Date: Tuesday, January 19, 2021
The warehouse industry in Southern California is pushing back against a proposed emissions rule that would make operators of distribution centers responsible for pollutants generated by trucks going into and out of their facilities.
The “indirect source” rule drafted by the South Coast Air Quality Management District (AQMD) is one of the first emissions regulations in the country to take aim at the massive growth in warehouse development tied to e-commerce.
If approved — the AQMD Board is expected to vote on the proposal this spring — the rule would require warehouse operators to either take steps to reduce emissions, such as transition to electric trucks, or pay a fee to the air quality agency.
The AQMD, an agency charged with reducing air pollution in Southern California, typically regulates “stationary” sources of pollutants such as factories and refineries, Sarah Rees, South Coast District assistant deputy executive officer, told FreightWaves.
The is the first time the agency has targeted a “mobile” source — trucks.
“With the growth in goods movement as a contributor to smog-forming emissions,” Rees explained, “it’s a good time to get at the source of the emissions contributing to the problem.”
The premise of the draft rule is fundamentally flawed, countered Timothy Jemal, CEO of the SoCal chapter of NAIOP, a commercial real estate association.
“The vast majority of warehouses have no control over what type of trucks are brought in,” he said. “So they don’t have any authority to take any actions to decrease truck emissions.”
California’s South Coast: Home to the country’s worst air quality
Regulatory efforts over the past decade have racked up huge improvements to air quality in the South Coast Air Basin — where more 17 million people reside in Los Angeles, San Bernardino, Orange and Riverside counties.
Nevertheless the region still has the worst smog in the country and consistently violates federal Clean Air Act standards.
Much of that pollution comes from trucks heading to and from warehouses.
The South Coast District includes the Ports of LA and Long Beach, where every year hundreds of millions of tons of freight moves from the megaports through around 1 billion square feet of warehouse space.
These distribution centers, owned and operated by some of the nation’s largest, most powerful companies — retailers, manufacturers, transportation and logistics businesses — draw thousands of medium- and heavy-duty trucks daily as they move goods from ships to warehouses.
Generally speaking, these facilities themselves don’t generate much pollution, said Ian MacMillan, the AQMD’s planning and rules manager.
“When you look at the emissions profile related to a warehouse,” he stressed, “typically 90% plus comes from trucks.”
Warehouse operators question authority over trucks
As drafted the indirect source rule would apply to owners and operators of distribution warehouses that are 100,000 or more square feet.
Around 3,000 warehouses in the South Coast would be impacted, the AQMD estimates.
Several retailers and logistics companies, including Walmart (NYSE: WMT) and NFI, declined to comment on the proposal or did not respond to FreightWaves’ requests for comment.
Some, like Amazon (NASDAQ: AMZN), declined to comment through the Los Angeles Area Chamber of Commerce, where they are members.
But Kendal Asuncion, the chamber’s manager of public policy, said the warehouse rule “is high on our priority list to continue to track for 2021,” and that among the chamber’s concerns are increased costs for goods for consumers.
“During a time when our economy is struggling to recover, we are concerned about the impact this regulation could have on goods movement and jobs in Southern California,” Asuncion said in an email to FreightWaves.
Echoing that statement, Jemal said NAIOP SoCal’s objects to “the potential imposition of an additional financial obligation on warehouses without a clear air quality benefit.”
Where e-commerce and environmental justice collide
Those concerns contrast with those of environmental and community groups. They say the regulation would hold the booming warehouse sector accountable for its role in air pollution impacting the (low-income and minority) neighborhoods that suffer from disproportionate rates of asthma and other pollution-related health problems.
“The industry is the main contributor to poor air quality in our communities,” said Faraz Rizvi, special projects coordinator for the Center for Community Action, Environmental Justice (CCAEJ), a Southern California nonprofit that has been working to mitigate the impacts of regional warehouse development.
As part of that effort CCAEJ recently created an ARCGIS storymap tracking new construction of distribution centers.
The pandemic-fueled surge in online shopping has worsened a problem that communities have been battling for more than a decade, Rizvi said. “Regulating warehouses will encourage use of green technology and hopefully reduce pollution.”
A complex network of clean air regulations
The proposed warehouse rule adds to the roster of aggressive trucking emissions regulations the state of California has approved in the past year.
Last year the state’s lead air quality regulator, CARB, approved the Advanced Clean Truck (ACT) rule requiring manufacturers of medium- and heavy-duty trucks to sell an increasing number of electric vehicles, with a goal of phasing out fossil fuel commercial vehicles altogether by mid-century.
CARB in 2020 also approved a regulation mandating a reduction in the amount of nitrogen oxide (NOx) pollutants coming from heavy-duty vehicles.
While CARB has oversight over the medium- and-heavy-duty trucking sector, the state’s regional Air Quality Management Districts and Air Pollution Control Districts, by contrast, typically regulate stationary sources of air pollution.
Opponents seize on that distinction as a reason why the AQMD is overstepping with the warehouse rule. Trucking emissions fall under the jurisdiction of CARB and the U.S. Environmental Protection Agency, Jemal noted.
“And then we have the new Biden administration, which will have jurisdiction over the EPA,” he added, the implication being that the Democratic president will only accelerate implementation of vehicle emissions regulations.
Given the severity of the problem, more aggressive action at the local level is needed, the rule’s proponents say.
“One of the reasons we are looking at this is we have limited regulatory authority over mobile sources, but mobile sources are the sources that are contributing to smog/ozone problems,” Rees explained.
Compliance tied to the number of trucks
In its current iteration, the rule would require warehouse operators to meet various reporting requirements, including detailing the number of trucks that go in and out of their facilities, with a greater burden falling on warehouses that host heavy truck activity.
Each regulated operator would have to acquire a number of points tied to emissions reductions activities, such as transitioning to electric trucks or installing electric charging infrastructure.
Operators can also earn points by mitigating the impacts of pollution, such as installing high efficiency air filters in local schools and hospitals.
If warehouses decide not to take action, they will have to pay a fee to AQMD, “and we turn the money right back around to incentivize zero-emission trucks in communities around the warehouses,” MacMillan said.
Status of EV transition
While the proposed policy comes as many of the nation’s shippers are announcing sizable commitments to electric trucks and delivery vehicles, industry groups opposed to the warehouse regulation argue the EV market and business case is not established enough for operators to make some of the desired changes.
“On the trucking side, we’re still waiting for the market and infrastructure to mature for NZEV (near zero-emission) and ZEV (zero-emission) vehicles,” the LA Chamber’s Asuncion said. “Additional constraints are cost, technology availability and tracking.”
MacMillan agreed costs tied to the EV transition pose a significant obstacle.
“Honestly, we need more funding incentives,” he said. But he added that the new rule is designed to work with CARB incentive programs, as well as existing regulations such as the ACT mandate, focusing the use of these vehicles “in the communities that need them the most.”
AQMD already works with local governments as new warehouses come online, McMillon said. “But this is a means to try to look at the industry as a whole.”
Trucking industry watching closely
If the rule is approved this spring, the first reporting requirements for larger warehouses could take effect in 2022, according to the draft proposal.
In the meantime, the trucking industry has no intention of sitting on the sidelines.
“We have serious questions as to whether or not these efforts overreach,” said Weston LeBar, CEO of the Harbor Trucking Association, a coalition of carriers serving the West Coast ports.
“Through the process we have concerns about the way the AQMD attempted to thread that needle between a policy that does not violate interstate commerce rules or South Coast powers,” he said.