The Ninth Circuit Court of Appeals capped a saga of over seven years on June 18 by extending its March 11, 2015 ruling in support of alternatives to imposing hefty fees on individual companies which have complied with the law, but happen to do business in California’s Central Valley or South Coast. Environmental groups challenged USEPA’s approvals of the alternatives adopted by both the South Coast Air Quality Management District and the San Joaquin Valley Air Pollution Control District. The March 11 ruling, in Natural Res. Def. Council v. EPA (9th Cir. 2015) 643 F.3d 311, upheld the SCAQMD’s alternative, which pays the fees from surplus air quality plan funds. The June 18 ruling in Medical Advocates for Healthy Air v. US Environmental Protection Agency (9th Cir. June 18, 2015, No. 12-73386 (opinion ordered nonpublished)) clarified extension of the March ruling to uphold the SJVAPCD’s alternative, which pays the fees from motor vehicle fees.

Background:

The 1990 Amendments to the Federal Clean Air Act added Section 185 imposing “nonattainment fees” on any “Major Source” of emissions in any area that had severe or extreme air quality problems Southern California and the San Joaquin Valley fell squarely within this provision, which also would apply to businesses emitting over 10 tons per year (100 tons applies to many US regions). While failure was alleged for the region, yet the fees would be levied on individual businesses even though most were in full compliance with the strictest air quality requirements in the Country.

The fee began at $9,000 per ton of emissions over 80% of any Major Source’s 2010 baseline. With IRS interest, this had grown huge and life-threatening for many businesses. With no prospect for full air quality attainment for either San Joaquin or Southern California the fee would have been never-ending.

The fight against this fee has been a saga. After a long back and forth between the regional air pollution control districts and industry, both San Joaquin and South Coast adopted alternatives. Along the way, industry won the support of Mary Nichols, Chair of the California Air Resources Board.

The March 11 ruling upheld USEPA’s approval of the South Coast Air District’s Rule 317, averting a very substantial hit for the Southern California Economy and setting a favorable precedent for the challenge to the SJVAPCD’s alternative Rule 3170 and beyond. Relying in part on Section 172 of the Clean Air Act, the Court found that it was the intent of Congress that air quality control regions have the flexibility to tailor their requirements to their own unique air quality challenges. More specifically, the Court stated, “In the SCAQMD region, for example, major stationary sources are already strictly regulated and contribute a relatively small amount to ozone pollution, with other sources, such as cars and trucks, contributing much more.” On June 18, the Court followed through, and adopted the South Coast holding for San Joaquin.