Updated NEI Could Represent A More Consistent Measure In 2003, EPA initiated an update of 1990 through 1999 NEI data based on EPA's latest models, emission factors, and methodologies. Because in most cases the data have been adjusted for State developed inventories, 13 the NEI could be used to accurately assess emissions reductions. OAQPS is presently in the process of producing emissions data for 2000 and 2001. With adjustments for non creditable reductions ( certain emissions resulting from pre 1990 controls), these emissions data could potentially be used by nonattainment areas to measure actual reductions in precursor emissions. Under the 2002 Consolidated Emission Reporting Rule, States are required to provide State wide emissions inventories to OAQPS. State emissions inventories will then be used to update the NEI, making it an accurate baseline from which States can develop future milestone compliance demonstrations for ozone precursor emissions OAQPS officials agreed that the updated NEI could serve as a source of data for measuring ozone precursor emission reductions by individual nonattainment areas. However, they were hesitant about using the data for milestone compliance demonstrations, noting that State and local agencies may not accept NEI data since it is a top down database ( EPA runs the models and chooses data). The Act provides for a bottom up approach, whereby States develop and submit to EPA demonstrations that required reductions have been achieved. However, since EPA 47 adjusts the NEI data every 3 years for State and local periodic inventories, States may have fewer objections. Our contacts with EPA staff in five regional offices indicated that most were willing to consider use of the updated NEI data for milestone demonstrations. Also, some States had already accepted certain NEI data for use in their nonattainment area PEIs, and indicated they would be willing to consider the use of the updated NEI data for milestone compliance demonstrations.

Meteorologically Adjusted Ozone Data May Also Be Useful In the mid 1990s, EPA developed a statistical trend model to normalize the effects of meteorological conditions on observed ozone levels. This model produces meteorologically adjusted ozone values that take into account meteorological conditions and thus more accurately reflects the impact of emission reductions on ozone levels over time. OAQPS uses meteorologically adjusted ozone data in national and regional air quality trend reports, but our research indicates that EPA regions and States do not generally use meteorologically adjusted data to assess ozone precursor emissions reductions or evaluate the effectiveness of their controls for individual nonattainment areas. Staff in five EPA regions and two States were aware of EPA's meteorologically adjusted ozone methodology, but most had not used it to perform long term ozone trend analyses for individual nonattainment areas.

PAMS Data Could Provide Good Measure of Emission Control Effectiveness The 1990 Act required EPA, in partnership with State and local agencies, to carry out more extensive, enhanced monitoring of ozone levels and ozone precursor emissions. In response, EPA established the Photochemical Assessment Monitoring Station ( PAMS) to collect detailed data on ambient concentrations of VOCs, NOx, and ozone, primarily within urban ozone nonattainment areas. States began implementing PAMS networks around 1994, and began collecting reliable data in 1995 or 1996. States operate the PAMS networks and upload the data into EPA's Air Quality System. Currently, there are about 8 to 9 years of PAMS data for most serious to extreme nonattainment areas in the Air Quality System.

Interviews of air program officials at five EPA regions and two States disclosed that States had developed PAMS data analysis plans and done some analyses of annual and seasonal observations of ambient VOC and NOx concentrations. However, we found little long term trend analyses of PAMS data. OAQPS staff indicated that the PAMS network produced reliable data on ambient VOC and NOx concentrations, and OAQPS had extracted this data from the Air Quality System into a separate database for trends analysis. However, only limited analytical work regarding individual nonattainment areas had been performed thus far. In the 2003 National Air Quality and Emission Trends Report, OAQPS 14Air Quality Management in the United States, National Research Council of the National Academies, January 2004.

48 provided an analysis of ambient VOC and NOx trends on a national basis, as well as a limited trends analysis of PAMS data for the Atlanta and Chicago nonattainment areas. OAQPS officials indicated that the staff assigned to this project were subsequently reassigned without replacement and no additional analyses of the PAMS data have occurred.

A January 2004 National Research Council report14 also suggests that EPA and States thus far have made little use of PAMS data to develop long term trends in ambient concentrations of VOCs and NOx within urban nonattainment areas. The report states:

The chief objective of PAMS data collection is to provide an air quality database that will assist air pollution control agencies to assess and refine O 3 [ ozone] control strategies and specifically evaluate the trends in and effectiveness of controls implemented on VOC and NOx emissions in an area.... In principle, the data from the PAMS network could be extremely useful for the regulatory and scientific communities. However, it appears that the full potential of the data has yet to be realized.

Since PAMS collects data on the ambient concentrations of precursor emissions, long term trend analyses of these data could provide a measure of whether ambient concentrations of these compounds for each nonattainment area are increasing or declining. Such trend analyses could be further used as a measure of the success of Federal, regional transport, and local controls in reducing precursor emissions and identifying areas where additional controls or other improvements are needed.

Conclusions As EPA develops new ozone control strategies and guidance for the 8 hour standard, the Agency has the opportunity to make better use of available data and methods to measure emission reductions, assess the effectiveness of emission controls in reducing precursor emissions, and evaluate the impact of emission reductions on ozone levels. These tools are especially warranted for nonattainment areas still struggling to achieve the 1 hour ozone standard. More effective use of these tools and methods may identify areas where ( 1) declines in ozone levels are due to temporary meteorological factors rather than emission reductions, ( 2) required emission reductions have not been achieved, and ( 3) precursor emission reductions have not resulted in reduced ozone levels. This information could allow EPA and States to identify shortcomings with current control strategies, develop and implement contingency plans when necessary, and better protect public health. 49 Recommendations We recommend that the Assistant Administrator for Air and Radiation:

6 1 Develop analytical procedures and processes for EPA and/ or States to utilize updated NEI data for measuring the progress of individual 8 hour nonattainment areas in reducing precursor emissions and complying with the Act's emission reduction mandates.

6 2 Issue guidance for the development of meteorologically adjusted ozone trends for individual nonattainment areas, updated annually, to better isolate the impact of emission reductions on ozone levels.

6 3 Provide resources to develop PAMS data analyses and identify trends in ambient VOC and NOx concentrations for individual ozone nonattainment areas. Such trends could be used to assess the effectiveness of Federal, regional, and local emission controls and identify where additional controls may be warranted.

Agency Comments and OIG Evaluation The Agency generally agreed with the expanded use of the data and analyses presented in this chapter. The Agency indicated that some improvements to the approaches and techniques involved would be needed before they could be used to evaluate the progress of individual nonattainment areas in reducing precursor emissions and related ozone levels. However, as previously stated in Chapter 2, EPA has already used these techniques and approaches, in a limited manner, to evaluate ozone levels and the impact of emission controls on ambient emission and ozone levels for certain nonattainment areas.

The Agency's specific responses to each recommendation presented in this chapter and a detailed OIG evaluation are included in Appendix H. 50 Chapter 7 Specific Performance Goals and Measures Not Developed EPA and States have not developed specific, quantifiable emission reduction goals and measures for ozone nonattainment areas, although the Act requires these areas reduce emissions by specific amounts within mandated timeframes. In addition to the Act, the Government Performance and Results Act of 1993 requires Federal agencies to develop goals and performance measures for each major program activity. EPA and State staff indicated that goals and measures for ozone precursor emission reductions had not been developed because EPA had not promulgated guidance and methods for measuring these reductions ( see Chapter 5). Without goals and measures to provide accountability, there is little incentive for staff to promulgate rules and guidance for measuring emission reductions.

Statutes Require Goals and Measures Section 182 of the Act specifies that ozone precursor emissions within nonattainment areas are to be reduced by specific amounts by certain milestone dates. For example, VOC baseline emissions for each nonattainment area should be reduced 15 percent by November 15, 1996. Further, Section 4 of the Government Performance and Results Act provides that each agency shall ( 1) prepare an annual performance plan covering each program activity; ( 2) establish performance goals to define the level of performance to be achieved by a program activity; ( 3) express such goals in an objective, quantifiable, and measurable form; and ( 4) establish performance indicators to be used in measuring or assessing the relevant outputs, service levels, and outcomes of each program activity.

EPA Strategic and Annual Plans Included Only Emission Reductions From Federal Rules EPA Strategic Plans, issued in 2000 and 2003, included goals for NOx and VOC emission reductions related to some national Federal programs and associated rules, such as power plant NOx emissions and mobile source NOx and VOC emissions. However, there were no strategic goals for VOC and/ or NOx reductions by ozone nonattainment areas. Further, EPA's Annual Plans for 1999 through 2003 did not include goals and performance measures for emission reductions by individual nonattainment areas. As in the strategic plan, annual plans included goals only for VOC and NOx reductions related to some national Federal programs and associated rules. 51 EPA Regional and State Plans Did Not Include Specific Emission Reductions for Nonattainment Areas EPA Regional annual and multi year goals and measures are negotiated between regional staff and OAQPS prior to the beginning of each fiscal year. The agreed to annual goals and measures are subsequently included in Memorandums of Agreement between EPA regions and OAQPS. The agreements for 2000 to 2003 that we reviewed for two EPA regions ( Regions 4 and 5) did not contain specific, numeric goals for ozone precursor emission reductions by nonattainment areas. Additionally, our interviews in six EPA regions further indicated that most regional annual plans did not generally have specific goals and measures for ozone precursor emission reductions achieved by individual nonattainment areas. Officials in three regions said EPA had not developed methods and guidance for measuring or demonstrating that emission reductions had been achieved. Most EPA regions indicated that they rely upon air quality, ambient ozone trends, and tracking of State implementation of emission controls to measure overall emission reductions by area.

At least two EPA regions ( Regions 1 and 5) indicated that they had developed regional strategic plans, but only one region included a specific strategic goal for nonattainment area emission reductions. Region 1 had established a specific strategic goal of reducing ozone precursor emissions in 8 hour ozone areas by 3 percent annually between 2002 and 2010. However, the region's strategic plan did not show how this goal would be measured.

Interviews with EPA officials in six regions and review of annual or multi year work plans for three States disclosed that States had not developed goals or measures for emission reductions required by the Act. States listed general goals for reduced emissions, but did not establish specific goals or measures for achieving clean air goals. For example, the New Hampshire Performance Partnership Agreement for 2003 and 2004 included the following general goal without specific measures: " Reduce emissions of criteria pollutants and achieve or maintain mandated air quality standards for the protection of public health and the environment."

Furthermore, States generally had not attempted to measure or demonstrate emission reductions achieved by nonattainment areas. Two States ( Georgia and Illinois) submitted one or more milestone compliance demonstrations to EPA but these did not measure or demonstrate actual emission reductions, and EPA regions did not review these demonstrations because EPA had not required that States prepare or submit them. Additionally, one State ( Maryland) tried to calculate emission reductions achieved as part of its periodic emission inventory process by comparing the baseline emission inventories to the latest inventory. However, the State had not updated the baseline inventories based on the methods used to 52 develop the periodic emission inventory and the State did not adjust the baseline inventories for noncreditable emission reductions, as required by the Act.

OAQPS staff acknowledged that EPA regions and States may not have specific nonattainment area goals for ozone precursor emission reductions because EPA has not promulgated rules or guidance on State measurement of emission reductions and the submission of milestone compliance demonstrations that would include such measurements.

Conclusions EPA's lack of goals and measures for mandated reductions undermines the legislative intent of the Act in establishing specific emission reduction requirements for ozone precursor emissions. In effect, the absence of goals for emission reductions has resulted in a lack of emphasis in measuring overall reductions in emissions for individual nonattainment areas. EPA needs to expedite the issuance of rules requiring States to demonstrate that required emission reductions have been achieved by nonattainment areas, and promulgate guidance on methods States should use to measure emission reductions. EPA should then establish specific goals and measures for emission reductions by nonattainment areas in EPA and State performance plans. The recent listing of nearly 474 counties that are in nonattainment for the 8 hour standard provides an excellent opportunity for EPA to expedite the issuance of rules requiring States to demonstrate that required emission reductions have been achieved by nonattainment areas, and promulgate guidance on methods States should use to measure emission reductions. EPA should then establish specific goals and measures for emission reductions by nonattainment areas in EPA and State performance plans.

Recommendations Once milestone compliance demonstration rules and guidance are issued, we recommend that the Assistant Administrator for Air and Radiation:

7 1 Establish annual and multi year goals and performance measures for ozone precursor emission reductions by individual nonattainment areas and require State and local agencies to submit evidence that these goals have been met.

7 2 Once annual goals and measures are established, include the goals and measures in EPA, State, and local agencies' annual and strategic plans, and provide accomplishments toward these goals in EPA's annual performance reports. 53 Agency Comments and OIG Evaluation In response to Recommendations 7 1 and 7 2, the Agency indicated that its strategic planning activities were already sufficient to address these recommendations. For example, in response to Recommendation 7 1, the Agency referred to a strategic 2010 goal for people living in areas with unhealthy ozone. While we appreciate this larger goal for ambient ozone, our recommendation pertains to establishing performance measures for precursor emission reductions ( NOx and VOCs) by individual nonattainment areas. As noted in our report, ambient ozone is our most complex, difficult to control, and pervasive urban air pollutant. In recognition, the 1990 Act mandated ever increasing levels of precursor emissions reductions until attainment is achieved. Thus, we continue to believe that Recommendation 7 1 is appropriate and necessary to assuring timely ozone attainment. For Recommendation 7 2, EPA indicated that the Agency's strategic goals, objectives, and performance measures reflect the broader goal of protecting public health and, thereby, the measurement of areas and populations with clean air for criteria pollutants. While we appreciate these larger goals, we believe the Agency strategic and annual plans should also include goals for reducing ozone precursor emissions in accordance with the 1990 Act. EPA's current strategic and annual plans already include goals for NOx emission reductions from power plants, as well as VOC and NOx emission reductions from stationary and mobile sources based on Federal rules.

The Agency's specific responses to each recommendation presented in this chapter and a detailed OIG evaluation are included in Appendix H. 15EPA Order 5360.1A2, revised May 5, 2000; initial Order 5360.1 issued 1984.

54 Chapter 8 Quality Assurance Reviews and Plans Need Improvement Most EPA regions contacted did not receive and/ or review nonattainment area periodic emissions inventories developed by States to ensure that these inventories were properly developed using acceptable models, methods, and emission factors. This was because regions did not consider these emissions inventories to be significant regulatory documents that required review and approval. Generally, States only submitted summary inventory data to OAQPS for updating the ozone precursors in EPA's NEI database. Consequently, EPA did not routinely perform quality assurance reviews for PEI development. Additionally, OAQPS did not have an approved Quality Assurance Project Plan ( QAPP) for NEI data to ensure data quality and consistency in accordance with EPA guidance. States we reviewed did not have approved QAPPs for emission inventory and ozone monitoring data that complied with EPA requirements for data quality.

Act Requires PEIs, EPA Policy Requires QAPPs and Data Quality Objectives The Act requires that nonattainment areas update their baseline emission inventories every 3 years; these updates are referred to as periodic emissions inventories, or PEIs. States use PEIs for planning, assessing progress in emission reductions, and modeling for attainment of standards. EPA uses PEIs to update or adjust the NEI, which is used, in turn, for air dispersion modeling, strategy development, regulation setting, tracking emission trends, performance measurement, and releasing reports to the public.

Because of the importance of environmental data in decision making, EPA issued an Agency order15 nearly 20 years ago requiring that data be of known and acceptable quality in order to be useful. A primary way that EPA ensures that environmental data is acceptable is through the use of approved QAPPs. EPA's quality assurance requirements state that work funded by EPA that involves the acquisition of environmental data generated from direct measurement activities, collected from other sources, or compiled from computerized databases and information systems shall be implemented in accordance with an approved QAPP. Except when specifically stated, all QAPPs prepared by non EPA organizations must be approved by EPA prior to any data gathering or use, except under special circumstances when immediate action is necessary. The order defines environmental data as information collected directly from measurements, and 55 includes environmental data collected by EPA and all EPA funded organizations ( such as States).

EPA's QAPP guidance also requires that QAPPs contain Data Quality Objectives ( DQOs) and performance criteria for the environmental data being collected. EPA's Guidance for the Data Quality Objectives Process ( EPA QA/ G 4), dated August 2000, defines DQOs as " qualitative and quantitative statements... that clarify study objectives, define the appropriate type of data, and specify tolerable levels of potential decision errors that will be used as the basis for establishing the quality and quantity of data needed to support decisions."

EPA Regions Did Not Receive and/ or Review PEIs Only three of seven regions ( Regions 1, 4, and 6) required States to submit PEIs, according to officials in the seven EPA regions we contacted, and one of the three did not require PEIs from all of its States. Two regions ( Regions 1 and 4) indicated they reviewed PEIs, but none of the seven had formally approved any PEIs. Only one region we interviewed ( Region 1) had provided comments to a State regarding PEI quality. The remaining four regions ( Regions 2, 3, 5, and 9) generally indicated that State submission of PEIs to regional offices was not a SIP requirement for these States. Table 8.1 summarizes the responses we received from 7 regions for 13 nonattainment areas.

Officials in four EPA regions told us that they did not require PEI submissions and that, if a PEI was submitted, they did not perform an in depth review, nor did they approve it, largely because EPA had determined that PEIs were not of " regulatory significance." EPA policy only required that nonattainment area baseline inventories be approved by EPA regions. Four regions referred us to September 1992 and September 1994 EPA policies, but we found that these two policies only excluded PEIs from rulemaking until they became significant regulatory documents. Neither policy exempted PEIs from review and approval by regional offices for quality assurance purposes, and in fact called for regional receipt, review, and approval of PEI summary data. For example, the September 1994 memorandum from OAQPS to regional air program chiefs, " 1993 Periodic Emission Inventory Guidance," stated:

The review and approval of the 1993 periodic emissions inventory is the responsibility of the Regional office. In accordance with the memorandum of September 29,1992, on " Public Hearing Requirements for 1990 Base Year Emissions Inventories for Ozone and Carbon Monoxide Nonattainment Areas," rulemaking on the 1993 periodic emission inventory can be deferred until it has regulatory significance. In any case, a submittal of a 1993 periodic emission inventory is required to avoid a " finding of Failure to Submit." 56 We found no current EPA guidance requiring in depth regional reviews of the methodologies and factors that States used to develop PEIs. An atmospheric modeling expert indicated that he had encountered significant problems in State emission inventories used for ozone attainment modeling. He said he had found incorrect methodologies were used in identifying emission points and developing and maintaining State emission inventories. He further indicated that EPA needed to perform better quality assurance reviews of State emission inventories.

OAQPS Did Not Receive Complete Data from States As shown in Table 8.1 below, many regional offices did not receive State PEIs for nonattainment areas, and the States that submitted electronic files to OAQPS only submitted summary data on the ozone precursor emissions in the nonattainment area. OAQPS used this summary information to develop the NEI for milestone years ( 1993, 1996, and 1999). Although OAQPS had quality assurance procedures regarding content and formatting of the PEI data received from States, it did not receive information on the models, emission factors, and other methods used by the States to develop the summary inventory data. Without quality control information regarding the development and collection of PEI data, OAQPS cannot assure the accuracy or quality of State PEIs, or subsequent NEIs. For the seven EPA regions we reviewed, Table 8.1 shows their review of PEI's.

Table 8.1: Regional Receipt and Review of Nonattainment Area PEI's Region State Nonattainment Area Required PEI Submittal Reviewed Comments to State Approval 1 MA NH Boston Lawrence Worcester yes yes yes no 1 NH Portsmouth Dover Rochester yes yes yes no 1 RI Providence noa no no no 1 MA Springfield yes yes yes no 2 NY NJ New York New Jersey Long Is. nob no nob no 3 MD Baltimore no no no no 3 MD DC VA Washington, DC no no no no 4 GA Atlanta yes yesc no no 5 IL IN Chicago Gary Lake County no no no no 5 WI Milwaukee Racine no no no no 6 TX Dallas yes no no no 9 CA Sacramento Metro no no no no 9 CA San Joaquin Valley no no no no a Providence did not publish or document PEIs for 1996 and 1999; PEI data submitted directly to OAQPS. b Region 2 only received and reviewed the 1996 PEI for New Jersey; no PEIs received from New York. c Region 4 informally reviewed Atlanta PEIs but provided no comments to the State. 16 Texas Commission on Environmental Quality, NAMS/ SLAMS Network and U. S./ Border Support Activities Quality Assurance Project Plan for 2002 and 2003.

57 States Generally Did Not Have Approved QAPPs Only one ( Region 6) of the five EPA regions we contacted had an approved QAPP for State emissions data ( Texas), but it did not contain DQOs to ensure the consistency and accuracy of the State data. Only two of the regions ( Regions 5 and 6) had State QAPPs for air monitoring data, including ozone data. QAPPs for State air monitoring data provided by Region 5 had not been approved by the region or the States and both Region 5 and 6 QAPPS did not contain DQOs. The EPA approved Texas QAPP for air monitoring data16 stated the following in Section A7, Data Quality Objectives ( DQO) for Measurement Data:

The tolerable limits on the probability of making a decision error with respect to attainment or nonattainment of the NAAQS ( National Ambient Air Quality Standards) for individual criteria pollutants in specified areas is not addressed in the federal regulations and is not attempted in this plan. This results in a break in the DQO process between the decision to be made and the quality of the data needed to make the decision within a defined error tolerance. Because of this, the measurement quality objectives for this project in terms of data accuracy, precision, and completeness are based on available monitoring technology and many years of practical monitoring experience rather than the DQO process.

Three regions ( Regions 1, 3, and 4) could not provide any QAPPs for ozone air monitoring data. Some regions believed State Quality Management Plans would suffice in lieu of QAPPs, but such plans are broad, covering all of a State's environmental programs, and do not include accuracy and precision criteria or DQOs. One region stated that since EPA had not promulgated the DQOs for ozone air monitoring data, the region had not required QAPPs. Another region indicated that its States still used EPA approved quality assurance plans from the mid 1980s, before QAPPs were required, and is in the process of negotiating current State QAPPs for air monitoring data, including ozone.

NEI Did Not Have An Approved QAPP OAQPS staff stated that until a few years ago they did not believe a QAPP was necessary for NEI ozone precursor emissions data because a significant amount of these data came from other sources, such as States and power plants. OAQPS does, however, maintain its own internal QAPP for data it collects or develops from modeling. In July 2003, OAQPS provided the OIG with a copy of a draft, 58 unapproved QAPP for NEI data. It did not contain DQOs, as required by EPA's guidance, and quality assurance staff at OAQPS indicated that DQOs for emission data produced by States or EPA have not yet been developed. The draft still had not been finalized as of May 2004.

DQOs for Emission and Ozone Data Not Promulgated OAQPS staff referred us to NEI planning and preparation documents for DQOtype guidance related to NEI data. However, these documents primarily establish how OAQPS will obtain and assimilate emissions data from external sources and perform quality assurance on data input. The documents did not contain specific precision and acceptance criteria for emissions data collected or developed by OAQPS through modeling or other methodologies. An OAQPS official indicated that DQOs for ozone data, which have to be issued as a regulation, have been developed but the DQOs have not been released.

An OAQPS official indicated that States should have QAPPs for ozone and other air monitoring data based on the pre 1990 precision and acceptance criteria, even though the DQOs have not been issued. However, the pre 1990 requirement for precision for ozone data was plus or minus 15 to 20 percent, whereas the ozone DQO will require a more strict precision level of plus or minus 7 percent.

Conclusions States use nonattainment area PEIs for many critical activities, such as planning and modeling for SIP revisions and attainment demonstrations. EPA also uses State emissions inventories to adjust the NEI and the NEI data are used in regulatory planning and public information releases. Therefore, adequate quality assurance of these data is critical. Despite the important role of State emissions data, EPA has no consistent process for ensuring the quality of the State PEIs. EPA regions did not require, receive, and/ or review PEIs. Additionally, OAQPS did not receive sufficient information regarding State inventory development and methodologies to provide quality assurance for inventories used to update and adjust the NEI. Further, QAPPs for ozone air monitoring data need improvement. Some States did not have QAPPs for air monitoring data; others had air monitoring QAPPs that did not include required DQOs. EPA has not developed DQOs for ozone precursor emissions data, and the ozone DQOs it has developed have not been released.

Recommendations We recommend that the Assistant Administrator for Air and Radiation:

8 1 Develop DQOs, using EPA DQO development guidance, for State and NEI generated emissions data for use in applicable QAPPs. 59 8 2 Expedite completion and approval of the draft QAPP for NEI data.

8 3 To the extent possible, expedite the regulatory process for releasing ozone DQOs for use in State air monitoring QAPPs.

8 4 Inform EPA regions that approved State QAPPs are needed for emissions and ozone air monitoring data accumulated or developed by States within each region's boundaries.

8 5 Promulgate policies and procedures which require regions to obtain State PEIs and review the PEIs for quality and compliance with EPA emission inventory development guidance.

Agency Comments and OIG Evaluation The Agency generally agreed with the recommendations presented in this chapter. The Agency's specific responses to each recommendation presented in this chapter and a detailed OIG evaluation are included in Appendix H. 60 Appendix A Details on Scope and Methodology To assess whether emission reduction controls have been as effective as originally projected in reducing ozone precursor emissions, we interviewed air program officials at EPA's OAQPS, five EPA regions, and the States of Georgia and Wisconsin. Further, we reviewed Agency guidance regarding planning, implementation, and oversight of programs to reduce ozone precursor emissions ( NOx and VOC) and the following pertinent documentation:

° EPA Annual Performance Reports for 2000 through 2003. ° SIPs for Georgia and Wisconsin, including revisions for ozone attainment demonstrations. ° Emission control assessments, evaluations, and compliance reports for Georgia and Wisconsin. ° SIP revisions involving ROP Plans for 10 nonattainment areas. ° Emission control development and implementation for ROP Plans for 10 nonattainment areas. ° OAQPS emissions trend analyses for 25 serious to extreme nonattainment areas.

To assess whether EPA and States adequately measured the effectiveness of emission controls in reducing overall precursor emissions as required by the Act, we interviewed air program officials at OAQPS, five EPA regions, and the States of Georgia and Wisconsin. We also interviewed external atmospheric scientists/ engineers and modeling experts; reviewed Clean Air Act requirements in Section 182 and Government Performance and Results Act requirements in Sections 3 and 4; and researched other documentation related to:

° Projected and actual measurements of emissions by five EPA regions and two States for 10 ozone nonattainment areas. ° PAMS data analyses by States and EPA for ambient concentrations of VOCs and NOx within nonattainment areas. ° EPA Air Quality System and external data on ozone exceedance days, observed ozone levels, and ozone trends between 1990 and 2003. ° EPA Strategic Plans for 2000 and 2003. ° EPA Annual Plans for 1999 through 2004. ° Regional Memorandums of Agreement and/ or Strategic Plans for EPA Regions 3, 4, and 5. ° Section 105 air program work plans for Georgia and Wisconsin.

To assess whether emission reduction plans and related controls had been properly completed and implemented to reduce precursor emissions by 3 percent annually within the 1990 Act's time frames, we interviewed officials at OAQPS, six EPA regions, and two States; downloaded and analyzed emission data from NEI for 25 serious to extreme nonattainment areas; and reviewed documentation related to:

° ROP Plans for 10 ozone nonattainment areas in five EPA regions. 61 ° SIP attainment demonstrations for Georgia and Wisconsin. ° Baseline and periodic emission inventories for 10 nonattainment areas. ° Emission control evaluations and compliance reports for Georgia and Wisconsin.

To gain an understanding of EPA, State, and local agency responsibilities in planning for and reducing ozone precursor emissions, we reviewed regulations, guidance, and policies involving the development and implementation of SIPs, ROP Plans, emission control measures, baseline emission inventories, periodic emission inventories, and quality assurance for air monitoring and emission inventory data. We also obtained budget and staffing information for EPA's ozone program for fiscal years 2000 through 2003 from OAQPS and the Office of the Chief Financial Officer.

To identify statutory requirements for EPA and States to classify ozone nonattainment areas; promulgate SIPs, ROP Plans, and emission controls; and reduce ozone precursor emissions, we reviewed Sections 110, 171 172, and 181 183 of the Clean Air Act.

Our scope was limited to OAQPS, five EPA Regions ( 1, 3, 4, 5, and 6), and 10 serious to severe ozone nonattainment areas within these regions, with the following exceptions: certain information was obtained from Regions 2 and 9 related to three other nonattainment areas, analyses of NEI data involved 12 serious or severe ozone nonattainment areas, and air quality data and related studies for the total 25 serious to extreme nonattainment areas were obtained and reviewed. Details on the 12 serious to severe ozone nonattainment areas ( which includes the aforementioned 10) are in Table A. 1.

Table A. 1: 12 Nonattainment Areas Reviewed Nonattainment Area EPA Region State( s) Current 1 Hour Classification Total Counties Population 2000 ( thousands)

Atlanta 4 GA Severea 13 3,699 Baltimore 3 MD Severe 6 2,512 Boston Lawrence Worcester 1 MA NH Serious 12 5,883 Chicago Gary Lake County 5 IL IN Severe 10 8,758 Dallas Fort Worth 6 TX Serious 4 4,590 Milwaukee Racine 5 WI Severe 6 1,839 Portsmouth Dover Rochester 1 NH Serious 2 192 Providence 1 RI Serious 5 1,048 Sacramento Metro 9 CA Severe 6 1,978 San Joaquin Valley 9 CA Extremeb 8 3,191 Springfield 5 MA Serious 4 815 Washington DC 3 DC MD VA Severea 16 4,545 a Areas reclassified from serious to severe nonattainment during 2003. b Area reclassified from severe to extreme nonattainment in April 2004. 62 Prior Related Coverage Government Accountability Office ( formerly General Accounting Office)

° Air Pollution: EPA Could Take Additional Steps to Help Maximize the Benefits from the 2007 Diesel Emissions Standards, GAO 04 313, March 11, 2004 ° Clean Air Act: Key Stakeholders' Views on Revisions to the New Source Review Program, GAO 04 274, February 2, 2004 ° Clean Air Act: New Source Review Revisions Could Affect Utility Enforcement Cases and Public Access to Emissions Data, GAO 04 58, October 21, 2003 ° Clean Air Act: EPA Should Use Available Data to Monitor the Effects of Its Revisions to the New Source Review Program, GAO 03 947, August 22, 2003 ° Environmental Protection: Federal Planning Requirements for Transportation and Air Quality Protection Could Potentially Be More Efficient and Better Linked, GAO 03 581, April 28, 2003 ° Emissions from Older Electricity Generating Units, GAO 02 79, June 2002 ° Meeting Electricity Demands Will Increase Emissions of Some Harmful Substances, GAO 03 49, October 2002 ° Environmental Protection: Wider Use of Advance Technologies Can Improve Emissions Monitoring, GAO 01 313, June 2001 ° Emission Sources Regulated by Multiple Clean Air Act Provisions, GAO/ RCED 00 155, May 2000 ° Status of Implementation and Issues of the Clean Air Act Amendments of 1990, GAO/ RCED 00 72, April 2000 ° The Border Smog Reduction Act's Impact on Ozone Levels, GAO/ RCED 99 212, July 1999 ° Delays In Motor Vehicle Inspection Program Jeopardize Attainment of Ozone Standard, GAO/ RCED 98 175, June 1998 ° Air Pollution  Limitations of EPA's Motor Vehicle Emissions Model and Plans to Address Them, GAO/ RCED 97 210, September 1997 EPA OIG ° Consistency and Transparency in Determination of EPA's Anticipated Ozone Designations, Report No. 2002 S 00016, August 15, 2002 ° Clean Air Design Evaluation Results, Report No. 2002 M 000013, April 23, 2002 ° EPA and State Progress In Issuing Title V Permits, Report No. 2002 P 00008, March 29, 2002 63 ° Consolidated Report on OECA's Oversight of Regional and State Air Enforcement Programs, Report No. E1GAE7 03 0045 8100244, September 25, 1998 ° Consolidated Review of the Air Enforcement and Compliance Assistance Programs, Report No. E1GAE5 05 0169 7100306, September 30, 1997 ° EPA's Air State Implementation Plan Program Consolidated Report, Report No. E1KAE6 05 0044 6400100, September 30, 1996 ° Emission Factor Development, Report No. E1KAF6 24 0008 6100318, September 30, 1996 64 Appendix B Timeline of Clean Air Act Requirements Illustration B. 1: Clean Air Act Timeline for ROP and Emission Inventory Submittals and Emission Reduction Milestones Through 2003 11/ 1990 11/ 1992 11/ 1993 11/ 1994 09/ 1995 11/ 1996 02/ 1997 09/ 1998 11/ 1999 02/ 2000 09/ 2001 11/ 2002 02/ 2003 CAAA BEI 15% ROP 9% ROPs 1993 PEI 15% ROP Milestone 15% MCD 1996 PEI Additional 9% ROP Milestone 9% MCD 1999 PEI Additional 9% ROP Milestone 9% MCD CAAA = Clean Air Act Amendments BEI = Baseline Emissions Inventory MCD = Milestone Compliance Demonstration Milestone = Date percent emissions reduction should be achieved. PEI = Periodic Emissions Inventory ROP = Rate of Progress Plan 17 " Assessment of Interannual Ozone Variation in Urban Areas From A Climatological Perspective," Atmospheric Environment, Volume 30, No. 14, pp 2615 2625, 1996, William Cox and Shao Hang Chu, EPA.

65 Appendix C Details on EPA Analyses of Meteorologically Adjusted Ozone Observations In 2003, OAQPS developed and analyzed 1990 through 2002 meteorologically adjusted ambient 8 hour ozone observations for 53 metropolitan areas, which included 19 serious, severe, and extreme ozone nonattainment areas. OAQPS used a method developed by OAQPS experts17 to statistically adjust raw ambient ozone observations to exclude the effects of variations in weather patterns on ambient ozone levels.

As noted in Chapter 2, our analysis of the meteorologically adjusted ozone levels and charts developed by OAQPS for the 19 nonattainment areas indicated that, once weather had been excluded as a factor in ozone formation, 12 areas had achieved little or no improvements in ozone levels over the 13 year period.

This OAQPS study included only a summary of the methodology used and charts for each of the 53 metropolitan areas showing meteorologically adjusted trends in ozone from 1990 through 2002. There was no written analysis for each of the 53 areas. OAQPS's general summary of the analysis stated, in part, the following:

Generally, annual variations in unadjusted ozone are quite large compared with annual ozone variations after adjustment [ for weather conditions]. For [ example] Baltimore, most of the apparent upturn in ozone between 2000 and 2002 is related to more favorable meteorological conditions in 2000 and 2001 compared with 2002.

Charts produced by OAQPS staff for the Baltimore nonattainment area follow. The raw ambient ozone observations show a significant drop in ozone levels for the 2000 2001 period. However, the meteorologically adjusted chart does not indicate a significant decrease in ozone for the same period, indicating that the drop in ozone levels was weather related. 66 Illustration C. 1: 67 Appendix D Details on State Delays in Submitting ROP Plans Submission and Approval of 15 Percent ROP Plans The 10 serious and severe nonattainment areas in our review involved 14 ROP Plans that required a 15 percent reduction in VOCs ( net of growth) by November 15, 1996. Of these 14 ROP Plans, 5 were submitted to EPA by the required date of November 15, 1993, and 9 were submitted approximately 2 months to almost 2 years late. Only 1 of the 14 plans received EPA final approval prior to the milestone date of November 15, 1996. For the other 13 ROP Plans, 11 received final approval from 8 months to 6 years after the milestone date, and two have not yet received final approval.

None of the 15 percent ROP Plans were approved or disapproved within 18 months of submission. Elapsed time between initial State submission and EPA final approval ranged from 2 to 11 or more years. Nine plans received conditional approvals, but only 1 was approved or disapproved within 1 year after the conditional approval, as required by the Act. Two ROP Plans received both " interim" and " final" conditional approvals, but such " conditional" approvals are not mentioned in the Act.

Table D. 1 shows the date that States initially submitted the 15 percent ROP Plans to EPA and the dates that these plans received final EPA approval. The table also shows the number of State revisions required for each and the approximate time taken by States to make these revisions. 68 Table D. 1: 15 Percent ROP Plans Nonattainment Area 15% ROP Submittal Due Per CAA Originally Submitted by State No. of Rev. Interval Between Revisions Conditional Approvals Final Approval Elapsed Time Submittal to Final Final Approval After Milestone 11/ 15/ 1996 Atlanta 11/ 15/ 93 11/ 15/ 93 2 1 3 years 09/ 12/ 97 04/ 26/ 99 Nonea 11+ years 7+ years Baltimore 11/ 15/ 93 07/ 12/ 95 2 1 2 years 10/ 09/ 97b 10/ 07/ 98 02/ 03/ 00 4.5 years 4 years Boston Lawrence Worcester  Massachusetts  New Hampshire 11/ 15/ 93 11/ 15/ 93c 02/ 03/ 94 5 2 1 5 yearsd 1 2 years 07/ 14/ 97 NA 08/ 28/ 02 12/ 07/ 98 8.75 years 5 years 6 years 2 years Chicago Gary Lake County  Illinois  Indiana 11/ 15/ 93 11/ 15/ 93 01/ 13/ 94 6 2 1 1.5 years 1.5 years NA NA 12/ 18/ 97 07/ 18/ 97 5 years 3.5 years 1 year 8 months Dallas Fort Worth 11/ 15/ 93 05/ 09/ 94 4 1 3 years 11/ 10/ 98 Nonee 4.3 years 7+ years Washington, DC Area  Maryland  District of Columbia  Virginia 11/ 15/ 93 07/ 12/ 95 05/ 15/ 95 05/ 15/ 95 2 2 2 2 3 years 1 year 1 2 years 09/ 23/ 97 07/ 07/ 98 06/ 24/ 97 07/ 19/ 00 08/ 05/ 99 10/ 06/ 00 5 years 4.25 years 5.5 years 4 years 3 years 4 years Milwaukee Racine 11/ 15/ 93 11/ 15/ 93 1 1 2 years NA 03/ 26/ 96 2.75 years None Portsmouth Dover Rochester 11/ 15/ 93 02/ 03/ 94 2 1 2 years NA 12/ 07/ 98 4.75 years 2 years Providenceg 11/ 15/ 93 03/ 15/ 94 1 4 years 04/ 17/ 97f 12/ 08/ 98 4.75 years 2 years Springfield 11/ 15/ 93 11/ 15/ 93 6 1 3 years NA 08/ 28/ 02 8.75 years 6 years a Region 4 issued a " final conditional interim approval" for Atlanta 15 percent ROP Plan on April 26, 1999 in 64 FR 20186. Region 4 did not issue a " final" approval after conditions were met for 15 percent ROP Plan. b 07/ 12/ 95 submittal did not include sufficient emission reductions to meet 15 percent requirement and account for growth for 1990 1996 period. Also, I& M program only conditionally approved. Federal Register Volume 65, page 6246, dated 02/ 03/ 2000, listed four problems that Baltimore must rectify, as stated in 10/ 09/ 97 conditional approval. c EPA ruled that the 11/ 15/ 93 ROP Plan was incomplete. d Processing of ROP Plan was suspended in 1999 due to air quality meeting 1 hour standard for period 1996 1998. However, area subsequently violated standard again for period 1999 2001. ROP Plan processing initiated again in 2002. e EPA proposed approval of 15 percent and post 1996 9% ROP Plans on 01/ 18/ 2001; however, final approval has not been issued. f The 04/ 17/ 97 rule was a limited approval/ limited disapproval rather than a conditional approval. See 62 Federal Register 18712, 04/ 17/ 97. g Rhode Island Department of Environmental Management stated that the State did not publish 1996 and 1999 periodic inventories. The emissions data in the State systems at the time was electronically submitted to Air Quality System/ NEI but no documentation was retained.

Delayed approval of 15 percent ROP Plans can be attributed to many factors, including the number of revisions made by States, the extensive time taken by States to revise the plans, and the time taken by EPA to review and approve the plans once received. As can be seen in the Table D 1, 15 percent ROP Plans were revised or modified as many as six times prior to final approval. States took from less than 1 year to as many as 5 years to submit revisions to the plans. Another problem stemming from major statutory and EPA policy guidance changes in the mid 1990s is that States were allowed to claim up to 100 percent of projected emission reductions for decentralized I& M programs. Prior to these changes, EPA had allowed States credit for only 50 percent of projected emission reductions from decentralized I& M systems. State revisions to their programs based on the new guidance delayed conditional and/ or final approval of 15 percent ROP Plans. At least one region indicated that it did not pressure a particular State with a centralized I& M program to submit its revised ROP Plan because the other States with 69 decentralized programs were still in the process of revising their ROP Plans based on the new guidance. Also, many States failed to implement their I& M programs, further delaying ROP Plan approval.

According to ambient ozone monitoring data, 4 of 10 nonattainment areas met the 1 hour standard in 1998 through 2000, but the areas subsequently violated the standard again. Processing of all ROP Plans, including the 15 percent and 9 percent plans that had not been approved by 1998 and 1999, was suspended once the areas attained the standard, but ROP Plan development was reinitiated once an area again violated the standard. Suspension of ROP Plan processing contributed to significant delays in finalizing the 15 percent and 9 percent ROP Plans for these four areas. Suspension of ROP development for these areas is discussed in more detail below.

Submission and Approval of 9 Percent ROP Plans The 14 post 1996 ( 9 percent) ROP Plans reviewed required that each nonattainment area achieve a 9 percent reduction, net of growth, in either VOC and/ or NOx emissions by November 15, 1999. These ROP Plans were to be submitted to EPA by November 15, 1994. Only three were submitted on time, and only one received final EPA approval prior to November 15, 1999. Two post 1996 ROP Plan have not yet received final approval from EPA and the remaining 12 were not granted final approval until 2 months to 3.5 years after the deadline. EPA issued a policy memorandum in March 1995, Ozone Attainment Demonstrations, that extended the date to mid 1997 for serious and above nonattainment areas to submit their first post 1996 ROP Plan. EPA issued the memorandum because States were having difficulty in developing timely and acceptable emission inventories, ROP Plans, and attainment demonstrations within the time frames provided in the Act.

Table D. 2 shows the submission, number of revisions, and final approval dates of State's post 1996 ROP Plans for 10 serious or severe nonattainment areas.

As with the 15 percent ROP Plans, the 9 percent plans were subject to several revisions and extensive time intervals for revision, review, and approval. None of the 9 percent plans received EPA approval or disapproval within 18 months as required by the Act. The elapsed time between ROP Plan submittal and EPA final approval ranged from 2 to 7 or more years. Only the Washington area post 1996 ROP Plans received conditional approvals.

States also had problems developing the Act's required ozone attainment demonstrations, which delayed final approval for many ROP Plans. In most cases, the post 1996 plans were contingent upon emission reductions from enhanced vehicle I& M programs, and several States were late in implementing the enhanced programs ( Georgia, Massachusetts, and Texas). 70 Table D. 2: Post 1996 ( 9%) ROP Plans Nonattainment Area 9% ROP Submittal Due Per CAA Originally Submitted by State No. of Rev. Interval Between Revisions/ Final Conditional Approvals Final Approval Elapsed Time Submittal to Final Final Approval After Milestone 11/ 15/ 1999 Atlanta 11/ 15/ 04 11/ 15/ 03 2 2 3 years NA 03/ 18/ 99 5.5 years NA Baltimore 11/ 15/ 94 12/ 24/ 97 04/ 24/ 98 2 1 3 years NA 09/ 26/ 01 3.75 years 2 years Boston Lawrence Worcester  Massachusetts  New Hampshire 11/ 15/ 94 11/ 15/ 94 09/ 27/ 96 6 1 5 years 6 years NA NA 08/ 28/ 02d 04/ 16/ 02d 7.75 years 5.5 years 3 years 2.5 years Chicago Gary Lake County  Illinois  Indiana 11/ 15/ 94 12/ 18/ 97 12/ 17/ 97 3 1 > 1 yeara 2 mo. 2 years NA NA 12/ 18/ 00 01/ 26/ 00 3 years 2 years 1 year 2 months Dallas Fort Worth 11/ 15/ 94 03/ 19/ 99 2 > 1 1 year NA Noneb 7+ years 5+ years Washington, DC Area  Maryland  District of Columbia  Virginia 11/ 15/ 94 12/ 24/ 97 11/ 03/ 97 12/ 19/ 97 1 1 1 1 1.5 years 09/ 28/ 00 10/ 19/ 00 10/ 19/ 00 02/ 03/ 03c 01/ 03/ 01 04/ 17/ 03c 3 years 3 years 3 years 1 year 3.5 yearsc Milwaukee Racine 11/ 15/ 94 12/ 11/ 97 4 1 mo. 2 years NA 10/ 10/ 01 4 years 2 years Portsmouth Dover Rochester 11/ 15/ 94 09/ 27/ 96 1 6 years NA 04/ 16/ 02 5.5 years 2.5 years Providence 11/ 15/ 94 11/ 15/ 94 0 3 years NA 06/ 08/ 01 3 years 1.5 years Springfield 11/ 15/ 94 11/ 15/ 94 6 > 1 2 years NA 08/ 28/ 02 7.75 years 3 years a Illinois amendments to post 1996 plan were submitted 12/ 17/ 99, 01/ 14/ 00, and 01/ 21/ 00. All amendments were after emission reductions were to be achieved, 11/ 15/ 99. b EPA proposed approval of 15 percent and post 1996 9 percent ROP Plans on 01/ 18/ 2001; however, final approval has not been issued. c Federal court vacated the post 1996 ( 1999) ROP Plan approved 01/ 03/ 01; however, none of the emission targets, reduction credits, or calculations were changed when ROP Plan was reapproved on 04/ 17/ 03. The 02/ 03/ 03 conditional approval is contained in Federal Register Vol. 68, page 5246, dated 02/ 03/ 03. d Processing of ROP Plan was suspended in 1999 due to air quality meeting 1 hour standard for period 1996 1998. However, area subsequently violated standard again for period 1999 2001. ROP processing initiated again in 2002.

Impact of Clean Data Policy on ROP Plans Region 1 had four nonattainment areas that achieved attainment of the 1 hour in 1998 through 2000, based on air monitoring data, but later violated the standard again in 2001 or 2002. The processing of the post 1996 ROP Plans were suspended once the area air monitoring data for the previous 3 years showed attainment of the 1 hour standard. The processing was not reinitiated until the areas again violated the 1 hour standard. As a result, ROP Plan development and approvals for these areas were delayed. 18 Policy referred to as " Clean Data Policy" was issued on May 10, 1995, in memorandum from OAQPS Director to regional air program directors, titled " Reasonable Further Progress, Attainment Demonstration, and Related Requirements for Ozone Nonattainment Areas Meeting the Ozone National Ambient Air Quality Standard."

71 Region 1 indicated that a May 1995 EPA policy, 18 referred to as the " Clean Data Policy," provided that certain SIP requirements could be suspended once air monitoring data indicate attainment, i. e., 3 years with a total of three or less 1 hour exceedances. However, Section 107( d)( 1) D, E of the Act indicates that SIP requirements are to remain in effect until an area is officially redesignated as being in attainment based on permanent enforceable emission reductions and an approved a maintenance plan that will ensure continued attainment. However, the 1 hour attainment for these areas was partially due to changes in meteorological conditions, not permanent and enforceable emission reductions.

In these cases, Region 1 suspended processing and implementation of ROP Plans based only on ambient monitoring data that showed that these areas had experienced three or less violations in the prior 3 year period. In addition to ambient ozone monitoring data, new methodologies and data currently exist that allow EPA regions to better assess the permanence of attainment. For example, EPA has PAMS data, collected since the mid 1990s, that permits trend analysis of ambient VOC and NOx concentrations over time. Such a trend analysis of monitoring system data could be used to determine whether ambient precursor concentrations of NOx and VOCs have been sufficiently reduced to assure attainment despite changes in weather. Similarly, before suspending ROP Plan requirements, EPA could determine whether upwind contributing sources have been sufficiently controlled to allow attainment, and require a meteorologically adjusted ozone trend analysis for nonattainment areas that attain based on ambient ozone monitoring data to better assure the permanence of such attainments. 72 Appendix E Growth Factors Used In Projecting ROP Emissions for Atlanta Area For the Atlanta area, which is just one example of an area that did not reflect historical growth rates, substantial differences existed between VOC and NOx target levels and the relevant PEIs. The differences for VOCs and NOx emissions, ranged from 104.11 tons per day in VOCs for the 15 percent ROP Plan to 175.06 tons per day in NOx for the post 1996 ROP Plan. These differences represented 23.4 to 39.8 percent understatements of the respective emission target levels. More importantly, the understatements indicate that required VOC and NOx emission reductions could be deficient as much as 104 and 175 tons per day, respectively. This potential deficit in emission reductions is significant considering that the 15 percent ROP Plan only contained emission control measures projected to reduce VOC emissions by 117 tons per day and the post 1996 ROP Plan contained only 50.10 tons per day in NOx reductions.

Officials with Georgia's Air Protection Division indicated that the State may have used a growth rate as low as 1 to 2 percent in projecting milestone year emissions for the 15 percent and post 1996 ROP Plans. The State officials further indicated that they no longer possessed documentation of the actual growth rates/ factors used or how these rates/ factors were determined. The officials admitted that the 1 to 2 percent growth factors may have been too low, resulting in the significant differences between target levels and PEI emissions data.

Information obtained from the Atlanta Regional Planning Commission indicated that a growth rate of 1 or 2 percent for the Atlanta metropolitan area would be substantially below the actual population and employment growth rates prior to and after the 15 percent and post 1996 ROP Plan milestone dates. Population growth in the Atlanta metropolitan area for the period 1980 through 1990 averaged about 3 percent per year. From 1990 to 1995 and 1995 to 2000, the population grew at 2.4 and 2.8 percent annual rates, respectively. Atlanta area employment between 1980 through 1990 expanded at a rate of over 4.5 percent with the employment rate declining slightly to between 2.8 and 4 percent between 1990 and 1997 and increasing again to between 3.7 and 4.3 percent between 1997 and 1999. Based on this information, the State's use of a 1 or 2 percent growth rate in projecting 1996 and 1999 precursor emissions is questionable.

The Atlanta Regional Planning Commission also commented on EPA's proposed approval of the Atlanta post 1996 ROP Plan and stated that Georgia was using outdated vehicle miles traveled estimates in the ROP projections and calculations related to Atlanta area emissions. Federal Register Volume 64, page 13340, dated March 18, 1999, stated the following:

Comment: The Atlanta Regional Commission ( ARC) submitted a letter on September 9, 1998, providing comment on the 9 percent plan. The comment concerned the use of vehicle miles traveled ( VMT) estimates. ARC updated the VMT estimates in 1996. The 9 percent plan used the VMT estimates previously provided to the Georgia Environmental Protection Division ( GAEPD) by ARC rather than the 1996 updated 73 VMT estimates. ARC recalculated the transportation emissions budget using the updated VMT and requested in the September 9, 1998, letter that this higher emissions budget be used as the applicable transportation conformity budget.

EPA acknowledged that the vehicle miles traveled estimates used by Georgia were not current but stated that the region would address this problem in the region's action on the Atlanta attainment demonstration, which will occur in a future Federal Register notice. 19 1998 Compliance Report Acid Rain Program ( EPA 430 R 99 010, Office of Air and Radiation, Acid Rain Division), dated July 1999.

20 NEI NOx data for power plants is generally based on Continuous Emissions Monitor Systems, which is the best emission monitoring technology currently available.

74 Appendix F Outside NOx Reductions Claimed in Post 1996 Chicago Gary Lake County Nonattainment Area ROP In the post 1996 ROP Plan for the Illinois portion of the Chicago Gary Lake County nonattainment area, Illinois claimed NOx emissions reductions of 40 to 60 percent, or 221.92 tons per day, between 1990 and 1999 at nine power plants outside of the Chicago and East St. Louis nonattainment areas. The State used the 1990 Illinois Attainment Area NOx emissions ( NOx emissions outside of Chicago and East St. Louis nonattainment areas) as the ROP baseline for computing required NOx reductions in the post 1996 ROP Plan. The post 1996 ROP Plan was required to include a 9 percent reduction in baseline VOCs or NOx emissions for the Chicago area. These emission reductions from outside the nonattainment area represented almost 7 percent of the total 9 percent in required reductions. The other 2 percent came primarily from projected VOC reductions within the Chicago nonattainment area.

In response to our request for technical support for the Acid Rain NOx reductions claimed in the post 1996 ROP Plan, Region 5 provided NOx reduction percentages for five of the power plants as shown in an EPA 1998 Acid Rain compliance report. 19 Region 5 indicated that they did not possess any information on the NOx reductions for the remaining plants. The Region's response did not mention Hennepin Units 1 2, which were listed in the post 1996 ROP Plan and the 1998 Acid Rain compliance report. The Acid Rain report showed only an 8 percent decrease in NOx emissions for Hennepin Units 1 2 between 1990 and 1998. Also, post 1996 ROP NOx emission reductions were claimed through 1999. In addition, this compliance report only reflects the Acid Rain Phase I reductions through 1998. However, the post 1996 ROP Plan also included reductions from early implementation of Phase II controls. Furthermore, the 1998 compliance report only included 1990 and 1998 NOx emission rates and percent reductions. There was no conversion of these rates to show daily NOx emission reductions for comparison to the State reductions claimed in the post 1996 ROP Plan.

Our analysis of 1990 through 1999 NEI data for the nine power plants indicated that annual NOx reductions were only reduced 12.5 percent between 1990 and 1999. These data do not support the State's claim of 40 to 60 percent in daily NOx reductions. NEI data20 indicated that one plant actually increased NOx emissions by 74.4 percent, or 16,497 tons per year, between 1990 and 1999, while the State claimed a reduction of 14.3 tons per day for the same period. A comparison between 1990 and 1999 NOx emissions for these plants, per the NEI, is shown in Table F. 1. 75 ( Note: Baldwin units 1 3 were listed separately in the post 1996 ROP Plan for a total of nine plants. However, the NEI does not separate these units.)

Table F. 1: NEI NOx Data for Illinois Power Plants Power Company  Emission Units 1990 NOx Emissions ( tpy) a 1999 NOx Emissions ( tpy) 1990 1999 Reductions Percent Reduction Dominion Energy  Kincaid 1 2b 39,477.82 27,118.68 12,359.14 31.3 Electric Energy  Joppa Steam 1 6 20,869.82 8,446.82 12,423 59.5 Cilco  Edwards 2 3 18,003.38 10,193.49 7,809.89 43.4 Illinois Power  Baldwin 1 3 57,159.77 55,026.84 2,132.93 3.7 Commonwealth Edison  Powerton 5 6 22,176.91 38,674.09  16,497.18 *  74.4b Illinois Power  Vermillion 1 2 3,367.42 1,962.23 1,405.19 41.7 Illinois Power  Hennepin 1 2 4077.39 3032.04 1045.35 25.6 Totals 161,132.51 144,454.15 20,678.32 12.5 a tpy = tons per year b Negative numbers represent increased NOx emissions.

Assuming constant demand on these units throughout the year, the total 20,678.32 tons per year reduction would equate to only 56.65 tons per day. The State post 1996 ROP Plan claimed a NOx reduction of 221.97 tons per day between 1990 and 1999 for these same power plants. NEI data also indicated:

° only a 0.27 percent decrease in total NOx emissions and a 3.83 percent reduction in NOx emissions for all electric utilities in the Illinois Attainment Area ( counties outside of Chicago and East St. Louis nonattainment areas) between 1990 and 1999. ° 3 percent increase for total NOx emissions Statewide between 1990 and 1999. ° 1.57 percent increase between 1990 and 1999 in power plant NOx emissions within the Illinois portion of the Chicago Gary Lake County nonattainment area.

According to the 1990 baseline and 1999 periodic emission inventories, there was an increase of 14 tons per day in total NOx emissions for the Illinois portion of the Chicago Gary Lake County nonattainment area.

Illinois had received an EPA waiver for NOx reductions within its portion of the Chicago Gary Lake County nonattainment area on the premise that a reduction in these emissions may increase ozone levels even though these emissions potentially impacted ozone levels in Chicago and all downwind nonattainment areas such as the Milwaukee Racine severe nonattainment area. Illinois had not implemented any controls on nonattainment area NOx sources until the NOx SIP Call reductions became effective in 2004. An OAQPS official stated that many of these waivers were granted based on questionable justifications. 76 Appendix G Examples on Use of Outside Emission Credits Post 1996 ROP Plans for two of the three nonattainment areas claiming outside emission reductions included only the baseline emissions for the selected sources when calculating required emission reductions. However, the post 1996 ROP Plan for the third nonattainment area did include the entire emissions baseline for the outside area where emission reductions were claimed.

The Illinois post 1996 ROP Plan for the Chicago Gary Lake County severe nonattainment area included NOx reductions based on Tier I vehicle emission rules, Federal non road engine standards, and the Federal Acid Rain program that occurred outside the nonattainment area. In calculating the required NOx reductions for the ROP, Illinois used the entire NOx baseline for all counties outside of the Illinois ozone nonattainment areas.

Wisconsin, in the post 1996 ROP Plan, claimed emission reduction credit of about 6.5 tons per day for certain VOC sources outside of the Milwaukee Racine nonattainment area. These reductions were based on prior Statewide VOC rules. The State determined that VOC emissions from 14 counties outside of the Milwaukee Racine nonattainment area affected the nonattainment area's ability to achieve the 1 hour ozone standard. For the 14 county area, the State included in ROP calculations of required VOC reductions only the 1990 baseline VOC emissions ( 28.53 tons per day) for autobody refinishing, degreasing, and organic solvent use. The use of baseline emissions only for these specific sources assumes that other VOC sources within the 14 county area did not increase emissions and offset or exceed any reductions by the selected sources. If the State had selected these same VOC control measures within the nonattainment area, the State would have had to calculate emission reductions and project emissions growth   per Clean Air Act statutes   against the entire anthropogenic VOC baseline for the Milwaukee Racine nonattainment area ( 362 tons per day). According to the NEI, the 1990 total VOC anthropogenic emissions for the 14 county area were 119,286 tons per year, or an estimated 326.8 tons per day. However, the State included only 28.53 tons per day of these emissions in the ROP baseline. Most of the VOC reductions projected in the Milwaukee Racine post 1996 ROP Plan resulted from controls within the nonattainment area. Therefore, to ensure VOC reductions, net of growth, for the entire area in which VOC reductions were claimed, the ROP baseline should have combined VOC baseline emissions for the 6 county Milwaukee Racine nonattainment area and the 14 county outside area.

The New Hampshire portion of the post 1996 ROP Plan for the Boston Lawrence Worcester severe nonattainment area included Acid Rain NOx reductions for a specific power plant located outside New Hampshire's portion of the nonattainment area. According to the NEI, Merrimack County, New Hampshire, in which the power plant is located, had total 1990 NOx emissions of 29,338.43 tons per year, or an estimated 80.4 tons per day. The State included only the power plant's 1990 baseline NOx emissions of 26.3 tons per day in the ROP total NOx baseline of 59.7 tons per day. This NOx baseline was used to calculate required NOx reductions and project growth in NOx emissions for New Hampshire's portion of the Boston Lawrence Worcester area. However, limiting the outside NOx baseline to the power plant emissions assumes that other NOx 77 sources in the surrounding outside area would not grow and/ or offset the power plant reductions. The post 1996 ROP Plan also included NOx reductions from Reasonably Available Control Technology controls within the nonattainment area. Therefore, to assure NOx reductions, net of growth, for the entire area in which emission reductions were claimed, the ROP baseline should have been the combined NOx baseline for New Hampshire's portion of the nonattainment area and Merrimack County. 78 Appendix H Agency Response to Draft Report and OIG Evaluation Note: The OIG's evaluation of the Agency's response appears in italics, in a box, after each comment.

MEMORANDUM SUBJECT: OIG Draft Evaluation Report EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions in Some Major Metropolitan Areas Assignment No. 2003 0000499 FROM: Jeffrey R. Holmstead Assistant Administrator for Air and Radiation TO: J. Rick Beusse, Director for Program Evaluation Air Quality Issues, OIG Thank you for the opportunity to comment on the draft report concerning progress in reducing ozone precursor emissions in some major metropolitan areas. The report reflects a significant effort from your staff and provides insightful recommendations for our consideration. Attached is our response addressing the report and recommendations. Our response also reflects input from the EPA Office of General Counsel and several Regional Offices.

In general, some of the recommendations concerning the draft rule for milestone compliance demonstrations seem reasonable and we will investigate how they can be implemented. Other of the recommendations are good in theory, but practical considerations constrain us from implementing them. Highlights of our comments include:

° Resource constraints are a major consideration. The Office of Air and Radiation ( OAR) has many statutorily required programs and resources to support those programs has remained stagnant for years. We must prioritize our efforts, putting our resources where we think we can get the most good for dollar spent. For several years now, our ozone program has focused on implementing the more health protective 8 hour ozone standard rather than the 1 hour standard that is due to be revoked under regulation on June 15, 2005. Rather than spending resources looking back, we have chosen to focus on moving forward and developing programs and guidance that will assist states in getting the reductions necessary to meet the new standard. We believe public health will be served by this choice. 79 OIG Evaluation: We agree that EPA should focus its resources on the current and future implementation of the 8 hour standard. Where possible we have focused the recommendations to future implementation actions that should help EPA and the States attain the 8 hour standard in a timely manner. However, we continue to believe that EPA needs to look closely at past implementation of the 1 hour standard to see what was accomplished and what was not accomplished, which controls worked as expected and which did not, and which aspects of their ozone strategy need improvement in order to implement the 8 hour standard more effectively than occurred under the 1 hour standard. As noted in our report, delays in implementation of 1 hour emission controls and related inadequate emission reductions have prolonged the exposure of millions of people to unhealthy ozone levels. In addition, if many nonattainment areas could not meet the 1 hour standard, attainment of the 8 hour standard will be even more complex and difficult for these areas. EPA needs to learn from the past how to better address these current and future challenges in reducing ozone precursor emissions.

° OAR has already required large reductions in nitrogen oxides ( NOx), a major precursor to ozone, through the NOx SIP call, heavy duty diesel rule, the Tier II tailpipe rule and offroad engines. These reductions, some which have just come into play this year, go a long way toward meeting the Clean Air Act ( CAA) goal of emission reductions contemplated through the rate of progress plans ( ROP). We anticipate further reductions under the proposed Clean Air Interstate ( CAIR) rule.

OIG Evaluation: We recognize that EPA has implemented many national and regional controls that should significantly impact NOx emissions in the future. These controls should further reduce ambient ozone levels. However, these controls were not timely designed and/ or implemented to meet emission reduction mandates of the Act. As a result, the effects of unhealthy ozone levels on public health have been substantially prolonged past the 1990 Act's milestones for the 1 hour ozone standard. Additionally, as indicated in our report, the effectiveness of these national and regional controls should still be measured in precursor emissions reductions at the local level, especially in those major metropolitan areas that have struggled to meet the 1 hour standard.

° The report expresses concern that the policy allowing States to claim ROP emission reductions for sources outside the nonattainment area allows for potential double counting of emission reductions and does not ensure that emission reductions do more than just offset emissions growth. The 1997 Ozone Transport Assessment Group analyses indicated reductions in NOx from upwind sources does, in fact, reduce ozone levels in downwind communities. This study was the basis for EPA's NOx SIP call and is more a co benefit than a double counting. 80 OIG Evaluation: In some cases, emission reductions by sources outside nonattainment areas could benefit more than one nonattainment area. However, modeling would be required to demonstrate that the outside sources actually impacted multiple areas and to what extent each area benefitted from these reductions. In our view, the credit given in ROPs should be limited to the extent of benefit received by each nonattainment area. The current policy does not provide for or require modeling to demonstrate outside emission sources' impact on individual nonattainment areas and does not limit credit for such emission reductions to the actual benefit received by individual nonattainment areas from such reductions. Under the policy, nonattainment areas are generally allowed credit for all emission reductions achieved by outside sources within specified distances outside the nonattainment area boundaries without any demonstration of the actual impact of these specific emissions on the area's nonattainment of the ozone standard. We believe that any " double counting" or " co benefit" of outside emission reductions by multiple nonattainment areas should be limited to the extent of benefit received by each area based on appropriate atmospheric modeling.

If you have any questions about this response, please contact Gail Whitfield at 919 541 1451.

Attachment cc: John Price, Office of Inspector General Steve Page, Director, Office of Air Quality Planning and Standards, OAR Lydia Wegman, Director, Air Quality Strategies and Standards Division, OAQPS Peter Tsirgotis, Director, Emissions, Monitoring, and Analysis Division, OAQPS Kay Holt, Director, Planning, Resources, and Regional Management Staff, OAQPS Kevin McLean, Office of General Counsel Pete Cosier, OAR Audit Coordinator Yvonne W. Johnson, OAQPS Audit Coordinator 81 Detailed Comments on August 16, 2004 Draft OIG Report Suggested changes:

On page 3, in title of Table 1: 2: after the word " Nonattainment" insert for " 1 hour ozone NAAQS". In the footnote, change " designated" to " re designated".

Also on page 3, " Twenty one of the 25 . . . to a lower nonattainment " classification" rather than " designation".

OIG Evaluation: The final report reflects the changes requested above.

To the last paragraph on page 3, add " These designations because [ sic, became] effective for 113 of the 126 areas on June 15, 2004. The remaining 13 (" Early Action Compact" or " EAC") areas received deferred effective dates for their designations. Furthermore, one of the original 113 areas subsequently received a deferred effective date."

OIG Evaluation: We agree with the effective dates for 8 hour designations shown above. However, we did not add this information as requested because the information did not directly relate to or provide clarification for any of the issues addressed in the report.

On page 6, the report presents the 3% requirement in a way that implies that it is a 3% annual requirement. Actually, it is 3% per year as averaged over a 3 year period.

OIG Evaluation: We modified the report to clarify that the 3 percent per year emission reduction requirement pertained to the average annual reduction required over each 3 year period.

On page 33, an OGC attorney was quoted as defining their job " as attorney advisors is to find language gaps and ambiguities in statutes that allow EPA flexibility in promulgating policy guidance." OGC attorneys are responsible for advising program offices on the legalities of various issues and providing their opinion on whether the policy or guidance in question would be successfully if challenged in court. That is a more accurate statement of their role. OAR rules, policies and guidance are frequently challenged, both by industry and by environmentalists. When establishing policies that affect large sectors of the population, it is critical to review the legal angles. We would request that the two sentences in the middle of the page beginning " However, according . . . score given to the policy" be stricken from the report and the above italicized sentence be substituted. 82 OIG Evaluation: The draft report reflects the actual statements made to the OIG by an EPA attorney who was involved in reviewing the outside emission credit policy. This statement was provided to allow the reader to understand Office of General Counsel's role in the questioned policy, and was not central to our finding that the legal basis of the policy was unclear; thus we made the changes in the final report as requested by the Agency. The OIG will refer to the Agency response as the source of the statement in the final report.

On use of data from EPA's National Emissions Inventory ( NEI) database to prove or disprove whether an area reduced its emissions by the required amount: OIG's analysis produces dubious results for several reasons. First, the Act requires that States demonstrate reductions on a tons per summer day ( TPSD) basis; using the NEI only allows for one to analyze reductions using annual emissions data. This is a significant difference. Additionally, EPA's NEI database simply doesn't have the same quality of data as State prepared inventories. Second, the draft report points out that a major failing of the NEI is its lack of documentation of methods used by the States to prepare the emission estimates. However, we would like to point out that each State's hard copy inventory includes methods as part of the report, making them available for assessment with the inventory. Third, the draft report finds that using periodic emission inventories ( PEIs) to compare back to baseline numbers is problematic: ". . . Our interviews with OAQPS, regional, and State officials disclosed that, due to changes in models, methodologies, and emissions factors over the years, a reliable comparison between baseline and periodic emission inventories could not be conducted unless both inventories were updated."

Although EPA has updated past inventory estimates to make them consistent with current estimates in various ways, such as updating past inventory year on road emission estimates with estimates produced by the most current version of the Mobile model, such efforts still do not produce emission estimates that match SIP emission inventory estimates for all years, and again, represent annual, not daily emission values. 83 OIG Evaluation: As stated in our report, the Act requires that States demonstrate that precursor emissions have been reduced an average of 3 percent annually " net of growth" for each 3 year period subsequent to the enactment of the 1990 Act. The Act does not require that States demonstrate attainment of emission reductions in " tons per summer day." Also, EPA adjusts the NEI every 3 years based on State emissions data that is expressed in tons per day or tons per summer day to a tons per year expression.

EPA has indicated that the NEI is the highest quality emissions data maintained by the Agency and has used this data for regulatory planning and support; national, regional, and State emission trends; and public information reports. However, the Agency now states that the NEI is not of sufficient quality to indicate whether nonattainment areas met emission reduction requirements in the Act, and asserts that State SIP inventories are best for such measurements. According to EPA documentation and our analysis, state inventory data is used every 3 years to update NEI; therefore, NEI and State emissions data should reflect the same level of quality. Further, the Agency routinely provides NEI developed emissions data to States for their use in developing their nonattainment periodic emissions inventories, and we found at least three states had used NEI data in their periodic inventories rather than developing their own data. The Agency further asserts that State inventories cannot be used to measure nonattainment area accomplishments in reducing precursor emissions because baseline and subsequent periodic inventories were produced using different models and factors. EPA has stated that requiring updates to baseline and periodic inventories would be too burdensome on States. These contentions by EPA would leave no actual, comparable emissions data available, State or national, to assess nonattainment progress as required by the Act. However, the OIG looked for emissions data that could provide a reliable indicator as to whether nonattainment areas had achieved precursor emission reductions required by the Act. Noting that the NEI was being updated for the 1990 to 1999 period based on the latest models and emissions factors, EPA senior officials   including some regional officials   said that this updated NEI data would provide a reliable indicator of whether nonattainment areas met emission reduction mandates. This is the data we used in our analysis.

We believe OIG has interpreted Tables 3.1 and 3.2 in the report incorrectly when they say " Negative differences between the target levels and PEIs for seven nonattainment areas indicate that the target levels were underestimated." This indicates OIG believes that projected emission inventories are used in the establishment of target emission levels, and therefore that underestimates of the projected emissions can cause ROP shortfalls because it leads to inadequate planning for emission reductions. In fact, projected emission estimates aren't used in establishing the target level. Target levels are directly determined by subtracting the required ROP reductions, non creditable reductions, etc. from the baseline inventory. It's a straight subtraction of known amounts from a known baseline. It can be miscalculated, but not underestimated. It would be true to say that " negative differences between projected, controlled emission levels and PEIs indicate that growth may have been underestimated, and so not enough emission reductions were planned for." But it's incorrect to say that negative differences target levels and PEIs indicate target levels were underestimated. 84 OIG Evaluation: The OIG did not use projected emission inventories in either Table 3.1 or 3.2. Actual, " calculated" target levels, as documented in the 15 percent and post 1996 ROP Plans, were used in these tables to show differences between actual periodic emission inventories and calculated target inventories.

The OIG agrees that the draft report statement cited by the Agency is not technically correct. The total emission reductions needed to achieve the target levels were under projected, not the target levels. The cited sentence has been changed to read: " Negative differences between the target levels and PEIs for seven nonattainment areas indicate that the growth of projected emissions may have been underestimated and ROP emission controls and related reductions, ( to include emissions growth) were inadequate to achieve the subject target levels."

Regarding Recommendations:

Chapter 2: 2 1 Perform an in depth evaluation of the compliance of all serious to extreme nonattainment areas with emission reduction requirements using, at a minimum, precursor emissions data contained in the Agency's NEI database.

Response: OAR has chosen to focus its efforts on developing plans and strategies that will implement the more health protective 8 hour standard rather than evaluate progress toward the 1 hour standard which is scheduled to be revoked on June 15, 2005. Since EPA will no longer be determining whether areas have met their 1 hour ROP milestones after June 15, 2005, it seems more appropriate to focus our efforts and our resources on implementing the 8 hour ozone rule. Implementation rules will incorporate development of the ROP plans and assessing progress toward those plans. 85 OIG Evaluation: We agree that the Agency should focus resources on implementation of the 8 hour standard. However, the Agency and States need to measure and assess the actual effectiveness of controls implemented under the 1 hour standard before developing controls for the 8 hour standard. This assessment could be a valuable tool in identifying controls that were not effective, overestimates of projected emission reductions, and methods for increasing the effectiveness of controls in 8 hour ROPs.

Many new nonattainment areas were designated under the 8 hour standard. These areas will be implementing many of the emission controls already implemented by 1 hour nonattainment areas. EPA needs to know how effective these 1 hour controls were in reducing emissions and identify where improvements may be needed before developing 8 hour emission control plans for these areas. An assessment of actual reductions achieved by 1 hour controls could identify the need for EPA to adjust the expected emission reductions from these controls and/ or the need to develop alternative controls to meet 8 hour milestones. A more viable method for assessing control effectiveness is to measure emission reductions that actually occurred from implementation and compare reductions achieved to the projected or expected reductions included in 1 hour plans. Finally, EPA needs to identify 1 hour areas that did not achieve required emission reductions for the 1 hour standard and implement all available contingency measures. Implementation of contingency measures should further reduce emissions in these areas and better facilitate the achievement of the more stringent 8 hour standard for areas that have struggled for years to meet the less stringent 1 hour standard. Therefore, we continue to believe that the recommendations in Chapter 2 are valid, realistic actions that EPA needs to take to ensure a more effective implementation of the 8 hour standard.

2 2 Implement contingency measures, where appropriate, if nonattainment areas have not met the Act's emission reduction requirements, including the use of enforcement and/ or sanctions as authorized under Section 185 of the Act.

Response: Section 182( g)( 3)   not the enforcement or sanctions provisions of the Act   establishes the process for when a serious, severe, or extreme area has not met the emission reduction obligations in a ROP plan. Under this provision, if an area has not met the emission reduction targets, the statute provides three options for the state:

$ to have the area reclassified to the next higher classification,

$ to implement specific additional measures adequate, as determined by the Administrator, to meet the next milestone as provided in the applicable contingency plan, or $ to adopt an economic incentive program as described elsewhere in the Act.

The Administrator may require the state to adopt additional controls only if he/ she determines that the state selected option is inadequate. Additionally, we note the provision referenced in the report, section 185, applies only when a severe or extreme nonattainment area fails to attain the standard by the area's attainment date. This provision does not apply to areas that fail to meet ROP milestones. 86 OIG Evaluation: We agree that Section 185 only pertains to sanctions for failure of a severe or extreme nonattainment area to attain the ozone standard by the statutory attainment date. This statutory reference was changed in the final report. However, Section 179 indicates that sanctions may be taken if an area fails to submit an adequate ROP that will attain the required reductions by the applicable milestone date and if an area fails to adequately implement ROPs. As indicated in the report, some ROP controls were not timely or adequately implemented in order to attain required emission reductions by statutory milestone dates.

Chapter 3 3 1 Develop oversight procedures and guidance that will expedite development, approval, and implementation of ROP Plans and related emission controls.

Response: Consistent with our focus on implementation of the 8 hour standard, EPA has proposed options for addressing the ROP requirement for areas covered under subpart 2 and intends to issue a final rule ( the phase 2 portion of the 8 hour ozone implementation rule) that would cover development and approvability of the ROP plans and the timing of emission controls.

OIG Evaluation: The OIG appreciates EPA's efforts to address the need for better oversight procedures and guidance as it simultaneously develops its final rules for implementing the 8 hour ozone standard; however, we continue to believe that new oversight procedures and guidance need to be developed that specifically show how the new 8 hour procedures and guidance will improve the development and implementation of 8 hour ROPs as compared to 1 hour ROPs that were the subject of our evaluation.

3 2 Require evaluation of proposed ROP Plans by EPA regional air programs to assure the propriety of ROP assumptions, projections, and related emission reductions in comparison to available emission databases and historical data.

Response: The Regional Offices have responsibility for reviewing all aspects of SIPs, including the ROP plans. OAR also includes this as an item in the annual guidance issued to Regions and States.

OIG Evaluation: The OIG recognizes that regions have the responsibility for reviewing State SIP submissions. However, as pointed out in Chapter 3, EPA Regions did not always throughly review State support for ROP Plans. We continue to believe that EPA needs to require regions to perform in depth reviews of State technical support for ROP submissions.

3 3 Develop guidance for analyzing and comparing periodic emission inventories to projected emission target levels and evaluating assumptions used in applicable ROP Plans, in order to: ( 1) reconcile differences between projected and actual inventories, ( 2) identify any incorrect assumptions or projections and understatement of needed emission reductions, and ( 3) establish improvements that may be needed in the ROP development process, and ensure training of staff in conducting these analyses. 87 Response: As noted in the draft report on page 39, OAQPS is developing a rule for the compliance milestone demonstration for the 8 hour ozone standard. In the process of developing that rule, OAQPS intends to address this recommendation.

OIG Evaluation: The OIG appreciates EPA's efforts to address the need for better oversight procedures and guidance for milestone compliance demonstrations as it simultaneously develops its final rules for implementing the 8 hour ozone standard.

3 4 When EPA staff determine that an understatement [ sic; may have meant " overstatement?" or " underachievement"] of emission reductions has occurred, require States to implement contingency or other measures needed in a timely manner to ensure that required emission reductions are achieved.

Response: As noted above in response to recommendation 2 2, Section 182( g)( 3)   not the enforcement or sanctions provisions of the Act   establishes the process for when a serious, severe, or extreme nonattainment area has not met the emission reduction obligations in an ROP plan. Under this provision, if an area has not met the emission reduction targets, the statute provides three options for the state:

$ to have the area reclassified to the next higher classification,

$ to implement specific additional measures adequate, as determined by the Administrator, to meet the next milestone as provided in the applicable contingency plan, or $ to adopt an economic incentive program as described elsewhere in the Act.

The Administrator may require the state to adopt additional controls only if he/ she determines that the state selected option is inadequate. Additionally, we note the provision referenced in the report, section 185, applies only when a severe or extreme nonattainment area fails to attain the standard by the area's attainment date. This provision does not apply to areas that fail to meet ROP milestones.

OIG Evaluation: While we appreciate the Agency's views, the response did not address the content of this recommendation, as Section 185 of the Act is not a part of this recommendation. The OIG's recommendation only provides that EPA should require implementation of contingency measures, as required under Section 182( g)( 3), when an area has not met emission targets. As shown in Chapter 3, our comparison of PEIs to target emission levels, indicated that many nonattainment areas did not achieve emission targets. The recommendation did not provide, as stated in OAR's response, that EPA require States to implement additional controls, only implementation of contingency measures that should have already been included in approved ROPs and ozone attainment demonstrations.

3 5 Revise EPA's " Clean Data" policy to require meteorologically adjusted ozone trend analyses and trend analyses of ambient VOC and NOx concentrations for nonattainment areas that attain the ozone standard based on ambient ozone monitoring data, to better assure the permanence of such attainments before suspending ROP Plan development and approval. 88 Response: OAQPS is evaluating incorporating these recommendations into the Clean Data Policy.

OIG Evaluation: The OIG appreciates EPA's efforts to address these recommendations as it revises the Clean Data Policy.

3 6 Require that EPA make and publish a determination that the ozone standard has been achieved through permanent and enforceable emission reductions before suspending ROP Plans and related emission reductions required by the Act.

Response: Current EPA guidance for redesignation to attainment requires a determination that the reductions are permanent; EPA will reassess the Clean Data Policy to determine whether such a determination can be incorporated into that policy.

OIG Evaluation: The OIG appreciates EPA's efforts to address these recommendations as it revises the Clean Data Policy.

Chapter 4 4 1 Subject the policy claiming outside emissions to the notice and comment rulemaking process, which will allow broad public comment and feedback.

Response: Each time the Agency approves a SIP that relies on the policy allowing , the public has an opportunity to comment on the reliance on reductions from outside the nonattainment area.

OIG Evaluation: We agree that ROP notices could allow public comment. However, the policy has only been referenced in ROP notices and not presented in detail for public comment. Additionally, ROP notices are usually long and complex and the use of outside emission reductions are buried within this long, technically complex document. The public has received few details regarding the policy in past ROP notices. The ROPs did not present a clear picture of the impact of this policy on nonattainment area emissions or any information on the statutory basis for the policy under the Act. Therefore, the OIG continues to consider Recommendation 4 1 valid.

4 2 Revise policy for nonattainment area outside emission reduction credit to: ° Encourage broadening of controls for sources in outside areas in order for a nonattainment area to claim emission reduction credits. ° Require atmospheric modeling to support the impact of outside emissions and sources on nonattainment area ozone levels. ° Require that the emission baselines from all selected outside areas be included in ROP baseline emissions for calculating required emission reductions and measuring achievement of reductions. ° Provide a methodology for apportioning outside area NOX or VOC emissions reductions among nonattainment areas to prevent double counting of emission reductions when a State has multiple nonattainment areas. 89 ° Require that outside sources or areas included in post 1996 ROPs also be included in subsequent PEIs for each applicable nonattainment area.

Response: As part of the rulemaking process implementing the 8 hour ozone standard, the Agency is assessing existing policies and guidance. We will take these comments into consideration, along with other comments received from stakeholders, as we proceed with implementation of the 8 hour ozone NAAQS. Also, Federal rules such as the NOx SIP call, new vehicle standards, and the proposed CAIR rule will provide emission reductions that will significantly reduce ozone levels in many of these areas and promote adequate ROP. Since upwind sources are known to contribute to downwind ozone pollution, controlling these source through regional programs will contribute to reducing the ozone levels in more than one nonattainment area. That isn't double counting.

OIG Evaluation: We appreciate OAR's plans to consider Recommendation 4 2 during its assessment of existing policies and guidance as part of the rulemaking process for implementation of the 8 hour standard.

Chapter 5 5 1 Expedite issuance of the milestone compliance guidance, but restrict the use of observed ambient ozone levels as a stand alone indicator of emission reductions. The guidance should also require the use of meteorologically adjusted ozone trends and trends in ambient concentrations of VOC and NOX in the weight of evidence approach.

Response: We will evaluate the current draft milestone compliance rule to determine the feasibility of this recommendation. We must remember our overall goal is to meet the health protective air quality standard for ozone, not just reduce precursor emissions. The ROP is a tool designed to help areas meet the standard, it is not the measure used for designation of areas as attainment or nonattainment.

5 2 Instruct States to utilize indicators, as reflected in the draft milestone compliance demonstration guidance, and/ or provide annual updates to emissions inventories ( one third of sources per year or one third of States per year) to determine potential or actual emission reductions within the Act's 90 day time frame for milestone compliance demonstrations.

Response: In the draft of the proposed rule, EPA is contemplating reliance on indicators to meet the milestone compliance demonstration. At this time, it is not technically feasible for States to complete quality assured emissions inventories for most source categories based on actual emissions generating activities in a 90 day time frame.

OIG Evaluation: Emission inventories are the best measure of actual emission reductions. Indicators will not provide assurance that emissions have been sufficiently reduced to meet the requirements of the Act. Updated inventories should be used as part of the milestone demonstration whenever feasible. 90 5 3 Require that nonattainment areas update baseline inventories and, subsequently, perform more in depth assessments of actual emission reductions, once the applicable PEIs are completed. This subsequent determination of actual emission reductions may not meet the milestone compliance demonstration 90 day time frame but will provide a measure of progress that is not currently available.

Response: We believe that the IG is recommending that OAR should require that whenever a state has revised an emission inventory model or method, for example a method of estimating emissions from mobile sources, as part of preparing the PEI, the baseline inventory ( e. g., for 2002 in the case of an 8 hour ozone area) should be recalculated with the new method so that actual reductions from base year to PEI year can be estimated without the confounding influence of method changes.

Assuming our interpretation of this recommendation is correct, we appreciate the issue. However, we are not certain that we have legal authority to require a state to revise its baseline inventory once submitted, or that it would be the best use of state and EPA resources in all cases. For some changes in method, it may be technically impossible to re estimate the baseline inventory years later, for example, if source testing methods change. We address the intercomparison issue on a case by case basis when, during review of a PEI submittal, it seems material to the area's progress toward attainment.

OIG Evaluation: The OIG did not intend, as suggested in the Agency's response above, that States update baseline inventories each time a new model or factor is promulgated. The recommendation provides that States should update baselines in order to be comparable to the most recently developed PEI, so that actual emission reductions achieved can be measured. The OIG continues to believe that this additional requirement would provide a realistic measure of emission reduction achievements under the 8 hour standard and, as such, would also represent an effective use of Agency resources to achieve the 8 hour standard. The use of indicators alone will not fully meet the Act's requirement that States demonstrate the attainment of specific, mandated precursor emission reductions for each nonattainment area.

5 4 Incorporate the use of updated NEI data and other available measures, where appropriate, into milestone compliance demonstration guidance as top down indicators or measures of nonattainment area progress in reducing precursor emissions.

Response: We will evaluate the current draft milestone compliance rule to determine the feasibility of this recommendation.

OIG Evaluation: We appreciate OAR's plans to consider Recommendation 5 4 during its assessment of milestone compliance guidance as part of the rulemaking process for implementation of the 8 hour standard.

5 5 Require State and local agencies to update past baseline and periodic emission inventories based on the latest models, emission factors, and methodologies, and complete milestone compliance demonstrations for 1990 through 1999 ( or later milestone year) for nonattainment areas based on the issued milestone compliance guidance. Further, for 91 future inventories, require States to continuously update inventories as new emissions data and methods are developed, to provide timely assessments of nonattainment area progress in reducing precursor emissions.

Response: The focus of the EPA ozone program is on implementation of the more protective 8 hour standard, including guidance on the ROP program. We do not feel it would be a good expenditure of our resources to document progress or failures against the 1 hour standard that will be revoked under regulation on June 15, 2005.

OIG Evaluation: As previously stated in response to Recommendation 2 1, we believe that if the Agency better understands nonattainment area progress in reducing emissions under the 1 hour standard, it can more effectively design and implement emission controls under the 8 hour standard. In our view, determining how to implement the 8 hour standard more effectively than occurred with the 1 hour standard represents an effective use of resources.

Chapter 6 6 1 Develop analytical procedures and processes for EPA and/ or States to utilize updated NEI data for measuring the progress of individual areas in reducing precursor emissions and complying with the Act's emission reduction mandates.

Response: We are broadly examining the issues of program tracking, assessment, and accountability in response to the recent National Academy of Sciences committee report on air quality management. To be clear, any policy, procedures, or guidance we would issue at this point would support implementation of the 8 hour NAAQS.

OIG Evaluation: This recommendation was intended to address future EPA and State analyses of NEI to determine the progress of nonattainment areas in reducing precursor emissions. The recommendation is directly related to implementation of the 8 hour standard and measurement of emission reductions by individual nonattainment areas under this standard. We have modified the recommendation in the final report to indicate that actions recommended apply to the 8 hour standard.

6 2 Issue guidance for the development of meteorologically adjusted ozone trends for individual nonattainment areas, updated annually, to better isolate the impact of emission reductions on ozone levels.

Response: While EPA has developed and used approaches to meteorologically adjust ozone trends ( e. g., EPA 454/ K 04 001, http:// www. epa. gov/ airtrends/ ozone. html), adjusted trends for specific areas or regions may not adequately adjust for all influences caused by meteorology. We are exploring more sophisticated adjustments and when a better approach is developed and demonstrated, we will make it available to States. 92 OIG Evaluation: In 2003, the EPA developed meteorologically adjusted ozone trends for major United States metropolitan areas, many of which are ozone nonattainment areas. An EPA analyses of these trends was included in publically released reports. If EPA's prior meteorologically adjusted trends for many large nonattainment areas were sufficiently reliable to be included in EPA's ozone trends reports, we do not understand the need for more sophisticated adjustments before utilizing the approach as an indicator of the impact of emission reductions on ozone levels. More precise measures of meteorologically adjusted ozone levels would improve the approach as an indicator but the current approach has already been deemed by EPA as sufficiently reliable for trends analyses and public information.

6 3 Provide resources to develop PAMS data analyses and identify trends in ambient VOC and NOx concentrations for individual ozone nonattainment areas. Such trends could be used to assess the effectiveness of Federal, regional, and local emission controls and identify where additional controls may be warranted.

Response: This is a resource allocation issue. The EPA has intermittently analyzed PAMS data for special studies but such analyses have been a lower priority during the last few years than other air quality analyses for ozone and fine PM. However, we re initiated PAMS data analysis in FY 2004. This analysis will involve technical challenges in relating ambient VOC concentrations to various meteorological factors influencing emissions and atmospheric transformations, and developing statistical relationships with factors such as activity levels and regional transport. This approach will likely require an iterative, exploratory analysis to determine the most relevant factors in evaluating the effectiveness of control programs and identifying additional control measures. In addition, there are PAMS siting " gaps" as not all 8 hour ozone nonattainment areas participate in this program. Considering these challenges, we are committed to PAMS data analysis provided sufficient resources can be allocated to PAMS data acquisition and analysis.

OIG Evaluation: The older 1 hour nonattainment areas already have PAMS networks. Therefore, PAMS data for these areas is already available for trend analysis to identify the direct impact of emission reductions on ambient concentrations of ozone precursor emissions. PAMS is probably one of the best methods available to assess the direct impact and effectiveness of emission controls on individual nonattainment areas. We agree that the Agency should pursue the resources necessary to perform PAMS data/ trend analyses for individual nonattainment areas.

Chapter 7 7 1 Establish annual and multi year goals and performance measures for ozone precursor emission reductions by individual nonattainment areas and require State and local agencies to submit evidence that these goals have been met.

Response: The Agency's 2003 Strategic Plan includes objectives regarding ozone improvements for nonattainment areas. Sub objective 1.1.1 states that by 2010 air quality with respect to 8 hour ozone will be improved to heathy levels ( i. e., meet the NAAQS) for 60 percent of the people who live in areas not meeting the national standard in 2001. The objective further states that air 93 quality will improve for an additional 27 percent of the people who live in areas not meeting the 8 hour standard in 2001.

7 2 Once annual goals and measures are established, include the goals and measures in EPA and State and local agencies' annual and strategic plans, and provide accomplishments toward these goals in EPA's annual performance reports.

Response: The Agency's goals, objectives, and performance measures are based on the broader overall goal of protecting public health, and as such, reflect measuring areas and population with clean air for the various criteria pollutants. Our instructions from OMB are that the goals be meaningful. We feel we are doing this by addressing the public health issue.

The State implementation plans ( SIP) for nonattainment and maintenance areas; specifically attainment demonstrations, rate of progress plans, and maintenance plans, provide emission targets for each of the ozone precursors. These targets are approved as part of the SIP rulemaking process. In the case of on road mobile source sector, these targets are " budgets" that are used in implementing the transportation conformity requirements.

OIG Evaluation: The Agency suggests that its strategic planning activities were already sufficient to address recommendations 7 1 and 7 2; however, our recommendations pertain to establishing performance measures for precursor emission reductions ( NOx and VOCs) by individual nonattainment areas. As noted in our report, ambient ozone is our most complex, difficult to control, and pervasive urban air pollutant. In recognition of this fact, the 1990 Act mandated ever increasing levels of precursor emissions reductions until attainment is achieved. Thus, we continue to believe that Recommendation 7 1 is appropriate and necessary to assuring timely and permanent ozone attainment. For Recommendation 7 2, EPA indicated that the Agency's strategic goals, objectives, and performance measures reflect the broader goal of protecting public health and, thereby, the measurement of areas and populations with clean air for criteria pollutants. While we appreciate these larger goals, we believe the Agency strategic and annual plans should also include goals for reducing ozone precursor emissions in accordance with the 1990 Act. Current Agency strategic and annual plans include goals for NOx emission reductions from power plants, as well as VOC and NOx emission reductions from stationary and mobile sources based on Federal rules.

Chapter 8 8 1 Develop DQOs, using EPA DQO development guidance, for State and NEI generated emissions data for use in applicable QAPPs.

Response: In FY 2005, EPA will develop data quality objectives ( DQOs) for the 2002 NEI as part of the development and finalization of the Quality Assurance Project Plan ( QAPP) for the 2002 NEI and then may consider the role these DQOs   or an augmented version of them   should play with respect to state generated emission inventories. The DQOs will be used in future versions of the NEI ( i. e., 2005 version and beyond).

8 2 Expedite completion and approval of the draft QAPP for NEI data. 94 Response: EPA will finalize the draft QAPP for the 1999 NEI by the end of this calendar year. We will develop a separate, improved QAPP for the 2002 NEI. This will complement the planned first ever external peer review of the 2002 NEI.

8 3 To the extent possible, expedite the regulatory process for releasing ozone DQOs for use in State air monitoring QAPPs.

Response: These DQOs were developed for ozone monitoring and are part of the regulatory change to EPA's ambient air quality monitoring requirements implementing the National Monitoring Strategy. These changes will be proposed in 2005.

8 4 Inform EPA regions that approved State QAPPs are needed for emissions and ozone air monitoring data air monitoring data accumulated or developed by States within each region's boundaries.

Response: EPA QA Policy has had a long standing requirement for QAPPs for any organization accepting federal funds for the collection of environmental data. The Regions are aware of this requirement. OAQPS has developed a format for collecting information from the Regions assessing the State, Local and Tribal QAPPs for the Ambient Air Quality Monitoring Program within the Region. We will soon be working with Regional Offices to compile this assessment information.

OIG Evaluation: We appreciate EPA's plans to develop data quality objectives for ozone precursor emissions data and ensure their use in State and national emissions inventories as expeditiously as practicable. 95 Appendix I Distribution EPA Headquarters Assistant Administrator for Air and Radiation ( 6101A) Agency Followup Official ( 2710A) Agency Followup Coordinator ( 2724A) Audit Followup Coordinator, Office of Air and Radiation ( 6102A) Audit Followup Coordinator, Office of Research and Development ( 8102A) Associate Administrator for Congressional and Intergovernmental Relations ( 1301A) Director, Office of Regional Operations ( 1108A) Associate Administrator for Public Affairs ( 1101A) Director, Office of Air Quality Planning and Standards ( C404 04) Deputy Director, Office of Air Quality Planning and Standards ( C404 04) Director, Air Quality Strategies and Standards Division ( C504 01) Leader, Ozone Policy and Strategies Group ( C539 02) Director, Emissions, Monitoring and Analysis Division ( C304 02) Leader, Air Quality Trends Analysis Group ( C304 01) Leader, Emission Inventory & Factors Group ( D205 01) Leader, Monitoring and Quality Assurance ( C339 02) Audit Liaison, Office of Air Quality Planning and Standards ( C404 2) Inspector General ( 2410)

EPA Regions Regional Air Program Directors