Annual RECLAIM Audit Report for the 1998 Compliance Year

SYNOPSIS: 

The annual report on the NOx and SOx RECLAIM program is prepared in accordance with Rule 2015 - Backstop Provisions. The report assesses emission reductions, average annual price and availability of RECLAIM Trading Credits (RTCs), job impacts, compliance issues, and other measures of performance for the fifth year of this program.

COMMITTEE: 

Stationary Source, February 25, 2000, Reviewed

RECOMMENDED ACTION:

Approve the attached report.

Barry R. Wallerstein, D. Env.
Executive Officer

Background

The AQMD Governing Board adopted the RECLAIM program on October 15, 1993 with the goal of providing facilities with added flexibility in meeting emission reductions requirements while lowering the cost of compliance. RECLAIM was designed to meet all state and federal requirements for clean air programs and a variety of performance criteria to ensure protection of public health, air quality improvement, effective enforcement, implementation costs, and minimal job impacts.

RECLAIM represents a significant departure from traditional command-and-control regulations. Therefore, the RECLAIM rules provide for annual program audits to verify that the program objectives are being met. Rule 2015 requires annual audits focusing on specific issues, as well as a more comprehensive three-year audit. The three-year audit was presented to the Governing Board May 8, 1998. This report presents the annual audit for the 1998 compliance year, which was the program’s fifth compliance year. Pursuant to Rule 2015, the audit report is presented for a public hearing and will be included in AQMD's annual performance report to the California Legislature.

Audit Findings

The audit findings indicate that RECLAIM met its objectives during the 1998 compliance year. In particular, the analysis demonstrates that:

• Aggregate actual emissions from RECLAIM facilities were below Allocations during the 1998 compliance year.
  
  
• The RECLAIM universe consisted of 326 facilities as of the end of the 1997 compliance year. There was a net change of five additional facilities in the RECLAIM universe included during the 1998 compliance year. Thus, there were 331 facilities in the RECLAIM Universe at the end of the 1998 compliance year.
  
  
• An active trading market for RTCs has developed. More than $103 million in RTCs have been traded since the adoption of RECLAIM, with over $24 million in trades occurring in Calendar Year 1999. Sufficient RTCs were available to meet the demand of RECLAIM facilities. Average prices, excluding RTCs that were transferred with a price of $0 (such as transfers between facilities of common ownership), were well below the backstop price of $15,000 per ton established in Rule 2015. Average prices during 1998 and 1999 are summarized below:
  

	1998	1999
	• $451 per ton for 1998 NOx RTCs • $1,971 Per ton for 2003 NOx RTCs • $1,859 per ton for 2010 NOx RTCs • $303 per ton for 1998 SOx RTCs • $1,760 Per ton for 2003 SOx RTCs • $1,760 per ton for 2010 SOx RTCs	• $1,827 per ton for 1999 NOx RTCs • $4,115 Per ton for 2003 NOx RTCs • $4,114 per ton for 2010 NOx RTCs • $784 per ton for 1999 SOx RTCs • $1,548 Per ton for 2003 SOx RTCs • $1,548 per ton for 2010 SOx RTCs

• Once again, the vast majority of RECLAIM facilities complied with their Allocations during the 1998 compliance year. Twenty-seven facilities exceeded their Allocations during this compliance year. Failure to reconcile emissions with RTCs held was the leading cause of exceedance.
  
  
• RECLAIM had minimal impact on employment during the 1998 compliance year, as in previous years. Three facilities attributed RECLAIM with generating one job each. Three facilities that experienced a job loss reported that RECLAIM was one of a number of factors contributing to its lost positions, but could not quantify the extent of RECLAIM’s contribution. Eleven facilities shut down or went out of business in 1998. One of these shutdown facilities claimed that RECLAIM was the cause for it to cease operation. However, the facility was not in operation for more than five years even though the facility permit was kept active. The operator decided to officially cease operations permanently at this location in 1998 and inactivated the permit. The plating facility that this facility supplied steam to was destroyed in a fire in March 1999; therefore, the demand for the product from this facility no longer existed.

AQMD staff will continue to monitor and assess the performance of the RECLAIM program and work closely with RECLAIM participants to ensure continued program success.

Attachment

Annual RECLAIM Audit Report for the 1998 Compliance Year

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