[Federal Register Volume 79, Number 96 (Monday, May 19, 2014)]
[Proposed Rules]
[Pages 28650-28658]
[FR Doc No: 2014-11481]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2013-0754; FRL-9911-01-Region-9]

Revision to the California State Implementation Plan; San Joaquin
Valley Unified Air Pollution Control District; Quantification of
Emission Reductions From Incentive Programs

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency is proposing to approve a
regulation submitted for incorporation into the San Joaquin Valley
Unified Air Pollution Control District (SJVUAPCD or District) portion
of the California State Implementation Plan (SIP). This regulation
establishes requirements and procedures for the District's
quantification of emission reductions achieved through incentive
funding programs implemented in the San Joaquin Valley. The effect of
this action would be to make these requirements and procedures
federally enforceable as part of the California SIP. We are taking
comments on this proposal and plan to follow with a final action.

DATES: Written comments must be received on or before June 18, 2014.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R09-OAR-2013-0754, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for
submitting comments.
    2. Email<EMAIL_ADDRESS>    3. Fax:<PHONE_NUMBER>.
    4. Mail or deliver: Andrew Steckel (AIR-4), U.S. Environmental
Protection Agency, Region IX, 75 Hawthorne Street, San Francisco, CA
94105-3901. Deliveries are only accepted during the Regional Office's
normal hours of operation.
    Instructions: All comments will be included in the public docket
without change and may be made available online at http://www.regulations.gov, including any personal information provided,
unless the comment includes Confidential Business Information (CBI) or
other information whose disclosure is restricted by statute.
Information that you consider CBI or otherwise protected should be
clearly identified as such and should not be submitted through http://www.regulations.gov or email. http://www.regulations.gov is an
anonymous access system, and EPA will not know your identity or contact
information unless you provide it in the body of your comment. If you
send email directly to EPA, your email address will be automatically
captured and included as part of the public comment. 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.
    Docket: Generally, documents in the docket for this action are
available electronically at www.regulations.gov and in hard copy at EPA
Region IX, 75 Hawthorne Street, San Francisco, California. While all
documents in the docket are listed at www.regulations.gov, some
information may be publicly available only at the hard copy location
(e.g., copyrighted material, large maps), and some may not be publicly
available in either location (e.g., CBI). To inspect the hard copy
materials, please schedule an appointment during normal business hours
with the contact listed in the FOR FURTHER INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Idalia Perez, EPA Region IX,
<EMAIL_ADDRESS>(415) 972-3248.

SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and
``our'' refer to EPA.

Table of Contents

I. Background
II. The State's Submittal
III. EPA's Evaluation of the State's Submittal
    A. SIP Procedural Requirements
    B. EPA Policy on Economic Incentives
    C. Sections 110(l) and 193 of the Act
IV. Proposed Action and Public Comment
V. Statutory and Executive Order Reviews

I. Background

    The San Joaquin Valley (SJV) \1\ is currently designated as
nonattainment for several of the national ambient air quality standards
(NAAQS) promulgated by EPA under the Clean Air Act (CAA) for ozone and
fine particulate matter (PM2.5). See 40 CFR 81.305. Despite
numerous air pollution control measures and programs that the SJVUAPCD
has implemented over the years to reduce air pollution, the SJV
continues to experience some of the worst air quality in the nation.
See, e.g., 76 FR 57846 (September 16, 2011) (discussing California
ozone plan for SJV) and 76 FR 41338 (July 13, 2011) (discussing
California PM2.5 plan for SJV). As a result, the District
has increasingly relied upon incentive programs and other innovative
strategies to reduce air pollution in the SJV. See San Joaquin Valley
Unified Air Pollution Control District, ``Final Staff Report: Proposed
Rule 9610 (State Implementation Plan Credit for Emission Reductions
Generated through Incentive Programs),'' dated June 20, 2013 (``Rule
9610 Staff Report'') at 2, 3.
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    \1\ The SJV encompasses over 23,000 square miles and includes
all or part of eight counties in California's central valley: San
Joaquin, Stanislaus, Merced, Madera, Fresno, Tulare, Kings, and the
valley portion of Kern.
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    In recent years, federal, state and local governments have begun to
use a broader array of tools to manage environmental quality, including
market-based economic incentives and other innovative strategies to
reduce air pollution. Economic incentives are defined broadly as
instruments that use financial means to motivate polluters to reduce
the health and environmental risks posed by their facilities,
processes, or products. See U.S. EPA (Office of Policy, Economics, and
Innovation) and National Center for Environmental Economics, ``The
United States Experience with Economic Incentives for Protecting the
Environment,'' EPA-240-R-01-001, January 2001, Executive Summary. In
light of the increasing incremental cost associated with further
stationary and mobile source emissions reductions in many nonattainment
areas, EPA supports and encourages the development of innovative
approaches to air quality improvement, including economic incentives,
to supplement traditional regulatory programs. See, e.g., ``Guidance on
Incorporating

Voluntary Mobile Source Emission Reduction Programs in State
Implementation Plans (SIPs),'' October 24, 1997 (``1997 VMEP'');
``Incorporating Emerging and Voluntary Measures in a State
Implementation Plan (SIP),'' September 2004 (``2004 Emerging and
Voluntary Measures Guidance''); and ``Guidance on Incorporating Bundled
Measures in a State Implementation Plan,'' August 16, 2005 (``2005
Bundled Measures Guidance'').
    To qualify for emission reduction credit in a SIP, however,
economic incentive programs and other innovative emission reduction
control measures must satisfy certain minimum CAA requirements for SIP
creditability. See id. In prior rulemaking actions on several
California SIP submissions, EPA has noted that California's incentive
programs would not qualify for SIP emission reduction credit without
the requisite demonstration of SIP creditability. See, e.g., 76 FR
69896 at 69915 (November 9, 2011) (final action on SJV PM2.5
SIP for 1997 PM2.5 NAAQS) and 76 FR 26609 at 26613 (May 9,
2011) (final action on SJVUAPCD Rule 9510, ``Indirect Source Review
(ISR)''). The SJVUAPCD's stated intent in adopting Rule 9610 was to
establish a regulatory framework to address these requirements for SIP
creditability and obtain SIP emission reduction credit for incentive
programs implemented in the SJV, including the Carl Moyer Memorial Air
Quality Standards Attainment Program (Carl Moyer Program), the
Proposition 1B: Goods Movement Emission Reduction Program (Prop 1B
Program), and the Environmental Quality Incentives Program (EQIP)
implemented by the U.S. Department of Agriculture. See Rule 9610 Staff
Report at 2-13.
    The Carl Moyer Program is a California grant program established in
1998 that provides funding to encourage the voluntary purchase of
cleaner-than-required engines, equipment, and other emission reduction
technologies. See generally CARB, ``The Carl Moyer Program Guidelines,
Approved Revisions 2011,'' Release Date: February 8, 2013, at Chapter 1
(available electronically at http://www.arb.ca.gov/msprog/moyer/moyer.htm). In its first 12 years, the Carl Moyer Program provided over
$680 million in state and local funds to reduce air pollution from
equipment statewide, e.g., by replacing older trucks with newer,
cleaner trucks, retrofitting controls on existing engines, and
encouraging the early retirement of older, more polluting vehicles. Id.
    The Prop 1B Program is a California grant program established in
2007, as a result of State bond funding approved by voters, which
provides $1 billion in funding to CARB to reduce air pollution
emissions and health risks from freight movement along California's
priority trade corridors. Under the enabling legislation (California
Senate Bill 88 and Assembly Bill 201 (2007)), CARB awards grants to
fund projects proposed by local agencies that are involved in freight
movement or air quality improvements associated with goods movement
activities. Upon receipt of such grants, the local agencies are then
responsible for providing financial incentives to owners of equipment
used in freight movement to upgrade to cleaner technologies, consistent
with program guidelines adopted by CARB. See generally ``Strategic
Growth Plan Bond Accountability, Goods Movement Emission Reduction
Program,'' Approved February 27, 2008 (available electronically at
http://www.arb.ca.gov/bonds/gmbond/docs/gm_accountability_with_links_2-27-08.pdf).
    The U.S. Department of Agriculture (USDA) administers the
Environmental Quality Incentives Program (EQIP), which Congress
established under section 334 of the Federal Agriculture Improvement
and Reform Act of 1996 (Pub. L. 104-12, 16 U.S.C. 3839aa-3839aa-9).
USDA has delegated authority to administer the program to the Natural
Resources Conservation Service (NRCS). 7 CFR 2.61(a)(13)(viii). The
purpose of EQIP is to promote agricultural production, forest
management, and environmental quality as compatible goals, and to
optimize environmental benefits. 16 U.S.C. 3839aa. Through this
voluntary program, NRCS assists enrolled agricultural producers in
implementing conservation measures on their private land to address
soil, water, air, and related natural resources concerns, wildlife
habitat, surface and groundwater conservation, and related natural
resource concerns. 7 CFR 1466.1(a). The financial and technical
assistance provided by NRCS under the program helps producers comply
with environmental regulations and enhance agricultural and forested
lands in a cost-effective and environmentally beneficial manner. Id.
Funding for EQIP is currently authorized by section 2601(a)(5) of the
Agricultural Act of 2014 (Pub. L. 113-79, 16 U.S.C. 3841(a)(5).\2\
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    \2\ See email dated March 31, 2014, from Stephanie Johnson, USDA
Office of General Counsel, to Kerry Drake, EPA Region 9, Air
Division, and email dated April 23, 2014, from Joshua Schnell, USDA
Office of General Counsel, to Jeanhee Hong, USEPA Region 9, Office
of Regional Counsel, RE: ``Summaries of 1619 and EQIP''.
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    Since 1992, the District has disbursed over $500 million in
incentive funds through the Carl Moyer and Prop 1B programs, which has
been matched by over $400 million in cost-sharing investments by
participants and has resulted in the retrofit or replacement of
hundreds of trucks, buses, tractors, forklifts and other equipment
operating in the SJV. See 2013 Annual Demonstration Report at 4 and
Data Sheet. Similarly, since 2009, NRCS has provided over $105 million
in incentive grants through EQIP to replace over one thousand high-
emitting pieces of farm equipment in the SJV. See Rule 9610 Staff
Report at 11 and 2013 Annual Demonstration Report, Appendix B.

II. The State's Submittal

    Table 1 lists the rule addressed by this proposal with the dates
that it was adopted by the SJVUAPCD and submitted by the California Air
Resources Board (CARB).

                                             Table 1--Submitted Rule
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           Local agency                 Rule No.             Rule title             Adopted         Submitted
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SJVUAPCD..........................            9610   State Implementation Plan        06/20/13         06/26/13
                                                      Credit for Emission
                                                      Reductions Generated
                                                      through Incentive
                                                      Programs.
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    On December 26, 2013, the submittal for SJVUAPCD Rule 9610 was
deemed by operation of law under CAA section 110(k)(1)(B) to meet the
minimum completeness criteria in 40 CFR Part 51 Appendix V, which must
be met before formal EPA review.
    Rule 9610 establishes requirements and procedures for the District
to quantify, for air quality planning purposes, emission reductions
achieved

through implementation of incentive programs in the San Joaquin Valley.
The stated purpose of the rule is to ``provide an administrative
mechanism for the District to receive credit towards State
Implementation Plan requirements for emission reductions achieved in
the San Joaquin Valley Air Basin through incentive programs
administered by'' the District, NRCS, or CARB. Rule 9610, section 1.0;
see also Rule 9610 Staff Report at 12.
    Rule 9610 contains several key components designed to establish a
regulatory framework for the District's quantification of emission
reductions achieved through incentive programs and to provide
opportunities for EPA, CARB, and the public to review and comment on
the District's evaluations on an annual basis. First, the rule
establishes definitions of key terms that apply to the District's
evaluations and actions under Rule 9610, including definitions for the
terms ``surplus,'' ``quantifiable,'' ``enforceable,'' and
``permanent.'' See Rule 9610, section 2.0. As explained elsewhere in
this notice, these terms apply to all discretionary EIPs and innovative
measures that are relied on for SIP purposes and are intended to ensure
that such programs and measures comply with the Act.
    Second, the rule identifies a number of incentive program
``guidelines'' \3\ that specify, among other things, the terms and
conditions that apply to each grant of incentive funds under three
specific incentive funding programs implemented in the SJV: (1) The
Carl Moyer Memorial Air Quality Standards Attainment Program (Carl
Moyer Program), which is implemented jointly by CARB and the District;
(2) the California Proposition 1B Goods Movement Emission Reduction
Program (Prop 1B Program), also implemented jointly by CARB and the
District; and (3) the Environmental Quality Incentives Program (EQIP),
implemented by NRCS. See Rule 9610, section 3.1.
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    \3\ Rule 9610 defines the term ``incentive program guidelines''
as ``administrative procedures, quantification methodologies,
eligibility criteria, cost effectiveness criteria, reporting
practices, and/or other procedures and methodologies used to
implement incentive programs.'' Rule 9610, section 2.15.
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    Third, the rule contains provisions requiring the District to make
publicly available a ``Manual of Procedures'' that identifies each of
the incentive program guidelines the District uses to quantify emission
reductions under Rule 9610, i.e., any guidelines specifically listed
under section 3.1 of the rule and any additional program guidelines not
specifically listed that satisfy the conditions in section 3.2. See
Rule 9610, sections 3.2 and 3.3.
    Fourth, the rule contains provisions requiring the District to
submit each year to CARB and EPA, following public review, an ``annual
demonstration report'' that provides updated information on emission
reductions achieved in the SJV through these incentive programs and the
District's progress in satisfying related SIP commitments. See Rule
9610, section 4.0.
    Finally, Rule 9610 specifies minimum requirements that the District
must address in each SIP submittal that relies on projections of
emission reductions from incentive programs to satisfy CAA
requirements. Among other things, each such SIP submittal must contain
a demonstration that the applicable incentive program guidelines
provide for ``SIP-creditable emission reductions'' (i.e., emission
reductions that are surplus, quantifiable, enforceable, and permanent)
\4\ and must contain an ``enforceable commitment'' on the District's
part to track emission reductions on an annual basis and to adopt and
submit substitute measures to EPA by a date certain if there is any
shortfall in required emission reductions. See Rule 9610, section 7.0;
see also Rule 9610 Staff Report at 23.
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    \4\ Rule 9610 defines the term ``SIP-creditable emission
reduction'' to mean ``reductions of emissions achieved through
incentive programs that are Surplus, Quantifiable, Enforceable, and
Permanent, as those terms are defined in this rule.'' Rule 9610,
section 2.25.
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    In sum, Rule 9610 establishes an administrative mechanism designed
to ensure that each SIP submittal in which the District relies upon
emission reductions achieved through implementation of incentive
programs in the SJV will adequately address the requirements of the
Act. The rule does not establish any emission limitation, control
measure, or other requirement that applies directly to an emission
source (e.g., any farm or truck that is the subject of an incentive
grant).\5\ As discussed elsewhere in this notice, the requirements and
procedures in the rule apply only to the District and lay the
groundwork for the District's incorporation of incentive programs into
air quality plans going forward. These requirements and procedures
would become federally enforceable against the District upon EPA's
final approval of the rule into the California SIP.
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    \5\ Accordingly, Rule 9610 is not intended to implement the
reasonably available control technology (RACT) standard or any other
control standard under the Act.
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III. EPA's Evaluation of the State's Submittal

A. SIP Procedural Requirements

    Sections 110(a)(2) and 110(l) of the Act require that revisions to
a SIP be adopted by the State after reasonable notice and public
hearing. EPA has promulgated specific procedural requirements for SIP
revisions in 40 CFR part 51, subpart F. These requirements include
publication of notices, by prominent advertisement in the relevant
geographic area, of a public hearing on the proposed revisions, a
public comment period of at least 30 days, and an opportunity for a
public hearing.
    CARB's June 26, 2013 SIP submittal includes public process
documentation for Rule 9610, including documentation of a duly noticed
public hearing held by the District on June 20, 2013 on the proposed
rule. On June 26, 2013, CARB adopted SJVUAPCD Rule 9610 as a revision
to the California SIP and submitted it to EPA for action pursuant to
CAA section 110(k) of the Act. We find that the process followed by the
SJVUAPCD and CARB in adopting Rule 9610 complies with the procedural
requirements for SIP revisions under CAA section 110 and EPA's
implementing regulations.

B. EPA Policy on Economic Incentives

    The CAA explicitly provides for the use of economic incentives as
one tool for states to use to achieve attainment of the NAAQS. See,
e.g., CAA section 110(a)(2)(A) (requiring that each SIP ``include
enforceable emission limitations and other control measures, means, or
techniques (including economic incentives such as fees, marketable
permits, and auctions of emissions rights), as well as schedules and
timetables for compliance, as may be necessary or appropriate to meet
the applicable requirements of [the Act]''); see also sections
172(c)(6), 183(e)(4). Economic incentive programs (EIPs) use market-
based strategies to encourage the reduction of emissions from
stationary, area, and/or mobile sources in an efficient manner. EPA has
promulgated regulations for statutory EIPs required under section
182(g) of the Act and has issued guidance for discretionary EIPs.\6\
See 59 FR 16690 (April 7, 1994) (codified at 40 CFR part 51, subpart U)
and ``Improving Air Quality with Economic Incentive Programs,'' U.S.

EPA, Office of Air and Radiation, January 2001 (EPA-452/R-01-001)
(``2001 EIP Guidance'').
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    \6\ A ``discretionary economic incentive program'' is ``any EIP
submitted to EPA as an implementation plan revision for purposes
other than to comply with the statutory requirements of sections
182(g)(3), 182(g)(5), 187(d)(3), or 187(g) of the Act.'' 40 CFR
51.491.
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    In light of the increasing incremental cost associated with further
stationary and mobile source emissions reductions and the difficulty of
identifying such additional sources of emissions reductions in many
areas, EPA encourages innovative approaches to generating emissions
reductions through EIPs and other nontraditional measures and programs,
including ``voluntary'' and ``emerging'' measures. See generally 1997
VMEP; ``Guidance on SIP Credits for Emission Reductions from Electric-
Sector Energy Efficiency and Renewable Energy Measures,'' August 5,
2004 (``2004 Electric-Sector Guidance''); 2004 Emerging and Voluntary
Measures Guidance; 2005 Bundled Measures Guidance; ``Roadmap for
Incorporating Energy Efficiency/Renewable Energy Policies and Programs
into State and Tribal Implementation Plans,'' July 2012 (``2012 EE/RE
Guidance''); and ``Diesel Retrofits: Quantifying and Using Their
Emission Benefits in SIPs and Conformity,'' February 2014 (``2014
Diesel Retrofits Guidance''). EPA recognizes, however, that these
nontraditional measures raise novel issues related to enforceability
and quantification of the associated emission reductions. Accordingly,
EPA's policies addressing nontraditional measures provide for some
flexibility in meeting established SIP requirements for enforceability
and quantification, provided the State takes clear responsibility for
ensuring that the emission reductions necessary to meet applicable CAA
requirements are achieved. See, e.g., 1997 VMEP at 5-7; 2004 Emerging
and Voluntary Measures Guidance at 9; 2005 Bundled Measures Guidance at
7; and 2012 EE/RE Guidance at 37-38.
    Importantly, EPA has consistently stated that nontraditional
emission reduction measures submitted to satisfy SIP requirements under
the Act must be accompanied by appropriate enforceable ``backstop''
commitments from the State to monitor emission reductions achieved and
to rectify shortfalls in a timely manner. See, e.g., 1997 VMEP at 4-5;
2004 Emerging and Voluntary Measures Guidance at 8-12; 2005 Bundled
Measures Guidance at 7-12; and 2004 Electric-Sector Guidance at 6-7.
For example, where a SIP submittal relies on emission reductions
achieved through a program dependent on voluntary actions that the
State does not directly implement, the State must be obligated to
monitor, assess and report on the implementation of the program and the
associated emission reductions, and to remedy emission reduction
shortfalls in a timely manner should the voluntary measure not achieve
the projected emission reductions. See 1997 VMEP at 6-7.
    We provide below a summary of our evaluation of Rule 9610 and the
extent to which the requirements and procedures contained in the rule
establish a framework for development of SIP submittals that satisfy
the requirements of the Act, as interpreted in EPA policy on
discretionary EIPs and other nontraditional emission reduction
measures. In addition to reviewing the rule itself, EPA has reviewed
several of the incentive program ``guidelines'' identified in the rule
and in the District's supporting materials. Although these incentive
program guidelines themselves are not part of Rule 9610,\7\ EPA has
evaluated them as supporting material for the SIP submittal because the
quantification protocols and other program requirements specified in
these guidelines inform EPA's review of the criteria and procedures set
out in Rule 9610. Our Technical Support Document (TSD) contains a more
detailed evaluation of the rule and each of the three incentive
programs that it addresses, including the applicable guidelines. EPA
will review each SIP submittal developed pursuant to Rule 9610 on a
case-by-case basis, following notice-and-comment rulemaking, to
determine whether the applicable requirements of the Act are met.
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    \7\ The guidelines themselves are not subject to EPA action
under CAA section 110(k) as they are neither contained within Rule
9610 nor incorporated by reference therein, and the State has not
separately submitted any of these guidelines for approval into the
SIP.
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1. Programmatic ``Integrity Elements''
    Where a State relies upon a discretionary EIP or other
nontraditional emission reduction measure in a SIP submittal, EPA
evaluates the programmatic elements of the measure to determine whether
the resulting emission reductions are quantifiable, surplus,
enforceable and permanent. See, e.g., 2001 EIP Guidance at Section 4.1.
These four fundamental ``integrity elements,'' which apply to all
discretionary EIPs and other innovative measures relied on for SIP
purposes, are designed to ensure that such programs and measures
satisfy the applicable requirements of the Act. See, e.g., 2001 EIP
Guidance at Section 4.1; 1997 VMEP at 6-7; 2004 Emerging and Voluntary
Measures Guidance at 3-4; and 2014 Diesel Retrofits Guidance at 27-29.
EPA has generally defined the four fundamental integrity elements for
discretionary EIPs and other innovative emission reduction programs as
follows:
     Quantifiable: Emission reductions are quantifiable if they
are measured in a reliable manner and can be replicated;
     Surplus: Emission reductions are surplus if they are not
otherwise required by or assumed in a SIP-related program (e.g., an
attainment or reasonable further progress plan or a transportation
conformity demonstration), any other adopted State air quality program,
a consent decree, or a federal rule designed to reduce emission of a
criteria pollutant or its precursors (e.g., a new source performance
standard or federal mobile source requirement); additionally, emission
reductions are ''surplus'' only for the remaining useful life of the
vehicle, engine, or equipment being replaced.
     Enforceable: Emission reductions and other required
actions are enforceable if they are independently verifiable; program
violations are defined; those liable can be identified; the State and
EPA may apply penalties and secure appropriate corrective action where
applicable; citizens have access to all emissions-related information
obtained from participating sources; and the required reductions/
actions are practicably enforceable consistent with EPA guidance on
practical enforceability.
     Permanent: Emission reductions are permanent if the State
and EPA can ensure that the reductions occur for as long as they are
relied upon in the SIP; the time period that the emission reductions
are used in the SIP can be no longer than the remaining useful life of
the retrofitted or replaced engine, vehicle, or equipment.
    See 2001 EIP Guidance at Section 4.1; 1997 VMEP at 6-7; 2004
Emerging and Voluntary Measures Guidance at 3-4; and 2014 Diesel
Retrofits Guidance at 27-29.
    Rule 9610 contains specific definitions for each of these terms
that are consistent with EPA policy. First, with respect to the term
``quantifiable,'' the rule states that ``emission reductions are
quantifiable if they can be reliably determined through the use of
well-established, publicly available emission factors and calculation
methodologies.'' Rule 9610, section 2.23. This definition ensures that
the District will treat as ``quantifiable'' only those emission
reductions that can consistently be measured in a reliable manner using
widely available methods and assumptions, consistent with EPA's policy
definition of this term.
    Second, with respect to the term ``surplus,'' Rule 9610 states that

``emission reductions are surplus when they are not otherwise required
by any federal, state, or local regulation, or other legal mandate, and
are in excess of the baseline emission inventories underlying a SIP
attainment demonstration.'' Rule 9610, section 2.27. This definition
ensures that the District will treat as ``surplus'' only those emission
reductions that are not otherwise required by or assumed in a SIP-
related program (e.g., an attainment or reasonable further progress
plan or a transportation conformity demonstration), any other adopted
State or local regulation, a consent decree, or a federal rule designed
to reduce emission of a criteria pollutant or its precursors,
consistent with EPA's policy definition of this term.
    Third, with respect to the term ``enforceable,'' Rule 9610 states
that ``emission reductions are enforceable if the incentive program
includes provisions for ensuring the following: [1] The emission
reductions are independently and practicably verifiable through
inspections, monitoring, and/or other mechanisms; [2] Incentive program
violations are defined through legally binding contracts, including
identifying the party or parties responsible for ensuring that emission
reductions are achieved; [3] Grantees are obligated to provide all
records needed to demonstrate that emission reductions are achieved;
and [4] The public has access to all emissions-related information for
reductions claimed in the annual demonstration report, as outlined in
Section 4.0 [of the rule].'' Rule 9610, section 2.8. Consistent with
EPA's policy definition of the term ``enforceable,'' this definition
ensures that the District will treat as ``enforceable'' only those
emission reductions that can, as a practical matter, be independently
verified and that result from a program or measure that defines
violations clearly, allows for identification of responsible parties,
requires grantees to provide all records needed to demonstrate that
emission reductions are achieved, and provides for public access to
emissions-related information.
    Finally, with respect to the term ``permanent,'' Rule 9610 states
that ``emission reductions are permanent if actions are taken to
physically destroy or permanently disable existing or baseline
equipment or vehicles, or to permanently amend practices to ensure the
reduction of emissions for the duration of the project life.'' Rule
9610, section 2.18. This definition ensures that the District will
treat as ``permanent'' only those emission reductions for which both
the State/District and EPA can ensure that the reductions will occur
for as long as they are relied upon in the SIP, consistent with EPA's
policy definition of this term.
    These definitions in Rule 9610 adequately represent the four
fundamental ``integrity elements'' that EPA has defined as guidelines
for discretionary EIPs and other innovative emission reduction
programs. Under Rule 9610, the term ``SIP-creditable emission
reductions'' \8\ incorporates these integrity elements and is at the
core of the key substantive requirements in the rule. For example,
sections 3.1 and 3.2 of Rule 9610 require the District to quantify
emission reductions in accordance with incentive program guidelines
that ``provide for SIP-creditable emission reductions''; section 7.0
identifies required SIP elements ``[w]here the District intends to rely
on projections of SIP-creditable emission reductions under this rule to
satisfy a federal Clean Air Act SIP requirement''; and section 4.0
requires the District to ``annually prepare a report that demonstrates
the quantity of SIP-creditable emission reductions.'' Rule 9610,
sections 3.0, 4.0, 7.0. These provisions in Rule 9610 ensure that, in
each SIP submittal that relies on an incentive program and in each
subsequent annual demonstration report, the District will be obligated
to demonstrate that the emission reductions relied upon to satisfy SIP
requirements are surplus, quantifiable, enforceable, and permanent.
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    \8\ See n. 4, supra.
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    Rule 9610 does not specify the requirements that govern the
incentive programs themselves and instead makes clear that the program
``guidelines,'' which specify (among other things) the terms and
conditions that apply to each grant of funds to an owner/operator of an
emission source, contain the provisions necessary to determine whether
a particular incentive program provides for ``SIP-creditable emission
reductions.'' For example, section 3.1 of the rule requires the
District to quantify emission reductions in accordance with specified
``incentive program guidelines that provide for SIP-creditable emission
reductions,'' and similarly section 3.2 states that the District may
quantify emission reductions using other guidelines ``provided the
District submits to EPA, pursuant to Section 7.0, a demonstration that
each such guideline provides for SIP-creditable emission reductions.''
Rule 9610, sections 3.1 and 3.2. In the TSD accompanying this proposed
rule, EPA has evaluated the guidelines listed in section 3.1 of the
rule, together with several guidelines listed in the District's
``Manual of Procedures,'' for consistency with the four integrity
elements. Although EPA is not proposing to take any particular action
on these guidelines,\9\ we provide our evaluation of them as a
preliminary guide to assist the District in its effort to address CAA
requirements in SIP submittals that rely on incentive programs going
forward.
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    \9\ See n. 7, supra.
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    Many of the guidelines that we have reviewed establish emission
reduction quantification protocols, reporting requirements,
administrative procedures, and other requirements that are generally
consistent with EPA's recommendations for nontraditional emission
reduction programs. EPA will review each SIP submittal developed
pursuant to Rule 9610 on a case-by-case basis, following notice-and-
comment rulemaking, to determine whether the applicable requirements of
the Act are met.
2. Required Components of SIP Submittals
    EPA policies identify several key components that should be
included in each SIP submittal that relies on an EIP or other
innovative emission reduction program, to ensure that the program
satisfies the requirements of the Act. First, the SIP submittal should
contain a demonstration that the emission reductions resulting from the
program are quantifiable, surplus, enforceable and permanent and should
include reliable methodologies for quantifying the emission reductions
\10\--i.e., assumptions and protocols for measuring emission reductions
that can be understood and replicated by different users. See, e.g.,
1997 VMEP at 6-9; 2001 EIP Guidance at 34-36 and 61-67; 2004 Emerging
and Voluntary Measures Guidance at 2-4; and 2014 Diesel Retrofits
Guidance at 27-29; see also discussion above in Section III.B.1
(``Programmatic `integrity elements''').
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    \10\ To account for uncertainties in the emission reduction
estimates, EPA recommends that states apply an appropriate downward
``adjustment'' to calculations of projected emission reductions.
See, e.g., 2004 Emerging and Voluntary Measures Guidance at 16
(identifying an assumed discount of 20 percent) and 1997 VMEP at 7.
The actual amount of the discount factor should reflect: (1) The
degree of uncertainty associated with quantifying the emissions
reductions from the measures; (2) the amount of the emissions
reductions being credited in the SIP; and (3) the degree of
uncertainty associated with verifying the emissions reductions
actually achieved by the measure(s). See 2005 Bundled Measures
Guidance at 16.
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    Second, the SIP submittal should include enforceable commitments by
the State to monitor emission reductions

achieved and to rectify any shortfall in required emission reductions
in a timely manner. See, e.g., 1997 VMEP at 5-7; 2005 Bundled Measures
Guidance at 7, 11-12, and 22; and 2014 Diesel Retrofits Guidance at 28,
31-32. EPA policy places clear responsibility on the State to ensure
that the emission reductions necessary to meet applicable CAA
requirements are achieved. See id. To this end, the State's commitment
should ensure that any shortfall in required emission reductions will
be corrected as soon as possible, and generally no later than 1 year
after the State learns of a shortfall. See 2005 Bundled Measures
Guidance at 11 and 2004 Emerging and Voluntary Measures Guidance at 12.
Importantly, however, if the emission reductions from the measure are
necessary to show attainment or reasonable further progress (RFP), the
deadline for correcting a shortfall cannot extend past the statutory
attainment or RFP milestone date for the nonattainment area. See id.
    Third, the SIP submittal should include documentation that clearly
shows how the emission reductions will be addressed in the emissions
inventory, RFP plan, and attainment or maintenance plan, as applicable.
See, e.g., 1997 VMEP at 8-9 and 2014 Diesel Retrofits Guidance at 27.
Such documentation is important for purpose of demonstrating that the
program or measure is consistent with SIP attainment, RFP, or
maintenance requirements and other applicable requirements of the Act.
See id. For example, to address potential double-counting of emission
reductions, the SIP submittal should explain how the State will ensure
that emission reductions already accounted for in the projected
``baseline'' emissions underlying an attainment or RFP demonstration
will not also be relied upon for SIP credit in the control strategy.
See 2005 Bundled Measures Guidance at 24 (``emission reductions are not
surplus for [ ] an attainment demonstration if they have already been
assumed in that same attainment demonstration'') and 2004 EE/RE
Guidance at 13-14 (noting that states may seek SIP credit only for
emission reduction measures ``beyond [those] already included in the
baseline assumptions'').
    Finally, the SIP submittal must demonstrate that the State has
adequate funding, personnel, implementation authority, and other
resources to implement the program/measure on schedule. See CAA section
110(a)(2)(E)(i) (requiring that each SIP provide ``necessary assurances
that the State [or local government as appropriate] will have adequate
personnel, funding, and authority under State (and, as appropriate,
local) law to carry out such implementation plan * * * ); see also 1997
VMEP at 7; 2005 Bundled Measures Guidance at 22, 26; and 2014 Diesel
Retrofits Guidance at 29-30.
    Rule 9610 contains several provisions designed to ensure that each
SIP submittal in which the District seeks to rely on incentive programs
for emission reduction credit will contain the necessary components and
supporting documentation described in these policies. First, under
section 7.0, each SIP submittal in which the District relies on
projected emission reductions from incentive programs must ``contain a
demonstration that the applicable incentive program guideline(s)
continues to provide for SIP-creditable emission reductions''--i.e.,
emission reductions that are surplus, quantifiable, enforceable, and
permanent.\11\ See Rule 9610, section 7.0. This demonstration must
identify the specific guideline(s) applicable to the relevant projects
(by title, year, and relevant chapters) and provide the District's
rationale for concluding that the identified reductions are ``SIP-
creditable emission reductions'' in accordance with the requirements of
Rule 9610. EPA expects that the District's integrity demonstration will
reflect appropriate adjustments to emission reduction calculations to
account for uncertainties in the emission reduction estimates, in
particular where the District seeks to rely on incentive programs for
larger amounts of SIP credit and/or there is a high degree of
uncertainty in the means for verifying the emissions reductions
actually achieved. See 2005 Bundled Measures Guidance at 16 (``[t]he
greater the uncertainty or amount of reductions claimed, the greater
the appropriate adjustment factor''). Additionally, consistent with the
definition of ``SIP-creditable emission reductions'' in the rule, the
demonstration must show that reliance on the identified Carl Moyer
Program source categories for SIP emission reduction credit is
consistent with SIP attainment, RFP, or maintenance requirements.
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    \11\ See n. 4, supra.
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    For the specific guidelines currently identified in the District's
Manual of Procedures (including a number of those listed under section
3.1 of Rule 9610), we expect the District to rely as appropriate on the
technical discussion in EPA's TSD, which contains EPA's preliminary
assessment of whether the specified guidelines provide for SIP-
creditable emission reductions and whether additional documentation is
needed to ensure the integrity of the emission reductions. For all
other guidelines not specifically addressed in the TSD, EPA commits to
work with the District to develop the necessary demonstrations
consistent with the requirements of Rule 9610 and the CAA, in the
context of specific SIP submittals that rely on emission reductions
quantified pursuant to those guidelines.
    Second, section 7.0 of Rule 9610 requires that each SIP submittal
in which the District relies on projected emission reductions from
incentive programs contain an ``enforceable commitment'' that: (1)
Identifies incentive program guidelines used to generate projected SIP-
creditable emission reductions; (2) identifies emission reductions not
to exceed the amount projected to be achieved through the use of
secured or reasonably anticipated incentive program funding and the
estimated availability of emission reduction projects and willing
participants, (3) is specifically adopted by the District as part of
the SIP and accounted for in the annual demonstration reports, and (4)
states that ``if either the District or EPA finds that there is a SIP
shortfall for a particular year, the District will adopt and submit to
EPA, by specified dates, substitute rules and measures that will
achieve equivalent emission reductions as expeditiously as practicable
and no later than any applicable implementation deadline in the [CAA]
or EPA's implementing regulations.'' Rule 9610, sections 7.1-7.4; see
also Rule 9610 Staff Report at 23. To ensure that any necessary
substitute measures are implemented by the statutory implementation
deadline(s), we note that each SIP commitment should identify specific
dates, well in advance of the applicable implementation deadline(s), by
when the District will determine whether a SIP shortfall necessitates
the development of substitute measures.
    Third, each SIP submittal in which the District relies on projected
emission reductions from incentive programs must ``identify specific
amounts of SIP-creditable emission reductions for a particular year or
years in the relevant SIP.'' Rule 9610, section 7.0. For example, if
the District intends to seek SIP credit in an ozone attainment plan for
NOx emission reductions achieved through the Carl Moyer program, the
ozone SIP submittal must specifically identify, among other things, the
years for which the District is relying on those NOX
reductions; the amounts of NOX reductions projected to be
achieved in each of those years; the specific source categories relied
on to achieve those

NOX reductions; and the specific Carl Moyer Program
guidelines applicable to those source categories (identified by title,
year, and relevant chapters). Consistent with the definition of ``SIP-
creditable emission reductions'' in the rule, the SIP submittal must
include a demonstration that reliance on the identified Carl Moyer
Program source categories for SIP emission reduction credit is
consistent with SIP attainment, RFP, or maintenance requirements for
the relevant years (e.g., that there is no double-counting of emission
reductions).
    Finally, with respect to the required demonstration that the State
has adequate funding, personnel, implementation authority, and other
resources to implement the program/measure on schedule, this is a
statutory requirement that is not specifically addressed by Rule 9610
but nonetheless applies to each SIP submitted by a State. See CAA
section 110(a)(2)(E)(i). Once the State submits an adequate
demonstration that the State and District have adequate personnel,
funding, and legal authority to carry out their implementation
responsibilities with respect to the relevant incentive programs, we
expect that future SIP submittals may rely, as appropriate, on such
prior demonstration to satisfy this requirement.
3. Procedures for Public Disclosure of Information
    Like all other SIP control measures, discretionary incentive
programs and other innovative emission reduction measures relied on for
SIP purposes must ensure that EPA and the public have access to
emission data in accordance with the requirements of section 114 of the
CAA and EPA's implementing regulations in 40 CFR section 2.301. See,
e.g., 2001 EIP Guidance at 59, 60 and 2004 Emerging and Voluntary
Measures Guidance at 23 (Attachment A). To this end, EPA has
recommended that discretionary EIPs contain program components such as
the following: (1) Requirements for participants to disclose violations
to the responsible state/local agency in an annual certification of
compliance or non-compliance; (2) requirements for sources that violate
program provisions to notify the affected community of the violations;
(3) procedures for the responsible state/local agency to compile these
disclosures into an annual comprehensive report on emissions and
violations; and (4) procedures to submit these reports to EPA and make
them available to the public. See id. EPA has also recommended that
states disclose information in a manner that is transparent, allowing
the public to easily and accurately calculate the emissions of the
participating sources or source categories and to adequately assess the
effectiveness of the program. See id.
    Rule 9610 contains several provisions designed to ensure that EPA
and the public have access to adequate information regarding the
specific incentive programs and associated emission reductions that the
District intends to rely upon for SIP purposes. First, under section
3.3 of the rule, the District is required to make publicly available a
``Manual of Procedures'' \12\ that includes each of the incentive
program guidelines the District uses to quantify emission reductions
under Rule 9610, i.e., both those guidelines specifically listed under
section 3.1 of the rule and any additional program guidelines not
specifically listed that satisfy certain conditions. See Rule 9610,
section 3.3; see also section 3.2 (allowing for use of other guidelines
not listed in section 3.1 ``provided the District submits to EPA,
pursuant to Section 7.0, a demonstration that each such guideline
provides for SIP-creditable emission reductions * * *''). Under
subsection 3.3.2, the Manual of Procedures must ``include[ ] a
description of how the incentive program guidelines ensure that
incentive program emission reductions are SIP-creditable.'' EPA expects
that the information in the MOP, together with the project-specific
information in the annual demonstration reports, will enable the public
to calculate the emission reductions for each project relied upon for
emission reduction credit in a SIP.
---------------------------------------------------------------------------

    \12\ CARB's initial Rule 9610 SIP submittal included a Manual of
Procedures dated June 20, 2013, which the District had made publicly
available during its rulemaking process. On March 4, 2014, the
District submitted a revised and clarified Manual of Procedures.
Throughout this proposed rule, references to the Manual of
Procedures (or ``MOP'') are to the revised version submitted March
4, 2014 (dated January 31, 2014), which is available in the docket
for this rulemaking and online at http://www.valleyair.org/MOP/mop9610_idx.htm.
---------------------------------------------------------------------------

    Second, under section 4.0 of Rule 9610, each year the District must
prepare an ``annual demonstration report'' that provides updated
information on emission reductions achieved through implementation of
incentive programs in the SJV and includes the following: (1) A
description of each incentive program guideline used by the District,
NRCS, or CARB to implement those programs that the District seeks to
rely upon for SIP purposes; (2) information about the types and
quantities of emission reductions generated through these programs
(e.g., the specific pollutants at issue, the years that the emission
reductions occur, the relevant funding amounts, and the project types);
(3) adjustments to emission reductions calculated for prior annual
demonstration reports, as necessary to reflect updated project
information or the adoption of new local, state, or federal
requirements; (4) identification of SIP commitments adopted by the
District that it has satisfied, in whole or in part, through SIP-
creditable emission reductions; (5) specific information concerning
each project \13\ relied upon for emission reductions (including the
unique project identification number, project location, project type,
and project life); (6) identification of projects that do not satisfy
contractual requirements; and additional project details as necessary
to demonstrate that the emission reductions relied upon for SIP
purposes are surplus, quantifiable, enforceable, and permanent. See
Rule 9610, sections 4.0-4.6. Under section 5.0 of Rule 9610, the
District must submit this annual demonstration report and information
described in section 4.0 of the rule to both CARB and EPA no later than
August 31 of each year, after providing an opportunity for public
review of a draft report, and the final report must be made publicly
available on the District's Web site. See Rule 9610, sections 5.1-5.3.
---------------------------------------------------------------------------

    \13\ Section 2.19 of Rule 9610 defines the term ``project'' as
follows: ``for purposes of this rule, actions taken to reduce
emissions through incentive programs, as contracted between the
Grantee and the District, NRCS, or CARB using incentive program
guidelines at the time of contracting. Such actions include, but are
not limited to, replacements, retrofits, new purchases, new
practices, and repower.''
---------------------------------------------------------------------------

    EPA has reviewed the ``2013 Annual Demonstration Report'' \14\
submitted by the District as supporting material for Rule 9610 and
believes it contains most, though not all, of the information required
by Section 4.0 of Rule 9610.\15\ To ensure that EPA and other
interested parties can track the District's progress

in satisfying its SIP commitments, we expect that going forward each
annual demonstration report will identify the specific projects (by
unique project identification number) that the District has relied upon
for emission reduction credit in a particular SIP, including necessary
adjustments to emission reduction calculations.\16\ See Rule 9610,
Section 4.3 and Section 4.5. EPA believes that a list of individual
projects relied upon for each specific SIP would enable EPA and the
public to enforce the District's SIP emission reduction commitments but
requests public comment on other possible mechanisms for tracking
compliance with SIP commitments through the annual demonstration
reports.
---------------------------------------------------------------------------

    \14\ CARB's initial Rule 9610 SIP submittal included a ``2013
Annual Demonstration Report'' dated June 20, 2013, which the
District had made publicly available (in draft form) during its
rulemaking process. On February 20, 2014, the District submitted a
revised annual demonstration report containing technical
clarifications recommended by EPA. See ``2013 Annual Demonstration
Report,'' dated January 31, 2014. Throughout this proposed rule,
references to the ``2013 Annual Demonstration Report'' are to the
revised version dated January 31, 2014. For informational purposes,
however, we provide both versions of the report in the docket for
this rulemaking.
    \15\ Our TSD provides a detailed evaluation of the 2013 Annual
Demonstration Report and our recommendations for improvement.
    \16\ The key purpose of the annual demonstration report is to
specifically document the District's progress in achieving necessary
emission reductions and to enable EPA and citizens to enforce the
SIP emission reduction commitments by requesting project-specific
documentation. It is not necessary, however, for the list of
projects relied on in a particular SIP to be identical from year to
year, as the District may appropriately eliminate those projects
found to be in violation of contract requirements or otherwise not
achieving expected emission reductions. See Rule 9610, Section 4.3.
---------------------------------------------------------------------------

    Finally, under section 6.1 of Rule 9610, ``[a]ll documents created
and/or used in implementing the requirements of Section 4.0 shall be
kept and maintained as required by the applicable incentive program
guidelines'' and ``shall be made available for public review''
consistent with the requirements of the California Public Records Act
and related requirements. See Rule 9610, section 6.1. Additionally, the
annual demonstration report must include information regarding the
process for public review of such records. See id. Consistent with this
requirement, the 2013 Annual Demonstration Report submitted by the
District states that the public may request documents created and/or
used in implementing the requirements of Section 4.0 (of Rule 9610)
through the District's Public Records Release Request form, which is
available on the District Web site. See 2013 Annual Demonstration
Report at 8.
    Rule 9610 appears to contain one exception to the general public
disclosure requirement in section 6.1 that applies only to documents
associated with NRCS's implementation of the EQIP program. Section 6.2
of Rule 9610 states that ``[r]ecords related to implementation of the
NRCS Program Combustion System Improvement of Mobile Engines incentive
program are prohibited from mandatory disclosure, pursuant to the
Federal Food Security Act of 1985 (7 U.S.C. 608d(2)).'' We note that 7
U.S.C. section 608d(2) concerns information relating to ``marketing
agreements'' and ``marketing order programs'' under the Agricultural
Adjustment Act (7 U.S.C. 601 et. seq.) and does not apply to the NRCS's
implementation of EQIP. The key statutory provision that governs
disclosure of information submitted by agricultural producers or owners
of agricultural land to participate in EQIP is section 1619 of the
Food, Conservation, and Energy Act of 2008 (Pub. L. 110-246, 7 U.S.C.
8791).\17\ See email dated April 23, 2014, from Joshua Schnell, USDA,
to Jeanhee Hong, EPA Region 9, RE: ``Summaries of 1619 and EQIP.'' We
discuss below this statutory provision and certain information that we
understand NRCS may make publicly available consistent with this
provision.
---------------------------------------------------------------------------

    \17\ The general Freedom of Information Act exemptions in 5
U.S.C. section 552(b) also apply to EQIP information.
---------------------------------------------------------------------------

    Under section 1619 of the Food, Conservation, and Energy Act of
2008 (Pub. L. 110-246, 7 U.S.C. 8791), Congress has prohibited the
Secretary of USDA and any officer or employee of USDA from disclosing
``information provided by an agricultural producer or owner of
agricultural land concerning the agricultural operation, farming or
conservation practices, or the land itself, in order to participate
in'' a USDA program. 7 U.S.C. 8791. Any contractor or cooperator of the
USDA is similarly prohibited from disclosing such information. Id.
There are several exceptions to this prohibition, including that USDA
may disclose information if it is transformed into a statistical or
aggregate form without naming any individual owner, operator or
producer or a specific data gathering site. See email dated March 31,
2014, from Stephanie Johnson, USDA, to Kerry Drake, EPA Region 9, RE:
``Summaries of 1619 and EQIP.''
    Taking these statutory prohibitions into account, in March 2014,
NRCS, EPA, CARB and the District signed the ``Addendum to the December
2010 Statement of Principles Regarding the Approach to State
Implementation Plan Creditability of Agricultural Equipment Replacement
Incentive Programs Implemented by the USDA Natural Resources
Conservation Service and the San Joaquin Valley Air Pollution Control
District'' (``2014 Addendum''). The purpose of the 2014 Addendum is to
identify information and documentation that NRCS will, consistent with
its statutory responsibilities under 7 U.S.C. 8791, make publicly
available to ensure that EPA and the District can carry out their
respective implementation responsibilities under the CAA and Rule 9610.
Among other things, the 2014 Addendum states that NRCS will provide to
EPA and the District an annual report that includes information
regarding emission reductions achieved by individual EQIP projects and
that will be certified by the NRCS California State Conservationist. We
believe the certified annual reports described in the 2014 Addendum,
which NRCS has agreed to submit to EPA and the District by March 31 of
each year, will provide information adequate to enable the District,
EPA, and the public to verify the emissions of participating sources
and to adequately assess the effectiveness of the EQIP program.
    To avoid confusion, however, EPA strongly recommends that the
District revise section 6.2 of Rule 9610 at its earliest opportunity to
remove the incorrect reference to 7 U.S.C. section 608d(2) and to
provide an accurate description of NRCS's statutory obligations with
respect to disclosure of information under 7 U.S.C. section 8791.
    Our TSD contains a more detailed discussion of the 2014 Addendum
and EPA's understanding of the information-sharing activities that the
signatory agencies have agreed to undertake, to enable the public to
verify emission reductions relied upon for SIP purposes. See TSD at 10-
11. Additionally, the TSD contains a more detailed evaluation of both
the 2013 Annual Demonstration Report and the Manual of Procedures and
provides recommendations for improvement to ensure that these documents
provide the information necessary to satisfy CAA requirements
concerning public availability of emission data. See TSD at 52-55.
4. Provisions To Measure and Track Programmatic Results
    EPA recommends that each SIP submittal that relies on an EIP or
other innovative emission reduction program contain specific evaluation
procedures to retrospectively determine the overall effectiveness of
the program and procedures to correct emissions projections as
appropriate. See, e.g., 1997 VMEP at 9; 2001 EIP Guidance at 70-76;
2005 Bundled Measures Guidance at 17-20; and 2014 Diesel Retrofits
Guidance at 33. For example, EPA recommends that the SIP submittal
include a State commitment to conduct program evaluations at least once
every 3 years, to determine whether the program is in fact achieving
projected emissions benefits; a schedule for submitting the results of
these evaluations to EPA, following

opportunities for public comment; and ``reconciliation procedures'' to
correct any differences between forecasted and actual emission
reductions. See id.
    Rule 9610 establishes procedures for the District to annually
report on the emission reductions achieved through specified incentive
programs and to evaluate programmatic effectiveness on a periodic
basis. Specifically, the provisions concerning annual demonstration
reports under section 4.0 of the rule contain both substantive and
procedural requirements for the District's development and submission
of these reports to EPA. See discussion above in Section III.B.3
(``Procedures for public disclosure of information''). Additionally,
under section 4.7 of the rule, the District is required to ``perform a
retrospective assessment of the performance of its incentive program to
evaluate overall incentive program performance and develop
recommendations for future enhancements to incentive program
implementation'' and to include in this assessment ``a summary of the
public process to receive comments on the draft [annual demonstration]
report, as required by Section 5.0.'' Rule 9610, section 4.7.
    EPA supports the District's effort to keep EPA, CARB, and the
public informed of its incentive program evaluations on an annual basis
through the annual demonstration reports developed pursuant to section
4.0 of Rule 9610. It is not clear, however, what sort of
``retrospective assessment'' the District intends to conduct under
section 4.7 of the rule and how this provision differs, if at all, from
the requirements of section 4.0. We recommend that the District revise
section 4.7 to clarify its procedures for evaluating program
performance and whether it will retrospectively assess only those
incentive programs that it directly implements, or whether the District
will also assess the performance of the EQIP program implemented by
NRCS and/or incentive programs implemented by CARB. Our TSD provides
more detailed recommendations for these program evaluations. As
previously explained, EPA will review each SIP submittal developed
pursuant to Rule 9610 on a case-by-case basis, following notice-and-
comment rulemaking, to determine whether the applicable requirements of
the Act are met.

C. Sections 110(l) and 193 of the Act

    Section 110(l) of the CAA prohibits EPA from approving any SIP
revision that would interfere with any applicable requirement
concerning attainment and RFP or any other applicable CAA requirement.
Rule 9610 does not establish any emission limitation, control measure,
or other requirement that applies directly to an emission source or
that is necessary to meet CAA requirements. Additionally, the rule does
not revise any requirement in the applicable SIP. The requirements and
procedures in Rule 9610 apply only to the District and are designed to
ensure that each SIP submittal in which the District relies upon
emission reductions achieved through incentive programs in the SJV will
adequately address the requirements of the Act. Nothing in Rule 9610
supplants the applicable requirements of the CAA.\18\ We propose to
determine that our approval of Rule 9610 would comply with CAA section
110(l) because the proposed SIP revision would not interfere with the
on-going process for ensuring that requirements for attainment of the
NAAQS and other CAA provisions are met.
---------------------------------------------------------------------------

    \18\ EPA will review each SIP submittal developed pursuant to
Rule 9610 on a case-by-case basis, following notice-and-comment
rulemaking, to determine whether the applicable requirements of the
Act are met.
---------------------------------------------------------------------------

    Section 193 of the Act does not apply to this proposed action
because Rule 9610 does not modify any SIP-approved control requirement
in effect before November 15, 1990.

IV. Proposed Action and Public Comment

    Under section 110(k)(3) of the Act, EPA is proposing to fully
approve the submitted rule as a revision to the California SIP. We will
accept comments from the public on this proposed action until the date
noted in the DATES section above.

V. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a
SIP submission that complies with the provisions of the Act and
applicable Federal regulations (42 U.S.C. 7410(k); 40 CFR 52.02(a)).
Thus, in reviewing SIP submissions, EPA's role is to approve State
choices, provided that they meet the criteria of the Clean Air Act.
Accordingly, this proposed action merely proposes to approve State law
as meeting Federal requirements and does not impose additional
requirements beyond those imposed by State law. For that reason, this
proposed action:
     Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under Executive Order
12866 (58 FR 51735, (October 4, 1993);
     does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     does not have Federalism implications as specified in
Executive Order 13132 (64 FR 43255 (August 10, 1999));
     is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR 19885
(April 23, 1997));
     is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355 (May 22, 2001));
     is not subject to requirements of Section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the Clean Air Act; and
     does not provide EPA with the discretionary authority to
address disproportionate human health or environmental effects with
practical, appropriate, and legally permissible methods under Executive
Order 12898 (59 FR 7629 (February 16, 1994)).
    In addition, this proposed action does not have tribal implications
as specified by Executive Order 13175 (65 FR 67249(November 9, 2000)),
because the SIP is not approved to apply in Indian country located in
the State, and EPA notes that it will not impose substantial direct
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Reporting and recordkeeping
requirements.

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

    Dated: May 6, 2014.
Jared Blumenfeld,
Regional Administrator, Region IX.
[FR Doc. 2014-11481 Filed 5-16-14; 8:45 am]
BILLING CODE 6560-50-P


8. Benefits Analysis This section presents benefits of the CUE allocation phaseout as compared to the original methyl bromide Phaseout RIA.

8.1 Basic Methodology Framework The benefits of the regulation were calculated using the Atmospheric and Health Effects Framework ( AHEF) model. The AHEF, which consists of a series of FORTRAN modules,

produces estimates of the likely increases in skin cancer mortality and incidence and cataract incidence resulting from past and future ODS emission scenarios, and compares the changes in health effects incidence and/ or mortality to those that would otherwise exist under a the 1979

1980 baseline scenario of no further ozone depletion scenario ( i. e., no depletion beyond that which existed in the 1979 1980 time period). The AHEF compares these differences across policy and control scenarios to estimate the additional benefits of each scenario based on the degree of ODS control stringency ( ICF 2000a).

8.2 Input Data The primary input for the AHEF is methyl bromide emissions data ( see Appendix B). The emissions model is based upon the assumption that 50 percent of methyl bromide consumed for treatment of agricultural soils is ultimately emitted to the atmosphere. 1 This analysis of benefits is for pre plant and post harvest methyl bromide uses for both the original and CUE phaseout scenarios. Consumption data are derived from figures reported to National Ozone Units and the Montreal Protocol Secretariat. In the baseline scenario, growth in future emissions was constrained to account for actual methyl bromide consumption, as well as the freeze required by the Montreal Protocol for both developed and developing countries. For purposes of this analysis,

it is assumed that a CUE level equal to 39% of the 1991 baseline for 2005, 37% of the baseline for 2006, and further reduction as outlined in Chapter 4 ( see Section 4.1) will be implemented. 2 Other important inputs to the benefits assessment are unit values used to monetize reductions in health effects due to the phaseout. In addition to value of a saved life ( VSL)

estimates, other values include costs for hospitalization or treatment of skin cancer ( e. g., surgery or therapy for melanoma and non melanoma lesions), and medical treatment for cataracts. To monetize the avoided health effects the following input data were used:

1 Emissions rates have been reported to range from 32 to 87 percent as presented by UNEP ( 1998).

2 As paraphrased by UNEP ( 1998), " For non Article 5( 1) Parties operating under the Protocol ( developed countries) . . . A freeze on MB production and consumption [ is] based on 1991 levels . . . For Parties operating under Article 5( 1) of the Protocol ( developing countries) a freeze on MB production and consumption [ is] based on 1995 98 levels from 1 January 2002 . . ."   Value of a life saved is based on EPA ( 1999b). The value used for this analysis is $ 5.8 million.   Value of avoided non fatal melanoma skin cancer is based on ICF ( 1999a). The value used for this analysis is $ 12,500.   Value of avoided non melanoma skin cancer is based on ICF ( 1999b). The value used for this analysis is $ 1,250.   Value of avoided cataract is based on ICF ( 1999c). The value used for this analysis is $ 2,500.

These values were used in the Phaseout RIA and are used here to maintain consistency between the monetized estimates of benefits presented in that analysis and the estimates presented here.

8.3 Results of the Benefits Analysis for the CUE Scenario Exhibit 8.3.1 presents preliminary estimates of the increases in human health effects expected from the CUE scenario, compared to the methyl bromide phaseout, as estimated by the AHEF. As stated previously, benefits were monetized by multiplying the reduced morbidity and mortality estimates by their respective unit value. Note that the monetized values are based on the central incremental case value in Exhibit 8.3.1. Monetized values are not provided for the uncertainty range of incremental cases. As shown, the benefits of the proposed CUE allocations in the United States are estimated to have decreased by $ 783.8 million ( undiscounted relative to the original 2005 phaseout). Benefits were also assessed at discount rates of 7, 3, and 1 percent. As shown by Exhibit 8.3.2, discounted benefits decreased $ 60 million and $ 209 million at 7 and 3 percent, respectively. On an annualized basis, the decrease in benefits range from $ 4.4 million to $ 8.0 million at 7 and 3 percent discount rates, respectively. Exhibit 8.3.1. Decreased Human Health Benefits from CUE allocations compared to the Methyl Bromide Phaseout in the United States in 2005 ( 1999 2150)

Cutaneous Malignant Melanoma Non melanoma Skin Cancer Cataract Incidence Mortality Basal Cell Incidence Squamous Cell Incidence Mortality Incidence Incremental Cases a ( Uncertainty Range) 660 ( 264   1,056) 83 ( 33   133) 15,809 ( 6,324  25,294) 7,752 ( 3,101   12,403) 42 ( 17   67) 8,105 ( 3,242   12,968) Unit Value ( 1999$) $ 12,500 $ 5.8 million $ 1,250 $ 1,250 $ 5.8 million $ 2,500 Monetized Benefit ( undiscounted) $ 8.3 million $ 481.5 million $ 19.8 million $ 9.7 million $ 244.2 million $ 20.3 million a Values in parentheses represent an uncertainty range of approximately 60% ( 0.6), based on health effects uncertainties for the following factors: 0.50 for action spectrum values, 0.05 for the UV radiative transfer modeling step, 0.30 for the biological amplification factor ( BAF), and 0.10 for the choice of dose metric used in the AHEF. The value of 0.6 is the square root of the sum of the squared uncertainty terms.

Exhibit 8.3.2. Decreased Human Health Benefits from CUE allocations compared to the Methyl Bromide Phaseout in the United States in 2005 ( 1999 2150)

Scenario Benefits ( 1997$)

Undiscounted NPV ($ 783.8 million)

Annualized $ 15.1 million)

Discount Rate: 7 percent NPV ($ 60.4 million)

Annualized ($ 4.4 million)

Discount Rate: 3 percent NPV ($ 208.6 million)

Annualized ($ 8.0 million)

Discount Rate: 1 percent NPV ($ 479.8 million)

Annualized ($ 11.9 million)

8.4 Unquantified Benefits Changes in the incidence and mortality for the numbers of skin cancers and incidence for cataracts are not the only indicators of the damage to human health and the environment that result from increases in UV radiation due to ozone depletion. Increased UV radiation can cause a wide variety of additional human health problems, including actinic keratosis ( a skin disease) and immune system disorders. Increased UV levels also lead to higher concentrations of tropospheric ozone ( smog) that can adversely impact human respiratory and pulmonary systems.

Furthermore, the impact of ozone depletion is not limited to humans; plants and animals can also suffer serious consequences from UV radiation. Overall, in addition to fewer skin cancers and cataracts, the following endpoints are expected to change due to the phaseout modifications.

Increase in:

  mortality from acute exposure; 3   immune system suppression;   aquatic and terrestrial ecosystem disruption, including reproductive/ developmental effects, immune system suppression;   impacts on agriculture such as decreased plant productivity, slowed metabolism, hastened plant disease;   impacts on materials ( i. e., accelerated breakdown of plastics and other synthetics); and   lost productivity and evacuations.

Therefore, negative unquantified impacts will follow in each of these areas as a result of the CUE.

3 Incremental human health effects due to acute exposure expected from the CUE scenario were examined for this analysis. Between 2005 and 2018, 5.4 fatalities are expected due to acute methyl bromide exposure and 106.3 cases of acute methyl bromide exposure are expected in California. Benefits ( or lost benefits) associated with acute exposure to methyl bromide are not examined further in this document, as analysis of these exposures fall under the purview of the Office of Pesticide Programs ( OPP) and any re registration requirements under FIFRA. ( CADPR 2000, EPA 1999b, ICF 1999).