BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 760|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 760
Author: Wright (D)
Amended: 4/29/13
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 8-0, 4/17/13
AYES: Hill, Gaines, Calderon, Corbett, Fuller, Hancock,
Jackson, Leno
NO VOTE RECORDED: Pavley
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/6/13
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : Electrical generation facility: emission reduction
credits
SOURCE : Author
DIGEST : This bill allows the repowering of electrical
generation facility equipment that had been previously retired
permanently in the event of a declared state of emergency. This
bill also restricts air districts that have programs with
emission reduction credits (ERCs) from requiring changes to
existing equipment in exchange for credits unless those changes
are specified in a protocol approved by the United States
Environmental Protection Agency (US EPA).
ANALYSIS : Existing federal law, under the Clean Air Act
(CAA):
CONTINUED
SB 760
Page
2
1. Requires the 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 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 Section 39000 et seq. and Section 39500 et
seq.). The ARB must coordinate efforts to attain and
maintain ambient air quality standards.
2. Provides that air pollution control districts (APCDs) and air
quality management districts (AQMDs) have primary
responsibility for controlling air pollution from all
sources, other than emissions from mobile sources, and
establishes certain powers, duties, and requirements for
those districts.
3. Requires every APCD in a federal nonattainment area for any
NAAQS 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. 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
CONTINUED
SB 760
Page
3
bank or accruing to internal accounts).
This bill:
1. Authorizes the repowering of previously retired electrical
generation facility equipment that generated ERCs from the
shutdown of the equipment if the Governor declares a state of
emergency due to a sudden and severe energy shortage and the
energy shortage can only be alleviated by the repowering of
the equipment. If a violation of the CAA occurs during the
repowering of the equipment, an APCD or AQMD may seek civil
penalties against the electrical generation facility.
2. Restricts air districts that have programs with ERCs from
requiring changes to existing equipment in exchange for
credits unless those changes are specified in a protocol
approved by the US EPA.
3. Requires districts to submit to the US EPA for approval a
protocol specifying the types of changes the district may
require in order to ensure that the emission reductions used
to create ERCs are permanent, including physical destruction
of existing equipment. The district may only require those
changes that are consistent with the approved protocol.
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 megawatts. 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 South Coast Air Quality Management District's (SCAQMD)
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
CONTINUED
SB 760
Page
4
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.
Air district rules . In compliance with the CAA NSR
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 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 NSR
regulations also specifies those emission reductions generating
ERCs 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 SIP, required under the
federal CAA, and are federally enforceable.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, there are
unlikely state costs but potentially very significant local
costs, mostly from legal liabilities.
SUPPORT : (Verified 5/6/13)
CONTINUED
SB 760
Page
5
AES Southland
California Council for Environmental and Economic Balance
California Municipal Utilities Association
Southern California Public Power Authority
OPPOSITION : (Verified 5/6/13)
South Coast Air Quality Management District
ARGUMENTS IN SUPPORT : According to the author's office, in
order to obtain 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's office, 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 an owner of a retired
facility to demolish or otherwise deliberately damage equipment
in order to demonstrate compliance with the CAA provisions
governing permitting under NSR and Prevention of Significant
Deterioration. The author's office 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's office states that this destruction policy endangers
electric grid reliability and needlessly places the public at
risk and states that the change made by this bill is consistent
with regulations adopted by the US EPA pursuant to the CAA and
would do nothing to impede the progress of attaining any
national or state Ambient Air Quality Standards.
ARGUMENTS IN OPPOSITION : The SCAQMD states:
If enacted, SB 760 violates the requirement of federal and
state Clean Air Acts and undermines the effectives of SCAQMD
New Source Review Regulations. If a facility is going to
apply the credit from and existing source to a new piece of
equipment, SCAQMD needs to verify that the reduction is
permanent. This requirement is contained in federal
regulations and the SCAQMD's Regulation XIII which is included
CONTINUED
SB 760
Page
6
in the State Implementation Plan. To do so, SCAQMD must
ensure that the existing equipment providing the offsets was
in fact, shut down, its permits have been surrendered and that
the equipment is permanently inoperable. In some cases it is
necessary to essentially destroy the equipment in order to
ensure it is permanentley inoperable.
Moreover, this bill could subject facilities receiving permits
under its provisions to enforcement by EPA for violating the
SIP, if the equipment providing the offsets is subsequently
restarted without undergoing New Source Review and providing
offsets. Further, it could potentially subject the state and
SCAQMD to citizen lawsuits, for issuing permits in violation
of the SIP.
Finally, the proposed bill could potentially subject the
region to federal sanctions, for not implementing the SIP, or
an EPA takeover of the permitting program.
RM:k 5/8/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED