BOARD MEETING DATE: March 6, 2009
AGENDA NO. 34
(Continued from January 9, 2009 Board Meeting)

PROPOSAL:

Adopt Rule 1144 – Vanishing Oils and Rust Inhibitors

SYNOPSIS:

PR 1144 will establish limits for vanishing oils and rust inhibitors used at industrial facilities, effective January 1, 2010. The proposed rule prohibits the sale of non-compliant fluids and includes exemptions for specific uses of vanishing oils and rust inhibitors. PR 1144 will implement Control Measure CTS-01 –Emission Reductions from Lubricants, of the 2007 AQMP.

COMMITTEE:

Stationary Source, October 17, 2008, November 21, 2008 and January 23, 2009, Reviewed

RECOMMENDED ACTIONS:

Adopt the attached resolution:

1. Certifying the CEQA Final Environmental Assessment for Proposed Rule 1144 – Vanishing Oils and Rust Inhibitors; and
2. Adopting Proposed Rule 1144 – Vanishing Oils and Rust Inhibitors.
    

Barry R. Wallerstein, D.Env.
Executive Officer

Background

In 2006, the AQMD conducted a survey of local metal working fluid manufacturers, suppliers and users. The survey data indicated that those local manufacturers and suppliers annually sold 4.2 million gallons of industrial lubricants, metal working fluids, rust inhibitors and solvent in the District. The solvents predominantly are used as vanishing oils, rust preventatives, for thinning other metal working fluids or cleaning. Of the 4.2 million gallons, only 11 percent of the sales were high-VOC light oils, vanishing oils, rust preventatives and solvents. After analyzing test sample results, the sales weighted average VOC content of the affected products was estimated to be over 3.2 tons per day of VOC emissions.

Most vanishing oils and rust inhibitors are currently subject to Rule 442 - Usage of Solvents, which reduces VOC emissions from VOC-containing materials that are not subject to VOC limits in any Regulation XI rule. Rule 442 allows a shop to emit up to five tons per year of VOC without restriction. Since most of the shops using these fluids are relatively small, the use of these fluids is essentially unregulated.
 

Affected Facilities

The facilities subject to the proposed rule include machine shops (job shops), aerospace facilities, steel mills, auto part rebuilders, screw machine shops, steel tube (pipe) manufacturers, steel spring manufacturers and captive machine shops located inside of others type of businesses. In 2008, there were more than 12,000 machine shops in the 4 county area serviced by AQMD. Of these machine shops, the U.S. Census (2002) estimates that 88 percent have fewer than twenty employees.
 

Public Process

During the rulemaking process, staff made twelve site visits and met fourteen times with industry and members of the community. A working group, comprised of industry and community representatives, was formed to evaluate the technical feasibility of the proposed rule. A public workshop and CEQA scoping meeting was held on September 23, 2008 and a public consultation meeting was held October 29, 2008.
 

Proposal

The proposed rule will reduce VOC emissions from vanishing oils and rust inhibitors used at industrial facilities during manufacturing operations where the fluids come in direct content with the parts and products. Such operations would include metal working or metal removal activities during the manufacturing and assembly of products and goods. Examples of these activities include, but are not limited to, broaching, drilling, drawing, forging, grinding, heading, honing, milling, stamping, tapping, thread cutting, turning and wire drawing. Likewise, fluids used for rust and corrosion prevention and inhibition during manufacturing and assembly of products and goods are included in the purview of this regulation. The proposed rule is not intended to regulate the use of vanishing oils or rust inhibitors for commercial, institutional or household use. Repair and maintenance activities are also not subject to the rule unless the parts are resold. The proposed VOC content limits and effective dates are shown in Table 1.

Table 1 – Fluid Categories and VOC Limits

Further, to facilitate the enforceability of the proposed rule, the proposal includes a prohibition of sale of non-compliant products and thus the proposed rule also applies to anyone who manufactures for use, supplies, solicits, sells or offers for sale vanishing oils and rust inhibitors subject to the rule. The prohibition of sale will not apply to consumer products.

To ensure a smooth transition to the lower VOC products, a use and sell-through provision has been included in this rule that will allow products manufactured before the effective date of the rule to be sold and used for up to six months after the effective date. This will allow manufacturers, suppliers and users to deplete their existing inventories. To facilitate this provision, manufacturers and suppliers will be required to display the date or a date code of manufacture on the container beginning January 2010.

Record keeping will be required per Rule 109 – Recordkeeping for Volatile Organic Compound Emissions. However, many fluids used to comply with the proposed rule will have a VOC content of 50 g/l or less, qualifying them as “Super Compliant Materials” and making them exempt from recordkeeping at facilities that do not exceed four tons of VOC emissions in any calendar year, determined by annual recordkeeping.

EPA Reference Method 24 will be used to determine VOC content. The District will continue to evaluate AQMD Test Method 313L and American Society for Testing and Materials (ASTM) Method E1868 - 04 Standard Test Method for Loss-On-Drying by Thermogravimetry as potential alternative test methods.

Finally, the proposal includes exemptions for lapping, sinker electrical discharge machining, space craft parts and rust inhibitors and vanishing oils used on assembled aircraft. An exemption that expires January 1, 2011 has been included for rust inhibitors used in association with military specifications, military standards, Department of Defense documents or Production Part Approval Processes. Consumer products will be exempt from the VOC limits of the rule until January 1, 2011.
 

Key Issues

Several key issues have been brought to staff’s attention during the rule making period. Staff worked closely with industry and managed to identify reasonable resolutions to the issues presented. The most notable two issues and their resolutions are summarized below:

Emission Reductions and Cost Effectiveness Determination

As proposed, the rule would reduce emissions by 2.71 tons per day with an estimated annualized cost of $8.1 million dollars. The overall cost-effectiveness of the proposed rule is conservatively estimated to be $8,189 per ton of VOC emissions reduced.
 

AQMP and Legal Mandates

PR 1144 will implement Control Measure CTS-01 –Emission Reductions from Lubricants, of the 2007 Air Quality Management Plan (AQMP) by limiting emissions at the source and at the point of sale/use.
 

California Environmental Quality Act

Pursuant to California Environmental Quality Act (CEQA) Guidelines §15252 and AQMD Rule 110, the AQMD has prepared an Environmental Assessment (EA) for PR 1144. The Draft EA was released for a 30-day public review and comment period beginning October 14 and ending November 12, 2008. No comment letters were received.
 

Socioeconomic Analysis

PR 1144 will primarily affect facilities in the fabricated metal product manufacturing, transportation equipment manufacturing, machinery manufacturing, and petroleum and coal products manufacturing sectors of the AQMD. Approximately 427 facilities would likely purchase cleaning equipment to comply with PR 1144. Based on a supplier survey of rust inhibitor and vanishing oil volumes, staff estimates indicate that there are thousands of facilities who will switch to fluids with a lower VOC as a result of PR 1144. Lastly, the record keeping provisions of PR 1144 are estimated to affect about 2,000 facilities.

The average annual cost of cleaning equipment, low VOC fluid substitution, and record keeping from PR 1144 is estimated to be $8.11 million from 2010 to 2025. Data collected by staff to support analysis of the proposed rule suggests that the distribution of the costs and savings across the affected industries will follow this pattern:  primary metal manufacturing (0.1%), fabricated metal product manufacturing (38.3%), machinery manufacturing (59.4%), transportation equipment manufacturing (1.9%), and petroleum and coal products manufacturing (0.1%).  The compliance of PR 1144 begins in 2010 and will reach full implementation in 2012.  The socioeconomic analysis of PR 1144 assumes that the cost of full implementation affects industry beginning in 2010.  While this approach may overestimate the cost impacts of PR 1144 on the affected industries, it allows for a more conservative analysis of cost impacts.  

Overall, 195 jobs could be forgone annually, on average, between 2010 and 2025 in the local economy.  Job impacts at the sectorial level relative to total industry employment are modest. The retail trade sector and machinery manufacturing are expected to experience the largest declines in employment, while utilities is expected to experience a modest increase in employment. The rule is expected to result in very few impacts on the relative costs of production and prices of goods in the local economy.  Thus, the impact of PR 1144 on the competitiveness of local industry should be very small.
 

Implementation and Resources

Staff believes that the enforcement and implementation of the rule at the manufacturer level can be conducted with the existing resources, whereas implementation at the end-users may require one additional FTE to audit facilities already being inspected regularly and conduct targeted inspections at smaller machine shops.
 

Attachments (EXE, 783k)

A. Summary of Proposed Amendments
B. Rule Development Process
C. Key Contacts List
D. Resolution
E. Rule Language
F. Final Staff Report
G. Final Socioeconomic Report
H. Final Environmental Assessment