l growth rate and 2015 inventory of instantaneous units, the District projects that the total number of instantaneous units in the Valley in 2034 will be 1,678 units.

As these sources are not permitted or registered, t he estimated number of units subject to these rule amendments has been determined using the best available data.

3 SCAQMD: About South Coast AQMD. (2012, October 9). Retrieved May 7, 2013 from http://www.aqmd.gov/aqmd/index.html

4 SCAQMD. (2006, May 5). Staff Report for Proposed Amended Rule 1146.2- Emis sions of Oxides of Nitrogen from Large Water Heaters and Small Boilers and Process H eaters. Diamond Bar, CA

. Retrieved from http://www.aqmd.gov/hb/2006/may/060535a.html

5 The Planning Center. (2012, March 27). San Joaquin Valley Demographic Forecasts 2010 to 20 50. http://www.valleyblueprint.org/files/San%20Joaquin% 20Valley%20Demographic%20Forecasts%20- %20Final%2027%20Mar%202012_0.pdf

6 Department of Energy [DOE]. (September 2009). Water Heater Market Profile . Retrieved from http://www.energystar.gov/ia/partners/prod_developm ent/new_specs/downloads/water_heaters/Water_Heater_ Marke t_Profile_Sept2009.pdf

7 California Utilities Statewide Codes and Standards Team. (October 2011). 2013 California Building Energy Efficiency Standards. http://www.energy.ca.gov/title24/2013standards/prer ulemaking/documents/current/Reports/Residential/Wat er_Heatin g/2013_CASE_WH2.WH5_WaterHeaterReady-10.28.2011.pdf

8 CenterPoint Energy. (2009). Vertical Subdivision Workshop: Tankless Water Heate rs. http://www.centerpointenergy.com/staticfiles/CNP/Co mmon/SiteAssets/doc/Tankless%20Water%20HeatersRheem.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 C. Current Rule

The purpose of Rule 4308 is to limit NOx and CO emi ssions from large water heaters and small boilers with a rated heat input of 0.075 MMBtu/hr to less than 2.0 MMBtu/hr. The rule currently requires that no person supply, sell, offer for sale, install, or solicit the installation of any natural gas-fired unit within t he Valley that exceeds a NOx emission limit of 20 ppmv, except instantaneous water heater s and pool heaters with a rated heat input of 0.075-0.4 MMBtu/hr that currently have a N Ox emission limit of 55 ppmv.

Rule 4308 also requires that manufacturers of units subject to this rule certify their units through either the District’s certification program , the SCAQMD certification process for SCAQMD Rule 1146.2, or another emission certificati on program approved by the United States Environmental Protection Agency (EPA) and District’s Air Pollution
Control Officer. Both the SCAQMD and District cert ification processes require that the

manufacturer obtain a certification source test fro m an independent testing laboratory for each unit, in order to verify compliance with t he applicable emission limits. The manufacturer is then required to submit the certifi cation source test as part of a compliance report that identifies the manufacturer, brand name, model number, and description of the unit being certified. SCAQMD ha s worked extensively with manufacturers subject to SCAQMD Rule 1146.2 to cert ify thousands of units and provides the complete list of certified units on th eir website for reference. 9

The District’s Governing Board adopted amendments t o Rule 4308 on December 17, 2009 to incorporate the 20 ppmv NOx emission limits ment ioned above. The District submitted

the amended rule to the California Air Resources Bo ard (ARB) for forwarding to the EPA as an amendment to the State Implementation Pla n (SIP) in 2010. EPA finalized approval of Rule 4308 on January 31, 2011 and found it to be at least as stringent as established RACT requirements. 10

D. Similar Rules in Other Air Districts

The District compared Rule 4308 to the following an alogous rules in other air districts:

• Bay Area Air Quality Management District (BAAQMD) Regulation 9, Rule 6 (Rule 09-06) (Nitrogen Oxides Emissions from Natural Gas- Fired Boilers and Water Heaters) 11

9 SCAQMD. (2013, July 9). List of Certified Units Pursuant to Rule 1146.2 . Diamond Bar, CA. Retrieved from http://www.aqmd.gov/rules/doc/r1146/r1146_2table.pd f

10 Revisions to the California State Implementation P lan, San Joaquin Valley Unified Air Pollution Contr ol District, 76 Fed. Reg. 20, pp. 5276-5277. (2011, January 31). (t o be codified at 40 C.F.R. pt. 52) http://www.gpo.gov/fdsys/pkg/FR-2011-01-31/pdf/2011 -1927.pdf

11 Bay Area Air Quality Management District [BAAQMD]. (2007, November 7). Regulation 9 Inorganic Gaseous Pollutants, Rule 6 Nitrogen Oxides Emissions from N atural Gas-Fired Boilers and Water Heaters . Retrieved from http://www.baaqmd.gov/~/media/Files/Planning%20and% 20Research/Rules%20and%20Regs/reg%2009/rg0906.ash

x?la=enSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 • Sacramento Metropolitan Air Quality Management Dis trict (SMAQMD) Rule 411 (NOx from Boilers, Process Heaters and Steam Genera tors) 12

• SMAQMD Rule 414 (Water Heaters, Boilers and Proces s Heaters Rated Less Than 1,000,000 BTU Per Hour) 13

• SCAQMD Rule 1146.2 (Emissions of Oxides of Nitroge n From Large Water Heaters and Small Boilers and Process Heaters) 14

• Ventura County Air Pollution Control District (VCA PCD) Rule 74.11.1 (Large Water Heaters and Small Boilers) 15

Units subject to Rule 4308 and these aforementioned rules in other air districts have emission limits based on two size categories: units with a rated heat input of 0.075-0.4 MMBtu/hr and units with a rated heat input greater than 0.4 but less than 2.0 MMBtu/hr. Rule 4308 currently enforces a 20 ppmv NOx emission limit for all natural gas-fired water heaters with a rated heat input greater than 0.4 but less than 2.0 MMBtu/hr, which is equivalent to the limits in these other Californ ia air districts’ rules.

Analogous rules in BAAQMD, SCAQMD, and VCAPCD have a 20 ppmv NOx emission limit for instantaneous units with a rated heat inp ut of 0.075-0.4 MMBtu/hr, whereas Rule 4308 contains a NOx emission limit of 55 ppmv for t hese units. The 20 ppmv limit was implemented in SCAQMD in 2012 and BAAQMD in 2013, a nd will be implemented in

VCAPCD in 2014.

The District also compared the CO emission limit in Rule 4308 to the aforementioned air

districts’ rules. The District’s emission limit of 400 ppm is equivalent to the CO emission

limits in these other air districts’ rules and it a pplies to the same size category of units specified within those rules. Therefore, aside fr om the NOx emission limit for instantaneous units, current Rule 4308 is as string ent as or more stringent than other air

districts’ rules.

E. Control Technologies

Instantaneous units are designed and manufactured w ith low NOx burner systems in order to meet specific NOx emission limits, such as the existing Rule 4308 NOx emission limit of 55 ppmv. The instantaneous units that meet a 20 ppmv NOx emission limit are equipped with ultra-low NOx burners. As this rule is a point-of-sale rule, retrofit of currently installed instantaneous units will not be required.

12 Sacramento Metropolitan Air Quality Management Dis trict [SMAQMD]. (2007, August 23). Rule 411, NOx from Boilers, Process Heaters, and Steam Generators. Retrieved from http://airquality.org/rules/rule411.pdf

13 SMAQMD. (2010, March 25). Rule 414, Water Heaters, Boilers and Process Heater s Rated Less Than 1,000,000

BTU Per Hour. Retrieved from http://airquality.org/rules/rule414.pdf

14 SCAQMD. (2006, May 5). Rule 1146.2 (Emissions of Oxides of Nitrogen from L arge Water Heaters and Small Boilers and Process Heaters). Retrieved from http://www.aqmd.gov/rules/reg/reg11/r1146-2.pdf

15 Ventura County Air Pollution Control District [VCA PCD]. (2012, September 11). Rule 74.11.1—Large Water

Heaters and Small Boilers. Retrieved from http://vcapcd.org/Rulebook/Reg4/RULE%2074.11.1.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 The District researched whether pool heater technol ogy has also advanced to achieve a 20 ppmv NOx emission limit. Water heater manufactu rers and staff at SCAQMD indicated that there are no known pool heaters with a rated heat input of 0.075-0.4 MMBtu/hr that are capable of meeting a 20 ppmv NOx emission limit. All pool heaters certified through SCAQMD are certified to meet a 55 ppmv NOx emission limit. The District is upholding the current NOx emission limi t for pool heaters in this size range to maintain the lowest feasible limit and stay consist ent with other air districts’ rules.

The District did not propose the addition of any PM 2.5 or sulfur dioxide (SO2) emission limits or requirements, as found in other District combustion rules, because there are no known units with a rated heat input of 0.075-2.0 MM Btu/hr that operate with PM2.5 or SO2 emission control devices (such as baghouses, el ectrostatic precipitators, and scrubbers). These technologies have not been demon strated or achieved-in-practice

for units smaller than 5 MMBtu/hr. 16 Units this small are fired on natural gas, propan e, liquefied petroleum gas, or low sulfur diesel fuel and already emit very low levels of

PM2.5 and SO2.

III. AMENDMENTS TO RULE 4308

A. Overview of Amendments

The District is making the following amendments to Rule 4308:

• Lowering the NOx emission limit for instantaneous units from 55 ppmv to 20 ppmv

• Addition of an exemption for hot water pressure wa shers

• Removal of redundant and expired language

• Clarifications to existing rule language in Sectio ns 1.0, 3.0, and 6.0

B. Amended Rule 4308

The following discussion details the amendments to Rule 4308. See amended Rule 4308 for exact language.

Section 1.0 Purpose

Language is added to this section to clarify that t his rule also limits CO emissions.

16 SJVAPCD. (2012, December 20). Appendix D (Stationary and Area Source Control Stra tegy Evaluation), 2012

PM2.5 Plan. Fresno: CA. Retrieved from http://www.valleyair.org/Workshops/postings/2012/12 -20- 12PM25/FinalVersion/14AppendixDStationaryandArea.pd fSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 Section 3.0 Definitions

To improve rule clarity, the definitions of “EPA,” “SCAQMD,” and “hot water pressure washer” are added to rule language, and the definit ion of “PUC Quality Natural Gas”

has been moved.

Section 4.0 Exemptions

To clarify current rule applicability, an exemption for hot water pressure washers is added to this section. In 2011, a pressure washer manufacturer notified the District that per the current definition of an instantaneous wate r heater, hot water pressure washers could be misinterpreted as being classified under t his source category.

Similar to instantaneous units, the water for hot w ater pressure washers is only heated when it flows through the heat exchanger. These un its are used in various industries, including food processing, construction, and transp ortation industries. The pressure washers are used to clean and degrease machinery, v ehicles, work surfaces, and floors. As such, most units are portable and are f ired on diesel fuel since it is more readily available and practical for portable uses t han natural gas.

Since most hot water pressure washers are portable, it is not possible to incorporate add-on NOx controls. For the few stationary units that may be in operation, the rated heat input capacity is so small that add-on control s are not feasible. Without the use of add-on controls, hot water pressure washers are una ble to meet the emission limits of Rule 4308. In addition, these units are generally only used for a couple of hours a day. Pressure washers are equipped with trigger guns, wh ich stop the flow of water when not needed and limit heating and fuel burning processes . The NOx emissions from hot water pressure washers are very small. There is cu rrently one 0.166 MMBtu/hr hot water pressure washer permitted in the Valley, and based on the current NOx emission limit within that permit, the unit would emit at mo st 0.13 pounds of NOx per day, assuming an unrealistic worst case scenario that th e unit runs for 24 hours a day.

Diesel fuel-fired water heaters of all sizes are re quired to obtain a permit for their units per District Rule 2201 (New and Modified Stationary Source Review Rule) and implement Best Available Control Technology (BACT) requirements. An exemption from Rule 4308 does not remove the requirement for diesel-fired hot water pressure washers to obtain a permit and implement the most s tringent controls possible via Rule

2201.

The District examined whether other air districts r egulate hot water pressure washers through their analogous rules and found that none o f the rules identified in Section II.D specifically address these units. The SCAQMD, BAAQ MD, and VCAPCD rules only apply to natural gas-fired units, and since hot wat er pressure washers are generally diesel-fired, these units would be exempt.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 Pressure washers were previously addressed in SCAQM D Rule 1147 (NOx Reductions from Miscellaneous Sources); they were recently rem oved from this rule and transitioned into Rule 219 (Equipment Not Requiring a Written Permit Pursuant to Regulation II). In the staff report for the 2013 a mendment of Rule 219, SCAQMD notes that due to the mobile nature of power pressure was hers, emission controls for these units are challenging, if not impossible. 17 As a result, Rule 219 exempts all diesel-fired pressure washers with a maximum heat input capacity of 0.55 MMBtu/hr or less; 96% of the permitted pressure washers in SCAQMD had rated maximum heat input capacities

less than 0.55 MMBtu/hr.

Section 5.0 Requirements

The District is amending the NOx emission limit for instantaneous units with a rated heat input of 0.075-0.4 MMBtu/hr from 55 ppmv to 20 ppmv . Emission limits in Table 1 of Rule 4308 will remain in effect until December 31, 2014. On and after January 1, 2015, Table 2 emission limits will be implemented. Table 2 of Rule 4308 reflects the new NOx emission limit for these instantaneous units; see b elow.

Table 2 for Rule 4308 NOx Emission Limits

17 SCAQMD. (2013, May 3). Staff Report for Proposed Amended Rule 219- Equipme nt Not Requiring a Written Permit Pursuant to Regulation II. Diamond Bar, CA

. Retrieved from http://www.aqmd.gov/hb/attachments/2011- 2015/2013May/2013-May3-028.pdf Table 2

Emission Limits (Effective on and after January 1, 2015) Type and Size of Unit,

in MMBtu/hr NOx Limit (at 3% stack gas oxygen by volume on a dry basis) PUC Gas Non PUC Gas or Liquid lb/MMBtu of heat input (ppmv) lb/MMBtu of heat input (ppmv) Units greater than or equal to 0.075 but less than or equal to 0.4, except as specified below 0.024 (20) 0.093 (77)

Units greater than 0.4 but less than 2.0, except as specified below 0.024 (20) 0.036 (30)

Instantaneous water heaters greater than or equal to 0.075 but less than

or equal to 0.4 0.024 (20) 0.093 (77)

Instantaneous water heaters greater

than 0.4 but less than 2.0 0.024 (20) 0.036 (30)

Pool heaters greater than or equal to 0.075 but less than or equal to 0.4 0.068 (55) 0.093 (77)

Pool heaters greater than 0.4 but

less than 2.0 0.024 (20) 0.036 (30)SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 This amendment will require that instantaneous unit s supplied, sold, or installed in the Valley after January 1, 2015 be certified to meet a 20 ppmv NOx emission limit. The

District examined whether low NOx instantaneous uni ts are available in the Valley. SCAQMD maintains a list of natural gas-fired water heater manufacturers certified to produce units that meet SCAQMD Rule 1146.2 emission limits. 18 There are six water heater manufacturers that produce instantaneous uni ts. Five of the six manufacturers produce 55 ppmv and 20 ppmv compliant instantaneous units, while one of the manufacturers no longer produces 55 ppmv compliant units and now only produces 20 ppmv compliant instantaneous units. All six instan taneous water heater manufacturers confirmed to District staff that they sell 20 ppmv compliant instantaneous units to Valley wholesalers or water heater suppliers. These Valle y wholesalers and suppliers generally only sell units to licensed contractors o r parties qualified to correctly install the

units.

Section 6.0 Administrative Requirements

Language is added to Section 6.2.3 to clarify that the SCAQMD protocol, “Nitrogen Oxides Emissions Compliance Testing for Natural Gas -Fired Water Heaters and Small Boilers,” is only applicable to natural gas-fired u nits. Redundant language is also

removed from Section 6.0.

Section 7.0 Compliance Schedule

To improve rule clarity and simplify rule language, Section 7.0 is deleted from Rule 4308. The compliance dates listed in this section are outdated and the new compliance dates are listed in Section 5.0 of the r ule.

IV. SUPPORTING ANALYSES

A. Global Climate Change and Greenhouse Gases

The California Global Warming Solutions Act of 2006 (AB 32) created a comprehensive, multi-year program to reduce greenhouse gas (GHG) e missions in California, with the overall goal of restoring emissions to 1990 levels by the year 2020. ARB and the State Legislature are developing policies and programs to implement AB 32. The District

believes that the evidence and the rationale that c limate change is occurring is compelling and convincing. In addition to the long -term consequences of climate change, the District is concerned with the potentia l ramifications of more moderate but imminent changes in weather patterns. The Valley d epends heavily on agriculture for its economy and has developed agricultural practice s based on the last several decades

18 SCAQMD. (2013, July 9). List of Certified Units Pursuant to Rule 1146.2 . Diamond Bar, CA. Retrieved from http://www.aqmd.gov/rules/doc/r1146/r1146_2table.pd fSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 of weather patterns. Unanticipated and large fluct uations in these patterns could have a devastating effect on the Valley’s economy.

While there are many win-win strategies that can re duce both GHG and criteria/toxic pollutant emissions, when faced with situations tha t involve tradeoffs between the two, the District believes that the more immediate publi c health concerns that may arise from an increase in criteria or toxic pollutant emission s should take precedence. The District Governing Board adopted the Climate Change Action P lan (CCAP) in August 2008. For California Environmental Quality Act (CEQA) require ments, one of the goals of the CCAP is to establish District processes for assessi ng the significance of greenhouse gas impacts. The District has developed a policy an d guidance for addressing greenhouse gases under CEQA.

B. Health Benefits

The District is a public health agency whose missio n is to improve the health and quality of life for all Valley residents through efficient, effective and entrepreneurial air quality management strategies. The District periodically c ompiles attainment plans to identify individual regulations and other strategies that wi ll achieve the emissions reductions needed for the Valley to meet federal health-based air quality standards (National Ambient Air Quality Standards, or NAAQS). Guided b y its Health-Risk Reduction Strategy, the District develops and implements both attainment plans and regulations to attain the NAAQS in the quickest, most health-prote ctive, and most cost-effective manner. The control strategy as a whole, then, has important public health benefits and health costs savings. This amendment to Rule 4308 is one component of this overall control strategy. Since this rule amendment reduce s NOx emissions, it benefits public health by contributing to improved ozone and PM2.5 air quality.

C. Emission Reduction Analysis

As presented in the 2012 PM2.5 Plan , the annual NOx emissions from the source category subject to Rule 4308 were 0.71 tpd (259 tp y) in 2012. The District did not specify an emission reduction commitment for this r ule amendment in that plan in lieu of conducting a more thorough emission reduction analy sis in this rule amendment project.

Rule amendments only affect a portion of the total source category; as such, the

baseline NOx emissions from instantaneous units are 2.92 tpy. Rule amendments will result in approximately 1.82 tpy of NOx emission re ductions after all units are replaced and new units are purchased within the next 20 year s, reflecting a 62.3% reduction from this baseline. The complete Emission Reduction Ana lysis is presented in Appendix B of this Final Staff Report.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 D. Cost Effectiveness Analysis

Pursuant to California Health & Safety Code (CH&SC) Section 40920.6(a), the District is required to analyze the cost effectiveness of new r ules or rule amendments. The District has prepared a Cost Effectiveness Analysis to analyze the economic feasibility

of the rule amendments. The estimated cost effecti veness of implementing a 20 ppmv NOx emission limit for instantaneous units is appro ximately $19,961-$52,746 per ton of

NOx emission reductions. The differential cost for a 20 ppmv compliant instantaneous unit ranges from a cost savings of $45 to an increa sed cost of $489, making this amendment cost effective. The complete analysis is presented in Appendix C of this Final Staff Report.

E. Socioeconomic Analysis

Pursuant to CH&SC Section 40728.5(a), “Whenever a d istrict intends to propose the adoption, amendment, or repeal of a rule or regulat ion that will significantly affect air quality or emissions limitations, that agency shall , to the extent data are available, perform an assessment of the socioeconomic impacts of the adoption, amendment, or repeal of the rule or regulation.” No significant socioeconomic impacts are expected from these rule amendments. The complete Socioecon omic Analysis is presented in Appendix D of this Final Staff Report.

F. Rule Consistency Analysis

Pursuant to CH&SC Section 40727.2, the District pre pared a Rule Consistency Analysis that compares the elements of the amendments with t he corresponding elements of other District rules and federal regulations. Amen dments do not conflict with other District rules, or federal rules, regulations, or p olicies covering similar stationary sources. This Rule Consistency Analysis is present ed in Appendix E of this Final Staff Report.

G. CEQA

Pursuant to Section 15061 of the Guidelines for Imp lementation of the CEQA, the District investigated the possible environmental impacts of the amendments to Rule 4308. Based on the lack of evidence to the contrary, the Distri ct has concluded that the rule amendments will not have any significant adverse ef fects on the environment. Staff filed a Notice of Exemption under the provisions of Public Resource Code 15061(b)(3).SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 V. RULE DEVELOPMENT PROCESS

A. Public Workshop for Rule 4308

The District held a public workshop to present, dis cuss, and hear comments on the draft rule and draft staff report on August 22, 2013. Th e draft rule and draft staff report were made available on the District’s website prior to t he public workshop, and a two week comment period followed the public workshop. Comme nts received during the workshop and during the commenting period following the workshop were considered and incorporated into the proposed amendments to Ru le 4308 and Final Draft Staff Report, as appropriate.

Per the District’s socioeconomic policy, adopted by the Governing Board in October 2011, District staff solicited information from sta keholders at the August 22 nd workshop about trade organizations that represent industries affected by the rule amendment. Through this process, the Cleaning Equipment Trade Association was identified as an affected trade organization. The District also sol icited feedback from affected sources to determine if any new Department of Transportatio n (DOT), Occupational Safety and Health Administration (OSHA), or other requirements would result from the amendments. Stakeholders did not identify any DOT, OSHA, or other requirements that

would result from the rule amendments.

B. Public Hearing for Rule 4308

In accordance with CH&SC Section 40725, the propose d amendments to Rule 4308 and Final Draft Staff Report were publicly noticed and made available on the District’s website prior to the Governing Board public hearing to consider adoption of the proposed rule amendments. The proposed amendments to Rule 4308, Final Draft Staff Report, and other supporting documents were made av ailable for public comment on October 15, 2013. No comments were received during the subsequent two-week comment period. The public was also invited to pro vide comments during the public hearing for the adoption of the proposed rule amend ments.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix A: Comments and Responses November 14, 2 013

A - 1 Final Staff Report with Appendices for

Amendments to Rule 4308 

### APPENDIX A

Summary of Significant Comments and Responses

For Amendments to Rule 4308

November 14, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Appendix A: Comments and Responses November 14, 2 013

A - 3 Final Staff Report with Appendices for

Amendments to Rule 4308 SUMMARY OF SIGNIFICANT COMMENTS FOR PROPOSED AMENDMENTS TO RULE 4308 (BOILERS, STEAM GE NERATORS,

AND PROCESS HEATERS — 0.075 MMBTU/HR TO LESS THAN 2 .0 MMBTU/HR)

EPA REGION IX COMMENTS

The District did not receive a comment letter from EPA.

ARB COMMENTS

The District did not receive a comment letter from ARB before the public hearing; however, a “no comment” letter was received on 11/1 5/13.

STAKEHOLDER COMMENTS

The District did not receive any comment letters fr om stakeholders.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix A: Comments and Responses November 14, 2 013

A - 4 Final Staff Report with Appendices for

Amendments to Rule 4308 SUMMARY OF SIGNIFICANT COMMENTS FOR DRAFT AMENDMENTS TO RULE 4308 (BOILERS, STEAM GENER ATORS, AND

PROCESS HEATERS — 0.075 MMBTU/HR TO LESS THAN 2.0 M MBTU/HR)

VERBAL COMMENTS, AUGUST 22, 2013 WORKSHOP

EPA REGION IX STAFF COMMENTS

No verbal comments were received from EPA.

ARB STAFF COMMENTS

No verbal comments were received from ARB.

STAKEHOLDER COMMENTS

R.F. MacDonald Company (MacDonald) Cargill Beef Packers (Cargill)

1. COMMENT: There are some boilers and water heaters in the 0. 075-2.0 million British thermal units per hour (MMBtu/hr) size rang e installed in the San Joaquin Valley (Valley) with a South Coast Air Quality Mana gement District (SCAQMD) certification sticker for meeting a 30 parts per mi llion by volume (ppmv) NOx emission limit; however, the current NOx emission l imit for these units in Rule 4308 is 20 ppmv. We are concerned the District’s Compli ance department is not noticing these units because they have a SCAQMD certificatio n sticker. (MacDonald)

RESPONSE: The 20 ppmv NOx emission limit for most units subje ct to Rule 4308 went into effect on January 1, 2011. Prior to that date, units supplied, sold, or installed in the Valley were required to meet eithe r a 30 ppmv or 77 ppmv NOx emission limit. Since Rule 4308 is a point-of-sale rule and does not require replacement of existing units to meet rule limits, these units may have been purchased prior to the January 1, 2011 compliance d ate.

2. COMMENT: Since the District is lowering the NOx emission l imit for instantaneous units with a rated heat input of 0.075-0.4 MMBtu/hr from 55 ppmv to 20 ppmv, will a 20 ppmv NOx emission limit also apply to instantane ous units with a rated heat input greater than 0.4 to less than 2.0 MMBtu/hr? (Cargil l)

RESPONSE: The current version of Rule 4308 already contains a 20 ppmv NOx

emission limit for instantaneous units with a rated heat input greater than 0.4 to less

than 2.0 MMBtu/hr.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix A: Comments and Responses November 14, 2 013

A - 5 Final Staff Report with Appendices for

Amendments to Rule 4308 WRITTEN COMMENTS, AUGUST 22, 2013 WORKSHOP

EPA REGION IX STAFF COMMENTS

The District did not receive a comment letter from EPA.

ARB STAFF COMMENTS

The District did not receive a comment letter from ARB.

STAKEHOLDER COMMENTS

One comment was received during the commenting peri od following the August 22 nd
public workshop from the Cleaning Equipment Trade A ssociation (CETA).

3. COMMENT: Pressure washers differ in application and design from the boilers, steam generators, and process heaters that Rule 430 8 is intended to regulate.

Pressure washers have limited use and most units ar e portable. As a result, CETA supports the draft amendment to Rule 4308 to includ e an exemption for pressure

washers.

RESPONSE: Comment noted.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Appendix B: Emission Reduction Analysis November 14, 2013

B - 1 Final Staff Report with Appendices for

Amendments to Rule 4308 

### APPENDIX B

Emission Reduction Analysis

For Amendments to Rule 4308

November 14, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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B - 2 Final Staff Report with Appendices for

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Appendix B: Emission Reduction Analysis November 14, 2013

B - 3 Final Staff Report with Appendices for

Amendments to Rule 4308 EMISSION REDUCTION ANALYSIS FOR

AMENDMENTS TO RULE 4308

I. SUMMARY

Rule amendments reduce NOx emissions by lowering th e NOx emission limit from 55 parts per million by volume (ppmv) to 20 ppmv for i nstantaneous water heaters with a rated heat input of 0.075-0.4 million British therm al units per hour (MMBtu/hr) (instantaneous units), as committed to in the 2012 PM2.5 Plan . Instantaneous units have an estimated lifetime of 20 years. 1 Therefore, as a point-of-sale rule, emission reductions will occur over 20 years, from 2015 thro ugh 2034.

The 2012 PM2.5 Plan

did not specify an emission reduction commitment f or this rule amendment project; therefore, there is no compariso n between a plan emission

reduction commitment and the emission reductions fr om these rule amendments. The estimated NOx emission reductions upon full rule im plementation in 2034 are

summarized in Table B-1.

Table B-1: Emissions Reduced Upon Full Rule Implem entation in 2034

Number of Units in the Valley Baseline NOx

Emissions Inventory (tons per year, or tpy) NOx Emission

Reductions (tpy) Percent

Reduction from

Baseline

1,678 2.92 1.82 62.3%

II. BACKGROUND

Rule 4308 applies to any person who supplies, sells , offer for sale, installs, or solicits the installation of boilers, steam generators, or p rocess heaters with a rated heat input

of 0.075 MMBtu/hr to less than 2.0 MMBtu/hr. The r ule amendment will reduce NOx emissions by requiring instantaneous units to meet a 20 ppmv NOx emission limit compared to the current limit of 55 ppmv. These ty pes of units in this size range are used primarily in a variety of commercial settings.

Since this rule amendment is affecting a small subc ategory of units subject to Rule 4308, the baseline NOx emissions inventory for thes e instantaneous units is considerably smaller than the total NOx emissions i nventory for the overall source category. Table B-2 illustrates the NOx emissions inventory for all units subject to Rule

1 United States Department of Energy [DOE]: Tankless or Demand-Type Water Heaters. (2012). Retrieved Ju ne 11,

2013 from http://energy.gov/energysaver/articles/tankless-or- demand-type-water-heatersSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: Emission Reduction Analysis November 14, 2013

B - 4 Final Staff Report with Appendices for

Amendments to Rule 4308 4308. As demonstrated in this appendix, the 2034 b aseline emissions inventory for instantaneous units affected by the rule amendments is 2.92 tpy.

Table B-2: Annual Average NOx Emissions Inventory f or All Units Subject to

Rule 4308 *

Year 2012 2014 2015 2016 2017 2018 2019

NOx

Emissions (tpy) 259.2 233.6 219.0 211.7 204.4 197.1 193.5

* 2012 PM2.5 Plan

data converted to tpy.

III. EMISSION REDUCTION ANALYSIS

A. Assumptions for the Emission Reduction Analysis

District staff gathered data from manufacturers, pr evious District staff reports, Department of Energy (DOE) data, and the 2006 South Coast Air Quality Management District (SCAQMD) Rule 1146.2 staff report to deter mine emission capacity factors, average usage rates, emission rates, and average un it size.

The District sent out a survey to gather informatio n on the number of units in this size category in 2009. Only 50% of surveys were returne d, and most of them did not contain any information on the number of units for this siz e category. Therefore, the results of that survey are not included in this analysis.

For purposes of this emission reduction analysis, t he following assumptions are made:

1. Population-to-Unit Ratio: District staff calculated an average population-to- unit ratio, using SCAQMD population data 2 and an estimate for the total number of units with a rated heat input of 0.075-0.4 MMBtu/hr in the SCAQMD. 3 For every 385 people, there is one unit in the size range of 0.075-0.4 MMBtu/hr.

2. Valley Population: A Valley population of 4,330,000 people is assumed for 2015, based on data from Valley Metropolitan Planni ng Organizations (MPOs). 4

2 SCAQMD: About South Coast AQMD. (2012, October 9). Retrieved May 7, 2013 from http://www.aqmd.gov/aqmd/index.html

3 SCAQMD. (2006, May 5). Staff Report for Proposed Amended Rule 1146.2- Emis sions of Oxides of Nitrogen from Large Water Heaters and Small Boilers and Process H eaters. Diamond Bar, CA

. Retrieved from http://www.aqmd.gov/hb/2006/may/060535a.html

4 The Planning Center. (2012, March 27). San Joaquin Valley Demographic Forecasts 2010 to 20 50. http://www.valleyblueprint.org/files/San%20Joaquin% 20Valley%20Demographic%20Forecasts%20- %20Final%2027%20Mar%202012_0.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: Emission Reduction Analysis November 14, 2013

B - 5 Final Staff Report with Appendices for

Amendments to Rule 4308 3. % Instantaneous: The DOE estimates that 3% of water heaters sold a re natural gas-fired tankless (instantaneous) units, 48% sold are natural gas-fired storage units, and the remaining 49% sold are electric unit s. 5 The District assumes that instantaneous units make up 5.9% of the natural gas -fired water heater inventory in 2015, which is the year that the 20 ppmv NOx emi ssion limit will be implemented for instantaneous units.

% of gas units that are instantaneous = (% of gas i nstantaneous) X 100 (% of gas instantaneous + % of gas storage)

% of gas units that are instantaneous = (0.03) X 100 (0.03+0.48)

% of gas units that are instantaneous = 5.9%

4. Growth Rate: An increasing number of new large residential and commercial developments are being built with instantaneous wat er heaters, due to the increased fuel and energy efficiency that these uni ts provide over typical tankstyle water heaters. Similarly, some existing comm ercial businesses and residents are replacing tank-style units with insta ntaneous units because of the added efficiency benefits. Various sources estimat e that in future years, instantaneous water heaters will have an annual gro wth rate of 4-10%. 6,7 To remain conservative, the District will assume an an nual 5% growth rate for the inventory of instantaneous units in the Valley.

5. # of Years Projected Forward : The District is projecting forward the inventory of instantaneous units in the Valley through 2034, the year of full rule implementation. Therefore, the District is project ing the inventory of instantaneous units forward 19 years.

6. Capacity Factor: A 0.22 capacity factor will be used to calculate th e baseline emissions from a 55 ppmv NOx emission limit and pot ential emissions from a 20 ppmv NOx emission limit. 8 The capacity factor represents the fraction of fu el

5 United States Department of Energy [DOE]. (2009). 2009 Water Heater Market Profile. http://www.energystar.gov/ia/partners/prod_developm ent/new_specs/downloads/water_heaters/Water_Heater_ Marke t_Profile_Sept2009.pdf

6 California Utilities Statewide Codes and Standards Team. (October 2011). 2013 California Building Energy Efficiency Standards. http://www.energy.ca.gov/title24/2013standards/prer ulemaking/documents/current/Reports/Residential/Wat er_Heatin g/2013_CASE_WH2.WH5_WaterHeaterReady-10.28.2011.pdf

7 CenterPoint Energy. (2009). Vertical Subdivision Workshop: Tankless Water Heate rs. http://www.centerpointenergy.com/staticfiles/CNP/Co mmon/SiteAssets/doc/Tankless%20Water%20HeatersRheem.pdf

8 SCAQMD. (2006, May 5). Staff Report for Proposed Amended Rule 1146.2- Emis sions of Oxides of Nitrogen from Large Water Heaters and Small Boilers and Process H eaters. Diamond Bar, CA

. Retrieved from http://www.aqmd.gov/hb/2006/may/060535a.htmlSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: Emission Reduction Analysis November 14, 2013

B - 6 Final Staff Report with Appendices for

Amendments to Rule 4308 actually burned or consumed by the unit in a year c ompared to the theoretical maximum amount of fuel that a unit could use in a y ear.

7. Average Rating: An average rating is applied to the 0.075 MMBtu/hr and 0.4 MMBtu/hr size categories since the number of instan taneous units is assumed to be distributed evenly within this size range. The average rating is 0.238

MMBtu/hr. Based on the instantaneous water heaters listed in the SCAQMD List

of Certified Units Pursuant to Rule 1146.2

, 9 the most commonly available instantaneous units have a rated heat input of 0.2 MMBtu/hr, further supporting the assumption.

8. Baseline Emission Rate: The baseline emission rate assumes 100% of instantaneous units in 2034 comply with the current NOx emission limit and operate with a NOx emission rate of 55 ppmv (0.068 lb NOx/MMBtu).

9. Amended Emission Rate: The amended emission rate assumes 100% of instantaneous units will comply with the amended NO x emission limit, upon full rule implementation in 2034, and operate with a NOx emission rate of 20 ppmv (0.024 lb NOx/MMBtu).

10. Commercial Average Daily Use (ADU commercial ): Average usage is 1,000 gallons/day (gal/day) for commercial and industrial water heaters. 10

11. Residential Average Daily Use (ADU residential ): Average residential water heater usage is 27-135 gal/day. District staff ave raged this range and assumes that average residential water heater usage is 81 g al/day. 11

12. Average Water Output Rate: The average water output rate range for instantaneous water heaters is 2-5 gallons/minute ( gal/min). 12 District staff assumes the average water output rate is 3.5 gal/mi n.

B. Total Number of Instantaneous Units in the Valle y in 2034

Using the population-to-unit ratio and percentage o f units that are instantaneous,

the District calculated the total number of instant aneous units in the Valley in 2015 (first year of rule implementation). Using th is figure and the annual growth

9 SCAQMD. (2013, July 9). List of Certified Units Pursuant to Rule 1146.2 . Diamond Bar, CA. Retrieved from http://www.aqmd.gov/rules/doc/r1146/r1146_2table.pd f

10 United States Department of Energy [DOE]: Office F EMP Designated Product: Commercial Gas Water Heater s. (2012). Retrieved June 11, 2013 from http://www1.eere.energy.gov/femp/technologies/m/eep _com_gaswaterheaters.html#foot4

11 Energy Center of Wisconsin. (2010). Energy Use by Residential Gas Water Heaters. Retrieved from http://www.ecw.org/ecwresults/254-1.pdf

12 United States Department of Energy [DOE]: Tankless or Demand-Type Water Heaters. (2012). Retrieved Ju ne 11,

2013 from http://energy.gov/energysaver/articles/tankless-or- demand-type-water-heatersSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: Emission Reduction Analysis November 14, 2013

B - 7 Final Staff Report with Appendices for

Amendments to Rule 4308 rate of instantaneous units, the District calculate d the total number of units in the Valley in 2034.

Units (in 2015) = (Population-to-Unit Ratio) x (Valley Population) x (% Instantaneous)

Units (in 2015) = (1 unit/385 people) x (4,330,000 people) x (0.059 )

Units (in 2015) = 664 instantaneous units

Total Units (in 2034) = [ Units (in 2015) ] x [( Growth Rate)^ ( # of Years Projected Forward )]

Total Units (in 2034) = (664) x [1.05^19]

Total Units (in 2034) = 1,678 instantaneous units

C. Average Daily Usage (ADU)

Most of the instantaneous units of this size range are used for commercial purposes; however, to conduct a conservative analys is the District averaged the

ADU residential and ADU commercial figures in order to calculate the ADU for all unit s.

ADU gallons = (ADU residential + ADU commercial ) / 2

ADU gallons = (81 gal/day + 1,000 gal/day) / 2

ADU gallons = 540.5 gal/day

ADU hours = (ADU gallons ) / (Average Water Output Rate x 60 min/hr)

ADU hours = (540.5 gal/day) / (3.5 gal/min x 60 min/hr)

ADU hours = 2.6 hours/day

D. Baseline NOx Emissions Based on Current NOx Emis sion Limit of 55 ppmv (Emissions 1 )

Emissions 1 (tpd) = (Total Units) x (Average Rating) x (Baseline Emi ssion Rate) x (Capacity Factor) x (ADU hours ) x (ton/lb)

Emissions 1 (tpd) = (1,678) x (0.238 MMBtu/hr) x (0.068 lb NOx/MMBtu ) x (0.22) x

(2.6 hours/day) x (1 ton/2,000 lb)

Emissions 1 (tpd) = 0.008 tpd

Emissions 1 (tpy) = (Emissions 1 (tpd) ) x (365 days/year)

Emissions 1 (tpy) = (0.008 tons/day) x (365 days/year)

Emissions 1 (tpy) = 2.92 tpySAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: Emission Reduction Analysis November 14, 2013

B - 8 Final Staff Report with Appendices for

Amendments to Rule 4308 E. NOx Emissions Based on Amended NOx Emission Limi t of 20 ppmv (Emissions 2 )

Emissions 2 (tpd) = (Total Units) x (Average Rating) x (Amended Emiss ion Rate) x (Capacity Factor) x (ADU hours ) x (ton/lb)

Emissions 2 (tpd) = (1,678) x (0.238 MMBtu/hr) x (0.024 lb NOx/MMBtu) x (0.22) x

(2.6 hr/day) x (1 ton/2,000 lb)

Emissions 2 (tpd) = 0.003 tpd

Emissions 2 (tpy) = (Emissions 2 (tpd) ) x (365 days/year)

Emissions 2 (tpy) = (0.003 tons/day) x (365 days/year)

Emissions 2 (tpy) = 1.10 tpy

F. Total Emission Reductions (TER)

TER = (Emissions 1(tpy) ) - (Emissions 2(tpy) ) TER = (2.92 tpy) - (1.10 tpy) TER = 1.82 tpy

G. % of Baseline Emissions Reduced

% of Baseline Emissions Reduced = [(TER) / (Baselin e Emissions)] x 100 % of Baseline Emissions Reduced = [(1.82 tpy) / (2. 92 tpy)] x 100

% of Baseline Emissions Reduced = 62.3%

IV. CONCLUSION

Since this is a point-of-sale rule, the NOx emissio n reductions from this rule amendment will occur gradually as instantaneous units are rep laced with newer instantaneous units, new units are purchased for new developments, and a s people switch from tank-style to

instantaneous units between 2015 and 2034. The tot al NOx emission reductions of 1.82 tpy will occur upon full rule implementation i n 2034. Table B-3 illustrates the cumulative NOx emission reductions over this 20 yea r period.

Table B-3: Cumulative NOx Emission Reductions from Amended Rule 4308 13

Year 2019 2024 2029 2034

NOx Emission Reductions (tpy) 0.34 0.76 1.25 1.82

13 District staff assumed that each year for 20 years 5% of the inventory of the existing instantaneous units in 2015 will be replaced. To calculate the cumulative emis sion reductions for each year, the District added t he emission reductions from the replacement of the existing ins tantaneous units to the emission reductions from th e purchase of new instantaneous units for either new developments or people switching from tank-style to instantaneo us units.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis November 14, 2013

C - 1 Final Staff Report with Appendices for

Amendments to Rule 4308 

### APPENDIX C

Cost Effectiveness Analysis

For Amendments to Rule 4308

November 14, 2013SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Appendix C: Cost Effectiveness Analysis November 14, 2013

C - 3 Final Staff Report with Appendices for

Amendments to Rule 4308 COST EFFECTIVENESS ANALYSIS FOR

AMENDMENTS TO RULE 4308

I. SUMMARY

Per California Health and Safety Code (CH&SC) Secti on 40920.6(a), the District

conducts absolute and incremental cost effectivenes s analyses of available emission control options to evaluate the economic reasonable ness of a new rule or rule amendment prior to adoption. A cost effectiveness analysis examines the added cost (in dollars per year) of the control technology or technique, divided by the emission reductions achieved (in tons per year (tpy)).

This rule amendment project will lower the NOx emis sion limit for natural gas-fired instantaneous water heaters with a rated heat input of 0.075-0.4 million British thermal units per hour (MMBtu/hr) (instantaneous units) fro m 55 parts per million by volume (ppmv) to 20 ppmv. As a point-of-sale rule, this r ule amendment will mandate that any instantaneous units supplied, sold, or installed in the San Joaquin Valley (Valley) meet a 20 ppmv NOx emission limit effective on and after J anuary 1, 2015.

Based on the analysis in this appendix, the absolut e cost effectiveness is summarized

in Table C-1. Incremental cost effectiveness is no t applicable to this project.

Table C-1: Cost Effectiveness Analysis Findings for Amended Rule 4308

Number of

Units Affected Differential Cost for a 20 ppmv Compliant Unit (Low-End Estimate) Differential Cost for a 20 ppmv Compliant Unit (High-End Estimate) Absolute Cost

Effectiveness

1,678 $3.00 to $185.00 -$45.00 to $489.00 $19,961 to $52,746/ton of NOx

reductions

II. ESTIMATED COMPLIANCE COSTS

Estimated compliance costs for a rule project can i nclude, but are not limited to, capital equipment costs, engineering design costs, addition al labor or fuel costs, installation costs, and costs incurred from implementing new saf ety requirements. There are no additional engineering costs, labor costs, or costs from new safety requirements resulting from this rule amendment. Installation c osts are not expected to vary for 20 ppmv and 55 ppmv compliant units. Therefore, compl iance costs for this rule

Cost Effectiveness ( **$/ton** ) = Compliance Cost ( **$/year** ) Emission Reductions ( **ton/year** )SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis November 14, 2013

C - 4 Final Staff Report with Appendices for

Amendments to Rule 4308 amendment consist solely of the price differential between 20 ppmv and 55 ppmv compliant instantaneous units.

South Coast Air Quality Management District (SCAQMD ) currently maintains a list of natural gas-fired water heaters certified to meet S CAQMD Rule 1146.2 emission limits. 1
This list is organized by the respective manufactur er, the size of the models, and the NOx emission limit achievable by that model (either 20 or 55 ppmv). The following six water heater manufacturers produce instantaneous un its:

1. Bosch 2. Navien America, Inc. 3. Noritz America Corp.
4. Paloma Industries, Inc.

5. Rinnai 6. Takagi Industrial Co. USA, Inc.

All six manufacturers confirmed that they sell thei r units to Valley suppliers, wholesalers, and/or contractors for distribution to Valley busin esses and residents. Five of the manufacturers produce both 20 ppmv and 55 ppmv comp liant instantaneous units, while Navien America only produces 20 ppmv compliant unit s due to the rules in place in the SCAQMD and Bay Area Air Quality Management District . Many of the manufacturers that still produce 55 ppmv compliant units have dis continued several of their 55 ppmv models and replaced them with instantaneous units c apable of meeting a NOx emission limit of 20 ppmv.

Using the model numbers provided in the SCAQMD list of certified units, District staff conducted research and collected data on the prices of the various 20 ppmv and 55 ppmv compliant units through a variety of water hea ter retailers, suppliers, and wholesalers; this list is available in Section VI ( References).

Cost data for luxury units, such as condensing gas combination boilers, is not included in this cost effectiveness analysis. Condensing ga s combination boilers are water heaters in which a high efficiency (typically great er than 90%) is achieved by using the waste heat to preheat the cold water entering the b oiler. These units are generally three to five times more expensive than a typical i nstantaneous unit and are not representative of the price range for the majority of instantaneous units.

Most of the instantaneous units sold in the 0.075-0 .4 MMBtu/hr size range have a rated heat input capacity of 0.12-0.2 MMBtu/hr. In addit ion, the majority of cost data available is for instantaneous units with a rated heat input capacity of 0.12-0.2 MMBtu/hr. Table

C-2 summarizes cost information for instantaneous u nits in two size categories: 0.12-

0.16 MMBtu/hr and 0.161-0.20 MMBtu/hr. The table i ncludes low-end and high-end

1 South Coast Air Quality Management District [SCAQM D]. (2013, July 9). **List of Certified Units Pursuant to Rule**

**1146.2** . Diamond Bar, CA. Retrieved from http://www.aqmd.gov/rules/doc/r1146/r1146_2table.pd fSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis November 14, 2013

C - 5 Final Staff Report with Appendices for

Amendments to Rule 4308 cost estimates of 20 ppmv and 55 ppmv compliant uni ts, as well as the price differential between 20 ppmv and 55 ppmv compliant units.

Table C-2: Compliance Costs for 55 ppmv Compliant U nits vs.

20 ppmv Compliant Units

Unit Size (MMBtu/hr) 20 ppmv

Compliant

Unit Cost 55 ppmv

Compliant

Unit Cost Price Differential

Between 20 ppmv and 55 ppmv Compliant

Units

Low-End Estimates

0.12 to 0.16 $549.00 $546.00 $3.00

0.161 to 0.20 $744.00 $559.00 $185.00

High-End Estimates

0.12 to 0.16 $1,554.00 $1,065.00 $489.00 0.161 to 0.20 $2,234.00 $2,279.00 -$45.00

III. ABSOLUTE COST EFFECTIVENESS ANALYSIS

Absolute cost effectiveness of a control option is the additional annual compliance cost, in dollars per year, to meet the amended rule’s req uirements divided by the emission reductions achieved in tons of pollutant reduced pe r year. This absolute cost effectiveness analysis examines the differential co st of a 20 ppmv compliant instantaneous unit and a 55 ppmv compliant instanta neous unit and the emission reductions anticipated from lowering the NOx emissi on limit to 20 ppmv for these units.

A. Assumptions and Formulas

The following assumptions and formulas were used fo r calculating the absolute cost effectiveness of lowering the NOx emission limit fo r instantaneous units to 20 ppmv:

1. Price Differential : A $185 price differential (highest price differen tial for the lowend cost estimates) and $489 price differential (hi ghest price differential for the high-end cost estimates) are used for these calcula tions in order to conduct a conservative absolute cost effectiveness analysis ( see Table C-2).

2. Annualized Compliance Cost (ACC) Formula :

ACC = Price Differential x Capital Recovery Factor (CRF)

The CRF converts the price differential into equal annual payments over a specified time, at a specified interest rate. The “equipment life” variable in theSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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C - 6 Final Staff Report with Appendices for

Amendments to Rule 4308 CRF equation is 20 years because this is the estima ted lifetime of an

instantaneous unit. 2

CRF = 1

) 1( ) 1(

− + +

n n

i i i

= 1

)1.0 1( )1.0 1(1.0

20 20

− + + = 0.117

Where: i = Interest rate (10%)

n = Equipment life (20 years)

3. Total Number of Units: Based on information from Appendix B (Emission Reduction Analysis), there are 1,678 instantaneous units in the Valley that will be affected by these rule amendments upon full rule im plementation in 2034.

4. Total Annualized Cost (TAC) Formula:

TAC = (ACC) x (Total Number of Units)

5. Total Emission Reductions : Based on the analysis in Appendix B (Emission Reduction Analysis), this rule amendment will resul t in a total of 1.82 tpy of NOx

emission reductions from instantaneous units.

6. Absolute Cost Effectiveness (ACE) Formula :

ACE = (TAC) / (Total Emission Reductions)

B. Annualized Compliance Cost

ACC = Price Differential x CRF

ACC (low-end estimate) = ($185) x (0.117)

ACC (low-end estimate) = $21.65 per unit

ACC (high-end estimate) = ($489) x (0.117)

ACC (high-end estimate) = $57.21 per unit

C. Total Annualized Cost (TAC)

TAC = (ACC) x (Total Number of Units)

TAC (low-end estimate) = ($21.65) x (1,678)

TAC (low-end estimate) = $36,329

2 Department of Energy [DOE]: Tankless or Demand-Typ e Water Heaters. (2012). Retrieved June 11, 2013 fr om http://energy.gov/energysaver/articles/tankless-or- demand-type-water-heatersSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 TAC (high-end estimate) = ($57.21) x (1,678)

TAC (high-end estimate) = $95,998

D. Absolute Cost Effectiveness (ACE)

ACE = (TAC) / (Total Emission Reductions)

ACE (low-end estimate) = ($36,329/year) / (1.82 tpy of NOx)

ACE (low-end estimate) = $19,961/ton of NOx reduced

ACE (high-end estimate) = ($95,998/year) / (1.82 tpy of NOx)

ACE (high-end estimate) = $52,746/ton of NOx reduced

IV. INCREMENTAL COST EFFECTIVENESS

The incremental cost effectiveness is the differenc e in cost between two successively more effective controls, divided by the additional emission reductions achieved. For this rule-amending project, the amended NOx emission lim it is considered the lowest achievable NOx emission limit in practice. An incr emental cost effectiveness analysis is not applicable to this project.

V. CONCLUSION

The additional cost for a 20 ppmv compliant instant aneous unit is $3.00 to $185.00 for the low-end cost estimates and -$45.00 to $489.00 f or the high-end cost estimates. This differential cost is distributed over the 20 y ear lifetime of the unit, which reduces the financial impact for stakeholders. The absolut e cost effectiveness ranges from $19,961 per ton of NOx emissions reduced (low-end c ost estimate) to $52,746 per ton of NOx emissions reduced (high-end cost estimate). Lowering the NOx emission limit to 20 ppmv for instantaneous units is a cost effective and economically reasonable rule

amendment.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 VI. REFERENCES

AC Wholesalers. (2013). Retrieved June 25, 2013, https://www.acwholesalers.com/

Appliances Connection. (2013). Retrieved June 27, 2 013, http://www.appliancesconnection.com/

aTanklessLife.com. (2013). Retrieved August 6, 2013

, http://www.atanklesslife.com/

Bonanza. (2013). Retrieved June 17, 2013, http://www.bonanza.com/

Build.com. (2013). Retrieved June 17, 2013, http://www.build.com/

BuyPlumbing.net. (2013). Retrieved June 17, 2013, http://www.buyplumbing.net/

ComfortGurus.com. (2013). Retrieved August 6, 2013, http://www.comfortgurus.com/

EcoDirect. (2013). Retrieved August 6, 2013, http://www.ecodirect.com/

eComfort.com. (2013). Retrieved June 27, 2013, http://ecomfort.com/

eCrater. (2013). Retrieved August 6, 2013, http://www.ecrater.com/

Food Service Warehouse (FSW). (2013). Retrieved Jun e 25, 2013, http://www.foodservicewarehouse.com/

Global Equipment Company. (2013). Retrieved August 6, 2013, http://www.globalindustrial.com/

Heater-Store. (2013). Retrieved August 6, 2013, http://www.heater-store.com/

Home Center. (2013). Retrieved June 17, 2013, http://www.homecenter.com/

Homeclick. (2013). Retrieved June 25, 2013, http://www.homeclick.com/

Home Perfect. (2013). Retrieved June 10, 2013, http://www.homeperfect.com/

Home Plumbing. (2013). Retrieved June 25, 2013, http://www.homeplumbing.com/

Hotel Restaurant Supply. (2013). Retrieved June 26, 2013, http://www.hotelrestaurantsupply.com/

Low Energy Systems. (2013). Retrieved August 5, 201 3, http://www.tanklesswaterheaters.com/SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 Menard. (2013). Retrieved August 6, 2013, http://www.menards.com/main/home.html

Newegg.com. (2013). Retrieved August 6, 2013, http://www.newegg.com/

Paloma Tankless Water Heaters. (2013). Retrieved Au gust 6, 2013, http://www.palomastore.com/

PexSupply.com. (2013). Retrieved June 10, 2013, http://www.pexsupply.com/

PlumbersCrib.com. (2013). Retrieved August 6, 2013, http://www.plumberscrib.com/

PlumbersStock.com. (2013). Retrieved June 25, 2013, https://www.plumbersstock.com/

PlumberSurplus.com. (2013). Retrieved August 6, 201 3, http://www.plumbersurplus.com/

Pro Water Heater Supply. (2013). Retrieved June 20, 2013, http://www.prowaterheatersupply.com/

Rakuten. (2013). Retrieved August 6, 2013, https://global.rakuten.com/en/

Remodelr.com. (2013). Retrieved June 20, 2013, http://www.remodelr.com/

Shop Designer Plumbing. (2013). Retrieved August 5, 2013, http://shop.designerplumbing.com/

Tankless Guys. (2013). Retrieved June 17, 2013, http://www.tanklessguys.com/

Tankless King. (2013). Retrieved August 6, 2013, http://www.tanklessking.com/

The Energy Conscious . (2013). Retrieved June 26, 2 013, http://www.theenergyconscious.com/

The Faucet Depot. (2013). Retrieved June 27, 2013, http://www.faucetdepot.com/

The Home Depot. (2013). Retrieved August 6, 2013, http://www.homedepot.com/

VentingDirect.com. (2013). Retrieved June 17, 2013, http://www.ventingdirect.com/

Wayfair.com. (2013). Retrieved June 10, 2013, http://www.wayfair.com/

Westside Wholesale. (2013). Retrieved August 5, 201 3, http://www.westsidewholesale.com/SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 SOCIOECONOMIC ANALYSIS FOR AMENDMENTS TO RULE 4308

I. INTRODUCTION

Pursuant to California Health and Safety Code (CH&S C) Section 40728.5 as well as the

District’s 2011 Economic Analysis Process Recommendations

, 1 the District conducts a socioeconomic analysis of a proposed rule or rule a mendment that will significantly affect air quality or emission limitations prior to rule adoption. A socioeconomic analysis examines how a rule project may impact industries, businesses, employment rates, and the economy in the San Joaquin Valley (Valley).

This rule amendment project will achieve emission r eductions by lowering the NOx emission limit for natural gas-fired instantaneous water heaters with a rated heat input of 0.075-0.4 million British thermal units per hour (MMBtu/hr) (instantaneous units) from 55 parts per million by volume (ppmv) to 20 ppmv. As a point-of-sale rule, this rule amendment will mandate that any instantaneous units supplied, sold, or installed in the Valley meet a 20 ppmv NOx emission limit effective on and after January 1, 2015.

The CH&SC requires discussion of the necessity of a dopting, amending, or repealing a rule to attain state and federal ambient air qualit y standards; this requirement is met through the discussion in the body of the Final Sta ff Report. The other five CH&SC requirements for a socioeconomic analysis are satis fied through this appendix, which examines the following items:

• Type of industries or businesses affected by the r ule amendments (Section II of this appendix)

• Range of probable costs for the rule amendments (S ection IV of this appendix)

• Emission reduction potential of the rule amendment s (Section IV of this appendix)

• Availability and cost effectiveness of alternative s to the rule amendments (Section V of this appendix)

• How the rule amendments impact the Valley’s employ ment and economy (Section VI of this appendix)

The District also evaluated two additional items in this socioeconomic analysis, per the

District’s 2011 Economic Analysis Process Recommendations :

• Costs and socioeconomic impacts from previous vers ions of the rule (Section III of this appendix)

1 San Joaquin Valley Air Pollution Control District [SJVAPCD]. (2011, October 20). Enhancements to District Economic Analysis of Regulations. Fresno, CA. Retrieved from http://www.valleyair.org/Board_meetings/GB/agenda_m inutes/Agenda/2011/October/GB_Agenda_Item_13_Oct_20

_ 2011.pdfSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 • Impacts of rule amendments to small businesses, mu nicipalities, and at-risk communities (Section VII of this appendix)

II. AFFECTED INDUSTRIES AND BUSINESSES

Instantaneous units are utilized in a variety of se ttings, including, but not limited to, the following areas:

• Apartment buildings

• Large homes

• Small businesses

• Commercial/office buildings

• Small manufacturing facilities

• Government facilities

• Hotels

• Restaurants

• Hospitals

• Educational institutions

• Religious organizations

End-users of instantaneous units are affected by th e rule amendments, as they will not be allowed to purchase 55 ppmv compliant instantane ous units and could potentially pay more for a 20 ppmv compliant instantaneous unit . The incremental cost for purchasing a 20 ppmv compliant unit instead of a 55 ppmv compliant unit is minimal or

nonexistent for certain instantaneous water heaters brands.

Manufacturers of instantaneous units will be affect ed by the rule amendments, but there are currently no instantaneous water heater manufac turers in the Valley. There are Valley wholesalers, suppliers, and contractors who purchase instantaneous units from manufacturers to sell in the Valley that will be af fected by the rule amendments. These businesses will no longer be allowed to sell, distr ibute, or install instantaneous units meeting a NOx emission limit of 55 ppmv.

III. COSTS AND SOCIOECONOMIC IMPACTS FROM PREVIOUS VERSIONS OF

RULE 4308

Rule 4308 was adopted in October 2005 and subsequen tly amended in December 2009. These 2013 amendments represent the third ge neration of this rule. In order to account for the cumulative impact of multiple gener ations of rules on this source category, the 2011 Economic Analysis Process Recommendations advises that staff reports include descriptions and cost estimates for previous generations of air pollution controls and reference previous socioeconomic analy ses as each rule is amended.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 Previous staff reports for Rule 4308 did not specif ically address cost estimates for instantaneous units; as such, there is no previous cost data to compare to the cost estimates for this final staff report. Previous so cioeconomic analyses concluded that there were no significant economic or employment im pacts associated with the adoption or amendment of Rule 4308 since it is a point-of-sa le rule and does not require forced replacement of units.

IV. COSTS AND EMISSION REDUCTION POTENTIAL FROM AME NDED RULE

4308

Compliance costs for this rule amendment consist of the price differential between 20 ppmv and 55 ppmv compliant instantaneous units. Th ere are no additional engineering costs, labor costs, or costs from new safety requir ements resulting from this rule amendment. Installation costs are not expected to vary for 20 ppmv and 55 ppmv compliant units. Table D-1 below presents the comp liance costs for 55 ppmv compliant instantaneous units versus 20 ppmv compliant instan taneous units, as examined in Appendix C (Cost Effectiveness Analysis).

Table D-1: Compliance Costs for 55 ppmv Compliant U nits vs.

20 ppmv Compliant Units

Unit Size (MMBtu/hr) 20 ppmv

Compliant

Unit Cost 55 ppmv

Compliant

Unit Cost Price Differential

Between 20 ppmv and 55 ppmv Compliant

Units

Low-End Estimates

0.12 to 0.16 $549.00 $546.00 $3.00

0.161 to 0.20 $744.00 $559.00 $185.00

High-End Estimates

0.12 to 0.16 $1,554.00 $1,065.00 $489.00 0.161 to 0.20 $2,234.00 $2,279.00 -$45.00

The price differentials listed in Table D-1 will be distributed over the 20 year lifetime of

the unit. 2 Assuming the most conservative price differential for the low-end estimates ($185) and high-end estimates ($489), the average a nnual cost of a 20 ppmv compliant instantaneous unit will be $21.65-$57.21 per year ( see Appendix C, Cost Effectiveness Analysis).

As discussed in Appendix B (Emission Reduction Anal ysis), the amendments to Rule 4308 are expected to result in 1.82 tons per year ( tpy) of NOx emission reductions upon

2 Department of Energy [DOE]: Tankless or Demand-Typ e Water Heaters. (2012). Retrieved June 11, 2013 fr om http://energy.gov/energysaver/articles/tankless-or- demand-type-water-heatersSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 full rule implementation. Given the 20 year lifeti me of instantaneous units, emission reductions will occur over a 20 year period (2015 t hrough 2034) as existing instantaneous units are replaced with newer instant aneous units, new instantaneous units are purchased for new developments, and some end-users switch from tank-style

to instantaneous units. These emission reductions represent a 62.3% reduction from the estimated baseline of 2.92 tpy of NOx emissions from instantaneous units.

V. ALTERNATIVES TO RULE AMENDMENT

Given the extent of the Valley’s attainment challen ges, the District evaluates all potential opportunities to reduce emissions during the attain ment planning process, and commits to pursue all reasonable emission reduction opportu nities identified during this planning process. This amendment to Rule 4308 was identifie d as a reasonable opportunity to reduce emissions during the development of the 2012 PM2.5 Plan and there is no alternative to pursuing these emission reductions.

The amended NOx emission limit is considered the lo west achievable NOx emission limit in practice. Although the District confirmed that the NOx emission limit is achievable and has been put into practice in other air districts, the rule does not specify

how manufacturers are to achieve this limit. As su ch, there are no technological alternatives to compare for this rule amendment, so evaluation of the cost effectiveness of alternatives is not applicable to this rule proj ect.

VI. SOCIOECONOMIC IMPACTS

A socioeconomic impact is any effect on the Valley’ s employment or economy due to a regulatory action. There are no socioeconomic impa cts anticipated for these rule amendments because there are no significant impacts to the following three groups that could potentially be affected by this rule-amending project:

• The end-users of instantaneous units;

• Manufacturers of instantaneous units; and

• Wholesalers, suppliers, and/or contractors who sup ply or install instantaneous

units.

End-Users Rule 4308 does not require end-users to replace exi sting instantaneous units within a certain time frame; rather, as instantaneous units meeting the 55 ppmv NOx emission limit reach the end of their life and the users rep lace them, they will purchase a unit that meets a 20 ppmv NOx emission limit, thus ensuring t hat end-users are not forced to

incur additional costs when their current units are still operable. Also, the price differential between 20 ppmv and 55 ppmv compliant units is minimal in terms of the overall cost of the unit, and some 20 ppmv complian t units are identical in price to theirSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 55 ppmv counterparts. The price range for instanta neous units is more closely related to the fuel efficiency, energy efficiency, or luxur y features (such as stainless steel build and touch screen capabilities) of an instantaneous unit, rather than the low-NOx capability of the unit.

The District anticipates that owners of tank-style water heaters will continue the trend of replacing their current water heaters with instanta neous (tankless) water heaters because of the increased fuel, water, and energy ef ficiencies of instantaneous units (see Section II of the Final Staff Report). For th ose owners switching from tank-style to instantaneous units, any potential price differenti al between a 55 ppmv compliant instantaneous unit and a 20 ppmv compliant instanta neous unit will be largely offset by fuel and energy savings.

Manufacturers

There are six instantaneous water heater manufactur ers identified by the South Coast Air Quality Management District (SCAQMD) in their List of Certified Units Pursuant to

Rule 1146.2

(see Appendix C of this Final Staff Report). Thes e manufacturers build
instantaneous units and sell them to wholesalers, s uppliers, or contractors for

distribution to the end-users.

As a result of these rule amendments, manufacturers will no longer be able to sell 55 ppmv compliant instantaneous units to Valley retail ers or contractors. However, all of the manufacturers identified who produce 55 ppmv co mpliant instantaneous units also produce the 20 ppmv compliant units. Five of the s ix manufacturers produce 55 ppmv and 20 ppmv compliant instantaneous units, while on e of the manufacturers no longer produces 55 ppmv compliant units and now only produ ces 20 ppmv compliant

instantaneous units. These rule amendments will ha ve a minimal impact to

instantaneous unit manufacturers.

District staff also verified that none of the six i nstantaneous water heater manufacturers have manufacturing facilities located in the Valley

.

Wholesalers, Suppliers, and/or Contractors Wholesalers, suppliers, and contractors are the med ium between the manufacturing facilities and the end-users, as these parties purc hase units from the manufacturers to

sell and distribute to users. These businesses wil l no longer be allowed to sell, distribute, or install instantaneous units meeting a NOx emission limit of 55 ppmv. The January 1, 2015 compliance deadline in the amended rule provides these wholesalers and suppliers with over 12 months to sell through e xisting stock before the new emission limit becomes effective. The availability and number of instantaneous units meeting a NOx emission limit of 20 ppmv has grown s ubstantially within the last few years. Each of the six instantaneous water heater manufacturers are already producing

several models in various sizes within the 0.075-0. 4 MMBtu/hr rated heat input size range that meet a 20 ppmv NOx emission limit and ar e currently selling these units in the Valley.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 Also, as discussed in Appendix C (Cost Effectivenes s Analysis), the price differential between a 55 ppmv and 20 ppmv compliant instantaneo us unit is minimal, ranging from $3.00 to $185.00 for the low-end cost estimates to a cost savings of $45.00 to an increased cost of $489.00 for the high-end cost est imates. Contractors, suppliers, and wholesalers sales volumes will not be adversely imp acted. Profit margins will remain the same as the cost will be passed onto the consum er.

VII. IMPACTS TO SMALL BUSINESSES, MUNICIPALITIES, A ND AT-RISK

COMMUNITIES

Per the 2011 Economic Analysis Process Recommendations document, District staff is

advised to evaluate how new rules or rule amendment s may impact small businesses, municipalities, and at-risk communities where the m ajor employer may respond to additional compliance costs by laying off workers. As discussed in Section VI above, these rule amendments are not expected to result in any significant economic impacts, nor any decreased employment for small businesses a nd industries in the Valley. As such, municipalities and at-risk communities are no t expected to incur any economic or employment effects from these rule amendments.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Rule Consistency Analysis

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Amendments to Rule 4308 RULE CONSISTENCY ANALYSIS FOR AMENDMENTS TO RULE 43 08

I. REQUIREMENTS FOR RULE CONSISTENCY ANALYSIS

Pursuant to Section 40727.2 of the California Healt h and Safety Code, prior to adopting, amending, or repealing a rule or regulation, the Di strict performs a written analysis that identifies and compares the air pollution control e lements of the rule or regulation with corresponding elements of existing or proposed Dist rict and United States Environmental Protection Agency (EPA) rules, regula tions, and guidelines that apply to the same source category. The rule elements analyz ed are emission limits; monitoring and testing requirements; recordkeeping and reporti ng requirements; and operating parameters and work practice requirements.

II. ANALYSIS

A. District Rules

There is no other District prohibitory rule or regu lation tailored specifically for boilers, steam generators, and process heaters with a rated heat input of 0.075 million British thermal units per hour (MMBtu/hr) to less than 2.0 MMBtu/hr. Sources would be subject to District Rule 1081 (Source Sampling). The requi rements of Rule 1081 are not in conflict with, nor are they inconsistent with the r equirements of the amendments to Rule

4308.

B. Federal Rules, Regulations, and Policies

1. EPA Alternative Control Techniques (ACT) Documen t

EPA 453/R-94-022 (“ACT Document – NOx Emissions fro m Industrial/ Commercial/Institutional Boilers,” dated March 1994 ) 1 discusses the different control techniques for controlling NOx emissions fr om boilers with heat input capacities from 0.4 to 1,500 MMBtu/hr. The ACT als o presents the achievable emission levels of several control techniques based on the type of boiler and the type of fuel used and contains cost effectiveness e stimates for the control techniques; however, the ACT does not recommend spe cific emission limits. As confirmed by the July 2010 EPA technical support do cument (TSD) for the approval of Rule 4308, the District rule is already as stringent as the ACT.

1 Environmental Protection Agency [EPA]: SIP Plannin g Information Toolkit: Control Techniques Guideline s and Alternative Control Techniques Documents. (2012). R etrieved April 10, 2013 from http://www.epa.gov/glo/SIPToolkit/ctgs.htmlSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 2. EPA Control Techniques Guideline (CTG) Document

Based on the EPA CTG list 2 , there is no CTG for boilers, steam generators, an d process heaters with a rated heat input capacity gr eater than or equal to 0.075

MMBtu/hr to less than 2.0 MMBtu/hr.

3. EPA New Source Performance Standard (NSPS)

Based on the NSPS list in 40 CFR 60 3 , there is no NSPS for boilers, steam generators, and process heaters of this size.

4. National Emission Standard for Hazardous Air Pol lutants (NESHAP) and Maximum Achievable Control Technology (MACT)

Based on the NESHAP and MACT lists in 40 CFR 61 (NE SHAP) 4 and 40 CFR 63 (MACT) 5 , there is no NESHAP or MACT for boilers, steam gen erators, and process heaters of this size.

5. EPA Best Available Control Technology (BACT) Req uirements

There are no BACT requirements listed for boilers, steam generators, and process heaters of this size range. BACT requireme nts are applicable to units greater than 5.0 MMBtu/hr.

6. EPA Policy on Recordkeeping

EPA has a policy that mandates stationary sources k eep and maintain records for at least five years; however, as a point-of-sal e rule, boilers, steam, generators, and process heaters 0.075 to less than 2.0 MMBtu/hr are not permitted sources and are thus not required to foll ow specific recordkeeping guidelines. Units subject to Rule 4308 are not sub ject to EPA’s Policy on Recordkeeping.

2 Environmental Protection Agency [EPA]: SIP Plannin g Information Toolkit: Control Techniques Guideline s and Alternative Control Techniques Documents. (2012). R etrieved April 10, 2013 from http://www.epa.gov/glo/SIPToolkit/ctgs.html

3 Environmental Protection Agency [EPA]: 40 CFR 60-S tandards of Performance for New Stationary Sources (NSPS). (2013). Retrieved April 10, 2013 from http://www.tceq.state.tx.us/permitting/air/rules/fe deral/60/60hmpg.html

4 Environmental Protection Agency [EPA]: 40 CFR 61-N ational Emission Standards for Hazardous Air Pollut ants (NESHAPS). (2012). Retrieved April 10, 2013 from http://www.tceq.state.tx.us/permitting/air/rules/fe deral/61/61hmpg.html

5 Environmental Protection Agency [EPA]: 40 CFR 63-N ational Emission Standards for Hazardous Air Pollut ants for Source Categories (a.k.a. Maximum Achievable Contro l Technology (MACT)). (2013). Retrieved April 10, 2 013 from http://www.tceq.state.tx.us/permitting/air/rules/fe deral/63/63hmpg.htmlSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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Amendments to Rule 4308 III. CONCLUSION

Based on the above analysis, District staff found t hat the amendments to Rule 4308 do not conflict with any District or federal rules, re gulations, or policies covering similar stationary sources.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

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