UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

REGION IX AIR DIVISION

Technical Support Document 

for

EPA’s Rulemaking for the

California State Implementation Plan

as submitted by the California Air Resources Board

Regarding

San Joaquin Valley Unified Air Pollution Control District

Rule 3170, “Federally Mandated Ozone Nonattainment Fee”

Prepared by: Lily Wong

July 19, 2011
2

TABLE OF CONTENTS

1. Rule Identification

2. Background

a. Clean Air Act Section 185 Fees

b. San Joaquin Valley 1-Hour Ozone Nonattainment Status

c. Current SIP-Approved Rule 3170 – Limited Approval/Limited Disapproval

d. Legal Rationale For Alternative Programs

3. Rule Summary

a. Overview of SJVUAPCD’S Alternative Equivalent 185 Program

b. Stationary Source Fees

c. Motor Vehicle Registration Fees

d. 185 Fee-Equivalency Demonstration

4. EPA Review Criteria

a. Enforceability

b. Rule Relaxation

c. Section 185 of the Clean Air Act

5. EPA Evaluation

a. Enforceability

b. Rule Relaxation

c. Section 185 of the Clean Air Act

6. EPA Action

7. Attachments
3

1. RULE IDENTIFICATION

Agency: San Joaquin Valley Unified Air Pollution Control District

(SJVUAPCD)

Subject of this TSD: Rule 3170 “Federally Mandated Ozone Nonattainment Fee” and

SJVUAPCD Alternative Equivalent 185 Program 

Adopted: May 19, 2011

Submitted: June 14, 2011

Current SIP-Approved

Rule: Adopted: May 16, 2002

Submitted: August 6, 2002

Approved1: January 13, 2010, effective February 12, 2010

2. BACKGROUND: 

a. Clean Air Act Section 185 Fees

Under Sections 182(d)(3), (e), (f) and 185 of the 1990 Clean Air Act Amendments (CAA 

or the Act), States with ozone nonattainment areas classified as severe or extreme are required to

submit a SIP revision that requires major stationary sources of volatile organic compounds 

(VOC) or oxides of nitrogen (NOx) emissions to pay a fee. Under CAA section 185(a), the 

required SIP revision must provide for payment of the fees, computed in accordance with section 

185(b), if the severe or extreme nonattainment area in which such sources are located has failed

to attain the 1-hour ozone standard by the applicable attainment date, for each calendar year 

beginning after the attainment date.

Although EPA revoked the 1-hour ozone standard (effective June 15, 2005), during the 

transition from the 1-hour ozone to the 8-hour ozone standard, EPA required 1-hour 

nonattainment areas to remain subject to certain requirements pertaining to the area’s previous 1-

hour classification, as ozone anti-backsliding requirements, for continued progress toward the 

1997 ozone standards. 

Initially, our rules to address the transition from the 1-hour to the 8-hour ozone standard

did not include the section 185 fee penalty requirement as one of the measures necessary to meet 

Clean Air Act anti-backsliding requirements.2 However, on December 23, 2006, the United 

States Court of Appeals for the District of Columbia Circuit upheld the revocation of the 1-hour 

standard but determined that EPA should not have removed from its anti-backsliding 

requirements the application of the section 185 fee provision for severe and extreme 

nonattainment areas that failed to attain the 1-hour ozone standard by their attainment date. 

South Coast Air Quality Management District v. EPA, 472 F.3d 882 (D.C. Cir. 2006).

 

1 The final action was a limited approval/limited disapproval (January 13, 2010, 75 FR 1716).

2

Final Rule to Implement the 8-hour Ozone National Ambient Air Quality Standard – Phase 1, 69 FR 23951 (April 

30, 2004).
4

San Joaquin Valley 1-Hour Ozone Nonattainment Status

In November 1991, the San Joaquin Valley 1-hour ozone nonattainment area (SJV) was 

classified as a serious nonattainment area by operation of law. See 56 FR 56694 (November 6, 

1991). In November 2001, EPA found that the SJV had failed to attain the 1-hour ozone 

standard by the attainment deadline for serious nonattainment areas (November 15, 1999) and 

reclassified the area as severe. See 66 FR 56476 (November 8, 2001). The State of California 

later requested a reclassification of the SJV from severe to extreme; EPA granted this request to 

reclassify the SJV to an extreme 1-hour ozone nonattainment area on April 16, 2004. See 69 FR 

20550. On April 30, 2004, EPA promulgated ozone area designations for the 8-hour ozone 

standard, and revoked the 1-hour standard, effective, as noted above, June 15, 2005. See 69 FR 

23951. As explained above, although the D.C. Circuit upheld EPA’s decision to revoke the 1-

hour standard, it also ruled that the requirements of section 185 continue to apply to areas that 

failed to meet the standard. Therefore, given the court’s decision and SJV’s classification as an

“extreme” 1-hour ozone nonattainment area, the State of California was required to submit a SIP 

providing for a section 185 fee program in San Joaquin Valley. The SJV is also designated as an 

“extreme” area under the 1997 8-hour ozone national ambient air quality standard (NAAQS). 

b. Current SIP-Approved Rule 3170 – Limited Approval/Limited Disapproval

On January 13, 2010, EPA issued a limited approval/limited disapproval of SJVUAPCD

Rule 3170. EPA found that while the rule strengthened the SIP, it did not fully comply with the 

requirements of section 185. EPA identified the following rule deficiencies which prevented full 

approval: (i) an exemption for units that began operation after the attainment year; (ii) an 

exemption for “clean units;” (iii) the definition of the baseline period as two consecutive years; 

(iv) a provision to allow averaging of baseline emissions over 2-5 years); and (v) a definition of 

“major source” inconsistent with the CAA.

EPA’s limited approval/limited disapproval started sanctions clocks under section 179 of 

the Act and our regulations at 40 CFR 52.31. Unless EPA approves a subsequent SIP revision 

which corrects the deficiencies, offset sanctions would become effective August 12, 2011, and 

highway sanctions would become effective February 12, 2012. 

c. Legal Rationale For Alternative Program

EPA is proposing that states can meet the 1-hour ozone section 185 obligation through a 

SIP revision containing either the fee program prescribed in section 185 of the Act, or an 

equivalent alternative program. As further explained below, EPA is proposing that an alternative 

program may be acceptable if EPA determines, through notice-and-comment rulemaking, that it 

is consistent with the principles of section 172(e) of the CAA.3

 

3 EPA has previously set forth this reasoning in a memorandum from Stephen D. Page, Director, Office of Air 

Quality Planning and Standards, to Air Division Directors, “Guidance on Developing Fee Programs Required by 

Clean Air Act Section 185 for the 1-hour Ozone NAAQS,” January 5, 2010. On July 1, 2011, the D.C. Circuit Court 

of Appeals vacated this guidance, on the ground that it was final agency action for which notice-and-comment 

rulemaking procedures were required. NRDC v. EPA, No. 10-1056, 2011 WL 2601560, C.A.D.C. 2011. In

today’s notice, we are applying the court’s directive to follow the rulemaking requirements set forth in the 

Administrative Procedures Act to inform our consideration of section 185 and alternative fee programs. We are 
5

Section 172(e) is an anti-backsliding provision of the CAA that requires EPA to develop 

regulations to ensure that controls in a nonattainment area are “not less stringent” than those that 

applied to the area before EPA revised a national ambient air quality standard (NAAQS) to make 

it less stringent. In the Phase 1 ozone implementation rule for the 1997 ozone NAAQS 

published on April 30, 2004 (69 FR 23951), EPA determined that although section 172(e) does 

not directly apply where EPA has strengthened the NAAQS, as it did in 1997, it was reasonable 

to apply the same anti-backsliding principle that would apply to the relaxation of a standard for 

the transition from the 1-hour NAAQS to the more stringent 1997 8-hour NAAQS. As part of 

applying the principles in section 172(e) for purposes of the transition from the 1-hour standard 

to the 1997 8-hour standard, EPA can either require states to retain programs that applied for 

purposes of the 1-hour standard, or alternatively can allow states to adopt alternative programs, 

but only if such alternatives are determined through notice-and-comment rulemaking to be “not 

less stringent” than the mandated program.

EPA has identified three possible types of alternative programs that could satisfy the 

section 185 requirement: (i) those that achieve the same emissions reductions; (ii) those that 

raise the same amount of revenue and establishes a process where the revenues would be used to 

pay for emission reductions that will further improve ozone air quality; and (iii) those that would 

be equivalent through a combination of both emission reductions and revenues. Accordingly, we 

are proposing to determine through notice-and-comment rulemaking, that States can demonstrate 

an alternative program’s equivalency by comparing expected fees and/or emissions reductions 

directly attributable to application of section 185 to the expected fees and/or emissions 

reductions from the proposed alternative program. Under an alternative program, states might 

opt to shift the fee burden from a specific set of major stationary sources to non-major sources, 

such as owners of mobile sources that also contribute to ozone formation. EPA also believes that 

alternative programs, if approved as “not less stringent” than the section 185 fee program, would 

encourage one-hour ozone NAAQS nonattainment areas to reach attainment as effectively and 

expeditiously as a section 185 fee program, if not more so, and therefore satisfy the CAA’s goal 

of attainment and maintenance of the NAAQS.

In sum, in order for EPA to approve an alternative program as satisfying the 1-hour ozone 

section 185 fee program SIP revision requirement, the state must demonstrate that the alternative 

program is not less stringent than the otherwise applicable section 185 fee program by collecting 

fees equal to or exceeding the fees that would have been collected under 185. 

3. RULE SUMMARY

This section of the TSD primarily summarizes the provisions of Rule 3170 and 

SJVUAPCD’s alternative equivalent 185 program. The evaluation of Rule 3170 and the 

alternative equivalent 185 program against requirements, guidances, or policies is found in the 

Section 5 of the TSD on “EPA Evaluation.” 

 

therefore inviting the public to comment on whether it is appropriate for EPA to consider an alternative program 

and, if so, whether SJVUAPCD’s program would constitute an approvable alternative program under the CAA. 
6

a. Overview of SJVUAPCD’s Alternative Equivalent 185 Program

On June 14, 2011, the California Air Resources Board (CARB), on behalf of 

SJVUAPCD, submitted an alternative section 185 fee program based on a fee equivalency 

demonstration. SJVUAPCD’s alternative equivalent program consists of three primary 

components. One component is the assessment of fees on certain major stationary sources as 

required by Rule 3170. A second component is the collection of an additional $12 for each 

motor vehicle registered in the San Joaquin Valley. This fee is collected by the California 

Department of Motor Vehicle (DMV) and provided to SJVUAPCD for reducing emissions. 

Lastly, Rule 3170 requires SJVUAPCD to annually demonstrate and report to EPA that the 

combined fees from stationary sources and motor vehicle registration are at least equal to the 

amount of fees that would have been collected under a fee program as prescribed in section 185 

of the Act. If SJVUAPCD fails to make that demonstration in any year, Rule 3170 requires 

SJVUAPCD to remedy any shortfall in fees through collecting additional fees from major 

stationary sources as outlined in the rule. 

b. Stationary Source Fees

Rule 3170 applies to all major stationary sources of VOCs and NOx, which in the 

SJVUAPCD are sources that emit 10 tons per year or more of either pollutant.

4

 Sources that fail 

to reduce their emissions by at least 80% of baseline emissions are required to pay fees for each 

ton of emissions above 80%. The rule states that a source’s baseline emissions are its actual 

emissions during the year 2010 or during an alternative baseline period pursuant to section

3.2.2.

5

 The fee rate is $5,000 per ton in 1990 dollars, which must be adjusted for inflation based 

on the Consumer Price Index (CPI).

6

 Based on sources’ annually reported emissions, 

SJVUAPCD will annually assess fees. 

The rule exempts from the assessment of fees “clean emissions units” which are units that 

have advanced emissions controls as defined in the rule (sections 3.5 and 4.0). The Air Pollution 

Control Officer (APCO) will determine which units are clean emissions units and exempt from 

fees. 

Sources subject to fees must pay SJVUAPCD by June 30, 2012, and each June 30

thereafter. Late payments are subject to a penalty (section 5.6). The rule provides that 

assessment of fees stops when EPA determines, after notice and comment rulemaking, that the 

San Joaquin Air Basin has attained the 1-hour ozone standard (section 2.0). 

Rule 3170 retains two provisions that EPA identified as deficiencies in our limited 

 

4

“Major Source” is defined in Rule 3170 section 3.7, which refers to Rule 2202 (New and Modified Stationary 

Source Review Rule). Rule 2202 was adopted December 18, 2008 and approved into the SIP on May 11, 2010. 75 

FR 26104.

5 Rule 3170 section 3.2.2 says, “An alternative baseline period that reflects the average of at least two consecutive 

years within 2006 through 2010, if those years are determined by the APCO as more representative of normal source 

operation.”

6 The CPI adjusted rate in 2009 was $8,755. This was described in Attachment B, Table 2 of the now vacated 

January 5, 2010 guidance on developing 185 programs. 
7

approval/limited disapproval.7 These provisions are: 1) a clean unit exemption which is not 

provided for under section 185; and 2) an allowance for an alternate baseline period of two 

consecutive years (2006-2010) if the APCO determines it would be more representative of 

normal operations.8 The CAA and EPA baseline guidance allows for alternative baseline periods 

only if a source’s emissions are irregular, cyclical, or otherwise vary significantly from year to 

year. However, as described below, EPA has determined that SJVUAPCD’s fee-equivalency

program will compensate for any shortfall in collected funds that might result from these two 

provisions. 

c. Motor Vehicle Registration Fees

In 2008, the state legislature passed AB2522 (now codified as Health and Safety Code 

sections 40610 - 40613), which authorizes SJVUAPCD to increase the amount of motor vehicle 

registration fees by an amount not to exceed $30 per motor vehicle per year. On October 21, 

2010, SJVUAPCD approved the assessment of a new motor vehicle registration fee of $12 per 

motor vehicle per year in the San Joaquin Valley (see SJVUAPCD Final Staff Report, Appendix 

D that included Resolution No. 10-10-14). The registration fees are to be collected by the DMV 

and forwarded to SJVUAPCD pursuant to California’s Vehicle Code section 9250.17 and Health 

and Safety Code sections 40610-40613. SJVUAPCD estimates the motor vehicle registration

fees will result in $34 million per year in revenues (see page 2 of SJVUAPCD Final Staff 

Report). State law requires that these revenues be used to fund incentive-based programs 

resulting in NOx and VOC emissions reductions in the San Joaquin Valley. State law also 

requires that at least ten million dollars of the collected fees 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. See Cal. Health & Safety Code section 

40612((b). 

d. 185 Fee-Equivalency Demonstration

Rule 3170 requires SJVUAPCD to track emissions from stationary sources, fees collected 

from stationary sources, and fees collected from motor vehicle registration. SJVUAPCD will 

determine the amount of fees that would have been collected from stationary sources based on a 

direct implementation of section 185 (section 7.2.1.3). This direct implementation calculation 

would use a baseline of 2010 actual emissions, and would not exempt clean emissions units from 

fees. The rule also requires SJVUAPCD to prepare and submit to EPA an “Annual Fee 

Equivalency Demonstration Report” to demonstrate that the amount of fees in the alternative 185 

fee program raises at least as much revenue as the revenue that would result under the section 

185 fee program if all section 185 sources paid fees for each applicable calendar year. (section

7.2). If the demonstration does not show at least equivalent funds in the alternative section 185 

program, section 7.3 requires SJVUAPCD to collect additional fees from stationary sources to 

make-up the shortfall in funds. 

 

7 There were three additional deficiencies identified in the January 12, 2010 final rule that have been resolved. The 

exemption for new emissions units has been deleted. Rule 3170 no longer defines baseline period as a 2-year period 

consisting of the attainment year and the preceding year. Lastly, Rule 3170 now uses the correct threshold for major 

stationary sources (i.e., 10 tons per year of VOC or NOx) (see footnote 4). 

8 While Rule 3170 retains a provision that allows for an alternative baseline period, the methodology and criteria 

have changed as reflected in SJVUAPCD’s revision to section 3.2.2. 
8

4. EPA REVIEW CRITERIA

EPA considered the criteria described and set forth in the following sections of the CAA and 

guidance documents to evaluate this rule:

a. Enforceability - Section 110(a) of the Clean Air Act requires enforceable SIP requirements. 

Several EPA guidance documents are used to evaluate rule enforceability, including the 

“Bluebook” (Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Clarification to 

Appendix D), November 24, 1978, 52 FR 45044), and “the Little Bluebook” (Guidance 

Document for Correcting Common VOC & Other Rule Deficiencies), EPA Region 9, August 

21, 2001. 

b. Rule Relaxation - EPA must evaluate whether this SIP revision would interfere with any 

applicable requirement concerning attainment and reasonable further progress (RFP) or any 

requirement of the Act (CAA 110(l)) or modify, in a nonattainment area, any SIP-approved 

control requirement in effect before November 15, 1990 (CAA 193).

c. Section 182(d)(3) of the Clean Air Act requires states with severe or extreme 1-hour ozone 

nonattainment areas to submit a SIP which includes the provisions required under section 

185. CAA section 185 requires such SIPs to provide that, if the area has failed to attain the 

1-hour ozone NAAQS by the applicable attainment date, each major stationary source of 

VOCs must pay a fee, computed in accordance with section 185(b), for each calendar year 

beginning after the attainment date. Under section 185(b), the state’s SIP revision must 

require each major stationary source to pay a fee for each ton of VOC emitted in excess of 

80% of baseline emissions. A source’s baseline emissions are its actual emissions during the 

required attainment year. Section 182(f) extends the requirements of section 185 to major 

stationary sources of NOx.

An alternative program equivalent to section 185 may be acceptable if EPA determines, 

through notice-and-comment rulemaking, that it is consistent with the principles of section 

172(e) of the CAA. Section 172(e) is an anti-backsliding provision of the CAA. As part of 

applying the principles in section 172(e) for purposes of the transition from the 1-hour 

standard to the 1997 8-hour standard, EPA can either require states to retain programs that 

applied for purposes of the 1-hour standard, or alternatively can allow states to adopt 

alternative programs, but only if such alternatives are determined through notice-andcomment rulemaking to be “not less stringent” than the mandated program.

d. Memorandum from William Harnett, Director of the Air Quality Policy Division to the 

Regional Air Division Directors, entitled, “Guidance on Establishing Emissions Baselines 

under Section 185 of the Clean Air Act (CAA) for Severe and Extreme Ozone Nonattainment 

Areas that Fail to Attain the 1-hour Ozone NAAQS by their Attainment Date,” March 21, 

2008. This guidance can be found on the Internet at: 

http://www.epa.gov/ttn/oarpg/t1/memoranda/20080321_harnett_emissions_basline.pdf
9

5. EPA EVALUATION

Rule 3170 complies with the evaluation criteria as discussed below. 

a. Enforceability – The rule is generally clear and consistent with the Bluebook and the Little 

Bluebook and other relevant EPA guidance regarding enforceability.

b. Rule Relaxation – EPA believes that this SIP revision would comply with CAA sections 

110(l) and 193, because it would not interfere with the on-going process for ensuring that 

requirements for RFP and attainment of the NAAQS are met, and the submitted SIP revision 

is more stringent than the rule previously approved into the SIP. Furthermore, amended Rule 

3170 addresses the deficiencies identified in EPA’s limited approval/limited disapproval by 

demonstrating, consistent with the principles of section 172(e) of the Act, that SJVUAPCD’s 

alternative program would raise at least as much revenue as would result under the section 

185 fee program if all section 185 sources paid fees for each applicable calendar year. 

c. Sections 182 and 185 of the CAA – SJVUAPCD submitted amended Rule 3170 and its 

alternative fee equivalent program to meet the requirements of sections 182 and 185. The 

amended rule applies to all major sources of VOC or NOx, and took effect for state law 

purposes on May 19, 2011. Rule 3170 is not in strict conformance with section 185 because 

it exempts clean units from fees and it allows a different method to calculate baseline

emissions. However, SJVUAPCD’s alternative program includes provisions to compensate 

for any shortfall in collected funds that might result from these two provisions. As explained 

above, EPA believes that states can meet the 1-hour ozone section 185 obligation through a 

SIP revision containing either the fee program prescribed in section 185 of the Act, or an 

equivalent alternative program if EPA determines, through notice-and-comment rulemaking, 

that it is consistent with the principles of section 172(e) of the CAA. 

SJVUAPCD’s alternative equivalent program consists of three primary components: 1)

assessment of fees on certain major stationary sources, 2) the collection of an additional $12 

for each motor vehicle registered in the San Joaquin Valley, and 3) an annual demonstration 

that the combined fees from stationary sources and motor vehicle registration are at least 

equal to the amount of fees that would have been collected under a fee program as prescribed 

in section 185 of the Act. If SJVUAPCD fails to make that demonstration in any year, Rule 

3170 requires SJVUAPCD to remedy any shortfall in fees through collecting additional fees 

from major stationary sources. 

One initial step in an equivalency demonstration is to determine the benchmark. Rule 3170 

requires SJVUAPCD to determine the amount of fees that would have been collected under a 

direct implementation of section 185. These calculation procedures (section 7.2.1.3, and 

sections 5.1 through 5.3) do not include a clean unit exemption, are based on actual 

emissions in 2010, and meet the requirements of section 185 of the Act as well as EPA’s 

March 2008 baseline guidance memorandum.

9

These provisions provide the correct 

benchmark for a comparison of equivalent fees. 

 

9

See TSD section 4.d above.
10

With respect to the assessment and collection of fees, Rule 3170 includes enforceable 

provisions for assessing and collecting fees from certain major stationary sources (sections 

5.0 and 6.0). Under state law, SJVUAPCD approved the assessment of a new motor vehicle 

registration fee, which will be collected by the DMV and forwarded to SJVUAPCD. 

Rule 3170 also requires the APCO to implement a system to track all information with 

respect to emissions data, the calculation, assessment, and collection of fees from stationary 

sources, as well as tracking of the amount of collected motor vehicle registration fees

(section 7.1). The APCO is required to prepare and submit to EPA an annual fee equivalency 

demonstration report which shows that the sum of the total fees collected from stationary 

sources and motor vehicle registrations are equal to or greater than the fees that would have 

been collected under a direct implementation of section 185 (section 7.2). Lastly, in the 

event that the annual fee equivalency demonstration report shows insufficient funds collected 

(i.e., a shortfall), Rule 3170 requires the collection of additional funds from stationary 

sources (section 7.3). 

We believe Rule 3170 adequately provides for an equivalency demonstration and the remedy 

for fee collection shortfall will guarantee that Rule 3170 provides equivalent fees. 

Furthermore, SJVUAPCD will be using the revenues for projects that reduce emissions and 

improve air quality in the San Joaquin Valley. We therefore believe Rule 3170 is at least as 

stringent as a rule required by CAA section 185. 

6. EPA ACTION

EPA staff recommends full approval of the submitted version to Rule 3170 because it 

complies with all relevant Clean Air Act requirements including those regarding enforceability, 

and it is consistent with CAA sections 172(e) and 185. Because of the recommendation for full 

approval, EPA staff also recommends simultaneously issuing an interim final determination to 

defer the imposition of sanctions pending EPA’s final approval of Rule 3170. The issuance of 

the interim final determination to defer sanctions is based on a finding that it is more likely than 

not that Rule 3170 meets the requirements of section 185 of the CAA. EPA staff believes relief 

from sanctions should be provided as quickly as possible. 

7. ATTACHMENTS

a. SJVUAPCD Rule 3170, “Federally Mandated Ozone Nonattainment Fee,” amended May 

19, 2011.

b. SJVUAPCD Final Staff Report, “Draft amendments to Rule 3170 (Federally Mandated 

Ozone Nonattainment Fee),” May 19, 2011.