On June 7th, 2024, the South Coast Air Quality Management District (SCAQMD) adopted Rule 317.1 – Clean Air Act Nonattainment Fees for 8-Hour Ozone Standards in order to fulfill the obligations of the Federal Clean Air Act (CAA) Section 185. CAA Section 185 requires all major stationary sources of Volatile Organic Compounds (VOC) and/or NOX within ozone nonattainment areas to either reduce their emissions by 20% of a baseline amount or pay a fee every year until the applicable National Ambient Air Quality Standard (NAAQS) for ozone is attained. Thus, Rule 317.1 was established by SCAQMD as a means to implement and collect CAA nonattainment fees for the 1997 and 2008 8-hour ozone standards until the South Coast Air Basin or Coachella Valley reach attainment.
Notice of Rule Applicability
As an initial wave of notifications, SCAQMD released a Stage I Notice of Rule Applicability on November 8, 2024, notifying facilities that they may be subject to Rule 317.1 and may therefore be required to pay the nonattainment fees. This Stage I Notice of Rule Applicability was based on a facility’s current potential to emit or their Title V status.
Later this summer of 2025, SCAQMD plans to release a Stage II Notice of Rule Applicability for any additional facilities, excluding those notified in Stage I, that may be subject to the Rule based on their actual emissions reported for Calendar Year (CY) 2024. Beyond this timeline, Notices of Rule Applicability will continue to be sent for new major stationary sources that will be subject to the Rule. Note that a facility is subject to Rule 317.1 and its provisions regardless of whether a notice has been issued.
Fee Obligations
For facilities that are required to pay, the fees will be based on the actual emissions of VOC and/or NOX in exceedance of the facility’s baseline year. A separate baseline and fee will be determined for each pollutant, and there will be a fee for each NAAQS that is not attained.
For the 1997 8-hour ozone standard CAA nonattainment fee, calendar year 2024 will serve as the baseline year. Baseline emissions will be based on one of two criteria, whichever is lower:
- Actual Emissions: Actual VOC/NOX emissions emitted during calendar year 2024, reported in the RY2024 Annual Emissions Report (AER) due May 1, 2025; or
- Permitted Emissions: The facility’s permitted VOC/NOX emissions in 2024.
Additionally, a facility may request to use an Alternative Baseline Year if the facility’s emissions are irregular, cyclical, or vary from year-to-year. In this case, the Alternative Baseline Year shall reflect emissions from normal operating conditions and will be the average of twenty-four (24) consecutive months within the last ten (10) calendar years.
Regardless of baseline, Calendar Year 2025 will be the first “Fee Assessment Year”, which is the calendar year when emissions occurred which are used to calculate the fees. Starting 2025, the CAA Nonattainment Fee will be determined by the Assessment Year’s (1) Fee Rate, and (2) Actual Emissions in exceedance of 80% of the Baseline Emissions. Below is an example calculation for a major stationary source of VOCs that had a decrease of 2 tons compared to its baseline. The calculation assumes that the 2023 Fee Rate is used for Calendar Year 2025.
Initial invoices will be issued in 2026 based on the 2025 emissions that will be compared to the 2024 baseline or the facility’s proposed alternative baseline. If a facility fails to pay the fees in full within 120 days after the invoice due date, SCAQMD has the authority to revoke the facility’s Permits to Operate. Currently, the annual CAA nonattainment fee rate is $12,476.67 per ton as of calendar year 2024 and is set to increase annually to adjust for inflation. Note that there is a separate CAA nonattainment fee for each ozone NAAQS standard. As such, an additional CAA nonattainment fee could potentially apply for the 2008 8-hour ozone standard if these areas do not reach attainment with the NAAQS by the 2032 deadline.
Next Steps: Pay the Fee or Elect Exclusion?
Rule 317.1 Fees are only applicable to major stationary sources of VOCs and/or NOX. By definition, a major stationary source is a facility that emits or has the potential to emit (PTE) 10 tons per year (TPY) or more of VOC and/or NOX emissions. Therefore, if a facility believes it does not meet this definition and is therefore not subject to the CAA nonattainment fees, the facility is able to either:
- Challenge the rule applicability by submitting a Request for Non-Applicability Determination within 90 days of notice issuance, pursuant to Rule 317.1(d)(6); or
- Submit an Exclusion Plan and accept a federally enforceable limit on the facility’s actual emissions to be below the major stationary source threshold pursuant to Rule 317.1(e)(3). Additionally, the facility can elect to proceed with a Title V exclusion instead, which can accomplish Rule 317.1 exclusion.
Request for Non-Applicability Determination
Facilities that elect to challenge the rule are allowed to evaluate their current emission sources for the District to re-evaluate the facility’s applicability to Rule 317.1. In order to challenge the rule applicability, the facility must submit the Rule data-sf-ec-immutable=”” 317.1 Request for Non-Applicability Determination, along with supporting documentation for the facility’s VOC and NOX PTE determination, within 90 days of receiving a Notice.
Facilities must include supporting documentation, or the Request will be considered incomplete and will therefore not be processed. Supporting documentation should provide verifiable evidence that the facility emits or has the potential to emit less than 10 tons per year of VOC and/or NOX. Examples include permits, compliance records signed and certified by the facility’s responsible official, and historical calculations. The following PTE categories must be included:
- PTE from Permitted Equipment (e.g. Active Permitted Equipment and Operational Limits)
- PTE from Non-Permitted Equipment (e.g. Rule 219 Exempt Equipment)
- PTE from fugitive emissions (e.g. coatings and solvents)
The facility will remain subject to Rule 317.1 until the District notifies the facility that it is no longer subject. Additionally, a facility that has already challenged the rule applicability once will no longer be eligible to challenge it again once the District has decided that the facility is subject to the Rule.
Exclusion Plan & Title V
Facilities that elect to be excluded from the Rule may submit a Rule 317.1 Exclusion Plan Form on the basis that the facility’s most recent five calendar years of actual emissions do not exceed 8 tons per year of both VOC and NOX. For facilities that want to request Exclusion this year, the most recent years to be considered would be the emissions from the 2020-2024 calendar years.
A complete Exclusion Plan application submittal would consist of the following items, completed and signed:
- Form 400-A
- Form 400-CEQA
- Form 400-P-1 (Rule 317.1 Exclusion Plan Form)
- Supporting Documentation & Records
- Potential Title V Revision Application (subject to additional Title V revision Fees per Rule 306)
By submitting an Exclusion Plan application, the facility volunteers to limit their actual emissions, through a federally enforceable condition, to below 10 tons per year, thereby confirming the facility’s status as a non-major stationary source of VOC and NOX.
Upon approval, the facility will not be required to pay the applicable CAA Nonattainment Fees, and will be required to conduct the following to remain excluded:
- Recordkeeping: Conduct monthly recordkeeping of emissions, signed and certified for accuracy. The records must be maintained for five years.
- Exceedance Reporting: In the event of an exceedance, the facility must report the exceedance as soon as possible, according to the terms of the Rule 317.1 Exclusion Plan.
Note, that if a facility exceeds the emission limits specified in the Rule 317.1 Exclusion Plan, the facility will be subject once again to the CAA Nonattainment Fee and will need to pay starting the calendar year of the exceedance per Rule 317.1(e)(3)(C).
Closing Thoughts
South Coast AQMD has notified 657 facilities as of the Stage I Notice, with more facilities expected to be subject later this year after the CY 2024 Annual Emissions Reports (due May 1st) are submitted. Stage I Notice Facilities will have to either submit a Request for Non-Applicability Determination by Thursday, February 6th, opt for an Exclusion Plan application, or will otherwise have to pay the fee next year.
Looking forward, some facilities may want to consider using Alternative Baseline Emissions [Rule 317.1(d)(8)] to reduce the amount they would have to pay in future years. However, as fees continue to increase year-over-year due to inflation, facilities should consider challenging rule applicability or opting for exclusion or otherwise invest in emission reduction measures to avoid future emissions expenses.
If you would like to discuss SCAQMD Rule 317.1 or Annual Emissions Reporting and how they may impact your facility, please contact Trinity’s Irvine office or call 949.567.9880
