South Coast Air Quality Management District (California) Proposes Tax and Creates Uproar Among Shipping, Distribution, and Logistics Groups

The South Coast Air Quality Management District (SCAQMD) is currently under considerable scrutiny due to its proposed tax, which is projected to raise $1 billion per year for up to 15 years in order to fund air quality improvements in the South Coast Air Basin (SCAB).

Photo credit: Aaron Katzenstein, Ph.D., Climate and Energy Supervisor, SCAQMD
Photo credit: Aaron Katzenstein, Ph.D., Climate and Energy Supervisor, SCAQMD

The South Coast Air Basin refers to a 10,000 sq. mile area that includes all of Orange County and the urban regions of San Bernardino, Los Angeles, and Riverside, CA. This area is known for having some of the worst quality air in the country due to population, sunshine, traffic congestion, and shipping and logistics at two major ports – the ports of Los Angeles and Long Beach.

The South Coast Air Quality Management District (SCAQMD) is one of California’s 35 Air Management Districts that monitor and regulate air pollution within the state. The SCAQMD has jurisdiction over SCAB where it regulates permitting and performs compliance data collection, inspections, and audits for over 28,000 businesses. As a result of SCAB’s frequently poor air quality ratings, the SCAQMD often finds itself in the news.

Recently, the SCAQMD proposed a tax on container shipments to fund incentives with the intention of reducing ozone levels. Specifically, the SCAQMD’s goals are to reduce ozone to 80 ppb by 2023 by reducing nitrogen oxide (NOx) emissions by 45%. It then wants to further reduce ozone another 10% to 75 ppb by 2031. To accomplish these goals, the Legislative Committee proposed a tax of $100 per TEU which is estimated to raise $1.1 billion per year. This is in addition to the tax the SCAQMD proposed early this year of $35 per TEU to raise $385 million per year. This tax will provide funds for the deployment of near-zero and zero-emission trucks (which will operate in and out of the L.A./Long Beach ports), cargo handling equipment for the ports, and other incentives for cleaner vessels and locomotives.

As you can imagine, shipping, transportation, distribution, and logistics companies – about 100 of them – strongly oppose these taxes. In a letter to William A. Burke, the Chairman of SCAQMD, these groups said, “How these funds will be collected and what programs they would fund are ill defined, and any analysis on how such fees would impact local businesses and California’s ports as trade gateways is nonexistent.”

Additional proposed uses for the funds include providing incentives to:

  • Replace old, dirty trucks – specifically those used for draying containers to and from ports,
  • Increase the amount of ships that are “cold ironing” or using shore power in port, and
  • To fund “sock on a stack” systems, which refers to capturing and cleaning exhaust fumes coming from docked ships.

The letter went on to claim that these tax proposals have major legal issues and that the SCAQMD was drafted without consideration for the impacts of the taxes on jobs or port competitiveness. The groups also cited how similar past efforts have failed because of the economic injury a heavy tax would cause.

Spokesman Sam Atwood recognized that these goals are rather challenging. However, he did comment that the container fee is part of a “Funding Action Plan” that lists approximately two dozen ways to raise the funds needed to reach these goals. He further pointed out that the container fee is a “concept” and that there currently isn’t any legislation on the table. Legislation that would have to be drafted, proposed, and implemented for the tax to take effect.

When the Pacific Merchant Shipping Association released its March West Coast Trade Report, it announced that it would also adopt the $100 per TEU tax for shipments in and out of the Port of Oakland.
It is yet to be seen whether SCAQMD will enact its proposed tax. If so, it could have a significant negative impact on shipping, transportation, distribution, and logistics companies despite the SCAQMD’s good intentions to improve air quality for residents of Orange County, San Bernardino, L.A., and Riverside, California.

April Uhlenburg
April U

April has been working with Penn Intermodal’s Sales and Operations teams to educate clients on the benefits of leasing chassis for bulk liquid storage and transport since 2012.