SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

FINAL 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 

May 19, 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 ozone 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 at 

$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 (appendix 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 (appendix 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. 

A workshop was held on March 8, 2011 to discuss, present and take comments on the 

Draft Rule 3170 amendments and the fee-equivalent program and associated tracking 

system. Comments received since that time are addressed in this final draft staff report 

(and in appendix H), and incorporated into the rule as appropriate. While the 

comments incorporated do not significantly change the amount of fees collected, they 

do incorporate many administrative requirements suggested by EPA. Due to the 

mandatory timelines for revising the rule (EPA must approve the rule before August 

2011), we are moving expeditiously, and we are recommending the adoption of 

proposed Rule 3170 at the May 19, 2011 Governing Board meeting. 
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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 ozone 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 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, 

generally 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. Only the ozone precursors for which the facility is considered a major 

source are subject to the fee collected in this rule. Since Section 185 applies only to 

major sources of pollution, minor sources of either NOx or VOC are not subject to the 

federal penalty fee 

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 
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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. 

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. 
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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). 

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 18 months (by August 

2011) to avoid federal 2-to1 offsetting sanctions, and 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, environmental groups at the national level have taken 

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 
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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. 

• 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. 
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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 within the geographic boundaries of 

the District but 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 mobile source-based revenues. 

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, Rule 3170 contains 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, and will 

collect fees for emissions from equipment at major sources of NOx and VOC 

that have not installed advanced controls and are therefore not “Clean 

Emissions Units” under the rule. 

b. AB2522 Motor Vehicle Fee 

On October 21, 2010, 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. 
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See appendix C for the related October 21, 2010, District staff report, and 

appendix D for the Board’s adopted revised 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. 

• 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 retrofitted 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. 
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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. 

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, using 2010 as the 

baseline period, regardless of the use of alternative baseline periods by 

any stationary sources. 
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These tracking requirements have been added to the rule, as section 7.1, 

in response to EPA comments about the SIP approvability of the feeequivalency program (see appendix H for the District’s responses to 

comments). 

• Annual Fee Equivalency Demonstration Report 

On or before November 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, 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 November 1 of 

the each billing year. 

These reporting requirements have been added to the rule, as section 7.2, 

in response to EPA comments about the SIP approvability of the feeequivalency program (see appendix H for the District’s responses to 

comments). 

• Fee Shortfall Backstop Provisions 

Discussions with EPA after the March 8 workshop revealed several areas 

in which EPA felt the fee-equivalency programs needed to be modified 

and improved to be SIP-approvable. One such component was 

provisions for making up any shortfall in fees collected. In other words, a 

remedy must be in place in the rule to take effect if the sum of the Rule 

3170 fees from stationary sources, plus the motor vehicle fees collected 

as noted above, were not sufficient in any given year to be considered 

equivalent to those that would have been collected under a direct 

implementation of Section 185. 
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These shortfall remedy requirements have been added to the rule, as 

section 7.3, in response to EPA comments about the SIP approvability of 

the fee-equivalency program (see appendix H for the District’s responses 

to comments). 

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 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 (appendix 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 

(appendix 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. 
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ARB has already made the findings required above (appendix F) 

and has forwarded the necessary information to the state 

Department of Motor Vehicles (appendix 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. 

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, with some exceptions, 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 $8370 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 
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before the sanction deadline expires, EPA will impose federal sanctions which include 

withholding highway funds and an increased emission offset ratio 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. 

F. Proposed Rule Amendments 

The proposed changes are included in the attached Draft Rule 3170 (5/19/11 version) 

in strikeout and underline format. The following changes were made to address 

comments received thus far: 

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

consideration to those facilities that have installed high efficiency emission 

control technology, as discussed above. However, any shortfall in funds is 

supplanted by the “fee-equivalent” program. The exemption is clarified to be 

pollutant-specific. 

• 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 2010 standard baseline period, but continue to allow two-year 

calculations that are more representative of normal source operation. Again, any 

shortfall in funds is supplanted by the “fee-equivalent” program. A 2010 baseline 

is used for all calculations related to direct implementation of a Section 185 fee 

program. 

• 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 since 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, largely in response to comments by 

EPA (see appendix H for more details on comments and District responses): 

• Clarifying that the fees cease upon EPA concurrence with a District finding that 

the national one-hour ozone standard has been met (in Section 2.0). 

• Adding various definitions, as necessary (Sections 3.1, 3.3, 3.4, 3.6). 
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• Requiring facilities to submit emissions information as necessary to invoice the 

fees and determine compliance with the District’s fee-equivalency obligation 

(Section 6.0) 

• Requiring the District to determine and report the success of the fee-equivalency 

program each year, and implement a backstop remedy to collect any shortfall in 

fees (Section 7.0). 

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 be 

submitted into the SIP and approved by EPA before August 12, 2011 (75 FR1716). 

District Staff conducted 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 have been 

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

19, 2011, after which the District’s Section 185 fee equivalent program, as implemented 

through Rule 3170, will be forwarded to EPA for inclusion into the SIP. The District’s 

Governing Board announced in their “Receive and File” action on April 21, 2011, their 

intent to consider the rule for adoption on May 19. No additional comments were 

received by the deadline of May 2. 

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. Regardless, in response to comments we have changed reporting 

schedules originally proposed in this rule to be consistent with similar reporting 
San Joaquin Valley Unified Air Pollution Control District 

Final Staff Report: Rule 3170 May 19, 2011 

Page 15 Final Staff Report 

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requirements for Rule 4320. In addition, we are attempting to eliminate any duplicative 

facility reporting requirements by aligning this rule with future emissions inventory 

reporting 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 assesses 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. 

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 

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 has prepared a Negative 

Declaration that was made available for public review and comment. Only one 

comment was received stating that the project will have no significant effect. 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 focused on 

potential air quality and greenhouse gas emission impacts. 

Upon approval of the proposed project by the District's Governing Board, District staff 

will file a Notice of Determination with each County Clerk within the boundaries of the 

District, indicating the District’s determination that the project will not have a significant 

effect on the environment (CCR §15075(d)). 
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Final Staff Report: Rule 3170 May 19, 2011 

Page 16 Final Staff Report 

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

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

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

Appendix D – District’s November 10, 2010 ARB Findings Request and Signed Board Resolution 

Appendix E – Assembly Bill 2522 

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

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

Appendix H – District’s Response to Comments on the 3/8/11 version of Rule 3170 

Appendix I – Sample Facility Fee Calculation Worksheet