New Draft Rule Imposes Compliance Obligations Regarding Indirect Source Emissions

The South Coast Air Quality Management District (SCAQMD) recently released a draft of a proposed rule, the Warehouse Indirect Source Rule (Warehouse ISR). The Warehouse ISR, unlike development impact fees or other air quality fee programs, requires owners and operators of warehouses to comply with the Warehouse ISR on an annual basis. The Warehouse ISR aims to regulate "indirect source" emissions that stem from the activities of all warehouses within the SCAQMD's jurisdiction (portions of Los Angeles, Riverside, and San Bernardino Counties, as well as all of Orange County) that exceed a specific size threshold. In its current draft form, the Warehouse ISR will require the owners and operators of those warehouses to take specific actions each year to reduce indirect source emissions, pay a mitigation fee to offset the cost of indirect source emissions, or implement a combination of the two.

Below, we address common questions at this stage of the administrative rulemaking, 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 during the rulemaking process. Though COVID-19 has forced the cancellation of scheduled public meetings, SCAQMD is seeking public input in a variety of ways. Interested parties can provide comments on specific technical portions of the Warehouse ISR by May 1, 2020.

Applicability of the Warehouse ISR: Who Will Be Affected?

We stress that multiple important variables in the draft Warehouse ISR have not yet been determined and are subject to stakeholder input during the next few months. However, the general applicability of the Warehouse ISR is unlikely to change. The 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 in the ISR. Warehouse owners and operators may satisfy their individualized points requirement each year by one of three methods: (i) taking specific, pre-approved actions that reduce their indirect source emissions, (ii) paying a mitigation fee, or (iii) a combination of the first two methods: taking some actions to limit emissions, and then paying 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 zero-emissions charging or fueling infrastructure. A full list of actions that would earn points, as well as the current proposed formula for the points requirement, is included in the current draft Warehouse ISR.

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 Draft WAIRE Menu Technical Report through May 1, 2020. The Draft WAIRE Menu Technical Report provides the method for calculating each warehouse owner's and operator's annual points requirement, thus playing a significant role in determining their obligations under the Warehouse ISR.

Beyond the comment deadline, SCAQMD is currently considering a number of options for engaging with the community, including public hearings after COVID-19 restrictions have been lifted and virtual meetings to continue gathering stakeholder input in the meantime.

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

Because the Warehouse ISR is in the early stages of the review process, the extent of its impact on warehouse owners and operators is not yet evident. At this juncture, the May 1, 2020 comment deadline provides an immediate opportunity to influence the rulemaking process and impact the formula that will determine each operator or owner's compliance obligation in the finalized Warehouse ISR.