This is bad. Southeast Wisconsin has just been tagged as a Serious Non attainment Area for ozone by the U.S. EPA, effective January 2025. This label isn’t just a bureaucratic footnote; it marks a significant regulatory shift with real-world implications for the region’s industrial landscape, potentially stifling growth and impacting economic vitality.
Economic and Regulatory Impact
The new classification means that industrial operations in Southeast Wisconsin must now navigate through tighter emissions controls. The threshold for major source status for NOx or VOC has halved from 100 to 50 tons per year, pushing many businesses into the realm of needing more stringent, costly Title V permits.
This isn’t just about paperwork; it’s about survival. The price of compliance includes investments in expensive emission control technologies, potentially running into millions per facility, alongside the mandatory purchase of pollution credits for new developments, which are scarce and increasingly expensive.
Permitting timelines will extend, with new projects facing delays of up to a year due to rigorous environmental reviews. This bureaucratic bottleneck could dissuade new businesses from setting up shop or expanding in the area, directly affecting leasing and development prospects.
A Unique Regional Dilemma
What makes this situation particularly galling for Wisconsin is the source of the problem. Much of the ozone pollution originates from upwind states like Illinois and Indiana, yet Southeast Wisconsin shoulders the regulatory burden. This discrepancy in responsibility versus regulation highlights an inequity in how environmental policy is applied.
While other regions have managed to negotiate exemptions or delayed enforcement, Wisconsin finds itself in a regulatory vise, potentially facing an upgrade to “Severe” nonattainment status by 2027 if no action is taken.
The Broader Implications
For industrial tenants, the future looks fraught with increased operational costs, not just from direct compliance but also from the need for additional staff to handle reporting and monitoring. This might push businesses towards downsizing, relocating, or halting expansion, all of which could depress industrial real estate values and occupancy rates in
The response must be multifaceted
Wisconsin needs to file Section 126 petitions against upwind states, challenge the EPA’s methodologies in court, and oppose any further tightening of regulations.
There’s a pressing need for amendments to the Clean Air Act that recognize the issue of transported pollution, alongside pushing for state-level emissions trading to distribute compliance costs more evenly.
Creating a coalition of stakeholders to fight this ruling through legal, media, and policy channels could be key. This group should advocate for the economic impacts of such regulations to be fully recognized.
Industrial real estate developers and landlords in Southeast Wisconsin must engage in this battle. Supporting legal challenges, educating tenants about the new compliance landscape, and backing economic impact studies are all crucial steps. In essence, the fight against this nonattainment status isn’t just about cleaner air; it’s about ensuring fair treatment and maintaining the region’s economic competitiveness.
Without a coordinated pushback, Southeast Wisconsin risks losing its industrial edge. Now is the time to act, to ensure that this region remains a viable hub for industry and innovation.
Who’s with me?
Jim Villa is the CEO of NAIOP Wisconsin. He can be reached at jim@naiop-wi.org.
