Technical Support Document 

for

EPA's Notice of Proposed Rulemaking 

for the

California State Implementation Plan

South Coast Air Quality Management District

Rule 1315 – Federal New Source Review Tracking System

Prepared by:

Geoffrey L. Glass and Laura Yannayon

Reviewed by:

Gerardo Rios

Air Division, Permits Office

United States Environmental Protection Agency, Region IX

San Francisco, California

February 9, 2012
Table of Contents

I. Rules Addressed by EPA’s Rulemaking Action....................................................................... 1

II. Background Information........................................................................................................... 1

A. Applicable Federal Regulations.......................................................................................... 1

B. The District ......................................................................................................................... 2

C. State and Local Regulations................................................................................................ 2

D. History of District’s Internal Offset Accounts.................................................................... 3

III. Adopted Rule 1315 ................................................................................................................... 5

IV. EPA Evaluation......................................................................................................................... 7

A. Federal Integrity Criteria..................................................................................................... 7

B. Base Year Requirements................................................................................................... 10

C. Aggregate Offset Equivalency.......................................................................................... 13

D. SIP Relaxation .................................................................................................................. 13

V. Recommendation .................................................................................................................... 14

VI. Attachments ............................................................................................................................ 14

Acronyms

AQMD (South Coast) Air Quality Management District (a.k.a. the District)

BACT Best Available Control Technology

BARCT Best Available Retrofit Control Technology

CAA Federal Clean Air Act

CARB California Air Resources Board

CFR Code of Federal Regulations

CO Carbon monoxide

EPA United States Environmental Protection Agency

ERC Emission Reduction Credit

NAAQS National Ambient Air Quality Standards

NO2 Nitrogen dioxide

NOx Oxides of nitrogen

NSR New Source Review

PM10 Particulate Matter with an aerodynamic diameter less than 10 micrometers

PM2.5 Particulate Matter with an aerodynamic diameter less than 2.5 micrometers

SCAB South Coast Air Basin

SIP State Implementation Plan

SO2 Sulfur dioxide

SOx Oxides of sulfur

VOC Volatile Organic Compounds
February 9, 2012 Technical Support Document Page 1

AQMD Rule 1315

I. Rules Addressed by EPA’s Rulemaking Action

The United States Environmental Protection Agency (EPA) is taking action on the South Coast 

Air Quality Management District (AQMD, or the District) Rule 1315 – Federal New Source 

Review Tracking System. AQMD’s Governing Board adopted Rule 1315 on February 4, 2011. 

The California Air Resources Board (CARB) submitted the rule to EPA for inclusion in the 

California State Implementation Plan (SIP) on March 3, 2011. On March 25, 2011, EPA found 

the submittal complete according to the criteria in 40 CFR part 51, appendix V. On February 7, 

2012, CARB supplemented the existing submittal by providing a copy of Rule 1315 for SIP 

approval which struck out the portions of the rule not intended for SIP submittal.

The purpose of District Rule 1315 is to prescribe a methodology for demonstrating that the 

District’s New Source Review (NSR) program is consistent with the federal NSR requirement to 

offset increases in emissions of non-attainment pollutants and precursors at new and modified 

major sources and modifications with appropriate reductions. Rule 1315 applies only to the 

nonattainment pollutants ozone and PM10 (particulate matter with an aerodynamic diameter less 

than or equal to 10 micrometers) and their precursors (nitrous oxides and volatile organic 

compounds for ozone, and sulfur dioxide for PM10), and the maintenance pollutant carbon 

monoxide, unless other pollutants are added later. PM2.5 is specifically excluded from Rule 1315 

and is regulated under a separate rule, Rule 1325 – Federal PM2.5 New Source Review Program.

II. Background Information

A. Applicable Federal Regulations

Section 110(a)(2)(C) of the CAA requires SIPs to include provisions to comply with Part D for 

nonattainment pollutants. Among the Part D requirements, section 172(c)(5) of the CAA requires 

SIPs for nonattainment areas to include a permitting program for new and modified major 

stationary sources of nonattainment air pollutants in accordance with section 173(a)(1)(A), which 

requires increases in such emissions over specified thresholds from a major stationary source to 

be offset by equal or greater reductions in emissions of the same pollutant. A permit authority 

may use an aggregate approach to demonstrate that their Part D permit program provides the 

required number of offsets. 1

Details concerning the use of offsets can be found in EPA’s implementing regulations at 40 CFR 

§ 51.165(a)(3). According to 40 CFR § 51.165(a)(3)(ii)(C)(1)(i), offsets resulting from the 

shutdown or curtailment of existing emission units can only be credited if they are permanent, 

surplus, quantifiable, and federally enforceable. 

Furthermore, according to 40 CFR § 51.165(a)(3)(ii)(C)(1)(ii), the shutdown or curtailment must 

 

1

See 61 FR 64292, Dec. 4, 1996 and Environmental Protection Agency, Region IX Air & Toxics Division 

Technical Support Document for EPA’s Notice of Final Rulemaking for the California State Implementation Plan 

South Coast Air Quality Management District New Source Review by Gerardo C. Rios, October 24, 1996 (TSD).
February 9, 2012 Technical Support Document Page 2

AQMD Rule 1315

have occurred after the last day of the base year for the SIP planning process unless the projected 

emissions inventory used to develop the attainment demonstration explicitly includes the 

emissions from such previously shut down or curtailed emission units. However, in no event may 

credit be given for shutdowns that occurred before August 7, 1977.

Appendix S to 40 CFR part 51 – Emission Offset Interpretative Ruling, explains EPA’s position 

on preconstruction review of major sources in nonattainment areas and provides some guidance 

on banking and using offsets. Although no longer in effect in the District as it is superseded 

when specific NSR programs are SIP approved, Appendix S is generally accepted as setting forth 

EPA’s interpretation of the minimum requirements of a nonattainment NSR program. Appendix 

S sets the general guidance of allowing, in Section IV.C.5, the banking of emission reductions 

for use as future offsets when such reductions exceed the requirements of reasonable progress 

toward attainment, provided SIP emission limits are applied at the time of use. Therefore a key 

ongoing requirement for banked emissions reductions is that they be adjusted to reflect current 

SIP requirements – aka ―surplus adjusted at the time of use.‖

B. The District

The AQMD is the local authority appointed by the State of California to administer Clean Air 

Act (CAA) permitting programs in Los Angeles County, except the Antelope Valley area 

northeast of the San Gabriel Mountains; all of Orange County; southwestern San Bernardino 

County; and Riverside County, with the exception of the easternmost area bordering Arizona.

EPA has classified the South Coast Air Basin (SCAB), which constitutes the bulk of the 

AQMD’s jurisdictional area, as an extreme non-attainment area for the revoked 1-hour and 

current 8-hour ozone standards and a serious nonattainment area for PM10. The Coachella Valley 

in central Riverside County east of the SCAB is classified as a severe nonattainment area for 8-

hour ozone and a serious nonattainment area for PM10. 

C. State and Local Regulations

District Rule 201 – Permit to Construct, requires written authorization from the Executive 

Officer before building, erecting, installing, altering, or replacing any equipment that generates 

or controls air pollutants. Those installations deemed to have a de minimis effect on air quality 

are exempted from the requirement to obtain permits from the District under Rule 219 –

Equipment not Requiring a Written Permit Pursuant to Regulation II.

Preconstruction review requirements are set in District Regulation XIII – New Source Review, 

which consists of District Rules 1301 through 1325. 

According to District Rule 1303 – Requirements, an application for a Permit to Construct will be 

denied unless offsets are obtained for each nonattainment pollutant, unless the source is 

exempted from this requirement by District Rule 1304 – Exemptions, or 1309.1 – Priority 

Reserve. 

District Rule 1304 – Exemptions, lists source types exempt from the requirement to obtain 
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AQMD Rule 1315

offsets. Examples of exempt sources include abrasive blasting equipment, emergency use 

equipment, portable equipment, essential public services (if the modification is required to 

comply with a District, State, or federal regulation and offsets from the Priority Reserve are not 

available), and sources at a facility with a net potential to emit less than 4 tons per year of NOx, 

VOC, PM10, or SOx, or less than 29 tons per year of CO. 

District Rule 1309.1 – Priority Reserve, established a Priority Reserve of emission reductions to 

be used to offset emission increases at certain high priority sources including innovative lowemitting sources, research operations, essential public services, and electrical generating 

facilities that submitted a complete application to the California Energy Commission or the 

District between 2000 and 2003. There are no pending applications for electrical generating 

facilities that still qualify for this provision.

District Rule 1309 – Emission Reduction Credits and Short Term Credits, requires all emission 

reductions to be creditable, e.g., the emission reductions must be real, quantifiable, permanent,

federally enforceable and not greater than the equipment would have achieved if operating with 

current Best Available Control Technology (BACT). Therefore Emission Reduction Credits 

(ERCs) granted pursuant to this rule meet the federal integrity criteria for offsets at the time they 

are issued. 

D. History of District’s Internal Offset Accounts

Prior to 1990, the District maintained a computerized emissions balance for all sources that 

obtained permits. If a source made a change that decreased emissions, the District would record 

it as a negative NSR balance for the source. For sources that had received permits from the 

District, NSR balances were based on permitted emissions. For pre-NSR sources – the District’s 

NSR program dates back to 1976 – NSR balances were based on an analysis of actual emissions.

NSR balances were required to be quantifiable and enforceable. Entries only occurred pursuant 

to permit applications and substantiating data was reviewed by permitting engineers. Pursuant to 

District Regulation XIII, the District established its internal offset accounts with starting 

balances based on the pre-1990 emissions reductions. Emission reductions resulting from 

shutdowns were recalled, reduced by 20 percent, and deposited into the District’s Internal Offset 

Accounts. 

In 1996, EPA Region 9 approved the SIP submittal of District Regulation XIII noting that 

Regulation XIII differed from federal requirements but was, overall, equivalent to or not less 

stringent than the federal requirements. Region 9 did not require an offset tracking system as part 

of the SIP submittal, but did state in the preamble to the Federal Register notice that, because 

District Rules exempted some major sources from the requirement to provide offsets, the District 

would implement an offset tracking system to demonstrate consistency with federal NSR offset 

requirements. As a result, the District established a federal offset account initially populated with 

pre-1990 emission reductions from the NSR negative balances that were validated. Because of 

the large existing balances in the accounts, not all of the eligible emission reductions were 

credited to the accounts. For example, in the pre-2006 tracking system, emission reductions 

resulting from orphan shutdowns at major sources, but not minor sources, were credited to the 

accounts. From 1997 through 2005, the District submitted annual equivalency reports to its 
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AQMD Rule 1315

Board for approval and provided copies to EPA Region 9. The public was generally invited to 

the District’s Board meetings at which the annual reports were approved and the annual 

equivalency reports were publicly available.

In 2002, when the District adopted new Rule 1309.2 – Offset Budget, which would allow sources 

to access the District’s internal offset accounts as an offset source of last resort, EPA informed 

the District that transparency of the account’s tracking system should be improved. In 2004-

2005, the District determined that the best solution would be to draft regulatory language, now 

known as Rule 1315, which would lay out with clarity how offsets are credited and debited to the 

District’s internal offset accounts.

In its discussions during 2002-2003, EPA also noted that the District’s use of the negative NSR 

balances and other pre-1990 era offsets to fund the internal bank would be inconsistent with 

federal requirements unless the District had sufficient records for those offsets. The District 

responded to EPA’s request for documentation on offsets from the negative NSR balances by 

reviewing its offset account records. The District concluded that it did not readily have sufficient 

documentation for many of the emission reductions it had collected from the negative NSR 

balances and other pre-1990 era offsets. The District responded by eliminating pre-1990 credits 

without adequate documentation and proposing to retire all unused pre-1990 credits at the end of 

the 2004-2005 reporting period. This resulted in a need for additional unclaimed emission 

reductions and the District proposed the following previously untapped sources of emission 

reductions:

Orphan shutdowns and reductions at minor sources,

ERCs provided to offset emission increases at minor sources, and

ERCs provided by major sources that are above the offset ratio required by the federal 

NSR program.

In 2005, the District further proposed to quantify the actual emissions for orphan shutdowns by 

multiplying permitted emission limits by a factor of 0.8 to reflect factory utilization rates. They 

also proposed to reduce the Offset Account balances annually by the percentage of emission 

reductions achieved by implementing control measures to reduce pollutant emissions. EPA and 

the District discussed further additional changes to the tracking system which resulted in a letter 

dated February 23, 2006. The revisions primarily resolved issues EPA had raised and added a 

remedy if a shortfall in the offset accounts balance was projected. EPA Region 9 responded on 

April 11, 2006, indicating that the District’s proposed revised tracking system funded with 

emission reductions from minor orphan shutdowns and other sources appeared to be sufficient 

for EPA to propose approval of Rule 1315.

In September, 2006, the District Board adopted Rule 1315, which was challenged on California 

Environmental Quality Act (CEQA) grounds. Subsequently, AQMD withdrew and then 

readopted the rule on August 3, 2007. However, a new lawsuit was filed challenging the August 

2007 readoption, again on CEQA grounds. The petitioners prevailed in this case, and the 

Superior Court of the State of California, County of Los Angeles (Court) issued a writ of 

mandate ordering AQMD to, inter alia, set aside the August 2007 rule adoption. AQMD 
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repealed Rule 1315 in January 2010. The current SIP submitted version of Rule 1315 was 

adopted by the District Board on February 4, 2011.

III. Adopted Rule 1315

The purpose of Rule 1315 as stated in paragraph (a) is to maintain the District’s ability to issue 

permits requiring offsets to major sources that require emission offsets under federal regulations 

but are exempted by local rules from this requirement, and to memorialize the procedures to 

establish the District’s NSR program equivalency with federal NSR offset requirements. 

Definitions of key terms used in the Rule are contained in paragraph (b). The Rule requires the 

Executive Officer (or the District acting on his behalf) to establish and maintain separate offset 

accounts for each federal nonattainment pollutant. Offset Accounts may be established or 

discontinued in the future depending on future attainment status and maintenance plan 

requirements. 

Paragraph (c) of the rule – Offset Accounts for Federal NSR Equivalency, contains provisions for 

quantifying, crediting and debiting the offset accounts. The Rule requires these offset accounts to 

be debited whenever construction or modification requiring a federal non-attainment major 

source NSR permit occurs and the project is either exempt from the requirement to obtain offsets 

pursuant to District Rule 1304 or is eligible for an allocation of Priority Reserve offsets (offsets 

provided by the District) under District Rule 1309.1. 

As discussed in Section II.D. of this TSD, the District Offset Accounts were originally 

established on October 1, 1990 with emission reductions that occurred prior to that date. In 2005 

the District reevaluated all credits deposited into the 1990 Offset Accounts and removed all 

credits for which sufficient records were no longer available to substantiate the emission 

reduction. This work lead to revised beginning balances as reported by the District in their 

―Federal Running Balance‖ summary,2 which are reflected in Table A of Rule 1315 as the 

Internal District Offset Account Balances. The rule required any remaining pre-1990 credits to 

be removed from the Offset Accounts after completion of the calendar year 2005 equivalency 

demonstration.

Paragraph (c)(1) also specifies under what conditions the Executive Officer must establish 

additional accounts for any new nonattainment pollutants, and when the tracking of a pollutant 

may be discontinued. Finally it specifies the criteria for determining equivalency with the federal 

offset requirements—the procedures specified in Rule 1315 must be followed and each Offset 

Account balance must remain positive.

Paragraph (c)(2) – Tracking of Offset Account Debits for Federal NSR Equivalency, specifies 

how the District shall track the amount of emissions to be debited, and which permit actions 

require debiting. It states that only emission increases from major polluting facilities that are not 

exempt from federal offset requirements must be debited. It also specifies the offset ratios 

required for each pollutant, which are consistent with federal CAA requirements.

 

2

See Rule 1315 Staff Report, Appendix I: AQMD’s NSR Offset Tracking—Updated Federal Running Balances.
February 9, 2012 Technical Support Document Page 6

AQMD Rule 1315

Paragraph (c)(3) – Tracking of Offset Account Credits for Federal NSR Equivalency, contains the 

provisions for crediting emission reductions to the Offset Accounts. This includes the types of 

emission reductions that may be quantified, how they must be quantified, and when tracking is 

no longer required for specific pollutants.

Paragraph (c)(3)(A) specifies that offset accounts shall be credited with emission reductions that 

have occurred since October 1, 1990 that fall into one of the following categories: 

1. Orphan reductions and shutdowns, i.e. emission reductions related to retirement or 

control of equipment at permitted sources where the permit holder does not apply for an 

ERC, quantified as 80 percent of the source’s NSR permitted emissions;

2. ERCs provided as emission offsets for sources at minor facilities;

3. The difference between the quantity of ERCs provided as emission offsets for sources at 

major facilities at a 1.2:1.0 offset ratio, as required by District Rules, and the quantity that 

would be required under 40 CFR § 51.165(a)(9);

4. The amount of emission reductions for which a facility cannot apply for ERCs because 

the emissions were originally permitted through an allocation of offsets from AQMD 

(a.k.a. payback of offset debt);

5. The difference between actual daily emission reductions calculated with and without a 

BACT adjustment, as required by District Rules, when the emission reduction is 

submitted as part of an ERC banking application and EPA concurs that the BACT 

adjustment is surplus to what is required by the federal NSR program.

Paragraph (c)(3)(B) specifies how the identified emission reductions are to be quantified prior to 

being credited into the Offset Accounts. In particular, only 80% of the emission reductions, 

based on permitted emissions from orphan reductions and shutdowns may be credited. Paragraph

(c)(3)(C) provides that on an ongoing basis, the District may elect not to track all creditable 

emission reductions if it determines that sufficient credits remain in the Offset Accounts. For 

example, it may not be necessary to track the surplus emission reductions from the difference in 

offset ratios required by Rule 1303 and the offset ratio required by the CAA.

Paragraph (c)(4) requires the District to discount the remaining balance of credits annually on a 

pollutant-by-pollutant basis, based on the percentage of emission reduction achieved from 

control requirements enacted in the previous year. Paragraph (c)(5) specifies the sequence of 

tracking actions, requiring that the Offset Account balance first be surplus adjusted consistent 

with the provisions of paragraph (c)(4), then debits quantified under paragraph (c)(2) must be 

subtracted from the remaining balances, and finally the emission reductions quantified under 

paragraph (c)(3)(A) are added. Paragraph (c)(6) identifies how the Offset Account credits used as 

offset debits meet each of the federal Offset Criteria.

Paragraph (d) – Federal NSR Equivalency Determination Reports, specifies the required 

reporting periods and the timing for completion and submission of Preliminary and Final 

Determinations of Equivalency reports to the District’s Governing Board and EPA. Paragraph 

(d)(1) details the specific historic, current and future reporting periods for the Offset Accounts. 

Paragraph (d)(3) specifies that no later than 12 months after the end of a reporting period, the 

District shall present a Preliminary Determination of Equivalency to the Governing Board and 
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AQMD Rule 1315

EPA. The determination is preliminary because it only includes offsets that were debited from 

the Offset Accounts for the reporting period and does not yet include any credits. Paragraph 

(d)(4) specifies that no later than 18 months after the end of a reporting period, the District shall 

present a Final Determination of Equivalency to the Governing Board and EPA. This report 

includes all of the emission reductions credited to the Offset Accounts during the reporting 

period.

Paragraph (e) – Projection of District Offset Account Balances, requires the District to provide 

with each Equivalency Determination report, a projection of what the account balances will be at 

the end of the next two reporting periods. The paragraph also specifies how the projections are to 

be made and clarifies that they are not a part of either Equivalency Determination. 

Paragraph (f) – Projections of District Offset Account Balances, states that if any Offset Account 

shows a shortfall, the District must discontinue funding the Priority Reserve and discontinue 

issuing permits requiring offset account debits until the shortfall is rectified.

Paragraph (h) – State Implementation Plan Submittals, states that paragraphs (b)(2), subdivisions 

(g) and (h) are not to be submitted for SIP approval. On February 7, 2012, the District provided 

a copy of Rule 1315 as adopted, but with these sections struck out to clearly indicate which 

sections will be included in the SIP revision. Since the District did not include these provisions 

as part of their SIP submittal, EPA is not considering these provisions in our evaluation and they 

will not be incorporated into any final SIP action.

Paragraph (i) – Sunset Date for Permit Issuance, specifies a sunset date of January 1, 2031. This 

means that prior to that date, the District must adopt a new/revised tracking rule to demonstrate 

equivalency with federal NSR offset requirements.

IV. EPA Evaluation 

The following evaluation is based on EPA’s review of submitted Rule 1315 – Federal New 

Source Review Tracking System. Our review focuses on several criteria. First, whether the 

emission reductions credited to and debited from the District Offset Accounts meet the federal 

integrity criteria of being permanent, surplus, quantifiable, and enforceable as required by 40 

CFR § 51.165(a)(3) (ii)(C)(1)(i). Second that emission reductions that occurred before an 

Attainment Plan base year are included in the emission inventory used to model attainment as 

required by 40 CFR § 51.165(a)(3) (ii)(C)(1)(ii). Third, whether Rule 1315 demonstrates that the 

District is providing the quantity of offsets which, in the aggregate, are at least equivalent to the 

amount of credits required by the CAA for federal major sources and modifications. And finally 

whether this proposed SIP revision complies with 110(l) of the CAA, which provides that a SIP 

revision cannot be approved if it would interfere with attainment, reasonable further progress 

(RFP) or any other CAA requirement.

A. Federal Integrity Criteria

1. Permanent
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The federal integrity criteria require emission reductions used as offsets to be 

permanent emission reductions, meaning the emissions are no longer legally allowed 

to be emitted. The majority of emission reductions credited to the Offset Accounts are 

from shutdown sources. The emission reductions from these permitted operations are 

considered permanent because the facilities no longer have permission to operate and 

emit specified pollutants. If a new source is constructed to carry out the same type of 

business activity, it would be required to provide new emission offsets prior to 

construction. In cases where the emission reductions were created by the use of 

additional emission controls, the operating permits must contain practicably and 

federally enforceable conditions to ensure the permanence of the credited emission 

reductions. For each type of emission reduction source listed in (iii)-(vi), the emission 

reductions are all generated as ERC’s subject to Rule 1309 – Emission Reduction 

Credits and Short Term Credits, which has its own requirement for the credits to be 

permanent prior to issuance of the ERC. Therefore these emission reductions are also 

permanent at the time they are credited to the Offset Accounts.

The emission reductions debited from the District Offsets Accounts are also 

permanent reductions because the Rule requires the District to subtract the debited 

quantity of emission reductions from the District’s Offset Account balances. The 

District must provide its Preliminary and Final Determinations of Equivalency 

annually to ensure there is a positive balance in each of the Offset Accounts. Rule 

1315 also contains an equivalency backstop provision in case any Offset Account has 

a shortfall (e.g., negative balance).

2. Surplus

The federal integrity criteria require emission reductions used as offsets to be surplus 

or in addition to, any other federal requirement to reduce emissions. Rule 

1315(c)(3)(A) contains a list of the types of emission reductions that may be credited 

to the Offset Accounts. Orphan shutdowns and reductions (listed as (i) and (ii)) are 

emission reductions that are not claimed by any source and which occur either from 

the shutdown of a permitted source or a revised permit limiting emissions, 

respectively, ―provided such reduction is not otherwise required by rule, regulation, 

law, approved Air Quality Management Plan Control Measure, or the State 

Implementation Plan and does not result in issuance of an ERC.‖ In both cases, the 

restriction that the emission reductions not be required by other rules and not result in 

the issuance of an ERC is sufficient to ensure the credits are surplus at the time they 

are added to the Offset Account. For each type of emission reduction sources listed in 

(iii)-(vi), the emission reductions are all generated as ERC’s subject to Rule 1309 –

Emission Reduction Credits and Short Term Credits, which has its own requirement 

for the credits to be surplus prior to issuance of the ERC. Therefore these emission 

reductions are also surplus at the time they are credited to the Offset Accounts.

In order to ensure the emission reductions in the Offset Accounts are also surplus at 

the time they are debited, Rule 1315 (c)(4) requires the District to reduce the Offset 

Account balances annually ―based on the percentage reduction in overall permitted 

emissions projected to be achieved as a result of implementation of control 
February 9, 2012 Technical Support Document Page 9

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requirements that became effective during the previous calendar year for each 

specific nonattainment contaminant within the District.‖ This provision requires the 

District to calculate the amount of reductions expected from each rule adopted by the 

District to reduce emissions, express the amount as a percentage of the total stationary 

source inventory for that pollutant and apply this same percentage to the Offset 

Account balance for that pollutant. The effect of this adjustment is that the Offset 

Account balance will be reduced annually to account for any newly adopted rules that 

control these pollutants, ensuring that the debits used as offsets are surplus at the time 

of use.

3. Quantifiable Emissions

The federal integrity criteria require emission reductions used as offsets to be 

quantifiable. The vast majority of emission reductions credited under Rule 1315 are 

from orphan shutdowns, which occur when the owner/operator of a shut down source 

does not apply for an Emission ERC under Rule 1309 – Emission Reduction Credits 

and Short Term Credits. When a source has shut down and the operating permit has 

been inactivated, the only emission data available to the District is the source’s 

permitted emissions limits, which represents its potential to emit rather than its actual 

emissions. In order to adjust these permitted emission limits to reflect actual 

emissions, Rule 1315 requires the District to reduce the permitted emissions by 20% 

before crediting these emissions to the Offset Accounts.

The District bases the 80% actual emissions factor on several considerations. The 

District has historically implemented the 80% actual emission factor for estimating 

actual emission reductions in its Regulation XIII annual reports to the California Air 

Resources Board after they concurred that this was an accurate characterization. The 

District also stated in their Staff Report that using eighty percent of potential 

emissions as a calculation of actual emissions is supported by two cited Federal 

Reserve reports. 3In addition to specific capacity and utilization data contained in the 

report, EPA notes that over the past 40 years the average total industry utilization rate 

was 80.4 percent.4

The District’s justification for quantifying actual emission reductions is also 

supported by the inherent structure of the District’s NSR program. Every source that 

is operated in the District with emissions exceeding 4 tons per year (tpy) of any 

nonattainment pollutant, including precursors, was required to obtain ERCs to offset 

those emissions. The cost of obtaining the ERCs provides ―a strong incentive to keep 

each source’s potential emissions in line with actual emissions during times of high 

production.‖ For exempt and priority reserve sources that obtain their offsets from 

the District, the District limits the amount of offsets provided by including permit 

conditions that limit operations to actual operating scenarios. Data provided by the 

District pertaining to the emission limits for the very small exempt sources (emitting 

 

3

 Staff Report, p 17. See Footnotes. 

4

 Federal Reserve Statistical Release G.17, Industrial Production and Capacity Utilization 

http://www.federalreserve.gov/releases/g17/cap_notes.htm as printed on February 7, 2011.
February 9, 2012 Technical Support Document Page 10

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< 4 tpy of most pollutants) shows that fifty percent of the VOC sources and over 

eighty percent of all other sources have permit emission limits which are less than 

one-half of the 4 tpy exemption threshold.5

EPA believes that the justifications provided by the District, as discussed above, are

adequate for quantifying the actual emissions from orphan shutdown sources. While 

some sources may have emission rates higher or lower than 80%, in the aggregate, the 

data and explanations provided by the District support the use of an overall 80% 

actual emissions factor.

4. Enforceable

The emission reductions credited to the Offset Accounts from orphan shutdown 

sources are enforceable reductions at the time they are credited to the accounts 

because the shutdown sources no longer have a valid permit allowing them to operate, 

which means the source is no longer allowed to operate/emit those pollutants. If such 

a source attempted to restart its operations, it would be required to obtain a new 

permit from the District and provide new offsets. In the cases in which the orphan 

reductions were created by a source implementing additional emission controls, the 

operating permits contain practicably enforceable conditions to ensure the 

permanence and enforceability of the credited emission reductions. This ensures that 

the emissions will be permanently retired or reduced.

For each of the other types of credits listed in Rule 1315 (c)(3)(A), the credits are 

based on ERCs that have been generated pursuant to Rule 1309, which also requires 

that the emission reductions meet each of the federal integrity criteria, including the 

requirement to be enforceable emission reductions.

5. Federal Integrity Criteria Summary

In the paragraphs above EPA has evaluated Rule 1315 in regards to whether the 

emission reductions credited into and debited out of the Offset Accounts meet the 

federal integrity criteria. Based on this evaluation we have determined that the 

emission reductions are permanent and enforceable reductions in that the emissions 

are no longer legally allowed to be emitted; they are surplus to any other federal 

requirement to reduce these emissions; and they are quantifiable based on either 

actual emission data for reductions credited from ERCs or 80% of permitted 

emissions for orphan shutdown sources. Therefore the emission reductions quantified, 

credited and debited as offsets pursuant to Rule 1315 meet the federal integrity 

criteria as required by 40 CFR § 51.165(a)(3) (ii)(C)(1)(i).

B. Base Year Requirements

As discussed earlier in the evaluation criteria, 40 CFR 52.165(a)(3)(i)(C) provides:

 

5

 Table 5 of Staff Report, p 18. 
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Emissions reductions achieved by shutting down an existing emission unit or curtailing 

production or operating hours may be generally credited for offsets if . . . .(ii) [t]he 

shutdown or curtailment occurred after the last day of the base year for the SIP 

planning process. For purposes of this paragraph, a reviewing authority may choose to 

consider a prior shutdown or curtailment to have occurred after the last day of the base 

year if the projected emissions inventory used to develop the attainment demonstration 

explicitly includes the emissions from such previously shutdown or curtailed emission 

units.

See also 40 CFR Part 50, Appendix S, IV.

Rule 1315 is being submitted by the District to demonstrate equivalency with the Part D 

requirements for ozone and PM10 (and their precursor emissions). To evaluate Rule 

1315’s compliance with the base year requirement for using offsets from emissions units 

being shut down or curtailed, EPA has determined that the most appropriate attainment 

demonstrations to review are the District’s approved PM10 and 8-hour ozone Plans. 

Approval and Promulgation of [SIPs] for Air Quality Planning Purposes; California -

South Coast and Coachella, 70 FR 69081 (Nov. 14, 2005) (2003 Plan); Approval of Air 

Quality Implementation Plans; California; South Coast; Attainment Plan for 1997 8-hour 

Ozone Standards, EPA-R09-OAR-2011-0622 (Signed Dec. 15, 2011) (2007 Plan). The 

District’s PM10 Plan was adopted in 2003 and relies on a 1997 base year emission 

inventory. 2003 Plans, Chapter 3 & Appendix III. For ozone, the Plan was adopted in 

2007 and relies on a 2002 base year emission inventory. 2007 Plan, Chapter 3 & 

Appendix III.

The District provides a discussion in Appendix III of the 2007 plan regarding ―SIP Set 

Aside Accounts‖ which are special accounts to track growth from new and modified 

sources, among other things. Growth from new and modified sources is estimated by 

reviewing historic usage and generation of ERCs in the open market and credits and 

debits from the District’s NSR accounts. Table 2-10 shows the estimated annual 

emission increases from sources subject to NSR, based on ERC open market usage from 

2003-2005. For all pollutants other than VOC, more ERC’s were generated (supply) than 

used (demand). On average, the demand for VOC ERCs was 0.39 tpd higher than the 

supply. Assuming this trend holds through 2014, an additional 3.1 tpd of pre-2002 base 

year VOC ERCs from the open market will be needed to satisfy demand (0.39 tpd 

shortage for each of 8 years from 2006-2014). A similar exercise was performed for 

credits in the District’s NSR Account, as shown in Table 2-11. In this case, historic 

supply has been significantly higher than demand, therefore the District projects that no 

pre-2002 emission reductions from the District Accounts will be needed. 

Line 2 of this table shows the amount of pre-2002 ERC’s are likely to be needed based on 

historic ERC generation and usage. The historic ERC trend is that in any one year more 

emission reductions are credited as supply than are debited as demand. Attachment I of 

the District’s Staff Report shows that this trend remains constant for the years 2003-2008 

(latest available data). This trend is explained in part by the fact that the District collects 

(credits) almost all of the valid available emission reductions that are surplus to federal 
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AQMD Rule 1315

requirements, while they debit only the portion of credits given to exempt and priority 

reserve sources that would otherwise be required to provide federal offsets if not for 

Rules 1304 and 1309.1. Only this amount is tracked and debited, because this amount 

represents the quantity of federally required offsets not otherwise provided by the 

District’s NSR program as approved in 1996. Rule 1315 requires this amount to be 

debited annually from the District’s Offset Accounts, and for those accounts to maintain a 

positive balance to demonstrate equivalency with federal offset requirements for new and 

modified major sources. 

In accordance with the base year requirements specified in 40 CFR 51.165, the District 

estimated that 3.1 tons per day (tpd) of pre-2002 base year VOC emission reductions may 

be needed to satisfy offset demand. 2007 Plan Appendix III. For ozone precursors, the 

District added 27 and 2 tpd for VOC and NOx, respectively, as growth, which is much 

higher than the amounts projected from historic use and is a conservative and appropriate 

way to meet the requirements of 40 CFR 51.165.

6

 The 27 tpd includes the 3.1 tpd of pre2002 base year VOC emission reductions. While this is not the total amount of pre-2002 

base year emission reductions available as debits pursuant to Rule 1315, (74.23 and 30.29 

tpd of VOC and NOx, respectively), the District has demonstrated that adding 27 tpd of 

VOC and 2 tpd of NOx represents more than the highest amount of pre-2002 credits that 

are expected to be used as offsets prior to attainment of the ozone standard. 2007 Plan 

Appendix III, pgs 28-34. 

Likewise, for PM10, the District provides a discussion in Appendix III of the 2003 plan 

regarding ―SIP Set Aside Accounts.‖ Growth from new and modified sources is 

estimated by reviewing historic usage and generation of ERCs in the open market and 

credits and debits from the District’s NSR accounts. Table 2-11 shows the estimated 

annual emission increases from sources subject to NSR, based on ERC open market 

usage from 1997-2001. On average, the demand for PM10 ERCs was 0.03 tpd higher than 

the supply. Assuming this trend holds through 2014, an additional .23 tpd of pre-1997 

base year PM10 ERCs from the open market will be needed to satisfy demand (0.03 tpd 

shortage for each of 8 years from 2003-2010). A similar exercise was performed for 

credits in the District’s NSR Account, as shown in Table 2-13. In this case, historic 

supply has been significantly higher than demand, therefore the District projects that no 

PM10 pre-1997 emission reductions from the District Accounts will be needed. 

In accordance with the base year requirements specified in 40 CFR 51.165, the District 

estimated that 0.03 tpd of pre-1997 base year PM10 emission reductions may be needed to 

satisfy offset demand. 2003 Plan Appendix III. For PM10, the District added 3.1 tpd as 

growth.7 This amount includes the 0.23 tpd of pre-2002 base year PM10 emission 

reductions. While this is not the total amount of pre-1997 base year emission reductions 

 

6

See 2007 Plan Appendix III, pgs 24-34. For Table 2.8, the District provided EPA with the point and area source 

data used to generate the summary data. EPA used this data to determine the amount of emission due to growth at 

facilities subject to NSR offset requirements. 

7

See 2003 Plan Appendix III, pgs 25-35. For Table 2.8, the District provided EPA with the point and area source 

data used to generate the summary data. EPA used this data to determine the amount of emission due to growth at 

facilities subject to NSR offset requirements. 
February 9, 2012 Technical Support Document Page 13

AQMD Rule 1315

available as debits pursuant to Rule 1315 (3.94 tpd), the District has demonstrated that 

this amount represents the highest amount of pre-1997 credits that are expected to be 

used as offsets prior to attainment of the ozone standard. 2003 Plan Appendix III, pgs

25-35. 

This approach is consistent with EPA guidance that States must include pre-base year 

credits to the ―extent that the State expects that such credits will be used for offsets...‖. 

57 FR 13498 

Therefore, even if the District Offset Accounts rely on pre-base year emission reductions 

as offsets, the District’s Plans have adequately added pre-base year emissions explicitly 

into the appropriate projected planning inventories. For these reasons, EPA is proposing 

to approve Rule 1315.

C. Aggregate Offset Equivalency

Rule 1303 – Requirements, provides that certain specified sources are exempted from the 

requirement to provide offsets prior to the issue of a Permit to Construct. As discussed in 

Section II.D of this TSD, EPA approved the District’s NSR program, including Rule 

1303 into the SIP, but noted that because District Rules exempted some new and 

modified major sources from the requirement to obtain offsets, the District would 

implement an offset tracking system to demonstrate consistency with federal NSR offset 

requirements. Rule 1315 is the codification of that offset tracking system. Paragraph 

(c)(2) of Rule 1315 requires the District to track the amount of offsets new and modified 

major sources are exempted from providing if those offsets are not otherwise exempt 

from federal offset requirements. Thus the amount of annual emission increases for 

which offsets are not provided by the applicant (source), but which are otherwise required 

pursuant to the CAA, are tracked. Paragraph (d) of Rule 1315 requires the District to 

make an annual demonstration that the balance of all Offset Accounts is positive, which 

shows that the District credited at least as many emission reductions as are debited 

pursuant to Rule 1315. This annual Final Demonstration of Equivalency demonstrates 

that in the aggregate, (emission offsets provided by major stationary sources and the 

District) provide an equivalent number of offsets as are otherwise required by the CAA

for federal major sources and modifications.

D. SIP Relaxation

Under section 110(l) of the CAA, EPA may not approve any SIP revision that would 

interfere with attainment, reasonable further progress (RFP) or any other CAA 

requirement. For ozone, the District’s 2007 Plan’s attainment demonstration was 

reviewed. For PM10, the District’s 2003 PM10 Plans for both the Coachella Valley and the 

South Coast Air Basin were reviewed. We have determined that incorporation of Rule 

1315 into the SIP will not interfere with attainment or RFP because the rule provides a 

regulatory mechanism setting forth the internal offset accounting system that the District 

has been relying on. In addition, the District does not rely on the offsets in the District’s 

Offset Accounts for attainment or RFP in the District’s most recent attainment 
February 9, 2012 Technical Support Document Page 14

AQMD Rule 1315

demonstrations for ozone or PM10

V. Recommendation

Rule 1315 has been submitted by the District to demonstrate equivalency with the Part D, 

Section 173(a) requirements for ozone and PM10 (and their precursor emissions). Our evaluation 

of the federal integrity criteria in Section IV of this TSD demonstrates that Rule 1315 ensures all 

offsets debited from the Offset Accounts meet the requirements of 40 CFR § 51.165(a)(3) 

(ii)(C)(1)(i), that such offsets be permanent, surplus, quantifiable, and enforceable. Because Rule 

1315 provides an accurate method for tracking and quantifying emission reductions which meet 

all of the federal integrity criteria for offsets, EPA is satisfied that–—in the aggregate, Rule 1315 

demonstrates that the District is providing at least the same amount of credits otherwise required 

by the CAA for new and modified federal major sources. Rule 1315 provides an adequate 

administrative mechanism for verifying this demonstration on an ongoing basis. Rule 1315 also 

complies with the requirement for pre-base year shutdown credits to be explicitly added back in 

to the most recent applicable air quality plans. Therefore, we recommend full approval of Rule 

1315 into the South Coast portion of the California SIP.

VI. Attachments

1. Rule 1315 SIP submittal letter, dated March 2, 2011

2. Rule 1315, adopted February 4, 2011 by SCAQMD

3. Rule 1315 Staff report, dated January 7, 2011

4. Rule 1315, adopted February 4, 2011; revised for SIP submittal on February 7, 2012

5. EPA Analysis of Staff Report Table 5 Data

6. 2007AQMP - 2020 Stationary Baseline Emissions With Growth - Apx III (Table 2-8) 

Stationary Source Breakdowns 

7. 2007AQMP - 2020 Stationary Baseline Emissions With No Growh - Apx III (Table 2-8) 

Stationary Source Breakdowns 

8. 2003AQMP - 2010 Stationary Baseline Emissions With Growth - Apx III (Table 2-8) 

Stationary Source Breakdowns 

9. 2003AQMP - 2010 Stationary Baseline Emissions With No Growh - Apx III (Table 2-8) 

Stationary Source Breakdowns