HomeMy WebLinkAbout17 LEGIS REPORT: SB 696 AIR QUALITY 08-04-09Agenda Item ~~
/^~ Reviewed:
M
~ . AGENDA REPORT Cit
anager
y
s
,.~tiT_."~ ~ Finance Director N/A
MEETING DATE: AUGUST 4, 2009
TO: WILLIAM A. HUSTON, CITY MANAGER
FROM: COMMUNITY DEVELOPMENT DEPARTMENT
SUBJECT: LEGISLATIVE REPORT: SENATE BILL (SB) 696, AIR QUALITY: CEQA
EXEMPTIONS: EMISSION REDUCTION CREDITS
SUMMARY:
If approved, Senate Bill (SB) 696 authorizes the South Coast Air Quality Management
District California (SCAQMD) to restart issuing air permits to businesses and public
agencies within the region.
RECOMMENDATION:
That the Tustin City Council support SB 696 and direct staff to transmit the attached letter.
FISCAL IMPACT:
There are no significant fiscal impacts associated with this action.
BACKGROUND AND DISCUSSION:
The SCAQMD has been prevented from issuing permits that require exemption from the
"offset requirement" by a November 2008 state court decision that issued a moratorium
on the permits. Under existing law air quality management districts in a federal
nonattainment area are required to establish a system by which all reductions in
emissions of air contaminants that are to be used to offset future increases in the
emission of air contaminants are banked prior to use. Per this requirement, the
SCAQMD promulgated rules establishing offsetting exemptions, providing priority
reserve offset credits, and creating tracking or credits used for offset exemption or
priority reserve projects. In the lawsuit filed against the District, it was deemed a
violation of CEQA to use this system of issuing permits. Affected projects include
equipment replacement to reduce air emission and projects for essential public services
such as hospitals, sewage treatment plants, renewable energy projects, and small
sources, including small businesses that are unable to locate or afford credits on the
open market. With time, many other similar projects will have to be placed on hold or
have their applications withdrawn. The City of Tustin's future fire station would likely fall
City Council Report
Senate Bill 696
Page 2
within this category. Further, no new businesses that would require such permits are
able to start operating, no current businesses can expand; and businesses cannot
initiate modernization projects that would result in emissions reductions. Over 2,000
existing permits in the region are potentially subject to being cancelled due to the court
ruling. If approved, SB 696 would allow the SCAQMD to restart issuing air permits to
businesses and public agencies.
A copy of the bill is included as Attachment A to this report.
Elizabeth A. Binsack
Community Development Director
Attachments A: Draft Letter of Support
B: Senate Bill 696 (Wright)
ATTACHMENT A
DRAFT LETTER OF SUPPORT
August 5, 2009
The Honorable Rod Wright
California State Senate
State Capitol, Room 2048
Sacramento, CA 95814
Re: Senate Bill (SB) 696 (Senator Wright) -Letter of Support
Dear Senator Wright:
On behalf of the City of Tustin, I am writing to express support for Senate Bill 696
(Wright), which would allow the South Coast Air Quality Management District
(AQMD) to restart issuing urgently needed air permits to businesses and public
agencies. AQMD has been prevented from issuing certain permits that require
exemption from the "offset requirement" by a November 2008 state court
decision. Your Bill is critical to ensure that local governments such as Tustin and
our businesses and industries may continue to function in these uncertain
economic times and are not impacted due to the moratorium on AQMD permits.
In addition to the impacts on the private sector businesses, there are a significant
number of projects for essential public services that would be put on hold due to
the lack of credits, including: fire stations, public facilities, and renewable energy
projects. Currently, no new businesses that would require a permit are able to
start operating and no current businesses can expand. Likewise, businesses
cannot initiate modernization projects that would result in emissions reductions.
Our region has experienced steady improvements in air quality, under those
rules that are strict but fair. This legislation would enable the AQMD to continue
to operate its credit bank, and allow for exemptions as needed, while ensuring
that the regional economy and jobs are not impacted. As our nation experiences
the worst economic crisis in decades, it is critical that SB 696 becomes law
immediately.
In the interest of protecting the local economy, local jobs, and improvements in
air quality, the City of Tustin supports the passage of SB 696 as expeditiously as
possible.
Sincerely,
Doug Davert
Mayor
ATTACHMENT B
SENATE BILL 696 (WRIGHT)
AMENDED IN SENATE JUNE 17, 2009
AMENDED IN SENATE JUNE 9, 2009
AMENDED IN SENATE MAY 5, 2009
AMENDED IN SENATE APRIL 13, 2009
SENATE BILL
No. 696
Introduced by Senator Wright
February 27, 2009
An act to add Sections 40440.12 and 40440.13 to the Health and
Safety Code, relating to air quality, and declaring the urgency thereof,
to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 696, as amended, Wright. Air quality: CEQA exemptions:
emission reduction credits.
(1) The California Environmental Quality Act (CEQA) requires a
lead agency, as defined, to prepare, or cause to be prepared, and certify
the completion of, an environmental impact report (EIR) on a project
that it proposes to carry out or approve that may have a significant effect
on the environment or to adopt a negative declaration if it finds that the
project will not have that effect. CEQA also requires a lead agency to
prepare a mitigated negative declaration for a project that may have a
significant effect on the environment if revisions in the project would
avoid or mitigate that effect and there is no substantial evidence that
the project, as revised, would have a significant effect on the
environment. CEQA exempts certain specified projects from its
requirements.
Under existing law, every air pollution control district or air quality
management district in a federal nonattainment area for any national
95
SB 696 - 2 -
ambient air quality standard is required to establish, by regulation, a
system by which all reductions in emissions of air contaminants that
are to be used to offset certain future increases in the emission of air
contaminants are banked prior to use. Pursuant to this requirement the
South Coast Air Quality Management District (district) promulgated
various rules establishing offset exemptions, providing Priority Reserve
offset credits, and creating or tracking credits used for offset exemption
or Priority Reserve projects. In Natural Resources Defense Council v.
South Coast Air Quality Management District (Super. Ct. Los Angeles
County, 2007, No. BS 110792), the superior court found the
promulgation of certain of these district rules to be in violation of
CEQA.
This bill would exempt from the requirements of CEQA, except as
specified, the adoption and implementation of specified district rules
relating to emission credits. Because a lead agency would be required
to determine whether the use of the credits qualifies for an exemption,
this bill would impose astate-mandated local program.
(2) This bill would state the findings and declarations of the
Legislature concerning the need for special legislation.
(3) The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act
for a specified reason.
(4) This bill would declare that it is to take effect immediately as an
urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
The people of the State of California do enact as follows:
1 SECTION 1. (a) The Legislature finds and declares all of the
2 following:
3 (1) Because of the superior court decision in Natural Resources
4 Defense Council v. South Coast Air Quality Management District
5 (Super. Ct. Los Angeles County, 2007, No. BS 110792) holding
6 the South Coast Air Quality Management District (district) violated
7 the requirements of the California Environmental Quality Act
8 (CEQA) (Division 13 (commencing with Section 21000) of the
9 Public Resources Code) in the promulgation of certain district
9s
- 3 - SB 696
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
rules, the district is unable to issue over a thousand pending permits
that rely on the district's internal offset bank to offset emissions.
(2) The superior court decision also required the district to set
aside several thousand permits that were previously issued in
reliance on the district's internal offset bank. These permits have
been subject to analysis performed pursuant to CEQA that the lead
agency has deemed appropriate.
(3) Between 2003 and 2005, the federal Environmental
Protection Agency conducted an extensive review of the criteria
for, and the types of documentation used to support, the deposit
of credits in the district's offset bank. As a result of that review,
the district made a significant adjustment.-T~ep The district reduced
the total credits by an average of 60 percent over all pollutants and
by over 90 percent for PM 10 credits. As a result of this review,
the Environmental Protection Agency issued a letter to the district
on April 11, 2006, confirming that the district tracking system
addressed the underlying historical issues, including the use of
pre-1990 credits and further recommended a rule codifying the
revised tracking system. The district in 2006 adopted Rule 1315
to meet this recommendation. Rule 1315 is now in part the subject
of the litigation described paragraph (1).
(4) If prompt legislative action is not taken to correct this
situation, projects will be stopped from going forward or frozen
in place, representing significant losses to the economy, as well
as numerous well-paying jobs. The impact of approved projects
not going forward will dramatically impede any economic recovery
in southern California and contribute to another state deficit as a
result of lower tax revenues.
(5) Affected projects include equipment replacement to reduce
air emissions, plus projects for essential public services such as
hospitals, schools, landfills, sewage treatment plants, renewable
energy projects, and small sources, including small businesses that
are unable to locate or afford credits on the open market. With
time, many other similar projects will have to be placed on hold,
or have their application withdrawn.
(6) The superior court decision also prohibits the district from
issuing air credits from its Priority Reserve to thermal powerplants
that the Public Utilities Commission found were needed.
9s
SB 696 - 4 -
1 The commission'sjinding was made after extensivepublic hearings
2 in the commission's long-term electric procurement plan
3 proceedings held pursuant to Section 454.5 of the Public Utilities
4 Code. The commission concluded that these thermal powerplants
5 were needed after concluding that efforts at all cost-effective,
6 reliable, and feasible demand response and demand reduction
7 resources were exhausted and that additional supplies of electricity
8 from eligible renewable energy resources were insufjicient to meet
9 the current and future projected electricity needs of the region to
10 prevent blackouts during peak demand periods, to maintain a
11 stable supply of electricity if imported supplies of electricity are
12 interrupted, and to integrate and backstop new, intermittent
13 electricity generated by eligible renewable energy resources that
14 will be added to the grid.
15 (7) Without corrective legislation, the district cannot improve
16 air quality by allowing the existing older and higher emitting and
17 less efficient powerplants to be replaced with new cleaner and
18 more efficient powerplants. Fifty percent of available total power
19 in the region is generated from powerplants that are 40 years or
20 older.
21 (8) Failure to correct this problem will mean the district cannot
22 help meet the mandates set forth in the California Global Warming
23 Solutions Act of 2006 (Division 25.5 (commencing with Section
24 38500) of the Health and Safety Code) if it cannot issue permits
25 to provide necessary peaking and load following power to support
26 increased reliance on intermittent electricity
27 generated by eligible renewable energy resources as will be
28 required by state efforts to reduce emissions of greenhouse gases.
29 (b) It is therefore necessary that legislation be enacted to allow
30 the district to resume issuing permits and to abrogate the superior
31 court decision in Natural Resources Defense Council v. South
32 Coast Air Quality Management District (Super. Ct. Los Angeles
33 County, 2007, No. BS 110792).
34 SEC. 2. Section 40440.12 is added to the Health and Safety
35 Code, to read:
36 40440.12. (a) South coast district Rule 1309.1, as amended on
37 September 8, 2006, and replaced August 3, 2007, and Rule 1315,
38 as adopted September 8, 2006, and readopted August 3, 2007,
39 relating to, among other things, the creation of internal accounts
40 for essential public services, small sources, exempt sources, and
9s
- 5 - SB 696
1 eligible powerplants, are hereby continued in full force and effect
2 without interruption since September 8, 2006, and August 3, 2007.
3 (b) The adoption and implementation of Rules 1309.1, 1315,
4 1304, and any amendments to these rules required by the United
5 States Environmental Protection Agency for approval, are exempt
6 from the California Environmental Quality Act (Division 13
7 (commencing with Section 21000) of the Public Resources Code),
8 except as provided in subdivision (d).
9 (c) The exemption provided in subdivision (b) applies to all
10 actions taken pursuant to the rules listed in subdivision (b)
11 occurring on and after September 8, 2006, and to the use of credits
12 pursuant to the May 3, 2002, version of Rule 1309.1, except as
13 provided in subdivision (d).
14 (d) (1) There are hereby established two accounts of offset
15 credits in the south coast district's internal bank: the operating
16 account and the set-aside account.
17 (2) The starting balances of the operating account are hereby
18 established in the following amounts:
19 (A) Volatile organic compounds: 10.98 tons/day.
20 (B) Nitrogen oxides: 14.27 tons/day.
21 (C) Sulfur oxides: 2.32 tons/day.
22 (D) Carbon monoxide: 12.72 tons/day.
23 (E) PM10: 10.63 tons/day.
24 (3) The credits in the operating account may be used for
25 implementation of Rules 1304 and 1309.1. The use of credits in
26 the operating account are exempt from the California
27 Environmental Quality Act (Division 13 (commencing with Section
28 21000) of the Public Resources Code) except that the issuance of
29 any permit using these credits is notes included
30 within this exemption. Future rules authorizing the creation of
31 additional offset credits for deposit into the operating account are
32 not exempt from the California Environmental Quality Act under
33 this section. The south coast district shall account for emission
34 credits used pursuant to this section to ensure that the credits issued
35 do not exceed the allocations described in this subdivision.
36 (4) The starting balances of the set-aside account are hereby
37 established in the following amounts:
38 (A) Volatile organic compounds: 55.56 tons/day.
39 (B) Nitrogen oxides: 11.24 tons/day.
40 (C) Sulfur oxides: Otons/day.
95
SB 696
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
6
(D) Carbon monoxide: Otons/day.
(E) PM10: 0.55 tons/day.
(5) The use of the credits in the set-aside account is not exempt
from the California Environmental Quality Act pursuant to this
section.
(e) The exemptions from the California Environmental Quality
Act provided in this section shall not apply unless all of the
following are satisfied:
(1) A south coast district rule requires the use of the best
available control technology, as defined in Section 40405, and air
quality modeling to ensure the source will not cause a violation,
or make significantly worse an existing violation, of any ambient
air quality standards as defined in district Rule 1303, unless
exempted from modeling pursuant to district Rule 1304, as
amended June 14, 1996, for each new, relocated, or modified
source with an emissions increase of one pound per day or greater
of any air contaminant.
(2) A south coast district rule prohibits the construction of any
new, relocated, or modified permitted unit if the emissions of any
toxic air contaminant, as listed by the district board, exceed a
cumulative increase in maximum individual cancer risk at any
receptor location of greater than one in one million if the permitted
unit is constructed without best available control technology for
toxic air contaminants, or greater than 10 in one million if the
permitted unit is constructed with best available control technology
for toxic air contaminants or exceeds a chronic or acute noncancer
health effect hazard index of 1.0.
(3) The south coast district accounts for the use of offset credits
pursuant to this subdivision as part of the district's state
implementation plan submissions and demonstrates that the use
of the offset credits will not interfere with attainment or
maintenance of ambient air quality standards.
(4) South coast district Rules 1304, 1309.1, and 1315, as
specified in this subdivision, have been submitted to the United
States Environmental Protection Agency, and have not been
disapproved by that agency.
(~ No fee shall be charged for the use of credits by essential
public services, as defined in south coast district Rule 1302.
95
7 - SB 696
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
(g) A powerplant maybe eligible to receive offset credits under
this section if it meets both of the following conditions:
(1) The powerplant has filed its application for certification
before the State Energy Resources Conservation and Development
Commission and its certificate is approved pending release of
internal offset credits by the south coast district.
(2) The powerplant will provide electric power to customers in
California, and either the powerplant owner has entered into a
binding contract for purchase of the power by an electrical
corporation subject to regulation by the Public Utilities
Commission, and the contracts have been approved by the Public
Utilities Commission consistent with its authority, including, but
not limited to, Section 380 ofthe Public Utilities Code, or the plant
is a powerplant owned by a local publicly owned electrical utility,
or owned by a municipality, that is designed and constructed not
to exceed the municipality or utility's native demand load
projections.
f~)
(h) (1) A powerplant accessing emission credits pursuant to
this section shall pay a mitigation fee for the Priority Reserve offset
credits obtained that shall be the amount set forth in south coast
district Rule 1309.1, as amended August 3, 2007.
(2) The south coast district shall, to the extent technically and
economically feasible, use the mitigation fees to mitigate emissions
of the relevant pollutants or its precursors in the area impacted by
emissions from the powerplant, with a minimum of one-third to
be used for installation of renewable or alternative sources of
energy. Up to 10 percent may be used by the district for
administration of the mitigation program.
(i) Any credits used pursuant to this section shall not be
transferable except to a new owner of the same source, and shall
revert back to the south coast district`s internal accounts upon the
source, or portion of a source, ceasing operation.
(j) Except as expressly provided in subdivisions (b) and (d),
nothing in this section shall affect the applicability of the California
Environmental Quality Act to the licensing and permitting of any
powerplant project, or to the permitting of any project by the south
coast district.
95
SB 696 - 8 -
1
2 (k) The decisions of the court in Natural Resources Defense
3 Council v. South Coast Air Quality Management District (Super.
4 Ct. Los Angeles County, 2007, No. BS 110792) are hereby
5 abrogated.
6 SEC. 3. Section 40440.13 is added to the Health and Safety
7 Code, to read:
8 40440.13. (a) (1) Any amendment of the operating account to
9 increase the amount of emission credits above the amounts
10 established in paragraph (2) of subdivision (d) of Section 40440.12
11 or a change in the eligibility for those credits shall be made in
12 accordance with the requirements of this section and any applicable
13 requirements of the federal Clean Air Act (42 U.S.C. Sec. 7401 et
14 seq.).
15 (2) The south coast district shall post its internal credit accounts,
16 including debits, credits, and balances on its Internet Web site.
17 (b) A powerplant shall be eligible to receive offset credits from
18 amounts added to the operating account beyond the starting
19 balances established in paragraph (2) of subdivision (d) of Section
20 40440.12 only if the powerplant meets both of the following
21 conditions:
22 (1) The powerplant will provide electric power to customers in
23 southern California, and the capacity addition is authorized by the
24 Public Utilities Commission in its long-term power procurement
25 decision in accordance with Section 454.5 of the Public Utilities
26 Code, after concluding that efforts at all cost-effective, reliable,
27 and feasible demand response and demand reduction resources
28 were exhausted and additional supplies of renewable power were
29 insufficient to meet the current and future projected electricity
30 needs of the region.
31 (2) The powerplant owner has entered into a binding contract
32 for purchase of the power by an electrical corporation subject to
33 regulation by the Public Utilities Commission, and the contracts
34 have been approved by the Public Utilities Commission consistent
35 with its authority, including, but not limited to, Section 380 of the
36 Public Utilities Code, or is a powerplant owned by a local publicly
37 owned electrical utility that is designed and constructed not to
38 exceed that utility's native demand load projections within the
39 local publicly owned electrical utility's service area. Powerplants
40 that meet this paragraph are deemed needed to meet electric power
95
- 9 - SB 696
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
demand, system reliability, and integration of renewable power
into the grid.
(c) Any credits used pursuant to this section shall not be
transferable except to a new owner of the same source, and shall
revert back to the south coast district upon the source, or portion
of a source, ceasing operation.
(d) The south coast district shall establish a fee paid by the
powerplant for the use of offset credits from the Priority Reserve
issued pursuant to this section.
(e) Nothing in this section affects the responsibilities of the
State Energy Resources Conservation and Development
Commission with respect to environmental analysis of a proposed
powerplant.
SEC. 4. The Legislature finds and declares that a special law
is necessary and that a general law cannot be made applicable
within the meaning of Section 16 of Article IV of the California
Constitution because of unique circumstances concerning the South
Coast Air Quality Management District.
SEC. 5. No reimbursement is required by this act pursuant to
Section 6 ofArticle XIIIB of the California Constitution because
a local agency or school district has the authority to levy service
charges, fees, or assessments sufficient to pay for the program or
level of service mandated by this act, within the meaning of Section
17556 of the Government Code.
SEC. 6. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
Due to the court decision in Natural Resources Defense Council
v. South Coast Air Quality Management District (Super. Ct. Los
Angeles County, 2007, No. BS 110792), the South Coast Air
Quality Management District is unable to issue over a thousand
pending permits that are either exempt from offset requirements
or qualified to use offset credits from the district's Priority Reserve
and is required to set aside thousands of permits already issued;
therefore it is necessary for this measure to take effect immediately
to allow the district to issue permits in an expeditious manner and
95
SB 696 -10
1 to validate previously issued permits called into question by the
2 superior court's decision.
O
95