BOARD MEETING DATE: February 5, 2010
AGENDA NO. 34

REPORT:

Refinery Committee

SYNOPSIS:

The Refinery Committee met Friday, December 11, 2009. Following is a summary of that meeting.

RECOMMENDED ACTION:

Receive and File
 

Jane Carney, Chair

Attendance

Mrs. Jane Carney, Chair of the Refinery Committee, called the meeting to order.  Present were Committee Members Dr. Joseph Lyou and Tonia Reyes-Uranga, and joining via teleconference was Committee Member Jan Perry.  Committee Member Dennis Yates joined via teleconference at 1:10p.m.

Overview of Proposed Amendments to SOx RECLAIM Program

Dr. Laki Tisopulos, Assistant Deputy Executive Officer of Planning, Rule Development and Area Sources, gave the staff presentation.  The amendments being developed seek to establish Best Available Retrofit Control Technology (BARCT) standards to reduce SOx emissions from seven emission categories at facilities in the SOx RECLAIM universe by 6.2 tons per day and help the Basin meet the federal annual and 24-hour PM2.5 standards by 2014 and 2020, respectively.  SOx is one of the key building blocks contributing greatly to the formation of PM2.5. Such periodic reassessments of BARCT levels is a tool the District uses to demonstrate equivalency of the RECLAIM program to the command and control regulatory approach, which is required by State law.

The District is required to meet the federal annual average PM2.5 standard by 2015. The Districts attainment strategy with respect to annual average PM2.5 standard is embedded in the 2007 AQMP, which forms the basis for this amendment.

Dr. Lyou asked staff what the PM2.5 state standard is.  Dr. Tisopulos responded that the state annual average standard is at 12 micrograms per cubic meter. There are ongoing efforts to lower the federal annual standard towards a value that is closer to the state standard.

Mrs. Carney asked staff where we are in meeting the 2015 standard and how far along the 2007 AQMP brings us toward meeting the standard. Dr. Tisopulos responded that assuming all the control measures listed in the 2007 AQMP for 2015 are fully implemented; the Basin should be able to meet the standard. Dr. Barry Wallerstein, Executive Officer, added that 2015 is the latest allowable date to meet the federal PM2.5 standard. Dr. Tisopulos added that while we are on track to meet the federal annual PM2.5 standard by 2015, preliminary modeling analysis concluded as part of the 2007 AQMP indicates that we will be short by 30% in meeting the 24-hour standard by 2020.

In addition to the cost, cost-effectiveness and  other details of the staff proposal, Dr. Tisopulos informed the Committee that staff is analyzing several CEQA alternatives and outlined the key issues associated with this rule making, including BARCT determination, market viability and shaving methodology. There were several questions and comments from the committee members and the public. 

In response to a question regarding the additional water demand, Dr. Tisopulos responded that the proposal may increase the total water usage from the refineries estimated baseline of 53 million gallons per day, by an estimated 1-2% but that water purveyors are able to meet the additional demand. Furthermore, access to recycled water and ground well water from some facilities may help offset the additional demand for potable water.  Although the estimated additional total water demand is well below the AQMDs CEQA significance threshold, staff will be using abundance of caution in analyzing such impacts. 

Committee Member Jan Perry joined the meeting via teleconference.

In response to the concerns regarding market viability if there are not enough trading partners, significant degree of competitiveness for the remaining RTCs, limited ability of SOx controls beyond BARCT, and uneven distribution of RTC holdings, staff will consider the use of the compliance margin and nontradeable RTC accounts as tools to alleviate expressed concerns.

In response to concerns regarding applying uniform shave levels across the universe of sources, staff is considering an alternate shave percentage. The higher percentage would be applicable to the 11 facilities and the lower percentage would be applicable to smaller facilities. Another alternative in consideration is a complete exemption subject to certain parameters or possibly a hybrid approach.  Dr. Tisopulos indicated that staff is going to continue working with stakeholders.

Mrs. Carney opened the floor for Board Members to present any questions.

Mayor Yates asked staff to prepare a projection of water cost to refineries and recommended a simplified approach to discussion of shave. He expressed concern that the capital investments equipment cost will impact the consumer.

Councilmember Reyes-Uranga asked staff for clarification on whether the cost of water usage and discharge is calculated in the overall cost. Dr. Tisopulos confirmed the cost was factored in by the consultants and staff will review cost estimates to ensure calculations accurately reflect the overall cost.

Joe Sporano, WSPA President, commented that the industry is faced with many obstacles with tremendous adverse economic consequences and requested another meeting prior to this item going before the Board. There is concern with the discrepancy in the cost numbers provided by AQMD staff and those calculated by the refineries.

Stan Holm, Exxon Mobil, expressed concern on the BARCT determination and shave calculation method. Staff has defined BARCT primarily at the levels recommended by an out-of-state consultant. BARCT requires consideration for environmental, energy and economic impacts. Mr. Holm questioned how an out-of-state contractor would evaluate water usage for the South Coast, an area that is in a drought and is under mandatory water reduction scenarios. Another concern with BARCT levels is that costs are not realistic. Internal surveys are indicating the costs are substantially higher.  In regards to the shave methodology, refinery staff is questioning the use of the 1997 baseline year when the AQMP control measure that calls for the three ton per day reduction is based on 2002 baseline year. Mr. Holm referred to the 2003 SOx allocations and indicated that BARCT does not apply to a great portion of that inventory. This calculation method may over calculate the shave. Based on this information, theres an expressed interest in seeking alternate shave methods.

Rod Spackman of Chevron, stated that the 19 tons forecast inventory in the Basin in 2014 is based on the 2007 AQMP and using that to apply to shave mechanism may not be appropriate. We need to discuss current figures of approximately 10 tons of direct emissions and a little over 11 tons of RTCs in the market. The shave that we are dealing with should apply to these current figures and not the 1997 baseline year.  Facilities have progressed over previously forecasted expectations by almost 100%.  The rule amendment proposal encompasses a small subset of the current SOx RECLAIM universe, approximately a third of the current participants in the market. This is not similar to NOx where there was tenfold number of participants in the exercise, there was a 22% shave across a larger universe of opportunity. When you remove all those considerations and understand the variability of where those credits may lay because this issue is, to a large extent, facility-specific with a very small number of participants. The level of that shave for the facilities requires direct investments of substantial resources in facility modifications and does not provide flexibility to moderate those investments consistently with what the market normally has done in the past. Investment decisions need to be based on the industry obligation consistent to the larger universe of emission sources and what their obligations should be. The proposed shave of 6.5 tons at 60% reduction over the current RTCs for this limited universe, when industrys contribution to the Basin-wide SOx inventory is at 12.5%, raises the question on how do we best manage the planning and the review of what is appropriate to look at, and what the next level of need might be. Within the broad context of looking at command and control equivalency and determination, there is plenty of flexibility to say we should be cautious on cost estimates that suggest a facility-specific basis that is limited in its scope.

Dr. Lyou commented that more meetings are necessary to address discussion and feedback from staff on the issues presented by the refineries, and requested representation from regional quality control and water purveyor at future meetings and board briefings, to provide input on the subject matter. He was unclear on the shave and give-back proposal and how does state law allow  a BARCT give-back. Theres a concern on the effort to stay on the path to obtaining a 2020 PM2.5 standard and that we can stay away from doing something now that may pay huge dividends in the future. Dr. Lyou agreed with Mayor Yates that there was an investment made recently and now we are asking for another huge investment. We need to be cognizant of it and make sure we are not doing it again. The intent is for the refineries to have a competitive advantage for the long term, the actions taken now will place them ahead of what the federal government was going to require everyone else in the future.

Committee Member Reyes-Uranga left the meeting at 4:05 pm.

Mayor Yates commented that stakeholders are concerned with the consultants cost analysis on installing the BARCT equipment. Mayor Yates has been out at several refineries and is aware that it is expensive to install the scrubbers, and there are space restraints to the installation. This could incur additional cost in relocating some of the processing equipment and questioned if individual refineries could submit estimates on the space limitations and costs involved. Mayor Yates questioned if the scrubbers come with a manufacturers warranty that the scrubber will attain the numbers we need. Dr. Tisopulos responded the consultants review included space availability and that staff received letters that would offer warranties for the prospect BARCT levels.

Mrs. Carney reiterated the consensus for another meeting to address areas of concerns and synthesize questions that arise from Board Members, similar to a work group.

Councilwoman Perry requested clarification on staff meeting with stakeholders prior to another committee meeting. Mrs. Carney confirmed that the Refinery Committee will reconvene after staff meets with stakeholders.

Committee Member Perry left the meeting at 4:09 pm.

Dr. Wallerstein suggested a working plan be developed to address the shave method, analyses on water and cost impacts.  In addition, Dr. Wallerstein requested that WSPA submit its interpretation of a shave method, submit data from page two of the attachment provided at the meeting and any other data they are working on. He would like to see further dialogue on WSPAs concept of fair share and how the Board should balance that with the fact that the Board has regulatory authority over stationary sources.

Other Business

None

Public Comment

Miles Heller, BP, commented that there was discrepancy with the report on the previous timeline that listed one scrubber per SRU, there are two SRU trains, and final report indicates the figures went up tenfold. In addition, he stated the RECLAIM water issues are not just a cost per gallon; additional cost to consider is infrastructure capacity. Staff responded that there was an error in the final report associated with the water consumption relative to the scrubbers serving the SRUs  and that staff had made appropriate corrections.

Jon Child, Exxon Mobil, commented that the decision to install a dry system was based on water considerations.

Meeting adjourned at 4:20 pm.