UPDATE: Pollution Control District’s Rule Relating to Emissions Associated With Development Sites is Not Preempted by the Federal Clean Air Act

In National Association of Home Builders v. The San Joaquin Valley Unified Air Pollution Control District, (— F.3d —-, C.A.9 (Cal.), December 7, 2010), the United States Court of Appeals for the Ninth Circuit considered the issue of whether an air emissions rule imposed by an air pollution control district to reduce emissions associated with development sites is preempted by the Federal Clean Air Act (“Clean Air Act”). The court of appeals held the pollution control district’s rule is not preempted by the Clean Air Act.

Facts

Pursuant to the Clean Air Act, the San Joaquin Valley Unified Air Pollution District (“District”) “promulgates and enforces regulations to meet national air quality standards set by the Environmental Protection Agency.” District fell short of federal standards for “ozone, particulate matter under 10 microns in diameter (“PM10”), and particulate matter under 2.5 microns in diameter (“PM2.5″).” District found that construction and development sites contributed significantly to emissions of nitrogen oxides (“NOx”) and PM10. District also found that projected growth in the area would increase such emissions. In response, District adopted Rule 9510, which regulates emissions from development projects.

Rule 9510 applies only to certain development projects, such as those that include 50 residential units, 2,000 square feet of commercial space, 9000 square feet of educational space and several categories of larger developments. Rule 9510 addresses “construction equipment emissions,” which are NOx and PM10 emissions that come from construction equipment of greater than 50 horsepower, and “operational emissions,” which are those emissions that will occur after the development is up and running. Under the rule, a computer model is used “to measure the baseline level of construction equipment emissions by assessing the emission that average California construction equipment would emit if it were used to complete the development.” The baseline may be adjusted if the assumptions about the development are shown to be incorrect. Starting from the baseline calculation, “Rule 9510 requires a 20% reduction in NOx emissions, and a 45% reduction in PM10 emissions.” A developer can inform the District about the construction equipment that actually will be used “at the site in order to refine the estimate of how much pollutant the site’s construction equipment will actually emit.” If this estimate reveals that the developer plans to use construction equipment that “will already reduce NOx emissions by 20% and PM10 emissions by 45% from the baseline calculation, the developer need [to] do no more.” However, “[i]f the development site, under the estimate, cannot meet the required emissions reductions, a development may reduce its emissions by using add-on controls, cleaner fuels, or more advanced equipment.” As an alternative, “instead of reducing emissions, a development may simply pay fees that the District then uses to fund emissions reductions elsewhere.”

The National Association of Home Builders (“NAHB”) filed a lawsuit asserting Rule 9510 is preempted by the federal Clean Air Act. The trial court held the Clean Air Act does not preempt Rule 9510.

Decision

Pursuant to the Clean Air Act, regulatory authority is divided between the federal government and the states. The Environmental Protection Agency (“EPA”) sets national air quality standards. The states must adopt implementation plans to achieve the national standards set by the EPA. Rule 9510 was adopted under section 110(a)(5) of the Clean Air Act, which addresses “indirect sources,” or those sources that are neither a stationary source nor a mobile source. An “indirect source” is defined as a “facility, building, structure, installation, real property, road, or highway which attracts, or may attract, mobile sources of pollution.” An “indirect source” may be a parking lot, parking garage, or other facility that involves parking. However, “[d]irect emissions sources or facilities at, within, or associated with, any indirect source shall not be deemed indirect sources.” District asserts Rule 9510 qualifies as “an indirect source review program because it regulates the emissions from construction sites, an indirect source.”

NAHB asserts that Rule 9510 is a ruse that was “adopted simply to regulate emissions from nonroad vehicles, a task that the Clean Air Act prevents California from attempting without first securing the EPA’s approval.” Section 209(e)(1) of the Act “expressly prohibits any state from ‘adopt[ing] or attempt[ing] to enforce any standard or other requirement relating to the control of emissions’ from ‘[n]ew engines’ smaller than 175 horsepower ‘which are used in construction equipment or vehicles.'” Section 209(e)(2) “creates a zone of implied preemption” because it requires approval from the EPA “before California can ‘adopt and enforce standards and other requirements relating to the control of emissions’ from ‘any nonroad vehicles or engines’ other than those referred to in section 209(e)(1).” NAHB asserts that section 209(e)(1) expressly preempts Rule 9510 and section 209(e)(2) impliedly preempts Rule 9510. The court of appeal rejected NAHB’s contentions and held that Rule 9510 is preempted under neither provision of the Act.

The court found that, although the Clean Air Act does not define the word “new,” the EPA has interpreted the use of the word “new” in section 209(e)(1) to mean “showroom new,” or never sold. The court found that “[u]nder this interpretation, section 209(e)(1) would not preempt Rule 9510 because none of the construction equipment that Rule 9510 regulates could possibly be ‘showroom new.'”

Section 209(e)(2) impliedly preempts “standards or other requirements relating to the control of emissions” from nonroad vehicles and engines that are not covered by section 209(e)(1). The court found that definitions of “nonroad engine” and “nonroad vehicles” under the Act are comprehensive enough to include construction equipment. The court, however, concluded that “[e]ven if Rule 9510 establishes standards or requirements, those requirements do not relate to the control of emissions from construction equipment.”

District adopted Rule 9510 pursuant to the provision of the Act addressing “indirect source review” programs. NAHB asserted that Rule 9510 is not an indirect source review program because it is directed at construction equipment instead of the construction site. The court recognized that Rule 9510 “is ultimately directed at emissions that come from construction equipment.” This fact, however, does not mean that Rule 9510 is not an “indirect source review program.” The court opined, “Emissions from any indirect source come from the direct sources located there; that is precisely what makes an indirect source indirect.” In fact, “[e]very regulation of the emissions from an indirect source . . . will ultimately regulate direct sources.” The court noted, “If an indirect source review program were not allowed in some circumstances to impute direct sources of emissions to an indirect source as a whole, there could be no regulation of the emissions from indirect sources and no indirect source review program could exist.” Rule 9510 targets certain types of developments, not certain types of construction equipment. The court concluded Rule 9510 is a proper indirect source review program under the Act.

The court also concluded Rule 9510 does not target either engines or vehicles. Rule 9510 targets a development site as a whole and therefore its standards and requirements relate “to emissions from an indirect source, not from nonroad vehicles or engines.” Rule 9510 imposes “site-based regulation of emissions.” Accordingly, the court held that “Rule 9510 is an indirect source review program that is not preempted by section 209(e) of the Clean Air Act.”

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Mona G. Ebrahimi | 916.321.4500

Jon E. Goetz | 805.786.4302