• Court Upholds Air District's Indirect Source Review Fees
  • October 28, 2009 | Authors: Geoffrey L. Robinson; Verne Ball
  • Law Firm: Bingham McCutchen LLP - San Francisco Office
  • In a closely watched case addressing fees imposed for air pollution, the Fifth District Court of Appeal upheld the San Joaquin Valley Air Quality Management District’s Indirect Source Review program, embodied in Rule 9510. California Building Industry Association v. San Joaquin Valley Air Pollution Control District.

    The Indirect Source Review program requires developers to reduce emissions from their projects, or pay a substantial fee to fund off-site programs, or combine the two approaches. The California Building Industry Association challenged the fee on a number of grounds.

    The court ruled that the fee is a regulatory fee and not a development impact fee. It is therefore not subject to the Mitigation Fee Act and does not need to meet the Act’s extensive requirements for fees imposed as a condition of development.

    The court also addressed the scope of the program. The air district defines “indirect source” to include “any facility, building, structure, or installation, or combination thereof, which attracts or generates mobile source activity that results in emissions of any pollutant, or precursor thereof…” The Court of Appeal broadly endorsed the view that a new housing development is an “indirect source” that may be subjected to fees.

    The Court of Appeal also addressed the amount of the fee. It rejected the argument that the Indirect Source Review program improperly treats all of a project’s emissions as if they were new to the district. The court emphasized that the district’s methodology accounted for existing regional emissions in some respects, and that the dispute turned only on a disagreement between experts. The court also broadly affirmed the air district’s finding that there was a reasonable relationship between the amount of the fees and the cost of the pollution reduction program. CBIA noted that the fee was calculated before specific off-site emissions reduction projects were identified. The court found that the district had estimated the emission reduction cost through a careful analysis of past and future emission reduction projects. “The record need only demonstrate a reasonable relationship, not an exact relationship, between the fees to be charged and the estimated cost of the program.”

    The decision may trigger more air districts to adopt similar fees, especially since indirect source review fees are recommended in the California Air Resources Board’s Scoping Plan as a means of mitigating greenhouse gas emissions.