BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 760|
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THIRD READING
Bill No: SB 760
Author: Wright (D)
Amended: 5/20/13
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 specifies that air districts are prohibited
from requiring the physical destruction of electrical generating
facility equipment that is or will be retired unless either
required by the new source review program of the federal Clean
Air Act (CAA), or in the case that the owner or operator retires
the equipment to provide emission reduction credits (ERCs),
emission offsets, or an offset exemption from the air district.
Senate Floor Amendments of 5/20/13 specify that air districts
are prohibited from destroying retired electrical generating
facility equipment unless required by federal law or if
equipment is retired to provide ERCs, emission offsets, or an
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offset exemption.
ANALYSIS : Existing federal law, under the CAA:
1. Requires the United States 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 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. 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 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
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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).
This bill specifies that air districts are prohibited from
requiring the physical destruction of electrical generating
facility equipment that is or will be retired unless either
required by the new source review program of the CAA, or in the
case that the owner or operator retires the equipment to provide
ERCs, emission offsets, or an offset exemption from the air
district.
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
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
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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 5/21/13)
AES Southland
California Council for Environmental and Economic Balance
California Municipal Utilities Association
Southern California Public Power Authority
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
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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.
RM:k 5/21/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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