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American Coatings Association, Inc v. South Coast Air Quality District

June 25, 2012

AMERICAN COATINGS ASSOCIATION, INC., PLAINTIFF AND APPELLANT,
v.
SOUTH COAST AIR QUALITY DISTRICT, DEFENDANT AND RESPONDENT.



Court: Superior County: Orange Judge: Ronald L. Bauer Ct.App. 4/3 G040122 Super. Ct. No. 03CC00007

The opinion of the court was delivered by: Liu, J.

Orange County

The South Coast Air Quality Management District (District) is charged with regulating nonvehicular air pollution emissions in a large area that encompasses much of Los Angeles and other parts of Southern California, regions that have some of the worst air pollution in the country. This case concerns the District's 2002 amendments to its Rule 1113, which limits certain pollution-causing substances in paints and coatings. The American Coatings Association (Association), formerly known as the National Paint and Coatings Association, challenged the amendments on the ground that they exceeded the District's regulatory authority under statutes requiring the use of "best available retrofit control technology." According to the Association, the District failed to show that technology necessary to meet the emissions limits set by the 2002 amendments was "available" within the meaning of the relevant statutes.

The Association adopts the position of the Court of Appeal below that a technology cannot be considered "available" unless it already exists or is ready to be assembled at the time a pollution standard is promulgated. The District contends that the relevant statute, which defines "best available retrofit control technology" by reference to "achievable" emissions reductions, authorizes pollution standards that are "technology-forcing." On the District's view, if new or developing technology will enable industry to meet a pollution standard by the compliance deadline, that standard is "achievable" -- and, under the statute, the technology is "available" -- even if the technology does not exist at the time the standard is promulgated. The regulations at issue here were originally proposed in 1999 and amended in 2002, and they required full compliance by July 2006.

The Association also contends that the paint and coating categories employed by Rule 1113 were too broad and heterogeneous, and that the District's emissions limits were not achievable for many products and applications within a given category. Thus, the Association argues, the District did not adequately demonstrate that the technology needed to meet the standards for such products were "available" under the statute. The District contends that the categories were reasonably drawn and that it need not show that the technology to achieve the emissions limit for each category is available for every paint or coating application within that category. On this issue, the Court of Appeal agreed with the District.

We conclude that the relevant statutes give the District the authority to promulgate pollution standards based on technologies that do not currently exist but are reasonably anticipated to exist by the compliance deadline. In addition, we conclude that the District sufficiently demonstrated that its challenged emissions limits were achievable in each category and that the categories were reasonably drawn. We therefore reverse in part the judgment of the Court of Appeal.

I.

Air pollution is regulated by federal, state, regional, and local governmental entities. The federal Clean Air Act mandates that the Environmental Protection Agency (EPA) set national ambient air quality standards. (42 U.S.C. § 7409(a).) States have primary responsibility for meeting these standards, and the Clean Air Act requires states to formulate and enforce implementation plans designed to meet national standards within their borders. (Id., §§ 7407(a), 7410.) State implementation plans are subject to EPA approval. (Id., § 7410(k).) If the EPA determines that a state plan is inadequate to meet federal standards or that the requirements of an approved plan are not being met, it may adopt a federal implementation plan and impose sanctions on the state. (Id., §§ 7410(c)(1),7410(m), 7509.)

A.

Under California law, the California Air Resources Board (Board) is charged with developing the state implementation plan and overseeing its enforcement. (Health & Saf. Code, §§ 39602, 41502-41505; all statutory references hereafter are to this code unless otherwise indicated.) The Board establishes ambient air quality standards to protect public health for each air basin in the state. (§ 39606, subd. (a).) While the Board is responsible for regulating vehicular pollution throughout the state, regulation of nonvehicular emissions is assigned to local and regional air pollution control districts. (§ 39002.) The Legislature has created five regional districts, and the South Coast Air Quality Management District is one. (2 Manaster & Selmi, Cal. Environmental Law and Land Use Practice (1989) § 40.51, pp. 40-86, 40-87 (rev. 2012) (Manaster & Selmi).)

All districts are required to "adopt and enforce rules and regulations to achieve and maintain the state and federal ambient air quality standards in all areas affected by emission sources under their jurisdiction, and shall enforce all applicable provisions of state and federal law." (§ 40001, subd. (a).) The Board monitors district compliance with air quality standards and, in the case of ozone and carbon monoxide pollution, classifies districts as in attainment of those standards or in moderate, serious, severe, or extreme nonattainment. (§§ 40918, 40419, 40920, 40920.5, 40921.5.) The nonattainment classifications trigger increasingly stringent requirements on air quality districts to control pollution. (§§ 40918, 40919, 40920, 40920.5.)

The South Coast Air Quality Management District is California's largest air pollution control district. Its jurisdiction, the South Coast Air Basin (Basin), covers all of Orange County and the urban portions of Los Angeles, Riverside, and San Bernardino Counties, and has some of the worst smog in the United States. The District was created in 1976 by the Lewis-Presley Air Quality Management Act (§ 40400 et seq.), which observed in its findings that the "South Coast Air Basin is a geographical entity not reflected by political boundaries" and that the Basin has "critical air pollution problems." (Stats. 1976, ch. 324., § 5, p. 893; § 40402, subds. (a), (b).) The 1976 act required the District to adopt an air quality management plan to achieve and maintain the state and federal air quality standards by 1979 and to regularly review and revise the plan thereafter. (§§ 40460, 40463, subd. (a).) The District's plan constitutes the "federally required state implementation plan for the South Coast Air Basin." (§ 40460, subd. (d).)

As originally enacted, section 40440 required the District to adopt rules and regulations by the end of 1977 "that are not in conflict with federal and state laws and rules and regulations and reflect the best available technology and administrative practices." (Stats 1976, ch. 324, § 5, p. 897.) In 1987, section 40440 was amended to provide in subdivision (b) that the "rules and regulations adopted pursuant to subdivision (a) shall . . . : [¶] (1) Require the use of best available control technology for new and modified sources and the use of best available retrofit control technology for existing sources." (Stats. 1987, ch. 1301, § 9, p. 4653, italics added.) The meaning of those terms, and particularly the latter term, is at the heart of this case.

In order to adopt, amend, or repeal a regulation, a district must hold at least one noticed public hearing. (§ 40725.) During such hearings, a district "shall provide for the submission of statements, arguments, or contentions, either oral, written, or both. . . . Following consideration of all relevant matter presented, a district board may adopt, amend, or repeal a rule or regulation, unless the board makes changes in the text originally made available to the public that are so substantial as to significantly affect the meaning of the proposed rule or regulation." (§ 40726.) Before adopting or amending a regulation, a district must make several findings, including a finding of "necessity." (§ 40727, subd. (a).)

The statutory scheme also authorizes districts to grant variances under certain conditions when compliance with a regulation would "result in either (A) an arbitrary or unreasonable taking of property, or (B) the practical closing and elimination of a lawful business." (§§ 42352, subd. (a)(2), 42368, subd. (a)(2).)

B.

The District regulates stationary sources of ozone. Ozone forms when volatile organic compounds (VOCs) react with oxides of nitrogen in the presence of sunlight. Ozone irritates the respiratory system, aggravates asthma, and leads to irreversible reductions in lung function. (See EPA, Air Quality Designations, 40 CFR § 81 (2004), 69 Fed. Reg. 23858, 23859 (Apr. 30, 2004); see also Allied Local & Regional Mfrs. v. U.S. EPA (D.C. Cir. 2000) 215 F.3d 61, 66, fn. 1.) These respiratory effects are particularly severe in children and the elderly. (See EPA, Air Quality Designations, 40 CFR § 81 (2004), 69 Fed. Reg. 23859 (Apr. 30, 2004); see also Dunn-Edwards Corp. v. South Coast Air Quality Management Dist. (1993) 19 Cal.App.4th 519, 522, fn. 2.)

The Basin has historically suffered, and continues to suffer, from the worst ozone pollution in the United States. (EPA, Latest Findings on National Air Quality: Status and Trends Through 2006 (2008) 8-10.) As a result, the Basin is in "extreme" nonattainment with state air quality standards for ozone and in "severe" nonattainment with the 1997 federal ozone standard. (EPA, Air Quality Designations, California-Ozone, 40 CFR § 81.305 (2004) 69 Fed. Reg. 23882-23883 (Apr. 30, 2004).) According to a recent study, the economic cost of the health impacts from ozone pollution in the Basin exceeds $480 million annually. (Hall et al., The Benefits of Meeting Federal Clean Air Standards in the South Coast and San Joaquin Valley Air Basins (Nov. 2008) pp. 76-80.)

The VOCs that cause ozone pollution come from many sources. In addition to motor vehicles, a significant source of VOCs is architectural coatings. According to a Board report in the record, these are coatings "applied to stationary structures and their appurtenances at the site of installation, to portable buildings at the site of installation, to pavements, or to curbs. To be classified as an architectural coating, a coating must be applied in the field, at the site of installation, rather than in a shop or factory where pollution control equipment may be installed. . . . [¶] Architectural coatings include, but are not limited to paints, varnishes, stains, industrial maintenance coatings, and traffic coatings."

According to the District, "emissions from architectural coatings are greater than the emissions from the entire refinery community, the furniture manufacturing industry, printing industry[,] and aerospace industry combined, multiplied by a factor of two." Architectural coatings are the single largest source of VOCs that the District can regulate. As of 2002, these coatings emitted approximately 58 tons of ozone per day in the Basin, an amount equal to what 1.7 million motor vehicles produce in a day. According to a Board report, VOC emissions from architectural coatings represent about 8 percent of stationary source VOC emissions statewide and 4 percent of total statewide emissions.

Architectural coatings consist of pigments that give paint its ability to hide the underlying surface, binders (or resins) that disperse pigment particles and bind pigments to the painted surface, solvents that keep paint in a liquid state during application, and chemical additives that are needed for other coating characteristics. Solvents are the primary source of VOCs in architectural coatings; VOCs are emitted when solvents evaporate during the drying process. The VOC content of a coating is generally expressed as grams of VOC per liter of coating.

Curtailing pollutants from architectural coatings is difficult because coatings typically are not applied within an enclosure vented to an air pollution control device. The principal cost-effective method to control VOC emissions from architectural coatings is to reduce their VOC content by reformulating coating products. In general, coating manufacturers will meet the VOC limits by replacing some of the solvents with water or other exempt compounds, or by increasing the amount of resins, pigments, or other solids. Because the substitution of water for solvents can lead to inferior performance by the coating, various additives or resins must be devised for waterborne coatings in order to upgrade their performance.

C.

The District's Rule 1113, originally enacted in 1977 and amended a number of times thereafter, limits concentrations of VOCs in architectural coatings. (See Rule 1113 (2007) p. 1.) Rule 1113 establishes VOC limits for coatings in 42 categories and prohibits the manufacture and use of noncompliant coatings, subject to certain qualifications.

The District's 1997 air quality management plan was in effect when it adopted the 2002 amendments to Rule 1113 at issue here (2002 Amendments). According to the 1997 plan, major reductions in VOC emissions are necessary to attain air quality standards for ozone and various particulates. A District staff report in the record observes that as emissions from facilities and vehicles decrease, "widespread area wide sources" such as architectural coatings become a greater proportion of VOC emissions and need to be reduced in order to make further progress toward reducing ozone pollution. The District estimated that if left unchecked, architectural coating emissions alone would account for more than 20 to 25 percent of allowed VOC emissions by 2010. The 1997 plan called for a 50 percent reduction in VOC emissions from coatings by 2010. After the plan's adoption, the Board and the EPA approved it. (See EPA, Approval and Promulgation of State Implementation Plans, Cal.-South Coast, 40 CFR § 52 (2000) 65 Fed. Reg. 18903 (Apr. 10, 2000).) These approvals made the plan binding on the District. (See General Motors Corp. v. U.S. (1990) 496 U.S. 530, 533-534.)

In 1999, the District amended Rule 1113 as part of its effort to implement the 1997 plan. The amendments established interim VOC limits for 11 categories of coatings, effective July 2002, with final limits effective July 2006. The amendments were adopted after industry input through various meetings and workshops. The District also received and responded towritten public comments. Some of the comments came from public agencies, which claimed that coatings at the level prescribed by the regulation were not available or feasible. In response to these comments, the District proposed to modify the amendments to exempt what it termed "essential public services." This proposal was submitted less than two weeks before the May 4, 1999 hearing where the amendments were adopted.

The Association challenged the regulation on substantive and procedural grounds. Without reaching the merits, the Court of Appeal held in an unpublished opinion that the District violated procedures set forth in sections 40725 and 40726 by adding the public agency exemption and other substantial changes to the proposed amendments without giving 30 days' notice prior to the May 4, 1999 hearing. The Court of Appeal directed the trial court to issue a writ of mandate vacating the District's adoption of the 1999 amendments.

But the amendments were never vacated. Before the writ could issue, the District largely readopted the 1999 amendments in December 2002, this time following the proper procedures and incorporating numerous revisions in response to a new round of comments by industry and others. The 2002 amendments -- the subject of the present proceeding in this court -- establish interim VOC limits that became effective January 1, 2003 (or July 1, 2004 for the industrial maintenance coatings category) and final limits that became effective July 1, 2006. (Proposed Amendments to Rule 1113 (Dec. 6, 2003) 1113-10, 1113-11.)

In formulating the rule, the District concluded in several staff reports included in the record that compliant coatings were becoming increasingly available in all the categories affected by the amendments. While earlier versions of low-VOC water-borne coatings had shown problems with stability, rheology (flow characteristics), water immersion, loss of gloss, rusting, lack of corrosion resistance, loss of drying capacity, and bacterial degradation, new additives and resin emulsions developed in the 1990s upgraded the performance of water-borne coatings and significantly reduced or eliminated these problems.

The District's conclusion about the availability of high-performing, low-VOC coatings was based in part on a survey of product data sheets prepared by coatings manufacturers. The District also relied on several studies by outside consultants conducted under the supervision of a technical advisory committee formed by the District and comprised of representatives of the paint industry, academia, and regulatory bodies. In one study, non-flat top coatings, primers, sealers, undercoaters, and industrial maintenance coatings were tested and evaluated according to various performance criteria, such as drying time, application properties, corrosion resistance, and adhesion to substrates. The study showed that low-VOC and zero-VOC coatings equaled or surpassed high-VOC coatings on many performance characteristics.

The District had also contracted for a two-year, real-time exposure study of exterior coatings and coating systems. "At the end of the two-year outdoor test," the District reported, "the results continue to show that zero- and low-VOC coatings are similar in weathering and durability characteristics, and in many cases have outperformed their higher VOC-based counterparts, corroborating the conclusions reached by the laboratory weathering and accelerated outdoor weathering studies." In addition, the District had conducted surveys of construction sites and facilities, and found that across a wide variety of applications, the vast majority of coatings used on these sites complied with the interim limits and that many coatings complied with the final limits.

In response to coating industry comments, the District acknowledged that "new products . . . will need to be formulated to comply with future lower VOC content limits. Industry input during development of the 1999 amendments to Rule 1113 indicated that research and development of new coatings where the resin technology is currently available takes approximately three to five years. Further, industry hasindicated that if a resin technology is not currently available, research and development of new coatings takes approximately five to seven years. Based on this industry input, the final compliance dates specified in the 1999 amendments to Rule 1113 allowed at least seven years for the development of new products. Because the May 1999 amendments to Rule 1113 have already been in effect for more than three years, the expectation is that coating manufacturers have made progress in their research and development efforts of new formulations that comply with future VOC limits." The District further stated that "based on current availability of low and zero-VOC . . . coatings for a wide range of applications, it is anticipated that even more complying coatings will be available by the 2003 and 2006 compliance dates." The District relied in part on a 1997 study it had commissioned concluding that in light of "the published results and availability of low VOC resins, coatings, and processing capabilities, the industry should witness major progress over the next 5 to 7 years."

The 2002 amendments to Rule 1113 also incorporated several measures designed to give manufacturers and users flexibility in achieving the rule's VOC limits. These included a sell-through provision whereby any coating manufactured before the effective date of the applicable Rule 1113 limit with a VOC content above that limit (but not above the applicable limit on the date of manufacture) "may be sold, supplied, offered for sale, or applied for up to three years after the specified effective date." (Rule 1113(c)(4).) The 2002 amendments also provided for an averaging compliance option for many coating categories, whereby "manufacturers may average designated coatings such that their actual cumulative emissions from the averaged coatings are less than or equal to the cumulative emissions that would have been allowed under those limits over a compliance period not to exceed one year." (Rule 1113(c)(6).)

Before adopting the 2002 amendments, the District received and responded to several critical comments, mostly from the coating industry. In some cases, industry comments caused the District to modify the amendments, for example, by delaying the effective date of the interim industrial maintenance coatings limits to July 1, 2004 and by creating additional coating categories with higher limits. On the other hand, the District disagreed with industry comments that low-VOC coatings in particular categories were inferior to high-VOC coatings with respect to various ...


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