BOARD MEETING DATE: December 5, 2008
AGENDA NO. 29
PROPOSAL:
Adopt Proposed Rule 317 – Clean Air Act Non-Attainment Fees
SYNOPSIS:
Sections 182 and 185 of the Clean Air Act, as amended in 1990, require major stationary sources of NOx and VOC located in air basins that do not attain the federal 1-hour ozone standard by the statutory deadline pay mitigation fees based upon a prescribed formula each year until attainment is demonstrated. Proposed Rule 317 implements these Clean Air Act requirements and 2007 AQMP Control Measure MCS-08.
COMMITTEE:
Administrative, November 14, 2008; Stationary Source, November 21, 2008, Reviewed
RECOMMENDED ACTIONS:
Adopt the attached resolution:
- Certifying the Notice of Exemption for Proposed Rule 317 – Clean Air Act Non-Attainment Fees; and
- Adopt Rule 317 – Clean Air Act Non-Attainment Fees.
Barry R. Wallerstein, D.Env.
Executive Officer
Background
The 1990 amendments to the Clean Air Act classified air basins not meeting the one hour ozone standard as moderate, severe, or extreme depending on the level of the exceedance. Areas classified as non-attainment for the one hour ozone standard were given additional time to meet the standard but required to meet the standard by a date established in the act. The act also required that severe and extreme ozone non-attainment areas that did not attain the standard by the required date were required to establish and implement a fee rule for major stationary sources. (CAA §185.) These fees are intended to act as deterrent to emission. Although U.S. EPA has revoked the one-hour standard, by court decision this requirement remains in effect.
There are two air basins in the SCAQMD that are subject to these provisions of the Clean Air Act – the Salton Sea Air Basin and the South Coast Air Basin. The one-hour ozone attainment dates for those two air basins are 2007 and 2010, respectively. The Salton Sea Air Basin is currently in non-attainment and the South Coast Air Basin is not projected to meet the attainment deadline. Major stationary sources of ozone precursors (VOC and NOx) within each air basin will be subject to the proposed fee rule.
Staff has identified 585 facilities that may be subject to the rule. One facility is in the Salton Sea Air Basin. Of those, approximately 500 are projected to pay fees (the others may likely take a cap to opt out of the rule provisions). Staff has proposed that monies collected pursuant to this rule be used on air quality improvement projects.
Proposal
Proposed Rule 317 – Clean Air Act Non-Attainment Fees was developed to satisfy the requirements of the Clean Air Act and concurrently implement control measure MSC -08 of the 2007 AQMP. The mechanics of the fee are fairly explicitly presented in the Clean Air Act and require that major stationary sources for VOC or NOx pay a fee of $5,000 (1990 dollars to be adjusted for inflation) for every ton of emissions in excess of 80 percent of the baseline emissions. Baseline emissions are the total emissions from the facility in the year attainment of the one-hour ozone standard was required (2007 for the SSAB and 2010 for the SOCAB). Fees are required to be paid annually until the basin attains the standard. Special rule language has been included for RECLAIM sources and new major stationary sources that become subject to the rule during or subsequent to the attainment year.
CAA non-attainment fees will be billed and due in the year immediately following the assessment year in accordance with the annual emissions fee billing requirements as established in Rule 301(e)(10). A major stationary source that does not pay any or all of the required CAA non-attainment fees, by the specified due date, shall be subject to the late payment surcharge and permit revocation provisions of Rule 301(e)(10). For major stationary sources in the SSAB the calendar year for baseline emissions is 2007, the first assessment year is 2008 and the first year for remittance is 2009. For major stationary sources in the SOCAB the calendar year for baseline emissions is 2010, the first assessment year is 2011 and the first year for remittance is 2012.
Revenues from the non-attainment fees collected will be invested in air quality improvement projects. The guidelines for investing the non-attainment fees will be developed soon after the adoption of Rule 317 through a public process that takes into account input from all interested parties and will be presented to the Board for approval.
Additional proposals to clarifying portions of the draft rule language were provided by stakeholders, through the public process, subsequent to the last public meeting. Changes based on this input provided are shown in the current version of the draft rule language and further explanation of the changes is provided in the staff report in strikeout/underline format. None of these changes have resulted in a substantive change to the rule language, and are solely for the purposes of clarifying the intent of the original rule language. Subsequent to the set hearing package, staff has revised the reference to Rule 301(e)(2) in Section (d)(2) of the proposed rule. The revision is to effect the requirement that all emissions from a major stationary source including unpermitted, fugitives, and unregulated, are considered actual emissions for the purposes of baseline and subsequent year emissions. A companion amendment to Rule 301 to clarify Rule 317 requirements will be made with the FY 2009/2010 amendments. Changes to the proposed rule language after the set hearing are identified by single underline for additions and by strikethrough for deletions.
Key Policy Issues
During the development of PR 317, staff held numerous conversations with key stakeholders in addition to the public workshop and two public consultation meetings. Two key policy issues arose form those discussions. Those are how to determine baseline emissions and what to do with the revenues generated by the rule.
Many stakeholders have requested flexibility in determining the “baseline” year for emissions. Some have suggested that the baseline year be based on the two highest emission years prior to the attainment year within a five- or ten-year time frame. These advocates note a memo issued earlier this year by the United States Environmental Protection Agency that discussed the possibility of a case-by-case analysis for sources with emissions that are “irregular, cyclical or otherwise vary significantly from year to year.” Staff’s key objectives in developing PR 317 are to design a rule that complies with Section 185 of the CAA and the 2008 AQMP, is administratively simple to implement, and has the greatest chance of approvability into the SIP. Implementing any of the alternative baseline options suggested would run contrary to the key objectives outlined and would be administratively a lot more complex, labor intensive, and subject to secondary review and approval. Also, implementing any of the alternative baseline scenarios suggested would result in significant reduction of the fee remitted by the impacted facilities, which was intended to act as a deterrent in the first place.
Many sources have asked that all or some portion of the monies generated from PR 317 be returned to them for air quality improvement projects. These sources argue that the facilities paying the non-attainment fees should have priority to use the money to reduce their emissions. Staff believes the best and most efficient use of the money is a Moyer-type program for both stationary and mobile sources that maximizes air quality benefit for each dollar invested. However, staff is open to the idea of investing a portion of the fees in air quality improvement projects within the facility and/or the surrounding communities or the advancement of the state of control technology. Staff intends to initiate the development of implementation guidelines soon after the rule adoption with input from all stakeholders and interested parties, and will bring these guidelines back to the Board for approval.
Emission Inventory and Emission Reduction
Although the proposed fee structure will provide an incentive for a major stationary source to reduce emissions, the proposed rule does not explicitly establish emissions limitations. Therefore, staff does not plan to claim any up front emissions reduction credit in the State Implementation Plan (SIP) as a result of this rule. However, staff intends to invest these fees in air quality improvement projects, and to the extent such projects result in emission reductions that are surplus to the SIP, staff will claim SIP credit prospectively, as part of future SIP revisions.
CEQA
SCAQMD staff has reviewed the proposed project pursuant to CEQA Guidelines §15002 (k)(1), the first step of a three-step process for deciding which document to prepare for a project subject to CEQA. Because the proposed project is mandatory pursuant to the federal Clean Air Act, it is exempt from CEQA pursuant to CEQA Guidelines §15268 – Ministerial Projects and §15061(b)(1) - Review for Exemption (Exemption by Statute). If approved, a Notice of Exemption, prepared pursuant to CEQA Guidelines §15062 - Notice of Exemption, will be sent to the county clerks for each county in the district for filing.
Socioeconomic Analysis
The proposed amendments do not directly affect air quality or establish emissions limitations. Therefore, a socioeconomic assessment is not necessary or required. Nonetheless, staff conducted a socioeconomic analysis to assess the total impacts for all the sectors in the four-county economy and it was determined that of the 585 facilities identified, 500 are expected to pay fees. The majority of the 500 facilities are in the manufacturing sectors (57 percent) and the utility sector (9 percent). The rest are spread across other sectors in the local economy. In 2012, it is projected that close to $30 million will be collected from the non-attainment fee. The petroleum manufacturing sector would pay the highest amount, $6.64 million or 23 percent of the total. The revenue from the non-attainment fee will be used on projects to reduce emission from stationary or sources. Specific projects will be determined in the future. The fee is required to be paid annually until the one-hour ozone standard is attained.
Authority to Assess Fees
Section 185 (b) of the 1990 amendments to the Clean Air Act specifically mandate the collection of the fee provided for by this rule.
Implementations and Resources
Proposed Rule 317 will be implemented within current staffing levels. The billing and fee collection process will be integrated into the existing annual emissions billing process. Electronic based billing and submittals will be used to facilitate the implementation of the proposed rule. Administering the investment of non-attainment fee revenues in air quality improvement projects (approximately $30 million per year) will undoubtedly have some resource impacts which are expected to be covered by retaining up to five percent of the fees collected for such projects.
Attachments (ZIP, 261k)
- Summary of Proposed Amendments
- Rule Development Process Flow Chart
- Key Contacts
- Resolution
- Rule Language
- Staff Report
- Socioeconomic Report
- CEQA – Notice of Exemption