October 21, 2010 1 Federal Mandates for Nonattainment Penalties - - PowerPoint PPT Presentation

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CONSIDER ALTERNATIVES FOR THE EQUITABLE APPLICATION OF MANDATED FEDERAL NONATTAINMENT PENALTIES THROUGH MOTOR VEHICLE FEES

October 21, 2010

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Federal Mandates for Nonattainment Penalties

• Section 185 of the federal Clean Air Act
• Imposes penalty fees in areas failing to reach

attainment

• Applies to Major Stationary Sources of either NOx
• r VOC
• Was intended as a hammer to force more

reductions from stationary source businesses

• Fee is based on annual emissions in excess of

80% of a ‘baseline amount’

• $8,755/ton fee adjusted annually using CPI

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Section 185 Triggered in the San Joaquin Valley

• More than one exceedance at any location triggers

the penalty

• Seven exceedances of the 1-hr ozone standard

experienced in 2010

• Exceedances coincide with back-to-school traffic

and high temperatures

• $29 million/year penalty imposed on Valley

businesses

• Payments due in 2012 based on 2011 actual

emissions

• EPA will impose and confiscate penalties if the

District fails to adopt an approvable program

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Penalties by Business Category

Business Category

Section 185 Nonattainment Penalties 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

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District Attempts to Satisfy Section 185

• Adopted Rule 3170 on May 16, 2002
• January 2010 – EPA action on Rule 3170 to

partially approve and partially disapprove

• Sections disapproved by the EPA:

– Clean Unit exemption – Multi-year emissions averaging

• These provisions were meant to reward

well-controlled sources

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Consequences of EPA Action

• Sanctions clock started

– Must receive EPA approval of revised program within 18 months (August 2011)

• Sanctions

– De-facto ban on new businesses locating or expanding in the Valley (2:1 offsets) – Loss of highway funds ($250 million/year) – EPA will collect and confiscate nonattainment fees and revenues

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Inequities in Section 185

• Considering their enormous expenditure and

sacrifice, Valley businesses deserve our recognition and reward, NOT A PENALTY

• Valley businesses have reduced NOx and VOC

emissions by 80% since 1980

– 500+ regulations adopted – Billions of dollars in clean-air technology investments

• Exceedances reduced from 56 days in 1996, to
• nly 7 days in 2010
• Today, 80% of NOx emissions are from mobile

sources, outside the District’s regulatory jurisdiction

• Ozone violations largely due to mobile sources

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Distribution of Responsibility

Stationary Source NOx Emissions Reduced by 75% since 1980 0% 20% 40% 60% 80% 100% 120% 1980 1985 1990 1995 2000 2005 2010

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Distribution of Responsibility (cont’d)

Stationary Source VOC Emissions Reduced by 88% Since 1980 0% 20% 40% 60% 80% 100% 120% 1980 1985 1990 1995 2000 2005 2010

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Distribution of Responsibility (cont’d)

On-road Mobile and Stationary Source Emissions

20 40 60 80 100 120 1980 2010 Percent

On-road Mobile Sources Stationary Sources

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Distribution of Responsibility (cont’d)

Vehicle Miles Have Grown Twice as Much as Population

0% 50% 100% 150% 200% 250% 1 9 8 1 1 9 8 3 1 9 8 5 1 9 8 7 1 9 8 9 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 1 2 3 2 5 2 7 2 9 % grow th from 1980 VMT % grow th from 1980 Pop.

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Distribution of Responsibility (cont’d)

NOx Emissions by Category

Stationary Area On-Road Mobile Off-Road Mobile

On-Road Mobile Stationary

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Distribution of Responsibility (cont’d)

On-road Mobile NOx Emissions (2010)

Heavy duty vehicles 84% Light and medium duty vehicles 16%

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Distribution of Responsibility (cont’d)

On-road Mobile VOC Emissions (2010)

Heavy duty vehicles 34% Light and medium duty vehicles 66%

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Distribution of Responsibility (cont’d)

Directly Emitted PM10

On-road mobile and travel-related road dust 22% Other direct PM10 emissions 66%

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Alternatives Available to Satisfy Section 185 Penalty Mandate

• In response to calls for flexibility, EPA

issued national guidance in Jan/2010

• Allows for use of new fees in lieu of

penalties on businesses if spent to reduce emissions

• AB 2522 (Arambula) provides an
• pportunity for a more equitable solution to

Section 185 penalty mandate

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Motor Vehicle Fees Under AB 2522

• Authorizes $24 per vehicle
• Requires majority vote of the Governing Board and

a majority vote of the elected members of the Board

• Authorization resolution and program for expending

funds

• CARB must find that the District has undertaken all

feasible measures to reduce emissions

– DMV collection begins 9 months after finding – Collection anticipated in October 2011, at the earliest

• Fees can be collected until 2023-24

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Valley Needs Additional Incentive Funding

• Valley cannot reach attainment with regulations alone
• District has no regulatory authority over mobile

sources (80% of emissions)

• Additional rules on stationary sources are becoming

cost-prohibitive and are reaching the point of diminishing return

• Past experience with incentive programs have led to

cost-effective reductions in emissions

• $200 million/year needed for meaningful incentive

program to reach attainment

• Board supported enactment of AB 2522 in 2008

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Benefit of Incentives on Attainment with Federal 8-Hour Ozone Standard

With Incentives Without Incentives Population in Attainment in 2015 2 million 1.4 million Population in Attainment in 2020 3.6 million 2.6 million

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Magnitude and Timing of Incentive Revenues - Factors to be Considered

• 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 fruit” reductions 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

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• Revenues will be used to fund emission

reduction projects throughout the Valley

• District has 20 years experience

implementing incentive programs

• Incentive program praised through

numerous recent audits as operating with high accountability and efficiency

New Revenues Will be Reinvested in the San Joaquin Valley

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New Revenues Will be Reinvested in the San Joaquin Valley (cont’d)

Spending Program Program Description Annual Funding Need A Truck Replacement $150 million B School Bus Replacement $100 million C Mass Transit $40 million D Van Pools $0.5 million E Public Transit Incentive $0.5 million F Park & Ride Lots $1.5 million G Traffic Signal Synchronization $12 million H Clean Alternative Fuel Infrastructure $8 million

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New Revenues Will be Reinvested in the San Joaquin Valley (cont’d)

Spending Program I Electronic mobility systems (i.e. online services) $3 million J Bicycle Infrastructure $0.5 million K City/county assistance to devise and implement Sustainable Community Strategies to reduce Vehicle Miles Traveled $15 million L Gross Polluting Vehicles $6 million M Inland Ports (Truck-to-Rail) $12.5 million N Short Sea Shipping (Truck-to-Ship) $2.5 million O Construction Equipment Replacement $4 million

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New Revenues Will be Reinvested in the San Joaquin Valley (cont’d)

Spending Program P Ag Off-Road Equipment Replacement $30 million Q Ag Irrigation Pump $5 million R Forklifts $1 million S Portable Off-Road Engines $5 million T 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

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• Annual spending allocations will be

established through public budgeting process

• Governing Board approval through budget

appropriations

• Designation for expenditure in

Environmental Justice communities

New Revenues Will be Reinvested in the San Joaquin Valley (cont’d)

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Reducing Air Quality Impacts in Environmental Justice Areas

• California H&SC requires that:

– $10 million be expended to benefit EJ areas – EJ advisory committee to provide recommendations to District on how and where to expend funds

• EJAG established in 2007 – could be used

to provide input

• District has excellent track record of

distributing funds in EJ areas

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Option 1 – Take No Further Action

• Considered, but NOT recommended for the

following reasons: – EPA will collect penalties plus interest from Valley businesses – All penalties collected will go to the Federal Treasury (no return to the Valley) – Expensive federal sanctions will be imposed:

• De-facto ban on new and expanding

businesses (2:1 offset ratio)

• $250 million per year loss of highway funds

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Option 2 – Apply Penalty to Valley Businesses

• Considered but NOT recommended for the following

reasons: – Well-controlled Valley businesses should not be penalized for nonattainment – Stationary source emissions reduced by over 80% – Violations primarily due to mobile sources – Penalties would be significant blow to fragile Valley economy (businesses and residents will suffer) – Recent guidance by EPA provides the option to assess nonattainment penalties on mobile sources

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Actions Recommended

• Pursue federal legislative remedies to

repeal Section 185 or provide exemption for well-controlled businesses

• Exempt well-controlled businesses from

Section 185 penalties

• Provide for an equitable distribution of

responsibility by adopting motor vehicle fees

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Actions Recommended (cont’d)

• Sunset motor vehicle fees upon expiration
• r revocation of Section 185 penalties
• Reinvest generated revenues in Valley by

funding emission reduction projects

• Ensure strict public accountability with

annual reports to the public detailing revenues generated, emission reduction projects funded, and expected reductions in emissions

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Select one of the following options:

• 1. $24 per year per motor vehicle, or
• 2. $12 per year per motor vehicle with a

phased-in increase

• Additional $6 increase effective 2013
• Additional $6 increase effective 2015, for total

increase of $24 per year vehicle per year, or

• 3. $10 per year per motor vehicle

Actions Recommended (cont’d)