Rule Caption

The Department of Environmental Quality proposal to increase Oregon Air Contaminant Discharge Permit Fees by 20%

Title of Proposed Rulemaking

Air Contaminant Discharge Permit Fee Increase

Need for the Rule

Through streamlining, DEQ decreased staffing in the Air Contaminant Discharge Permit (ACDP) program to a point where no additional reductions are available without reducing service and essential functions. Because the ACDP program has experienced significant inflationary cost increases since 2001, DEQ will have to cut two core ACDP positions if it does not receive additional resources. These positions conduct permitting, facility inspections and complaint response in the ACDP program. Loss of these positions would cause delays in permitting, degradation of air quality due to out of date permits, reduced compliance assistance, and reduced technical assistance in permitting and pollution prevention. DEQ’s inability to process permits in a timely manner can create an obstacle to future economic development, especially for new and existing facilities modifying their operations. Because of inadequate resources, DEQ is currently unable to meet its target for timely issuance of ACDPs.

The annual revenue from a 20% fee increase would fully fund the ACDP Program for two biennia (four years). The proposed ACDP fee increase would benefit Oregonians and the environment by allowing DEQ to:

•  issue and renew ACDP permits in a timely manner;

•  meet the Oregon Progress Board economic benchmark to issue 90% of ACDP permits within the target timeframe;

•  complete required ACDP inspections;

•  monitor and enforce compliance with air quality regulations that apply to ACDP facilities.

Documents Relied Upon for Rulemaking

Documents relied upon to provide the basis for this proposal include:

1.  2007-2009 Legislatively Approved Budget

2.  Fiscal Year 2008 ACDP Revenue Forecast

3.  ACDP Fee Increase Advisory Committee Findings and Recommendations

Copies of these documents may be reviewed at the Department of Environmental Quality’s office at 811 SW 6th Avenue, Portland, Oregon 97204.

Fiscal and Economic Impact

Overview

The Air Contaminant Discharge Permit (ACDP) program, an important part of DEQ’s strategy to maintain clean air, controls the amount of air pollution from industrial facilities. Industrial permitting maintains healthy air and addresses new air quality challenges such as tighter federal health standards and air toxics requirements. Investing in clean air provides a healthy environment that supports vibrant economies and healthy communities while accommodating rapid population growth.

ACDP fees currently pay for approximately 85% of the cost to run the ACDP program. The remaining costs are funded by state General Funds and Federal Funds. The fees help pay for permitting, technical assistance, inspections, enforcement, rule and policy development, data management and reporting to EPA. ACDP fees also help support a portion of air quality monitoring, air quality planning and air program management costs. Unlike fees in the Title V program which regulates air emissions from large industrial facilities, the ACDP fees do not increase yearly based on cost increases from inflation.

Because of extensive streamlining implemented over the last five years, DEQ has avoided a fee increase in the ACDP program since 2001 and decreased staffing to a point where no additional reductions are available without reducing service and essential functions, such as permitting, compliance, and technical assistance. To maintain essential program services and functions in the ACDP program, DEQ proposes to increase ACDP fees by 20% for all permit categories. This increase matches the rise in ACDP program costs since 2001.

ACDP Fees were established in their current form during a fee overhaul in 2001 that DEQ believes improved equity among sources. The proposed rulemaking maintains equity among sources because it would raise fees 20% for all permit categories, rather than disproportionately affecting various categories.

The proposed ACDP fee increase would affect all businesses required to maintain ACDPs. There are approximately 1,130 businesses with ACDPs in Oregon. Many are small businesses with 50 or fewer employees. In general, sources with lower emissions and less complex permits would experience a smaller annual impact than would large sources with more complex permits. Based on 2006 invoice information, the Department estimates that under a 20% fee increase, about 78% of ACDP permittees would experience an annual fee increase between $60 and $320. The larger ACDP sources (approximately 22%) would experience an annual fee increase between $640 and $1,280.

The two tables below for annual and initial permit fees show the amount of the proposed fee increase and number of permits in each fee category. Specific Activity Fees, such as permit modification fees, are infrequent and contribute a relatively small portion of program revenue. The proposed fee increase to Specific Activity Fees is available in Attachment A.

Annual Permitting Fees

Current

Proposed

Number of Permits in 2006

Basic ACDP

$300

$360 (+$60)

161

General Class I ACDP

$600

$720 (+$120)

201

General Class II ACDP

$1,080

$1,296 (+$216)

331

General Class III ACDP

$1,560

$1,872 (+$312)

157

Simple Low ACDP

$1,600

$1,920 (+$320)

38

Simple High ACDP

$3,200

$3,840 (+$640)

94

Standard ACDP

$6,400

$7,680 (+$1,280)

149

Initial Permitting Fees

Current

Proposed

Number of Initial Permits in 2006

Short Term Activity ACDP

$2500

$3000 (+$500)

0

Basic ACDP

$100

$120 (+$20)

19

Assignment to General ACDP

$1,000

$1,200 (+$200)

37

Simple ACDP

$5,000

$6,000 (+$1,000)

7

Construction ACDP

$8,000

$9,600 (+$1,600)

2

Standard ACDP

$10,000

$12,000 (+$2,000)

2

Standard ACDP (New Source Review)

$35,000

$42,000 (+$7,000)

0

Request for Other Options

Pursuant to ORS 183.335(2)(b)(G), DEQ requests public comment on whether other options should be considered for achieving the rule’s substantive goals while reducing negative economic impact of the rule on business.

Impacts on the General Public

DEQ does not anticipate any direct fiscal or economic impacts from the proposed fee increases on the general public. The proposed fee increases could indirectly impact the general public because the fee increases could be passed through by ACDP permit holders, resulting in a slight increase in the costs of products or services provided by businesses with ACDPs.

Air pollution creates public health problems that can have negative economic impacts. The proposed fee increases could create positive economic benefits and improvements in public health and welfare resulting from an adequately funded ACDP program. A fee increase that provides sufficient resources for compliance and technical assistance may help avoid public health costs associated with lower compliance and increased air pollution.

Impacts on Small Business

(50 or fewer employees –ORS183.310(10))

The proposed increase of 20% for all fee categories would directly affect approximately 1,130 businesses with ACDPs in Oregon. The Department estimates that approximately half of these (565) are small businesses with 50 or fewer employees. The increased Specific Activity Fees could potentially discourage out of state businesses from coming to Oregon and could pose greater obstacles for new companies and startup businesses needing ACDPs.

The proposed fee increases could also indirectly impact small businesses because the fee increases could be passed through by ACDP holders, resulting in a slight increase in the costs of products or services.

Cost of Compliance on Small Business

(50 or fewer employees –ORS183.310(10))

a) The estimated number of small businesses subject to the proposed fee increases

The Department estimates that approximately 565 small businesses would be subject to the proposed fee increases.

b) The types of businesses and industries with small businesses subject to the proposed fee increases

Many different types of small businesses could be subject to the proposed fee increase. Categories include seed and grain companies; sand, rock and gravel operations; asphalt paving; crematories; commercial boilers; furniture manufacturing; food preparation; metal plating; wood products and printing.

c) The projected reporting, recordkeeping and other administrative activities required by small businesses for compliance with the proposed fee increases

The proposed rule amendments do not establish any additional reporting, recordkeeping or other administrative activities.

d) The equipment, supplies, labor, and increased administration required by small businesses for compliance with the proposed fee increases

The proposed rule amendments do not require any additional equipment, supplies, labor or increased administration.

e) A description of the manner in which DEQ involved small businesses in the development of the proposed fee increases

In fall 2006, the Department described the proposed ACDP fee increase at Air Quality Permit Program information sessions held in Medford, Bend, Pendleton and Portland. The Department also communicated the proposed fee increase to its Small Business Compliance Advisory Panel in fall 2006, and to the Associated Oregon Industries Air Committee in early 2007. In November 2006, the Department provided notice of the proposed fee increase to lobbyists for many of the industrial sectors requiring ACDPs. In December 2006, the Department posted on its website a fact sheet describing the proposed fee increase. As part of its 2007 legislative budget process, the Department submitted to the legislature detailed information about ACDP program funding and the proposed fee increase.

On July 16, 2007, the Notice of Proposed Rulemaking will be sent by mail or electronically to ACDP sources and interested parties. The August 17, 2007 public hearing will provide a forum for both large and small ACDP holders and interested parties to comment on the rule.

Impacts on Large Business

The proposed fee increases would directly impact large businesses required to have an ACDP. The Department estimates that approximately half of ACDP holders (565) are large businesses with more than 50 employees. The increased Specific Activity Fees could potentially discourage out of state businesses from coming to Oregon and could pose greater obstacles for new companies and startup businesses needing ACDPs.

Large businesses could also be indirectly affected because the fee increases could be passed through by ACDP holders, resulting in a slight increase in the costs of products or services.

Impacts on Local Government

The proposed fee increases would directly impact local governments required to have ACDPs. Based on 2006 invoice information, the Department projects that the proposed fee increases would result in the following impacts on local government facilities in FY 2008:

•  Sewage and Water Treatment facilities: seven facilities affected

o  One facility would have a $216 increase

o  Three facilities would have a $640 increase

o  Three facilities would have a $1,280 increase

•  Landfills and refuse systems: seven facilities affected

o  One facility would have a $60 increase

o  Two facilities would have a $120 increase

o  Four facilities would have a $640 increase

•  Institutional boilers: nineteen facilities affected

o  One facility would have a $60 increase

o  Seventeen facilities would have a $216 increase

o  One facility would have a $320 increase

•  Rock, gravel and paving: ten facilities affected

o  Three facilities would have a $60 increase

o  One facility would have a $120 increase

o  Six facilities would have a $216 increase

•  Electric power generation: one facility would have a $216 increase

The proposed fee increases could indirectly impact local governments because the fee increases could be passed through by ACDP holders, resulting in a slight increase in the costs of products or services.

Impacts on State Entities

The proposed fee increases would directly impact state entities required to have ACDPs. Based on 2006 invoice information, the Department projects that the proposed fee increases would result in the following impacts on state entities in FY 2008:

•  Landfills and refuse systems: one facility would have a $640 increase

•  Institutional boilers: eight facilities affected

o  Seven facilities would have a $216 increase

o  One facility would have a $1,280 increase

•  Rock, gravel and paving: two facilities would have a $216 increase

•  Electric power generation: three facilities affected

o  One facility would have a $216 increase

o  Two facilities would have a $320 increase

The proposed fee increases could indirectly impact state entities including DEQ and other agencies because the fee increases could be passed through by ACDP holders, resulting in a slight increase in the costs of products or services.

Impacts on DEQ

The Department of Environmental Quality would not incur any additional costs to implement the proposed fee increases. Instead, DEQ would gain additional resources needed to operate its ACDP Program.

Impacts on other Agencies

DEQ anticipates that no other agencies would be directly affected by the proposed rule amendments.

Assumptions

Estimated revenue forecasts and expenditures are based on the assumption that all facilities subject to the ACDP Program have been identified, and that the number of ACDP permits and facility emissions will remain approximately the same as in 2006. The Department projects approximately 1,130 sources will be subject to ACDP permitting and fee requirements in FY 2008.

Housing Costs

The Department has determined that the proposed fee increases may have a negative impact on the development of a 6,000 square foot parcel and the construction of a 1,200 square foot detached single family dwelling on that parcel if ACDP permit holders providing goods and services for such development and construction pass on the fee increase through their goods and services. The possible impact appears to be minimal. DEQ cannot quantify this impact at this time because the information available to it does not indicate whether the 20% fee increase would be passed on to consumers and any such estimate would be speculative.

Administrative Rule Advisory Committee

An ACDP Fee Increase Rulemaking Advisory Committee was convened to provide input and recommendations on the fiscal impact statement for the proposed rule amendments. The Committee concluded that the proposed fee increases would have a fiscal and economic impact and could have a significant adverse effect on some small businesses, but did not have enough information to conclusively make a finding to that effect. However, the Committee stated that despite any possible adverse effect on small business they did not believe there is a need, at this time, for additional mitigation steps as outlined in ORS 183.540. The benefits of an effective ACDP program, such as adequate service to businesses and continued protection of public health outweigh the potential fiscal burdens on small business. In addition, the fees are currently structured in a way that minimizes fiscal impacts on sources with smaller emissions, many of which are small businesses. If comments received during the public comment period reveal significant adverse fiscal impacts on small businesses, DEQ may reconsider the need for alternative mitigation.

The Notice of Proposed Rulemaking will be distributed to ACDP businesses and interested parties in July 2007.