	ENVIRONMENTAL PROTECTION AGENCY

	40 CFR Parts 52 and 81

	[EPA-R03-OAR-2006-0917; FRL-      ]

Approval and Promulgation of Air Quality Implementation Plans; Virginia;
Redesignation of the Richmond-Petersburg 8-hour Ozone Nonattainment Area
to Attainment and Approval of the Associated Maintenance Plan and 2002
Base-Year Inventory

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Proposed rule.

SUMMARY:  EPA is proposing to approve a redesignation request and State
Implementation Plan (SIP) revisions submitted by the Commonwealth of
Virginia.  The Virginia Department of Environmental Quality (VADEQ) is
requesting that the Richmond–Petersburg ozone nonattainment area
(“Richmond Area” or “Area”) be redesignated as attainment for
the 8-hour ozone national ambient air quality standard (NAAQS).  The
Area is comprised of the Cities of Petersburg, Colonial Heights,
Hopewell, and Richmond, and the Counties of Prince George, Chesterfield,
Hanover, Henrico, and Charles City.  EPA is proposing to approve the
ozone redesignation request for the Richmond Area.  In conjunction with
its redesignation request, the Commonwealth submitted a SIP revision
consisting of a maintenance plan for the Richmond Area that provides for
continued attainment of the 8-hour ozone NAAQS for at least 10 years
after redesignation.  EPA is proposing to make a determination that the
Richmond Area has attained the 8-hour ozone NAAQS, based upon three
years of complete, quality-assured ambient air quality monitoring data
for 2003-2005.  EPA’s proposed approval of the 8-hour ozone
redesignation request is based on its determination that the Richmond
Area has met the criteria for redesignation to attainment specified in
the Clean Air Act (CAA).  In addition, the Commonwealth of Virginia has
also submitted a 2002 base-year inventory for the Richmond Area, and EPA
is proposing to approve that inventory for the Richmond Area as a SIP
revision.  EPA is also providing information on the status of its
adequacy determination for the motor vehicle emission budgets (MVEBs)
that are identified in the maintenance plan for the Richmond Area for
purposes of transportation conformity, and is also proposing to approve
those MVEBs.  EPA is proposing approval of the redesignation request and
of the maintenance plan and 2002 base-year inventory SIP revisions in
accordance with the requirements of the CAA.

DATES: Written comments must be received on or before [insert date 30
days from date of publication].

ADDRESSES:  Submit your comments, identified by Docket ID Number
EPA-R03-OAR-2006-0917 by one of the following methods:

A.  www.regulations.gov.  Follow the on-line instructions for submitting
comments.

      B.  E-mail:    HYPERLINK<EMAIL_ADDRESS><EMAIL_ADDRESS>
C.  Mail:  EPA- R03-OAR-2006-0917, Makeba Morris, Chief, Air Quality
Planning Branch, Mailcode 3AP21, U.S. Environmental Protection Agency,
Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.

      D.  Hand Delivery:  At the previously-listed EPA Region III
address.  Such deliveries are only accepted during the Docket’s normal
hours of operation, and special arrangements should be made for
deliveries of boxed information.

Instructions:  Direct your comments to Docket ID No.
EPA-R03-OAR-2006-0917.  EPA's policy is that all comments received will
be included in the public docket without change, and may be made
available online at www.regulations.gov, including any personal
information provided, unless the comment includes information claimed to
be Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute.  Do not submit information that you
consider to be CBI or otherwise protected through www.regulations.gov or
e-mail.  The www.regulations.gov website is an (anonymous access(
system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment.  If you
send an e-mail comment directly to EPA without going through
www.regulations.gov, your e-mail address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet.  If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit.  If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment.  Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses.

Docket:  All documents in the electronic docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute.  Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form.  Publicly available docket
materials are available either electronically in www.regulations.gov or
in hard copy during normal business hours at the Air Protection
Division, U.S. Environmental Protection Agency, Region III, 1650 Arch
Street, Philadelphia, Pennsylvania 19103.  Copies of the State submittal
are available at the Virginia Department of Environmental Quality, 629
East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT:  Amy Caprio,<PHONE_NUMBER>, or by e-

mail at   HYPERLINK<EMAIL_ADDRESS><EMAIL_ADDRESS>.

SUPPLEMENTARY INFORMATION:

Throughout this document whenever “we,” “us,” or “our” is
used, we mean EPA.

TABLE OF CONTENTS

What Are the Actions EPA Is Proposing to Take?

What Is the Background for These Proposed Actions?

 What Are the Criteria for Redesignation to Attainment?

 Why Is EPA Taking These Actions?

 What Would Be the Effect of These Actions?

 What Is EPA’s Analysis of the Commonwealth’s Request?

 Are the Motor Vehicle Emissions Budgets Established and Identified in
the Maintenance Plan for the Richmond Area Adequate and Approvable?

Proposed Actions

Statutory and Executive Order Reviews

What Are the Actions EPA Is Proposing to Take?

On September 20, 2006 the VADEQ formally submitted a request to
redesignate the Richmond Area from nonattainment to attainment of the
8-hour NAAQS for ozone.  On September 25, 2006 Virginia submitted a
maintenance plan for the Richmond Area as a SIP revision to ensure
continued attainment in the Area over the next 11 years.  VADEQ also
submitted a 2002 base-year inventory for the Richmond Area as a SIP
revision on September 18, 2006 and supplements to the base-year
inventory submittal on November 17, 2006 and February 13, 2007.  The
Richmond Area is comprised of the Cities of Petersburg, Colonial
Heights, Hopewell, and Richmond, and the Counties of Prince George,
Chesterfield, Hanover, Henrico, and Charles City.  It is currently
designated a marginal 8-hour ozone nonattainment area.  EPA is proposing
to determine that the Richmond Area has attained the 8-hour ozone NAAQS
and that it has met the requirements for redesignation pursuant to
section 107(d)(3)(E) of the CAA.  EPA is, therefore, proposing to
approve the redesignation request to change the designation of the
Richmond Area from nonattainment to attainment for the 8-hour ozone
NAAQS.  EPA is also proposing to approve the Richmond maintenance plan
as a SIP revision for the Area (such approval being one of the CAA
criteria for redesignation to attainment status).  The maintenance plan
is designed to ensure continued attainment in the Richmond Area for the
next 11 years.  Concurrently, the Commonwealth is requesting that this
8-hour maintenance plan supersede the previous 1-hour maintenance plan.
EPA is also proposing to approve the 2002 base-year inventory for the
Richmond Area as a SIP revision.  Additionally, EPA is announcing its
action on the adequacy process for the MVEBs identified in the Richmond
maintenance plan, and proposing to approve the MVEBs identified for
volatile organic compounds (VOCs) and nitrogen oxides (NOx) for the
Richmond Area for transportation conformity purposes.

II.  What Is the Background for These Proposed Actions?

A.  General

Ground-level ozone is not emitted directly by sources.  Rather,
emissions of NOx and VOC react in the presence of sunlight to form
ground-level ozone.  The air pollutants NOx and VOC are referred to as
precursors of ozone.  The CAA establishes a process for air quality
management through the attainment and maintenance of the NAAQS.

On July 18, 1997, EPA promulgated a revised 8-hour ozone standard of
0.08 parts per million (ppm).  This new standard is more stringent than
the previous 1-hour standard.  EPA designated, as nonattainment, any
area violating the 8-hour ozone NAAQS based on the air quality data for
the three years of 2001-2003.  These were the most recent three years of
data at the time EPA designated 8-hour areas.  The Richmond Area was
designated a marginal 8-hour ozone nonattainment area in a Federal
Register notice signed on April 15, 2004 and published on April 30, 2004
(69 FR 23857), based on its exceedance of the 8-hour health-based
standard for ozone during the years 2001-2003.  On June 15, 2005April
30, 2004, EPA issued a final rule (69 FR 23951, 23996),) to revoke the
1-hour ozone NAAQS was revoked in the Richmond Area (as well as in most
other areas of the country).) effective June 15, 2005.  See 40 CFR
50.9(b); 69 FR at 23996 (April 30, 2004); and see 70 FR 44470 (August 3,
2005).

However, on December 22, 2006, the U.S. Court of Appeals for the
District of Columbia Circuit vacated EPA's Phase 1 Implementation Rule
for the 8-hour Ozone Standard. (69 FR 23951, April 30, 2004).  South
Coast Air Quality Management Dist.  v. EPA, 472 F.3d 882 (D.C.Cir.
2006) (hereafter “South Coast.”). The Court held that certain
provisions of EPA's Phase I Rule were inconsistent with the requirements
of the Clean Air Act.  The Court rejected EPA's reasons for
implementing the 8-hour standard in nonattainment areas under Subpart 1
in lieu of subpart 2 of  Title I,  part D of the Act.  The Court also
held that EPA improperly failed to retain  four measures required for
1-hour nonattainment areas under the  anti-backsliding provisions of
the regulations:   (1) nonattainment area New Source Review (NSR)
requirements based on an area's 1-hour nonattainment classification; (2)
Section 185 penalty fees for 1-hour severe or extreme nonattainment
areas; (3) measures to be implemented pursuant to section 172(c)(9) or
182(c)(9) of the Act, on the contingency of an area not making
reasonable further progress toward attainment of the 1-hour NAAQS, or
for failure to attain that NAAQS; and (4) the certain conformity
requirements for certain types of  federal.  The Court upheld EPA's
authority to revoke the 1-hour standard provided there were adequate
anti-backsliding provisions.  Elsewhere in this document, mainly in
section VI. B. “The Richmond Area Has Met All Applicable Requirements
under Section 110 and Part D of the CAA and Has a Fully Approved SIP
Under Section 110(k) of the CAA,” EPA discusses its rationale why the
decision in South Coast is not an impediment to redesignating the
Richmond Area to attainment of the 8-hour ozone NAAQS.

The CAA, title I, part D, contains two sets of provisions—subpart 1
and subpart 2 –that address planning and control requirements for
nonattainment areas.  Subpart 1 (which EPA refers to as “basic”
nonattainment) contains general, less prescriptive requirements for
nonattainment areas for any pollutant—including ozone—governed by a
NAAQS.  Subpart 2 (which EPA refers to as “classified”
nonattainment) provides more specific requirements for ozone
nonattainment areas.  In 2004, the Richmond Area was classified a
marginal 8-hour ozone nonattainment area based on air quality monitoring
data from 2001-2003.  Therefore, the Richmond Area is subject to the
requirements of subpart 2 of part D.

Under 40 CFR part 50, the 8-hour ozone standard is attained when the
3-year average of the annual fourth-highest daily maximum 8-hour average
ambient air quality ozone concentrations is less than or equal to 0.08
ppm (i.e., 0.084 ppm when rounding is considered).  See 69 FR 23857
(April 30, 2004) for further information.  Ambient air quality
monitoring data for the 3-year period must meet data completeness
requirements.  The data completeness requirements are met when the
average percent of days with valid ambient monitoring data is greater
than 90 percent, and no single year has less than 75 percent data
completeness as determined in Appendix I of 40 CFR part 50.  The ozone
monitoring data indicates that the Richmond Area has a design value of
0.082 ppm for the 3-year period of 2003-2005, using complete,
quality-assured data.  Therefore, the ambient ozone data for the
Richmond Area indicates no violations of the 8-hour ozone standard.

 The Richmond Area

Under the 1-hour ozone NAAQS, the Richmond Area consisted of the Cities
of Colonial Heights, Hopewell, and Richmond, and the Counties of
Chesterfield, Hanover, Henrico, and Charles City.  Under the 8-hour
ozone NAAQS, the Richmond Area was expanded to also include the City of
Petersburg and Prince George County.  Prior to its designation as an
8-hour ozone nonattainment area, the Richmond Area was a maintenance
area for the 1-hour ozone NAAQS.  See November 17, 1997 (62 FR 61237).

On September 20, 2006 the VADEQ requested that the Richmond Area be
redesignated to attainment for the 8-hour ozone standard.  The
redesignation request included three years of complete, quality-assured
data for the period of 2003-2005, indicating that the 8-hour NAAQS for
ozone had been achieved in the Richmond Area.  The data satisfies the
CAA requirements that the 3-year average of the annual fourth-highest
daily maximum 8-hour average ozone concentration (commonly referred to
as the area’s design value), must be less than or equal to 0.08 ppm
(i.e., 0.084 ppm when rounding is considered).  Under the CAA, a
nonattainment area may be redesignated if sufficient complete,
quality-assured data is available to determine that the area has
attained the standard and the area meets the other CAA redesignation
requirements set forth in section 107(d)(3)(E).

III.  What Are the Criteria for Redesignation to Attainment?

The CAA provides the requirements for redesignating a nonattainment area
to attainment.  Specifically, section 107(d)(3)(E) of the CAA, allows
for redesignation, providing that:

(1)  EPA determines that the area has attained the applicable NAAQS;

(2)  EPA has fully approved the applicable implementation plan for the
area under section 110(k);

(3)  EPA determines that the improvement in air quality is due to
permanent and enforceable reductions in emissions resulting from
implementation of the applicable SIP and applicable Federal air
pollutant control regulations and other permanent and enforceable
reductions;

(4)  EPA has fully approved a maintenance plan for the area as meeting
the requirements of section 175A; and

(5) The State containing such area has met all requirements applicable
to the area under section 110 and part D.

EPA provided guidance on redesignations in the General Preamble for the
Implementation of Title I of the CAA Amendments of 1990, on April 16,
1992 (57 FR 13498), and supplemented this guidance on April 28, 1992 (57
FR 18070).  EPA has provided further guidance on processing
redesignation requests in the following documents:

“Ozone and Carbon Monoxide Design Value Calculations,” Memorandum
from Bill Laxton, June, 18, 1990;

“Maintenance Plans for Redesignation of Ozone and Carbon Monoxide
Nonattainment Areas,” Memorandum from G.T. Helms, Chief, Ozone/Carbon
Monoxide Programs Branch, April 30, 1992;

“Contingency Measures for Ozone and Carbon Monoxide (CO)
Redesignations,” Memorandum from G.T. Helms, Chief, Ozone/Carbon
Monoxide Programs Branch, June 1, 1992;

“Procedures for Processing Requests to Redesignate Areas to
Attainment,” Memorandum from John Calcagni, Director, Air Quality
Management Division, September 4, 1992;

“State Implementation Plan (SIP) Actions Submitted in Response to
Clean Air Act (Act) Deadlines,” Memorandum from John Calcagni
Director, Air Quality Management Division, October 28, 1992;

“Technical Support Documents (TSDs) for Redesignation Ozone and Carbon
Monoxide (CO) Nonattainment Areas,” Memorandum from G.T. Helms, Chief,
Ozone/Carbon Monoxide Programs Branch, August 17, 1993;

“State Implementation Plan (SIP) Requirements for Areas Submitting
Requests for Redesignation to Attainment of the Ozone and Carbon
Monoxide (CO) National Ambient Air Quality Standards (NAAQS) on or after
November 15, 1992,” Memorandum from Michael H. Shapiro, Acting
Assistant Administrator for Air and Radiation, September 17, 1993;

Memorandum from D. Kent Berry, Acting Director, Air Quality Management
Division, to Air Division Directors, Regions 1-10, “Use of Actual
Emissions in Maintenance Demonstrations for Ozone and CO Nonattainment
Areas,” dated November 30, 1993;

“Part D New Source Review (part D NSR) Requirements for Areas
Requesting Redesignation to Attainment,” Memorandum from Mary D.
Nichols, Assistant Administrator for Air and Radiation, October 14,
1994; and

“Reasonable Further Progress, Attainment Demonstration, and Related
Requirements for Ozone Nonattainment Areas Meeting the Ozone National
Ambient Air Quality Standard,” Memorandum from John S. Seitz,
Director, Office of Air Quality Planning and Standards, May 10, 1995.

IV.  Why Is EPA Taking These Actions?

On September 20, 2006, the VADEQ requested redesignation of the Richmond
Area to attainment for the 8-hour ozone standard.  On September 25,
2006, VADEQ submitted a maintenance plan for the Richmond Area as a SIP
revision, to ensure continued attainment of the 8-hour ozone NAAQS over
the next 11 years, until 2018.  Concurrently, Virginia is requesting
that 8-hour maintenance plan submittal supersede the 1-hour maintenance
plan requirements already in place and that the 8-hour maintenance plan
meet the requirement of CAA section 175A(b) with respect to the 1-hour
ozone maintenance plan update.  EPA is proposing to approve the
maintenance plan to fulfill the requirement of section 175A(b) for
submission of a maintenance plan update eight years after the area was
redesignated to attainment of the 1-hour ozone NAAQS.  EPA believes that
such an update must ensure that the maintenance plan in the SIP provides
maintenance of the NAAQS for a period of 20 years after the area is
initially redesignated to attainment.  EPA can propose approval because
the maintenance plan, which demonstrates maintenance of the 8-hour ozone
NAAQS through 2018, also demonstrates maintenance of the 1-hour ozone
NAAQS through 2018.

VADEQ also submitted a 2002 base-year inventory as a SIP revision on
September 18, 2006 and supplements to that submittal on November 17,
2006 and February 13, 2007, which is an applicable requirement for the
Richmond Area for purposes of redesignation.  EPA has determined that
the Richmond Area has attained the 8-hour ozone standard and has met the
requirements for redesignation set forth in section 107(d)(3)(E).

V.  What Would Be the Effect of These Actions?

Approval of the redesignation request would change the official
designation of the Richmond Area from nonattainment to attainment for
the 8-hour ozone NAAQS found at 40 CFR part 81.  It would also
incorporate into the Virginia SIP a 2002 base-year inventory and a
maintenance plan ensuring continued attainment of the 8-hour ozone NAAQS
in the Richmond Area for the next 11 years, until 2018.  The maintenance
plan includes contingency measures to remedy any future violations of
the 8-hour NAAQS (should they occur), and identifies the NOx and VOC
MVEBs for transportation conformity purposes for the years 2011 and
2018.  These MVEBs are displayed in the following table:

Table 1:  Motor Vehicle Emissions Budgets in Tons per Day (tpd)

Year	VOC	NOx

2011	32.343	43.661

2018	23.845	26.827

VI.  What Is EPA’s Analysis of the Commonwealth’s Request?

EPA is proposing to determine that the Richmond Area has attained the
8-hour ozone standard and that all other redesignation criteria have
been met.  The following is a description of how the VADEQ’s September
20, 2006 (redesignation request), September 25, 2006 (maintenance plan
and MVEBs), September 18, 2006 (base-year emissions inventory) and
November 17, 2006 and February 13, 2007 (supplements to base-year
inventory) submittals satisfy the requirements of section 107(d)(3)(E)
of the CAA.

A.  The Richmond Area Has Attained the 8-Hour Ozone NAAQS

EPA is proposing to determine that the Richmond Area has attained the
8-hour ozone NAAQS.  For ozone, an area may be considered to be
attaining the 8-hour ozone NAAQS if there are no violations, as
determined in accordance with 40 CFR 50.10 and Appendix I of Part 50,
based on three complete, consecutive calendar years of quality-assured
air quality monitoring data.  To attain this standard, the 3-year
average of the fourth-highest daily maximum 8-hour average ozone
concentrations measured at each monitor, within the area, over each year
must not exceed the ozone standard of 0.08 ppm.  Based on the rounding
convention described in 40 CFR part 50, Appendix I, the standard is
attained if the design value is 0.084 ppm or below.  The data must be
collected and quality-assured in accordance with 40 CFR part 58, and
recorded in the Air Quality System (AQS). The monitors generally should
have remained at the same location for the duration of the monitoring
period required for demonstrating attainment.

There are four ozone monitors in the Richmond Area.  As part of its
redesignation request, Virginia referenced ozone monitoring data for the
years 2003-2005 for the Richmond Area.  This data has been quality
assured and is recorded in the AQS.  The fourth-high 8-hour daily
maximum concentrations, along with the three-year averages are
summarized in Table 2.  The Hanover County monitoring site had the
highest 3-year average of the fourth highest daily maximum 8-hour
average and are therefore used to make air quality determinations.

Table 2:  Richmond Area Fourth Highest 8-hour Average Values, Richmond
Monitors, parts per million (ppm)

Monitor	AQS ID #	2003	2004	2005	3-Year Average

Chesterfield County	510410004	0.079	0.075	0.078	0.077

Henrico County	510870014	0.083	0.074	0.084	0.080

Hanover County	510850003	0.086	0.078	0.083	0.082

Charles City County	510360002	0.079	0.077	0.083	0.079

The average for the 3-year period 2003-2005 is 0.082 ppm

The air quality data for 2003-2005 indicate that the Richmond Area has
attained the standard with a design value of 0.082 ppm.  The data
collected at the Richmond Area monitors satisfy the CAA requirement that
the 3-year average of the annual fourth-highest daily maximum 8-hour
average ozone concentration is less than or equal to 0.08 ppm.  The
VADEQ’s request for redesignation for the Richmond Area indicates that
the data is complete and was quality assured in accordance with 40 CFR
part 58.  The VADEQ uses the AQS as the permanent database to maintain
its data and quality assures the data transfers and content for
accuracy.  In addition, as discussed below with respect to the
maintenance plan, VADEQ has committed to continue monitoring in
accordance with 40 CFR part 58.  In summary, EPA has determined that the
data submitted by Virginia indicates that the Richmond Area has attained
the 8-hour ozone NAAQS.

B.  The Richmond Area Has Met All Applicable Requirements Under Section
110 and Part D of the CAA and Has a Fully Approved SIP Under Section
110(k) of the CAA

EPA has determined that the Richmond Area has met all SIP requirements
applicable for purposes of this redesignation under section 110 of the
CAA (General SIP Requirements) and that it meets all applicable SIP
requirements under part D of Title I of the CAA, in accordance with
section 107(d)(3)(E)(v).  In addition, EPA has determined that the SIP
is fully approved with respect to all requirements applicable for
purposes of redesignation in accordance with section 107(d)(3)(E)(ii).
In making these proposed determinations, EPA ascertained which
requirements are applicable to the Richmond Area and determined that the
applicable portions of the SIP meeting these requirements are fully
approved under section 110(k) of the CAA.  We note that SIPs must be
fully approved only with respect to applicable requirements.

The September 4, 1992 Calcagni memorandum (“Procedures for Processing
Requests to Redesignate Areas to Attainment,” Memorandum from John
Calcagni, Director, Air Quality Management Division, September 4, 1992)
describes EPA’s interpretation of section 107(d)(3)(E) with respect to
the timing of applicable requirements.  Under this interpretation, to
qualify for redesignation, States requesting redesignation to attainment
must meet only the relevant CAA requirements that came due prior to the
submittal of a complete redesignation request.  See also Michael Shapiro
memorandum, September 17, 1993, and 60 FR 12459, 12465-66 (March 7,
1995) (redesignation of Detroit-Ann Arbor).  Applicable requirements of
the CAA that come due subsequent to the area’s submittal of a complete
redesignation request remain applicable until a redesignation is
approved, but are not required as a prerequisite to redesignation.
Section 175A(c) of the CAA.  Sierra Club v. EPA, 375 F.3d 537 (7th Cir.
2004).  See also 68 FR at 25424, 25427 (May 12, 2003) (redesignation of
St. Louis).

This section also sets forth EPA's views on the potential effect of the
Court's ruling in South Coast on this redesignation action.  For the
reasons set forth below, EPA does not believe that the Court's ruling
alters any requirements relevant to this redesignation action so as to
preclude redesignation, and does not prevent EPA from finalizing this
redesignation.  EPA believes that the Court's decision, as it currently
stands or as it may be modified based upon any petition for rehearing
that has been filed, imposes no impediment to moving forward with
redesignation of this area to attainment, because in either circumstance
redesignation is appropriate under the relevant redesignation provisions
of the Act and longstanding policies regarding redesignation requests.

1.  Section 110 General SIP Requirements

Section 110(a)(2) of Title I of the CAA delineates the general
requirements for a SIP, which includes enforceable emissions limitations
and other control measures, means, or techniques, provisions for the
establishment and operation of appropriate devices necessary to collect
data on ambient air quality, and programs to enforce the limitations.
The general SIP elements and requirements set forth in section 110(a)(2)
include, but are not limited to the following:

Submittal of a SIP that has been adopted by the State after reasonable
public notice and hearing;

Provisions for establishment and operation of appropriate procedures
needed to monitor ambient air quality;

Implementation of a source permit program; provisions for the
implementation of part C requirements (Prevention of Significant
Deterioration (PSD));

Provisions for the implementation of part D requirements for New Source
Review (NSR) permit programs;

Provisions for air pollution modeling; and

Provisions for public and local agency participation in planning and
emission control rule development.

Section 110(a)(2)(D) requires that SIPs contain certain measures to
prevent sources in a state from significantly contributing to air
quality problems in another State.  To implement this provision, EPA has
required certain states to establish programs to address transport of
air pollutants in accordance with the NOx SIP Call, October 27, 1998 (63
FR 57356), amendments to the NOx SIP Call, May 14, 1999 (64 FR 26298)
and March 2, 2000 (65 FR 11222), and the Clean Air Interstate Rule
(CAIR), May 12, 2005 (70 FR 25162).  However, the section 110(a)(2)(D)
requirements for a State are not linked with a particular nonattainment
area’s designation and classification in that State.  EPA believes
that the requirements linked with a particular nonattainment area’s
designation and classifications are the relevant measures to evaluate in
reviewing a redesignation request.  The transport SIP submittal
requirements, where applicable, continue to apply to a state regardless
of the designation of any one particular area in the State.

Thus, we do not believe that these requirements are applicable
requirements for purposes of redesignation.  EPA believes that the other
section 110 elements not connected with nonattainment plan submissions
and not linked with an area’s attainment status are not applicable
requirements for purposes of redesignation.  The Richmond Area will
still be subject to these requirements after it is redesignated.  The
section 110 and part D requirements, which are linked with a particular
area’s designation and classification, are the relevant measures to
evaluate in reviewing a redesignation request.  This policy is
consistent with EPA’s existing policy on applicability of conformity
(i.e., for redesignations) and oxygenated fuels requirement.  See
Reading, Pennsylvania, proposed and final rulemakings (61 FR 53174,
October 10, 1996), (62 FR 24826, May 7, 1997); Cleveland-Akron-Lorain,
Ohio final rulemaking (61 FR 20458, May 7, 1996); and Tampa, Florida,
final rulemaking (60 FR 62748, December 7, 1995).  See also the
discussion on this issue in the Cincinnati redesignation (65 FR at
37890, June 19, 2000), and in the Pittsburgh redesignation (66 FR at
53099, October 19, 2001).  Similarly, with respect to the NOx SIP Call
rules, EPA noted in its Phase 1 Final Rule to Implement the 8-hour Ozone
NAAQS, that the NOx SIP Call rules are not “an” ‘applicable
requirement’ for purposes of section 110(1) because the NOx rules
apply regardless of an area’s attainment or nonattainment status for
the 8-hour (or the 1-hour) NAAQS.” 69 FR 23951, 23983 (April 30,
2004).

EPA believes that section 110 elements not linked to the Area’s
nonattainment status are not applicable for purposes of redesignation.
As explained later in this notice, two part D requirements applicable
for purposes of redesignation under the 8-hour standard became due prior
to the submission of the redesignation request.

Because the Virginia SIP satisfies all of the applicable general SIP
elements and requirements set forth in section 110(a)(2),  EPA concludes
that Virginia has satisfied the criterion of section 107(d)(3)(E)
regarding section 110 of the Act.

2.  Part D Nonattainment Requirements Under the 8-Hour Standard

The Richmond Area was classified a Subpart 2, marginal nonattainment
area for the 8-hour ozone standard. Sections 172-176 of the CAA, found
in subpart 1 of part D, set forth the basic nonattainment requirements
applicable to all nonattainment areas.  Section 182 of the CAA, found in
subpart 2 of part D, establishes additional specific requirements
depending on the area’s nonattainment classification.

The Richmond Area is classified as a Subpart 2, marginal nonattainment
area.  We do not believe that any part of the Court’s opinion would
require that this subpart 2 classification be changed upon remand to
EPA.  However, even assuming for present purposes that the Richmond Area
would become subject to a different classification under a
classification scheme created in a future rule in response to the
court’s decision, that would not prevent EPA from finalizing a
redesignation for this area.  For the reasons set forth below, we
believe that any additional requirements that might apply based on that
different classification would not be applicable for purposes of
evaluating the redesignation request.

This belief is based upon (1) EPA’s longstanding policy of evaluating
redesignation requests in accordance with only the requirements due at
the time the request was submitted; and (2) consideration of the
inequity of applying retroactively any requirements that might be
applied in the future.

First, at the time the redesignation request was submitted, the area was
classified under Subpart 2 and was required to meet the Subpart 2
requirements.  Under EPA’s longstanding interpretation of section
107(d)(3)(E) of the Clean Air Act, to qualify for redesignation, states
requesting redesignation to attainment must meet only the relevant SIP
requirements that came due prior to the submittal of a complete
redesignation request.  September 4, 1992 Calcagni memorandum
(“Procedures for Processing Requests to Redesignate Areas to
Attainment”, Memorandum from John Calcagni, Director, Air Quality
Management Division) See also Michael Shapiro Memorandum, September 17,
1993, and 60 FR 12459, 12465-66 (March 7, 1995) (redesignation of
Detroit-Ann Arbor); Sierra Club v. EPA, 375 F.3d 537 (7th Cir. 2004),
which upheld this interpretation.  See, e.g, also 68 FR 25418, 25424,
25427 (May 12, 2003) (redesignation of St. Louis). At the time the
redesignation request was submitted, the Richmond Area was classified as
a marginal area under Subpart 2 and thus only Subpart 2 marginal area
requirements are applicable for purposes of redesignation.

Moreover, it would be inequitable to retroactively apply any new SIP
requirements that were not applicable at the time the request was
submitted, but which might later become applicable.  The D.C. Circuit
has recognized the inequity in such retroactive rulemaking.  See Sierra
Club v. Whitman, 285 F.3d 63 (D.C. Cir. 2002), in which the D.C. Circuit
upheld a District Court’s ruling refusing to make retroactive an EPA
determination of nonattainment that was past the statutory due date.
Such a determination would have resulted in the imposition of additional
requirements on the area.  The Court stated: “Although EPA failed to
make the nonattainment determination within the statutory time frame,
Sierra Club’s proposed solution only makes the situation worse.
Retroactive relief would likely impose large costs on the States, which
would face fines and suits for not implementing air pollution prevention
plans in 1997, even though they were not on notice at the time.”  Id.
at 68.  Similarly, here it would be unfair to penalize the area by
applying to it for purposes of redesignation any additional requirements
that were not in effect at the time it submitted its redesignation
request, but that might apply in the future.

Two Subpart 2 requirements became due for the Richmond Area under
section 182(a) of the CAA prior to redesignation—a 2002 base-year
inventory, and the emissions statement requirement pursuant to section
182(a)(3)(B).  The Virginia SIP has an approved emissions statement rule
for the 1-hour standard covering those portions of the 8-hour
nonattainment area that was part of the previous 1-hour attainment area,
which satisfies the emissions statement requirement for the 8-hour
standard.  See 65 FR 21315 (April 21, 2000).  Virginia recently
submitted a rulemaking to expand the VOC and NOx Richmond Emissions
Control Area to include the City of Petersburg and Prince George County.
 EPA approved this rulemaking on March 2, 2007 (72 FR 9441) and will be
effective on April 2, 2007.  Today, EPA is proposing to approve the 2002
base-year inventory for the Richmond Area, which was submitted on
September 18, 2006, and supplemented on November 17, 2006 and February
13, 2007, concurrently with its maintenance plan, into the Virginia SIP.
 A detailed evaluation of Virginia’s 2002 base-year inventory for the
Richmond Area can be found in a Technical Support Document (TSD)
prepared by EPA for this rulemaking.  EPA has determined that the
emission inventory and emissions statement requirements for the Richmond
Area have been satisfied.

EPA believes it is reasonable to interpret the general conformity and
NSR requirements of part D as not requiring approval prior to
redesignation.  With respect to section 176, Conformity Requirements,
section 176(c) of the CAA requires states to establish criteria and
procedures to ensure that Federally-supported or funded projects conform
to the air quality planning goals in the applicable SIP.  The
requirement to determine conformity applies to transportation plans,
programs, and projects developed, funded or approved under Title 23
U.S.C. and the Federal Transit Act (“transportation conformity”) as
well as to all other Federally supported or funded projects (“general
conformity”).  State conformity revisions must be consistent with
Federal conformity regulations relating to consultation, enforcement and
enforceability that the CAA required the EPA to promulgate.

EPA believes it is reasonable to interpret the conformity SIP
requirements as not applying for purposes of evaluating the
redesignation request under section 107(d) since state conformity rules
are still required after redesignation and federal conformity rules
apply where state rules have not been approved.  See Wall v. EPA, 265 F.
3d 426, 438 (6th Cir. 2001), upholding this interpretation.  See also 60
FR 62748 (December 7, 1995).

EPA has also determined that areas being redesignated need not comply
with the requirement that a NSR program be approved prior to
redesignation, provided that the area demonstrates maintenance of the
standard without part D NSR in effect, because PSD requirements will
apply after redesignation.  The rationale for this position is described
in a memorandum from Mary Nichols, Assistant Administrator for Air and
Radiation, dated October 14, 1994, entitled, “Part D NSR Requirements
or Areas Requesting Redesignation to Attainment.”  Virginia has
demonstrated that the Richmond Area will be able to maintain the
standard without Part D NSR in effect in the Richmond Area, and
therefore, Virginia need not have a fully approved Part D NSR program
prior to approval of the redesignation request.  Virginia’s
SIP-approved PSD program will become effective in Richmond upon
redesignation to attainment.  See rulemakings for Detroit, Michigan (60
FR at 12467- 68); Cleveland-Akron-Lorrain, Ohio (61 FR at 20458,
20469-70); Louisville, Kentucky (66 FR 53665, 53669 October 23, 2001);
Grand Rapids, Michigan (61 FR at 31831, 31834-37, June 21, 1996).

3.    SEQ CHAPTER \h \r 1 Requirements Under the 1-Hour Standard

  SEQ CHAPTER \h \r 1 With respect to the 1-hour standard  requirements,
the  SEQ CHAPTER \h \r 1  City of Petersburg and the Prince George
County portions of the Richmond Area were designated
Unclassifiable/Attainment under the 1-hour standard and were never
designated nonattainment for the 1-hour standard.  Therefore, there are
no outstanding 1-hour nonattainment area requirements these portions of
the Richmond Area would be required to meet.  Thus, we find that the
Court’s ruling does not result in any additional 1-hour requirements
for purposes of redesignation.

  SEQ CHAPTER \h \r 1 The portion of the Richmond Area consisting of the
Cities Colonial Heights, Hopewell, and Richmond, and the Counties of
Chesterfield, Hanover, Henrico, and Charles City was an Attainment area
subject to a Clean Air Act section 175A maintenance plan under the
1-hour standard. The Court’s ruling does not impact redesignation
requests for these types of areas.

First, there are no conformity requirements that are relevant for
redesignation requests for any standard, including the requirement to
submit a transportation conformity SIP2.  Under longstanding EPA policy,
 EPA believes that it is reasonable to interpret the conformity SIP
requirement as not applying for purposes of evaluating a redesignation
request under section 107(d)  because state conformity rules are still
required after redesignation and federal conformity rules apply where
state rules have not been approved.  40 CFR 51.390.   See Wall v. EPA,
265 F.3d 426 (6th Cir. 2001), upholding this interpretation.  See also
60 FR 62748 (Dec. 7, 1995) (Tampa, FL redesignation).

Second, with respect to the three other anti-backsliding provisions for
the 1-hour standard that the Court found were not properly retained,
this portion of the Richmond Area is an attainment area subject to a
maintenance plan for the 1-hour standard, and the NSR, contingency
measure (pursuant to section 172(c)(9) or 182(c)(9)) and fee provision
requirements no longer apply to an area that has been redesignated to
attainment of the 1-hour standard.

Thus the decision in South Coast should not alter requirements that
would preclude EPA from finalizing the redesignation of this area.

4.  Richmond has a Fully Approved SIP for Purposes of Redesignation

EPA has fully approved the Virginia SIP for the purposes of this
redesignation. EPA may rely on prior SIP approvals in approving a
redesignation request.  Calcagni Memo, p.3; Southwestern Pennsylvania
Growth Alliance v. Browner, 144 F. 3d 984, 989-90 (6th Cir. 1998), Wall
v. EPA, 265 F. 3d 426 (6th Cir. 2001), plus any additional measures it
may approve in conjunction with a redesignation action.  See 68 FR at
25425 (May 12, 2003) and citations therein.  The Richmond Area was a
1-hour ozone maintenance area at the time of its designation as a
marginal 8-hour ozone nonattainment area on April 30, 2004.  As stated
previously, two subpart 2 part D requirements became due for the
Richmond Area prior to redesignation a 2002 base-year inventory, and the
emissions statement requirement.  VADEQ has submitted concurrently with
its maintenance plan, a 2002 base-year inventory as a SIP revision.  In
this action, EPA is proposing approval of this inventory.  The emissions
statement requirement for the entire Richmond Area was recently
fulfilled on March 2, 2007 (72 FR 9441).  Because there are no
outstanding SIP submission requirements applicable for the purposes of
the redesignation of the Richmond Area, the applicable implementation
plan satisfies all pertinent SIP requirements.

C.  The Air Quality Improvement in the Richmond Area is Due to Permanent
and Enforceable Reductions in Emissions Resulting from Implementation of
the SIP and Applicable Federal Air Pollution Control Regulations and
Other Permanent and Enforceable Reductions

EPA believes that the Commonwealth has demonstrated that the observed
air quality improvement in the Richmond Area is due to permanent and
enforceable reductions in emissions resulting from implementation of the
SIP, Federal measures, and other State-adopted measures.  Emissions
reductions attributable to these rules are shown in Table 3.

Table 3:  Total VOC and NOx Emissions for 2002 and 2005 in tons per day
(tpd)

Volatile Organic Compounds (VOC)

Year	Point	Area*	Nonroad	Mobile	Total

2002	31.228	51.364	23.278	50.200	156.070

2005	32.705	54.760	20.438	43.518	151.421

Diff (02-05)	+1.477	+3.396	 -2.840	-6.682	 -4.649

Nitrogen Oxides (NOx)

Year	Point	Area*	Nonroad	Mobile	Total

2002	119.750	27.067	17.792	74.130	238.739

2005	77.281	26.501	16.862	67.155	187.799

Diff (02-05)	-42.469	-0.566	-0.930	-6.975	-50.940

* Area source category includes emissions from motor vehicle refueling.

Between 2002 and 2005, VOC emissions decreased by 4.649 tpd and NOx
emissions decreased by 50.940 tpd because of permanent and enforceable
measures implemented by the Commonwealth and the federal government.
These reductions, and anticipated future reductions, are due to the
following permanent and enforceable measures.

Programs Currently in Effect

(a)  Tier 1;

 National Low Emission Vehicle (NLEV) Program; and

 NOx SIP Call

EPA believes that permanent and enforceable emissions reductions are the
cause of the long-term improvement in ozone levels and are the cause of
the Area achieving attainment of the 8-hour ozone standard.

D.  The Richmond Area Has a Fully Approvable Maintenance Plan Pursuant
to Section 175A of the CAA

In conjunction with its request to redesignate the Richmond Area to
attainment status, Virginia submitted a SIP revision to provide for
maintenance of the 8-hour ozone NAAQS in the Area for at least 11 years
after redesignation.  The Commonwealth is requesting that EPA approve
this SIP revision as meeting the requirement of CAA 175A and 175A(b).
Section 175A(a) was met with the September 25, 2006 submission of the
maintenance plan, because it states that Richmond will maintain the
8-hour ozone NAAQS for at least 10 years after redesignation.  Section
175A(b) was met with the September 25, 2006 submission of the
maintenance plan, because it will replace the 1-hour maintenance plan
update requirement that was due 8 years after redesingation of the
Richmond Area to attainment.  Once approved, the maintenance plan for
the 8-hour ozone NAAQS will ensure that the SIP for the Richmond Area
meets the requirements of the CAA regarding maintenance of the
applicable 8-hour ozone standard.

What Is Required in a Maintenance Plan?

Section 175A of the CAA sets forth the elements of a maintenance plan
for areas seeking redesignation from nonattainment to attainment.  Under
section 175A(a), the plan must demonstrate continued attainment of the
applicable NAAQS for at least 10 years after approval of a redesignation
of an area to attainment.  Section 175A(b) states that eight years after
redesignation from nonattainment to attainment, the State must submit a
revised maintenance plan demonstrating that attainment will continue to
be maintained for the next 10-year period following the initial 10-year
period.  To address the possibility of future NAAQS violations, the
maintenance plan must contain such contingency measures, with a schedule
for implementation, as EPA deems necessary to assure prompt correction
of any future 8-hour ozone violations.  Section 175A of the CAA sets
forth the elements of a maintenance plan for areas seeking redesignation
from nonattainment to attainment.  The Calcagni memorandum dated
September 4, 1992, provides additional guidance on the content of a
maintenance plan.  An ozone maintenance plan should address the
following provisions:

(a) an attainment emissions inventory;

(b) a maintenance demonstration;

(c) a monitoring network;

(d) verification of continued attainment; and

(e) a contingency plan.

Analysis of the Richmond Area Maintenance Plan

(a) Attainment inventory – An attainment inventory includes the
emissions during the time period associated with the monitoring data
showing attainment.  VADEQ determined that the appropriate attainment
inventory year is 2005.  That year establishes a reasonable year within
the three-year block of 2003-2005 as a baseline and accounts for
reductions attributable to implementation of the CAA requirements to
date.  The 2005 inventory is consistent with EPA guidance and is based
on actual “typical summer day” emissions of VOC and NOx during 2005
and consists of a list of sources and their associated emissions.

To develop the NOx and VOC base year emissions inventories, VADEQ used
the following approaches:

Point source emissions were developed using the latest version of
EPA’s Economic Growth Analysis System (EGAS 5.0).

Area source emissions were also developed using growth factors from EGAS
5.0 and then applied to the 2002 Area source inventory.

Mobile nonroad emissions were developed using EPA’s NONROAD 2005
model.  The NONROAD 2005 model estimates fuel consumption and emissions
of total hydrocarbons, carbon monoxide, nitrogen oxides, sulfur oxides,
and particulate matter for all nonroad mobile source categories except
for aircraft, locomotives, and commercial marine vessels (CMV).

Mobile on-road source emissions were calculated using EPA’s MOBILE6.2
mobile source inventory model.  The Virginia Department of
Transportation (VDOT) provided daily vehicle miles traveled (DVMT),
average speed data for each road type by jurisdiction, and annual growth
rates that were used to forecast DVMT into the future.  Also, the
Virginia Department of Motor Vehicles provided registration data that
was specific to each jurisdiction.  Mobile source emission projections
include the National Low Emission Vehicle Program (NLEV), the 2004 Tier
2 and Low Sulfur Gasoline Rule, the 2004 and 2007 Heavy-Duty Diesel
Vehicle Rules, and the 2006 Low Sulfur Diesel Rule.  In addition,
Richmond, Hopewell, Colonial Heights, Chesterfield, Hanover, Henrico,
and Charles City were modeled with Phase II Reformulated Gasoline (RFG)
while Prince George and Petersburg were modeled with conventional
gasoline fuel.

More detailed information on the compilation of the 2002, 2005, 2011,
and 2018 inventories can found in the Technical Appendices, which are
part of VADEQ’s September 25, 2006 submittal.

Maintenance Demonstration – On September 25, 2006, the VADEQ submitted
a maintenance plan as required by section 175A of the CAA.  The Richmond
maintenance plan shows maintenance of the 8-hour ozone NAAQS by
demonstrating that future emissions of VOC and NOx will not exceed the
attainment year 2005 emissions levels throughout the Richmond Area
through the year 2018.  A maintenance demonstration need not be based on
modeling.  See Wall v. EPA, supra; Sierra Club v. EPA, supra.  See also
66 FR at 53099-53100; 68 FR at 25430-32.

Tables 4 and 5 specify the VOC and NOx emissions for the Richmond Area
for 2005, 2011, and 2018.  The VADEQ chose 2011 as an interim year in
the maintenance demonstration period to demonstrate that the VOC and NOx
emissions are not projected to increase above the 2005 attainment level
during the time of the maintenance period.

Table 4:  Total VOC Emissions for 2005-2018 (tpd)

Source Category	2005 VOC Emissions	2011 VOC

Emissions	2018 VOC Emissions

Point	32.705	36.074	39.900

Area1	54.760	60.315	68.331

Mobile2	43.518	32.343	23.845

Nonroad	20.438	15.898	15.515

Total	151.421	144.630	147.591

1 Includes vehicle refueling emissions and the benefits of selected
local controls (Stage I, CTG RACT, and open burning).  Also includes
site/project specific emissions estimates and projections.

2 Includes transportation provisions

Table 5:  Total NOx Emissions for 2005-2018 (tpd)

Source

Category	2005 NOx

Emissions	2011 NOx

Emissions	2018 NOx

Emissions

Point	62.536	69.333	75.241

Area1	55.207	56.974	60.105

Mobile2	78.169	50.387	31.890

Non-road	30.208	29.116	23.093

Total	226.120	205.810	190.329

1 Includes selected local controls (open burning).

2 Includes transportation provisions

Additionally, the following programs are either effective or due to
become effective and will further contribute to the maintenance
demonstration of the 8-hour ozone NAAQS:

Currently in Effect:

The National Low Emission Vehicle (NLEV) program;

Open burning restrictions for Richmond, Hopewell, Colonial Heights,
Hanover, Henrico, Chesterfield, and western Charles City;

Control Technology Guideline (CTG) Reasonable Available Control
Technology (RACT) requirements for Richmond, Hopewell, Colonial Heights,
Hanover, Henrico, Chesterfield, and western Charles City;

Non-CTG VOC RACT requirements for Richmond, Hopewell, Colonial Heights,
Hanover, Henrico, Chesterfield, and western Charles City;

Reformulated gasoline requirements for Richmond, Hopewell, Colonial
Heights, Hanover, Henrico, Chesterfield, and western Charles City;

Motor vehicle fleet turnover with new vehicles meeting the Tier 2
standards; and

Low sulfur gasoline.

Additionally, the following programs are in place and either effective
or are due to become effective:

Heavy duty diesel on-road (2004/2007) and low sulfur on-road (2006); 66
FR 5002, (January 18, 2001)

Non-road emission standards (2008) and off-road diesel fuel 2007/2010);
69 FR 38958 (June 29, 2004).

Lastly, to further improve air quality and to provide room for
industrial and population growth while maintaining emissions in the area
to less than 2005 levels, the Commonwealth of Virginia has initiated
rulemaking to implement the following programs:

Implement the Stage I requirements of 9 VAC 5 Chapter 40, Article 37 in
Prince George, Petersburg, and eastern Charles City;

Implement open burning restriction requirements of 9 VAC 5 Chapter 40,
Article 40 in Prince George, Petersburg, and eastern Charles City; and

Implement existing source CTG RACT requirements of 9 VAC 5 Chapter 40,
Articles 5-6, 24-36, and 39 in Prince George, Petersburg, and eastern
Charles City.

Based on the comparison of the projected emissions and the attainment
year emissions along with the additional measures, EPA concludes that
VADEQ has successfully demonstrated that the 8-hour ozone standard
should be maintained in the Richmond Area.

Monitoring Network – There are three monitors measuring ozone in the
Richmond Area.  VADEQ will continue to operate its current air quality
monitors (located in the Richmond Area), in accordance with 40 CFR part
58.

Verification of Continued Attainment – In addition to maintaining the
key elements of its regulatory program, the Commonwealth will acquire
ambient and source emission data to track attainment and maintenance.
The Commonwealth will track the progress of the maintenance
demonstration by periodically updating the emissions inventory.  This
tracking will consist of annual and periodic evaluations.  The annual
evaluation will consist of checks on key emissions trend indicators such
as the annual emission update of stationary sources, the Highway
Performance Monitoring System (HPMS) vehicle miles traveled data
reported to the Federal Highway Administration, and other growth
indicators.  These indicators will be compared to the growth assumptions
used in the plan to determine if the predicted versus the observed
growth remains relatively constant.  The Commonwealth will also develop
and submit periodic (every three years) emission inventories prepared
under EPA’s Consolidated Emission Reporting Regulation (40 CFR 51,
subpart A), beginning in 2005.

The Maintenance Plan’s Contingency Measures – The contingency plan
provisions are designed to promptly correct a violation of the NAAQS
that occurs after redesignation.  Section 175A of the CAA requires that
a maintenance plan include such contingency measures as EPA deems
necessary to ensure that the Commonwealth will promptly correct a
violation of the NAAQS that occurs after redesignation.  The maintenance
plan should identify the events that would “trigger” the adoption
and implementation of a contingency measure(s), the contingency
measure(s) that would be adopted and implemented, and the schedule
indicating the time frame by which the state would adopt and implement
the measure(s).

The ability of the Richmond Area to stay in compliance with the 8-hour
ozone standard after redesignation depends upon VOC and NOx emissions in
the Area remaining at or below 2005 levels.  The Commonwealth’s
maintenance plan projects VOC and NOx emissions to decrease and stay
below 2005 levels through the year 2018.  The Commonwealth’s
maintenance plan outlines the procedures for the adoption and
implementation of contingency measures to further reduce emissions
should a violation occur.

The Commonwealth’s maintenance plan lays out situations where the need
to adopt and implement a contingency measure to further reduce emissions
would be triggered.  Those situations are as follows:

(i)  An actual increase of the VOC or NOx emissions exceed the regional
emissions budgets, which would be identified or predicted through the
development of the comprehensive periodic tracking inventories - The
maintenance plan states that the VADEQ will monitor the observed growth
rates for VMT, population, and point source VOC and NOx emissions on a
yearly basis which will serve as an early warning indicator of the
potential for a violation.  The plan also states that comprehensive
tracking inventories will also be developed every 3 years using current
EPA-approved methods to estimate emissions, concentrating on areas
identified in the less rigorous yearly evaluations as being potential
problems.  If the regional emissions budget for VOC or NOx is exceeded,
the following control strategies will be implemented as follows:

Preparation of a complete VOC and NOx emission inventory; and

The expanded implementation of one or more of the control strategies,
listed in Table 6, that have no already been implemented in the Richmond
Area.

Table 6:  Maintenance Plan Contingency Measure Options

Control Strategy	Description

9 VAC 5 Chapter 40, Article 42	Emission Standards for Portable Fuel
Container Spillage

9 VAC 5 Chapter 40, Article 47	Emissions Standards for Solvent Metal
Cleaning Operations

9 VAC 5 Chapter 40, Article 48	Emissions Standards for Mobile Equipment
Repair and Refinishing Operations

9 VAC 5 Chapter 40, Article 49	Emissions Standards for Architectural and
Industrial Maintenance Coatings

9 VAC 5 Chapter 40, Article 50	Emission Standards for Consumer Products

9 VAC 5-40-310 of 9 VAC 5 Chapter 40, Article 4	General Process
Operations - Standard for Nitrogen Oxides (non-CTG RACT for major
sources)

(ii) A violation (any 3 year average of each annual fourth highest
8-hour average) of the 8-hour ozone NAAQS of 0.08 ppm occurs - The
maintenance plan states that if a violation (any 3 year average of each
annual fourth highest 8-hour average) of the 8-hour ozone NAAQS of 0.08
ppm occurs at a monitor located in the Richmond monitoring network, the
VADEQ will implement two of the following control strategies as follows:

The expanded implementation of one or more of the following control
strategies, listed in Table 6, that have not already been implemented in
the Richmond Area.

(iii) A violation (any 3 year average of each annual fourth highest
8-hour average) of the 8-hour ozone NAAQS of 0.08 ppm in any subsequent
ozone season - The maintenance plan states that if a violation (any 3
year average of each annual fourth highest 8-hour average) of the 8-hour
ozone NAAQS of 0.08 ppm occurs in the Richmond monitoring network
following the implementation of the requirements listed in the previous
section (section e(ii)) and in any subsequent ozone season, two
additional control strategies from Table 6 will be implemented.

The following schedule for adoption, implementation and compliance
applies to the contingency measures concerning non-CTG RACT
requirements.  It would also apply to the imposition of the area source
VOC regulations if those regulations had not already been implemented
due to other triggers or provisions of the maintenance plan.

Notification received from EPA that a contingency measure must be
implemented, or three months after a recorded violation;

Applicable regulation to be adopted 6 months after this date;

Applicable regulation to be implemented 6 months after adoption3;

Compliance with regulation to be achieved within 12 months of adoption.

The maintenance plan adequately addresses the five basic components of a
maintenance plan:  attainment inventory, maintenance demonstration,
monitoring network, verification of continued attainment, and a
contingency plan.  EPA believes that the maintenance plan SIP revision
submitted by Virginia for the Richmond area meets the requirements of
section 175A of the Act.  VII.  Are the Motor Vehicle Emissions Budgets
Established and Identified in the Richmond Maintenance Plan Adequate and
Approvable?

A.  What are the Motor Vehicle Emissions Budgets?

Under the CAA, States are required to submit, at various times, control
strategy SIPs and maintenance plans in ozone areas.  These control
strategy SIPs (i.e., RFP SIPs and attainment demonstration SIPs) and
maintenance plans identify and establish MVEBs for certain criteria
pollutants and/or their precursors to address pollution from on-road
mobile sources.  In the maintenance plan, the MVEBs are termed
“on-road mobile source emission budgets.”  Pursuant to 40 CFR part
93 and 51.112, MVEBs must be established in an ozone maintenance plan.
An MVEB is the portion of the total allowable emissions that is
allocated to highway and transit vehicle use and emissions.  An MVEB
serves as a ceiling on emissions from an area’s planned transportation
system.  The MVEB concept is further explained in the preamble to the
November 24, 1993, transportation conformity rule (58 FR 62188).  The
preamble also describes how to establish and revise the MVEBs in control
strategy SIPs and maintenance plans.

Under section 176(c) of the CAA, new transportation projects, such as
the construction of new highways, must “conform” to (i.e., be
consistent with) the part of the State’s air quality plan that
addresses pollution from cars and trucks.  “Conformity” to the SIP
means that transportation activities will not cause new air quality
violations, worsen existing violations, or delay timely attainment of or
reasonable progress towards the NAAQS.  If a transportation plan does
not “conform,” most new projects that would expand the capacity of
roadways cannot go forward.  Regulations at 40 CFR part 93 set forth EPA
policy, criteria, and procedures for demonstrating and ensuring
conformity of such transportation activities to a SIP.

When reviewing submitted “control strategy” SIPs or maintenance
plans containing MVEBs, EPA must affirmatively find the MVEB contained
therein “adequate” for use in determining transportation conformity.
 After EPA affirmatively finds the submitted MVEB is adequate for
transportation conformity purposes, that MVEB can be used by state and
federal agencies in determining whether proposed transportation projects
“conform” to the SIP as required by section 176(c) of the CAA.
EPA’s substantive criteria for determining “adequacy” of a MVEB
are set out in 40 CFR 93.118(e)(4)

EPA’s process for determining “adequacy” consists of three basic
steps:  public notification of a SIP submission, a public comment
period, and EPA’s adequacy finding. This process for determining the
adequacy of submitted SIP MVEBs was initially outlined in EPA’s May
14, 1999 guidance, “Conformity Guidance on Implementation of March 2,
1999, Conformity Court Decision.”  This guidance was finalized in the
Transportation Conformity Rule Amendments for the “New 8-Hour Ozone
and PM2.5 National Ambient Air Quality Standards and Miscellaneous
Revisions for Existing Areas; Transportation Conformity Rule Amendments
– Response to Court Decision and Additional Rule Change” on July 1,
2004 (69 FR 40004).  EPA consults this guidance and follows this
rulemaking in making its adequacy determinations.

The MVEBS for the Richmond Area are listed in Table 1 of this document
for 2011 and 2018, and are the projected emissions for the on-road
mobile sources plus any portion of the safety margin allocated to the
MVEBs (safety margin allocation for 2011 and 2018 only).  These emission
budgets, when approved by EPA, must be used for transportation
conformity determinations.

B.  What Is a Safety Margin?

A “safety margin” is the difference between the attainment level of
emissions (from all sources) and the projected level of emissions (from
all sources) in the maintenance plan.  The attainment level of emissions
is the level of emissions during one of the years in which the area met
the NAAQS.  The following example is for the 2018 safety margin:
Richmond first attained the 8-hour ozone NAAQS during the 2003 to 2005
time period.  The Commonwealth used 2005 as the year to determine
attainment levels of emissions for Richmond.  The total emissions from
point, area, mobile on-road, and mobile non-road sources in 2005 equaled
151.421 tpd of VOC and 187.799 tpd of NOx.  The VADEQ projected
emissions out to the year 2018 and projected a total of 147.591 tpd of
VOC and 154.158 tpd of NOx from all sources in Richmond.  The safety
margin for 2018 would be the difference between these amounts, or 3.830
tpd of VOC and 33.641 tpd of NOx.  The emissions up to the level of the
attainment year including the safety margins are projected to maintain
the Area's air quality consistent with the 8-hour ozone NAAQS.  The
safety margin is the extra emissions reduction below the attainment
levels that can be allocated for emissions by various sources as long as
the total emission levels are maintained at or below the attainment
levels.  Table 7 shows the safety margins for the 2011 and 2018 years.

Table 7:  2011 and 2018 Safety Margins for Richmond

Inventory Year	VOC Emissions (tpd)	NOx Emissions (tpd)

2005 Attainment	151.421	187.799

2011 Interim	144.630	168.492

2011 Safety Margin	6.791	19.307

2005 Attainment	151.421	187.799

2018 Final	147.591	154.158

2018 Safety Margin	3.830	33.641

The VADEQ allocated 1.000 tpd VOC and 3.000 tpd NOx to the 2011 interim
VOC projected on-road mobile source emissions projection and the 2011
interim NOx projected on-road mobile source emissions projection to
arrive at the 2011 MVEBs.  For the 2018 MVEBs the VADEQ allocated 1.000
tpd VOC and 3.000 tpd NOx from the 2018 safety margins to arrive at the
2018 MVEBs.  Once allocated to the mobile source budgets these portions
of the safety margins are no longer available, and may no longer be
allocated to any other source category.  Table 8 shows the final 2009
and 2018 MVEBS for the Richmond Area.

Table 8:  2011 and 2018 Final MVEBs for Richmond

Inventory Year	VOC Emissions (tpd)	NOx Emissions (tpd)

2011 projected on-road mobile source projected emissions	31.343	40.661

2011 Safety Margin Allocated to MVEBs	1.000	3.000

2011 MVEBs	32.343	43.661

2018 projected on-road mobile source projected emissions	22.845	23.827

2018 Safety Margin Allocated to MVEBs	1.000	3.000

2018 MVEBs	23.845	26.827

C.  Why Are the MVEBs Approvable?

The 2011 and 2018 MVEBs for the Richmond Area are approvable because the
MVEBs for NOx and VOCs continue to maintain the total emissions at or
below the attainment year inventory levels as required by the
transportation conformity regulations.

D.  What Is the Adequacy and Approval Process for the MVEBs in the
Richmond Maintenance Plan?

The MVEBs for the Richmond Area maintenance plan are being posted to
EPA’s conformity Website concurrently with this proposal.  The public
comment period will end at the same time as the public comment period
for this proposed rule.  In this case, EPA is concurrently processing
the action on the maintenance plan and the adequacy process for the
MVEBs contained therein.  In this proposed rule, EPA is proposing to
find the MVEBs adequate and also proposing to approve the MVEBs as part
of the maintenance plan.  The MVEBs cannot be used for transportation
conformity until the maintenance plan and associated MVEBs are approved
in a final Federal Register notice, or EPA otherwise finds the budgets
adequate in a separate action following the comment period.

If EPA receives adverse written comments with respect to the proposed
approval of the Richmond MVEBs, or any other aspect of our proposed
approval of this updated maintenance plan, we will respond to the
comments on the MVEBs in our final action or proceed with the adequacy
process as a separate action.  Our action on the Richmond Area MVEBs
will also be announced on EPA’s conformity Website:    HYPERLINK
"http://www.epa.gov/otaq/stateresources/transconf/index.htm"
http://www.epa.gov/otaq/stateresources/transconf/index.htm

(once there, click on the “Conformity” button, then look for
“Adequacy Review of SIP Submissions).

VIII.  Proposed Actions

EPA is proposing to determine that the Richmond Area has attained the
8-hour ozone NAAQS. EPA is also proposing to approve the redesignation
of the Richmond Area from nonattainment to attainment for the 8-hour
ozone NAAQS.  EPA has evaluated Virginia’s redesignation request and
determined that it meets the redesignation criteria set forth in section
107(d)(3)(E) of the CAA.  EPA believes that the redesignation request
and monitoring data demonstrate that the Richmond Area has attained the
8-hour ozone standard.  The final approval of this redesignation request
would change the designation of the Richmond Area from nonattainment to
attainment for the 8-hour ozone standard.  EPA is also proposing to
approve the associated maintenance plan for the Richmond Area, submitted
on September 25, 2006, as a revision to the Virginia SIP.  EPA is
proposing to approve the maintenance plan for the Richmond Area because
it meets the requirements of section 175A as described previously in
this notice.  EPA is also proposing to approve the 2002 base-year
inventory for the Richmond Area, and the MVEBs submitted by Virginia for
the Richmond Area in conjunction with its redesignation request.  EPA is
soliciting public comments on the issues discussed in this document.
These comments will be considered before taking final action.

IX.  Statutory and Executive Order Reviews

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
proposed action is not a "significant regulatory action" and therefore
is not subject to review by the Office of Management and Budget.  For
this reason, this action is also not subject to Executive Order 13211,
"Actions Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use"  (66 Fed. Reg. 28355 (May 22, 2001)).  This action
merely proposes to approve state law as meeting Federal requirements and
imposes no additional requirements beyond those imposed by state law.
Accordingly, the Administrator certifies that this proposed rule will
not have a significant economic impact on a substantial number of small
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Because this rule proposes to approve pre-existing requirements under
state law and does not impose any additional enforceable duty beyond
that required by state law, it does not contain any unfunded mandate or
significantly or uniquely affect small governments, as described in the
Unfunded Mandates Reform Act of 1995 (Public Law 104-4).  This proposed
rule also does not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes, as specified by
Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132 (64 FR 43255, August 10, 1999),
because it merely proposes to approve a state rule implementing a
Federal requirement, and does not alter the relationship or the
distribution of power and responsibilities established in the Clean Air
Act. This proposed rule also is not subject to Executive Order 13045 (62
FR 19885, April 23, 1997), because it approves a state rule implementing
a Federal standard.

In reviewing SIP submissions, EPA(s role is to approve state choices,
provided that they meet the criteria of the Clean Air Act.  In this
context, in the absence of a prior existing requirement for the State to
use voluntary consensus standards (VCS), EPA has no authority to
disapprove a SIP submission for failure to use VCS.  It would thus be
inconsistent with applicable law for EPA, when it reviews a SIP
submission, to use VCS in place of a SIP submission that otherwise
satisfies the provisions of the Clean Air Act.  Redesignation is an
action that affects the status of a geographical area and does not
impose any new requirements on sources.  Thus, the requirements of
section 12(d) of the National Technology Transfer and Advancement Act of
1995 (15 U.S.C. 272 note) do not apply.  As required by section 3 of
Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this
proposed rule, EPA has taken the necessary steps to eliminate drafting
errors and ambiguity, minimize potential litigation, and provide a clear
legal standard for affected conduct.  EPA has complied with Executive
Order 12630 (53 FR 8859, March 15, 1988) by examining the takings
implications of the rule in accordance with the (Attorney General(s
Supplemental Guidelines for the Evaluation of Risk and Avoidance of
Unanticipated Takings( issued under the executive order.

This rule, proposing to approve the redesignation of the Richmond Area
to attainment for the 8-hour ozone NAAQS, the associated maintenance
plan, the 2002 base-year inventory, and the MVEBS identified in the
maintenance plan, does not impose an information collection burden under
the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.).

List of Subjects

40 CFR Part 52

Environmental protection, Air pollution control, Nitrogen oxides, Ozone,
Reporting and recordkeeping requirements, Volatile organic compounds.

40 CFR Part 81

Air pollution control, National parks, Wilderness Areas.

Authority: 42 U.S.C. 7401 et seq.

___________________________           	___________/s/_________________

Dated:   April 5, 2007                                   	Judith Katz,
Acting

Regional Administrator,

Region III.

 Under the 1-hour ozone NAAQS the Richmond Area consisted of the Cities
of Colonial Heights, Hopewell, and Richmond, the Counties of
Chesterfield, Hanover, Henrico, and Charles City.  See November 6, 1991
(58 FR 56694).

2 Clean Air Act section 176(c)(4)(E) currently requires States to submit
revisions to their SIPs to reflect certain federal criteria and
procedures for determining transportation conformity.  Transportation
conformity SIPs are different from the motor vehicle emissions budgets
that are established in control strategy SIPs and maintenance plans.

3 In the event of implementation of the RACT contingency measure,
Virginia would amend its current RACT regulations to apply them to
non-CTG sources in the Richmond Area within 6 months after (a)
notification received from EPA that the contingency measure must be
implemented, or (b) three months after a recorded violation.  The newly
subject non-CTG RACT sources would need to develop source-specific RACT
plans and comply with their plans no later than 12 months from the date
of Virginia’s adoption of the amended regulations.

 PAGE  46


[Federal Register Volume 88, Number 159 (Friday, August 18, 2023)]
[Notices]
[Pages 56672-56675]
[FR Doc No: 2023-17759]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98129; File No. SR-MRX-2023-15]

Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend MRX
Options 7, Section 3

August 14, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 9, 2023, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule at
Options 7, Section 3 (Regular Order Fees and Rebates).\3\
---------------------------------------------------------------------------

    \3\ The Exchange withdrew SR-MRX-2023-13 on August 9, 2023 and
replaced it with the instant filing.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's
Pricing Schedule at Options 7, Section 3 (Regular Order Fees and
Rebates).
    Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following Maker Fees/Rebate for regular orders in
Penny Symbols:

                                                  Penny Symbols
----------------------------------------------------------------------------------------------------------------
                                                  Maker fee tier  Maker fee tier    Maker fee/      Maker Fee/
               Market participant                        1               2         rebate tier 3   rebate tier 4
----------------------------------------------------------------------------------------------------------------
Market Maker....................................           $0.10           $0.00         ($0.05)         ($0.10)
Non-Nasdaq MRX Market Maker (FarMM).............            0.47            0.47            0.47            0.47
Firm Proprietary/Broker-Dealer..................            0.47            0.47            0.47            0.47
Professional Customer...........................            0.47            0.47            0.47            0.47
Priority Customer...............................            0.00            0.00            0.00            0.00
----------------------------------------------------------------------------------------------------------------

    Today, the Exchange assesses the following Penny Symbol Maker Fees/
Rebates to Market Makers: \4\ a Tier 1 fee of $0.10 per contract, a
Tier 2 fee of $0.00 per contract, a Tier 3 rebate of $0.05 per contract
and a Tier 4 rebate of $0.10 per contract. At this time, the Exchange
proposes to amend the Market Maker Tier 1 through Tier 4 Penny Symbol
Maker Fees/Rebates by adding a new note 6 in Options 7, Section 3 that
would provide that Market Maker Penny Symbol Tier 1 through Tier 4
Maker Fees/Rebates will be $0.00 per contract for options on SPDR S&P
500 ETF Trust (``SPY''), the INVESCO QQQ Trust\SM\, Series 1 (``QQQ''),
and iShares Russell 2000 ETF (``IWM'').
---------------------------------------------------------------------------

    \4\ A ``Market Maker'' is a market maker as defined in Nasdaq
MRX Rule Options 1, Section 1(a)(21). See Options 1, Section 1(c).
---------------------------------------------------------------------------

    Today, as set forth in Table 1 of Options 7, Section 3, the
Exchange assesses the following Taker Fees for regular orders in Penny
Symbols:

----------------------------------------------------------------------------------------------------------------
                                                  Taker fee tier  Taker fee tier  Taker fee tier  Taker fee tier
               Market participant                        1               2               3               4
----------------------------------------------------------------------------------------------------------------
Market Maker....................................           $0.50           $0.50           $0.50           $0.50
Non-Nasdaq MRX Market Maker (FarMM).............            0.50            0.50            0.50            0.50
Firm Proprietary/Broker-Dealer..................            0.50            0.50            0.50            0.50
Professional Customer...........................            0.50            0.50            0.50            0.50
Priority Customer...............................            0.15            0.15            0.15            0.10
----------------------------------------------------------------------------------------------------------------

    Today, the Exchange assesses the following Penny Symbol Taker Fees
to Priority Customers: a Tier 1 fee of $0.15 per contract, a Tier 2 fee
of $0.15 per contract, a Tier 3 fee of $0.15 per contract and a Tier 4
fee of $0.10 per contract. At this time, the Exchange proposes to amend
the Priority Customer \5\ Tier 1 through Tier 4 Penny Symbol Taker Fees
by adding a new note 6 in Options 7, Section 3 that would provide that
the Priority Customer Penny Symbol Tier 1 through Tier 4 Taker Fees
will be $0.00 for options on SPY, QQQ and IWM.
---------------------------------------------------------------------------

    \5\ A ``Priority Customer'' is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s), as defined in Nasdaq MRX Options 1,
Section 1(a)(36). Unless otherwise noted, when used in this Pricing
Schedule the term ``Priority Customer'' includes ``Retail''. A
``Retail'' order is a Priority Customer order that originates from a
natural person, provided that no change is made to the terms of the
order with respect to price or side of market and the order does not
originate from a trading algorithm or any other computerized
methodology. See Options 1, Section 1(c).
---------------------------------------------------------------------------

    The Exchange believes that the proposed pricing will attract
Priority Customer orders in SPY, QQQ and IWM to MRX in Penny Symbols.
Additionally, the Exchange believes this pricing will encourage Market
Makers to add liquidity on the MRX order book in SPY, QQQ and IWM as
the Tier 1 Market Maker Penny Symbol Maker Fee of $0.10 per contract is
being reduced to $0.00 per contract. While Market Makers that add
liquidity in SPY, QQQ and IWM will no longer receive the Market Maker
Tier 3 or Tier 4 Maker Rebates in Penny Symbols, the proposed pricing
should overall continue to attract order flow to MRX in these symbols.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among members and issuers and other persons using any facility,
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange's proposed changes to its Penny Symbol Maker Fees/
Rebates and Taker Fees are reasonable in several respects. As a
threshold matter, the

Exchange is subject to significant competitive forces in the market for
options securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \8\
---------------------------------------------------------------------------

    \8\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \9\
---------------------------------------------------------------------------

    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options security transaction services. The Exchange is only one of
sixteen options exchanges to which market participants may direct their
order flow. Within this environment, market participants can freely and
often do shift their order flow among the Exchange and competing venues
in response to changes in their respective pricing schedules. As such,
the proposal represents a reasonable attempt by the Exchange to
increase its liquidity and market share relative to its competitors.
    The Exchange believes that it is reasonable to decrease its Market
Maker Penny Symbol Tier 1 Maker Fee from $0.10 to $0.00 per contract on
options in SPY, QQQ and IWM and not pay any Market Maker Penny Symbol
Tier 3 or 4 Maker Rebates (currently $0.05 and $0.10 per contract,
respectively) on options in SPY, QQQ and IWM in order to attract
Priority Customer orders in SPY, QQQ and IWM to MRX and incentivize
Market Makers to add liquidity in SPY, QQQ and IWM on MRX. With this
proposal, the Exchange seeks to assess Market Makers no Penny Symbol
Maker Fees and pay no Maker Rebates in Penny Symbols to Market Makers
on options in SPY, QQQ and IWM. While Market Makers who are eligible to
receive a Penny Symbol Tier 3 or 4 Maker Rebate would no longer receive
this rebate in SPY, QQQ, and IWM, they would be able to provide
liquidity on the order book in these symbols at no cost. Additionally,
Priority Customers would be able to remove Penny Symbol liquidity from
the order book at no cost. With this proposal, the Priority Customer
Penny Symbol Taker Fee in Tiers 1-3 would be reduced from $0.15 to
$0.00 per contract and the Priority Customer Penny Symbol Taker Fee in
Tier 4 would be reduced from $0.10 to $0.00 per contract on options in
SPY, QQQ and IWM.
    The Exchange believes that it is equitable and not unfairly
discriminatory to decrease its Market Maker Penny Symbol Tier 1 Maker
Fee from $0.10 to $0.00 per contract and not pay any Market Maker Penny
Symbol Tier 3 or 4 Maker Rebates, (currently $0.05 and $0.10 per
contract, respectively) on options in SPY, QQQ and IWM because Market
Makers have different requirements and additional obligations to the
Exchange that other market participants do not (such as quoting
requirements).\10\ As such, the proposed fees are designed to increase
Market Maker participation in SPY, QQQ and IWM, for the benefit of all
market participants, by removing fees for Market Makers to add Penny
Symbol liquidity in SPY, QQQ and IWM. The Exchange believes that it is
equitable and not unfairly discriminatory to assess Priority Customers
no Penny Symbol Taker Fees in SPY, QQQ and IWM because Priority
Customer liquidity benefits all market participants by providing more
trading opportunities, which attracts market makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants, to the benefit of all market
participants.
---------------------------------------------------------------------------

    \10\ See MRX Options 2, Section 5.
---------------------------------------------------------------------------

    The Exchange believes assessing different fees for options in SPY,
QQQ and IWM, as compared to other symbols, is reasonable because
trading in SPY, QQQ and IWM is different from trading in other symbols
in that they are more liquid, have higher volume and competition for
executions is more intense. Additionally, the Exchange believes
assessing different fees for options in SPY, QQQ and IWM, as compared
to other symbols, is equitable and not unfairly discriminatory because
the Exchange would uniformly not assess a Market Maker the Penny Symbol
Maker Fees or pay a Market Maker the Penny Symbol Maker Rebates in SPY,
QQQ and IWM. Similarly, the Exchange would uniformly not assess
Priority Customers the Penny Symbol Taker Fees in SPY, QQQ and IWM.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
    In terms of intra-market competition, the Exchange does not believe
that its proposals will place any category of market participant at a
competitive disadvantage. The Exchange believes that the proposed
Market Maker Penny Symbol Maker Fees/Rebates and Priority Customer
Penny Symbol Taker Fees will encourage additional liquidity and trading
of SPY, QQQ and IWM on MRX. Despite not paying Market Makers any Maker
Rebates in SPY, QQQ and IWM in Penny Symbols, the proposed pricing
should overall continue to attract order flow to MRX in these symbols.
    In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
options exchanges. Because competitors are free to modify their own
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited.
    The Exchange believes that this proposal does not impose an undue
burden on competition. The proposed pricing will attract Priority
Customer orders in SPY, QQQ and IWM to MRX in Penny Symbols because no
Priority Customer Penny Symbol Taker Fee will be assessed in these
symbols.

Additionally, the Exchange believes this pricing will encourage Market
Makers to add liquidity on the MRX order book in SPY, QQQ and IWM as
the Tier 1 Market Maker Penny Symbol Maker Fee of $0.10 per contract is
being reduced to $0.00 per contract. While Market Makers that add
liquidity in SPY, QQQ and IWM will no longer receive the Market Maker
Tier 3 or Tier 4 Maker Rebates in Penny Symbols, the proposed pricing
should overall continue to attract order flow to MRX in these symbols.
Market Makers have different requirements and additional obligations to
the Exchange that other market participants do not (such as quoting
requirements).\11\ Increasing Market Maker participation in SPY, QQQ
and IWM, by removing the Tier 1 Maker Fee for Market Makers to add
Penny Symbol liquidity in SPY, QQQ and IWM, will benefit all market
participants. Assessing Priority Customers no Penny Symbol Taker Fees
in SPY, QQQ and IWM will benefit all market participants as Priority
Customer liquidity provides more trading opportunities, which attracts
market makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants,
for the benefit of all market participants. The Exchange believes
assessing different fees for options in SPY, QQQ and IWM, as compared
to other symbols, does not impose an undue burden on competition
because the Exchange would uniformly not assess a Market Maker a Penny
Symbol Maker Fee or pay a Market Maker a Penny Symbol Maker Rebate in
SPY, QQQ and IWM. Similarly, the Exchange would uniformly not assess
Priority Customers a Penny Symbol Taker Fee in SPY, QQQ and IWM.
---------------------------------------------------------------------------

    \11\ See MRX Options 2, Section 5.
---------------------------------------------------------------------------

    In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \12\ and Rule 19b-4(f)(2) \13\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is: (i) necessary or
appropriate in the public interest; (ii) for the protection of
investors; or (iii) otherwise in furtherance of the purposes of the
Act. If the Commission takes such action, the Commission shall
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
file number SR-MRX-2023-15 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-MRX-2023-15. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-MRX-2023-15 and should be
submitted on or before September 8, 2023.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17759 Filed 8-17-23; 8:45 am]
BILLING CODE 8011-01-P