1.

NOTICED PUBLIC HEARING:

ADOPTION OF AMENDMENTS TO RULES 1401, 1410, 1415, AND APPENDIX A OF REGULATION XIV – TITLE V OPERATING PERMITS (DISTRICT: ALL)

2.

NOTICED PUBLIC HEARING:

ADOPTION OF NEW RULE 60.1 – LIMITING POTENTIAL TO EMIT AT SMALL SOURCES (DISTRICT: ALL)

3.

VEHICLE REGISTRATION FUNDING ALLOCATION PLAN ISSUES (DISTRICT: ALL)

APCD 1.

SUBJECT:

NOTICED PUBLIC HEARING:

ADOPTION OF AMENDMENTS TO RULES 1401, 1410, 1415, AND APPENDIX A OF REGULATION XIV - TITLE V OPERATING PERMITS

(DISTRICT: ALL)
 

Title V of the federal Clean Air Act amendments requires states and local air districts to develop and implement a federal major stationary source permit program.  In San Diego County (serious nonattainment area), a major source has actual or potential emissions of 50 tons per year or more of oxides of nitrogen or volatile organic compounds; 100 tons per year or more of PM10, carbon monoxide, or sulfur oxides; 10 tons per year or more of any federally-listed hazardous air pollutant; or 25 tons per year or more of any combination of any federally-listed hazardous air pollutants.  Certain categories of non-major sources may also be required to obtain Title V permits.

On February 5, 1996, EPA granted interim approval of the District’s Title V permit program and identified deficiencies needing correction before granting final program approval.  The deadline for correcting these deficiencies is June 1, 2001.

As a result, Rule 1401 – General Provisions is being amended to define an affected state as any state or Indian tribe designated by EPA as an affected state within 50 miles of a Title V source.  There are no states within 50 miles of any Title V source in San Diego County and no Indian tribes in the County have been designated by EPA as affected states.  The definition of federally mandated new source review is being clarified to exclude New Source Review rule requirements derived solely from state law or local requirements.  This will avoid EPA from having any authority, including enforcement authority, over state and local program requirements that are not federally mandated. 

Rule 1410 – Permits Required is being amended to require any significant change in emissions-related monitoring be treated as a significant permit modification.  Significant permit modifications require a change to a Title V permit and associated public and EPA notification for review and comment.  Previously, only relaxations in the stringency of emissions monitoring requirements were considered significant permit modifications.  Additionally, the rule includes a list of permit amendments considered administrative in nature and not requiring prior EPA and public notice for review and comment.  Monitoring and reporting requirements that are more frequent than existing requirements have been added to the list.

Rule 1415 – Permit Process – Public Notification is being amended to add procedures for notifying affected states of Title V permitting actions, including EPA-designated Indian tribes.

Appendix A of Regulation XIV lists insignificant activities (equipment or operations with low emissions potential) not required to be listed in a Title V permit application.  It is also being revised to incorporate recent changes to Rule 11 – Exemption from Permit Requirements.  The Appendix A revisions also correct other EPA-identified deficiencies including clarifying insignificant activities involving ozone depleting compounds.

There are 25 major sources in San Diego County that will be affected in varying degrees by the proposed amendments.  They include industrial, military, and governmental (e.g. municipal landfills) installations.

There is a remaining Title V program deficiency identified by EPA that is beyond the control of California air districts to resolve.  Currently, state law exempts agricultural production operations from air district permitting requirements.  EPA requires these operations to obtain a Title V permit if they are major sources.  There are currently no such major sources in San Diego County.  The legislature will need to amend state law to allow air districts to require Title V permits of major source agricultural production operations.  If this does not happen, EPA could disapprove all Title V programs in the state and then take over the program and impose sanctions (eliminate federal highway funding and increase the emission offset required for any new construction in San Diego County).

A public workshop was held on March 22, 2001, to discuss the proposed amendments.  The workshop report is Attachment II.
 

Adopting the amendments to Regulation XIV will have no fiscal impact on the District.
 

AIR POLLUTION CONTROL OFFICER

Adopt the resolution amending Rule 1401, Rule 1410, Rule 1415, and Appendix A of Regulation XIV and make appropriate findings:

(i)      of necessity, authority, clarity, consistency, non-duplication and reference as required by Section 40727 of the State Health and Safety Code;

(ii)    that an analysis of existing requirements applicable to the source or category is not required by Section 40727.2 of the Health and Safety Code because the proposed amendments do not impose new or more stringent emission standards nor new or more stringent monitoring, reporting or recordkeeping requirements;

(iii)    that an assessment of the socioeconomic impact of the proposed amendments is not  required by Section 40728.5 of the State Health and Safety Code because the proposed amendments will not significantly affect air quality or emission limitations; and

(iv)    that it is certain there is no possibility that the proposed amended Regulation XIV may have a significant adverse effect on the environment and that this action is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to California Code of Regulations, Title 14, Section 15061(b)(3).
 

Noting for the record that changes have been received to the Proposed Amendments to Rules 1401, 1410, 1415 and Appendix A of Regulation XIV; ON MOTION of Member Cox, seconded by Member Slater, the Members of the Air Pollution Control Board closed the hearing and took action as recommended, on Consent; and pursuant to Section 40727 of the Health and Safety Code, adopting Findings as presented by County Counsel and adopting Resolution No. 01-157 , entitled:   RESOLUTION AMENDING RULES 1401, 1410, 1415, AND APPENDIX A OF REGULATION XIV OF THE RULES AND REGULATIONS OF THE SAN DIEGO COUNTY AIR POLLUTION CONTROL DISTRICT.

AYES:  Cox, Jacob, Slater, Roberts, Horn
 

APCD 2.

SUBJECT:

NOTICED PUBLIC HEARING:

ADOPTION OF NEW RULE 60.1 – LIMITING POTENTIAL TO EMIT AT SMALL SOURCES

DISTRICT: ALL)
 

The 1990 federal Clean Air Act Amendments require states and local air districts to implement a federal permitting program, referred to as the Title V permit program, for all major stationary sources.  The U.S. Environmental Protection Agency (EPA) defines a major source based on potential rather than actual emissions.  EPA recently rescinded (effective June 30, 2001) a policy allowing facilities to be considered non-major by keeping records sufficient to demonstrate emissions below 50 percent of the major source thresholds.  As a result, many small and medium-sized facilities could be forced by EPA or citizen lawsuits to obtain Title V permits at significant expense and burden, with no air quality benefit.  However, EPA allows a rule like proposed new Rule 60.1, establishing emission limits allowing facilities with actual emissions less than 50 percent of major source thresholds, to avoid Title V permitting requirements, thereby protecting small and medium sources from Title V permitting requirements.

Accordingly, the proposed rule provides three methods for qualifying facilities to avoid Title V permits.  A facility can demonstrate emissions are below 50 percent of all major source thresholds with specified recordkeeping and emissions reporting.  Facilities can elect to accept alternative operating limits (e.g. limits on millions of cubic feet per year of natural gas or gallons per year of coatings) and maintain annual throughput records and reports.  Very low emitting facilities can comply by maintaining records demonstrating that throughput, usage, or emissions are below specified de minimis levels (e.g. five tons per year or less of volatile organic compounds).  Most facilities are expected to comply through this latter de minimis method, in many cases using records already required by existing District rules.

Approximately 3,800 facilities in San Diego will be affected by the rule.  Facilities with permit conditions already limiting potential to emit to less than major source levels will not be affected.  Of the 3,800 affected facilities, an estimated 3,500 facilities will be able to avoid a Title V permit by staying below the rule's de minimis throughput or emission levels, 150 facilities by staying below the alternative operating limits of the rule, and 150 facilities by tracking emissions and reporting them annually.  To demonstrate compliance, all facilities will need to keep records starting six months from the date of adoption.

A public workshop was held on February 15, 2001, to discuss the proposed rule.  The workshop report is Attachment III.
 

Adopting new Rule 60.1 will require the District to annually review information provided by affected businesses to determine the applicability of and compliance with the rule.  The associated costs will be recovered through permit or emission fees on affected businesses.  There will be no additional cost for about one-half the facilities already included in the District's emissions inventory program.  For the remainder, the estimated additional annual District cost is $15,000 to $30,000.
 

AIR POLLUTION CONTROL OFFICER

Adopt the resolution adding new Rule 60.1 to Regulation IV of the District’s Rules and Regulations and make appropriate findings:

(i)  of necessity, authority, clarity, consistency, non-duplication and reference as required by Section 40727 of the State Health and Safety Code;

(ii)  that an analysis of existing requirements applicable to the sources affected by the proposed rule has been prepared pursuant to Health and Safety Code Section 40727.2;

(iii)  that an assessment of the socioeconomic impact of the proposed amendments is not required by Section 40728.5 of the State Health and Safety Code because the proposed amendments will not significantly affect air quality or emission limitations; and

(iv)  that it is certain there is no possibility that adopting Rule 60.1 may have a significant adverse effect on the environment, and this action is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to California Code of Regulations, Title 14, Sections 15061(b)(3).
 

ON MOTION of Member Cox, seconded by Member Slater, the Members of the Air Pollution Control Board closed the hearing and took action as recommended, on Consent; and pursuant to Section 40727 of the Health and Safety Code, adopting Findings as presented by County Counsel and adopting Resolution No. 01-158 , entitled:  RESOLUTION ADDING RULE 60.1 TO REGULATION IV OF THE RULES AND REGULATIONS OF THE SAN DIEGO COUNTY AIR POLLUTION CONTROL DISTRICT

AYES:  Cox, Jacob, Slater, Roberts, Horn
 

APCD 3.

SUBJECT:

VEHICLE REGISTRATION FUNDING ALLOCATION PLAN ISSUES (DISTRICT: ALL)
 

On April 25, 2001 (APCB #3), your Board considered the FY 2000-01 Vehicle Registration Fund Allocation Plan, adopted it with the exception of two projects, and raised several issues.  Your Board asked for a recommendation regarding an appropriate percentage for matching funds.  The City of San Diego’s $389,000 project converting refuse packers from diesel to liquid natural gas (LNG) was set aside pending a report on the city’s willingness to provide a match. 

The $50,000 funding request for the Solana Beach Linear Bikeway construction costs was removed from the allocation, and there was direction to evaluate any other SANDAG-recommended projects that are not cost-effective.  Finally, your Board requested the subject of prioritizing retrofitting of diesel school buses with particulate filters over purchasing new school buses be addressed.

Matching Funds

Your Board’s Vehicle Registration Fund Program project evaluation criteria (4/24/96, APCB #2) has never required matching funds.  Matching funds are an important factor in determining the cost-effectiveness of a project and provide added points in a project’s ranking.  Up to 15 points may be awarded to a project based on its percentage of matching funds compared to total project cost.  The only exception is your Board requiring MTDB and NCTD bus projects have a match.  That is because they receive 80% of the cost of a replacement bus from the federal government and, prior to 1995 (9/26/95 APCB #1), received the incremental cost (approximately 20%) of a CNG bus from Vehicle Registration Funds and, thus, provided none of the funding for each replacement bus. 

Because of the importance of matching funds in the evaluation criteria, matching funds are often proposed for projects to purchase new alternative-fuel vehicles to increase a project’s cost-effectiveness.  Repower and retrofit projects provide emission reduction benefits similar to a new vehicle, but at a lower cost and, as a result, are competitively cost-effective without matching funds. 

Requiring matching funds is not recommended.  Requiring such funs could exclude worthwhile projects.  For example, some school districts are unable to provide any match.  Also, a match requirement is not needed because the evaluation criteria are biased in favor of projects that provide a match, by giving substantial weight to matching funds, both as a factor in determining cost-effectiveness and by providing additional points toward a favorable ranking.  Accordingly, there is a considerable incentive to include matching funds in order to improve the likelihood of being funded.  Finally, there is no analytical means to determine what an appropriate match should be, it is simply a choice.

Because of the disadvantages of establishing a match requirement, it is recommended that points for matching funds be increased from 15 to 20 points (20%) by eliminating the five (5) points available for multi-agency projects, which have proven inconsequential in project rankings.  This will ensure that only the most cost-effective projects can compete for funding without providing some match.  Using this revised method, the Poway School District project ranking would increase from seventeenth to sixteenth and the City of San Diego project would fall from sixteenth to seventeenth.  If your Board considers it appropriate, any specific project can be required to provide or increase the match.  This flexibility in conjunction with the evaluation methodology optimizes the opportunity to fund the most worthy projects.

City Refuse Packers

The City of San Diego submitted a letter (Attachment I) in response to your Board’s concerns about providing matching funds.  They continue to seek full funding for their project, retrofitting 11 refuse packers for LNG operation.  The accounting for investments shown in the City’s letter differs from District records which show the District has allocated funding of $1,984,679 ($1,771,500 from Vehicle Registration Funds and $213,179 from state Moyer funds) and the California Energy Commission (CEC) has granted $275,000.  If the $1,387,000 investment by the City is correct, the project total would be $3,646,679, with City resources providing 38%, the District 54% and CEC 8% of the total investment in refuse packers and infrastructure.  Note that the evaluation methodology includes only matching funds specific to the current project when determining cost-effectiveness and ranking.  This is the standard practice because other costs vary widely from project to project and are difficult verify.  However, the city’s overall contribution and long-term commitment to converting their fleet to LNG is relevant. 

Using alternative fuels in refuse trucks is a high priority.  Based on ranking and cost-effectiveness, this project is recommended for full funding.  However, if your Board believes the city should provide a match, it should not be the same as the transit districts’ match (50% of the incremental cost of CNG) because, unlike the transit districts, the city does not receive federal funding for the basic vehicle costs.  Should your Board decide to withhold all or part of the funding, those funds are recommended to be allocated to school bus projects, the next highest ranked projects.

SANDAG Recommended Projects  

The only project recommended by SANDAG that was not cost-effective is the City of Solana Beach Linear Bikeway project ($50,000).  Your Board’s decision not to fund this project was based on cost-effectiveness.  Also, emission reductions for this project were previously claimed when $54,000 was allocated for the design phase (9/26/95, APCB #1).  It is recommended that the $50,000 be allocated to school bus projects.

School Buses

There are two issues relating to school bus projects and funding.  First, whether retrofitting diesel buses should have priority over purchasing replacement buses and, second, how the supplemental Vehicle Registration funds and power generator mitigation fees should be distributed among various programs and projects. 

Retrofitting and Bus Replacement

Retrofitting diesel school buses with particulate traps provides quicker, more cost-effective particulate matter emission reductions than purchasing new school buses but does not reduce NOx emissions.  However, replacing diesel buses with new CNG buses reduces both particulate matter and NOx emissions.  Further, some school districts (at least 6 of the 21 applicant districts) have made a commitment and substantial investment in converting their bus fleets to CNG.  And, while not an air quality issue, the newer buses are safer and reduce accident injury risk to children compared to pre-1977 buses (more than 100) still in use in many local districts.  Additionally, the state Air Resources Board is currently evaluating particulate filters systems and it is uncertain whether they will be certified effective for all makes and years of school buses.  Therefore, it is recommended that funds continue to be allocated for both retrofit and bus replacement projects.

Distribution of Local Funding for School Buses

The state School Bus Program mandates program funding be allocated 50% to CNG buses and infrastructure, 25% to lower emission diesel buses, and 25% to diesel particulate filter retrofits, with the 10% District match divided proportionally between CNG (2/3) and diesel (1/3) replacement buses.  Funds must be allocated to school districts using a lottery.  The state program lottery will be held May 18, 2001, and will consist of drawing the name of each participating school district and creating an ordered list, then going through the list and funding one CNG bus and related infrastructure, one lower emission diesel bus, or up to 10 particulate filter retrofits, continuing through the list until all funds are distributed. 

Your Board has allocated $600,000 from Vehicle Registration funds for school bus projects.  Your Board’s decisions today may add $113,541 or more (depending on a decision on the City of San Diego’s project).  The method for allocating these funds is at your Board’s discretion, and there are several viable options.   

First, the ordered list used for the state program could be used, continuing through the list until the supplemental funds are allocated.  This is the easiest process and would allocate funds to districts without regard to their ability to provide matching funds but would not maximize emission reductions.  This method is not recommended.  

Second, an RFP could be issued and school bus projects ranked using the Vehicle Registration fund evaluation criteria, modified to include particulate matter emission reductions.  This alternative is recommended because it maximizes emission reductions, a primary Board Policy, and allows retrofit projects to compete with replacement bus projects.  Also, state school bus funding will have been awarded, and school districts can reevaluate their needs before submitting project applications.

Finally, your Board could fund projects according to their ranking in the FY 2001 Vehicle Registration Fund plan.  This is not recommended because particulate matter emission reductions were not included in the ranking, based on the evaluation criteria.  As a result, particulate filter retrofit projects were not eligible.  Since particulate matter from diesel combustion has now been identified as airborne toxin, it is recommended that the Vehicle Registration Allocation Evaluation Criteria be revised to include particulate matter, as is being recommended for school bus projects.

On May 1, 2001, the District received a $3.11 million award for replacement school buses, $290,000 less than the $3.4 million requested, thus, reducing the 10% required match by $29,000.  There was no overall program reduction because the reduction for replacement buses was offset by a $300,000 increase for particulate filter retrofit funding, which does not require matching funds.  It is recommended this $29,000, plus the $34,541 not allocated during the April 25^th deliberations and the $50,000 available when the Solana Beach Linear Bikeway was removed from allocation plan, be added to the $600,000 Vehicle Registration fund supplement for school bus projects.  Accordingly, a total of $713,541 would be allocated by one of the above methods. 

Distribution of Power Generator Mitigation Fees

Approximately $10 to $20 million in power generation mitigation fees may be available over the next two years.  These fees must be used for emission reduction projects, offsetting increased emissions from power generators during California’s energy crisis.  Each mitigation agreement varies slightly as to use, but most are directed to school bus projects or to Moyer projects (heavy-duty diesel engines replacements or retrofits to achieve NOx reductions) or Vehicle Registration Fund projects.  Mitigation fees for specific South Bay school districts will be allocated through the selected school bus allocation process.  Otherwise, your Board may determine the manner by which these funds are allocated. 

To maximize emission reductions, the District recommends an RFP process using Vehicle Registration fund criteria modified to include particulate matter emission reductions.  An allocation plan would be brought to your Board with projects ranked for approval.  As additional mitigation fees are received, the next most cost-effective project(s) would be funded.  The benefit of this option is that projects compete for funding based on cost-effectiveness and other relevant criteria, maximizing emission reductions. 

Alternatively, the mitigation fees could be combined with Vehicle Registration funds allocated to supplement the school bus program.  The combined funds could be distributed to school districts using the lottery created for the state funding program, taking into account funds restricted to specific school districts.  This method would expedite distribution of supplement school bus funds and mitigation funds.  However, it is not recommended because it would not maximize emission reductions from mitigation fees collected specifically to offset increased emissions from power generators. 
 

These recommendations require additional appropriations of $34,165 from previously unallocated fund balance.
 

AIR POLLUTION CONTROL OFFICER

1.  Do not require matching funds for vehicle registration fund projects except as directed by your Board; instead modify existing criteria to increase the weight of Matching Funds to 20 points (20%) in the project ranking by eliminating the 5 points for multi-agency projects.

2.   Fund the City of San Diego’s project ($389,000) to convert 11 additional refuse packers from diesel to LNG based on its ranking, cost-effectiveness, and emissions reductions.   

3.   Direct the Air Pollution Control Officer to issue an RFP for Vehicle Registration funded school bus projects and mitigation fee projects, use the Vehicle Registration Fund Evaluation Criteria modified to include particulate matter emission reductions, separately rank school bus projects and mitigation fee projects, then return to the Board with an allocation plan for each funding source. 

4.   Allocate $29,000 in reduced state program match, $50,000 from projects removed from the allocation plan, and $34,541 previously unallocated, for a total of $713,541 to supplement the state School Bus Program.

5.    Establish additional appropriations of $34,541, previously unallocated, to supplement the state school bus program based on available fund balance in the Air Pollution Control Air Quality Improvement Trust Fund, #285002.  (4 VOTES)
 

ON MOTION of Member Jacob, seconded by Member Cox, the Members of the Air Pollution Control Board took action as recommended.