SYNOPSIS:

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

Reporting, provides information on the effectiveness ofRegulation XIII -New Source

Review (NSR), in meeting state and federal NSR requirements. This report amends the

previous calculation methodology for compliance with state law requirements for emission

offsets, and presents data for October 1990 to July 1997 for state law compliance, and for

August 1996 to July 1997 for federal law compliance. AQMD’s non-RECLAIM NSR

program is shown to meet all state and federal NSR requirements for this reporting period.

COMMITTEE:

Stationary Source Committee, February 20, 1998, Reviewed

RECOMMENDED ACTION:

Receive and File.

Barry R. Wallerstein, D.Env.

Acting Executive Office

INTRODUCTION

Regulation XIII -New Source Review 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 tothe AQMD Governing Board on the effectiveness of Regulation XIII in meeting state and federal NSR

requirements.

The last annual report on the effectiveness ofRegulation XIII -NSR was submitted to the Board onFebruary 14, 1997 and covered the period August 1995 to July 1996. Historic information for the period

before 1995 may be found in the staff report submitted to the Board as part ofthe December 1995amendment of Regulation XIII.

O This report provides information from October 1990 to July 1997 for state law compliance and from August 1996 to July 1997 for federal law compliance. The state demonstration of equivalency covers the

period from October 1990 to July 1997 instead ofthe past 12 months only, because the previous

information is being revised based on an improved methodology that uses “actual” emissions to report

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needs of local business and air quality. While the non

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

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 of state and federal NSR

requirements. The MDs 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 ofLAER 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 iO 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 ofsources 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)(1) ofthe 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 i82(e)(l)].

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

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

least 1.5-to-i .. . .“ By referring to the offset requirements pursuant to this part, which includes the basicoffset requirement of Section i73(a)(1)(A) ofthe CAA, and by using the term “total emission

reductions” -- language which is similar to Section 173(a)(1)(A) --Section 1 82(e)(1) indicates that the

increased offset ratio requirements can be met on an aggregate basis. An aggregate compliance approach

for federal NSR is acceptable provided the information is substantiated by an emissions tracking system.

The AQMD’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 of BACT 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 C) located.http:/fwww.aqmd.gov/hb/980325a.html 2/28/2002
This report amends the calculation methodology for state law compliance. Based on the previous methodology, AQMD had used “permitted” emissions to report emissions subject to the “no net emission increase” requirement ofstate law instead of “actual” emission increases. The methodology using “permitted” emission levels has produced a deficit in the NSR equivalency program for NOx emissions. Since creditable emission reduction are based on actual emission decreases, the ARE staff has agreed with the AQMD staffthat the appropriate methodology to report emission increases for compliance with the “no net emission increase” requirement ofstate law is to use “actual” emissions. The revision ofthe methodology makes the AQMD NSR program fully compliant with the requirements ofstate law.

AQMI)’s Approach

BACT and offsetting emission increases are the primary requirements of federal and state NSR requirements. AQMD’s BACT standards are equivalent to, and in many cases are more stringent than, Q BACT as defmed 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 since they meet the intent of both state and federal law. Therefore, the estimates oftotal 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 defme 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.]

Table 1-1 presents the cumulative creditable emission reductions available to offset the emission (Z) 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, 1996 to July 31, 1997. Table 1-2 also presents the balance of creditable emission reductions available for future

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(tons/day) (tons/day ] (

y) 

Orphan shutdowns 1.5 0.2 0.0 f 0.2 0.8

r BACTDiscountofERCs 1.4 0.0 0.0 0.1 0.0

NSR Balance as of 102.4 22.7 18.7 31.7 40.6

August 1996 [ Balance of

Creditable Emissions

Reductions presented in Table

1-2, p 6, ofthe document entitled Effectiveness of

Regulation XIII -New Source

Review, report to the AQMD

Governing Board, February 14,

1997]

Total 105.3 22.9 18.7 32.0 41.4

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.

Qrphan Shutdowns

Orphan shutdowns are emission decreases from stationary sources that go out of business, permanentlycease emitting activities, and do not apply for ERCs. These emission decreases are retained by the

AQMD to fund the NSR program. The emissions shown in Table 1-1 represent data for the period

August 1996 to July 1997.

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 emissions reductions, since they are in

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

August 1996 to July 1997.

NSR Balances

This source of creditable emission reductions was generated by discounting negative NSR balances in

1990. 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

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Compared with Creditable Emission Reductions for

Federal NSR Compliance

(Auanst 1996 to July 1997)

Source Amount (tons/day) VOC - NOx SOx CO PM1O [ 1 (tons/day) (tons/day) (tons/day) (tons/day) (tons/day) [Community Bank 1 0.0 0.0 0.0 0.0 0.0 [Priority Reserve 1 0.0 0.0 1[ 0.0 0.0 0.0 Exempt Emissions 1 0.3 0.0 0.0 [ 0.0 0.0 (Rule 1304) I

Total Emission Increases 0.3 0.0 0.0 0.0 0.0

Creditable Emission 105.3 22.9 18.7 32.0 41.4 Reductions

(from Table 1-1)

Balance (as of 7/97) 105.0 22.9 18.7 32.0 41.4

Source of Emission Increases

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.

community Bank

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 PM1 0. This featare was replaced with a facility exemption for small business operators, effective February 1, 1996. The facility exemption provides an exemption from offsets for facilities which emission are less or equal to 4 tons per year.

Priority_Resery

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.

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(October 1990 to July 1997)

ISource Amount (tons/day) VOC NOx SOx CO PM1O I_________________________ (tons/day) j[ (tons/day) (tons/day) (tons/day) (tons/day)

Community Bank 32.6 11.4 0.0 0.6 0.0

Ipriority Reserve 1.0 1.4 0.2 0.5 0.0

Exempt Emissions(Rule 18.3 16.2 0.6 8.9 0.0

1304)

Total Emission Increases j 51.9 29.0 ] 0.8 10.0 0.0 1

Creditable Emission 113.3 35.8 19.7 40.4 41.4

Reductions

(from Table 1-3)

Balance 61.4 6.8 18.9 30.4 41.4

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 therevised 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 represents “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 ofstate law for the

period of October 1990 to July 1997. AQMD had previously presented

a shortfall in creditable NOx

emission reduction required to comply with state law requirements. However, based on the current

interpretation ofthe “no net emission increase” requirement and

a change in methodology that allows

calculation based on actual emissions instead of permitted emissions, the AQMD is now in compliancewith all NSR requirements of state law.

CONCLUSION

& RECOMMENDATION

AQMD’s NSR program meets all federal and state NSR requirements. The previously presented deficit

for state laws compliance has been resolved based on

a change in calculation methodology. However,

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