JUARI) MEETING DATE: April 9, 1999 AGENDA NO. 22 Page 1 of 8

BOARD MEETING DATE: April 9, 1999 AGENDA NO.22

PROPOSAL:

Report on the Effectiveness of Regulation XIII -New Source Review

SYNOPSIS:

This report, submitted to the Board pursuant to subdivision (b) of Rule 1310 -Analysis and

Reporting, provides information on the effectiveness of Regulation XIII -New Source

Review (NSR), in meeting state and federal NSR requirements. This report presents data for

August 1997 to July 1998 for state and federal law compliance.

COMMITTEE:

Stationary Source, March 19, 1999, Reviewed

RECOMMENDED ACTION:

Receive and file.

Barry R. Wallerstein, D.Env.

Executive Officer

INTRODUCTION

Regulation XIII - New Source Review (NSR) governs the permitting of new, modified, and relocated

sources within AQMD, provided such sources are not subject to Regulation XX -Regional Clean Air Incentives Market (RECLAIM). Rule 1310 -Analysis and Reporting, requires the submittal of an annual

report to the AQMD Governing Board on the effectiveness of Regulation XIII in meeting state and federal NSR requirements.

The last annual report on the effectiveness of Regulation XIII — NSR, was submitted to the Board on March 13, 1998 and covered the period from October 1990 to July 1997 for state compliance and the period of August 1996 to July 1997 for federal compliance. This report provides information from

August 1997 to July 1998 for both state and federal compliance with applicable NSR requirements.

BACKGROUND

AQMD’s NSR program has evolved since 1976, in response to state and federal legal requirements, and the changing needs of the local economy and the environment. The latest adjustment to the NSR

program was made in December 1995, when Regulation XIII was amended by the Board to balance the needs of local business and air quality. While the non-RECLAIM NSR program is non-traditional and

flexible, it must comply with the governing principles of NSR contained in the federal CAA and the

http ://www. aqmd. gov/hb/990422a.html 3/22/2002
BOARD MEETING DATE: April 9, 1999 AGENDA NO.22 l’age z o

California Health and Safety Code. At a minimum, the AQMD’s NSR program must achieve equivalent

emission reductions to what would have been achieved by the implementation ofstate and federal NSR

requirements. The AQMD’s program is designed to meet the state and federal statutory requirements for

NSR and to ensure that the construction and operation of new or modified sources do not interfere with

progress towards attainment ofthe NAAQS. Presented below are the specific requirements of federal

and state law.

Federal Law

Federal law requires the use of Lowest Achievable Emissions Rate (LAER) and offsets. Effective

November 15, 1992, Section 182(e)(i) and (2) ofthe federal CAA required a 1.5-to-i or a 1.2-to-i

external offset ratio and a 1.3-to-I internal offset ratio for VOC or NOx sources that emit or have the

potential to emit 10 tons or more per year. [Section 182(e) ofthe CAA specifically defines a ‘major

source” and a “major stationary source” as follows “... any stationary source or group of sources located

within a contiguous area and under common control that emits or have the potential to emit, at least 10

tons per year of volatile organic compounds.” Section 182 (f)(l) of the CAA also states that “the

provisions required ... major stationary sources of volatile organic compounds shall also apply to major

stationary sources ... of oxides of nitrogen.”] The South Coast Air Basin (Basin) is the only extreme

ozone nonattainment area in the nation. An extreme ozone nonattainment area may qualify for the 1.2-

to-i offset ratio if it requires all existing major sources to use federally defined BACT [CAA Section

I 82(e)(1)] which is a federal requirement for ozone attainment areas.

Section 182(e) states that “for purposes of satisfying the offset requirements pursuant to this part, the

ratio oftotal emission reductions of VOCs to all increased emissions of such air pollutant shall be at

least 1.5-to-i ... .“ Because the statute uses the term “total emission reductions” the offset ratio

requirements of Section 1 82(e)( 1) can be met on an aggregate basis, provided the information is

substantiated by an emissions tracking systent The AQIvID’s NSR program meets the federal offset

requirements in an aggregate form. All the information provided in this report is substantiated by data

retrieved from the AQMD’s NSR Tracking System.

State Law

State law requires the use ofBACT for new and modified sources (Health and Safety Code Sections

40440(b)(1) and 40920.5) and “no net increase in emissions” from certain permitted new or modified

sources based on their potential to emit and the nonattainment classification ofthe area in which they are

located.

Based on their classification, the Basin and Southeast Desert Air Basin (SEDAB) must comply with the

requirements for extreme and severe non-attainment areas for ozone precursors (i.e., VOC and NOx).

Both the Basin and the SEDAB [SEDAB was recently changed to the Riverside County portion ofthe

Salton Sea Air Basin (SSAB) and the non-Palo Verde Valley, Riverside County portion ofthe Mojave

Desert Air Basin.] must comply with the requirements for serious nonattainment areas for PM1O and its

precursors. For CO, the Basin and the SEDAB must comply with the requirements for serious

nonattainment areas and moderate nonattainment areas, respectively. The AQMD demonstrates

compliance with the “no net emission increase” requirements ofstate law for the period from August

1997 to July 1998 by demonstrating compliance with the requirements for extreme ozone non

attainment areas (VOC and NOx) and with the requirements for serious nonattainment areas for PM 10,

SOx and CO.

State Law Methodology

http ://www.aqmd.gov/hb/990422a.html 3/22/2002
iOARD MEETING DATE: April 9, 1999 AGENDA NO.22 Page 3 of 8

The previous report to the Board, submitted March 13, 1998, amended the calculation methodology for

state law compliance. Prior to that change, the AQMD utilized “permitted” emissions to report emissions

subject to the “no net emission increas&’ requirement of state law. The AQMD now uses “actual”

emission levels to represent emission increases subject to state NSR requirements. The methodology

using “permitted” emission levels had produced a deficit in the NSR equivalency program for nitrogen

oxides (NOx) emissions in the past. Since creditable emission reduction are based on actual emission

decreases, ARE staff agreed with the AQMD staffthat reporting emission increases with the use of

“actual” emissions is an acceptable methodology for demonstrating compliance with the “no net

emission increase” requirement of state law. The revision of the methodology resulted in a

demonstration of equivalency that fully meets the requirements of state law.

The AQMD presently uses permitted emissions to estimate “actual” emissions increases with a ratio of

0.80 to calculate “actual” emissions from permitted emissions. This ratio was derived based on analysis

conducted by AQMD staff. ARE staff have reviewed the analysis, and agreed on the methodology.

Further details ofthis analysis and review process may be found in the attachment.

AQMD Approach

BACT and offsetting emission increases are the primary requirements offederal and state NSR

requirements. AQMD’s BACT standards are equivalent to, and in many cases are more stringent than,

LAER and BACT, respectively, as defined by federal and state laws. Therefore, the principal measure to

determine equivalency with state and federal NSR laws is the requirement to offset emission increases.

This report demonstrates compliance with federal and state NSR requirements by an aggregate

demonstration of equivalency for federal and state offset requirements.

FEDERAL OFFSET REQUIREMENTS

The data and information presented in this report is limited to the supply and demand for creditable

emission reductions and offsets for sources for which the AQMD has taken responsibility to provide

offsets (i.e., previous Community Bank, Priority Reserve and emission increases exempted from offsets

pursuant to Rule 1304). Emission increases mitigated by the applicant through the purchase of external

offset or by internal mitigation are not included here. Therefore, the estimates of total supply and

demand of creditable emission reductions and offsets, respectively, refers to the total supply and demand

for sources for which the AQMD is directly responsible to meet the offset requirements.

The analysis performed to generate the data presented in this report was based on the emission

thresholds that define a “major polluting facility” in the Basin. [The thresholds that define major

polluting facilities in the Basin are more stringent than the thresholds that define major polluting

facilities in the SEDAB. Therefore, the analysis is conservative since it may over estimate the emission

increases subject to federal offset requirements.J

Table I -1 presents the cumulative creditable emission reductions available to offset the emission

increases subject to federal NSR. Table 1-2 presents the emission increases for which AQMD is

accountable to comply with federal NSR requirements for the period from August 1, 1997 to July 31,

1998. Table 1-2 also presents the balance of creditable emission reductions available for future

compliance with federal offset requirements.

Table 1-1

Creditable Emission Reductions for Federal NSR Compliance

http://www.aqmd.gov/hb/990422a.html 3/22/2002
BOARD MEETING DATE: April 9, 1999 AGENDA NO.22 Page 4 ol

(August 1997 -July 1998)

Source Ivoc NOx SOX Co PM1O

(tons/day) (tons/day) (tons/day) (tons/day) (tons/day)

Orphan shutdowns 0.0 0.0 0.0 0.0 0.0

BACT Discount of ERCs 1.6 0.0 0.0 0.0 0.6

NSRBalance as of 105.3 22.9 18.7 32.0 41.4

August 1997 [Balance of

Creditable Emissions

Reductions presented in Table

1-2, pg. 6, ofthe document

entitled Effectiveness of

Regulation XIII — New Source

Review, report to the AQMD

governing Board, March 13,

1998.1

Total 106.9jJ 22.91j 18.711 32j) 42.OI

Source of Creditable Emission Reductions

The sources of creditable emission reductions used by AQMD to demonstrate compliance with federal

and state NSR requirements are described below.

Orphan_Shutdowns

Orphan shutdowns are emission decreases from stationary sources that go out of business, permanently

cease emitting activities, and do not apply for ERCs. These emission decreases are retained by the

AQMD to fund the NSR program. No orphan shutdowns were identified during this reporting period.

BACT Discount of ERCs

Emission reductions from shutdowns for which ERCs are issued are discounted to BACT levels. The

amount discounted is credited to the NSR account as a creditable emission reduction, since they are in

excess of the federal NSR requirements. The emissions shown in Table 1-1 represent data for the period

August 1997 to July 1998.

NSR Balances

Discounting negative NSR balances in 1990 generated this source of creditable emission reductions.

Negative NSR balances represented a facility’s emission reduction credit balance. Negative NSR

balances were generated by emission reductions (which were the result of equipment or facility

modifications or shutdowns) that were credited to a facility’s NSR account and not issued as a

certificate. As part of the 1990 amendments to Regulation XIII, the AQMD reduced these credit

balances by 80 percent to generate emission reductions to fund the Community Bank, Priority Reserve

and Rule 1304 exemptions.

The NSR balance reported in Table 1-1 represent the creditable emissions reductions balance as of

httn://wwwacjmd ov/hb/99O422a.html 3/22/2002
OARD MEETING DATE: April 9, 1999 AGENDA NO.22 Page 5 of 8

August 1997 as calculated in the previous annual NSR report of March 1998.

Table 1-2

Emission Increases for Which AQMD is Accountable [Based on a 1.5 to 1 Offset Factor.] Compared

with

Creditable Emission Reductions for Federal NSR Compliance

(August 1997 to July 1998)

Source Amount (tons/day) I voc NOx SOx CO PMIO

(tons/day) ][ (tons/day) (tons/day) (tons/day) (tons/day)

Community Bank 0.Ojj o.oil 0.JI 0.Ojj 0.0

Priority Reserve o.olr 0.011 0.011 0.011 0.0

Exempt Emissions 0.8 0.0 0.0 0.0 0.0

(Rule 1304)

Total Emission Increases 0.8 0.0 0.0 0.0 0.0

Creditable Emission 106.9 22.9 18.7 32.0 42.0

Reductions

(from Table 1-1)

Balance l06.lj 18.711 32.011 42.0

Source of Creditable Emission Reductions

AQMD’s non-traditional NSR program provides an exception from the offset requirements of

Regulation XIII for new or modified sources that meet the requirements to obtain exemptions under

Rule 1304. However, the federal CAA does not recognize such exemptions, and requires the AQMD to

account for these emission increases with the creditable emission reductions discussed earlier in this

report.

Communiiynk

Until February 1996 no offsets were required for projects whose emission increases, for that project,

were below a specified threshold of 30 lb/day VOC, 40 lb/day NOx, 60 lb/day SOx, 220 lb/day CO, and

30 lb/day PM1O. This feature was replaced with a facility exemption for small emission sources

effective February 1, 1996. The facility exemption provides an exemption from offsets for facilities

emitting less than or equal to 4 tons per year.

Prjoijt{eserve

No offsets are required for essential public service projects that increase emissions from new and

modified sources. Essential public services are defined in Rule 1302 and include landfills, sewage

treatment plants and similar operations.

Other Exernpilpns

Several offset exemptions are provided in Rule 1304 in keeping with AQMD’s policy for fair and

equitable treatment of businesses. While a complete explanation may be found in earlier staff reports for

Regulation XIII revisions, most ofthese exemptions are either beneficial to the environment or driven

http ://www.aqmd.gov/hb/990422a.html m/7 oft)
BOARD MEETING DATE: April 9, 1999 AGENDA NO.22 Page 601

by severe economic needs.

Compliance with Federal NSR Requirements

As presented in Table 1-2, the AQMD’s NSR program meets the offset requirements of federal law.

Since the AQMD’s BACT standards are equivalent to federally-defined LAER and the program contains

and implements all the federal NSR requirements for major sources (Rule 1303), the AQMD’s program

is hereby deemed equivalent to and in compliance with all federal NSR requirements.

STATE “NO NET EMISSION INCREASE” REQUIREMENTS

The analysis presented here is based on the fact that the “no net emission increase” requirement for

extreme nonattainment pollutants is applicable only to VOC and NOx. The “no net emission increase”

requirements for serious non-attainment pollutants are applicable to PM 10, SOx and CO.

Table 1-3 presents the cumulative creditable emission reductions available for compliance with the

state’s “no net emission increase” requirement for the period from August 1, 1997 to July 31, 1998.

Table 1-4 presents the cumulative amount of emission increases subject to the state’s “no net emission

increase” requirements for the same period for sources for which the AQMD was responsible to meet

the state’s offset requirement. Explanation for the source categories may be found earlier under the

heading “Federal offset Requirements.”

Table 1-3

Creditable Emission Reductions for State NSR Compliance

(August 1997 to July 1998)

[Source Amount (tons/day) IVOC IINOx }lSOx I1CO 11PM 10

II(tons/day) ](tons/day) II(tons/day) II(tons/day) 1l(tons/day)

[orphan Shutdowns 0.011 0.011 0.011 0.011 0.0

BACT Discount of ERCs 1.611 0.011 o.oj 0.011 0.6

Balance[Creditable 61.4 6.8 18.9 30.4 41.4

Emissions Reductions

balance presented in Table 1 -

4, pg. 10, of the document

entitled Report on

Effectiveness of Regulation

XIII — New Source Review,

March 13, 1998.]

[Total 63.011 6.811 18.911 30.4 IL 42.0]

Table 1-4

Emission Increases for Which AQMD is Accountable Compared to Creditable Emission Reductions for

State NSR Compliance [All new and modified VOC and NO x sources (regardless oftheir potential to

emit), and all new and modified SO x, CO and PM 10 sources that emit, or have the potential to emit 15

tons or more per year.]

(August 1997 to July 1998)

hffn://wwwaomckov/hh/99O422ahtml 3/22/2002
3OARD MEETING DATE: April 9, 1999 AGENDA NO.22 Page 7 of 8

Source Amount (tons/day) Ilvoc IINOx ff50 x fö jfPMlO

I___________________________ II(tons/day) Iktonslday) Iktons/day) If (tons/day) s/day)

fcommuni Bank 0.3]f 0.211 0.011 0.011 0.0

Priority Reserve 0.211 0.2f( 0.011 o.o[ o.oj

Exempt Emissions(Rule 9.0 1.5 0.0 1.3 0.0

1304)

Total Emission Increases 9.5 1.91 0.0 1.3 0.0

Creditable Emission 63.0 6.8 18.9 30.4 42.0

Reductions

(from Table 1-3)

Balance 4.9jj 18.9jJ 29.1 42.0

Revision of Calculation Methodology

Table 1-4, presents emission increases subject to the State’s “no net emission increase” requirement

compared to creditable emission reductions. The emission increases reported above are based on the

revised methodology, which calls for the use of “actual” emissions. AQMD calculates “actual” emission

as a percentage of “permitted” emissions. Emission increases using “permitted” emissions were

extracted from the NSR Tracking system and reduced by 20 percent to represent “actual” emissions.

Based on previous analysis, AQMD believes that estimating “actual” emissions as 80 percent of

“permitted” emission yields a conservative estimate. Therefore, AQMD staff is confident that the

AQMD’s NSR program fully meets the NSR requirements of State law.

Compliance with State Law Requirements

As presented in Table 1-4, the AQMD’s NSR program meets the offset requirements of state law for the

period of August 1997 to July 1998.

CONCLUSION & RECOMMENDATION

AQMD’s NSR program meets all federal and state NSR requirements. Available NOx creditable

emission reductions for compliance with the State offset requirements are low and may represent a

problem in the future. Therefore, AQMD staff propose to analyze the program in detail to find solutions

to meet the State NSR requirements.

Attachments

1. Letter dated February 12, 1998 to Mr. Ray Menebroker, CARB from Dr. Anupom Ganguli,

AQMD

2. Letter dated June 12, 1998 to Mr. Ray Menebroker, CARB from Dr. Anuporn Ganguli, AQMD

3. Letter dated July 28, 1998 to Mr. Ray Menebroker, CARB from Dr. Anupom Ganguli, AQMD 4. Letter dated October 30, 1998 to Dr. Anupom Ganguli from Mr. Peter Venturini, CARB

I/I

AQMDf

http ://www.aqmd.gov/hb/990422a.html
BOARD MEETING DATE: April 9, 1999 AGENDA NO.22 Page 8 ot

Home

Page

Previous Page

Last Update: 04/06/99

URL: http://www. aqmd gov/hb/990422a html

httr,:Ilwww.aamd.ov/hb/99O422a.htm1 3/22/2002