Clean Air Act Section 185 Penalty Fees

Sacramento Metro Area, CA (Severe-15) – Yolo/Solano Air Quality Management District portion; Feather River Air Quality Management District portion; Placer County Air Pollution Control District portion; El Dorado County Air Quality Management District portion.
Southeast Desert Modified Air Quality Management Association (Severe-17) - Includes Coachella Valley
Los Angeles-South Coast Air Basin (Extreme)

The finding does not make a determination on whether or not these areas failed to meet their attainment deadline, and therefore would be subsequently subject to penalty fees under section 185 of the Clean Air Act. However, it does require California to submit to EPA for approval SIPs for these nonattainment areas to establish programs for assessing and collecting these section 185 fees.

42 U.S.C. Sec. 7511d - Enforcement for Severe and Extreme Ozone Nonattainment Areas for Failure to Attain Requires states to collect fees from major source facilities located in severe or extreme nonattainment ozone areas if the designated are within the state fails to meet its attainment deadline. This policy is applicable to all ozone standards set forth by the Environmental Protection Agency, including:

1991: EPA established a 1-hour standard, setting the limit of 125 parts per billion.
1997: EPA established an 8-hour primary and secondary standard, setting the limit of 0.080 parts per million.
2008: EPA revised the 8-hour primary and secondary standards, setting a new limit of of 0.075 parts per million for both.

CAA 185 sets the penalty amount as $5,000 per ton of excess emissions that exceed 80% of baseline emissions, in 1990 dollars, adjusted annually for inflation. These fees are to be collected annually until the area achieves attainment.

UPDATES, COMMENTS & OTHER REPORTS

September 2011 To date, no fees have been assessed or collected. As a result of the July 2011 court ruling (see below), major source facilities in four designated ozone nonattainment areas will face penalty fees in the coming months. The areas are Houston-Galveston-Brazoria (HGB), the South Coast Air Quality Management District (SCAQMD), the San Joaquin Valley, and parts of Los Angeles. Major facilities located in the HGB and SCAQMD nonattainment areas are expected to be assessed penalty fees for calendar years 2008 to present, based on 2007 emissions. Facilities in San Joaquin and Los Angeles nonattainment areas will be assessed the fee for 2011, based on 2010 emissions.

July 2011 The D.C. Circuit Court of Appeals vacated a January 2010 guidance document addressing the obligations of regions still in nonattainment of the one-hour NAAQS for ozone. The court concluded that the guidance, which would have allowed states to implement alternative programs in lieu of assessing penalty fees, violated the Clean Air Act’s plain language. The court further ruled that EPA violated the Administrative Procedures Act in issuing the guidance, noting that the document qualifies as a legislative rule that should have been developed through a notice-and comment rulemaking process.

March 2011 During March, the New Jersey Department of Environmental Protection notified industry stakeholders that CAA185 penalty fees would not be assessed for facilities located in the NY/NJ Metropolitan Air Quality Control Region. NJDEP recently submitted a "clean data determination" based on the latest emissions data for 2007-2009 that indicated that the region was in compliance with the 1997 eight-hour NAAQS for ozone. Additionally, EPA published a proposed rule to terminate the applicability of CAA 185 fees for the Baton Rouge, LA, ozone nonattainment area. The region received an attainment designation for the applicable standards in February 2010.

October 2009 In a presentation to the Clean Air Act Advisory Committee, EPA indicated that a final guidance document for assessing and collecting fees under CAA 185 would be available before year end. During the meeting, the Committee also dissolved its Section 185 Workgroup.

May 2009 On May 14, the Clean Air Act Advisory Committee’s Section 185 Workgroup gave a presentation during the Clean Air Act Advisory Committee Meeting. The presentation outlined requirements and applicability of CAA 185 and draft recommendations for EPA guidance to address implementation issues. For more information, click here.

April 2009 EPA has identified eight nonattainment areas that may be subject to CAA 185 for failure to comply with the 1-hour NAAQS for ozone. Under CAA 185, major source facilities in these areas will be penalized for annual emissions that exceed 80 percent of a baseline emission level. Facilities will be assessed $5,000 per ton of excess emissions, adjusted annually for inflation, beginning with the calendar year following the attainment deadline.

November 15, 2005 Attainment Deadline – Fees will be assessed beginning with calendar year 2006.

Baltimore, MD
Baton Rouge, LA
Sacramento, CA

November 15, 2007 Attainment Deadline – Fees will be assessed beginning with calendar year 2008.

Houston-Galveston-Brazoria, TX
Northern New Jersey, - Long Island – Connecticut (NY-NJ-CT)
Southeast Desert Modified Air Quality Management District, CA

November 15, 2010 Attainment Deadline – Fees would be assessed beginning with calendar year 2011 should these areas fail to meet the deadline.

South Coast Air Quality Management District, CA
San Joaquin Valley, CA

EPA is expected to provide official guidance on how states should implement CAA 185. EPA’s Clean Air Act Advisory Council has formed a Section 185 Workgroup to focus on developing equivalence type alternatives to offset penalty fees. For now, it seems that most states will need to write or revise their State Implementation Plans to include provisions for assessing and collecting these fees. In some cases, additional legislative action may be needed.

January 2009 The New Jersey Department of Environmental Protection (NJDEP) indicated its intent to assess facility VOC and Nox emission fees in 2009, pursuant to CAA 185. According to NJDEP, this is based upon the failure of the NY/NJ Metropolitan Air Quality Control Region to attain the 1-hour National Ambient Air Quality Standard for Ozone by its 2007 attainment date. Affected companies would be assessed penalty fees based on their 2008 emissions. NJDEP has indicated that invoices would be sent out in December 2009. Payment of fees may be due as early as January 31, 2010. However, NJDEP acknowledged that it may need to develop new legislation in order to collect penalty fees.

EPA has also confirmed that California is in the process of submitting revisions to its State Implementation Plan to include language giving the state the authority to collect CAA 185 fees from major sources in several regions.

Visit the State & Regional Issues section of ILTA’s website for more information on the potentially affected areas, specifically in New Jersey, California, and New York.

March 2008 On March 21, 2008, EPA released a guidance document on how to determine “baseline emissions” for purposes of assessing CAA 185 fees. According to the EPA memo, baseline emissions are considered the lower amount of either allowable permitted emissions or calendar year actual emissions. The guidance document also included methods for calculating baseline emissions where source emissions are irregular, cyclical or otherwise vary significantly.

June 8, 2007 U.S. Court of Appeals for the District of Columbia Circuit Ruling

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

Case History

40 CFR § 51.905 (e) Asserts that CAA 185 and other CAA provisions for the 1-hour National Ambient Air Quality Standard for Ozone no longer are applicable once the standard has been revoked by EPA.
70 FR 44470 Final rule revokes the 1-hour ozone standard for all states, and codifies provisions of an earlier rulemaking (69 FR 23858) that replaced the 1991 1-hour standard with the 1997 8-hour National Air Quality Standard for Ozone and re-designated areas of attainment and nonattainment.
South Coast Air Quality Management District challenges EPA, claiming that the 1-hour standard still applied to nonattainment areas due to anti-backsliding provisions outlined in 40 CFR § 51.905 (a).

Court Ruling

Ruled that EPA improperly determined that nonattainment areas would no longer be subjected to the 1-hour ozone standard.
Reinstated the applicability of CAA 185 fees for nonattainment areas that were classified as severe or extreme if attainment was not achieved by the areas attainment deadline.
Ordered EPA to require that a nonattainment area’s contingency measures be implemented if the area fails to attain the 1-hour ozone standard.