SOUTH COAST AIR QUALITY MAAGEMET DISTRICT 

Staff Report 

Proposed Rule 1315 – Federal ew Source Review Tracking System 

January 7, 2011 

Deputy Executive Officer 

Engineering and Compliance 

Mohsen Nazemi, P.E. 

Author: Mitch Haimov, M.S. – Air Quality Analysis and Compliance Supervisor 

Reviewed By: Kurt Wiese – General Counsel 

 Barbara Baird – District Counsel 

 Elaine Chang, DrPH – Deputy Executive Officer of Planning, Rule 

Development, & Area Sources 

Contributors: William Thompson, P.E. – Senior Manager 

 Gary Turner, P.E. – Air Quality Analysis and Compliance Supervisor 

 George Illes – Senior Air Quality Engineer 
SOUTH COAST AIR QUALITY MAAGEMET DISTRICT 

GOVERIG BOARD 

Chairman: WILLIAM A. BURKE, Ed.D. 

 Speaker of the Assembly Appointee 

Vice Chairman: DENNIS YATES 

 Mayor, City of Chino 

 Cities of San Bernardino County 

MEMBERS:

 MICHAEL D. ANTONOVICH 

 Supervisor, Fifth District 

 County of Los Angeles 

 JOHN J. BENOIT 

 Supervisor, Fourth District 

 County of Riverside 

MICHAEL A. CACCIOTTI 

Mayor, City of South Pasadena 

 Cities of Los Angeles County, Eastern Region 

 BILL CAMPBELL 

Supervisor, Third District 

 County of Orange 

 JANE W. CARNEY 

 Senate Rules Committee Appointee 

 

 JOSIE GONZALES 

Supervisor, Fifth District 

 County of San Bernardino 

 RONALD O. LOVERIDGE 

 Mayor, City of Riverside 

 Cities of Riverside County 

 JOSEPH K. LYOU, PH.D 

 Governor’s Appointee 

 JUDITH MITCHELL 

 Councilmember, City of Rolling Hills Estates 

 Cities of Los Angeles County, Western Region 

 JAN PERRY 

 Councilmember, Ninth District 

 City of Los Angeles Representative 

 MIGUEL PULIDO 

 Mayor, City of Santa Ana 

 Cities of Orange County 

 

EXECUTIVE OFFICER

 BARRY R. WALLERSTEIN, D.Env. 
TABLE OF COTETS 

Page 

EXECUTIVE SUMMARY 1 

BACKGROUD 3 

PROJECT DESCRIPTIO 7 

DISCUSSIO OF AQMD’S PROPOSED REVISED 8 

SR TRACKIG SYSTEM 

SOURCES OF OFFSETS 9 

Pre-1990 Credits 9 

1990 and Beyond Credits 14 

Summary 19 

USE OF OFFSETS 23 

DEMOSTRATIOS OF EQUIVALECY 23

TRACKIG AD BACKSTOP 26 

STATE IMPLEMETATIO PLA AD RULE SUSET DATE 29 

DISCUSSIO OF PR 1315 RULE LAGUAGE 29 

CALIFORIA HEALTH AD SAFETY SECTIO 34 

40440.5(c)(3)—REQUIRED STAFF REPORT ELEMETS 

CEQA AALYSIS 36 

SOCIO-ECOOMIC IMPACTS 376

AQMP AD LEGAL MADATES 37 

RESOURCE IMPACTS 37 

DRAFT FIDIGS 37 

COCLUSIOS AD RECOMMEDATIOS 38 

APPEDIX I: AQMD’S SR OFFSET TRACKIG—FEDERAL I-1 

RUIG BALACES 

APPEDIX II: LIST OF SOURCES EXEMPT FROM OFFSET II-1 

REQUIREMETS AD PROVISIOS COVERED BY 

EQUIVALECY SHOWIG 
Page 1

EXECUTIVE SUMMARY 

AQMD’s New Source Review (NSR) program is defined in and established by Regulation XIII – 

New Source Review. EPA approved AQMD’s Regulation XIII into the State Implementation 

Plan (SIP) in 1996 (Federal Register Volume 61, No. 234, pages 64291-94), establishing that 

AQMD’s NSR requirements and the federal NSR requirements are programmatically 

equivalent1. As part of the preamble to this SIP-approval, EPA stated that AQMD was expected 

to track both emission increases from major sources not required to provide emissions offsets 

and offsetting emission reductions. The purpose of the tracking was to make annual showings 

that the aggregate emissions offsets provided by AQMD for emission increases pursuant to 

AQMD’s NSR program for sources exempt from emissions offsets are equal to (or greater than) 

the aggregate emissions offsets that would be required for such sources pursuant to the federal 

NSR offset requirements. Emissions offsets are emission reductions created at one location to 

compensate and balance emission increases at another location. AQMD’s NSR program (Rule 

1303) requires that emission increases are offset by emission reduction credits (ERCs) provided 

by the applicant or by allocations from the Priority Reserve pursuant to Rule 1309.1 – Priority 

Reserve unless they are exempt from offset requirements pursuant to Rule 1304 - Exemptions. 

The federal new source review program does not provide any offset exemptions for most of the 

Priority Reserve sources or for the sources that qualify for the exemptions listed in Rule 1304. 

Therefore, major sources subject to Rule 1309.1 or exempt under Rule 1304 are not exempt from 

the offset requirements of federal NSR. As a result, AQMD maintains internal offset accounts 

from which it provides offsets for federal major sources exempt from AQMD’s NSR 

requirements pursuant to Rule 1304 and for federal major sources that receive offsets from the 

Priority Reserve (Rule 1309.1; principally essential public services). AQMD tracks all 

disbursements from these offset accounts, as well as all deposits to them. The results of this 

tracking are aggregated and reported on an annual basis. These annual reports summarize the 

disbursements from and deposits to AQMD’s offset accounts, as well as the running account 

balances. They also demonstrate programmatic equivalency between AQMD’s NSR offset 

requirements and federal NSR offset requirements contained in the federal Clean Air Act for 

such sources. 

Rule 1315 – Federal New Source Review Tracking System was initially developed and adopted 

in 2006 to: 

• Formalize AQMD’s then-existing accounting methodology used to track debits from and 

credits to AQMD’s federal offset accounts and AQMD’s equivalency demonstration and 

reporting procedures; 

• Remove certain categories of offset credits, including pre-1990 credits without sufficient 

currently-available documentation and almost all the BACT discounts of newly issued 

ERCs, from AQMD’s federal offset accounts; and 

• Track creditable and eligible offset sources in AQMD’s federal offset accounts, which were 

previously not tracked in the federal tracking system, including surplus emission reductions 

 

1

 Subsequent to that, in June 2006, EPA SIP-approved AQMD’s May 2002 amendments to Rule 1309.1 (Federal

Register Volume 71, No. 117, pages 35157-59). 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 2

from minor sources and use of ERCs as emissions offsets beyond federal NSR offset 

requirements. 

The accounting methodology contained in Rule 1315 as adopted in 2006 was intended to be used 

to continue to annually demonstrate that emissions increases from sources that are not required to 

provide ERCs (i.e., sources whose offsets are provided by AQMD) are offset by AQMD’s 

accounts. The rule applied exclusively to AQMD’s internal federal offset accounts. Therefore, 

the accounting methodology and equivalency demonstration requirements did not impact holders 

of ERCs. 

At the same time as it adopted Rule 1315 in 2006, AQMD also adopted amendments to Rule 

1309.1. The amendments to Rule 1309.1 would have allowed power plants on a temporary basis 

to access to the Priority Reserve upon qualifying and paying mitigation fees. 

A lawsuit was filed in Superior Court regarding Rules 1309.1 and 1315 after their joint 

September 2006 amendment (Rule 1309.1) and adoption (Rule 1315) on California 

Environmental Quality Act (CEQA) grounds. On August 3, 2007, AQMD approved a Program 

Environmental Assessment, re-amended Rule 1309.1 by adding more stringent air quality and 

health risk requirements for power plants to qualify for access to the Priority Reserve, and 

readopted Rule 1315, rendering the litigation moot. However, a new lawsuit was filed 

challenging the August 2007 amendment and adoption, again on CEQA grounds. The 

petitioners prevailed in this case, and the Superior Court of the State of California, County of Los 

Angeles (Court) issued a writ of mandate ordering AQMD to, inter alia, set aside the August 

2007 rule adoptions. AQMD repealed Rule 1315 and the August 3, 2007 amendments to Rule 

1309.1 in January 2010. 

AQMD now proposes to adopt a revised version of Rule 1315. The current Proposed Rule 1315 

(PR 1315) is similar to the rule previously adopted in 2006 and 2007 but includes an updated and 

more detailed Purpose subdivision and several new definitions, introduces the concept of 

tracking cumulative net emissions increases resulting from implementation of the proposed rule, 

strengthens the backstop provisions designed to ensure programmatic equivalency with the offset 

requirements of federal NSR, and adds a new set of backstop provisions that are designed to 

ensure the actual cumulative net increases in potential to emit nonattainment air contaminants 

resulting from implementation of the proposed rule do not need exceed the anticipated increases 

that were analyzed in the CEQA review of the proposed rule. The CEQA document (Program 

Environmental Assessment or PEA) prepared for PR 1315 analyzes direct and indirect impacts 

that could result from implementation of PR 1315, and addresses concerns expressed by the 

Court. This analysis of impacts includes the direct and indirect impacts of issuing permits 

relying on the Priority Reserve pursuant to Rule 1309.1 and/or offset exemptions pursuant to 

Rule 1304 to non-major sources even though the proposed Federal NSR tracking rule would not

track such non-major source permit actions. This is because AQMD interpreted the Court 

decision as preventing the issuance of permits relying on the Priority Reserve and/or the offset 

exemptions of Rule 1304 to either minor or major sources until a federal tracking rule is adopted 

in compliance with CEQA requirements. Thus, a direct result of adoption of Proposed Rule 

1315 would be the issuance of such permits to both minor and major sources. The AQMD does

not propose to re-adopt the amendments to Rule 1309.1 for power plants. SB 827, California 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 3

Health and Safety Code Section 40440.13, effective January 1, 2010, allows AQMD until May 1, 

2012 to issue permits pursuant to Rules 1309.1 and 1304. 

BACKGROUD 

In general, the Federal Clean Air Act (CAA) requires that emission increases of nonattainment 

air pollutants from new and major modifications of federal major sources be offset with equal or 

greater quantities of emissions decreases. The specific quantity of emission decreases required 

to offset a specific increase in federal nonattainment emissions is dependent upon the pollutant’s 

federal nonattainment classification for the air basin in which the increase occurs. In the case of 

AQMD, the applicable offset ratios are 1.2 pounds of decrease for every 1.0 pounds of increase 

for VOC and NOx2 and at least 1.0 pounds of decrease for every 1.0 pounds of increase for all 

other nonattainment pollutants and their precursors. Some aspects of the offset requirements in 

AQMD’s NSR program (Regulation XIII – New Source Review3) are more stringent than the 

federal offset requirements,. For example, Regulation XIII is more stringent in that it requires 

offsets for increases from sources that are not federal major sources (federal minor sources) and 

an offset ratio of 1.2-to-1.0 for all nonattainment pollutants and their precursors (rather than the 

federally-required 1.0-to-1.0 for pollutants other than VOC and NOx). On the other hand, 

Regulation XIII includes certain exemptions from the offset requirement that do not exist in 

federal NSR. Several of these exemptions, however, are necessitated by the increased stringency 

of the AQMD NSR program as compared to the federal program. 

AQMD submitted its NSR program to California Air Resources Board (CARB) for approval into 

the SIP. CARB approved AQMD’s NSR program as satisfying the applicable requirements 

without condition and forwarded the rules to the United States Environmental Protection Agency 

(EPA) for federal approval into the SIP. EPA subsequently approved AQMD’s NSR program 

into the SIP (refer to Table 1 for the specific revisions of each rule in Regulation XIII that EPA 

has approved). However, EPA’s approval in the preamble anticipated that AQMD would 

implement a tracking system to account for emission decreases of federal nonattainment air 

contaminants that occur under AQMD’s NSR program but that are surplus under federal NSR, as 

well as emission increases of federal nonattainment pollutants that occur under AQMD’s NSR 

program without individually complying with federal NSR’s offset requirements4. The purpose 

of this tracking system referred to in EPA’s Technical Support Document is to “continuously 

show that in the aggregate the District will be able to provide for the necessary offsets required 

to meet the appropriate statutory offset ratio” (TSD, p. 16). The TSD further states that “EPA 

 

2

 As precursors to ozone (for which the South Coast Air Basin is designated by EPA as extreme nonattainment), the 

federally-required offset ratio for VOC and NOx applicable to AQMD would be 1.5-to-1.0, but AQMD requires 

installation of Best Available Retrofit Control Technology (BARCT, which is equivalent to federal Best Available 

Control Technology or BACT) on all permitted sources, making AQMD eligible to use a 1.2-to-1.0 offset ratio for 

VOC and NOx under the federal Clean Air Act (42 U.S.C. §7511a(e)(1) and §7511a(f)(1)). 

3

 AQMD’s Regional Clean Air Incentives Market (RECLAIM) program includes its own NSR requirements for 

new and modified sources of NOx and/or SOx subject to RECLAIM in its Rule 2005 – New Source Review for

RECLAIM. PR 1315 is not applicable to RECLAIM emissions, so Rule 2005 is outside the scope of this 

discussion. 

4

 United States Environmental Protection Agency, Region IX Air & Toxics Division Technical Support Document 

for EPA’s Notice of Final Rulemaking for the California State Implementation Plan South Coast Air Quality 

Management District New Source Review by Gerardo C. Rios, October 24, 1996 (Technical Support Document or 

TSD). 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 4

determined that the District’s proposal to offset all emissions increases with emissions reductions 

not otherwise required by the Act could be met in the aggregate was consistent with the language 

of the Act” (p. 16). Thus, AQMD’s development and maintenance of a tracking system to 

account for the differences in emissions reductions achieved by and offsets required by the 

AQMD and federal NSR programs is expected by EPA’s approval of Regulation XIII into the 

SIP. EPA determined in 1996 that AQMD’s internal offsets “meet or exceed the legal 

requirements in Section 173(c).”5 Responses to Comments for Docket No. EPA-R09-OAR-2006-

0281, Revisions to the California State Implementation Plan, South Coast Air Quality 

Management District. 

Table 1 

SIP-Approved Revisions of AQMD’s NSR Rules 

 Rule AQMD Adoption Date(s) 

 213 10/8/1976 (Rescinded by AQMD 6/28/1990) 

 1300 (Rescinded by AQMD 6/28/1990) 

 1301 12/7/1995 

 1302 12/7/1995, 6/13/1997 

 1303 5/10/1996 

 1304 6/14/1996 

 1305 4/6/1984 (Rescinded by AQMD 6/28/1990) 

 1306 6/14/1996 

 1307 (Rescinded by AQMD 6/28/1990) 

 1308 10/5/1979 or 3/7/1980 or 4/4/1980 or 7/11/1980 (Rescinded by 

AQMD 6/28/1990) 

 1309 12/7/1995 

 1309.1 12/7/1995, 5/3/2002 

 1309.2 (Rescinded by AQMD 2/5/2010) 

 1310 12/7/1995 

 1311 10/5/1979 (Rescinded by AQMD 6/28/1990) 

 1312 (Rescinded by AQMD 6/28/1990) 

 1313 12/7/1995 

 1315 (Rescinded by AQMD 1/8/2010) 

Since EPA’s October 1996 approval of AQMD’s NSR program, AQMD has implemented an 

NSR tracking system to demonstrate programmatic equivalence between its NSR program and 

the offset requirements of the federal program. As a part of this effort, AQMD staff has prepared 

and presented to the AQMD Governing Board at public meetings a series of reports that track 

credits and debits from August 1990 through July 2002 and present the remaining balances of 

credits in AQMD’s federal accounts including the initial pre-1990 offsets. These NSR tracking 

reports go back to the year 1990 because that was the year when fundamental amendments were 

made to AQMD’s Regulation XIII. A key source of credits in these tracking reports was 

“orphan shutdowns” of federal major sources. “Orphan shutdowns” refers to shutdowns of 

 

5

 Responses to Comments for Docket No. EPA-R09-OAR-2006-0281, Revisions to the California State 

Implementation Plan, South Coast Air Quality Management District. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 5

sources that did not receive ERCs either because they originally obtained their offsets from 

AQMD or because they failed to properly claim ERCs. Other credit sources included “negative 

NSR balances” resulting from permit actions prior to 1990, and the “BACT discount” currently 

required by Regulation XIII when banking ERCs. Additionally, the staff report for the original 

adoption of Rule 1315 in September 2006 included preliminary revised tracking of credits and 

debits pursuant to the revised tracking system embodied in then-Proposed Rule 1315 from 1990 

through July 2004. After Rule 1315 was adopted additional tracking reports finalizing the 

revised tracking through 2005 as well as tracking the 2006 debits but not 2006 credits6 were 

presented to the Governing Board. 

In 2002 AQMD adopted an Offset Budget rule (Rule 1309.2 – Offset Budget) as part of 

AQMD’s NSR program to address some of the shortage problems with ERCs. As adopted, Rule 

1309.2 would have made the Offset Budget available as a “bank of last resort” to sources subject 

to AQMD’s NSR offset requirements but unable to obtain sufficient NOx, SOx, CO, or PM10 

ERCs to provide as emissions offsets on the open market7. Offset credits would have been 

available to such sources from the Offset Budget provided the sources paid a non-refundable 

mitigation fee based on the quantity and type of offsets to be obtained from the Offset Budget. 

As part of the discussions between EPA and AQMD regarding Rule 1309.2, EPA raised some 

questions related to the credits in AQMD’s offset accounts for use in the Offset Budget. Among 

the key issues raised by EPA were the following: 

• availability of pre-1990 emission reductions, particularly availability of existing records 

associated with such reductions; 

• availability of reductions resulting from the BACT discount of newly-banked ERCs, since 

the discount is presumably also used to satisfy the federal surplus at the time of use discount 

requirement; 

• baseline calculation procedures to assure an “actual” baseline; 

• surplus adjustment at time of use for credits in the tracking system; and 

• consistency of credit use with assumptions in the SIP. 

EPA staff requested that these issues be resolved prior to EPA considering approval of Rule 

1309.2 into the SIP. EPA staff also requested that AQMD adopt a rule specifying how the 

tracking of debits and credits would occur in the future. Therefore, EPA and AQMD staff 

engaged in a series of discussions to develop a proposed revised NSR tracking system intended 

to demonstrate continued programmatic equivalency of AQMD’s NSR program with federal 

NSR requirements and to address EPA’s above-described concerns. AQMD spent several 

thousand person hours to evaluate the existing NSR tracking system as a part of this effort. Rule 

 

6

 The Court decision enjoining AQMD from implementing Rule 1315 was issued after the report describing 2006 

credits was presented to the Governing Board’s Stationary Source Committee but before it was presented to the 

Governing Board itself. Therefore, that report was never finalized. This staff report brings the tracking up to 

date. 

7

 Rule 1309.2 included a provision specifying that the Offset Budget would be established by the Executive Officer 

upon approval of the rule by CARB and EPA. EPA never approved the rule and AQMD’s Governing Board 

repealed the rule in February 2010. Therefore, the Offset Budget was never implemented and no permits were 

ever issued relying upon the Offset Budget. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 6

1315 – Federal New Source Review Tracking System, as adopted September 8, 2006, was the 

result of this process. 

AQMD’s Governing Board adopted Rule 1315 along with amendments to Rule 1309.1 – Priority 

Reserve (creating a mechanism for proposed electrical generating facilities (EGFs) to 

temporarily obtain emissions offsets for specified nonattainment pollutants from the Priority 

Reserve) on September 8, 2006. Pursuant to the California Environmental Quality Act (CEQA), 

AQMD determined the adoption of Rule 1315 and the amendment of Rule 1309.1 were exempt 

from CEQA8. A group of environmental organizations that had opposed these rule actions 

during the Public Hearing filed suit against AQMD challenging these rules on CEQA grounds, 

disputing that either rulemaking was exempt from CEQA. After AQMD’s demurer was 

overruled, and rather than wait for the suit to be finally decided in court, possibly resulting in the 

rule actions being vacated and the resulting need to readopt Rule 1315 and the amendments to 

Rule 1309.1 after many months of delay, AQMD initiated the process of preparing a full CEQA 

analysis for Rule 1315 and the amendments to Rule 1309.1 while the litigation was pending. 

The case was therefore dismissed as moot. The Governing Board approved a Program

Environmental Assessment, readopted Rule 1315 and re-amended Rule 1309.1 on August 3, 

2007. The September 2006 and August 2007 adoptions of Rule 1315 were identical; the August 

2007 amendments to Rule 1309.1 differed from the September 2006 amendments in that they 

included additional environmental requirements based on the location of the project in 

environmental justice or more polluted areas. The same environmental organizations considered 

the CEQA documents for the August 3, 2007 re-adoption and re-amendment inadequate and 

again filed suit and prevailed in the Superior Court of the State of California, County of Los 

Angeles (Court), resulting in a July 28, 2008 Court decision determining that the August 2007 

Governing Board action adopting Rule 1315 and amending Rule 1309.1 would be vacated and 

that AQMD would be enjoined from “undertaking any action to further implement these rules 

pending CEQA compliance.” The Court subsequently issued a writ of mandate on November 3, 

2008 ordering AQMD to, inter alia, set aside its actions to adopt Rule 1315 and amend Rule 

1309.1, “including the certification of the Final Program Environmental Assessment.” AQMD 

does not intend to readopt the amendments to Rule 1309.1 for power plants, but is proceeding 

with a rulemaking effort to replace the set aside version of Rule 1315 with a different version 

(PR 1315) supported by a new environmental assessment that analyzes the potential direct and 

indirect impacts of PR 1315, and addresses concerns expressed by the Court. 

During the interval between the September 8, 2006 adoption of Rule 1315 and the July 28, 2008 

Court decision ordering it to be vacated, AQMD implemented Rule 1315 to demonstrate ongoing 

equivalency between AQMD’s NSR program and federal NSR requirements. Therefore, a Status 

Report on Regulation XIII – New Source Review was presented to the Governing Board on 

February 2, 2007 and a second status report was presented on September 7, 2007. The first of 

these reports demonstrated continued equivalency for the August 2002 through July 2003 and 

 

8

 AQMD staff reviewed then-Proposed Rule 1315 and concluded that it did not meet CEQA’s definition of 

“project” and, even if it were determined to be a project, that it was exempt from CEQA pursuant to CEQA 

Guidelines §15061(b)(3), referred to as the general rule or commonsense exemption. Similarly, staff concluded 

that the amendments to Rule 1309.1 were exempt because each of the EGF projects which would make use of the 

amendments would be subject to individual CEQA review with the California Energy Commission as lead 

agency, making the amendments statutorily exempt from CEQA pursuant to CEQA Guidelines §15271 – Early 

Activities Related to Thermal Power Plants. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 7

August 2003 through July 2004 time periods; the second report did so for the August 2004 

through December 2005 time period. The accounting procedures for demonstrating equivalency 

between AQMD’s NSR program and federal NSR remain consistent between the previouslyadopted versions of Rule 1315 and the current PR 1315. Therefore, the NSR tracking presented 

in the staff reports for the September 2006 and August 2007 adoptions of Rule 1315 were 

consistent with the provisions of the current PR 1315, as were the February and September 2007 

status reports on Regulation XIII. As a result, if of the current PR 1315 is adopted, the February 

and September 2007 reports will be consistent with the newly-adopted Rule 1315 and with the 

exception of minor adjustments (see Appendix I) no new federal tracking reports for August 

2002 through December 2005 will be needed. The balances in AQMD’s federal offset accounts 

as of December 31, 2005 are shown in Table 2. 

Table 2 

AQMD’s Federal Offset Account Balances as of December 31, 2005 

(Tons per Day) 

 VOC NOx SOx CO PM10 

Balance 64.40 23.61 1.89 11.08 10.77 

PROJECT DESCRIPTIO 

In light of the circumstances described above, AQMD proposes to adopt Rule 1315 – Federal 

New Source Review Tracking System with the following objectives: 

• Maintain AQMD’s ability to continue to administer its new source review program for major 

and minor sources for facility modernization and to accommodate population growth through 

implementation of Rule 1304 and Rule 1309.1. AQMD’s policy objectives include allowing

the permitting system to operate in order to: 1) allow facility modernization which will 

increase efficiency and reduce air pollution, 2) allow facilities to install pollution control 

equipment, 3) allow emergency equipment to be installed, 4) allow permitting of equipment 

necessary for essential public services and small emitters, 5) allow operation of portable 

equipment and other sources determined as a policy matter to be exempt from offsets or 

eligible for Priority Reserve credits, and 6) take into account environmental and 

socioeconomic benefits as well as environmental and socioeconomic impacts; 

• Memorialize in rule form the accounting procedures AQMD uses to establish equivalency of 

AQMD’s New Source Review program with federal offset requirements, and ensure that 

valid offsets are projected to be available in AQMD internal offset accounts before a major 

source relying on such offsets is permitted thus assuring that increases in emissions resulting 

from such sources are fully offset; and 

• Recognize sufficient previously-unused emission reductions that are beyond those required 

by applicable regulatory requirements in order to demonstrate federal equivalency for major 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 8

sources that are exempt under Rule 1304 or that obtain credits from the Priority Reserve 

under Rule 1309.1. 

PR 1315 would be used to establish that exempt sources (under Rule 1304) and Priority Reserve 

sources (under Rule 1309.1) are fully offset to the extent required by federal law by valid 

emission reductions from AQMD’s internal offset accounts. PR 1315 would achieve this by 

establishing what types of reductions are eligible to be used to offset emissions. PR 1315 would 

also allow the use of certain previously unused credits that are eligible to offset emission 

increases. For example, PR 1315 would recognize emission reductions generated from minor 

source “orphan shutdowns,” which were not previously accounted for in AQMD’s NSR tracking 

system and federal equivalency demonstrations, to offset emission increases from other sources. 

PR 1315 would also exclude from the applicable equivalency obligation any new or modified 

permits that are not required to provide offsets under federal law. PR 1315 would expire January 

1, 2031. AQMD has prepared a Program Environmental Assessment for this rule development 

effort. 

DISCUSSIO OF AQMD’S PROPOSED REVISED SR TRACKIG SYSTEM 

AQMD staff has developed a proposed rule that formalizes AQMD’s NSR tracking system and 

includes certain revisions to the procedures used in the previous tracking system that existed 

prior to September 2006. The proposed revised procedures include elimination of all pre-1990 

credits for which AQMD no longer retains documentation. AQMD has also included additional

classes of creditable and eligible offsets in the proposed revised tracking system, including 

orphan shutdowns and orphan reductions of minor sources, as well as other surplus reductions. 

As a result of these revisions, and even with the inclusion of the additional offset sources, 

AQMD’s previously-reported 2002 federal offset account balances9 for all pollutants except for 

NOx10 would be reduced, depending on the pollutant, by from 37% to 81%. Several elements of 

the proposed revisions to AQMD’s tracking system contribute to these reductions, as discussed 

below, but the single element of the proposal with the greatest contribution is the reevaluation of 

pre-1990 credits and proposed elimination of all offsets for which AQMD no longer retains 

documentation. As a result of this proposed change, AQMD’s pre-1990 credits would be 

reduced, depending on the pollutant, by from 7% to 92%. The specific amounts of reductions for 

each pollutant for the pre-1990 and the 2002 offset account balances are shown in Table 3. 

 

9

 This was the latest NSR Annual Report utilizing the pre-September 6, 2006 tracking procedures. 

10 The 2002 federal NOx balance increased relative to the previously-reported 2002 balance. This increase is the 

result of both the fact that reevaluation of the pre-1990 balances had only a minor impact on NOx (7 % reduction 

compared with 56 % to 92 % reductions for the other four pollutants) and the inclusion of additional offset 

sources into the revised federal tracking system that have always been surplus but previously were not tracked due 

to the ample supply of offsets in AQMD’s federal offset accounts for all five pollutants. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 9

Table 3 

Pre-1990 Credits Deposited in AQMD’s Offset Accounts/ 

Reduction in 2002 Federal Offset Account Balances 

(Tons per Day) 

 VOC NOx SOx CO PM10 Overall

 Previously-Reported Pre-1990 

Credits 92.4 25.8 18.4 34.9 34.5 206.0 

 Revised Pre-1990 Credits Verified 

with Records or Validation 

Procedures 

38.46 23.92 8.04 8.45 2.67 81.54 

Percent Reduction in Pre-1990 

Credits 58% 7% 56% 76% 92% 60% 

 Previously-Reported 2002 Federal 

Offset Account Balances 107.65 21.60 18.76 24.09 41.24 213.34

 Revised 2002 Federal Offset 

Account Balances 68.70 28.84 10.72 7.84 7.68 123.78

Percent Reduction in 2002 

Federal Offset Account Balances 36% -34% 43% 67% 81% 42% 

The detailed line-by-line adjusted credit balances that result from the proposed modified 

procedures are shown in Appendix I: AQMD’s SR Offset Tracking—Updated Federal Running 

Balances. The following is a more detailed description of the proposed changes. 

SOURCES OF OFFSETS 

AQMD has described in its annual status reports on Regulation XIII a 1990 starting balance for 

offset accounts based on data available in 1990. While portions of pre-1990 credits were used 

years ago, EPA staff requested an accounting of the validity of such offsets to ensure that they 

were creditable. To that end, EPA staff raised questions about the availability of records relating 

to the pre-1990 credits. To address these and other issues raised by EPA, AQMD staff spent 

several thousand staff hours reviewing and reevaluating all available data for the offsets in 

AQMD’s federal offset accounts, including the pre-1990 credits in the 1990 starting balances. 

The following is a description of sources of offsets in AQMD’s tracking system. The pre-1990 

timeframe and the 1990 and beyond timeframe are addressed separately due to differing 

provisions of AQMD rules applicable to generation of offsets in these time periods. 

Pre-1990 Credits 

Pre-1990 Permitting Program 

AQMD had, and continues to have, a robust stationary source permitting program for all sources 

regardless of potential to emit (including both major and minor sources) in place well before 

1990. Key elements of that program are summarized below: 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 10

 Permit Rules 

Since prior to 1976, the year that AQMD adopted its initial NSR rules, virtually any 

construction or modification of a source has required the operator to obtain a permit to 

construct from AQMD (Rule 201 – Permit to Construct). The only exceptions to these 

permit requirements are, and at all times were, specified in AQMD Rule 219 – Equipment 

not Requiring a Written Permit Pursuant to Regulation II, which exempts certain equipment 

from permit requirements due to minimal potential to affect air quality. With the exception 

of the specific exemptions in Rule 219, there has been no exemption from permit

requirements for sources emitting even relatively small amounts of air contaminants; that is, 

all sources with potential to emit or control air contaminants, including all federal minor 

sources, have been required to obtain permits when constructed or modified unless 

specifically exempted by Rule 219. 

 New Source Review Rules 

AQMD adopted its initial New Source Review rules in October 1976, prior to the adoption of 

the New Source Review requirements into the federal CAA. Originally included in Rule 213 

– Standards for Permits to Construct: Air Quality Impact, the NSR rules were moved into a 

series of rules in Regulation XIII – New Source Review in 1979. The rules required 

offsetting of emissions increases that exceeded certain thresholds. The thresholds were 

decreased over time pursuant to rule amendments. For example, for volatile organic 

compounds and nitrogen oxides, the offset threshold initially was 250 pounds per day, and 

was reduced by rule amendments during the 1980’s to 150 pounds per day, 75 pounds per 

day, 30 pounds VOC per day and 40 pounds NOx per day, and finally down to zero, 

requiring no net increase in potential to emit (using an actual emissions baseline if the source 

had not previously undergone NSR analysis as described under the discussion of NSR 

Balance below), unless ERCs are provided or specifically exempt from offset requirements 

pursuant to Regulation XIII. 

 NSR Balance 

Prior to 1990, in order to implement its offset requirements, AQMD kept a running “NSR 

balance” for each facility with permitted sources. The NSR balance included an entry for 

every increase and every decrease in emissions at the facility that resulted from a permit 

action. The entries in the NSR balance were based on maximum allowable emissions, i.e. the 

maximum amount of emissions that a source could emit given its physical capabilities and 

permit limitations and rule requirements. However, the NSR balance was initially 

determined for each piece of equipment which had not previously undergone NSR analysis 

(i.e., pre-NSR equipment) from an actual emissions baseline for that equipment. Any 

subsequent NSR activity for such equipment was conducted on a potential-to-potential basis. 

Therefore, a pre-NSR source modified under NSR would be subject to NSR on an actual-topotential basis (i.e., actual pre-modification emissions to potential post-modification 

emissions)—a very conservative approach. 

Prior to 1990, emissions offsets were required when a permit was sought for construction of a 

new source, or for modification of an existing source, that would cause the sum of increases 

and decreases at a facility (i.e. the NSR balance) to exceed the pre-1990 offset threshold 

levels in effect at the time of permit issuance. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 11

NSR balance entries had to be quantifiable and enforceable. Such entries only occurred 

pursuant to permit applications with sufficient substantiating data to ensure quantifiability, 

after evaluation by AQMD engineers and review by supervisory staff pursuant to Regulation 

XIII rules and implementing policies established by the agency, and upon issuance of permits 

or permit modifications that were enforceable under state law. 

AQMD applied substantial resources to implementing these rules. For example, from 1985 

through 1989 AQMD’s engineering staff that processed permits consisted of between 97 and 

175 professional engineers and supervisory and management staff. In sum, at all times 

including, but not limited to, prior to 1990, AQMD has had a robust air quality permitting 

system—a system that AQMD considers qualitatively superior in terms of quantification and 

reliability to any other NSR permitting system in the nation. 

 Compliance with Federal NSR Requirements 

In addition to being reliable, the above-described pre-1990 AQMD NSR rules fully complied 

with all federal requirements. AQMD’s NSR rules were more stringent than required by 

federal law in the following important respects: (1) offset thresholds were lower than 

required by federal law and; (2) unlike federal requirements that allowed “bubbling” or 

netting out of LAER, until the 1990 amendments to the CAA, which prohibited netting out 

for ozone precursors, AQMD’s BACT requirement (equivalent to federal LAER) applied to 

any emissions increase from an individual piece of equipment; i.e., there was no netting out 

of LAER; (3) a 1.2-to-1.0 offset ratio was used for all sources and all emittents while federal 

law required a 1.2-to-1.0 offset ratio for precursors to ozone (i.e., VOC and NOx) provided 

federal BACT is required for all major sources and a 1.0-to-1.0 offset ratio for SOx, CO, and 

PM10; and (4) AQMD had a zero BACT threshold (i.e., BACT—federal LAER—was 

required for all emission increases, no matter how small at all sources, no matter how low the 

potential to emit). EPA SIP-approved AQMD’s Rule 201 as amended January 5, 1990, and 

AQMD’s NSR rules as adopted or amended on the dates identified in Table 1, above. 

 Negative Balances 

By 1990, some facilities had negative NSR balances. These negative balances were the 

result of equipment shutdowns or process changes since October 1976 that resulted in 

reductions in emissions from one or more sources exceeding any increases at the facility. 

The majority of negative balances resulted from equipment shutdowns. Like all entries 

contributing to a facility’s NSR balance, negative entries only occurred pursuant to permit 

actions—i.e. either modification of an AQMD permit or shutdown of equipment and 

inactivation of the associated permit. Negative entries were quantified by AQMD engineers 

based upon the permitted physical capabilities of the modified or shut down equipment and 

applicable permit and rule requirements; negative balances resulted when the sum of a 

facility’s positive and negative NSR entries was negative. 

Pre-1990 Accounting as it Existed Prior to September 8, 2006 

AQMD’s offset accounts were established with starting balances based on pre-1990 emissions 

reductions. The primary source of these pre-1990 reductions was a portion of facilities’ negative 

NSR balances that were discounted as specified in the 1990 amendments to Regulation XIII 

(described below). The 1990 Regulation XIII amendments also directed the Executive Officer to 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 12

recall all existing pre-1990 ERCs that had resulted from shutdowns, discount them by eighty 

percent, and issue new ERCs at twenty percent of their original values. The eighty percent 

discount of the pre-1990 shutdown ERCs was deposited into AQMD’s offset accounts along

with the amounts derived from the discount of pre-1990 negative balances (further explanation 

of the implementation of the 1990 amendments to Regulation XIII is provided with the 

discussion of AQMD’s proposed revisions to its pre-1990 accounting). All of AQMD’s annual 

status reports prepared prior to September 2006 included the starting balances from these sources 

(discount of pre-1990 negative balances and pre-1990 shutdown ERCs); AQMD has not prior to 

the initial adoption of Rule 1315 taken credit for any other pre-1990 offset sources, such as the 

zero BACT threshold, use of ERCs by minor sources, and the additional ERCs provided by 

major sources for SOx, CO, and PM10 at a ratio of 1.2-to-1.0 compared to 1.0-to-1.0. 

Proposed Adjustments to Pre-1990 Accounting 

AQMD is now proposing to significantly reduce (by more than 60% overall) its pre-1990 

emission offsets balances as they existed prior to September 8, 2006 by continuing to eliminate 

any present or past use of any offsets for which AQMD presently has no records in its possession 

so cannot re-verify their validity and to only utilize the portion of the previously-reported pre1990 emission reductions that was originally validated in 1990 and 1991 and revalidated in 2003 

through 2005 as offsets in its tracking system and for which AQMD has all or some records. 

The emission reductions that underlie those offsets occurred between 20 and 34 years ago, and 

not all records related to them are available today. In many cases, however, summary data based 

on previous analyses are available. In addition, AQMD at all relevant times prior to and after 

1990 had a sufficiently robust permitting program and record validation procedure to provide a 

high level of confidence regarding the validated emission reductions for which AQMD proposes 

to retain pre-1990 credits. This conclusion is supported by the facts summarized in the preceding 

discussion of AQMD’s pre-1990 permitting program and the following summary of the 1990 

Regulation XIII amendments and their implementation: 

 1990 Regulation XIII Amendments

AQMD substantially modified Regulation XIII in 1990. The offset threshold was dropped to 

zero, although relatively small emitting facilities (e.g. less than 30 pounds per day of VOC or 

40 pounds per day of NOx) were eligible to obtain needed offsets from a new “Community 

Bank.” Under the 1990 amendments, negative balances were to be “verified by the 

Executive Officer” and discounted by 80%. The rules specified that “upon validation” the 

remaining 20% was to be issued to the permit holder in the form of an ERC (Rule 1309(a)). 

 Implementation of 1990 Amendments 

Shortly after adoption of the 1990 amendments to Regulation XIII, AQMD staff drafted a 

detailed internal guidance document titled “Regulation XIII – New Source Review Guidance 

Manual” (Guidance Manual) specifying how the amendments would be implemented by 

AQMD permit processing engineers. The required treatment of negative balances was 

described in this document. It specified that negative balances would have to be “verified” in 

accordance with standard procedures established by the Guidance Manual. It also specified 

that each facility’s NSR account would be searched by computer to determine if any 

“forgivenesses” (i.e. negative entries due to prior rule amendments lowering offset 

thresholds) contributed to the facility’s negative balance. The Guidance Manual further 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 13

provided that NSR balances “shall be recalculated” excluding any forgivenesses since they 

were not “real” emission reductions and therefore did not qualify for ERC generation 

pursuant to Rule 1309(b)(1). The Guidance Manual also specified that any negative

particulate matter emissions balances would be converted to PM10 by multiplying the 

particulate matter emissions by an average factor of 0.5. Finally, the Guidance Manual stated 

that any facility with a negative balance of 500 pounds per day or greater was to have each 

negative entry “confirmed by reviewing the application file which resulted in the negative 

NSR entry.” The vast majority of negative balances at the time (in excess of 80%) were 

associated with facilities with negative balances exceeding 500 pounds. 

In 1991, AQMD’s engineering staff commenced the verification and validation processes 

described in the Guidance Manual. The result of these processes was a substantial reduction 

in the amount of the negative balances for some pollutants, even prior to the 80% discount. 

These reductions were the result of (1) addressing the “forgivenesses,” (2) determinations 

that some reductions were required by AQMD rules and thus ineligible for ERCs, and (3) in 

some cases correction of simple data entry errors. Table 3 presents the 80% portion of the 

1990 negative balances that were deposited in AQMD’s offset accounts. The larger amount 

shown for each pollutant is the amount originally deposited as the result of this process in the 

early 1990s and which has been previously reported as the 1990 starting balance in the

annual NSR status reports prior to September 2006. The lower amount is revised based upon 

recent (2003-2005) re-validation of these numbers by AQMD staff based on records that are 

still available to address EPA’s comments and consistent with EPA policy guidance that 

allows use of pre-1990 credits that are explicitly included and quantified as growth in the 

SIP. 

Records for pre-1990 emission credits are from 20 to 34 years old. AQMD staff recently 

conducted an extensive review of the pre-1990 credits and determined that the types of 

records available today include printouts of NSR data captured in AQMD’s permitting 

database at the time of permit issuance and complete engineering files, which include the 

materials and documentation submitted by the applicant and AQMD’s engineering 

evaluation. 

In the proposed revised NSR tracking system, AQMD is recommending to only use the 

revised and re-verified pre-1990 credits (as set forth in Table 3). These are pre-1990 credits 

that can reasonably be concluded to be creditable based on presently available records. 

However, for the majority of the pre-1990 credits (more than 60% overall), the AQMD at 

present time no longer has the ability to substantiate the validity of the original reductions 

based on the available records. Therefore, AQMD is proposing to adjust the pre-1990 credits 

by eliminating any past or present use of any credits for which AQMD presently does not 

have the records and can no longer substantiate the validity of such records. 

 Remaining Pre-1990 Credits

AQMD’s NSR tracking system did not specify the age of credits held in AQMD’s offset 

accounts before 2006. However, in response to EPA’s comments about the use of pre-1990 

credits, staff has completed a “First In/First Out” analysis of its federal offset accounts. The 

results of this analysis are summarized in Table 4, which show that, as of December 31, 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 14

2005, significant portions of the adjusted pre-1990 VOC and SOx credits and about one fifth 

of the pre-1990 NOx credits remained in AQMD’s federal offset accounts. All of the pre1990 CO and PM10 credits were depleted from AQMD’s federal offset accounts by 199711

. 

In order to address EPA’s comment regarding prolonged use of pre-1990 credits from 

AQMD’s accounts, AQMD proposes to retire all unused pre-1990 credits remaining in its 

federal offset accounts at the end of the 2004-2005 reporting period as a clean air benefit and 

not use any pre-1990 credits in its offset accounts post 2005. As explained below, the retired 

pre-1990 credits will be replaced by newly tracked sources of offsets. As a result of this 

replacement, any shortfalls in offsets supporting permits already issued occasioned by 

retiring the pre-1990 credits will be eliminated, although the 1990 balances and 2002 

balances except for NOx will be smaller than they were before. This will in turn eliminate 

the continued need for the offset tracking authorized by SB 827 or AB 1318 either 

prospectively or retrospectively. 

Table 4 

Pre-1990 Credits Unused and Retired in AQMD’s Federal Offset Accounts 

December 31, 2005 

(Tons per Day) 

 VOC NOx SOx CO PM10 Overall

 Revised pre-1990 credits verified 

with records or validation 

procedures 

38.46 23.92 8.04 8.45 2.67 81.5 

Unused and retired pre-1990 

credits as of December 31, 2005 21.52 4.52 7.42 0 0 33.46 

Percent of pre-1990 credits 

unused and retired 56% 19% 92% 0% 0% 41% 

1990 and Beyond Credits 

1990 and Beyond Accounting as it Existed Prior to September 8, 2006 

Due to the relatively high level of available offsets in AQMD’s accounts prior to the September 

8, 2006 adoption of Rule 1315, AQMD only took credit for some of the qualified sources of 

emission reductions during the period prior to September 2006. For example, AQMD’s federal 

NSR tracking system took credit for orphan shutdowns from major sources, but not from minor 

sources during that period. The pre-September 2006 tracking system credited orphan shutdowns 

to AQMD’s federal offset accounts based upon the allowable permitted level of emissions of the 

shutdown source. It also did not take credit in the federal offset accounts for surplus reductions 

 

11 All data for 1991 to 1997 is aggregated, so it is uncertain when in this time period the adjusted pre-1990 CO, and 

PM10 credits were depleted from AQMD’s federal offset accounts. However, by assuming that these credits were 

consumed at an approximately constant rate, it is estimated that PM10 was depleted from AQMD’s federal offset 

accounts in 1994, while CO was depleted from AQMD’s federal offset accounts in 1995. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 15

of SOx, CO, or PM10 provided as ERCs by major sources as a result of the differences between 

the federal and local offset requirements for these pollutants (local requirement is 1.2-to-1.0 

while federal law does not specify an offset ratio in excess of 1.0-to-1.0 for SOx, CO, or PM10) 

or for surplus reductions resulting from minor sources providing ERCs as emission offsets as 

required by local but not federal NSR. The tracking system also did not take credit for AQMD’s 

zero BACT threshold. BACT discounts applied to newly-banked ERCs were credited to 

AQMD’s federal offset accounts prior to 2006. Offsets were debited from AQMD’s federal 

offset accounts at 1.2-to-1.0 for all five pollutants when major sources that were not exempt 

pursuant to the CAA were permitted using Rule 1304 exemptions or the Priority Reserve. 

AQMD’s portion of the California SIP did not include commitments to make up any shortfall in 

AQMD’s federal offset accounts; it also did not commit to discontinue issuing permits relying on 

offsets from AQMD’s offset accounts if the balances in those accounts are depleted. 

Additionally, the tracking system did not take credit into the federal offset accounts for surplus 

reductions resulting from offsets provided in connection with modifications at major sources that 

do not constitute “major modifications” pursuant to the new NSR Reform Regulations even 

though federal NSR does not require offsets in such cases. 

Proposed Adjustments to 1990 and Beyond Accounting 

The proposed changes to the sources of credits to and debits from AQMD’s federal offset 

accounts for the 1990 and beyond time period are summarized below: 

 Pre-1990 Credits 

In addition to elimination of almost 60% of overall pre-1990 credits (those for which AQMD 

no longer retains records), AQMD proposes to retire any unused pre-1990 credits remaining 

in its offset accounts at the end of the 2004-2005 reporting period as an air quality benefit 

and to not use any pre-1990 credits in its offset accounts post 2005. 

 Orphan Shutdowns of Minor Sources 

Prior to 2006, the NSR tracking system used orphan shutdowns of only major sources to fund 

AQMD’s federal offset accounts. However, shutdowns of permitted minor sources also meet 

the requirements that credits be real, permanent, enforceable, quantifiable, and surplus in the 

same way as do shutdowns of major sources. ERCs applied for and issued for emission 

reductions from minor sources are commonly used to fulfill the offset requirements for 

emission increases at major sources that are not exempt from offset requirements under 

AQMD’s NSR rules. Therefore, although AQMD has not previously used these reductions, 

it is appropriate to include emission reductions from minor source orphan shutdowns as

offsets in AQMD’s federal offset accounts. 

AQMD’s Rule 201 requires written authorization from the Executive Officer (i.e., a permit to 

construct) before a person may build, erect, install, alter or replace any equipment, the use of 

which may cause the issuance of air contaminants or the use of which may eliminate, reduce 

or control the issuance of air contaminants. Rule 203 – Permit to Operate similarly prohibits 

the operation or use of such equipment without a permit issued by the Executive Officer. 

The only exceptions to these requirements are specifically identified in Rule 219. Therefore, 

all of the minor sources that AQMD proposes to use as sources of orphan shutdown offsets as 

described above have been through the permitting process. In fact, such minor sources are 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 16

subject to the same Regulation IV - Prohibitions, Regulation XI - Source Specific Standards, 

and Regulation XIII rule requirements as are major sources. In some cases the operators of 

these sources go through the necessary steps to quantify and generate ERCs when they 

experience real, permanent, enforceable, quantifiable, surplus emission reductions (e.g., 

equipment or facility shutdown or modification). Such ERCs generated by minor sources are 

fully valid and eligible for use as offsets for major sources. Therefore, in cases where the 

operators do not go through the steps to generate ERCs from their emission reductions, or are 

not eligible for ERCs because they originally obtained their offsets from AQMD internal 

accounts, it is appropriate for AQMD to treat these orphan shutdowns in the same manner as 

it does orphan shutdowns at major sources, i.e., to allow such reductions to offset increases 

from major sources. 

 Major Source Use of SOx, CO, and PM10 ERCs 

AQMD proposes to include credit for the 20% additional SOx, CO, and PM10 ERCs 

provided by major sources as emission offsets at a ratio of 1.2-to-1.0 pursuant to Rule 1303 

rather than the federally-required 1.0-to-1.0 as a source of offsets to its federal accounts. The 

20% above a 1.0-to-1.0 offset ratio is creditable because the federal CAA only requires a 1.2-

to-1.0 offset ratio for extreme non-attainment pollutants and their precursors (i.e., VOC and 

NOx); the required offset ratio for SOx, CO, and PM10 pursuant to the CAA and the TSD is

“at least 1-to-1” according to EPA. 

 Offset Ratio for Major Sources of SOx, CO, and PM10 

The proposed tracking system would provide emissions offsets for major sources of SOx, 

CO, and PM10 from AQMD’s federal offset accounts at an offset ratio of 1.0-to-1.0. This

change is consistent with the CAA, which only requires a 1.2-to-1.0 offset ratio for extreme 

nonattainment pollutants and their precursors (i.e., VOC and NOx, not SOx, CO, or PM10). 

 ERCs Provided by Minor Sources to Offset Emission Increases 

The CAA does not require offsets for emission increases from minor sources. Therefore, the 

third-party (i.e., private market) ERCs that these sources provide to offset their increases 

pursuant to Rule 1303 would be creditable to AQMD’s federal offset accounts. 

 Surplus Discount at Time of Use 

AQMD also proposes that offsets in its federal offset accounts that resulted from post-1990 

orphan shutdowns or orphan reductions and that, based on a first-in/first-out analysis, are not 

used in the same timeframe they are banked be subject to a best available retrofit control 

technology (BARCT) at the time of use adjustment. This would be accomplished based on 

rule control requirements that become effective each year. Specifically, each year all offsets 

in AQMD’s federal accounts carried over from the previous year would be discounted by the 

amount of the percentage reduction in overall permitted emissions12 projected to be achieved 

as a result of implementation of control requirements that become effective during the year 

for the pollutant in question. This analysis would be performed on an aggregate basis each 

year for offsets carried over from the previous year on a pollutant-by-pollutant basis. 

 

12 Permitted emissions data is derived primarily from permitted facilities emitting more than four tons of VOC, 

NOx, SOx, or PM per year or more than 100 tons of CO per year. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 17

 Actual Emissions Baseline

AQMD proposes to use an average discount factor to account for the difference between 

potential and actual emissions. Since 1997, AQMD has used a twenty percent discount to 

convert potential emissions to estimated actual emissions for purposes of compliance with 

California requirements for no net increase in emissions of California nonattainment air 

pollutants. This procedure has been used with concurrence of the California Air Resources 

Board. The current proposal is to use the same factor for federal NSR tracking purposes. In 

light of the methodology used to quantify potential emissions (explained in more detail 

below), staff’s engineering judgment indicates that, on average, a twenty percent reduction 

from potential emissions is a reasonable calculation of actual emissions. Actual emissions 

for individual sources range from the sources’ full potential emissions down to less than 

eighty percent of potential emissions, but eighty percent of potential emissions represents a 

calculation of aggregate actual emissions. The use of eighty percent of potential emissions as 

a calculation of actual emissions is well documented in AQMD’s annual status reports 

regarding Regulation XIII and is further supported by “Industrial Production and Capacity 

Utilization13” and “Industrial Production and Capacity Utilization: The 2009 Annual 

Revision14.” 

Facilities with potential to emit in excess of the Rule 1304 exemption thresholds (4 tons per 

year for VOC, NOx, SOx, and PM10 and 29 tons per year for CO), provide ERCs to offset

their increases in potential emissions so they have a strong incentive to keep their potential 

emissions in line with actual emissions at times of high production. Smaller facilities with 

potential to emit below the exemption thresholds theoretically may be inclined to request 

permits based on potential emissions at the exemption threshold levels because the offsets are 

provided by AQMD at no cost to the facility; however, as shown below, this generally does 

not occur. AQMD engineers perform a thorough evaluation of each permit application prior 

to recommending issuance of a permit to construct or a permit to operate. These evaluations 

include a determination of the actual controlled emission rate (based on source test results, 

VOC content of coatings, sulfur content of fuel, or potential toxics emissions, for example) 

or expected actual controlled emission rate (based on established emission factors or 

manufacturers’ guarantees, for example). This data is then combined with the maximum 

anticipated production rate to determine the equipment’s potential to emit. Note that the 

maximum production rate used in these calculations is based on what is reasonably expected 

for the facility and source in question during periods of high production and is not based on 

either “24-7” operations (except for those facilities that actually do operate in such a manner) 

or an artificially highest permissible emission level for each source. In addition, although 

these sources are not required to provide emission offsets, they are still subject to AQMD’s 

toxics NSR rules, and as such are discouraged from artificially raising their potential to emit 

or permitted emissions since to do so would increase potential toxic emissions. Therefore, 

actual emissions are not expected to be considerably different than potential emissions, and 

80% of potential emissions provides a reasonable calculation of actual emissions. This 

conclusion is further supported by potential to emit data for facilities at or below the 

 

13 Federal Reserve Statistical Release G.17, June 25, 2010, 

http://www.federalreserve.gov/releases/g17/cap_notes.htm. 

14 Anne Hall, Federal Reserve Board, Division of Research and Statistics, August 2009, 

http://www.federalreserve.gov/pubs/bulletin/2009/pdf/Industrial09.pdf. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 18

exemption thresholds. Table 5 shows that there are far more facilities with potentials to emit 

below the exemption thresholds than at the exemption thresholds. 

Table 5

Ratio of Numbers of Facilities with Potential to Emit (PTE) Below Exemptions 

Thresholds to Numbers of Facilities with PTE at Exemption Thresholds 

 Facility Count Ratio 

(Below Threshold: 

 Pollutant PTE Range A1 PTE Range B2 PTE C3 At Threshold) 

 VOC 4,583 2,228 2,237 3:1 

 NOx 4,218 560 25 191:1 

 SOx 480 99 3 193:1 

 CO 2,719 219 0 Undefined:1 

 PM10 2,163 454 18 144:1 

1

 PTE Range A is greater than zero but less than 2 tons per year for VOC, NOx, SOx, and 

PM10 and is greater than zero but less than 15 tons per year for CO. 

2

 PTE Range B is greater than or equal to two but less than four tons per year for VOC, 

NOx, SOx, and PM10 and is greater than or equal to 15 but less than 29 tons per year for 

CO. 

3

 PTE C is four tons per year for VOC, NOx, SOx, and PM10 and is 29 tons per year for CO. 

The above table indicates that it is likely that few facilities obtain a potential to emit (permit 

limit) substantially higher than their actual emissions. 

 Discounting Newly-Banked ERCs to BACT 

Rule 1309 – Emission Reduction Credits and Short Term Credits specifies that the amount of 

emission reductions banked as a new ERC not be “greater than the equipment would have

achieved if operating with current Best Available Control Technology (BACT).” Similarly, 

Rule 1306 – Emission Calculations specifies that “emission decreases from sources which 

are modified or removed from service shall be the actual emissions reduced to the amount 

which would be actual if current BACT were applied” in its description of the procedure to 

be used for quantifying emission reductions used to generate ERCs. No similar requirement 

exists in the federal CAA. Therefore, the amount of any otherwise qualifying emission 

reductions not issued as an ERC due to implementation of these provisions is surplus. 

However, EPA has indicated that AQMD uses the BACT discount at time of generation in 

lieu of the federally-required BARCT discount at time of use and, therefore, AQMD cannot 

take credit into its federal offset accounts for the BACT discount of ERCs. In order to 

address EPA’s concerns, AQMD proposes to retroactively remove all offsets generated from 

BACT discount of ERCs from its offset accounts, except such offsets that AQMD has 

demonstrated (or demonstrates in the future) are not otherwise required by rule, regulation, 

law, approved Air Quality Management Plan Control Measure, or the State Implementation 

Planexceed the discount that would be required by approved SIP rules and rules scheduled to 

be approved by AQMD in the following year’s rule cycle. AQMD would notify EPA and 

obtain EPA’s concurrence when making this alternative discount. Specifically, AQMD has 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 19

identified 6.67 tons of CO per day of BACT discount of ERC credits from 199115 in 

AQMD’s federal CO offset account that are satisfied this criterion at the time of their use 

(1998 and earlier)beyond approved SIP rules and rules scheduled to be approved by AQMD 

in the following year’s rule cycle. AQMD, therefore, proposes to retain these offsets (which 

were used in the early 1990s). 

 SIP Inventory and Growth Assumptions

To date, AQMD has incorporated a sufficient portion of available tracking system offsets 

into the Air Quality Management Plan (AQMP or Plan) at the time of Plan revision to assure 

that the growth assumptions in the Plan are consistent with NSR offsets used. In order to 

assure that the actual impacts of the proposed rule do not exceed the impacts analyzed in the 

PEA, PR 1315 includes provisions directing the Executive Officer to track cumulative net 

emissions increases by pollutant and to discontinue issuing permits to construct and permits 

to operate issued to major and minor sources that rely on new use of offsets from the internal 

accounts resulting from the use of Rule 1304 exemptions or Priority Reserve offsets for any 

pollutant with a cumulative net emissions increase that exceeds cap set forth in the rule, 

which is based on the stationary source growth assumption for that pollutant in the SIP. 

 Other Potential Credits 

AQMD does not propose to take any credits for surplus reductions such as application of 

LAER in excess of federal requirements to any increase in emissions at a major stationary 

source for non-ozone precursors such as SOx, CO and PM10 or the zero BACT threshold. 

AQMD understands that when and if it wants to use such credits it will be necessary to hold 

further discussions with EPA and CARB. AQMD is also not presently proposing to take any 

credits for not having to deduct emission increases resulting from modifications at major 

sources that do not constitute major modifications pursuant to the NSR Reform Regulations 

at this time. Such an approach to credit generation would be subject to future discussion with 

and approval by EPA. 

Summary 

The proposed revised NSR tracking system establishes a very conservative accounting 

methodology for demonstrating equivalency with federal NSR offset requirements. It also 

establishes new sources of emissions offsets for inclusion in AQMD’s offset accounts. As 

 

15 The 6.67 tons of CO per day that AQMD has claimed as BACT discount credits which were not otherwise 

required by rule, regulation, law, approved Air Quality Management Plan Control Measure, or the State 

Implementation Planbeyond approved SIP rules and rules scheduled for the following year’s rule cycle at the time 

of use resulted from the shutdown of internal combustion engines (ICEs). In particular, Southern California 

Edison (SCE) arranged for various operators to remove their ICEs from service in 1991 as a means of mitigating 

the then-proposed merger between SCE and San Diego Gas and Electric. However, the PUC denied the merger 

request, so SCE applied for ERCs for the shutdown engines. According to the first in/first out analysis on the 

resulting BACT discount CO credits, the credits were completely used by the 1997-98 reporting period. The rule 

limit for CO emissions from ICEs was 2,000 ppm during the 1991 through 1998 timeframe and all of the subject 

ICEs were in compliance with this limit prior to being removed from service. BACT for CO emissions from ICEs 

was 250 ppm during the same timeframe. Furthermore, there were not only no approved SIP rules and no rules 

scheduled for adoption in the following year’s rule cycle, but there also were no control measures in AQMD’s Air 

Quality Management Plan seeking CO emission reductions from ICEs during that timeframe. Therefore, the 1991 

BACT discount of the resulting ERCs was available for credit to AQMD’s offset accounts at the time of use (1998 

and earlier). 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 20

indicated earlier and shown in Tables 3 and 6, it includes reducing AQMD’s previously-reported 

pre-1990 credits from a 7% reduction in NOx to a 92% reduction in PM10 and would change the 

previously-reported federal 2002 NSR offset accounts from a 34% increase in NOx credits to an 

81% reduction in PM10 credits. The overall impact on the federal offset accounts of the 

proposed revised NSR tracking system is summarized in Table 6 for both the 1990 starting 

balances and the July 2002 running balances. Table 6 also presents the federal offset account 

balances at the end of the 2002-2003, 2003-2004, 2004-2005, 2006, 2007, and 2008 reporting 

periods as calculated consistent with the proposed revised NSR tracking system procedures. A 

detailed accounting of federal tracking, including debits, the various categories of credits, 

BARCT adjustments, and balances of pre-1990 and post 1990 offsets during each reporting 

period is presented in Appendix A. 

Table 6 

Summary of Federal Offsets Accounts 

(Tons per Day) 

 VOC Ox SOx CO PM10 

Previously-Reported Pre-1990 Beginning Balance 92.40 25.80 18.40 34.90 34.50 

Revised Pre-1990 Beginning Balance 38.45 23.92 8.04 8.45 2.67 

Reductions in Pre-1990 Beginning Balance 58% 7% 56% 76% 92% 

Previously-Reported 2001-02 Ending Balance 107.65 21.60 18.76 24.09 41.24 

Revised 2001-02 Ending Balance 68.75 28.84 10.72 8.30 7.67 

Reductions in 2001-02 Ending Balance 36.1% -33.5% 42.9% 65.5% 81.4% 

2002-03 Ending Balance 74.23 30.29 10.95 9.60 9.34 

2003-04 Ending Balance 82.86 29.79 10.79 10.73 10.36 

2004-05 Ending Balance 64.40 23.61 1.89 11.08 10.77 

2006 Ending Balance 68.72 27.10 2.19 13.87 11.07 

2007 Ending Balance 72.57 28.25 2.40 15.00 11.29 

2008 Ending Balance 73.30 28.85 2.43 15.91 11.68 

Tables 7 and 8 summarize the changes between AQMD’s pre-September 2006 federal NSR 

tracking system and the proposed federal NSR tracking system that would be established by PR 

1315. Specifically, these tables compare the existing and proposed revised NSR tracking 

systems for pre-1990 emission reductions and 1990 and beyond emission reductions. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 21

Table 7 

Summary of Changes between AQMD’S PreSeptember 2006 and Proposed Revised NSR Tracking 

Systems for Equivalency with Federal Requirements: 

Pre-1990 Federal Emission Reductions

AQMD’s Pre-September 2006 NSR 

Tracking System 

AQMD’s Proposed Revised NSR Tracking 

System 

Starting Balance based on data generated in 

1990 from facilities’ (both major and minor 

sources) emission reductions recorded as 

negative NSR balances. This data has been 

used and previously reported in all preSeptember 2006 annual NSR status reports. 

Initial Starting Balance would be based on data 

from facilities’ (both major and minor sources) 

emission reductions recorded as negative NSR 

balances that were originally verified in 1990-

1991 and re-verified in 2003-2005 and all or 

some records currently exist. This would 

exclude all other data for emission reductions 

with no present records. 

No credit taken for surplus reductions from 

SOx, CO, and PM10 offsets provided (at 120% 

of PTE) as ERCs for minor sources. 

No Change. 

No credit taken for the 20% additional SOx, 

CO, and PM10 offsets (ERCs) for major 

sources provided at a ratio of 1.2-to-1.0 

compared to 1.0-to-1.0. 

No Change. 

No credit taken for emission reductions created 

from the application of zero BACT threshold(1). 

No Change. 

(1) “Zero BACT threshold” refers to AQMD’s requirement that BACT applies to all emission increases (no 

matter how small) at all sources (no matter how low their potential to emit). 

Table 8 

Summary of Changes between AQMD’S PreSeptember 2006 and Proposed Revised NSR Tracking 

Systems for Equivalency with Federal Requirements: 

1990 and Beyond Federal Emission Reductions 

AQMD’s Pre-September 2006 NSR 

Tracking System 

AQMD’s Proposed Revised NSR Tracking 

System 

Remaining pre-1990 credits eligible for use 

until depleted. 

Remaining pre-1990 credits would be eligible 

for use until the end of 2005; no pre-1990 

credits would be used post-2005. 

No credit taken for orphan shutdowns from 

minor sources. 

Creditable orphan shutdowns would include 

shutdowns of both major and minor sources. 

No further discount/adjustment applied to 

estimate actual emissions. 

All orphan shutdowns would be discounted/ 

adjusted to reflect estimated actual emissions. 

No further discount/adjustment for orphan 

shutdowns due to BARCT at time of use. 

All orphan shutdowns would be discounted/ 

adjusted to BARCT at time of use by 

discounting balances “carried over” from one 

year to the next. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 22

Table 8 (continued) 

1990 and Beyond Federal Emission Reductions 

AQMD’s Pre-September 2006 NSR 

Tracking System 

AQMD’s Proposed Revised NSR Tracking 

System 

BACT discount of newly-issued ERCs eligible 

for crediting to AQMD’s offset accounts (as 

previously approved by EPA). 

No BACT-discount credits from any past or 

future-issued ERCs would be eligible for 

crediting to AQMD’s offset accounts except 

those for specific projects for which staff has 

demonstrated or demonstrates and EPA has 

agreed or agrees that the BACT discount is not 

otherwise required by rule, regulation, law, 

approved Air Quality Management Plan 

Control Measure, or the State Implementation 

Planbeyond approved SIP rules and rules 

scheduled to be approved by AQMD in the 

following year’s rule cycle. 

VOC and NOx offsets provided by AQMD for 

federal major sources exempted by AQMD at a 

ratio of 1.2-to-1.0. 

No Change. 

SOx, CO, and PM10 offsets provided by 

AQMD for major sources exempted from 

providing offsets by Rule 1304 or using the 

Priority Reserve at a ratio of 1.2-to-1.0 

compared to 1.0-to-1.0. 

SOx, CO, and PM10 offsets would be provided 

by AQMD for major sources exempted from 

providing offsets by Rule 1304 or using the 

Priority Reserve at a ratio of 1.0-to-1.0. 

No credit taken for surplus reductions created 

from offsets (ERCs) provided (at 120% of PTE) 

by minor sources that are not exempt from 

offset requirements under AQMD NSR rules 

(e.g., > 4 but < 10 TPY of VOC and NOx, etc.). 

Credit would be taken for surplus reductions 

created from offsets (ERCs) provided (at 120% 

of PTE) by minor sources (i.e., not subject to 

federal offset requirements) that are not 

exempt from offset requirements under AQMD 

rules (e.g., > 4 but < 10 TPY of VOC and NOx, 

etc.). 

No credit taken for surplus reductions created 

from the 20% additional SOx, CO, and PM10 

offsets (ERCs) provided by major sources at 

1.2-to-1.0 ratio compared to 1.0-to-1.0 ratio. 

Credit would be taken for surplus reductions 

created from the 20% additional SOx, CO, and 

PM10 offsets (ERCs) provided by major 

sources at a ratio of 1.2-to-1.0 compared to 

1.0-to-1.0 ratio. 

No credit taken for emission reductions created 

from the application of zero BACT threshold. 

No Change. 

No credit taken for application of LAER in 

excess of federal requirements to non-major 

modifications resulting in any increase in 

emissions at a major stationary source for nonozone precursors (SOx, CO, and PM10). 

No credit would be taken for application of 

LAER in excess of federal requirements to 

non-major modifications resulting in any 

increase in emissions at a major stationary 

source for non-ozone precursors (SOx, CO, 

and PM10). 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 23

Table 8 (continued) 

1990 and Beyond Federal Emission Reductions 

AQMD’s Pre-September 2006 NSR 

Tracking System 

AQMD’s Proposed Revised NSR Tracking 

System 

No SIP adjustment for NSR tracking system 

and no backstop to ensure net emissions 

increases do not exceed AQMP growth 

assumptions. 

Appropriate assumptions would be included in 

the SIP to reflect NSR tracking system with 

commitment to make up any shortfall in next 

AQMP revision pursuant to state law and 

backstop provisions stopping issuance of 

permits to major and minor sources relying on 

new use of credits from internal offset accounts 

if cumulative net emissions increase of any air 

contaminant exceeds the rule cap based on 

AQMP growth assumption for that air 

contaminant. 

USE OF OFFSETS 

The above-described offsets would be used by AQMD for the following purposes: 

• To provide offsets for federal major sources that are exempt from offset requirements under 

AQMD Regulation XIII (Rule 1304)16; and 

• To provide Priority Reserve offsets (Rule 1309.1) to major sources. 

These uses of the offsets in AQMD’s accounts ensure ongoing equivalence with federal NSR 

requirements. As indicated earlier, a list of sources that Rule 1304 exempts from offset 

requirements or that are eligible to obtain offsets from the Priority Reserve pursuant to Rule 

1309.1 and for which AQMD uses its offset accounts to demonstrate equivalency is presented in 

Appendix II. 

DEMOSTRATIOS OF EQUIVALECY 

AQMD’s proposed revised NSR tracking system would call for the Executive Officer to make 

annual equivalency demonstrations in two steps. In the first step, AQMD would make a 

preliminary determination of equivalency (PDE) within twelve months of the close of each 

reporting period. Each PDE would be a very conservative determination based on the reporting 

 

16 Rule 1304 includes exemptions from the offset requirements of Rule 1303(b)(2) for a variety of categories of 

sources. Three of those categories—replacements with no increase in maximum rating, relocations without any 

increase in potential to emit, and concurrent facility modifications resulting in net emissions decreases—are 

essentially self offsetting in that for each emissions increase they include and provide a corresponding emissions 

decrease. Furthermore, BACT is required to be employed on all the new sources permitted pursuant to these 

exemption provisions. Therefore, the decreases are expected to offset the increases, so neither the emissions 

reductions associated with the old permits nor the increases associated with the new permits need to be tracked 

pursuant to Rule 1315. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 24

period’s combined debits but would not include the credits from that reporting period. 

Therefore, the PDE would represent a “worst case” analysis. As the second step, the Executive 

Officer would then make a final determination of equivalency (FDE), which would include 

crediting the reporting period’s surplus reductions to the offset accounts, within another six 

months (i.e., within eighteen months of the close of the reporting period). For example, the PDE 

for reporting year B (including all debits for years A and B and credits for year A only) would be 

completed by the end of reporting year C. Then an FDE incorporating year B’s credits would be 

prepared within six months of the end of year C. Each PDE would be presented to AQMD’s 

Governing Board in a report from the Executive Officer (“Board Letter”) at a public meeting of 

the AQMD Governing Board, no later than the second regularly-scheduled Governing Board 

meeting after the conclusion of the applicable twelve-month period. Similarly, reports 

presenting the results of each FDE for a reporting period with a PDE that does not demonstrate 

equivalency with federal NSR offset requirements would be due to the Governing Board by the 

second regularly scheduled Governing Board meeting after the FDE completion deadline. 

However, reports presenting the results of each FDE for a reporting period with a PDE that does 

demonstrate equivalency with federal NSR offset requirements would be due with the report for 

the subsequent reporting period’s PDE. Figure 1 illustrates the timeline for preparing PDEs and 

FDEs, and for reporting their results to the Governing Board. The PDE and FDE reports would 

include the balances in AQMD’s offset accounts, as well as summaries of credit and debit data 

by category such as Priority Reserve, Community Bank, and Rule 1304 exemptions. Table 9 

summarizes the differences between AQMD’s pre-September 2006 and proposed revised 

determinations of equivalency. In lieu of preparing a PDE and an FDE for a particular reporting 

period, the Executive Officer would have the option to merge the PDE into the FDE provided the 

FDE includes all of the elements of the PDE that it subsumes and it complies with the 

completion and reporting requirements of the subsumed PDE. The offset accounting for year B 

would be conducted in the following order: 

1. Discount any post-1990 credits remaining from year A as described in the discussion of 

Surplus Discount at Time of Use; then 

2. Subtract as much of year B’s debits from any remaining pre-1990 credits as possible without 

resulting in a negative balance of pre-1990 credits (1990-2005 timeframe only); then 

3. Subtract any debits remaining after step 2 from any post-1990 credits remaining from year A 

after application of step 1; then 

4. Add year B’s credits to the remaining discounted post-1990 credits. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 25

Figure 1 

Equivalency Demonstration Timeline 

In addition, AQMD would evaluate the future availability of offsets in AQMD’s accounts by 

conducting a two-year projection of debits, credits, and account balances in conjunction with 

(but not as a part of) each determination of equivalency. This analysis would include projected 

debits, credits, and offset account balances for each of the two years following the subject 

reporting period. The projections for each pollutant would be based on the average of the 

previous five years’ credits and debits for that pollutant. The purpose of the projections would 

be to provide the Executive Officer a prospective indicator that a shortfall may be coming so that 

the Executive Officer can further investigate, inform the Governing Board of the findings of the 

investigation, and recommend appropriate actions to prevent or resolve the shortfall or 

demonstrate that no action is needed because AQMD remains in aggregate equivalency with 

federal offset requirements. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 26

Table 9 

Summary of Changes between AQMD’S Pre-September 

2006 and Proposed Revised Determinations of Equivalency 

AQMD’s Pre-September 2006 NSR Tracking 

System 

AQMD’s Proposed Revised NSR Tracking 

System 

Annual reports to the Governing Board 

“regarding the effectiveness of Regulation XIII 

in meeting the state and federal NSR 

requirements” specified by Rule 1310 – 

Analysis and Reporting. 

Preliminary (worst case) determination of 

equivalency (PDE) would be completed within 

one year of the close of the reporting period. If 

PDE does not verify equivalency, final 

determination of equivalency (FDE) would be 

completed within six months of the PDE 

timeframe. 

No projections of future equivalency done with 

annual equivalency demonstrations. 

All annual demonstrations of equivalency (FDE 

or PDE) would be accompanied by projected 

NSR offset account balances for the two years 

following the subject reporting period. These 

projections would be for the purpose of 

prospectively determining if implementation of 

backstop measures is necessary to prevent an 

offset account shortfall and would not 

constitute a part of the determinations of 

equivalency. 

TRACKIG AD BACKSTOP 

AQMD’s proposed revised NSR tracking system includes equivalency backstop provisions that 

would be triggered in the event that an FDE does not demonstrate equivalency. In such an event, 

the backstop provisions would require the Executive Officer to both discontinue funding the 

Priority Reserve for each air contaminant with a shortfall17 and discontinue issuing permits to 

construct and permits to operate that rely on Rule 1304 exemptions or on offsets from the 

Priority Reserve for each air contaminant that has a shortfall to sources that are major sources of 

that air contaminant. Funding of the Priority Reserve and issuance of permits relying on Rule 

1304 exemptions or on offsets from the Priority Reserve may resume upon completion of an 

FDE demonstrating that the shortfall no longer exists. Additionally, if there is an actual or 

projected shortfall in any of the offset accounts, the backstop provisions would require the 

Executive Officer to prepare a report to the Governing Board recommending appropriate action 

to remedy the shortfall. The report would either recommend implementing one or more of the 

 

17 Offsets provided from the Priority Reserve would be debited from AQMD’s offset accounts for the period during 

which the permit was issued (i.e., for the timeframe they are used) whereas the quarterly allocations made to the 

Priority Reserve pursuant to Rule 1309.1(a) would not constitute debits from AQMD’s offset accounts. The 

newly-proposed future years’ projections of balances in AQMD’s offset accounts would include projected use of 

Priority Reserve offsets as well as sources exempted pursuant to Rule 1304. A significant portion of the quarterly 

allocations to the Priority Reserve are used by sources that are not subject to federal offset requirements (i.e., 

federal minor sources) and, therefore, do not need to be debited from AQMD’s offset accounts for purposes of 

demonstrating equivalency with federal NSR requirements.
Proposed Rule 1315 – Federal New Source Review Tracking System Page 27

following actions as needed to correct the shortfall or include an explanation of why it is not 

necessary to implement any of the following actions by making a demonstration that AQMD 

remains in compliance with federal NSR offset requirements on an aggregate basis, as 

applicable: 

• Provide additional offsets within six months of the FDE demonstrating the shortfall or of the 

projection that predicted it; such offsets could be derived through AQMD purchase of credits, 

through AQMD funding of emission reduction projects using quantification protocols or 

rules approved by EPA/CARB on a case-by case or programmatic basis, application of 

LAER/BACT in excess of federal requirements18, or other approved sources of credits. 

• Propose amendments to Rules 1309.1 and/or 1304 to restrict access by specific sources to the 

Priority Reserve and/or to eliminate certain categories of offset exemptions, respectively, to 

be identified during the rulemaking process. 

In addition to the equivalency backstop provisions discussed above, the proposed revised NSR 

tracking system also includes backstop provisions designed to ensure the impacts of 

implementing the proposed project do not exceed those analyzed in the Program Environmental 

Assessment (PEA) pursuant to the California Environmental Quality Act (CEQA; refer to the 

CEQA Analysis section of this staff report for further information regarding the PEA). In 

particular, the proposed rule includes provisions directing the Executive Officer to track the 

cumulative net emissions increase of each nonattainment air contaminant tracked pursuant to the 

proposed revised federal NSR tracking system. (Net emission increase is defined as the 

“aggregate increase in potential to emit from permitted major and minor stationary sources of a 

nonattainment air contaminant subject to tracking pursuant to paragraph (c)(2) offset from the 

Priority Reserve or exempt from offsets pursuant to Rule 1304 minus the aggregate emissions 

reductions of the same nonattainment air contaminant tracked pursuant to paragraph (c)(3) over 

the same time period.”) The proposed rule also includes a table summarizing cumulative net 

emission increase thresholds for each nonattainment air contaminant to be initially tracked for 

each year from 2010 through 2030. The CEQA backstop provisions specify that, if the 

cumulative net emission increase of a nonattainment air contaminant tracked pursuant to the 

proposed rule and reported in an FDE exceeds the corresponding threshold for that air 

contaminant, the Executive Officer shall discontinue issuing permits to construct and permits to 

operate that rely on new use of Rule 1304 exemptions or Priority Reserve offsets for that air 

contaminant. If triggered, this backstop provision would prevent the issuance of permits drawing 

on the Priority Reserve or on Rule 1304 exemptions for the air contaminant with cumulative net 

emission increases in excess of the applicable threshold in the proposed rule to major or minor 

sources until the cumulative net emissions increase is reduced to a level at least ten percent 

below its threshold. 

 

18 Precise quantification of all surplus credits generated through application of LAER/BACT in excess of federal 

requirements may be extremely resource intensive. Therefore, AQMD could, with EPA approval, demonstrate 

that such application of LAER/BACT has generated at least enough surplus reductions to make up for the shortfall 

using very conservative assumptions to estimate the surplus reductions.
Proposed Rule 1315 – Federal New Source Review Tracking System Page 28

Table 10 summarizes the differences between AQMD’s pre-September 2006 and proposed 

revised NSR tracking backstop measures. 

Table 10 

Summary of Changes between AQMD’S Pre-September 

2006 and Proposed Revised Backstop Measures 

AQMD’s Existing NSR Tracking System AQMD’s Proposed Revised NSR Tracking 

System 

No backstop measures identified for 

addressing potential shortfalls in AQMD’s 

offset accounts. 

Several backstop provisions identified in the 

proposed revised NSR tracking system: 

• If there is an actual shortfall: 

 Discontinue funding the Priority Reserve 

for the contaminant(s) with a shortfall; and 

 Discontinue issuing permits relying on 

AQMD’s offset accounts for pollutant(s) 

with a shortfall. 

• If there is an actual or projected shortfall, 

recommend one or more of the following or 

demonstrate continued compliance with 

federal NSR offset requirements, as 

appropriate: 

 Provide additional credits within six months 

of the demonstration or projection of the 

shortfall; to be derived from AQMD 

purchase of credits, AQMD funding of 

emission reduction projects using 

quantification protocols or rules approved 

by EPA, application of LAER/BACT in 

excess of federal/California requirements, 

or other EPA-approved credit sources. 

 Suspend issuance of Priority Reserve 

credits within 90 days of the report to the 

Governing Board, not to be resumed until 

equivalency has been reestablished. 

 Propose amendments to Rules 1309.1 

and/or 1304 to eliminate access to the 

Priority Reserve by certain sources and/or 

eliminate certain offset exemptions, 

respectively. 

No backstop measures identified for 

addressing cumulative net emission increases. 

Discontinue issuing permits relying on new use 

of the Priority Reserve or of Rule 1304 

exemptions if cumulative net emission increase 

for any pollutant exceeds the specified 

threshold until the cumulative net emission 

increase has returned to a level at least 10% 

below current threshold. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 29

STATE IMPLEMETATIO PLA AD RULE SUSET DATE 

The provisions of PR 1315 pertaining to tracking of cumulative net emissions increase and 

CEQA backstop measures would not be included in the SIP. The rule would expire January 1, 

2031. 

DISCUSSIO OF PR 1315 RULE LAGUAGE 

Several changes have been made to the language of PR 1315 since the Draft PEA was circulated. 

The following changes were made to ensure that the language of the proposed rule is clear and 

unambiguous and is consistent with the intent of the proposed rule. 

• Paragraph (c)(1) was clarified to explain that AQMD may discontinue tracking of an 

attainment air contaminant only if the use of emission offsets is not necessary to maintain 

attainment for that air contaminant. 

• The provisions pertaining to CEQA backstop formerly contained in subdivisions (d), (f), and 

(h) were consolidated into a single subdivision of the proposed rule, subdivision (g). Some 

wording changes were also made to ensure that these backstop provisions are unambiguous 

and consistent with their intent. 

• The provisions in paragraph (c)(4) requiring that credits deposited into the District’s offset 

accounts be discounted to ensure they remain surplus at the time of use was extended to 

include clause (c)(3)(A)(vi) for offset credits derived from the Rule 1306(c)(2) BACT 

adjustment that applies to newly banked ERCs. In addition, the criteria in clause 

(c)(3)(A)(vi) for determining if the reductions are surplus were strengthened. 

• Provisions explicitly stating the sequence and order in which each tracking element is 

implemented for each reporting period were added in paragraph (c)(5) to remove a potential 

source of confusion. 

• A paragraph explicitly identifying the provisions of the proposed rule that ensure offsets 

tracked pursuant to PR 1315 meet the federal offset criteria was added in paragraph (c)(6). 

• A clarifying provision was added in subparagraph (f)(1)(B) to require that, as part of the 

equivalency backstops, any permit application that has not provided sufficient ERCs and is 

put on hold due to a shortfall will not be approved until the Governing Board has approved 

an FDE report demonstrating that the shortfall that triggered the backstop provisions has 

been rectified. 

• It was clarified in paragraph (d)(3) that if a PDE shows compliance with federal NSR, an 

FDE will be prepared either separately or with the next reporting period’s PDE. 

• The sunset date specified in subdivision (i), formerly subdivision (j), was removed from the 

list of provisions to be excluded from submittals for approval into the SIP so that the rule 

would not remain active in the SIP after expiring locally. 

• The language excluding PM2.5 from tracking was clarified. 

• The Public Hearing to consider adoption of PR 1315, previously scheduled for December 

2010, is now scheduled for January 2011. Therefore, several dates in subdivisions (d) and 

(g) of the proposed rule were updated accordingly. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 30

The following discussion provides a subdivision-by-subdivision analysis of PR 1315:

• PR 1315(a) Purpose 

Subdivision (a) would summarize the purpose of this proposed rule. In particular, PR 1315 

would specify and memorialize in rule form the procedures to: maintain AQMD’s ability to 

issue permits to major sources that rely on the Priority Reserve for emissions offsets or that 

are exempt from AQMD’s NSR offset requirements, and demonstrate programmatic 

equivalency between its NSR program and federal NSR offset requirements, and demonstrate

equivalence between AQMD and federal NSR offset requirements. 

• PR 1315(b) Definitions 

Subdivision (b) would provide definitions for “Community Bank,” “net emission increase,” 

“offset ratio,” “orphan reduction,” “orphan shutdown,” “Priority Reserve,” and “shortfall.” 

• PR 1315(c) Offset Accounts for Federal NSR Equivalency 

 Paragraph(c)(1) District Offset Accounts for Federal Nonattainment Air Contaminants 

Paragraph (c)(1) would establish AQMD’s offset accounts, including starting balances 

for VOC, NOx, SOx, CO, and PM10 as of 1990, and specify that any portion of the 

starting balances not used by December 31, 2005 would be retired for clean air. 

Paragraph (c)(1) would further direct the Executive Officer to establish additional offset 

accounts for any nonattainment air contaminants (excluding PM2.519) or their precursors 

that become subject to federal nonattainment NSR offset requirements (unless by rule, 

the District establishes that Rule 1304 and Rule 1309.1 do not apply to such contaminants 

or their precursors) and would provide for the Executive Officer to discontinue tracking 

and reporting the offset account for any air contaminant that is changed from a 

nonattainment designation to attainment by EPA. Finally, paragraph (c)(1) would specify 

the criterion for considering AQMD’s NSR program equivalent with federal 

nonattainment NSR offset requirements to be that following the procedures in PR 1315 

results in the balances in AQMD’s offset accounts remaining positive. 

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

Paragraph (c)(2) would identify the sources of debits from AQMD’s offset accounts as 

emissions offsets from the Priority Reserve or Community Bank pursuant to Rule 1309.1 

for major sources and exemptions from the offset requirements of Rule 1303 for major 

sources pursuant to Rule 1304 and would specify that the offset ratios applicable to these 

debits are 1.2-to-1.0 for extreme nonattainment air contaminants and their precursors and 

1.0-to-1.0 for all other nonattainment air contaminants. 

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

Paragraph (c)(3) would identify the sources of credits to AQMD’s offset accounts as 

orphan shutdowns (at eighty percent of permitted emission levels20), orphan reductions 

 

19 The provision directing the Executive Officer to establish additional offset accounts for any nonattainment air 

contaminants or their precursors that become subject to federal nonattainment NSR offset requirements is not 

applicable to PM2.5 because AQMD is developing a separate regulation specifically addressing federal 

nonattainment NSR for PM2.5 and existing Regulation XIII will not be applicable to PM2.5. Therefore, facilities 

will not be able obtain PM2.5 offsets via the Priority Reserve or the offset exemptions in Rule 1304. 

20 The permitted emission level is the potential to emit of the source in pounds per day on a thirty-day average basis 

calculated by an AQMD engineer as part of the evaluation of the permit application. This emission level often, 

but not always, appears on the permit either directly as an emission limit or indirectly as a throughput limit (e.g., a 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 31

(at eighty percent of the reduction in permitted emission levels), ERCs provided as 

offsets by minor sources, excess ERCs provided at a 1.2-to-1.0 offset ratio rather than 

1.0-to-1.0 by major sources of non-attainment air contaminants that are not extreme nonattainment air contaminants, payback of NSR offset debt through the ERC banking 

process, and the BACT discount of newly-banked ERCs in cases where “the Executive 

Officer demonstrates and EPA concurs that the subtracted amount is not otherwise 

required by rule, regulation, law, approved Air Quality Management Plan Control 

Measure, or the State Implementation Plan.” Paragraph (c)(3) would also provide the 

Executive Officer the option to not track some of the potential sources of credits provided 

sufficient credits remain in the federal offset accounts to demonstrate equivalence with 

federal NSR offset requirements each reporting period. 

 Paragraph (c)(4) Surplus at the Time of Use 

Paragraph (c)(4) would direct the Executive Officer to discount all orphan shutdown and 

orphan reduction credits, as well as all credits resulting from the BACT discount of 

newly-banked ERCs, deposited in AQMD’s federal offset accounts pursuant to paragraph 

(c)(3) to ensure that they are surplus at the time of use. This discounting would be 

performed annually “based on the percentage reduction in overall permitted emissions 

projected to be achieved as a result of implementation of control requirements that 

become effective during the year for each specific pollutant within the District.” 

 Paragraph (c)(5) Tracking Sequence 

Paragraph (c)(5) would specify the order in which the tracking elements described in 

paragraphs (c)(2), (c)(3), and (c)(4) would be carried out. That order would be apply 

surplus at the time of use discount to any remaining post-1990 balance, subtract the 

aggregate debits from the remaining Pre-1990 unused initial balance to the extent 

available, subtract remaining debits from the post-1990 balance, and add the credits to the 

corresponding District Offset Account Balance. 

 Paragraph (c)(6) Federal Offset Criteria 

Paragraph (c)(6) would specify that offset account credits used pursuant to Rule 1304 or 

Rule 1309.1 are real as specified in subparagraphs (c)(3)(A) and (c)(3)(B), surplus as 

specified in paragraphs (b)(4), (b)(5), and (c)(4), permanent as specified in paragraphs 

(b)(4) and (b)(5) and subparagraph (c)(3)(A), quantifiable as specified in subdivisions 

paragraphs (c)(1), (c)(3), (c)(4), and (c)(5), and enforceable as specified in paragraphs 

(b)(4), (b)(5), and (c)(3). 

• PR 1315(d) Federal NSR Equivalency Determination Reports 

 Paragraph (d)(1) Reporting Periods 

Paragraph (d)(1) would establish the following reporting periods for purposes of NSR 

tracking: October 1, 1990 through July 31, 1995; each year starting with August 1995 

through July 1996 and ending with August 2003 through July 2004; August 2004 through 

December 2005; each calendar year from 2006 through 2009, and each calendar year 

from 2010 through 2030. 

 

limit on fuel or raw material consumption). In the case of a permit that did not have a 30-day average emission 

level calculated by the engineer as a part of the application evaluation (e.g., a “pre-NSR” permit), the permitted 

emission level would be estimated based on the controlled emission rate (the source’s emission rate considering 

the effect of any installed control equipment in pounds per hour) and the operating schedule (if no operating 

schedule is on file for the source then a schedule of eight hours per day, five days per week, and fifty weeks per 

year would be used).
Proposed Rule 1315 – Federal New Source Review Tracking System Page 32

 Paragraph (d)(2) Preliminary Determinations of Equivalency 

Paragraph (d)(2) would specify that, commencing with the 2010 reporting period, the 

Executive Officer would complete a PDE within twelve months of the end of each 

reporting period and report each to the Governing Board and to EPA by the second 

regularly-scheduled Governing Board meeting after its completion deadline. Each PDE 

would be a conservative assessment of the remaining balances in AQMD’s offset 

accounts at the end of the reporting period obtained by subtracting the reporting period’s 

aggregate debits from the remaining balance that existed at the start of the reporting 

period without accounting for any credits that accrued during the reporting period. 

 Paragraph (d)(3) Final Determinations of Equivalency 

Paragraph (d)(3) would specify that, commencing with the 2010 reporting period, the 

Executive Officer would complete an FDE within eighteen months of the end of each 

reporting period. The Executive Officer would report the FDE to the Governing Board 

and to EPA by the second regularly-scheduled Governing Board meeting after the PDE 

completion deadline for cases in which the PDE did not demonstrate equivalence with 

federal NSR offset requirements (i.e., did not show a positive balance in each of 

AQMD’s federal offset accounts) and by the reporting deadline for the subsequent 

reporting period’s PDE for cases in which the PDE did demonstrate equivalence with 

federal NSR offset requirements. Each FDE would be an assessment of the remaining 

balances in AQMD’s offset accounts at the end of the reporting period obtained by 

subtracting the reporting period’s aggregate debits from and adding the reporting period’s 

aggregate credits to the remaining balance that existed at the start of the reporting period. 

 Paragraph (d)(4) Early FDE Subsuming PDE 

Paragraph (d)(4) would provide the Executive Officer the option to combine all of the 

elements of a reporting period’s PDE and FDE into the FDE provided the consolidated 

FDE complies with the completion and reporting deadlines of the subsumed PDE.

• PR 1315(e) Projections of District Offset Account Balances 

Subdivision (e) would specify that each PDE [PR 1315(d)(2)] report and each FDE [PR 

1315(d)(3)] report would also include projections of the federal offset account balances at the 

end of each of the two subsequent reporting periods based upon the average of the total 

annual debits and credits for the five reporting periods most recently included in a PDE or an 

FDE. These projections would be reported with the results of the PDE or FDE but would not 

be a part of them. Because PDEs would not include tracking of aggregate credits or 

aggregate emissions reductions for the subject reporting period, projections presented in PDE 

reports would need to include projections of the subject reporting period’s aggregate credits 

and aggregate emissions reductions in addition to the projections for the subsequent two 

reporting periods. 

• PR 1315(f) Equivalency Backstop Provisions 

 Paragraph (f)(1) Funding of the Priority Reserve and Issuance of Permits 

Paragraph (f)(1) would establish that, if the most-recent FDE [PR 1315(d)(3)] 

demonstrates a shortfall in the federal offset account for any air contaminant, the 

Executive Officer would discontinue funding the Priority Reserve for the air

contaminant(s) with a shortfall and discontinue issuing permits to construct and permits 

to operate that rely on Rule 1304 exemptions or the Priority Reserve for any air 

contaminant with a shortfall to any source that is a major source of that air contaminant. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 33

The Executive Officer would be able to resume funding the Priority Reserve and issuing 

such permits upon completion of an FDE demonstrating that the shortfall no longer

exists. 

 Paragraph (f)(2) Report to the Governing Board: Rectification of a Shortfall 

Paragraph (f)(2) would, in the event of an FDE [PR 1315(d)(3)] demonstrating a shortfall 

or of a projection [PR 1315(e)] predicting a shortfall, direct the Executive Officer to 

prepare a report to the Governing Board either recommending action to remedy the 

shortfall or demonstrating that AQMD “remains in compliance with federal

nonattainment NSR offset requirements on an aggregate basis.” If such a report were to 

recommend action to remedy the shortfall, the recommended action would include one or 

more of the following: 

Provide additional credits to the federal offset account(s) with a shortfall within six 

months of the demonstration or projection of the shortfall. The Executive Officer

could purchase them, fund emission reduction projects using quantification protocols 

approved by EPA, track application of BACT (federal LAER) in excess of federal 

requirements21, or implement other credit sources approved by EPA; and/or 

Propose amendments to Rule 1304 and/or Rule 1309.1 to eliminate certain offset 

exemptions or certain sources’ ability to obtain offsets from the Priority Reserve. 

• PR 1315(g) California Environmental Quality Act Backstop Provisions 

Subdivision (g) would direct the Executive Officer to track the cumulative net emission 

increase from both major and minor sources of each nonattainment air contaminant tracked 

pursuant to the proposed rule from the date of adoption through the end of each postadoption reporting period and to report those cumulative net emission increases to the 

Governing Board, and would establish annual cumulative net emission increase thresholds 

for nonattainment air contaminants resulting from major and minor Rule 1309.1 and Rule 

1304 sources based upon AQMP growth projections. It would further specify that, if the 

cumulative net emission increase of a nonattainment air contaminant from such sources 

exceeds the threshold for that air contaminant, issuance of permits to construct and permits to 

operate relying on new use of Rule 1304 exemptions or Priority Reserve offsets for that air 

contaminant would cease, not to resume unless and until the corresponding net emission 

increase returns to a level at least ten percent below the corresponding threshold. 

Additionally, commencing with the reports for the 2011 reporting period, each PDE report 

and each FDE report would also include projections of the cumulative net emission increases 

at the end of each of the two subsequent reporting periods based upon the average of the 

aggregate increase in potential to emit of each nonattainment air contaminant and the average 

of the aggregate emissions reductions of the same nonattainment air contaminant for the five 

reporting periods most recently included in a PDE or an FDE or each of the reporting periods 

commencing with the 2011 reporting period, whichever is fewer reporting periods. 

 

21 Quantification of all surplus emissions reductions resulting from application of LAER beyond federal 

requirements could be extremely resource intensive. Therefore, with the concurrence of EPA, AQMD could make 

a demonstration based on conservative assumptions that application of LAER has generated at least enough 

surplus reductions to rectify the shortfall.
Proposed Rule 1315 – Federal New Source Review Tracking System Page 34

• PR 1315(h) State Implementation Plan Submittals 

Subdivision (h) would specify that paragraphs (b)(2) and (e)(2) and subdivisions (g) and (h) 

shall not be submitted to the California Air Resources Board or to the United States 

Environmental Protection Agency for inclusion in the California State Implementation Plan.

• PR 1315(i) Sunset Date for Permit Issuance 

Subdivision (i) would specify that Rule 1315 expires on January 1, 2031.

CALIFORIA HEALTH AD SAFETY SECTIO 40440.5(c)(3)—REQUIRED 

STAFF REPORT ELEMETS 

Section 40440.5(c)(3) of the California Health and Safety Code specifies that the staff report for 

a proposed rule that would significantly affect air quality or emissions limitations must include 

“the full text of the proposed rule or regulation, an analysis of alternative control measures, a list 

of reference materials used in developing the proposed rule or regulation, an environmental 

assessment, exhibits, and draft findings for consideration by the south coast district board 

pursuant to Section 40727. Further, if an environmental assessment is prepared, the staff report 

shall also include social, economic, and public health analyses.” Table 11 identifies where each 

of the elements required by H&SC §40440.5(c)(3) is located in this staff report and associated 

documents. 

Table 11 

Staff Report Elements Required by H&SC §40440.5(c)(3) 

Element Location

Full text of PR 1315 Appended to this staff report and incorporated herein by 

reference. 

Analysis of alternative 

Control Measures 

Program Environmental Assessment for Re-Adoption of 

Proposed Rule 1315 - Federal New Source Review Tracking 

System Chapter 6 – Alternatives and Chapter 7 – Alternatives – 

Indirect Impacts circulated for public comment from September 9 

through November 9, 2010 and available at 

http://www.aqmd.gov/ceqa/aqmd.html. 

Reference materials used in 

developing PR 1315 

South Coast Air Quality Management District 2007 Air Quality 

Management Plan; applicable laws and regulations; February 

2006 AQMD letter to U.S. EPA describing the proposed tracking 

system and U.S. EPA’s response letter expressing agreement. 

Environmental Assessment Program Environmental Assessment for Re-Adoption of 

Proposed Rule 1315 - Federal New Source Review Tracking 

System circulated for public comment from September 9 through 

November 9, 2010 and available at 

http://www.aqmd.gov/ceqa/aqmd.html. 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 35

Table 11 (continued) 

Staff Report Elements Required by H&SC §40440.5(c)(3) 

Element Location

Exhibits • Table 1: SIP-Approved Revisions of AQMD’s NSR Rules (p. 

4) 

• Table 2: AQMD’s Federal Offset Account Balances as of 

December 31, 2005 (p. 7) 

• Table 3: Pre-1990 Credits Deposited in AQMD’s Offset 

Accounts (p. 9) 

• Table 4: Pre-1990 Credits Unused and Retired in AQMD’s 

Federal Offset Accounts December 31, 2005 (p. 14) 

• Table 5: Ratio of Numbers of Facilities with Potential to Emit 

(PTE) Below Exemptions Thresholds to Numbers of Facilities 

with PTE at Exemption Thresholds (p. 18) 

• Table 6: Summary of Federal Offsets Accounts (p. 20) 

• Table 7: Summary of Changes between AQMD’S PreSeptember 2006 and Proposed Revised NSR Tracking 

Systems for Equivalency with Federal Requirements (p. 21) 

• Table 8: Summary of Changes between AQMD’S PreSeptember 2006 and Proposed Revised NSR Tracking 

Systems for Equivalency with Federal Requirements (pp. 21-

23) 

• Figure 1: Equivalency Demonstration Timeline (p. 25) 

• Table 9: Summary of Changes between AQMD’S PreSeptember 2006 and Proposed Revised Determinations of 

Equivalency (p. 26) 

• Table 10: Summary of Changes between AQMD’S PreSeptember 2006 and Proposed Revised Backstop Measures 

(pp. 28-29) 

• Table 11: Staff Report Elements Required by H&SC 

§40440.5(c)(3) (pp. 33-34) 

• Appendix I: AQMD’S NSR Offset Tracking—Updated Federal 

Running Balances (pp. I-1 through I-8) 

• Appendix II: List of Sources Exempt From Offset 

Requirements and Provisions Covered by Equivalency 

Showing (p. II-1 through II-3) 

• Program Environmental Assessment for Re-Adoption of 

Proposed Rule 1315 - Federal New Source Review Tracking 

System circulated for public comment from September 9 

through November 9, 2010 and available at 

http://www.aqmd.gov/ceqa/aqmd.html

• Socio-Economic Analysis circulated with this staff report.
Proposed Rule 1315 – Federal New Source Review Tracking System Page 36

Table 11 (continued) 

Staff Report Elements Required by H&SC §40440.5(c)(3) 

Element Location

Draft Findings for Governing 

Board consideration 

pursuant to H&SC §40727 

DRAFT FINDINGS section of this staff report (pp. 36-37) 

Social analysis Socio-Economic Analysis circulated with this staff report. 

Economic analysis Socio-Economic Analysis circulated with this staff report. 

Public health analysis Program Environmental Assessment for Re-Adoption of 

Proposed Rule 1315 - Federal New Source Review Tracking 

System Chapter 4 – Direct Environmental Impacts and Mitigation 

Measures and Chapter 5 – Indirect Environmental Impacts and 

Mitigation Measures circulated for public comment from 

September 9 through November 9, 2010 and available at 

http://www.aqmd.gov/ceqa/aqmd.html. 

CEQA AALYSIS 

The AQMD is the lead agency for the proposed project and has prepared a PEA pursuant to its 

certified regulatory program (CEQA Guidelines §15251(l)) as codified as AQMD Rule 110. A 

Draft Program Environmental Assessment (PEA) for the Proposed Rule (PR) 1315 has been 

prepared because the proposed rule would establish criteria to govern the conduct of a continuing 

program. 

PR 1315 would codify existing procedures and establish new requirements for establishing 

equivalency under federal New Source Review requirements through the use of AQMD’s 

internal emission offsets by operators of various projects that either obtain emissions offsets 

pursuant to Rule 1309.1 – Priority Reserve or are exempt from the emissions offsets 

requirements of Rule 1303 – Requirements pursuant to Rule 1304 – Exemptions. The PEA 

analyzes direct and indirect impacts from both major and non-major sources relying on offsets 

from the AQMD’s internal offset accounts pursuant to Rule 1309.1 – Priority Reserve or Rule 

1304 – Offset exemptions. The analysis in the PEA includes the conservative assumption that all 

net emission increases will occur at a rate consistent with growth rate projections in the 2007 Air 

Quality Management Plan (AQMP). 

Air quality would be directly impacted by the proposed project. In addition, the proposed project 

has the potential for significant adverse impacts resulting from construction and operation of 

sources obtaining permits on all environmental topic areas on the environmental checklist. 

The air quality impacts from the emissions resulting from permits issued and emission reductions 

foregone and environmental impacts from the siting, construction, and operation of those 

facilities provided offsets from the AQMD’s internal accounts would exceed the AQMD’s 

significance thresholds, so the environmental impacts from the proposed project have been 

determined to be significant. The PEA has been circulated for a 62-day public review and 
Proposed Rule 1315 – Federal New Source Review Tracking System Page 37

comment period. After the close of the public review period, responses to all comments will be 

prepared and included in the PEA, at which time the document will become a Final PEA. 

SOCIO-ECOOMIC IMPACTS 

The analysis of socio-economic impacts is contained in a socio-economic analysis circulated 

with this staff report. 

AQMP AD LEGAL MADATES 

The California Health and Safety Code requires AQMD to adopt an AQMP to meet state and 

federal ambient air quality standards in the South Coast Air Basin. In addition, the California 

Health and Safety Code requires that AQMD adopt rules and regulations that carry out the 

objectives of the AQMP. While Proposed Rule 1315 is not a control measure included in the

AQMP, its requirements are consistent with the AQMP objectives. 

RESOURCE IMPACTS 

Due to the volume and complexity of analysis required, it is estimated that implementation of PR 

1315 would require one full time employee and $150,000 in programming costs for 

enhancements to AQMD’s New Source Review computer program. 

DRAFT FIDIGS 

Before adopting, amending or repealing a rule, the AQMD Governing Board shall make findings 

of necessity, authority, clarity, consistency, non-duplication, and reference, as defined in Health 

and Safety Code Section 40727. The draft findings are as follows: 

ecessity – The AQMD Governing Board has determined that a need exists to adopt Proposed 

Rule 1315 – Federal New Source Review Tracking System to: 

• Maintain AQMD’s ability to continue to administer its new source review program for major 

and minor sources for facility modernization and to accommodate population growth through 

implementation of Rule 1304 and Rule 1309.1. AQMD’s policy objectives include allowing 

the permitting system to operate in order to: 1) allow facility modernization which will 

increase efficiency and reduce air pollution, 2) allow facilities to install pollution control 

equipment, 3) allow emergency equipment to be installed, 4) allow permitting of equipment 

necessary for essential public services and small emitters, 5) allow operation of portable 

equipment and other sources determined as a policy matter to be exempt from offsets or 

eligible for Priority Reserve credits, and 6) take into account environmental and 

socioeconomic benefits as well as environmental and socioeconomic impacts;

• Memorialize in rule form the accounting procedures AQMD uses to establish equivalency of 

AQMD’s New Source Review program with federal offset requirements, and ensure that 

valid offsets are projected to be available in AQMD internal offset accounts before a major 

source relying on such offsets is permitted thus assuring that increases in emissions resulting 

from such sources are fully offset; and
Proposed Rule 1315 – Federal New Source Review Tracking System Page 38

• Recognize sufficient previously-unused emission reductions that are beyond those required 

by applicable regulatory requirements in order to demonstrate federal equivalency for major 

sources that are exempt under Rule 1304 or that obtain credits from the Priority Reserve 

under Rule 1309.1.

Authority – The AQMD Governing Board obtains its authority to adopt, amend, or repeal rules 

and regulations from Sections 39002, 40000, 40001, 40440, 40441, 40463, 40702, 40725 

through 40728, 41508, and 42300 et seq. of the California Health and Safety Code. 

Clarity – The AQMD Governing Board has determined that Proposed Rule 1315 – Federal New 

Source Review Tracking System, as proposed to be adopted, is written or displayed so that its 

meaning can be easily understood by the persons directly affected by it. 

Consistency – The AQMD Governing Board has determined that Proposed Rule 1315 – Federal 

New Source Review Tracking System, as proposed to be adopted is in harmony with, and not in 

conflict with or contradictory to, existing statutes, court decisions, or state or federal regulations. 

on-Duplication – The AQMD Governing Board has determined that Proposed Rule 1315 – 

Federal New Source Review Tracking System, as proposed to be adopted, does not impose the 

same requirements as any existing state or federal regulation and is necessary and proper to 

execute the power and duties granted to, and imposed upon, the AQMD. 

Reference – The AQMD Governing Board, in adopting Proposed Rule 1315 – Federal New 

Source Review Tracking System, references the following statutes that the AQMD hereby 

implements, interprets, or makes specific: Health and Safety Code Sections 40001, 40702, 40910 

et seq., 40920.5, and 42300 et seq. and Clean Air Act Sections 110, 172, 173, 182, and 189 (42 

U.S.C. §§ 7410, 7502, 7503, 7511a, and 7513a). 

COCLUSIOS AD RECOMMEDATIOS 

The comparative analysis referred to in Health and Safety Code Section 40727.2 is not 

required because PR 1315 would not establish a new emissions limit, make an existing 

limit more stringent, or impose new or more stringent monitoring, reporting, or 

recordkeeping requirements on a source. Similarly, the proposed rule would not impose

any requirements on regulated sources so the incremental cost effectiveness analysis 

identified in Health and Safety Code Section 40920.6 (which only applies to adoption of 

rules or regulations that require use of best available retrofit control technology or that 

are feasible measures pursuant to Health and Safety Code Section 40914) is not required. 

Staff recommends adoption of Proposed Rule 1315 for the reasons stated in this staff 

report.
Page I-1

APPEDIX I 

AQMD’S SR OFFSET TRACKIG—UPDATED FEDERAL RUIG BALACES 

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

Previously-Reported Pre-1990 Beginning Balance (1) 92.40 25.80 18.40 34.90 34.50 

Pre-1990 Beginning Balance Values verified with records by category: 

Discounted (80%) Pre-1990 Negative Balance 29.57 22.09 5.95 7.54 2.18 

Discounted (80%) Pre-1990 Shutdown ERCs 2.36 1.51 0.22 0.91 0.20 

Discounted (80%)Pre-1990 ERCs 6.19 0.32 1.49 0.00 0.26 

Donated ERCs (2) 0.00 0.00 0.37 0.00 0.04 

Unclaimed ERCs (2) 0.33 0.00 0.00 0.00 0.00 

Revised Beginning Balance verified with records (3) 38.45 23.92 8.04 8.45 2.67 

Percentage Reduced from the Original Previously Reported 

Pre-1990 Beginning Balance 58% 7% 56% 76% 92%

Total 1990-97 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 24.17 7.67 1.16 6.10 6.13 

Total 1990-97 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 11.43 5.61 0.49 2.56 0.41 

1990-97 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.84 0.29 0.08 0.55 0.52 

1990-97 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.15 0.02 

1990-97 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.49 0.08 0.00 0.00 0.01 

1990-97 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 6.67 0.00 

Sum of 1990-97 Credits 36.93 13.65 1.73 16.03 7.08 

Sum of 1990-97 Debits [(c)(2)] (6) -9.83 -12.03 -0.47 -13.71 -5.81 

Pre-1990 Remaining Balance (7) 28.62 11.89 7.57 0.00 0.00 

Post-1990 Balance (7) 36.93 13.65 1.73 10.77 3.94 

1997 Ending Balance 65.54 25.54 9.30 10.77 3.94 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -8.49 -0.82 -0.97 0.00 0.00 

1997-98 Starting Balance 57.05 24.72 8.33 10.77 3.94 
Appendix I Page I-2

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

1997-98 Starting Balance 57.05 24.72 8.33 10.77 3.94 

1997-98 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 4.01 2.68 0.18 1.73 1.87 

1997-98 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 2.80 0.81 1.07 0.04 0.17 

1997-98 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

1997-98 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.02 0.00 

1997-98 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.00 0.00 0.00 0.00 0.00 

1997-98 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 1997-98 Credits 6.92 3.52 1.25 1.86 2.11 

Sum of 1997-98 Debits [(c)(2)] (6) -1.64 -1.79 -0.04 -1.98 -2.67 

1997-98 Refinements 0.00 0.00 0.00 0.00 0.89 

Pre-1990 Remaining Balance (7) 26.99 10.10 7.53 0.00 0.00 

Post-1990 Balance (7) 35.36 16.35 2.01 10.65 4.27 

1997-98 Ending Balance 62.35 26.45 9.54 10.65 4.27 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -1.77 -0.49 -0.02 0.00 0.00 

1998-99 Starting Balance 60.58 25.96 9.52 10.65 4.27 

1998-99 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 3.45 1.37 0.06 0.91 1.03 

1998-99 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 0.42 0.24 0.00 0.07 0.02 

1998-99 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

1998-99 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.02 0.00 

1998-99 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.00 0.00 0.00 0.00 0.00 

1998-99 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 1998-99 Credits 3.98 1.65 0.07 1.07 1.12 

Sum of 1998-99 Debits [(c)(2)] (6) -1.39 -1.24 -0.04 -2.89 -0.05 

1998-99 Refinements 0.00 0.00 0.00 0.00 0.00 

Pre-1990 Remaining Balance (7) 25.60 8.86 7.49 0.00 0.00 

Post-1990 Balance (7) 37.57 17.51 2.06 8.82 5.34 

1998-99 Ending Balance 63.17 26.37 9.55 8.82 5.34 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -1.13 0.00 0.00 0.00 0.00 

1999-00 Starting Balance 62.04 26.37 9.55 8.82 5.34 
Appendix I Page I-3

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

1999-00 Starting Balance 62.04 26.37 9.55 8.82 5.34 

1999-2000 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 2.03 1.07 0.12 1.00 1.41 

1999-2000 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 0.24 0.03 0.00 0.06 0.01 

1999-2000 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

1999-2000 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.20 0.02 

1999-2000 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.00 0.00 0.00 0.00 0.00 

1999-2000 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 1999-2000 Credits 2.39 1.14 0.13 1.32 1.51 

Sum of 1999-2000 Debits [(c)(2)] (6) -0.40 -0.66 0.00 -1.43 -0.14 

Pre-1990 Remaining Balance (7) 25.20 8.20 7.49 0.00 0.00 

Post-1990 Balance (7) 38.83 18.65 2.19 8.72 6.71 

1999-00 Ending Balance 64.03 26.85 9.68 8.72 6.71 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -0.78 0.00 0.00 0.00 0.00 

2000-01 Starting Balance 63.25 26.85 9.68 8.72 6.71 

2000-01 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 2.67 0.87 0.75 0.30 0.96 

2000-01 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 0.99 0.84 0.00 0.70 0.00 

2000-01 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

2000-01 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.02 0.00 

2000-01 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.00 0.00 0.00 0.00 0.00 

2000-01 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Positive Balance Adjustment via ERC [(c)(3)(A)(v)] 0.01 0.00 0.00 0.00 0.00 

Sum of 2000-01 Credits 3.78 1.75 0.76 1.09 1.03 

Sum of 2000-01 Debits [(c)(2)] (6) -1.33 -0.59 0.00 -0.34 -1.09 

Pre-1990 Remaining Balance (7) 23.87 7.61 7.49 0.00 0.00 

Post-1990 Balance (7) 41.83 20.40 2.95 9.47 6.65 

2000-01 Ending Balance 65.70 28.01 10.44 9.47 6.65 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -0.42 -0.41 0.00 0.00 0.00 

2001-02 Starting Balance 65.28 27.60 10.44 9.47 6.65 
Appendix I Page I-4

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

2001-02 Starting Balance 65.28 27.60 10.44 9.47 6.65 

2001-02 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 2.63 0.91 0.19 0.87 0.60 

2001-02 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 1.69 1.09 0.08 0.40 0.42 

2001-02 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

2001-02 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.02 0.00 

2001-02 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.00 0.00 0.00 0.00 0.00 

2001-02 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2001-02 Credits 4.43 2.05 0.28 1.36 1.09 

Sum of 2001-02 Debits [(c)(2)] (6) -0.97 -0.81 0.00 -2.53 -0.07 

Pre-1990 Remaining Balance (7) 22.90 6.80 7.49 0.00 0.00 

Post-1990 Balance (7) 45.85 22.04 3.23 8.30 7.67 

2001-02 Ending Balance 68.75 28.84 10.72 8.30 7.67 

Previously-Reported 2002 Running Balance 107.65 21.60 18.76 24.09 41.24 

Percentage Reduction to 2002 Running Balance Due to

Proposed Changes 

36.1% -33.5% 42.9% 65.5% 81.4%

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -0.46 -0.44 0.00 0.00 0.00 

2002-03 Starting Balance 68.29 28.40 10.72 8.30 7.67 

2002-03 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 4.78 1.17 0.26 1.88 0.62 

2002-03 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 1.74 1.71 0.02 1.60 1.08 

2002-03 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

2002-03 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.02 0.00 

2002-03 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.02 0.00 0.00 0.00 0.00 

2002-03 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2002-03 Credits 6.65 2.92 0.30 3.57 1.78 

Sum of 2002-03 Debits [(c)(2)] (6) -0.71 -1.03 -0.07 -2.27 -0.11 

Pre-1990 Remaining Balance (7) 22.19 5.77 7.42 0.00 0.00 

Post-1990 Balance (7) 52.04 24.52 3.53 9.60 9.34 

2002-03 Ending Balance 74.23 30.29 10.95 9.60 9.34 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -0.52 -2.21 -0.60 0.00 0.00 

2003-04 Starting Balance 73.71 28.08 10.35 9.60 9.34 
Appendix I Page I-5

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

2003-04 Starting Balance 73.71 28.08 10.35 9.60 9.34 

2003-04 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 6.76 2.10 0.43 1.30 1.05 

2003-04 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 2.54 0.37 0.00 1.50 0.03 

2003-04 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.11 0.04 0.01 0.07 0.07 

2003-04 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.02 0.00 

2003-04 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.00 0.00 0.00 0.00 0.00 

2003-04 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2003-04 Credits 9.42 2.52 0.44 2.89 1.14 

Sum of 2003-04 Debits [(c)(2)] (6) -0.27 -0.81 0.00 -1.76 -0.12 

Pre-1990 Remaining Balance (7) 21.92 4.96 7.42 0.00 0.00 

Post-1990 Balance (7) 60.94 24.83 3.37 10.73 10.36 

2003-04 Ending Balance 82.86 29.79 10.79 10.73 10.36 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -5.48 -2.48 -1.65 0.00 -0.10 

2004-05 Starting Balance 77.38 27.31 9.14 10.73 10.26 

2004-05 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 7.59 1.10 0.14 1.37 0.78 

2004-05 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 1.16 0.11 0.01 0.33 0.00 

2004-05 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.17 0.06 0.02 0.11 0.10 

2004-05 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.03 0.00 

2004-05 ERC Payback of Offset Debt [(c)(3)(A)(v)] 0.02 0.00 0.00 0.00 0.00 

2004-05 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2004-05 Credits 8.94 1.27 0.17 1.84 0.89 

Sum of 2004-05 Debits [(c)(2)] (6) -0.41 -0.44 0.00 -1.49 -0.38 

Pre-1990 Remaining Balance (7) 21.51 4.52 7.42 0.00 0.00 

Post-1990 Balance (7) 64.40 23.61 1.89 11.08 10.77 

2004-05 Ending Balance w/ pre-1990 credits 85.91 28.13 9.31 11.08 10.77 

Remove Remaining Pre-1990 Balance -21.51 -4.52 -7.42 0.00 0.00 

2004-05 Ending Balance 64.40 23.61 1.89 11.08 10.77 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -1.61 -0.21 0.00 0.00 -0.42 

2006 Starting Balance 62.79 23.40 1.89 11.08 10.35 
Appendix I Page I-6

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

2006 Starting Balance 62.79 23.40 1.89 11.08 10.35 

2006 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 4.79 1.06 0.31 1.36 0.72 

2006 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 1.32 3.16 0.00 1.56 0.00 

2006 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.03 0.01 0.00 0.02 0.02 

2006 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.01 0.00 

2006 ERC Payback of Offset Debt 0.00 0.00 0.00 0.00 0.00 

2006 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2006 Credits 6.13 4.24 0.31 2.94 0.74 

Sum of 2006 Debits [(c)(2)] (6) -0.21 -0.54 -0.01 -0.15 -0.02 

Pre-1990 Remaining Balance (7) 0.00 0.00 0.00 0.00 0.00 

Post-1990 Balance (7) 68.72 27.10 2.19 13.87 11.07 

2006 Ending Balance 68.72 27.10 2.19 13.87 11.07 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -1.48 -0.22 0.00 0.00 -0.31 

2007 Starting Balance 67.24 26.88 2.19 13.87 10.76 

2007 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 4.92 0.85 0.20 0.74 0.39 

2007 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 0.23 0.73 0.00 0.64 0.00 

2007 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.30 0.00 0.01 0.01 0.14 

2007 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.00 0.00 

2007 ERC Payback of Offset Debt 0.01 0.00 0.00 0.00 0.00 

2007 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2007 Credits 5.46 1.58 0.21 1.38 0.53 

Sum of 2007 Debits [(c)(2)] (6) -0.13 -0.21 0.00 -0.25 0.00 

Pre-1990 Remaining Balance (7) 0.00 0.00 0.00 0.00 0.00 

Post-1990 Balance (7) 72.57 28.25 2.40 15.00 11.29 

2007 Ending Balance 72.57 28.25 2.40 15.00 11.29 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -3.96 -0.26 0.00 0.00 0.00 

2008 Starting Balance 68.61 27.99 2.40 15.00 11.29 
Appendix I Page I-7

 VOC Ox SOx CO PM10 

 t/d t/d t/d t/d t/d 

2008 Starting Balance 68.61 27.99 2.40 15.00 11.29 

2008 Minor Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 4.00 0.66 0.02 0.62 0.36 

2008 Major Source Credits [(c)(3)(A)(i), (c)(3)(A)(ii)] (4) 0.56 0.20 0.00 0.36 0.01 

2008 Creditable Minor Source ERC use [(c)(3)(A)(iii)] 0.16 0.00 0.00 0.00 0.01 

2008 Creditable Major Source ERC use [(c)(3)(A)(iv)] 0.00 0.00 0.00 0.00 0.00 

2008 ERC Payback of Offset Debt 0.01 0.02 0.01 0.07 0.00 

2008 BACT Discount ERCs [(c)(3)(A)(vi)] (5) 0.00 0.00 0.00 0.00 0.00 

Sum of 2008 Credits 4.73 0.88 0.03 1.05 0.39 

Sum of 2008 Debits [(c)(2)] (6) -0.04 -0.02 0.00 -0.13 0.00 

Pre-1990 Remaining Balance (7) 0.00 0.00 0.00 0.00 0.00 

Post-1990 Balance (7) 73.30 28.85 2.43 15.91 11.68 

2008 Ending Balance 73.30 28.85 2.43 15.91 11.68 

Surplus Adjustment of Post-1990 Balance Carryover [(c)(4)] -2.95 -1.25 -0.32 0.00 -0.18 

2009 Starting Balance 70.35 27.60 2.11 15.91 11.50 

2009 Projected Credits (8) 6.41 2.02 0.22 1.91 0.69 

2009 Projected Debits (8) -0.19 -0.38 0.00 -0.67 -0.08 

Projected Pre 1990 Balance 0.00 0.00 0.00 0.00 0.00 

Projected Post 1990 Balance 76.57 29.24 2.33 17.15 12.11 

2009 Projected Ending Balance 76.57 29.24 2.33 17.15 12.11 

Projected Surplus Adjustment of Post-1990 Balance Carryover 

[(c)(4)] -3.08 -1.26 -0.31 0.00 -0.19 

2010 Projected Starting Balance 73.49 27.98 2.02 17.15 11.92 

2010 Projected Credits (8) 6.41 2.02 0.22 1.91 0.69 

2010 Projected Debits (8) -0.19 -0.38 0.00 -0.67 -0.08 

Projected Post 1990 Balance 79.71 29.62 2.24 18.39 12.53 

2010 Projected Balance 79.71 29.62 2.24 18.39 12.53 

Notes: 

(1) The total amount of the Previously Reported Pre-1990 Beginning Balance. 

(2) Donated and Unclaimed ERCs reflect 20% of the negative NSR balances for facilities that donated or did not 

claim their pre-1990 ERCs; the other 80% of these pre-1990 negative NSR balance amounts are included in the 

Discounted Pre-1990 ERCs. 

(3) Revised Beginning Balances based on documented values with records. 

(4) Minor Source and Major Source Credits are orphan shutdowns and orphan reductions from Minor and Major 

Sources, respectively, and reflect 80 % of permitted allowable emission values. 

(5) No credit claimed for BACT discount of ERCs except CO 1991 BACT discount of ERCs issued for removal of 

ICEs. This discount was surplus to BARCT at the time of use. The resulting credits were completely used by 

the 1997-98 reporting period to offset portions of the 13.71 tons per day debits for 1990-97 and the 1.98 tons 

per day debits for 1997-98. 

(6) Debits are sources that were exempt from offset requirements under Reg. XIII yet were not exempt from offset 

requirements under Federal NSR. Debits are denoted as negative amounts and are deducted from the account 
Appendix I Page I-8

balances at a ratio of 1.2:1.0 for ozone precursors (1.2 pounds are deducted for each pound of increase in 

potential emissions) and at a ratio of 1.0:1.0 for non-ozone precursors. 

(7) The Debits are first deducted from Pre-1990 account balances, if any, and any remaining debits are then 

deducted from the earliest available Post-1990 account balances. 

(8) Projections based on average of the previous five years' credits and debits. 
Page II-1

APPEDIX II: 

LIST OF SOURCES EXEMPT FROM OFFSET REQUIREMETS AD PROVISIOS 

COVERED BY EQUIVALECY SHOWIG 

The following sources are exempt from AQMD’s NSR offset requirements or eligible to obtain 

their offsets from AQMD’s Priority Reserve but are not exempt from federal NSR offset 

requirements. Therefore, use of these exemptions or use of Priority Reserve offsets by major 

sources requires debits from AQMD’s offset accounts and would be reflected in AQMD’s 

demonstrations of equivalency. 

Rule 1304 - Exemptions: 

(1) Replacements of electric utility steam boilers with combined cycle gas turbines, 

intercooled, chemically-recuperated gas turbines, other advanced gas turbines, solar, 

geothermal, or wind energy, or other equipment to allow compliance with Rule 1135 – 

Emissions of Oxides of Nitrogen from Electric Power Generating Systems or Regulation 

XX – Regional Clean Air Incentives Market. If the replacement results in a per-utility 

increase in basinwide electricity generating capacity, the emissions associated with the 

increase in capacity is not exempt. 

(2) Abrasive Blasting Equipment 

(3) Air Pollution Control Strategies 

(4) Emergency Equipment 

(5) Portable Internal Combustion Engines 

(6) Methyl Bromide Fumigation 

(7) Replacement of Ozone Depleting Compounds 

(8) Portable Equipment 

(9) Regulatory Compliance 

(10) Regulatory Compliance for Essential Public Services 

(11) Facility Exemption (VOC, NOx, SOx, or PM10 PTE less than 4 tons per year or CO PTE 

less than 29 tons per year) 

(12) Resource Recovery and Energy Conservation 

(13) Electric Utility Boilers 

Rule 1309.1 - Priority Reserve 

The Priority Reserve, which is funded from AQMD’s offset accounts, provides a source of 

emission offsets for certain priority categories of sources. Except as noted below, these offsets 
Appendix II Page II-2

are provided by AQMD at no cost to the operator. The various categories of sources eligible to 

access the Priority Reserve pursuant to Rule 1309.1 as amended May 3, 2002, which is the 

currently operative version of the rule, are summarized below: 

(1) Innovative Technology 

Use of a technology that results in significantly lower emissions than would the use of 

BACT. 

(2) Research Operations 

Projects with the purpose of “investigation, [experimentation], or research to advance the 

state of knowledge or the state-of-the-art.” Limited to at most two years. 

(3) Essential Public Service 

Sources in the following categories located at facilities where all sources operate at or 

below BARCT levels 

 Publicly-owned sewage facilities; 

 Prisons; 

 Police facilities; 

 Fire fighting facilities; 

 Schools; 

 Hospitals; 

 Construction/operation of landfill gas control or processing facility; 

 Water delivery operations; 

 Public transit; and 

(4) Electrical Generating Facilities (2000 through 2003) 

Specified categories of facilities that generate electricity; meet BARCT for all sources; 

applicant has conducted a due diligence effort to acquire ERCs on the open market;

applicant has applied for California Energy Commission certification or AQMD permit to 

construct during calendar years 2000, 2001, 2002, or 2003; and applicant pays the 

following fee for each pound of Priority Reserve offsets obtained (VOC and NOx not 

available for these sources): 

 $25,000 per pound PM10 and day; 

 $8,900 per pound SOx per day; and 

 $12,000 per pound CO per day.