AQMD ANNUAL EMISSIONS REPORTS (AER) – CALENDAR 2015

The web-based annual emissions reporting system is now equipment-based. In other words, the criteria and toxic emissions from each piece of equipment at a facility will be reported separately from all other sources of emissions. The requirements are expected to remain almost the same as in the previous year.

Who is required to file?

• Facilities in the Annual Operating Permit Emission Fee Program. Those are companies who pay annual emissions for permitted equipment. Such facilities are subject to AQMD Rule 301(e) and are required to file when exceeding the corresponding reporting thresholds.
• Facilities whose permitted plus non-permitted emissions equal 4 tons or more per year of criteria pollutants (VOCs, NOx, SOx, PM, Specific Organics); or 100 tons or more per year of CO.
• Facilities which had emissions [thresholds specified in Rule 301(e)] of specific Toxic Air Contaminants or ozone depleting compounds, listed in form TAC.
• Facilities that receive an Annual Emissions Report Package. However, it is the operator’s responsibility to file a report if necessary, even if the facility does not receive a notification from SCAQMD.
• Facilities which prior to July 1, 2000 had equipment listed as exempt. There is no fee associated with these exempt emissions but they must be reported.

What if I miss the deadline?

The SCAQMD 2015 Annual Emissions Report (AER) is due by 5:00 p.m. on March 1, 2016. The Report applies to the Calendar Year 2015 reporting period (January 1, 2015 – December 31, 2015). If a facility misses the deadline and owes an emission fee, late payment penalties in the form of a percentage of the emission fees will apply. The penalties are set forth in AQMD Rule 301(e)(10)(B) and are as follows:

Fees are determined based on rates in effect for the year when the emissions are actually reported, not the year wherein the emissions occurred.

Special circumstances
The AQMD has a Fee Review Committee to handle issues regarding fees and penalties. The agency requires records related to the AER to be kept for a minimum of five years.

What is new this year?

• The 2015 Annual Emissions Report (AER) applies to the Calendar Year 2015 reporting period (January 1, 2015 – December 31, 2015).
• New Emission Fee Rates: New emission fee rates are in effect for the 2015 Annual Emission Reporting Program for criteria pollutants, toxic air contaminants, and ozone depleting compounds in accordance with AQMD Rule 301(e).
• AB2588 Quadrennial Report: For 2015 AER, facilities in Phase 1A are required to file their Quadrennial Reports.
• Updated Guidelines: Guidelines for reporting emissions for dairy and poultry farms and polyester resins operations are updated.
• The PIN codes will remain the same as in previous year’s.

AQMD ENCOURAGES FACILITY MODERNIZATION

The SCAQMD has unveiled their concept of facility modernization in a recently released white paper. The basic principle is to provide incentives for facilities to purchase new lower emitting equipment. The classic example is a facility that avoids installing an afterburner because if they do, the new equipment will need a permit and this represents an added cost.

The agency claims “modernization and technology advancement choices are needed in order to meet attainment goals.” The “Industrial Facility Modernization” White Paper identified cost, New Source Review rules, offsets and the permitting process as hurdles that may be preventing businesses from replacing older pieces of equipment. Proposed incentives that can encourage ultra clean facilities to locate in the District included reduced and/or streamlined permitting, less recordkeeping, expansion of Rule 1304 exemptions for near-zero emission technologies and “branding incentives” such as recognizing businesses for going above and beyond regulatory requirements. Following a directive from their Governing Board, staff included a commitment to identify mechanisms to provide greater policy certainty to businesses that invest in low emitting technologies or pollution controls.

RULE 1110.2 FIRST TO DEAL WITH STARTUP, SHUTDOWN AND MALFUNCTIONS DISAPPROVAL

The Environmental Protection Agency (EPA) proposed a disapproval of revisions to the California State Implementation Plan (SIP) concerning South Coast Air Quality Management District (SCAQMD) Rule 430–Breakdown Provisions. The first rule to deal with the disapproval is SCAQMD Rule 1110.2 –Emissions from Gaseous and Liquid Fueled Engines. The action is the result of a new EPA Startup Shutdown and Malfunctions (SSM) policy prompted by a petition from the Sierra Club (environmental group) and recent court decisions, which will cause Rule 430 to be disapproved within the next six months.

Rule 430 allows sources to be exempted from applicable emission limits contained in permits and in source category specific rules when excess emissions occur due to an unavoidable malfunction. EPA policy on excess emissions resulting from unavoidable malfunctions is contained in a memorandum dated February 15, 1983, entitled “Policy on Excess Emissions during Startup, Shutdown, Maintenance, and Malfunctions” (the Bennett Memo). The Bennett Memo explains that even if the source demonstrates that the excess emissions are due to an unavoidable malfunction, these emissions still constitute a violation of the applicable requirement. The occurrence of a violation gives rise to EPA enforcement actions, including imposing penalties such as seeking an injunction against the source.

According to the EPA, one of the deficiencies of SCAQMD Rule 430 is that “it provides complete discretion to the Executive Officer to determine whether penalties shall be imposed in response to excess emissions due to a malfunction.” It is EPA policy that the Agency cannot be bound by the decision of the District from seeking penalties for a violation of the SIP.

In order to address EPA’s concerns on potential excess emissions due to equipment breakdowns without enforcement, SCAQMD has proposed a per calendar quarter limit for these incidents under the proposed amendments to Rule 1110.2. Under the staff proposal (Option #1) there will be a threshold for excess emissions and three breakdowns per calendar quarter would be permissible. Staff also presented an alternative proposal (Option #2) to the Governing Board that would have defined all breakdowns as violations. The Governing Board unanimously adopted Option #1.

EPA has also found that the SSM provisions in the SIPs of 36 states do not meet the requirements of the Clean Air Act (CAA) and accordingly issued a “SIP call” for each of those states. The SCAQMD has until November 2016 to correct the deficiencies or face sanction such as loss of highway funding and more stringent offset requirements.

CHANGES TO PROPOSITION 65

California Attorney General (AG) Kamala Harris recently announced a series of regulatory changes to Proposition 65 meant to curb frivolous lawsuits. The Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65) is designed to reduce human exposure to those chemicals identified on a Governor’s list as “Known to the State” to cause cancer, reproductive harm, or developmental harm. Violations may occur where a business discharges listed chemicals into drinking water, or exposes individuals to listed chemicals without providing the required warning.

Proposition 65 allows any private party to sue “in the public interest” if the party gives notice of the violation to the alleged violator, the Attorney General, and those District Attorneys in whose jurisdiction the violation is alleged to occur (Health & Safety Code, § 25249.7). This provision has given rise to litigation abuse. The Sacramento Business Journal reports that “businesses paid more than $29 million in settlements last year related to Proposition 65. Of that total, $21 million went for attorney fees and costs.” According to the AG’s office, the changes create “less financial incentive for parties to bring litigation against businesses in ways that are not necessarily in the public interest.”

The proposed regulations would (1) impose a cap on the fraction of settlement payments that can be paid “in lieu of” civil penalties; (2) require that the projects with an “Additional Settlement Payment” component be subject to ongoing judicial supervision, and that such payments fund only projects with a clear nexus to specific violations giving rise to the settlement; and (3) place more stringent requirements on determining when a settlement confers the “significant” public benefit prerequisite to obtaining attorney’s fees.

Business groups contend that any benefit obtained by the new regulations is overshadowed by proposed regulations from California’s Office of Environmental Health Hazard Assessment (OEHHA), which would change current requirements for Prop 65 warnings. OEHHA proposes changes to the Maximum Allowable Daily Level (MADL) for lead, averaging for reproductive toxicants, lot averaging and a switch to using an arithmetic mean. Business representatives argue that these changes will result in more warnings and substantially increase litigation.

ARCHITECTURAL COATINGS RULE CHANGES

The South Coast Air Quality Management District (SCAQMD) proposes yet another revision to Rule 1113 (Architectural Coatings). The proposed rule amendments include new definitions, VOC limits and the controversial test method 313. The District is also seeking to eliminate the Small Container Exemption compliance option for Flats, Non-flats, Industrial Maintenance Coatings and Rust Preventative Coatings. Fees (assessed on the manufacturers’ reported annual quantity of architectural coatings, as well as the cumulative VOC emissions from the reported annual quantity of coatings) for products sold in small containers will be increased.

The proposal removes the flexibility to use non-compliant coatings provided the emissions were offset elsewhere in the process. There are new definitions for: Building Envelope, Building Envelope Coatings, Color Indicating Safety Coatings, Default Coatings, Tile and Stone Sealers, Topcoat, Tub and Tile Refinishing Coatings & Wood Conditioners, Faux Glazes, Flat Coatings, Floor Coatings, Mastic Coatings, Non-flat Coatings, Lacquers, Reactive Penetrating Sealers, Shellacs, Varnishes, and Clear Wood Finish (re-named Wood Coatings). VOC limits are proposed for the following new coating categories: Building Envelope Coatings, Color Indicating Safety Coatings, Tile and Stone Sealers, Tub and Tile Refinishing Coatings & Wood Conditioners. New labeling requirements are proposed for colorants.

Building Envelope Coatings (which currently fall under the waterproofing sealer category) had a limit of 100 grams per liter (g/l). Staff is proposing to initially set the VOC limit at 100 g/l, which will be lowered to 50 g/l effective January 1, 2019. The VOC limit for recycled coatings will be lowered to 150 g/l.

The controversy over Test Method 313 – Determination of Volatile Organic Compounds VOC by Gas Chromatography-Mass Spectrometry, remains. Business groups contend that the test is problematic given the lack of a “precision and bias” statement and that the District has only conducted an internal evaluation. Since results from external laboratories were not considered, the regulated community has no way of knowing how results from these labs compare to SCAQMD results. This is an important issue since differences in data could result in enforcement action against companies whose test results do not match those of the SCAQMD.

Various commenters asked the District to fully exempt tertiary butyl acetate (tBAc) propylene carbonate (PC), dimethyl carbonate (DMC) and 2-amino-2-methyl-1-propanol (AMP). These compounds are currently listed as exempt by the Environmental Protection Agency. The staff report states that unless further studies are conducted and submitted for review, staff has removed the proposal to exempt AMP from the definition of a VOC. The Office of Environmental Health Hazard Assessment (OEHHA) is still in the process of finalizing their analysis on tBAc. Until there is a final peer reviewed analysis on tBAc, staff will not propose any changes to the current tBAc exemption.

The American Coatings Association (ACA) “strongly opposes this proposal and has requested that SCAQMD analyze the impact of the increased fees on small container sales before eliminating the Small Container Exemption for these coatings categories.” The ACA argues that there is no justification for the amendments since the District has already met its 2012 Air Quality Management Plan commitment for the architectural coatings category.

NOX RECLAIM SHAVE

SCAQMD staff proposed changes to their Regional Clean Air Incentives Market Program (RECLAIM) to comply with state law requirements. According to the staff, significant NOx (Nitrogen Oxides) reductions were needed for ozone and Particulate Matter (PM) 2.5 attainment. The lower price of RECLAIM Trading Credits (RTCs) as compared to the cost of command and control requirements for mobile sources and other stationary sources was cited as the reason for RECLAIM companies choosing to buy credits rather than installing control equipment. Thus, there was an incentive not to implement cost-effective controls that would be required under command and control.

The staff proposal included a “shave” of 14 tons per day from the RECLAIM market, which would impact sources such as refinery equipment, glass melting furnaces and Internal Combustion engines. The current allocation cap for the market was 26.51 tons per day. The staff proposal would have reduced the allocation to 12.51 tons per day by the year 2023. The proposal was recently presented to the Governing board for adoption. The topic was hotly debated with over sixty speakers on both sides of the issue providing public comments. Environmentalists objected that the staff proposal did not go far enough to protect public health. Industry representatives commented that the changes had a $2.7 billion price tag.

The Western States Petroleum Association (WSPA) noted that in the past 20 years emissions have been reduced by 66%. Under the proposal, industry would be required to reduce another 66% in a seven year period. The “elephant in the room” is that RECLAIM is being changed into a command and control program—commented an oil industry representative. Another objection was that the proposal will have a devastating impact to the market to the point that it will no longer exist and that no economists have looked at the District’s numbers.

After deliberating and introducing several motions which failed to pass, the Board adopted a modified version of the staff proposal that had been sanctioned by industry. The 14 ton per day shave was reduced to a 12 ton per day shave. The adopted rule includes an “opt-out” provision for electrical generating facilities that will essentially allow them to exit the RECLAIM program. Some commenters argued that allowing facilities to leave the program would drive RTC prices up but staff claims that the rule contains price stabilization measures that can address the issue. The shutdown provisions of the rule [subsection (i)] were set aside by the Board to allow for further discussions between stakeholder and staff.

RULE 1147 (NOX REDUCTIONS FROM MISCELLANEOUS SOURCES) TECHNOLOGY ASSESSMENT

In 2011, industry asserted that a technology assessment was needed in order to analyze the feasibility and availability of burner systems and heating units for processes with NOx emissions of one pound per day or less. Thus, the 2011 amendments to Rule 1147 included a technology assessment for low emission sources. Staff is proposing to exempt all units with total heat input less than 325,000 BTU per hour from NOx emission limits. Exemptions are also being considered for in-use heated process tanks, evaporators and parts washers. The NOx limit may be raised from the current 30 parts per million (ppm) to 60 ppm, for the primary chamber or multi-chamber incinerators, burn-off ovens, burn-out furnaces and incinerators that operate below 800 degrees Fahrenheit.

Staff is proposing to delay the requirement to replace burners for existing in-use spray booths until the heating system is modified or the unit is replaced. Delays are also being considered for burner replacement of in-use units emitting less than one pound per day of NOx, unless the combustion system is modified or the unit is replaced.