# San 

# JoaquinValley l E HEALTHY 1

# -1R 

# LlVlNF

DATE: 

### TO: FROM:



### RE:

WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES RECOMMENDATIONS: 1. As authorized by California Health and Safety Code Sections 4061 0 throl~gh 40613, approve an increase in motor vehicle fees established under Sections 44223 and 44225, by one of the following amounts:

a. 

### $24 per year per motorvehicle. Authorize the Chair to sign the adoption resolution (AttachmentA). b. $12 per year per motor vehicle. Authorize additional $6 increase effective in 2013, and an additional $6 increase effective in 2015, for a maximum increase of $24 per year per motorvehicle. Authorizethe Chair to sign the adoption resolution (Attachment 

### B). c. $1 0 per year per motor vehicle. Authorize the Chair to sign the adoption resolution (Attachment C). October 21,2010 SJVUAPCD Governing Board Seyed Sadredin, Executive Dire

Project Coordinators: Samir SheikhJDave Warner

Revenues generated shall be used to satisfy the requirementsof Section 185 of the federal Clean Air Act in lieu of imposition of nonattainment penalties strictly on Valley businesses. Direct the Air Pollution Control Officer (APCO) to develop an alternative Section 185 programto exempt well-controlled Valley businesses from nonattainment penalties. Subsequent to the prerequisite public workshops and notification process, the alternative program shall be presentedto the Governing Board for approval prior to submittal to the United States Environmental ProtectionAgency (E PA).SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THEEQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October21, 2010 3. Spend revenues generated on reducing mobile source emissions as provided under California Health and Safety Code Sections 44223 and 44225 to help expedite attainment and maintenance of state and federal ambient air quality standards. Direct the APCO to provide an annual report to the,publicdetailing the new revenues generated, emission reduction projectsfunded, and expected reductions in emissions. 4. Motor vehicle fees adopted here shall sunset upon expiration or revocation of the Section 185 nonattainment penalties. 5. Directthe APCO to notify the CaliforniaAir Resources Board that motor vehicle fees have been adopted; provide the California Air Resources Board with a copy of the adoption resolution and estimate of total annual funds generated by the above fees; and request that the California Air Resources Board make the finding that the District has undertaken all feasible measures to reduce nonattainment air pollutants from sources within the District's jurisdiction and regulatory control. 

### 6. Pursue federal legislative changes to repeal Section 185 of the federal Clean Air Act or eliminate inequities in the fee by providing an exemption from the fee for wellcontrolled stationary sources.

BACKGROUND: With recent exceedances of the federal I-hour ozone standard, the federal Clean Air Act mandatesthe imposition of nonattainment penalties on stationary source businesses in the Valley. Federal law requires the Districtto promulgate regulations to comply with Section 185 of the federal Clean Air Act for the imposition and collection of these penalties. Failure to do so will result in the unilateral imposition and collection of these penalties from Valley businesses by the federal EPA. All penalties collected by EPA would then be deposited in the federal treasury with no expenditures in the Valley.. The District believes that these mandates are unfairto the Valley businesses that have made significant investments in clean-air technology. Considering their enormous expenditure and sacrifice, Valley businesses deserve our recognition and reward, rather than penalties. With that in mind, we asked for alternative approaches to imposing nonattainment penalties on stationary sources. In January 2010, EPA released guidance that provided alternative options for the equitable distribution of responsibility to mobile sources. This combined wi,ththe authority granted to your Board by the state legislature in 2008 (Assembly Bill 2522 

### -Arambula), enables the District to craft an alternative solution that satisfies the above-referenced federal mandate in a more equitable fashion.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SANJOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October27, 2070


### OPTIONS CONSIDERED BUT NOT RECOIVIMENDED: 1. Take no action 

# - Let current District Rule 3170 (Federally Mandated Ozone Nonattainment Fee) stand with no amendments to satisfy Section 185 Requirements: 

### This option is NOT recommended for the following reasons: Valley businesses will be requiredto pay the fees directly to the federal government and the revenues generated will not be reinvested in the Valley. If the District fails to adopt or implement a required fee program, EPA is required by federal law to collect the unpaid fees plus interest on any unpaid fees. Federal laws also require that any fees collected under Section 185to be deposited in the United States Treasury. The Valley will be subject to expensive federal sanctions including a de-facto ban on new businesses locating in the Valley (i.e., 2-1 offset ratio), and the loss of federal highway funds ($250 million per year). The current version of District Rule 3170 was adopted by your Board On May 16, 2002. This version includes special provisionsto exempt well-controlled businesses ("clean urrits") from the penalties and provides for multi-year averaging of err~issions to extend credit to businesses that invested in early reductions in emissions, and to account for fluctuations in production rates due to market conditions. Unfortunately, in January 2010, the U.S. Environmental Protection Agency (EPA) disapproved these special provisions and issued a limited approval and limited disapproval of Rl.lle 3170. This action by EPA began an 18-month sanction clock that mandates the submission of an approvable rule by the District. 2. Strict adherence to Section 185 mandates

# - Apply nonattainment penalties to the Valley's stationary source businesses: 

### This option is also NOT recommendedfor the following reasons: Well-controlled Valley businesses should not be penalized for failure to attain the federal I-hour ozone standard. Violations of the I-hour ozone standard are primarily due to emissions from mobile sources. Emissions from mobile sources constitute more than 80 percent of emissions that contribute to the formation of ozone.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENTPENALTIES TO SOURCES WITHIN THE SANJOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October2 1, 20 10 Emissions from stationary sources in the Valley have already been reduced by over 80 percent. Valley's stationary source businesses are already subject to some of the toughest air regulations in the nation. lmposition of the nonattainment penalties on well-controlled stationary sources will 

### NOT result in meaningful reductions in emissions from these sources as was initially intended under Section 185. lmposition of the Section 185 nonattainment fees on Valley businesses will result in a significant blow to the Valley's fragile economy. Recent guidance issued by the EPA providesthe option to assess nonattainment fees on mobile sources of emissions. Section 185 of the federal Clean Air Act mandates that "Severe" and "Extreme" ozone nonattainment areas adopt a program requiring major NOx and VOC stationary sources of air pollution to pay nonattainment fees in the event the area fails to reach attainment by the required attainment date. Affected businesses would be required to pay these fees on an annual basis 1.1ntilthe area reaches attainment. In 1990,the Clean Air Act set the fee at $5,000 per ton of VOC and NOx emitted by the source during the calendar year in excess of 80 percent of the facility's "baseline amount". The Act also required that the fees be adjusted for inflation based on the Consumer Price Index (CPI) on an annual basis. For 2009, the fee had escalatedto $8,755.33 per ton. When Section 185was first enacted by the United States Congress, it was intended to serve as a hammer compelling stationary sources to install additional controls to reduce emissions and expedite attainment. Given today's circumstances, however, these fees, if applied to stationary sources, will not have the intended impact in San Joaquin Valley. Most stationary sources in San Joaquin Valley are already equipped with Best Available Retrofit Control Technology (BARCT) or Best Available Control Technology (BACT). In reality, with the mature control programs that are in place in the San Joaquin Valley, most businesses have already made significant investments and installed the most advanced controls available for their facilities. Please refer to the District's recent 2010 Ozone Mid-Course Reviewfor a detailed assessment of various stationary source regulations that Valley businesses must comply with. Under these circumstances, Section 185 has become a punitive fee with no real ability by most facilities to reduce their emissions. The only options available to Valley businesses to reduce or avoid the fees would be to curtail production or go out of business. Given the Valley's chronic high unemployment rates combined with the current global and regional economic distress, the consequences could be devastating.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENTPENALTIES TO SOURCES WITHIN THE SANJOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October21, 2010 Under a straightforward implementation of Section 

### 185, Valley businesses that are major sources of NOx or VOC emissions wo~~ld be subject to a total of an estimated 

### $29 million per year in penalty fees. These estimated penalties are dependent on several primary factors, including the level of business activity during the baseline (calendar year 

### 201 0)and subsequent years, and an escalating penalty rate pegged to the CPI. The fees would continue until the District reaches attainment for the now revoked 

### I-hour ozone standard, which would require three consecutive years without a violation. The Clean Air Act does not impose any restrictions on the manner by which the nonattainment fee revenues are to be spent by the District. Table 

### I: Estimate of Section 185 Penalty Fees Source Category Agriculture

ACTIONS RECOMMENDED: Section 

### 185 Nonattainment Fees 

### $5,511,014 Commercial 

### $1,385,399

Adopt a multifaceted approach with the following elements: Electric Generation

Pursue federal legislative changes to repeal Section 

### 185 of the federal Clean Air Act or eliminate inequities in the fee by providing an exemption from the fee for well-controlled stationary sources. 

### $4,123,852

Exempt well-controlled stationary sources from the Section 

### 185 nonattainment fees. Industrial 

### $9,110,370 Industrial

### - Oil and Gas 

### $6,786,434 Industrial

### - Oil and Gas Area-wide 

### $1,674,600 TOTAL 

### $28,591,668

Provide for an equitable distribution of responsibility by adopting motor vehicle fees for use in satisfying federal mandates under Section 

### 185. The District has the authority to adopt motor vehicle fees at a rate greater than that necessary to satisfy Section 

### 185 requirements.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENTPENALTIES TO SOURCES WITHIN THE SANJOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October21, 2010 Sunset motor vehicle fees upon expiration or revocation of the Section 185 nonattainment penalties. Reinvest generated revenues in San Joaquin Valley to fund emission reduction projects throughout the Valley. Ensure strict public accountability with annual reports to the public detailing the new revenues generated, emission reduction projects funded, and expected reductions in emissions. Given the inherent inequities in Section 185 penalties, and the fact that its applicationto stationary sources in San Joaquin Valley cannot produce the intended results, the District should pursue appropriate legislative remedies at the federal level. The desired changes will require amendments to federal Clean Air Act that will take time and will be difficult to achieve. Historically, the Clean Air Act has been amended rarely and each time the amendment process has been lengthy and has involved a myriad of national issues. Although the District should devote significant resources to pursue legislative changes, expecting quick results is not realistic. Inthe meantime, it is prudent for the District to act timely to devise and implement a strategy that produces optimum results in the face of problematic and unfair circumstances generated by these federal mandates. In 2008, when Assembly Bill 2522 (Arambula)was enacted, the District had identified the need for these funds to expedite attainment of the federal health-based standards for ozone and particulate matter. In developing and adopting the 

### 2007 Ozone Plan,the District left no stone unturned in finding and adopting feasible regulatory measures to reduce ozone precursor emissions. Ttris extensive research and planning effort revealed that the District cannot attain the federal &hour ozone standards with regulations alone. The conclusion was that a well-funded incentive-based strategy to provide grant funding to Valley businesses, residents, and municipalities was essential. The 2007 Ozone Plan estimated that it will take close to $3 billion (approximately $200 million per year) in incentives to bring the Valley into attainment with the federal standard. With intensive advocacy at the state and federal level, the District has achieved a ten-fold increase in grant funding for a sum total of $1 10 million per year, leaving a shortfall of nearly $90 million per year. As can be seen inTable 2, an additional 1 million people in the San Joaquin Valley can breathe healthy air with a wellfunded incentive program.

~ - 

# 1 Population in Attainment in 2015 2 million 

# 1 1.4 million 

# 1 Table 

### 2: Benefit of lncentives on Attainment

### with Federal 

### 8-Hour Ozone Standard 

# I Population inAttainment in 2020 

# 1 3.6million 

# I 2.6 million 

# I I With Incentives 

# I Without Incentives 

# 1SJVUA PCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENTPENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October27, 2070

District staff is suggesting that the Board consider the following options in selecting the appropriate amount for the magnitude of the motor vehicle fees: 1. $24 per year per motor vehicle, or 2. $12 per year per motor vehicle with a phased-in increase of an additional $6 in 2013, and an additional $6 in 2015, for a maximum of $24 per year, or 

### 3. $1 0 per year per motor vehicle. 

### A $10 motor vehicle fee will generate approximately $28 million dollars per year which will be sufficient to meet the Section 185 mandates. The following factors should also be considered in selecting the amount and the tirr~ing for motor vehicle fees: Incentive-based programs expedite reductions and improve public health while offering financial assistance to the regulated community Cost of reductions is increasing with time

- "lower hanging ,fruitvreductions already consumed

- Funding eligibility reduced in the future due to existing and future state and local regulations Funds generated locally can be offered as a match for additional state and federal funding General public participation (fair share responsibility) Public's acceptability and ability to absorb fee given the current economic distress The Valley has seen stationary source businesses reduce their emissions by 80% over the past several decades. This has significantly reduced the number of days during which the Valley exceeds the I-hour ozone standard, as shown in the Table 3 below. Unfortunately,the Valley is still triggering Section 185 penalty fees due to exceedances of the standard this year. Mobile sources now make up over 80% of ozone-forming emissions, and are the primary reason for ozone exceedances inthe Valley. Commute traffic before and after school, for example, pose an ongoing challenge in eliminating exceedances of the standard.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THEEQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENTPENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October21. 2010

Table 

### 3: Vallev 

### I -Hour Ozone Exceedances 

## 1 Year 

## I Exceedances 

## I

In response to calls for added flexibility by the District and other agencies, EPA issued national guidance in January 2010 providing for alternative approaches to satisfy Section 185 requirements. The guidance includes several different alternative approaches that could utilize new funding to avoid the imposition of straight penalties on Valley businesses, as follows: 2010

Fee-Equivalent Alternative Program: Program that raises at least as much revenue as the otherwise required Section 185 penalties if the proceeds are spent to pay for emissions reductions in the same geographic area subject to the section 185 program. 

### 7

Emissions-Equivalent Alternative Programs: Program that achieves at least as much additional emissions reductions as the amount of emissions against which fees would be assessed each year under the Section 185 penalty program (i.e., actual emissions in excess of 80 percent of the baseline emissions). *Most violations attributed to wild fires

Combination of the Above Options: Program that combines features of the abovementioned alternatives. Under this option, a part of the reductions that are necessary to show equivalence come from program components that directly achieve the estimated reductions, and the remainder could come from imposition of fees on a set of sources identified in the alternate program.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October 21, 2010

PROGRAM FOR EXPEDI'TWRE OF REVENUES: Revenues generated shall be reinvested in the Valley to reduce mobile source emissions as provided under California Health and Safety Code Sections 44223 and 44225. Utilizing the District's highly successful grant administration program, the funds generated here will be awarded to Valley businesses, residents, and municipalities to generate real and quantifiable reductions in emissions. The District has nearly 20 years of experience implementing highly successful voluntary incentive programs. To date, the District has awarded over $300 million in funds, achieving more than 80,000 tons of emission reductions through a variety of incentive programs aimed at reducing emissions primarily from mobile sources, but also other sources, such as fireplaces and residential lawn equipment. The District's incentive program has gained a reputationfor excellence and serves as a model for grant programs throughout the State. The District has been acknowledged through a number of recent audits conducted by the California Air Resources Board, the Department of Finance, the Bureau of State Audits and the Sierra Nevada Air Quality Group (funded by the William and Flora Hewlett Foundation) as operating with a high degree of accountability, efficiency and the ability to do more with less. These audits are a reflection of the commitment by your Board to aggressively pursue and compete for available incentive funds and allocate the necessary resources to effectively administer these important programs.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLEAPPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October 21, 2010 

### The following is a list of program areas that will be eligible for grants under the motor vehicle fee revenues generated here: Table 4: 

### ProgramAreas for lncentive Funding

Van Pools Public Transit Incentive Annual Funding Need $150 rnillion $1

### 00 million $40 million Program A B C $0.5 million $0.5 million Park & 

### Ride Lots Traffic Signal Synchronization Clean Alternative Fuel Infrastructure Electronic mobility systems (i.e. online services) Bicycle Infrastructure Citylcounty assistance to devise and implement Sustainable Community Strategies to reduce Vehicle Miles Traveled Gross Polluting Vehicles



### Q 

# I Ag Irrigation Pump $5 million Description Truck Replacement School Bus Replacement Mass Transit

$1.5 rr~illion $1 2 million $8 

### million $3 million $0.5 million
$15 million $6 

### million Inland Ports (Truck-to-Rail) Short Sea Shipping (Truck-to-Ship) Construction Equipment Replacement Ag Off-Road Equipment Replacement 

## I R 

## I Forklifts 

## I $1 rnillion $12.5 million $2.5 million

$4 

### million $30 million

Portable Off-Road Engines Locomotives

X 

### ( School Boilers $1 million $5 million $10 

### million 

### U V W

Specific funding designations and allocations will be made, on an annual basis, by the District Governing Board through the District's public budget development and adoption process. Clean Lawn Equipment Fireplace Change Out Residential Furnace 

### $1 million $0.5 million $0.5 millionSJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October21, 2010

EXPENDITLIRE IN ENVIRONMENTAL JUSTICE AREAS: The California H&SC includes a specific requirement that $10 million of funds collected under the increased motor vehicle fees be used to mitigate the impact of air pollution in disproportionately impacted neighborhoods, commor~ly referred to as "environmental justice" communities. The District has an excellent track record of distributing the majority of its funds to these areas, and fully expects to meet this requirement. Additionally, the legislation also requires that the District 

### "convene an environmental justice advisoty committee, selected from a list given to the board by environmental justice groups from the San Joaquin Valley, to recommend the neighborhoodsin the district that constitute environmental justice communities, and how to expendfunds within these communities." In 2007, the District formed the Environmental Justice Advisory Group (EJAG), comprised of members from the environmental justice commur~ity.EJAG has been consulted on the potential of increased motor vehicle fees and their advisory role in the process, and would be utilized by the Districtto satisfy the advisory requirements in the legislation.

PROCESS AND LEGAL REQUIREMENTS: California H&SC Sections 40610 through 40613 provide the authority for the District Boardto increase motor vehicle surcharge fees, and lay out specific requirementsfor such an increase to take effect. The requirements include (see attached legislationfor detailed requirements): Majority vote of the Governing Board and a majority vote of the elected members of the Board. Adoption of a resolution providing for both the fee increase and a corresponding program for expenditure of the moneys raised by the increased fees for the reduction of mobile source emissions. ARB make the following findings: The District has undertaken all feasible measures to reduce nonattainment air pollutants from sources within the District'sjurisdiction and regulatory control. The District has notified ARB that fees have been adopted pursuant to this section and provided ARB with an estimate of the total funds that will be provided annually by each of those fees. Collection of the new fees nine months after ARB'Sfindings, above. Assessment by ARB of the District's progress in using the new fees to achieve and maintain state and federal ambient air quality standards every two years that the fee is assessed, and subrr~ittal of these assessmentsto the Legislature within two weeks of their completion.SJVUAPCD Governing Board CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES October2 1, 20 10 Fees may be collected between fiscal years 2009-10 and 2023-24. If approved by your Board, the District estimates that the process for increasing motor vehicle fees would take approximately 12 months before new fees are ultimately received by the District, with fees being received no sooner than fiscal year 201 1-12.



### FISCAL IMPACT: No new motor vehicle fees are anticipated inthe 2010-2011 fiscal year. Given the prerequisite process outlined under AB 2522 and the DMV's administrative process, a delay of approximately 

### 9 months is expected before any new motor vehicle fees are collected and submitted to the District. No new staffing is proposed at this time for the administrationof new grants with the revenues generated under Section 185 or from new motor vehicle fees. To minimize administrative costs, the District will utilize and leverage existing grant programs for the expenditure of new revenues. With this approach, it is anticipated that the bulk of additional administrative work can be absorbed by the existing staff. Additional staffing, if needed, will be subject to Board approval in future budgeting actions.

Attachments: A) Resolution to lncrease Motor Vehicle Fees by $24, 5pages B) Resolution to lncrease Motor Vehicle Fees by $12, with additional $6 increases in 2013 and 2015, 5pages C) Resolution to lncrease Motor Vehicle Fees by $10, 5pages D) Assembly Bill No. 2522, 3pages E) EPA's January 5 2010 memo, "Guidance on Developing Fee Programs Required by Clean Air Act Section 185 for the 1-hour Ozone NAAQS", 17 pages F) Support Letter from California Partnership for the San Joaquin Valley, Februaty 18, 20 10, 2 pages G) Support Letter from San Joaquin Business Council, October 12,2010, 2 pages

### San Joaquin Valley UnifiedAir Pollution Control District Meeting of the Governing Board October 21,2010



### CONSIDER ALTERNATIVES FOR THE EQUITABLEAPPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIESTO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment A: RESOLUTION TO 

### INCREASE MOTOR VEHICLE FEES 

### BY $24 (5 PAGES)SJVUAPCD 1990E. GEmSBURG AVENUE FRESNO, CA 93726-0244 

### BEFORE THE GOVERNING BOARD OF THE SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT


### IN THE MATTER OF 

### CONSIDER RESOLU'TION N,O. 

### ALTERNATIVES FOR THE EQUITABLE APPLICATION OF FEDERAL NONATTAINMENT PENAL1-IESTO 

### SOURCES WITHIN 

### THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES
WHEREAS, 

### The San Joaquin Valley Unified Air Pollution Control District (District) is a duly constituted unified district, as provided in California Health and Safety Code sections 40150 to 40161; 

### and 

# 11 WHEREAS, 

### said District is authorized by California Health and Safety Code 

# 11section 40702 to make and enforce all necessary and proper orders, rules and 

# I(

regulations to accomplish the purpose of Division 26 of the Health and Safety Code. 

# 11and; and 

# 11 WHEREAS, 

### Federal law under Section 185 of the federal Clean Air Act 

# 11mandates that the District adopt a rule to impose nonattainment penalty fees on the I(Valleylsstationary sources due to failure to reach attainment of the now-revoked

federal one-hour ozone standard; and WHEREAS, 

### under Section 185 of the Clean Air Act, Valley businesses that are 

# 11major sources of NOx or VOC emissions will be subject to a total of approximately 

# 11$29 

### million per year in nonattainrnent penalty fees; and 

# )I WHEREAS, 

### the imposition of $29 million per year fee on Valley businesses can 

# )I

have a devastating economic impact on Valley residents and businesses; and 

# II WHEREAS, 

### a January 201 0 guidance by the federal Environmental Protection 

# (1~~enc~ provides alternativesfor meeting Section 185 mandates by assessing all or 

# 11part of the nonattainment penalty fees to mobile sources; and 

# 11 WHEREAS, 

### more than 80 percentof the Valley's NOx emissions, the leading 

# 11contributor to Valley's ozone and particulate exceedances, come from mobile sources

outside of the District's regulatory jurisdiction; and

1 ATTACHMENTA 

## - RESOLUTIONSNUAPCD

1990E. GEIlYSBURG A VENUE FRESNO, CA 937264264 

### WHEREAS, Valley stationary sources are already subject to some of the most stringent air pollution regulations in the nation and, therefore, imposition of Section 185 nonattainment penaltiesto stationary sources will not havethe intended effect of compelling further reductions of emissions from stationary sources; and WHEREAS, Assembly Bill 2522 (Arambula) added Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code, authorizing the District to increase the motor vehicle fee specified in Sections 44223 and 44225 of the Health and Safety Code by an amount up to twenty-four dollars ($24) per motor vehicle per year to provide funding for air pollution control programs needed to achieve and maintain state and federal ambient air quality standards; and WHEREAS, section 9250.17 of the California Vehicle Code authorizes the Departmentof Motor Vehicles to collect fees requested by the District Board pursuant to Health and Safety Code Sections 44223 and 44225; and WHEREAS, said fees are in addition to any other fees imposed by the District and may be charged in any of fiscal years 2009-10 to 2023-24, inclusive, and as of that date are repealed unless a later enacted statute, that is enacted prior to 2023-24, deletes or extends the date; and WHEREAS, the San Joaquin Valley Air Pollution Control District has been designated as extreme nonattair~rnent for ozone by the United States Environmental ProtectionAgency; and NOW, THEREFORE, IT IS RESOLVED THAT, to minimize the economic impact to Valley residents and businesses, and to more equitably distribute responsibility for Dzone violations, the Governing Board of the San Joaquin Valley Unified Air Pollution Control District, hereby: levies an additional twenty four dollar ($24) fee on all motor ilehicles subject to registrationfees in the counties of Fresno, Kings, Madera, Merced, San Joaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in accordance with Chapter 5.8 (commencingwith Section 40610) to Part 3 of Division 26 3f the Health and Safety Code; requests that the California Air Resources Board make

ATTACHMENT A 

## - RESOLUTIONSNUAPCD

1990e GETNS~URG AVENUE FRESNO, CA 93726-0244 

### required findings under California Health and Safety Code Section 40612; and requests that the California Department of Motor Vehicles collect the fee in accordance with Section 9250.17 of the Vehicle Code. BE IT FURTHER RESOLVED THAT at least ten million dollars ($10,000,000) of said fees shall be used to mitigate the impacts of air pollution on public health and the environment on disproportionately impacted environmental justice communities in the San Joaquin Valley. BE IT FURTHER RESOLVED THAT the District Governing Board shall convene
an environmental justice advisory committee, selected from a list given to the District Governing Board by environmental justice groups from the San Joaquin Valley, to recommend the neighborhoods in the District that constitute environmental justice communities, and howto expend funds inthese communities. BE IT FURTHER RESOLVED THAT the fees adopted PI-~rsuant to this section, shall become effective after the California Air Resources Board makes the following findings: 

### A) the District has undertaken all feasible measures to reduce nonattainment air pollutants from sources within the District's jurisdiction and regulatory control; and 

### 6)the District has notified the California Air Resources Board that the fees have been adopted pursuant to this section and has provided the California Air Resources Board with an estimate of the total funds that will be provided annually by each of those fees. BE IT FURTHER RESOLVEDTHAT said fees shall cease to be levied upon expiration or revocation of the Section 185 nonattainment penalties, or June 30, 2024, whichever is earlier. BE IT FURTHER RESOLVED THAT the District shall pursue federal legislative changes to repeal Section 185 of the federal Clean Air Act or eliminate inequities in the fee by providing an exernption from the fee for well-controlled stationary sources. 

### '11SJVUAPCD 1990E. Gl3lYSBURG AVENUE FRESNO, CA 93726-0244 BE IT FURTHER RESOLVED 'THAT Pursuant to Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code the fees shall be collected beginning nine months after the above requirements are met. BE IT FURTHER RESOLVED THAT the San Joaquin Valley Unified Air Pollution Control District shall utilize its Emission Reduction Incentive Program to
use the above fees in accordance with Chapter 

### 5.8 (commencing with Section 40610) of Part 3, and Chapter 7 (commencing with Section 44220) of Part 5 of Division 

### 26 of the Health and Safety Code to achieve attainment with state and federal ambient air quality standards by the earliest practicable date. 

### Ill Ill 

### Ill 

### Ill 

### Ill Ill Ill Ill 111 /I1 111 111 'I1 '11 'I1 'I1 'I1 

### Yl Yl

ATTACHMENT A 

## - RESOLUTIONSJVUAPCO

1990E. G~BURG AVENUE fRESNO. CA 93726-0244 THE FOREGOING 

### was passed and adopted by the following majority vote of the Governing Board and majority vote of the elected officials of the Governing Board of the SAN JOAQUIN VALLEY UNIFIED AIR POLLUI-ION CONTROL DISTRICT this 21st day of October, 201 0, to wit: AYES:

NOES:

ABSENT: SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT BY Tony Barba, Chair Governing Board 4TTEST: Jerk to the Governing Board 3~ 

### Michelle Franco

ATTACHMENT A

### - RESOLUTIONSan Joaquin Valley Unified Air Pollution Control District Meeting of the Governing Board

' October21, 2010



### CONSIDER ALTERNATIVES FOR THE EQUITABLEAPPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment B: RESOLUTIONTO INCREASE MOTOR VEHICLE FEES 

### BY $12, WITH ADDITIONAL $6 

### INCREASES IN 2013 AND 2015 (5 PAGES)

### BEFORE THE GOVERNING BOARD OF THE SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT
INTHE MATTER OF CONSIDER RESOLUTION NO. ALTERNATIVES FOR THE EQUITABLE

I 

### APPLICATION OF FEDERAL NONATTAINMENT PENALTIESTO SOURCES WITHIN THE SAN JOAQUINVALLEY THROUGH THE USE OF MOTOR VEHICLE FEES
WHEREAS, The San Joaquin Valley Unified Air Pollution Control District (District) is a duly constituted unified district, as provided in Califor~iia Health and Safety Code sections 40150 to 40161; 

### and WHEREAS, said District is authorized by California Health and Safety Code section 40702 to make and enforce all necessary .and proper orders, rules and regulations to accomplish the purpose of Division 26 of the Health and Safety Code, and; and WHEREAS, Federal law under Section 185 of the federal Clean Air Act mandatesthat the District adopt a rule to impose nonattainment penalty fees on the Valley's stationary sources due to failure to reach attainment of the now-revoked federal one-hour ozone standard; and WHEREAS, under Section 185 of the CleanAir Act, Valley businesses that are major sources of NOx or VOC emissions will be subject to a total of approximately $29 

### million per year in nonattainment penalty fees; and WHEREAS, the imposition of $29 million per year fee on Valley businessescan have a devastating economic impact on Valley residents and businesses; and WHEREAS, a January 2010 guidance by the federal Environmental Protection Agency provides alternativesfor meeting Section 185 mandates by assessing all or part of the nonattainment penaltyfees to mobile sources; and WHEREAS, more than 80 percent of ,theValley's NOx emissions, the leading corltributor to Valley's ozone and particulate exceedances, come from mobile sources outside of the District's regulatory jurisdiction; and

SJVUAPCD 1990E. GRPISBURG AVENUE FRESNO, CA 937264244SNUAPCD

1990 E. GETTYSBURG AVENUE FRESNO, CA 937260244 L 

### WHEREAS, Valley stationary sources are already subject to some of the most stringent air pollution regulations in the nation and, therefore, imposition of Section 185 nonattainment penaltiesto stationary sources will not have the intended effect of compelling further reductions of emissions from stationary sources; and 

### WHEREAS, Assembly Bill 2522 (Arambula) added Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code, authorizing the District to increase the motor vehicle fee specified in Sections 44223 and 44225 of the Health and Safety Code by an amount up to twenty-four dollars ($24) per motor vehicle per year to provide funding for air pollution control programs needed to achieve and maintainstate and federal ambient air quality standards; and 

### WHEREAS, section 9250.17 of the California Vehicle Code authorizes the Department of MotorVehicles to collect fees requested bythe District Board pursuant to Health and Safety Code Sections44223 and 44225; and 

### WHEREAS, said fees are in addition to any other fees imposed by the District and may be charged in any of fiscal years 2009-10 to 2023-24, inclusive, and as of that ;late are repealed unless a later enacted statute, that is enacted prior to 2023-24, jeletes or extends the date; and 

### WHEREAS, the San Joaquin Valley Air Pollution Control District has been jesignated as extreme nonattainment for ozone by the United States Environmental 'rotection Agency: and 

### NOW, THEREFORE, IT IS RESOLVEDTHAT, to minimizethe economic impact o Valley residents and businesses, and to more equitably distribute responsibility for )zone violations, the Governing Board of the San Joaquin Valley Unified Air Pollution 2ontrol District hereby: levies an additional twelve dollar ($12) fee on all motor vehicles ;ubject to registration fees in the counties of Fresno, Kings, Madera, Merced, San Joaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in iccordance with Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 )f the Health and Safety Code; requests that the California Air Resources Board makeSJVUAPCD

1990E. GE~TVSBURG AVENUE FRESNO, CA 93726-0244 

### required findings under California Health and Safety Code Section 40612; and requests that the California Department of Motor Vehicles collect the fee in accordance with Section 9250.17 of the Vehicle Code. BE IT FURTHER RESOLVED THAT, beginning on January 1, 2013, the Governing Board of the San Joaquin Valley Unified Air Pollution Control District hereby levies an additional six dollar ($6) fee on motor vehicles subject to registration fees in the counties of Fresno, Kings, Madera, Merced, San Joaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in accordance with Chapter 5.8 :commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code and requests that the California Department of Motor Vehicles collect the fee in accordance with Section 9250.17 of the Vehicle Code. BE 

### IT FURTHER RESOLVED 'THAT, beginning on January 1, 2015, the Soverning Board of the San Joaquin Valley Unified Air Pollution Control District hereby evies an additional six dollar ($6) fee for a maximum increase of twenty-four dollars ;$24) on all motor vehicles subject to registration fees in the counties of Fresno, Kings, Vladera, Merced, San Joaquin, Stanislaus and Tulare and the San Joaquin Valley )ortion of Kern in accordance with Chapter 5.8 (commencing with Section 40610) to Dart 3 

### of Division 26 of the Health and Safety Code and requests that the California lepartment of Motor Vehicles collect the fee in accordance with Section 9250.17 of the Jehicle Code. BE IT FURTHER RESOLVEDTHAT at least ten million dollars ($10,000,000) of ;aid fees shall be used to mitigate the impacts of air pollution on public health and the znvironment on disproportionately impacted environmental justice communities in the ;an Joaquin Valley. BE IT FURTHER RESOLVEDTHAT the District Governing Board shall convene 

### In environmental justice advisory committee, selected from a list given to the District Soverning Board by environmental justice groups from the San Joaquin Valley, to I!



### 3 AITACHMENT B

### - RESOLUTIONSJVUAPCD

1990E. GEllYSBURG AVENUE FRESNO, CA 93726-0244 recommend the neighborhoods in the District that constitute environmental justice communities, and how to expend funds in these communities. 

### BE IT FURTHER RESOLVED 'THAT the fees adopted pursuant to this section, shall become effective after the Califorrria Air Resources Board makes the following findings: A) the District has undertaken all feasible measures to reduce nonattainment air pollutants from sources within the District's jurisdiction and regulatory control; and B) the District has notified the California Air Resources Board that the fees have been adopted pursuant to this section and has provided :he California Air Resources Board with an estimate of the total funds that will be ~rovided annually by each of those fees. 

### BE IT FURTHER RESOLVEDTHAT said fees shall cease to be levied upon 3xpiration or revocation of the Section 185 nonattainment penalties, or June 30, 2024, whichever is earlier. 

### BE IT FURTHER RESOLVED THAT the District shall pursue federal egislative changes to repeal Section 185 of the federal Clean Air Act or eliminate nequities in the fee by providing an exemption from the fee for well-controlled ;tationary sources. 

### BE IT FURTHER RESOLVED THAT Pursuant to Chapter 5.8 (commencing vith Section 40610) to Part 

### 3 of Division26 of the Health and Safety Code the fees ;hall be collected beginning nine months after the above requirementsare met. 

### BE IT FLIRTHER RESOLVED THAT the San Joaquin Valley Unified Air >ollutionControl District shall utilize its Emission Reduction Incentive Program to
rse the above fees in accordance with Chapter 5.8 (commencing with Section 10610) of Part 3, and Chapter 7 (commencing with Section 44220) of Part 5 of Iivision 26 of the Health and Safety Code to achieve attainment with state and ederal ambient air quality standards by the earliest practicable date. 

### 'I

ATTACHMENT B

## - RESOLUTIONSJVUAPCD

1990 E. GETWSBURG AVENUE FRESNO, CA 93726-0144 THE 

### FOREGOING was passed and adopted by the following majority vote of the Governing Board and majority vote of the elected officials of the Governing Board of the SAN JOAQUIN VALLEY UNIFIED AIR POLLUI-ION CONTROL DISTRICT this 21st day of October, 2010, to wit:

AYES:

NOES:

ABSENT:

SAN JOAQUIN VALLEY UNIFIED AIR POLLU-TIONCONTROL DISTRICT

Tony Barba, Chair Governing Board ATTEST: Clerk to the Governing Board BY Michelle FrancoSan Joaquin Valley Unified Air Pollution Control District Meeting of the Governing Board October 21,2010



### CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY 'THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment C: RESOLUTIONTO INCREASE MOTOR VEHICLE FEES 

### BY $10 

### I5 PAGES)

### BEFORETHE GOVERNING BOARD OF THE SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

3 

### INTHE MATTER 

### OF CONSIDER 

# II

ALTERNATIVES FOR THE EQUITABLE RESOLUTION NO.


# 11 WHEREAS, The San Joaquin Valley Unified Air Pollution Control District 4 5 

# 11(District) is a duly constituted unified district, as provided in California Health and Safety APPLICATION 

### OF FEDERAL NONATTAINMENT PENALTIESTO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Code sections 40150 to 40161; 

### and 

# II

10 

# 11 WHEREAS, said District is authorized by California Health and Safety Code 11 

# (1section 40702 to make and enforce all necessary and proper orders, rules and l2 

# (1regulations to accomplish the purpose of Division 26 of the Health and Safety Code, 13

# (1and; and
l4 

# 11 WHEREAS, Federal law under Section 185 of the federal Clean Air Act 15 

# 11mandates that the District adopt a rule to impose nonattainment penaltyfees on the l6 

### Valley's stationary sources due to failure to reach attainment of the now-revoked 

# I I l7 

### federal one-hour ozone standard; and 

# II

18 

# 11 WHEREAS, under Section 185 of the CleanAir 

### A& Valley businessesthat are l9 

### l(rnajorsources of NOx or VOC emissions will be subject to a total of approximately 20 $29 

### million per year in nonattainment penalty fees; and 

# I I

21 

# 11 WHEREAS, the imposition of $29 

### million per year fee on Valley businesses can

' 22 

# 11have a devastating economic impact on Valley residents and businesses; and
23 

# 11 WHEREAS, a January 2010 guidance by the federal Environmental Protection 24 

# (1Agency provides alternativesfor meeting Section 185 mandates by assessing all or 25 

# 11part of the nonattainment penaltyfees to mobile sources; and
26 

# 11 WHEREAS, more than 80 percent of the Valley's NOx emissions, the leading 27 

# 11contributor to Valley's ozone and particulate exceedances, come from mobile sources

28

# 11outside of the District's regulatory jurisdiction; and

SJVUAPCD t 990 L GElTYSBURG 

# IISJVUAPCD

1990E. GET'NSBURG AVENUE FRESNO, CA 93726-0244 WHEREAS, 

### Valley stationary sources are already subject to some of the most stringent air pollution regulations in the nation and, therefore, imposition of Section 185 nonattainment penaltiesto stationary sources will not have the intended effect of compelling further reductions of emissions from stationary sources; and WHEREAS, 

### Asserr~bly Bill 2522 (Arambula) added Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code, authorizing the District to increase the motor vehicle fee specified in Sections 44223 and 44225 of the Health and Safety Code by an amount up to twenty-four dollars ($24) per motor ilehicle per year to provide funding for air pollution control programs needed to achieve and maintain state and federal ambient air quality standards; and WHEREAS, 

### section 9250.17 of the California Vehicle Code authorizes the 3epartment of MotorVehicles to collect fees requested by the District Board pursuant to iealth and Safety Code Sections 44223 and 44225; and WHEREAS, 

### said fees are in addition to any other fees imposed by the District and may be charged in any of fiscal years 2009-10 to 2023-24,' inclusive, and as of that jate are repealed unless a later enacted statute, that is enacted prior to 2023-24, jeletes or extends the date; and WHEREAS, 

### the San Joaquin Valley Air Pollution Control District has been lesignated as extreme nonattainment for ozone by the United States Environmental DrotectionAgency; and NOW, THEREFORE, IT IS RESOLVED 'THAT, 

### to minimizethe economic impact
o Valley residents and businesses, and to more equitably distribute responsibility for )zone violations, the Governing Board of the San Joaquin Valley Unified Air Pollution :ontrol District hereby: levies an additional ten dollar ($10) fee on all motor vehicles iubject to registration fees in the counties of Fresno, Kings, Madera, Merced, San loaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in ~ccordance with Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 

### ,f the Health and Safety Code; requests that the California Air Resources Board makeSJVUAPCD

1990 E, G-BURG AVENUE FRESNO, CA 93726-0244 

### required findings under California Health and Safety Code Section 40612; and requests that the California Department of Motor Vehicles collect the fee in accordance with Section 9250.17 of the Vehicle Code. BE IT FURTHER RESOLVED THAT at least ten million dollars ($10,000,000) of said fees shall be used to mitigate the impacts of air pollution on public health and the environment on disproportionately impacted environmental justice communities in the San Joaquin Valley. BE IT FURTHER RESOLVED THAT the District Governing Board shall convene
an environmental justice advisory committee, selected from a 

### list given to the District Governing Board by enviror~mental justice groups from the San Joaquin Valley, to recommend the neighborhoods in the District that constitute environmental justice communities, and how to expend funds inthese communities. BE IT FURTHER RESOLVED THAT the fees adopted pursuant to this section, shall become effective after the California Air Resources Board makes the following findings: A) the District has undertaken all feasible measures to reduce nonattair~mentair pollutants from sources within the District's jurisdiction and regulatory control; and 6) the District has notified the California Air Resources Board that the fees have been adopted pursuant to this section and has provided the California Air Resources Board with an estimate of the total funds that will be provided annually by each of those fees. BE IT FURTHER RESOLVEDTHAT said fees shall cease to be levied upon expiration or revocation of the Section 185 nonattainment penalties, or June 30, 2024, whichever is earlier. BE IT FURTHER RESOLVED THAT the District shall pursue federal legislative changes to repeal Section 

### 185 of the federal Clean Air Act or eliminate nequities in the fee by providing an exemption from the fee for well-controlled stationary sources. 

### 'I1

A~ACHMENT C

## - RESOLUTIONSJVUAPCD

1990E. GmYSBURG AVENUE FRESNO, CA,93726-0244 BE IT FURTHER RESOLVED 

### THAT Pursuant to Chapter 

### 5.8 (commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code the fees shall be collected beginning nine months after the above requirementsare met. BE 

### IT FURTHER RESOLVED THAT the San Joaquin Valley Unified Air Pollution Control District shall utilize its Emission Reduction Incentive Program to use the above fees in accordance with Chapter 

### 5.8 (commencing with Section 40610) of Part 3, and Chapter 7 (commencing with Section 44220) of Part 

### 5 of Division 26 of the Health and Safety Code to achieve attainment with state and federal ambient air quality standards by the earliest practicable date. 

### /I/ 

### Ill Ill 111 111 Ill 111 111 111 IllSJWAPCD

1990E..GETTYSBURG AVENUE FRESNO. CA 93726-0244 THE FOREGOING 

### was passed and adopted by the following majority vote of the Governing Board and majority vote of the elected officials of the Governing Board of the SAN JOAQUIN VALLEY UNIFIED AIR POLLU-I-ION CONTROL DISTRICT this 21st day of October, 2010, 

### to wit: AYES:

NOES:

ABSENT: SAN JOAQUIN VALLEY UNIFIED AIR POLLU'I'ION CONTROL DISTRICT
BY Tony Barba, Chair Governing Board ATTEST: Clerk to the Governing Board BY Michelle FrancoSan Joaquin Valley Unified Air Pollution Control District Meeting of the Governing Board October 21,2010



### CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment D: ASSEMBLY 

### BILL NO. 2522 

### (3 PAGES)Assembly Bill No. 2522 CHAPTER 677
An act to add Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety Code, relating to air quality.
[Approved by Governor September 30,2008. Filed with Secretary of State Scptcrnbcr 30, 2008.1

LEGISLATIVE COUNSEL'S DIGEST AB 2522, Arambula. San Joaquin Valley Unified Air Pollution Control District.

Existing law authorizes air pollution control districts and air quality management districts, except as provided, to levy a fee ofup to $2on motor vehicles, and authorizes the districts to increasethis fee toupto $6ifcertain conditions are met.

This bill would authorize the San Joaquin Valley Unified Air Pollution Control District to increase this fee to up to, but not exceeding, $30 for incentive-based programs to achieve surplus emissions reductions, as specified. The bill would require the state board to assess the use of these fees in achieving and maintaining state and federal ambient air quality standards.

The bill would authorize the San Joaquin Valley district to adopt rules and regulations to reduce vehicle trips in order to reduce air pollution from vehicular sources.

The people of[heStale of Cul~ornia do enact m follows: SECTION 1. Chapter 5.8 (commencing with Section 40610) is added to Part 3 of Division 26 of the Health and Safety Code, to read:

40610. The Legislature finds and declares as follows: (a) Residents of the San Joaquin Valley suffer some of the worst air quality in the world. Thispoor air quality poses a significant threat to public health, the environment, and the economy of the valley.

(b) The extremedifficulty for the valley tomeet state and federal ambient air quality standards requires an urgent and unified program that combines more strict clean air rules and regulations and ongoing funding to clean up those sources that cannot be regulated effectively.Ch. 677 -2- (c) The purpose of this chapter is to establish a program for the San Joaquin Valley to achieve state and federal ambient air quality standards by the earliest practicable date.

406 12. (a) In orderto provide funding for air pollution control programs needed to achieve and maintain state and federal air quality, the district may do both of the following:

(1) Notwithstanding the limits on the amount of the motor vehicle fee s~ecified in Sections44223 and44225. increase the fee established eursuant tb these sections to up to, but not exceeding, thirty dollars ($30) pkr motor vehicle per year for the purposes of establishing and implementing incentive-based programs to achieve surplus emissions reductions that the district determines are needed to remediate air pollution harms created by motor vehicles on which the fee is imposed and that are intended to achieve and maintain stateand federal ambient air quality standards required by the federal Clean Air Act (42 U.S.C. Sec. 7401 et seq.). Except for the amount of the fee, any increase shall be subject to Chapter 7 (commencing with Section 44220) of Part 5, including, but not limited to, the adoption of a resolution providing for both the fee increase and a corresponding program for expenditureofthe moneys raised by the increased fees for the reduction of mobile source emissions.

(2) Notwithstanding Section 407 17.9, adopt rules and regulations to reduce vehicle trips in order to reduce airpollution from vehicular sources. (b) Fees adopted pursuant tothis section are in addition to any other fees imposed by the district, and may be charged in any of fiscal years 2009-10 to 2023-24, inclusive. Fees may be assessed after the 2012-13 fiscal year only if the United States Environmental Protection Agency approves the district's proposed reclassification of its nonattainment status for ozone from severe to extreme. The fees adoeted pursuant to this section are for 1. the district portion of the total amount needed to achieve and maintain state and federal ambient air quality standards. At least ten million dollars ($10,000,000) shall be used to mitigate the impacts of air pollution on public health and the environment in disproportionately impacted environmental justice communities in the San Joaquin Valley. The district board shall convene an environmentaljustice advisory committee, selected from a list given to the board by environmental justice groups from the San Joaquin Valley, to recommend the neighborhoods in the district that constitute environmentaljustice communities, and how to expend funds within these

. . communities.

(c) (1) The fees adopted pursuant to this section shall become effective after the state board makes both of the following findings:

(A) The district has undertaken all feasible measures to reduce nonattainment air pollutants from sources within the district's jurisdiction and regulatory control.

(B) The district has notified the stateboard that fees have been adopted pursuant to this section and provided the stateboard with an estimate ofthe total funds that will be provided annually by each of those fees.-3- Ch. 677 (2) The state board shallfile a written copy of its findings madepursuant to this subdivision with the Secretary of State within two days of its determination.

(3) The fees adopted pursuant to this section shall be collected nine months after the requirements of paragraph (2)are met.

40613. The state board shall assess the district's progress in using any fees assessed pursuant to Section 40612 to achieve and maintain state and federal ambient airquality standardsevery two years that the fee is assessed, and shall submit these assessments to the Legislature within two weeks of their completion.San Joaquin Valley UnifiedAir Pollution Control District Meeting of the Governing Board October 21,2010



### CONSIDER ALTERNATIVES FOR THE EQUITABLEAPPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment E: EPA'S JANUARY 5 2010 MEMO, "GUIDANCE ON DEVELOPING FEE PROGRAMS REQUIRED BY CLEAN AIR ACT SECTION 185 FOR THE 1-HOUR OZONE NAAQS" /I7 PAGES)Q+<eD"'4% 2' 

### db % LlNlTED STATES ENVIRONMENTAL PROTECTIONAGENCY RESEARCHTRIANGLE PARK,NC 27711

OFFCE OF AIR OUALlTYPLANNING AND STANDARDS MEMORANDUM 

### SUBJECT: Guidance on DevelopingFee Programs Required by Clean Air Act Section 

### 185 for the 1 -hour ozone N&QS 

### FROM: StephenD. Page, Director OfficeofAir Quality Planning 

# M-

and Standard 

### TO: Regional Air Division Directors, Regions 

### I-X

Section 185of the Clean 

### Air Act (CAA) requires stateswith ozone nonattainment areas classified'as Severeor Extreme to develop, 

### as a revision to their state implementation plan (SIP),



# . a fee collectionruleto be implemented in the event that an area fails to attain the ozone standards

by the required attainment date.' This memorandumprovides additional guidance on fee collection programs for the 1 -hour ozoneNational Ambient Air Quality Standard (NAAQS or standard), which are i-equired

### as anti-backslidingmeasures during transition to the 1997 8-hour ozone standard. ~oplicabilitv of Section 185 to OzoneNAAQS NonattainmentAreas , The section 

### 185 fee program requirement applies to any ozone nonattainment areathat is classified as Severe or Extreme under the NAAQS, including any area that was classified Severe or Extreme under the 1-hour ozone

### NAAQS as of the effective date ofthe area's 8-hour de~i~nation.~ The EPA had previously waived the section 

### I85 feeprogram requirements applicable under the revoked 1-hourozoneNAAQS in rules issued to address the transition from the 1-hour standard to the 1997 8-hour~tandard.~ However, on December 23,2006, the United States Court ofAppeals for the District of Columbia Circuit issued 

### an opinion determiningthat 

### EPA improperly waived the application of the section 185feeprovision for Severeand Extreme nonattainmentareas that failed to attain the I-hour ozone standard by their attainment date. South Coast Air Quality ManagementDistrict v. EPA, 472 F.3d 882 (D.C. Cir. 2006). 

## ' See Attachment A for the text ofCAA section 185. The CAA requires that fee program SIPSfor nonattainrnent areas initially classified as Severe or Extreme for the I -hour ozone standard be submitted to EPA by December 31,'2000(see CAA section 182(d)(3)). Areas subsequentlyreclassified as Severe or Extreme have a SIP submission date as determined by EPA. 

## ' The 1-hourozoneNAAQS were established in 1982 and revoked on June 15,2004 for most areas. The 8-hour ozone NAAQS were first established in 1997. EPA is currently reconsidering the 8-hour ozoneNAAQS that was last revised in 2008. EPA intends to completethe reconsideration by August 3 1,2010. 

## ' See 69 Fed Reg 23951 (April 30,2004).

Interne!Address (URL) htlp:l~.epa.gov RosycledlRecyclaMe Printedwith VegetableOU Based Inkson RecydedPaper (Mlnlmum25% Poslmnsumer)Summary of Sectioh 185 Requirements

. . In the event that a nonattainmint area classified 

### as SevereorExtreme failsto attain the ozone standardby the required date, section 185 ofthe CAA requires each major stationary source of volatile organic compounds (VOC) and nitrbgen oxides located 

### in such areato ' pay a'feeto the state for eachcalendar ye? fo'llowingthe attainment year for emissions above a

. , "baseline amount." In 1990,the CAA set the fee 

### as $5,000

### per ton of

### VOC andNOx emitted by the source'duringthe calendar year in excessof 80percent'of

### the "bcke~ine amount." The fee must be adjusted.forinflation based on the Consumer Price Index (CPI) on an annual basis.

, Attachment 

### B.sets forth the fees, 

### asadjusted for ifiatidn, forthe years 1990-2009.

. . . The CAA provides that the computation of a source's "baseline amounty' must be the lower ofthe amount of actual or alIowableemissions under the permit applicableto the source (or ifno permit has been issued for the attainment year, the amount ofVOC and NOx emissions allowed under the applicable implementationplan) during the attainmentyear. The CAA also provides that EPA may issue guidance on the calculationof the "baseline amount" as the lower ofthe average actual emissions or average allowable emissions over a period of more than one year in cases where a "source's emissions are irregular, cyclical or otherwisevary significantly from year to year." Accordingly, on 

## i arch21,2008, EPA issued a memorandum entitled "Guidance on Establishing EmissionsBaselines under Section 185ofthe CAA for Severe and Extreme OzoneNonattainmentAreas that Fail to Attain the 1 -hour Ozone NAAQS by their Attainment Date." The CAA does not specifyhow states

### may spend or allocate the fees collected under a section 185fee program. Therefore, stateshave discretion on how to use the fees. We believe that one beneficial approach would be to channel the fees into innovativeprograms to provide incentivesfor additional ozone precursor emissions reductions from stationaryor mobile sources, or for otherpurposes aimed at reducing ambient ozone concentrations in the affected area. Ifthe state fails to adopt or implement arequired feeprogram, EPA is required to collect the unpaid fees and may also collectinterest on any unpaid fees. All revenuecollected by 

### EPA under authority of section 185is required to be deposited in a special fund in the United States Treasury for licensingand other services and may be used to fund the Agency's activities for coIlecting such fees. 

### See, CAA sections 185(d)and 502(b)(3)(C). Alternativesto Section 1 85 Fee Proerams

' &a result ofthe 2006 court decision in South ~oast~states with areas classified as .. .Severeor Extreme nonattainrnent for the I-hour ozone standard at the time of the'initial nonattaiment designation for the.8-hourstandard are~~ubjbct to the requirementsof section 185. We believe'states

### can meet this obligation through a SIPrevision containing either the fee

. programprescribed in section 

### 185,or 

### an equivalent. alternative program,,as fbther explained

. . while section 185 expresslyrnentidns only VOC, sectio! I82(f) extendsthe application ofthis provision. ' to NOx,by providing that "plan provisionsrequired unde! [iubpartD] for major stationary sourcesdf [VOCI- shall also apply to major stationary sources...of [NOx]."

, ' ' -below. EPA believes that an alternativeprogram may be acceptable ifit is consistentwith 

### the principles of section 172(e)ofthe CAA,' which allows

### EPA thrdugh rulemakingto accept alternativeprograms that are "not less .&ingent" where EPA.hasrevised the NAAQS to make it

. . less stringent. This discretion doesnot currently apply to a section 1'85fee program obligation arising from failureto attain the 19978-hour ozone

### NAAQS by the attainment date associated with a Severe or Extterne classificationfor that NAAQS because, that NAAQS has not been revoked. Section 172(e)is an anti-backsliding provision of the 

### CAA that requires EPA to develop regulationsto ensure that controls 

### are "not less stringent" than those that appliedprior to relaxing a standard where 

### EPA has revised a NAAQS to make it less stringent In the implementation 

### rule forthe 1997ozone NAAQS, EPA determined that although section 172(e)does not directly apply where 

### EPA has strengthened the NAAQS, as it did in 1997, it was reasonableto apply the same principle for the transition from the 1 -hourNAAQS to the 1997 8-hour

### NAAQS. As part of applyingthe principle in section 172(e)for purposes ofthe transition fiom the 1-hour standard to the 19978-hour standard, EPA can either require statesto retain programsthat applied for purposes of the 1-hour standard, or alternatively can allow states flexibilityto adopt alternative programs, but only if such alternatives are "not less stringent" than the mandated program. EPA is electing to consider alternativeprograms to satisfy the section 185fee program SIPrevisionrequirement. The remainder of this memorandum describes the circumstances under which we believe 

### we can approve an alternativeprogram that is "no less stringent." These interpretationswill only be finalizedthrough 

### EPA actions taken under notice-and-comment demakingto address the fee program obligations associated with each applicablenonattainment area. 

### If 

### a state choosesto adopt an aIternativeprogram to the section 185fee program, the state must demonstrate that the alternativeprogram is no less stringent than the otherwise applicable section 185 fee program. If ourpreliminary assessment indicatesthat the alternativeprogram is not less stringent, we would issue a notice 

### in the Federal Registerproposingto make such a determination at the same time we propose and take action on any accompanying

### SIP revision pursuant to section 11 

### O(k). EPA believes that for an 

### areathat we determineis attainingeither the 

### I -hour or 1997 8- hour ozoneNAAQS, based onpermanent and enforceableemissionsreductions, the area would no longer be obligated to submit a fee program SIPrevision to satisfy the anti-backsliding requirements associated with the transition from the 1-hourstandard to the 1997 8-hour standard. In such cases an area's existing 

### SIP should be considered

### an adequate alternativeprogram. Our reasoning followsfrom the.factthat an area's existing SIP measures, in conjunctionwith other eliforceablefedera1measures, 

### are adequate for the areato achieve attainment,which is the purpose ofthe section I85 program. The section 185 fee program is an element of an area's attainmentdemonstration,and 

### its object isto bring about attainment after a failure of an area to attain by its attainment date. Thus, areas that have attainedthe 1 -hour standard,the standard for which the feeprogram was originallyrequired, as a result ofpermanent and enforceable emissionsreductions, would have a SIPthat is not less stringent than 

### the SIPrequired under section 185. Also, once an area attains the 19978-hour ozone standard,which replaced the now revoked I-hour standard, the purpose ofretaining the section 185feeprogram as an antibacksliding measure would also be fulfilled 

### asthe area would have attained the 8-hour standardfor which the fee program was retained 

### as a transition measure. We believe that it would unfairly penalize sources in these areas to require that fees be paid after an 

### area has attainedthe 8-hour standard due to permanent and enforceable emission reductions because the fees were imposed due to a failure to meet the applicable attainmentdeadline for the 1 -hour standard,not any failure to achieve the now applicable 8-hour standardby its attainment date. Similarly, for the reasonsedescribedabove, areas that must still develop and submit a fee program may submit an alternative that provides that the fees end at the time that the area attains either the I-hour or 19978-hour standard dueto the existence of permanent and enforceabIe measures. There is also 

### an additional, independent basis for EPA's approachto determining that the anti-backslidingrequirements associated with section 185 have been satisfied. Although section 185 provides that fees are to continue until the area is redesignated for ozone, EPA no longer promulgatesredesignations for the I-hour standard becausethat standard has been revoked. Therefore, relief from the 1-hour fee program requirements under the terms of the statute is 

### an impossibility, sincethe conditions the statute envisioned for relieving an area of

### its feeprogram obligation no longer can exist. There is, thus, a gap in the statute which must be filled by EPA. We believe that under these circumstances we must exercise our discretion under Chevron

### USA. Inc. v. Natural Resources Defense Council,467 

### U.S.837 (1984), to fill this gap, so as to cany out Congressional intent in the unique context of anti-backsliding requirements for a revoked standard. We believe that it isreasonable for the feeprogram obligation that applies for purposes of anti-backsliding to cease upon a determination,based on notice-and-comment rulemaking, that an areahas attained the 1-hour or 8-hour standard due topermanent and enforceable measures. This determination centers on core criteria for redesignations under 

### CAA section 

### 107(8)(3). We beIieve these criteria provide reasonable assurancethat the purpose of the I-hour anti-backsliding feeprogram obligation has been fulfilled in the context of 

### a regulatory regime where the area remains subject to other applicable 1-hour anti-backsliding and 8-hour measures. Under these circumstances, retention ofthe fee program under the anti-backsliding rule isno longer necessary for 

### the purpose of achieving attainment of the 8-hour standard. Additional Potential Equivalent Alternative Program Conceits Following is a summary of concepts for additional alternative programs that a state might consider if all 1 -hour nonattainment areas subjecttothe section 185feeprogram anti-backsliding requirements within that state are not eligible for the EPA determination set forth in the section above, and/or if the state chooses to develop another alternative program that is no less stringent than a section 185 feeprogram. While section 185 focusesmost directly on assessing emissions fees, we believe it is usell to interpret section 185within the context ofthe CAA's ozone implementationprovisions of subpart 2 (which includes section 185). The subpart 2 provisions are designedto provide 

### an ever-growing incentive to reduce ozone-forming pollutant emissions to levels that achieve attainment ofthe ozone NAAQS. In this context, to satisfy the requirements of section 185associated with the 1-hour NAAQS we believe it is appropriate for states to focus on fee assessments, achieving fbrther emissions reductions, or some combination ofboth in developing an alternativeprogram. For any alternative program adopted by 

### a state, the state's demonstration that the program is no less stringent should consist of comparing expected fees andlor emissions reductions directly attributableto application of section 185 to the expected fees andlor emissions reductions from the proposed alternativeprogram. For a validdemonstrationto ensure equivalency, the state's submissionshould not underestimate the expectedfees andor emissions reductions fiom the section 185fee program, nor overestimate the expected fees andlor emissionsreductions associatedwith the proposed alternative program. Recently, a task force composed ofmembers ofthe Clean Air Act Advisory Committee (CAAAC) was formed to discuss alternate ideason complying with section 185.~ The concepts described here were discussed by the task force, and the CAAAC forwardeda list of potential program featuresto EPA for review. EPA's assessmentofwhether and how certainprogram features identified by the CAAACcan be used in the context of satisfying the requirementsof section 1

### 85 is included as Attachment C to this memorandum. EPA cannot conclude at this time whether specific state-developed programs relying on these concepts or containing any ofthe featurespresented by the CAAAC would be approvable because such a determinationwould be based on the specificparameters of the program adopted. Further, any such determinationwould need to be made through notice-and-comment rulemaking. Statesmay decide to developunique &ternathe programs for each applicable nonattainment area, and we will independently evaluate the approvabilityof each alternative program. To assure a valid demonstration that an alternative is no less stringent,we'recommend that states work with EPA on a case-by-case basis. ~dditional Fee-Ec~uivalent Altetnative Programs

. . We anticipate (subjectto notice-and-commentrulemaking

### as noted above)that we could approve a program that clearly raises at least as much revenue 

### as the otherwiserequired section 185feeprogram ifthe proceeds are spent to pay for emissionsreductions of ozone-forming pollutants (NOx andor VOC) in the same geographic area subjectto the section 185program. Under this approach,the state would estimate revenues that would result under the section 185 feeprogram if all section 

### 185sourcespaid fees for each applicable calendar year, developan alternativeprogram that would raise at least that much revenue, and establish a process where the revenues would be used to pay for emissionsreductionsthat will further improve ozoneair quality. Under this concept, states could developprograms that shiftthe fee burden from the specificset ofmajor stationary sourcesthat are otherwise required to pay fees accordingto section 185,to other non-major sourcesof emissions, includingownersloperatorsof mobile sources. This could allow states to recognize through reduced fees those major sources of emissionsthat have already installed the latest technology,and assess the remainder of the total required fees on other sources that are not already aswell controlled. EPA recognizes that section 

### 185 is not strategicin imposingemissions fees on 

### 4major stationary sources,including already well-controlled sources that have few, if any, optionsfor avoiding fees by achieving additional reductions. States can be more strategicby crafting alternativeprograms that exempt or reduce the fee obligation on wellkontrolled sources, and assign the required fees to less wellcontrolled sources

### as an incentive for those sources to furtherreduce emissions of ozone-forming

,pollutants. 

### The alternativeprogram should not rely on emissionsreductions already required by 

# 'For more information on the CAAAC and the proceedingsofthe Task Force on section 185 fee programs, ' visit the following Web site: http://www.epa.~ov/air/caaac/185.htmlthe applicable SIP, since the goal is to achieve fiuther reductions to move the area expeditiously to attainment. Additional Emissions-EauivalentAlternative Programs 

### EPA believes that as 

### an alternative to the section 185feeprogram a state could adopt a program that achieves at least 

### as much additional emissionsreductions 

### as would be expected to result &omthe fee-minimizationincentive of the section 185feeprogram. EPA believes this would clearly be demonstrated 

### ifthe alternativeprogram achieves emissionsreductionseach year that are equal to or greater 

### than the amount of emissions againstwhich fees would be assessed each year under the section 185fee program (i.e., actual emissions in excess of 80 percent ofthe baseline

### emission^).^ For purposes ofestimatingthe emissionsreductions required in such a program, the statewould assumethat sourceswould reduce their emissions to the fee applicability threshold. This conservative approach would assure that emissionsreductionsfrom the alternative program are at least as great as reductionsthat might have occurred if the statutory feeprogram resulted in all major stationary sourcesreducing their emissionsto no more than 

### 80

. percent ofthe baseline emissions. The emissions reductionsin the alternativeprogram could come from the same set ofmajor sources subjectto section 

### 185,or from a different set of sources,in whole or in part, so long 

### as all reductionscome from within the nonattaiment area and are equally beneficial inreducingozone formation. The alternativeprogram should not rely on emissionsreductions already required by the' applicable 

### SIP, since the goal isto achieve fktherreductions to move the area expeditiouslyto attainment. Under this approach, states would first calculatethe emissionsbaseline for the major stationary sources ofVOC 

### andNOx 

### in accordancewith the methodology required under CAA section 185(b)(2)and as further described in the March 2 1,2008guidancememorandum. 

### Once a state calculates the baseline amount of each pollutant for each source affectedby section 185, the amount of emissions in excess of 80percent of the baseline would be the amount of emissionsof each pollutant that sources within the area would need to reduce on a calendaryear basis in each year following the I-hour ozone attainmentyear until such time asthe feeprogram no longer applies.

I Additional Alternative Programs CombiningEmissions Reductions and Fees

. A program that combines featuresof an emissions-equivalent program with a feeequivalent program could also be adopted. For example, some portion of the emissions reductions necessary to demonstrate equivalence(as explained above) could be offset by fees collected.on each ton of emissions that is offset. To illustrate, assume that 1000tons of emissions reductions is needed 

### to demonstrate equivalence. The state could instead adopt a program that obtains 600 tons of emissionsreductions and collect fees totaling $2.0 million
- (calculatedas the remaining400 tons times $5,000 per ton).

Aprogramthatachieves less 'thanthis amount ofemissions reductionsmay also.be approvabledepending an the, case-specific circumstances.

. .

.. ...EPA Assistance My office is availableto provide any additional guidance and to consultwith any state that wants to developm alternative equivalentprogram to the section 185 fee program. For additional consultationyou may contactDenise 

### Gerth, 919-541-5550.

### ATTACHMENT A Text of 

### CAA Section 185 SEC. 185.ENFORCEMENT FOR 

### SEVERE

### AND 

### EXTREMEOZONE NONAlTAINMENT 

### AREAS 

### FOR FAILURE TO ATTAIN.

(a) General Rule.-' Each implementationplan revision required under section 182 (d) and (e) (relating to the attainmentplan for Severe and Extreme ozone nonattainment areas) shall provide that, ifthe area to which such plan revision applieshas failed to attain the national primary ambient air quality standard for ozoneby the applicable attainment date, each major stationary source ofVOCs located in the area shall, except as otherwise provided under subsection (c), pay a fee to the State 

### as a penalty for such failure,computedin accordancewith subsection (b), for each calendar year beginning after the attainmentdate,until the area is redesignated as an attainment area for ozone. Each such plan revision should include proceduresfor assessment and collection of such fees.

(b) Computationof Fee.- (1) Fee amount.- The fee shall equal $5,000, adjustedin accordancewith paragraph (3), per ton of VOC emitted by the source during the calendaryear in excess of 80 percent ofthe baseline amount, computed under paragraph (2). 

### (2) Baseline amount.- For purposes ofthis section,the baseline amount shall be computed, in accordance with such guidance as the Administrator

### may provide, 

### as the lower of the amount of actual 

### VOC emissio'ns ("actuals") or VOC emissions allowedunder the permit applicable to the source (or, 

### if no such permit has been issued forthe attainmentyear, the amount ofVOC emissions allowed underthe applicableimplementationplan "allowables")) during the attainmentyear. Notwithstanding

### the preceding sentence,the Administratormay issue guidance authorizing the baseline amount to be determined in accordancewith the lower of average actuals or average allowables, determined over a period ofmore than one calendar year. Such guidancemay provide that such average calculationfor a specific sourcemay be used if that source's emissionsare irregular, cyclical, or otherwisevary significantly from year SO year. (3)'Amual adjustment.- The fee amount under paragraph (1) shall be adjusted annually, beginning in the year beginning after the year of enactment, in accordancewith section 502(b)(3)(B)(v)(relatingto inflation adjustment).

(c)Exception.-Notwithstandingany provision of this section,no source shall be required to pay any fee under subsection(a) with respect to emissions during any year that is treated as 

### an Extension Year under section 18l(a)(5).

(d)Fee Collection by the Admjnistrator.- Ifthe Administrator has found that the fee provisions ofthe implementationplan do not meet the requirementsof this section, or ifthe Administrator makes a finding that the State isnot administeringand enforcingthe fee required under this section, the Administrator 

### shall, in addition to any other action authorized under this title, collect, in accordancewith procedures promulgatedby the Administrator, the unpaid fees required under

, subsection (a). Ifthe Administrator

### makes such a finding under section 179(a)(4),the Administrator may collect fees forperiods before the determination,plus interest computed in accordance with section 662l(a)(2) ofthe Internal Revenue Code of 1986 (relatingto computationof interest on underpayment of Federal taxes), to the extent the Administrator

### finds such feeshave not been paid to the State. The provisions of clauses (ii) through (iii) of section 502(b)(3)(C) (relating to penalties and use of the funds, respectively) shall apply with respect to feescollected under this subsection.(e) Exemptions for Certaih Small Areas.- For areas with a total population under 200,000 which fail to attain the standard by the applicableattainment date, no sanction under this section or under any other provision ofthis Act shall apply ifthe area can demonstrate, consistent with guidance issued by the Administrator, that attainment in the area is prevented because of ozone or ozone precursors transported from other areas. The prohibition applies only in cases in which the area

### has met a11 requirements and implemented all measures applicable to the area 

### under this Act. \ [42U.S.C. 75 1 Id]

### ATTACHMENT 

### B ~nflation Adiustment for Section 185Fees Section 

### 185 cross-references

### the methodology in section 502(b)(3)(B)(v)ofthe CAA. This method has been interpreted for use in determiningpermit fees in a 

### 1992EPA memorandum. (See, Memorandumof October 15, 1992,from Frank Bunyard, "Calculating Fees for Operating Permits.") EPA hasused this method to calculate the Part 70permit fee rate since 1990, and will continue to update the rate every year in September, when the August values are available. The adjusted section 185fee, then, would be prorated to that adjusted permit fee, 

### as shown 

### in Table 

### 1below, by multiplying the 

### Part 70permit fee rate by 200 ($5000/$25). Since section 185fees are assessed on a calendar year basis, and the inflation factor is applied in ~eptember; the calendar year fee is determined as a weighted average (8112 of the fee associated with January to August, and 4/12 ofthe fee associated 

### with Septemberto December). The weighted fees appear 

### in Table 

### 2 below. These 

### will be updated each year in the fall. TABLE 1: SECTION 185 FEE RATE BASED ON PART 70 PERMIT FEE RATE

* 

### From www.e~a.aov/oar/o~aa~d~emits/histona~rates~html

, .TABLE.9: ANNUALIZED SECTION 185,FEE RATEATTACHMENT C

. . Response 

### to CAAAC Task Force Options

. EPA's Clean Air Act.AdvisoryCommittee (CAAAC) submitted a letter toEPA dated May -15,2009, asking whether "it is legally permissible under either section 185 or 172(e)for a state to exercise the discretion identified"in 10bullet points listed in 

### an attachment to the letter (see Attachment 

### D). In general, we believe the languagein section 185 is relatively clear regqrding the provisions that must comprise an approvableprogram and, asindicated in the discussionbelow, we do not believe that many ofthe flexibilitiesraisedby the CAAACwould, be approvableprovisions of a state-adopted section 185 feeprogram. However, EPA believes that an.alternativeprogrmthat contains some ofthese flexibilitiesmay be acceptable if it is consistent-with the principles'of section 172(e) ofthe CAA, which allows EPA through

. . rulemakingto accept alternative programsthat are "not less stringent" where EPA has revised the NAAQS. Although the anti-backslidingprovisions of section 172(e)facially apply only.

' ' where EPA has revised the NAAQS to make it less stringent, in its implementationrule governingthe transition fiom the 1-hour ozone standard to the more stringent 1997 8-hour standard, EPA concluded that it made senseto rely ,onthe governing principles in section 172(e). Applying this pIinciple for the transition from 

### the 

### I&ur standard to the 1997 8-hour ozone standard, EPA can either require statesto retain a specificprogram that applied forpurposes of

. . the 1-hourstandard, or alternatively can allow states, flexibility to adopt alternativeprograms, but only if such alternatives are "not less stringent" than the mandated program. 

### EPA has not yet concluded whether to apply the principles of section 172(e)to any future transitionsfrom the 1997 ozone NAAQS to any new or revised ozoneNAAQS. Consistent with the preceding distinction between a section I85 fee program and an alternative program that is "not less stringent," we address each of the 10points separately below. Point A asks whether a state may "authorize multi-facility operators to aggregatc emissions from commonly-owned and -operated facilities within a single nonattainment area for the purpose of calculatingthe fee." We have defined "major stationary sources" in many , contexts and have interpreted that definitionin certain circumstances to allow for aggregation of sources. We anticipate that we would be able to approve a section 185 fee program SIP that relies on a definition of "major stationary source" that is consistentwith the CAA as interpreted in our exjstingregulations and policies. Point 

### B asks whether a state "may permit major sourcesto'aggregatetheir VOC and NOx emissions on a site-wide basis in calculating the fee" and includes 

### a description of certain limitationsthat would be assumed for such aggregation. Provided that aggregationis not used to avoid a "major source" applicability finding, and aggregation is consistent with the attainment demonstration (e.g., ifthe area has received a NOx waiver under section 182(f), then NOx reductions cannot be substituted for 

### VOC reductions), we believe states have discretion to allow a major sourceto aggregate 

### VOC and NOx emissions. Points C and 

### D concern whether statesmay allow a discount for certain "pre-attainment year or attainmentyear" controls. We do not believe that section 185 allows for any such.

. .consideration. The statutorylanguage isclear that the baseline emissions are the lower ofthe actual emissionsor emissions allowed under the applicable permit during the attainmentyear or allowed under the SIP during the attainmentyear where there is no suchpermit. The only exceptionto this calculation for baseIine emissions is where a source's emission are "irregular, cyclical or otherwisevary significantlyfrom year to year." EPA has previously issued guidance addressing this exception. Although considerationof these controls is not consistentwith the express terms of section 185, statesmay be ableto develop a "no less stringent" progr'vn consistent with the principles in section 172(e),taking into consideration such pre-attainment controls. See discussion of point I below. Point 

### E asks whether the purchase of emissionneduction credits, or allowances,that are part of an area's attainment controlmeasures "may reduce the amount ofemissions upon which the fee is based or constitute

### an investmentthat should be credited against the fee." In the context of calculating both the attainment-year baseline emissions and the post-attainmentyear emissions, section 185 requires such emissionsbe the lower of actual or allowableemissions. We believe aIlowableemissions can include emission reduction credits or emissions allowances held by a source subjectto fees. Whether holding the emissions allowances will affect a source's fee obligationdepends on the amount that is determinedto be the lower of actuaI or allowable emissionsfor that source. If stateswish to provide some other form of credit for sourcesthat purchase market-based control measures,they may be ableto do so in the context of a program that is no less stringent than a section 185program consistent with the principle in section 172(e). See discussion ofpoint 

### I below. Point 

### F asks whether sourcesmay receive credit for post-attainment year emissions reductions or air qudity investments. The Act is clear that post-attainment year emission reductions will be credited to the extent that they reduce emission levels from the baseline year. For example,

### if a source has 1000 tons of emissionsin the attainment "baseline" year, the CAA requires that sourceto pay fees on any emissionsin excess of 800 tons (80percent of baseline) in each post-attainment year. If the source is able to reduce post-attainment year emissions from 1000tons to 900 tons, then the source will pay fees on only 100tons of emissions. With regard to crediting emission-reducing or air-quality investments,we note that section 185 does not specify how collected fees must be spent. 

### In general, we believe that a state may choose to use collected fees to support air quality improvementprojects at sources. However, we cautionthat any such provisions should not be developed in a way such that the provisionswould appearto defeatthe purpose of section 185, which is to encourage emission reductionsthat will bring the areainto attainmentwith the ozoneNAAQS in the near-term. Point G asks whetherpost-attainmentyear new sources must be subject to the fees. We believe it is clear that the fee imposed is on major sources. Thus, to the extent a "new source" is considered a part of a major sourcethat existed in the attainmentyear, the emissionsfrom the new source must be considered as emissions from that major source. For new major sourcesthat are not part of existing major sources, we believe section 

### 185does not provide a clear interpretationof the source's fee obligation. Therefore, we believe states have discretion in

. determining how fees apply to these sources. States should considerthat section 185 requires "each major stationary source" to pay a fee; however, the baseline amount for sourcesthat did not have a permit in the attainmentyear is calculated accordingto what the 

### SIP "allowed" duringthe attainment yeat. Therefore, states should examinehow the applicable SIP addressed emissions fiom potential new major sources in the attainmentyear. For example, a state could determine that the SIP's new source review (NSR) requirements would provide that a new source employ emissions control that meets the requirements of "lowest achievable emissionsrate" (LAER). Therefore, the attainment-yearbaseline for a new source is the level allowable after application of LAER. Alternatively, a state could determinethe SIP's 

### NSR requirements would provide that a new source's net emissionsimpactbe no greater 

### than zero (i.e.;emissions levels after application of LAER must be offset at a ratio of at least 1to 1). Thereforethe attainmentyear baseline for a new source is zero, subjecting the entire,amountof 

### a source's post-attainment year emissions 

### to the per-ton emissions fee. Also, statesmay be able to develop "not less stringent" programs consistent with the principles in section 172(e),that exempt new major sources from fees, provided the alternativeprograms meet the 172(e) standard of equivalence. See discussion of point 

### I below. With regard to Point 

### H, which references state discretion rqgardingthe.useof collected

' 

## - fees, we pointto our.response above for Point F. Point I asks whether section 172(e)authorizes a state to develop 

### an alternativeprogram to . that mandated under section 185. As an initial matter, we note that section 172(e)doesnot directly apply here, where we are transitioning from the 1-hour ozone standard to the more stringent 1997 8-hour standard. However, in developingour anti-backsIidingrules inthe Phase 

### 1 Rule for Implementingthe 8-hour Standard (69

### FR 23951, April 30,2004), we indicated that although section 172(e) did not.directly apply,we were relying on the principles in section 172(e),as well as other indications of Congressional intent, in developing our anti-backsliding rules. In South Coast Air Quality Management District v. EPA, 472 F.3d 882 (D.C. Cir. 2006), the Court rejected our waiver of

### the section 185fee program for the 1 -hour standard,holding that suchprogram was a "control applicable" to the areaasthat phrase is used in section 172(e)and thus must be retained under EPAYs decision to apply section 172(e)to the transition from the 1- hour standard to the more stringent 8-hour standard. Not before the Court was the issue ofthe remaining language in section 172(e)that provides that EPA "shall promulgaterequirements



### .. . t to provide for controls which are not less stringent than the controls applicable to areas designated nonattainrnent before such relaxation." EPA believes that this language clearly allows EPA by regulation to accept alternative control programs that "are not less stringent" than those that were mandated by the Act for the standard that has been replaced (i.e., the 1-how standard)



### . Point J requests ,hat

### EPA "clearly indicatethe conditionsunder which the collection of feesmay be terminated." Furthermore, it indicates that some members of the task force "would likethe authority to terminate the section 185feeprogram upon the first year in which 

### an area achievesthe relevant standard.'' 

### EPA believes that for an area 

### EPA determinesthrough noticeand-commentrulemaking is attaining either the 1-houror 

### 1997 8-hour ozone NAAQS based on permanent and enforceable emissions reductions,the area would no longer be obIigated to submit a feeprogram SIPrevision, nor be obligated to continue implementing a section 185 fee program (or approved alternative equivalentprogram). The bases for EPA to make such a determination through notice-and-comment rulemaking are provided in the memorandum associated with this Attachment.ATTACHMENT

### D

. . CAAAC Letter United StatesEnvironmental Protection Agency Clean Air Act Advisory Committee May 15,2009

.. TheHonorable Elizabeth Craig Acting Assistant Administrator Ofice ofAir and Radiation U.S. EPA Ariel Rios North 1200PennsylvaniaAvenue, N.W. Mail Code 6 101 A Washington, DC 20460 Re: Clean Air Act Sections 185and 172(e) Dear Assistant Administrator Craig: At the May 14,2009meeting ofthe US EPA Clean Air Act Advisory Committee, on a unanimous vote, the Committee resolved to urge the Agencyto provide prompt guidanceto the States regarding the followingquestion arising under the Clean Air Act: Is it legally permissible under either section 185 or 172(e) for a State toexercise the discretion identijied in OptionsA-J? TheClean Air Act Section 185

### Task Force, a work group established under the Clean Air Act Advisory Committee, identified ten areas (A-J) of potential statediscretion. These optionsare Listed in the attachmentto this letter. The Committeetook no position on the reasonableness or legal permissibility of any option. As several States are in the process of developing their section 185 nonattainment fee programs, time is of the essence inproviding appropriate legal and policy guidance.

' 

### Thank you sincerely,

Co-Chairs of the Section 185Task Force:

. . EddieTerrill Robert A. Wyman Director Latham & WatkinsL;LP Department ofEnvironmental Quality'. 355 South Grand Avenue

. Air Quality Division

. .Los' Angeles, CA 90071 707 North Robinson Oklahoma City, OK 73 101-1677 . .A. 

### þÿÿ reg at ion ofEmis'sionsAmong Commonly-Owned Facilities At its option, a Statemay authorize multi-facility operators to aggregate emissions Erom commonly-ownedand -operated facilities within a singlenonattainment area for the purpose of calculatingthe fee.

. .
. .

, 

### B. ~~~re&on ofVOC and 

### NOx Emissions

. . .. . At its option, a Statemay permit major sourcesto aggregate their 

### VOC and 

### NOx emissionson a site-wide basis in calculatingthe fee to the extent such aggregation isconsistent 

### with attainment modeling previously submitted by the Statefor the applicable air quality control region. Such aggregationis not to be used for the purpose of avoiding a "major source" applicability finding (e.g., by spreading emissions over multiple sources so as to render the averagefacility emissionsless than the major sourcethreshold).


### C.

. ConsiderationofPre-Attainment Year or Attainment Year Installation ofBACT or LAER

. . .. At its option, a Statemay consider to appropriate extent pre-attainmentor

.

. . attainmentyear:emissioncontrol investments by major sources. .Without intending to define the preciseboundaries of a state's discretionto recognizethe

.' degree of control already achieved by a.source,the participantsdetermined that sources that had recently (e.g., withinlive 

### (.5)years ofthe year for which the fee would be.irnposed)undergone new sourcereview and, as a result, installed BACT

.

. . or LAER, should not be required toinclude emissionsfrom such equipment

### ir! calculating the fee.

. .. 

### D. ' Consideration of Pre-AttainmentYearor Attainment Year Installation of Retrofit

. . Controls.

. . In addition, at its optionunder appropriate circumstances; 

### a State may designate emissionperfdrmance stahdhds that it has determined represeqt well-controlled. (e.g., in therange of or'superiorto BACTor LAER) units for a given pcriod o'f time and authorize a facility to demonstrate what portion of.itsemissions should

. ' be excluded from the fee.calculationon that basis,

.

... E. ' Considerationof Market-Based Programs

. . At its option under appropriatecircumstances, a Statemay determinethat purchases of emissionreduction credits, or allowances,

### as part ofa State's market-based attainment control measure may reduce the amount of emissions upon which the 

### fee isbased or constitute

### an investment that should be credited against the fee.Credit Sources for Post-Attainment Year Emissions-Reducing or Air Quality Investments At its option, a State should recognize and appropriately credit qualifying postattainment year emissions-reducing or air quality-beneficial investmentsby major sources. These investmentsshould be creditedto such sources in a manner that reduces or eliminates fees that otherwise would be due under the program. States should identi@ the qualifications for such investmentsbased on their unique attainment needs.

. ~osi-~ttairhent 

### Year New Sources There was agreement that new sources constructed after the attainment year would not have a baseline;would already have instailed'~~~~ or LAER, would already have provided offsets, and therefore shouldnot be subjectto the fee for

. .

such equipment. 1

useof Program ~evenues States retgn full discretionregardingthe use of collected revenues.: Participants encouraged States to tailor strategiesto their unique attainment challenges and to consider ways to addressunder-regulated sources(e.g.,legacy vehicles and engines and 'certain area.sources). Equivalent Programs Under section 172(e), a State should have the option ofcollectingequivalent or greater fees, or of requiringequivalent or greater emission reductions, by shifting the program target in part or in whole to under-regulated sources (e.g., legacy vehicles and engines, under-regulated area sources)or by applyingthe progrim in a manner that addresses other attainment gaps. Likewise,the task force envisioned that any recommended strategynot directly approvableunder section 185 should be considered 

### as an equivalent alternativeprogram under 172(e). 

### In such circumstances,the state may need to shift the fee burden among sourcesto demonstrate equivalency. Program Sunset

. . EPA needs to ~learl~indicate the conditions under which the collection of fees ' may be terminated. .Somemembers of the taskforce would like the authority to terminatethe section 

### 185feeprogram upon the first year in which an area achieves the reIevant standard.San Joaquin Valley UnifiedAir Pollution Control District Meeting of the Governing Board October 21,201

### 0



### CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment F: SUPPORT LETTER FROM THE CALIFORNIA PARTNERSHIP FOR THE SAN JOAQUIN VALLEY, FEBRUARY 18,2010 12 PAGES)California Partnership for the 

### San Joaquin Valley

February 18,2010
Mr. Seyed Sadredin Air Pollution Control Officer San Joaquin Valley Air Pollution Control District 1990East Gettysburg Avenue Fresno, CA 93726 RE: California Partnership Support for the Implementation of AB 2522
Dear Mr. Sadredin, On behalf ofthe California Partnership for the San Joaquin Valley (Partnership), 1 write to urge prompt action by the San Joaquin Valley Air Pollution Control District (Air District) on the implementation of AB 2522, which authorizes the Air District to increase DMV surcharge fees for the purpose of generating air quality mitigation funds for the San Joaquin Valley. The Partnership board includes representatives from both the public and private sector in all eight Valley counties in the San Joaquin Valley. The Partnership Air Quality Work Group (AQWG) is comprised of representatives from a very broad and diverse group of Valley stakeholders, including environmental advocacy groups as well as business and agricultural interests. At a recent meeting, a recommendation of support for prompt implementation of AB 2522 was unanimously approved by the AQWG. The rationale for this recommendation follows.
As you are well aware, the Valley experiences some ofthe worst ozone and particulate air pollution in the nation, and failure to take all possible action toward improving the Valley's air will result in the continuation of the significant health, social and economic consequences that have plagued the region for decades. Additionally, we risk losing federal transportation dollars if the Valley fails to comply with federal standards. The adverse economic impact of the Valley's air quality is staggering, causing 192,000 missed school and workdays annually. One in three Valley families has a member with a respiratory ailment, and the poor air quality contributes to 460 deaths per year. These statistics, along with the challenges in meeting state and federal air quality standards,

5010 NWoodrow Ave. 2nd Floor, MISWC 142 Fresno,California 93740prompted the Partnership to help get AB 2522 approved by the Legislature in 2008. 'The bill is consistent with the actions and objectives of the Partnership, as set forth in our Strategic Action Proposal, by generating funding needed to "implement incentive mechanisms to accelerate adoption of air quality mitigation technologies." Technology to significantly improve the Valley's air quality is available today; however, the cost is often prohibitive. Even in the best of economic times, accelerated adoption of these technologies is financially very difficult for industry and agriculture. In the current economic environment, such investments border on being impossible for most in the Valley, making funding for incentive-based programs even more important and timely.
We do not take lightly the recommendation to increase fees in these difficult economic times, but it is the consensus opinion of the diverse stakeholders represented in the AQWG that a certain amount of self-sacrifice is necessary to help clean our air and address the economic consequences of failure to comply with federal standards in a way that reduces the burden on the economic engines of the Valley.
We also do not take lightly the burden of additional fees on Valley residents when much of our air quality problem comes from sources outside the Valley and vehicles using the Valley as a transit route. While the Partnership, in close consultation with the Air District, has worked hard and has been successful in raising state and federal funds for air quality mitigation in the Valley, there remains a tremendous need for additional funding. AB 2522 is an additional resource to add to our collective effort in realizing critical air quality improvement throughout the San Joaquin Valley. It is our self-help measure, and its implementation will provide us with matching funds to help generate more air quality mitigation funding from state and federal sources. Conversely, failure to utilize the authority provided in the legislation will likely limit our ability to be effective in lobbying for additional funding in the future. On behalf of the California Partnership for the San Joaquin Valley, I respectfully request the Air District take prompt action in moving forward with the implementation of AB 2522 and thank you in advance for your consideration. The Partnership looks forward to continuing to work with the Air District in improving the quality of life in the San Joaquin Valley. Sincerely,

Fritz Grupe, Deputy Chair

PAGE 2 OF 2San Joaquin Valley Unified Air Pollution Control District Meeting of the Governing Board October 21,2010



### CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR VEHICLE FEES

Attachment G: SUPPORT LETTER FROM SAN JOAQUIN BUSINESS COUNCIL, OCTOBER 12,2010 (2 PAGES)BUSINESS COUNCIL 0I;I~ICEIZS

IIUSlNL:.SS COUNCIL Dll<EC1'01<S 1990 East Gettysburg Avenue Fresno, CA 93726
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Dear Mr. Sadredin,
We are writing on behalf of the board of the San Joaquin Business Council to support prompt implementationof AB 2522, which authorizes the Air District to increase DMV surcharge fees for the purpose of generating air quality mitigation funds for the San Joaquin Valley. The board of the San Joaquin Business Council is made up of CEO's of prominent businesses in San Joaquin County.
As you are well aware, the Valley experiences some of the worst ozone and particulate air pollution in the nation, creating severe health issues and major economic impacts. Valley stationary sources have invested a significant amount of resources to comply with Air District requirements and now constitute only 20% of the oxides of nitrogen emissions in the San Joaquin Valley while mobile sources, which largely fall under EPA's jurisdiction, make up 80% of emissions.
The Section 185 penalty fee that has been imposed on the Valley by the EPA fails to recognize the circumstances ofthe Valley. If imposed, it will cost Valley businesses approximately $29 million per year, with no recognition of the substantial investments that have been made to implement the most stringent controls in the country. At the same time, mobile sources that make LIP the majority of the emissions inventory are not required to pay the fee. We are pleased that the Air District's call for flexibility has resulted inthe EPA being willing to accept AB 2522 revenues as an alternative, if the proceeds are spent to pay for emissions reductions of ozone precursors. We believe AB 2522 should be implemented expeditiously for two reasons: (a) -the Valley urgently needs incentive funding to help reduce mobile source emissions through voluntary measures; and (b) revenues raised through AB 2522 will enable the Valley to meet 185 fee requirements without adding an unfair burden on businesses.
We do not take lightly the recommendation to increase fees inthese difficult economic times, butvehicle owners must be willing to accept a certain amount of self-sacrifice, given the huge contribution of mobile sources to our poor air quality.

BUSINESS COUNCIL INC. OF SAN JOAQLTINCOUNTY 2800 WestAdarch Laiie, Suite 473. Stoclcton, California952 19 (209) 956-3388/fax (209)9.56- 1520 E-Allail:Dci3sjpirel.orgMr. Seyed Sadredin October 12,2010 Page 2

We also do not take lightly the burden of additional fees on Valley residents when much of our air quality problem comes from sources outside the Valley and vehicles using the Valley as a transit route. The Air District must continue to address this inequity, but we need a self-help measure while we continue to addressthis challenge, Implementation of AB 2522 will provide us with matchingfunds to help generate more air quality mitigation funding from state and federal sources. Conversely, failure to utilize the authority provided in AB 2522 will liltely limit our ability to be effective in lobbyingfor additional funding in the future.
On behalf of the San Joaquin Business Council, we respectfully request the Air District take prompt action in moving forward with the implementation of AB 2522, and thank you in advance for your consideration. Sincerely, 

# *@G
I Fritz Grupe Ron Addington 

### / Chairman President/CEO