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12.01.21

Warehouse Indirect Source Rule causes concerns in the South Coast as the holidays approach

By , Stratton P. Constantinides

With little fanfare, on May 7, 2021, the South Coast Air Quality Management District (SCAQMD) adopted Rule 2305, otherwise known as the Warehouse Indirect Source Rule (ISR). The ISR requires warehousing, including manufacturing facilities with at least 100,000 square feet of indoor floor space, to reduce nitrogen oxide (NOx) and diesel particulate matter (DPM) emissions associated with “mobile sources.” The ISR’s requirements include submission of compliance reports and annual Warehouse Actions and Investments to Reduce Emissions (WAIRE) reports, and meeting the requirements of the Warehouse Point Compliance Obligation (WPCO). The WAIRE Program will determine each warehouse facility’s compliance obligation on a points-based system based upon annual truck trips and warehousing activities. Aligning with the carbon tax concept, the WAIRE Program beginning in 2022 will collect a “mitigation fee” from warehouse owners and operators, unless they are able to earn sufficient points from increased visits by zero- and near-zero emissions trucks, or implement other activities on a menu.

SCAQMD’s approach is fascinating and unique in the sense that the local government is targeting regulation of the trucks and other vehicles that visit warehouses instead of implementing additional regulation for the facilities themselves. SCAQMD argues that the adoption and implementation of Rule 2305 is expected to reduce smog-forming emissions by 10–15% over the next three years from warehouse-related sources beyond existing state and federal regulatory requirements.

However, it should be noted that, because California local air districts such as SCAQMD are technically barred from directly regulating tailpipe emissions, this indirect source rule is undergoing numerous court challenges before it is even fully implemented. As of August 5, 2021, the California Trucking Association (CTA) filed a complaint in the U.S. District Court for the Central District of California. On October 13, 2021, the State of California, on behalf of the Office of the Attorney General and the California Air Resources Board filed a motion to intervene. Regardless of the outcome, this attempt at indirect regulation is, while interesting, yet another attack against warehouses, in the midst of an ongoing pandemic causing workers shortages and a nationwide supply chain crisis. Warehouse owners and operators across the country should watch these developments, as their outcomes will likely shape the ongoing interplay between the increased air contaminant emissions warehouses allegedly indirectly contribute to and consumer demand for next-day and same-day deliveries.

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Author

Alison B. Torbitt

Partner

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Stratton P. Constantinides

Associate

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