BILL ANALYSIS Ó
SB 1387
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Date of Hearing: June 27, 2016
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
SB
1387 (De León) - As Amended April 7, 2016
SENATE VOTE: 22-13
SUBJECT: Nonvehicular air pollution: market-based incentive
programs: South Coast Air Quality Management District board
SUMMARY: Adds three members to the South Coast Air Quality
Management District (SCAQMD) Governing Board, as specified, and
creates a process by which the Air Resources Board (ARB) is
required to review and approve, disapprove, or amend and
approve, any plan for, changes to, or rules implementing, a
local air district's market-based incentive program (e.g., the
SCAQMD's Regional Clean Air Incentives Market, or RECLAIM)
EXISTING LAW:
1) Provides ARB with primary responsibility for control of
mobile source air pollution and 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.
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2) Creates certain AQMDs, with related authority, including the
SCAQMD under the Lewis-Presley Air Quality Management Act.
SCAQMD covers portions of Los Angeles, Orange, Riverside, and
San Bernardino counties within the South Coast Air Basin.
3) Establishes the SCAQMD Governing Board, and specifies the
Board consist of 13 members, where one member each is
appointed by the Governor, Senate Rules Committee, and the
Speaker of the Assembly, and the other 10 members are
appointed by regional government entities in the South Coast
Air Basin, as specified.
4) Requires SCAQMD adopt a plan to achieve and maintain the
state and federal ambient air quality standards for the South
Coast Air Basin, and requires that plan and subsequent
revisions contain deadlines for compliance with federal air
quality standards, as well as schedules and deadlines to
achieve the state ambient air quality standards by the
earliest date achievable, including by use of best available
retrofit control technology (BARCT).
5) Makes findings and declarations that other options for air
quality improvement, including market-based incentive
programs, should be explored, provided those programs provide
equivalent emission reductions.
6) Authorizes a district to adopt a market-based incentive
program as an element of the district's plan for attainment
of state or federal ambient air quality standards, if that
plan meets specified requirements.
7) Requires a district's plan for attainment or plan revision
submitted to the state prior to January 1, 1993, be designed
to achieve equivalent emission reductions and reduced cost
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and job impacts compared to current command and control
regulations and future air quality measures that would
otherwise have been adopted as part of the district's plan
for attainment.
8) Prohibits a district from implementing a market-based
incentive program unless the state board determines the above
requirements are met.
9) Requires a district's plan or plan revision submitted on or
after January 1, 1993, be designed to allow the trading of
reductions among a variety of sources and requires ARB to
approve the above plan or plan revision prior to program
implementation and make their determination no later than 90
days from submission of the plan or plan revision.
10)Requires the district, upon adoption of rules and regulations
to implement the market-based program, to submit the rules
and regulations to ARB, and requires ARB, within 90 days, to
determine whether the rules and regulations meet specified
requirements.
THIS BILL:
1) Makes findings and declarations that other options for air
quality improvement, including market-based incentive
programs, may be explored, provided those programs provide
greater emission reductions and ensure disadvantaged
populations are not disproportionately impacted.
2) Strikes the January 1, 1993 date for plan or plan revision
submission, and requires any district plan or plan revision
achieve equivalent emission reductions and reduced cost and
job impacts compared to current command and control
regulations and future air quality measures that would
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otherwise have been adopted as part of the district's plan
for attainment.
3) Prohibits a district from implementing any revisions to an
adopted market-based incentive program, unless ARB determines
the plan or plan revision complies with the above
requirements.
4) Requires, if ARB determines a plan or plan revision does not
meet the specified requirements for a market-based incentive
program, that ARB notify the district, revise the plan or
plan revision so that it complies with specified
requirements, and approve the plan or plan revision.
5) Specifies that the above plan or plan revision approved by
ARB shall take effect immediately and is binding on the
district.
6) Requires, if ARB determines a district rule does not meet
the specified requirements for a market-based incentive
program, ARB notify the district, revise the rule so that it
complies with specified requirements, and adopt the rule.
7) Specifies that the above rule approved by ARB shall take
effect immediately and have the same legal force and effect
as a district rule.
8) Expands the SCAQMD Governing board by three to increase the
membership to 16, with the additional members appointed by
the Governor, the Senate Committee on Rules, and the Speaker
of the Assembly.
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9) Requires the above appointees be representatives of a bona
fide nonprofit environmental justice organization that
advocates for clean air and pollution reductions in one or
more communities within the South Coast Air Basin.
FISCAL EFFECT: According to the Senate Appropriations
Committee, unknown, likely significant, costs to the ARB (Air
Pollution Control Fund).
COMMENTS:
1)Background. The SCAQMD board is made up of 13 members, where
three are appointed by the state (one each by the Senate Rules
Committee, the Speaker of the Assembly, and the Governor) and
10 are appointed by local governments. The members of the
board serve four-year terms. Currently, Dr. William Burke,
appointed by the Speaker of the Assembly, serves as the
Chairman of the SCAQMD Board.
Under the federal Clean Air Act, the United States
Environmental Protection Agency (US EPA) establishes National
Ambient Air Quality Standards that apply for outdoor air
throughout the country. These federal standards exist for
several air pollutants due to their negative impact on public
health above specified concentrations, including ozone and
particulate matter, among others. Nonattainment areas are
regions that do not meet the national ambient air quality
standard for one of those pollutants.
The South Coast Air Basin has some of the worst air quality in
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the nation, and is in serious nonattainment for particulate
matter (<2.5 microns, or PM 2.5) and extreme nonattainment for
ozone. As a result of its nonattainment status, state law
requires the district to adopt an Air Quality Management Plan
(AQMP) to achieve and maintain the state and federal ambient
air quality standards and submit this plan to the ARB for
inclusion into the state implementation plan (SIP). The AQMP
was originally adopted in 1982, and is formally reviewed every
two years. The SCAQMD is currently working on the 2016 AQMP.
AB 1054 (Sher, Chapter 1160, Statutes of 1992) authorizes
local air districts to adopt a market-based incentive program
as a substitute for command and control regulations and future
air quality measures that would otherwise have been adopted as
part of the district's plan for attainment.
Pursuant to AB 1054, the SCAQMD adopted the Regional Clean Air
Incentives Market, or RECLAIM in 1993. RECLAIM was designed
and adopted amidst an economic recession in the region with
widespread industry and electrical utility support. The
program replaced a series of existing command and control
rules and was intended to allow for the most efficient
emission reduction projects within the sector to achieve the
desired emissions reductions with the lowest economic cost to
industry.
Instead of permitting individual equipment and devices, the
program sets individual emissions limits on nitrogen oxide
(NOx) and sulfur oxide (SOx) for facilities as a whole.
Credits, (called RECLAIM Trading Credits, or RTCs) are
provided to the facility in an amount equivalent to their
emissions limit assigned under the program. RECLAIM sources
may choose to install emission control equipment that enables
them to operate within their allocation, or they may exceed
emissions allocations as long as they acquire sufficient RTCs
from other sources. In 2013, there were 275 facilities in the
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program, including refineries, power plants, and other
industrial sources.
RECLAIM has been criticized over the years for an oversupply
of credits, starting from the original allocation of credits
where the initial distribution of RTCs in 1994 exceeded actual
NOx emissions by 60%. This significant over-allocation was
due in part to incorrect economic growth assumptions for the
region. Other than a few notable exceptions, the oversupply
of credits has kept credit prices relatively low compared to
costs associated with installing pollution control equipment.
As a result, the largest polluters in the region have
primarily chosen to comply by purchasing RTCs to exceed their
NOx emissions cap under the program, instead of by reducing
NOx through installation of readily available pollution
control equipment.
In March of this year, the US EPA disapproved portions of the
2012 AQMP related to the achievement of the 2006 PM 2.5
standard, citing deficiencies in the 2010 version of the
RECLAIM program that allowed for excess of credits and delay
of pollution controls for some facilities. According to the
SCAQMD Web site, district staff expects that recent RECLAIM
amendments last December will address the disapproval and
ensure compliance with federal Clean Air Act requirements.
Despite the initial excess allocation of credits, RECLAIM has
only been amended twice to reduce excess RTCs for NOx (called
a credit "shave"), once in 2004, and again in December 2015.
According the SCAQMD staff report, amendments to the program
were needed to address BARCT requirements in state law. BARCT
evaluation is required by California law to assess the
advancement in control technology to ensure that RECLAIM
facilities achieve the same emission reductions that would
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have occurred under a command-and-control approach and that
emissions reduction from the program fully contribute to the
efforts in the Basin to achieve federal ambient air quality
standards.
Specifically, the SCAQMD staff proposal recommended amendments
to shave NOx RTC credits from 26.5 tons/day (tpd) to 14 tpd
with a front-loaded implementation schedule. The proposal
notes that the 14 tpd day value represents the emissions
reductions necessary to comply with state law BARCT
requirements, with a 10% compliance margin, adjustments for
projected growth, and uncertainties in the BARCT analysis.
The staff proposal also recommended amendments to retire RTCs
from larger NOx emitting facilities that have shut down to
help address oversupply of credits.
During the public comment portion of the hearing, support was
expressed among industry representatives for a reduced shave
of 12 tpd, a back-loaded implementation schedule, and a
removal of the proposal to retire credits from facility shut
downs from consideration at the hearing. A motion to approve
these amendments, in lieu of the staff-proposed amendments,
passed by a vote of 7-5 at the December 4, 2015 SCAQMD
Governing Board meeting.
In January, Richard Corey, Executive Officer of ARB, wrote a
letter to Dr. Barry Wallerstein, the former executive officer
of the SCAQMD, expressing significant concerns over the
December SCAQMD Board vote, including whether the RECLAIM
amendments meet requirements in state law.
On February 6, 2016, Dr. Wallerstein replied to Mr. Corey's
letter, stating, "We believe that several of CARB staff's
conclusions are incorrect and do not accurately reflect the
public process for the referenced rulemaking." The letter
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also noted that SCAQMD would be submitting the December 4th
RECLAIM amendments to ARB for inclusion into the SIP in late
February of this year. ARB is currently reviewing the
amendments, which is expected to be complete later this
summer.
10)Author's statement:
The SCAQMD is one of the leading voices for clean air and
climate pollution reductions in the southern California
region. In the past six months, with its recent changes in
governance, it has voted to dismiss its longstanding
executive officer and weaken clean air regulations over its
expert staff's recommendations. Outside parties have
worked to reduce diversity on the board and to install a
majority that is more concerned with polluters than with
public health. SB 1387 seeks to modernize the membership
of the governing board and to ensure the ARB can conduct
speedy oversight of any amendments to smoke stack
regulations made by the new board.
11)Related/prior legislation:
AB 2616 (Burke) adds three members to the Coastal Commission,
appointed by the Governor, the Senate Rules Committee, and the
Speaker of the Assembly, who are required to work directly
with communities in the state that are most burdened by, and
vulnerable to, high levels of pollution and issues of
environmental justice, including, but not limited to,
communities with diverse racial and ethnic populations and
communities with low-income populations. AB 2616 is pending
in the Senate Natural Resources and Wildlife Committee.
AB 1288 (Atkins, Chapter 586, Statutes of 2015) adds two
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members to ARB, appointed by the Senate Rules Committee and
the Speaker of the Assembly, who are required to work directly
with communities in the state that are most significantly
burdened by, and vulnerable to, high levels of pollution,
including communities with diverse racial and ethnic
populations and low-income populations.
SB 886 (Negrete McLeod, Chapter 664, Statutes of 2007)
increased the board membership of SCAQMD from 12 to 13 members
by adding a seat for the City of Los Angeles and deleted
prohibitions on a member serving more than two consecutive
terms as chair of the SCAQMD and other specified air
districts.
REGISTERED SUPPORT / OPPOSITION:
Support
American Lung Association in California
California Environmental Justice Alliance
Clean Power Campaign
Coalition for Clean Air
Communities for a Better Environment
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Community Action and Environmental Justice
East Yard Communities for Environmental Justice
Liberty Hill Foundation
Physicians for Social Responsibility-Los Angeles
Sierra Club California
Transform
Union de Vecinos
Opposition
American Coatings Association
American Forest & Paper Association
Associated Builders and Contractors of California
Automotive Specialty Products Alliance
Building Industry Association of Southern California
Building Owners & Managers Association of California
California Asphalt Pavement Association
California Association of Realtors
California Auto Body Association
California Building Industry Association
California Business Properties Association
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California Chamber of Commerce
California Chapter of the International Warehouse Logistics
Association
California Construction and Industrial Materials Association
California Cotton Ginners and Growers Association
California Independent Oil Marketers Association
California Independent Petroleum Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
California Paint Council
California Railroad Industry
California Small Business Alliance
California Small Business Association
California Taxpayers' Association
California Trucking Association
Chemical Industry Council of California
City of Glendora
City of Lake Forest
City of Laguna Hills
Coalition of Energy Users
Commercial Real Estate Development Association
Construction Industry Air Quality Coalition
Consumer Specialty Products Association
El Monte/South El Monte Chamber of Commerce
Engineering Contractor's Association
Fullerton Association of Concerned Taxpayers
FuturePorts
Glass, Molders, Pottery, Plastics and Allied Workers
International Union
Grocery Manufacturers Association
Haddick's Towing
Harbor Trucking Association
Howard Jarvis Taxpayers Association
Independent Oil Producers Agency
Industrial Association of Contra Costa County
Industrial Environmental Association
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Inland Empire Economic Partnership
International Council of Shopping Centers
International Warehouse Logistics Association
Kern Country Taxpayers Association
Long Beach Chamber of Commerce
Los Angeles Area Chamber of Commerce
Los Angeles County Business Federation
Los Angeles County Division of the League of California Cities
Metal Finishing Association of Northern California
Metal Finishing Association of Southern California
National Federation of Independent Business/California
Printing Industries Association of Southern California
Redondo Beach Chamber of Commerce
Regional Hispanic Chamber of Commerce
San Bernardino Associated Governments
Santa Barbara Taxpayers Association
Santa Barbara Technology and Industry Association
Small Business Action Committee
South Bay Association of Chambers of Commerce
South Coast Air Quality Management District
Torrance Area Chamber of Commerce
Valley Industry & Commerce Association
West Coast Protective League
Western Agricultural Processors Association
Western States Petroleum Association
Western States Trucking Association
One Individual
Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)
319-2092
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