REPORT: Status Report on Regulation XIII — New Source Review

SYNOPSIS: This report, submitted to the Board pursuant to subdivision (b) of Rule 1310— Analysis and Reporting, provides information on the Status ofRegulation XIII — New Source Review, in meeting State and Federal NSR requirements. This report presents data for August 1998 to July 1999 for State and Federal law compliance.

COMtv11TTEE: Stationary Source, July 28, 2000, Reviewed

RECOMMENDED ACTION:Receive and file.

Barry R. Wallerstein, D.Env.

Executive Officer

CC:MN:WCT:PB:vl

INTRODUCTION

Regulation XIII -New Source Review (NSR) regulates and accounts for emissions increases from the permitting ofnew, modified and relocated sources within the AQMD, provided such emissions are not subject to Regulation XX — Regional Clean Air Incentives Market (RECLAIM) 1.Rule 1310 -Analysis and Reporting, requires the submittal of an annual report to the AQMI) Governing Board on the status ofRegulation XIII in meeting State and Federal NSR requirements.

The last annual report on the status ofRegulation XIII — NSR was submitted to the Board

on April 9, 1999 and covered the period from August 1997 to July 1998 for both State and Federal NSR requirements.

NSR

While the RECLAIM program is “non-traditional” and provides greater regulatory flexibility to businesses, its

Act

requirements are designed to comply with the governing principles of NSR contained in the federal Clean Air (CAA) and the California Health and Safety Code.
substantive change to Regulation XIII -NSR.

The AQMD’s NSR program is required to achieve, at a minimum, emission reductions

equivalent to State and Federal statutory NSR requirements. The AQMD’s NSR program

implements the State and Federal statutory requirements for NSR and ensures that

construction and operation of new and modified sources do not interfere with progress

towards attainment ofthe National and State Ambient Air Quality Standards. Presented

below are the specific requirements of Federal and State law.

Federal Law

Federal law requires the use ofLowest Achievable Emission Rate (LAER) and offsets for

new, modified and relocated sources. Effective November 15, 1992, Section 1 82(e)( 1)

and (2) ofthe Federal CAA require a 1.5-to-i or a 1.2-to-i external offset ratio and a 1.3-

to-i internal offset ratio for VOC or NOx sources that emit or have the potential to emit

10 tons or more per year. 2 The South Coast Air Basin (SOCAB) is the only extreme

ozone non-attainment area in the nation. An extreme ozone non-attainment area may

qualify for the 1.2-to-i offset ratio ifit requires all existing major sources to use federally

defined BACT [CAA Section 1 82(e)( 1)1 which is a federal requirement for ozone

attainment areas.

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

this part, the ratio oftotal emission reductions ofVOCs to all increased emissions ofsuch

air pollutant shall be at least 1.5-to-i... .“ Because the statute uses the term “total

emission reductions”, the offset ratio requirements of Section 1 82(e)( 1) can be met on an

aggregate basis, provided the information is substantiated by an emissions tracking

system. The AQMD’s NSR program meets the Federal offset requirements based upon

the information retrieved from the AQMD’s NSR Tracking System.

2 Section 182(e) of the CAA specifically defines a “major source” and a “major stationary source” as follows “...

any stationary source or group ofsources located within a contiguous area and under common control that emits orhave the potential to emit, at least 10 tons per year of volatile organic compounds.” Section 182(0(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.”

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Based on their classification, the SOCAB and Salton Sea Air Basin (SSAB) 3must comply with the requirements for extreme and severe non-attainment areas, respectively, for ozone precursors (i.e., VOC and NOx). Both the SOCAB and the SSAB must comply with the requirements for serious nonattainment areas for PMI 0 and its precursors. For CO, the SOCAB must comply with the requirements for serious nonattainment areas. The AQMD demonstrates compliance with the “no net emission increase” requirements of State law for the period from August 1998 to July 1999 by demonstrating compliance with the requirements for extreme ozone non-attainment areas (VOC and NOx) and with the requirements for serious nonattainment areas for CO, PM1O, and precursors to PM1O, i.e. SOx.

State Law Methodology

Beginning with the report submitted to the Board on March 13, 1998, the calculation methodology was amended to better reflect actual emissions to determine State law compliance. Prior to that change, the AQMD utilized “maximum allowable permitted” emissions to report emissions subject to the “no net emission increase” requirement of State law. The AQMD now uses “actual” emission levels to represent more realistic emission increases subject to State NSR requirements. The methodology using “permitted” emission levels had over estimated real emission increases and as

a result had produced

a deficit in the NSR equivalency program for nitrogen oxides (NOx) emissions in the past. Since creditable emission reductions are based on actual emission decreases, ARB staff agreed with the AQMD staffthat reporting emission increases with the use of “actual” emissions is an acceptable methodology for demonstrating compliance with the “no net emission increase” requirement of State law. The revised methodology resulted in

a demonstration of equivalency that fully met the requirements of State law.

The AQMD presently uses

a factor of 0.80 to calculate “actual” emissions from “maximum allowable permitted” emissions. This factor was derived based on analysis conducted by AQMD staff. ARB staff have reviewed the analysis, and agreed on the methodology.

Southeast Desert Air Basin was recently changed to the Riverside County portion ofthe Salton Sea Air Basin (SSAB) and the non-Palo Verde Valley, Riverside County portion of the Mojave Desert Air Basin which is currently unclassified.

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offsets meet both Federal and State requirements. The AQMD, however, is responsible

for offsetting emission increases that qualif’ for offset exemption pursuant to Rule 1304.

Consistent with the previous annual report, the information presented in this report is

focused on the supply and demand for creditable emission reductions and required offsetsfor sources for which the AQMD has taken responsibility to provide offsets (i.e., previousCommunity 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 such as Emission Reduction Credits (ERCs) or by internal

mitigation are not included. Therefore, the estimates oftotal supply and demand of

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

demand for sources for which the AQMD is directly responsible to meet the offset

requirements.

This report demonstrates compliance with Federal and State NSR requirements by

demonstration of equivalency in aggregate with Federal and State offset requirements for

this reporting period.

Source of Creditable Emission Reductions

The sources of creditable emission reductions used by the AQMD to demonstrate

compliance with Federal and State NSR requirements are described below.

A. Orphan Shutdowns

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

permanently cease emitting activities, and do not apply for ERCs. These emission

decreases are retained by the AQMD as Orphan Shutdown Credits (OSC) to fund the

NSR program. Three different criteria were applied to determine OSC amounts:

1. If the source was offset by a NSR Rule 1304 exemption, the Community Bank, or

Priority Reserve, the OSC was not discounted for Federal requirements and equals

the Potential to Emit (PTE). However, for State requirements the OSC was

discounted to 80% of the potential to emit to better reflect actual emissions.

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3. For all cases not covered by criteria 1 or 2 above, the source’s PTE was calculated

using the average hourly emissions and a maximum operating schedule (24 hr/day, 7 day/week, 52 week/yr). In order to provide a conservative OSC, the source’s PTE

was discounted by 77% or reduced to 23% of the calculated PTE. The 23% factor is

based on using a more realistic 8 hr/day, 5 day/week, 50 week/yr operating schedule.

B. BACT Discount ofERCs

Emission reduëtions from shutdowns for which ERCs are issued are discounted to BACT levels. The amount discounted is credited to the NSR account as a creditable emission reduction, since they are in excess ofthe Federal NSR requirements.

C. NSR Balances

Discounting negative NSR balances in 1990 generated this source of creditable emission reductions. Negative NSR balances represented a facility’s positive emission reduction credit balance that has not yet been converted to ERC. Negative NSR balances were generated by emission reductions (that were the result of equipment or facility modifications or shutdowns). As part ofthe 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.

Source of Debits from Creditable Emission Reductions

The AQMD’s 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.

A. Community Bank

Until February 1996 no offsets were required for projects whose emission increases, for that project, were below a specified threshold of 30 lbs/day VOC, 40 lbs/day NOx, 60

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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, for example, landfills, sewage treatment plants and other operations.

C. Other Exemptions

Several offset exemptions are provided in Rule 1304 in keeping with AQMD policy forfair and equitable treatment of businesses. Most ofthese exemptions are either beneficial

to the environment or driven by severe economic needs. A more complete explanation of

exempted sources can be found in earlier staffreports for Regulation XIII revisions.

FEDERAL OFFSET REQUIREMENTS

The analysis performed to generate the data presented in this report was based on theemission thresholds that define a “major polluting facility” in the SOCAB. 4Table 1-1

presents the cumulative creditable emission reductions available to offset the emission

increases subject to Federal NSR. Table 1-2 presents the emission increases for which

AQMD is accountable to comply with Federal NSR requirements for the period fromAugust 1, 1998 to July 31, 1999. Table 1-3 presents the balance of creditable emission

reductions available for future compliance with Federal offset requirements.

‘ The thresholds that define major polluting facilities in the SOCAB are more stringent than the thresholds that

define major polluting facilities in the SSAB. Therefore, the analysis is conservative since it may over estimate

the emission increases subject to federal offset requirements.

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BACT Discount ofERCs 0.63 0.00 0.00 0.00 2.75

Carry Over Balance from

August 106.10 22.90 18.70 32.00 42.00 1998

.82 22.94 18.70 32.04 44.76

Table 1-2 presents the “Permitted” emission increases and the calculated emission increases (based on a 1.5 to 1 offset ratio) from Federally recognized facilities which the AQMD is accountable. The table also identifies Community Bank, Priority Reserve, and Rule 1304 Exemptions used by the AQMD to offset the calculated emission increases from Federally recognized facilities.

Table 1-2 - Increases and AQMD Funded Offsets for Federal NSR

(August 1998 -July 1999)

Source VOC NOx SOx CO PM1O

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

Community Bank Offsets 0.03 0.04 0.00 0.00 0.00

Priority Reserve Offsets 0.09 0.07 0.00 0.1 1 0.00

Rule 1304 Offset Sources 1.04 0.92 0.04 2.78 0.05

Permitted Emission Increase 1.16 1.03 0.04 2.89 0.05

Permitted Emission Increase . 1.5 to. 1 1.74 1.55 0.06

.. 4.34 0.07

Balance of Creditable Emissions Reductions presented in Table l2, pg. 6, of the document entitled Effectiveness of Regulation XIII — New Source Review, report to the AQMD Governing Board, April 9, 1999.

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Table 1-3 -Emission Increases for which the AQMD is Accountable 6Comp

Creditable Emission Reductions for Federal NSR Compliance

(August 1998 to July 1999)

Source VOC J NOx SOx CO PM1O

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

Total Emission Increases 1.74 I 1.55 0.06 4.34 0.07

‘From Table 1-2)

Creditable EmissionReductions (From Table 11) 106.82 22.94 18.70 32.04 44.76

NSR Balance - August 1999 105.08 21.39. 18.64 27.70

As presented in Table 1-3, the AQMIYs NSR program meets the offset requirements of

Federal law. Since the AQMD’s BACT standards are equivalent to Federally defined

LAER and the program contains and implements all the Federal NSR requirements for

major sources (Rule 1303), the AQMD’s program is equivalent to and in compliance with

all Federal NSR requirements.

6 Based on a 1.5 to I Offset Factor. Federal levels for offsetting all new and modified VOC and NOx sources that

emit 10 tons or more per year; all new and modified PMIO sources that emit 70 tons or more per year; all new

and modified CO and SOx sources that emit 100 tons or more per year.

0

0

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the State

s 

no net emission increase

requirement for the period from August 1, 1998 to July 31, 1999. Table 1-5 presents the emission increases for which AQMD is accountable to comply with State NSR requirements for the period from August 1, 1998 to July 31, 1999. Table 1-6 presents the cumulative amount of emission increases subject to the State’s “no net emission increase” requirements for the same period for sources for which the AQMD was responsible to meet the State’s offset requirement. Explanation for the source categories may be found earlier under the heading “Federal Offset Requirements.”

Table 1-4 -Creditable Emission Reductions for State NSR Compliance (August 1998 to July 1999)

Source VOC NOx SOx CO PM1O

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

Orphan Shutdowns 4.06 1.70 0.06 1.05 1.17

BACT Discount ofERCs 0.63 0.00 0.00 0.00 2.75

Carry Over Balance from

August 1998 53.50 4.90 18.90 29.10 42.00

Total 58.19 6.60 18.96 30.15 45.92

Revision of Calculation Methodology

Table 1-5 presents the “Permitted” increases and the calculated “Actual” increases (based on 80% ofthe “Permitted” increases) for all emission increases that the AQMD is accountable for in accordance with State NSR requirements. The table also identifies the increases from the Community Bank, Priority Reserve, and Rule 1304 Exempt Emissions.

Creditable Emissions Reductions balance presented in Table 1-4, pg. 9, of the document entitled Report on Effectiveness of Regulation XIII — New Source Review, April 9, 1999.

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Priority Reserve Offsets 0.09 0.13 0.09 0.23 0.01

Rule 1304 Offset Sources 9.24 2.10 0.09 3.50 0.33

Permitted Emission Increase 9.81 2.32 0.18 3.88 0.34

80% of Permitted Increase or “Actual” 7.85 1.86 0.15 ‘ 3.10 0.27

Table 1-6, presents emission increases subject to the State’s “no net emission increase”

requirement compared to creditable emission reductions. The emission increases reported

in Table 1-6 are based on the revised methodology, which calls for the use of “actual”emissions.

AQMD calculates “actual” emission as a percentage of “permitted” missions. Emission

increases using “permitted” emissions were extracted from the NSR Tracking System and

reduced by 20 percent to represent “actual” emissions. Based on previous analysis,AQMD believes that estimating “actual” emissions as 80 percent of “permitted” emission

8 All new and modified VOC and NOx sources (regardless of their potential to emit), and all new and modified

SOx, CO and PMIO sources that emit, or have the potential to emit 15 tons or more per year.

Table 1-6 -Emission Increases for which the AQMD is Accountable Compared to

Creditable Emission

(August

Reductions

1998

for

to July

State

1999)

NSR Compliance 8

Source VOC NOx SOx CO PM1O

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

Creditable Emission 58.19Reductions (From Table 1-4)

6.60 18.96 30.15 45.92

0

0

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State law for the period ofAugust 1998 to July 1999.

CONCLUSION & RECOMMENDATION

The District’s NSR program meets all Federal and State NSR requirements. Under Federal requirements the AQMD received more emissions from Orphan Shutdowns and BACT discounting than it provided as offsets for all pollutants. For State requirements the AQMD provided more VOC, NOx, CO and SOx emission offsets than it received from Orphan Shutdowns and BACT discounting. The AQMD had to offset less PM1O emission increases than it received from Orphan Shutdowns and BACT discounting under the State requirements. The pollutant of greatest concern continues to be NOx. During the period ofAugust 1998 to July 1999, the AQMD offset 1.86 tons per day ofNOx emission increases. During this same period the AQMD rçcovered 1.70 tons per day of NOx credits. The availability ofNOx emission offsets that the District is responsible for will continue to be a primary focus. AQMD staffproposes to continue to assess the

program in detail and ensure compliance with Federal and State NSR requirements.

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