ENERGY CRISIS

Governor Gray Davis has issued various executive orders in order to alleviate the current energy crisis. Specifically, executive orders D-22-01 through D-30-01 are intended to streamline permitting and accelerate construction of new power plants and increase the output from existing power plants.

Under the orders, permitting agencies such as the SCAQMD and the California Energy Commission (CEC) will have to issue permits in 60 days for restarts and 21 days for new peaking plants.

Since the power generating facilities fall under the RECLAIM program, the District has made changes to address the current crisis.

Faced with electricity shortages and unpredictable power outages, a number of companies in California are considering purchasing or renting electrical generators. According to a generator sales office in Southern California, they are swamped with calls and requests for price quotes for their generators, in a way that is unprecedented. With higher natural gas and electricity costs, many companies are looking into ways to reduce their facilities’ energy-related expenses. Some companies that rely heavily on natural gas or electricity for their production and the energy costs comprise a large portion of their operating expenses, are in fact considering shutting down the operations, even if it is temporary. Some have already closed down. The SCAQMD has increased the number of hours emergency engine can operate during the calendar year, from 200 hours to 500 hours, for now. It is expected that the AQMD will go back to the 200 annual hours once the electricity shortage issues are resolved.

Many companies are under the “Interruptible Program” of the power companies. Essentially, they have agreed to be interrupted during peek demand periods in exchange for lower rates. Repeated interruptions are hampering operations at these facilities and some are considering purchasing generators to provide power during the interruptions.

Unlike PG&E and Edison, L.A. Department of Water & Power (DWP) who stayed out of “deregulation”, is in good shape and its customers are not having any difficulties.

Apparently, even if enough electricity is provided to California companies and residents, the higher cost of this energy could have a profound effect on California’s economy.

NEW EPA ADMINISTRATOR

With a new administration the Environmental Protection Agency has seen changes to its staff. Perhaps the most noted change is the appointment of Christie Whitman as EPA Administrator. Prior to her EPA position, Whitman served as the 50th governor of New Jersey. She earned a bachelor’s degree in government from Wheaton College in Massachusetts in 1968. After graduation, she worked for the U.S. Office of Economic Opportunity and the Republican National Committee where she developed the “Listening Program”, which reached out to groups not traditionally associated with the Republican Party. As part of that program she met with minorities, senior citizens and gang members in the East Ward of Chicago.

She also headed the New Jersey Board of Public Utilities. In 1990, she resigned from the Board to run for U.S. Senate, challenging Senator Bill Bradley (Democrat-New Jersey). She received 49% of the vote. Following her narrow defeat, she remained active in public affairs, writing a newspaper column and hosting a radio talk show.

Whitman testified to the U.S. Senate that she believed environmental and economic goals go hand in hand and that she would continue her record of working to forge strong partnerships among citizens, government and business to produce measurable environmental results of cleaner air, water and land.

PROPOSED CHANGES TO PERMIT AND EMISSION FEES

Based on a 1999 fee structure study, the SCAQMD is proposing changes to the fee regulation. District staff presented the proposed changes to the Stationary Source committee of the Governing Board. Regulation III establishes various fee rates ranging from permit application to annual emission fees. These fees fund approximately 70 percent of the AQMD programs. According to District staff, the 1999 study showed that the current fee structure “significantly under-recovers permit processing costs. ” The District reported that its annual revenue from these fees is down to $20 million per year as compared to $40 million from several years back.

The study showed that 1,700 facilities with over 4 tons per year in emissions, pay annual emission fees. Currently, 27,000 facilities emit less than 4 tons per year and do not pay emission fees. The District now proposes to amend the fee rule so that the previously unaffected facilities will pay a minimum flat fee. Currently, unpermitted emissions for large emitters (>4 tons per year) are not subject to fees. The new proposal would impose fees for these unpermitted emissions.

A time tracking study showed that current fee schedules A through C account for 95% of the permitting activity while schedules D through H make up the remaining 5%. A schedule A application takes an average processing time of 10 hours as compared to almost 160 hours for a schedule H. The proposal will increase fees for schedules A, B, B1 and C and reduce fees for schedules D through H. Schedules A1 and B1 will become new schedule B.Currently, application fees for new permits are different from the alteration/modification fees. The new proposal would eliminate the present distinction between the two. The proposed changes will be presented for public hearing on May 11, 2001.

Examples of current permit fees:

NEW SCAQMD RULE FOR LARGE SPRAY BOOTH OPERATIONS

Earlier this year the South Coast Air Quality Management District (SCAQMD), adopted a new rule, which will affect large spray booth operations. The rule (Rule 1132) applies to facilities which emit over 20 tons per year of Volatile Organic Compounds. The District staff identified 79 potentially affected facilities among four main manufacturing industries: aerospace, metal and plastics, fiberglass-reinforced plastics, and wood products. The rule is expected to reduce 3.7 tons per day of VOC’s by requiring a 65 percent emission reduction from spray booth operations through installation of add-on controls, use of low VOC products, or a combination thereof. The SCAQMD has cited carbon or zeolite adsorption, thermal oxidation, catalytic oxidation, biofiltration, cryogenic condensation, ultraviolet oxidation, hybrid concentrator/oxidation systems, powder coatings radiation curable coatings and waterborne coatings as potential ways to meet the rule requirements.

The rule allows composite manufacturing facilities that implement pollution prevention strategies by January 2002 to achieve final compliance by July 1, 2004. Additional compliance time will be allowed (until December 31, 2004) provided that these facilities will reduce emissions by 85 percent. Facilities willing to accept a facility-wide emissions cap of 20 tons per year will automatically meet the rule requirements. The rule has various exemptions for “low-concentration spray booths” as follows:

Spray booths which already comply with Best Available Control Technology requirements (provided that BACT requirements are as stringent as Rule 1132 requirements) will satisfy the rule.

The District estimates that complying with the rule will cost industry $13.1 million per year from 2003 to 2015 and that 141 jobs will be lost from Southern California as a result. The highest emitting facilities will have to comply by the year 2003 and the remaining by 2004.

SUPREME COURT DECISION REGARDING COST CONSIDERATIONS

In a unanimous decision, the U.S. Supreme Court upheld the constitutionality of the Clean Air Act as interpreted by EPA when setting the 1997 ambient air standards. The case brought before the Court, dealt with the EPA’s long standing position that the Clean Air Act requires the standards be set based solely on public health considerations without consideration of costs.

In 1997, as part of a requirement under the Clean Air Act, EPA toughened the standards for smog. EPA also set a standard for fine particulates equal to or smaller than 2.5 microns in diameter for the first time. The American Trucking Associations, the U.S. Chamber of Commerce and other state and business groups challenged EPA’s decision in court claiming that the EPA had misinterpreted the Clean Air Act to give itself unlimited discretion to set air standards.

The Court also acknowledged that it is appropriate for states and EPA to continue to consider cost in implementing the standards. The EPA will now need to determine how to implement the standards consistent with the Court’s opinion.

GREENHOUSE GASES GETTING ATTENTION

EPA plans to examine global climate change issues which may include regulating greenhouse gas emissions. In a press release, Administrator Christie Whitman stated “The President has said we will fully examine global climate change issues, including the science, technologies, market-based systems, an innovative options for addressing concentrations of greenhouse gases in the atmosphere.” However, the administration does not believe that carbon dioxide emissions should be regulated at the present time because of the energy crisis.

Several companies are already voluntarily addressing the issue of global warming. The EPA and the Semiconductor Industry Association will sign a new voluntary agreement to reduce perfluorocompound (PFC) emissions. PFCs have, on average, 10,000 times the global warming potential of carbon dioxide over 100 years. The World Semiconductor Council and other semiconductor trade associations have also committed to reduce greenhouse gas emissions worldwide.

EXEMPTION FROM FEDERAL PROGRAM

The federal facility permit program, commonly referred to as the Title V program, requires that companies obtain a facility-wide permit and be subject to additional monitoring and public noticing requirements. Originally, applicability for Title V was based on a facility’s “Potential to Emit” (PTE). The PTE calculation assumes that the equipment operated 24 hours per day, 365 days/year at its maximum capacity. Defining PTE on this basis became a difficulty for both the regulators and the facilities. In order to provide an off ramp from the program, the Environmental Protection Agency issued a guidance memorandum, which allowed facilities to qualify as minor sources and avoid Title V applicability until PTE issues were resolved. This policy memo was first issued in 1995 and was extended several times with a final extension that expired in December of 2000.

The expiration of the EPA Transition Policy brought in about 25,000 facilities in the South Coast into the Title V program. In order to keep these facilities out of the program, the SCAQMD applied for an additional extension of the policy until June 30, 2001. The District also adopted Rule 3008 (Potential to Emit Limitations) in order to keep low emitting facilities exempt from the Title V program. The rule will exempt facilities considered major sources based on their potential to emit, but their actual emissions must be less than 50 percent of the major source thresholds.

Under the rule, facilities considered “De Minimis” would not need to keep added records for Title V purposes. In addition, a list of “Alternative Operational Limits” will serve as a guideline for companies that cannot calculate their actual emissions and allow them to be exempt from Title V requirements.

Alternative Operational Limits