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 a ttainment 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 penalti es that would compel major sources that had not done all they could to control emissi ons 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 sour ce during the calendar year in excess of 80 percent of a facility’s “baseline emissions”. The C AA also required that the fees be adjusted annually for inflation based on the Consumer Pric e Index (CPI). The federal Bureau of Labor Statistics currently places the CP I-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 incl uded special provisions to exempt “clean units” from the fees and provi ded for multi-year averaging of emissions to recognize and

reward businesses that reduced their em issions before the attainment year.

In January 2010, the U.S. En vironmental Protection Agen cy (EPA) disapproved these special provisions and issued a limited approval and limited di sapproval (attachment A)

of the current version of Rule 3170. This action by EPA began an 18-month sanction clock, and the District has unt il August of 2011 to submit a revised program satisfyingSan Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 the requirements of section 185, or Federal sanctions take effect. If the District fails to adopt or implement a federa lly 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 sect ion 185 nonattainment fees providing for alternative approaches to satisf y the CAA fee requirements, provided such alternatives are no less stringent.

As provided in EPA’s 185 guidance, the Distr ict is now proposing an alternative feeequivalent program that will be submitted to EPA for approval into the State Implementation Plan (SIP). The District’s Go verning Board took the first steps towards implementing a fee-equival ent program as provided in the EPA 185 guidance memorandum when they approved a motor vehicl e 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 int ended specifically to fill any shortfall in

the District’s collection of section 185 fees . As part of an alte rnative equivalent program, the District will also re-adopt a versi on of Rule 3170 that retains many of the initial concepts originally adopted in 2002, whic h were intended to facilitate an equitable distribution of responsibility and reward fa cilities that had invested in clean air technology. Finally, the District is proposi ng a fee-equivalent pr ogram tracking system to demonstrate, on an annual bas is, 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 standar d in 1990 when the federal Clean Air Act amendments (CAA) were adopted by Congress, to only three days of exceedances inSan Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 2009. In 2010, the Valley experienced seven da ys 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 fo r 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 signific ant investments and in stalled 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 comp ly with. As recently as December 10, 2010, the state Air Resource s 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, se ction 185 has become puni tive, with no real ability for most facilities to avoid the fee.

The section 185 nonattainment fees must be in voiced 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 ma jor 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 f ees would then continue until

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

B. EPA Section 185 “Equivalent Program” Guidance

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

directed staff to make use of the flexib ility 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 c ontinuing to fulfill that intent.

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

### Guidance on Developing Fee Programs R equired by Clean Air Act Section 185 for the 1-hour Ozone NAAQS,” provides the following alternat ive 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 t he basic section 185 f ee program if the proceeds are spent to pay for emissions r eductions of ozone-forming pollutants (NOx and/or VOC) in the same geographic area subject to the section 185 program.San Joaquin Valley Unified Air Pollution Control District

Draft Staff Report: Rule 3170 March 8, 2011

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for Rule 3170 EPA clearly states in their guidance that su ch fee-equivalent alte rnative programs may

shift the fee burden from the s pecific set of major stationar y sources that are otherwise required to pay fees accordi ng to section 185, to other non-major sources of emissions, including owners/operators of m obile sources. EPA acknowledges that section 185 is not strategic in imposing em issions fees on all major stationary sources, including already well-controlled source s that have few, if any, opt ions for avoiding fees by achieving additional reductions. Therefor e, under this option EPA would allow the District to recognize through reduced fees t hose major sources of emissions that have already installed the latest technology, and a ssess the remainder of the total required

fees on other sources that ar e 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-minimizati on incentive of the se ction 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 gr eater than the amount of emissions against which fees would be asse ssed 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 r eductions required in such a program, the

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

threshold under section 185. The emissions r eductions in the alternative program could then come from the same set of major s ources 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 benef icial in reducing ozone formation.

Once again, the alternative program cannot rely on emissions reductions already required by the applicable St ate Implementation Plan.

Alternative Programs Combining Emissions Reductions and Fees: EPA also would approve a program that combi nes features of the above-m entioned alternatives. Under this option a part of the reduc tions that are necessary to show equivalence come from program components that direct ly achieve the estimated reductions, and the remainder could come from imposition of fees on a se t of sources identified in the alternate program. For example, if 1000 tons of emissions reducti ons are needed to demonstrate equivalence, the District could instead adopt a program that obtains 600 tons of

emissions reductions and collect fees totali ng $3.34 million (calculated as the remaining 400 tons times $8342 per ton).San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 C. Implementing an Equivalent Program

1. Equivalency Considerations:

In 2002, the District became the first jurisd iction in the nation to submit a section 185 rule to the EPA. Many other jurisd ictions, including some in California, missed their corresponding deadlines and hav e not yet submitted a rule or program to the EPA. Some of these jurisdictions have already missed their attainment deadline and risk having the f ederal government collect fees and

confiscate revenues as described earlier. Given that EPA has already acted to disapprove certain provisions of the Distric t 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 circumst ances, the District must also receive EPA approval of the alter nate program within 24 mont hs 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 a llows 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 utilizi ng the federal CAA’s equ ivalency 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 forma l public notice-and-comment federal rulemaking process. Also a number of env ironmental groups at the national level have expressed desire to take legal acti on 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 principl es in designing the proposed alternative

program:

• All emission reductions used in the al ternate 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 r eductions from measures for which credit is already taken in other State Implementati on Plans should be

minimized. New revenue sources and em ission control strategies shall be given preference.

• Recognize through reduced fees those major sources of emissions that have already installed the latest tec hnology and have few, if any, options for avoiding fees by achieving additional reductions.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 • To the extent possible provide for equitable assignment of responsibility to mobile and stationary sources, commens urate to their relative emissions

and contributions to nonattainment.

• Exercise all feasible measures to prevent or minimize the likelihood of federal take over, imposition of f ederal 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 s ources 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 administr ative burden and diminish overall effectiveness in reducing emissions, or lim it 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 Distributi on of Responsibility:

Under section 185 of the CAA, only stat ionary sources are subjected to the nonattainment penalty fees. This is inher ently inequitable, especially in areas such as the San Joaquin Valley where stat ionary sources are already subject to some of the toughest air regulations in the nation. Sinc e 1980, the NOx and

VOC emissions from stat ionary sources in San Joaquin Valley have been reduced by 80 percent. Mobile source emissions have been reduced by 40 percent during the same ti me period. Today, more than 80 percent of the Valley’s NOx emissions, the leading contri butor to Valley’s ozone and particulate exceedances, comes from mobile source s outside of the District’s regulatory jurisdiction. Under the alternative options provided in the EPA’s guidance memorandum, the District can craft an equiva lent program that to the extent possible would defray the cost to stationary sources through the use of existing

or new mobile source revenues.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 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 thr ee 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 st ationary source emi ssions; two, AB2522 motor vehicle fees will be used to suppl ement the section 185 fees collected under Rule 3170; and three, a fee tracking and reporting system to verify that this overall program meets the se ction 185 fee obligation.

a. Rule 3170

The proposed rule amendments, discuss ed in detail below, will address the deficiencies identified by EPA in their limited approval/disapproval. It should

be noted that in EPA’s limit ed 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 Gove rning 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 approximat ely $34 million dollars annually is intended specifically to fill any shor tfall in the District’s collect ion of section 185 fees.
See attachment C for the related Distr ict staff report, and attachment D for the Board’s adopted resolution.

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

established to assure the defens ibility 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 implement ed it specifically to address any

shortfall in section 185 f ees created by Rule 3170 in implementing the District’s intent to provide well-c ontrolled 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.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 • The resulting distribution of f unding of the equivalent section 185 program is roughly commensurate with each sector’s contribution to the ozone precursor inventory in the Va lley, with the stationary source contribution being roughly 20% in te rms of both emissions and revenue, and mobile sources making up the balance.

• The District Governing Board has discr etion 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 v ehicle 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 shortcom ings in the District’s estimates of

section 185 fees. The District has estima ted 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 duri ng a particular year to 80% of the emissions during 2010, and neither of t hose emissions number s are currently known, the District had to make a ssumptions based on the latest known emissions inventory information, gener ally 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 exempti on is also expected to encourage sources to control their previously unde r-controlled sources in an effort to avoid paying future fees.

In sum, these unknowns provide so me uncertainty in the District’s estimations, particularly over the multiple years that this fee is expected to be in place. However, the anticipat ed new revenue of $34 million dollars (at least 2.8 million registered motor vehicl es in the San Joaquin Valley @ $12 per vehicle) should be sufficient to cove r 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 fr om a straight applicati on of section 185. The

District will demonstrate on an annual basis that our f ee-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.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 The following are the District’s commitm ents 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 dur ing the billing year is equal to or greater than the total penal ty fee that would be co llected under a literal application of the federal ozone nonattainm ent fee, codified in section 185
of the federal CAA.

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

submit annual emission stat ements that detail the em issions from each of their permitted units, and indicate t hose identified as clean emissions units. The District will also verify t he basis of the source’s determination that the unit qualifies as a clean emissions unit.

The District will then determine t he annual amount of NOx and VOC emissions generated from each permi tted unit, including clean units, for the reporting year in question, and t hen 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 appr opriate 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 demonstrat e 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 feder al ozone nonattainment fee, codified in section 185 of the f ederal 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.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 This approach, as demonstrated above, has all of the components necessary for EPA to find that this program is an approvable “fee-equival ent” 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 source s within the District's jurisdiction and regulatory

control.

o The District has notified ARB that f ees have been adopted pursuant to this section and provided ARB with an estimate of the total f unds 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 (a ttachment G) to start their administrative, non-discretionary pr ocess of fee collection. The DMV is expected to initiate t he collection of the AB 2522 fee approximately 9 months after receiving ARB’s findings, approximately September or October 2011.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 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 t he 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 pai d beginning in the second year after the attainment year, and in each calendar year thereafter, until the ar ea 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). Secti on 185 requires that the penalty fee be adjusted annually based on the C onsumer Price Index. T he 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 Dis trict Rule 3170 (Federally Mandated Ozone Nonattainment Fee) for inclusion in the SI P. The EPA’s final approval/disapproval was effective on February 12, 2010. The main disappr oval issues in the existing rule are:

• Clean Unit Fee Exemption;

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

• Standard two-year baseline period ca lculation, 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 disappr oval triggered an 18-month sanction clock requiring the District to submit a SIP appr oval revision of Rule 3170 before August 12, 2011. Unless the rule deficiency is corre cted 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 em ission offset ration requirement for stationary sources within the San Joaquin Valley. In addition to the 18-month sanction, the District could face a Federal Implement ation Plan by EPA if t he District fails to submit a fully approvable SIP revision of Ru le 3170 within 24 months . At that point, EPA would impose the section 185 fees on valle y sources and the pena lty fees will be collected by EPA and the funds will be s ent to the national treasury.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 F. Proposed Rule Amendments

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

strikeout and underline format. The followi ng changes were made to address EPA’s specific comments:

• Clean Unit Fee Exemption – This ex emption is maintained to provide

consideration to those facilities that have done all that t hey can to reduce emissions, as discussed above. However, any shortfall in funds is supplanted by the “fee-equivalent” program.

• Fee Exemption for units pe rmitted 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 gr anted for replacement units, and language has

been added to allow the use of baseline emi ssions 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 baseli ne period, but allow two-y ear 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 ent itled "Guidance on Establishing

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

Ozone Nonattainment Areas t hat 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 sour ces with potential emissions above 10 tons per year of NOx or VOC are major sources.

In addition, sections have been added to the ru le 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.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 IV. RULE DEVELOPMENT PROCESS

EPA’s final limited approval and limited dis approval (effective February 12, 2010) provides 18 months to subm it an approvable section 185 fee program for the revoked one-hour standard. Thus for this requirem ent, EPA mandates that Rule 3170 needs to
be submitted into the SIP bef ore August 12, 2011 (75 FR1716).

District Staff will conduct a workshop on Marc h 8, 2011 to present, discuss and take comments on the proposed rulemaking. T he comments received from the public, affected sources, ARB, and EPA during t he 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 sect ion 185 fee equivalent program will be forwarded to EPA
for inclusion into the SIP.

V. COST EFFECTIVENESS AND SO CIOECONOMIC 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 dra ft 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 dr aft amendments will have neither effect and are mandated by federal law. Therefore they not subjec t 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 limit s 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 facilitie s, as required by Sections 185 and 182(f) of the FCAA. Th is project also will develop an alternative fee equivalency program to satisfy the fee requirements of sect ion 185 of the federal Clean

Air Act.San Joaquin Valley Unified Air Pollution Control District

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for Rule 3170 Pursuant to the California Envi ronmental Quality Act (CEQA) , District staff has reviewed the possible environmental im pacts of the proposed rule amendments. District staff

concludes that there is no s ubstantial evidence in the whol e 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 s een with certainty that the proposed amendments to Rule 3170 and the development an alternativ e fee equivalency program to satisfy the fee requirements of section 185 of the federal Clean Air Ac t 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 si gnificant effect on the environment (CEQA Guidelines §15061(b)(3)), to provide clarity in the admin istrative record, District staff will prepare a Negative Declaration for Board approval suppor ting 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 secti on 185 of the federal Clean Air Act, would not impose new regulatory requirements. Thus, air qua lity and perhaps greenhouse gas emissions are the only potentially affected environmental re sources. Therefor e, consistent with California Code of Regulations , Title 14, Division 6, Chapter 3, Section 15006 (Reducing Delay and Paperwork) the scope of the Negat ive Declaration will focus on potential air quality and greenhouse gas emission impacts.

Attachment A – EPA’s Final Rule partially approv ing 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 R equest 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 Ca lifornia Department of Motor Vehicles