Environmental Challenge Threatens SJVAPCD Rule 3170 Compromise

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Under Title I of the federal Clean Air Act (CAA), Section 185 mandates that "Severe" and "Extreme" ozone nonattainment areas adopt a rule that requires major stationary sources of air pollution to pay nonattainment fees in the event the area fails to reach attainment by the required attainment date. The San Joaquin Valley Air Pollution Control District (District) failed to meet the 2010 deadline for ozone standard. This triggered the Section 185 imposition of penalties.

The basic requirement under Section 185 is that major sources must reduce certain ozone precursors by 20 percent compared to the attainment deadline base year. If they make the reductions, there is no fee. If not, the fees are imposed and are very steep. Affected businesses are required to pay these fees on an annual basis until the area reaches attainment of the ozone standard. Section 185 nonattainment fees were intended to serve as penalties, compelling major sources that had not done all they could to control emissions of ozone precursors to reduce their emissions and expedite attainment. In 1990, the CAA set the fee as $5,000 per ton of volatile organic compound (VOC) and NOx emitted by the source during the calendar year in excess of 80 percent of a facility’s "baseline emissions."

The District is subject to this fee requirement because the District has been classified as "Extreme" non-attainment for the now-revoked 1-hour ozone standard. Food processors may be affected if they are subject to Title V permitting provisions as the District uses Title V requirements as an enforcement tool to meet its State Implementation Plan (SIP) obligations under Title I.

In response to the Section 185 mandate, the District adopted Rule 3170 (Federally Mandated Ozone Nonattainment Fee) in 2002. However, in 2010, the U.S. Environmental Protection Agency (EPA) disapproved the special provisions of Rule 3170, and issued a limited approval and limited disapproval of Rule 3170 and forced the district to revise Rule 3170.

In revising Rule 3170, the District pursued one of the alternative approaches suggested by the EPA to satisfy the CAA fee requirements. In 2011, the District implemented a fee-equivalent program as provided in the EPA Section 185 guidance by approving a motor vehicle fee of $12 per vehicle registered in the San Joaquin Valley in October 2010. The total motor vehicle assessment of approximately $34 million dollars annually effectively fills any shortfall in the District’s collection of Section 185 fees from stationary sources. As part of an alternative equivalent program, the District also re-adopted a version of Rule 3170 that retained many of the initial concepts originally adopted in 2002 – concepts which were specifically designed to facilitate an equitable distribution of responsibility and to reward facilities that had invested in clean air technology.

The latest version allows clean units to escape the penalty fees while increasing fees on motor vehicles through the existing DMV pollution fee program. The goal is to make sources that contribute the largest portion of emissions to the Valley, such as vehicles, share in the responsibility. The EPA has supported the District’s approach.

However, now various environmental groups are challenging that approval in the 9th Circuit Court of Appeals. If they are successful, District Rule 3170 will be eviscerated and Section 185 will be re-imposed without any recognition of past efforts resulting in significant economic harm. If the environmental challenge is successful, most valley food processors subject to Title V may face a significant increase in fees. In 2011, the fee was $8,967 per ton (adjusted annually by the Consumer Price Index).

While the District is defending its position, there is an effort to fund an amicus brief in support of the District’s effort. If interested in learning more please contact John Larrea at CLFP.

Article contributed by John Larrea, Goverment Affairs Director

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