EPA Pushing Ahead on Smog Check Penalties : Pollution: Officials reject congressional agency’s opinion allowing state 18 months to overhaul vehicle inspection system. Sanctions could cost California $750 million in U.S. highway funds.

The Environmental Protection Agency began drafting documents Monday that would allow it to impose sanctions on California as early as March for failing to overhaul the state vehicle inspection program.

The sanctions could amount to a loss of as much as $750 million in federal highway funds.

EPA officials said the agency has rejected the legal opinion of the General Accounting Office, an investigative arm of Congress, that the federal government must wait 18 more months before sanctions can take hold.

The environmental agency contends that the Clean Air Act clearly provides for the imposition of sanctions at the administrator’s discretion and it is moving quickly to do so.

A senior EPA official Monday rejected arguments that the Clinton Administration would change its mind and back away from the sanctions because California is too significant politically and its economy too feeble to withstand the penalties.

“Unfortunately, there seem to be some players, some members of the leadership in California, who believe that because of the state’s political importance, its size and its economic situation, sanctions will never be imposed,” said Mary Nichols, assistant EPA administrator for air and radiation. “As a result, they believe they don’t have to move expeditiously or that EPA will somehow be forced to accept a program that doesn’t meet its requirements. That’s just not so.”

The EPA’s actions are expected to result within the next several weeks in a notice in the Federal Register declaring that the EPA has found California’s implementation plan inadequate. A period of public comment would follow, during which state officials could negotiate with the federal government to head off the sanctions.

Indeed, EPA officials said they are continuing to huddle with California state lawmakers in hopes of drafting amendments to a bill that would bring the state into compliance. But a key California lawmaker, Assemblyman Richard Katz (D-Sylmar) said: “EPA’s position on these so-called negotiations (has not) changed in several months. It seems to be EPA’s way or no way. I have not seen any flexibility whatsoever.”

At issue is whether Californians will be permitted to take their vehicles to the same service station for inspection and repair--as is allowed now--or whether inspections will be conducted at a network of state-run facilities separate from repair stations.

Most California lawmakers favor a system that would retain the 9,600 privately owned service stations across the state as inspection-and-repair stations. The Clinton Administration and a minority of California lawmakers, citing the risk of fraud in such a system, have favored a central network of inspection stations separate from repair facilities.

Monday marked the latest stage in a long-running standoff between the EPA and the state Legislature over the Smog Check program. By Nov. 15, states with air-quality problems were to have submitted comprehensive plans that would bring them into compliance with the Clean Air Act. The California Legislature adjourned in late September without passing such a plan, so the EPA received neither a plan nor a promise of one soon. The Legislature goes back to work in January.

A quarter of all vehicles covered by the inspection and maintenance provisions of the Clean Air Act nationwide are registered in California. That fact makes the state’s unwillingness to revise its system a key concern to the EPA.

“I think they’re looking at California like the big kid on the block,” said Katz, chairman of the the California Assembly’s Transportation Committee and the author of an inspection and maintenance package that has been rejected by the EPA. “They’re thinking, ‘If California gets away with it, then what will the other kids do?’ So it’s important that they beat down California.”

Katz called the EPA’s warnings “a serious threat” but cautioned that imposing sanctions on the state would be a “major mistake” that overlooked concessions already made, workable compromises that could be made and the economic impact of such a move on California.

“There’s no question if they go ahead with their threat, it devastates a very fragile economy: Highway money’s been one of the few bright spots keeping people at work,” Katz said. “That’ll have major political consequences for the Administration, as well, which faces major land mines. In California alone, a cutoff of funds could mean a loss of 210,000 jobs. That’s a lot of unemployed people in late ’95 who aren’t going to be real positive about Clinton in 1996.”

California is not the only state that faces sanctions and the EPA’s Nichols insisted that the state has not been singled out for harsh treatment. The Clinton Administration also is moving to impose sanctions on Indiana and Illinois for their failure to adopt and fund programs that, in the EPA’s view, adequately protect the air.