SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

DRAFT STAFF REPORT 

DRAFT AMENDMENTS TO 

RULE 3170 (FEDERALLY MANDATED OZONE NONATTAINMENT FEE) 

Prepared by: Carlos Garcia, Senior Air Quality Engineer 

Reviewed by: David Warner, Director of Permit Services, 

 Leland Villalvazo, Supervising Air Quality Specialist, and 

George Heinen, Supervising Air Quality Engineer 

March 8, 2011 

I. SUMMARY 

Section 185 of the federal Clean Air Act (CAA) Amendments mandates that “Severe” 

and “Extreme” ozone nonattainment areas adopt a rule that requires major stationary 

sources of air pollution to pay nonattainment fees in the event the area fails to reach 

attainment by the required attainment date. Affected businesses would be required to 

pay these fees on an annual basis until the area reaches attainment of the ozone 

standard. These fees, often referred to as “section 185 nonattainment fees” or “clean 

air act fees,” were intended to serve as penalties that would compel major sources that 

had not done all they could to control emissions of ozone precursors to reduce their 

emissions and expedite attainment. In 1990, the CAA set the fee as $5,000 per ton of 

VOC and NOx emitted by the source during the calendar year in excess of 80 percent of 

a facility’s “baseline emissions”. The CAA also required that the fees be adjusted 

annually for inflation based on the Consumer Price Index (CPI). The federal Bureau of 

Labor Statistics currently places the CPI-adjusted rate at $8342 per ton for 2010 

(http://data.bls.gov/cgi-bin/cpicalc.pl). 

The San Joaquin Valley Air Basin (SJVAB) is subject to this fee requirement as the 

District has been classified as “Extreme” non-attainment for the now-revoked 1-hour 

ozone standard with an attainment deadline of November 2010. To satisfy the section 

185 mandate, on May 16, 2002, the District adopted Rule 3170 (Federally Mandated 

Ozone Nonattainment Fee). The District included special provisions to exempt “clean 

units” from the fees and provided for multi-year averaging of emissions to recognize and 

reward businesses that reduced their emissions before the attainment year. 

In January 2010, the U.S. Environmental Protection Agency (EPA) disapproved these 

special provisions and issued a limited approval and limited disapproval (attachment A) 

of the current version of Rule 3170. This action by EPA began an 18-month sanction 

clock, and the District has until August of 2011 to submit a revised program satisfying 
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the requirements of section 185, or Federal sanctions take effect. If the District fails to 

adopt or implement a federally approved 185 fee program, in addition to the customary 

sanction penalties, the EPA will also directly collect the fees, plus interest. Under these 

circumstances all revenues collected will be sent to the federal treasury with no 

accommodation for the fees to be returned to the region from which they were collected. 

In response to calls for added flexibility, in January 2010 EPA also issued a national 

guidance memorandum (attachment B) on section 185 nonattainment fees providing for 

alternative approaches to satisfy the CAA fee requirements, provided such alternatives 

are no less stringent. 

As provided in EPA’s 185 guidance, the District is now proposing an alternative feeequivalent program that will be submitted to EPA for approval into the State 

Implementation Plan (SIP). The District’s Governing Board took the first steps towards 

implementing a fee-equivalent program as provided in the EPA 185 guidance 

memorandum when they approved a motor vehicle fee of $12 per vehicle registered in 

the San Joaquin Valley in October 2010. The total motor vehicle assessment of 

approximately $34 million dollars annually is intended specifically to fill any shortfall in 

the District’s collection of section 185 fees. As part of an alternative equivalent 

program, the District will also re-adopt a version of Rule 3170 that retains many of the 

initial concepts originally adopted in 2002, which were intended to facilitate an equitable 

distribution of responsibility and reward facilities that had invested in clean air 

technology. Finally, the District is proposing a fee-equivalent program tracking system 

to demonstrate, on an annual basis, that the combined revenue streams from Rule 3170 

and the motor vehicle fees are equivalent to the revenue that would have resulted from 

a straightforward application of section 185. 

The workshop scheduled for March 8, 2011 is intended as a forum to discuss, present 

and take comments on the Draft Rule 3170 amendments and the fee-equivalent 

program and associated tracking system. Due to the mandatory timelines for revising 

the rule, we expect the revised rule to be considered for adoption by our Governing 

Board on May 19, 2011. 

II. DISCUSSION OF SECTION 185 ALTERNATIVE FEE-EQUIVALENT 

PROGRAM 

A. Background 

The failure to attain the now-revoked 1-hour ozone standard by November 2010 will 

trigger the imposition of the section 185 nonattainment fees in the Valley. Significant 

progress has been made in reducing the number of one-hour ozone standard 

exceedances, from 50 days over the standard in 1990 when the federal Clean Air Act 

amendments (CAA) were adopted by Congress, to only three days of exceedances in 
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2009. In 2010, the Valley experienced seven days of exceedances, thus triggering the 

section 185 fees. 

When section 185 was first enacted in 1990 by the United States Congress, it was 

intended to serve as a compelling incentive for stationary sources to install additional 

controls to reduce emissions and expedite attainment. Given today's circumstances, 

however, these fees will not have the intended impact in the San Joaquin Valley. With 

the mature air pollution 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 Review for a detailed assessment of various stationary source 

regulations that Valley businesses must comply with. As recently as December 10, 

2010, the state Air Resources Board has determined that the San Joaquin Valley Air 

District has adopted all feasible measures to control emissions from sources under its 

control. Under these circumstances, section 185 has become punitive, with no real 

ability for most facilities to avoid the fee. 

The section 185 nonattainment fees must be invoiced for the first time in 2012, based 

on a comparison between 2010 and 2011 emissions. Under section 185, fees would be 

collected from Valley businesses that are major sources of NOx or VOC emissions. 

The amount that the District estimates would be collected under the section 185 fee 

requirements is approximately $29 million per year. The fees would then continue until 

the District reaches attainment for the now-revoked 1-hour ozone standard. 

B. EPA Section 185 “Equivalent Program” Guidance 

In fulfilling the section 185 Clean Air Act requirements, the District Governing Board has 

directed staff to make use of the flexibility provided by EPA and develop an equivalent 

program that better addresses the Valley’s unique circumstances. Concepts in the 

original version of Rule 3170, such as the clean emissions unit exemption, were 

intended to facilitate an equitable distribution of responsibility and reward facilities that 

had invested in clean air technology, and EPA’s guidance provides the means to 

address EPA disapproval issues while continuing to fulfill that intent. 

Specifically, EPA’s January 5, 2010 guidance memorandum titled, “Guidance on 

Developing Fee Programs Required by Clean Air Act Section 185 for the 1-hour 

Ozone NAAQS,” provides the following alternative approaches to section 185 

nonattainment fee requirements: 

Fee-Equivalent Alternative Programs: In their section 185 guidance memo, EPA 

anticipates that they will be able to approve a program that clearly raises at least as 

much revenue as otherwise required under the basic section 185 fee program if the 

proceeds are spent to pay for emissions reductions of ozone-forming pollutants (NOx 

and/or VOC) in the same geographic area subject to the section 185 program. 
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EPA clearly states in their guidance that such fee-equivalent alternative programs may 

shift the fee burden from the specific set of major stationary sources that are otherwise 

required to pay fees according to section 185, to other non-major sources of emissions, 

including owners/operators of mobile sources. EPA acknowledges that section 185 is 

not strategic in imposing emissions fees on all major stationary sources, including 

already well-controlled sources that have few, if any, options for avoiding fees by 

achieving additional reductions. Therefore, under this option EPA would allow the 

District to recognize through reduced fees those major sources of emissions that have 

already installed the latest technology, and assess the remainder of the total required 

fees on other sources that are not already as well controlled. Under this option, the 

alternative program cannot rely on emissions reductions already required by the 

applicable State Implementation Plan. 

Emissions-Equivalent Alternative Programs: EPA believes that it can approve a 

program that achieves at least as much additional emissions reductions as would be 

expected to result from the fee-minimization incentive of the section 185 fee program. 

In other words, an emissions-equivalent program could be approved if it achieves 

emissions reductions each year that are equal to or greater than the amount of 

emissions against which fees would be assessed each year under the section 185 fee 

program (i.e., actual emissions in excess of 80 percent of the baseline emissions). 

For purposes of estimating the emissions reductions required in such a program, the 

District must assume that sources would reduce their emissions to the fee applicability 

threshold under section 185. The emissions reductions in the alternative program could 

then come from the same set of major sources subject to section 185, or from a 

different set of sources, in whole or in part, so long as all reductions come from within 

the nonattainment area and are equally beneficial in reducing ozone formation. 

Once again, the alternative program cannot rely on emissions reductions already 

required by the applicable State Implementation Plan. 

Alternative Programs Combining Emissions Reductions and Fees: EPA also would 

approve a program that combines features of the above-mentioned 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. For example, if 1000 tons of emissions reductions are needed to demonstrate 

equivalence, the District could instead adopt a program that obtains 600 tons of 

emissions reductions and collect fees totaling $3.34 million (calculated as the remaining 

400 tons times $8342 per ton). 
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C. Implementing an Equivalent Program 

1. Equivalency Considerations: 

In 2002, the District became the first jurisdiction in the nation to submit a section 

185 rule to the EPA. Many other jurisdictions, including some in California, 

missed their corresponding deadlines and have not yet submitted a rule or 

program to the EPA. Some of these jurisdictions have already missed their 

attainment deadline and risk having the federal government collect fees and 

confiscate revenues as described earlier. Given that EPA has already acted to 

disapprove certain provisions of the District rule on this matter, the District cannot 

delay or abate a federal take over by simply submitting a proposed program for 

EPA consideration. Under these circumstances, the District must also receive 

EPA approval of the alternate program within 24 months after EPA’s action on 

the previously adopted rule (or no later than January 2012) to avoid triggering the 

imposition of a Federal Implementation Plan. 

EPA’s section 185 guidance memorandum allows for an alternative 185 fee 

program that is, consistent with Section 172 (e) of the act, ‘not less stringent’, but 

the memo does not provide a template or provide a pre-approved alternative 

program model when utilizing the federal CAA’s equivalency program under 

section 172(e). In fact, EPA makes it clear that a case-by-case approval will be a 

part of EPA’s review, as will a formal public notice-and-comment federal 

rulemaking process. Also a number of environmental groups at the national level 

have expressed desire to take legal action against EPA challenging the legality of 

these alternatives. Therefore, it is critical to carefully consider relevant issues 

and questions and design a program that would be legally defensible and would 

have optimum chance for EPA approval. Towards that end, the District has 

incorporated the following guiding principles in designing the proposed alternative 

program: 

• All emission reductions used in the alternate program must be surplus to 

the District’s 1-hour Extreme Ozone Attainment Demonstration Plan. 

• To better ensure that the alternate program will yield additional reductions 

that expedite attainment of the applicable standard and satisfy section 

185’s intent, the use of emission reductions from measures for which 

credit is already taken in other State Implementation Plans should be 

minimized. New revenue sources and emission control strategies shall be 

given preference. 

• Recognize through reduced fees those major sources of emissions that 

have already installed the latest technology and have few, if any, options 

for avoiding fees by achieving additional reductions. 
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• To the extent possible provide for equitable assignment of responsibility to 

mobile and stationary sources, commensurate to their relative emissions 

and contributions to nonattainment. 

• Exercise all feasible measures to prevent or minimize the likelihood of 

federal take over, imposition of federal fees on valley businesses, and 

confiscation of section 185 fee revenues. 

• To the extent possible, minimize reliance on funding sources or emission 

control strategies over which the District has little or no control. 

• Minimize the use of revenue sources that have quickly-approaching 

sunset provisions, unless appropriate alternatives are identified in 

advance. 

• Refrain from the use of revenue sources for which EPA approval would 

add a cost-prohibitive administrative burden and diminish overall 

effectiveness in reducing emissions, or limit the District’s discretion to fund 

preferred projects. 

• Incorporate comprehensive public reporting and accountability for 

alternate program components that rely on public funds to show 

equivalency. 

• Preference shall be given to funding sources that provide additional cobenefits in satisfying other District emission reduction goals. 

2. Equitable Distribution of Responsibility: 

Under section 185 of the CAA, only stationary sources are subjected to the 

nonattainment penalty fees. This is inherently inequitable, especially in areas 

such as the San Joaquin Valley where stationary sources are already subject to 

some of the toughest air regulations in the nation. Since 1980, the NOx and 

VOC emissions from stationary sources in San Joaquin Valley have been 

reduced by 80 percent. Mobile source emissions have been reduced by 40 

percent during the same time period. Today, more than 80 percent of the 

Valley’s NOx emissions, the leading contributor to Valley’s ozone and particulate 

exceedances, comes from mobile sources outside of the District’s regulatory 

jurisdiction. Under the alternative options provided in the EPA’s guidance 

memorandum, the District can craft an equivalent program that to the extent 

possible would defray the cost to stationary sources through the use of existing 

or new mobile source revenues. 
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3. The Fee-Equivalent Program 

The alternative fee program that District staff is proposing to send to EPA for 

approval into the SIP consists of three main components: one, District Rule 3170 

will be used to collect 185 fees from major stationary sources that have not done 

all that they can do to reduce their stationary source emissions; two, AB2522 

motor vehicle fees will be used to supplement the section 185 fees collected 

under Rule 3170; and three, a fee tracking and reporting system to verify that this 

overall program meets the section 185 fee obligation. 

a. Rule 3170 

The proposed rule amendments, discussed in detail below, will address the 

deficiencies identified by EPA in their limited approval/disapproval. It should 

be noted that in EPA’s limited approval and disapproval of Rule 3170, they 

did not consider some of the alternate fee requirements in the rule because of 

the need to meet a deadline imposed by a consent decree, and that the 

District did not formally request for EPA to review the rule with the principles 

of section 172(e). 

b. AB2588 Motor Vehicle Fee 

On October 21, 2011, the District Governing Board took the first steps 

towards implementing a fee equivalent program as provided in the EPA 

guidance memorandum discussed above when they approved a motor 

vehicle fee of $12 per vehicle registered in the San Joaquin Valley. The total 

assessment of approximately $34 million dollars annually is intended 

specifically to fill any shortfall in the District’s collection of section 185 fees. 

See attachment C for the related District staff report, and attachment D for 

the Board’s adopted resolution. 

This action adheres to all of the guiding principles discussed above that were 

established to assure the defensibility of an equivalent program: 

• The motor vehicle fee assessment is a new source of revenue 

authorized by Assembly Bill 2522 (Arambula, 2008). 

• The District Governing Board implemented it specifically to address any 

shortfall in section 185 fees created by Rule 3170 in implementing the 

District’s intent to provide well-controlled units an exemption from the 

fees. 

• This new revenue and the emissions reduction incentive programs that 

will be funded by the new revenue are not relied on in, and are therefore 

surplus of, the District’s 1-hour Extreme Ozone Attainment 

Demonstration Plan. 
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• The resulting distribution of funding of the equivalent section 185 

program is roughly commensurate with each sector’s contribution to the 

ozone precursor inventory in the Valley, with the stationary source 

contribution being roughly 20% in terms of both emissions and revenue, 

and mobile sources making up the balance. 

• The District Governing Board has discretion over this new motor vehicle 

fee revenue source, and has chosen to sunset the related fee-collection 

concurrently with a demonstration of attainment of the one-hour ozone 

standard, which is also the date of cessation of the section 185 penalty 

fee requirement and the end of any fee obligation under Rule 3170. 

This new revenue source, at $12 per vehicle registered in the San Joaquin 

Valley, is sized to adequately address any shortfall in revenues created by 

the District’s proposed “clean emissions unit” exemption, including a cushion 

that is intended to address any shortcomings in the District’s estimates of 

section 185 fees. The District has estimated that a straightforward application 

of section 185 in the San Joaquin Valley would result in approximately $29 

million in revenues. However, because the basis of these fees will be a 

comparison of actual emissions during a particular year to 80% of the 

emissions during 2010, and neither of those emissions numbers are currently 

known, the District had to make assumptions based on the latest known 

emissions inventory information, generally 2008 and 2009 data. In addition, 

more units will be replaced and retrofit as a result of the District’s aggressive 

control measure development and attrition. In fact, this proposed rule’s 

innovative clean emissions unit exemption is also expected to encourage 

sources to control their previously under-controlled sources in an effort to 

avoid paying future fees. 

In sum, these unknowns provide some uncertainty in the District’s 

estimations, particularly over the multiple years that this fee is expected to be 

in place. However, the anticipated new revenue of $34 million dollars (at 

least 2.8 million registered motor vehicles in the San Joaquin Valley @ $12 

per vehicle) should be sufficient to cover all but the most dire estimation 

shortcomings. 

c. Fee Equivalency Tracking System 

Finally, the District is proposing a fee equivalency tracking system to 

demonstrate, on an annual basis, that the combined revenue streams from 

Rule 3170 and the AB 2522 motor vehicle fees are equivalent to the revenue 

that would have resulted from a straight application of section 185. The 

District will demonstrate on an annual basis that our fee-equivalent program – 

the combination of revenues from Rule 3170 and from the AB 2522 motor 

vehicle fees – collects no less fee revenue than a straightforward fee 

assessment under section 185. 
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The following are the District’s commitments to establish and administer the 

tracking system: 

• Actual Emission Tracking System 

The APCO will implement a system for tracking all information necessary 

to demonstrate that the sum of fees collected under this rule plus AB 2522 

motor vehicle fees to be collected during the billing year is equal to or 

greater than the total penalty fee that would be collected under a literal 

application of the federal ozone nonattainment fee, codified in section 185 

of the federal CAA. 

To that end, Rule 3170 will require that each applicable major source 

submit annual emission statements that detail the emissions from each of 

their permitted units, and indicate those identified as clean emissions 

units. The District will also verify the basis of the source’s determination 

that the unit qualifies as a clean emissions unit. 

The District will then determine the annual amount of NOx and VOC 

emissions generated from each permitted unit, including clean units, for 

the reporting year in question, and then calculate the corresponding 185 

fee amount as if section 185 were strictly applied. 

• Annual Fee Equivalency Demonstration Report 

On or before September 1 of each billing year, the APCO will prepare an 

Annual Section 185 Fee Equivalency Demonstration Report. The report 

will include: 

o the sum of emissions of NOx and VOC from all major sources of 

those pollutants for the appropriate reporting period; 

o the sum of emissions of NOx and VOC from clean units at those 

sources; 

o the total fees collected under Rule 3170 for the billing year; and 

o the total fees collected under the AB 2522 motor vehicle fee 

program. 

The report shall demonstrate that the sum of fees collected under Rule 

3170 plus AB 2522 motor vehicle fees to be collected during the billing 

year is equal to or greater than the total penalty fee that would be 

collected under a literal application of the federal ozone nonattainment 

fee, codified in section 185 of the federal CAA. The report shall be made 

available to the public and mailed to Region IX of the federal EPA no later 

than September 1 of the each billing year. 
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This approach, as demonstrated above, has all of the components necessary for 

EPA to find that this program is an approvable “fee-equivalent” program, and we 

will ask them to do so simultaneously with their approval of this revised Rule 

3170. 

D. Discussion of AB 2522 

The effectiveness and approvability of the fee-equivalent program discussed above 

depends on the reliability of new revenues anticipated due to the Governing Board’s 

activation of Assembly Bill 2522 (attachment E), so an analysis of that reliability is 

warranted. 

AB 2522 requires specific decisions and steps be taken in order to implement the motor 

vehicle fees: 

• Majority vote of the Governing Board and a majority vote of the elected members 

of the Board. 

This requirement was met by unanimous vote of the Board. Twelve of 

fifteen Board members were present, and ten of thirteen elected members 

were present. All present voted for approval. 

• 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. 

This requirement was met with the adoption of the attached resolution 

(attachment D). 

• ARB makes the following findings: 

o The District has undertaken all feasible measures to reduce nonattainment 

air pollutants from sources within the District's jurisdiction and regulatory 

control. 

o 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. 

ARB has already made the findings required above (attachment F) 

and has forwarded the necessary information to the state 

Department of Motor Vehicles (attachment G) to start their 

administrative, non-discretionary process of fee collection. The 

DMV is expected to initiate the collection of the AB 2522 fee 

approximately 9 months after receiving ARB’s findings, 

approximately September or October 2011. 
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Therefore, the collection of the AB 2522 motor vehicle fees is assured and can be relied 

on to make up any shortfall in section 185 fee collection. 

E. EPA Approval and Disapproval of Rule 3170 

District Rule 3170 (Federally Mandated Ozone Nonattainment Fee) requires major 

sources over 10 tons per year of volatile organic compound and nitrogen oxide 

emissions to pay a fee if the SJVAB fails to attain the 1-hour national ambient air quality 

standard (NAAQS) for ozone. The attainment year for the valley’s 1-hour extreme 

ozone designation is 2010. The fee must be paid beginning in the second year after the 

attainment year, and in each calendar year thereafter, until the area is redesignated to 

attainment of the 1-hour ozone standard. 

Originally, section 185 of the 1990 CAA set the penalty fee amount at $5,000 per ton of 

ozone precursors (NOx and VOC). Section 185 requires that the penalty fee be 

adjusted annually based on the Consumer Price Index. The federal Bureau of Labor 

Statistics currently places the CPI-adjusted rate at $8342 per ton for 2010 

(http://data.bls.gov/cgi-bin/cpicalc.pl). 

On January 12, 2010, EPA published in the Federal Register (75 FR1716) a final limited 

approval and limited disapproval of District Rule 3170 (Federally Mandated Ozone 

Nonattainment Fee) for inclusion in the SIP. The EPA’s final approval/disapproval was 

effective on February 12, 2010. The main disapproval issues in the existing rule are: 

 

• Clean Unit Fee Exemption; 

• Fee Exemption for units that begin operation after the attainment year; 

• Standard two-year baseline period calculation, instead of one year; 

• Omission of “irregular, cyclical, or otherwise vary significantly from year to year” 

language for alternative baseline periods; and 

• Reference to the then-current Rule 2201 Major Source definition at 25 tons per 

year NOx and VOC instead of 10 tons per year. 

The EPA’s final limited disapproval triggered an 18-month sanction clock requiring the 

District to submit a SIP approval revision of Rule 3170 before August 12, 2011. Unless 

the rule deficiency is corrected and a SIP approvable rule is submitted by the District 

before the sanction deadline expires, EPA will impose federal sanctions which include 

withholding highway funds and an increase emission offset ration requirement for 

stationary sources within the San Joaquin Valley. In addition to the 18-month sanction, 

the District could face a Federal Implementation Plan by EPA if the District fails to 

submit a fully approvable SIP revision of Rule 3170 within 24 months. At that point, 

EPA would impose the section 185 fees on valley sources and the penalty fees will be 

collected by EPA and the funds will be sent to the national treasury. 
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F. Proposed Rule Amendments 

The proposed changes are included in the attached Draft Rule 3170 (3/4/11 version) in 

strikeout and underline format. The following changes were made to address EPA’s 

specific comments: 

• Clean Unit Fee Exemption – This exemption is maintained to provide 

consideration to those facilities that have done all that they can to reduce 

emissions, as discussed above. However, any shortfall in funds is supplanted by 

the “fee-equivalent” program. 

• Fee Exemption for units permitted after the attainment year – This exemption is 

unnecessary, and has been deleted, since all new units will be required to be 

equipped with BACT or will be required to pay the fee for the full amount of the 

new emissions. An exception is granted for replacement units, and language has 

been added to allow the use of baseline emissions of the unit replaced in the fee 

calculation. 

• Two-year baseline period calculation as standard, instead of one year – Changed 

to a one-year standard baseline period, but allow two-year calculations provided 

the facility provides a demonstration that emissions are “irregular, cyclical, or 

otherwise vary significantly from year to year”, consistent with EPA’s comments 

and their March 21, 2008 memorandum entitled "Guidance on Establishing 

Emissions Baselines under Section 185 of the CAA for Severe and Extreme 

Ozone Nonattainment Areas that Fail to Attain the 1-hour Ozone NAAQS by their 

Attainment Date“ on alternate baselines; 

• Omission of “irregular, cyclical, or otherwise vary significantly from year to year” 

language for calculating baseline emissions – Added, see above. 

• Reference to the then-current Rule 2201 Major Source definition of 25 tons per 

year NOx and VOC instead of 10 tons per year – Rule 2201 has been modified 

and approved by EPA into the SIP in the interim and now includes the 

appropriate language indicating that sources with potential emissions above 10 

tons per year of NOx or VOC are major sources. 

In addition, sections have been added to the rule clarifying that the fees cease upon 

EPA concurrence with a District finding that the national one-hour ozone standard has 

been met, and requiring facilities to submit emissions information as necessary to 

invoice the fees and determine compliance with the District’s fee-equivalency obligation. 
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IV. RULE DEVELOPMENT PROCESS 

EPA’s final limited approval and limited disapproval (effective February 12, 2010) 

provides 18 months to submit an approvable section 185 fee program for the revoked 

one-hour standard. Thus for this requirement, EPA mandates that Rule 3170 needs to 

be submitted into the SIP before August 12, 2011 (75 FR1716). 

District Staff will conduct a workshop on March 8, 2011 to present, discuss and take 

comments on the proposed rulemaking. The comments received from the public, 

affected sources, ARB, and EPA during the public scoping meeting process will be 

incorporated into the draft rules as appropriate. The anticipated adoption date is May 

19, 2011 and the District’s section 185 fee equivalent program will be forwarded to EPA 

for inclusion into the SIP. 

V. COST EFFECTIVENESS AND SOCIOECONOMIC IMPACT ANALYSIS 

Pursuant to CH&SC Section 40920.6(a), the District is required to analyze the cost 

effectiveness of new rules or rule amendments that implement Best Available Retrofit 

Control Technology (BARCT). The draft amendments do not add BARCT requirements 

and therefore are not subject to the cost effectiveness analysis mandate. 

Additionally, state law requires the District to analyze the socioeconomic impacts of any 

proposed rule amendment that significantly affects air quality or strengthens an 

emission limitation. The draft amendments will have neither effect and are mandated by 

federal law. Therefore they not subject to the socioeconomic analysis mandate. 

VI. RULE CONSISTENCY ANALYSIS 

Pursuant to CH&SC Section 40727.2 (g) a rule consistency analysis of the draft rule is 

not required. The draft rule does not strengthen emission limits or impose more 

stringent monitoring, reporting, or recordkeeping requirements. 

VII. ENVIRONMENTAL ASSESSMENT 

The purpose of this project is to amend existing District Rule 3170 (Federally Mandated 

Ozone Nonattainment Fee), which was adopted by the District’s Governing Board on 

May 16, 2002. Rule 3170 assess a fee for volatile organic compounds (VOCs) and 

oxides of nitrogen (NOx) emissions from major source facilities, as required by Sections 

185 and 182(f) of the FCAA. This project also will develop an alternative fee 

equivalency program to satisfy the fee requirements of section 185 of the federal Clean 

Air Act. 
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Pursuant to the California Environmental Quality Act (CEQA), District staff has reviewed 

the possible environmental impacts of the proposed rule amendments. District staff 

concludes that there is no substantial evidence in the whole record before the District 

that the proposed amendments to Rule 3170 and to the proposed alternative fee 

equivalency program would cause any adverse effects on the environment. As such, 

District staff concludes that it can be seen with certainty that the proposed amendments 

to Rule 3170 and the development an alternative fee equivalency program to satisfy the 

fee requirements of section 185 of the federal Clean Air Act will not have any significant 

adverse effect on the environment. Although the District finds that the project could be 

considered exempt per the general rule that CEQA applies only to projects which have 

the potential for causing a significant effect on the environment (CEQA Guidelines 

§15061(b)(3)), to provide clarity in the administrative record, District staff will prepare a 

Negative Declaration for Board approval supporting adoption of the proposed project. 

Approval of the draft amendments does not change the meaning of current rule 

language and implementation of an alternative fee equivalency program to satisfy the 

fee requirements of section 185 of the federal Clean Air Act, would not impose new 

regulatory requirements. Thus, air quality and perhaps greenhouse gas emissions are 

the only potentially affected environmental resources. Therefore, consistent with 

California Code of Regulations, Title 14, Division 6, Chapter 3, Section 15006 (Reducing 

Delay and Paperwork) the scope of the Negative Declaration will focus on potential air 

quality and greenhouse gas emission impacts. 

Attachment A – EPA’s Final Rule partially approving and partially disapproving District Rule 3170 

Attachment B – EPA’s “Guidance on Developing Fee Programs Required by Clean Air Act Section 185...” 

Attachment C – District Staff’s Report, October 21, 2010 

Attachment D – District’s ARB Findings Request and Signed Board Resolution, October 21, 2010 

Attachment E – Assembly Bill 2522 

Attachment F – ARB’s Executive Order G-10-126, making findings required by AB 2522 

Attachment G – ARB’s request to the California Department of Motor Vehicles