AQMD SEEKS AUTHORITY TO IMPOSE SALES TAX

During its development of the Air Quality Management Plan, the SCAQMD focused on providing incentives in order to achieve emission reductions. The agency estimated a cost of one billion dollars per year to implement the incentive program. Agency staff has been working on ways to raise the money. One approach is to create a new tax. In California, the law allows counties, cities and transportation authorities to impose taxes. Air districts such as the South Coast Air Quality Management District (SCAQMD) currently lack such authority. Thus, SCAQMD is sponsoring legislation that would increase its authority to impose sales taxes. SB 732 by Senator Allen would allow SCAQMD to “impose, increase, or extend a transaction and use tax in increments of .25%, up to a total of 1% that exceeds the 2% cap.” Estimates show that the proposal could equate to a $1.4 billion annual tax increase on residents of Los Angeles, Riverside, San Bernardino and Orange Counties.

There is a law which essentially limits the local portion of the sales tax to 2 percent and local government agencies such as cities are concerned that the AQMD tax may infringe on their own taxing authority. SCAQMD spent approximately $75,000 on surveys to assess public support of the concept. Then, the agency’s lobbyists and staff sponsored Senate Bill 732, which would authorize a majority of the SCAQMD board, made up of 10 elected officials and three state appointees to put a sales tax increase of up to 1 percent on the ballot for voter approval that could exceed 10.25 percent in some cities.
The San Gabriel Valley Economic Partnership has opposed the tax proposal. “…SB 732, if passed, would place a 0.25 percent transition and use tax on all sales in the four major SoCal counties. That tax, if approved by voters, would generate nearly half a billion dollars – three times the District’s current operating budget – with no sunset on the tax and an option to incrementally increase it to 1 percent. That’s a lot of cash – some $2 billion dollars at the full 1 percent tax – when the District has issued no spending plan, no list of projects, no analysis of the most effective technology incentive programs to pursue, and no clear administrative process for how the District will hold itself accountable for spending this immense pot of money let alone whether these funds will substantially improve our air quality in the region.” said Partnership President & CEO Bill Manis. Additional opponents include the California Business Roundtable, California Taxpayers Association, California Business Properties Association, California Food Producers, the California Building and Owners Association, the California Manufacturing and Technology Association and the San Bernardino County Transportation Authority.

Some of the SCAQMD board members do not support the proposal and have cited lack of taxpayer oversight as a concern. While the bill passed in committee, its fate is uncertain at this point.

QUANTITY EMISSION REPORTS

The South Coast Air Quality Management District first introduced the concept of Quantity Emission Reports (QER) in rules related to architectural coatings. The most recent amendments of Rule 1168 (Adhesives) require the reports, which according to staff, are needed because “having strong inventory data is critical for planning purposes, emission reduction calculations, and understanding the products that are being used within our jurisdiction.”

Starting in 2019, manufacturers and private labelers of regulated adhesive products need to submit a Quantity and Emission Report (QER) every three years from the years 2019 to 2025; and every five years thereafter, until and including 2040. Each report is to include the previous two years of sales. The QERs will have the reported years separated. For instance, the 2017 sales must be distinguished from the 2018 sales. The QER for regulated products must include the following information:

• Product manufacturer (as labeled)
• Product name and code
• Applicable Rule 1168 category
• The grams of VOC per liter of regulated product (less water and exempt solvents)
• The grams of VOC per liter of material
• Whether the product is waterborne or solvent based
• Total annual volume sold into or within the District, including products sold through distribution centers located within or outside the District, reported in gallons of container size
• Whether the product was sold under a specific provision

Similar information is also required for aerosol adhesives and aerosol adhesive primers QERs. The aerosol adhesive exemption applies to non-refillable aerosol spray systems. Rule 1168 also specifies reports for Big Box retailers and distribution centers. The following table outlines the reporting timelines:

CARB’S NEW CRITERIA AND TOXICS REPORTING REGULATION

California Assembly Bills 617 and 197 by Eduardo Garcia created new mandates that the California Air Resources Board (CARB) is responsible for implementing in conjunction with the local air districts. In December 2018, CARB adopted the newly established “Regulation for the Reporting of Criteria Air Pollutants and Toxic Air Contaminants” (or CTR Regulation). Prior to finalizing the regulation, the Board directed staff to complete a “15-day change process,” to update the proposal based on the significant public feedback received. Two key issues were identified for review: (1) modification of the applicability criteria to better satisfy public health and major air quality objectives for communities and statewide and (2) changes based on comments received regarding ambiguity and other clarifications to the language. According to CARB the existing criteria and toxics emission inventory data are insufficient for “meeting the community protection, public right to know, and cutting-edge analysis needs of these mandates. Therefore, it is necessary to adopt a new paradigm, making significant improvements in the completeness of emission inventory data collected, and how it is collected…”

Under the draft additional applicability requirements, instead of only including AB-617 selected communities, the applicability based on criteria pollutant and toxics emitting facilities would be expanded statewide. Facilities with permitted criteria pollutant emissions greater than four (4) tons per year will be subject to the regulation. The changes clarified that un-permitted sources would not be covered. The revised proposal establishes a toxic pollutant threshold applicability for specific industry sectors or activities that are known to produce toxic emissions, and mimics the AB-2588 Air Toxics “Hot Spots” program. But certain permitted industry sectors are required to submit emissions data reports regardless of emissions. This type of “no threshold” applicability would apply to sources such as metal plating and hazardous waste facilities, which regulators believe to be sources of concern for toxics emissions, regardless of the level of activity at the facility. CARB has also specified a second group of sectors that must report if a throughput or use threshold is exceeded, such as gallons of fuel used. Some of the types of activities in this threshold-based category include permitted backup diesel engines, retail gas stations, auto paint and body shops, and commercial cooking and charbroiling.

CARB staff estimates that over the course of the implementation roll-out covering the next five to six years around fifty-thousand additional sources would be subject to reporting out of a universe of about seventy to eighty-thousand permitted sources. Due to the large number of sources a phased-in approach for the toxics facilities is being proposed. For example, for Tier 4 diesel engines, the proposed reporting threshold is over 100 gallons of fuel combusted per year or over 5 hours per year of operation. For painting and auto body shops the threshold is over 30 gallons of paint used per year. There are similar thresholds for styrene, methylene chloride, ethylene oxide uses and so on. The agency has not made a final decision on an initial start year for the “additional” applicability requirements, but the feasibility of starting with 2020 data reported in 2021, or 2021 data reported in 2022 is being discussed.

Various stakeholders, including the South Coast Air Quality Management District (SCAQMD), have submitted comments on the proposal. In a comment letter SCAQMD stated: “While some elements are mandated, such as the development of a uniform statewide system of annual reporting of emissions of criteria air pollutants and toxic air contaminants, the most concerning elements proposed are not required under the statute.” SCAQMD pointed to Community Emission Reduction Plans (CERPs), which can and are currently being developed “without the need for excessive requirements for statewide emissions reporting by individual facilities.” The District was also concerned with the extensive protocol development, outreach, training, and auditing that would be needed, pointing out that the effort could take many years. SCAQMD suggested changes to include unpermitted equipment, thereby including fugitive emissions-a change which industry representatives oppose. They also want flexibility for air districts to determine best available data and methods for emission sources; a delay in the individual reporting phases by at least one year for Phases I and II, and 2 years for Phase III; restructuring phases based on sector or industry as opposed to by the type of process; streamlined emission calculations for some processes and aligning emission report content with that required by air districts.

CARB has said that staff will continue working with stakeholders and will host public workshops in the coming weeks to refine elements of the regulation, including providing revised regulatory text, before it is finalized and becomes effective on January 1, 2020.

TOXICS FEES

In May, the SCAQMD Board adopted the 2019-20 Budget and Regulation III – Fees. But the board continued the portion of Rule 301 addressing toxics emissions fees to June 7, 2019. The board considered phasing in the fees either over a two year or three year period. In a split vote, the board adopted the two-year phase-in option, beginning January 1, 2020. The approval restructures how toxics emissions fees are collected from facilities, and also increase the level of these fees.
Specifically, the following fee levels are proposed:

• A new Base Toxics Fee of $78.03 applicable to any permitted facility that reports any toxic air contaminant above existing reporting thresholds, which are found in Table IV of Rule 301;
• A new Flat Rate Device Fee of $341.89 applied per emission source at a permitted facility that emits a toxic air contaminant above reporting thresholds;
• A new Cancer-Potency Weighted Fee of $10 per cancer-potency weighted pound of emissions above reporting thresholds;
• Fee for Diesel Particulate Matter.

Facilities within the petroleum and coal products manufacturing and utilities sectors are expected to incur 33 and 17 percent of the additional fee increase, respectively, due to the overall increase in fees on toxic emissions and proposed new toxicity-weighted emission fee. According to the District, 39% of facilities will not see a fee difference, 22% of facilities will get an increase of $1,000 to $5,000 and 15% of facilities will get increases ranging from $100 to $500. Fee increases for four hundred and twenty-eight (428) small businesses will average $1,191 per facility. Under the two-year phase-in, the fee impact is estimated to be $1.76 million in Fiscal Year 2019-20 and $4.12 million in FY 2020-21 and thereafter.

CHANGES TO AQMD’S ENGINEERING POLICIES AND PROCEDURES FOR BACT

Citing concerns with “circumvention” of rules by permit applicants, the SCAQMD has revised their policies related to thresholds for triggering Best Available Control Technology (BACT). New or modified sources that emit more than one pound per day of any “non-attainment” contaminant must comply with BACT. The one-pound trigger was intended to ensure the BACT requirement “broadly applied while avoiding excessive cost for a minimal emission increase for a piece of equipment.” During a meeting of the Permit streamlining Task Force the District presented an internal Memorandum, which indicated applicants are applying multiple times for emission increases on the same equipment of less than one pound per day “to avoid triggering BACT.” But the multiple increases add up to actual emissions greater than one pound per day.

For “the purposes of preventing future circumvention of triggering a BACT requirement” the District will now use a period of 5 years prior to the date of application submittal to accumulate all previous permitting actions allowing emissions increase for that specific permit unit, to determine if emission increases exceed 1.0 pound per day. For spray booths, BACT is triggered if the total VOC emissions from all spray booths at a facility is 22 pounds per day or greater. Some emission increases may be exempted from accumulation provided the applicant can demonstrate that the latest emission increase arose from a totally independent cause and was not foreseeable.

RULE 1106 (MARINE COATINGS)

The SCAQMD recently adopted changes to its Rule 1106 (Marine Coatings) and subsumed Rule 1106.1 for pleasure craft coatings, thereby creating a single rule covering both marine and pleasure craft coatings. The original 2015 proposal was voted down by the board and completely scrapped amid strong opposition by industry related to the additional requirements for reporting and recordkeeping. The newly adopted rule did not include the controversial requirements. Marine coatings are coatings applied to boats, ships, and vessels, their appurtenances, and structures such as piers, docks, buoys and oil drilling rigs intended for the marine environment, and for pleasure craft. Pleasure crafts are defined as marine or fresh water vessels that are less than 20 meters in length and are manufactured or operated primarily for recreational purposes, including vessels operated in amusement parks.

The changes eliminated the previous exemption for aluminum substrates and incorporate a 560 gram/liter VOC content limit for antifoulant coatings that are applied to aluminum substrates in the “Table of Standards I.”

Three new coating categories are added to reflect federal requirements:

Mist Coating –VOC limit 610 grams per liter
Nonskid Coating — VOC limit 340 grams per liter
Organic Zinc Coating — VOC limit 340 grams per liter

The “most restrictive” VOC content limit for products that may be marketed for both marine and pleasure craft coatings use is now required. During the rulemaking representatives from the Ultraviolet/Electron Beam (UV/EB) industry advocated for an exemption for low VOC materials and additional clarity for test methods. The rule includes an exemption for marine or pleasure craft coatings that have a VOC content of 50 grams per liter or less, or its equivalent, less water and exempt compounds, as applied. Coatings that have a viscosity greater than 650 centipoises that have poor flow characteristics have been exempted from the transfer efficiency requirements [paragraph (d)(9) of the rule]. The staff report states that equipment required to spray such thick fluids includes spraying equipment such as plural type application or other means that must use very high pressure (greater than 1,000 psi) and heated elements to apply coatings. Without the proposed exemption, “shops forced to use HVLP equipment would otherwise have to thin high solids coatings with VOC solvents to allow them to be sprayed, thus eliminating the benefit of the low-VOC high solids coatings,” read the rule staff report.

NEW EPA ADMINISTRATOR CONFIRMED

The United States Senate has confirmed the nomination of Andrew Wheeler for Administrator of the Environmental Protection Agency (EPA). Mr. Wheeler became Deputy EPA administration in April 2018 after Senate confirmation and transitioned to Acting Administrator in July 2018 following the resignation of Scott Pruitt. The Senate voted 52 to 47 to confirm Wheeler.
“I believe he will do an excellent job leading the agency. As acting administrator of EPA, he has prioritized commonsense policies that protect our air and water, while allowing our economy to grow. I look forward to working with Administrator Wheeler in his new role.”-commented U.S. Senator John Barrasso (R-WY), chairman of the Senate Committee on Environment and Public Works.