BOARD MEETING DATE: October 1, 2010
AGENDA NO. 18

PROPOSAL:

Appropriate Funds and Authorize Amending of Existing Contract with Special Outside Counsel to Assist with Litigation Regarding SB 827 and AB 1318 and the Internal Offset Accounts

SYNOPSIS:

This item is to consider appropriating funds from Rule 1309.1 Priority Reserve Fund (Fund 36) and amending the existing contract with outside counsel to assist in defending the agency in litigation relating to operation of the internal offset accounts, including readoption of Rule 1315 and implementation of SB 827 and AB 1318. Additional funding is necessary for three pending projects – advice and anticipated litigation relating to CEQA document for readoption of Rule 1315; the ongoing state-court lawsuit regarding AB 1318 and SB 827; and the U.S. EPA petition regarding this legislation.

COMMITTEE:

Administrative, September 17, 2010, Recommended for Approval

RECOMMENDED ACTIONS:

1. Transfer $550,000 from Rule 1309.1 Priority Reserve Fund (Fund 36) to the Legal Office FY 2010-11 Budget, Services and Supplies Major Object, Professional and Special Services Account to be used to obtain advice and litigation services regarding the District’s internal offset accounts, including the readoption of Rule 1315.
   
2. Authorize the Executive Officer to amend the existing contract to add up to $550,000 with the law firm of Bingham McCutchen for a total contract value of $2.85 million to provide advice and litigation services regarding the District’s internal offset accounts, including the readoption of Rule 1315.

 

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Several organizations including Natural Resources Defense Council, Communities for a Better Environment, and California Communities Against Toxics, have sued the AQMD and petitioned U.S. EPA to set aside the operation of the AQMD’s internal offset accounts. Without operation of these accounts, the AQMD, as a practical matter, is unable to issue permits for a wide variety of sources, including many sources desiring to install newer low-emitting technologies. To address the effects of this litigation, the Legislature adopted SB 827. Plaintiffs have sued the AQMD challenging implementation of SB 827 as well as AB 1318, which requires the AQMD to transfer offsets from its internal offset accounts to the Sentinel Power Plant project in the Coachella Valley. Although the District has obtained a court order dismissing the lawsuit, the plaintiffs have appealed. The fate of the District’s permitting program, as well as the Sentinel project, hinge on the outcome of this litigation.

In addition to the lawsuit, certain of the plaintiffs have filed a petition with U.S. EPA seeking to shutdown the internal offset accounts. Thus, the USEPA petition, too, has the potential to significantly impact the District’s permitting program and the Sentinel project. Additional assistance from outside counsel may be necessary in connection with the U.S. EPA petition.

To finally address the litigation regarding the internal offset accounts, staff will present the Board with a revised version of Rule 1315 for adoption, along with a revised CEQA document. The CEQA document has recently been released for circulation. Assistance from outside counsel related to the newly circulated CEQA document will be necessary, including preparation of responses to comments on the document. It is also possible that the readoption of Rule 1315 could be met by a new lawsuit or lawsuits from plaintiffs.

The need for additional funding, above and beyond the amounts requested here, will depend on the progress of the appeal, on the outcome of the U.S. EPA petition, and on plaintiffs’ reaction to the Rule 1315 CEQA document and potential readoption of the rule.

The Rule 1309.1 Priority Reserve Fund was established in 2001 to account for mitigation fees paid for Particulate Matter ≤ 10 microns (PM₁₀) credits.

Proposal

Staff is proposing that the Board authorize the transfer of $550,000 from Rule 1309.1 Priority Reserve Fund (Fund 36) to pay for the continuing litigation and for assistance with the CEQA document for Rule 1315.

Fiscal Impacts

The total cost of this contract shall not exceed $2.85 million, of which $550,000 is added by this Board letter. Sufficient funds will be available in Legal’s FY 2010-11 Budget following the transfer of funds from Rule 1309.1 Priority Reserve Fund (Fund 36).