While EPA policy generally is to impose a FIP where States fail to adopt Clean Air Act NSR provisions, section 113( a)( 5) of the amended Act provides that EPA may prohibit the construction or modification of any major stationary source in any area, including an attainment area, where there is a violation of the statute's NSR requirements. Specifically, EPA may apply section 113( a)( 5) whenever the Administrator finds, on the basis of available information, that a State is not acting in compliance with any requirement or prohibition of the Act relating to construction of new sources or the modification of existing sources. Upon such a finding, the Administrator may issue an order prohibiting the construction or modification of any major stationary source in any area to which such requirement applies, issue an administrative penalty order in accordance with the requirements of section 113( d), or bring a civil action under section 113( b). Nothing in section 113( a)( 5) precludes the EPA from taking other enforcement action or commencing a criminal action under section 113( c) at any time for any such violation. Section 113( a)( 5) is discussed in greater detail in section IV. B. 2. 2. Emissions Offsets The 1990 CAAA clarify and expand the basic requirements for emissions offsets already contained in section 173 of part D. Moreover, in limiting the States' opportunities to set up a growth allowance ( described in section III. G. 3), the 1990 CAAA establish emissions offsets as the primary regulatory mechanism for accommodating major new source growth without jeopardizing the Act's mandate for reasonable progress toward NAAQS attainment. In light of such statutory changes, each State should review the emissions offset requirements in its current NSR rules and determine what revisions are necessary to conform those rules with the criteria described below.

( a) RFP. The basic requirement in section 173( a)( 1) remains the same in that to issue a permit the State must demonstrate that the new source growth does not interfere with the approved demonstration of reasonable progress for the area. Such growth results from new or increased emissions potential from major stationary sources, as well as from emissions from minor source growth unaccounted for by the control strategy in the EPA approved SIP.

The EPA interprets section 173( a)( 1)( A) to ratify current EPA regulations requiring that the emissions baseline for offset purposes be calculated in a manner consistent with the emissions baseline used to demonstrate RFP. Regarding the amount of offsets that is necessary to show noninterference with RFP, EPA will presume that so long as a new source obtains offsets in an amount equal to or greater than the amount specified in the applicable offset ratio ( or, where the statute does not specify an offset ratio, in an amount greater than 1: 1), the new source will represent RFP. In general, this presumption may be overcome only if the applicable SIP expressly relies on new sources to generate a greater amount of reductions than set forth in the statutory offset ratios. The offsets still must satisfy the section 173( c) requirements as discussed below.

The EPA regulations at 40 CFR 51.165( a)( 3)( i) presently require that offset be based on allowable or actual emissions, depending on which currency is used for RFP and attainment demonstration purposes. Historically, RFP often has been tracked primarily by a yearly assessment of the net actual emissions reductions that have occurred, because actual emissions best correlate with ambient air quality concentrations. In such cases, EPA regulations disallow the use of " paper" offsets based on SIP allowable emissions in excess of actual emissions, and the statutory changes do not call for any change in this approach.

( b) Geographic location of offsets. New section 173( c)( 1) stipulates that emissions offsets generally must be obtained by the same source or other existing sources in the same nonattainment area. However, the statutory provision does allow offsets to be obtained in another nonattainment area under two specific conditions. First, the other nonattainment area must have an equal or higher nonattainment classification than the nonattainment area in which the source would construct. In applying this provision, the other nonattainment area must have an equal or higher nonattainment classification for the same pollutant. For example, a proposed major new source of VOC seeking to locate in a nonattainment area classified as serious for ozone could possibly obtain emission offsets in another ozone nonattainment area if such area were designated serious, severe or extreme for ozone.

The second condition is that the emissions from such other nonattainment area must contribute to a violation of the NAAQS in the nonattainment area in which the source would construct. The showing that such contribution from sources in another nonattainment area exists should be acknowledged and verified by the permitting authority. Generally, dispersion modeling is used to identify the existence of such impacts.

( c) Timing of offsets. New section 173( c)( 1) also adds the condition that any emissions offsets obtained in conjunction with the issuance of a permit to a new or modified source must be, " by the time a new or modified source commences operation, in effect and enforceable * * * *." This new statutory condition for offsets augments an existing requirement under section 173 that provides that offsets must be " legally binding" before a permit may be issued. The 1990 CAAA clarified the existing requirement by requiring that the offsets be federally enforceable before permit issuance ( see revised section 173( a)). Accordingly, while it is possible for a State to issue a permit to construct once sufficient emissions offsets have been identified and made federally enforceable ( generally through a permit condition made to the permit of the existing source), the State must also ensure that the required emissions reductions actually occur no later than the date on which the new source or modified source would commence operation.

( d) Actual emissions reductions. New section 173( c)( 1) includes the provision that the:

* * * Total tonnage of increased emissions from the new or modified source shall be offset by an equal or greater amount, as applicable, in the actual emissions of such air pollutant from the same or other sources in the area.

The Act was previously silent on this issue; however, EPA's current policy concerning the baseline for emissions offsets, as contained in the part 51 NSR nonattainment regulations, provides that the offset baseline is the emissions limit under the applicable SIP in effect at the time the permit application is filed, unless the State's demonstration of RFP and NAAQS attainment is based on actual emissions, or the applicable SIP does not contain an emissions limitation for that particular source or source category ( see existing Sec. 51.165( a)( 3)( i)). The new statutory requirement provides that emissions increases from the new or modified source must be offset by real reductions in actual emissions. As noted above, RFP and attainment demonstrations generally are based on actual emissions. However, to the extent that these plans are based on allowable emissions, offset credit for reductions in allowable emissions ( as necessary to conform with the requirements of section 173( a)( 1)) is appropriate, but will be deemed inadequate if there is not a real reduction in actual emissions that equals or exceeds, as applicable, the increase in emissions resulting from the operation of the major new or modified source.

( e) Creditable reductions. The final condition, added under new section 173( c)( 2), prevents emissions reductions otherwise required by the Act from being credited for purposes of satisfying the part D offset requirement. For example, reductions required to meet RACT and acid rain reductions pursuant to statutory requirements are not creditable for emissions offsets. However, the statutory language does allow reductions that are achieved indirectly pursuant to a requirement of the CAAA ( incidental emission reductions) to be credited if they meet the other criteria for offsets contained in section 173( c)( 1) as described above. Section 112 of the CAAA contains source requirements for hazardous air pollutants. The listed hazardous air pollutants in section 112( b)( 1) are not exempt from regulation under the nonattainment provisions of part D. New and existing sources must meet, where applicable, the MACT emissions limitations as promulgated under section 112( d). As part of the schedule to comply with an applicable MACT standard, an existing source may elect to comply with the early reductions requirements of section 112( i)( 5). By electing to achieve early reductions, an existing source may, under certain conditions outlined below, meet an alternative emission limit in lieu of meeting an applicable MACT standard for a period of 6 years from the compliance date of an otherwise applicable MACT standard. Except as follows, to obtain the MACT compliance extension, the reduction must be achieved before the otherwise applicable standard is first proposed. A source may also obtain an extension if it achieves the early reductions after the proposal of an applicable MACT limitation but before January 1, 1994, and it makes an enforceable commitment to achieve such reductions before the proposal of the MACT standard.

Emissions reductions of the hazardous air pollutants listed in section 112( b)( 1) to meet a standard under section 112( d), including emissions reductions to meet the early reductions requirements of section 112( i)( 5), are not creditable emissions reductions. These reductions are required by the Act and therefore are not creditable for offsetting emission increases under part D ( section 173( c)( 2)). However, any emissions reductions in excess of the required MACT standards or, in the case of early reductions under section 112( i)( 5), any emissions reductions in excess of 90 percent ( or in excess of 95 percent for particulates) should be considered surplus and therefore should be creditable for offsetting purposes if all other applicable requirements are met. Also, if emissions of a pollutant other than one of the specific pollutants required to be controlled are reduced as a result of complying with a MACT standard ( e. g., reductions in nontoxic VOC's that are incidental to reductions of a toxic VOC that is subject to the MACT standard), or if reductions are achieved pursuant to a State requirement that goes beyond the requirements of the Act, such emissions reductions are considered incidental and, therefore, should be considered as creditable reductions if all other conditions for a creditable offset are met.

For purposes of equity, EPA encourages States to allow sources to use pre enactment banked emissions reductions credits for offsetting purposes. States may do so as long as the restored credits meet all other offset creditability criteria and such credits are considered by States as part of the attainment emissions inventory when developing their post enactment attainment demonstration. For VOC offsets, it is important to note that such reductions must be used in accordance with the offset ratios established by the 1990 CAAA for the different ozone nonattainment area classifications. Existing EPA regulations ( 40 CFR 51.165( a)( 3)( ii)( C)( 1)) prohibits certain pre enactment banked emissions reduction credits, i. e., reductions achieved by shutting down existing sources or curtailing production or operating hours, from being used in the absence of an EPA approved attainment plan.

3. Creditable Emissions Reductions for Netting Except for the provisions of subpart 2 of title I, the 1990 CAAA generally do not affect EPA's current procedures for netting emissions decreases and increases ( see section III. A. 3 5). Netting emissions increases and decreases should be determined consistent with EPA's current NSR rules and EPA's " Emissions Trading Policy Statement ( ETPS)" ( 51 FR 43823, December 4, 1986). Use of pre enactment reductions for netting with post enactment emissions increases continues to be available to the extent allowed under State rules. However, because these reductions represent emissions that are not included in the 1990 base year inventory, States should consider the post enactment increases ( less post enactment decreases) as growth even though, for applicability purposes, the source's net emissions change is de minimis.

Early reductions of hazardous air pollutant ( HAP) emissions under section 112( i)( 5) may also be creditable emissions reductions for netting. The EPA considers early reductions under section 112( i)( 5) to be " surplus" under the ETPS and creditable for netting. As stated above, early reductions cannot be used as creditable reductions for offset purposes due to the statutory limitations of section 173( c)( 2).

4. Growth Allowances Before the enactment of the 1990 CAAA, the Act provided in general that States could establish a pollutant specific allowance for additional growth in any designated nonattainment area by controlling existing source emissions beyond the amount of reduction required to demonstrate RFP. Based on the amount of excess control of existing emissions, section 172( b)( 5) of the 1977 Act provided that States could " expressly identify and quantify the emissions, if any, of any such pollutant which will be allowed to result from the construction and operation of major new or modified stationary sources" in a particular nonattainment area. Before the 1990 CAAA, section 173( 1)( A) implied that the emissions reductions used to " allow" the new emissions from the proposed source could be furnished by controlling existing major sources to a greater degree than that required by RACT or by controlling minor sources.

Commensurate with the above provision, section 173( 1)( B) of the 1977 Act required that, before a part D permit to construct could be issued to any major new or modified stationary source, the permitting agency had to have determined that " emissions of such pollutant from the proposed source would not cause or contribute to emissions levels which exceed the allowance permitted * * *." Alternatively, when a major new or modified stationary source applied for a part D permit ( in the absence of an approved growth allowance), corresponding emissions reductions ( offsets) were to be obtained from existing sources as a prerequisite for approving the new construction. These provisions formed the basis for States to develop " growth allowances" in their SIP's.

The revised Act restricts where new allowances may be established and voids certain existing growth allowances. Revised sections 172( c)( 4) and 173( a)( 1)( B) limit new growth allowances to only those portions of a nonattainment area which have been formally targeted for economic growth by the Administrator, in consultation with the Secretary of Housing and Urban Development. New section 173( b) of the Act invalidates by operation of law any existing growth allowance in any nonattainment area that either received a notice that the SIP was substantially inadequate under section 110( a)( 2)( H)( ii) of the 1977 Act, or receives a notice of inadequacy under new section 110( k)( 1) of the amended Act. Again, section 173( a)( 1)( B) lifts this restriction from targeted economic growth areas. Where a growth allowance is no longer valid or cannot be established, a proposed major new or modified stationary source in a nonattainment area is required to obtain emissions offsets on a case by case basis in order to obtain construction approval. 5. Analysis of Alternatives Before the enactment of the 1990 CAAA, section 172 of part D contained a provision requiring that, in the case of implementation plans that could not demonstrate attainment of the NAAQS for ozone or carbon monoxide by December 31, 1982, such plans must include * * * A program which requires, prior to the issuance of any permit * * * an analysis of alternative sites, sizes, production processes, and environmental control techniques for such proposed source which demonstrates that the benefits of the proposed source significantly outweight the environmental and social costs imposed as a result of its location, construction, or modification.

The 1990 CAAA removed this provision from section 172 and added it as new section 173( a)( 5). Consequently, such analysis and demonstration are now prerequisites to the issuance of any part D permit.

6. Control Technology Information Per section 173( d), the States must provide that the control technology information from permits issued under section 173 be promptly submitted to EPA's RACT/ BACT/ LAER clearinghouse, to other States, and to the general public.

7. Innovative Controls for Rocket Engines and Motors Under section 173( e) States are authorized to allow offsetting, by alternative or innovative means, of emission increases from rocket engine and motor firing, and cleaning related to such firing. This authorization applies to any existing or modified major source that tests rocket engines or motors under the conditions found at section 173( e) ( 1) through ( 4). The conditions require that a proposed modification be solely for the purpose of expanding the testing of rocket engines or motors at a facility already permitted for such purposes, and that the testing is required for a program essential to the national security as certified in writing by the appropriate departments and agencies of the Federal government. Also, the source must have used all reasonable means to obtain offsets, all available offsets must already have been used, and sufficient offsets must not be available to the source. Once these criteria are met, the source will comply with an alternative measure, imposed by the permitting authority, designed to offset any emissions increases not directly offset by the source. In lieu of requiring alternative offset measures, the permitting authority may impose an emissions fee to be paid to, and used by, the State to maximize emissions reductions in the area of the test facility. Section 173( e)( 4) caps such fees at 1.5 times the cost of stationary control costs adopted in the area during the previous 3 years.

8. Exemptions for Stripper Wells Section 819 of the CAAA provides a limited exclusion for activities related to stripper wells, where such activities occur in certain designated nonattainment areas. The statutory provision as written applies to the production of oil or natural gas from a stripper well, and the equipment used in the exploration, production, development, storage, and processing of such stripper well oil and natural gas. Stripper wells are low production wells. Oil stripper wells produce less than 10 barrels of oil per day and natural gas stripper wells ( as defined in the National Gas Policy Act; 15 U. S. C. section 3318( b)) cannot exceed an average of 60,000 cubic feet per production day during a 90 day production period.

While still subject to the general requirements under sections 172 and 173 of the Act for NSR nonattainment area permits, including requirements applicable under those sections pursuant to subpart 1 of part D of the amended Act, these activities are not required to satisfy the additional nonattainment area requirements enacted under new subparts 2, 3, 4 and 5 of part D of the amended Act. Section 819 of the 1990 CAAA limits this exclusion to PM 10, ozone, or CO nonattainment areas classified as marginal, moderate, or serious ( and having a population of less than 350,000). ( subpart 5 of part D provides no additional NSR requirements for sulfur oxides, nitrogen dioxide, or lead nonattainment areas.) No exclusion from the additional requirements of subparts 2 through 5 is provided for serious PM 10, ozone or CO nonattainment areas having a population of 350,000 or more, or in severe and extreme ozone nonattainment areas.

9. OCS source Applicability Section 801 of the 1990 CAAA adds a new section 328 to the Act entitled " Air Pollution from Outer Continental Shelf Activities". This section contains provisions pertaining to the control of air pollution from OCS sources. These provisions necessitate a revision of the Federal NSR regulations under both the PSD and NSR nonattainment permit programs to facilitate implementation of OCS regulations. The OCS regulations will be proposed in a separate EPA action and codified at 40 CFR part 55. The reader is referred to the separate OCS proposal package for more specific information on the OCS rules. 10. Tribal Lands Applicability As discussed more fully in section V. B. of this preamble, the 1990 CAAA grant EPA the authority to treat Indian tribes in certain respects as States, and specifically allows Tribes to develop tribal implementation plans for implementating the NAAQS on tribal lands. Like SIP's, these plans must include all implementation requirements set out in the Act, including complete NSR programs for constructing or modifying existing sources located on tribal lands. Further guidance on the treatment of Indian tribes will be provided as part of a separate rulemaking required by section 301( d)( 2) of the Act.

11. Stationary Source Definition The 1990 CAAA added a new definition of " stationary source" in section 302( z) of title III of the Act, and amended the existing definition already contained in section 111( a)( 3). The addition of the new definition appears to strengthen congressional intent that certain internal combustion engines must be subject to control under State permit programs, while requiring the exclusion of those internal combustion engines which fall under the newly defined category of " nonroad engines." Congress authorized EPA to establish emissions standards for categories of nonroad engines that are deemed to contribute significantly to pollution problems. Such authorization preempts States from further regulating such sources of pollution under the stationary source permit process. The EPA presently believes that most internal combustion engines used in stationary applications should be subject to the State permit process for stationary sources.

12. Temporary Clean Coal Technology Demonstration Projects Section 415( b)( 2) of the amended Act provides under certain conditions an exemption from the part D requirements of title I for the installation, operation, cessation, or removal of a temporary clean coal technology demonstration project. Section 415( b)( 1) specifies that clean coal technology projects are those funded under the Department of Energy Clean Coal technology appropriations or similar projects funded by EPA and limits the applicability of section 415 to existing facilities.

Under section 415( b)( 2), to qualify for this exemption, a temporary clean coal demonstration project must operate for no more than 5 years. The project must also comply with any applicable SIP for the area in which the project is located and all other requirements for the attainment and maintenance of ambient air quality standards, both during and after the project. Section 415( b)( 4) requires EPA to issue rules or interpretive rulings to implement this exemption. As required, EPA has proposed such changes to the rules for steam electric utility units. These proposed changes were published in the Federal Register on June 14, 1991 ( 56 FR 27630). Readers are referred to this notice for more details on the applicability of this exemption. Under section 415( b)( 4), these rules are limited to those areas where EPA is the permitting authority. Where the State is the part D permitting authority, the State may, but is not required to, adopt and submit to EPA for approval rule changes incorporating the section 415( b)( 2) exemption in its SIP.

13. Failure to Submit NSR Rules By Statutory Deadlines The 1990 CAAA require States to adopt SIP revisions subject to EPA approval that incorporate the new preconstruction permitting requirements for new or modified sources that were discussed in the preceding sections. For instance, new permit rules for PM 10 nonattainment areas must be submitted to EPA by June 30, 1992; new rules for ozone nonattainment areas must be submitted by November 15, 1992; new rules for most CO nonattainment areas are due 3 years from the date of the nonattainment designation. The EPA has previously announced its interpretation that the new NSR requirements did not go into effect with passage of the 1990 CAAA but rather become effective in accordance with the schedule for State adoption of SIP revisions ( see J. Seitz, " New Source Review ( NSR) Program Transitional Guidance," p. 6 ( March 11, 1991) ( appendix D)).

If these deadlines pass without States submitting NSR revisions, EPA may impose sanctions on delinquent States. Specifically, the Act ( in two separate provisions) grants EPA the authority to impose sanctions based on several different types of State failures including a State's failure to submit a SIP or SIP element, or a State's submitting an inadequate SIP or SIP element ( see section IV. B. 2). The sanctions include reducing a State's highway funds ( section 179( b)( 1)) or increasing emissions offsets ( to at least 2 to 1) for new and modified sources ( section 179( b)( 2)). In addition to these general sanctions, section 113( a)( 5) provides that when the Administrator finds that a State is not acting in compliance with any requirement or prohibition relating to NSR, the Administrator may issue an order prohibiting the construction or modification of any major stationary source in any area where such requirements apply. In States that delay in revising their SIP's to include the new preconstruction permitting requirements by the statutory deadline, EPA may exercise this authority by proceeding under section 113( a)( 5) whenever a particular new source attempts to construct without meeting the NSR requirements added by the 1990 CAAA, or by issuing a general construction ban. As an alternative, the Administrator could issue a contingent order prohibiting construction of any major new or modified source that failed to obtain a permit that met the amended statutory NSR requirements. The EPA will provide additional information on this issue in its NSR regulatory package.

In addition to imposing statutorily required sanctions, EPA is also required by the statute to promulgate a FIP when it finds that a State has failed to make a required SIP submittal or has made an incomplete submission ( see section IV. C). Pursuant to this authority, EPA is developing revised NSR regulations that would include, at 40 CFR part 52, a Federal NSR nonattainment permitting program that EPA ( or the State pursuant to a delegation agreement) could implement as a FIP in those States that fail to submit NSR regulations by the statutory deadlines. Because of the importance of the increased offset ratios, reduced source thresholds, and other NSR changes to States' overall attainment effort, EPA presently intends to impose this NSR FIP on any State that fails to adopt its own NSR regulations within the deadlines established by the Act. In addition, or until such time as the FIP is in place, EPA may impose any of the sanctions identified above. Of course, once it receives and approves the State's NSR regulations, EPA would, under ordinary circumstances, withdraw the FIP and any sanctions that may have been imposed.

H. General 1. Part D, Subpart 1/ Section 110 ( to the Extent Not Covered Under Pollutant Specific)

Subsections ( A) through ( M) of section 110( a)( 2) set forth the elements that a SIP must contain in order to be fully approved. Although Congress substantially amended section 110( a)( 2) upon enactment of the amended Act, many of the basic requirements remain the same.

Amended subsection ( A) includes the pre amended subsection ( B) requirement that all measures and other elements in the SIP be enforceable. The amended provision specifically authorizes SIP's to contain certain nontraditional techniques for reducing pollution economic incentives, marketable permits, and auctions of emissions rights. The EPA reads this language to require even these other means of achieving reductions to be enforceable. Section 172( c)( 6), one of the general SIP requirements for nonattainment areas, also includes this requirement in essentially the same language.

Subsection ( B) carries forth the pre amended subsection ( C) requirement to monitor and compile data on ambient air quality. The EPA historically has promulgated regulations in part 58 of the CFR, indicating the necessary data States need to collect and submit as part of their SIP. The existing regulations remain in effect, pursuant to section 193, to the extent they are not inconsistent with the new law, until EPA elects to amend them. The enforcement provisions of pre amended subsection ( D) are now under subsection ( C). While this provision retains the preexisting requirement that the SIP include a pre construction review for all new and modified stationary sources, it deletes the previous provision's specific reference to pre construction review of sources subject to NSPS.

Amended subsection ( D) also contains provisions that essentially remain unchanged. It incorporates language from pre amended subsection ( E) requiring States to include SIP provisions prohibiting sources from emitting pollutants that would contribute significantly to nonattainment, interfere with maintenance of the standard, or interfere with PSD or visibility./ 34/

NOTE / 34/ The pre amended section 110( a)( 2)( E) required SIP's to contain a provision prohibiting stationary sources from emitting an air pollutant in amounts which will " prevent attainment" in another State. The amended version of this language requires a SIP provision that prohibits emissions that will " contribute significantly to nonattainment" in another State. However, EPA interpreted the pre amended language in the manner that Congress expressed in the amended Act. See Air Pollution Control Dist. v. U. S. EPA., 739 F. 2d 1071, 1090 93 ( 6th Cir. 1984). In the Senate Report, Congress noted that the pre amended language presented an impossible standard and noted that it was adopting " significantly contribute" to clarify when a violation of that requirement would occur. S. Rep. No. 228, 101st Cong., 1st sess. 21 ( 1989).

Subsection ( E) of the amended Act incorporates one provision from pre amended subsection ( F) clause ( E)( ii) reinforces the section 128 requirement that the SIP contain certain requirements as to State boards. In addition, clause ( E)( i) of the amended Act includes the pre amendment subsection ( F) requirement that States ensure that the State and/ or local governments have adequate resources to implement the plan. This includes a new requirement that the State ensure that nothing in the SIP is otherwise prohibited by any other State or Federal law. Finally, clause ( E)( iii) adds a new requirement that the State retain responsibility for ensuring adequate implementation in cases in which it relies on local implementation of plan provisions.

Subsection ( F) carries forth the requirements of pre amended subsection ( F) that concern emission monitoring. The EPA promulgated monitoring regulations at Sec. 51.210 of the CFR and in appendix P to part 51. Under section 193, the existing regulations remain effective to the extent they are not inconsistent with the new law, until EPA elects to amend them.

Amended subsection ( G) also carries forth a provision of pre amended subsection ( F). States must provide authority to bring emergency actions ( comparable to that granted to EPA in section 303) in cases where a source or a group of sources present an imminent and substantial endangerment to the public health. The EPA has also adopted regulations regarding such authority in 40 CFR 51.150, and these regulations will remain effective under section 193, to the extent they are not inconsistent with the new law, until EPA amends them.

Subsection ( H) was not revised by the amendments. It still requires States to provide for the revision of their SIP's ( commonly referred to as " SIP calls") in two circumstances: if the NAAQS were revised, or if EPA made a finding that the plan was substantially inadequate to attain the standard. New section 110( K)( 5) gives EPA the authority to issue a SIP call.

Amended subsection ( I) adds a new requirement to section 110( a)( 2). It now states explicitly that any plan or plan revision must meet the applicable requirements of part D ( provisions relating to nonattainment areas). Although this is a new section 110( a)( 2) provision, it does not add a new requirement to the Act as a whole. The SIP's for nonattainment areas have always been required to meet the part D requirements.

Subsection ( J) has also been retained in its preexisting form. It continues the requirement that SIP's meet the applicable PSD and visibility requirements and the associated consultation and public notification provisions of sections 121 and 137, respectively.

Amended subsection ( K) reinforces EPA's authority to require States to do air quality modeling. Although this is a section 110( a)( 2) provision, EPA has always had the authority to require appropriate modeling. This requirement will be met if the State submits its actual modeling in its SIP submittal, and EPA determines that the submitted SIP measures are approvable. The EPA currently does not have regulations concerning modeling for the SIP demonstration purposes,/ 35/ but has issued guidance ( e. g., " EPA's Guideline on Air Quality Modeling" ( 1987)).

NOTE / 35/ Under the PSD provisions of section 320, EPA has historically had such modeling rules. In addition, EPA has used these rules as guidance for other purposes, using the guidance as a basis for what is adequate modeling. This new subsection ( K) requirement ratifies EPA's past application of the rules, as rules for PSD purposes and as guidance for other purposes.

The pre amended provisions concerning permitting fees has been carried over in subsection ( L). Although the language of this provision has not changed, in light of the new permit provisions of the amended Act ( title V), these requirements could have a different impact from under the pre amended Act. Amended subsection ( M) is a new provision requiring States to provide for consultation and participation by local political subdivisions affected by the SIP. This section builds on several other section 110( a)( 2) requirements that require consultation and participation in regard to specific SIP elements.

2. Conformity ( a) General requirements. Section 176( c) provides the framework for ensuring that Federal actions conform to air quality plans under section 110. Under section 176( c), before any agency, department, or instrumentality of the Federal Government engages in, supports in any way, provides financial assistance for, licenses, permits, or approves any activity, that agency has an affirmative responsibility to ensure that such action conforms to the SIP or FIP.

" Conformity to an implementation plan" is defined in section 176( c)( 1) ( A and B) of the Act as meaning " conformity to an implementation plan's purpose of eliminating or reducing the serverity and number of violations of the national ambient air quality standards and achieving expeditous attainment of such standards; and that such activities will not cause or contribute to any new violation of any standard in any area; increase the frequency or severity of any existing violation of any standard in any area; or delay timely attainment of any standard or any required interim emission reductions or other milestones in any area." The intent of these provisions is explained in the Committee Report:

Through the evaluation of the air quality impacts of proposed projects before they are undertaken, the conformity provision is intended to foster long range planning for the attainment and maintenance of air quality standards, and to assure that Federal agencies do not take or support actions which are in any way inconsistent with the effort to achieve NAAQS or which fail to take advantage of opportunities to help in the effort to achieve the NAAQS. ( Committee expects that the new conformity provisions will be especially helpful in assuring that air quality considerations play a greater role in Federally supported transportation planning efforts, which can have a major impact on air quality and, in some severely polluted areas, are essential as part of the program for achieving the NAAQS (" Committee Report," page 222.)

Section 176( c)( 4) required EPA to promulgate general criteria and procedures for determining conformity by November 1991. In the case of transportation plans, programs, and projects, the EPA Administrator, with the concurrence of the Secretary of Transportation, was required to promulgate criteria and procedures for " demonstrating and assuring" conformity by November 1991. Section 176( c)( 4)( C) requires EPA to include in such procedures a requirement that each State submit to EPA and the DOT by November 1992 a revision to the implementation plan that includes criteria and procedures for assessing the conformity of any plan, program, or project subject to the conformity requirements. Until this revision is approved by EPA, existing conformity provisions in the SIP remain in effect. The criteria for determining transportation conformity ultimately require the existence of SIP's which contain estimates of emissions from motor vehicles. Until such times as EPA approves these SIP's however, there exists an interim period with criteria for determining transportation conformity which are different from those that will apply after the SIP is approved. These interim criteria are contained in section 176( c)( 3). The EPA and DOT jointly issued guidance on transportation conformity for this interim period based on these criteria in June 1991.

The EPA's transportation conformity regulations are still under development, in coordination with DOT. On October 24, 1991, EPA and DOT jointly issued further guidance indicating that the interim transportation guidance issued on June 7, 1991 would continue in effect until the agencies promulgated final conformity regulations. It is unlikely that final regulations will be available significantly before November 1992 to allow States to submit SIP revisions addressing conformity by November 15, 1992, the date the statute requires EPA to call for such submittals in its regulations. The EPA consequently anticipates that in its conformity regulations, it will establish a later date for such SIP submittals in recognition of the impossibility of imposing the 1992 date. The EPA intends to provide States with a reasonable period to develop conformity regulations, such as the year that Congress had in mind in section 176( c)( 4)( C). The EPA notes for clarification that States are under no duty to submit conformity regulations until EPA promulgates its regulations and establishes a date for such submittals. Detailed guidance on the overall conformity program will be provided in later rulemaking actions. The guidance below concerns section 176( c)( 1)( B)( iii) as applied to nonattainment areas.

( b) Establishment of emission budgets for transportation related actions in ozone or CO nonattainment areas. In general, Federal actions may not delay timely attainment of any standard or any required interim emission reductions or other milestones in any area. More specifically, after the interim period, conformity cannot be determined for a transportation plan or program unless a determination has been made by the metropolitan planning organization that emissions expected from implementation of such plans and programs are consistent with estimates of emissions contained in the applicable SIP. The EPA interprets these provisions to mean that the combination of highway capacity expansion, highway extensions, support for transit, and TCM's in the transportation plan and program must result in vehicle emissions that are not in excess of those contained in the SIP's demonstration of RFP and attainment, despite any difference that may exist between the area's current and forecasted population, employment, and travel demand and those that were assumed at the time of SIP preparation and adoption. In other words, the conformity provisions envision that the SIP will create an emissions budget ( for the criteria pollutant and its precursors) for highway vehicles, and that the transportation planning process will be required to produce plans and programs that will result in emissions within that budget. For regional pollutants ( ozone, NO2, CO in some areas, and PM 10 in some areas) the transportation planning process is not required to demonstrate again that the budgeted emission level will result in attainment. ( For pollutants capable of forming hot spots of nonattainment, an air quality determination is required.) ( 1) Areas required to demonstrate RFP and attainment. For nonattainment areas that are required to demonstrate RFP and attainment by a future year, the SIP revision that contains those demonstrations will necessarily contain statements of the motor vehicle emissions for future years on which those demonstrations are based. These statements will become the emissions budgets that will be used for later conformity determinations. Budgets will thereby be defined for a number of future dates, depending on the RFP and attainment showings required for the area based on its nonattainment status. States should make sure that these budgets are stated clearly and unambiguously in the SIP. For example, assumed temperature inputs and the geographic area of the inventory must be stated so that comparisons can be made later on an accurate basis. The RFP milestones will usually be defined in terms of typical seasonal weekday emissions, like the base and periodic inventory. Attainment demonstrations may be based on individual episode days, however. If so, the SIP must contain an attainment year inventory expressed on the same basis as the other milestone inventories.

The 1990 CAAA allow a single budget for a nonattainment area for a given criteria pollutant or percussor. However, States have the option of specifying the budgets in more detail or disaggregation. For example, an ozone attainment demonstration using a grid model will contain estimates of vehicle emissions for many small grid squares. The SIP may provide that only the sum of vehicle emissions from all grids within the nonattainment area will apply for purposes of conformity determination, or it may divide the area into subareas and establish a budget for each. This approach would provide additional assurance that transportation plans and programs will result in emission patterns that will produce attainment. Such an approach will of course constrain the transportation planning process, and it may later be found useful for the State to submit a SIP revision showing that some other distribution of emissions, or even a different emission total, is also consistent with attainment. A SIP may also provide for alternative emission budgets each of which is shown to produce milestone compliance and/ or attainment, for example, different combinations of VOC and NOx emissions. Finally, a SIP that demonstrates a margin of safety with respect to milestones may identify a budget for conformity purposes which is higher than expected to result from the measures in the SIP, but is consistent with the milestone and attainment date requirements, for purposes of providing the transportation planning process with a cushion for unexpected growth or less than expected effectiveness from TCM's. This sort of cushion for unexpected growth is only a suggestion and EPA wants to affirm its confidence in the SIP planning process. This does not change the substantive requirements for SIP approval, however.

( 2) Other nonattainment areas. Transitional, submarginal, and marginal ozone nonattainment areas, not violating CO areas, and moderate CO areas with design values of 12.7 ppm or less are not required to include specific attainment demonstrations or to show compliance with interim milestones. Consequently, they are not required to contain statements of future emissions which could be used as emissions budget for later conformity determinations. Nevertheless, EPA believes that the intent of section 176( c) is to make conformity a meaningful process for these areas, rather than to release the transportation planning process of all rsponsibility for area wide motor vehicle emissions. On the other hand, the need to provide emissions criteria for future conformity determinations should not defeat the evident congressional intent to temporarily excuse these areas from having to develop and implement control strategies beyond vehicle fleet turnover, Federal measures, and required measures specified for them in the Act. It also seems clear that Congress did not intend these areas to be subject to any serious constraint on VMT and industrial activity growth prior to the date on which they are vulnerable to being reclassified for failure to attain. To satisfy these intents, these States should choose from two options as described below, and clearly indicate their selection in the SIP.

First option: The State may elect to extend the interim conformity criteria of section 176( c)( 3)( A) for the entire period prior to EPA approval of either a section 175( A) maintenance SIP or following bump up a SIP that meets RFP and attainment requirements. These interim criteria would otherwise expire when EPA approves the conformity SIP revision described in section III. H. 1. a. The most important of these criteria is that the transportation plan and program must contribute to emissions reductions, i. e., that implementation of the plan and program will cause lower emissions than if new projects were not implemented. This option requires the least analysis by the State, but precludes transportation plan caused increases in emissions that might in fact not interfere with attainment by the deadline due to the large reductions resulting from other measures. In the joint EPA/ DOT interim conformity guidance, these areas were implicitly placed under this option and will remain there unless a SIP revision exercising the second option is approved.

Second option: The State may voluntarily submit, as a SIP revision, an attainment demonstration and corresponding motor vehicle emissions budget, like higher classified areas. This may show that transportation plans that cause emissions increases are in fact compatible with attainment, thereby providing the transportation planning process flexibility to adopt such plans later.

( 3) Maintenance plan. More specific guidance on the content of maintenance plans may be provided at a date closer to when States will be preparing these plans. For now, States should be aware that transportation planning in areas redesignated to attainment and operating under a maintenance plan will also be subject to the emissions budget concept. A budget for motor vehicle emissions must be establishment in the maintenance plan and shown to be consistent with the maintenance demonstration in light of expected emissions from other sources.

( 4) Emission budgets during the replanning period immediately following failure to meet a milestone or failure to attain. Failure to meet a milestone or to attain by the expected date may be due to inaccurate inventorying of 1990 emissions, inaccurate air quality modeling, excess growth in nonvehicle emissions, or excess growth in vehicle emissions despite the operation of the conformity process. In such cases, the adequacy of the emissions budgets for motor vehicles is called into question and new budgets must be developed as part of the replanning that is required by the 1990 CAAA. Until a new SIP is approved or a Federal plan is promulgated, the previous budgets will continue to be applied for demonstrating conformity.

( c) Identification and scheduling of transportation control measures. Section 176( c)( 2)( B) requires that transportation improvement programs provide for timely implementation of TCM's consistent with schedules included in the applicable SIP. In general, EPA will allow emission reduction credit only for TCM's that are fully adopted and for which a sponsoring agency has made an enforceable commitment of its own; nevertheless, the provision regarding transportation improvement programs will be an important aid to implementation. Effective implementation of this provision will require that SIP's adequately describe TCM's with respect to their design, location, scope, scale, and implementation schedule including milestones prior to full adoption.

3. Planning Requirements Including Section 174 Section 174, Planning Procedures, was broadened to ensure that State and local authorities share in the development, implementation, and enforcement of the SIP. This section requires the State to certify the planning organization and to identify the specific State, local, or regional agencies that will develop, adopt, and implement the elements of the SIP. In addition, a new subsection was added to clarify that when a nonattainment area includes more than one State, the affected States may jointly undertake planning procedures. States are required to review and update, as necessary, their SIP planning procedures by November 1992. Two options are generally available to States through section 174: To continue using the planning organization previously certified, or to certify a new planning organization. If a new planning organization is certified, section 174 requires that organization to include elected officials or local governments in the affected area and representatives of the State air quality planning agency, the State transportation planning agency, the metropolitan planning organization designated to conduct the continuing cooperative and comprehensive transportation planning process for the area under section 134 of title 23, U. S. C., the organization responsible for the air quality maintenance planning process, and any other organization with responsibilities for developing, submitting, or implementing any aspects of the SIP.

The EPA encourages the States to certify either the previous organization or a new organization well before the November 1992 deadline. Early certification will be helpful to the various agencies that must meet deadlines by this date.

Additional guidance on the new section 174 provisions is contained in the update of the 1978 Transportation Air Quality Planning Guidelines by EPA and DOT, due in November 1991. Previous guidance issued by EPA and DOT in 1977 specific to section 174 was superseded by this 1991 update. The EPA will soon update Subpart M, Intergovernmental Consultation, of the " Code of Federal Regulations" to reflect the new section 174 requirements.

4. Economic Incentives Since 1980 EPA has developed several programs to allow industry and States more flexibility in meeting statutory requirements of the 1977 Act. One of these initiatives is the Emissions Trading Policy Statement ( ETPS) ( 51 FR 43814, December 4, 1986). The ETPS allows source specific SIP revisions for sources to trade emissions reductions credits ( ERC's) with other sources to meet some emission limitations. All ERC's must be permanent, real, quantifiable, ( federally) enforceable, and surplus ( i. e., not otherwise needed for an attainment strategy or other already existing control requirements). The ETPS also allows States to develop and adopt generic emission trading programs into their SIP. To receive EPA approval, a generic emission trading program must contain replicable procedures to ensure that all ERC's meet the criteria above.

As discussed below, the CAAA include several new economic incentive programs as well as changing statutory language that may lead to modification to existing policies, including updating of the ETPS. The EPA has started work to inventory potential discrepancies between the ETPS and the CAAA. If warranted, EPA would issue a policy interpretation of the ETPS that EPA will use when applying the ETPS for the SIP approval process. The 1990 CAAA encourage innovation through the use of market based approaches, not only in the title IV acid rain program, but also in title I SIP provisions. The use of economic incentives are explicitly allowed for in the general SIP requirements ( section 110( a)( 2)), the general provisions for nonattainment SIP's ( section 172( c)( 6)), and in the system of regulations for controlling of emissions from consumer or commercial products ( section 183( e)( 4)).

Beyond these general allowances for economic incentives, use or considering the use of an option to implement economic incentives is mandated in certain cases. These cases include State failure to submit a compliance demonstration or to meet applicable milestones for RFP for serious, severe, and extreme ozone nonattainment areas ( sections 182( g)( 3) and 182( h)) and State failure to submit a milestone demonstration, to meet a required specific emissions reductions milestone, or for serious CO nonattainment areas to attain the standard ( sections 187( d)( 3), 187( g)).

Section 182( g)( 4)( A) defines such a State economic incentive program as one that is consistent with EPA rules, the publication of which is mandated by November 15, 1992 ( section 182( g)( 4)( B)). According to section 182( g)( 4)( A), the State program may include but is not limited to, systems of emissions fees, marketable permits, or State fees on the sale or manufacture of products, as well as incentives and requirements to reduce vehicle emissions and VMT's, including any of the TCM's in section 108( f).

One such TCM is the accelerated retirement of vehicles. It is estimated that in some areas of the country, as few as 20 percent of the vehicles produce up to 60 percent of the total vehicle emissions. Because of less stringent emission standards, deterioration, tampering, malmaintenance, old vehicles can emit at very high levels. An accelerated retirement program encourages the removal and destruction/ recycling of these older vehicles by offering individuals money of their " old" cars. An incentive is created for owners to voluntarily trade in these vehicles for new, lower emitting vehicles.

The EPA believes that an accelerated retirement program can be an important part of an attainment strategy by providing greater flexibility to industry in complying with emission standards. By this notice, EPA is announcing the availability of an information document of the accelerated retirement of vehicles programs, as required under section 108( f). The document outlines the theory behind accelerated vehicle retirement, considers desirable elements of program design, and discusses the experience of a pilot program sponsored by UNOCAL Corporation in Southern California.

States may include scrappage programs in SIP submissions. Scrappage emissions reductions will get full credit toward SIP attainment demonstrations. To the extent permissible by law, credits generated through scrappage programs may be used to meet air quality limitations.

The EPA interprets 182( g)( 4)( A) as allowing a broad range of market based strategies. The State program is to be " nondiscriminatory" and consistent with inter State commerce laws ( section 182( g)( 4)( A)).

The EPA's economic incentive rules are to include model plan provisions for permitted stationary sources, area sources, and mobile sources, as well as guidelines that specify how revenues generated by the plan provisions shall be used ( section 182( g)( 4)( B)). These rules will address issues such as setting baselines, banking provisions, administrative requirements and consistency with the title V Permitting Program, title VII Enhanced Monitoring and Compliance Certification Program, and other provisions discussed elsewhere in this notice. The EPA currently views these rules as guidance that is intended to encourage early implementation of appropriate economic incentive programs to potentially avoid such failures in the future. The EPA hopes that the rules will stimulate innovative, market based approaches, where appropriate, in meeting long term milestones and goals. The EPA also will give consideration to using these rules as guidance in developing Federal rules and FIP strategies when necessitated by State failures in meeting RFP milestones. The EPA will solicit comments on its economic incentive program rules at the time of proposal of that rulemaking.

The EPA encourages the development of economic incentive programs that increase flexibility and stimulate the use of more cost effective strategies, as well as provide incentives for continuing to develop and implement innovative emissions reductions technology and strategies beyond those specifically mandated through standards and regulations. However, EPA believes that the implementation of economic incentive programs must also meet the standards of enforceability currently found in traditional regulatory programs.

The Agency wishes to clarify its position regarding mobile/ stationary source trading. The agency is very supportive of efforts to trade emission reductions among mobile and stationary sources to the extent such trades would result in a less costly mix of measures to attain the standards and would meet the relevent Clean Air Act requirements. EPA will work with states and individual sources to highlight and develop such trading opportunities and will be taking various steps to encourage such trades.

In particular, EPA will clarify which Clean Air Act requirements can be met by trading emission reductions among mobile and stationary sources and how such trading can be implemented, through guidance it will issue as part of the economic incentive rules and elsewhere as necessary. This guidance will encourage states to consider such trades as they develop their state implementation plans. Mobile source programs which could generate tradeable credits include, but are not limited to: ** An accelerated vehicle retirement program, ** A program to convert cars or fleets to cleaner fuels, and ** A program to expand the geographic coverage of inspection and maintenance programs.

States can allow stationary sources to use these reductions on an individual basis to meet certain emission reduction requirements or to generate tradeable offsets to help meet new source review requirements where not prohibited by the statute.

5. Section 172( c)( 1) Requirement for All Reasonably Available Control Measures ( RACM)

Section 172( c)( 1) requires the plans for all nonattainment areas to provide for the implementation of all RACM as expeditiously as practicable. The EPA interprets this requirement to impose a duty on all nonattainment areas to consider all available control measures and to adopt and implement such measures as are reasonably available for implementation in the area as components of the area's attainment demonstration.

The EPA has previously interpreted the RACM provisions of the pre amended Act. The EPA is today changing its prior interpretation and adding specific interpretations with respect to PM 10. The following discussion explains the origins of EPA's past interpretation and the rationale for the current changes to that interpretation.

The EPA previously interpreted this provision under the pre amended Act in its guidance at 44 FR 20372, 20375 ( April 4, 1979). The EPA there indicated that where measures that might in fact be available for implementaton in the nonattainment area could not be implemented on a schedule that would advance the date for attainment in the area, EPA would not consider it reasonable to require implementation of such measures. The EPA continues to take this interpretation of the RACM requirement.

Also in the 1979 guidance, EPA created a presumption that all of the TCM's listed in section 108( f) were RACM for all areas, and required areas to specifically justify a determination that any measure was not reasonably available based on local circumstances. The EPA reiterated that guidance at 46 FR 7182, 7187 ( January 22, 1981).

However, based on experience with implementing TCM's over the years, EPA now believes that local circumstances vary to such a degree from city to city that it is inappropriate to presume that all section 108( f) measures are reasonably available in all areas. It is more appropriate for States to consider TCM's on an area specific, not national, basis and to consider groups of interacting measures, rather than individual measures.

The section 108( f) measures should be considered by States as potential air quality control options. Further, the list should not be viewed as exhaustive, but rather indicative of the types of TCM's States should consider in developing the TCM portion of their control strategy. A recent study for EPA identified more than 70 individual measures within broad TCM categories that could be considered as potential controls ( SAI, IT, PES 9 90). In addition, any measure that a commenter indicates during the public comment period is reasonably available for a given area should be closely reviewed by the planning agency to determine if it is in fact reasonably available for implementation in the area in light of local circumstances.

Local circumstances relevant to the reasonableness of any potential control measure involve practical considerations that cannot be made through a national presumption. Various TCM's must be locally coordinated to minimize contradictory results and maximize mutually supportive outcomes. Feasibility of TCM implementation can thus be particularly complicated, and EPA recognizes the importance of assessing candidate TCM's in the context of each particular area's situation.

Finally, with respect to TCM's or any other control measures, EPA does not believe that Congress intended the RACM requirement to compel the adoption of measures that are absurd, unenforceable, or impracticable ( see 55 FR 38326, September 18, 1990).

The EPA, therefore, concludes that it is inappropriate to create a presumption that all of the measures listed in section 108( f) are per se reasonably available for all nonattainment areas. All States must, at a minimum, address the section 108( f) measures. The EPA believes that at least some of the measures will be reasonably available for implementation in many nonattainment areas. Where a section 108( f) measure is reasonably available, section 172( c)( 1) requires its implementation.

The Senate managers' explanation of the new transportation control provisions includes a statement endorsing EPA's 1979 guidance on RACM as recently construed by the Court of Appeals for the Ninth Circuit in Delaney v. EPA, 898 F. 2d 687 ( 1990). 136 Cong. Rec. S16971 ( daily ed. Oct. 27, 1990). In that case, the court held that EPA was bound to apply its then applicable 1979 RACM guidance by its own terms, which created the presumption that all section 108( f) measures were reasonably available. However, the court did not hold that the statute required such an interpretation of the RACM requirement, nor that EPA could not in the future revise its RACM guidance. The EPA remains free to alter its past guidance consistent with a reasonable interpretation of statutory requirements in light of historical experience implementing TCM's.

The legislators who cited the Delaney v. EPA decision had lobbied in the Senate Committee bill for a requirement that all section 108( f) measures be implemented in severe ozone nonattainment areas. This position was however abandoned in the final Senate bill. Any statements in the subsequent Senate debates concerning implementation of all section 108( f) measures therefore do not necessarily reflect the views of the Senate as a whole, let alone the entire Congress.

Finally, EPA also notes that it believes the court in Delaney v. EPA mischaracterized EPA's guidance in one respect. The court stated that in light of the previous presumption that section 108( f) measures were reasonably available, " a state can reject one of these measures only by showing that the measure either would not advance attainment, would cause substantial widespread and long term adverse impact, or would take too long to implement." Delaney, at 692. In the case before the court, EPA had argued that certain measures would have substantial widespread and long term adverse impact. However, EPA believes that its revised RACM interpretation would provide for the rejection of control measures as not reasonably available for various reasons related to local conditions even where such costs fell short of substantial widespread impact. This is especially true in the absence of a presumption that any given measure is per se reasonably available.

Section 177 permits a State to adopt and enforce new motor vehicle emission standards that are identical to those adopted by California and for which a waiver under section 209( a) has been granted. The EPA is not able at this time to specify the emissions reduction credits that may be available to a State that adopts emissions standards identical to California's so called " Low Emission Vehicle ( LEV) program." The EPA is presently developing the updated version of its mobile emissions model MOBILE5 which will include EPA's estimates of the SIP credits available to States adopting the LEV standards. The EPA plans to complete work on the model in June 1992, at which time it will be made available to States and the public.

The EPA has recently been asked whether a State, which requires under section 177, that new vehicles sold in the State comply with the California standards, must also require that those vehicles use the fuel or fuels upon which they were certified as meeting the California standards. The EPA is undertaking a legal and policy review of this question.

PM 10 is different from O3 and CO in that here may be many PM 10 areas where mobile sources do not significantly contribute to the nonattainment problem in the area. Section 190 of the Act, which applies specifically to PM 10, recognizes this distinction. Section 190 specifies those source categories for which EPA is required to issue guidance on RACM. Section 190 also provides that EPA shall examine other categories of sources contributing to nonattainment of the PM 10 standard and determine whether additional guidance on RACM is needed. Section 190 represents a statutory expression of those sources generally deemed to contribute to the PM 10 nonattainment problem and requires that EPA determine whether other sources contribute to the PM 10 nonattainment problem and, as necessary, issue RACM guidance for such sources. Thus, in the discussion addressing PM 10 RACM, EPA takes the position that the available control measures EPA has identified in its guidance issued under section 190 are the suggested starting point for determining RACM. Accordingly, the affected State should evaluate these measures and other measures that a commenter demonstrates may well be reasonably available in an area considering their technological and economic feasibility in the area to which the SIP applies.

The EPA received comments requesting that additional control measures, including the TCM's identified in section 108( f) of the amended Act, be added to EPA's guidance on control measures issued under section 190. At this time, EPA has insufficient information to conclude that the sources addressed by these measures contribute to the PM 10 problem in a sufficient number of areas in the nation such that section 190 guidance is necessary. Thus, EPA does not presently believe that each of these measures should be added to the list of measures which is the suggested starting point for the RACM analysis for each of the PM 10 nonattainment areas in the nation. This is not to suggest that States should ignore such measures. In those PM 10 nonattainment areas where mobile sources do significantly contribute to the PM 10 air quality problem, consistent with the statement above regarding section 108( f) measures, the State must, at a minimum, address the section 108( f) measures. Similarly, it follows that where a section 108( f) measure is reasonably available, sections 189( a)( 1)( c) and 172( c)( 1) require its implementation.

6. Redesignations Section 107( d)( 3) of the Act specifies the procedures and reqirements for changing an area's designation. Subparagraphs ( A), ( B), and ( C) describe the requirements and schedules for such changes when initiated by the Administrator. An additional discussion of the reqirements and schedules is provided in 56 FR 16274 ( April 22, 1991) describing the notification of States that certain PM 10, SO2, and lead areas should be redesignated.

Section 107( d)( 3)( E) specifies the conditions under which the Administrator may approve a Governor's request ( submitted in accordance with section 107( d)( 3)( D)) for redesignating an area from nonattainment to attainment. These conditions are as follows: ( 1) The Administrator has determined that the NAAQS has been attained.

( 2) The Administrator has fully approved the applicable implementation plan under section 110( k).

( 3) The Administrator has determined that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementing the applicable implementation plan and applicable Federal air pollutant control regulations and other permanent and enforceable reductions.

( 4) The Administrator has fully approved the maintenance plan for the area as specified in section 175A.

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

The remainder of this discussion describes how EPA will review a State request to redesignate an area from nonattainment to attainment, and what criteria EPA will use in determining whether the above conditions have been met.

( a) Requests submitted before enactment. Some States had submitted requests for redesignation prior to enactment of the 1990 CAAA that EPA was unable to process before enactment. The EPA plans to review these requests carefully to determine whether the above conditions ( as described further under " Requests Submitted After Enactment"), including the maintenance plan requirement, have been essentially satisfied by the State's actions under the provisions of the Act prior to enactment of the 1990 CAAA. The EPA will determine on a case by case basis what additional information is needed in order for the requests to be approvable. At a minimum, an appropriate maintenance plan showing maintenance of the standard at least 10 years from the time of EPA approval will still be needed before the request for redesignation is considered complete.

The maintenance plan requirement is not applicable in the very narrow circumstance where the amended Act does not apply to the redesignation. At the time of enactment, November 15, 1990, two redesignation actions were substantially completed the Atlanta CO redesignation and the Green Bay SO2 redesignation. Because the States had completed all necessary action, the Agency had done everything but prepare a final approval notice, and no adverse comments were received, EPA determined that the new redesignation requirements were not applicable ( see 56 FR 37285 ( August 6, 1991); 57 FR 3013 ( January 27, 1992)).

States should consult with their EPA Regional Offices to determine what additional information is needed to supplement their requests for redesignation, including information to satisfy any new requirements under section 110 or subpart 1 of part D of the 1990 CAAA. For example, EPA plans to assume that the operating permits program requirements of title V ( including the requirement for permit fees) that will be implemented in States over the next few years will effectively satisfy the section 110( a)( 2)( L) requirement for permit fees in the subject areas ( i. e., in areas for which requests for redesignation were submitted prior to enactment of the Act). States should consult with the Regional Offices about other new requirements under section 110 or subpart 1 of part D in the Act, and whether any additional State actions will be needed to satisfy those requirements.

The EPA believes that the language of section 107( d)( 3)( E)( iii) clearly requires that the emission reductions that were achieved and enabled the area to attain the standard must be linked to enforceable regulations. Many of these regulations are rules representing RACT as required for an area before and/ or after enactment of the 1990 CAAA ( depending on the particular area). Even though EPA has found a range of deficiencies in State RACT rules and has notified many States that corrective action is needed,/ 36/ EPA believes that the current emphasis for areas that had submitted a request for redesignation prior to enactment should be on the enforceability of the rules in place at the time of enactment. Therefore, for these types of areas, the States must make whatever corrections are necessary to ensure that the rules are and continue to be fully enforceable./ 37/

NOTE / 36/ The EPA issued SIP calls to a number of States in 1988 and 1989 requiring that they correct their RACT rules as necessary to be consistent with EPA guidance and policies. In addition, new section 182( a)( 2) specifically requires all ozone nonattainment areas with a marginal or above classification to correct or add RACT requirements for complying with the provision of pre enactment section 172( b).

NOTE / 37/ See " Issues Relating to VOC Regulations, Cutpoints, Deficiencies, and Deviations," U. S. Environmental Protection Agency, Office of Air Quality Planning and Standards, Air Quality Management Division, May 25, 1988.

As a matter of course, EPA will not require the full set of RACT corrections ( e. g., lower source size applicability thresholds) in areas that had submitted a redesignation request prior to enactment and that were not violating the standard at the time of enactment. Imposing more stringent rules ( unless needed for maintenance) appears to be unnecessary since applying the current State rules has resulted in attainment of the standard. In other words, the uncertainty of mathematical models or other techniques for projecting attainment when planning first occurred for these areas strongly supported the need for any possible " margin of safety" that might be provided by RACT measures or any other measures. But now that attainment has occurred, the justification or need for the margin of safety that might have been produced by the RACT measures ( adopted and implemented in a manner consistent with EPA guidance and policies) is lessened. However, to satisfy the goals of section 107( d)( 3)( E)( iii) and to ensure the soundness of the maintenance plan ( discussed below), these areas still must ensure that their RACT rules are consistent with any guidance or policies concerning the enforceability of rules ( e. g., adopting the most recent EPA test methods and procedures available at the time of the redesignation request). In addition to ensuring that appropriate RACT corrections have been made to ensure that the rules are enforceable, the State must show that the emission inventory that occurred during the time of no violations of the standard is based on the implementation of permanent and enforceable regulations rather than a " temporary" reduction in emissions, which may have resulted from a suspension of industrial production or other temporary change in the industrial or economic activity in the area. Reductions in emissions from shutdowns are considered permanent and enforceable to the extent those shutdowns have been reflected in the SIP, and all applicable permits have been modified accordingly. During the pendency of these redesignation requests, EPA will not require these areas to adopt amended NSR program elements. However, these areas must continue to apply their existing NSR program or comply with the NSR permitting requirements of 40 CFR part 51, appendix S. Prior to redesignation, these areas also must adopt and be prepared to implement a permitting program that satisfies the requirements of part C and EPA's regulations implementing the PSD program. Areas should consider the need for offsets under the part C program to ensure that new sources do not " cause or contribute" to an increase in pollutant levels that would take the area out of compliance. If the area's redesignation request is rejected and the statutory deadlines for adopting amended part D permitting rules for the pollutant in question have passed, EPA may impose a construction ban pursuant to section 113( a)( 5) until such time as the area adopts a part D program satisfying the NSR requirements of the CAAA.

The requirements of the applicable SIP will continue in force and effect even after the request has been approved and the area has been redesignated to attainment except to the extent the maintenance plan shows that such measures are not necessary to maintain the standard. The requirement for new or modified control measures or regulations for these areas is discussed below under " Improvement in Air Quality Results From Implementation of the SIP." ( b) Requests submitted after enactment. Any requests for redesignation from nonattainment to attainment that are submitted to EPA after enactment of the 1990 CAAA must satisfy the conditions in section 107( d)( 3)( E) that were listed at the beginning of this section ( III. H. 6). Certain of these conditions ( listed above) are further described below.

( 1) Determining whether the area has attained the ambient standard. The NAAQS for ozone and CO are specified in 40 CFR 50.9 and 50.8, respectively. Appendix H of 40 CFR 50.9 ( Interpretation of the National Ambient Air Quality Standards for Ozone) explains the procedures for determining whether violations of the ozone standard have occurred. A recent EPA memorandum / 38/ provides additional guidance on calculating " design values" and attainment for ozone and CO.

NOTE / 38/ " Ozone and Carbon Monoxide Design Value Calculations," William G. Laxton, Director, Technical Support Division, Office of Air Quality Planning and Standards, June 18, 1990.

Any request for redesignation should be based on the most recently available and quality assured air quality monitoring data, collected in accordance with the requirements of 40 CFR part 58.

( 2) Full approval of the applicable implemention plan. Section 110( k)( 3) allows the Administrator to approve or disapprove a plan revision in full or in part. Although section 110( k)( 4) provides for conditional approval of a SIP revision in certain circumstances, a conditionally approved plan revision is not to be treated as satisfying the requirements of the Act until the entire revision has been approved as satisfying the Act requirements. Therefore, in order for the request for redesignation of an area from nonattainment to attainment to be approved, the State must have satisfied all requirements of the Act that apply to the area. The requirements have not been met if a revision has been only partially approved ( or has been partially disapproved).

( 3) Improvement in air quality results from implementing the SIP. Section 107( d)( 3)( E)( iii) requires that prior to approving a request for redesignation of an area from nonattainment to attainment, the Administrator must determine that the improvement in air quality has resulted from permanent and enforceable emission reductions resulting from implementing the SIP and applicable Federal measures and/ or from other permanent and enforceable measures. Before it makes such a determination, EPA will require that these measures satisfy EPA guidance or requirements regarding enforceability, and that the emission inventory for the area during the time in which attainment has been demonstrated is based on permanent and enforceable regulations or measures.

The EPA believes that the language of section 107( d)( 3)( E)( iii) clearly requires that the emission reductions that were achieved and enabled the area to attain the standard must be linked to enforceable regulations in the SIP. The EPA will assume that all control measures and regulations in the SIP for an area contribute to attainment of the standard. Therefore, any request for redesignation to attainment must show that permanent and enforceable rules are in place to implement these requirements. This showing will also support the State's demonstration that it has met all requirements that apply to the areas under section 110 and part D ( discussed below under " Meeting section 110 and part D Requirements").

In addition to showing that it has developed enforceable rules and measures implementing the requirements that apply to the area, the State must show that the emission inventory that occured during the time of no violations of the standard is based on the implementation of permanent and enforceable regulations rather than a temporary reduction in emissions, which may have resulted from a suspension of industrial production or other temporary change in the industrial or economic activity in the area. Reductions in emissions from shutdowns are considered permanent and enforceable to the extent those shutdowns have been reflected in the SIP and all applicable permits have been modified accordingly.

( 4) A fully approved maintenance plan. The State must submit a maintenance plan in accordance with section 175A for any area the State requests be redesignated from nonattainment to attainment. This plan must provide for maintenance of the standard for at least 10 years from the anticipated date of redesignation. Eight years after the redesignation date, the State will be required to revise its SIP to provide for maintenance in the area for an additional 10 years ( beyond the first 10 year period).

The maintenance plan consists of three basic components: An emission inventory, a maintenance demonstration, and contingency measures. The inventory must include the emissions that occurred during the same period associated with attaining the national standard. The EPA plans to issue additional guidance on preparing these inventories and other components ( discussed below) of the maintenance plan.

For the maintenance demonstration, the State must either demonstrate that the future emission inventory will not exceed the inventory that existed at the time of the request for redesignation, or conduct an appropriate modeling analysis consistent with EPA's " Guidelines on Air Quality Models" that shows that the future mix of sources and emission rates when combined with control strategy for the area, will not cause any violations of the ambient standard. Under either alternative, the State must identify the mechanism that will be used to track the progress of the maintenance plan. Where the maintenance demonstration is based on the inventory, the State may choose to periodically update the emission inventory or periodically review the factors used to develop the inventory to determine whether any significant changes have occurred. Where the demonstration is based on modeling, the State may periodically review the assumptions and input data for the modeling analysis. Such reviews and/ or updates may typically be done every 3 years. The maintenance plan must contain any additional measures as necessary to ensure that the standard will not be violated. Any future measures must be implemented before any violations might be anticipated, based on tracking of the emission inventory ( under the first alternative, above) or the modeling assumptions and input data ( under the second alternative). The maintenance plan must also include contingency measures to ensure that any violations can be quickly addressed should such violations occur after the area is designated to attainment. The EPA will review each request for redesignation on a case by case basis to determine what contingency measures are needed for possible violations. Section 175( d) requires the maintenance plan to contain, at a minimum, a commitment for the implementation of all measures that were part of the control strategy ( i. e., the SIP) for the area prior to redesignation should violations occur in the future./ 39/ The plan should provide for prompt implementation of these measures with minimal administrative action on the part of the State or other government agency responsible for its implementation.

NOTE / 39/ This provision implies that the State would have removed or reduced the stringency of certain measures in the SIP after the area was redesignated to attainment. The EPA is soliciting comment on the circumstances in which the State may remove or modify measures that are specifically required ( e. g., enhanced I/ M) or are required as part of the demonstration of attainment. Any approach would have to ensure that the maintenance plan would prevent future violations either through a limit on overall emissions or a rigorous modeling analysis, or some combination. EPA also solicits comment on the emission limit and modeling analysis should be applied. For example, should a limit on overall emissions be required at least for some period beyond the time the area is designated to attainment?

( 5) Meeting section 110 and subpart 1 ( of part D) requirements. In order to be redesignated from nonattainment to attainment, an area must have met all of the applicable requirements in section 110 ( regarding general provisions needed in a SIP) and in part D ( regarding the requirements for nonattainment plans). Part D contains general provisions that apply to all nonattainment plans and certain sections that apply to specific pollutants ( e. g., section 182 applies for ozone nonattainment areas).

Subpart 1 of part D contains the general requirements for nonattainment plans. Section 172( c) describes the provisions required in nonattainment plans. The requirements of subparagraphs ( 1) through ( 9) of section 172( c) must be satisfied before a request for redesignation can be approved. In addition, the conformity requirements of section 176 must be met. The discussion below describes further how EPA will assess compliance with these provisions.

( i) RFP. The requirements for RFP will not apply in evaluating a request for redesignation to attainment since, at a minimum, the air quality data for the area must show that the area has already attained. Showing that the State will make RFP towards attainment will, therefore, have no meaning at that point.

( ii) Emission inventory. The emission inventory requirements of section 172( a)( 3) will be satisfied by the inventory requirements of the maintenance plan, as discussed above.

( iii) Identification of certain emission increases. Section 172( c)( 4) requires an area, in developing its plan for attainment, to identify expected emissions increases that will result from new or modified major sources in a " zone to which economic development should be targeted" according to section 173( a)( 1)( B). These provisions effectively allow the State to provide a " growth allowance" for sources in such an area in lieu of the offset requirements under section 173( a)( 1)( A). Since this is an optional alternative to requiring the acquisition of offsets under section 173( a)( 1)( A), it is not a prerequisite to redesignation. Moreover, once the area is redesignated attainment, these provisions will not apply since the PSD requirements of part C will become effective ( see discussion in next section).

( iv) NSR Permit program. Generally, the requirements of the part D NSR permitting nonattainment program will be replaced by the PSD program once an area is redesignated to attainment./ 40/ ( The exception is in ozone transport regions where the part D NSR requirements applicable to moderate areas would continue to apply along with PSD ( part C) requirements.) However, to ensure that the PSD program can become fully effective immediately upon redesignation, EPA will require an area to make any needed NSR corrections to their part C NSR programs prior to redesignation.

NOTE / 40/ See footnotes 8 and 16.

( v) Other measures to provide attainment. Since attainment will have been reached, no additional measures are needed to provide for attainment. The need for additional measures to ensure that maintenance continues is addressed under the requirements for maintenance plans. Areas should consider the need for offsets under the part C program to ensure that new sources do not " cause or contribute" to an increase in pollutant levels that would take the area out of compliance.

( vi) Compliance with section 110( a)( 2). In the requests for SIP redesignation, States must show that their plans satisfy the requirements under section 110. These requirements specify that the plans must contain enforceable emission limits, monitoring requirements, procedures to prevent interstate pollution problems, adequate resources to carry out the control programs, and other provisions related to the development and administration of effective air pollution control programs; a more detailed discussion of these provisions is located in section H. States should consult with their EPA Regional Offices if additional guidance is needed with respect to section 110 requirements.

( vii) Equivalent techniques. The provisions of section 172( c)( 8) allow the State to use equivalent techniques for modeling, inventorying, or other planning activities unless EPA determines that the techniques are less effective. This allowance will continue to apply with respect to the requirements of the maintenance plan.

( viii) Contingency measures. The section 172( c)( 9) requirements for contingency measures are directed at ensuring RFP and attainment by the applicable date. These requirements no longer apply when an area has attained the standard and is eligible for redesignation. Furthermore, section 175( A) for maintenance plans ( discussed above) provides specific requirements for contingency measures that effectively supersede the requirements of section 172( c)( 9) for these areas.

( ix) Conformity. The State must show that the section 176 requirements of conformity have been met. The SIP conformity provisions must be consistent with EPA guidance issued pursuant to section 176( c)( 4).

( 6) Meeting other part D requirements. For classified ozone areas, the applicable requirements of sections 182, 184, and 185 must be met. For CO areas, the applicable requirements of section 187 must be satisfied. Satisfying these requirements for redesignation purposes is particularly important since the contingency measures of the maintenance plan will require, at a minimum, that the measures in place just before redesignation be implemented if future violations occur.

7. Transition Issues ( a) Phase II of SIP calls. Prior to enactment of the 1990 CAAA, the EPA issued SIP calls under section 110( a)( 2)( H) of the Act to many areas based on a finding that their SIP's were substantially inadequate to provide for timely attainment of the ozone and/ or CO NAAQS. In these SIP calls, EPA stated that States should respond in two phases to produce SIP's that would be adequate to attain and maintain the standards. The EPA first required States, in Phase I of their responses, to update their emissions inventories and make corrections in previously required regulations imposing RACT on existing stationary sources. Phase I responses were due generally by September 30, 1989.

The EPA advised States that they could delay submitting Phase II responses which included a full attainment demonstration and all additional regulations necessary to support such demonstrations, until EPA completed its policy on post 1987 nonattainment planning. Since EPA did not complete its post 1987 ozone/ CO policy in anticipation of passage of the 1990 CAAA, EPA has never set a generally applicable date for Phase II SIP call responses. However, the basis underlying the SIP call remains valid even under the amended Act. The SIP's for the affected areas are still substantially inadequate to attain the relevant NAAQS. Since the date for submitting Phase I SIP call responses has already passed, and the amended Act requires all marginal and above ozone nonattainment areas subject to the RACT correction aspects of the SIP calls to submit those corrections within 6 months of enactment, the requirement for Phase I responses to the SIP calls remains in effect for these areas. Thus, these areas should have submitted RACT corrections by May 15, 1991, pursuant to section 182( a)( 2)( A) ( see Section III. A. 2.( b)).

However, as to Phase II SIP call responses, the amended Act alters both the substantive requirements and submission deadlines for full attainment demonstrations and their component control measures. Thus, although the obligation to submit a SIP adequate to attain and maintain the NAAQS remains in all SIP call areas, both the necessary elements of such plans and the timing of the plan submissions is now governed by the requirements of sections 182 and 187 of the amended Act. The EPA therefore will not require Phase II SIP call response submissions on schedule different from the schedules established by those sections. States should respond to Phase II of the SIP calls by making the submissions otherwise required by sections 182, 184, and 187. This new Phase II schedule supersedes any schedule EPA may have established for any area prior to enactment of the 1990 CAAA.

It should be noted that section 173( b) of the Act restricts the use of growth allowances by all areas that received SIP calls under the 1977 Act. Since EPA is keeping the pre 1990 CAAA SIP calls in effect, use of a growth allowance is restricted in any area that received a SIP call under the 1977 Act.

( b) Construction ban. The amended Act repeals the provisions found in section 110( a)( 2)( I) of the 1977 Act requiring EPA to impose a construction ban in nonattainment areas that failed to submit plans meeting all of the requirements of part D of the Act. The amended Act also contains a savings clause in section 110( n)( 3) that preserves certain existing construction bans. Construction bans remain in place only where imposed by virtue of a finding that the plan for the area did not contain an adequate NSR permitting program as required by section 172( b)( 6) of the 1977 Act, or the plan failed to provide for timely attainment of the SO2 NAAQS.

Thus, EPA cannot impose or maintain any previously imposed construction ban that was based on a finding that the plan for the area did not demonstrate timely attainment and maintenance of the ozone or CO NAAQS. The EPA is developing a rule amending its regulations at 40 CFR 52.24 to clarify the limited applicability of the construction ban and appealing the individual sections of 40 CFR part 52 that imposed the construction ban in each ozone or CO nonattainment area where the ban was imposed solely for failure to provide for timely attainment. Since the amended Act no longer authorizes EPA to impose bans on the above basis, EPA interprets the enactment of the Act's amendments as repealing these bans by operation of law as of the date of enactment and treat those amendments to part 52 as mere administrative housekeeping responsibilities. The EPA will treat those areas previously subject to the construction ban under these circumstances as no longer being subject to the ban after the date of enactment.

It should be noted that where construction bans were imposed for failure to demonstrate timely attainment of a standard ( other than for SO2) and also for failure to contain an adequate NSR program, the ban will remain in effect under the savings clause unless and until the State has submitted and EPA has approved such a permitting program. However, where the ban was originally imposed based only upon a finding that the plan did not provide for timely attainment and maintenance, event if the area in fact did not have an approved new source permitting program, the savings clause by its own terms will not preserve the construction ban. Such areas should of course promptly submit adequate permitting programs, but they will not be subject to the section 110( a)( 2)( I) ban in the interim.

( c) NSR. The 1990 CAAA make numerous changes to the part D NSR permitting requirements for nonattainment areas. The EPA intends to propose rules by April 1992 to implement the NSR related changes mandated by the 1990 CAAA. In the interim period between passage of the 1990 CAAA and adoption of the Agency's regulations, EPA expects that numerous issues regarding the 1990 CAAA will arise. A March 11, 1991 EPA memorandum signed by John S. Seitz, Director of the Office of Air Quality Planning and Standards, sets forth EPA's position on the most important of these transitional issues involving the part D NSR program. Additional transitional guidance will be provided as needed.

8. General Savings Clause.

New Act section 193 sets forth a " General Savings Clause" governing retention of certain types of previously enacted or mandated requirements. Under section 193, any regulation, standard, rule, notice, order and guidance issued prior to November 15, 1990, shall remain in effect unless it is inconsistent with any provision of the 1990 CAAA or is revised by the Administrator. No control requirement in effect, or required to be adopted by an order, settlement agreement, or plan in effect prior to November 15, 1990, in any nonattainment area for any air pollutant, may be modified after enactment in any way unless the modification will result in equivalent or greater emissions reductions of that pollutant.

IV. EPA Requirements A. SIP Processing Requirements 1. Completeness Section 110( k)( 1) required EPA to promulgate by August 15, 1991 ( within 9 months of enactment), minimum criteria that any SIP submittal must meet. The EPA proposed an initial set of completeness criteria at 56 FR 23826 ( May 24, 1991) and finalized them at 56 FR 42216 ( August 26, 1991). Those notices describe the procedures for assessing whether a SIP submittal is complete and, therefore, adequate to trigger the Act requirement that EPA review and take action on the submittal. The completeness criteria provide a procedure and criteria that enable States to prepare adequate SIP submittals and enable EPA reviewers to promptly screen SIP submittals, identify those that are incomplete, and return them to the State for corrective action without having to go through rulemaking.

The criteria for determining whether a submittal by the State is complete have been separated into two categories: administrative information and technical support information. Administrative information includes the documentation necessary to demonstrate that the State has adhered to basic administrative procedures during the rule adoption process. Technical support information includes the documentation that adequately identifies all of the required technical components of the plan submissions.

When a submittal is determined to be complete, EPA will inform the State by letter of its determination. The EPA will then begin the formal review for approvability. If a submittal is determined to be incomplete, it will be returned to the State with a letter listing the deficiencies. Consistent with section 110( k)( 1)( B), EPA will attempt to make completeness determinations within 60 days of receiving a submittal. However, a submittal will be deemed complete if a completeness determination is not made by EPA within 6 months of EPA's receipt of the submittal.

2. Partial Approvals ( a) Full, partial, and limited approval and disapproval. The EPA has authority to fully approve or disapprove a State SIP submittal under section 110( k)( 3). However, in some instances a State's submission of a SIP or SIP revision will include a provision that does not comply with one or more applicable requirements of the Act. The Agency must disapprove those portions of a SIP submittal that do not meet the applicable requirements of the Act ( section 110( k)( 3)). Where the disapproved portions of a SIP submittal are separable ( i. e., disapproval of a provision will not affect the stringency of other portions of the SIP), EPA will partially approve the SIP and disapprove those separate parts. However, there may be instances where inseparable portions of the SIP submittal are disapproved. The EPA has interpreted the Act to provide flexibility in the instance where a submittal as a whole serves to improve air quality by providing progress toward attainment, RFP, and/ or RACT, yet fails to comply with all of the Act's requirements. Such an action, called a limited approval, is not considered a complete action on the SIP submittal. To complete the action, EPA must also issue a limited disapproval whereby the Agency disapproves the SIP revision request as a whole for failing to meet one or more requirements of the Act.

( b) Conditional approval. Under section 110( k)( 4), the Administrator may approve a plan revision based on a commitment of the State to adopt specific enforceable measures by a specified date but not later than 1 year after the date of EPA approval of the plan revision that incorporated that commitment. If EPA finds that the State fails to meet the commitment within that year, the conditional approval would automatically convert into a disapproval. The time periods culminating in imposition of sanctions and/ or FIP's do not begin to run until the conditional approval is converted to a disapproval.

B. Sanctions and Other Safeguards 1. Background Under 1977 CAAA The 1977 CAAA provided for two types of sanctions: Construction bans ( i. e., a ban on construction or modification of major sources under section 110( a)( 2)( I), of a ban on permitting such sources under section 173( 4)) and various forms of funding restrictions. The construction bans automatically applied when EPA disapproved a SIP for failure to meet Act requirements as specified under section 110( a)( 2)( I); the permitting ban applies when EPA found that a State failed to implement a SIP provision as specified under section 173( 4). In addition, EPA had discretionary authority under section 113( a)( 5) to impose a construction ban upon finding that a State was not acting in compliance with NSR permitting requirements in nonattainment areas. The EPA also had authority to apply the restrictions on air grants or highway funding under section 176 ( a) and ( b), or sewage treatment works funding under section 316( b). 2. Available Measures Under 1990 CAAA The 1990 CAAA revised the law concerning sanctions and related measures. It sets forth specific criteria in section 179( a) to determine when EPA may apply two types of sanctions specified under section 179( b): Highway funding restrictions, and increased emissions offset ratios for new and modified sources. A third type of sanction, restrictions on air grant funding, is provided for under section 179( a). The construction ban provisions of section 110( a)( 2)( I) were largely repealed ( see section III. G. 1.). However, several other provisions of the Act provide for construction bans and other sanctions to safeguard against increases in air pollution due to SIP planning or implementation failures.

Section 179( a) sets forth the four types of findings, disapprovals, or determinations ( hereafter referred to as " findings") which may lead to the imposition of a sanction: That a State has failed to submit a SIP or an element of a SIP, or that the SIP or SIP element submitted fails to meet the completeness criteria for section 110( k); that EPA disapproves a SIP submission for a nonattainment area based on its failure to meet one or more plan elements required by the Act; that the State has not made any other submission required by the Act that meets the completeness criteria or had made a required submission that is disapproved by EPA for not meeting the Act's requirements; or that a requirement of an approved plan is not being implemented.

( a) Highway funding sanction. Consistent with the procedures and findings described below, the EPA may ( and in some cases must) prohibit approval by the Secretary of Transportation of projects or grants ( pursuant to title 23 of the U. S. C.) in the affected nonattainment area except where the Secretary has determined that the purpose of the project or grant is to improve a demonstrated safety problem. In addition, the Act provides exemptions for certain projects and grants that are intended to minimize air pollution problems ( section 179( b)( 1)).

( b) Emission offset sanction. The emission offset sanction provision ( section 179( b)( 2)) refers to the application of the emission offset requirements of section 173. This sanction applies to new or modified sources or emission units for which a permit is required under part D of the amended Act. Under this sanction, the ratio of emissions reductions that must be obtained to offset increased emissions ( caused by the new or modified source) in the sanctioned area must be at least 2 to 1. The ozone pre sanction ratio ranges between 1 to 1.5, depending upon the classification of the area. The EPA plans to promulgate Federal nonattainment rules at 40 CFR 52.10, which could be used to apply this sanction.

( c) Grant funding sanction. According to section 179( a), the Administrator may withhold all or part of the grants that support air pollution planning and control programs that the Administrator may award under section 105.

( d) Section 173( a)( 4) permitting ban. Section 173 of the amended Act contains the requirements that must be met to issue a NSR construction permit for a new or modified major source in a nonattainment area. A prerequisite contained in section 173( a)( 4) for issuing such permits is that the permit authority must find that the Administrator has not determined that the applicable implementation plan is not being adequately implemented as required by part D. This means that issuing construction permits for major stationary sources under section 173 is prohibited if the Administrator determines that the approved SIP for complying with the part D nonattainment requirements is not being adequately implemented for the nonattainment area in which the new source wants to locate or in which the source wishing to modify its facility is located.

( e) Section 113( a)( 5) construction prohibition. Section 113( a)( 5) authorizes EPA to prohibit the construction or modification of specific major stationary sources in all areas, including attainment areas, and to take other enfo rcement actions against individual sources whenever the Administrator finds that a State is not acting in compliance with any requirement or prohibition of the Act related to constructing new sources or modifying existing sources. The authority in section 113( a)( 5) may also be used to issue general construction bans. After making a finding under section 113( a)( 5), the Administrator may issue an order prohibiting the construction or modification of any major stationary source in any area to which such requirement applies, issue an administrative penalty order in accordance with the requirements of section 113( d), or bring a civil action under section 113( b). Nothing in section 113( a)( 5) shall preclude the United States from commencing, at any time, a criminal action under section 113( c) for any such violation.

( f) Other sanction provisions. Section 110( m) includes provisions on sanctions. The EPA will be discussing those provisions in a subsequent Federal Register notice.

3. Application and Timing of the Section 179 Sanctions Eighteen months after the Administrator makes a finding concerning a State failure ( as described below) with respect to a specific plan required by part D or in response to a SIP call, under section 179( a), the Administrator must apply either the highway or offset sanctions of section 179( b) unless the inadequacy has been corrected to EPA's satisfaction. The sanction applied will be chosen on a case by case basis depending on the circumstances involved. The EPA must apply both sanctions after 18 months if the Administrator finds a lack of good faith on the part of the State, or after 24 months if the deficiency is not corrected ( within 6 months after the first sanction is imposed). C. Federal Implementation Plans ( FIP's)

The Administrator is required to promulgate a FIP within 2 years of finding that a State has failed to make a required submittal or that a received submittal does not satisfy the minimum completeness criteria established under section 110( k)( 1)( A) ( see 56 FR 42216, August 26, 1991), or disapproving a SIP submittal in whole or in part. Section 110( c)( 1) mandates EPA promulgation of a FIP if the Administrator has not yet approved a correction proposed by the State before the time a final FIP is required to be promulgated. Within the Act's general provisions, a FIP is defined explicitly to allow for the inclusion of " economic incentives, such as marketable permits or auctions of emissions allowances" ( section 302( y)). The EPA views the use of economic incentives in the context of a FIP as potentially appropriate, especially in cases of failure of ozone nonattainment areas to meet the RFP requirements. Such incentives may focus particularly on permitted sources. In developing FIP strategies that include economic incentives, EPA will look to its economic incentive program rules ( section 182( g)( 4)) due to be published November 15, 1992, as guidance in developing those elements of the FIP. Economic incentive programs are discussed in more detail in section III. G. 3.

There may be areas where EPA has to promulgate Federal NSR regulations. The EPA intends to adopt at 40 CFR 52.10 Federal nonattainment area permitting rules that EPA can impose in States with deficient nonattainment NSR permit programs.

V. Miscellaneous A. Relationship of Title I to Title V 1. Introduction The purpose of this section is to discuss the issues originally described in the title V rulemaking preamble ( 56 FR 21712 May 10, 1991). The three main issues discussed here are how a combination of SIP's and permits can do the job that SIP's now do by themselves, the extent to which EPA will develop RACT protocols or procedures, and how EPA will approach marketable permits and trading of allowances in ozone nonattainment areas.

The approach taken here begins with the purposes of a SIP, which are to make demonstrations ( of how attainment, maintenance, and progress will be achieved), and to provide a control strategy that will achieve the necessary reductions and otherwise meet the requirements of the Act.

The key questions are what fundamental principles apply to SIP's, and what features must SIP's and permits have to implement SIP control strategies and to satisfy these principles? The fundamental SIP principles will be used as guiding criteria for judging success in resolving the issues described above.

For a number of reasons explained below, certain elements must be contained in a SIP so that it will satisfy the identified principles and meet the Act's requirements. Other elements could be contained in permits, and still other elements may be shared and/ or implemented in part by SIP's and in part by permits.

Following the discussion of fundamental SIP principles and associated SIP and permit features, this section proposes ways to answer the questions raised in the title V proposal.

2. Purposes of a SIP One purpose of a SIP is to perform demonstrations of how various goals will be achieved. These goals are of three types: Attainment of the NAAQS, maintenance of the NAAQS once attainment occurs, and prescribed rates of progress. To satisfy these purposes, a number of assumptions must be made in the SIP regarding baseline emissions and future growth in various sectors of the economy. For these assumptions, SIP planners often rely on projections of population, motor vehicle travel or economic indicators made by other government agencies, and projections made by the air pollution control agency regarding the future effect of planned pollution control measures.

These assumptions, control strategies, and measures are developed as necessary to meet the attainment objectives for the area and the Act's requirements ( e. g., RACT). These assumptions and measures are key components of the SIP. It is important to note that projections of the effect of planned air pollution control measures contained in the SIP's are not merely assumed but are enforced by regulations adopted as part of the SIP. Therefore, if the control measures are not implemented sufficiently to result in required reductions, the State or local agency, or EPA, can take action to enforce implementation of the regulations. This provides a means of achieving, at least in part, the goals of attainment and further progress required in the Act.

For purposes of illustrating the principles and elements of SIP's that apply to sources, the discussion below concentrates more on elements relevant to implementing the control strategies part of a SIP, rather than on those relevant to the demonstration. This simplifies the discussion and reflects the fact that the purpose of the permit is to implement measures, not perform demonstrations, which is unquestionably a purpose of the SIP. 3. Fundamental Principles for SIP's/ Control Strategy To develop an effective SIP control strategy and to achieve the desired result, the SIP and any implementing instruments, including permits, should adhere to certain principles. These principles help provide assurance that the planned emissions reductions will be achieved. These principles are discussed in EPA's policy on emissions trading contained in 51 FR 43814 ( December 4, 1986).

( a) First principle. The first principle is that the baseline emissions from the source and the control measures be quantifiable ( i. e., a specific amount of emissions reductions can be ascribed to the measures). Baseline emissions must be represented accurately in the SIP in order for the benefits of the measure to be properly quantified. Furthermore, the emissions must be representative of the time period of the inventory. Likewise, the effect of the measure must be identified in order to assess the contribution to the necessary emissions reductions. The value for a measure's effect can be used as a limit in a regulation, or it may be used alone or in combination with assumptions regarding operating hours or production, or as part of the projections in the demonstrations.

( b) Second principle. The second principle is that the measures be enforceable. Measures are enforceable when they are duly adopted, and specify clear, unambiguous, and measurable requirements. A legal means for ensuring that sources are in compliance with the control measure must also exist in order for a measure to be enforceable. This principle is well grounded in the Act. New section 110( a)( 2) of the Act requires that SIP's include " enforceable emission limitations and other control measures" and " a program to provide for the enforcement of the measures" in the plan. Court decisions made clear that regulations must be enforceable in practice. A regulatory limit is not enforceable if, for example, it is impractical to determine compliance with the published limit.

( c) Third principle. The third principle is that the measures be replicable. This means that where a rule contains procedures for changing the rule, interpreting the rule, or determining compliance with the rule, the procedures are sufficiently specific and nonsubjective so that two independent entities applying the procedures would obtain the same result.

( d) Fourth principle. The fourth principle is that the control strategy be accountable. This means, for example, that source specific limits should be permanent and must reflect the assumptions used in the SIP demonstrations. It also means that the SIP must contain means ( such as operating permits issued under title V) to track emission changes at sources and provide for corrective action if emissions reductions are not achieved according to the plan. The Act provides for this tracking and remedial action in its requirements for meeting milestones and for contingency measures in SIP's. The EPA will use this principle to explore options for tracking emissions resulting from issuing permits or permit amendments.

The principles of quantification, enforceability, replicability, and accountability apply to all SIP's and control strategies, including those involving emissions trading, marketable permits and allowances. The EPA's emissions trading policy provides that only trades producing reductions that are surplus, enforceable, permanent, and quantifiable can get credit and be banked or used in an emissions trade.

4. Approaches To Ensure That Permits Properly Support SIP's.

The EPA has considered various ways that permits and SIP's can be configured to complement each other and still meet the principles discussed above. The following discussion covers some approaches.

The SIP remains the basis for demonstrating and ensuring attainment and maintenance of the national ambient air quality standards ( NAAQS). The permit program collects and implements the requirements contained in the SIP as applicable to the particular permittee. Since permit must incorporate emission limitations and other requirements of the SIP, all SIP provisions applicable to a particular source will be defined and collected into a single document. The applicable requirements in the permit would include any recent SIP changes, whether as a result of a State or local SIP revision or of a FIP action by EPA. The EPA intends to assist in the implementation of the permit program through the use of model permits for numerous source categories.

As previously discussed, title V affords significant operational flexibility. The relationship between title V permits and SIP's is a key factor in determining the extent to which operational flexibility is available to sources, since each permit, in part, must assure compliance with the applicable implementation plan. The EPA recognizes that it will take time to complete the transition from a regulatory system where SIP's are the primary tool for implementing and enforcing the Act, to one where operating permits ultimately assume primary responsibility for implementation and enforcement.

The EPA is considering what means will aid in ensuring a smooth transition to increasingly general, and thus more flexible, SIP's, which may allow permits rather than the SIP's to specify the details of how SIP limits and objectives apply to subject sources. In particular, EPA will be seeking to develop information in the following areas: ( 1) The most efficient ways of implementing requirements of SIP's through permits, such as moving detail from SIP's to permits; ( 2) Flexible ways for sources to demonstrate compliance with reasonably available control technology ( RACT) limits, such as through the use of protocols for defining equivalency or through the development of equivalency determinations in the permitting process ( as discussed below); and ( 3) Expanded use of emissions trading and marketable permits to achieve SIP objectives as well as providing a stable accountable mechanism for tracking and enforcing emissions reductions at a source.

EPA will be adopting provisions to facilitate the movement toward more flexible SIP's in its final rules to implement title V. EPA plans to include provisions which specify that no permit revision is required for emission trades through economic incentives or marketable permit programs, provided that the permit contains a means or process for implementing the program. Thus, a SIP containing a generic trading rule and a replicable procedure for implementing the rule through a permit may allow trading to occur without a permit revision, provided the permit contains the replicable procedure. This is similar to the way in which permits allow sources to shift among alternate scenarios that were initially provided for in the permit. It States choose to implement trading in this matter, the provisions of the permit allowing the trades must incorporate all of the procedural protections contained in the underlying SIP.

States may also elect to develop SIP's that set forth trading and compliance provisions that sources could use to comply with SIP limits. The SIP would have to include compliance requirements and procedures for the trade which are sufficiently specific to demonstrate compliance. Such provisions can prove useful to sources in cases where permits do not already provide for emission trades.

( a) Increasing flexibility in SIP's through permits. In addition, a State may choose to adopt a SIP provision that would authorize sources to meet either the SIP limit or an equivalent limit to be formulated in the permit system. The permit must contain the equivalency determination, as well as provisions that assure that the resulting emission limit is quantifiable, accountable, enforceable, and, based upon replicable procedures, is equivalent to the SIP limit. Consistent with these requirements, States may do so for all appropriate SIP requirements or only for specific requirements for which the State determines equivalency determinations are appropriate. The determination of what constitutes an equivalent limit could take place either during the permit issuance, or renewal process, or as a result of the significant permit modification procedures. The State retains discretion, subject to EPA veto, to decide if an alternative emission limit is justified in any particular case. ( b) Developing more RACT protocols. In the title V preamble, the EPA said that it would develop more flexible ways for sources to demonstrate compliance with RACT limits. One way is to use protocols defining equivalent means of compliance. For example, in 1980 EPA released the " Can Coating Policy," which allows cross line averaging for can coating facilities and provides the calculation technique for doing so.

The EPA is undertaking a study to determine the extent to which multi day and cross line averaging can be used to provide specific industries more flexibility in meeting their VOC RACT requirements. This project is focusing on the graphic arts and aerospace industries. For this study, EPA is taking the following steps: ( i) Survey the can coating industry to determine how the protocol has been functioning and to collect data on daily and monthly emissions, coating usage and VOC content. These data will be used to determine whether there is a good and stable correlation between daily and monthly emissions rates and between cross line and line by line emissions.

( ii) Survey aerospace and graphic arts sources to collect emissions data, coating usage and VOC content on a daily basis. These data also will be analyzed to determine the variability of emissions from day to day and line to line.

( iii) Based on the above information, EPA will determine the appropriateness of developing procedures for time averaging and line by line compliance for the graphic arts and aerospace industries and issue these procedures as appropriate.

When EPA completes this process, it will then assess whether it is feasible and desirable to develop procedures for other source categories for which such procedures may be appropriate.

( c) Exploring marketable permits/ allowance trading. The EPA fully expects that the use of emissions trading and economic incentives such as marketable permits or allowance trading will increase as the Act is implemented. In addition, EPA is committed to exploring ways to reduce the cost or burden to industry through the use of innovative measures that use the marketplace to reduce costs. And, as mentioned in its title V preamble, the EPA wants to find ways to achieve the goals of the Act without requiring time consuming SIP revisions for every change at a source.

One way to minimize SIP revisions is through the use of replicable SIP procedures that are implemented by the permit. As long as the terms of the permit complied with the SIP rule, changes to the permit could be made without a SIP revision. The proposed title V regulation, for example, would not require a permit change for emission trades authorized under the Act if such changes were implemented consistently with the replicable procedure specified in the SIP. The EPA believes that the same principles discussed previously also should apply to measures such as marketable permits, emission trades and allowances. In addition, the principles of surplus and consistency with the SIP should also apply to any trading program. For example, replicability must always be honored to assure that consistent and predictable benefits are derived from a marketable permits program. Also, the principle that baseline emissions and measures should be quantifiable is particularly important when applied to the level of emission trading that might occur in a large ozone nonattainment area.

The EPA does not believe that it has enough information at this time to fully resolve all of the practical questions mentioned above or in the title V preamble regarding marketable permits, trading, and allowances. The EPA believes that, in resolving such questions, it should apply the same principles mentioned above, namely, that such measures should be quantifiable, accountable, enforceable and implemented according to replicable procedures.

B. Tribal Implementation Plans Section 107 of the 1990 CAAA adds several provisions to the statute that create the first express authority for EPA to treat Indian tribes as States for certain Act purposes. Section 107 also allows a tribe that qualifies for treatment as a State to develop and submit to EPA a tribal implementation plan ( TIP) for implementation of the NAAQS on tribal lands ( see Act sections 110( o) and 301( d)). Under section 301( d)( 2), EPA is required to promulgate regulations by May 15, 1992 for treating of tribes as States. Section 301( d)( 3) states that EPA may promulgate regulations setting forth the elements of TIP's and procedures for EPA action on them. In addition, section 301( d)( 4) states that where EPA determines that treatment of Indian tribes as identical to States is not appropriate, the Agency may by regulation provide other means by which EPA will directly administer these provisions. In the preambles to the proposed and final rules, EPA will discuss other issues relating to implementation of the Act on tribal lands.