Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

FINAL DRAFT STAFF REPORT

Proposed Amendments to Rule 4702 (Internal Combusti on Engines)

August 18, 2011

Prepared by: Anna Myers, Senior Air Quality Special ist, Plan Development Sandra Lowe-Leseth, Air Quality Engineer, Permits

Reviewed by: Brian Clements, Senior Air Quality Eng ineer, Permits Ramon Norman, Air Quality Engineer, Permits

Patrick Houlihan, Senior Air Quality Specialist, Co mpliance Kevin McCaffrey, Senior Air Quality Specialist, Inc entives Leonard Scandura, Manager, Permits Errol Villegas, Program Manager, Strategies and Inc entives Samir Sheikh, Director, Strategies and Incentives

I. SUMMARY

The San Joaquin Valley Unified Air Pollution Contro l District (District) is committed to protecting public health for all residents in the S an Joaquin Valley (Valley) through

efforts to meet health-based state and federal ambi ent air quality standards with efficient, effective, and entrepreneurial air quali ty management strategies. One such strategy includes a commitment in both the District ’s 2007 Ozone Plan and 2008 PM 2.5 Plan to amend Rule 4702 (Internal Combustion Engine s) to reduce emissions of oxides of nitrogen (NOx) from this source category.

District staff is proposing to amend Rule 4702 to c larify existing rule standards and to achieve much needed NOx emission reductions. Propo sed amendments would be applicable to non-agriculture operated internal com bustion engines. Proposed amendments include provisions for limited use engin es, point of sale requirements for engines rated at 25 to 50 brake horsepower (bhp), m ore stringent NOx emission limits for various types of engines within this category, and SOx requirements would be added to rule language.

A. Reasons for Rule Development and Implementation

The federal Environmental Protection Agency (EPA) h as classified the San Joaquin Valley Air Basin as extreme non-attainment area for federal ambient air quality standard for ozone and non-attainment for the standard for p articulate matter with aerodynamic diameter of 2.5 micrometers and less (PM2.5). The California Air Resources Board (ARB) has classified the basin a severe non-attainm ent area for the state’s ozoneSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

2 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 standard. As a result of these classifications, th e District is required to evaluate sources of pollution and create a strategy (plan) for how t he District will come into attainment of

the standards. The ozone and PM2.5 attainment stra tegies are comprised of regulatory

and incentive-based measures to reduce emissions of NOx, volatile organic compounds (VOCs), sulfur oxides (SOx) as well as directly-emi tted particulates.

The District’s 2007 Ozone Plan and 2008 PM 2.5 Plan each identified Rule 4702 (Internal Combustion Engines) as part of the Distri ct’s attainment strategy. There is no commitment for a specific quantity of NOx reduction s in either District attainment plan.

B. Description of Rule Project

The proposed amendments to Rule 4702 will seek to o btain as much NOx emission reductions from the source category as expeditiousl y practical, technologically feasible, and economically reasonable, as determined by the D istrict’s Governing Board.

C. Rule Development Process

Work on this rule amending project began in 2007 wi th the adoption of the District’s 2007 Ozone Plan and then the adoption of the 2008 P M 2.5 Plan. Each attainment plan identified Rule 4702 as part of the District’s atta inment strategy. District staff began the rule development process with extensive research as a part of a feasibility study performed to determine if there was potential from this source category for achieving

additional emission reductions.

After the completion of the feasibility study, staf f continued to research the District’s permits database, industry standards, technological advancements and actions taken by other regulatory agencies regarding the technolo gical and economic feasibility of amending rule standards to make them more stringent . District staff presented their research findings to stakeholders, industry, ARB, a nd EPA during a public Scoping Meeting on June 24, 2010. During the Scoping Meeti ng staff outlined the potential range of the rule project and requested comments, f eedback, and cost information from all interested parties. It was during the public S coping Meeting that staff explained to stakeholders that research was being conducted as t o the feasibility of controlling SOx and that staff was considering the replacement of e ngines with electric motors where possible. Staff also explained the decisions why c ertain engine categories would not be amended during this rule-amending process; specifyi ng that these decisions were based on research, the evaluation of the permits da tabase, and conversations with industry.

After evaluating the comments received regarding th e proposed rule concepts, staff crafted draft rule requirements based on the best a vailable information. The District then hosted a Public Workshop on September 9, 2010 to present and discuss the proposed amendments to the rule. The draft amendme nts to Rule 4702, as presented in September 2010, included requirements that nearl y all non-AO spark ignited enginesSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

3 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 meet a NOx concentration of 11 ppmvd (@ 15% O2). D raft VOC and CO limits were also being proposed to be lowered to levels seen in a comparable South Coast AQMD engine rule. Knowing that the proposed rule requir ements would potentially be costly to some facilities, the District included an annual fe e option (similar to Rule 4320), allow additional compliance options.

A socioeconomic focus group was also held during th e first public workshop.

Stakeholders were solicited for more cost informati on and potential impacts to their operations in light of the draft amendments.

After the September Public Workshop, District staff met several times with stakeholders. District staff worked closely with the affected sta keholders to refine the rule requirements and address the cost impacts to affect ed facilities and address feasibility concerns of implementing various control technologi es. Due to the remaining issues, in December 2010, District staff provided an update to the District’s Governing Board on the status of this project with plans to bring fort h a proposed rule for Governing Board

consideration in 2011.

The District hosted a technical discussion session in January 2011 for the District’s Citizens’ Advisory Committee of Industry (CAGI) to get further input on issues and

concerns from affected stakeholders. The comments received from the public, affected sources, interested parties, EPA, and ARB during th e public workshop, stakeholder meetings, and technical session were used to develo p the second draft amendments to the rule. The new amendments included provisions f or engines used on a limited basis, meaning they are only used during part of the year. A phased compliance schedule was developed to extend compliance deadlines for fa cilities with multiple engines to

lessen the financial burden on these facilities. I n order to maximize NOx reductions VOC and CO limits were changed back to current leve ls. Upon further reflection, the cyclically loaded and waste gas combustion engines were returned to current NOx

emission limits. The second draft of the rule was released to the public for comment and the District conducted the final public worksho p June 22, 2011.

Staff continued to work diligently with the remaini ng affected stakeholders and EPA to draft the Proposed Rule. Compared to the June vers ion of the rule, the Proposed Rule provides a requirement specific to lean burn engine s used for gas compression. Additionally, the phased in compliance schedule has been further extended for those operators with more than twelve engines at a statio nary source. Section IV.B of this Final Draft Staff Report provides a detailed discus sion for each proposed amendment.

Pursuant to state law, the District performed a soc ioeconomic impact analysis. As part of the District socioeconomic analysis process, Dis trict staff solicited volunteers from affected stakeholders and interested parties to par ticipate as members of the Socioeconomic Focus Group. District staff convened a meeting of the Focus Group in conjunction with the first workshop in September 20 10 to assist District staff in gathering information on regulatory compliance costs and busi ness impacts resulting fromSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

4 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 compliance with the draft amendments. The results of the socioeconomic analysis were published in a report and presented along with the draft rule amendments to the public and interested parties during the June 2011 worksho p; at which time staff solicited more

feedback from stakeholders.

The proposed rule and final draft staff report were published and made available to affected sources and interested parties prior to a public hearing to consider the adoption of the rule by the District Governing Board. The p roposed amendments are scheduled to be presented to the Governing Board for the publ ic hearing to consider adoption of the amendments to the rule on August 18, 2011.

II. GLOBAL CLIMATE CHANGE AND GREENHOUSE GASES

The California Global Warming Solutions Act of 2006 (AB 32) created a comprehensive, multi-year program to reduce greenhouse gas (GHG) e missions in California, with the overall goal of restoring emissions to 1990 levels by the year 2020. In the coming years, ARB and the Legislature will be developing p olicies and programs to implement

AB 32. The District believes that the evidence and the rationale that climate change is occurring is compelling and convincing. In additio n to the long-term consequences of climate change, the District is concerned with the potential ramifications of more moderate but imminent changes in weather patterns. The Valley depends heavily on agriculture for its economy and has developed agric ultural practices based on the last several decades of weather patterns. Unanticipated and large fluctuations in these patterns could have a devastating effect on the Val ley’s economy.

While there are many win-win strategies that can re duce both GHG and criteria/toxic pollutant emissions, when faced with situations tha t involve tradeoffs between the two, District staff believes that the more immediate pub lic health concerns that may arise from an increase in criteria or toxic pollutant emi ssions should take precedence. The San Joaquin Valley Air Pollution Control District’s Governing Board adopted the Climate Change Action Plan (CCAP) in August 2008. For Cali fornia Environmental Quality Act (CEQA) requirements, one of the goals of the CCAP i s to establish District processes for assessing the significance of greenhouse gas im pacts. The District has developed a policy and guidance for addressing greenhouse gases under CEQA.

III. BACKGROUND

An internal combustion (IC) engine is any engine th at operates by burning its fuel inside the engine. IC engines generate power by the combu stion of an air/fuel mixture. The main types of IC engines are spark-ignited (SI) eng ines and compression-ignited (or diesel) engines. In the case of spark-ignited (SI) engines, a spark plug ignites the air/fuel mixture. SI engines come in several desig ns such as: two-stroke and fourstroke, rich-burn and lean-burn, turbocharged and n aturally aspirated. SI engines maySAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

5 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 use one or more fuels, such as natural gas, propane , butane, liquefied petroleum gas, oil field gas, digester gas, landfill gas, methanol , ethanol, and gasoline.

Compression-ignited (CI) engines rely on heating of the inducted air during the compression stroke to ignite the injected diesel fu el. In addition to being classified into compression-ignited and spark-ignited, IC engines c an be further divided into two-stroke and four-stroke engines. Most diesel engines are f our-stroke, while larger diesel engines often are two-stroke. Natural gas fired sp ark-ignited engines are usually fourstroke, but some operators prefer two-stroke engine s for their applications.

Most IC engines are used to power pumps, compressor s, or electrical generators. IC engines are used by a large variety of private busi nesses and public agencies throughout the SJVAB. Examples of businesses and i ndustries that use IC engines that could be affected by this project include schools a nd universities, agriculture, oil and gas production and pipelines, petroleum refining, m anufacturing facilities, food processing, electrical power generation, landfill a nd waste water treatment facilities, and water districts. Many of the permitted compression -ignited engines in the District are used as emergency engines and are used to provide b ackup power when electric service is interrupted.

IV. CURRENT RULE 4702 AND PROPOSED AMENDMENTS

A. Existing Rule 4702

Rule 4702 was adopted in August 2003 and was last a mended in January 2007. The purpose of Rule 4702 is to limit NOx, CO, and VOC e missions from stationary IC engines. The rule applies to any stationary IC eng ines with a rated brake horsepower (bhp) greater than 50. The rule divides engines in to those used in agricultural operations (AO) and those used in other, non-agricu ltural operations (non-AO).

Rule 4702 provides some exemptions from the emissio ns standards or other requirements of the rule for engines used in certai n specific applications, such as an emergency standby engine, military tactical equipme nt, and certain types of engines used in AO (e.g., wind machines, mobile agricultura l equipment, engines used to propel implements of husbandry). Rule 4702 exempts engine s from complying with the emission limits provided they do not exceed 200 hou rs of operation per calendar year

and meet other conditions.

The existing NOx concentration limits in Rule 4702 range from 25 ppmv to 150 ppmv

corrected to 15% O 2 , depending on engine category. The VOC and CO con centration limits range from 250 to 750 ppmv (depending on eng ine category) and 2,000 ppmv,

each corrected to 15% O 2 , respectively.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

6 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 B. Proposed Amendments to Rule 4702

The following paragraphs detail the proposed modifi cations to rule language. See Proposed Rule 4702 for exact changes.

1. Rule Title, Section 1.0 Purpose and Section 2.0 App licability

The rule’s title would be modified to remove the ph rase “Phase 2”. This phrase is a holdover from past years and the phrase no longer r eflects the rule’s scope.

The Purpose section of the rule would add SOx to th e list of pollutants. In the Applicability section, the minimum horsepower ratin g of engines subject to the rule would be amended from 50 brake horsepower to 25 bra ke horsepower.

2. Section 3.0 Definitions

The definitions for “Agreement to Electrify,” “Beam Balanced Pumping Engine,” and “Crank Balanced Pumping Engine” would be removed, s ince they are no longer found in the body of the rule.

The existing rule defines “Agricultural Operations” by referencing it to the definition in Rule 4550 (Conservation Management Practices). For reader clarity, the definition of “Agricultural Operation” will be included in Rule 4 702.

Seven definitions would be added to the rule. Thes e definitions are: Air Pollution Control Officer (APCO); California reformulated die sel; higher heating value; limited-use engine; operator; owner; and variable-load engine. These definitions would be added to improve reader clarity. Also, throughout the rule, the word “owner” would be replaced with the word “operator” to make the rule language consistent with other District rules, and to provide clarity as to whom rule requirements are applicable to.

District staff is re-locating the definition of low -use engine from the Section 4.0- Exemptions to the Section 3.0-Definitions. No requ irements have been added or

removed from the definition.

The language in two definitions would be edited. T he definition of California reformulated gasoline would better specify the sect ion of the California Code of Regulations where the state’s definition is located . The definition of replacement engine would be modified to change the starting date of re placement to reflect the current

amendments to the rule.

The definitions would be renumbered as needed.

In the June 22, 2011 version of the staff report, t here was a definition of “existing cyclic field gas fueled engines.” This has been removed f rom the rule because there is noSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

7 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 NOx control technology that will allow newer cyclic ally-loaded engines to be controlled below their current emission level, even with the l atest emission control technology.

3. Section 4.0 Exemption

The language in Section 4.2 would be amended to con solidate requirements for emergency standby and low-use engines. The require ments to be considered a lowuse engine would be moved to Section 3.0 (Definitio ns) of the rule.

Section 4.4 allows an exemption from the requiremen ts of Best Available Control Technology (BACT) and Offset requirements of Rule 2 201 (New and Modified Stationary Source Review Rule) if the replacement e ngine is installed for the sole purpose of complying with Rule 4702. In the first draft version of the rule presented during the September 2010 public workshop, District staff proposed to delete Section 4.4 because, in the past, EPA has disapproved prohi bitory rules which included a similar exemption. EPA has stated in previous rule making projects that BACT and Offset requirements should be addressed in District Rule 2201 instead of the prohibitory

rule.

However, comments were received from stakeholders r ecommending to keep the existing BACT and Offset exemption in the rule for replacement engines that are needed to comply with the draft rule requirements. After conferring with the District’s Permit Services Department, staff agrees with the c ommenter’s justification. The existing Section 4.4 in Rule 4702 will be retained. Staff believes that the narrow and limited exemption from BACT and Offset specified in existing Rule 4702 for replacement engines is appropriate since Section 5.2 of the rul e requires an operator to replace existing older compression-ignited engines with cle aner EPA-certified Tier 3 or Tier 4 engines.

If the exemption were removed from Rule 4702, opera tors who, according to the rule, must replace their engines with Tier 3 engines, for instance, would instead be subject to BACT when they apply for permits to install those T ier 3 engines. Instead of installing a Tier 3 engine, an operator may be required to elect rify. Although existing Rule 2201 Sections 4.2.3 and 4.6.8 allow exemptions from BACT and Offset requirements, the exemptions apply only to the installation or modifi cation of an emission control technique performed solely for the purpose of compl iance with the requirements of District, State or Federal air pollution control la ws, regulations or orders. Such exemptions do not apply to replacement units needed to comply with the prohibitory rules. Therefore, the District will retain the exi sting language in Rule 4702.

4. Section 5.0 Requirements

This section of the rule enumerates emission limits and monitoring requirements for stationary IC engines.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

8 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 o New Section 5.1 – IC Engines between 25 and 50 Brak e Horsepower New Section 5.1 would establish the requirements fo r spark-ignited engines and compression-ignited engines rated at 25 to 50 brake horsepower (bhp) that are used exclusively in Non-AO. These small engines are alr eady regulated under the existing federal Standards of Performance. The provision is intended to be a point of sale provision and would prohibit a person from selling, or offering for sale engines rated at 25 to 50 bhp unless the engines meet the applicable requirements and emission limits specified in the Code of Federal Regulation Title 4 0 Part 60 (40 CFR 60) Subpart IIII (Standards of Performance for Stationary Compressio n Ignition Internal Combustion Engines) and 40 CFR 60 Subpart JJJJ (Standards of P erformance for Stationary Spark Ignition Internal Combustion Engines) for the year that the engine is purchased. The provision is intended to ensure that more polluting engines are not sold to another person or entity if cleaner small engines that meet the NSPS standards are available in

the market. District staff has removed the terms “ solicit the operation, supplying, and install” from this provision. This provision would not affect the leasing of these engines because the ownership of the engine would remain wi th the lessor until such time as the lessor chooses to sell the engine; at which time, t his provision would apply.

This provision regulates engines by attrition rathe r than requiring the operator to install additional emission control system on existing engi nes as is the case for engines greater than 50 bhp. Over time, the non-agricultur al operations (non-AO) engines between 25 and 50 bhp will be replaced with the cle anest-burning engines available and the replacement happens at a time of the operator’s choosing, since the operator elects when to replace a given engine. If there is no cle aner engine available, meaning that the federal emission limits haven’t changed since t he engine was manufactured, the engine can change hands and continue to operate wit hin the Valley because the engine is the cleanest version available. Conversely, if there is a cleaner federal emission standard than the standard at the time the engine w as manufactured, rather than continuing to have the older, dirtier engine contin uing to operate, but at a different Valley location, the District is proposing that the older engine be retired or retrofitted to meet the latest standard. The draft requirement, a s written, is a win-win situation for both operators and Valley air quality because it pr ovides continuous air quality improvement through normal engine turnover as well as operator flexibility by allowing the operator, not the District, to determine when t o replace an engine.

Additionally, the draft rule amendments would requi re the current owner of non-AO small engines operated in commercial, industrial, a nd institutional facilities to submit a one-time report to the District which includes info rmation on the number of engines, location of each engine, engine manufacturer, model designation and engine serial number, engine bhp, fuel type and consumption rate, ignition type and combustion type, purpose of the engine, and daily operating schedule . The purpose of the report is to allow the District to improve the emission inventor y for this category.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

9 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 o Section 5.2 – Engines Greater than 50 Horsepower Section 5.2 would separate the existing emission li mits/standards for non-AO from agricultural operations (AO) spark-ignited engines and from compression-ignited engines greater than 50 bhp. This section would al so specify the proposed limits for non-AO spark-ignited engines greater than 50 bhp. The following are the sub-sections being modified as well as the new provisions being proposed:

• Section 5.2.1 – Existing Emission Concentration Lim its Section 5.2.1 would be reorganized to separate AO e ngines from non-AO engines. The existing emission limits for spark-ignited engines used in AO would be relocated and new emission concentration limits for non-AO engine s would be placed in a separate

table. The non-AO limits would be effective until the new emission limits in new table become effective. The compliance schedule for the non-AO spark-ignited engines is specified in Section 7.4 of the rule.

District staff did not consider reducing the emissi on limits on AO engines as part of this rule project. AO engines have just recently been r equired to comply with Rule 4702; the current emission limits have compliance dates from January 2009 through January 2015. By comparison, non-AO engine emission limits were first adopted in 2003; meaning that operators with non-AO engines have had an opportunity to get a return on their investment. . Appendix D of the Final Draft Staff Report for Revised Proposed Amendments to Rule 4570 (Confined Animal Facilities ) dated October 2010 discusses the San Joaquin Valley agricultural community econo mic conditions. Farms, ranches and dairies generally, speaking, do not have the ab ility to pass on higher costs to the supply chain due to regulatory framework for these operations. In order to give agricultural operators some return on their capital investment, it would be imprudent to impose new limits for agricultural engines at this time. District staff will re-evaluate potential emission reductions from AO engines as pa rt of future plan control measures and rule projects.

A new constraint has been added to this section. I n Section 5.1.2.2, if an operator elects to use the “fee payment in lieu of complianc e” option, the current emission limits would remain in place for these engines. In other words, the provision prevents existing engines that are included in a fee payment program from increasing their emissions above the current emission limits. Including this provision is fulfills an EPA requirement called “anti-backsliding,” meaning changes to a rul e cannot allow operators to increase their emissions above whatever is currently in plac e. An example of when emissions could increase would be if operators in the fee pay ment program were allowed to pull all NOx emission control equipment off their engines, a nd then pay the fee based on uncontrolled engine emissions. NOx emissions from the individual engine would be higher than the current rule allows and EPA would c onsider such an action “backsliding”

from current level of control. Previous draft vers ions of the rule did not address the potential for increased emissions when engines ente r the fee payment program.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

10 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 • Section 5.2.2 – Non-AO Spark-Ignited Engine Emissio n Concentration

Limits

Section 5.2.2 would establish the emission concentr ation limits for non-AO spark-ignited engines greater than 50 bhp. In the September 9, 2 010 version of the draft rule amendments that were presented at the first public workshop, District staff proposed 11 ppmv NOx limit for all engines in this category. H owever, after considering the

comments and recommendations from stakeholders and the Citizens Advisory Group of Industry (CAGI), District staff is now proposing th e NOx emission limits that take into account the differences between engines used in dif ferent applications. Table 1 summarizes the proposed emission limit changes. Th e limits are in concentration units of parts per million by volume on a dry basis (ppmv d), corrected to 15% oxygen.

Table 1 – Current and Proposed NOx Limits (in ppmvd corrected to 15% oxygen)
Current Limit Proposed Limit
Rich-Burn Engines A. Waste Gas Fueled Engine 50 50 B. Cyclic Loaded, Field Gas Fueled 50 50 C. Limited Use Engine ---- * 25

D. Rich-Burn Engine, not listed above 25 or

96% reduction 11

Lean-Burn Engines
E. Two-Stroke, Gaseous Fueled, < 100 hp Engine 75 or

90% reduction 75

F. Limited Use Engine --- * 65 G. Lean-Burn Engine used for gas compression --- * 65 or 93% reduction

H. Lean-Burn Engine, not listed above 65 or

90% reduction 11



### * Limited-use engines and variable-load engines are not categories in the current rule. They are currently subject to the applicable “not listed abo ve” emission limits.

Due to the heat content variability of waste gas, N Ox control can be problematic for engines fired on waste gas, therefore, District sta ff is proposing that there be no change to the NOx emission concentration limit for waste g as fueled engines.

Cyclic-loaded, field gas fueled engines can achieve some level of control, but not the very stringent control that can be imposed on engin es that operate in a narrow range of loads. The exhaust gas temperature of cyclic loade d engines varies as a function of the engine load. Catalyst chemistry depends on a minim um temperature to be effective. When the cyclic load engine is operating in an engi ne load range that the exhaust gas is in the catalyst’s effective range, the emissions ar e well-controlled, but as the engine cycles out of the “sweet spot,” NOx control is less . Eventually, the exhaust gas temperature can be too low for any effective contro l. For this reason, District staff isSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

11 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 proposing that the NOx limit for cyclic loaded fiel d-gas fueled engines be left unchanged.

Two-stroke, gaseous fueled engines between 50 hp an d 100 hp would remain at the current NOx emission level. There is no technology that will allow a lower NOx level.

The proposed amendments create a new category of en gines that operate less than 4,000 hours per year, based on the cost effectivene ss of installing additional catalyst for these engines compared to engines that have higher utilization. These engines will be designated as limited use engines. This is not to imply that the proposed amendments leave the engines as uncontrolled. The NOx concent ration limit for limited use rich-burn engines would be 25 ppmv NOx, which is the current emission limit for rich-burn engines. The NOx emissions foregone resulting from not lowering the existing NOx limit of 25 ppmv to 11 ppmv for the limited use engines i s about 1.3 tons NOx/year or about 0.004 tons/day as shown in Appendix C of the Draft Staff Report.

Based on the District Permit Services database, the re are no lean-burn engines currently operating less than 4,000 hours per year in the District. However, District staff is proposing to include this limited-use category o f engines in order to provide operators with the option of limiting their engine usage so a s not to retrofit with an expensive SCR system, in exchange for reduction in their current emissions level. Since there are no lean-burn engines currently operating less than 4,0 00 hours per year in the District, in carving out this group of engines, there is no NOx emission impact from this engine
category.

Another new category would be created by the propos ed rule - lean-burn engines used in gas compression. In general, these engines oper ate over a wide range of loads. As noted in the EPA’s technical support document (see Appendix F), these engines fluctuate over a broad range of conditions making S CR use problematic. For this reason, District staff proposes that the lean-burn engine used in gas compression be created with a NOx control as a percent reduction o ver the uncontrolled emission factor.

Although District staff is leaving certain types of engines at their current numeric emission limits, for most engines the proposed rule removes the percent reduction as an alternative limit. As currently enforced, the o perators with the percent reduction are assuming that the input to the control device is an uncontrolled engine. The percent reduction option when converted from pounds NOx per MMBtu to ppmvd at 15% oxygen is equal to or greater than the proposed num eric limit, therefore, removing the percent reduction option will not increase emission s from the targeted engine.

• VOC and CO Emission Limits The September 2010 draft rule contained a CO limit of 500 ppmv and 30 ppmv VOC limit. Stakeholders recommended leaving the existi ng 2,000 ppmv CO and 250/750 VOC limits in place. The Engine Manufacturers Asso ciation (EMA) commented that they do not believe reductions are achievable in pr actice for all stationary engineSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

12 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 systems particularly for existing engines under var ied operating and field conditions. EMA stated that for spark-ignited engines, there is a known relationship between emissions of NOx, VOC, and CO, in that as the engin e is adjusted to reduce NOx, the VOC and CO emissions will increase. Efforts to adj ust the engine to reduce VOC and

CO emissions would result in an increase in NOx emi ssions. District staff contacted

South Coast AQMD staff to determine if the current 30 ppmv VOC in South Coast AQMD’s Rule 1110.2 (Emissions from Gaseous - and Li quid-Fueled Engines) is being

achieved. District staff has found that there are several variances that have been approved by South Coast AQMD Hearing Board allowing a temporary regulatory relief from the 30 ppmv VOC limit until such time that an alternate limit, which is an allowable provision of South Coast AQMD Rule 1110.2, could ap proved by their Executive Officer.

Based on stakeholders’ recommendations and results of the South Coast AQMD variances, District staff believes that it is appro priate to not change the existing VOC limits in Rule 4702. Likewise, the current CO limi t of 2,000 ppmv would not be changed. Keeping the existing VOC and CO emission limits in the current rule would allow engine manufacturers and emission control system manufactu rers to have the much-needed flexibility to be able to achieve much lower NOx em issions under varying field operating conditions and applications.

• Section 5.2.2.2 – Alternative Emission Control Opti on Section 5.2.2.2 allows operators of non-AO spark-ig nited engines an alternative to installing a NOx emission control system. Operator s have the option to pay annual fees. The District would take the fees generated b y the alternative emission control option to fund other emission-reducing projects tha t would get equivalent reductions. Operators would remain subject to CO and VOC emissi on concentration limits – only

NOx emissions would be allowed to fall under an alt ernative emission control option. As noted above, a provision would be added to re-itera te the Section 5.2.1.2 requirement that the engines of operators who elect the fee pay ment option would not be allowed to emit NOx above the applicable current NOx limit to preclude any increase above the current NOx emissions. More details on the fee-pay ment option are contained in new

Section 5.6 of the rule.

o Section 5.6 – Alternative Emission Control Option C alculations

Section 5.6 details the calculation of emissions an d fees for this option. The fees are

based on the total annual NOx emissions for the uni t. As such, this program does not constitute a discretionary economic incentive progr am as defined by 40 CFR 61 Subpart U. The District intends to use the money generated by this program to acquire equivalent emission reductions from other sources. Details of the program itself will be sent to EPA when the program is initiated. Because any emission reductions generated by the fee program cannot be credited to the Distri ct until the reductions are actually achieved, District staff is taking no State Impleme ntation Plan (SIP) emission reduction credit for the overall rule project. Not taking SI P credit for NOx emission reductions

does not affect either the District’s 2007 Ozone Pl an attainment strategy nor does it affect the District’s 2008 PM2.5 attainment strateg y because the control measure forSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

13 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 amending Rule 4702 did not include any specific amo unt of emission reductions. The emission reduction analysis in Appendix B of this s taff report is based on each engine complying with the rule through the installation of NOx emission control technology. The District staff expects that the emission reduct ions associated with the fee payment option will be higher than by requiring installatio n of individual control technology. However, any estimate of additional reductions woul d be speculative, because neither the number nor the size of engines participating in the fee payment program can be predicted in advance of the program.

o Section 5.7 – Control of Sulfur Oxide (SOx) Emissio ns and

o Section 5.10 – SOx Emissions Monitoring Requirement s The rule would limit SOx emissions through fuel cho ice. For non-AO engines, these fuels are widely available. Although the proposed sections limit the sulfur in the engine’s fuel, for SIP purposes, the District is no t taking any credit for SOx emission

reductions associated with the rule modifications b ecause it is expected that most operators are already comply with the requirement. Although SOx is a precursor to
PM2.5, the control measure in the PM2.5 Plan did no t commit the District to any SOx reduction, therefore, the attainment date is not af fected by not taking SIP credit for the potential SOx emission reductions.

o Section 5.0 – Miscellaneous Changes

Sections and section references have been renumbere d as needed and some section titles have been modified for reader clarity.

5. Section 6.0 Administrative Requirements

o Section 6.1 – Emission Control Plan Language would be added to these section allowing o perators with no changes to their emission control plan to submit a letter stating th at there are no changes rather than having to submit the entire plan. District staff a greed with a stakeholder who stated that preparing an emission control plan is time-consumin g and is redundant if the existing emission control plan is already adequate. The pro posed change would streamline compliance for certain operators of existing engine s.

o Section 6.4.6 – SOx Test Methods and

o Section 6.4.7 – Higher Heating Value Test Methods Section 6.4.6 would be added in order to specify th e test methods for determining oxides of sulfur, total sulfur as hydrogen sulfide, sulfur content of liquid fuel, and calculation method for SOx control efficiency. Sec tion 6.4.7 would be added to specify the allowable test methods for determining a fuel’s higher heating value. These test methods were added to complement the addition of SO x requirements.

o Section 6.5 – Inspection and Monitoring (I&M) Plan Language would be added to this section to indicate that operators, who have no changes to the facility’s I&M Plan, can submit a le tter to that effect rather thanSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

14 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 submitting a new plan. This provision affords oper ators a streamlined process when there are no changes to the facility’s current I&M Plan.

o Section 6.0 – Miscellaneous Changes

Section numbers and section references would be ren umbered, as needed.

6. Section 7.0 – Compliance Schedule

District staff has reviewed the compliance schedule s already in the rule and removed those schedules that have are in the past. A new c ompliance section was added for existing engines that would need to comply with the proposed amendments.

o Existing Sections 7.3, 7.4, and 7.5 Language has been removed from these sections that apply to schedules that have already passed.

o New Section 7.5 This section would require the owner of a non-AO sp ark-ignited engine subject to the rule to comply with the proposed requirements accor ding to a specific compliance schedule. The September 2010 version of the draft rule had a single compliance date. In response to stakeholder comments, the draft comp liance date has been amended and now a phased-in compliance schedule is proposed . Additional discussions with stakeholders yielded a further refinement - operato rs with more engines have a longer period of time to come into compliance, starting in 2014 and ending in 2017. The longer compliance schedule recognizes that operators with more engines might have some logistical issues in bringing so many engines into compliance in a short amount of time, while recognizing the District’s commitment to expe dite air quality benefits as committed to by the Governing Board with the dual path strate gy.

Stakeholders asked for a compliance timeline ending in 2020. While staff recognizes that there is no specific NOx reduction commitment in either air quality attainment plan; staff feels that providing a nine-year compliance t imeline would be counterproductive to District air quality attainment goals and the dual path strategy adopted by the District Governing Board.

In developing and adopting the 2007 Ozone Plan , the District’s technical and legal analysis indicated that reclassification to “extrem e” reflecting attainment no later than 2023 was the only option available to the District. However, the District Governing Board concurrently adopted a dual path strategy to ensure continual progress and attainment at earliest practicable date. This dual path strategy commits the District to continuously look for any and all new measures that could bring the Valley into attainment sooner. Table 2 below shows the propose d compliance schedule. It is important to note that the division of compliance d ate requirements in Table 2 is specific to the amount of engines per stationary source and not to the amount of engines owned by an operator. For example, an operator that owns 12 engines with five engines at oneSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

15 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 facility and the other seven engines at another fac ility would not have the 2017 compliance timeline as allowed for operators with a t least 12 engines at a stationary source; because all the engines are not at one stat ionary source, rather than one

location.

Table 2 – Proposed Compliance Schedule for Non-AO S park Ignited Engines

Engines to be in Compliance at a Stationary Source Emission

Control Plan Authority to

Construct and Inspection and Monitoring Plan Full

Compliance

Single Engine at a stationary

source 1/1/12 1/1/13 1/1/14

Operator with at least two engines, but less than 1 2 engines at a stationary source

33% or more of the engines 7/1/12 1/1/13 1/1/14 66% or more of the engines 7/1/12 1/1/14 1/1/15 100% of the engines 7/1/12 1/1/15 1/1/16

Operator with at least 12 engines at a stationary s ource 25% or more of the engines 7/1/12 1/1/13 1/1/14 50% or more of the engines 7/1/12 1/1/14 1/1/15 75% or more of the engines 7/1/12 1/1/15 1/1/16 100% of the engines 7/1/12 1/1/16 1/1/17

o New Section 7.6 The owner of a Non-AO spark-ignited engine who elec ts to pay annual NOx emission fees to the District in lieu of complying with the proposed Table 2 emission limits of the rule would be required to submit an Emission Contro l Plan which includes the information specified in new Section 7.6.1 by July 1, 2012 as specified in Table 6 of the rule. The owner would be required to pay the total annual fee to the District no later than June 30 of each year for the NOx emissions of the previous calendar year. Payment would continue annually until the engine ei ther is permanently removed from use in the San Joaquin Valley Air Basin and the Per mit-to-Operate is surrendered, or the operator demonstrates compliance with the propo sed rule’s Table 2 emission limits.

o Section 7.0 – Miscellaneous Changes

Section numbers and section references would be ren umbered, as needed.

C. Implications of the Federal Stationary IC Engine Requirements

Although the District has some of the most stringen t rules in the nation, EPA also

creates rules to limit emissions. One such rule th at affects stationary IC engines is 40 CFR 63 Subpart ZZZZ (National Emissions Standards f or Hazardous Air Pollutants for Stationary Reciprocating Internal Combustion Engine s). Also called a Maximum Achievable Control Techniques (MACT), the MACT divi des the engines into several groups and has different provisions for the differe nt engine groups depending onSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

16 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 whether facility where the engine is located is a m ajor or area Hazardous Air Pollutants (HAPs) source, spark-ignited or compression-ignited , rich-burn or lean-burn, etc. For some engines, the MACT requires periodic maintenanc e only. For other engines, there are specific emission limits, source testing, and m onitoring requirements. There are either CO or formaldehyde emission limits for certa in larger spark-ignited engines. It is these engines that are of interest for this rule pr oject.

There are some engines that are in compliance with the MACT’s low emission limits for CO/formaldehyde without an add-on control system. An existing engine that does not meet the emission limits would need to be modified, which usually means installing an emission control system containing an oxidation cat alyst. The installation of the oxidation catalyst would be in addition to any equi pment necessary to meet the Draft Rule 4702’s proposed NOx limit.

In addition to the potential to have a two-catalyst emission control system, the MACT compliance schedule is a little ahead of schedule f or Draft Rule 4702. All spark-ignited engines at area HAPs sources that are subject to th e IC engine MACT must be in full compliance with standards by May 2013. As noted ea rlier, some engines are already in compliance with the MACT’s CO/formaldehyde limits a nd no retrofit would be required to meet the MACT standard. The compliance schedule for Draft Rule 4702 is tiered, meaning that, for operators with multiple engines, compliance deadlines are phased in over three or four years beginning in 2014. In a w orst case scenario, operators could make modifications to meet the IC engine MACT in 20 13, and then need to make more

modifications in 2014. District staff believes tha t by making operators aware of the changes in the District’s rule soon enough would al low the operators to combine MACT

and District rule retrofits to minimize downtime an d costs.

Stakeholders contacted about how they were going to meet the IC engine MACT stated that they were early in their assessment process an d hadn’t fully determined their course of action. In general, operators are concer ned about the engineering design challenges as well as the operational complexity in herent in a two-catalyst emission control system.

V. EMISSION REDUCTION ANALYSIS

District staff queried the District Permit Services Database for all engines, and then manually sorted the engines into one of three categ ories: emergency standby, richburn, and lean-burn. No analysis was done for emer gency standby engines because the proposed rule amendments do not affect this typ e of engine. Of the remaining engines, District staff determined that out of 326 rich-burn engines, only 160 engines would be required to reduce their NOx emissions. F or lean-burn engines, District staff found a total of 97 lean-burn engines, of which 62 have permit limits higher than the proposed rule limits. Based on the assumptions use d, District staff estimates that the proposed changes in the rule limits for non-AO spar k-ignited engines would lead toSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

17 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 approximately 1.4 tons per day of NOx emission redu ctions. However, in the strictest sense, these emission reductions cannot be directly credited to the District’s attainment plans (State Implementation Plan (SIP) purposes) be cause at least a portion of them will come as part of the fee payment program. Emis sion reductions in a fee payment program cannot be credited to the District until th ey are actually achieved. Although District staff expects that the Rule 4702 program w ill generate more emission reductions than what has been calculated, this rule project wi ll take no credits for SIP purposes at

this time.

It is the District’s experience that, when an emiss ion limit is reduced, a small percentage of operators will choose to replace their IC engine s with electric motors rather than retrofit with an emission control system. Based on past experience with engine rule amendments, there could be two or three of the 222 affected engines replaced by electric motors. It would be speculative, at best, to determine which engines would electrified, therefore the following emission reduc tion analysis does not include an

estimate for NOx reductions associated with electri fication scenarios. All affected engines are analyzed as if they will add NOx contro ls rather than replace the engine

with an electric motor.

District staff will use 1.4 tons per day of NOx red uctions for cost effectiveness purposes. A summary of the analysis results is shown in Table 3 and details of the calculations are in Appendix B of this staff report.

Table 3 – Summary of Estimated NOx Reductions Used for Cost Effectiveness

Calculations

Engine Type Total

Permitted Engines Number

Affected Engines Total Rated

Power (bhp) Estimated

NOx

Reductions (tpy) Estimated

NOx

Reductions (tpd)
Rich-Burn 326 160 80,738 131.5 0.36
Lean-Burn 97 62 123,886 390.9 1.07
Totals 423 222 204,624 522.4 1.43

VI. COST EFFECTIVENESS ANALYSIS

Draft Rule 4702 would implement low NOx limits for non-AO spark-ignited engines. These engines burn natural gas, gas from waste prod ucts or field gas. It is the District’s experience that, when an emission limit is reduced, a small percentage of operators will choose to replace their IC engines with electric mo tors rather than retrofit with an emission control system. Based on this past experi ence, there would be two or three engines replaced by electric motors. It would be s peculative, at best, to determine which engines would electrified, therefore the foll owing compliance costs and cost effectiveness analysis do not include any cost-of-e lectrification scenarios.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

18 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 The estimated total annual cost to retrofit 222 eng ines is a range between $12.3 million and $27.1 million annually. District staff believe s that the lower cost number reflects smaller engines with situations that are relatively easy to retrofit and the higher number is more likely for large engines that need signific ant modification in order to install control equipment.

Absolute cost effectiveness is the estimated total annual cost divided by the estimated

emission reductions. District staff estimates that the overall cost effectiveness of the draft amendments is between $23,600 and $51,800 per ton NOx removed. A summary

of the costs and cost effectiveness are shown in Ta ble 4.

Table 4 – Summary of Compliance Costs and Cost Effe ctiveness

Rich-Burn Lean-Burn Overall Number Affected Engines 160 62 222 Total Cost ($/yr) a lower cost higher cost ---

$3,900,000 $8,400,000 -

$23,200,000 $12,300,000 -

$27,100,000

Cost Effectiveness b ($/ton NOx)

--- $29,600 $21,600 -

$59,300 $23,600 -

$51,800

a Rounded to nearest $100,000

b Rounded to nearest $100

The incremental cost effectiveness is the differenc e in cost between successively more effective controls. For engines operating at least 6,750 hours annually, the NOx emission concentration limits are the most stringen t available. For this reason, no incremental cost effectiveness analysis can be done because there is no more stringent option available for these engines.

The incremental cost effectiveness for requiring en gines operating less than 4,000 hours per year to retrofit to meet a lower NOx limi t was evaluated. Incremental cost effectiveness cannot be directly compared to the ab solute cost effectiveness, but allows comparison between successively more stringent comp liance options. In this case, the incremental cost effectiveness analysis focuses on limited-use engines and evaluates the difference between keeping the current NOx emis sion limit and requiring a lower NOx limit for these engines. The incremental cost effectiveness for limited-use engines is about $183,800 per ton additional NOx removed.

VII. SOCIOECONOMIC IMPACT ANALYSIS

Pursuant to California Health and Safety Code (CH&S C) 40728.5(a), “Whenever a district intends to propose the adoption, amendment , or repeal of a rule or regulation that will significantly affect air quality or emiss ions limitations, that agency shall, to the extent data are available, perform an assessment of the socioeconomic impacts of the adoption, amendment, or repeal of the rule or regul ation.” As part of the District’s socioeconomic analysis process, a meeting of operat ors and other interested partiesSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

19 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 was convened in September 2010 to discuss complianc e costs and possible business responses to the proposed amendments. Using inform ation gathered during Focus Group meeting and public comment period, a draft of the socioeconomic impact analysis report was presented during the June 2011 workshop for the rule. After receiving comments, the final socioeconomic impact analysis report has been published prior to the public hearing to consider rule adopti on. The report is contained in Appendix D of this staff report. The public hearin g is anticipated August 18, 2011.

VIII. ENVIRONMENTAL IMPACT ASSESSMENT

It is assumed that rich burn engines affected by th is rule amendment already are equipped with NSCR. As such, there will be no GHG increase attributed to the richburn engine category at this time because there is no change to the control technology.

For purposes of assessing environmental impact, Dis trict staff assumes that operators of the lean-burn engines affected by the draft rule amendments do not currently have SCR units, but will install SCR units as the contro l technology of choice in order to meet the rule’s stringent NOx emission limits.

• SCR control technology can reduce the fuel efficie ncy of an engine by as much as 5%, meaning that 5% more fuel must be burned in order to have the same
power output.

• Utilizing 5% as a conservatively high assumption f or an engine's power penalty due to the use of an SCR system, and conservatively applying that power loss to the total rated horsepower of all engines affected by the rule changes (a total of 123,886 bhp), there is an equivalent 6,194 bhp incr ease required to maintain current power levels.

• Using a conversion factor to convert the additiona l 6,194 hp to carbon dioxide equivalents (metric ton CO2-e), it is estimated tha t the installation of 62 SCR units will increase GHG emissions by 15,200 metric ton-CO2e/year.

• However, electrification as a method of compliance has the potential to offset any

increases in GHG emissions. The District identified the number of engines subject to Rule 4702 that are needed to electrify t o offset the potential increase in

GHG emissions. The assessment demonstrated electri fication of two to three engines would reduce the net increase in GHG emissi ons. See Appendix B for

more details on the calculations.

• Based on prior rule projects, electrification of t wo to three engines is a plausible compliance response to the rule requirements, offse tting the increased GHG

emissions from the SCR.

Thus, the District concludes that implementation of the proposed revisions would have a less than cumulative significant impact on global c limate change.

District staff concludes that there is no substanti al evidence in the whole record before the District that the proposed amendments to Rule 4 702 would cause any adverseSAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

20 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 effects on the environment. Pursuant to CEQA Guidel ines §15063 (a), District staff will prepare an Initial Study and Negative Declaration f or the project. Upon approval of the proposed amendments by the District’s Governing Boa rd, District staff will file a Notice of Determination with each County Clerk within the boundaries of the District, CEQA Guidelines § 15075(d).

IX. RULE CONSISTENCY ANALYSIS

Pursuant to California Health and Safety Code Secti on 40727.2, staff has prepared a rule consistency analysis that compares the element s of Rule 4702 with the corresponding elements of other District rules and federal regulations and guidelines that apply to the same type of equipment or source category. The analysis is discussed in Appendix E of this staff report. District staff has concluded that Proposed Rule 4702

is not in conflict with nor inconsistent with other District rules nor is Proposed Rule 4702 in conflict with nor inconsistent with federal poli cy, rule, or regulations governing the
same source category.

X. OTHER ANALYSES

A. Reasonably Available Control Technology (RACT) A nalysis

Sections 182(b)(2) and 182(f) of the federal Clean Air Act require ozone nonattainment areas to implement RACT for sources that are subjec t to Control Techniques Guidelines (CTG) documents issued by EPA and for “major source s” of VOCs and NOx, which are ozone precursors. RACT can be defined as devices, systems, process modifications, or other apparatus or techniques that are reasonably a vailable, taking into account the necessity of imposing such controls in order to att ain and maintain a national ambient air quality standard (NAAQS); the social, environme ntal, and economic impact of such controls; and alternative means of providing for at tainment and maintenance of such a standard. These control techniques, which are defi ned in EPA guidelines for limiting emissions from existing sources in nonattainment ar eas, are adopted and implemented for nonattainment areas by state analysis. The fol lowing paragraphs evaluate the requirements of Proposed Rule 4702 in light of the RACT definition outlined previously.

1. Emergency Engines and Low-Use Engines

District staff is not proposing any changes to the exemption requirements for emergency standby engines and low-use engines. The existing requirements are consistent with ARB RACT/BARCT Determination for Spark-Ignited Engi nes and ARB Airborne Toxics Control Measures (ATCM). In addition, the ATCM is already being implemented through the District’s process for issuing Permits to Operate. The exemptions as outlined in the current rule represent RACT for the se sources.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

21 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 2. AO Spark-Ignited Engines

District staff is not proposing any changes to the existing emission limits for AO sparkignited engines because the current limits have bee n recently implemented in January

2009.

In August 2007, EPA published the Technical Support Document (TSD) 1 for the current version of Rule 4702 in conjunction with EPA’s full approval of the rule for inclusion into the State Implementation Plan (SIP). The TSD state d that SJVUAPD provided documentation for the process of determining BACM/B ACT 2 and in the staff report, provided analyses of the inventory of affected engi nes and the technological and economic feasibility of possible control technologi es. The TSD also stated that EPA concurs with the BACM/BACT analysis, and noted that the emission limits and other provisions in submitted Rule 4702 are quite stringe nt when compared with the Determination and comparable rules in other air dis tricts, and in light of the economic and social circumstances in the San Joaquin Valley.

In March 2010, EPA approved the District’s 1-Hour O zone Plan (Federal Register/Vol. 75, No. 44, March 8, 2010), which listed Rule 4702 as one of the NOx control rules that have been approved into the SIP. Therefore, the Di strict believes that the recent approval of the 1-Hour Ozone Plan validated that EP A has accepted that existing Rule 4702 constitutes RACT level. Since EPA’s approval of the District’s 1-Hour Ozone Plan in March 2010, there has been no further advancemen t in control technologies that would be feasible for use on agricultural engines.

As previously stated, owners of AO engines have jus t recently installed emission control systems to meet the current emission limits effecti ve January 2009. The control systems included a 3-way catalytic converter, air/f uel ratio controller, and oxygen sensor. The District are still evaluating the effe cts and other technical operational problems associated with this type of control syste m because of the conditions they were installed such as remote locations, fluctuatio ns in gas pressures, and unattended operations, which make it more difficult to constan tly monitor the emissions level during day-to-day operation of the engines. The District will be evaluating the long-term effectiveness of the currently installed emission c ontrol system for possible future rule amendments on AO engines. The currently installed controls give the District a better understanding if lower limits can be achieved under these conditions that exist in the farms. In addition, the District would also pursue incentive program route to addressing agricultural pumping engines any further than has a lready been accomplished. For example, the On-Road Heavy-Duty Diesel Vehicles (In-Use) Regulation and the InUse Mobile Agricultural Equipment Regulation are go ing to place very significant economic burden on the agricultural industry. Furt hermore, in order to give agricultural

1 Technical Support Document for EPA’s Notice of Pro posed Rulemaking and Direct Final Rule for the California State Implementation Plan – San Joaquin Valley Unified Air Pollution Control District Rule 4702 (Internal Combustion Engine – Phase 2), August 2007

. 2 The TSD stated that BACM includes BACT in the same way as RACM includes RACT.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

22 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 operators some return on their capital investment, the District does not want to impose new lower limits for agricultural engines at this t ime. District staff believes that the existing Rule 4702 emission limits for agricultural engines meets RACT.

3. Compression Ignited Engines (AO and non-AO)

The existing emission limits for compression-ignite d engines apply to both nonagricultural and agricultural engines. It should b e noted that certified Tier 1 or Tier 2 diesel engines are required to comply with EPA cert ified Tier 4 by January 1, 2015 or 12 years after installation date, whichever is later. Non-certified diesel engines that are required to meet either Tier 3 or Tier 4 depending on the engine size and its operating hours have just began complying with the existing e mission limits early this year, and some of the larger engines will need to comply by m id-2011. Engines greater than 500 hp that operate at least 1,000 hours annually were required to meet 80 ppmv NOx last January 1, 2008 or by January 1, 2010, if the owner has an agreement to replace the diesel engine with electric motor. For this reason , District staff believes that the current emission limits represent RACT for compression igni ted engines.

4. Limited-Use Non-AO Spark Ignited Engines (Rich-B urn and Lean-Burn)

District staff evaluated stationary engines that op erate less than 4,000 hours annually and compared the cost effectiveness for the limited -use engines and full-time use engines. Since limited-use engines have fewer emis sions on an annual basis, the cost effectiveness for a limited-use engine is higher th an for a full-time engine. For this reason, the draft rule includes a separate category for limited-use engines that keeps the current emission limit, which, as discussed ear lier, meets RACT.

5. Waste Gas Fueled Non-AO Spark Ignited Rich-Burn Engines

The current NOx limit in Rule 4702 for non-AO waste gas fueled rich-burn engines is 50 ppmv (at 15% O 2 ) or 90 percent reduction. Although SCAQMD Rule 11 10.2 specifies a NOx limit of 11 ppmv for landfill gas or digester g as fired engines effective July 1, 2012, Rule 1110.2 includes a provision to complete a tech nology assessment by July 2010 and that the limit will only be implemented if the result of SCAQMD’s technology assessment that is confirms that 11 ppmv is indeed achievable. In a recent telephone conversation with South Coast AQMD staff, District staff has found that the technology assessment would not be completed until next year. Therefore, District staff is not proposing any change to the current limit for non-A O waste gas fueled rich-burn engines until such time that South Coast AQMD’s tec hnology assessment confirms that it is technologically and economically feasible to achieve the rule limit.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

23 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 6. Cyclic Loaded Field Gas Fueled Non-AO Spark Igni ted Rich-Bun Engines

As noted earlier in this report, cyclic-loaded, fie ld gas fueled engines can achieve some level of control, but not the very stringent contro l that can be imposed on engines that operate in a narrow range of loads. The exhaust ga s temperature of cyclic loaded engines varies as a function of the engine load. C atalyst chemistry depends on a minimum temperature to be effective. When the cycl ic load engine is operating in an engine load range that the exhaust gas is in the ca talyst’s effective range, the emissions are well-controlled, but as the engine cycles out o f the “sweet spot,” NOx control is less. Eventually, the exhaust gas temperature can be too low for any effective control. For this reason, District staff believes that the curre nt emission limit fulfills RACT.

7. 2-Stroke Engines Less than 100 hp Non-AO Spark I gnited Lean-Burn Engines

There is no technology for these engines that will allow a lower NOx level. District staff

believes that the current emission limit for 2-stro ke engines less than 100 hp fulfills

RACT.

8. Lean-Burn Engine Used For Gas Compression

Most large natural gas-fired lean-burn IC engines i n the region are in natural gas distribution and storage service and these engines experience frequently changing load

conditions. In the technical support document for the EPA’s 200 3 NOx SIP call, the

EPA stated that there is an insufficient basis curr ently to conclude that SCR is an appropriate technology for the large lean-burn engi nes used for gas compression. The proposed emission limit is achievable through low-N Ox combustion technology, which includes changes to the engine’s timing, enhanced c ontrol of the air-fuel ratio and other changes that lower NOx emissions. For this reason, District staff believes that the proposed emission limit for these engines fulfills RACT for this source category.

9. Non-AO Spark Ignited Engines, Not Listed (Rich-B urn and Lean-Burn)

The proposed emission limit of 11 ppmvd for non-AO spark ignited engines is more stringent than RACT since the engines in question w ould be required to install advanced add-on controls in order to meet the propo sed limit. The proposed emission limit goes beyond RACT for this source category.

10. Consideration for Prohibitory Rules in Other Ca lifornia Air Districts: South Coast AQMD Rule 1110.2 (Emissions from Gaseous - and Liqu id-Fueled Engines)

In considering what benchmarks to use for RACT, it is important to evaluate other emission limits that have been imposed on the same source category. District staff reviewed South Coast AQMD Rule 1110.2, which covers the same source category as

District Rule 4702. South Coast AQMD Rule 1110.2 h as stringent NOx, CO, and VOC emission limits for internal combustion engines.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

24 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 While on the surface it would appear that the South Coast AQMD rule is more stringent, the medium and large operators in the South Coast A ir Basin are most likely part of the South Coast RECLAIM program and therefore, not meet ing the emission limits outlined

in the South Coast AQMD rule. All facilities that emit more than a certain amount of pollution are required to be in the RECLAIM program . Certain companies receive emission allocations every year. Each allocation i s good for 12 months. The portion of the allocation not needed to offset the operator’s own emissions can be sold to other companies. If the operator does not receive an emi ssion allocation, they must buy emission credits from operators with unused emissio n allocations. In this way, the RECLAIM program is similar to a cap-and-trade progr am. At this time, the District is not planning a RECLAIM-type program for this source cat egory. Instead a fee payment program in lieu of complying with the very stringen t NOx limits is proposed. District staff believes that the current rule limits fulfill RACT, as evidenced by the recent approval of the current version of Rule 4702 by EPA. The propo sed limits are beyond RACT and

fulfill the state mandate for all feasible measures

.

11. Conclusion

Since the previous rule was determined to meet RACT and this amendment further strengthens the rule requirements, this rule is exp ected to satisfy RACT, if not go well beyond RACT.

B. Consideration for the Condensable Fraction of PM 2.5

Certain high-temperature processes emit gaseous pol lutants that rapidly condense into particle form in the ambient air. After January 1, 2011, areas that are nonattainment for the National Ambient Air Quality Standard (NAAQS) f or PM2.5 are to consider the condensable fraction of directly emitted PM2.5 for purposes of establishing the

emissions limits for:

• Reasonable Further Progress (RFP), in which an are a shows continuous reductions of directly emitted PM2.5 and precursors , with sufficient emissions reductions to demonstrate attainment by the applica ble deadline

• Reasonably Available Control Technology (RACT) and Reasonably Available Control Measures (RACM), in which a nonattainment a rea shows that it is adopting technologies and measures reasonably avail able, considering technical and economic feasibility; sufficient to demonstrate expeditious attainment; and

meet RFP. (Code of Federal Regulations Title 40 Section 51.10 02(c))

The District established emissions limits for its a ttainment, RFP, and RACT/RACM

demonstrations in the 2008 PM2.5 Plan for the PM2.5 NAAQS as set by EPA in 1997. The District continues to evaluate condensable part iculates and other directly emitted PM2.5 to improve its PM2.5 emissions inventory for future attainment plan efforts.SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

Final Draft Staff Report: Rule 4702 (Internal Comb ustion Engines) August 18, 2011

25 Final Draft Staff Report with Appendices For Proposed Amendments to Rule 4702 Specific emission reduction targets for Rule 4702 w ere neither included in, nor does this action impede, the emissions limits set in the 2008 PM2.5 Plan . The District is not currently aware of significant uncontrolled condens able PM2.5 emissions or related condensable PM2.5 emissions control technologies fo r the sources affected by this amendment. Therefore, the District has satisfied a ny applicable requirement to consider condensable particulates from this source at this time.

XI. REFERENCES

1. California Air Resources Board: Determination of Reasonably Available Control Technology and Best Available Retrofit Control Tech nology for Stationary SparkIgnited Internal Combustion Engines. November 2001.

2. South Coast Air Quality Management District: Rule 1110.2 (Emissions from Gaseous- and Liquid- Fueled Engines). February 1, 2008.

3. South Coast Air Quality Management District: Final Staff Report for Proposed Amended District Rule 1110.2 (Emissions from Gaseou s- and Liquid- Fueled Engines). December 2007.

4. U.S. Environmental Protection Agency: Alternative Control Techniques Document – NOx emissions from Stationary Reciprocating Inter nal Combustion Engines. EPA-453/R-93-032. July 1993.

5. U.S. Environmental Protection Agency: Code of Federal Regulation Title 40 Part 51 Subpart U (Economic Incentive Programs)

6. U.S. Environmental Protection Agency: Code of Federal Regulations Title 40 Section 51 Subpart Z (Provisions for Implementation of PM2.5 National Ambient Air Quality Standards).

7. U.S. Environmental Protection Agency: Technical Support Document for EPA’s Notice of Proposed Rulemaking and Direct Final Rule for the California State Implementation Plan – San Joaquin Valley Unified Ai r Pollution Control District Rule 4702 (Internal Combustion Engine – Phase 2) . August 2007.

8. U.S. Environmental Protection Agency: Stationary Reciprocating Internal Combustion Engines Technical Support Document for N Ox SIP Call . October 2003SAN JOAQUIN VALLEY UNITIFED AIR POLLUTION CONTROL D ISTRICT

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