BOARD MEETING DATE: February 5, 2010
AGENDA NO. 38

PROPOSAL:

 Rescind Rule 1309.2 Offset Budget and Amend Rule 1309 Emission Reduction Credits and Short Term Credits

SYNOPSIS:

Staff is proposing to rescind Rule 1309.2 in an effort to streamline the CEQA analysis associated with the readoption of Rule 1315 and to amend Rule 1309 to remove reference to Rule 1309.2 and add language referenced in Rule 1309.2 to Rule 1309.

COMMITTEE:

Stationary Source, January 22, 2010

RECOMMENDED ACTIONS:

Adopt the attached resolution:

1. Certifying the Notice of Exemption for Proposed Amended Rule 1309 Emission Reduction Credits and Short Term Credits and Rescinded Rule 1309.2 Offset Budget.
   
2. Rescinding Rule 1309.2 Offset Budget.
   
3. Amending Rule 1309 Emission Reduction Credits and Short Term Credits.
    

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Rule 1309.2 was adopted by the AQMD on December 6, 2002, in order to potentially act as a bank of last resort providing offsets for sources unable to obtain  them in the open market and ineligible for Priority Reserve (Rule 1309.1) offsets.  However, Rule 1309.2(a) requires that the rule be approved by the California Air Resources Board (CARB) and the United States Environmental Protection Agency (U.S. EPA) prior to being implemented as follows:  The Executive Officer shall establish an Offset Budget to provide credits for sources that require external emission offsets for NOx, SOx, PM10 and CO, upon approval by CARB and U.S. EPA..

U.S. EPA has not to date approved implementation of the rule.  Furthermore, Rule 1315 Federal New Source Review Tracking System was set aside by court order for failure to adequately analyze potential environmental impacts of proposed Rule 1315 and proposed amended Rule 1309.1 pursuant to the California Environmental Quality Act (CEQA) prior to adoption.  Adoption of Rule 1315 by the AQMD and approval of Rule 1315 by U.S. EPA would have allowed the AQMD to implement Rule 1309.2.  Staff is currently working to re-adopt Rule 1315 and is preparing a Program Environmental Assessment to comprehensively analyze potential environmental impacts as a result of readopting and implementing Rule 1315.  As a part of this effort staff is proposing the rescission of Rule 1309.2 to assure that sources covered under 1309.2 would not be able to access offsets form the internal tracking system bank to be implemented under Rule 1315.

Rule 1309 specifies that the issuance of short term (emissions reduction) credits (STCs), shall follow the public noticing procedures as specified in Rule 1309.2.  Since staff is proposing to rescind Rule 1309.2, staff is also proposing that Rule 1309 be amended concurrently with the rescission of 1309.2 to include the specific referenced language for noticing requirements, currently in Rule 1309.2, directly in Rule 1309.

Staff is proposing that Rule 1309.2 be rescinded.  In conjunction with the rescission of Rule 1309.2 staff is proposing that Rule 1309 be amended to delete references in the rule to Rule 1309.2 and insert specific language for STC noticing requirements.  The proposed amendments are procedural and no change in emissions or emissions standards is being proposed.

The paragraph below describes the specific text amendments being proposed in PAR 1309.

1. Deleting the reference to Rule 1309.2(d), for Short Term Credit (STC) public noticing procedures, and the following two additional references to Rule 1309.2 in Rule 1309(f)(3) and Rule 1309(g) as follows:
   
   Rule 1309(f)(3) -
   The issuance of STCs shall follow the public noticing procedures of Rule 1309.2(d).
   
   Rule 1309(g) -
   Except for those ERCs issued Pursuant to Rules 1309.1 or 1309.2 and STCs issued pursuant to Rule 1309.2, a user of STCs as offsets for a stationary source may have STCs reissued provided:

2. Inserting the public noticing requirements for STCs currently enumerated in Rule  1309.2(d) in Rule 1309(f)(3) as follows:

   Prior to issuance or granting the use of STCs, the operator of a facility requesting the generation or use of any STCs shall:

   1. Publish a notice, prepared by the Executive Officer, containing source information and the Districts analysis on air quality, in a newspaper of general circulation in each of the four counties in the AQMD, and
   2. Mail a copy of the notice required in subparagraph (f)(3)(A)(d)(1)to the Administrator of U.S. EPA Region IX and the Executive Officer of the California Air Resources Board, and
   3. Respond to all public comments received within 30 days of the notice publication. Copies of all comments and responses shall be provided to the Executive Officer. The Executive Officer will consider all comments and responses prior to final approval of the allocations or STCs, and
   4. Provide proof of publication of the notice to the Executive Officer.

Rule 1309.2 is not required by the AQMP or any other legal mandate.  However, before adopting, amending or rescinding a rule, the California Health and Safety Code Section 40727 requires the AQMD to adopt written findings of necessity, authority, clarity, consistency, non-duplication and reference on relevant information presented at the public hearing and in the draft board letter.

Necessity - The AQMD Governing Board has determined that a need exists to rescind Rule 1309.2 - Offset Budget since the U.S. EPA has not approved implementation of the rule and also since rescission of Rule 1309.2 is necessary in order to re-adopt Rule 1315 - Federal New Source Review Tracking System.  Furthermore, it is necessary to concurrently amend Rule 1309 - Emission Reduction Credits and Short Term Credits in order to retain Rule 1309 public noticing requirements for STCs currently referenced in Rule 1309.2.

Authority - The AQMD Governing Board obtains its authority to adopt, amend, or rescind rules and regulations from the California Health and Safety Code Sections 39002, 39650, 40000, 40001, 40440, 40702, 41508, and 41700, et seq.

Clarity - The AQMD has determined that the proposed rescission of Rule 1309.2 and the concurrent proposed amendment of Rule 1309 are both written or displayed so that their meaning can be easily understood by the persons directly affected by them.

Consistency - The AQMD Governing Board has determined that Proposed Rescinded Rule 1309.2 and Proposed Amended Rule 1309 are in harmony with, and not in conflict with or contradictory to, existing statutes, court decisions, federal or state regulations.

Non-Duplication - Rule 1309 and Rule 1309.2 do not impose the same requirements as any existing state or federal regulations, and the proposed rescission of Rule 1309.2 and the proposed amendment of Rule 1309 are necessary and proper to execute the powers and duties granted to, and imposed upon, the AQMD.

Reference - In adopting this regulation, the AQMD Governing Board references the following statutes which the AQMD hereby implements, interprets or makes specific:  California Health and Safety Code Sections 40440(a) (rules to carry out the Air Quality Management Plan), and Federal Clean Air Act Section 172(c) Emissions Offsets.

The proposed rescission of Rule 1309.2 and proposed amendments to Rule 1309, do not impose new emission limits or standards, make existing emission limits or standards more stringent, or impose new or more stringent monitoring, reporting, or recordkeeping requirements.  Since Rule 1309.2 has never been approved by CARB or U.S. EPA, it has never been implemented by the AQMD.  Therefore, it can be seen with certainty that there is no possibility that rescinding Rule 1309.2 and amending Rule 1309 to remove references to Rule 1309.2 may have a significant effect on the environment.  Therefore, rescinding Rule 1309.2 and amending Rule 1309 to remove references to Rule 1309.2 are exempt from CEQA pursuant to CEQA Guidelines §15061(b)(3).  If the proposals are approved by the AQMD Governing Board, a Notice of Exemption will be prepared pursuant to CEQA Guidelines §15062 and sent to the count clerks for each county in the district for filing.

Socioeconomic Analysis

While Rule 1309.2 was adopted, it was never implemented and therefore, no socio-economic impact is anticipated from the rescission of Rule 1309.2. No socio-economic impact will result from the insertion of noticing requirement language in Rule 1309 since no change in the noticing requirements for STCs is being proposed.

Resource Impacts

No additional resource impacts are expected.

Attachments (EXE, 370k)

A.  Summary of Proposed Amendments
B.  Rule Development Process
C.  Key Contacts
D.  Resolution
E.   Proposed Rescinded Rule 1309.2
F.   Proposed Amended Rule 1309
G.  CEQA Notice of Exemption