The Kentucky Energy & Environmental Cabinet is proposing to move to a hybrid fee schedule, involving both a variable annual emissions fee (consistent with past practice), based on the amount of actual subject emissions, and a new flat annual base fee. Although the actual annual emissions-based fees program will remain largely unchanged, the $/ton fee will be reduced significantly, and the number of sources subject to paying these fees will be increased. In addition, every source that is required to have an air quality permit will now pay a flat fee to the Kentucky Division for Air Quality (Division) every year. As a result, when adapting this new approach to the calendar year 2016, this new hybrid approach would have invoiced 892 additional sources on top of the 694 sources that received a bill from the Division. The proposed hybrid fee schedule includes the following:

Emissions-Based Fees

  • Under the current system, Conditional Major (401 KAR 52:030) and Minor Sources (i.e. State Origin Sources at 401 KAR 52:040, excluding Registration Sources at 401 KAR 52:070) only pay $/ton fees if they are subject to a Federal New Source Performance Standard (NSPS) or National Emissions Standards for Hazardous Air Pollutants (NESHAP). Going forward, this exemption will be eliminated, where all Conditional Major and Minor Sources will pay a $/ton fee in addition to the proposed annual flat fee.
  • Electric Generating Unit (EGU) Title V Sources will pay a reduced annual fee of $75/ton (which will not be adjusted for inflation each subsequent year) compared to the variable annual fee of $97/ton.
  • Non-EGU Title V, Conditional Major, and Minor Sources will have a lower inflation adjusted $/ton fee, expected to start at approximately $52/ton compared to $97/ton.
  • The emission cap for subject emissions, above which there is no further $/ton fee, remains at 4,000 tpy.

Flat Fees

  • The annual flat fee for Title V, Conditional Major, and State Origin sources would be $10,000, $7,000, and $500, respectively.
  • A one-time initial fee and revision fee for a Registration Source per 401 KAR 52:070 would be $250 and $100, respectively.

Based on the presentations given by the Division over this last year, it seems like the monies received by the Division will be redistributed. The proposed fee schedule changes will have the following impacts:

  • Significant net reduction (-20%) in fees to EGU Title V Sources;
  • Marginal net reduction (-7%) in fees to non-EGU Title V Sources;
  • Significant net increase (+1,320%) in fees for Conditional Major Sources (primarily due to the proposed annual flat fee); and,
  • Significant net increase (+54%) in fees for State Origin Sources (also primarily due to the proposed annual flat fee).

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The expected timeline for these proposed fee schedule changes is as follows:

  • The Division will continue to take informal comments over the next two months.
  • During the upcoming legislative session in January 2019, the Division will request a minor change to the underlying laws to accommodate the hybrid fee approach.
  • Next, the Division will prepare the regulation revision package, which will then go out to public comment, presumably in mid-2019.
  • The last steps are final review and approval by the LRC legislative committees.

There is a possibility that the new fee structure could be in place by October 2019, in which case it will be applicable for CY2018 emission fees, but this is not likely. A more plausible scenario is that it will be in place for CY2019.

Here is the definition of subject emissions taken from Section 1 of 401 KAR 50:038 Air Emissions Fee:

"Subject emissions means actual emissions, as recorded in the Kentucky Emissions Inventory System {KyEIS}, of sulfur dioxide {SO2}, oxides of nitrogen {NOx}, PM10, lead, volatile organic compounds {VOCs}, hazardous air pollutants {HAPs} listed in 401 KAR 57:061 for which a standard applies, or a pollutant subject to a standard contained in Section 111 of the Act {i.e., NSPS}, from an air pollution source subject to this administrative regulation, except that actual emissions in excess of 4,000 tons of a single pollutant from a source shall not be subject emissions. Pollutants subject only to 42 USC 7412r (Section 112(r) of the Act) {i.e., NESHAP and RMP}, and pollutants that are class I or class II substances under 42 USC 7671 through 7671q and which are not otherwise regulated shall not be subject emissions."

If you have any questions or concerns about this new hybrid fee structure, please reach out to anyone of our fourteen (14) staff from Trinity's Kentucky office at (859) 341-8100.