(Adopted September 8, 2006) 

1315 - 1 

PROPOSED RULE 1315 – FEDERAL NEW SOURCE REVIEW TRACKING 

SYSTEM 

(a) Purpose 

The purpose of this rule is to specify procedures to be followed by the Executive 

Officer to make annual demonstrations of equivalency to verify that specific 

provisions in the District’s New Source Review (NSR) program related to sources 

that are either exempt from offsets or which obtain their offsets from the District’s 

offset accounts meet in aggregate the federal nonattainment NSR offset 

requirements. The procedures specified in this rule are used by the Executive 

Officer to demonstrate that the sources which are subject to the federal NSR 

emission offset requirements and which obtain emission credits through 

allocations from District Rule 1309.1 – Priority Reserve or Rule 1309.2 – Offset 

Budget or which utilize the emission offset exemptions contained in Rule 1304 – 

Exemptions are fully offset by valid emission credits. 

(b) Definitions

(1) OFFSET RATIO means the ratio of the quantity of offset credits provided 

(in pounds per day) to offset a specific quantity of increase in potential 

emissions (in pounds per day).

(2) ORPHAN REDUCTION means any reduction in actual emissions from a 

permitted source within AQMD resulting from a physical change to the 

source and/or a change to the method of operation of the source provided 

the change is reflected in a revised permit for the source and 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.

(3) ORPHAN SHUTDOWN means any reduction in actual emissions from a 

permitted source within AQMD resulting from removal of the source from 

service and inactivation of the permit without subsequent reinstatement of 

such permit 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.
Proposed Rule 1315 (Cont.) Adopted September 8, 2006 

1315 - 2 

(b)(c) Offset Accounts for Federal NSR Equivalency

(1) District Offset Accounts 

The Executive Officer shall maintain a separate District offset account for 

each federal nonattainment air contaminant. The District offset accounts 

are established with valid credits effective October 1, 1990 for the air 

contaminants and with the initial account balances as listed in Table A. 

Any portions of the initial account balances identified in Table A 

remaining in the District offset accounts at the end of calendar year 2005 

shall be removed from the District offset accounts by the Executive 

Officer and shall not be used for purposes of demonstrating equivalency 

between federal NSR offset requirements and the District’s NSR program. 

Additional District offset accounts are to be established by the Executive 

Officer in the event that additional federal nonattainment air contaminants 

or their precursors become subject to federal nonattainment NSR offset 

requirements. If the United States Environmental Protection Agency 

(EPA) changes the District’s attainment designation from nonattainment to 

attainment for a specific air contaminant the Executive Officer may 

discontinue tracking and reporting the associated District offset account 

for that air contaminant. The District’s NSR program shall be considered 

equivalent to federal nonattainment NSR offset requirements for an air 

contaminant so long as the procedures specified in this rule are followed 

and the balance in the District offset account for that contaminant remains 

positive. 

TABLE A 

Initial District Offset Account Balances 

Air Contaminant Initial Account Balance 

(tons per day) 

 Volatile Organic Compounds (VOC) 38.46 

 Nitrogen Oxides (NOx) 23.92 

 Sulfur Oxides (SOx) 8.04 

 Carbon Monoxide (CO) 8.45 

 Fine Particulate Matter (PM10) 2.67 

(2) Tracking of Offset Account Debits for Federal NSR Equivalency

The Executive Officer shall track and debit from the District offset 

accounts the following types of offset allocations or exemptions provided 
Proposed Rule 1315 (Cont.) Adopted September 8, 2006 

1315 - 3 

from the District offset accounts for sources located at major polluting 

facilities and which are not exempt from the offset requirements of federal 

nonattainment NSR: 

(A) Emission offsets from the Priority Reserve pursuant to Rule 1309.1 

– Priority Reserve; 

(B) Emission offsets from the Offset Budget pursuant to Rule 1309.2 – 

Offset Budget; and 

(C) Exemptions from the offset requirements of Rule 1303 – 

Requirements pursuant to Rule 1304 – Exemptions. 

The applicable offset ratios for offsets tracked by the Executive Officer 

pursuant to this paragraph is 1.2-to-1.0 for extreme nonattainment air 

contaminants and their precursors and is 1.0-to-1.0 for all other 

nonattainment air contaminants. 

(3) Tracking of Offset Account Credits for Federal NSR Equivalency

(A) The Executive Officer shall track and credit the following types of 

emission reductions to the District offset accounts: 

(i) Orphan shutdowns; 

(ii) Orphan reductions; 

(iii) ERCs provided as emission offsets for sources located at 

minor facilities; 

(iv) The difference between the quantity of ERCs provided for 

a source located at a major polluting facility at a 1.2-to-1.0 

offset ratio pursuant to Rule 1303(b)(2)(A) and the quantity 

of ERCs required to offset the emission increases at a ratio 

of 1.0-to-1.0 for all non-attainment air contaminants except 

extreme nonattainment air contaminants and their 

precursors. 

(v) The amount of emission reductions associated with a

facility’s NSR balance, Community Bank and Priority

Reserve allocations, and offset exemptions which is

subtracted from the emission reductions quantified pursuant 

to Rule 1306(c) as part of the Executive Officer’s 

evaluation of an ERC banking application; and 

(vi) The portion of all emission reductions quantified pursuant 

to Rule 1306(c) as part of the Executive Officer’s 

evaluation of an ERC banking application which is 
Proposed Rule 1315 (Cont.) Adopted September 8, 2006 

1315 - 4 

subtracted from the emission credit prior to issuance of the 

banked ERC pursuant to Rule 1309(b)(4)(E). This clause 

applies only in cases where the Executive Officer 

demonstrates and EPA concurs that the subtracted amount 

exceeds the discount that would be required by approved 

SIP rules and rules scheduled to be approved by the District 

in the following year’s rule cycle. 

(B) The Executive Officer shall deposit emission reductions into the 

District offset accounts according to the following procedures: 

(i) From orphan sources tracked pursuant to 

clausessubparagraphs (cb)(3)(A)(i) orand (cb)(3)(A)(ii) at 

eighty percent of the total or change in the source’s 

permitted emission levels, respectively; and 

(ii) From ERCs tracked pursuant to clausessubparagraphs

(cb)(3)(A)(iii), (cb)(3)(A)(iv), (cb)(3)(A)(v), and 

(cb)(3)(A)(vi). 

(C) The Executive Officer may choose not to track all potential sources 

of credits in each reporting period if the Executive Officer 

determines that sufficient credits remain in the District offset 

accounts to demonstrate equivalency in each reporting period. 

(4) Surplus at the Time of Use 

All credits deposited into the District offset accounts pursuant to 

clausessubparagraph (cb)(3)(A)(i) and (c)(3)(A)(ii) excluding clause 

(b)(3)(A)(vi) shall be discounted by the Executive Officer to ensure that 

they remain surplus at the time of use. Such discounting shall be 

performed annually and shall be based on the percentage reduction in 

overall permitted emissions projected to be achieved as a result of 

implementation of control requirements that become effective during the 

year for each specific pollutant within the District. 

(c)(d) Federal NSR Equivalency Determinations 

(1) Reporting Periods 

The Executive Officer shall aggregate tracked offsets provided from the 

District offset accounts into the following reporting periods for purposes 

of making periodic determinations of equivalency: 

(A) October 1, 1990 through July 31, 1995; 
Proposed Rule 1315 (Cont.) Adopted September 8, 2006 

1315 - 5 

(B) Each of the consecutive twelve-month periods commencing with 

August 1995 through July 1996 and concluding with August 2003 

through July 2004; 

(C) August 2004 through December 2005; and 

(D) Each calendar year commencing with 2006. 

(2) Preliminary Determinations of Equivalency 

Commencing with the August 2004 through December 2005 reporting 

period, the Executive Officer shall, no later than twelve months after the 

completion of the reporting period, complete a Preliminary Determination 

of Equivalency (PDE) with federal nonattainment NSR offset 

requirements. The Executive Officer shall report the PDE to the District’s 

Governing Board and EPA no later than the second regularly-scheduled 

monthly Governing Board meeting after the completion deadline for the 

PDE. The PDE is a conservative assessment of available balances of 

credits without accounting for orphan and other credits which become 

available during the reporting period. As a result, each PDE shall include 

the debit accounting elements identified in paragraph (cb)(2) and the 

running balances in the District offset accounts at the beginning and at the 

end of the subject reporting period. 

(3) Final Determinations of Equivalency 

Commencing with the August 2004 through December 2005 reporting 

period, the Executive Officer shall complete a Final Determination of 

Equivalency (FDE) with federal nonattainment NSR offset requirements 

for any account(s) for which the PDE did not demonstrate equivalence. 

The FDE for any such account(s) shall be completed no later than eighteen 

months after the completion of the subject reporting period. The 

Executive Officer shall report the FDE to the District’s Governing Board 

and EPA no later than the second regularly-scheduled monthly Governing 

Board meeting after the completion deadline for the FDE for any 

account(s) for which the PDE did not demonstrate equivalence. Each FDE 

shall include both the debit and the credit accounting elements identified 

in paragraphs (cb)(2) and (cb)(3), respectively, and the running balances in 

the District offset accounts at the beginning and at the end of the subject 

reporting period. The Executive Officer shall report the credit accounting 

elements identified in paragraph (cb)(3) for any account(s) for which the 
Proposed Rule 1315 (Cont.) Adopted September 8, 2006 

1315 - 6 

PDE did demonstrate equivalence either with the FDE for the same 

reporting period or with the PDE for the subsequent reporting period. 

(4) Early FDE Subsuming PDE 

In lieu of preparing both a PDE and an FDE for a single reporting period, 

the Executive Officer may opt to include the PDE in the FDE for the same 

reporting period. Such FDEs are subject to the same completion and 

reporting deadlines as are the PDEs which they subsume. 

(d)(e) Projections of the District Offset Account Balances 

Each PDE and each FDE report the Executive Officer prepares and presents to the 

Governing Board and EPA shall also include projections of the District offset 

account balances at the end of each of the two subsequent reporting periods. The 

Executive Officer shall make the projections of the District offset account 

balances based upon the average of the total annual debits and the average of the 

total annual credits for the five reporting periods most recently included in a PDE 

or an FDE. Although these projections are to be reported with the results of the 

PDEs and FDEs, they are separate from the determinations of equivalency and do 

not constitute an element of the determinations of equivalency. 

(e)(f) Backstop Provisions 

(1) Funding of the Priority Reserve 

The Executive Officer shall discontinue funding the Priority Reserve for 

any air contaminant which the most recent FDE has demonstrated does not 

have a positive balance in its District offset account no later than the 

completion deadline for the FDE specified in paragraph (dc)(3). If the 

most recent projections of the District offset account balances prepared 

pursuant to subdivision (ed) in conjunction with a PDE or an FDE predict 

a shortfall for any air contaminant, the Executive Officer shall discontinue 

funding the Priority Reserve for that contaminant during the year which 

the shortfall is projected to exist. The Executive Officer may resume 

funding the Priority Reserve according to the following schedule: 

(A) In cases where the Executive Officer has discontinued funding the 

Priority Reserve due to an actual account shortfall demonstrated 

pursuant to paragraph (dc)(3), the Executive Officer may resume 

funding the Priority Reserve upon completion of a PDE or an FDE 

demonstrating that the shortfall no longer exists. 
Proposed Rule 1315 (Cont.) Adopted September 8, 2006 

1315 - 7 

(B) In cases where the Executive Officer has discontinued funding the 

Priority Reserve due to an offset account shortfall projected 

pursuant to subdivision (ed), the Executive Officer may resume 

funding the Priority Reserve upon either completing a PDE or an 

FDE pursuant to paragraphs (dc)(2) or (dc)(3), respectively, 

demonstrating that no actual shortfall exists for the reporting 

period in which the shortfall was projected to occur; or completing 

a new projection pursuant to subdivision (ed) for the same 

reporting period demonstrating that the shortfall is no longer 

projected to occur. 

(2) If an FDE demonstrates that a shortfall exists in any of the District offset 

accounts, the Executive Officer shall implement one or more of the 

following backstop provisions as needed to correct the shortfall: 

(A) Provide additional credits to the District offset account(s) which 

have a shortfall within six months of the FDE that demonstrated 

the shortfall. The Executive Officer may obtain such credits by 

purchasing them, by funding emission reduction projects using 

quantification protocols approved by EPA, application of BACT 

(federal LAER) in excess of federal requirements, or other credit 

sources approved by EPA; and/or 

(B) Suspend funding of the Offset Budget within 90 days of the FDE 

that demonstrated the shortfall, not to be resumed until equivalency 

has been reestablished; and/or 

(C) Propose amendments to Rule 1304, Rule 1309.1, and/or Rule 

1309.2 to eliminate certain offset exemptions or to eliminate 

certain sources’ eligibility to receive offsets from the Priority 

Reserve or from the Offset Budget, respectively.