April Mike Taylor

Transcription

1 2015 Ozone Standards and Current and Potential Shortage of Emission Reduction Credits April 2018 Mike Taylor 945 McKinney Street, Suite 561 Houston, Texas

2 8-Hour Ozone Non Attainment Area (2008 Standard) Map

3 2015 OZONE NAAQS On October 1, 2015, the EPA lowered the NAAQS from 75 parts per billion (ppb) (current 2008 Ozone NAAQS level) to 70 ppb By October 1, 2016, each state must recommend designations of attainment, nonattainment, or unclassifiable The EPA was expected to make final designations by October 1, To date, EPA still has not finalized list of nonattainment areas for 2015 Ozone NAAQS and has been sued. 3

4 Texas 8-hour Ozone Nonattainment Areas (2008 Standard) Map

5 Estimated 2017 Design Values for Texas Area 2017 Design Value Houston-Galveston-Brazoria* 81 Dallas-Fort Worth* 79 San Antonio** 74 El Paso-Juarez** 72 Waco 69 Austin 69 Beaumont-Port Arthur 68 Corpus Christi-Victoria 66 Tyler-Longview-Marshall 65 Lower Rio Grande Valley 57 Laredo 53 *Currently has ERC trading program and interstate trading has been allowed with ERCs moving from DFW to HGB recently **Currently does not have ERC trading program 5

6 Houston Galveston Brazoria Requirement to Offset For NOx and VOC emissions in Houston-Galveston-Brazoria (HGB): Facility Type Potential to Emit (PTE) Offset Ratio Status New facility >= 25 tons 1.3 to 1 Previous Severe Major modification >= 25 tons 1.3 to 1 Previous Severe New facility >=100 tons 1.15 to 1 Current redesignation to Moderate Major modification >=40 tons 1.15 to 1 Current redesignation to Moderate July 20, 2018 has to obtain PPM (2008 Standard) or bumped up to Serious which will increase the offset ratio to 1.2 to 1. As of Data, Design Value of 81 did not achieve. Drops the new facility threshold to 50 tons and major modification to 25 tons

7 HGB NOX & VOC ERC REGISTRY HGB ERC Registry Mar-10 May-10 Nov 2011 May-12 Jan-13 Sep-13 Jul-14 Dec-14 Aug-15 Mar-16 Mar-17 May-17 Nov-17 Feb-18 VOC NOx Pending NOx banking ton applications tons Pending VOC banking ton applications tons NOx expiring by the end of tons (36%) VOCs expiring by the end of tons (~5%) Interpollutant trading has been approved to use NOx to offset VOC in HGB Source: Texas Commission on Environmental Quality 7

8 NOX ERC Pricing from 2013-Today $350, $300, $250, $200, $150, $100, $50, $ /18/2012 5/6/ /22/2013 6/10/ /27/2014 7/15/2015 1/31/2016 8/18/2016 3/6/2017 9/22/2017 4/10/2018

9 VOC ERC Pricing from 2013-Today Chart Title $350, $300, $250, $200, $150, $100, $50, $ /18/2012 5/6/ /22/2013 6/10/ /27/2014 7/15/2015 1/31/2016 8/18/2016 3/6/2017 9/22/2017 4/10/2018

10 Dallas Fort Worth Requirement to Offset For NOx and VOC emissions in DFW: Facility Type Potential to Emit (PTE) Offset Ratio Status New facility >=100 tons 1.15 to 1 Current redesignation to Moderate Major modification >=40 tons 1.15 to 1 Current redesignation to Moderate July 20, 2018 has to obtain PPM (2008 Standard) or bumped up to Serious which will increase the offset ratio to 1.2 to 1. As of Data, Design Value of 79 did not achieve. Drops the new facility threshold to 50 tons and major modification to 25 tons

11 Dallas-Fort Worth Nonattainment Area Current ERC Registry Registry as NOx VOC Volume DFW historically has a small registry A large project would have a very hard time finding ERCs in DFW Over 70% of VOC ERCs expire in next 6 months! Shortage partially caused as ERCs only have a 5 year shelf life from reduction date (not issuance)and applicants have up to 2 years to apply and could take a year to be issued. Could only have 2 years to market and be applied to an air permit prior to expiration Prices in recent years for VOC have ranged in $750/ton to $10,000/ton range Prices in recent years for NOx ERC have hovered in the $20,000/ton range

12 Baton Rouge Nonattainment Area Requirement to Offset For NOx and VOC emissions in Baton Rouge Nonattainment Facility Type Potential to Emit (PTE) New facility >= 100 tons Major modification Offset Ratio 1.1 to 1 (offset only down to 0 tons) >= 40 tons 1.1 to 1 (offset only down to 0 tons) New facility >=50 tons 1 to 1 (offset only down to 50 tons) Major modification >=50 tons 1 to 1 (offset only down to 50 tons) Status Previous to 2017 Attainment Designation Previous to 2017 Attainment Designation Current State requirements Current redesignation to Moderate Classified as attaining 2008 Standard in 2017, but 2017 Design Value not attaining 2015 Standard Interpollutant Trading approved in 2017 for first time, using NOx to offset VOC

13 8-hr Design Value as of October 1, NAAQS 70 ppb

14 NOx ERC and VOC ERC supply in Baton Rouge NOx ERC Supply VOC ERC Supply Date Listed Reduction Listed Reduction Volume since 2008 Volume since 2008 Aug-08 6,839-2,149 - Aug-09 6,049 12% 1,818 15% Aug-10 5,135 25% 1,666 23% Aug-11 4,403 36% 1,208 44% Aug-12 4,403 36% 1,011 53% Aug-13 4,281 37% % Aug-14 2,939 57% % Aug-15 1,581 77% % Aug-16 1,660 76% % Aug-17 3,255 52% % Mar-18 3,166 48% % NOx VOC

15 Northeast ERCs

16 New York ERCs ERCs Never Expire no rule discounting New York City Severe Nonattainment Trading Rest of State OTR/Marginal Prices do not get reported No interpollutant Trading ERCs allowed to be exported/imported to PA and CT and for a 3 year window NOx only to exported/imported to Northern NJ NOx (tpy) VOC (tpy) 23,427 2,874

17 New Jersey ERCs Shutdown ERCs get cut in half after 5 years, than 100% expire after 10 years Reduction ERCs never expire, but subject to rule discounting Northern New Jersey Severe 17 (area includes NY and CT) Southern New Jersey Severe 15 Prices do not get reported No interpollutant Trading (yet?) No current interstate trading: NJ did bring in 350 tons (100% of cap) of NOx in from NY from , than NY refused to extend NOx (tpy) 1, VOC (tpy)

18 Connecticut ERCs ERCs Never Expire but rule discounting Only NOx ERCs Fairfield/New Haven Severe Nonattainment Trading Rest of State Moderate Prices do not get reported No interpollutant Trading ERCs allowed to be exported to NY and RI NOx (tpy) 230

19 Maryland ERCs ERCs 100% expire after 10 years Baltimore Area Severe Trading Restrictions Rest of State Marginal Prices do not get reported No interpollutant Trading (yet?) NO VOC! Interstate Trading: Can be exported to VA and import/export PA NOx (tpy) 2,874 0 VOC (tpy)

20 Pennsylvania ERCs Shutdown ERCs 100% expire after 10 years Reduction ERCs never expire Philadelphia Severe Trading Restrictions Rest of State OTR/Marginal Prices do not get reported Interpollutant Trading: NOx used to offset VOC first time in 2017 Interstate trading: export/import with NY and MD NOx (tpy) VOC (tpy) 22,649 1,006

21 California ERC Summary ERCs are generally available in San Joaquin Valley, South Coast, Bay Area, Mojave and San Diego ERCs are tighter supply in Santa Barbara and Sacramento The aggressive Renewable Portfolio Standard (RPS) and AB32 Carbon Cap and Trade Program has dramatically decreased power generation from fossil fuel and with it the demand for ERCs, while also increasing supply. Interpollutant trading is allowed (i.e. VOC for NOx, Sox for PM10) and limited intrastate trading is allowed (i.e. San Joaquin to Mojave)

22 Summary 2015 Ozone Standard could add more ERC trading regions as more counties will be nonattainment Running out of ERCs in many parts of Gulf Coast and Northeast, especially VOC. Interpollutant Trading on the Rise VOC for NOx. California home to most expensive ERCs in World, now is on a different path 2008 Ozone Standard still affecting markets and bumps ups are coming 1997 Ozone NOx Revocation may affect designation status

23 Lessons Learned Plan Earlier for projects that require Offsets, especially if interpollutant or interstate trading Avoid Panic or Fatal Flaw! Get educated: Become Smarter Buyer! Latest market supply and demand Pricing Regulations Future Potential Regulations- Redesignation Be more strategic in timing of procurement of ERCs Save Money! More flexible rules to generate ERCs Make Money!

24 Mike Taylor President McKinney Street, Suite 561 Houston, Texas