INTRODUCTION

Valero Refining Company (formerly Exxon and then Exxon Mobil) has been granted the following Interchangeable Emission Reduction Credits (IERC's).

Baseline Period: January 1, 1992 through December 31, 1996
Credit Generation Period No. 1: January 1, 1997 through December 31, 1997
IERC's: 172.7 Tons of Nitrogen Oxides
Effective Period: January 1, 1998 to December 31, 2002

Baseline Period: January 1, 1992 through December 31, 1996
Credit Generation Period No. 2: January 1, 1998 through December 31, 1998
IERC's: 38.5 Tons of Nitrogen Oxides
Effective Period: January 1, 1999 to December 31, 2003

Baseline Period: January 1, 1992 through December 31, 1996
Credit Generation Period No. 3: January 1, 1999 through December 31, 1999
IERC's: 130.9 Tons of Nitrogen Oxides
Effective Period: January 1, 2000 to December 31, 2004

These IERC's are for emission reductions from the S-3 Crude Preheat Furnace F-101 and S-4 Reduced Crude Preheat Furnace F-102 at the Valero Refining Company in Benicia, California. The IERC's were approved for banking in accordance with BAAQMD Regulation 2, Rule 9, Interchangeable Emissions Reduction Credits.

Pursuant to Regulation 2, Rule 9, an IERC may only be used at the same facility in which the IERC is generated as part of an Alternative Compliance Plan (ACP) to comply with a NOx emission standard of a rule in Regulation 9, or permit condition that is based on such a rule. Valero Refining Company has submitted Application #3915 for the purpose of using these IERC's, and future generated IERC's, in an ACP to comply with the requirements of Regulation 9, Rule 10 "Nitrogen Oxides and Carbon Monoxide from Boilers, Steam Generators, and Process Heaters in Petroleum Refineries".

Effective July 1, 2002 for refineries producing Cleaner Burning Gasoline, NOx emissions from affected units, excluding CO boilers, shall average less than or equal to 0.033 pound per million BTU of heat input, based on an operating-day average [Regulation 9-10-301 and 403]. The NOx Compliance Plan for the Valero Refining Company is shown in Table 1. Valero Refining Company has identified the following sources for compliance with Regulation 9, Rule 10.

Valero Refining Company (Plant # 12626)
S-7 Pipestill Hydrofiner Furnace: F-103, 53 MMBtu/Hr
S-20 Naphtha Hydrofiner Furnace: F-104, 62 MMBtu/Hr
S-21 Hydrogen Reforming Furnace: F-301, 614 MMBtu/Hr
S-22 Hydrogen Reforming Furnace: F-351, 614 MMBtu/Hr
S-23 HCU Recycle Gas Furnace: F-401, 185 MMBtu/Hr
S-24 Cat Feed Hydrofiner Treat Gas Furnace: F-601, 33 MMBtu/Hr
S-25 Fluid Catalytic Cracker Unit: F-701, 230 MMBtu/Hr
S-26 Cat Naphtha Hydrofiner Furnace: F-801, 33 MMBtu/Hr
S-30- S-S33 Power former Furnace: F-2901 thru 2904, 463 MMBtu/Hr
S-34 Powerformer Regenerator Furnace: F-2905, 74 MMBtu/Hr
S-35 Powerformer Reactivation Furnace: F-2906, 14 MMBtu/Hr
S-40 Utility Package Boiler: SG-2301, 218 MMBtu/Hr
S-41 Utility Package Boiler: SG-2302, 218 MMBtu/Hr
S-173 Coker Steam Superheat Furnace: F-902, 20 MMBtu/Hr
S-220 MRU Hot Oil Furnace: F-4460, 351 MMBtu/Hr

Valero Asphalt Plant (Plant # 13193)
S-19 Crude Furnace: H-1, 33 MMBtu/Hr
S-20 Small Boiler: H-2A, 15 MMBtu/Hr
S-21 Small Boiler: H-2B, 15 MMBtu/Hr

Two boilers (S-38 and S-39) which are affected by Regulation 9, Rule 10 are not shown since these units will be shutdown prior to the effective compliance date of July 1, 2002.

As shown in Table 1, the above listed sources combined have a total maximum rated heat input capacity of 3260 million Btu/Hr. The typical firing rate for all of the listed sources combined is estimated to be 2298 million Btu/Hr. The refinery-wide NOx mass rate for these affected sources during typical operations at 2298 million Btu/hr is estimated to be 0.074 pound per Million BTU, based on an operating day average. Per Regulation 9-10-301, the sources combined are limited to no more than 0.033 pound per million BTU, based on an operating day average. Hence, their typical operations will exceed the refinery-wide NOx standard by 0.041 lb/MM Btu resulting in an annual excess above the standard of 412.7 tons (2298 MM Btu/hr x 0.041 lb NOx/MM Btu x 8760 hr/yr x 1 ton/2000 lb).

Thus, Valero has requested to comply with Regulation 9-10-301 through the use of an Alternative Comlpiance Plan using IERC's in accordance with the provisions allowed in Regulation 2-9-303. Valero Refining Company will supply IERC's to fully cover the annual excess in emissions. Valero Refining Company has acquired, to date, 342.1 tons of NOx emissions as IERC's for compliance with this BARCT NOx rule. Application 4398 has been submitted for the 2000 year generation period, which should be completed by July 1, 2002. Other applications are envisioned to be submitted for subsequent annual generation periods. Table 2 shows the anticipated consumption of IERC's up to 2005 and beyond.

ALTERNATIVE COMPLIANCE PLAN USING IERC'S

An Alternative Compliance Plan (ACP) must satisfy all of the requirements of Regulation 2-9-303 prior to the IERC's being used to comply with any NOx rule in Regulation 9. Valero Refining Company has met this obligation as noted below:

Section 303.1 Only IERC's that have been generated, approved and banked in accordance with this rule may be used in an ACP

The IERC's were obtained pursuant to the requirements of Regulation 2, Rule 9 "Interchangeable Emission Reduction Credits".

Section 303.2 NOx emissions from each source or group of sources (if grouping is allowed under the applicable emission standard) in the ACP, less IERC's applied, shall not exceed that amount or level of NOx emissions which would result if the affected source or sources complied with the applicable BARCT requirements of Regulation 9 on a daily basis.

The ACP will require that Valero Refining Company use IERC's, as needed, on a daily basis to ensure that the adjusted level of NOx emissions do not exceed the allowable emissions utilizing BARCT. The spreadsheet shown as Attachment I which applies to all sources illustrates that the total actual emissions from the group of sources will be calculated on a daily basis with any excess above the Rule being satisfied through banked IERC's.

Section 303.3 The ACP must be reviewed and approved by the APCO on an annual basis.

The initial review and approval by the APCO of the ACP will occur through this application. Subsequent reviews and approval will occur on an annual basis in accordance with established protocol. The protocol will require that Valero submit quarterly reports and an annual calendar-year report of their activity. These reports will be submitted within 30 days of the close of a recognized period.

Section 303.4 The ACP must include methods for demonstrating compliance on a daily basis, by listing:

4.1 All sources covered by the ACP;

4.2 Maximum firing rate (higher heating value) of each source

The sources and their maximum firing rate are listed as follows:

Valero Refining Company
S-7 Pipestill HF Furnace: 53 MMBtu/Hr
S-20 Naphtha HF Furnace: 62 MMBtu/Hr
S-21 Hydrogen Reforming Furnace: 614 MMBtu/Hr
S-22 Hydrogen Reforming Furnace: 614 MMBtu/Hr
S-23 HCU Recycle Gas Furnace: 200 MMBtu/Hr
S-24 CFHU Treat Gas Furnace: 33 MMBtu/Hr
S-25 Fluid Catalytic Cracker Unit: 230 MMBtu/Hr
S-26 Naphtha HF Furnace: 33 MMBtu/Hr
S-30- S-S33 Power former Furnace: 463 MMBtu/Hr
S-34 Powerformer Regenerator Furnace: 74 MMBtu/Hr
S-35 Powerformer Reactivation Furnace: 14 MMBtu/Hr
S-40 Utility Package Boiler: 218 MMBtu/Hr
S-41 Utility Package Boiler: 218 MMBtu/Hr
S-173 Coker Steam Superheat Furnace: 20 MMBtu/Hr
S-220 MRU Hot Oil Furnace: 351 MMBtu/Hr

Valero Asphalt Plant
S-19 Crude Furnace: 33 MMBtu/Hr
S-20 Small Boiler: 15 MMBtu/Hr
S-21 Small Boiler: 15 MMBtu/Hr

4.3 Type(s) of fuel and heat content (higher heating value) of each fuel combusted in each source.

Fuel1 HHV (typical)

Valero Refining Company
S-7 Pipestill HF Furnace RFG 1250
S-20 Naphtha HF Furnace RFG 1250
S-21 Hydrogen Reforming Furnace RFG 1250
S-22 Hydrogen Reforming Furnace RFG 1250
S-23 HCU Recycle Gas Furnace RFG 1250
S-24 CFHU Treat Gas Furnace RFG 1250
S-25 Fluid Catalytic Cracker Unit RFG 1250
S-26 Naphtha HF Furnace RFG 1250
S-30- S-S33 Power former Furnace RFG 1250
S-34 Powerformer Regenerator Furnace RFG 1250
S-35 Powerformer Reactivation Furnace RFG 1250
S-40 Utility Package Boiler RFG 1250
S-41 Utility Package Boiler RFG 1250
S-173 Coker Steam Superheat Furnace RFG 1250
S-220 MRU Hot Oil Furnace RFG

1250 Pentane 3976

Valero Asphalt Plant S-19 Crude Furnace: 33 MMBtu/Hr RFG 1250
S-20 Small Boiler: 15 MMBtu/Hr RFG 1250
S-21 Small Boiler: 15 MMBtu/Hr RFG 1250

1Refinery Fuel Gas
The type of fuel and heat content will be listed on the table titled "Regulation 9-10 NOx Emissions – Compliance Calculation". This is contained in Attachment I.

4.4 NOx emission rate for each type of fuel combusted in each source

The NOx emission rate for each type of fuel combusted will be determined on a hourly basis using data from an analog computer which provides the measured concentration (ppm from the CEM) of NOx in the flue gas and the corresponding heat input rate (HHV). The NOx emissions mass rate (lb/hr) for the calendar day will be prepared for use in the compliance calculation in Attachment I.

The ACP spreadsheet will show the calculated emissions rate for all affected sources. The calculation will be based on the NOx concentration (also listed) as measured by the continuous emissions monitor meeting the requirements of the District Manual of Procedures and District Guidelines dated 6/23/2000 and will utilize the following equation:

Lb NOx/MM Btu = (NOx conc @ 3%O2 x 1.197E-7 x Fuel Gas F-factor x 20.9/(20.9 – 3))

4.5 A comparison of the actual nitrogen oxide emission rate and the nitrogen oxide emission rate that would be allowed under the applicable BARCT provision(s) of Regulation 9, in the absence of this rule, for each source, or group of sources (if grouping is allowed under the applicable emission standard)

Attachment I shows the compliance tracking for Regulation 9, Rule 10. Each day, the actual daily mass of NOx emissions for the group of sources will be listed in the table and compared to the allowable amount under BARCT. The needed IERC's for daily compliance will show in the next column.

4.6 Detailed calculation of the amount of IERC's required for BARCT compliance in accordance with the procedure in Section 2-9-605.

Compliance with Regulation 9, Rule 10 will be determined based on each calendar day calculation of the NOx mass emissions, minus IERC's, divided by the actual heat input in accordance with Section 2-9-605. The supplied IERC's will include the environmental benefit surcharge of 1.1 : 1.0. Total IERC's for the ACP will include the sum of all the daily-required IERC's for the one-year period beginning July 1, 2002.

Startup, shutdown and turnaround periods will be treated in accordance with the allowances provided in Regulation 9, Rule 10.

California Environmental Quality Act (CEQA)

This permit application was found not to be exempt from CEQA and no other agency will be conducting a Negative Declaration or EIR for the project. The District is preparing an EIR for the project. The final action (approval, approval with conditions, or denial) by the District will only be taken after the information contained in the Final EIR is considered and Significant Adverse Environmental Impacts, if any, are mitigated to the extent feasible.

PUBLIC COMMENT

Before approving the initial ACP for a source or group of sources, the APCO must publish in at least one newspaper of general circulation within the District a notice stating the preliminary decision of the APCO to approve the ACP [Regulation 2-9-405]. The public comment period shall last for 30 days. To comply with this Section, a public notice will be placed in the following newspaper to solicit comments on the ACP.

Benicia Herald

The District will also seek comments on the draft EIR, which will be public noticed at the same time.

CONDITIONS

Conditions will be imposed on all of the sources in the NOx Compliance Plan to limit the maximum firing rates to the numbers presented in the Plan. For those sources in Phase I, the added condition will read as follows:

1. The affected sources making up this Alternative Compliance Plan shall not exceed the following maximum hourly firing rates: (Basis: Regulation 9, Rule 10, Cumulative Increase)

Valero Refining Company (Plant # 12626)
S-7 Pipestill Hydrofiner Furnace: F-103, 53 MMBtu/Hr
S-20 Naphtha Hydrofiner Furnace: F-104, 62 MMBtu/Hr
S-21 Hydrogen Reforming Furnace: F-301, 614 MMBtu/Hr
S-22 Hydrogen Reforming Furnace: F-351, 614 MMBtu/Hr
S-23 HCU Recycle Gas Furnace: F-401, 200 MMBtu/Hr
S-24 Cat Feed Hydrofiner Treat Gas Furnace: F-601, 33 MMBtu/Hr
S-25 Fluid Catalytic Cracker Unit: F-701, 230 MMBtu/Hr
S-26 Cat Naphtha Hydrofiner Furnace: F-801, 33 MMBtu/Hr
S-30- S-S33 Power former Furnace: F-2901 thru 2904, 463 MMBtu/Hr
S-34 Powerformer Regenerator Furnace: F-2905, 74 MMBtu/Hr
S-35 Powerformer Reactivation Furnace: F-2906, 14 MMBtu/Hr
S-40 Utility Package Boiler: SG-2301, 218 MMBtu/Hr
S-41 Utility Package Boiler: SG-2302, 218 MMBtu/Hr
S-173 Coker Steam Superheat Furnace: F-902, 20 MMBtu/Hr
S-220 MRU Hot Oil Furnace: F-4460, 351 MMBtu/Hr

Valero Asphalt Plant (Plant # 13193)
S-19 Crude Furnace: H-1, 33 MMBtu/Hr
S-20 Small Boiler: H-2A, 15 MMBtu/Hr
S-21 Small Boiler: H-2B, 15 MMBtu/Hr

2. The applicant shall submit quarterly reports and an annual calendar-year report of their ACP activity no later than 30 days after the close of the specified period. (Basis: Regulation 2-9-303.3)

3. The applicant shall submit all necessary documents to the District to review and approve (or deny) the Alternative Compliance Plan. These documents in support of continuing the ACP shall be submitted no later than 30 days after the close of the calendar year. (Basis: Regulation 2-9-303.3)

4. The applicant shall maintain all records required in condition #2 and #3 for a period of at least 5 years from the date of such record. These records shall be made available to District staff upon request. (Basis: Record keeping)

RECOMENDATION

I recommend that the APCO render a preliminary decision to approve the Alternative Compliance Plan (ACP) to permit Valero Refining Company and Valero Asphalt Company in Benicia, California to use IERC's to comply with the NOx averaging standard in Regulation 9, Rule 10. This preliminary decision to approve the ACP will be public notice in accordance with the public notification requirements set forth in Regulation 2, Rule 9.

Douglas W. Hall

Supervising Air Quality Engineer Dated: _________________

Note:
Attachments provided upon request from Douglas Hall at 415-749-4706.