Agenda Item 8 Oct 21 2010

San Joaquin Valley lE
HEALTHY 1 -1R LlVlNF
DATE: October 21,2010
TO: SJVUAPCD Governing Board
FROM: Seyed Sadredin, Executive Dire

Project Coordinators: Samir SheikhJDave Warner
RE:
WITHIN THE SAN JOAQUIN VALLEY THROUGH THE

USE OF MOTOR VEHICLE FEES
RECOMMENDATIONS:
1. As authorized by California Health and Safety Code Sections

4061 0 throl~gh4061 3, approve an increase in motor vehicle fees
established under Sections 44223 and 44225, by one of the
following amounts:
a. $24 per year per motor vehicle. Authorize the Chair to sign the
adoption resolution (Attachment A).
b. $12 per year per motor vehicle. Authorize additional $6

increase effective in 2013, and an additional $6 increase
effective in 2015, for a maximum increase of $24 per year per
motor vehicle. Authorize the Chair to sign the adoption
resolution (Attachment B).
c. $1 0 per year per motor vehicle. Authorize the Chair to sign the
adoption resolution (Attachment C).
Revenues generated shall be used to satisfy the requirements of

Section 185 of the federal Clean Air Act in lieu of imposition of
nonattainment penalties strictly on Valley businesses. Direct the
Air Pollution Control Officer (APCO) to develop an alternative
Section 185 program to exempt well-controlled Valley businesses
from nonattainment penalties. Subsequent to the prerequisite
public workshops and notification process, the alternative program
shall be presented to the Governing Board for approval prior to
submittal to the United States Environmental Protection Agency
(EPA).
SJVUAPCD Governing Board
CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL
NONATTAINMENT PENALTIES TO SOURCES WITHIN THE SAN JOAQUIN VALLEY THROUGH THE
October 21, 2010
3. Spend revenues generated on reducing mobile source emissions as provided under

California Health and Safety Code Sections 44223 and 44225 to help expedite
attainment and maintenance of state and federal ambient air quality standards.
Direct the APCO to provide an annual report to the,public detailing the new revenues
generated, emission reduction projects funded, and expected reductions in
emissions.
4. Motor vehicle fees adopted here shall sunset upon expiration or revocation of the
Section 185 nonattainment penalties.
5. Direct the APCO to notify the California Air Resources Board that motor vehicle fees
have been adopted; provide the California Air Resources Board with a copy of the
adoption resolution and estimate of total annual funds generated by the above fees;
and request that the California Air Resources Board make the finding that the District
has undertaken all feasible measures to reduce nonattainment air pollutants from
sources within the District's jurisdiction and regulatory control.
6. Pursue federal legislative changes to repeal Section 185 of the federal Clean Air Act
or eliminate inequities in the fee by providing an exemption from the fee for well-
controlled stationary sources.
BACKGROUND:
With recent exceedances of the federal I-hour ozone standard, the federal Clean Air
Act mandates the imposition of nonattainment penalties on stationary source
businesses in the Valley. Federal law requires the District to promulgate regulations to
comply with Section 185 of the federal Clean Air Act for the imposition and collection of
these penalties. Failure to do so will result in the unilateral imposition and collection of
these penalties from Valley businesses by the federal EPA. All penalties collected by
EPA would then be deposited in the federal treasury with no expenditures in the Valley..
The District believes that these mandates are unfair to the Valley businesses that have
made significant investments in clean-air technology. Considering their enormous
expenditure and sacrifice, Valley businesses deserve our recognition and reward, rather
than penalties. With that in mind, we asked for alternative approaches to imposing
nonattainment penalties on stationary sources. In January 2010, EPA released
guidance that provided alternative options for the equitable distribution of responsibility
to mobile sources. This combined wi,th the authority granted to your Board by the state
legislature in 2008 (Assembly Bill 2522 - Arambula), enables the District to craft an
alternative solution that satisfies the above-referenced federal mandate in a more
equitable fashion.
October 27,2070
OPTIONS CONSIDERED BUT NOT RECOIVIMENDED:
-
1. Take no action Let current District Rule 3170 (Federally Mandated Ozone
Nonattainment Fee) stand with no amendments to satisfy Section 185
Requirements:
This option is NOT recommended for the following reasons:
Valley businesses will be required to pay the fees directly to the federal
government and the revenues generated will not be reinvested in the Valley.
If the District fails to adopt or implement a required fee program, EPA is

required by federal law to collect the unpaid fees plus interest on any unpaid
fees. Federal laws also require that any fees collected under Section 185 to
be deposited in the United States Treasury.
The Valley will be subject to expensive federal sanctions including a de-facto

ban on new businesses locating in the Valley (i.e., 2-1 offset ratio), and the
loss of federal highway funds ($250 million per year).
The current version of District Rule 3170 was adopted by your Board On May 16,
2002. This version includes special provisions to exempt well-controlled businesses
("clean urrits") from the penalties and provides for multi-year averaging of err~issions
to extend credit to businesses that invested in early reductions in emissions, and to
account for fluctuations in production rates due to market conditions.
Unfortunately, in January 2010, the U.S. Environmental Protection Agency (EPA)

disapproved these special provisions and issued a limited approval and limited
disapproval of Rl.lle 3170. This action by EPA began an 18-month sanction clock
that mandates the submission of an approvable rule by the District.
-
2. Strict adherence to Section 185 mandates Apply nonattainment penalties to
the Valley's stationary source businesses:
This option is also NOT recommended for the following reasons:
Well-controlled Valley businesses should not be penalized for failure to attain

the federal I-hour ozone standard.
Violations of the I-hour ozone standard are primarily due to emissions from
mobile sources. Emissions from mobile sources constitute more than 80
percent of emissions that contribute to the formation of ozone.
October 2 1, 20 10
Emissions from stationary sources in the Valley have already been reduced
by over 80 percent.
Valley's stationary source businesses are already subject to some of the

toughest air regulations in the nation. lmposition of the nonattainment
penalties on well-controlled stationary sources will NOT result in meaningful
reductions in emissions from these sources as was initially intended under
Section 185.
lmposition of the Section 185 nonattainment fees on Valley businesses will

result in a significant blow to the Valley's fragile economy.
Recent guidance issued by the EPA provides the option to assess

nonattainment fees on mobile sources of emissions.
Section 185 of the federal Clean Air Act mandates that "Severe" and "Extreme"
ozone nonattainment areas adopt a program requiring major NOx and VOC
stationary sources of air pollution to pay nonattainment fees in the event the area
fails to reach attainment by the required attainment date. Affected businesses would
be required to pay these fees on an annual basis 1.1ntil the area reaches attainment.
In 1990, the Clean Air Act set the fee at $5,000 per ton of VOC and NOx emitted by
the source during the calendar year in excess of 80 percent of the facility's "baseline
amount". The Act also required that the fees be adjusted for inflation based on the
Consumer Price Index (CPI) on an annual basis. For 2009, the fee had escalated to
$8,755.33 per ton.
When Section 185 was first enacted by the United States Congress, it was intended
to serve as a hammer compelling stationary sources to install additional controls to
reduce emissions and expedite attainment. Given today's circumstances, however,
these fees, if applied to stationary sources, will not have the intended impact in San
Joaquin Valley. Most stationary sources in San Joaquin Valley are already equipped
with Best Available Retrofit Control Technology (BARCT) or Best Available Control
Technology (BACT). In reality, with the mature control programs that are in place in
the San Joaquin Valley, most businesses have already made significant investments
and installed the most advanced controls available for their facilities. Please refer to
the District's recent 2010 Ozone Mid-Course Review for a detailed assessment of
various stationary source regulations that Valley businesses must comply with.
Under these circumstances, Section 185 has become a punitive fee with no real
ability by most facilities to reduce their emissions. The only options available to
Valley businesses to reduce or avoid the fees would be to curtail production or go
out of business. Given the Valley's chronic high unemployment rates combined with
the current global and regional economic distress, the consequences could be
devastating.
October 21, 2010
Under a straightforward implementation of Section 185,Valley businesses that are

major sources of NOx or VOC emissions w o ~ ~be l d subject to a total of an estimated
$29 million per year in penalty fees. These estimated penalties are dependent on
several primary factors, including the level of business activity during the baseline
(calendar year 201 0)and subsequent years, and an escalating penalty rate pegged
to the CPI. The fees would continue until the District reaches attainment for the now
revoked I -hour ozone standard, which would require three consecutive years
without a violation. The Clean Air Act does not impose any restrictions on the
manner by which the nonattainment fee revenues are to be spent by the District.
Table I:
Estimate o f Section 185 Penalty Fees
Source Category Section 185 Nonattainment Fees

Agriculture $5,511,014
Commercial $1,385,399
Electric Generation $4,123,852
Industrial $9,110,370
Industrial - Oil and Gas $6,786,434
Industrial - Oil and Gas Area-wide $1,674,600
TOTAL $28,591,668
ACTIONS RECOMMENDED:
Adopt a multifaceted approach with the following elements:
Pursue federal legislative changes to repeal Section 185 of the federal Clean Air
Act or eliminate inequities in the fee by providing an exemption from the fee for
well-controlled stationary sources.
Exempt well-controlled stationary sources from the Section 185 nonattainment

fees.
Provide for an equitable distribution of responsibility by adopting motor vehicle

fees for use in satisfying federal mandates under Section 185. The District has
the authority to adopt motor vehicle fees at a rate greater than that necessary to
satisfy Section 185 requirements.
October 21, 2010
Sunset motor vehicle fees upon expiration or revocation of the Section 185
nonattainment penalties.
Reinvest generated revenues in San Joaquin Valley to fund emission reduction

projects throughout the Valley.
Ensure strict public accountability with annual reports to the public detailing the
new revenues generated, emission reduction projects funded, and expected
reductions in emissions.
Given the inherent inequities in Section 185 penalties, and the fact that its application to
stationary sources in San Joaquin Valley cannot produce the intended results, the
District should pursue appropriate legislative remedies at the federal level. The desired
changes will require amendments to federal Clean Air Act that will take time and will be
difficult to achieve. Historically, the Clean Air Act has been amended rarely and each
time the amendment process has been lengthy and has involved a myriad of national
issues. Although the District should devote significant resources to pursue legislative
changes, expecting quick results is not realistic. In the meantime, it is prudent for the
District to act timely to devise and implement a strategy that produces optimum results
in the face of problematic and unfair circumstances generated by these federal
mandates.
In 2008, when Assembly Bill 2522 (Arambula) was enacted, the District had identified
the need for these funds to expedite attainment of the federal health-based standards
for ozone and particulate matter. In developing and adopting the 2007 Ozone Plan, the
District left no stone unturned in finding and adopting feasible regulatory measures to
reduce ozone precursor emissions. Ttris extensive research and planning effort
revealed that the District cannot attain the federal &hour ozone standards with
regulations alone. The conclusion was that a well-funded incentive-based strategy to
provide grant funding to Valley businesses, residents, and municipalities was essential.
The 2007 Ozone Plan estimated that it will take close to $3 billion (approximately $200
million per year) in incentives to bring the Valley into attainment with the federal
standard. With intensive advocacy at the state and federal level, the District has
achieved a ten-fold increase in grant funding for a sum total of $1 10 million per year,
leaving a shortfall of nearly $90 million per year. As can be seen in Table 2, an
additional 1 million people in the San Joaquin Valley can breathe healthy air with a well-
funded incentive program.
Table 2: Benefit of lncentives on Attainment with Federal 8-Hour Ozone Standard

I
With Incentives I Without Incentives 1
1 1 1
~ -
Population in Attainment in 2015 2 million 1.4 million
I Population in Attainment in 2020 1 3.6million I 2.6 million I

October 27,2070
District staff is suggesting that the Board consider the following options in selecting the
appropriate amount for the magnitude of the motor vehicle fees:
1. $24 per year per motor vehicle, or
2. $12 per year per motor vehicle with a phased-in increase of an additional $6 in 2013,
and an additional $6 in 2015, for a maximum of $24 per year, or
3. $10 per year per motor vehicle.
A $10 motor vehicle fee will generate approximately $28 million dollars per year which
will be sufficient to meet the Section 185 mandates. The following factors should also
be considered in selecting the amount and the tirr~ingfor motor vehicle fees:
Incentive-based programs expedite reductions and improve public health while

offering financial assistance to the regulated community
Cost of reductions is increasing with time
- "lower hanging ,fruitvreductions already consumed
- Funding eligibility reduced in the future due to existing and future state
and local regulations
Funds generated locally can be offered as a match for additional state and
federal funding
General public participation (fair share responsibility)
Public's acceptability and ability to absorb fee given the current economic
distress
The Valley has seen stationary source businesses reduce their emissions by 80% over
the past several decades. This has significantly reduced the number of days during
which the Valley exceeds the I-hour ozone standard, as shown in the Table 3 below.
Unfortunately, the Valley is still triggering Section 185 penalty fees due to exceedances
of the standard this year. Mobile sources now make up over 80% of ozone-forming
emissions, and are the primary reason for ozone exceedances in the Valley. Commute
traffic before and after school, for example, pose an ongoing challenge in eliminating
exceedances of the standard.
October21. 2010
Table 3: Vallev I-Hour Ozone Exceedances

1 Year I Exceedances I
2010 7
*Most violations attributed to wild fires
In response to calls for added flexibility by the District and other agencies, EPA issued
national guidance in January 2010 providing for alternative approaches to satisfy
Section 185 requirements. The guidance includes several different alternative
approaches that could utilize new funding to avoid the imposition of straight penalties on
Valley businesses, as follows:
Fee-Equivalent Alternative Program: Program that raises at least as much revenue

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

additional emissions reductions as the amount of emissions against which fees
would be assessed each year under the Section 185 penalty program (i.e., actual
emissions in excess of 80 percent of the baseline emissions).
Combination of the Above Options: 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.
October 21, 2010
PROGRAM FOR EXPEDI'TWRE OF REVENUES:
Revenues generated shall be reinvested in the Valley to reduce mobile source

emissions as provided under California Health and Safety Code Sections 44223 and
44225. Utilizing the District's highly successful grant administration program, the funds
generated here will be awarded to Valley businesses, residents, and municipalities to
generate real and quantifiable reductions in emissions.
The District has nearly 20 years of experience implementing highly successful voluntary
incentive programs. To date, the District has awarded over $300 million in funds,
achieving more than 80,000 tons of emission reductions through a variety of incentive
programs aimed at reducing emissions primarily from mobile sources, but also other
sources, such as fireplaces and residential lawn equipment.
The District's incentive program has gained a reputation for excellence and serves as a
model for grant programs throughout the State. The District has been acknowledged
through a number of recent audits conducted by the California Air Resources Board, the
Department of Finance, the Bureau of State Audits and the Sierra Nevada Air Quality
Group (funded by the William and Flora Hewlett Foundation) as operating with a high
degree of accountability, efficiency and the ability to do more with less. These audits
are a reflection of the commitment by your Board to aggressively pursue and compete
for available incentive funds and allocate the necessary resources to effectively
administer these important programs.
October 21, 2010
The following is a list of program areas that will be eligible for grants under the motor
vehicle fee revenues generated here:
Table 4: Program Areas for lncentive Funding

Program Description Annual Funding Need
A Truck Replacement $150 rnillion
B School Bus Replacement $100 million
C Mass Transit $40 million
Van Pools $0.5 million
Public Transit Incentive $0.5 million
Park & Ride Lots $1.5 rr~illion
Traffic Signal Synchronization $12 million
Clean Alternative Fuel Infrastructure $8 million
Electronic mobility systems (i.e. online services) $3 million
Bicycle Infrastructure $0.5 million
Citylcounty assistance to devise and implement
Sustainable Community Strategies to reduce
Vehicle Miles Traveled $15 million
Gross Polluting Vehicles $6 million
Inland Ports (Truck-to-Rail) $12.5 million
Short Sea Shipping (Truck-to-Ship) $2.5 million
Construction Equipment Replacement $4 million
Ag Off-Road Equipment Replacement $30 million
Q I Ag Irrigation Pump $5 million
I R I Forklifts I $1 rnillion
Portable Off-Road Engines $5 million
Locomotives $10 million
U Clean Lawn Equipment $1 million
V Fireplace Change Out $0.5 million
W Residential Furnace $0.5 million
X ( School Boilers $1 million
Specific funding designations and allocations will be made, on an annual basis, by the
District Governing Board through the District's public budget development and adoption
process.
October 21, 2010
EXPENDITLIRE IN ENVIRONMENTAL JUSTICE AREAS:
The California H&SC includes a specific requirement that $10 million of funds collected
under the increased motor vehicle fees be used to mitigate the impact of air pollution in
disproportionately impacted neighborhoods, commor~lyreferred to as "environmental
justice" communities. The District has an excellent track record of distributing the
majority of its funds to these areas, and fully expects to meet this requirement.
Additionally, the legislation also requires that the District "convene an environmental
justice advisoty committee, selected from a list given to the board by environmental
justice groups from the San Joaquin Valley, to recommend the neighborhoods in the
district that constitute environmentaljustice communities, and how to expend funds
within these communities." In 2007, the District formed the Environmental Justice
Advisory Group (EJAG), comprised of members from the environmental justice
commur~ity. EJAG has been consulted on the potential of increased motor vehicle fees
and their advisory role in the process, and would be utilized by the District to satisfy the
advisory requirements in the legislation.
PROCESS AND LEGAL REQUIREMENTS:
California H&SC Sections 40610 through 40613 provide the authority for the District
Board to increase motor vehicle surcharge fees, and lay out specific requirements for
such an increase to take effect. The requirements include (see attached legislation for
detailed requirements):
Majority vote of the Governing Board and a majority vote of the elected members of
the Board.
Adoption of a resolution providing for both the fee increase and a corresponding
program for expenditure of the moneys raised by the increased fees for the
reduction of mobile source emissions.
ARB make the following findings:
The District has undertaken all feasible measures to reduce nonattainment air
pollutants from sources within the District's jurisdiction and regulatory control.
The District has notified ARB that fees have been adopted pursuant to this
section and provided ARB with an estimate of the total funds that will be
provided annually by each of those fees.
Collection of the new fees nine months after ARB'S findings, above.
Assessment by ARB of the District's progress in using the new fees to achieve and
maintain state and federal ambient air quality standards every two years that the fee
is assessed, and subrr~ittalof these assessments to the Legislature within two weeks
of their completion.
October 2 1, 20 10
Fees may be collected between fiscal years 2009-10 and 2023-24. If approved by your
Board, the District estimates that the process for increasing motor vehicle fees would
take approximately 12 months before new fees are ultimately received by the District,
with fees being received no sooner than fiscal year 201 1-12.
FISCAL IMPACT:
No new motor vehicle fees are anticipated in the 2010-2011 fiscal year. Given the
prerequisite process outlined under AB 2522 and the DMV's administrative process, a
delay of approximately 9 months is expected before any new motor vehicle fees are
collected and submitted to the District.
No new staffing is proposed at this time for the administration of new grants with the
revenues generated under Section 185 or from new motor vehicle fees. To minimize
administrative costs, the District will utilize and leverage existing grant programs for the
expenditure of new revenues. With this approach, it is anticipated that the bulk of
additional administrative work can be absorbed by the existing staff. Additional staffing,
if needed, will be subject to Board approval in future budgeting actions.
Attachments:
A) Resolution to lncrease Motor Vehicle Fees by $24, 5 pages
B) Resolution to lncrease Motor Vehicle Fees by $12, with additional $6 increases in 2013 and
2015, 5 pages
C) Resolution to lncrease Motor Vehicle Fees by $10, 5 pages
D) Assembly Bill No. 2522, 3 pages
E) EPA's January 5 2010 memo, "Guidance on Developing Fee Programs Required by Clean
Air Act Section 185 for the 1-hour Ozone NAAQS", 17 pages
F) Support Letter from California Partnership for the San Joaquin Valley, Februaty 18, 20 10, 2
pages
G) Support Letter from San Joaquin Business Council, October 12, 2010, 2 pages
San Joaquin Valley Unified Air Pollution Control District
Meeting of the Governing Board
October 21,2010
CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF

MANDATED FEDERAL NONATTAINMENT PENALTIES TO SOURCES
WITHIN THE SAN JOAQUIN VALLEY THROUGH THE USE OF MOTOR
VEHICLE FEES
Attachment A:
RESOLUTION TO INCREASE MOTOR VEHICLE FEES BY $24
(5 PAGES)
BEFORE THE GOVERNING BOARD OF THE
SAN JOAQUIN VALLEY UNIFIED
AIR POLLUTION CONTROL DISTRICT
IN THE MATTER OF CONSIDER RESOLU'TION N,O.

ALTERNATIVES FOR THE EQUITABLE
APPLICATION OF FEDERAL NONATTAIN-
MENT PENAL1-IES TO SOURCES WITHIN
THE SAN JOAQUIN VALLEY THROUGH THE
WHEREAS, The San Joaquin Valley Unified Air Pollution Control District
(District) is a duly constituted unified district, as provided in California Health and Safety
Code sections 40150 to 40161; and
1111 WHEREAS, said District is authorized by California Health and Safety Code
section 40702 to make and enforce all necessary and proper orders, rules and
I( regulations to accomplish the purpose of Division 26 of the Health and Safety Code.
11 and; and
1111 WHEREAS, Federal law under Section 185 of the federal Clean Air Act
mandates that the District adopt a rule to impose nonattainment penalty fees on the
I(Valleyls stationary sources due to failure to reach attainment of the now-revoked
federal one-hour ozone standard; and
WHEREAS, under Section 185 of the Clean Air Act, Valley businesses that are
11 major sources of NOx or VOC emissions will be subject to a total of approximately
11 $29 million per year in nonattainrnent penalty fees; and
)I)I WHEREAS, the imposition of $29 million per year fee on Valley businesses can
have a devastating economic impact on Valley residents and businesses; and
I( 1I WHEREAS, a January 2010 guidance by the federal Environmental Protection

~ ~ e provides
n c ~alternatives for meeting Section 185 mandates by assessing all or
11 part of the nonattainment penalty fees to mobile sources; and
1111 WHEREAS, more than 80 percent of the Valley's NOx emissions, the leading
contributor to Valley's ozone and particulate exceedances, come from mobile sources
outside of the District's regulatory jurisdiction; and
SJVUAPCD
1990 E. G E m S B U R G 1
AVENUE
FRESNO, CA 93726-0244 ATTACHMENTA - RESOLUTION
WHEREAS, Valley stationary sources are already subject to some of the most
stringent air pollution regulations in the nation and, therefore, imposition of Section
185 nonattainment penalties to stationary sources will not have the intended effect of
compelling further reductions of emissions from stationary sources; and
WHEREAS, Assembly Bill 2522 (Arambula) added Chapter 5.8 (commencing
with Section 40610) to Part 3 of Division 26 of the Health and Safety Code, authorizing
the District to increase the motor vehicle fee specified in Sections 44223 and 44225 of
the Health and Safety Code by an amount up to twenty-four dollars ($24) per motor
vehicle per year to provide funding for air pollution control programs needed to achieve
and maintain state and federal ambient air quality standards; and
WHEREAS, section 9250.17 of the California Vehicle Code authorizes the
Department of Motor Vehicles to collect fees requested by the District Board pursuant to
Health and Safety Code Sections 44223 and 44225; and
WHEREAS, said fees are in addition to any other fees imposed by the District
and may be charged in any of fiscal years 2009-10 to 2023-24, inclusive, and as of that
date are repealed unless a later enacted statute, that is enacted prior to 2023-24,
deletes or extends the date; and
WHEREAS, the San Joaquin Valley Air Pollution Control District has been
designated as extreme nonattair~rnentfor ozone by the United States Environmental
Protection Agency; and
NOW, THEREFORE, IT IS RESOLVED THAT, to minimize the economic impact
to Valley residents and businesses, and to more equitably distribute responsibility for
Dzone violations, the Governing Board of the San Joaquin Valley Unified Air Pollution
Control District, hereby: levies an additional twenty four dollar ($24) fee on all motor
ilehicles subject to registration fees in the counties of Fresno, Kings, Madera, Merced,
San Joaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in
accordance with Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26
3f the Health and Safety Code; requests that the California Air Resources Board make
SNUAPCD
1990 E. GEIlYSBURG
A VENUE
FRESNO, CA 937264264 ATTACHMENT -
A RESOLUTION
required findings under California Health and Safety Code Section 40612; and requests
that the California Department of Motor Vehicles collect the fee in accordance with
Section 9250.17 of the Vehicle Code.
BE IT FURTHER RESOLVED THAT at least ten million dollars ($10,000,000) of
said fees shall be used to mitigate the impacts of air pollution on public health and the
environment on disproportionately impacted environmental justice communities in the
San Joaquin Valley.
BE IT FURTHER RESOLVED THAT the District Governing Board shall convene
an environmental justice advisory committee, selected from a list given to the District
Governing Board by environmental justice groups from the San Joaquin Valley, to
recommend the neighborhoods in the District that constitute environmental justice
communities, and how to expend funds in these communities.
BE IT FURTHER RESOLVED THAT the fees adopted PI-~rsuantto this
section, shall become effective after the California Air Resources Board makes the
following findings: A) the District has undertaken all feasible measures to reduce
nonattainment air pollutants from sources within the District's jurisdiction and
regulatory control; and 6)the District has notified the California Air Resources
Board that the fees have been adopted pursuant to this section and has provided
the California Air Resources Board with an estimate of the total funds that will be
BE IT FURTHER RESOLVED THAT said fees shall cease to be levied upon
expiration or revocation of the Section 185 nonattainment penalties, or June 30,
2024, whichever is earlier.
BE IT FURTHER RESOLVED THAT the District shall pursue federal
legislative changes to repeal Section 185 of the federal Clean Air Act or eliminate
inequities in the fee by providing an exernption from the fee for well-controlled
stationary sources.
'11
SNUAPCD
1990 e GETNS~URG
AVENUE
FRESNO, CA 93726-0244
BE IT FURTHER RESOLVED 'THAT Pursuant to Chapter 5.8 (commencing
with Section 40610) to Part 3 of Division 26 of the Health and Safety Code the fees
shall be collected beginning nine months after the above requirements are met.
BE IT FURTHER RESOLVED THAT the San Joaquin Valley Unified Air
Pollution Control District shall utilize its Emission Reduction Incentive Program to
use the above fees in accordance with Chapter 5.8 (commencing with Section
40610) of Part 3, and Chapter 7 (commencing with Section 44220) of Part 5 of
Division 26 of the Health and Safety Code to achieve attainment with state and
federal ambient air quality standards by the earliest practicable date.
Ill
Ill
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Ill
Ill
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Ill
111
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111
111
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SJVUAPCD
1990 E. Gl3lYSBURG
AVENUE
FRESNO, CA 93726-0244 ATTACHMENT -
A RESOLUTION
THE FOREGOING was passed and adopted by the following majority vote of the
Governing Board and majority vote of the elected officials of the Governing Board of the
SAN JOAQUIN VALLEY UNIFIED AIR POLLUI-ION CONTROL DISTRICT this 21st
day of October, 2010, to wit:
AYES:
NOES:
ABSENT:

BY
Tony Barba, Chair

Governing Board
4TTEST:
Jerk to the Governing Board
3~
Michelle Franco
SJVUAPCO
1990 E. G ~ B U R G
AVENUE
f RESNO. CA 93726-0244 ATTACHMENT -
A RESOLUTION
October21, 2010
'

VEHICLE FEES
Attachment B:
RESOLUTION TO INCREASE MOTOR VEHICLE FEES BY $12, WITH ADDITIONAL
$6 INCREASES IN 2013 AND 2015
(5 PAGES)
IN THE MATTER OF CONSIDER RESOLUTION NO.

I APPLICATION OF FEDERAL NONATTAIN-
MENT PENALTIES TO SOURCES WITHIN
THE SAN JOAQUIN VALLEY THROUGH THE
WHEREAS, The San Joaquin Valley Unified Air Pollution Control District
(District) is a duly constituted unified district, as provided in Califor~iiaHealth and Safety
Code sections 40150 to 40161; and
WHEREAS, said District is authorized by California Health and Safety Code
section 40702 to make and enforce all necessary .and proper orders, rules and
regulations to accomplish the purpose of Division 26 of the Health and Safety Code,
and; and
WHEREAS, Federal law under Section 185 of the federal Clean Air Act
mandates that the District adopt a rule to impose nonattainment penalty fees on the
Valley's stationary sources due to failure to reach attainment of the now-revoked
federal one-hour ozone standard; and
WHEREAS, under Section 185 of the Clean Air Act, Valley businesses that are
major sources of NOx or VOC emissions will be subject to a total of approximately
$29 million per year in nonattainment penalty fees; and
WHEREAS, the imposition of $29 million per year fee on Valley businesses can
WHEREAS, a January 2010 guidance by the federal Environmental Protection
Agency provides alternatives for meeting Section 185 mandates by assessing all or
part of the nonattainment penalty fees to mobile sources; and
WHEREAS, more than 80 percent of ,the Valley's NOx emissions, the leading
corltributor to Valley's ozone and particulate exceedances, come from mobile sources
outside of the District's regulatory jurisdiction; and
SJVUAPCD
1990 E. GRPISBURG
AVENUE
FRESNO, CA 937264244
WHEREAS, Assembly Bill 2522 (Arambula) added Chapter 5.8 (commencing
vehicle per year to provide funding for air pollution control programs needed to achieve
Department of Motor Vehicles to collect fees requested by the District Board pursuant to
Health and Safety Code Sections 44223 and 44225; and
and may be charged in any of fiscal years 2009-10 to 2023-24, inclusive, and as of that
;late are repealed unless a later enacted statute, that is enacted prior to 2023-24,
jeletes or extends the date; and
jesignated as extreme nonattainment for ozone by the United States Environmental
'rotection Agency: and
NOW, THEREFORE, IT IS RESOLVED THAT, to minimize the economic impact
o Valley residents and businesses, and to more equitably distribute responsibility for
)zone violations, the Governing Board of the San Joaquin Valley Unified Air Pollution
2ontrol District hereby: levies an additional twelve dollar ($12) fee on all motor vehicles
;ubject to registration fees in the counties of Fresno, Kings, Madera, Merced, San
Joaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in
iccordance with Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26
)f the Health and Safety Code; requests that the California Air Resources Board make
SNUAPCD
1990 E. GETTYSBURG
AVENUE
FRESNO, CA 937260244
L
BE IT FURTHER RESOLVED THAT, beginning on January 1, 2013, the
Governing Board of the San Joaquin Valley Unified Air Pollution Control District hereby
levies an additional six dollar ($6) fee on motor vehicles subject to registration fees in
the counties of Fresno, Kings, Madera, Merced, San Joaquin, Stanislaus and Tulare
and the San Joaquin Valley portion of Kern in accordance with Chapter 5.8
:commencing with Section 40610) to Part 3 of Division 26 of the Health and Safety
Code and requests that the California Department of Motor Vehicles collect the fee in
accordance with Section 9250.17 of the Vehicle Code.
BE IT FURTHER RESOLVED 'THAT, beginning on January 1, 2015, the
Soverning Board of the San Joaquin Valley Unified Air Pollution Control District hereby
evies an additional six dollar ($6) fee for a maximum increase of twenty-four dollars
;$24) on all motor vehicles subject to registration fees in the counties of Fresno, Kings,
Vladera, Merced, San Joaquin, Stanislaus and Tulare and the San Joaquin Valley
)ortion of Kern in accordance with Chapter 5.8 (commencing with Section 40610) to
Dart 3 of Division 26 of the Health and Safety Code and requests that the California
lepartment of Motor Vehicles collect the fee in accordance with Section 9250.17 of the
Jehicle Code.
;aid fees shall be used to mitigate the impacts of air pollution on public health and the
znvironment on disproportionately impacted environmental justice communities in the
;an Joaquin Valley.
In environmental justice advisory committee, selected from a list given to the District
Soverning Board by environmental justice groups from the San Joaquin Valley, to
I!
SJVUAPCD
1990 E. GE~TVSBURG
AVENUE
3
FRESNO, CA 93726-0244 AITACHMENT -
B RESOLUTION
BE IT FURTHER RESOLVED 'THAT the fees adopted pursuant to this
section, shall become effective after the Califorrria Air Resources Board makes the
nonattainment air pollutants from sources within the District's jurisdiction and
regulatory control; and B) the District has notified the California Air Resources
:he California Air Resources Board with an estimate of the total funds that will be
~rovidedannually by each of those fees.
3xpiration or revocation of the Section 185 nonattainment penalties, or June 30,
egislative changes to repeal Section 185 of the federal Clean Air Act or eliminate
nequities in the fee by providing an exemption from the fee for well-controlled
;tationary sources.
BE IT FURTHER RESOLVED THAT Pursuant to Chapter 5.8 (commencing
vith Section 40610) to Part 3 of Division 26 of the Health and Safety Code the fees
;hall be collected beginning nine months after the above requirements are met.
BE IT FLIRTHER RESOLVED THAT the San Joaquin Valley Unified Air
>ollution Control District shall utilize its Emission Reduction Incentive Program to
rse the above fees in accordance with Chapter 5.8 (commencing with Section
Iivision 26 of the Health and Safety Code to achieve attainment with state and
ederal ambient air quality standards by the earliest practicable date.
'I
SJVUAPCD
1990 E. GEllYSBURG
AVENUE
FRESNO, CA 93726-0244 -
ATTACHMENT B RESOLUTION
SAN JOAQUIN VALLEY UNIFIED AIR POLLUI-ION CONTROL DISTRICT this 21st
AYES:
NOES:
ABSENT:

AIR POLLU-TION CONTROL DISTRICT
Tony Barba, Chair

Governing Board
ATTEST:
Clerk to the Governing Board
BY
Michelle Franco
SJVUAPCD
1990 E. GETWSBURG
AVENUE
FRESNO, CA 93726-0144
October 21,201 0

WITHIN THE SAN JOAQUIN VALLEY 'THROUGH THE USE OF MOTOR
VEHICLE FEES
Attachment C:
RESOLUTION TO INCREASE MOTOR VEHICLE FEES BY $10
I5 PAGES)
3
4
I IN THE MATTER OF CONSIDER
APPLICATION OF FEDERAL NONATTAIN-
MENT PENALTIES TO SOURCES WITHIN
RESOLUTION NO.
5 THE SAN JOAQUIN VALLEY THROUGH THE

1111 WHEREAS, The San Joaquin Valley Unified Air Pollution Control District
(District) is a duly constituted unified district, as provided in California Health and Safety
II Code sections 40150 to 40161; and
10
11
11(1 WHEREAS, said District is authorized by California Health and Safety Code
section 40702 to make and enforce all necessary and proper orders, rules and
(1
l2 regulations to accomplish the purpose of Division 26 of the Health and Safety Code,
13 (1 and; and
1111
WHEREAS, Federal law under Section 185 of the federal Clean Air Act
l4
15 mandates that the District adopt a rule to impose nonattainment penalty fees on the
I
l6 Valley's stationary sources due to failure to reach attainment of the now-revoked
l7
II federal one-hour ozone standard; and
18
l9
11 WHEREAS, under Section 185 of the Clean Air A& Valley businesses that are
l(rnajor sources of NOx or VOC emissions will be subject to a total of approximately
20
II $29 million per year in nonattainment penalty fees; and
'
21
22
1111 WHEREAS, the imposition of $29 million per year fee on Valley businesses can
23
24
11(1 WHEREAS, a January 2010 guidance by the federal Environmental Protection
Agency provides alternatives for meeting Section 185 mandates by assessing all or
25 11 part of the nonattainment penalty fees to mobile sources; and
26 11 WHEREAS, more than 80 percent of the Valley's NOx emissions, the leading
27 11 contributor to Valley's ozone and particulate exceedances, come from mobile sources
SJVUAPCD
t 990 L GElTYSBURG
28 1II outside of the District's regulatory jurisdiction; and
WHEREAS, Asserr~blyBill 2522 (Arambula) added Chapter 5.8 (commencing
ilehicle per year to provide funding for air pollution control programs needed to achieve
3epartment of Motor Vehicles to collect fees requested by the District Board pursuant to
iealth and Safety Code Sections 44223 and 44225; and
and may be charged in any of fiscal years 2009-10 to 2023-24,' inclusive, and as of that
jate are repealed unless a later enacted statute, that is enacted prior to 2023-24,
jeletes or extends the date; and
lesignated as extreme nonattainment for ozone by the United States Environmental
Drotection Agency; and
NOW, THEREFORE, IT IS RESOLVED 'THAT, to minimize the economic impact
o Valley residents and businesses, and to more equitably distribute responsibility for
)zone violations, the Governing Board of the San Joaquin Valley Unified Air Pollution
:ontrol District hereby: levies an additional ten dollar ($10) fee on all motor vehicles
iubject to registration fees in the counties of Fresno, Kings, Madera, Merced, San
loaquin, Stanislaus and Tulare and the San Joaquin Valley portion of Kern in
~ccordancewith Chapter 5.8 (commencing with Section 40610) to Part 3 of Division 26
,f the Health and Safety Code; requests that the California Air Resources Board make
SJVUAPCD
1990 E. GET'NSBURG
AVENUE
FRESNO, CA 93726-0244
said fees shall be used to mitigate the impacts of air pollution on public health and the
environment on disproportionately impacted environmental justice communities in the
San Joaquin Valley.
an environmental justice advisory committee, selected from a list given to the District
Governing Board by enviror~mentaljustice groups from the San Joaquin Valley, to
BE IT FURTHER RESOLVED THAT the fees adopted pursuant to this
section, shall become effective after the California Air Resources Board makes the
nonattair~mentair pollutants from sources within the District's jurisdiction and
regulatory control; and 6) the District has notified the California Air Resources
the California Air Resources Board with an estimate of the total funds that will be
expiration or revocation of the Section 185 nonattainment penalties, or June 30,
legislative changes to repeal Section 185 of the federal Clean Air Act or eliminate
nequities in the fee by providing an exemption from the fee for well-controlled
stationary sources.
'I1
SJVUAPCD
1990 E, G-BURG
AVENUE
FRESNO, CA 93726-0244 A~ACHMEN -
CT RESOLUTION
BE IT FURTHER RESOLVED THAT Pursuant to Chapter 5.8 (commencing
with Section 40610) to Part 3 of Division 26 of the Health and Safety Code the fees
shall be collected beginning nine months after the above requirements are met.
BE IT FURTHER RESOLVED THAT the San Joaquin Valley Unified Air
Pollution Control District shall utilize its Emission Reduction Incentive Program to
use the above fees in accordance with Chapter 5.8 (commencing with Section
Division 26 of the Health and Safety Code to achieve attainment with state and
federal ambient air quality standards by the earliest practicable date.
/I/
Ill
Ill
111
111
Ill
111
111
111
Ill
SJVUAPCD
1990 E. G m Y S B U R G
AVENUE
FRESNO, CA,93726-0244
SAN JOAQUIN VALLEY UNIFIED AIR POLLU-I-ION CONTROL DISTRICT this 21st
AYES:
NOES:
ABSENT:

AIR POLLU'I'ION CONTROL DISTRICT
BY
Tony Barba, Chair

Governing Board
ATTEST:
Clerk to the Governing Board
BY
Michelle Franco
SJWAPCD
1 9 9 0 E..GETTYSBURG
AVENUE
FRESNO. CA 9 3 7 2 6 - 0 2 4 4
October 21,201 0

VEHICLE FEES
Attachment D:
ASSEMBLY BILL NO. 2522
(3 PAGES)
Assembly Bill No. 2522
CHAPTER 677
An act to add Chapter 5.8 (commencing with Section 4061 0) to Part 3 of

Division 26 of the Health and Safety Code, relating to air quality.
[Approved by Governor September 30,2008. Filed with

Secretary of State Scptcrnbcr 30, 2008.1
LEGISLATIVE COUNSEL'S DIGEST
AB 2522, Arambula. San Joaquin Valley Unified Air Pollution Control

District.
Existing law authorizes air pollution control districts and air quality
management districts, except as provided, to levy a fee of up to $2 on motor
vehicles, and authorizes the districts to increase this fee to up to $6 if certain
conditions are met.
This bill would authorize the San Joaquin Valley Unified Air Pollution
Control District to increase this fee to up to, but not exceeding, $30 for
incentive-based programs to achieve surplus emissions reductions, as
specified. The bill would require the state board to assess the use of these
fees in achieving and maintaining state and federal ambient air quality
standards.
The bill would authorize the San Joaquin Valley district to adopt rules
and regulations to reduce vehicle trips in order to reduce air pollution from
vehicular sources.
The people of [he Stale of Cul~orniado enact mfollows:
SECTION 1. Chapter 5.8 (commencing with Section 40610) is added

to Part 3 of Division 26 of the Health and Safety Code, to read:
40610. The Legislature finds and declares as follows:

(a) Residents of the San Joaquin Valley suffer some of the worst air
quality in the world. This poor air quality poses a significant threat to public
health, the environment, and the economy of the valley.
(b) The extreme difficulty for the valley to meet state and federal ambient
air quality standards requires an urgent and unified program that combines
more strict clean air rules and regulations and ongoing funding to clean up
those sources that cannot be regulated effectively.
Ch. 677 -2-
(c) The purpose of this chapter is to establish a program for the San
Joaquin Valley to achieve state and federal ambient air quality standards
by the earliest practicable date.
406 12. (a) In order to provide funding for air pollution control programs
needed to achieve and maintain state and federal air quality, the district may
do both of the following:
(1) Notwithstanding the limits on the amount of the motor vehicle fee
s~ecifiedin Sections 44223 and 44225. increase the fee established eursuant
tb these sections to up to, but not exceeding, thirty dollars ($30) pkr motor
vehicle per year for the purposes of establishing and implementing
incentive-based programs to achieve surplus emissions reductions that the
district determines are needed to remediate air pollution harms created by
motor vehicles on which the fee is imposed and that are intended to achieve
and maintain state and federal ambient air quality standards required by the
federal Clean Air Act (42 U.S.C. Sec. 7401 et seq.). Except for the amount
of the fee, any increase shall be subject to Chapter 7 (commencing with
Section 44220) of Part 5, including, but not limited to, the adoption of a
resolution providing for both the fee increase and a corresponding program
for expenditure of the moneys raised by the increased fees for the reduction
of mobile source emissions.
(2) Notwithstanding Section 407 17.9, adopt rules and regulations to
reduce vehicle trips in order to reduce air pollution from vehicular sources.
(b) Fees adopted pursuant to this section are in addition to any other fees
imposed by the district, and may be charged in any of fiscal years 2009-10
to 2023-24, inclusive. Fees may be assessed after the 2012-13 fiscal year
only if the United States Environmental Protection Agency approves the
district's proposed reclassification of its nonattainment status for ozone
from severe to extreme. The fees adoeted pursuant to this section are for
1 .
the district portion of the total amount needed to achieve and maintain state
and federal ambient air quality standards. At least ten million dollars
($10,000,000) shall be used to mitigate the impacts of air pollution on public
health and the environment in disproportionately impacted environmental
justice communities in the San Joaquin Valley. The district board shall
convene an environmental justice advisory committee, selected from a list
given to the board by environmental justice groups from the San Joaquin
Valley, to recommend the neighborhoods in the district that constitute
environmental
. .
justice communities, and how to expend funds within these
communities.
(c) (1) The fees adopted pursuant to this section shall become effective
after the state board makes both of the following findings:
(A) The district has undertaken all feasible measures to reduce
nonattainment air pollutants from sources within the district's jurisdiction
and regulatory control.
(B) The district has notified the state board that fees have been adopted
pursuant to this section and provided the state board with an estimate of the
total funds that will be provided annually by each of those fees.
-3- Ch. 677
(2) The state board shall file a written copy of its findings made pursuant
to this subdivision with the Secretary of State within two days of its
determination.
(3) The fees adopted pursuant to this section shall be collected nine
months after the requirements of paragraph (2) are met.
40613. The state board shall assess the district's progress in using any
fees assessed pursuant to Section 406 12 to achieve and maintain state and
federal ambient air quality standards every two years that the fee is assessed,
and shall submit these assessments to the Legislature within two weeks of
their completion.
October 21,2010

VEHICLE FEES
Attachment E:
EPA'S JANUARY 5 2010 MEMO, "GUIDANCE ON DEVELOPING FEE PROGRAMS
REQUIRED BY CLEAN AIR ACT SECTION 185 FOR THE 1-HOUR OZONE NAAQS"
/ I 7 PAGES)
Q+<eD"'4%
2' db % LlNlTED STATES ENVIRONMENTAL PROTECTION AGENCY
RESEARCH TRIANGLE PARK,NC 27711
OFFCE OF
AIR OUALlTY PLANNING
AND STANDARDS
MEMORANDUM
SUBJECT: Guidance on Developing Fee Programs Required by Clean Air Act Section 185
M-
for the 1-hour ozone N&QS
FROM: Stephen D. Page, Director

Office of Air Quality Planning and Standard
TO: Regional Air Division Directors, Regions I-X
Section 185 of the Clean Air Act (CAA) requires states with ozone nonattainment areas
classified'as Severe or Extreme to develop, as a revision to their state implementation plan (SIP),
. a fee collection rule to be implemented in the event that an area fails to attain the ozone standards
by the required attainment date.' This memorandum provides additional guidance on fee
collection programs for the 1-hour ozone National Ambient Air Quality Standard (NAAQS or
standard), which are i-equired as anti-backsliding measures during transition to the 1997 8-hour
ozone standard.
~oplicabilitvof Section 185 to Ozone NAAQS Nonattainment Areas ,
The section 185 fee program requirement applies to any ozone nonattainment area that is
classified as Severe or Extreme under the NAAQS, including any area that was classified Severe
or Extreme under the 1-hour ozone NAAQS as of the effective date of the area's 8-hour
d e ~ i ~ n a t i o The
n . ~ EPA had previously waived the section I85 fee program requirements
applicable under the revoked 1-hour ozone NAAQS in rules issued to address the transition from
the 1-hour standard to the 1997 8-hour ~tandard.~ However, on December 23,2006, the United
States Court of Appeals for the District of Columbia Circuit issued an opinion determining that
EPA improperly waived the application of the section 185 fee provision for Severe and Extreme
nonattainment areas that failed to attain the I -hour ozone standard by their attainment date.
South Coast Air Quality Management District v. EPA, 472 F.3d 882 (D.C. Cir. 2006).
' See Attachment A for the text of CAA section 185. The CAA requires that fee program SIPSfor
nonattainrnent areas initially classified as Severe or Extreme for the I -hour ozone standard be submitted to EPA by
December 3 1,'2000 (see CAA section 182(d)(3)). Areas subsequently reclassified as Severe or Extreme have a SIP
submission date as determined by EPA.
'
The 1-hour ozone NAAQS were established in 1982 and revoked on June 15,2004 for most areas. The
8-hour ozone NAAQS were first established in 1997. EPA is currently reconsidering the 8-hour ozone NAAQS that
was last revised in 2008. EPA intends to complete the reconsideration by August 3 1,2010.
'
See 69 Fed Reg 2395 1 (April 30,2004).
Interne! Address (URL) h t l p : l ~ . e p a . g o v

RosycledlRecyclaMe Printed with Vegetable OU Based Inks on Recyded Paper (Mlnlmum 25% Poslmnsumer)
Summary of Sectioh 185 Requirements
. .
In the event that a nonattainmint area classified as Severe or Extreme fails to attain the
ozone standard by the required date, section 185 of the CAA requires each major stationary
'
source of volatile organic compounds (VOC) and nitrbgen oxides located in such area to
pay a'fee to the state for eachcalendar ye? fo'llowing the attainment year for emissions above a . ,
"baseline amount." In 1990, the CAA set the fee as $5,000 per ton of VOC and NOx emitted by
the source'during the calendar year in excess of 80 percent' of the "bcke~ineamount." The fee
must be adjusted.for inflation based on the Consumer Price Index (CPI) on an annual basis. ,
.
Attachment B. sets forth the fees, as adjusted for ifiatidn, for the years 1990-2009. . .
The CAA provides that the computation of a source's "baseline amounty'must be the
lower of the amount of actual or alIowable emissions under the permit applicable to the source
(or if no permit has been issued for the attainment year, the amount of VOC and NOx emissions
allowed under the applicable implementation plan) during the attainment year. The CAA also
provides that EPA may issue guidance on the calculation of the "baseline amount" as the lower
of the average actual emissions or average allowable emissions over a period of more than one
year in cases where a "source's emissions are irregular, cyclical or otherwise vary significantly
from year to year." Accordingly, on i arch21,2008, EPA issued a memorandum entitled
"Guidance on Establishing Emissions Baselines under Section 185 of the CAA for Severe and
Extreme Ozone Nonattainment Areas that Fail to Attain the 1-hour Ozone NAAQS by their
Attainment Date."
The CAA does not specify how states may spend or allocate the fees collected under a
section 185 fee program. Therefore, states have discretion on how to use the fees. We believe
that one beneficial approach would be to channel the fees into innovative programs to provide
incentives for additional ozone precursor emissions reductions from stationary or mobile sources,
or for other purposes aimed at reducing ambient ozone concentrations in the affected area.
If the state fails to adopt or implement a required fee program, EPA is required to collect
the unpaid fees and may also collect interest on any unpaid fees. All revenue collected by EPA
under authority of section 185 is required to be deposited in a special fund in the United States
Treasury for licensing and other services and may be used to fund the Agency's activities for
coIlecting such fees. See, CAA sections 185(d) and 502(b)(3)(C).
Alternatives to Section 1 85 Fee Proerams

'
& a result of the 2006 court decision in South ~ o a s t ~ s t a twith

e s areas classified as ..
.Severeor Extreme nonattainrnent for the I-hour ozone standard at the time of the'initial
nonattaiment designation for the.8-hour standard are~~ubjbct to the requirements of section 185.
We believe'states can meet this obligation through a SIP revision containing either the fee .
program prescribed in section 185, or an equivalent.alternative program,,as fbther explained
. .
while section 185 expressly rnentidns only VOC, sectio! I82(f) extends the application of this provision. '
to NOx,by providing that "plan provisions required unde! [iubpart D] for major stationary sources df [VOCI- shall
also apply to major stationary sources. ..of [NOx]." , ' -'
below. EPA believes that an alternative program may be acceptable if it is consistent with the
principles of section 172(e) of the CAA,' which allows EPA thrdugh rulemaking to accept
alternative programs that are "not less .&ingent" where EPA.has revised the NAAQS to make it
.. less stringent. This discretion does not currently apply to a section 1'85 fee program obligation
arising from failure to attain the 1997 8-hour ozone NAAQS by the attainment date associated
with a Severe or Extterne classification for that NAAQS because,that NAAQS has not been
revoked.
Section 172(e) is an anti-backsliding provision of the CAA that requires EPA to develop
regulations to ensure that controls are "not less stringent" than those that applied prior to relaxing
a standard where EPA has revised a NAAQS to make it less stringent In the implementation
rule for the 1997 ozone NAAQS, EPA determined that although section 172(e) does not directly
apply where EPA has strengthened the NAAQS, as it did in 1997, it was reasonable to apply the
same principle for the transition from the 1-hour NAAQS to the 1997 8-hour NAAQS. As part
of applying the principle in section 172(e) for purposes of the transition fiom 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 flexibility to adopt alternative
programs, but only if such alternatives are "not less stringent" than the mandated program.
EPA is electing to consider alternative programs to satisfy the section 185 fee program
SIP revision requirement. The remainder of this memorandum describes the circumstances
under which we believe we can approve an alternative program that is "no less stringent." These
interpretations will only be finalized through EPA actions taken under notice-and-comment
demaking to address the fee program obligations associated with each applicable nonattainment
area. If a state chooses to adopt an aIternative program to the section 185 fee program, the state
must demonstrate that the alternative program is no less stringent than the otherwise applicable
section 185 fee program. If our preliminary assessment indicates that the alternative program is
not less stringent, we would issue a notice in the Federal Register proposing to make such a
determination at the same time we propose and take action on any accompanying SIP revision
pursuant to section 1 1O(k).
EPA believes that for an area that we determine is attaining either the I -hour or 1997 8-
hour ozone NAAQS, based on permanent and enforceable emissions reductions, the area would
no longer be obligated to submit a fee program SIP revision to satisfy the anti-backsliding
requirements associated with the transition from the 1-hour standard to the 1997 8-hour standard.
In such cases an area's existing SIP should be considered an adequate alternative program. Our
reasoning follows from the.fact that an area's existing SIP measures, in conjunction with other
eliforceable federa1 measures, are adequate for the area to achieve attainment, which is the
purpose of the section I85 program. The section 185 fee program is an element of an area's
attainment demonstration, and its object is to bring about attainment after a failure of an area to
attain by its attainment date. Thus, areas that have attained the 1-hour standard, the standard for
which the fee program was originally required, as a result of permanent and enforceable
emissions reductions, would have a SIP that is not less stringent than the SIP required under
section 185. Also, once an area attains the 1997 8-hour ozone standard, which replaced the now
revoked I-hour standard, the purpose of retaining the section 185 fee program as an anti-
backsliding measure would also be fulfilled a s the area would have attained the 8-hour standard
for which the fee program was retained as a transition measure. We believe that it would
unfairly penalize sources in these areas to require that fees be paid after an area has attained the
8-hour standard due to permanent and enforceable emission reductions because the fees were
imposed due to a failure to meet the applicable attainment deadline for the 1-hour standard, not
any failure to achieve the now applicable 8-hour standard by its attainment date. Similarly, for
the reasonsedescribedabove, areas that must still develop and submit a fee program may submit
an alternative that provides that the fees end at the time that the area attains either the I-hour or
1997 8-hour standard due to the existence of permanent and enforceabIe measures.
There is also an additional, independent basis for EPA's approach to determining that the
anti-backsliding requirements associated with section 185 have been satisfied. Although section
185 provides that fees are to continue until the area is redesignated for ozone, EPA no longer
promulgates redesignations for the I-hour standard because that standard has been revoked.
Therefore, relief from the 1-hour fee program requirements under the terms of the statute is an
impossibility, since the conditions the statute envisioned for relieving an area of its fee program
obligation no longer can exist. There is, thus, a gap in the statute which must be filled by EPA.
We believe that under these circumstances we must exercise our discretion under Chevron USA.
Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), to fill this gap, so as to cany
out Congressional intent in the unique context of anti-backsliding requirements for a revoked
standard. We believe that it is reasonable for the fee program obligation that applies for
purposes of anti-backsliding to cease upon a determination, based on notice-and-comment
rulemaking, that an area has attained the 1-hour or 8-hour standard due to permanent and
enforceable measures. This determination centers on core criteria for redesignations under CAA
section 107(8)(3). We beIieve these criteria provide reasonable assurance that the purpose of the
I-hour anti-backsliding fee program obligation has been fulfilled in the context of a regulatory
regime where the area remains subject to other applicable 1-hour anti-backsliding and 8-hour
measures. Under these circumstances, retention of the fee program under the anti-backsliding
rule is no longer necessary for the purpose of achieving attainment of the 8-hour standard.
Additional Potential Equivalent Alternative Program Conceits
Following is a summary of concepts for additional alternative programs that a state might
consider if all 1-hour nonattainment areas subject to the section 185 fee program anti-backsliding
requirements within that state are not eligible for the EPA determination set forth in the section
above, and/or if the state chooses to develop another alternative program that is no less stringent
than a section 185 fee program. While section 185 focuses most directly on assessing emissions
fees, we believe it is u s e l l to interpret section 185 within the context of the CAA's ozone
implementation provisions of subpart 2 (which includes section 185). The subpart 2 provisions
are designed to provide an ever-growing incentive to reduce ozone-forming pollutant emissions
to levels that achieve attainment of the ozone NAAQS. In this context, to satisfy the
requirements of section 185 associated with the 1-hour NAAQS we believe it is appropriate for
states to focus on fee assessments, achieving fbrther emissions reductions, or some combination
of both in developing an alternative program. For any alternative program adopted by a state, the
state's demonstration that the program is no less stringent should consist of comparing expected
fees andlor emissions reductions directly attributable to application of section 185 to the
expected fees andlor emissions reductions from the proposed alternative program. For a valid
demonstration to ensure equivalency, the state's submission should not underestimate the
expected fees andor emissions reductions fiom the section 185 fee program, nor overestimate
the expected fees andlor emissions reductions associated with the proposed alternative program.
Recently, a task force composed of members of the Clean Air Act Advisory Committee
(CAAAC) was formed to discuss alternate ideas on complying with section 185.~The concepts
described here were discussed by the task force, and the CAAAC forwarded a list of potential
program features to EPA for review. EPA's assessment of whether and how certain program
features identified by the CAAAC can be used in the context of satisfying the requirements of
section 185 is included as Attachment C to this memorandum.
EPA cannot conclude at this time whether specific state-developed programs relying on
these concepts or containing any of the features presented by the CAAAC would be approvable
because such a determination would be based on the specific parameters of the program adopted.
Further, any such determination would need to be made through notice-and-comment
rulemaking. States may decide to develop unique &ternathe programs for each applicable
nonattainment area, and we will independently evaluate the approvability of each alternative
program. To assure a valid demonstration that an alternative is no less stringent, we'recommend
that states work with EPA on a case-by-case basis.
~dditionalFee-Ec~uivalentAltetnative. Programs
.
We anticipate (subject to notice-and-comment rulemaking as noted above) that we could

approve a program that clearly raises at least as much revenue as the otherwise required section
185 fee program if the proceeds are spent to pay for emissions reductions of ozone-forming
pollutants (NOx andor VOC) in the same geographic area subject to the section 185 program.
Under this approach, the state would estimate revenues that would result under the section 185
fee program if all section 185 sources paid fees for each applicable calendar year, develop an
alternative program that would raise at least that much revenue, and establish a process where the
revenues would be used to pay for emissions reductions that will further improve ozone air
quality.
Under this concept, states could develop programs that 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 ownersloperators of mobile
sources. This could allow states 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. EPA recognizes that
section 185 is not strategic in imposing emissions fees on 4 major stationary sources, including
already well-controlled sources that have few, if any, options for avoiding fees by achieving
additional reductions. States can be more strategic by crafting alternative programs that exempt
or reduce the fee obligation on wellkontrolled sources, and assign the required fees to less well-
controlled sources as an incentive for those sources to further reduce emissions of ozone-forming
, pollutants. The alternative program should not rely on emissions reductions already required by
'
' For more information on the CAAAC and the proceedings of the Task Force on section 185 fee programs,
visit the following Web site: http://www.epa.~ov/air/caaac/185.html
the applicable SIP, since the goal is to achieve fiuther reductions to move the area expeditiously
to attainment.
Additional Emissions-Eauivalent Alternative Programs
EPA believes that as an alternative to the section 185 fee program a state could adopt a
program that achieves at least as much additional emissions reductions as would be expected to
result &om the fee-minimization incentive of the section 185 fee program. EPA believes this
would clearly be demonstrated if the alternative program 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 emission^).^ For purposes of estimating the emissions reductions required
in such a program, the state would assume that sources would reduce their emissions to the fee
applicability threshold. This conservative approach would assure that emissions reductions from
the alternative program are at least as great as reductions that might have occurred if the statutory
fee program resulted in all major stationary sources reducing their emissions to no more than 80 .
percent of the baseline emissions. The emissions reductions in the alternative program could
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 nonattaiment area
and are equally beneficial in reducing ozone formation. The alternative program should not rely
on emissions reductions already required by the' applicable SIP, since the goal is to achieve
fkther reductions to move the area expeditiously to attainment.
Under this approach, states would first calculate the emissions baseline for the major
stationary sources of VOC and NOx in accordance with the methodology required under CAA
section 185(b)(2) and as further described in the March 2 1,2008 guidance memorandum. Once
a state calculates the baseline amount of each pollutant for each source affected by section 185,
the amount of emissions in excess of 80 percent of the baseline would be the amount of
emissions of each pollutant that sources within the area would need to reduce on a calendar year
basis in each year following the I-hour ozone attainment year until such time as the feeprogram
no longer applies.
I
Additional Alternative Programs Combining Emissions Reductions and Fees .
A program that combines features of an emissions-equivalent program with a fee-

equivalent program could also be adopted. For example, some portion of the emissions
reductions necessary to demonstrate equivalence (as explained above) could be offset by fees
collected.on each ton of emissions that is offset. To illustrate, assume that 1000 tons of
emissions reductions is needed to demonstrate equivalence. The state could instead adopt a
program that obtains 600 tons of emissions reductions and collect fees totaling $2.0 million
- (calculated as the remaining 400 tons times $5,000 per ton).
Aprogram that achieves less 'than this amount of emissions reductions may also. be approvable depending an the,
case-specific circumstances.
. .
. . .
.. EPA Assistance
My office is available to provide any additional guidance and to consult with any state
that wants to develop m alternative equivalent program to the section 185 fee program. For
additional consultation you may contact Denise Gerth, 919-541-5550.
ATTACHMENT A
Text of CAA Section 185
SEC. 185. ENFORCEMENT FOR SEVERE AND EXTREME OZONE NONAlTAINMENT

AREAS FOR FAILURE TO ATTAIN.
(a) General Rule.-' Each implementation plan revision required under section 182 (d) and (e)
(relating to the attainment plan for Severe and Extreme ozone nonattainment areas) shall provide
that, if the area to which such plan revision applies has failed to attain the national primary
ambient air quality standard for ozone by the applicable attainment date, each major stationary
source of VOCs located in the area shall, except as otherwise provided under subsection (c), pay
a fee to the State as a penalty for such failure, computed in accordance with subsection (b), for
each calendar year beginning after the attainment date, until the area is redesignated as an
attainment area for ozone. Each such plan revision should include procedures for assessment and
collection of such fees.
(b) Computation of Fee.-
(1) Fee amount.- The fee shall equal $5,000, adjusted in accordance with paragraph (3), per
ton of VOC emitted by the source during the calendar year in excess of 80 percent of the baseline
amount, computed under paragraph (2).
(2) Baseline amount.- For purposes of this section, the baseline amount shall be computed,
in accordance with such guidance as the Administrator may provide, as the lower of the amount
of actual VOC emissio'ns ("actuals") or VOC emissions allowed under the permit applicable to
the source (or, if no such permit has been issued for the attainment year, the amount of VOC
emissions allowed under the applicable implementation plan "allowables")) during the
attainment year. Notwithstanding the preceding sentence, the Administrator may issue guidance
authorizing the baseline amount to be determined in accordance with the lower of average
actuals or average allowables, determined over a period of more than one calendar year. Such
guidance may provide that such average calculation for a specific source may be used if that
source's emissions are irregular, cyclical, or otherwise vary significantly from year SO year.
(3)'Amual adjustment.- The fee amount under paragraph (1) shall be adjusted annually,
beginning in the year beginning after the year of enactment, in accordance with section
502(b)(3)(B)(v) (relating to inflation adjustment).
(c) Exception.- Notwithstanding any provision of this section, no source shall be required to pay
any fee under subsection (a) with respect to emissions during any year that is treated as an
Extension Year under section 18l(a)(5).
(d) Fee Collection by the Admjnistrator.- If the Administrator has found that the fee provisions
of the implementation plan do not meet the requirements of this section, or if the Administrator
makes a finding that the State is not administering and enforcing the fee required under this
section, the Administrator shall, in addition to any other action authorized under this title, collect,
in accordance with procedures promulgated by the Administrator, the unpaid fees required under ,
subsection (a). If the Administrator makes such a finding under section 179(a)(4), the
Administrator may collect fees for periods before the determination, plus interest computed in
accordance with section 662l(a)(2) of the Internal Revenue Code of 1986 (relating to
computation of interest on underpayment of Federal taxes), to the extent the Administrator finds
such fees have not been paid to the State. The provisions of clauses (ii) through (iii) of section
502(b)(3)(C) (relating to penalties and use of the funds, respectively) shall apply with respect to
fees collected under this subsection.
(e) Exemptions for Certaih Small Areas.- For areas with a total population under 200,000 which
fail to attain the standard by the applicable attainment date, no sanction under this section or
under any other provision of this Act shall apply if the area can demonstrate, consistent with
guidance issued by the Administrator, that attainment in the area is prevented because of ozone
or ozone precursors transported from other areas. The prohibition applies only in cases in which
the area has met a11 requirements and implemented all measures applicable to the area under this
Act. \
[42 U.S.C. 75 1Id]

ATTACHMENT B
~nflationAdiustment for Section 185 Fees
Section 185 cross-references the methodology in section 502(b)(3)(B)(v) of the CAA.

This method has been interpreted for use in determining permit fees in a 1992 EPA
memorandum. (See, Memorandum of October 15, 1992, from Frank Bunyard, "Calculating Fees
for Operating Permits.") EPA has used this method to calculate the Part 70 permit fee rate since
1990, and will continue to update the rate every year in September, when the August values are
available. The adjusted section 185 fee, then, would be prorated to that adjusted permit fee, as
shown in Table 1 below, by multiplying the Part 70 permit fee rate by 200 ($5000/$25). Since
section 185 fees are assessed on a calendar year basis, and the inflation factor is applied in
~eptember;the calendar year fee is determined as a weighted average (8112 of the fee associated
with January to August, and 4/12 of the fee associated with September to December). The
weighted fees appear in Table 2 below. These will be updated each year in the fall.
TABLE 1: SECTION 185 FEE RATE BASED ON PART 70 PERMIT FEE RATE
* From www.e~a.aov/oar/o~aa~d~emits/histona~rates~html
. ,
TABLE.9: ANNUALIZED SECTION 185,FEE RATE
ATTACHMENT C . .
Response to CAAAC Task Force Options
. EPA's Clean Air Act.Advisory Committee (CAAAC) submitted a letter toEPA dated
May -15,2009,asking whether "it is legally permissible under either section 185 or 172(e) for a
state to exercise the discretion identified" in 10 bullet points listed in an attachment to the letter
(see Attachment D). In general, we believe the language in section 185 is relatively clear
regqrding the provisions that must comprise an approvable program and, as indicated in the
discussion below, we do not believe that many of the flexibilities raisedby the CAAAC would,
be approvable provisions of a state-adopted section 185 fee program. However, EPA believes
that an.alternative progrmthat contains some of these flexibilities may be acceptable if it is
. .
consistent-withthe principles'of section 172(e) of the CAA, which allows EPA through
rulemaking to accept alternative programs that are "not less stringent" where EPA has revised
the NAAQS. Although the anti-backsliding provisions of section 172(e) facially apply only.
' '
where EPA has revised the NAAQS to make it less stringent, in its implementation rule
governing the transition fiom the 1-hour ozone standard to the more stringent 1997 8-hour
standard, EPA concluded that it made sense to rely ,onthe governing principles in section 172(e).
Applying this pIinciple for the transition from the I&ur standard to the 1997 8-hour ozone
standard, EPA can either require states to retain a specific program that applied for purposes of . .
the 1-hour standard, or alternatively can allow states,flexibility to adopt alternative programs, but
only if such alternatives are "not less stringent" than the mandated program. EPA has not yet
concluded whether to apply the principles of section 172(e) to any future transitions from the
1997 ozone NAAQS to any new or revised ozone NAAQS.
Consistent with the preceding distinction between a section I85 fee program and an
alternative program that is "not less stringent," we address each of the 10 points separately
below.
Point A asks whether a state may "authorize multi-facility operators to aggregatc

emissions from commonly-owned and -operated facilities within a single nonattainment area for
the purpose of calculating the fee." We have defined "major stationary sources" in many ,
contexts and have interpreted that definition in certain circumstances to allow for aggregation of
sources. We anticipate that we would be able to approve a section 185 fee program SIP that
relies on a definition of "major stationary source" that is consistent with the CAA as interpreted
in our exjsting regulations and policies.
Point B asks whether a state "may permit major sources to'aggregate their VOC and NOx
emissions on a site-wide basis in calculating the fee" and includes a description of certain
limitations that would be assumed for such aggregation. Provided that aggregation is not used to
avoid a "major source" applicability finding, and aggregation is consistent with the attainment
demonstration (e.g., if the area has received a NOx waiver under section 182(f), then NOx
reductions cannot be substituted for VOC reductions), we believe states have discretion to allow
a major source to aggregate VOC and NOx emissions.
Points C and D concern whether states may allow a discount for certain "pre-attainment
year or attainment year" controls. We do not believe that section 185 allows for any such. . .
consideration. The statutory language is clear that the baseline emissions are the lower of the
actual emissions or emissions allowed under the applicable permit during the attainment year or
allowed under the SIP during the attainment year where there is no such permit. The only
exception to this calculation for baseIine emissions is where a source's emission are "irregular,
cyclical or otherwise vary significantly from year to year." EPA has previously issued guidance
addressing this exception. Although consideration of these controls is not consistent with the
express terms of section 185, states may be able to develop a "no less stringent" progr'vn
consistent with the principles in section 172(e), taking into consideration such pre-attainment
controls. See discussion of point I below.
Point E asks whether the purchase of emissionneduction credits, or allowances, that are
part of an area's attainment control measures "may reduce the amount of emissions upon which
the fee is based or constitute an investment that should be credited against the fee." In the
context of calculating both the attainment-year baseline emissions and the post-attainment year
emissions, section 185 requires such emissions be the lower of actual or allowable emissions.
We believe aIlowable emissions can include emission reduction credits or emissions allowances
held by a source subject to fees. Whether holding the emissions allowances will affect a source's
fee obligation depends on the amount that is determined to be the lower of actuaI or allowable
emissions for that source. If states wish to provide some other form of credit for sources that
purchase market-based control measures, they may be able to do so in the context of a program
that is no less stringent than a section 185 program consistent with the principle in section
172(e). See discussion of point I below.
Point F asks whether sources may receive credit for post-attainment year emissions
reductions or air qudity investments. The Act is clear that post-attainment year emission
reductions will be credited to the extent that they reduce emission levels from the baseline year.
For example, if a source has 1000 tons of emissions in the attainment "baseline" year, the CAA
requires that source to pay fees on any emissions in excess of 800 tons (80 percent of baseline) in
each post-attainment year. If the source is able to reduce post-attainment year emissions from
1000 tons to 900 tons, then the source will pay fees on only 100 tons of emissions. With regard
to crediting emission-reducing or air-quality investments, we note that section 185 does not
specify how collected fees must be spent. In general, we believe that a state may choose to use
collected fees to support air quality improvement projects at sources. However, we caution that
any such provisions should not be developed in a way such that the provisions would appear to
defeat the purpose of section 185, which is to encourage emission reductions that will bring the
area into attainment with the ozone NAAQS in the near-term.
Point G asks whether post-attainment year new sources must be subject to the fees. We
believe it is clear that the fee imposed is on major sources. Thus, to the extent a "new source" is
considered a part of a major source that existed in the attainment year, the emissions from the
new source must be considered as emissions from that major source. For new major sources that
are not part of existing major sources, we believe section 185 does not provide a clear
interpretation of the source's fee obligation. Therefore, we believe states have discretion in .
determining how fees apply to these sources. States should consider that section 185 requires
"each major stationary source" to pay a fee; however, the baseline amount for sources that did
not have a permit in the attainment year is calculated according to what the SIP "allowed" during
the attainment yeat. Therefore, states should examine how the applicable SIP addressed
emissions fiom potential new major sources in the attainment year. For example, a state could
determine that the SIP's new source review (NSR) requirements would provide that a new source
employ emissions control that meets the requirements of "lowest achievable emissions rate"
(LAER). Therefore, the attainment-year baseline for a new source is the level allowable after
application of LAER. Alternatively, a state could determine the SIP's NSR requirements would
provide that a new source's net emissions impact be no greater than zero (i.e.;emissions levels
after application of LAER must be offset at a ratio of at least 1 to 1). Therefore the attainment-
year baseline for a new source is zero, subjecting the entire,amount of a source's post-attainment
year emissions to the per-ton emissions fee. Also, states may be able to develop "not less
stringent" programs consistent with the principles in section 172(e), that exempt new major
sources from fees, provided the alternative programs meet the 172(e) standard of equivalence.
See discussion of point I below.
With regard to Point H, which references state discretion rqgarding the.use of collected
' - fees, we point to our.response above for Point F.
Point I asks whether section 172(e) authorizes a state to develop an alternative program to .
that mandated under section 185. As an initial matter, we note that section 172(e) does not
directly apply here, where we are transitioning from the 1-hour ozone standard to the more
stringent 1997 8-hour standard. However, in developing our anti-backsIiding rules in the Phase 1
Rule for Implementing the 8-hour Standard (69 FR 2395 1, April 30,2004), we indicated that
although section 172(e) did not.directly apply, we were relying on the principles in section
172(e), as well as other indications of Congressional intent, in developing our anti-backsliding
rules. In South Coast Air Quality Management District v. EPA, 472 F.3d 882 (D.C. Cir. 2006),
the Court rejected our waiver of the section 185 fee program for the 1-hour standard, holding that
such program was a "control applicable" to the area as that phrase is used in section 172(e) and
thus must be retained under EPAYsdecision to apply section 172(e) to the transition from the 1-
hour standard to the more stringent 8-hour standard. Not before the Court was the issue of the
remaining language in section 172(e) that provides that EPA "shall promulgate requirements ... t
to provide for controls which are not less stringent than the controls applicable to areas
designated nonattainrnent before such relaxation." EPA believes that this language clearly
allows EPA by regulation to accept alternative control programs that "are not less stringent" than
those that were mandated by the Act for the standard that has been replaced (i.e., the 1-how
standard).
Point J requests ,hat EPA "clearly indicate the conditions under which the collection of
fees may be terminated." Furthermore, it indicates that some members of the task force "would
like the authority to terminate the section 185 fee program upon the first year in which an area
achieves the relevant standard.'' EPA believes that for an area EPA determines through notice-
and-comment rulemaking is attaining either the 1-hour or 1997 8-hour ozone NAAQS based on
permanent and enforceable emissions reductions, the area would no longer be obIigated to
submit a fee program SIP revision, nor be obligated to continue implementing a section 185 fee
program (or approved alternative equivalent program). The bases for EPA to make such a
determination through notice-and-comment rulemaking are provided in the memorandum
associated with this Attachment.
ATTACHMENT D . .
CAAAC Letter
United States Environmental Protection Agency

Clean Air Act Advisory Committee
May 15,2009 ..
The Honorable Elizabeth Craig

Acting Assistant Administrator
Ofice of Air and Radiation
U.S.EPA
Ariel Rios North
1200 Pennsylvania Avenue, N.W.
Mail Code 6 101A
Washington, DC 20460
Re: Clean Air Act Sections 185 and 172(e)
Dear Assistant Administrator Craig:
At the May 14,2009 meeting of the US EPA Clean Air Act Advisory Committee, on a
unanimous vote, the Committee resolved to urge the Agency to provide prompt guidance to the States
regarding the following question arising under the Clean Air Act:
Is it legally permissible under either section 185 or 172(e) for a State to exercise
the discretion identijied in Options A-J?
The Clean Air Act Section 185 Task Force, a work group established under the Clean Air Act
Advisory Committee, identified ten areas (A-J) of potential state discretion. These options are Listed in
the attachment to this letter. The Committee took no position on the reasonableness or legal
permissibility of any option.
As several States are in the process of developing their section 185 nonattainment fee programs,
time is of the essence in providing appropriate legal and policy guidance.
' Thank you sincerely,
Co-Chairs of the Section 185 Task Force:
..
Eddie Terrill Robert A. Wyman
Director Latham & Watkins L;LP
Department of Environmental Quality'. 355 South Grand Avenue
. Air Quality Division . . Los' Angeles, CA
707 North Robinson 9007 1
. .
Oklahoma City, OK 73 101-1677
A. þÿÿ reg at ion of Emis'sions Among Commonly-Owned Facilities
At its option, a State may authorize multi-facility operators to aggregate emissions
Erom commonly-owned and -operated facilities within a single nonattainment
area for the purpose of calculating the fee.
. . . .
, B. ~ ~ ~ r e &ofVOC
on and NOx Emissions . . .. .
At its option, a State may permit major sources to aggregate their VOC and NOx
emissions on a site-wide basis in calculating the fee to the extent such aggregation
is consistent with attainment modeling previously submitted by the State for the
applicable air quality control region. Such aggregation is not to be used for the
purpose of avoiding a "major source" applicability finding (e.g., by spreading
emissions over multiple sources so as to render the average facility emissions less
than the major source threshold).
C. . Consideration of Pre-Attainment Year or Attainment Year Installation of BACT

or LAER
. . .. At its option, a State may consider to appropriate extent pre-attainment or .

. . attainment year:emission control investments by major sources. .Without
intending to define the precise boundaries of a state's discretion to recognizethe
. '
degree of control already achieved by a.source, the participants determined that
sources that had recently (e.g., withinlive (.5)years of the year for which the fee
would be.irnposed) undergone new source review and, as a result, installed BACT
.
. .
or LAER, should not be required to include emissions from such equipment ir!
calculating the fee. . . .
D. ' Consideration of Pre-Attainment Yearor Attainment Year Installation of Retrofit

. . Controls.
. .
In addition, at its option under appropriate circumstances; a State may designate

emission perfdrmance stahdhds that it has determined represeqt well-controlled.
(e.g., in the range of or'superior to BACT or LAER) units for a given pcriod o'f
time and authorize a facility to demonstrate what portion of.its emissions should . '
be excluded from the fee.calculationon that basis, .

. . .
E. ' Consideration of Market-Based Programs . .
At its option under appropriate circumstances, a State may determine that

purchases of emission reduction credits, or allowances, as part of a State's
market-based attainment control measure may reduce the amount of emissions
upon which the fee is based or constitute an investment that should be credited
against the fee.
Credit Sources for Post-Attainment Year Emissions-Reducing or Air Quality
Investments
At its option, a State should recognize and appropriately credit qualifying post-
attainment year emissions-reducing or air quality-beneficial investments by major
sources. These investments should be credited to such sources in a manner that
reduces or eliminates fees that otherwise would be due under the program. States
should identi@ the qualifications for such investments based on their unique
attainment needs. .
~ o s i - ~ t t a i r h eYnea
t r New Sources
There was agreement that new sources constructed after the attainment year
would not have a baseline; would already have i n s t a i l e d ' or
~ ~LAER,
~ ~ would
.
already
.
have provided offsets, and therefore shouldnot be subject to the fee for
such equipment. 1
use of Program ~ e v e n u e s
States retgn full discretion regarding the use of collected revenues.: Participants
encouraged States to tailor strategies to their unique attainment challenges and to
consider ways to address under-regulated sources (e.g., legacy vehicles and
engines and 'certain area .sources).
Equivalent Programs
Under section 172(e), a State should have the option of collecting equivalent or
greater fees, or of requiring equivalent or greater emission reductions, by shifting
the program target in part or in whole to under-regulated sources (e.g., legacy
vehicles and engines, under-regulated area sources) or by applying the progrim in
a manner that addresses other attainment gaps. Likewise, the task force
envisioned that any recommended strategy not directly approvable under section
185 should be considered as an equivalent alternative program under 172(e). In
such circumstances, the state may need to shift the fee burden among sources to
demonstrate equivalency.
Program Sunset
. .
'
EPA needs to ~learl~indicate the conditions under which the collection of fees
may be terminated. .Some members of the taskforce would like the authority to
terminate the section 185 fee program upon the first year in which an area
achieves the reIevant standard.
October 21,2010

VEHICLE FEES
Attachment F:
SUPPORT LETTER FROM THE CALIFORNIA PARTNERSHIP FOR THE SAN
JOAQUIN VALLEY, FEBRUARY 18,2010
12 PAGES)
California Partnership for the
San Joaquin Valley
February 1 8 , 2 0 10
Mr. Seyed Sadredin

Air Pollution Control Officer
San Joaquin Valley Air Pollution Control District
1990 East Gettysburg Avenue
Fresno, CA 93726
RE: California Partnership Support for the Implementation of AB 2522
Dear Mr. Sadredin,
On behalf of the California Partnership for the San Joaquin Valley (Partnership), 1 write
to urge prompt action by the San Joaquin Valley Air Pollution Control District (Air
District) on the implementation of AB 2522, which authorizes the Air District to increase
DMV surcharge fees for the purpose of generating air quality mitigation funds for the San
Joaquin Valley.
The Partnership board includes representatives from both the public and private sector in
all eight Valley counties in the San Joaquin Valley. The Partnership Air Quality Work
Group (AQWG) is comprised of representatives from a very broad and diverse group of
Valley stakeholders, including environmental advocacy groups as well as business and
agricultural interests. At a recent meeting, a recommendation of support for prompt
implementation of AB 2522 was unanimously approved by the AQWG. The rationale for
this recommendation follows.
As you are well aware, the Valley experiences some of the worst ozone and particulate
air pollution in the nation, and failure to take all possible action toward improving the
Valley's air will result in the continuation of the significant health, social and economic
consequences that have plagued the region for decades. Additionally, we risk losing
federal transportation dollars if the Valley fails to comply with federal standards.
The adverse economic impact of the Valley's air quality is staggering, causing 192,000
missed school and workdays annually. One in three Valley families has a member with a
respiratory ailment, and the poor air quality contributes to 460 deaths per year. These
statistics, along with the challenges in meeting state and federal air quality standards,
5010 N Woodrow Ave.

2nd Floor, MIS WC 142
Fresno, California 93740
prompted the Partnership to help get AB 2522 approved by the Legislature in 2008. 'The
bill is consistent with the actions and objectives of the Partnership, as set forth in our
Strategic Action Proposal, by generating funding needed to "implement incentive
mechanisms to accelerate adoption of air quality mitigation technologies."
Technology to significantly improve the Valley's air quality is available today; however,
the cost is often prohibitive. Even in the best of economic times, accelerated adoption of
these technologies is financially very difficult for industry and agriculture. In the current
economic environment, such investments border on being impossible for most in the
Valley, making funding for incentive-based programs even more important and timely.
We do not take lightly the recommendation to increase fees in these difficult economic
times, but it is the consensus opinion of the diverse stakeholders represented in the
AQWG that a certain amount of self-sacrifice is necessary to help clean our air and
address the economic consequences of failure to comply with federal standards in a way
that reduces the burden on the economic engines of the Valley.
We also do not take lightly the burden of additional fees on Valley residents when much
of our air quality problem comes from sources outside the Valley and vehicles using the
Valley as a transit route. While the Partnership, in close consultation with the Air
District, has worked hard and has been successful in raising state and federal funds for air
quality mitigation in the Valley, there remains a tremendous need for additional funding.
AB 2522 is an additional resource to add to our collective effort in realizing critical air
quality improvement throughout the San Joaquin Valley. It is our self-help measure, and
its implementation will provide us with matching funds to help generate more air quality
mitigation funding from state and federal sources. Conversely, failure to utilize the
authority provided in the legislation will likely limit our ability to be effective in lobbying
for additional funding in the future.
On behalf of the California Partnership for the San Joaquin Valley, I respectfully request
the Air District take prompt action in moving forward with the implementation of AB
2522 and thank you in advance for your consideration. The Partnership looks forward to
continuing to work with the Air District in improving the quality of life in the San
Joaquin Valley.
Sincerely,
Fritz Grupe, Deputy Chair
PAGE 2 OF 2
October 21,2010

VEHICLE FEES
Attachment G:
SUPPORT LETTER FROM SAN JOAQUIN BUSINESS COUNCIL,
OCTOBER 12,2010
(2 PAGES)
BUSINESS C O U N C I L 0 I ; I ~ I C E I Z S
1990 East Gettysburg Avenue

Fresno, CA 93726
IIUSlNL:.SS C O U N C I L Dll<EC1'01<S
Sylvcslcr Agc~ilar,Ijortk of'thc Il/trst RE: San Joaquin Business Council Support for the Implementation of AB 2522
I lo\v;~rtlArnaiz. I1.D. ,Ir.rrrrir Cotp.
Dm1 Uro\\,ll. 7bicItet.t COIISII~IICI~OII Dear Mr. Sadredin,
Micllucl Brn\\,n, IJt.oli:rt (7~)ttp.Irtc.
.Innt: U ~ ~ l l e ~ . l i eCbttrtrtruri!,~
ld, Ijotrk We are writing on behalf of the board of the San Joaquin Business Council to
Micllacl C o ~ l g i l o ~II/ell.s
l . Fcrt.go Butt/; support prompt implementation of AB 2522, which authorizes the Air District to
Icogcr W . Coo\,cr. 1 %I(ccor.rl
~ increase DMV surcharge fees for the purpose of generating air quality mitigation
JOC C I . ; I I ~Fitt.rtro:v
~. ~4A,l~,t.c.lttrtt~
Uotrk funds for the San Joaquin Valley. The board of the San Joaquin Business Council is
1 )r. I'nu l D~CII;IIII.
Stt//c,t.(;ortM ~\~l(!dicol made up of CEO's of prominent businesses in San Joaquin County.
~(>tttl(/~t/~Olt
Ivlichilcl Ilc~fly.I:itrtrttcitr/ Cutr/et. G.etiit As you are well aware, the Valley experiences some of the worst ozone and
Ur~iotr particulate air pollution in the nation, creating severe health issues and major
J;l~nosli. Dyer, Ir.. D o n ~ r e /Ir.otttl
j~ economic impacts. Valley stationary sources have invested a significant amount of
Dollg Ehcrh:~rd[,llotrk q/!l'Sto~:R/ott resources t o comply with Air District requirements and now constitute only 20%
Dr. I'nmcla Eibeck, Utrilvr.\.ity c!/'tltc IJnc;/ic of the oxides of nitrogen emissions in the San Joaquin Valley while mobile sources,
13ill Filios, AKF Di:~t~k~l~ttrc,trt which largely fall under EPA's jurisdiction, make up 80% of emissions.
C : ~ r s o Fu~ltlcrburk.
~i I;otoztl d/ills
Garrett, /I.(2 Sl~ctttosCOIIII)NII~CS
I<;II.~II The Section 185 penalty fee that has been imposed on the Valley by the EPA fails
I)ylall Gcorgc. /'(;&I: t o recognize the circumstances of the Valley. If imposed, it will cost Valley
Gcnc Gilli, Collitrs Elec/t.icctl Co. businesses approximately $29 million per year, with no recognition of the
COI\V~II
l.I:irpcr, Koiset. Fotttt(l(t/iott t / o s / ~ i ~ c ~ / substantial investments that have been made to implement the most stringent
Maria11.lacobs, Ptrblic /(elcttiotrs. 1<et. controls in the country. At the same time, mobile sources that make LIP the
Phil Johnso~l./.itrcoltr C(:rr/er. majority of the emissions inventory are not required t o pay the fee. We are
Brad Langc, Lottgefi~ins
pleased that the Air District's call for flexibility has resulted in the EPA being
Jol111I.ctlbctler. I/i,tu I~(~t.ttrs,
Itrc..
willing t o accept AB 2522 revenues as an alternative, if the proceeds are spent to
Kc11Monroe. / l o l l ol'Colfot~rtio
pay for emissions reductions of ozone precursors.
I)n\,c tvlorgn~lso~l.
Itrrcrlvtctle 7i?tc/( Ce~trer
We believe AB 2522 should be implemented expeditiously for two reasons: (a)
Andy I'rokop. Cirtiled Il/o.v of'S(ttt .lortqtritt
-the Valley urgently needs incentive funding t o help reduce mobile source
.loll11Quinn, Food 4 Le.ss
emissions through voluntary measures; and (b) revenues raised through AB 2522
,1011 11 T<i ng. Il/ells F'(ttgo lttstirotrce Set.~.ices
will enable the Valley t o meet 185 fee requirements without adding an unfair
L.orcrla 'frevelia, Orrk lirrllej>Cotti. llorrli
burden on businesses.
z ; ~ , o / ' , l ~S. Cot~rtttet~re
T J i l l T ~ ~ c z Ortttk
Greg Tutlol: Bel<itrs-Ptrci/icS!ot.o,ye
We do not take lightly the recommendation t o increase fees in these difficult
'l'ol~hieWells, Ijoi~~ttrrtt~.
CPlI
economic times, but vehicle owners must be willing t o accept a certain amount of
I>o~laltl1. Wilcy, Sr. .loscl)h '.r h,lerlicol C e t r l o
self-sacrifice, given the huge contribution of mobile sources t o our poor air
l3nl1 % . ; ~ ~ n oZcrrtrot~cr
ro, ~ltt/utttutii:cG~.urtp
quality.
BUSINESS COUNCIL INC. OF SAN JOAQLTIN COUNTY

2800 West Adarch Laiie, Suite 473. Stoclcton, California 952 19 (209) 956-3388 /fax (209) 9.56- 1520
E-Allail: Dci3sjpirel. org
Mr. Seyed Sadredin October 12,2010 Page 2
We also do not take lightly the burden of additional fees on Valley residents when much of our air
quality problem comes from sources outside the Valley and vehicles using the Valley as a transit route.
The Air District must continue t o address this inequity, but we need a self-help measure while we
continue t o address this challenge, Implementation of AB 2522 will provide us with matching funds to
help generate more air quality mitigation funding from state and federal sources. Conversely, failure to
utilize the authority provided in AB 2522 will liltely limit our ability to be effective in lobbying for
additional funding in the future.
On behalf of the San Joaquin Business Council, we respectfully request the Air District take prompt
action in moving forward with the implementation of AB 2522, and thank you in advance for your
consideration.
Sincerely,
*@G
I
Fritz Grupe Ron Addington /
Chairman President/CEO

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Agenda Item 8 Oct 21 2010

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San Joaquin Valley lE

HEALTHY 1 -1R LlVlNF

DATE: October 21,2010

TO: SJVUAPCD Governing Board

FROM: Seyed Sadredin, Executive Dire

WITHIN THE SAN JOAQUIN VALLEY THROUGH THE

1. As authorized by California Health and Safety Code Sections

b. $12 per year per motor vehicle. Authorize additional $6

Revenues generated shall be used to satisfy the requirements of

3. Spend revenues generated on reducing mobile source emissions as provided under

OPTIONS CONSIDERED BUT NOT RECOIVIMENDED:

This option is NOT recommended for the following reasons:

If the District fails to adopt or implement a required fee program, EPA is

The Valley will be subject to expensive federal sanctions including a de-facto

Unfortunately, in January 2010, the U.S. Environmental Protection Agency (EPA)

This option is also NOT recommended for the following reasons:

Well-controlled Valley businesses should not be penalized for failure to attain

Valley's stationary source businesses are already subject to some of the

lmposition of the Section 185 nonattainment fees on Valley businesses will

Recent guidance issued by the EPA provides the option to assess

Under a straightforward implementation of Section 185,Valley businesses that are

Source Category Section 185 Nonattainment Fees

Adopt a multifaceted approach with the following elements:

Exempt well-controlled stationary sources from the Section 185 nonattainment

Provide for an equitable distribution of responsibility by adopting motor vehicle

Reinvest generated revenues in San Joaquin Valley to fund emission reduction

Table 2: Benefit of lncentives on Attainment with Federal 8-Hour Ozone Standard

Population in Attainment in 2015 2 million 1.4 million

I Population in Attainment in 2020 1 3.6million I 2.6 million I

1. $24 per year per motor vehicle, or

3. $10 per year per motor vehicle.

Incentive-based programs expedite reductions and improve public health while

Table 3: Vallev I-Hour Ozone Exceedances

Fee-Equivalent Alternative Program: Program that raises at least as much revenue

Emissions-Equivalent Alternative Programs: Program that achieves at least as much

PROGRAM FOR EXPEDI'TWRE OF REVENUES:

Revenues generated shall be reinvested in the Valley to reduce mobile source

Table 4: Program Areas for lncentive Funding

EXPENDITLIRE IN ENVIRONMENTAL JUSTICE AREAS:

PROCESS AND LEGAL REQUIREMENTS:

CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF

IN THE MATTER OF CONSIDER RESOLU'TION N,O.

I( 1I WHEREAS, a January 2010 guidance by the federal Environmental Protection

SAN JOAQUIN VALLEY UNIFIED

Tony Barba, Chair

CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF

IN THE MATTER OF CONSIDER RESOLUTION NO.

SAN JOAQUIN VALLEY UNIFIED

Tony Barba, Chair

CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF

5 THE SAN JOAQUIN VALLEY THROUGH THE

II Code sections 40150 to 40161; and

SAN JOAQUIN VALLEY UNIFIED

Tony Barba, Chair

CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF

An act to add Chapter 5.8 (commencing with Section 4061 0) to Part 3 of

[Approved by Governor September 30,2008. Filed with

LEGISLATIVE COUNSEL'S DIGEST