1995, which allows EPA to determine that an area has attained the standard and that certain planning requirements ( e. g., RFP and attainment demonstrations) will not apply so long as the area remains in attainment. 47 This is referred to as the " Clean Data Policy." We proposed that this policy would remain effective for purposes of areas that EPA determines have attained the 8 hour ozone NAAQS.

b. Summary of final rule PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 192 In the proposed rule, we indicated that the Clean Data Policy, which we had applied under the 1 hour standard,

should apply for purposes of the 8 hour standard. We are adopting this approach. In this action EPA is finalizing the statutory interpretation that is embodied in the policy.

The text of the final rule encapsulates the statutory interpretation set forth in the policy. Determinations as to whether individual areas have attained the 8 hour standard and thus qualify for application of the policy will be made in the context of rulemakings for those individual areas.

The EPA has applied the Clean Data Policy in rulemakings under the 1 hour ozone standard to both subpart 1 areas, e. g., San Francisco Bay Area ( 69 FR 21717; April 22, 2004) and subpart 2 areas, e. g., St. Louis, Missouri ( 68 FR 25418; May 12, 2003). The EPA will also apply the policy to both subpart 1 and subpart 2 areas under the 8 hour standard.

c. Comments and responses Comment: One commenter stated that EPA's " Clean Data Policy" is unlawful with respect to both the 1 hour and 8

hour NAAQS. A commenter argued that EPA also has no authority to waive the attainment demonstration and RFP PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 193 plans mandated by subpart 2 on the pretext that an area has clean data. The CAA unambiguously requires these plans for any area designated nonattainment for the pollutant ozone,

and gives EPA no power whatsoever to waive such plan requirements.

Several other commenters supported the continued use of the " Clean Data Policy."

Response: The EPA believes that the Clean Data Policy comports with the provisions of the CAA in regard to attainment demonstrations, ROP plans, RACM, contingency measures and other related requirements. The Clean Data Policy, issued on May 10, 1995, sets forth EPA's interpretation that where EPA has determined that an area has attained the standard, certain SIP requirements are suspended ( e. g., RFP) for so long as the area remains in attainment.

As set forth in its May 10, 1995 policy, EPA believes it is reasonable to interpret the provisions regarding RFP and attainment demonstrations, along with certain other related provisions, as not requiring further submissions to achieve attainment for so long as the area is in fact attaining the standard. Under the policy, EPA is not granting an exemption from any applicable requirements under PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 194 part D. Rather, EPA has interpreted these requirements of subparts 1 and 2 as not applying for so long as the area remains in attainment with the standard. This is not a waiver of requirements that by their terms apply; it is a determination that certain requirements are written so as to be operative only if the area is not attaining the standard.

The EPA has explained in other rulemaking actions on the 1 hour ozone standard its rationale for the reasonableness of this interpretation of the CAA and incorporates these explanations by reference. See, for example, 67 FR 49600 ( July 31, 2002); 65 FR 37879 ( June 19,

2000) ( Cincinnati Hamilton, Ohio Kentucky); 61 FR 20458 ( May 7, 1996) ( Cleveland Akron Lorain, Ohio); 66 FR 53094 ( October 19, 2001) ( Pittsburgh Beaver Valley, Pennsylvania);

60 FR 37366 ( July 20, 1995); 61 FR 31832 33 ( June 21, 1996)

( Grand Rapids, MI); 60 FR 36723 ( July 18, 1995) ( Salt Lake and Davis Counties, Utah); 68 FR 25418 ( May 12, 2003) ( St.

Louis, Missouri); 69 FR 21717 ( April 22, 2004)( San Francisco Bay Area). The EPA has also set forth its legal rationale for the Clean Data Policy in briefs filed in the 10th, 7th,

and 9th Circuits, and hereby incorporates those briefs insofar as relevant here. See Sierra Club v. EPA, No. 95

9541 ( 10th Cir.), Sierra Club v. EPA, No. 03 2839, 03 3329 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 195 ( 7th Cir.), Our Children's Earth Foundation v. EPA, No. 04

73032 ( 9th Circuit).

As stated in the policy, the attainment demonstration,

RFP requirements and contingency measure requirement are designed to bring an area into attainment. Once this goal has been achieved, it is appropriate to suspend the obligation that States submit plans to meet these goals, so long as the area continues to attain the relevant standard.

The Tenth, Seventh and Ninth Circuits have upheld EPA rulemakings applying the Clean Data Policy. See Sierra Club v. EPA, 99 F. 3d 1551 ( 10th Circuit, 1996), Sierra Club v.

EPA, 375 F. 3d 537 ( 7th Circuit, 2004) and Our Children's Earth Foundation v. EPA, No. 04 73032 ( 9th Circuit, June 28,

2005) memorandum opinion.

Comment: A commenter said that although subpart 2 contains some narrowly crafted exceptions [ e. g., CAA 182( b)( 1)( A)( ii)], there are no exceptions based on clean data. In the past, EPA has cited a Tenth Circuit decision,

Sierra Club v. EPA, 99 F. 3d 1551 ( 10th Circuit, 1996), as supporting the Clean Data Policy. The commenter contended that case was wrongly decided and has been superseded by the Supreme Court decision in Whitman v. American Trucking PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 196 Assoc., Inc., 531 U. S. 457 ( 2001). There, the Court held that subpart 2 eliminates regulatory discretion previously allowed to EPA under subpart 1, and noted that subpart 2 prescribes large parts of nonattainment programs, for example, section 182. The requirements for RFP and attainment demonstrations are among those subpart 2 nonattainment programs that Congress prescribed by law,

thereby eliminating EPA discretion to accept something less.

See also Sierra Club v. EPA, 293 F. 3d 155 ( D. C. Circuit,

2002) ( holding that EPA is without authority to infer exceptions to attainment deadlines and to explicit subpart 2 requirements for RFP plans).

Response: The EPA believes that the Tenth Circuit correctly decided Sierra Club v. EPA and that the comments misconstrue both Whitman and Sierra Club v. EPA, 293 F. 3d 155 ( D. C. Circuit, 2002) ( Sierra Club 2002). The Sierra Club 2002 case addressed the statutory requirements applicable to an area not attaining the standard. The issue of the requirements of part D of title I of the CAA that must continue to be met by areas that EPA has determined are monitoring attainment of the standard was not before the court. As discussed below, the Sierra Club 2002 decision upheld EPA's determination that the RACM provision under PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 197 section 172( c)( 1) requires only additional measures that could contribute to RFP or attainment, which is an element of EPA's application of the Clean Data Policy. To this limited extent, Sierra Club 2002 is relevant to EPA's interpretation that the policy will apply for the 8 hour ozone standard, and the decision supports EPA's interpretation. However, the other issues addressed in the decision ( extension of the statutory attainment date for areas affected by ozone transport, the content of a demonstration of RFP toward attainment, and whether contingency measures must be submitted as part of an attainment demonstration or plan for RFP) did not relate to the Clean Data Policy or how the subpart 2 requirements apply to areas attaining the standard.

The issue addressed by the Clean Data Policy is whether an area that has attained the standard ( as evinced by air quality monitoring data) still needs to submit a demonstration of how the area will achieve enough reductions to demonstrate that it will " attain the NAAQS," a plan to obtain reasonable periodic reductions towards the goal of attainment and other related requirements.

The EPA continues to believe that the statutory requirement for an attainment demonstration   a SIP revision PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 48[ The EPA's interpretation that the statute requires only implementation of RACM measures that would advance attainment was upheld by the United States Court of Appeals for the Fifth Circuit ( Sierra Club v. EPA, 314 F. 3d 735, 743 745, 5th Cir. 2002) and by the United States Court of Appeals for the D. C. Circuit ( Sierra Club v. EPA, 294 F. 3d 155, 162 163, D. C. Cir. 2002). See also the final rulemakings for Pittsburgh Beaver Valley, Pennsylvania, 66 FR 53096 ( October 19, 2001) and St. Louis, 68 FR 25418 ( May 12, 2003).]

198 which identifies the level of future reductions needed to achieve the NAAQS and any additional adopted measures needed to achieve these future reductions   is written so as to be inapplicable once the NAAQS is attained.

In addition, EPA believes that the RACM requirements are a " component" of an area's attainment demonstration under section 172( c)( 1). General Preamble 57 FR 13560;

April 16, 1992. Thus, since for the same reason the attainment demonstration no longer applies by its own terms,

RACM also no longer applies. The EPA has consistently interpreted this provision to require only implementation of potential RACM measures that could contribute to reasonable further progress or to attainment. General Preamble 57 FR 13498; April 16, 1992. Thus, where an area is already attaining the standard, no additional RACM measures are required. 48 Likewise, EPA concludes that the provision for RFP   a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 199 plan for annual incremental reductions leading to attainment   is also expressed in terms that show that RFP is unnecessary in areas attaining the standard. For areas in attainment, there is no longer a need to plan for measures to meet that goal. Similarly, EPA continues to believe that the contingency measure requirements of section 172( c)( 9) no longer apply in an area that is attaining the standard since those " contingency measures are directed at ensuring RFP and attainment by the applicable date." ( See 57 FR 13564; April 16, 1992). The section 182( c)( 9) contingency measure requirement also no longer applies once an area has attained the standard.

Section 172( c)( 2) of the CAA and the related provisions of subpart 2 provide that RFP is required only where an area continues to violate the standard. By definition, the " reasonable further progress" provision requires only such reductions in emissions as are necessary to attain the NAAQS by the attainment date. If an area has attained the standard, the stated purpose of the RFP provision has been fulfilled. Also, section 172( c)( 1) and the related provisions of subpart 2 require SIPS to provide for attainment of the NAAQS. ( See also section 182( b)( 1)( A)( i)

which requires that SIPS for moderate ozone nonattainment PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 200 areas must " provide for such specific annual reductions in emissions of [ VOCs] and [ NOx] as necessary to attain the [ ozone NAAQS]" by the applicable attainment date). When an area has attained the NAAQS, there is no need for a plan demonstrating how it will reach attainment, and thus the attainment demonstration provision no longer applies.

Similarly section 172( c)( 9) and the related provisions of subpart 2 provide that SIPs in nonattainment areas shall provide for contingency measures to be undertaken if the area fails to make RFP or to attain the NAAQS by the applicable attainment date. Since contingency measures are required only if RFP or attainment is not achieved, there is no need for them where the area has attained the standard.

The language of these statutory provisions indicates that Congress intended that when an area has attained the standard these requirements no longer apply as the purpose of these provisions   attainment   has been accomplished.

The EPA believes that Whitman does not provide a basis to reconsider our position on the Clean Data Policy. In Whitman, the Court was addressing EPA's stated approach that subpart 2 did not apply for purposes of implementing the 8

hour NAAQS. In the Phase 1 rule, EPA addressed the Court's decision and concluded that subpart 2 does apply. The issue PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 201 here is not whether it applies, but how those requirements apply under a specific situation where an area has attained the NAAQS. That issue was not addressed by the Court in Whitman. The decision in Whitman has no bearing on the question of whether an area that has demonstrated attainment must nonetheless submit an attainment demonstration plan and related requirements. Thus, Whitman does not undermine the Tenth Circuit's reasoning in Sierra Club v. EPA, 99 F. 3d 1551 ( 10th Circuit, 1996). See also the post Whitman decisions in Sierra Club v. EPA, 375 F. 3d 637 ( 7th Circuit,

2004), and Our Children's Earth Foundation v. EPA, No. 04

73032, memorandum opinion ( 9th Circuit, June 28, 2005)

rejecting challenges to the Clean Data Policy and upholding redesignation actions based on the policy.

10. How will RFP be addressed in Tribal areas?

[ Section VI. I. 11. of June 2, 2003 proposed rule ( 68 FR 32835); no draft or final regulatory text.]

a. Background The TAR provides flexibility for Tribes in the preparation of a TIP to address the NAAQS. As mentioned in the proposed rulemaking, the TAR provides the Tribes with the ability to develop TIPs to address and implement the NAAQS in Indian country. It further provides the Tribes PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 202 with flexibility to develop these plans in a modular way, as long as the elements of their TIPs are reasonably " severable." For example, each TIP submission must include a demonstration that the Tribe has authority to develop and run its program, the ability to enforce its rules, and the capacity and resources to implement the program it adopts.

Therefore, it may include one or two source specific requirements but may not include provisions for RFP and other SIP requirements. The proposal noted that these TIPs can be an important step in addressing an overall air quality plan to achieve health and environmental goals on Tribal lands. Where a Tribe chooses not to address a specific planning element, EPA may be obligated to step in.

Such action would not preclude a Tribe from addressing those elements at a later time.

b. Summary of policy We intend to take the approach noted in the proposal.

There is no regulatory text for this intention.

c. Comments and responses No comments were received on this portion of the proposal.

11. How will RFP targets be calculated?

[ Section VI. I. 12. of June 2, 2003 proposed rule ( 68 FR PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 203 32836); § 51.910( c) of the draft and final regulatory text.]

a. Background We proposed a methodology for the calculation of RFP target levels of emissions that is based on the method we developed for the 1 hour standard, while taking into account our interpretation of CAA restrictions on creditable emissions and our proposal to use the 2002 inventory as the baseline inventory for the RFP requirement. The CAA specifies four types of measures that were not creditable toward the 15 percent RFP requirement. These are:

( 1) Any measure relating to motor vehicle exhaust or evaporative emissions promulgated by the Administrator by January 1, 1990.

( 2) Regulations concerning Reid Vapor Pressure ( RVP)

promulgated after 1990 or required under section 211( h).

( 3) Measures required under section 182( a)( 2)( A) to correct deficiencies in SIPs regarding VOC RACT regulations required prior to enactment of the CAA Amendments of 1990.

( 4) State regulations submitted to correct deficiencies in I/ M existing or required programs.

These four types of measures were all expected to result in a decrease in emissions between 1990 and 1996. Of these four types of measures, RACT and I/ M program corrections and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 204 the 1992 RVP requirements were completely in place by 1996 and therefore are already accounted for in the 2002 baseline. As a result, they would produce no additional reductions between 2002 and 2008 or later milestone years.

However, the pre 1990 Federal Motor Vehicle Control Program ( FMVCP) will continue to provide additional benefits during the first two decades of the 21st century as remaining vehicles meeting pre 1990 standards are removed from the vehicle fleet. Because these benefits are not creditable for RFP purposes, in order to calculate the target level of emissions for future RFP milestone years ( i. e., 2008, 2011,

etc.), States must first calculate the reductions that would occur over these future years as a result of the pre 1990 FMVCP. We proposed three methods to properly account for the non creditable reductions when calculating RFP targets for the 2008 and later RFP milestone years.

b. Summary of final rule The calculation methods have been revised slightly from those in the proposal. The revisions now account for NOx reductions and take account of other mobile emissions models other than the MOBILE model. The methods appear as appendix A to this preamble. These methods are consistent with the requirements of sections 182( b)( 1)( C) and ( D) and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 205 182( c)( 2)( B) of the CAA.

c. Comments and responses Comment: One commenter agreed that the base emission level should be decreased by reductions that occur from the pre 1990 FMVCP standards ( 1990 I/ M program and fuel RVP of 9.0 or 7.8 psi). However, the commenter further recommended that the reductions from pre 1990 FMVCP standards be calculated using the I/ M program and fuel properties in effect during the new baseline year of 2002.

The commenter claimed an advantage of the recommended change is that it removes from the non creditable reductions from the pre 1990 FMVCP standards, creditable reductions from controls implemented prior to 2003 ( such as improvements to the I/ M program or cleaner gasoline).

The commenter claimed that the EPA proposal specifies using the MOBILE6 command NO CAA in the calculation of the non creditable emissions reductions. The commenter concurred that this command could be used, but recognized that some of the controls in effect during 2002 cannot be modeled with this command. ( Refer to technical specifics of this comment in the response to comment document).

Response: The EPA does not agree with the commenter that the non creditable pre 1990 FMVCP reductions should be PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 206 calculated using the I/ M program and fuel properties in effect during the new baseline year of 2002. Including the I/ M program and fuel properties in effect in 2002 in the calculation of non creditable reductions would not accurately account for reductions that are the result of pre 1990 Federal motor vehicle control measures. The EPA believes that the methods provided in the final rule accurately identify the non creditable reductions from pre

1990 motor vehicle standards and provide appropriate credit for all post 1990 control measures.

12. Should EPA continue the policy of allowing substitution of controls from outside the nonattainment area within 100 kilometers for VOC and 200 kilometers for NOx?

[ Section VI. I. 2. of June 2, 2003 proposed rule ( 68 FR 32833); no draft or final regulatory text.]

a. Background The proposal noted [ 68 FR 32833] that EPA currently has a policy that allows States to take credit for RFP for NOx and VOC controls that occur outside the nonattainment areas [" Guidance for Implementing the 1 Hour Ozone and Pre

Existing PM10 NAAQS, December 29, 1997"]. Specifically, the guidance allows credit for VOC reductions occurring up to 100 km outside the area and for NOx reductions occurring up PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 207 to 200 km outside the area ( statewide where a regional NOx control strategy is being implemented). The policy indicates that credit may be taken only for emissions reductions from measures not otherwise mandated by the CAA.

As explained in the policy, EPA believes that this additional flexibility for crediting reductions outside nonattainment areas is consistent with the CAA. We noted in the proposed policy that reductions from outside a nonattainment area within the geographic limits contribute to progress toward attainment within the area ( 61 FR 65758).

Under this approach, the geographic area for substitution of VOC emissions reductions is 100 km from the nonattainment area and the geographic area for substitution of NOx reductions is 200 km from the nonattainment area with the possibility for additional expansion of the NOx substitution area as follows. Nitrogen oxides emissions reductions from anywhere within the State may be credited for those States that participate in a regional NOx control strategy such as the NOx SIP Call. All other States implementing a NOx substitution strategy for RFP would be restricted to a distance of 200 km from the nonattainment area, unless a substitution for a greater distance is accompanied by adequate technical justification. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 49 Last September, the EPA Office of Inspector General submitted a report ( outside the rulemaking process) outlining concerns and recommendations with respect to the potential for double counting of emissions reductions and problematic equity issues. U. S. EPA Office of the Inspector General. In responding to that report, we indicated that we would consider the various recommendations as we assess existing policies and guidance in parallel to the rulemaking for implementing the 8 hour ozone standard. [ Evaluation Report: EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions In Some Major Metropolitan Areas. Report No. 2004 P 00033. September 29, 2004.] [ Memorandum from Jeffrey R. Holmstead to J. Rick Beusse, " Response to the Office of the Inspector General ( OIG) Evaluation Report, EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions in Some Major Metropolitan Areas," Report No. 2004 P 00033. December 29, 2004. March 25, 2005.]

208 Substitutions are restricted to intrastate areas unless two or more States involved reach mutual agreement. The EPA notes that in all cases the distances in the policy provide only a general policy presumption that, if used, would need data resources in the record showing that reductions from sources in the specific locations in attainment areas benefit the nonattainment area. See LEAN v. EPA, 382 F. 3d 575 5th Circuit, 2004.

b. Summary of final rule States may continue to rely on emissions reductions from outside the nonattainment area for credit toward their RFP obligations. 49 In doing so, States should ensure that the reductions meet the standard tests of creditability PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 209 ( permanent, enforceable, surplus, and quantifiable) and are shown to be beneficial toward reducing ozone in the nonattainment area.

c. Comments and responses Comment: Several commenters supported this feature of EPA's proposal regarding RFP because it allows the States flexibility to tailor control strategies to address the issues specific to a particular nonattainment area.

The commenters supported codification ( 68 FR 32833,

column 1) in the final rule of the December 29, 1997 guidance memo (" Guidance for Implementing the 1 Hour Ozone and Pre Existing PM10 NAAQS") that allows emissions reductions from outside the nonattainment area to be creditable toward RFP. One commenter agreed that States ought to be able to account for regional emissions in their attainment demonstrations. On the other hand, the commenter was concerned that the Agency might allow jurisdictions to " credit" emissions reductions from sources up to 100 km for VOC and 200 km for NOx toward 15 percent RFP plans, and this in turn could encourage jurisdictions in need of these tonnage reductions to regulate without a sound basis. The commenter contended that while ozone is known to be a " regional pollutant," EPA has failed to establish in this PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 210 rulemaking any technical basis for allowing States to impose regulations on sources outside the nonattainment area boundaries without independent justification of the impact of such sources on an area's failure to attain the standard.

Response: We developed our 1997 policy as a result of the modeling results relating to the NOx SIP Call ( see, for example, 63 FR 57355, October 27, 1998, and 69 FR 21604,

April 21, 2004). These modeling analyses demonstrate that significant contribution to nonattainment resulted not only from source emissions within a nonattainment area but also from source emissions over a much broader area. Not only can these emissions from outside the nonattainment area affect air quality within the nonattainment area, in some cases it might be necessary to include and control emission sources located in the nearby areas in order to attain the standard. We believe it is appropriate to allow States to take credit for reductions from sources outside their nonattainment areas where data indicate that those emissions affect air quality in the nonattainment areas.

We note that section 182( c)( 2)( C), which provides for the substitution of NOx controls for VOC, speaks in terms of reductions of ozone concentrations rather than strictly reductions in emissions. This provision led us to conclude PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 50The EPA notes that paragraph ( 1) of subsection 182( b) is entitled " Plan Provisions for Reasonable Further Progress" and that subparagraph ( B) of paragraph 182( c)( 2) is entitled " Reasonable Further Progress Demonstration," thereby making it clear that both the 15 percent plan requirement of section 182( b)( 1) and the 3 percent per year requirement of section 182( c)( 2) are specific varieties of RFP requirements.

211 that Congress' intent for the ROP requirement is to lower ozone concentrations within the nonattainment area. It is consistent with that intent that emissions reductions from outside the nonattainment area that will reduce ozone concentrations in the nonattainment area should be creditable in RFP demonstrations. We also believe that the CAA is clear that both the 15 percent plan requirement of section 182( b)( 1) and the 3 percent per year requirement of section 182( c)( 2) are specific varieties of RFP requirements. 50 Section 171( 1) of the CAA states that, for purposes of part D of title I, RFP " means such annual incremental reductions in emissions of the relevant air pollutant as are required by this part or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable NAAQS by the applicable date."

Thus, whether dealing with the general RFP requirement of section 172( c)( 2), or the more specific RFP requirements of subpart 2 for classified ozone nonattainment areas ( i. e., PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 212 the 15 percent plan requirement of section 182( b)( 1) and the 3 percent per year requirement of section 182( c)( 2)), the purpose of RFP is to ensure attainment by the applicable attainment date. Emissions reductions strategies applied to sources outside the nonattainment area may help decrease ambient ozone levels within the designated area. Since RFP/ ROP is progress towards attainment, specific, annual emissions reductions from geographic areas outside the nonattainment area boundaries that contribute to lower ambient ozone levels in the nonattainment area would fall within the scope of " such annual incremental reductions in emissions of the relevant air pollutant as are required . .

. for the purpose of ensuring attainment of the applicable NAAQS by the applicable date."

Comment: One commenter requested clarification that if the 100 km/ 200 km area extends into adjacent States that reductions in those States should also be creditable,

especially with regard to the implementation of Federal measures.

Response: We intend to look into this issue further in the future as part of the overall reassessment of the 100km/ 200km credit issue.

Comment: Another commenter expressed confusion by the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 213 provision to allow creditable reductions be made outside nonattainment areas. They asked if reductions made outside a nonattainment area actually bring that nonattainment area into compliance with the standard, then shouldn't those outside areas be designated nonattainment by definition?

The commenter contended that this contradiction is unacceptable, and a fatal flaw of current designation efforts and this implementation proposal.

Response: The commenter appears to be commenting on the designation process as well as the implementation rule.

To the extent that the commenter has concerns about the process EPA used for designating areas as nonattainment,

those issues should have been raised prior to the time EPA promulgated designations in April 2004. The EPA is not taking any action in this rulemaking to establish the procedures for designating areas or to designate areas. In the designation process that was completed in April 2004,

EPA provided guidance to areas regarding how to determine the boundaries of nonattainment areas in light of the statutory definition of " nonattainment," which provides that an area will be designated nonattainment if it is either violating the NAAQS or is a " nearby" area that " contributes to ambient air quality" in an area that is violating the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 51Memorandum from John Seitz, " Boundary Guidance on Air Quality Designations for the 8 Hour Ozone National Ambient Air Quality Standards ( NAAQS or Standard)." March 28, 2000. Found at: http:// www. epa. gov/ ozonedesignations/ guidance. htm.

214 standard. 51 The CAA does not establish a hard and fast set of rules for determining " nearby" or " contributes to,"   i. e., it does not specify a distance that is nearby or a specific level of emissions that is deemed to " contribute to" nonattainment. Nor did EPA establish a hard and fast set of rules; rather the guidance provided a broad set of factors for States and EPA to consider in determining the boundaries of each nonattainment area. Thus, it is not inconsistent with the statute that there are areas that were not designated nonattainment, but that have emissions that affect air quality in a nonattainment area.

Comments on draft regulatory text Comment: One commenter recommended that EPA state,

either in the preamble to this rule or in the rule itself,

that any VOC emissions reductions within 100 km and any NOx emissions reductions within 200 km of the nonattainment boundary, including reductions in adjacent States, are creditable for RFP plan purposes. They also suggested that EPA provide that reductions from voluntary measures should PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 215 be incorporated into the baseline emissions inventory calculation.

Another commenter stated that EPA does not specify in § 51.910( a)( 4) that in areas where the 3 percent annual reduction is required, those reductions must be achieved within the statutorily defined baseline " area." [ CAA section 182( b)( 1)( B)]. The commenter stated that we issued initial NOx substitution guidance in 1993 that required RFP reductions to be achieved from sources within the designated nonattainment area. The commenter noted that subsequently,

we attempted to unlawfully allow RFP reductions to be obtained from sources within the modeling domain. The commenter advocated that we clarify that the CAA requires creditable reductions to be obtained only from sources within the designated nonattainment areas.

Response: We believe that the policy does not need to be incorporated into a rule. Since areas must include record support for application of the policy in an area demonstrating that emissions from regulated sources affect ambient air quality in the specific nonattainment area,

individual rulemaking in the context of an area's SIP must be conducted in any event to implement the policy. The EPA believes that any reductions that in fact result in improved PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 216 air quality within the nonattainment area can be credited to RFP demonstrations. Voluntary emissions reductions that are used to satisfy RFP requirements   or any requirements under the CAA   must meet EPA's criteria for creditability of such reductions, particularly the inclusion in the baseline of the emissions from the sources that would be producing the voluntary reductions. As explained elsewhere in response to another comment on the policy of allowing substitution of controls from outside the nonattainment area within 100 km for VOC and 200 km for NOx, EPA disagrees with the comment that the CAA limits the scope of creditable emissions reductions to only those reductions in emissions emanating from within the nonattainment area boundaries. We also address elsewhere the comment relating to allowance of RFP credit from emissions reductions outside the State in which the nonattainment area is located.

13. When must RFP emissions reductions be achieved?

[ Section VI. I. of June 2, 2003 proposed rule ( several locations starting at 68 FR 32832); several locations including § 51.910( a)( 1) of the draft and final regulatory text.]

a. Background Section 51.910( a)( 1) of the draft regulatory text PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 217 provided that for areas initially designated nonattainment for the 8 hour NAAQS, the initial 6 year period for RFP shall run from January 1, 2003 to December 31, 2008.

Section 182( c)( 2)( B), applicable to serious and above areas,

requires that RFP be continued out to the attainment date.

Therefore, § 51.910( a)( 2) of the draft regulatory text provided, " For each area classified as serious or higher under § 51.903, the State must submit no later than 3 years after the effective date of the area's nonattainment designation a SIP revision consistent with section 182( c)( 2)( B) of the CAA for each 3 year period following the initial 6 year period addressed under paragraph ( a)( 1)( ii)( B) of this section until the area's attainment date. For areas initially designated nonattainment for the 8 hour NAAQS the 3 year periods referenced in section 182( c)( 2)( B) of the Act shall begin January 1, 2009."

In applying the requirement of section 182( c)( 2)( B), it is necessary to know the attainment date for the area. The attainment date is not necessarily the maximum allowed under part D of the CAA, but must be " as expeditious as practicable" but no later than the maximum statutory date ( e. g., 9 years after designation for a serious area). Thus,

for purposes of determining the period for which RFP is PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 52With this rulemaking, this provision is codified as 40 CFR 51.908( d).

218 needed, the State must have completed an attainment demonstration and RACM analysis ( discussed elsewhere in this preamble) to demonstrate that the attainment date selected is as expeditious as practicable.

There are several other provisions that bear on the issue of when emissions reductions must be achieved for purposes of the RFP requirements. The Phase 1 Rule,

§ 51.900( g) sets forth the following definition: " Attainment year ozone season shall mean the ozone season immediately preceding a nonattainment area's attainment date." Also,

§ 51.90852 ( What is the required time frame for obtaining emission reductions to ensure attainment by the attainment date?) provides: " For each nonattainment area, the State must provide for implementation of all control measures needed for attainment no later than the beginning of the attainment year ozone season." Thus, if the latest attainment date allowed by the CAA for a serious area designated in 2004 is June 15, 2013, the ( complete) ozone season preceding that date would occur in 2012. However, if all of the reductions necessary to achieve attainment are in place prior to that ozone season, then the most expeditious PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 53With the exception of areas with year round ozone seasons, in which case the latest attainment date may be earlier in the year of the outside attainment date identified in the statute.

54Note that 40 CFR 51.900( g) defines " Attainment year ozone season" as the ozone season immediately preceding a nonattainment area's attainment date.

219 attainment date would in fact be just after the end of that ozone season in 2012 ( assuming the RACM analysis did not compel a more expeditious attainment year). Thus, in light of the Phase 1 rule, the latest possible attainment date for all areas will be just after the end of the ozone season in the year prior to the outside attainment date identified in the statute for the area's classification. 53 Consistent with the manner in which ROP plans under the 1 hour ozone standard were developed, the RFP baseline for 2002 will have a typical summer day tons/ day basis. As such, the attainment year target will also be a typical summer day target. Thus, the target level of emissions must be met by the attainment date of the attainment year. 54 As noted above, section 182( c)( 2)( B) requires that RFP be continued out to the attainment date. Thus, to some extent, the RFP requirement may help determine the attainment date. In the example discussed above of a serious area, the first milestone year after 2008 by which PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 220 an annual average of 3 percent emissions reductions would have to be achieved over each 3 year period ( i. e., 9 percent over 3 years) would be 2011, with an additional annual average of 3 percent per year between the end of 2011 and the attainment year ( if the attainment year is beyond 2011).

The maximum statutory attainment year under the discussion above would be 2013, but, for the reasons explained above concerning the date by which emissions reductions must be achieved, the actual maximum attainment year would generally be the year prior, viz., 2012. If for example this area needs an additional 7 percent emission reduction for attainment purposes beyond 2008, however, RFP would require implementation of the entire 7 percent no later than the end of 2011. Since that is the amount needed for attainment,

the area would actually achieve attainment by 2011, and the attainment date would then have to be no later than 2011.

If the area did not achieve this 7 percent reduction until the end of 2011, the RFP requirement in this case could not require the full 9 percent reduction. Thus, since RFP is only needed up to the attainment date, should the area achieve the 7 percent earlier in the year it would have achieved attainment and no further ROP would be required.

Therefore, in this example, RFP would not require more PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 221 reductions than needed for attainment. Furthermore, the RFP requirement by itself would not force an attainment year earlier than 2011 for this case ( e. g., 2010   2 years after 2008), since the 7 percent reduction over 2 years is greater than an annual average of 3 percent, which is beyond that required by the RFP requirement. In summary, RFP reductions end at the attainment date, and as shown the RFP requirement would not result in emissions reductions greater than needed for attainment.

b. Summary of final rule For each area classified as moderate or higher, the State's 15 percent VOC emission reduction plan must provide for the emissions reductions to be achieved by the end of the 6 year period after the baseline year. The 6 year period referenced in section 182( b)( 1) of the CAA shall begin January 1 of the year following the year used for the baseline emissions inventory. For areas initially designated nonattainment for the 8 hour NAAQS, the 6 year period runs from January 1, 2003 to December 31, 2008.

For each area classified as serious or higher, the State's RFP plan must provide a 3 percent annual emission reduction requirement averaged over every 3 year period after the initial 6 year period. For areas initially PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 222 designated nonattainment for the 8 hour NAAQS, the first 3

year period would run from January 1, 2009 to December 31,

2011. The final increment of progress must be achieved no later than the attainment date for the area.

To summarize, for areas designated nonattainment for the 8 hour NAAQS with an effective date of June 15, 2004,

the rule would establish the following:

° The 6 year period in section 51.910( a)( 1)( i)( A) and ( ii)( C)( 1) would run from January 1, 2003 to December 31, 2008.

° The first 3 year period in section 51.910( a)( 1)( i)( B)

would run from January 1, 2009 to December 31, 2011.

° The baseline emissions inventory in section 51.910( d)

would be for calendar year 2002.

c. Comments and responses No comments were received on the proposal concerning the timing of emissions reductions needed for RFP.

14. Banked emission reduction credits ( including shutdown credits)

Can pre baseline emission reduction credits be used to satisfy the RFP requirement? [ No discussion in June 2, 2003 proposal; no draft or final regulatory text.]

a. Background PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 223 This topic was not discussed in the proposed rulemaking, but we believe that questions that have arisen on this topic bear some discussion here.

The CAA provides the following definition in section 182( b)( 1)( D) regarding the 15 percent VOC RFP requirement:

Baseline emissions. For purposes of subparagraph ( A), the term " baseline emissions" means the total amount of actual VOC or NOx emissions from all anthropogenic sources in the area during the calendar year of the enactment of the Clean Air Act Amendments of 1990, excluding . . . [ emphasis added.]

The April 1992 General Preamble provides:

The adjusted base year inventory ( i. e., baseline emissions) must contain only actual emissions occurring in the base year, 1990, within the designated nonattainment area boundaries. The baseline emissions should not include pre enactment banked emission credits since they were not actual emissions during the calendar year of enactment [ 57 FR 13507; April 16, 1992; emphasis added].

and Pre enactment banked emissions reductions credits are not creditable toward the 15 percent progress requirement. However, for purposes of equity, EPA encourages States to allow sources to use such banked emissions credits for offsets and netting. When States use such banked credits for offsets and netting to the extent otherwise creditable under the Part D NSR regulations, these pre enactment emissions credits must be treated as growth. Consequently, this " growth" must be accounted for, as is the case with all other anticipated growth, in order to ensure that it does not interfere with the 15 percent rate of progress requirement ( which is " net" of growth). In addition, when such growth emissions are used as offsets, they must be applied in accordance with the offset ratio PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 55Guidance on the Adjusted Base Year Emissions Inventory and the 1996 Target for the 15 Percent Rate of Progress Plans. Ozone/ Carbon Monoxide Programs Branch, U. S. Environmental Protection Agency, Office of Air Quality Planning and Standards, Research Triangle Park, NC 27711. EPA 452/ R 92 005. October 1992.

5651 FR 233 " Emissions Trading Policy Statement; General Principles for Creation, Banking and Use of Emission Reduction Credits; Final Policy Statement and Technical Issues Document." December 4, 1986. This document has been replaced by Improving Air Quality with Economic Incentive Programs, January 2001, available at http:// www. epa. gov/ region07/ programs/ artd/ air/ policy/ search. htm.

224 prescribed for the area of concern ( e. g., 1.3 to 1 for severe areas, etc.). All pre enactment banked credits must be included in the nonattainment area's attainment demonstration for ozone to the extent that the State expects that such credits will be used for offsets or netting prior to attainment of the ambient standards. Credits used after that date will need to be consistent with the area's plan for maintenance of the ambient standard [ 57 FR 13508].

The EPA's 1992 guidance on calculating the 15 percent emission target55 contained the following:

4.3 Pre enactment Banked Emissions Reduction Credits. If the State has an emissions credit bank that meets the EPA's requirements under an earlier policy statement[ 56], the State is allowed to use its preenactment banked emissions reduction credits to facilitate the location of new sources in nonattainment areas during the 1990 1996 period. However, because these reduction credits represent emissions that are not included in the 1990 base year inventory, any additional emissions that result from the use of banked credits must be treated as growth in order to ensure that the 15 percent VOC emissions reduction requirement is achieved. Also, it is important to note that the use of pre enactment banked emissions credits must be PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 225 in accordance with the offset ratios prescribed in the CAA Amendments ( e. g., 1.3 to 1 in severe areas.)

The 1992 guidance document provides an example calculation of the above guidance.

b. Interpretation for 8 hour ozone NAAQS The guidance provided above is still relevant for banked emission reduction credits in relation to the RFP requirement for the 8 hour ozone standard. However, because the rule for implementing the 8 hour ozone standard uses a 2002 baseline year, the above guidance should be read   for purposes of implementing the 8 hour ozone RFP requirement   by substituting " pre enactment banked emission credits" with " pre 2002 banked emission credits." A pre 2002 banked emission credit is one that was generated before January 1,

2002 and that is certified in a bank that EPA has approved for such purposes. For a discussion of the use of shutdown/ curtailment credits for offsets and netting, see section V. B. 1. a of this preamble. For a discussion of the use of emission reduction credits for offsets and netting,

see section V. D. 5 of this preamble.

F. Are contingency measures required in the event of failure to meet a milestone or attain the 8 hour ozone NAAQS? PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 226 [ Section VI. J. of June 2, 2003 proposed rule ( 68 FR 32837); no draft or final regulatory text.]

1. Background Under the CAA, 8 hour ozone nonattainment areas subject only to subpart 1, as well as those classified under subpart 2 as moderate, serious, severe, and extreme must include in their SIPs contingency measures consistent with sections 172( c)( 9) and 182( c)( 9), as applicable. Contingency measures are additional controls to be implemented in the event the area fails to meet a RFP milestone or fails to attain by its attainment date. These contingency measures must be fully adopted rules or measures which are ready for implementation quickly upon failure to meet milestones or attainment.

For additional background information, see the Proposal ( 68 FR 32802, June 2, 2003). Other related information can be found in the following applicable guidance documents:

° " Contingency Measures for Ozone and Carbon Monoxide ( CO) Redesignations," Memorandum from G. T. Helms,

Chief, Ozone/ Carbon Monoxide Programs Branch, June 1,

1992,

° " Procedures for Processing Requests to Redesignate Areas to Attainment," Memorandum from John Calcagni, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 227 Director, Air Quality Management Division, September 4,

1992,

° " Guidance for Growth Factor, Projections, and Control Strategies for the 15 percent Rate of Progress Plans,"

( EPA 452/ R 93 002), March 1993,

° " Early Implementation of Contingency Measures for Ozone and Carbon Monoxide ( CO) Nonattainment Areas,"

Memorandum from G. T. Helms, Chief, Ozone/ Carbon Monoxide Programs Branch, August 13, 1993,

° " Guidance on Issues Related to the 15 Percent Rate of

Progress Plans," Memorandum from Michael H. Shapiro,

Acting Assistant Administrator for Air and Radiation to the Regional Division Directors, August 23, 1993,

° " Clarification of Issues Regarding the Contingency Measures that are due on November 15, 1993 for Moderate and Above Ozone Nonattainment Areas," Memorandum from D. Kent Berry, Acting Director, Air Quality Management Division, November 8, 1993, and ° " Guidance on the Post 1996 Rate of Progress Plan ( ROP)

and Attainment Demonstration," ( EPA 452/ R 93 015),

January 1994.

2. Summary of final rule We are adopting the approach taken in our proposal. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 228 All subpart 1 and subpart 2 areas other than marginal areas are required to adopt contingency measures to be implemented in the event of failure to meet a RFP milestone or to attain the 8 hour ozone NAAQS. The contingency measures SIP should accompany the attainment demonstration SIP required for submission by June 15, 2007.

It should be noted that the CAA requires States to identify contingency measures that will go into effect without further action on the part of the State or EPA. We believe this language means that contingency measures should be adopted regulations but also recognize that some additional State or local action may be necessary ( such as notification of sources) before implementation.

Under subpart 2, areas that are nonattainment for the 8 hour ozone NAAQS that have unused adopted contingency measures for the 1 hour ozone NAAQS may use those measures as appropriate as contingency measures for the 8 hour NAAQS.

For subpart 1 areas, States should follow EPA's existing guidance for subpart 2 areas. We intend to provide additional guidance only if needed.

3. Comments and responses Comment: Two commenters raised concerns about the difficulty some areas may have in identifying what they PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 229 referred to as " reserve" or " unused" measures for the 1 hour standard that could be used as contingency measures for the 8 hour standard for subpart 2 areas. These commenters requested protection for areas that have no " leftover"

measures to be used in the event of failure to meet the milestone. The commenters contended that EPA needs to have policies that do not penalize areas that have implemented all feasible measures to attain the standard and may not have any identified contingency measures left.

Response: The commenters appear to be asking EPA to drop the requirement for a nonattainment area SIP to contain contingency measures. The commenters have not provided a legal rationale why they believe it is possible to do this.

The purpose of contingency measures is to have a quickly implementable backup plan of action should primary measures fail to bring a nonattaining area to the requisite level ( be it attainment of the NAAQS or meeting a RFP milestone). It is up to each State to determine what measures the State will commit to implement should failure occur. We note that States may rely on regional and national control measures as well as local control measures to meet the contingency measure obligation.

A list of example contingency measures has been PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 230 provided. See section 9.5 of " Guidance for Growth Factor,

Projections, and Control Strategies for the 15 percent Rateof Progress Plans," ( EPA 452/ R 93 002), March 1993. The States have the responsibility of determining what contingency measures are most appropriate for their area( s).

To allow nonattaining areas with seemingly few potential contingency measures to opt out of the contingency measure requirement is counter to the contingency measure provision in the CAA. The EPA does not see any way to interpret the clear language of the statute other than as requiring contingency measures in all nonattainment areas other than marginal subpart 2 areas. It should also be noted that the CAA's requirement for an area's SIP to demonstrate attainment by the attainment date is not limited to the adoption only of those measures that are " feasible."

Comment: One commenter alleged EPA's proposal to allow Federal measures that result in additional emissions reductions beyond RFP or attainment to qualify as contingency measures is legally invalid. The commenter further stated that contingency measures must consist of control requirements that will be taken off the shelf and undertaken if and when a RFP or attainment failure occurs.

In other words, contingency measures must be new measures PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 231 not Federal or local measures that already exist.

Response: The CAA states that contingency measures are to be " specific measures to be undertaken if the area fails to make reasonable further progress, or to attain . . . by the attainment date." The April 16, 1992 General Preamble provided the following guidance: " States must show that their contingency measures can be implemented with minimal further action on their part and with no additional rulemaking actions such as public hearings or legislative review. In general, EPA will expect all actions needed to affect full implementation of the measures to occur within 60 days after EPA notifies the State of its failure." ( 57 FR 13512). This could include Federal measures and local measures already scheduled for implementation.

The EPA has approved numerous SIPs under this interpretation   i. e., that use as contingency measures one or more Federal or local measures that are in place and provide reductions that are in excess to the attainment demonstration or RFP plan. ( 62 FR 15844, April 3, 1997; 62 FR 66279, December 18, 1997; 66 FR 30811, June 8, 2001; 66 FR 586 and 66 FR 634, January 3, 2001.) The key is that the statute requires extra reductions that are not relied on for RFP or attainment and that are in the demonstration to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 232 provide a cushion while the plan is revised to meet the missed milestone. In other words, contingency measures are intended to achieve reductions over and beyond those relied on in the attainment and RFP demonstrations. Nothing in the statute precludes a State from implementing such measures before they are triggered. In fact, a recent court ruling upheld contingency measures that were previously required and implemented where they were in excess of the attainment demonstration and RFP SIP. See LEAN v. EPA, 382 F. 3d 575 5th Circuit, 2004.

Comment: One commenter supported EPA's proposal to continue to observe existing policies regarding contingency measures for areas covered under subpart 2 for the 8 hour standard. Additionally, the commenter anticipated that EPA's additional guidance on the contingency measure requirement for subpart 1 will be patterned after the subpart 2 requirement.

Response: The EPA acknowledges the commenter's support of our proposal that subpart 2 8 hour ozone nonattainment areas may rely on our existing contingency measure guidance.

As provided above, both subpart 1 and subpart 2 areas should rely on that guidance for purposes of adopting contingency measures. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 233 G. What requirements should apply for RACM and RACT for 8

hour ozone nonattainment areas?

[ Section VI. K. of June 2, 2003 proposed rule ( 68 FR 32837); § 51.912 in draft and final regulatory text.]

The first subsection of this section covers RACT and the second subsection covers RACM.

1. Reasonably Available Control Technology ( RACT)

a. Background As described in more detail in the June 2 proposal,

subpart 1 of part D includes a requirement that an attainment plan provide for the implementation of all RACM as expeditiously as practicable, including such reductions that may be obtained through RACT. Under subpart 2,

marginal areas are required to correct pre 1990 RACT requirements and new RACT requirements are specified for moderate and above ozone nonattainment areas. Additionally,

States must adopt RACT for all areas in an OTR. The RACT requirement applies to both ozone precursors   NOx and VOC.

Since 1990, we have issued guidance documents on the RACT requirements in subpart 2. Prior to enactment of the CAA Amendments of 1990, EPA also issued detailed guidance PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 57The EPA defined RACT as the lowest emission limitation that a particular source is capable of meeting by the application of control technology that is reasonably available considering technological and economic feasibility ( 44 FR 53762; September 17, 1979).

58In addition, EPA is considering related recommendations from the Air Quality Management Work Group to the Clean Air Act Advisory Committee ( CAAAC) dated January 2005 [ available at: http:// www. epa. gov/ air/ caaac/ aqm. html# library ] in response to the recent National Research Council report on Air Quality Management in the United States ( January 2004) [ available for sale; individual pages available for viewing at http:// www. nap. edu/ books/ 0309089328/ html]. One of the recommendations to the CAAAQ is that " for the SIPs States are required to submit over the next several years, EPA and States, locals, and Tribes should promote the consideration of multipollutant impacts, including the impacts of air toxics, and where there is discretion, select regulatory approaches that maximize benefits from controlling key air toxics, as well as ozone, PM2.5 and regional haze." As part of this effort, EPA intends in the future to develop updated technology guidance with respect to source categories 234 documents on RACT for ozone nonattainment area SIPs. 57 Section 183( c) of the CAA requires EPA to " revise and update such documents [ i. e., Control Techniques Guidelines and Alternative Control Techniques] as the Administrator determines necessary." As new or updated information becomes available States should consider the new information in their RACT determinations. States should consider the new information in any RACT determinations or certifications that have not been issued by the State as of the time such an update becomes available. 58 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 emitting multiple pollutants in large amounts. At this time, however, we think it is unlikely that updated technology guidance will be available in time for the RACT SIPs due in 2006.

235 The June 2, 2003 proposal addressed several aspects of the RACT requirement. For subpart 1 areas, we proposed several options. We proposed in one option to interpret the CAA in a manner similar to that under subpart 2 by requiring areas covered under subpart 1 to face different RACT requirements based on the magnitude of the ozone problem in the area ( i. e., the area's design value). In another option, we proposed that RACT would be met if the area were able to demonstrate attainment of the standard as expeditiously as practicable with emission control measures in the SIP. We also proposed as an early attainment incentive that RACT would be met in an area which demonstrates attainment within 3 years and submits the demonstration within 1 year. We proposed the RACT submittal dates for subpart 1 areas would be within 2 years after designation.

For subpart 2 areas, we proposed to apply RACT as specified in subpart 2. We proposed ( in the draft regulatory text) to require that States submit their subpart 2 RACT SIPs within 2 years after the nonattainment PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 236 designation. In addition, we proposed the date for affected sources to implement RACT in subpart 2 areas would be 30 months after the required submittal date. We also proposed that States may use current EPA guidance in making RACT determinations; consequently, in some cases, sources previously evaluated under the 1 hour ozone RACT requirement and sources subject to the NOx SIP Call cap and trade program could be determined to meet the 8 hour ozone RACT requirement.

b. Summary of final rule For subpart 1 areas that do not request an attainment date extension ( i. e., an attainment date beyond 5 years after designation), RACT will be met with control requirements sufficient to demonstrate that the NAAQS is attained as expeditiously as practicable. The RACT submittal date for these areas is the same as the submittal date for the attainment plan. This submission date is no later than 3 years after designation.

For subpart 1 areas that request an attainment date extension ( i. e., an attainment date beyond 5 years after designation), the State shall submit the RACT SIP with its PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 59This is generally expected with the submission of the attainment demonstration.

237 attainment date extension request. 59 For subpart 2 moderate and above areas, and areas within an OTR, RACT is required with the RACT submittal and is due 27 months after designation. States must require sources to implement RACT no later than the first ozone season or portion thereof which occurs 30 months after the required submittal date.

Where a RACT SIP submission ( separate from the attainment demonstration) is required ( except certain subpart 1 areas, as described two paragraphs prior to this,

and except certain sources subject to the NOx SIP Call or CAIR, as described below), State SIPs implementing the 8

hour standard must assure that RACT is met, either through a certification that previously required RACT controls represent RACT for 8 hour implementation purposes or through a new RACT determination. States may use existing EPA guidance in making RACT determinations. Where a State has adopted and EPA has approved a control measure as RACT for a specific major stationary source or source category for the 1 hour ozone NAAQS, and absent data indicating that the previous RACT determination is no longer appropriate, the State may submit a certification that the source is subject PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 238 to a SIP approved RACT requirement. Such certification shall be accompanied by appropriate supporting information,

such as consideration of information received from public commenters.

For purposes of meeting the NOx RACT requirement, the State need not perform ( or submit) a NOx RACT analysis for sources subject to the State's emission cap and trade program where the cap and trade program has been adopted by the State that meets the NOx SIP Call requirements or, in States achieving CAIR reductions solely from EGUs, the CAIR NOx requirements. The EPA believes that the SIP provisions for those sources meet the ozone NOx RACT requirement. A State that is relying on this conclusion for the affected sources should document this reliance in its RACT SIP.

Additionally, RACT is considered met for cement kilns and stationary internal combustion engines that are subject to a SIP approved as meeting the NOx SIP Call obligation to install and operate controls that are expected to achieve at least a 30 percent and 82 percent reduction, respectively,

from uncontrolled levels. A State that is relying on this conclusion for the affected sources should document this reliance in its RACT SIP.

A State may meet the NOx RACT requirement by showing PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 239 that the weighted average emission rate from a broad range of sources in the nonattainment area subject to RACT     meet RACT requirements.

At their discretion, States are free to conduct a case by case RACT determination for any source   or RACT determinations or certifications for groups of sources.

As discussed below in greater detail, States may use information gathered from prior BACT or LAER analyses, to the extent it remains valid, to help complete a RACT determination. Similarly, emissions standards developed under 111( d) and NSR/ PSD settlement agreements may be considered. This will allow States, in a number of cases,

to rely on these prior determinations for purposes of showing that a source is meeting RACT requirements.

For VOC sources subject to MACT standards, States may streamline their RACT analysis by including a discussion of the MACT controls and considerations relevant to VOC RACT.

We believe that this will allow States, in many cases, to rely on the MACT standards for purposes of showing that a source has met VOC RACT.

Consistent with the proposed regulatory text for this rule [ section 51.912( b)( 1)], the final rule provides that,

for purposes of meeting the RACT obligations under section PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 240 182( b)( 2)( C) of the CAA for major stationary sources of VOCs and under section 182( f) of the CAA for major stationary sources of NOx, the definition of major stationary source in section 302 of the CAA, as modified by the major source definition in either section 182( b), ( c), ( d) or ( e) of the CAA as applicable to the area's classification, applies.

Although we drafted more extensive regulatory language for several aspects of the RACT program in the proposal, we believe it is sufficient to describe EPA's views on the details of the RACT program in today's preamble and in other guidance [ e. g., the NOx Supplement to the General Preamble,

November 25, 1992 ( 57 FR 55620)]. Thus, some detailed portions of the proposed regulatory text regarding RACT were not retained in the final rule ( in particular paragraph ( b)( 2) " Prior RACT Determinations").

c. Comments and responses Comments: For subpart 2 ozone nonattainment areas,

several States expressed agreement with the proposed approach for implementing RACT consistent with section 182 of the CAA.

Response: The EPA agrees with these comments.

Comments: For subpart 1 ozone nonattainment areas, EPA received several comments for and against the options PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 241 proposed for addressing RACT.

Several State and industry commenters supported EPA's proposed approach that RACT would be met if the area is able to demonstrate attainment of the standard as expeditiously as practicable with emission control measures in the SIP.

The reasons provided by these commenters were generally as follows: States should be able to use their discretion in determining which control strategies are the most effective in addressing a particular area's air quality problem;

flexibility is needed as areas differ in sensitivity to NOx and VOC reductions; EPA's regional modeling shows these requirements are unnecessary in many areas; and many of these areas violate the ozone standard primarily or entirely due to transport.

The EPA also received comments, primarily from several States and environmental groups, opposing the approach that RACT would be met by control measures that are part of a SIP demonstrating attainment of the standard as expeditiously as practicable. These commenters made the following points:

since section 172( c)( 1) of the CAA explicitly mandates RACT " at a minimum" in all nonattainment areas, Congress plainly intended to require RACT as a floor level of control technology in addition to any measures needed to demonstrate PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 242 timely attainment; even where RACT does not advance attainment, it is needed in order to reduce the severity and number of violations; under this approach, the statutory RACT provisions add nothing to the statutory attainment mandate   which violates basic canons of statutory interpretation; RACT in nonattainment areas will substantially reduce transport of ozone and ozone precursors; for equity reasons, sources in similar areas should be subject to the same control; and RACT is a useful tool that should not be abandoned through flexibility mechanisms.

Response: The general RACT provision under subpart 1 in the statute, is found in section 172( c)( 1). It is a portion of the RACM provision found in that same section.

Our long standing interpretation of the RACM provision is that areas need only submit such RACM as will contribute to timely attainment and meet RFP, and that measures which might be available but would not advance attainment or contribute to RFP need not be considered RACM. This interpretation has been upheld in several recent court cases. See Sierra Club v. EPA, 294 F. 39 155, 162 ( D. C.

Circuit, 2002) ( concerning the Metropolitan Washington,

D. C., attainment demonstration) and Sierra Club v. EPA, No. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 243 01 60537 ( 5th Circuit, 2002) ( concerning the Beaumont attainment demonstration). Since subpart 1 RACT is a portion of RACM, these cases also support a conclusion that,

where we are dealing only with section 172 RACT, it is reasonable to require only such RACT as will meet RFP and advance attainment. In view of these court cases, EPA disagrees with the comments listed above opposing the approach that, in subpart 1 areas, RACT would be met by control measures in a SIP demonstrating attainment of the standard as expeditiously as practicable and meeting RFP.

The EPA generally agrees with comments that States should have flexibility to determine which control strategies are the most effective in reaching attainment as expeditiously as practicable and providing for RFP, and the CAA gives primary authority to States and local governments to select the mix of controls necessary to meet the NAAQS.

In addition, EPA believes that section 172( c) is not the appropriate section of the CAA to address the transport of ozone and ozone precursors; EPA has conducted and is conducting rulemaking pursuant to sections 110 and 126 for that purpose.

Finally, some commenters suggested, for equity reasons,

that sources in similar areas should be subject to the same PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 244 control. In the proposal, EPA suggested subpart 1 and 2 areas with the 8 hour ozone design values above 91 ppb should be subject to VOC and NOx RACT requirements. The EPA also proposed that RACT would be met in an area which demonstrates attainment within 3 years and submits the demonstration within 1 year. In the final rule, EPA has addressed equity concerns by taking portions of these two proposals, such that subpart 1 and subpart 2 areas with attainment deadlines longer than 5 years after designation must meet the same RACT requirements. We believe longer than 5 years is more appropriate than the 3 years proposed for this requirement since this approximates the maximum attainment date for subpart 2 ( moderate) areas subject to RACT and since this approach is consistent with the manner in which ROP/ RFP requirements are treated in the final rule.

Therefore, in subpart 1 areas that do not request an extension beyond the initial 5 years after designation, the final rule indicates that RACT would be met by the emission control measures in a SIP that demonstrates attainment of the standard as expeditiously as practicable and meets RFP.

In addition, the final rule requires subpart 1 areas with maximum attainment deadlines longer than 5 years after designation to meet the same RACT requirements as subpart 2 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 245 areas. This approach minimizes the RACT inequity with subpart 2 areas and provides flexibility for subpart 1 areas demonstrating attainment within 5 years.

Comment: One commenter believes that new marginal nonattainment areas should be subject to RACT under the 8

hour standard just as they would have been subject to RACT immediately prior to the CAA Amendments of 1990.

Response: Section 182( a) provides that marginal and higher classified areas for the 1 hour standard with pre

1990 RACT obligations had to submit corrections to their RACT rules within 6 months after classification under the 1990 CAA Amendments. To the extent that any 8 hour ozone nonattainment areas did have this obligation, they already met it. See footnote 60 in the June 2, 2003 proposal. The CAA does not require RACT for marginal areas other than the obligation to " correct" pre 1990 RACT requirements.

Comment: The EPA received several comments for and against the proposal that States may use a prior RACT determination with respect to the 1 hour ozone standard for purposes of meeting the RACT requirements for the 8 hour ozone standard. Further, EPA received comments on the proposal that a new RACT determination is required in cases where the initial RACT analysis under the 1 hour standard PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 246 for a specific source or source category concluded that no additional controls were necessary.

Several State and industry commenters supported EPA's proposed approach that a prior RACT analysis under the 1

hour ozone standard should meet RACT requirements under the 8 hour standard where major sources or source categories were previously reviewed and controls applied to meet RACT.

These commenters stated that RACT is not specific to any particular ozone standard, such that once a source has met RACT, it has met RACT, whether or not the ozone standard is revised to become more ( or less) stringent; just as with the 15 percent VOC requirement, the statute provides no basis for duplicative imposition of RACT; and there is no basis in the statute to read in a new requirement for RACT. In addition, some industry commenters stated that EGUs which meet title IV NOx control requirements would also meet the NOx RACT requirement.

The EPA also received comments from several States opposing EPA's proposed approach. These commenters believe the NOx and VOC guidance is too old, needs updating and, in the case of NOx controls, the improvement over the last 3 years has been dramatic with controls previously considered to be BACT ( and therefore generally considered at the time PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 247 to be more stringent than RACT) are now considered to be merely RACT. In addition, one State suggested the presumptive RACT level should be revised to at least 85 percent control or that NOx RACT should be defined as up to $ 10,000/ ton of pollutant removed.

Two States disagreed with EPA's proposal that a new RACT determination should be required in cases where the initial RACT analysis under the l hour NAAQS found that no additional controls were necessary for a specific source or source category. They indicated such re analysis would be an unwise use of resources because it would not yield significant benefits. Further, they do not agree that a RACT determination is warranted for major VOC or NOx sources not in existence during the previous RACT determination,

because new sources in 1 hour nonattainment areas have been permitted pursuant to the requirements for NSR and, where applicable, have already been subject to more stringent control requirements.

Several State and industry commenters recommended that RACT requirements apply for major sources in any portion of the 8 hour nonattainment area not subject to a RACT program for the 1 hour standard.

Response: In 1992, EPA set presumptive NOx RACT for PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 248 boilers as combustion modification, consistent with title IV acid rain requirements. For all other NOx stationary source categories, EPA guidance in 1994 indicated States should consider in their RACT determinations technologies that achieve 30 50 percent reduction within a cost range of $ 160

1300 per ton of NOx removed. In the NOx SIP Call Rule, we reviewed all major NOx source categories and stated in the final rule that the NOx SIP Call controls, at less than $ 2,000/ ton, represent reductions beyond those required by RACT. The suggestion of one State that EPA's RACT guidance should be revised to reflect 85 percent control and $ 10,000/ ton of pollutant removed is inconsistent with EPA's previous conclusions regarding what level of control represents RACT and because the comment lacked supporting documentation that the suggested values represent feasible control levels for the many source categories affected by the RACT program.

Many areas subject to the major source RACT requirement under the 8 hour ozone standard have previously addressed the RACT requirement with respect to the 1 hour ozone standard. For example, major sources located in States of the Ozone Transport Commission were subject to the NOx RACT requirement in the mid 1990s. We believe that, in many PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 249 cases, a new RACT determination under the 8 hour standard would result in the same or similar control technology as the initial RACT determination under the 1 hour standard because the fundamental control techniques, as described in the CTGs and ACTs, are still applicable. In cases where controls were applied due to the 1 hour ozone RACT requirement, we expect the incremental emissions reductions from application of a second round of controls would be small and, therefore, the cost for advancing that small additional increment of reduction would not be reasonable.

In such cases, EPA believes the cost per ton of NOx removed associated with installing a second round of RACT controls ( and perhaps the removal of initial RACT controls) is likely to be beyond the costs assumed in our current guidance noted above ($ 160$ 1300/ ton). In contrast, a RACT analysis for uncontrolled sources would be much more likely to find that RACT level controls are economically and technically feasible.

The CTGs and ACTs for VOC were completed over a period from the late 1970s to mid 1990s and have not been updated.

The CTGs are still used to presumptively define VOC RACT.

The EPA issued NOx ACT documents between 1992 and 1995. In September 2000, updates to the NOx ACT documents were PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 250 completed for stationary internal combustion engines and cement kilns. The NOx and VOC ACTs describe available control techniques and their cost effectiveness, but do not define presumptive RACT levels as the CTGs do. Updating the ACTs would not, by itself, change EPA's NOx or VOC RACT guidance, but it could provide information that would lead to a new conclusion as to which control measures constitute RACT for a specific source or source category. Since RACT can change over time as new technology becomes available or the cost of existing technology decreases, EPA does not agree with comments that once a source has met RACT, it has met RACT whether or not the ozone standard is revised.

We agree that progress has been made in improving the cost effectiveness of some NOx and VOC controls. States and other interested parties should consider available information that may supplement the CTG and ACT documents.

In cases where additional information is presented, for example, as part of notice and comment rulemaking on a RACT SIP submittal, States ( and EPA) would necessarily consider the additional data in reviewing what control obligation is consistent with RACT. Similarly, we encourage States to use the latest information available in making RACT determinations, whether that information is in CTGs, ACTs, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 251 or elsewhere.

The EPA agrees that it is more efficient for EPA to broadly assess what is RACT for a specific source category than for States to conduct source by source RACT determinations, especially considering that States need to initiate RACT programs in the near future ( as discussed in a separate comment/ response). The EPA's current RACT guidance may be used for purposes of the 8 hour standard. At the same time, we agree with comments that many of the CTGs/ ACTs have not been revised since issued and thus may not provide the most accurate picture of current control options.

Therefore, we believe States must consider new information that has become available and certify that a 1 hour ozone RACT determination, even where controls were required, still represents an appropriate RACT level of control for the 8

hour ozone program. In the alternative, the State should revise the SIP to reflect a modified RACT requirement for specific sources or source categories.

In summary, we believe the current NOx and VOC RACT guidance, including CTGs and ACTs, may continue to be used by States in making RACT determinations with respect to the 8 hour ozone standard. States should ensure that their SIPs accurately reflect RACT based on the current PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 252 availability of technically and economically feasible controls.

Therefore, in portions of 8 hour ozone nonattainment areas where major sources or source categories were previously reviewed and controls applied to meet the RACT requirement under the 1 hour standard, States should review and, if appropriate, accept the initial RACT analysis as meeting the RACT requirements for the 8 hour standard.

Absent data indicating that the previous RACT determination is no longer appropriate, the State need not submit in its SIP a new RACT requirement for these sources. In such cases, the State should submit a certification as part of its SIP revision, with appropriate supporting information,

such as consideration of new data, that these sources are already subject to SIP approved requirements that still meet the RACT obligation. There are cases where the initial RACT analysis under the 1 hour standard for a specific source or source category concluded that no additional controls were necessary. In such cases, a new RACT determination is needed to consider whether more cost effective control measures have become available for sources that were not previously regulated. A re analysis may determine that controls are now economically and technically feasible and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 253 should be required to meet RACT. Furthermore, in this situation, we expect the incremental emissions reductions to be significant, compared to the uncontrolled emissions levels. Thus, the cost per ton of emissions controlled is more likely to make controls " reasonably available" than where a source had already installed controls to meet RACT for the 1 hour standard. In all cases where additional information is presented as part of notice and comment rulemaking, including a RACT SIP submittal for sources previously controlled, States ( and EPA) must consider the additional information as part of that rulemaking.

We agree with several State and industry comments that RACT requirements apply for major sources in any portion of the 8 hour nonattainment area not subject to a RACT program for the 1 hour standard.

Some commenters objected to EPA's proposal that any major VOC or NOx source that did not exist during a previous RACT determination must be subject to a RACT determination as part of the SIP for the 8 hour ozone standard. These commenters stated that the BACT or LAER provisions would assure at least RACT level controls on such sources. We agree this should be true in many cases, but not all. The BACT/ LAER analyses do not automatically ensure compliance PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 254 with RACT since the regulated pollutant or source applicability may differ and the analyses may be conducted many years apart. States may, however, rely on information gathered from prior BACT or LAER analyses for the purposes of showing that a source has met RACT to the extent the information remains valid. We believe that the same logic holds true for emissions standards for municipal waste incinerators under CAA section 111( d) and NSR/ PSD settlement agreements. Where the State is relying on these standards to represent a RACT level of control, the State should present their analysis with their determination during the SIP adoption process.

For VOC sources subject to MACT standards, States may streamline their RACT analysis by including a discussion of the MACT controls and relevant factors such as whether VOCs are well controlled under the relevant MACT air toxics standard, which units at the facility have MACT controls,

and whether any major new developments in technologies or costs have occurred subsequent to the MACT standards. We believe that there are many VOC sources that are well controlled ( e. g., through add on controls or through substitution of non VOC non HAP materials for VOC HAP materials) because they are regulated by the MACT standards, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 60However, there are some MACT categories for which it may not be possible to determine the degree of VOC reductions from the MACT standard without additional analysis; for example, the miscellaneous metal parts and products ( 40 CFR part 60, subpart MMMM) due to the uncertainty of the compliance method that will be selected.

255 which EPA developed under CAA section 112. Any source subject to MACT standards must meet a level that is as stringent as the best controlled 12 percent of sources in the industry. Examples of these HAP sources that may effectively control VOC emissions include organic chemical plants subject to the hazardous organic NESHAP ( HON),

pharmaceutical production facilities, and petroleum refineries. 60 We believe that, in many cases, it will be unlikely that States will identify emission controls more stringent than the MACT standards that are not prohibitively expensive and are thus unreasonable. We believe this will allow States, in many cases, to rely on the MACT standards for purposes of showing that a source has met VOC RACT.

Comments: Some commenters pointed out that many companies have employed averaging programs for NOx SIP Call compliance and want this option preserved under the 8 hour ozone standard since requiring sources to individually meet NOx RACT requirements would greatly increase the costs of compliance at sources already subject to the NOx cap and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 61 The EPA's NOx RACT guidance ( NOx General Preamble at 57 FR 55625) encourages States to develop RACT programs that are based on " areawide average emission rates." Thus, EPA's existing policy provides for States to submit a demonstration as part of their RACT submittal showing that the weighted average emission rate from sources in the 256 trade program without achieving greater emissions reductions.

Response: In some cases, a facility or a group of sources in a nonattainment area might choose to meet NOx RACT by adopting an emissions averaging concept within the area;

e. g., over controlling one or more large units and not controlling other units. We agree with comments that emission averaging and cap and trade programs such as the NOx SIP Call Rule achieve emissions reductions at lower costs.

The EPA's NOx RACT guidance, published on November 25, 1992 ( 57 FR 55625), was, in part, for the purpose of " enhancing the ability of States to adopt market based trading systems for NOx" and to encourage States to " structure their RACT requirements to inherently incorporate an emissions averaging concept ( i. e., installing more stringent controls on some units in exchange for lesser control on others)."

EPA believes that such cap and trade programs are beneficial ways to achieve the greatest overall reductions in the most cost effective manner. Consistent with previous guidance, 61 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 nonattainment area subject to RACT meet RACT requirements.

257 EPA continues to believe that RACT can be met on average by a group of sources within a nonattainment area rather than at each individual source. In addition, EPA believes that sources complying with the NOx SIP call trading system meet their RACT obligation, for reasons explained later in this section.

Comments: Several State and industry commenters supported EPA's proposed approach concerning RACT and the NOx SIP Call. These commenters stated that the level of emissions reductions required by the NOx SIP Call is far greater than the level of reductions achieved by controls that have been determined to be NOx RACT. One State encouraged EPA to provide this approach to other areas subject to approved cap and trade programs in addition to those areas affected by the NOx SIP Call.

The EPA also received comments, primarily from several States and environmental groups, opposing the approach.

These commenters stated that there are no exceptions to the RACT mandates in either subpart 1 or subpart 2 for sources subject to NOx SIP Call cap and trade programs, and EPA is without authority to invent such an exception. Because the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 258 NOx SIP Call's cap and trade program does not require emission control technologies to be installed at a particular source, some commenters conclude that RACT requirements are necessary and appropriate to ensure that all sources implement at least a minimum level of control.

One State indicated there have been numerous cases where sources subject to the NOx SIP Call have not had to install controls comparable to RACT. Commenters also suggested that RACT is intended to be a benchmark for control technology at individual stationary sources, not a level of regional reductions. In addition, some commenters noted that the NOx SIP Call requirements are specific to the ozone season,

where RACT requirements are year round. Consequently, these commenters recommended that EPA should also consider nonozone related nitrogen issues, including fine particles,

visibility, nitrification and acidification of watersheds and eutrophication of coastal waters all of which would be reduced with year round controls.

Response: In 2009, when sources in areas designated nonattainment for the 8 hour standard in June 2004 must comply with RACT, the NOx SIP call trading program is subsumed by the CAIR trading program. As described below,

EPA believes that sources meet ozone NOx RACT requirements if PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 259 they comply with the NOx SIP Call trading program or, in States where all CAIR reductions are achieved by EGUs, rules implementing CAIR. Accordingly, a State need not perform a NOx RACT analysis for non EGU sources that after 2008 continue to be subject to a SIP that regulates those non EGU sources equally or more stringently than the State's current rules meeting the NOx SIP call. In a NOx SIP Call State that ensures such reductions from non EGUs, the State need not perform a NOx RACT analysis for EGU sources if the State retains a summer season EGU budget under CAIR that is at least as restrictive as the EGU budget that was approved in the State's NOx SIP call SIP. In addition, the State need not perform a NOx RACT analysis for EGUs subject to a State cap and trade program that meets CAIR and achieves CAIR NOx reductions solely from EGUs. As noted above, the SIP should document that the State is relying on EPA's conclusion in this preamble that these levels of control meet RACT for the covered sources.

The EPA believes the RACT mandate in subpart 1 and subpart 2 applies in specific geographic areas but does not necessarily require every major source to install controls.

For example, as discussed in a separate comment/ response,

where we are dealing only with subpart 1 RACT, we only PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 260 require such RACT as will advance attainment or meet RFP.

Thus, EPA does not agree with commenters who conclude that RACT requirements are necessary and appropriate to ensure that all sources implement at least a minimum level of control or that RACT is intended to be a benchmark for control technology at all individual stationary sources.

Some commenters pointed out that the NOx SIP Call requirements are specific to the ozone season, yet RACT requirements are year round. While there are some exceptions, EPA agrees that RACT usually is an application of controls year round; thus, there would be non

ozonerelated nitrogen benefits, including fine particles,

visibility, nitrification and acidification of watersheds and eutrophication of coastal waters due to year round controls. However, since the NOx SIP call reductions must be achieved during the 5 months of the ozone season critical for high ozone concentrations for affected States, we believe that the RACT requirement will be satisfied for sources covered by the NOx SIP Call. In addition, because many sources have installed combustion controls that function all the time, emissions reductions from these controls will occur year round.

( i) NOx SIP Call: All States submitting SIP revisions PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 62The cost of purchasing allowances will often be higher than the cost for achieving a RACT level of control. In the 1998 NOx SIP Call Rule, average costs of compliance were estimated at about $ 1500/ ton and average RACT level costs are less than $ 1300/ ton. Recent estimates of the projected cost of allowances are about $ 2000 4000/ ton ( NOx Budget Trading Program, 2003 Progress and Compliance Report, August 2004, EPA 430 R 04 010).

63The EPA's 1992 NOx RACT guidance provides that the controls required under title IV of the CAA are RACT controls and specifies emission rates three times larger than the rates later used for coal fired units in the NOx SIP Call ( 0.45 0.50 lb/ mmBtu versus 0.15). Base case refers to the situation absent NOx SIP call controls.

261 to meet the NOx SIP Call ( October 27, 1998; 63 FR 57356)

elected to require large boilers and turbines to comply with an emissions cap and trade program consistent with EPA's model cap and trade rule. As a result, the covered sources are already subject to a stringent control program. 62 As described in the June 2, 2003 proposal, these sources collectively achieve more emissions reductions within the SIP Call area than would be required by application of RACT requirements to each source in that area. At the time that EPA promulgated the NOx SIP Call rule, EPA estimated that in the NOx SIP Call control case, EGUs would achieve a 64 percent reduction beyond the base case requirements, 63 and that the non EGUs subject to the States' cap and trade program would achieve a 60 percent reduction from PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 64 63 FR 57434 5 65 Memorandum of March 16, 1994, from D. Kent Berry re: " Cost Effective Nitrogen Oxides ( NOx) Reasonably Available Control Technology ( RACT)." U. S. Environmental Protection Agency, Research Triangle Park, North Carolina.

262 uncontrolled levels. 64 These EGU and non EGU reductions were clearly beyond the 30 50 percent expected from a RACT program. 65 We stated in the final NOx SIP Call rule that the reductions achieved by that program ". . . represent reductions beyond those required by Title IV or Title I RACT." In addition, because the cap and trade program covers units serving a 25 megawatt generator, it may achieve emission reductions from many units that are below the general NOx RACT threshold of 100 tpy for sources in the East.

EPA generally has the discretion to determine whether a State submitted rule is consistent with the RACT requirements for a particular source in the context of approving individual RACT SIPs. The NOx SIP Call is estimated to achieve a beyond RACT degree of control regionally, and sources were required to install any controls needed for compliance no later than May 2004.

Under these circumstances, EPA believes that the NOx SIP call constitutes RACT for those sources covered by the Nox PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 263 SIP Call, regardless of the manner of compliance of individual sources ( e. g., control equipment installation or purchase of allowances from other sources). EPA is making this finding now for all areas in the NOx SIP Call region,

such that States need not submit RACT analyses for sources subject to the NOx SIP call that are in compliance with a SIP approved as meeting the NOx SIP Call. A State that is relying on this conclusion for affected sources should document this reliance in its RACT SIP.

Whether our judgment that non EGU sources subject to the NOx SIP Call trading system meet RACT will continue to apply in the future depends upon how the State chooses to make the transition from the NOx SIP Call trading system to the CAIR trading system. After 2008, EPA will no longer administer the NOx SIP Call trading system and will only administer the CAIR trading system. A State subject to the NOx SIP Call has three choices for the transition. One, a State can bring its non EGU sources that are subject to the NOx SIP Call trading program into the CAIR trading program with the same emissions budget allowed by the State's current NOx SIP Call rules. Two, a State can adopt a SIP that regulates those non EGU sources at least as stringently as the State's current NOx SIP Call rules, but does not move PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 264 those sources into the CAIR trading program. Three, a State can adopt a new SIP that meets its NOx SIP Call responsibilities, in whole or in part, by regulating sources other than the non EGU sources regulated by the State's current NOx SIP Call trading program rules. We believe it is unlikely that States will choose the third option, given that its non EGU sources already would have complied with the NOx SIP Call requirements. Under the first two options,

we believe that these non EGU sources would continue to satisfy RACT. Under the third option, the State would need to determine whether non EGU sources that had participated in the NOx SIP Call trading program continue to meet RACT ( either individually, or through averaging among sources within the nonattainment area).

Finally, as proposed, in cases where States have adopted controls for cement kilns consistent with the NOx SIP Call ( i. e., 30 percent reduction), the State may choose to accept the NOx SIP Call requirements as meeting the NOx RACT requirements for the 8 hour standard and need not perform a new NOx RACT analysis for those sources. In its RACT SIP submission, the State should identify the cement plants that are subject to NOx SIP Call controls and that, therefore, are already subject to a SIP approved requirement consistent PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 66As described in the April 21, 2004 rule ( 69 FR 21608).

67 CAIR achieves about 85% of its NOx emission reductions in 2009 ( remainder in 2015).

265 with RACT. The EPA received comments from States supporting the proposal. Similarly, EPA believes a State may choose to accept the Phase II NOx SIP Call control level for stationary internal combustion engines66 as meeting the NOx RACT requirements and identify these obligations as RACT level controls in its RACT SIP.

( ii) CAIR: The EPA has determined that EGU sources complying with CAIR requirements meet ozone NOX RACT requirements in States where CAIR reductions are achieved from EGUs only.

First, as discussed more fully in the CAIR final rulemaking, EPA has set the 2009 CAIR NOx cap at a level that, assuming the reductions are achieved from EGUs, would result in EGUs installing emission controls on the maximum total capacity on which it is feasible to install emission controls by those dates. The 2015 NOx cap is specifically designed to eliminate all NOx emissions from EGUs that are highly cost effective to control ( the first cap represents an interim step toward that end). 67 In general, we expect PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 266 that the largest emitting sources will be the first to install NOx control technology and that such control technology will gradually be installed on progressively smaller emitting sources until the ultimate cap is reached.

We do not believe that requiring source specific RACT controls on EGUs in nonattainment areas will reduce total NOx emissions from sources covered by CAIR below the levels that would be achieved under CAIR alone. Furthermore, we believe that source specific RACT could result in more costly emission reductions on a per ton basis. If States chose to require smaller emitting sources in nonattainment areas to meet source specific RACT requirements by 2009 ( the required compliance timing for RACT), they would likely use labor and other resources that would otherwise be used for emission controls on larger sources. Because of economies of scale,

more boiler makers and other resources may be required per megawatt of power generation for smaller units than larger units. Thus, the cost of achieving such reductions would be greater on a per ton basis. In any event, the imposition of source specific control requirements on a limited number of sources also covered by a cap and trade program would not reduce the total emissions from sources subject to the program. Under a cap and trade program such as CAIR, there PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 267 is a given number of allowances that equals a given emission level. Source specific control requirements may affect the temporal distribution of emissions ( by reducing banking and thus delaying early reductions) or the spatial distribution of emissions ( by moving them around from one place to another), but it does not affect total emissions. If source specific requirements were targeted at the units that can be controlled most cost effectively, then the imposition of source specific controls would achieve the same result as the projected CAIR cap and trade program. If not, however,

the imposition of source specific requirements would make any given level of emission reduction more costly than it would be under the cap and trade program alone. Thus, the combination of source specific RACT and CAIR would not reduce the collective total emissions from EGUs covered by CAIR, but would likely achieve the same total emissions reductions as CAIR alone, in a more costly way. As a result, we believe that EGUs subject to the CAIR NOx controls meet the definition of RACT for NOx ( in States that require all CAIR NOx reductions from EGUs). EPA is making this finding now for all areas in the NOx SIP Call region, such that States need not submit RACT analyses for sources subject to the NOx SIP Call that are in compliance with a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 268 SIP approved as meeting the NOx SIP Call.

Under CAIR, a State may elect to meet its State budget for NOx emissions solely through requiring reductions from EGUs or through requiring reductions from a combination of sources, including non EGUs. If the State requires reductions from sources other than EGUs, it is not eligible to participate in the EPA administered CAIR trading program.

Additionally, separate provisions of the CAIR rule allow States to choose to allow large NOx sources that are not EGUs to opt in to the program. If only part of the CAIR reductions are required from EGUs, and the balance of the reductions obtained from non EGU sources, then the stringency of CAIR EGU control would be diminished to some extent ( an amount that cannot be determined until a State submits a SIP indicating which sources are participating in the program). Therefore, in these cases, the above rationales for our judgment that CAIR satisfies RACT would not apply. However, even where a State allows opt ins from other source categories to meet CAIR emission levels, if a State transitions from the NOx SIP call level of control to CAIR by the first two transition options for non EGUs discussed above, the NOx RACT requirement would be met for EGUs ( and the State would not need to conduct RACT analyses PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 269 for these EGUs) if the State retains a summer season EGU budget under CAIR that is at least as restrictive as the EGU budget that was set in the State's NOx SIP call SIP.

Otherwise, the State would need to conduct RACT analyses for EGUs ( either on an individual basis, or using the averaging approach within the nonattainment area).

Also, EGU controls adopted to comply with CAIR will be in addition to the numerous controls already adopted to meet state rules implementing the NOx SIP call or other existing requirements.

For clarity, we would note that a State has discretion to require beyond RACT NOx reductions from any source ( including CAIR or NOx SIP Call sources), and has an obligation to demonstrate attainment as expeditiously as practicable. In certain areas, States may require NOx controls based on more advanced control technologies to provide for attainment of the ozone standards.

Comments: Several States expressed support for the proposed RACT submittal date of 2 years after designation for subpart 1 and subpart 2 areas. Other commenters suggested the RACT submittal date for subpart 1 areas should be 3 years after designation in order to coincide with the attainment demonstration submittal deadline and to allow a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 270 more efficient use of resources. In addition, comments from industry suggested a 48 60 month period is needed for installation of controls, rather than the 30 month period proposed.

Response: As described in an earlier comment/ response,

in subpart 1 areas that do not request an extension of their attainment date, RACT is met with the control requirements associated with a demonstration that the NAAQS is attained as expeditiously as practicable. The EPA agrees with commenters that it would be more efficient, in these areas,

if the date for submittal of the RACT rules were to coincide with submittal of the attainment demonstration since RACT is closely tied to the attainment demonstration. Therefore, in the final rule, the RACT submittal date for these areas is the same as the submittal date for the attainment plan,

which is 3 years after designation ( June 2007). Although EPA is not setting a specific RACT rule implementation deadline for these areas, as provided in the Phase 1 rule,

all controls necessary for attainment must be implemented by the beginning of the attainment year ozone season. For example, States would need to require implementation no later than May 1, 2008 where the area has a June 15, 2009 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 68This assumes the ozone season in this example begins May 1.

271 attainment date. 68 In some cases, the time from State rule adoption to installation of controls by sources may be relatively short; in other cases, sources may need more time. Therefore, EPA encourages States to adopt rules expeditiously ( prior to the June 2007 deadline, where possible) so that sources have more than sufficient time to install the controls prior to the start of the attainment year ozone season.

For subpart 2 moderate and above areas and areas within an OTR, the final rule is similar to provisions in section 182 of the CAA which require States to submit RACT rules for these areas within 24 months after the designation. Several commenters supported this approach. Since some States may rely on submittal of SIP revisions meeting CAIR to also satisfy RACT for some sources, the final rule extends the proposed RACT submittal date of 24 months to 27 months after designation ( September 15, 2006), to be consistent with the date for submittal of the CAIR SIP ( September 10, 2006).

For areas subject to the 27 month RACT submittal date,

EPA believes the proposed 30 month period for installation of controls is reasonable, given that this is the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 69In the 1990 CAA Amendments, Congress specifically added RACT requirements for major sources in section 182. Section 182 required the RACT rules to be implemented " as expeditiously as practicable" but no later than 30 months after the submittal deadline.

272 statutorily prescribed period69 ( for the areas covered under subpart 2) and based on our prior experience with States adopting and implementing RACT requirements. For instance,

subsequent to submission of the NOx RACT SIP revisions for the 1 hour standard subject to the 30 month CAA period, EPA approved NOx RACT SIP submittals in some areas which had been exempt from the requirements, including the Dallas and Houston areas, which required implementation within 2 years from the State adoption date. Also, the EPA recently determined that a 24 month period is adequate for stationary internal combustion engines to install low emission combustion controls ( April 21, 2004; 69 FR 21633).

The 48 to 60 month period ( June 15, 2011) for installation of controls suggested by some commenters was not adequately supported with a justification that more time is necessary. In addition, as described in an earlier comment/ response, EPA anticipates that many sources which applied controls due to RACT requirements with the 1 hour ozone standard will not need to install new controls for the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 7057 months from June 15, 2004 effective date of designation ( 27 months to submission plus 30 months to implementation).

71Note, since the CAA requires attainment as expeditiously as practicable, some moderate nonattainment areas may have an attainment date earlier than June 15, 2010.

273 8 hour standard. Thus, because fewer sources will be subject to new requirements to meet RACT for the 8 hour standard than were subject to the 1 hour standard, there will be less demand for control equipment. States and many sources face a reduced burden compared to the same CAA requirement in the 1990s.

Since the ozone season ( 40 CFR part 58, appendix D)

does not begin for many areas until May 1, however, for areas with an effective date of designation of June 15,

2004, the final rule allows sources until the beginning of the area's 2009 ozone season ( generally May 1, 2009) rather than March 15, 200970 to install controls. Installation of controls before the 2009 ozone season is sufficient to provide the benefits for timely attainment of the ozone standard in areas with a 2010 or later attainment date. 71 And the short delay ( generally between March 15, 2009 and May 1, 2009) will cause no harm since it is prior to the ozone season, which is when ozone levels are most likely to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 274 be at harmful levels. Sources meeting NOx RACT through compliance with CAIR would be subject to the CAIR NOx caps beginning January 1, 2009. Additionally, some areas have ozone seasons that begin earlier than March 15, 2009 and would need to ensure sources are complying by that earlier date.

For subpart 1 areas that request an attainment date extension ( i. e., an attainment date beyond 5 years after designation), the final rule sets the RACT submittal and implementation dates the same as required for subpart 2 moderate and above areas, except subpart 1 areas are required to submit the RACT SIP with its attainment date extension request.

2. Reasonably Available Control Measures ( RACM)

a. Background As noted in the June 2, 2003 proposed rule, subpart 1 of part D includes general requirements for all designated nonattainment areas, including a requirement that a nonattainment plan provide for the implementation of all RACM as expeditiously as practicable, including such reductions that may be obtained through RACT. We have also issued guidance for implementing the RACM provisions of the CAA that interprets that provision to require a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 72" State Implementation Plans; General Preamble for Proposed Rulemaking on Approval of Plan Revisions for Nonattainment Areas" 44 FR 20372 at 20375. " Provide for implementation of all reasonably available control measures ( RACM) as expeditiously as practicable, insofar as necessary to assure reasonable further progress and attainment by the required date. . ."

" State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990; Proposed Rule." 57 FR 13498 at 13560 ( April 16, 1992). In part this guidance said, " The EPA . . . indicated that where measures that might in fact be available for implementation 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." As an example, with regard to one possible list of measures ( TCMs under section 108( f) of the Act) that guidance said, ". . . 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 areaspecific not national, basis and to consider groups of interacting measures, rather than individual measures." " Guidance on the Reasonably Available Control Measures ( RACM) Requirement and Attainment Demonstration Submissions for Ozone Nonattainment Areas." John S. Seitz, Director, Office of Air Quality Planning and Standards. November 30,

275 demonstration that the State has adopted all reasonable measures to meet RFP requirements and to demonstrate attainment as expeditiously as practicable and thus that no additional measures that are reasonably available will advance the attainment date or contribute to RFP for the area. 72 The RACM requirement, which is set forth in section PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 1999. Web site: www. epa. gov/ ttn/ oarpg/ t1pgm. html. Memorandum of December 14, 2000, from John S. Seitz, Director, Office of Air Quality Planning and Standards, re: " Additional Submission on RACM from States with Severe One Hour Ozone Nonattainment Area SIPs."

276 172( c)( 1) of the CAA, applies to all nonattainment areas that are required to submit an attainment demonstration,

whether covered under only subpart 1 or also subpart 2. The June 2, 2003 proposal noted that EPA had issued policies and procedures related to RACM. The draft regulatory text ( section 51.912( d)) provided that for each nonattainment area required to submit an attainment demonstration under § 51.908, the State would have to submit with the attainment demonstration a SIP revision demonstrating that it has adopted all control measures necessary to demonstrate attainment as expeditiously as practicable and to meet any RFP requirements.

b. Summary of final rule Section 51.912( d) of the final rule reflects our proposal and draft regulatory text. For each nonattainment area required to submit an attainment demonstration under § 51.908, the State must submit with the attainment demonstration a SIP revision demonstrating that it has adopted all control measures necessary to demonstrate PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 277 attainment as expeditiously as practicable and to meet any RFP requirements.

In the CAIR rulemaking ( May 12, 2005, 70 FR 25221 et seq.), EPA found that the control installations projected to result from the CAIR NOx and SO2 caps in 2009 and 2010 would be as much as feasible from EGUs across the CAIR region by those dates. EPA concluded that the CAIR compliance dates represent an aggressive schedule that reflects the limitations of the labor pool, and equipment/ vendor availability, and need for electrical generation reliability for installation of NOx emission controls. We believe that the CAIR rule appropriately reflects the constraints the EGU sector faces in achieving NOx reductions in a way that is as expeditious as practicable. States should recognize these constraints in developing their own compliance schedules for NOx emission controls in meeting their CAIR and RACM responsibilities. However, the CAIR rule did not specify which sources should install emissions control equipment or reduce emission rates to a specific level in order to meet the SO2 and NOx caps under CAIR.

Based on our experience developing the NOx SIP Call,

CAIR, and the proposed Clear Skies Legislation, we believe that many power companies will develop their strategies for PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 278 complying with CAIR based, in part, on consultations with air quality officials in the areas in which their plants are located. Because power plants are generally major emission sources, the operators of those plants typically have ongoing relationships with State and local officials that will be involved in developing air quality plans. We are aware that, in the past, companies have worked with air quality officials to meet their emission control obligations under a cap and trade approach such as the NOx SIP Call while also addressing the concerns of air quality officials about the air quality impacts of specific plants. This has led to controlling emissions from power plants located in or near specific ozone nonattainment areas. A number of companies have indicated that such collaboration will be even more important as the States in which they are located address multiple air quality goals ( e. g., visibility,

interstate air pollution, local attainment of standards for multiple pollutants).

The EPA expects similar consultations between States and power sector companies on which plants will be controlled under CAIR, considering local attainment needs in planning for CAIR compliance. This consultation might promote opportunities to provide improved air quality PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 279 earlier for large numbers of people. Power companies may identify economic advantages in situating CAIR controls to help the local area attain; for example, it might need to control fewer facilities for the area to reach attainment.

These benefits may outweigh any additional marginal costs the company might incur by forgoing less costly controls on another more distant plant. In any event, the intent of these consultations would not be to upset market behavior or incentives. With respect to ozone, we anticipate that these consultations will affect individual control decisions for a few areas.

In this regard, EPA notes that CAIR SIPs will be due in 2006, while local 8 hour ozone attainment plans will be due in 2007. The EPA suggests that consultations on location of CAIR controls would be timely during State development of the CAIR SIP.

As States implement the RACM provisions in conjunction with their attainment demonstration, we recognize that for some moderate areas and some subpart 1 areas it may be difficult to demonstrate attainment in less than 5 years due to the time needed to adopt and implement controls, and the need to achieve significant emissions reductions to advance the attainment date. However, the State will need to assess PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 280 RACM to determine whether the attainment date could be sooner than 5 years from designation for each nonattainment area.

EPA believes that while areas projected to attain within 5 years of designation as a result of existing national measures should still be required to conduct a RACM analysis, such areas may be able to conduct a limited RACM analysis that does not involve additional air quality modeling beyond that used for the attainment demonstration.

A limited analysis of this type could involve the review of available reasonable measures, the estimation of potential emissions reductions, the evaluation of the time needed to implement these measures, and anticipated levels of regional controls affecting ozone in the nonattainment area. If the State could not achieve significant emissions reductions by the beginning of 2008 due to time needed to implement reasonable measures or other factors ( including regional transport considerations), then it could be concluded that reasonably available local measures would not advance the attainment date. In lieu of conducting air quality modeling to assess the impact of potential RACM measures, existing modeling information could be considered in determining the magnitude of emissions reductions that could significantly PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 73Ibid.

281 affect air quality and potentially result in earlier attainment. If the State, in consultation with EPA,

determines from this initial, more limited RACM analysis that the area may be able to advance its attainment date through implementation of reasonable measures, then the State must conduct a more detailed RACM analysis, involving air quality modeling analyses, to assess whether it can advance the attainment date.

c. Comments and responses Comment: One commenter asked that we clarify whether old SIP measures become RACM.

Response: Under EPA's policy concerning RACM, there are no measures that are automatically deemed RACM. The determination of whether a SIP contains all RACM requires an area specific analysis that there are no additional economically and technologically feasible control measures ( alone or in conjunction with others) that will advance the attainment date. 73 The April 16, 1992, " General Preamble"

provides some guidance on measures that the State should consider in making its RACM determination, including " any measure that a commenter indicates during a public comment PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 282 period is reasonably available 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." Such measures can be rejected as not being RACM if they will not advance attainment or provide for RFP or if they are not economically or technologically feasible.

Comment: One commenter recommended that EPA revise its policy permitting SIPs to exclude otherwise feasible and potentially RACM that achieve emissions reductions in increments less than the amount necessary to advance the attainment date by a full year. The commenter believed this was an onerous standard that has stymied development of new control measures, particularly transportation control measures. The commenter believed EPA's RACM standard is especially harmful to the ability to provide SIP credit for Smart Growth land use, due to the long timeframe over which land is developed and redeveloped. The commenter believes that ever increasing suburbanization of our nation inflates the growth rate in VMT, thereby neutralizing improvements in vehicle emissions. The commenter claimed that a significant air quality improvement strategy for the 21st Century is compact mixed use pedestrian friendly development near frequent transit and believed that changing land use plans PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 283 in this direction will benefit air quality by reducing the rate of growth in VMT and emissions. The commenter recommended that EPA be aware of this and revise its RACM standard to encourage local governments to alter their land use plans by providing a mechanism to give credit for air quality beneficial land use changes.

Response: We do not believe our RACM policy has " stymied" development of new control technologies. New emission reduction technologies have surfaced and continue to surface to meet market demands resulting in part from CAA requirements, which include the requirements to demonstrate attainment as expeditiously as practicable and to make RFP toward attainment. In addition, control measures that produce emissions reductions can be approved into SIPs whether or not such measures meet the definition of RACM.

Our RACM policy merely interprets the CAA as not mandating measures that do not contribute to expeditious attainment and timely RFP. The policy does not limit the potential for States to develop any control measures they wish, including land use measures. In fact, we have prepared a separate guidance document on how areas can develop and receive SIP PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 11/ 03/ 05 74Improving Air Quality Through Land Use Activities; Transportation and Regional Programs Division, Office of Transportation and Air Quality, U. S. Environmental Protection Agency. EPA420 R 01 001. January 2001.

284 credit for land use control measures. 74 We conclude,