Highway Fund Sanctions and Conformity Under the Clean Air Act

James E. McCarthy

Specialist in Environmental Policy Resources, Science, and Industry Division

Updated October 15, 1999

RL30131

Summary

This report discusses two related Clean Air Act provisions that can result in denial of federal highway funding to local areas: sanctions and the lapse of what is called "conformity." Under the Clean Air Act, the Administrator of the Environmental Protection Agency is required to impose highway fund and other sanctions on areas that have not submitted or not implemented adequate plans to attain air quality standards. In addition, federal departments and agencies may not approve, permit, or provide financial support to transportation improvements in areas that have not attained air quality standards, unless such improvements conform with the State Implementation Plan for achieving air quality.

The threat of sanctions is a powerful tool that Congress gave EPA to encourage state compliance with the Act's objectives. EPA has formally notified the states of its intent to use this tool 858 times since 1990. Actual imposition of sanctions, which cannot occur until 18 months after formal notification, is a relatively rare event, however. The Agency has imposed sanctions 18 times since 1990; as of October 1999, they were in effect for 5 areas.

Conformity determinations can also be a powerful tool — one meant to integrate transportation and air quality planning. Twenty-nine states have experienced a lapse of conformity at some time since 1993, and 5 areas, the largest of which is Atlanta, had lapsed conformity as of October 1999. Conformity lapses have, until recently, been applied only to new projects. Most areas have had a sufficient backlog of approved ("grandfathered") projects that the lapse of conformity had little immediate impact. On March 2, 1999, however, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the Clean Air Act limits grandfathering of funding in conformity situations, overturning EPA's regulations and considerably raising the stakes for areas subject to a conformity lapse. This decision and another case that awaits trial in Missouri have aroused congressional interest in the sanctions and conformity issues.

This report provides information concerning the authority to impose sanctions and to make conformity determinations, lists the areas that have been subject to sanctions since 1990, describes their status as of October 1999, provides information on areas with lapsed conformity, and discusses the role of sanctions and alternatives under the Act.

In the 106th Congress, two bills (Senator Bond's S. 495 and Representative Baker's H.R. 1626) would repeal the highway fund sanction provisions, and two other bills (Senator Bond's S. 1053 and Representative Talent's H.R. 1876) would restore the grandfather provisions of the conformity rule overturned by the March 2 court ruling. The Senate Environment and Public Works Committee held a hearing on the conformity issue July 14, 1999, and ordered S. 1053 reported, with substantial amendments, September 29.

Contents

EPA's Sanction Authority
Limitations and Exceptions to the Sanction Authority Recent History Regarding the Use of Sanctions
Conformity Determinations
The Role of Sanctions and Conformity
Conclusion

List of Tables

Table 1. Areas of the United States Where EPA Has Implemented Sanctions Under the Clean Air Act Amendments of 1990
Table 2. Metropolitan Areas Currently in a Conformity Lapse

The authorities of the Environmental Protection Agency (EPA) to impose sanctions withholding federal highway funds, and of the Federal Highway Administration (FHWA) and other agencies to make determinations that transportation projects do not conform with applicable State Implementation Plans are powerful tools given the agencies by Congress to encourage state and local governments to attain national air quality standards. This report provides information on conformity requirements and sanction authority (found in Sections 176, 179, and 110(m) of the Clean Air Act), the limitations and exceptions to that authority, the recent history of the authority's use, and a discussion of the role played by highway

Fund and other sanctions under the Clean Air Act.

Legislation to repeal EPA's highway fund sanction authority (S. 495 / H.R. 1626) and to change the conformity rules (S. 1053 / H.R. 1876) marks renewed congressional interest in the use of these tools. S. 1053 was ordered reported, amended, by the Committee on Environment and Public Works, September 29, 1999. EPA's Sanction Authority

Under the Clean Air Act, EPA sets what are called National Ambient Air Quality Standards (NAAQS), defining what are considered acceptable levels of pollution from a public health perspective. NAAQS have been set for six pollutants: ozone, carbon monoxide, particulate matter, sulfur dioxide, nitrogen dioxide, and lead. States are required to monitor for each of these pollutants and submit monitoring data annually to EPA. The data are used to determine whether areas are in attainment or nonattainment for each of the standards.

If an area is in nonattainment, the Act (in general) leaves to the states the determination of such measures (to be imposed on industry, transportation, services, individuals, etc.) as may be necessary to achieve compliance with air quality standards. These measures vary from state to state. Within certain limits, states are free to choose their own approach, provided that their plan contains sufficient reductions in emissions to demonstrate compliance, using approved EPA air quality models.1

If the EPA Administrator determines that a state has failed to submit an acceptable implementation plan for achieving or maintaining air quality standards, or has failed to implement the requirements of an approved plan, a finding is made noticing the state of the deficiency. 2 Sanctions cannot be imposed until 18 months after the Administrator makes such a determination, and they may not be imposed if a deficiency has been corrected within the 18-month period. It is not failure to attain the standards that leads to sanctions, but failure to submit an acceptable plan or to implement the measures identified in the plan.

In such cases. Section 179 of the Clean Air Act authorizes EPA to use two types of sanctions: 1) withholding of certain federal highway funds; and 2) imposing what are called "2:1 offsets" on new or modified sources of emissions. 3 Under regulations issued pursuant to Section 179, 4 the Administrator first imposes the offset sanction. If the deficiency has not been corrected within 6 months, both sanctions are applied.

Under Section 110(m) of the Act, the Administrator is required to apply sanctions to any portion of a state, rather than the entire state, "where one or more political subdivisions covered by the applicable implementation plan are principally responsible for such deficiency."

Before the 1990 Amendments, the Secretary of Transportation was required to impose highway fund sanctions and the EPA Administrator was not allowed to approve any award or grant under the Clean Air Act to areas that failed to submit adequate SIPs. There was no 18-month grace period, as there is under current law, and there was no provision for invoking 2:1 offsets for a 6-month period before use of highway fund sanctions. 5

Limitations and Exceptions to the Sanction Authority

With some notable exceptions, under the circumstances described above EPA can prohibit the Secretary of Transportation from awarding any grants under Title 23 of the United States Code. However,

• projects that would improve safety may be exempt from the sanctions, if the Secretary determines, based on accident or other appropriate data, that the principal purpose of a project is an improvement in safety.

In addition, despite the imposition of sanctions, the Secretary may approve the following projects geared toward the improvement of air quality:

• capital programs for public transit;

• construction of roads or lanes for the use of buses or high occupancy vehicles;

• planning for requirements for employers to reduce employee work-trip-related vehicle emissions;

• highway ramp metering, traffic signalization, and related programs to improve traffic flow and achieve a net emission reduction;

• fringe and transportation corridor parking facilities serving multiple occupancy vehicle programs or transit operations;

• programs to limit or restrict vehicle use in downtown areas or other areas of emission concentration particularly during periods of peak use, through road use charges, tolls, parking surcharges, or other pricing mechanisms, vehicle restriction zones or periods, or vehicle registration programs;

• programs for vehicle breakdown and accident scene management, nonrecurring congestion, and vehicle information systems, to reduce congestion and emissions; and

• such other transportation-related programs as the Administrator, in consultation with the Secretary of Transportation, finds would improve air quality and would not encourage single occupancy vehicle capacity. 6

Thus, the highway fund sanctions are not absolute.

Recent History Regarding the Use of Sanctions

Imposition of sanctions is a relatively rare event, but their invocation to prompt state action is not. Since passage of the 1990 Clean Air Act Amendments, EPA has made formal findings of non-submittal or incompleteness of SIPs through letters to state Governors, or disapproval of SIPs through Federal Register notices, 858 times.

These letters or notices start what EPA refers to as the "sanctions clock," giving a state 18 months to submit or resubmit a plan and obtain approval. In general, the states have submitted acceptable plans within the 18 months and no sanctions were imposed.

The Agency has imposed sanctions in only 18 cases since 1990; a list of these cases is provided in Table 1. In each of the 18 cases, the Administrator has imposed the offset sanction. In 2 of the 18, involving small portions of Montana and Missouri, the Administrator has imposed highway fund sanctions in addition to the offset requirement, 6 months after the imposition of offsets. The highway sanctions were subsequently lifted in the case of Iron County, Missouri. As of October 1999, they remained in effect in East Helena, Montana. As this report was written, four other areas were subject to offset sanctions.

Conformity Determinations

Conformity determinations are also a powerful tool. Under Section 176 of the Act, departments and agencies of the federal government are prohibited from engaging in, supporting, licensing, permitting, approving, or providing financial support for any activity that does not conform to a State Implementation Plan after any such plan has been submitted and approved. Metropolitan planning organizations (which designate transportation projects eligible for funding in urban areas) are prohibited from approving projects or programs that do not conform to a SIP. Conformity to a SIP means that a proposed project or program "will not produce new air quality violations, worsen existing violations, or delay timely attainment of the national ambient air quality standards." 7

The Federal Highway Administration, Federal Transit Administration, and metropolitan planning organizations make conformity determinations based on the most recent estimates of emissions, population, employment, travel, and traffic congestion approved by the metropolitan planning organization. Before a new transportation plan can be approved or a new project can receive federal funding, a regional emissions analysis must demonstrate that the emissions projected from the plan or project are consistent with the emissions ceiling established by the SIP.

Conformity lapses operate in a fashion similar, in some respects, to highway fund sanctions. As with sanctions, the prohibition on new projects is not absolute: exceptions are provided for highway projects that will improve safely or air quality. 8 Furthermore, conformity lapses have generally been applied only to new projects. In many cases, an area simply waits until its next revision of its Transportation Improvement Program (TIP) or its SIP to revise the proposed project or through other measures to return to conformity.

Table 1. Areas of the United States Where EPA Has Implemented
Sanctions Under the Clean Air Act Amendments of 1990
(as of October 8, 1999)

Nevertheless, the need to make a conformity determination impacts transportation decisions in all nonattainment and maintenance areas, whether or not conformity has lapsed. In this respect, it is more a tool for ongoing planning and coordination between transportation and air quality officials than it is a penalty.

Twenty-nine states have experienced a lapse of conformity at some time since 1993, 9 and as of early October, 1999, five areas were experiencing a conformity lapse (see Table 2). The largest of these areas is Atlanta. In January 1998, Atlanta's TIP — its list of highway and transit projects eligible for funding — lapsed out of conformity with the area's State Implementation Plan. Funding for new highway projects cannot be provided until either the TIP or the SIP is revised and the TIP conforms with the SIP.

Because exempt and grandfathered projects (from previously approved TIPs) were allowed to proceed, Atlanta continued to receive its full share of federal highway funding. New projects, however, including an Outer Perimeter highway, have been stalled. Furthermore, on March 2, 1999, the U.S. Court of Appeals for the District of Columbia ruled that the Clean Air Act limits grandfathering of funding in conformity situations, considerably raising the stakes for Atlanta and other areas subject to a conformity lapse. 10 EPA announced on April 16 that it would not appeal the decision, and subsequently reached agreement with the Department of Transportation on procedures to implement the court's decision. 11

Some Members of Congress were upset with the Agency's decision not to appeal the decision. In May, they introduced legislation (S. 1053/H.R. 1876) to restore the grandfather rules in effect prior to March 2. Their legislation has been endorsed by the National Governors Association, the American Association of State Highway and Transportation Officials (AASHTO), and the American Road and Transportation Builders Association, but is opposed by EPA and by environmental groups, led by the Environmental Defense Fund.

The Senate Environment and Public Works Committee held a hearing on the conformity issue July 14 and ordered S. 1053 reported, with substantial amendments, September 29. As amended, the bill would restore the grandfather provisions in effect prior to the March 2 court decision for a period of one year while EPA writes new regulations. The bill also stipulates that certain projects, including any project approved prior to March 2, may be implemented even if conformity lapses. It establishes new requirements regarding approval of emissions budgets by EPA, allows the use of non-Federal funds for right-of-way acquisition and highway design during periods of conformity lapse, and delays the application of conformity to areas that may be designated nonattainment under the pending 8-hour ozone standard. (For current information on conformity legislation, see CRS Issue Brief IB 10004, Clean Air Act Issues in the 106th Congress).

Table 2. Metropolitan Areas Currently in a Conformity Lapse
(as of October 4, 1999)

The Role of Sanctions and Conformity

The purpose of sanctions is to provide an incentive for states to develop and implement "acceptable" air quality implementation plans (as judged by EPA), by penalizing those states that do not. Without some tool to force state action, some states might lag in the adoption of air pollution control measures and there might be competition to ease standards as a means of attracting or retaining pollution-intensive industries. Thus, sanctions are viewed by many as a useful tool to focus a state's attention on its responsibilities under the Act. 12

Similarly, conformity determinations are a means of enforcing the SIP, once adopted. If federal agencies were not required to conform to a SIP, the plan might not be implemented as intended, significantly weakening the Act's effectiveness. The absence of conformity would put federal agencies in the role of undermining the legally adopted state plan for achieving air quality.

Sanctions and conformity requirements can be useful to EPA whether or not they are actually used. The threat of imposing sanctions or invoking a conformity lapse is often sufficient to prompt state action. As noted, such "threats" are common. They may be used even by state officials. For example, state officials anxious to have their state legislature enact laws implementing a State Implementation Plan may argue that failure to act will lead EPA to cut off the state's highway funds.

While potentially significant in impact, the withholding of funds generally does not lead to their ultimate loss. Highway funds are made available for a multi-year period under federal law. If a state submits an acceptable air quality plan or corrects the deficiencies in its state plan during the multi-year period, it will ultimately receive the funds that were withheld.

While some may view highway fund sanctions as being too coercive and may wish to remove EPA's sanction authority, without the sanctions EPA would be left to rely on two other tools, which are arguably even more burdensome, to encourage state action: its authority to impose 2:1 offsets (previously described, and always invoked by the agency prior to imposition of highway sanctions); and its authority under Section 110(c) to impose Federal Implementation Plans (FIPs) in states that have not submitted adequate state plans. Under the latter section, Congress required EPA to promulgate a federal plan to achieve or maintain air quality in states that have failed to submit adequate state plans, within 24 months of a determination of the state's failure to act.

Development of a FIP has rarely been used. In the most recent FIP case, EPA developed a FIP for six counties in California in 1994, only after being ordered to do so by a federal court. It contained measures that were considered draconian by many regulated industries in the state. The FIP was imposed February 14, 1995, but was rescinded by P.L. 104-6, enacted April 10, 1995.

Conclusion

Imposition of sanctions and loss of funds due to lapsed conformity with a State Implementation Plan are rare events. In most cases, sanctions have involved imposition of additional offset requirements for new or modified sources of emissions. Highway fund sanctions, in contrast, have been imposed only twice since enactment of the Clean Air Act Amendments of 1990. Highway funds have been cut off under the conformity requirement several times, delaying new projects, but funds have not generally been lost under this provision. Nevertheless, EPA has threatened to use sanctions on numerous occasions, when it has found state actions inadequate to achieve the requirements of the Clean Air Act. Conformity has lapsed at some time in a majority of the States, and a recent court case appears to increase the potential impact of such lapses.

If EPA did not have authority to impose such sanctions, the Agency would have no recourse but to directly impose air pollution control measures in any recalcitrant state, in the form of a Federal Implementation Plan. This might be considered less desirable than the imposition of sanctions in many cases.

Footnotes

1 The federal government does have some additional authority that affects the State Implementation Planning process. Under Sections 182-189, the Act sets specific requirements for measures to be included in state plans, depending on the severity and type of pollution in a nonattainment area. The Act also imposes federal emission standards on automobiles and a limited number of other products sold in interstate commerce, which affect the ability of local areas to plan for emission reductions. Under the 1990 amendments to the Act, EPA is also implementing federal programs for acid rain (imposing federal standards on electric utilities) and toxic air emissions (imposing federal standards on a number of sources in industrial and service sectors).

2 The Act gives this authority to the Administrator, but in reality these determinations are delegated to EPA's 10 Regional Administrators.

3 The 2:1 offset sanction permits the Administrator to require that new or modified sources of emissions for which a permit is required offset increased emissions from the permitted facility by emission reductions elsewhere in a ratio of at least 2:1.

4 The regulations are found in 40 CFR 52.31.

5 The requirement to withhold Clean Air Act grants was made discretionary in the 1990 amendments, in addition to the other changes. In addition, since 1977, the Administrator has had discretionary authority under Section 316 of the Clean Air Act to withhold sewage treatment grants from areas that are not implementing approved State Implementation Plans. This authority has not been used since 1985.

6 These exceptions are listed in Section 179(b) of the Clean Air Act.

7 U.S. EPA, "Transportation Conformity Rule Amendments: Flexibility and Streamlining," Final Rule, 62 Federal Register 43780, August 15, 1997.

8 For a complete list of the types of projects exempted, see Tables 2 and 3 of the Transportation Conformity Rule, 62 Federal Register 43817 - 43818, August 15, 1997. The tables list 52 types of safety, mass transit, air quality, and other projects that are exempt.

9 California, Colorado, Delaware, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, New York, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia Washington, West Virginia, and Wisconsin.

10 See "Court Strikes Down 'Grandfather' Clause, Says Transportation Must Meet Air Goals, Bureau of National Affairs, Daily Environment Report, March 4, 1999, p. AA-I. The case is Environmental Defense Fund-v. EPA, 1999 WL 100875 (D.C. Cir. Mar. 2, 1999).

11 Copies of EPA's May 14 memorandum and DOT'S June 18 memorandum implementing the new procedures can be found on EPA's website at   http://www.epa.gov/oms/transp/traqconf.htm  

12 The Clean Air Act contains no provision for directly coercing states to enact components of the federal clean air program. Such direct coercion would exceed the federal government's constitutional power. Rather, the federal government must achieve its ends through other, non-coercive means, such as preconditions on the disbursement of federal grants (e.g., the highway funds sanction) or the threat of federal assumption of currently state-run programs (e.g., the use of Federal Implementation Plans, described below). See New York v. United States, 505 U.S. 144 (1992).