BILL ANALYSIS Ó
SB 1387
Page 1
SENATE THIRD READING
SB
1387 (De León, et al.)
As Amended April 7, 2016
Majority vote
SENATE VOTE: 22-13
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Natural |6-2 |Williams, Cristina |Hadley, Harper |
|Resources | |Garcia, Gomez, | |
| | |McCarty, Mark Stone, | |
| | |Wood | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |11-4 |Gonzalez, Bloom, |Bigelow, Chang, |
| | |Bonilla, Bonta, |Jones, Obernolte |
| | |Eggman, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Quirk, Santiago, | |
| | |Weber, Wood, McCarty | |
| | | | |
| | | | |
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SB 1387
Page 2
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).
Specifically, 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
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.
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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.
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.
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.
2) Creates certain AQMDs, with related authority, including the
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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
and job impacts compared to current command and control
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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.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Increased ongoing annual costs of between $400,000 (2.5
Personnel Year (PY)) and $900,000 (5.5 PY) for ARB to review,
revise, and approve plans, plan revisions, and rules for
compliance with applicable requirements (Air Pollution Control
Fund).
This estimate is specific to the SCAQMD, the only local air
district with a market-based incentive program. For the
ongoing, plans and plan revisions (every three years) ARB
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estimates requiring one new position. The other one to four
estimated positions depend on the estimated the deficiency
rule, as well as frequency of the revisions.
2)Unknown, potentially significant ongoing increased costs if
other local air districts adopt market-based incentive
programs (Air Pollution Control Fund.)
COMMENTS: 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
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
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into the state implementation plan (SIP). The AQMP was
originally adopted in 1982, and is formally reviewed every two
years.
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 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
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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 2016, 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 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
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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 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.
According to the author, SCAQMD is one of the leading voices for
clean air and climate pollution reductions in the southern
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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. This
bill 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.
Analysis Prepared by:
Lawrence Lingbloom / NAT. RES. / (916) 319-2092
FN:
0004080