On Friday, June 3rd, the South Coast Air Quality Management District (SCAQMD) in California adopted changes to rule 1325, the Federal New Source Review program.  This rule incorporates U.S. EPA's requirements for particulate matter less than 2.5 micrometers in size (PM 2.5) into Regulation XII- New Source Review.

This rule applies only to:

• New facilities with emissions greater than 100 tons per year of PM 2.5 or its precursors;
• Major modifications to major polluting facilities of PM 2.5; and
• Any facility with an emissions increase or a potential to emit 100 tons per year or more of PM 2.5 and its precursors.

Sources that will be subject to the new rule must adhere to the following requirements:

• Lowest Achievable Emissions Rater (LEAR) must be used for all modifications and existing sources.
• Emissions increases are offset at a ratio of 1.1:1 for PM 2.5. the offset ratio for NOx and SO2 will equate to the ratio required under the applicable NSR rule.
• An analysis must be conducted to weigh alternative sites, size, production process and the environmental control techniques for the proposed source. Additionally, the report must demonstrate that the benefits of the proposed project outweigh the environmental and social costs associated with the project.

There are relatively few facilities expected to trigger this 100 tons per year of PM 2.5 threshold, but this rule could affect facilities’ future expansion plans.  

The rule change tightens the existing standard, which regulated emissions of particulate matter less than 10 micrometers in size (PM 10). Facilities with emissions of particulate matter less than 10 micrometers but greater than 2.5 micrometers will still comply with the existing regulations for PM 10 emissions.

Additional information will follow as the SCAQMD continues to work through the implementation of this rule, including whether the Air District will reissue PM 2.5 emission reduction credits or split them off from existing PM 10 credits.

If you have any questions regarding how the rule may impact regional California emissions markets or to transact in the market please contact our California Emissions Markets Group at: +1 415.963.9150 or caemissions@evomarkets.com.