• Ensure that the same Rule 9-11 standards will continue to apply, regardless of CPUC regulatory status or facility ownership;
• Clarify the definition of "electric utility power generating system" to recognize that the facilities can be divested, and to allow for multiple electric generating systems or owners;
• Streamline the definitions of "emergency natural gas curtailment" and "electric system emergency"; and
• Prevent "backsliding" to less stringent emission limits due to industry restructuring.

Tosco Refining Company and Chevron Products Company expressed concern that as a result of deleting the qualifying phrase "CPUC-regulated utility" from the applicability section of Rule 9-11, large steam boilers such as the units at their facilities could become subject to rule requirements. District staff responded that the refinery boilers are already regulated under the petroleum refinery NOx rule, Rule 9-10, and are exempt from Rule 9-11 because the units are not over 250 MMBTU/hr heat input capacity and used for electric power generation. For additional clarity, a definition of an electric power generating steam boiler was included in the proposed rule amendments.

Power Plant Divestiture and Emission Reduction Credit Impacts:

Southeast Alliance for Environmental Justice (SAEJ) expressed concern that due to power plant divestiture and CPUC deregulation of the electric utility industry, the new owner/operators of the affected boilers could potentially increase their capacity factors and significantly increase emissions of NOx and PM10. These issues have already been addressed at great length by the Environmental Impact Report (EIR) prepared and certified by the CEQA lead agency, the California Public Utilities Commission, Commissioners Decision 98-11-064, November 19, 1998 for the deregulation of the electric utility generating industry. The EIR concluded that a significant impact on air quality due to possible increased power production and resultant NOx emissions is plausible but highly unlikely (EIR pp. 3-12 ff. and 4.5-81). Indeed, the EIR states that Rule 9-11 control requirements will mitigate this potential increase, and if such an increase were to occur, it would only be a temporary effect in the year 2000 time frame (EIR pg. 4.5-81).

In point of fact, the EIR identified this proposed rule amendment as a necessary CEQA Mitigation Measure 4.5-5 for the CPUC’s divestiture project, to ensure that the Rule continues to apply even if the power plants are no longer CPUC-regulated utilities. Adoption of the proposed amendments will facilitate the continued enforcement of Rule 9-11 requirements and would help ratchet down the potential increased emissions, if they were to occur, to less than significant levels in subsequent years. The EIR also concluded that air quality modeling of the worst case NOx and PM10 emissions, due to increased power plant operation, has demonstrated that the potential emission increases are not significant, even at the local level, based on the state’s health-based, ambient air quality standards (NOx, 0.25 ppm 1 hr. standard; PM10, 50 µg/m3 24 hr., 30 µg/m3 annual standard) (EIR pp. 4.5-77 to 4.5-81).

Finally, SAEJ also expressed concern that "retroactive" interchangeable emission reduction credits (IERCs) could be applied for by the power plant owners and their use could lower the NOx emission reductions anticipated by Rule 9-11. Staff believes that this comment should be directed not at Regulation 9, Rule 11 but at Regulation 2, Rule 9: Interchangeable Emission Reduction Credits, adopted by the District’s Board of Directors on April 7, 1999, in response to state law, Health & Safety Code Section 40714.5. In any event, allowing IERCs to be generated by voluntary early compliance with rule standards and used as partial fulfillment of future requirements has been endorsed by the California Air Resources Board, as being consistent with the state law. Indeed, incentives for voluntary early compliance with emission standards are an important goal of the IERC program. Moreover, it is inaccurate to describe some IERC’s as being "retroactive" since there is nothing in Rule 2-9 regarding "retroactivity". All IERC’s are issued pursuant to the strict calculation procedures in Rule 2-9.

Section 40728.5 of the California Health and Safety Code requires the District to perform an assessment of the socioeconomic impacts for any rule amendment that will significantly affect air quality or emission limitations. The amendments proposed here impose no new emission standards or requirements. Besides, the changes proposed here are well within the scope and range of the socioeconomic study that was completed for the original Rule adopted on February 16, 1994. Thus the proposed amendments impose no new costs.

Pursuant to the California Environmental Quality Act (Public Resources Code Section 21000 et seq.), District staff has conducted an initial study for the proposed amendments to Regulation 9, Rule 11 and has concluded that the proposed amendments would not have significant environmental impacts. Staff recommends adoption of the attached negative declaration pursuant to Public Resources Code Section 21080(c) and CEQA Guidelines 15070 et seq.