Proposed Rule in Southern California Imposes Compliance Obligations To Reduce Emissions from Large Trucks and Yard Equipment

The South Coast Air Quality Management District (SCAQMD) recently released a 153-page preliminary draft staff report that analyzes one of its most controversial proposed rules in recent years: the Warehouse Indirect Source Rule (Warehouse ISR). The Warehouse ISR, unlike other air district rules that mainly affect factory emissions, would require owners and operators of warehouses to take specific actions each year or pay a mitigation fee or implement a combination of the two. The Warehouse ISR regulates the emissions associated with vehicle travel to-and-from large warehouses within the SCAQMD's jurisdiction (portions of Los Angeles, Riverside, and San Bernardino Counties, as well as all of Orange County) with the primary goal of improving ozone and particulate matter levels in the region’s air.

Below, we address common questions focusing on the applicability of the Warehouse ISR, its high-level impact as currently proposed, and the opportunities for interested parties to learn more about the Warehouse ISR and provide input to the SCAQMD.  Interested parties can provide comments on the Warehouse ISR at virtual community meetings to be conducted via Zoom on February 16 and February 17, 2021, or in writing before the hearing during which the SCAQMD Governing Board will consider the rule (currently scheduled for May 7, 2021, but this schedule could change).

Applicability of the Warehouse ISR: Who Will Be Affected?

The Warehouse ISR will apply to owners and operators of both new and existing warehouses that contain greater than 100,000 square feet of indoor floor space in a single building.

How Will the Warehouse ISR Operate as Currently Drafted?

The Warehouse ISR is designed to reduce or offset "indirect source" emissions, which are those emissions that do not originate directly from a warehouse, but stem from its day-to-day operation, such as trucks entering and exiting the premises with manufactured goods. Under the Warehouse ISR, each warehouse owner or operator must satisfy an annual points requirement that is determined according to a formula. Warehouse owners and operators may satisfy their individualized points requirement each year by one of three methods: (i) taking specific, pre-approved actions, (ii) paying a mitigation fee, or (iii) combining the first two methods by taking some actions to limit emissions and supplementing them with a reduced mitigation fee.

Proposed actions that would count toward satisfaction of a warehouse owner or operator's points requirement include acquiring low or zero-emissions trucks, increasing the proportion of annual truck trips by low or zero-emissions trucks, and installing onsite electrical charging or alternative fueling infrastructure (such as hydrogen). A full list of actions that would earn points, as well as the proposed formula for the points requirement, is included in the current proposed Warehouse ISR. The rule as proposed is complex and regulated parties will need to carefully consider their options.

Warehouse owners and operators who do not meet their points requirement will be required to pay a mitigation fee. Estimates of this fee vary, but the SCAQMD has estimated in its preliminary draft staff report that the mitigation fee will require warehouse owners and operators to pay an average of $0.75 per square foot on an ongoing, annual basis. (SCAQMD Preliminary Draft Staff Report, p. 77.) It is possible that the compliance costs could be higher.

What Opportunities Exist to Influence the Rulemaking Process?

Though COVID-19 restrictions on gatherings have temporarily halted SCAQMD's plans for public meetings to gather input regarding the Warehouse ISR, interested parties still have an opportunity to provide feedback. SCAQMD is currently seeking comments on the proposed Warehouse ISR at upcoming community meetings on February 16 and 17, 2021. These public meetings have been scheduled in order to provide information and solicit comments from the public on the proposed Warehouse ISR. The meetings will be conducted via Zoom, and more information is available on the SCAQMD website.

Conclusion: What Does the Future Hold for the Warehouse ISR?

The Warehouse ISR is expected to be considered by the SCAQMD Governing Board at a public hearing on May 7, 2021. Approximately 30 days prior to that hearing, SCAQMD will release further information pertaining to the Warehouse ISR, including a socioeconomic assessment and a comparative analysis of other federal or SCAQMD rules and regulations that are applicable to the same source, along with potential revisions to the proposed rule. Interested parties may attend the upcoming community meetings in February to provide comments on the Warehouse ISR, as well as submit comments to the SCAQMD Governing Board during the notice and comment period in advance of the anticipated May 7, 2021, public hearing.