COMMITTEE EXPLORES REGULATORY BARRIERS TO BUSINESSES

The SCAQMD has formed the “Ad Hoc Committee on Large Compliance Investments and Future Regulatory Certainty.” The committee is tasked with identifying ways to avoid stranded assets for businesses complying with SCAQMD rules, reduce risks and increase incentives for voluntary and required adoption of clean air technologies, and provide more regulatory certainty. Stranded assets can occur when changes in rules render a piece of equipment non compliant or obsolete before the end of its useful life or require investment in additional control technology before previous investments have been fully amortized.

The agency has released a draft policy that identifies various actions such as:

1. More accurately estimating the useful life of equipment and integrating this knowledge into the rulemaking process and related economic assessments.
2. Harmonizing requirements, where possible, with federal and state rules to promote greater regulatory certainty.
3. Taking into consideration the time required to secure financing when imposing compliance schedules.
4. Providing incentives, financing and funding programs for large and small business operators as a more cost effective way to contribute to emission reductions.
5. Expanding outreach into the small business community to increase awareness of SCAQMD rules, regulations, permit requirements and options for adopting cleaner technologies.
6. Gathering data from stakeholders early in the rulemaking process and providing draft information to stakeholders as early as possible.
7. Rewarding early adopters of technology and facilities that go “Above and Beyond” the requirements.

The concepts will be presented to the full SCAQMD board for adoption in the coming weeks.

NATURAL GAS UNDER SCRUTINY

For several years regulatory agencies such as the South Coast Air Quality Management District (SCAQMD) have turned to natural gas conversion as the solution to pollution from gasoline and diesel combustion. Greenhouse gas regulations and a recent gas leak in Aliso Canyon have caused environmentalists and regulators to question their support of the fuel.

Southern California Gas’s Aliso Canyon natural gas storage reservoir is located approximately one mile from the Porter Ranch community and it is one of the nation’s largest natural gas storage reservoirs. In October of last year, a leak was detected which reportedly caused more than 77,000 metric tons of methane to be released, causing the evacuation and relocation of thousands of residents. Residents complained of breathing problems, dizziness, light-headedness, nausea, headaches, vomiting and nosebleeds. According to court documents, the gas from the leaky well has “now leaked into the air and into the water table.” Water table is the level under ground which is saturated with water.

Federal, state and local agencies are crafting new policies to address the public outcry. “Aliso Canyon is a wake-up call,” said Senator Fran Pavley. “We need to ensure this will not happen again.” Pavley authored Senate Bill 887 to reform state oversight of the wells at California’s 14 natural gas storage facilities. The bill would add requirements for natural gas storage wells, including additional testing, an automatic downhole shutoff system, and the drilling of a relief well within 24 hours of the discovery of a leak. In the event of a leak, the operator is to issue a notification to the state agency that would then be required to post information on its website. A risk assessment to determine safe setback distances between new storage wells and existing homes would have to be performed. Additionally, the Bill requires the collaboration between state agencies and local air districts such as SCAQMD.

On the federal side, Senators Barbara Boxer and Diane Feinstein have included the “Aliso Canyon Task Force” as an amendment to the Securing America’s Future Energy: Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016. The federal legislation passed the Senate by unanimous consent and will now move to the House of Representatives for consideration.

According to a report by SCAQMD staff, the natural gas and storage conversation is heating up with regard to electricity availability, as there is a possibility of blackouts this summer in Southern California due to lack of natural gas for small electricity generating plants.

RULE 1110.2 AMENDMENTS

Rule 1110.2 regulates oxides of nitrogen (NOx), carbon monoxide (CO) and volatile organic compound (VOC) emissions from liquid and gas fueled internal combustion engines operating in the SCAQMD producing more than 50 rated brake horsepower (bhp). The rule was recently amended to exempt certain landfill gas-fired engines from the emission requirements of the rule due to comments by a company, which uses diverted landfill gas to fuel engines to produce electricity that is the sold to utility companies under a power purchase agreement (PPA). The exemption would be contingent on the submission of a retirement plan for the permanent shutdown of all equipment by the termination date of the PPA on October 1, 2022. A plan, outlining specific commitments is due to the SCAQMD by July 1, 2016 and the plan would need to be approved before the January 1, 2017 compliance date.

TOXIC SUBSTANCES CONTROL ACT REFORM

The Toxic Substances Control Act (TSCA) of 1976 gives the U.S. Environmental Protection Agency (EPA) authority to review and regulate chemicals in commerce. Since the law’s passage, groups such as the American Chemistry Council have called on Congress to “modernize TSCA to ensure product safety and consumer confidence, as well as to preserve America’s role as the world’s leading innovator.” The EPA presented various goals for updated legislation to Congress including:

• Reviewing chemicals against safety standards that are based on sound science and reflect risk-based criteria protective of human health and the environment.
• Requiring that manufacturers provide EPA with the necessary information to conclude that new and existing chemicals are safe and do not endanger public health or the environment.
• Taking into account sensitive subpopulations, cost and availability of substitutes when making risk management decisions.
• Assessing and acting on priority chemicals, both existing and new, in a timely manner.
• Encouraging Green Chemistry and assuring transparency and public access to information.

In its policy position, the American Chemistry Council stated: “While the United States should learn from other jurisdictions, Congress must not jump to conclusions about the appropriateness of other chemicals management systems for the United States. For example, the European Union’s REACH program is often cited as a model, but its effectiveness has yet to be proven.” The President has now signed the Bill into law.

LEGISLATION TO INCREASE SIZE OF AQMD BOARD

Senate Bill 1387 (De León) Non-vehicular Air Pollution: Market-based Incentive
Programs: South Coast Air Quality Management District Board – would expand
the SCAQMD Governing Board by three additional members intended to represent
Environmental Justice communities. The proposal would also alter requirements for revisions to the SCAQMD’s Regional Clean Air Incentives Market (RECLAIM) program and grants the California Air Resources Board greater oversight authority. SB 1387 would require the District Board to submit to the State Board for review and approval the District’s market-based incentive program and any revisions to that program. The move was described by some AQMD board members as “political” and a power grab by Sacramento.

Supporters of the legislation included the American Lung Association in California, the Sierra Club of California and other environmental groups. Dozens of business groups, including but not limited to the California Building Industry Association, the American Coatings Association, the Automotive Specialty Products Alliance and the California Chamber of Commerce stand in opposition. In a 7-6 vote during their June board meeting, the South Coast Air Quality Management District board took a position to oppose the bill.

RECLAIM LAWSUIT

In March of this year, various environmental groups filed a lawsuit against the South Coast Air Quality Management District, which challenges the Board’s December 4, 2015 adoption of the amendments to the Regional Clean Air Incentives Market (RECLAIM). The lawsuit alleges two causes of action: (1) the RECLAIM amendments do not achieve Best Available Retrofit Control Technology (BARCT) equivalence, because they artificially inflate the program cap by establishing buffers to account for growth, compliance margins and uncertainties, while also failing to take into account shut-down equipment; (2) the adopted time schedule for the shave fails to align with several attainment deadlines and that the adopted amendments were arbitrary and capricious because the record does not provide any connection between the 12 ton per day shave and the BARCT assessment, and the shave is inconsistent with various attainment deadlines. There are also allegations that the adopted amendments were procedurally unfair because the public only became aware of the changed proposal at the hearing.

SHORT LIVED CLIMATE POLLUTANTS

The California Air Resources Board (CARB) heard a report on the Proposed Short-Lived Climate Pollutant (SLCP) Reduction Strategy. The Proposed Strategy described ongoing and new measures for California to reduce emissions of SLCPs (methane, black carbon, and fluorinated gases, specifically hydrofluorocarbons) through 2030. It also describes current research efforts to improve the SLCP emission inventory and evaluate potential mitigation measures and identify areas where further research is needed. A draft environmental analysis prepared under the California Environmental Quality Act is included as an appendix to the Proposed Strategy.

SLCPs are a major priority in 2016 after CARB released its proposed strategy for reducing these emissions. Senate Bill 1383 (Lara) would mandate reductions in black carbon and methane in a way that is very similar to CARB’s proposed strategy to reduce SLCPs. The bill passed in the Senate and is now in the Assembly.

Additionally, California has entered into an Agreement with Oregon, Washington and British Columbia. The Pacific Coast Climate Leadership Action Plan “reaffirms the key climate and clean energy commitments made in 2013 and extends regional collaboration”. The Agreement includes establishing a consistent approach for monitoring and reporting on emissions of short-lived climate pollutants with the aim of establishing reduction targets by 2020.

Staff anticipates presenting a final Proposed Strategy, along with the final environmental documents to the Board for consideration and approval in the fall of 2016. SCAQMD is in the process of revising portions of its Air Quality Management Plan to include SLCPs.

AIR QUALITY MANAGEMENT PLAN UPDATE

Every three years, the South Coast Air Quality Management District (SCAQMD) prepares an Air Quality Management Plan (AQMP) to demonstrate how the region will reduce air pollution emissions to meet the federal and state health based standards and to comply with Clean Air Act requirements. Staff is in the process of developing the 2016 AQMP, focusing on addressing the ozone and Particulate Matter (PM) 2.5 standards. The Plan will be a regional and multi-agency effort (SCAQMD, California Air Resources Board, Southern California Association of Governments and US Environmental Protection Agency). State and federal planning requirements include developing control strategies, attainment demonstrations, reasonable further progress, and maintenance plans.

Earlier this year, the Environmental Protection Agency (EPA) reclassified the South Coast Air Basin from Moderate to Serious nonattainment for the 2006 24-hour PM2.5 standard. The District will need to submit all requirements of a Serious Area Plan by August 12, 2017. Attainment of the standard must be no later than December 31, 2019, or end of the tenth calendar year after the effective date of original designation. In April of this year, EPA disapproved the Reasonably Available Control Technology/Measures (RACT/RACM) element based on the 2010 version of the RECLAIM program not achieving RACT level controls. In addition, due to the extension of the 24-hour PM2.5 attainment date, the Plan was found to lack a Reasonable Further Progress demonstration.

The District has released a list of control measures for stationary and mobile sources. Control Measure CMB-01 would seek emission reductions of Nitrogen Oxides (NOx) from traditional combustion sources by replacement with zero and near-zero emission technologies including equipment electrification or fuel cells for combined heating and power (CHP). Manufacturers, distributors, sellers, installers and purchasers of commercial heating furnaces used for space heating would be impacted by CMB-02, which would reduce emission from unregulated commercial space heating furnaces. Additionally, the control measure looks to achieve reductions via incentive programs to replace older boilers, water heaters and space heating furnaces with zero and near-zero emission technologies.

On the Volatile Organic Compound (VOC) side, the agency proposes to further limit the allowable VOC content in formulations or incentivizing the use of super-compliant technologies. The VOC rules that may be affected by this control measure are as follows:

• Rule 1113 – Architectural Coatings
• Rule 1124 – Aerospace Assembly and Component Manufacturing Operations
• Rule 1144 – Metalworking Fluids and Direct-Contact Lubricants
• Rule 1168 – Adhesive and Sealant Applications
• Rule 1171 – Solvent Cleaning Operations

Industry representatives expressed concern that if efforts to reduce emissions from mobile sources fail and the region is still not able to reach attainment, stationary sources may be subjected to additional fees, as per the Clean Air Act. Staff has indicated that the emission reductions from stationary sources would primarily come from Adhesive and Sealant Applications (Rule 1168) sources.

Under the socio economic analysis, some control measures, including those involving incentives, are listed as “To Be Determined.” Staff commented that further work is being done to clarify this area but that there is already a certain amount of money that has been committed towards getting SIP credit for incentive measures, such as Carl Moyer authorization through 2025 and possible cap-and-trade funding from CARB. The plan will ultimately outline the costs and identify existing and potential funding sources.

CLEAN UP GREEN UP

The City of Los Angeles adopted an ordinance to “address cumulative health impacts resulting from a legacy of incompatible land use patterns for certain neighborhoods within the City.” The ordinance covers the neighborhoods of Pacoima/Sun Valley, Boyle Heights and Wilmington.

According to the city, Clean Up Green Up contains land use-related performance standards for new or expanding projects coupled with City-led efforts to assist and incentivize existing businesses in their effort to comply with current environmental regulations. Title V and AB2588 facilities rank high on the priority list.

Business groups contend that an analysis of cumulative impacts was missing from the policy despite the issue being the stated focus of the policy. The additional fines associated with violations of the ordinance make it more difficult for businesses to operate in the city. Additionally, there is a growing concern about the duplicity of the regulations which cross over into SCAQMD jurisdiction.