Smog Credit Openings Make Way for More Power

New liquefied natural gas terminals and power plants will have access to more pollution credits, which could make or break facility development. The South Coast Air Quality Management District announced changes to the proposal to open up its so-called priority reserve pollution credit bank to private energy companies at a June 28 meeting in Diamond Bar. The district estimates that opening the reserve will supply enough pollution credits for 2,000 MW of new gas-fired generating capacity within its jurisdiction, plus credits for additional facilities in downwind air basins. Overall, it projects that it will make enough credits available under the plan to cover 21,224 pounds a day of new emissions from energy facilities in Southern California. "We want to address the emerging energy crisis through 2010," said Larry Bowen, SCAQMD planning and rules manager. Traditionally, the reserve has provided emission credits to sewage treatment plants, landfills, hospitals, and other public facilities typically run by government agencies or nonprofit corporations. The South Coast district briefly opened the reserve to power plant builders in the wake of the state's 2000-01 energy crisis (Circuit, March 24, 2006). The air district's revised credit proposal for smoggy Los Angeles would specifically add offshore liquefied natural gas terminals and power plants downwind of its jurisdiction to the list of facilities that could tap into the pool of air pollution credits. Initially, only onshore terminals and power plants within its jurisdiction would have been eligible for the credits. Downwind power plants, however, would only be able to access volatile organic compounds from the reserve and then transfer them to their local air district to meet emissions offset requirements under the Clean Air Act. Numerous power plant projects are planned in the desert areas surrounding the South Coast Air Basin. The district also amended the proposal to extend the time when it will make the credits available to run through 2008 instead of just 2007. The extension of time potentially will open the way for generators selected under Southern California Edison's latest request for offers to obtain the credits. Reliant, for instance, plans to submit a proposal to Edison, said a company representative at the meeting. Under the proposal, energy companies would have to pay for the credits, each of which grants the right to emit a pound of pollution in perpetuity. Fees would run $50,417 per pound for fine particulate matter, known as PM10; $15,083 per pound for sulfur oxides; $12,000 a pound for carbon monoxide; and $1,400 a pound for volatile organic compounds. Companies would have to buy 1.2 pounds of credits for each pound of pollution they emit. Project developers would be eligible for credits from the reserve only after showing that they could not purchase emissions rights on the open market at a reasonable price. They also must show that they completed their applications for permits to construct facilities. Offshore liquefied natural gas terminal developers would have to seek an air pollution control permit from SCAQMD, as well as from the federal government, to tap into the credit bank, said Bowen. "The rule allows the [SCAQMD] executive officer to deposit more credits in the reserve," said Mohsen Nazemi, agency assistant deputy executive officer, should it run dry. The air district's board is expected to vote on the proposal on September 8. No environmental groups spoke on the issue at the June 28 meeting.

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Smog Credit Openings Make Way for More Power

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