Request for Matching Funds for Development of a Web-Based Information Resources Site Designed to Facilitate Utilization of DEQ’s Forthcoming Emission Reduction Credits Banking Rule Revisions

September 22, 2016

REQUEST FOR MATCHING FUNDS

DEVELOPMENT OF A WEB-BASED INFORMATION RESOURCES SITE DESIGNED TO FACILITATE UTILIZATION OF DEQ’S FORTHCOMING EMISSION REDUCTION CREDITS BANKING RULE REVISIONS.

The Baton Rouge area achieved attainment of the 2008 ozone standard (75 parts per billion) in 2014 and has remained below the standard since then. This was the third of increasingly stringent ozone standards that the area has met.  Later this month, EPA is expected to formally recognize this achievement and redesignate the area to attainment status.  However, in October, 2015, EPA promulgated a new ozone standard of 70 ppb and it is quite likely that the area will not meet this standard and will fall back into nonattainment status.

Aside from health implications, nonattainment status with a National Ambient Air Quality Standard can have enormous economic development consequences for an affected area.

The importance of maintaining attainment of the federal ozone standard for economic development in the Baton Rouge area cannot be overstated. Under federal Clean Air Act requirements, any new major source of emissions (new industrial developments or expansions) must undergo New Source Review (NSR).  In attainment areas NSR consists of a process called Prevention of Significant Deterioration (PSD).  New Source Review in nonattainment areas (NNSR) is a much more severe process.  The principal requirements of NNSR are:

  • installation of Lowest Achievable Emission Rate (LAER) technology
  • provision for “offsets” representing emission reductions that must be made from other sources, and
  • completion of an analysis of alternate sites, sizes, production processes, and environmental control techniques and
  • demonstrate that the benefits of locating the source in a nonattainment area significantly outweigh the environmental and social costs imposed

The “offset” provision of NNSR requires that, for example, a new industry locating in an ozone nonattainment area that expects to emit 100 tons per year (tpy) of a pollutant (e.g. NOx) might have to find 110 tpy of reductions from another source to offset its emissions. The offset ratio (e.g. 1:1.1) is designed to ratchet down ozone-forming emissions over time.  It is this provision that presents the potential for seriously constraining industrial development in the Baton Rouge area.  The stark truth is that there is precious little in the way of available offsets to support permitting for new industries or expansions at existing industries.

Only point sources are currently eligible for generation, banking and/or trading of emission reduction credits (ERCs) under current DEQ rules. After several decades of aggressively reducing emissions of NOx and VOCs to mitigate ozone levels, Baton Rouge industries have practically exhausted opportunities for voluntary emission reduction projects and ERCs.  Banked ERCs have been depleted and, for all practical purposes, are unavailable for new industries or expansions that would require them to meet offset requirements for air permits. The industrial renaissance that the Baton Rouge area was beginning to enjoy has come to a grinding halt.

Historically, ERCs were typically earned by an industry through implementing projects that resulted in emission reductions at their facility. For example, an industry might close or put controls on an existing source.  DEQ would have to certify the credits before allowing them to be banked or used for offsets, since the credits must meet Clean Air Act requirements that they be:

  • enforceable (i.e., authorized by an appropriate permitting mechanism)
  • permanent
  • quantifiable
  • real (i.e., must be actual, not potential emission reductions), and
  • surplus (i.e., not required by a regulation).

Alternatively, an industry might buy ERCs that have been banked by another industry.

The current problem with this rather limited field of play (industrial facilities) is that the emission reduction credits bank is now practically broke with few, if any credits, available to provide needed offsets. The Baton Rouge Area Chamber (BRAC) describes several major projects for the Baton Rouge Area that are on hold because sufficient offsets cannot be acquired for requisite air quality permits.

After almost 25 years of working to reduce ozone levels in the Baton Rouge area, practically all of the simple and relatively low-cost emission reduction measures have been exhausted.   Recognizing these impediments to further progress in reducing ozone levels and economic development, stakeholders of Baton Rouge Clean Air Coalition, have proposed an innovative strategy for the Baton Rouge area that will (1) reduce ozone-forming emissions and help facilitate maintenance of the ozone standard, and (2) produce bankable ERCs that can be used to meet offset requirements for permitting new facilities and expansions at existing facilities.

The centerpiece of the new strategy is to revise DEQ’s banking rules to allow creditable (i.e., surplus, permanent, quantifiable, and enforceable) reductions from certain mobile sources to qualify as ERCs and therefore be used as offsets for nonattainment new source review (NNSR) purposes. Some examples of types of projects that could be conducted in the Baton Rouge area are:

  • Local industry funds truck stop electrification to earn NOx ERCs
  • Local industry funds retrofits/conversions of marine vessels operating on the Mississippi River in the Baton Rouge region for NOx/VOC/PM2.5 ERCs
  • Local industry pays for conversions of school buses from diesel to CNG and gets ERCs for PM2.5 emissions reductions
  • Retrofits/conversions of local mass transit vehicles generate marketable ERCs that can help fund services
  • Local industry contributes to a match for a local government grant for vehicle fleet conversions to CNG

Implementing the new strategy will help mitigate air quality improvement and economic development constraints of the current “point source only” banking system and provide a number of valuable benefits such as:

  • Allow for continued economic and transportation development (increased availability and lower costs for ERCs)
  • New ERC projects can start reducing emissions and improving air quality in a relatively short period of time
  • Provide for overall ratcheting down of emissions in the nonattainment area
  • Reduce emissions from important ozone precursor sources not easily regulated by DEQ (e.g. on-road and off-road mobiles sources)
  • Facilitate overall emissions reductions in pursuit of attainment and maintenance of ozone and PM2.5 NAAQS
  • Substantially further interest in clean diesel

DEQ has now completed the draft rule (AQ365) that would implement the new ERC strategy. It was proposed in August, the public hearing is set for September 28th , and the comment period will close on Oct. 5.  The rule is expected to become effective in the December-January time frame.

To help coordinate and facilitate the new ERC program, BRCAC stakeholders felt it would be beneficial to develop and maintain a web-based Information Resources Center (IRC) website. Purposes of the new IRC would include:

  • Information resources on the new ERC program
  • Reservoir of guidance on participation in the new ERC program
  • Coordination and facilitation of ERC projects
  • Database for ERC projects and emission reductions
  • Source of information on banked ERCs
  • Tracking of overall emissions reductions from ERC projects for DEQ SIP purposes

Suggested elements (pages or tabs) of the IRC website might include:

  • Home page – describes what the IRC is, why it has been put together, what it offers, an events calendar, featured news section, recent blogs, an emissions reductions graphic, etc.
  • About us – conceived and put together by BRCAC stakeholders; owned and maintained by CRPC; and how to contact us
  • Backgrounder – Offset requirements for permits in nonattainment areas
  • ERC strategy – background/overview; air quality and economic development benefits
  • ERC opportunities- examples of projects used to generate credits
  • Existing ERCs (must accurately reflect DEQ banked ERCs)
  • ERC projects in progress
  • Projects with ERC potential seeking funding
  • List of supporting services providers (consultants/contractors) with qualifications information
  • Links to additional local, state, and national information resources
  • Reference materials

Recognizing the potential value of the new ERC strategy and IRC to transportation and air quality improvements in the Baton Rouge area, one of BRCAC’s major stakeholders, Capital Region Planning Commission (CRPC), has stepped forward to help fund development of the IRC. CRPC has programmed federal planning (PL) funds in their annual work program for FY 2017 (July 1 2016 – June 30, 2017) for development of the IRC.  The funding ($80,000) was provided subject to a match of $20,000 in local funds.

The purpose of this paper is to inform organizations interested in air quality, economic, and transportation improvements in our area of the opportunity to fund in whole, or in part, the $20,000 match required to support CRPC with its IRC project effort. Since the new ERC program is expected to be rolled out in December, it is important that the IRC project matching funds be identified as soon as practicable.

Anyone interested in helping fund this important effort is invited to contact Dr. Mike McDaniel, BRCAC Executive Director, at m.d.mcdaniel@att.net.

 

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