[Federal Register Volume 88, Number 105 (Thursday, June 1, 2023)]
[Notices]
[Pages 35961-35964]
[FR Doc No: 2023-11611]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97585; File No. SR-MSRB-2023-03]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Approval of a Proposed Rule Change To Amend MSRB
Rules G-12 and G-15 To Define Regular-Way Settlement for Municipal
Securities Transactions as Occurring One Business Day After the Trade
Date and To Amend Rule G-12 To Update an Outdated Cross Reference

May 25, 2023.

I. Introduction

    On March 28, 2023, the Municipal Securities Rulemaking Board
(``MSRB'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend MSRB Rules G-12 (``Rule
G-12''), on uniform practice, and G-15 (``Rule G-15''), on
confirmation, clearance, settlement and other uniform practice
requirements with respect to transactions with customers, to define
regular-way settlement for municipal securities transactions as
occurring one business day after the trade date and a proposed
amendment to Rule G-12 to update an outdated cross reference
(``proposed rule change'').
---------------------------------------------------------------------------

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

    The MSRB also requested that the proposed rule change be approved
with an implementation date of May 28, 2024, to align with the
implementation date for Exchange Act Rule 15c6-1, as amended.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 96930 (Feb. 15,
2023), 88 FR 13872, 13916 (Mar. 6, 2023) (``SEC's T+1 Adopting
Release''). If the Commission's compliance date were to change, the
MSRB stated that it would issue a regulatory notice to modify the
compliance date to remain aligned with the Commission's compliance
date. Securities Exchange Act Release No. 97257 (Apr. 6, 2023), 88
FR 22075 n.3 (Apr. 12, 2023) (File No. SR-MSRB-2023-03)
(``Notice'').
---------------------------------------------------------------------------

    The proposed rule change was published for comment in the Federal
Register on April 12, 2023.\4\ The Commission received three comment
letters \5\ on the proposed rule change. On May 11, 2023, the MSRB
responded to the comment letters.\6\ As described further below, the
Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \4\ See Notice, 88 FR at 22075.
    \5\ See Letter from Leslie M. Norwood, Managing Director and
Associate General Counsel, Securities Industry and Financial Markets
Association, dated May 3, 2023 (``SIFMA Letter''); Letter from RJ
Rondini, Director, Securities Operations, Investment Company
Institute, dated May 2, 2023 (``ICI Letter''); and Letter from
Gregory Babyak, Global Head of Regulatory Affairs, Bloomberg L.P.,
dated May 3, 2023 (``Bloomberg Letter'').
    \6\ See Letter to Secretary, Commission, from Saliha Olgun,
Interim Chief Regulatory Officer, MSRB, dated May 11, 2023 (``MSRB
Letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The MSRB stated that, consistent with its strategic goal to
modernize its rulebook, the proposed rule change would amend Rule G-
12(b)(ii)(B)-(D) and Rule G-15(b)(ii)(B)-(C) to define regular-way
settlement for municipal securities transactions as occurring on one
business day after the trade date (``T+1''). The MSRB wrote that this
proposed rule change would align with regular-way settlement on T+1 for
equities and corporate bonds under Exchange Act Rule 15c6-1, as
amended.\7\ Although Exchange Act Rule 15c6-1, as amended, does not
apply to municipal securities transactions,\8\ the MSRB stated that it
believes that the regular-way settlement cycle for municipal securities
transactions in the secondary market should be consistent with that for
equity and corporate bond transactions.\9\ The MSRB explained that, to
facilitate a T+1 standard settlement cycle, the MSRB proposed to amend
Rule G-12(b)(ii)(B)-(D) and Rule G-15(b)(ii)(B)-(C) to define regular-
way settlement as occurring on the first business day following the
trade date rather than on the second business day following the trade
date.\10\
---------------------------------------------------------------------------

    \7\ 17 CFR 240.15c6-1.
    \8\ Id.
    \9\ Notice, 88 FR at 22075.
    \10\ Id.
---------------------------------------------------------------------------

A. Background

    The SEC initially adopted Exchange Act Rule 15c6-1 \11\ in 1993 to
shorten the settlement cycle of most equity and corporate bond
transactions from the industry standard of within five business days
(``T+5'') to requiring settlement within three business days
(``T+3'').\12\ The T+3 settlement cycle remained in effect until 2017
when the SEC amended Exchange Act Rule 15c6-1 \13\ to require the
settlement of most equity and corporate bond transactions within two
business days (``T+2'').\14\ On February 15, 2023, the SEC adopted
amendments to Exchange Act Rule 15c6-1 (``Amended Exchange Act Rule

15c6-1'') \15\ to further shorten the settlement process, requiring the
settlement of most equity and corporate bond transactions on T+1.\16\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.15c6-1.
    \12\ Exchange Act Release No. 33023 (Oct. 6, 1993), 58 FR 52891
(Oct. 13, 1993). In adopting Exchange Act Rule 15c6-1, the
Commission set a compliance date of June 1, 1995, 58 FR at 52891.
    \13\ 17 CFR 240.15c6-1.
    \14\ Securities Exchange Act Release No. 80295 (Mar. 22, 2017),
82 FR 15564 (Mar. 29, 2017).
    \15\ 17 CFR 240.15c6-1.
    \16\ Notice, 88 FR at 22075.
---------------------------------------------------------------------------

    Amended Exchange Act Rule 15c6-1(a) \17\ prohibits a broker-dealer
from effecting or entering into a contract for the purchase or sale of
a security (other than an exempted security,\18\ a government security,
a municipal security, commercial paper, bankers' acceptances, or
commercial bills) that provide for payment of funds and delivery of
securities later than T+1, unless the parties expressly agree to a
different settlement date at the time of the transaction.\19\ The MSRB
notes that the recent amendments to Exchange Act Rule 15c6-1 \20\
change only the standard settlement date for securities transactions
covered by the existing rule and do not impact the existing exclusions
enumerated in the rule.\21\
---------------------------------------------------------------------------

    \17\ 17 CFR 240.15c6-1(a).
    \18\ 15 U.S.C. 78c(a)(12).
    \19\ The MSRB wrote that Exchange Act Rule 15c6-1 was also
amended to prohibit a broker-dealer from effecting or entering into
a contract for firm commitment offerings of securities (other than
exempt securities) priced after 4:30 p.m. Eastern Time that provide
for payment of funds and delivery of securities later than T+2,
unless the parties expressly agree to a different settlement date at
the time of the transaction. Notice, 88 FR at 22075 n.13.
    \20\ 17 CFR 240.15c6-1. See also SEC's T+1 Adopting Release, 88
FR at 13874.
    \21\ Notice, 88 FR at 22075-76. The MSRB stated that Exchange
Act Rule 15c6-2 improved the processing of institutional trades
through new requirements for broker-dealers and registered
investment advisers related to same-day affirmations. Notice, 88 FR
at 22076 n.15. As Exchange Act Rule 15c6-2 does not apply to
municipal securities, the MSRB stated that it is evaluating whether
a like requirement should be considered under MSRB rules. Id.
---------------------------------------------------------------------------

B. Summary of the Proposed Rule Change

    The MSRB explained that shortening the settlement process can serve
to reduce operational risks that can be present between trade date and
settlement date, which can promote investor protection, help reduce the
risk of counterparty default and the capital required to mitigate this
risk.\22\ The MSRB stated that, in support of these objectives and to
promote regulatory consistency, it has consistently stated that the
regular-way settlement cycle for municipal securities transactions in
the secondary market should be consistent with that for equity and
corporate bond transactions.\23\ The MSRB noted that market
efficiencies could be eroded if market participants encounter different
settlement cycles when replacing equity or corporate bonds with
municipal securities.\24\ For that reason, the MSRB stated that it
adopted a T+3 settlement cycle in 1994,\25\ and a T+2 settlement cycle
in 2017.\26\ According to the MSRB, in order to continue to maintain
consistency across asset classes and harmonize with Amended Exchange
Act Rule 15c6-1,\27\ it proposed to amend Rule G-12(b)(ii)(B)-(D) and
Rule G-15(b)(ii)(B)-(C), which both currently define regular-way
settlement as occurring on T+2, to define regular-way settlement as
occurring on T+1.\28\
---------------------------------------------------------------------------

    \22\ Notice, 88 FR at 22076. See also SEC's T+1 Adopting
Release, 88 FR at 13919.
    \23\ Notice, 88 FR at 22076. See, e.g., ``T+3 Settlement,
Amendments Filed: Rules G-12 and G-15,'' MSRB Reports, Vol. 14, No.
4 (August 1994) at 3; ``Report of the Municipal Securities
Rulemaking Board on T+3 Settlement for the Municipal Securities
Market'' (Mar.17, 1994); and Securities Exchange Act Release No.
77364 (Mar. 14, 2016), 81 FR 14906 (Mar. 18, 2016) (File No. SR-
MSRB-2016-04).
    \24\ Notice, 88 FR at 22076.
    \25\ See Securities Exchange Act Release No. 34541 (Aug. 17,
1994), 59 FR 43503 (Aug. 24, 1994) (File No. SR-MSRB-1994-10).
    \26\ See Securities Exchange Act Release No. 77744 (Apr. 29,
2016), 81 FR 26851 (May 4, 2016) (File No. SR-MSRB-2016-04).
    \27\ 17 CFR 240.15c6-1.
    \28\ Notice, 88 FR at 22076.
---------------------------------------------------------------------------

    The MSRB stated that, as a result, with regular-way settlement
occurring on T+1, settlement for ``when, as and if issued''
transactions under Rule G-12(b)(ii)(C) would be required to be a date
agreed upon by both parties that is not earlier than one business day
after notification of the initial settlement date for the issue.\29\
Specifically, the MSRB stated that the proposed rule change would amend
G-12(b)(ii)(C)(2) for ``when, as and if issued'' transactions not
eligible for automated comparison to specify that the date agreed upon
by both parties shall not be earlier than the first business day,
rather than the second business day, following the date that the
confirmation indicating the final settlement date is sent.\30\ For all
other municipal securities transactions under Rule G-12(b)(ii)(D), the
MSRB stated that the proposed rule change would amend the current time
frame to provide that a broker, dealer or municipal securities dealer
(a ``dealer'') would be prohibited from effecting a transaction that
provides for payment of funds and delivery of securities later than the
first business day, rather than the second business day, after the
transaction unless expressly agreed to by the parties.\31\
---------------------------------------------------------------------------

    \29\ Id. Pursuant to MSRB Rule G-34 (``Rule G-34''), on CUSIP
numbers, new issue, and market information requirements,
subparagraph (a)(ii)(E)(2), the initial settlement is to be provided
to the registered clearing agency by the managing underwriter for
the issue. With respect to transactions not eligible for automated
comparison, the settlement date shall not be earlier than the first
business day after the date that the confirmation indicating the
final settlement date is sent. Notice, 88 FR at 22076 n.21.
    \30\ Notice, 88 FR at 22076. For ``when, as and if issued''
transactions required to be compared in an automated comparison
system under Rule G-12(f)(i), the settlement date shall continue to
be not earlier than two business days after notification of initial
settlement date for the issue is provided to the registered clearing
agency by the managing underwriter for the issue as required by Rule
G-34(a)(ii)(E)(2). Notice, 88 FR at 22076 n.22.
    \31\ Notice, 88 FR at 22076. The MSRB explained that variable
rate demand obligations may establish a settlement date expressly
agreed to by the parties that may occur later than regular-way
settlement to coincide with the reset date (e.g., T+5, T+3, etc.).
See Three Day Settlement: Rules G-12(b) and G-15(b), MSRB Reports,
Vol. 15, No. 12 (July 1995), available at https://www.msrb.org/sites/default/files/July1995-Volume15-Number2.PDF. See also Notice,
88 FR at 22076 n.23.
---------------------------------------------------------------------------

    The MSRB also explained that the proposed rule change would correct
an outdated cross-reference within Rule G-12.\32\ Specifically, the
MSRB explained that Rule G-12(b)(ii)(C) regarding the settlement date
for ``when, as and if issued'' transactions currently cross-references
Rule G-34 subsection paragraph (a)(ii)(D)(2) in referring to the
obligation that a managing underwriter has to provide notification of
initial settlement date of an issue to the registered clearing
agency.\33\ The MSRB also wrote that this obligation remains in Rule G-
34 but was moved to subparagraph (a)(ii)(E)(2) due to previous
amendments to Rule G-34. The MSRB indicated that correcting the cross-
reference will not alter the obligation of dealers under Rule G-34 or
Rule G-12.\34\
---------------------------------------------------------------------------

    \32\ Notice, 88 FR at 22076.
    \33\ Id.
    \34\ Id.
---------------------------------------------------------------------------

C. Compliance Date

    The MSRB stated that the compliance date of the proposed rule
change would be announced by the MSRB in a notice published on its
website, which date would correspond with the industry's transition to
a T+1 regular-way settlement consistent with the implementation of
Amended Exchange Act Rule 15c6-1,\35\ which is currently scheduled for
May 28, 2024. The MSRB indicated that if the SEC's compliance date were
to change, the MSRB would issue a regulatory notice to modify the
compliance date to remain aligned with the SEC's compliance date.\36\
---------------------------------------------------------------------------

    \35\ Id. See also SEC's T+1 Adopting Release, 88 FR at 13916.
    \36\ Notice, 88 FR at 22076.
---------------------------------------------------------------------------

III. Summary of Comments Received to the Proposed Rule Change

    The Commission received three comment letters \37\ on the proposed
rule

change, as well as a response \38\ from the MSRB to the comment
letters. Two of the three commenters expressed support for the proposed
rule change and no commenters objected to the proposed rule change.
---------------------------------------------------------------------------

    \37\ See SIFMA Letter; ICI Letter; Bloomberg Letter.
    \38\ See MSRB Letter.
---------------------------------------------------------------------------

    Two commenters expressed support for the proposed rule change
related to the alignment of municipal securities settlement with
regular-way settlement on T+1 for equities and corporate bonds under
Exchange Act Rule 15c6-1, as amended.\39\ Additionally, one commenter
encouraged the MSRB to consider further a rule consistent with Exchange
Act Rule 15c6-2, to improve the processing of institutional trades
through new requirements for market participants related to same-day
affirmations.\40\ The MSRB responded that it continues to evaluate
whether a similar standard may be appropriate for the municipal
securities market, and that it expect to engage stakeholders to inform
this continued evaluation.\41\
---------------------------------------------------------------------------

    \39\ See SIFMA Letter; ICI Letter.
    \40\ SIFMA Letter at 2.
    \41\ MSRB Letter at 2.
---------------------------------------------------------------------------

    One commenter encouraged the MSRB and the SEC to consider
permitting market participants a choice among financial identifiers for
required reporting and for other regulatory use cases as specified in
the MSRB's rules.\42\ The MSRB responded that it appreciated this
feedback but believes that the comment is outside of the scope of the
proposed rule change and should be considered separately.\43\
---------------------------------------------------------------------------

    \42\ Bloomberg Letter at 1.
    \43\ MSRB Letter at 2.
---------------------------------------------------------------------------

    The MSRB stated that it continues to believe the proposed rule
change is reasonable and that the proposed rule change is necessary and
appropriate to reduce operational risks, which can promote investor
protection, help reduce risk of counterparty default and the capital
required to mitigate this risk.\44\
---------------------------------------------------------------------------

    \44\ Id.
---------------------------------------------------------------------------

IV. Discussion and Commission's Findings

    The Commission has carefully considered the proposed rule change,
the comment letters received, and the MSRB's response thereto. The
Commission finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the MSRB.
    In particular, the Commission believes that the proposed rule
change is consistent with the provisions of Section 15B(b)(2)(C), which
provides, in part, that the MSRB's rules shall be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in municipal
securities and municipal financial products, to remove impediments to
and perfect the mechanism of a free and open market in municipal
securities and municipal financial products, and, in general, to
protect investors, municipal entities, obligated persons, and the
public interest.\45\ The Commission believes that the proposed rule
change will: (i) foster cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with
respect to, and facilitating transactions in municipal securities and
municipal financial products; (ii) remove impediments to and perfect
the mechanism of a free and open market in municipal securities and
municipal financial products; and (iii) protect investors, municipal
entities, obligated persons, and the public interest.
---------------------------------------------------------------------------

    \45\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

A. Foster Cooperation and Coordination With Persons Engaged in
Regulating, Clearing, Settling, Processing Information With Respect to,
and Facilitating Transactions in Municipal Securities

    The Commission believes that the proposed amendments to Rule G-
12(b)(ii)(B) and (D) and Rule G-15(b)(ii)(B)-(C) would foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in municipal securities and municipal
financial products. In particular, the Commission notes that the
proposed rule change applies the standard for regular-way settlement
established by the SEC to transactions in municipal securities. As
such, the Commission finds that the proposed rule change would continue
to ensure that the settlement cycle remains synchronous across classes
of securities (including municipal securities). By avoiding different
settlement cycles for municipal securities, the proposed rule change
would avoid regulatory confusion, simplify compliance, and reduce risk
(e.g., operational error). These positive effects would be experienced
by municipal securities market participants involved in regulating,
clearing and settling, and processing information for municipal
securities transactions.
    In addition, the proposed amendment to correct an outdated cross-
reference in Rule G-12(b)(ii)(C) is consistent with Section
15B(b)(2)(C) of the Act,\46\ and correcting the cross-reference will
not alter a dealer's obligations under Rule G-34 or Rule G-12. The
Commission further believes that the proposed amendment promotes
coordination with persons engaged in facilitating transactions in
municipal securities by aiding dealers' understanding of the rule and
facilitating compliance.
---------------------------------------------------------------------------

    \46\ Id.
---------------------------------------------------------------------------

B. Remove Impediments to and Perfect the Mechanism of a Free and Open
Market

    The Commission also believes the proposed rule change would serve
to remove impediments to and perfect the mechanism of a free and open
market in municipal securities and municipal financial products. The
Commission notes that the proposed rule change yields long-term
benefits for a range of market participants including, but not limited
to, operational cost savings, reduced counterparty risk due to a
shorter settlement cycle, reduced market risk for unsettled trades,
decreasing clearing capital requirements, reduced pro-cyclical margin,
and therefore, reduced liquidity demands and risk. The Commission also
believes the proposed rule change would promote regulatory consistency
and market efficiency. In particular, the Commission notes that the
proposed rule change institutes regular-way settlement for municipal
transactions consistent with the standard settlement for other security
classes, harmonized with Amended Exchange Act Rule 15c6-1.\47\ As the
proposed rule change reduces liquidity demands and risk, as well as
promotes regulatory consistency and market efficiency, the Commission
finds that the proposed rule change removes impediments to and perfects
the mechanism of a free and open market in municipal securities and
municipal financial products.
---------------------------------------------------------------------------

    \47\ 17 CFR 240.15c6-1.
---------------------------------------------------------------------------

C. Protect Investors, Municipal Entities, Obligated Persons, and the
Public Interest

    The Commission believes that the proposed rule change would promote
investor protection and the public interest. The Commission notes that
the proposed rule change will reduce the timeframe for regular-way
settlement and avoiding misaligned settlement dates, which can serve to
reduce risks

that can be present between trade date and settlement date (including
the incidence of failed transactions). In addition, the Commission
believes that a shorter standard settlement cycle would reduce
liquidity risks that could arise by allowing investors to obtain the
proceeds of securities transactions sooner. Given the associated risk
reduction, the Commission finds that the proposed rule change would
promote investor protection and the public interest.
    In approving the proposed rule change, the Commission has
considered the proposed rule change's impact on efficiency,
competition, and capital formation. Section 15B(b)(2)(C) of the Act
\48\ requires that MSRB rules not be designed to impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. The Commission believes the proposed rule change to amend
Rule G-12(b)(ii)(B)-(D) and Rule G-15(b)(ii)(B)-(C) would not impose
any burden on competition and would not have an impact on competition,
as the proposed rule change would apply a uniform standard for regular-
way settlement for municipal securities to align with the standard
applicable to, among other securities, equity and corporate bond
transactions under Amended Exchange Act Rule 15c6-1.\49\ In addition,
the proposed rule change would apply equally to all dealers. The
proposed rule would also change to correct an outdated cross-reference
in Rule G-12(b)(ii)(C) to properly reference Rule G-34(a)(ii)(E)(2)
rather than Rule G-34(a)(ii)(D)(2), which would not impose any burden
on competition or have an impact on competition as the proposed change
is technical in nature, does not impose any new obligation and enhances
understanding of the rule. As all of these components of the proposed
rule change would be applied equally to all registered dealers
transacting in municipal securities, the Commission believes that the
proposed rule change would not impose any additional burdens on
competition that are not necessary or appropriate in furtherance of the
purposes of the Act.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78o-4(b)(2)(C).
    \49\ 17 CFR 240.15c6-1.
---------------------------------------------------------------------------

    The Commission also finds that the proposed rule change will not
hinder capital formation. As noted above, the proposed rule changes
ensures a uniform settlement cycle across all asset classes of
securities (including municipal securities), and would be applied
equally to all dealers. As such, the Commission believes that the
proposed rule change would promote clearer regulatory requirements for
the clearance and settlements of municipal securities transactions.
Furthermore, a shorter settlement cycle may reduce the volume of
unsettled transactions that could potentially pose settlement risk, and
also decrease liquidity risk by enabling market participants to access
the proceeds of their transactions sooner. Therefore, the Commission
also finds that the proposed rule change would promote efficiency of
the clearance and settlement process, would not negatively impact the
municipal securities market's operational efficiency.
    As noted above, the Commission received three comment letters on
the filing. The Commission believes that the MSRB, through its
response, addressed the commenters' concerns. For the reasons noted
above, the Commission believes that the proposed rule change is
consistent with the Exchange Act.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\50\ that the proposed rule change (SR-MSRB-2023-03) be,
and hereby is, approved.
---------------------------------------------------------------------------

    \50\ 15 U.S.C. 78s(b)(2).

    For the Commission, pursuant to delegated authority.\51\
---------------------------------------------------------------------------

    \51\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-11611 Filed 5-31-23; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 87 (Wednesday, May 6, 2015)]
[Notices]
[Pages 26041-26046]
[FR Doc No: 2015-10610]

-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2014-0036; FRL-9927-31-OAR]

California State Nonroad Engine Pollution Control Standards;
Small Off-Road Engines Regulations; Notice of Decision

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of decision.

-----------------------------------------------------------------------

SUMMARY: The Environmental Protection Agency (EPA) is confirming that
the California Air Resources Board's (CARB) 2008 amendments to its
Small Off-Road Engines (SORE) regulation (2008 Amendments) are within
the scope of previous EPA authorizations. The 2008 Amendments modify
provisions through which manufacturers may generate and use emission
credits to comply with SORE emission standards, and establish an
ethanol blend certification fuel option. CARB's SORE regulations apply
to all small off-road engines rated at or below 19 kilowatts (kW) (25
horsepower (hp)). This decision is issued under the authority of the
Clean Air Act (CAA or Act).

DATES: Petitions for review must be filed by July 6, 2015.

ADDRESSES: EPA has established a docket for this action under Docket ID
EPA-HQ-OAR-2014-0036. All documents relied upon in making this
decision, including those submitted to EPA by CARB, are contained in
the public docket. Publicly available docket materials are available
either electronically through www.regulations.gov or in hard copy at
the Air and Radiation Docket in the EPA Headquarters Library, EPA West
Building, Room 3334, located at 1301 Constitution Avenue NW.,
Washington, DC. The Public Reading Room is open to the public on all
federal government working days from 8:30 a.m. to 4:30 p.m.; generally,
it is open Monday through Friday, excluding holidays. The telephone
number for the Reading Room is<PHONE_NUMBER>. The Air and Radiation
Docket and Information Center's Web site is http://www.epa.gov/oar/docket.html. The electronic mail (email) address for the Air and
Radiation Docket is<EMAIL_ADDRESS>the telephone number is
(202) 566-1742, and the fax number is<PHONE_NUMBER>. An electronic
version of the public docket is available through the federal
government's electronic public docket and comment system. You may
access EPA dockets at http://www.regulations.gov. After opening the
www.regulations.gov Web site, enter EPA-HQ-OAR-2014-0036 in the ``Enter
Keyword or ID'' fill-in box to view documents in the record. Although a
part of the official docket, the public docket does not include
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute.
    EPA's Office of Transportation and Air Quality (OTAQ) maintains a
Web page that contains general information on its review of California
waiver and authorization requests. Included on that page are links to
prior waiver Federal Register notices, some of which are cited in
today's notice; the page can be accessed at http://www.epa.gov/otaq/cafr.htm.

FOR FURTHER INFORMATION CONTACT: Brenton Williams, Attorney-Advisor,
Compliance Division, Office of Transportation and Air Quality, U.S.
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105. Telephone:<PHONE_NUMBER>. Fax:<PHONE_NUMBER>. Email:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    CARB first adopted standards and test procedures applicable to SORE
in 1992. In 1993, CARB amended these regulations to delay their
implementation until 1995. EPA authorized these initial SORE
regulations in 1995.\1\ California subsequently amended its regulations
in 1994, 1995, and 1996 to clarify certification and implementation
procedures, exempt military tactical equipment, and relax emissions
standards for certain engines. EPA authorized these three amendment
packages in 2000.\2\
---------------------------------------------------------------------------

    \1\ 60 FR 37440 (July 20, 1995).
    \2\ 65 FR 69763 (November 20, 2000).
---------------------------------------------------------------------------

    In 1998, CARB amended the SORE regulation to apply to all engines
rated less than 19 kW used in off-road applications. The 1998
amendments also revised the regulations to be based on engine
displacement instead of whether the engine is used in a handheld or
non-handheld application, delayed implementation of certain portions of
the standards, and adopted new emission standards for new engines under
19 kW, consistent with the ``Compression-Ignition Engine Statement of
Principles'' jointly entered into by CARB, EPA, and engine
manufacturers in August 1996.\3\ EPA found these amendments to be
within the scope of the previously granted 1995 authorization.\4\
---------------------------------------------------------------------------

    \3\ 62 FR 200 (January 2, 1997).
    \4\ 65 FR. 69767 (November 20, 2000).
---------------------------------------------------------------------------

    In 2000, CARB amended the SORE regulations by recodifying the
requirements applicable to certain new compression ignition (CI)
engines. EPA found this amendment to be within the scope of the
previously granted SORE authorization.\5\ In 2004, CARB amended its
off-road CI regulations to match federal standards and exhaust
emissions standards, and adopted evaporative emissions standards for
spark-ignited (SI) small off-road engines rated at or below 19 kW. EPA
granted full authorizations for these amendments in 2006.\6\
---------------------------------------------------------------------------

    \5\ 75 FR 8056 (February 23, 2010).
    \6\ 71 FR 75536 (December 15, 2006).
---------------------------------------------------------------------------

A. California's Authorization Request

    On November 21, 2008, CARB approved three additional amendments

to its SORE regulations: \7\ (1) Modification of certification
emissions credits to limit their lifetime to five years, and to allow
electric equipment (zero-emissions equipment or ``ZEE'') to participate
in the emission credits program; (2) modification of production
emissions credits; and (3) establishment of an ethanol blend
certification test fuel option, each of which will be addressed in
turn.\8\ CARB seeks confirmation that the 2008 Amendments are within
the scope of EPA's previous authorizations of CARB's SORE
regulations.\9\
---------------------------------------------------------------------------

    \7\ The specific regulatory text enacted by the 2008 amendments
is set forth in California Code of Regulations (CCR), title 13,
sections 2401, 2403, 2405, 2406, 2408, 2408.1 and 2409.
    \8\ CARB Authorization Support Document, December 2, 2013, EPA-
HQ-OAR-2014-0036-0003.
    \9\ Id. at 1.
---------------------------------------------------------------------------

    According to CARB, the certification emissions credits program was
established in 1998 to provide manufacturers with additional
flexibility in certifying engines. The certification credits program
enabled manufacturers to generate credits when they certified engines
that were cleaner than the SORE emission standards, and use those
credits to offset emissions from ``dirtier'' engine families that could
otherwise not meet the standards. CARB expected that the program would
help manufacturers comply with the new emission standards, while also
encouraging early introduction of cleaner technologies.\10\ However,
while this program gave manufacturers flexibility, it did not result in
use of advanced technologies at the anticipated pace. Manufacturers
accumulated large credit balances, in part because the certification
emission credits did not expire. CARB states that manufacturers were
able to use banked emissions credits to certify ``dirty'' engines and
delay implementation of cleaner technology, instead of using catalysts
and other emission control technologies to reduce emissions on the more
challenging engine families. Thus, CARB found that the original design
of the emissions credit program slowed rather than promoted progress
toward cleaner engines.\11\ CARB's amendments to the certification
emissions credits within the 2008 Amendments cause the credits to
expire five years after their creation. The 2008 Amendments also modify
the certification emissions credit program to allow electric equipment
to participate for the first time. ZEE manufacturers will be allowed to
generate emissions credits for equipment that meets certain performance
and design requirements. CARB anticipates this change will encourage
manufacturers to develop professional-grade ZEE and allow manufacturers
greater flexibility in their introduction of such equipment.\12\
---------------------------------------------------------------------------

    \10\ Id. at 4.
    \11\ Id. at 6.
    \12\ Id. at 10.
---------------------------------------------------------------------------

    CARB states that the production emissions credits, which
manufacturers could convert to certification emissions credits, also
contributed to an overabundance of the latter form of credits.\13\
Under CARB's earlier SORE regulation, manufacturers could generate
production emission credits when a production engine's emissions were
below the applicable engine family emissions limit. CARB established
the production credits program to help manufacturers offset compliance
problems, but as of 2008, no manufacturer needed to use production
credits for that purpose, using them instead to generate large
certification emissions credit balances. The 2008 Amendments eliminated
generation of production emission credits beginning in 2009, but
allowed manufacturers to convert production emission credits to
certification emission credits for an additional year.\14\
---------------------------------------------------------------------------

    \13\ Id. at 11-12.
    \14\ Id. at 12.
---------------------------------------------------------------------------

    Finally, CARB's amended SORE regulations permit manufacturers the
option to use a certification fuel with up to ten percent ethanol
content (commonly known as E10) if the same fuel is used for
certification with EPA. CARB asserts that this will enhance
harmonization with EPA's nonroad \15\ certification procedures, and
could reduce testing costs for some manufacturers.\16\
---------------------------------------------------------------------------

    \15\ The federal term ``nonroad'' and the California term ``off-
road'' are used interchangeably.
    \16\ Id. at 13.
---------------------------------------------------------------------------

B. Clean Air Act Nonroad Engine and Vehicle Authorizations

    Section 209(e)(1) of the Act permanently preempts any state, or
political subdivision thereof, from adopting or attempting to enforce
any standard or other requirement relating to the control of emissions
for certain new nonroad engines or vehicles.\17\ For all other nonroad
engines (including ``non-new'' engines), states generally are preempted
from adopting and enforcing standards and other requirements relating
to the control of emissions, except that section 209(e)(2)(A) of the
Act requires EPA, after notice and opportunity for public hearing, to
authorize California to adopt and enforce such regulations unless EPA
makes one of three enumerated findings. Specifically, EPA must deny
authorization if the Administrator finds that (1) California's
protectiveness determination (i.e., that California standards will be,
in the aggregate, as protective of public health and welfare as
applicable federal standards) is arbitrary and capricious, (2)
California does not need such standards to meet compelling and
extraordinary conditions, or (3) the California standards and
accompanying enforcement procedures are not consistent with section 209
of the Act.
---------------------------------------------------------------------------

    \17\ States are expressly preempted from adopting or attempting
to enforce any standard or other requirement relating to the control
of emissions from new nonroad engines which are used in construction
equipment or vehicles or used in farm equipment or vehicles and
which are smaller than 175 horsepower. Such express preemption under
section 209(e)(1) of the Act also applies to new locomotives or new
engines used in locomotives.
---------------------------------------------------------------------------

    On July 20, 1994, EPA promulgated a rule interpreting the three
criteria set forth in section 209(e)(2)(A) that EPA must consider
before granting any California authorization request for nonroad engine
or vehicle emission standards.\18\ EPA revised these regulations in
1997.\19\ As stated in the preamble to the 1994 rule, EPA historically
has interpreted the consistency inquiry under the third criterion,
outlined above and set forth in section 209(e)(2)(A)(iii), to require,
at minimum, that California standards and enforcement procedures be
consistent with section 209(a), section 209(e)(1), and section
209(b)(1)(C) of the Act.\20\
---------------------------------------------------------------------------

    \18\ See ``Air Pollution Control; Preemption of State Regulation
for Nonroad Engine and Vehicle Standards,'' 59 FR 36969 (July 20,
1994).
    \19\ See ``Control of Air Pollution: Emission Standards for New
Nonroad Compression-Ignition Engines at or Above 37 Kilowatts;
Preemption of State Regulation for Nonroad Engine and Vehicle
Standards; Amendments to Rules,'' 62 FR 67733 (December 30, 1997).
The applicable regulations are now found in 40 CFR part 1074,
subpart B, Sec.  1074.105.
    \20\ See supra note 12. EPA has interpreted 209(b)(1)(C) in the
context of section 209(b) motor vehicle waivers.
---------------------------------------------------------------------------

    In order to be consistent with section 209(a), California's nonroad
standards and enforcement procedures must not apply to new motor
vehicles or new motor vehicle engines. To be consistent with section
209(e)(1), California's nonroad standards and enforcement procedures
must not attempt to regulate engine categories that are permanently
preempted from state regulation. To determine consistency with section
209(b)(1)(C), EPA typically reviews nonroad authorization requests
under the same ``consistency'' criteria that are applied to motor
vehicle waiver requests under section 209(b)(1)(C). That provision
provides that the Administrator shall not grant California

a motor vehicle waiver if she finds that California ``standards and
accompanying enforcement procedures are not consistent with section
202(a)'' of the Act. Previous decisions granting waivers and
authorizations have noted that state standards and enforcement
procedures will be found to be inconsistent with section 202(a) if (1)
there is inadequate lead time to permit the development of the
necessary technology, giving appropriate consideration to the cost of
compliance within that time, or (2) the federal and state testing
procedures impose inconsistent certification requirements.
    In light of the similar language of sections 209(b) and
209(e)(2)(A), EPA has reviewed California's requests for authorization
of nonroad vehicle or engine standards under section 209(e)(2)(A) using
the same principles that it has historically applied in reviewing
requests for waivers of preemption for new motor vehicle or new motor
vehicle engine standards under section 209(b).\21\ These principles
include, among other things, that EPA should limit its inquiry to the
three specific authorization criteria identified in section
209(e)(2)(A),\22\ and that EPA should give substantial deference to the
policy judgments California has made in adopting its regulations. In
previous waiver decisions, EPA has stated that Congress intended EPA's
review of California's decision-making be narrow. EPA has rejected
arguments that are not specified in the statute as grounds for denying
a waiver:
---------------------------------------------------------------------------

    \21\ See Engine Manufacturers Association v. EPA, 88 F.3d 1075,
1087 (D.C. Cir. 1996): ``. . . EPA was within the bounds of
permissible construction in analogizing Sec.  209(e) on nonroad
sources to Sec.  209(a) on motor vehicles.''
    \22\ See supra note 12, at 36983.

    The law makes it clear that the waiver requests cannot be denied
unless the specific findings designated in the statute can properly
be made. The issue of whether a proposed California requirement is
likely to result in only marginal improvement in California air
quality not commensurate with its costs or is otherwise an arguably
unwise exercise of regulatory power is not legally pertinent to my
decision under section 209, so long as the California requirement is
consistent with section 202(a) and is more stringent than applicable
Federal requirements in the sense that it may result in some further
reduction in air pollution in California.\23\
---------------------------------------------------------------------------

    \23\ ``Waiver of Application of Clean Air Act to California
State Standards,'' 36 FR 17458 (Aug. 31, 1971). Note that the more
stringent standard expressed here, in 1971, was superseded by the
1977 amendments to section 209, which established that California
must determine that its standards are, in the aggregate, at least as
protective of public health and welfare as applicable Federal
standards. In the 1990 amendments to section 209, Congress
established section 209(e) and similar language in section
209(e)(1)(i) pertaining to California's nonroad emission standards
which California must determine to be, in the aggregate, at least as
protective of public health and welfare as applicable federal
standards.

This principle of narrow EPA review has been upheld by the U.S. Court
of Appeals for the District of Columbia Circuit.\24\ Thus, EPA's
consideration of all the evidence submitted concerning an authorization
decision is circumscribed by its relevance to those questions that may
be considered under section 209(e)(2)(A).
---------------------------------------------------------------------------

    \24\ See, e.g., Motor and Equip. Mfrs Assoc. v. EPA, 627 F.2d
1095 (D.C. Cir. 1979) (``MEMA I'').
---------------------------------------------------------------------------

C. Within-the-Scope Determinations

    If California amends regulations that were previously authorized by
EPA, California may ask EPA to determine that the amendments are within
the scope of the earlier authorization. A within-the-scope
determination for such amendments is permissible without a full
authorization review if three conditions are met. First, the amended
regulations must not undermine California's previous determination that
its standards, in the aggregate, are as protective of public health and
welfare as applicable federal standards. Second, the amended
regulations must not affect consistency with section 209 of the Act,
following the same criteria discussed above in the context of full
authorizations. Third, the amended regulations must not raise any ``new
issues'' affecting EPA's prior authorizations.\25\
---------------------------------------------------------------------------

    \25\ See ``California State Motor Vehicle Pollution Control
Standards; Amendments Within the Scope of Previous Waiver of Federal
Preemption,'' 46 FR 36742 (July 15, 1981).
---------------------------------------------------------------------------

D. Deference to California

    In previous waiver decisions, EPA has recognized that the intent of
Congress in creating a limited review based on the section 209(b)(1)
criteria was to ensure that the federal government did not second-guess
state policy choices. This has led EPA to state:

    It is worth noting * * * I would feel constrained to approve a
California approach to the problem which I might also feel unable to
adopt at the federal level in my own capacity as a regulator. The
whole approach of the Clean Air Act is to force the development of
new types of emission control technology where that is needed by
compelling the industry to ``catch up'' to some degree with newly
promulgated standards. Such an approach * * * may be attended with
costs, in the shaped of reduced product offering, or price or fuel
economy penalties, and by risks that a wider number of vehicle
classes may not be able to complete their development work in time.
Since a balancing of these risks and costs against the potential
benefits from reduced emissions is a central policy decision for any
regulatory agency under the statutory scheme outlined above, I
believe I am required to give very substantial deference to
California's judgments on this score.\26\
---------------------------------------------------------------------------

    \26\ 40 FR 23103-23104 (May 28, 1975); see also LEV I Decision
Document at 64 (58 FR 4166 (January 13, 1993)).

    EPA has stated that the text, structure, and history of the
California waiver provision clearly indicate both a congressional
intent and appropriate EPA practice of leaving the decision on
``ambiguous and controversial matters of public policy'' to
California's judgment.\27\
---------------------------------------------------------------------------

    \27\ 40 FR 23104; 58 FR 4166.
---------------------------------------------------------------------------

    The House Committee Report explained as part of the 1977 amendments
to the Clean Air Act, where Congress had the opportunity to restrict
the waiver provision, it elected instead to explain California's
flexibility to adopt a complete program of motor vehicle emission
controls. The amendment is intended to ratify and strengthen the
California waiver provision and to affirm the underlying intent of that
provision, i.e., to afford California the broadest possible discretion
in selecting the best means to protect the health of its citizens and
the public welfare.\28\
---------------------------------------------------------------------------

    \28\ MEMA I, 627 F.2d at 1110 (citing H.R. Rep. No. 294, 95
Cong., 1st Sess. 301-02 (1977).
---------------------------------------------------------------------------

E. Burden and Standard of Proof

    As the U.S. Court of Appeals for the D.C. Circuit has made clear in
MEMA I, opponents of a waiver request by California bear the burden of
showing that the statutory criteria for a denial of the request have
been met:

    [T]he language of the statute and its legislative history
indicate that California's regulations, and California's
determinations that they must comply with the statute, when
presented to the Administrator are presumed to satisfy the waiver
requirements and that the burden of proving otherwise is on whoever
attacks them. California must present its regulations and findings
at the hearing and thereafter the parties opposing the waiver
request bear the burden of persuading the Administrator that the
waiver request should be denied.\29\
---------------------------------------------------------------------------

    \29\ MEMA I, supra note 19, at 1121.

The Administrator's burden, on the other hand, is to make a reasonable
evaluation of the information in the record in coming to the waiver
decision. As the court in MEMA I stated: ``here, too, if the
Administrator ignores evidence demonstrating that the waiver should not
be granted, or if he seeks to overcome that evidence with unsupported
assumptions of his own, he runs the risk of having his waiver decision
set aside as `arbitrary and

capricious.' '' \30\ Therefore, the Administrator's burden is to act
``reasonably.'' \31\
---------------------------------------------------------------------------

    \30\ Id. at 1126.

    \31\ Id. at 1126.
---------------------------------------------------------------------------

    With regard to the standard of proof, the court in MEMA I explained
that the Administrator's role in a section 209 proceeding is to:

[. . .]consider all evidence that passes the threshold test of
materiality and * * * thereafter assess such material evidence
against a standard of proof to determine whether the parties
favoring a denial of the waiver have shown that the factual
circumstances exist in which Congress intended a denial of the
waiver.\32\
---------------------------------------------------------------------------

    \32\ Id. at 1122.

In that decision, the court considered the standards of proof under
section 209 for the two findings related to granting a waiver for an
``accompanying enforcement procedure.'' Those findings involve: (1)
Whether the enforcement procedures impact California's prior
protectiveness determination for the associated standards, and (2)
whether the procedures are consistent with section 202(a). The
principles set forth by the court, however, are similarly applicable to
an EPA review of a request for a waiver of preemption for a standard.
The court instructed that ``the standard of proof must take account of
the nature of the risk of error involved in any given decision, and it
therefore varies with the finding involved. We need not decide how this
---------------------------------------------------------------------------
standard operates in every waiver decision.'' \33\

    \33\ Id.
---------------------------------------------------------------------------

    With regard to the protectiveness finding, the court upheld the
Administrator's position that, to deny a waiver, there must be ``clear
and compelling evidence'' to show that proposed enforcement procedures
undermine the protectiveness of California's standards.\34\ The court
noted that this standard of proof also accords with the congressional
intent to provide California with the broadest possible discretion in
setting regulations it finds protective of the public health and
welfare.\35\
---------------------------------------------------------------------------

    \34\ Id.
    \35\ Id.
---------------------------------------------------------------------------

    With respect to the consistency finding, the court did not
articulate a standard of proof applicable to all proceedings, but found
that the opponents of the waiver were unable to meet their burden of
proof even if the standard were a mere preponderance of the evidence.
Although MEMA I did not explicitly consider the standards of proof
under section 209 concerning a waiver request for ``standards,'' as
compared to a waiver request for accompanying enforcement procedures,
there is nothing in the opinion to suggest that the court's analysis
would not apply with equal force to such determinations. EPA's past
waiver decisions have consistently made clear that: ``[E]ven in the two
areas concededly reserved for Federal judgment by this legislation--the
existence of `compelling and extraordinary' conditions and whether the
standards are technologically feasible--Congress intended that the
standards of EPA review of the State decision to be a narrow one.''
\36\
---------------------------------------------------------------------------

    \36\ See, e.g., ``California State Motor Vehicle Pollution
Control Standards; Waiver of Federal Preemption,'' 40 FR 23102 (May
28, 1975), at 23103.
---------------------------------------------------------------------------

F. EPA's Administrative Process in Consideration of California's SORE
Amendment Requests for Authorization

    On May 28, 2014, EPA published a Federal Register notice announcing
its receipt of California's authorization request. In that notice, EPA
invited public comment on each of the 2008 amendments and an
opportunity to request a public hearing.\37\
---------------------------------------------------------------------------

    \37\ See ``California State Nonroad Engine Pollution Control
Standards; Small Off-Road Engines; Request for Within-the-Scope and
Full Authorization; Opportunity for Public Hearing and Comment,'' 79
FR 30610 (May 28, 2014).
---------------------------------------------------------------------------

    First, EPA requested comment on the 2008 amendments, as follows:
(1) Should California's 2008 SORE amendments be considered under the
within-the-scope analysis, or should they be considered under the full
authorization criteria?; (2) If those amendments should be considered
as a within-the-scope request, do they meet the criteria for EPA to
grant a within-the-scope confirmation?; and (3) If the amendments
should not be considered under the within-the-scope analysis, or in the
event that EPA determines they are not within the scope of the previous
authorization, do they meet the criteria for making a full
authorization determination?
    EPA received one anonymous written comment that opposed ``any new
Regulation or Rule promulgated by EPA on California State Non Road
Engine Pollution Control Standards: Small off-Road Engines
Regulations.'' \38\ EPA is not promulgating any regulations or rules
regarding California's SORE regulations, but rather is adjudicating
whether or not the amendments that CARB made to its own SORE
regulations are within the scope of previous authorizations granted by
EPA or fulfill the criteria for a full authorization under the Clean
Air Act. EPA received no requests for a public hearing. Consequently,
EPA did not hold a public hearing.
---------------------------------------------------------------------------

    \38\ See EPA-HQ-OAR-2014-0036-0016.
---------------------------------------------------------------------------

II. Discussion

A. California's 2008 SORE Amendments

    The 2008 amendment package contains three amendments: (1) The
modification of certification emission credits and creation of ZEE
certification emissions credits; (2) the modification of production
emission credits; and (3) the addition of an ethanol blend
certification fuel option.
1. Modification of Certification Emission Credits and Creation of ZEE
Certification Emissions Credits
    California's request for authorization of the amendments limiting
the lifetime of certification emissions credits to five years and
permitting emissions credit generation for ZEE are interrelated, and
therefore will be treated together in this discussion. As explained by
CARB in its 2013 authorization request, certification emissions credits
under the pre-2008 regime ``continued in existence even after the
engines that had generated the emission credits had been taken out of
service.'' Thus, ``[i]nstead of using catalysts and other advanced
technologies on the more challenging engine families, a small number of
manufacturers have often been able to use banked credits to . . . delay
implementation of cleaner technology.'' \39\ CARB found that the
certification emissions credit program achieved only mixed results in
promoting the development of lower-emissions engines. Certification
emissions credits were generated at an unexpectedly high rate, and,
because the credits did not expire, they could be banked for an
indefinite period of time. In sum, CARB determined that the program
failed to meet its goal of providing incentives to create advanced,
low-emissions engine technology.\40\
---------------------------------------------------------------------------

    \39\ 2013 Request, supra note 1, at 8-9.
    \40\ Id. at 7-8.
---------------------------------------------------------------------------

    Similarly, CARB found that its SORE regulation, prior to the
amendments, did not appropriately incentivize the creation of
professional grade ZEE.\41\ As a result, CARB's 2008 Amendments
introduced emissions credit generation for ZEE technology. These
credits must also be used within five years of generation, and cannot
be used to certify engines that exceed the relevant emissions standard
by more than 40 percent.\42\ California requested that these amendments
be treated as within

the scope of EPA's prior authorizations of the SORE program.
---------------------------------------------------------------------------

    \41\ Id. at 9-10.
    \42\ Id. at 10.
---------------------------------------------------------------------------

    California asserted that the amendments met all three within-the-
scope criteria, i.e. that the amendments: (1) Do not undermine the
original protectiveness determination underlying California's SORE
regulations; (2) do not affect the consistency of the SORE regulations
with section 202(a); and (3) do not raise any new issues affecting the
prior authorizations.\43\ We received no adverse comments or evidence
suggesting a within-the-scope analysis is inappropriate, or that the
2008 Amendments fail to meet any of the three criteria for within-the-
scope confirmation.
---------------------------------------------------------------------------

    \43\ Id. at 16.
---------------------------------------------------------------------------

    In regard to the first within-the-scope criterion, California
asserts that the amendment establishing a five-year restriction on
certification emissions credits did not undermine the original
protectiveness determination underlying California's SORE regulations
because it does not modify the emissions standards applicable to
engines, but rather only the credit program which is ancillary to these
standards.\44\ Limiting the lifespan of certification emissions credits
reduces the ability of manufacturers to use banked credits from one
engine family to certify another, dirtier engine family. EPA finds that
because California's pre-2008 certification emissions credit program
was at least as protective as the applicable federal standards, so too
is the less generous certification emissions credit policy, as
established by the 2008 Amendments.
---------------------------------------------------------------------------

    \44\ Id.
---------------------------------------------------------------------------

    EPA also finds that permitting the creation of emissions credits
through ZEE technology, particularly given the five year credit
expiration and limitation on the purposes for which the credits can be
used, will promote advanced technology. We cannot therefore find that
limiting the lifespan of certification emissions credits and extending
emissions credits to ZEE products undermines the protectiveness
determination that EPA found in its previous SORE authorizations not to
be arbitrary and capricious.
    In regard to the second within-the-scope criterion, this amendment
did not attempt to regulate new motor vehicles or motor vehicles
engines and so is consistent with section 209(a). It likewise did not
attempt to regulate any of the permanently preempted engines or
vehicles, and so is consistent with section 209(e)(1). Finally, it did
not cause any technological feasibility issues for manufacturers or
cause inconsistency between state and federal test procedures, per
section 209(b)(1)(C). Most manufacturers have been able to meet the
requirements of CARB's SORE amendments using widely available
technologies, and no evidence has been offered that any manufacturer
would experience significant compliance issues because the credits will
be limited to five years.\45\ The amendment allowing manufacturers to
generate emissions credits through ZEE technology will provide
additional compliance options, thus posing no barrier to compliance.
---------------------------------------------------------------------------

    \45\ Id. at 19.
---------------------------------------------------------------------------

    In regard to the third within-the-scope criterion, California
stated that no new issues exist, and EPA has received no evidence to
the contrary.\46\ Limiting the lifespan of certification emissions
credits and permitting the creation of credits through ZEE technology
does not modify emissions requirements, but instead makes changes to
the alternate means used for compliance. We therefore do not find any
new issues raised by the amendments limiting the lifespan of
certification emissions credits and permitting the creation of
emissions credits through ZEE technology.
---------------------------------------------------------------------------

    \46\ Id. at 20.
---------------------------------------------------------------------------

    Having received no contrary evidence regarding these amendments, we
find that California has met the three criteria for a within-the-scope
authorization approval, and the modification of certification emission
credits and creation of ZEE certification emissions credits amendments
are confirmed as within the scope of previous EPA authorizations of
California's SORE regulations.
2. Modification of Production Emissions Credits
    Another California 2008 SORE amendment eliminated production
emissions credits. These credits were generated when a manufacturer
produced an engine whose production line test result was below the
applicable engine family emission limit. Through these credits, CARB
intended to permit manufacturers to ``certify engine families as well
as to offset production line testing exceedances of another engine
family.'' \47\ CARB states that production emissions credits were
implemented in anticipation of EPA's adoption of a similar program.\48\
EPA ultimately decided not to implement production emissions credits.
Thus elimination of this program through the 2008 Amendments will more
closely harmonize California's regulations with federal standards.
---------------------------------------------------------------------------

    \47\ Id. at 11.
    \48\ Id.; see also 64 FR 15208 (March 30, 1999) and 73 FR 59034
(October 8, 2008).
---------------------------------------------------------------------------

    The production emissions credit program permitted manufacturers to
convert production emissions credits into certification emissions
credits. CARB found that some manufacturers accumulated a large amount
of production emissions credits and converted them into certification
emissions credits.\49\ This unexpectedly resulted in the continued
production of engines that did not comply with otherwise applicable
emissions standards.\50\ CARB's 2008 Amendments eliminated the
production emissions credits program, but permitted manufacturers one
year to use their production credits or convert them to certification
emissions credits.\51\ EPA received no adverse comments or evidence
contradicting California's request to consider this amendment as within
the scope of previous authorizations.
---------------------------------------------------------------------------

    \49\ 2013 Request, supra note 1, at 12.
    \50\ Id. at 12.
    \51\ Id.
---------------------------------------------------------------------------

    In regard to the first within-the-scope criterion, California found
that the elimination of production emissions credits did not undermine
the original protectiveness determination regarding its SORE
regulations because it increases harmony with the federal system.\52\
Based on the evidence before the Agency and in the absence of any
evidence to the contrary, we cannot find that California's
protectiveness determination regarding the elimination of production
emissions credits is arbitrary or capricious.
---------------------------------------------------------------------------

    \52\ Id. at 11.
---------------------------------------------------------------------------

    In regard to the second within-the-scope criterion, this amendment
did not attempt to regulate new motor vehicles or motor vehicles
engines, and thus is consistent with section 209(a). It similarly did
not attempt to regulate any of the permanently preempted engines or
vehicles, and so is consistent with section 209(e)(1). It did not cause
any technological feasibility issues for manufacturers or cause
inconsistency between state and federal test procedures, per section
209(b)(1)(C). CARB stated that no manufacturer has relied upon
production emissions credits to comply with applicable emissions
standards since 2008.\53\ As no contrary evidence has been offered, we
do not find the amendment is inconsistent with section 209 of the Act.
---------------------------------------------------------------------------

    \53\ Id. at 12.
---------------------------------------------------------------------------

    In regard to the third within-the-scope criterion, CARB stated that
it was not

aware of any new issues presented by the elimination of production
emissions credits, and we have received no evidence to the contrary. We
therefore do not find any new issues raised by the elimination of
production emissions credits.
    Having received no contrary evidence regarding this amendment, we
find that California has met the three criteria for a within-the-scope
authorization approval, and the modification of production emissions
credits amendment is confirmed as within the scope of previous
authorizations of California's SORE regulations.
3. Ethanol Blend Certification Fuel Option
    Finally, one of the 2008 Amendments granted manufacturers the
option to ``use a certification fuel with up to ten percent ethanol
content when that same fuel is used for certification with the EPA.''
\54\ EPA received no adverse comments or evidence contradicting
California's request to consider this amendment as within the scope of
previous authorizations.
---------------------------------------------------------------------------

    \54\ Id. at 13.
---------------------------------------------------------------------------

    In regard to the first within-the-scope criterion, CARB stated that
this amendment would increase ``harmonization of California's SORE
certification procedures with EPA's nonroad engine certification
procedures, and could reduce the testing cost for some manufacturers.''
\55\ Based on the record before us and in the absence of any evidence
to the contrary, we cannot find that California's protectiveness
determination regarding the implementation of an ethanol blend
certification fuel option is arbitrary or capricious.
---------------------------------------------------------------------------

    \55\ Id.
---------------------------------------------------------------------------

    In regard to the second within-the-scope criterion, California
found that the amendment does not affect consistency with section 209
of the Act.\56\ This amendment does not regulate emissions from new
motor vehicles or new motor vehicle engines, and thus is not
inconsistent with 209(a). Similarly, it did not attempt to regulate any
of the permanently preempted engines or vehicles, and so is consistent
with section 209(e)(1). This amendment expands rather than limits the
means by which manufacturers can certify fuels, and thus poses no lead-
time or technological feasibility problems. We therefore find no
evidence that this amendment is inconsistent with section 209 of the
Act.
---------------------------------------------------------------------------

    \56\ Id. at 17-18.
---------------------------------------------------------------------------

    In regard to the third within-the-scope criterion, California
stated that the ethanol blend certification fuel option raised no new
issues.\57\ EPA similarly finds no new issues arising from the
amendment.
---------------------------------------------------------------------------

    \57\ Id. at 20.
---------------------------------------------------------------------------

    Having received no contrary evidence regarding this amendment, we
find that California has met the three criteria for a within-the-scope
authorization approval, and the ethanol blend certification fuel option
amendment is confirmed as within the scope of previous authorizations
of California's SORE regulations.

III. Decision

    The Administrator has delegated the authority to grant California
section 209(e) authorizations to the Assistant Administrator for Air
and Radiation. After evaluating the 2008 Amendments to CARB's SORE
regulations described above and CARB's submissions for EPA review, EPA
is taking the following actions.
    First, EPA confirms that California's amendment modifying
certification emissions credits and permitting emissions credit
generation for ZEE is within the scope of prior authorizations. Second,
EPA confirms that California's amendment eliminating production credit
generation is within the scope of prior authorizations. Third, EPA
confirms that California's amendment permitting certification with
fuels with up to ten percent ethanol content provided that the same
fuel is used for certification with EPA is within the scope of prior
authorizations.
    This decision will affect persons in California and those
manufacturers and/or owners/operators nationwide who must comply with
California's requirements. In addition, because other states may adopt
California's standards for which a section 209(e)(2)(A) authorization
has been granted if certain criteria are met, this decision would also
affect those states and those persons in such states. See CAA section
209(e)(2)(B). For these reasons, EPA determines and finds that this is
a final action of national applicability, and also a final action of
nationwide scope or effect for purposes of section 307(b)(1) of the
Act. Pursuant to section 307(b)(1) of the Act, judicial review of this
final action may be sought only in the United States Court of Appeals
for the District of Columbia Circuit. Petitions for review must be
filed by July 6, 2015. Judicial review of this final action may not be
obtained in subsequent enforcement proceedings, pursuant to section
307(b)(2) of the Act.

IV. Statutory and Executive Order Reviews

    As with past authorization and waiver decisions, this action is not
a rule as defined by Executive Order 12866. Therefore, it is exempt
from review by the Office of Management and Budget as required for
rules and regulations by Executive Order 12866.
    In addition, this action is not a rule as defined in the Regulatory
Flexibility Act, 5 U.S.C. 601(2). Therefore, EPA has not prepared a
supporting regulatory flexibility analysis addressing the impact of
this action on small business entities.
    Further, the Congressional Review Act, 5 U.S.C. 801, et seq., as
added by the Small Business Regulatory Enforcement Fairness Act of
1996, does not apply because this action is not a rule for purposes of
5 U.S.C. 804(3).

    Dated: April 29, 2015.
Janet G. McCabe,
Acting Assistant Administrator, Office of Air and Radiation.
[FR Doc. 2015-10610 Filed 5-5-15; 8:45 am]
 BILLING CODE P


[Federal Register: June 7, 2006 (Volume 71, Number 109)]
[Proposed Rules]
[Page 32895-32899]
[DOCID:fr07jn06-35]

-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 180

[EPA-HQ-OPP-2006-0493; FRL-8072-4]

Inert Ingredient; Revocation of a Tolerance Exemption with
Insufficient Data for Reassessment

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This document proposes under section 408(e)(1) of the Federal
Food, Drug, and Cosmetic Act (FFDCA) to revoke the existing exemption
from the requirement of a tolerance for residues of one inert
ingredient because there are insufficient data to make the
determination of safety required by FFDCA section 408(b)(2). The inert
ingredient tolerance exemption under 40 CFR 180.920 is ``[alpha]-Alkyl
(C10-C16)-[omega]-hydroxypoly(oxyethylene)
mixture of dihydrogen phosphate and monohydrogen phosphate esters and
the corresponding ammonium, calcium, magnesium, monoethanolamine,
potassium, sodium, and zinc salts of the phosphate esters; the
poly(oxyethylene) content averages 3-20 moles.'' The revocation action
in this document contributes towards the Agency's tolerance
reassessment requirements under FFDCA section 408(q), as amended by the
Food Quality Protection Act (FQPA) of 1996. By law, EPA is required by
August 2006 to reassess the tolerances that were in existence on August
2, 1996. The regulatory action in this document pertains to the
revocation of one tolerance exemption which is counted as tolerance
reassessment toward the August 2006 review deadline.

DATES: Comments must be received on or before July 7, 2006.

ADDRESSES: Submit your comments, identified by docket identification
(ID) number EPA-HQ-OPP-2006-0493, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.

Follow the on-line instructions for submitting comments.
     Mail: Office of Pesticide Programs (OPP) Regulatory Public
Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania
Ave., NW., Washington, DC 20460-0001.
     Delivery: OPP Regulatory Public Docket (7502P),
Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South
Building), 2777 S. Crystal Drive, Arlington, VA. Deliveries are only
accepted during the Docket's normal hours of operation (8:30 a.m. to 4
p.m., Monday through Friday, excluding legal holidays). Special
arrangements should be made for deliveries of boxed information. The
Docket telephone number is<PHONE_NUMBER>.
    Instructions: Direct your comments to docket ID number EPA-HQ-OPP-
2006-0493. EPA's policy is that all comments received will be included
in the docket without change and may be made available on-line at
http://www.regulations.gov, including any personal information

provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through regulations.gov or e-
mail. The Federal regulations.gov website is an ``anonymous access''
system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment. If you
send an e-mail comment directly to EPA without going through
regulations.gov, your e-mail address will be automatically captured and
included as part of the comment that is placed in the docket and made
available on the Internet. If

you submit an electronic comment, EPA recommends that you include your
name and other contact information in the body of your comment and with
any disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses.
    Docket: All documents in the docket are listed in the docket index.
Although listed in the index, some information is not publicly
available, e.g., CBI or other information whose disclosure is
restricted by statute. Certain other material, such as copyrighted
material, is not placed on the Internet and will be publicly available
only in hard copy form. Publicly available docket materials are
available either in the electronic docket at http://www.regulations.gov
, or, if only available in hard copy, at the OPP

Regulatory Public Docket in Rm. S-4400, One Potomac Yard (South
Building), 2777 S. Crystal Drive, Arlington, VA. The hours of operation
of this Docket Facility are from 8:30 a.m. to 4 p.m., Monday through
Friday, excluding legal holidays. The Docket telephone number is (703)
305-5805.

FOR FURTHER INFORMATION CONTACT: Kerry Leifer, Registration Division
(7505P), Office of Pesticide Programs, Environmental Protection Agency,
1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone
number:<PHONE_NUMBER>; e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this Action Apply to Me?

    You may be potentially affected by this action if you are an
agricultural producer, food manufacturer, or pesticide manufacturer.
Potentially affected entities may include, but are not limited to:
     Crop production (NAICS code 111).
     Animal production (NAICS code 112).
     Food manufacturing (NAICS code 311).
     Pesticide manufacturing (NAICS code 32532).
    This listing is not intended to be exhaustive, but rather provides
a guide for readers regarding entities likely to be affected by this
action. Other types of entities not listed in this unit could also be
affected. The North American Industrial Classification System (NAICS)
codes have been provided to assist you and others in determining
whether this action might apply to certain entities. To determine
whether you or your business may be affected by this action, you should
carefully examine the applicability provisions in Unit II. If you have
any questions regarding the applicability of this action to a
particular entity, consult the person listed under FOR FURTHER
INFORMATION CONTACT.

II. Background and Statutory Findings

A. What Action is the Agency Taking?

    On May 3, 2006, EPA published a proposed rule in the Federal
Register (71 FR 25993; FRL-8060-9) to revoke exemptions from the
requirement of a tolerance for certain inert ingredients used in
pesticide products. Unfortunately, one inert ingredient tolerance
exemption was inadvertently omitted from this Federal Register proposed
rule: ``[alpha]-Alkyl (C10-C16)-[omega]-
hydroxypoly(oxyethylene) mixture of dihydrogen phosphate and
monohydrogen phosphate esters and the corresponding ammonium, calcium,
magnesium, monoethanolamine, potassium, sodium, and zinc salts of the
phosphate esters; the poly(oxyethylene) content averages 3-20 moles.''
Therefore, in this proposed rule, EPA is proposing to revoke this one
inert ingredient tolerance exemption because sufficient data are not
available to the Agency to make the safety determination required by
FFDCA section 408(c)(2).
     As described in the Federal Register of May 3, 2006, described in
this unit, EPA is now in the process of reassessing all inert
ingredient exemptions from the requirement of a tolerance (``tolerance
exemptions'') established prior to August 2, 1996, as required by FFDCA
section 408(q). Under FFDCA section 408(q), tolerance reassessment may
lead to regulatory action under FFDCA section 408(e)(1). When taking
action under FFDCA section 408(e)(1), EPA may leave a tolerance
exemption in effect only if the Agency determines that the tolerance
exemption is safe. As is the case for the inert ingredient tolerance
exemptions identified in the May 3 Federal Register, EPA has
insufficient data available to make the safety determination required
by FFDCA section 408(c)(2) for this one inert ingredient and is
proposing to revoke the tolerance exemption.
    In making the FFDCA reassessment safety determination, EPA
considers the validity, completeness, and reliability of the data that
are available to the Agency, FFDCA section 408 (b)(2)(D), and the
available information concerning the special susceptibility of infants
and children (including developmental effects from in utero exposure),
FFDCA section 408 (b)(2)(C). Data gaps exist for this inert ingredient
in areas critical to reassessment. Without these data, the assessment
of possible effects to infants and children cannot be made. Thus, EPA
has insufficient data to make the safety finding of FFDCA section
408(c)(2) and is revoking the inert ingredient tolerance exemption
identified in this document.
    In developing risk assessment documents for inert ingredient
tolerance exemptions, EPA currently reviews data submitted to the
Agency as well as information from reputable, publicly available
sources. For example, studies may be available in professional (peer-
reviewed) journals, and chemical assessments may be available on the
Internet from U.S. Government agencies (e.g., EPA, the Agency for Toxic
Substances and Disease Registry, National Institutes of Health, Food
and Drug Administration (FDA)) and international organizations (e.g.,
World Health Organization, Organization for Economic Cooperation and
Development (OECD)). In some cases, representatives from chemical and
pesticide manufacturing industry associations endeavored to locate data
to support reassessment of surfactant chemicals. Nonetheless,
sufficient valid and reliable data were not available to make the
requisite FFDCA safety finding.
    EPA could not have made the requisite FFDCA safety finding unless,
at the very least, a set of basic toxicity studies had been available
to the Agency. It is possible that the tests agreed to under OECD's
Screening Information Data Set (SIDS) program would have sufficed.
Especially important to inert ingredient reassessment is an acceptable
repeat-dose study. The preferred test for repeat-dose toxicity is the
``Combined Repeated Dose Toxicity Study with the Reproduction/
Developmental Toxicity Screening Test'' (OECD Test Guideline 422). More
information about the OECD SIDS and EPA's High Production Volume (HPV)
programs is found at http://www.epa.gov /oppt/chemrtk/ sidsappb.htm.

For the inert ingredient subject to this proposed rule and the inert
ingredients identified in the May 3 Federal Register, the full OECD
SIDS may not have been necessary in some cases because EPA has
available a limited number of studies and information on the inert
ingredient in question (e.g., acute toxicity studies). In other cases,
the limited toxicity information available to the Agency may

indicate a need for further testing. EPA always recommends that parties
interested in supporting an inert ingredient consult with the Agency
prior to embarking on a testing strategy in order to determine existing
data gaps and if testing certain chemicals within a multi-chemical
exemption would serve to represent the entire exemption.
    In summary, the safety finding required by FFDCA section 408(b)(2)
cannot be made for the one inert ingredient tolerance exemption due to
insufficient data. Therefore, EPA is revoking under FFDCA section
408(e)(1) the tolerance exemption identified at the end of this
document under 40 CFR 180.920 with the revocation effective 2 years
after the date of publication of the final rule in the Federal
Register.
    The inert ingredient tolerance exemption that is the subject of
this revocation proposal is found in 40 CFR 180.920 and reads as
follows: ``[alpha]-Alkyl (C10-C16)-[omega]-
hydroxypoly (oxyethylene) mixture of dihydrogen phosphate and
monohydrogen phosphate esters and the corresponding ammonium, calcium,
magnesium, monoethanolamine, potassium, sodium, and zinc salts of the
phosphate esters; the poly(oxyethylene) content averages 3-20 moles.''
It is noted that the chemical described in this tolerance exemption is
included in a broader tolerance exemption also found in 40 CFR 180.920
that was proposed for revocation for insufficient data in the May 3
Federal Register, which reads as follows: ``[alpha]-Alkyl
(C10-C16)-[omega]-hydroxypoly (oxyethylene)poly
(oxypropylene) mixture of di- and monohydrogen phosphate esters and the
corresponding ammonium, calcium, magnesium, monoethanolamine,
potassium, sodium, and zinc salts of the phosphate esters; the combined
poly(oxyethylene) poly(oxypropylene) content averages 3-20 moles.'' The
public has had an opportunity to comment on the proposed revocation of
the broader tolerance exemption since May 3. Because the public has had
an opportunity since May 3 to comment on the broader exemption that
encompasses this more narrow tolerance exemption, a 30-day comment
period is provided for this proposed revocation of the more narrow
tolerance exemption.

B. What is the Agency's Authority for Taking this Action?

    A ``tolerance'' represents the maximum level for residues of
pesticide chemicals legally allowed in or on raw agricultural
commodities and processed foods. Section 408 of FFDCA, 21 U.S.C. 346a,
as amended by FQPA, Public Law 104-170, authorizes the establishment of
tolerances, exemptions from tolerance requirements, modifications in
tolerances, and revocation of tolerances for residues of pesticide
chemicals in or on raw agricultural commodities and processed foods.
Without a tolerance or exemption, food containing pesticide residues is
considered to be unsafe and therefore ``adulterated'' under FFDCA
section 402(a), 21 U.S.C. 342(a). Such food may not be distributed in
interstate commerce (21 U.S.C. 331(a)). For a food-use pesticide to be
sold and distributed, the pesticide must not only have appropriate
tolerances under FFDCA, but also must be registered under Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) (7 U.S.C. 136 et
seq.). Food-use pesticides not registered in the United States must
have tolerances in order for commodities treated with those pesticides
to be imported into the United States.

C. When do These Actions Become Effective?

    EPA is revoking the tolerance exemption identified in this proposed
rule that has insufficient data effective 2 years after the date of
publication of the final rule in the Federal Register. Any commodities
listed in this rule treated with pesticide products containing the
inert ingredient and in the channels of trade following the tolerance
revocation shall be subject to FFDCA section 408(1)(5), as established
by FQPA. Under this section, any residues of this pesticide chemical in
or on such food shall not render the food adulterated so long as it is
shown to the satisfaction of FDA that:
    1. The residue is present as the result of an application or use of
the pesticide at a time and in a manner that was lawful under FIFRA.
    2. The residue does not exceed the level that was authorized at the
time of the application or use to be present on the food under a
tolerance or exemption from tolerance. Evidence to show that food was
lawfully treated may include records that verify the dates when the
pesticide was applied to such food.

D. What is the Contribution to Tolerance Reassessment?

    By law, EPA is required by August 2006 to reassess the tolerances
and exemptions from tolerances that were in existence on August 2,
1996. This document revokes one inert ingredient tolerance exemption,
which counts as a tolerance reassessment toward the August 2006 review
deadline under FFDCA section 408(q), as amended by FQPA in 1996.

III. Are the Actions Consistent with International Obligations?

    The tolerance revocation in this rule is not discriminatory and is
designed to ensure that both domestically produced and imported foods
meet the food safety standard established by FFDCA. The same food
safety standards apply to domestically produced and imported foods.
    EPA is working to ensure that the U.S. tolerance reassessment
program under FQPA does not disrupt international trade. EPA considers
Codex Maximum Residue Limits (MRLs) in setting U.S. tolerances and in
reassessing them. MRLs are established by the Codex Committee on
Pesticide Residues, a committee within the Codex Alimentarius
Commission, an international organization formed to promote the
coordination of international food standards. It is EPA's policy to
harmonize U.S. tolerances with Codex MRLs to the extent possible,
provided that the MRLs achieve the level of protection required under
FFDCA. EPA's effort to harmonize with Codex MRLs is summarized in the
tolerance reassessment section of individual Reregistration Eligibility
Decision (RED) documents. EPA has developed guidance concerning
submissions for import tolerance support which was published in the
Federal Register of June 1, 2000 (65 FR 35069) (FRL-6559-3). This
guidance will be made available to interested persons. Electronic
copies are available on the Internet at http://www.epa.gov. On the Home

Page select ``Laws, Regulations, and Dockets,'' then select
``Regulations and Proposed Rules'' and then look up the entry for this
document under ``Federal Register--Environmental Documents.'' You can
also go directly to the ``Federal Register'' listings at http://

http://www.epa.gov/fedrgstr.

IV. Statutory and Executive Order Reviews

    The Office of Management and Budget (OMB) has exempted this type of
action from review under Executive Order 12866, entitled Regulatory
Planning and Review (58 FR 51735, October 4, 1993). Because this rule
has been exempted from review under Executive Order 12866 due to its
lack of significance, this rule is not subject to Executive Order
13211, Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use (66 FR 28355, May 22, 2001). This rule
does not contain any information collections subject to OMB approval
under the Paperwork Reduction Act (PRA), 44

U.S.C. 3501 et seq., or impose any enforceable duty or contain any
unfunded mandate as described under Title II of the Unfunded Mandates
Reform Act of 1995 (UMRA) (Public Law 104-4). Nor does it require any
special considerations under Executive Order 12898, entitled Federal
Actions to Address Environmental Justice in Minority Populations and
Low-Income Populations (59 FR 7629, February 16, 1994); or OMB review
or any Agency action under Executive Order 13045, entitled Protection
of Children from Environmental Health Risks and Safety Risks (62 FR
19885, April 23, 1997). This action does not involve any technical
standards that would require Agency consideration of voluntary
consensus standards pursuant to section 12(d) of the National
Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law
104-113, section 12(d) (15 U.S.C. 272 note).
    Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.), the Agency previously assessed whether establishment of
tolerances, exemptions from tolerances, raising of tolerance levels,
expansion of exemptions, or revocations might significantly impact a
substantial number of small entities and concluded that, as a general
matter, these actions do not impose a significant economic impact on a
substantial number of small entities. These analyses for tolerance
establishments and modifications, and for tolerance revocations were
published on May 4, 1981 (46 FR 24950) and on December 17, 1997 (62 FR
66020) (FRL-5753-1), respectively, and were provided to the Chief
Counsel for Advocacy of the Small Business Administration. Taking into
account this analysis, and available information concerning the
pesticide chemical listed in this rule, the Agency hereby certifies
that this action will not have a significant negative economic impact
on a substantial number of small entities. Specifically, the Agency has
concluded in a memorandum dated May 25, 2001 that for import tolerance
revocation there is a negligible joint probability of certain defined
conditions holding simultaneously which would indicate an RFA/Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) concern
and require more analysis. (This Agency document is available in the
docket of this rule). Furthermore, for the pesticide chemical named in
this rule, the Agency knows of no extraordinary circumstances that
exist as to the present rule that would change the EPA's previous
analysis.
    In addition, the Agency has determined that this action will not
have a substantial direct effect on States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132, entitled Federalism (64 FR 43255,
August 10, 1999). Executive Order 13132 requires EPA to develop an
accountable process to ensure ``meaningful and timely input by State
and local officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in the Executive order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' This rule directly regulates growers, food processors,
food handlers, and food retailers, not States. This action does not
alter the relationships or distribution of power and responsibilities
established by Congress in the preemption provisions of section
408(n)(4) of FFDCA. For these same reasons, the Agency has determined
that this rule does not have any ``tribal implications'' as described
in Executive Order 13175, entitled Consultation and Coordination with
Indian Tribal Governments (65 FR 67249, November 6, 2000). Executive
Order 13175 requires EPA to develop an accountable process to ensure
``meaningful and timely input by tribal officials in the development of
regulatory policies that have tribal implications.'' ``Policies that
have tribal implications'' is defined in the Executive order to include
regulations that have ``substantial direct effects on one or more
Indian tribes, on the relationship between the Federal Government and
the Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.'' This rule will not
have substantial direct effects on tribal governments, on the
relationship between the Federal Government and Indian tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian tribes, as specified in Executive Order 13175.
Thus, Executive Order 13175 does not apply to this rule.

List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.

    Dated: May 31, 2006.
Donald R. Stubbs,
Acting Director, Registration Division, Office of Pesticide Programs.
    Therefore, 40 CFR chapter I is amended as follows:

PART 180--[AMENDED]

    1. The authority citation for part 180 continues to read as
follows:

    Authority: 21 U.S.C. 321(q), 346a and 371.
    2. In Sec.  180.920, the table is amended by revising the entry in
the table to read as follows:

Sec.  180.920  Inert ingredients used pre-harvest; exemptions from the
requirement of a tolerance.

----------------------------------------------------------------------------------------------------------------
                       Inert Ingredients                                 Limits                    Uses
----------------------------------------------------------------------------------------------------------------
                                                    * * * * *
 [alpha]-Alkyl (C10-C16)-[omega]-hydroxypoly(oxyethylene)          Expires June 9, 2008      Surfactant; related
 mixture of dihydrogen phosphate and monohydrogen phosphate                                         adjuvants of
 esters and the corresponding ammonium, calcium, magnesium,                                          surfactants
 monoethanolamine, potassium, sodium, and zinc salts of the
 phosphate esters; the poly(oxyethylene) content averages 3-20
 moles........................................................
                                                    * * * * *
----------------------------------------------------------------------------------------------------------------

[FR Doc. E6-8826 Filed 6-6-06; 8:45 am]

BILLING CODE 6560-50-S