I3UAKLJIV11iIiA11’4ULniir,:iviarcuii,ioH11N1J1-i.P’iJ.L.) 0___BOARDMEETINGDATEMarch13,1998AGENDANO25PIa:PROPOSAL:ReportonEffectivenessofRegulationXIII-NewSourceReviewSYNOPSIS:Thisreport,submittedtotheBoardpursuanttosubdivision(b)ofRule1310-AnalysisandReporting,providesinformationontheeffectivenessofRegulationXIII-NewSourceReview(NSR),inmeetingstateandfederalNSRrequirements.Thisreportamendsthepreviouscalculationmethodologyforcompliancewithstatelawrequirementsforemissionoffsets,andpresentsdataforOctober1990toJuly1997forstatelawcompliance,andforAugust1996toJuly1997forfederallawcompliance.AQMD’snon-RECLAIMNSRprogramisshowntomeetallstateandfederalNSRrequirementsforthisreportingperiod.COMMITTEE:StationarySourceCommittee,February20,1998,ReviewedRECOMMENDEDACTION:ReceiveandFile.BarryR.Wallerstein,D.Env.ActingExecutiveOfficeINTRODUCTIONRegulationXIII-NewSourceReviewgovernsthepermittingofnew,modified,andrelocatedsourceswithinAQMD,providedsuchsourcesarenotsubjecttoRegulationXX-RegionalCleanAirIncentivesMarket(RECLAIM).Rule1310-AnalysisandReporting,requiresthesubmittalofanannualreporttotheAQMDGoverningBoardontheeffectivenessofRegulationXIIIinmeetingstateandfederalNSRrequirements.ThelastannualreportontheeffectivenessofRegulationXIII-NSRwassubmittedtotheBoardonFebruary14,1997andcoveredtheperiodAugust1995toJuly1996.Historicinformationfortheperiodbefore1995maybefoundinthestaffreportsubmittedtotheBoardaspartoftheDecember1995amendmentofRegulationXIII. OThisreportprovidesinformationfromOctober1990toJuly1997forstatelawcomplianceandfromAugust1996toJuly1997forfederallawcompliance.ThestatedemonstrationofequivalencycoverstheperiodfromOctober1990toJuly1997insteadofthepast12monthsonly,becausethepreviousinformationisbeingrevisedbasedonanimprovedmethodologythatuses“actual”emissionstoreporthttp://www.aqmd.gov/hb/980325a.html2/28/2002BOARD MEbIINU DAIb: March 13, 199 AUbNL)A NO.2)

rage or emission increases subject
to the state’s “no net emission increase” requirement. The previous methodology
for calculating emission increases for state law compliance was based on “permitted” emission levels, and showed

a small imbalance regarding emissions
of Nitrogen Oxides (NOx). BACKGROIThID 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 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
of the NAAQS. Presented below are the specific requirements

of federal and state law. Federal Law Federal law requires the use of LAER and offsets. Effective November
15, 1992, Section 182(e)(i) and (2) of the 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) of the 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)(1) 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 i82(e)(l)]. Section 182(e) states that “for purposes of satisfying the offset requirements pursuant

to this part, the ratio of total emission reductions
of VOCs to all increased emissions
of such air pollutant shall be at least 1.5-to-i....“ By referring

to the offset requirements pursuant
to this part, which includes the basic offset requirement

of Section i73(a)(1)(A)

of the 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

of the area in which they are C) located. http:/fwww.aqmd.gov/hb/980325a.html

2/28/2002BOARD MEETING DATE: March 13, 1998 AGENDA NO.25

Page

3 of 8 Based on their classification,
the Basin and Southeast Desert Air Basin (SEDAB) must comply with the Q requirements
for extreme and severe nonattainment areas for ozone precursors (i.e., VOC and NOx). Both the Basin and the SEDAB must comply with the requirements
for serious nonattainment areas for PM1
0 and its precursor (i.e., SOx). 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

of state law for the period from October 1990 to July 1997 by demonstrating compliance with the requirements
for extreme nonattainment areas for VOC and NOx and with the requirements
for serious nonattainment areas for PM1O, SOx, and CO. 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

of state 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 staff that the appropriate methodology

to report emission increases for compliance with the “no net emission increase” requirement

of state law is to use “actual” emissions. The revision of the methodology makes the AQMD NSR program fully compliant with the requirements of state 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 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 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 http://www.aqmd.govfhb/9803 25a.html

2/7 R17flfl7

## BOARD MEETING DATE: March 13, 1998 AGENDA NO.25

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4 

## ot c compliance with federal offset requirements. Table 1-1 Creditable Emission Reductions For Federal NSR Compliance



# 0 (August 1996

- 

## July 1997) 

# [

Source
VOC NOx SOX
CO PM1O (tons/day) (tons/day



# ]

(tons/day) (tons/day) (tons/day 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, of the 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, permanently cease 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 of the 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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2/28/2002.BOARD MEETING DATE: March 13, 1998 AGENDA NO.25

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5 of 8 modifications

or shutdowns) that were credited
to a facility’s NSR account and not issued as a Q 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. Table 1-1 shows the balances
as of August 1996 as calculated

in the previous annual NSR report of February 1997. Table 1-2 Emission Increases for Which AQIvED

is Accountable

[ Based on a 1.5 to

1 Offset Factorj 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. http ://www.aqmd.gov/hb/980325a.html

## BOARD MEETING DATE: March 13, 1998 AGENDA NO.25

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I 

## ot Table 1-4 Emission Increases for Which AQMD

is Accountable



# C) Compared

to Creditable Emission Reductions For State NSR Compliance [All new and modified VOC and N o x sources (regardless
of their potential to emit), and all new and modified SO X, CO and PM1O sources that emit, or have the potential

to emit 15 tons or more per year.] (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 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 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

of state 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

of the “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 compliance with 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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2/28/2002L3UAKL) Mbb’flNG DATE: March 13, 1998 AGENDA NO.25

Page

8 of 8 the 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 proposed

to analyze the NSR program
in detail to find solutions

to resolve potential shortfalls

in creditable NOx emission reductions inthe future. /1/ ,QMD Pgc Previous Page 41 Last Update: 03/06/98 URL: htp://www. aqmcigov/hb/980325a.html http://www.aqmd.gov/hb/980325a.html

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