BILL ANALYSIS �
SB 760
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: SB 760
AUTHOR: Wright
AMENDED: April 1, 2013
FISCAL: Yes HEARING DATE: April 17, 2013
URGENCY: No CONSULTANT: Rebecca Newhouse
SUBJECT : AIR DISTRICTS: EMISSION REDUCTIONS
SUMMARY :
Existing federal law , under the Clean Air Act (CAA),
1)Requires the US Environmental Protection Agency (US EPA) to
set national ambient air quality standards (NAAQS);
authorizes states to adopt more stringent standards; and
requires states to develop a general plan, known as a state
implementation plan (SIP), to attain and maintain the
standards for each area designated nonattainment for an
NAAQS. The SIP is subject to US EPA approval.
2)Requires the SIP to include a New Source Review (NSR)
permitting program for nonattainment areas for the
construction and operation of new and modified major sources
of air emissions. NSR regulations require that emission
increases from the permitting of major sources be offset by
corresponding emission reductions.
Existing state law :
1) Provides the California Air Resources Board (ARB) with
primary responsibility for control of mobile source air
pollution, including adoption of rules for reducing vehicle
emissions and the specification of vehicular fuel
composition. (Health and Safety Code �39000 et seq. and
�39500 et seq.). The ARB must coordinate efforts to attain
and maintain ambient air quality standards. (�39003).
2) Provides that air pollution control districts (APCDs) and
air quality management districts (AQMDs) have primary
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responsibility for controlling air pollution from all
sources, other than emissions from mobile sources, and
establishes certain powers, duties, and requirements for
those districts. (�40000 et seq.).
3) Requires every air pollution control district in a federal
nonattainment area for any national ambient air quality
standard to establish by regulation a system by which air
contaminant emission reductions that are to be used to
offset future emission increases can be banked prior to use
to offset future emission increases. The system must
provide that only those emission reductions not otherwise
required by any federal, state, or district requirement are
approved by the district before they may be banked and used
to offset future emission increases (�40709). The system
must meet certain requirements (e.g., identification of
tracking sources possessing emission credit balances,
periodic analysis of increases or decreases in emissions
occurring when credits are used, procedures for emission
reductions credited to the bank or accruing to internal
accounts) (�40709.5).
This bill prohibits a district that has established a system
where emission reductions may be banked and used to offset
future emission increases of air contaminants, or used to
offset internal emission increases, from imposing conditions
to physically destroy existing equipment that may be currently
operating, not operating, or retired at an electrical
generation facility that applies for an emission reduction
credit.
COMMENTS :
1) Purpose of Bill . The author notes that in order to obtain
emission reduction credits (ERCs), or to secure permits to
develop new powerplants, operators of power generating
facilities that retire or shutdown an electrical generation
plant must demonstrate that the retired or shutdown plant
has been permanently shut down pursuant to federal law and
air district regulations. According to the author, the US
EPA has a long-standing and well-established national
policy that determines if an emission source has been
permanently shut down, and that the US EPA does not require
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an owner of a retired facility to demolish or otherwise
deliberately damage equipment in order to demonstrate
compliance with the federal Clean Air Act provisions
governing permitting under New Source Review (NSR) and
Prevention of Significant Deterioration (PSD). The author
states that, nevertheless, in recent cases, some air
districts in California have interpreted EPA policy as
requiring owners of power generating facilities to
deliberately and systematically damage and destroy
equipment to make the facility permanently inoperable. The
author states that this destruction policy endangers
electric grid reliability and needlessly places the public
at risk and states that the change made by SB 760 is
consistent with regulations adopted by the US EPA pursuant
to the federal Clean Air Act and would do nothing to impede
the progress of attaining any national or state Ambient Air
Quality Standards.
2) Background .
San Onofre . On January 31, 2012, the San Onofre Nuclear
Generation Station (SONGS) unexpectedly shut down after a
radioactive steam leak was discovered at the nuclear
facility. According to the California Independent System
Operator (CAISO), the loss of power generation from SONGS
means the amount of electrical generation needed in the
region in the absence of SONGS is between 4,300 and 4,600
MW. Prior to the unplanned shut down of SONGS, two electric
generating units on the AES Huntington Beach plant were
sold to Edison Mission Energy, who then permanently retired
the units in order to gain access to SCAQMD's internal
offsets for Edison Mission Energy's new Walnut Creek
powerplant in the City of Industry. SCAQMD required the
owner to render the equipment inoperable by destroying and
damaging major pieces of equipment several months before
the new plant was scheduled to be operational. The
previously retired Huntington Beach units were repaired
last year and were brought back as generators to fill the
void left by the SONGS for the summer peak in energy
consumption in 2012. CAISO has expressed the need for the
two units to be converted to synchronous condensers, which
do not produce emissions, in order to provide dynamic
voltage support this summer.
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3) Air district rules . In compliance with the CAA New Source
Review requirements, air districts in nonattainment
implement regulations for new, modified, or relocated
facilities to ensure that the operations of such facilities
do not interfere with progress in attainment of the
national and state ambient air quality standards. The
specific air quality goal of this regulation is to ensure
the use of Best Available Control Technology and to offset
emission increases from new or modified permitted sources
of nonattainment air contaminants or their precursors. Air
districts in nonattainment regions are required to have
programs where actions or projects that result in a
quantifiable reduction in emissions from a permitted
facility may be banked and used to offset future emissions
increases. These emission reduction credits, or ERCs, may
be used internally to offset future emission increases for
the entity that generated them, or sold on the open market
to other entities that are required to obtain offsets for
planned projects with estimated emission increases. For
SCAQMD, Rule 1309 requires that emission reductions for
generation of ERCs be real, quantifiable, permanent and
federally enforceable. Federal law under the CAA New Source
Review regulations also specifies those emission reductions
generating emission reduction credits be permanent. Other
district rules allowing facilities to replace equipment
with functionally identical equipment and allowing
facilities to replace an existing electric utility steam
boiler with more advanced, efficient technologies without
requiring additional offsets, require that the existing
equipment is shut down and permanently disabled. Those
rules are part of the district's EPA-approved state
implementation plan (SIP), required under the federal Clean
Air Act, and are federally enforceable.
4) How to ensure "shut-down and permanently disabled"
equipment if not physically destroyed ? The author argues
that equipment can be shutdown, in compliance with the SIP,
without being physically destroyed, specifically because of
the surrendered operating permits, clear declarations and
demonstrations of intent to retire the plant to third party
regulatory agencies and financial markets and inspections
of closed and unmanned facilities by regulators. However,
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in order to ensure that when issuing ERCs, emission
reductions are "permanent" and in the issuing of operating
permits for new sources, that equipment to be replaced is
"permanently shut-down," SCAQMD has in the past required a
facility to physically disable the equipment, such as
drilling holes through retired equipment.
It would seem that the goals of SB 760 to ensure retired
equipment is usable in the event of unplanned power
emergency, is fundamentally at odds with the air districts
current SIP requirements in operating an emission
reductions system where emission reductions are
"permanent." The potential repowering of previously
"shut-down" facilities that generated ERCs or were required
to be permanently shutdown to allow entities to receive
operating permits for other equipment, would mean that
emission reductions were not permanent, or that the
operating permits granted on the condition that certain
equipment be "permanently shut down" are in violation of
the permitting rules of the district, the SIP, and the
federal CAA, and may subject the district and the state to
either US EPA enforcement or private legal action.
5) Do we need to choose between air quality and energy
reliability ? The San Joaquin Valley and South Coast regions
have some of the worst air quality in the nation. Both
regions are nonattainment areas for ozone (extreme
designation) and for suspended particulate matter (PM).
According to the Center for Disease Control (CDC), numerous
scientific studies have linked ground-level ozone contact
to problems such as aggravation of asthma, bronchitis, and
emphysema, and higher chance of getting respiratory illness
like pneumonia or bronchitis. The CDC notes that being
exposed to any kind of particulate matter may cause
increased emergency department visits and hospital stays
for breathing and heart problems, adverse birth outcomes,
such as low birth weight, decreased lung growth in
children, lung cancer, and early deaths. The rules and
regulations of local air districts, especially as they
apply to the largest sources of air pollutants emissions,
are essential to reducing levels of criteria pollutants in
the state to better protect public health.
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While the intent of the author to ensure electric grid
reliability and adequate electric generation in the event
of an emergency is laudable and necessary, this issue
should not be framed as a choice between healthy air and
energy security. Indeed, the decisions and implementation
of federal and state requirements by air districts,
especially in the case of SCAQMD, can have a great impact
on energy generation and reliability in the region,
however, the problem appears to be a lack of coordination
between regulatory agencies, not the air quality district's
implementation of state and federal law. Instead of
prohibiting districts from enforcing rules to achieve
federally mandated air quality standards, the committee may
wish to consider encouraging better communication and
subsequent planning between local air districts and energy
agencies including the California Energy Commission,
California Public Utilities Commission and CAISO.
SOURCE : Senator Wright
SUPPORT : California Municipal Utilities Association
OPPOSITION : South Coast Air Quality Management District