NSR Stakeholders NSR Stakeholders Working Group Meeting Working Group Meeting January 21, 2009 January 21, 2009 1 1
Agenda Item #2 Agenda Item #2 Background on NSR and Offsets Background on NSR and Offsets NSR Stakeholders Working Group NSR Stakeholders Working Group January 21, 2009 January 21, 2009 2 2
New Source Review (NSR) New Source Review (NSR) Background Background Federal Law – – The Federal Clean Air Act The Federal Clean Air Act Federal Law has NSR requirements for major sources has NSR requirements for major sources for both Attainment and Non- -Attainment Air Attainment Air for both Attainment and Non Contaminants Contaminants State Law – – The California Clean Air Act The California Clean Air Act State Law has NSR (No Net Increase) requirements has NSR (No Net Increase) requirements for both major and non- -major source of major source of for both major and non Non- -Attainment Air Contaminants Attainment Air Contaminants Non 3 3
New Source Review Requirements New Source Review Requirements Attainment Air Contaminants Attainment Air Contaminants Requirements are for Prevention of Significant Requirements are for Prevention of Significant Deterioration (PSD): Deterioration (PSD): – Best Available Control Technology (BACT) Best Available Control Technology (BACT) – – Air Dispersion Modeling Air Dispersion Modeling – – Visibility Analysis Visibility Analysis – Non- -Attainment Air Contaminants Attainment Air Contaminants Non Requirements are for Non- -attainment NSR: attainment NSR: Requirements are for Non – BACT/ Lowest Achievable Emission Rate (LAER) BACT/ Lowest Achievable Emission Rate (LAER) – – Air Dispersion Modeling Air Dispersion Modeling – – Emission Offsets – Emission Offsets 4 4
When are Emission When are Emission Offsets Required? Offsets Required? Emission Offsets are required for Emission Offsets are required for permitting of: permitting of: – New Facilities New Facilities – – Relocations Relocations – – Existing Facility Modifications/Expansions by: Existing Facility Modifications/Expansions by: – Installation of New Equipment Installation of New Equipment Replacement of Existing Equipment Replacement of Existing Equipment Modification and/or modernization of equipment Modification and/or modernization of equipment 5 5
New Source Review New Source Review SCAQMD NSR Rules SCAQMD NSR Rules SCAQMD adopted its NSR Rules in 1976 prior SCAQMD adopted its NSR Rules in 1976 prior to adoption of federal and state Clean Air Acts to adoption of federal and state Clean Air Acts Emission Offsets are required from the Emission Offsets are required from the applicants in the form of Emission Reduction applicants in the form of Emission Reduction Credits (ERCs ERCs) or RECLAIM Trading Credits ) or RECLAIM Trading Credits Credits ( (RTCs RTCs) ) ( Emission Offset Exemptions (Rules 1309.1 and Emission Offset Exemptions (Rules 1309.1 and 1304) 1304) – SCAQMD NSR Rules provide exemptions from – SCAQMD NSR Rules provide exemptions from offsets (i.e., ERCs offsets (i.e., ERCs) for certain specific sources ) for certain specific sources – SCAQMD provides offsets for the exempt sources SCAQMD provides offsets for the exempt sources – from its Offset Credit Bank from its Offset Credit Bank 6 6
Rule 1309.1 - -Priority Reserve Priority Reserve Rule 1309.1 What Sources Qualify? What Sources Qualify? Innovative Technology Innovative Technology Research Operations Research Operations Essential Public Service Essential Public Service – sewage treatment facilities, prisons; police sewage treatment facilities, prisons; police – facilities; fire fighting facilities; schools; facilities; fire fighting facilities; schools; hospitals; construction and operation of a hospitals; construction and operation of a landfill gas control or processing facility; water landfill gas control or processing facility; water delivery operations; and public transit. delivery operations; and public transit. Limited Electrical Generating Facilities Limited Electrical Generating Facilities 7 7
Rule 1304- - Exemptions Exemptions Rule 1304 What Sources Qualify? What Sources Qualify? Equipment Replacements Equipment Replacements Facility or Equipment Relocations Facility or Equipment Relocations Emergency Equipment or Operations Emergency Equipment or Operations Air Pollution Control Strategies Air Pollution Control Strategies Regulatory Compliance Regulatory Compliance Concurrent Facility Modification Concurrent Facility Modification Small Sources (< 4 Tons per Year) Small Sources (< 4 Tons per Year) Others (Abrasive Blasting & Portable equipment, Others (Abrasive Blasting & Portable equipment, Replacement of ODCs ODCs) ) Replacement of 8 8
What Are the Sources What Are the Sources of Offsets? of Offsets? Open Market Credits Open Market Credits – Sources shutdown or over- -control emissions and apply control emissions and apply – Sources shutdown or over for and obtain Emission Reduction Credits (ERCs) for and obtain Emission Reduction Credits (ERCs) – ERCs traded between companies for offsets – ERCs traded between companies for offsets The SCAQMD’s Offset Credit Bank The SCAQMD’s Offset Credit Bank – – Offset credits are emission reductions created from Offset credits are emission reductions created from sources which do not obtain ERCs sources which do not obtain ERCs (Orphan Shutdowns) (Orphan Shutdowns) – Offsets are provided free of charge to Essential Public – Offsets are provided free of charge to Essential Public Services, Smaller Sources and other exempt sources Services, Smaller Sources and other exempt sources 9 9
The SCAQMD’s Offset The SCAQMD’s Offset Credit Bank Credit Bank 1990 - -Offset Credit Bank established Offset Credit Bank established 1990 Funded primarily with: Funded primarily with: (i) (i) “Pre- “Pre -1990” emission reduction credits 1990” emission reduction credits (ii) (ii) Post 1990 “major- Post 1990 “major -source orphan shutdowns” source orphan shutdowns” An NSR Tracking System is used to account for credit withdrawals and and An NSR Tracking System is used to account for credit withdrawals deposits deposits 2002 2002 In connection with other NSR rule amendments EPA asked In connection with other NSR rule amendments EPA asked SCAQMD to memorialize NSR Tracking system in a SCAQMD SCAQMD to memorialize NSR Tracking system in a SCAQMD regulation regulation 10 10
Actions Taken by SCAQMD Actions Taken by SCAQMD in 2006 and 2007 in 2006 and 2007 Use of SCAQMD Use of SCAQMD SCAQMD Adopted Rule SCAQMD Adopted Rule 1315 � � Credit Bank Credit Bank 1315 � � NSR Tracking Rule NSR Tracking Rule Replaced some of pre- -1990 1990 Replaced some of pre SCAQMD Rule 1309.1- - Priority Reserve Priority Reserve SCAQMD Rule 1309.1 credits with creditable credits with creditable minor minor � � Essential Public Services (i.e. Essential Public Services (i.e. source orphan shutdowns source orphan shutdowns sewage treatment plants, landfills, sewage treatment plants, landfills, hospitals) hospitals) � � Amended to add power plants Amended to add power plants SCAQMD Rule 1304 (Exemptions) SCAQMD Rule 1304 (Exemptions) � � Credit exemptions for certain Credit exemptions for certain sources sources 11 11
Agenda Item #4 Agenda Item #4 Permitting Status Permitting Status NSR Stakeholders Working Group NSR Stakeholders Working Group January 21, 2009 January 21, 2009 12 12
As a Result of the Court As a Result of the Court Decision Decision Without SCAQMD’s bank of offset credits: Without SCAQMD’s bank of offset credits: – No essential public service projects can be permitted – No essential public service projects can be permitted – No other local government & business permits can be – No other local government & business permits can be issued issued – No new power plants can be permitted – No new power plants can be permitted The only remaining option for local government and The only remaining option for local government and business is to purchase ERCs in Open Market business is to purchase ERCs in Open Market – Not enough ERCs in the open market – Not enough ERCs in the open market – ERCs are expensive and potentially unaffordable – ERCs are expensive and potentially unaffordable 13 13
PM10 ERC Supply & Average PM10 ERC Supply & Average Cost Trends (2000- -2008) 2008) Cost Trends (2000 Supply dropped by 54% since 2000 Cost increased by 3,755% since 2000 Highest Price of PM10 ERC sold in 2008 was $247,000 per lb/day 2,500 $160,000 2,123 $148,761 $140,000 1,998 2,000 $120,000 ERC Supply (lbs/day) $100,000 Cost ($/lb/day) $103,499 1,500 ERC Average 1,187 1,145 $80,000 $85,893 941 984 1,000 872 $60,000 846 803 779 $25,372 $23,649 $49,053 $21,710 $40,000 $16,917 500 $20,000 $3,859 0 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 Three proposed power plants with SCE contracts (Sentinel in Palm Springs, Walnut Creek in City of ERC Supply (lbs/day) ERC Cost ($/lb/day) Industry, and NRG in El Segundo) 14 14
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