November 30, 1993 - From the November, 1993 issue

Proposed EPA Reg’s Subject Public and Private Projects to New Hurdles

By Rick Zbur & Cindy Simons, who are both attorneys with the law firm of Latham & Watkins.

The Environmental Protection Agency (EPA) is on the verge of adopting regulations under the Federal Clean Air Act establishing new requirements for many transportation and non-transportation projects seeking to qualify for federal permits, approvals or funding. Under Section 176(c) of the Clean Air Act, federal agencies must determine that their actions "conform" to the local air plan, EPA's proposed regulations would define what it means for a project to conform to the air plan and establish standards for applicability of the regulations.

EPA transmitted the proposed final conformity regulations to the Office of Management and Budget (OMB) in late September, seeking to comply with the terms of a consent decree requiring final promulgation of such rules by November l, 1993. However, the proposed regulations covering non-transportation projects have given rise to strong opposition from federal agencies and business interests concerned that expansive reading of the conformity requirement proposed by the EPA will subject thousands of projects requiring any federal involvement to spiraling costs, unpredictable delays and potential disapproval or cancellation. Recent discussions indicate that EPA may be moving to restrict application of the conformity requirement in response to these concerns. 

Due to ongoing modifications, final rules were not issued on November 1, 1993, although they could be finalized at any time. It is unclear whether revised regulations will be made available for public review prior to final adoption.

1990 Clean Air Act Amendments Require Promulgation of Transportation and Non-Transportation Conformity Regulations 

Sponsors of transportation projects may be familiar with federal conformity procedures administered by the Southern California Association of Governments for projects to be listed in the Regional Transportation Improvement Program, a pre-requisite to qualifying for various sources of public transportation funding. Those requirements are likely to be modified under EPA's new final conformity regulations, although these have been withheld from further public review since their publication for comment in early 1993. Two key issues for sponsors of public and private transportation projects will be the extent to which existing projects will be grandfathered under EPA's current Interim Conformity Guidelines, as opposed to being required to comply with additional, new conformity criteria that may be established by the final transportation regulations, and the extent to which conformity will apply in maintenance and attainment areas as well as non-attainment areas. EPA still intends to adopt transportation regulations by November 1, 1993.

The greatest impact, however, will be felt by public and private sponsors of non-transportation projects, which will become subject to federal conformity regulations for the first time. Debate has focused on the range of non-transportation actions that should be covered by the new conformity requirements. While most participants could probably agree that Congress intended to subject obviously federal projects, such as a federal prison or a ski resort on federal land, to a federal air quality review and conformity demonstration, many doubt that Congress intended to authorize such federal assessments of non-federal projects merely because a minor federal action may be involved.

Proposed Regulations Would Apply to a Broad Range of Federal Actions

In the regulations transmitted to OMB in late September, EPA proposed an expansive "inclusive" application of the non-transportation regulations that would subject any action resulting in an emissions increase above de minimis thresholds and requiring any federal approval, permit or funding to an exhaustive federal air quality assessment. Such reviews would not be limited to development projects required to complete environmental impact reports or statements, but would extend to many other actions, including certain federal contracts, including defense contracts; federal permits and approvals, including wetlands permits and endangered species approvals; transfers and leases of federal lands, including military base conversions; and federal grants to hospitals, universities, ports and law enforcement agencies. 

In fact, under the inclusive approach, thousands of actions would meet the emissions thresholds (and, thus, become subject to the conformity regulations) because emissions increases subject to conformity review include all ''reasonably foreseeable" emissions that would result from the overall project. For instance, in the case of a wetlands permit, the Anny Corps of Engineers would assess not only those emissions associated with the permitted dredge and fill activities, which are likely to be below emissions thresholds, but all emissions resulting from the overall development project. Relevant emissions would include both direct and indirect emissions, and must include mobile source emissions due to vehicle trips to and from the finished project.

However, EPA may be moving toward the more limited "exclusive" approach, which had been proposed as an alternative in previous draft regulations. Under this version, federal agencies would assess only those emissions the federal agency "has and will continue to maintain some authority to control." Under this more limited approach, fewer federal actions would result in emissions increases above thresholds set forth in the regulations, and, thus, require a conformity determination.

A Mechanism for Assessing Conformity Is Not Yet In Place in the Southern California Region

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Regardless of the approach selected for the assessment of indirect emissions, conformity review would require a comprehensive assessment of the air quality impacts of the overall project, similar to those currently conducted under CEQA. Pollutant-specific air quality analyses would be required depending upon the emissions associated with a particular project. Most untried will be the new requirement that the local air agency or regional planning agency certify that emissions associated with a project “together with another emissions in the area" would not exceed the region's "emissions budget." This requirement seems to anticipate a checkbook approach to accounting for regional emissions increases that is not yet in place and is difficult to imagine at this early stage. One concern commonly expressed throughout the development of these regulations has been that such a tracking system could be impossible to develop and administer in an air basin such as ours containing hundreds of thousands of emissions sources. 

Failure to Satisfy the Conformity Criteria Would Absolutely Prohibit the Desired Federal Action 

The proposed regulations could render many projects infeasible because failure to satisfy the conformity criteria cannot be overcome by a statement of overriding considerations. If the federal agency cannot make a positive conformity finding, it is prohibited from issuing the permit, approving the funding or otherwise taking the requested action. 

Moreover, although impact analyses commonly assess cumulative impacts and induced growth associated with a project, the proposed inclusive approach would take this assessment a step further, requiring project sponsors to fully mitigate cumulative emissions from projects undertaken by unrelated entities. For instance, taking an example from EPA's draft commentary, in the case of an airport expansion, the conformity review would look not only at emissions increases associated with the airport itself, but all emissions associated with development that may reasonably be expected in response to the expansion, including hotels, conference centers and restaurants. The airport sponsor would be required to offset all emissions (both project-related and cumulative emissions) that are in excess of the emissions budget for the region. If such emissions cannot be fully mitigated, the federal action must be disapproved. This burden presumably would be reduced under the alternative exclusive approach because federal agencies would assess only those emissions associated with airport operations that arc under their control. 

Impacts to Development and Economic Growth In Southern California

Members of the development community, federal agencies and various elected public officials have argued that EPA’s conformity regulations could block private development and public infrastructure projects and inhibit general economic growth that otherwise is supported by local jurisdictions. EPA appears to be sympathetic to concerns that broad implementation of the conformity requirement could result in significant economic and administrative impacts and may be moving toward modified regulations that address these concerns. 

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