Response: Voluntary reductions that occur prior to January 1, 2003 will be reflected in the area's baseline PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 34For example, if an area had VOC emissions in 2001 of 100 tons per day, and a source reduces emissions by 10 tons per day in 2002, the baseline emission will be 90 tons per day. Thus, the area will need to achieve 13.5 tons per day reduction to meet its 15 percent requirement, rather than 15 tons per day. However, the area cannot take credit in the 15 percent plan for the 10 tons per day of emissions that are not part of the baseline inventory.

192 inventory. This lower baseline means that fewer reductions will be needed to achieve RFP. 34 Allowing an area to take credit for reducing emissions that are not included in the inventory would result in " double counting" of those emission reductions.

Comment: One commenter suggested that areas should be able to take credit for MACT standards that may reduce VOC for which compliance is required after the 2002 baseline year. The commenter said it would be helpful to States if EPA produced a document detailing the expected VOC reductions after implementation of MACT standards. States could claim these reductions toward any reductions required to meet their target. The commenter suggested that the most useful way to express the reduction would be as a percent of the 2002 emissions.

Response: The EPA agrees that areas can take credit in RFP plans for post 2002 VOC reductions from MACT standards. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 193 We are still considering whether to develop the recommended guidance.

Comment: One commenter objected to EPA's proposal to allow States to claim RFP credit from any reductions achieved through post 1990 adoption of the types of measures listed in section 182( b)( 1)( D). They further stated that Ssection 182( b)( 1)( D) prohibits granting RFP credit for any measures contained on the list. Congress wanted the RFP reductions to be new reductions rather than emission cuts that would have occurred anyway. In the case of 8 hour nonattainment areas,

the baseline year will be 2002. Therefore, according to the commenter, to be consistent with subpart 2, EPA must disallow RFP credit for measures listed in section 182( b)( 1)( D)

adopted any time prior to 2002.

Another commenter urged EPA to consider a hybrid approach that gives States credit for approved RFP plans that go beyond 2002, provided that the Plan is evaluated on a 2002 baseline. This approach would give States credit for ongoing emissions reductions, recognize the need to address the 8

hour standard as the ozone standard ( rather than rely on plans developed to meet the 1 hour standard), and potentially avoid some unneeded controls. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 194 Another commenter recommended that EPA not allow emissions reductions credit for all emissions reductions occurring after the baseline year. Emissions reductions to satisfy the RFP requirements of CAA section 182( b)( 1) and 182( c)( 2)( B) are required to be achieved by submitting " a revision to the applicable implementation plan to provide for . . . emissions reductions." The commenter argued that emissions reductions already required by, or accounted for in, the applicable implementation plan may not be credited toward the new RFP requirements. For example, reductions that were required to be achieved by SIP or other requirements, but which were not achieved in practice prior to the baseline year, should not be credited toward meeting the new RFP reductions required after the baseline year.

Only new measures submitted with the new SIP revision may be credited for this purpose.

Response: The EPA believes that, with certain exceptions, any reductions that occur after 2002 are creditable towards RFP and attainment and that it should not matter when the State initially adopted or EPA promulgated the measures that produce those reductions. The ActCAA does not mandate the approaches advocated in the comments. While the comments cite phrases in the CAA that might be read to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 195 support the approach advocated in the comments, EPA believes such an interpretation is at odds with other provisions of the ActCAA. In addition to the restriction imposed by section 182( b)( 1)( D) on crediting certain measures, section 182( b)( 1)( C) places only two restrictions on creditability of reductions towards RFP: first, reductions are creditable if they result from measures in the applicable implementation plan, i. e., the approved SIP, from rules promulgated by EPA or from a permit issued under Ttitle V; and secondly, only those reductions that have actually occurred after the baseline year and before the milestone date may be credited towards a RFP milestone. The requirement that the reductions result from measures in the applicable implementation plan,

EPA regulations, or a Ttitle V operating permit places no restriction that such measures must be measures promulgated by EPA, adopted by the State, or in a Ttitle V permit issued after the date of designation or after the baseline year.

This restriction only requires that the measure be approved into the SIP, promulgated by EPA., or included in a the permit issued before or concurrently with approval of the RFP SIP revisions, and that the reductions occur after the baseline year and before the milestone date. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 196 While this provision limits EPA's discretion to allow credit towards the RFP requirement from any reduction that does not fit into any of the three aforementioned classes of measures, EPA does not see anything in the statute that mandates the adoption of the approach advocated in the comments. In fact, EPA believes the opposite is the case.

The same argument ( i. e., that creditable RFP measures must be measures adopted/ promulgated after designation or after the baseline year) could have been made for the various programs mandated by the 1990 aCAA Amendments to the CAA.

These mandated measures included reasonably available control technologyRACT requirements under section 182( b)( 2), stage II vapor recovery under section 182( b)( 3), motor vehicle inspection and maintenanceI/ M under sections 182( b)( 4) and 182( c)( 3), reformulated gasoline under section 211( k), and the Tier 1 motor vehicle standards under Ttitle II. The EPA believes the statute is plain that Congress envisioned that all of these would be adopted after 1990 and in most cases implemented before 1996 because the statute contains enforceable deadlines for submission of the requisite SIP revisions or promulgation of the EPA rules and i. In many cases, they contain required implementation dates before 1996. Congress clearly did not limit credit from the RFP PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 197 requirements for any of these measures. In our proposed rulemaking, EPA specifically proposed allowing use of reductions resulting from any measure as long as the reductions meet the creditability criteria of section 182( b)( 1)( C) for the very reason EPA concluded Congress did not intend to impose the sort of limit on creditability advocated in the comments for the 1 hour standard and for any revised standard.

In summary, the statute says that only four specific categories of emissions reductions are restricted. It does not refer to or include any post 1990 rules' emissions reductions as restricted and only speaks to creditability in terms of when the reductions occurred, not when the rules or measures were adopted. As explained in the proposal and the preceding paragraphs, Congress had reason to limit creditability of pre 1990 rules, mandated many post 90 rules and allowed these rules to be credited towards post 90 RFP,

and nothing in the statute leads us to believe that Congress would not have wanted them to also be creditable to post 2002 RFP. The EPA believes it is appropriate to allow credit toward RFP for emissions reductions other than reductions from the four categories specified in the ActCAA pursuant to section 182( b)( 1)( C). Language that was once pertinent to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 198 the schedule of the 1990 CAAACAA Amendments should be reinterpreted now to mean emission reductions are creditable toward emission reductions requirements to the extent they have actually occurred as of 6 years after any baseline year including 2002.

7. For areas covered only by subpart 1, how should the RFP requirement be structured?

[ Section VI. I. 8. of June 2, 2003 proposed rule ( 68 FR 32834); section 51 § 51.910( b) of the draft and final regulatory text.]

a. Background.

The proposal noted that the RFP requirement under subpart 1 is more general than that under subpart 2, and EPA thus has more flexibility in determining what RFP means under subpart 1. For instance, the State may rely on emissions reductions of VOC or NOx, or a combination of both to meet its RFP requirement. However, we acknowledged the need for ensuring equity between areas with similar 8 hour ozone problems covered under subpart 1 and those covered under subpart 2.

We proposed three scenarios for three types of areas described as ( a) Areas with attainment dates 3 years or less after designation, ( b) Areas with attainment dates between 3 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 199 to 6 years after designation, and ( c) Areas with attainment dates beyond 6 years after attainment.

° Areas with attainment dates 3 years or less after designation.

We proposed an RFP requirement for these areas similar to that for areas under subpart 2 that are classified as marginal. Such an area would not be subject to a separate RFP requirement, but RFP would be met by demonstrating the area could attain the standard by its attainment date.

° Areas with attainment dates between 3 to 6 years after designation.

These areas would have attainment dates similar to subpart 2 areas classified as moderate. We proposed two options for these areas:

° Option 1. This option would require the RFP plan to be submitted with the attainment demonstration within 3 years after designation of the nonattainment area. The SIP would have to show that all emissions reductions needed for attainment would be implemented by the attainment date. Where areas have only 3 years after SIP submission before attainment, this option recognizes that there may be only a short amount of time available to achieve any specified emission reduction beyond that PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 35NOx Substitution Guidance. December 15, 1993; available at http:// www. epa. gov/ ttn/ oarpg/ t1pgm. html).

200 needed to demonstrate attainment and therefore would not require a showing that a specified amount of emissions reductions occur between the time of SIP submission and the attainment date. The draft regulatory text incorporated this option.

° Option 2. This option would have required these areas to be treated in a manner similar to subpart 2 areas classified as moderate. The RFP SIP would have to provide for a 15 percent emission reduction from the baseline year within 6 years after the baseline year.

The RFP SIP would have to be submitted within 2 years after designation. However, since the area is subject only to subpart 1, VOC or NOx emissions reductions could be relied on to meet the 15 percent reduction requirement, consistent with EPA's NOx substitution policy. 35 Also, we solicited comment on whether a percentage other than 15 percent should be required as the minimum. Additional measures that would provide the remaining portion of the emissions reductions needed for attainment would have to be submitted with the area's PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 201 attainment demonstration within 3 years after designation.

° Areas with attainment dates beyond 6 years after designation.

These areas are similar in attainment dates to areas classified under subpart 2 as serious or higher. We proposed that the RFP plan show increments of progress from the baseline emissions inventory year out to the attainment date.

The RFP SIP would first have to provide for a 15 percent emission reduction from the baseline year within 6 years after the baseline year. The 15 percent RFP SIP would have to be submitted within 2 years after designation. However,

since the area is subject only to subpart 1, NOx emissions reductions could be substituted for some or all of the 15 percent reduction requirement, consistent with EPA's NOx substitution policy. Also, we solicited comment on whether a percentage other than 15 percent would be more appropriate.

Then, for each subsequent 3 year period out to the attainment date, another RFP SIP would have to provide for an additional increment of progress no less than the amount of emissions reductions that would be roughly proportional to the time between the end of the first increment ( in 2008) to the attainment date. This second RFP SIP would have to be PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 202 submitted at the same time as the attainment demonstration,

namely within 3 years after designation.

b. Summary of Final Rule.

We are finalizing rules for two, rather than three,

categories of areas based on the Act'sCAA's division of attainment dates for subpart 1 areas under section 172( a)( 2).

This provision requires that subpart 1 areas must attain as expeditiously as practicable but no later than 5 years after designation as a nonattainment area. It also allows the Administrator to extend the attainment date beyond that 5 year period " . . . for a period no greater than 10 years from the date of designation as nonattainment, considering the severity of nonattainment and the availability and feasibility of pollution control measures." The two scenarios for RFP for subpart 1 areas are based on whether the area does or does not receive the extended attainment date. The following are the two scenarios and the RFP requirements for each:

° Scenario A: Areas with attainment dates 5 years or less after designation ( i. e., on or before June 15, 2009 for areas designated June 15, 2004). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 203 As noted elsewhere in this preamble, for areas classified under subpart 1, emissions reductions needed for attainment must occur by the beginning of the ozone season preceding the attainment date. Thus, to enable a SIP to demonstrate attainment by June 15, 2009, the area must achieve all necessary reductions by the beginning of the 2008 ozone season. The final rule provides that RFP for these areas would be met by ensuring emission reductions needed for attainment are implemented as noted above by the beginning of the ozone season prior to the attainment date. In other words, for purposes of RFP, these areas would be treated similar to subpart 2 RFP for areas classified as marginal ( although marginal areas are not required under the ActCAA to submit an attainment demonstration).

° Scenario B: Areas with attainment dates more than 5 years after designation ( i. e., beyond June 15, 2009 for those areas designated June 15, 2004).

For these areas:

° The RFP plan must show increments of progress from the baseline emissions inventory year out to the attainment date.

° The RFP SIP would first have to provide for a 15 percent emission reduction from the baseline year through the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 204 6th year after the baseline year ( i. e., from January 1,

2003 through December 31, 2008).

° The 15 percent RFP SIP must be submitted within 3 years after designation ( i. e., by June 15, 2007).

° However, since the area is subject only to subpart 1,

NOx or VOC emission reductions ( or both) could be used to achieve the 15 percent emission reduction requirement.

° For each subsequent 3 year period ( after 2008) out to the attainment date, the RFP SIP would have to provide for an additional increment of progress no less than the amount of emission reductions that would be roughly proportional to the time between the end of the first increment ( December 31, 2008) and the attainment date.

This second RFP SIP must also be submitted within 3 years after the effective date of designation ( i. e., by June 15, 2007).

While the adopted rule is not identical to any of the proposed options, we believe it is a logical outgrowth of our three proposed scenarios. The adopted approach is more stringent than certain of the proposed options and less stringent than others. Since this final decision incorporates elements of the three proposed scenarios, we PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 205 believe it is similar in result to the three scenarios proposed.

c. Comments and responses Comment: One commenter stated that EPA has no authority to adopt " Option 1" for areas with attainment dates between 3 and 6 years after designation, because that option would waive any showing of RFP.

Others supported the proposal that ties the required RFP showing to the attainment date. Specifically, these commenters supported the proposal that areas with attainment dates of three3 years or less should have no separate RFP requirement, consistent with the requirement applicable to marginal areas under Ssubpart 2. In addition, support was shown for Option 1 for Ssubpart 1 areas with an attainment date between 3 and 6 years following designations. Under Option 1, areas would have to show an adequate rate of reduction in order to achieve attainment by the deadline, but there would be no specific percentage reduction required.

Another commenter believed that a 15 percent emissions reductions requirement should only be required where such reductions would meaningfully advance the date of attainment.

The RFP requirement in Ssubpart 1 requires that the SIP provide for " reasonable further progress," and where PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 206 emissions reductions would not create " reasonable further progress" either in the area itself or in downwind areas,

there is no basis under Ssubpart 1 to require such specific emission reductions. They further said that requiring a potentially expensive reduction in emissions in those cases where that reduction would not improve air quality was not justified based on a notion of " equity" with similar areas classified under Ssubpart 2 and noted that such an interpretation was not required by the statute or sensible.

That some Ssubpart 2 areas might have to reduce emissions by a specified percentage even where such reductions would yield no positive environmental benefits is an unfortunate result of the Congress's decision to limit EPA's discretion under Ssubpart 2   which in turn is a result of a far less sophisticated understanding of the dynamics of ozone creation in 1990 than exists now   and where EPA has the discretion not to dictate an ineffective and inefficient result, it must exercise that discretion.

Response: The EPA acknowledges that Congress prescribed specific RFP requirements under subpart 2, but for subpart 1 provided more flexibility.

Our rule does not eliminate RFP obligations for subpart 1 areas. We are not requiring any specific percent reduction PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 207 for areas not subject to 15 percent VOC reductions and with near term attainment dates. The measures that bring about near term attainment represent all the reductions that are reasonable to require as annual incremental progress towards attainment. The EPA is not compelled to require a 15 percent emission reduction for all subpart 1 areas, especially in those cases where a full 15 percent is not needed in order to reach attainment. However, we believe that it is generally appropriate to require the full 15 percent for areas with long term attainment dates to ensure interim progress towards attainment and on equity grounds.

8. How should the RFP requirements be implemented for areas designated for the 8 hour ozone standard that entirely or in part encompass areas that were designated nonattainment for the 1 hour ozone standard?

[ Section VI. I. 9. of June 2, 2003 proposed rule ( 68 FR 32835); no draft regulatory text; section 51 § 51.910( a)( 1)( iii) of final rule.]

a. Background.

We proposed the following approach to address this issue. The State would have to develop a new baseline and new RFP emission reduction targets for the entire 8 hour standard nonattainment area ( i. e., the old 1 hour standard PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 208 nonattainment area and the newly added portion of the 8 hour standard nonattainment area). Emissions reductions from measures in the 1 hour ozone SIP that are achieved after the 8 hour ozone NAAQS baseline year could count ( subject to creditability restrictions as discussed above in the proposed rulemaking) toward meeting the RFP requirement for the entire 8 hour area.

This approach would set an RFP target for the entire 8

hour ozone nonattainment area. The State would have to ensure that the target is at least as stringent as the 1 hour RFP target, thus ensuring no backsliding on the 1 hour NAAQS requirements. Under this approach, the new RFP target for the 8 hour standard would replace the previous 1 hour ROP target ( while ensuring that, at a minimum, the emissions reductions required to meet the old target are met). The proposal did not address how the 15 percent ROP requirement would apply to an 8 hour area that includes ( in whole or in part) a 1 hour area that previously met the 15 percent ROP requirement, but also included one or more counties that were not previously subject to the 15 percent ROP requirement.

b. Summary of Ffinal Rrule.

We are incorporating the proposed approach. As noted above, an 8 hour nonattainment area that is identical, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 209 geographically, to its predecessor 1 hour nonattainment area ( which has already done the 15 percent reduction) will not be required to do another 15 percent VOC only reduction plan.

Although the proposal did not address the 15 percent VOC reduction requirement for an 8 hour moderate or higher nonattainment area that contains a 1 hour nonattainment area that has an approved 15 percent VOC ROP plan, we have addressed this in the final rule. We believe the approach we have adopted is consistent with the intent of the proposal.

The final rule allows States the choice between the following two options.

° Option 1. Develop a new baseline and new 15 percent VOC ROP emission reduction target for the entire newly expanded area. Determine that emissions reductions that occur after the 2002 baseline emissions inventory year are creditable in the combined new area. The reductions must be of VOC only.

° Option 2. Treat the 8 hour nonattainment area as divided between the old 1 hour area and the newly added 8 hour area. For the newly added portion ( which had not previously implemented a 15 percent plan), States must establish a separate 15 percent VOC target under subpart 2. VOCVolatile organic compound reductions to meet the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 210 15 percent requirement for the portion of the new 8 hour nonattainment area may come from across the entire 8

hour area. The portion of the area that was nonattainment for the 1 hour standard is subject to the subpart 1 provisions of the CAA, and both VOC and NOx emissions reductions can be credited toward meeting the RFP target for this portion of the nonattainment area.

Furthermore, for an 8 hour nonattainment area that is composed in total by various 1 hour areas that had 15 percent plans ( i. e., the 8 hour boundaries are not exactly the same as the 1 hour boundaries but all parts of the area were a part of a 1 hour area with a 15 percent plan), EPA will also consider that the area has met its 15 percent VOConly requirement. As explained elsewhere in the preamble in response to comment on the draft regulatory text for section 51 § 51.910( a)( 1)( ii), EPA has modified the text in section 51 § 51.910( a)( 1)( ii) of the final rule to embody this change.

Then, as a result, these areas will need to implement either " whatever reductions are necessary for attainment by its attainment date," if moderate, or 3 percent NOx/ VOC per year ( averaged over each 3 year period out to the attainment date), if serious and above. If part of an 8 hour area ( town, county, etc.) was never part of a 1 hour area with a a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 211 15 percent VOC only plan approved by EPA, the 8 hour area must prepare and submit a 15 percent VOC only plan with the caveats outlined below.

InThe subpart 1 RFP provisions addressed by the rule below that are applicable in the former 1 hour portion of the area depend on the subpart 2 area's attainment date as follows:

° In subpart 2 areas that have an attainment date within 5 years after their 8 hour designation, for which portions of the area have previously met their 15 percent requirements under the 1 hour standard, the former 1 hour portion of the area will only be subject to subpart 1 RFP requirements, which will be satisfied with the measures that demonstrate attainment as expeditiously as practicable, these areas will not be developing RFP plans separate from their attainment plans. Thus, for these areas, the only motor vehicle emissions budgets that will be developed will be for the attainment year.

° In subpart 2 areas that have an attainment date beyond 5 years after their 8 hour designation, for which portions of the area have previously met their 15 percent requirements under the 1 hour standard, the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 212 former 1 hour portion of the area will only be subject to subpart 1 RFP requirements, which will be satisfied with a plan to demonstrate 15 percent emission reductions ( which may be either VOC or NOx or a combination of both) from 2002 to 2008, and any additional emission reductions needed for attainment beyond 2008. Thus, these areas ( the entire 8 hour nonattainment area) would establish a motor vehicle emission budget for 2008 and for their attainment year.

Serious and above areas will be developing both a 15 percent VOC plan for the new portion of the 8 hour nonattainment area and an 18 percent VOC/ NOx plan for the portion of the area that previously met its 15 percent requirement. Thus, the RFP plan as a whole will establish total allowable emissions for 2008 for the entire 8 hour nonattainment area.

Therefore, the plans for these areas, as well as moderate areas that choose option one, will establish motor vehicle emissions budgets for both 2008 and the attainment year.

Therefore, in the case of an 8 hour nonattainment area that is classified as moderate or higher and includes an area that was not part of a 1 hour area with an the EPA approved 15 percent VOC only plan and also includes areas that had an EPA approved 15 percent VOC only plan( s), there are two PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 213 possible options: ( 1) the entire 8 hour nonattainment area needs to have a new 15 percent VOC only plan; or ( 2) the 15 percent VOC only reduction plan needs to be prepared for that portion of the area that was not previously subject to an EPA approved 15 percent VOC only plan approved, and the former 1 hour portion of the area is subject to the subpart 1 RFP requirements previously discussed. Under either option,

the 15 percent reduction needed to meet the RFP milestone for the new portion of the nonattainment area can come from the anywhere in the 8 hour nonattainment area. As an added alternative to preparing a fully modeled 15 percent VOC only plan for the expanded area, EPA believes that if this expanded area implements and has SIP approved the same VOC control measures ( for example, VOC RACT at the same source thresholds, Stage II, I/ M, etc...) that the initial area which demonstrated 15 percent had implemented and the mix of sources ( point with similar industrial mix/ area/

mobilemix/ area/ mobile) is similar to the existing area, then EPA will consider and presume that the expanded area has met its 15 percent VOC only requirement. The EPA will propose this as acceptable on a case by case basis for any area that meets this criteria. This would be only a presumption,

because EPA can notcannot guarantee areas, up front, that PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 214 they will not have to do something more for the 15 percent reduction. This would be determined on a case by case basis in the SIP approval rulemaking in which EPA would have to respond to any comments that the presumption was inappropriate and the area actually failed to make 15 percent. If EPA does not take action to formally agree that the area has met the 15 percent VOC only obligation in the expanded area, then that new portion of the 8 hour ozone nonattainment area must do a 15 percent VOC only plan from the 2002 base year. Nonattainment areas subject to subpart 2 are required initially to reduce their emissions by 15 percent no later than 6 years from the base year. These reductions can only occur for VOC in order to be credited toward those first 6 years. States can begin to use NOx emissions reductions to make up the 3 percent per year ( 9 percent averaged over 3 years) after the initial 6 years.

c. Comments and responses Comment: Some commenters believed an additional 15 percent VOC reduction should not be necessary for 8 hour areas that encompass in whole or in part a 1 hour nonattainment area. Such areas should simply be required to achieve whatever NOx or VOC emissions reductions are needed for attainment. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 215 Another commenter agreed with the approach outlined in the proposal but cautioned that the States would have to ensure that the target is at least as stringent as the 1 hour ROP target, thus ensuring no backsliding on the 1 hour NAAQS requirements. Under this approach, the State would have to develop a new baseline and new RFP emission reduction targets for the entire 8 hour standard nonattainment area. Emissions reductions from measures in the 1 hour ozone SIP that are achieved after the 8 hour ozone NAAQS baseline year could count ( subject to credibility restrictions as discussed in the proposed rulemaking) toward meeting the RFP requirement for the entire 8 hour area. The new RFP target for the 8

hour standard would replace the previous 1 hour ozone target ( while ensuring that, at a minimum, the emissions reductions required to meet the old target are met).

Response: As noted elsewhere in the preamble, if an 8

hour nonattainment area is classified as moderate or higher,

and has the same geographic boundaries as a 1 hour area which has an EPA approved 15 percent ROP plan, EPA believes that the area does not need to prepare an additional 15 percent VOC only plan.

We agree with the commenter who noted that the proposed section 51 § 51.910( a)( ii) did not address all boundary change PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 216 scenarios consistent with our proposed approach found in section VI. I. 9. of the June 2, 2003 proposed rule ( 68 FR 32835). We proposed an approach to deal with what RFP requirements should be implemented for areas designated for the 8 hour ozone standard that entirely or in part encompass an area that was designated nonattainment for the 1 hour ozone standard. We stated in the proposed rule that our intent was that those portions of an 8 hour nonattainment area already covered by an approved 15 percent VOC only plan would not be subject to a second 15 percent VOC only requirement. In our discussion in section VI. I. 9. of the June 2, 2003 proposed rule, we focused mainly on the most likely boundary change scenario which is where the boundary of the 8 hour area was expanded to include additional areas beyond the 1 hour area's boundaries. Considering this comment in light of our experience in setting the actual boundaries of the initially designated areas, we have now identified four scenarios of boundary changes relative to areas with approved 15 percent VOC only reduction plans:

° The first scenario is where the 1 hour boundaries are exactly the same as the 8 hour boundaries. The sSection 51.910( a)( 1)( ii) of the proposed regulatory text was intended to cover these areas. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 217 ° The second scenario is where a specific 8 hour area encompasses part of a former 1 hour area that already had an approved 15 percent VOC only reduction plan.

Such a scenario arises where the boundaries shrink due to deletion of part of the 1 hour area, or, the former 1 hour area has been divided among two or more adjacent 8 hour areas.

° The third scenario arises where an existing 1 hour area covered by an approved 15 percent VOC only plan receives additional portions from one or more 1 hour areas that were also covered by an approved 15 percent VOC only plan and does not include additional areas not covered by an approved 15 percent plan.

° The fourth scenario arises where part of the 8 hour area consisting of portions of one or more existing 1 hour areas each of which is covered by an approved 15 percent VOC only plan is expanded to include additional portions which are not covered by an approved 15 percent VOC only plan. This case also includes the situation where a single 1 hour area, that is covered by an approved 15 percent VOC only plan, is expanded to receive additional areas that are not covered by an approved 15 percent VOC only plan. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 218 We have concluded that there is no rationale to require an area that falls into either the second or third scenario to do another 15 percent VOC only plan just because the boundaries do not exactly coincide with a single 1 hour area,

or, just because no areas without coverage under an approved 15 percent plan have been added.

We had proposed an approach not to require a 15 percent VOC only plan for the portion of an 8 hour area which, in part, encompassed an area that was designated nonattainment for the 1 hour ozone standard, and which, in part,

encompassed new areas. For the fourth scenario, we see no reason to distinguish the case where the 8 hour area is built from around one former nonattainment area and from where the 8 hour area is built from portions of more than one former 1

hour area. Likewise, we see no rationale to distinguish an 8 hour area which falls in the second scenario from the former 1 hour nonattainment area portion of an 8 hour area that falls under the fourth scenario; the latter portion is not required to have a 15 percent VOC only plan for that portion because the boundaries have been enlarged. We had intended to treat all of these areas in a similar manner.

We received extensive comments in support of our proposal to allow flexibility in regards to the initial RFP PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 219 requirement of section 182( b)( 1). Many of the comments decried the need for flexibility to allow needed NOxNOx reductions to count towards RFP where NOxNOx reductions contribute to attainment of the 8 hour NAAQS. As discussed in the June 2, 2003 proposed rule and elsewhere in this preamble, we must require that the initial RFP targets reflect a 15 percent reduction in baseline VOC emissions in those areas, or portions of areas, not included in an approved 15 percent plan in the SIP.

We have revised the final section 51 § 51.910( a)( 1)( ii)

from that proposed to clarify this issue and encompass the first through third scenarios. Section 51.910( a)( 1)( iii)

covers the third scenario.

Comment: Another commenter prefers to work with EPA in the development of an alternative that will eliminate or minimize the planning burdens associated with development of a 15 percent RFP plan for one town. One alternative might be the development of a " comparability demonstration," showing that the town had implemented the same controls that had been previously responsible for achieving a 15 percent reduction in VOCs in its l hour ozone nonattainment area.

Response: As noted above in the summary of the final rule, we have made the following provision: If part of an 8 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 220 hour area ( town, county, etc.) was never part of a 1 hour area with a a 15 percent VOC only plan approved by EPA, the 8 hour area must prepare and submit a 15 percent VOC only plan with the caveats outlined below. As an added alternative to preparing a fully modeled 15 percent VOC only plan for the expanded area, EPA believes that if this expanded area implements and has SIP approved the same VOC control measures ( for example, VOC RACT at the same source thresholds, Stage II, I/ M, etc...) that the initial area which demonstrated 15 percent had implemented and the mix of sources ( point with similar industrial mix/ area/ mobile) is similar to the existing area, then EPA will consider and presume that the expanded area has met its 15 percent VOConly requirement. The EPA will propose this as acceptable on a case by case basis for any area that meets this criteria.

This would be only a presumption, because EPA can notcannot guarantee areas, up front, that they will not have to do something more for the 15 percent reduction. This would be determined on a case by case basis in the SIP approval rulemaking in which EPA would have to respond to any comments that the presumption was inappropriate and the area actually failed to make 15 percent. If EPA does not take action to formally agree that the area has met the 15 percent VOC only PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 221 obligation in the expanded area, then that new portion of the 8 hour ozone nonattainment area must do a 15 percent VOC only plan from the 2002 base year.

Comments on draft regulatory text Comment: One commenter stated that draft section 51 § 51.910( a)( 1)( ii) eliminates the 15 percent requirement for areas that have already achieved this requirement under the 8 hour standard and supported that change. However, they further state that the strict criteria of " same boundaries"

should be revisited because there may be limited changes in the nonattainment areas " boundaries" when areas are designated for the 8 hour standard. Such changes should not negate this provision. A broader definition needs to apply to this section to allow for changes to boundaries in nonattainment areas between 1 hour and 8 hour designations where such changes do not substantially alter the geographical or population characteristics for the area.

Another commenter supports an exemption for 8 hour nonattainment areas that have met the 15 percent ROP requirement for the 1 hour NAAQS. The commenter requests that EPA clarify the criteria that the area must have the same geographic boundaries to qualify for the exemption.

This means that in the geographic areas for which a State has PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 222 an approved 15 percent plan, the 15 percent requirement will not apply, and the 15 percent requirement is only intended to apply to the new geographic areas of the 8 hour nonattainment area, and that the 15 percent reduction of emissions from the new areas could come from the entire nonattainment area to satisfy this requirement.

Response: In the final rule, we addressed situations where the 8 hour nonattainment area includes areas that already have approved 15 percent VOC plans as well as areas that do not have such plans. As a general rule, EPA believes that the entire 8 hour nonattainment area needs a 15 percent VOC only plan, either the plan approved for the 1 hour standard or a new 15 percent RFP plan for the 8 hour standard, or alternatively, the 15 percent VOC only reduction plan needs to be prepared for that portion of the area which previously did not have an EPA approved 15 percent VOC only plan approved ( i. e., the expanded area). As an added alternative to preparing a fully modeled 15 percent VOC only plan for the expanded area, EPA believes that if this expanded area implements and has SIP approved the same VOC control measures that the initial area which demonstrated 15 percent had implemented and the mix of sources is similar to the existing area, then EPA will initially consider and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 36Memorandum of May 10, 1995, " RFP, Attainment Demonstration, and Related Requirements for Ozone Nonattainment Areas Meeting the Ozone National Ambient Air Quality Standard," from John S. Seitz, Director, Office of Air Quality Planning and Standards. Available at: http:// www. epa. gov/ ttn/ oarpg/ t1/ memoranda/ clean15. pdf.

223 presume that the expanded area has met its 15 percent VOConly requirement, as described above. Beyond this presumption, EPA does not believe that the statute would allow expanded areas to avoid implementation of a 15 percent plan.

9. Will EPA's " Clean Data Policy" apply for purposes of 8

hour RFP, attainment demonstrations and other related requirements?

[ Section VI. I. 10 of June 2, 2003 proposed rule ( 68 FR 32835); no draft or final regulatory text.]

a. Background.

As noted in the proposal, we issued a policy on May 10,

1995, which allows EPA to determine that an area has attained the standard and that certain planning requirements ( e. g.,

RFP and attainment demonstrations) will not apply so long as the area remains in attainment. 36 This is referred to as the " Clean Data Policy." We proposed that this policy would remain effective for purposes of areas that EPA determines have attained the 8 hour ozone NAAQS. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 224 b. Summary of Ffinal Rrule.

As proposed, the Clean Data Policy will apply for purposes of the 8 hour standard in the same manner as we applied it for the 1 hour standard. In this notice EPA is taking final rulemaking action on the statutory interpretation that we are applying in the policy.

Determinations as to whether individual areas have attained the standard and thus qualify for application of the policy will be made in the context of rulemakings for those individual areas.

EPA has applied the Clean Data policy in rulemakings under the one hour ozone standard to both Subpart 1 areas ( e. g., San Francisco Bay Area, 69 FR 21717 ( April 22, 2004))

and Subpart 2 areas ( e. g., St. Louis, Missouri, 68 FR 25418).

The EPA will continue to apply the policy to Subpart 1 and Subpart 2 areas under the 8 hour standard.

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

hour NAAQS.

A commenter argued that EPA also has no authority to waive the attainment demonstration and RFP plans mandated by subpart 2 on the pretext that an area has clean data. The PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 225 ActCAA unambiguously requires these plans for any area designated nonattainment for the pollutant ozone, and gives EPA no power whatsoever to waive such plan requirements.

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

Response: The EPA believes that the Clean Data Policy comports with the general languageprovisions of the ActCAA in regard to attainment demonstrations, rate of progressROP plans, RACM, contingency measures and other related requirements. The Clean Data Policy, issued on May 10, 1995,

providessets forth EPA's interpretation that where EPA has determined that an area has attained the standard, certain submissions are not required ( e. g., RFP) for so long as the area remains in attainment.

As set forth in its May 10, 1995 policy, EPA believes it is reasonable to interpret the provisions regarding RFP and attainment demonstrations, along with certain other related provisions, as not requiring further submissions to achieve attainment if an area is in fact attaining the standard.

Under its policy, EPA is not granting an exemption from any applicable requirements under part D. Rather, EPA has interpreted certain requirements of subparts 1 and 2 as not being applicable once an area has attained the standard, for PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 226 as long as it continues to do so. This is not a waiver of requirements that by their terms apply; it is a determination that certain requirements are written so as to be operative only if the area is not attaining the standard.

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

65 FR 37879 ( June 19, 2000) ( Cincinnati Hamilton, Ohio

Kentucky); 61 FR 20458 ( May 7, 1996) ( Cleveland Akron Lorain,

Ohio); 66 FR 53094 ( October 19, 2001) ( Pittsburgh Beaver Valley, Pennsylvania); 60 FR 37366 ( July 20, 1995), 61 FR 31832 33 ( June 21, 1996) ( Grand Rapids, MI); 60 FR 36723 ( July 18, 1995) ( Salt Lake and Davis Counties, Utah); 68 FR 25418 ( May 12, 2003) ( St. Louis, Missouri) 69 FR 21717 ( April 22, 2004)( San Francisco Bay Area). The EPA has also set forth its legal rationale for the Clean Data Policy in briefs filed in the 10th, 7th, and 9th Circuits, and hereby incorporates those briefs insofar as relevant here. See Sierra Club v. EPA, No. 95 9541 ( 10th Cir.), Sierra Club v.

EPA, No. 03 2839, 03 3329 ( 7th Cir.), Our Children's Earth Foundation v. EPA, No. 04 73031 ( 9th Circuit). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 227 As stated in the policy, the attainment demonstration and, RFP requirements and contingency measure requirement are designed to bring an area into attainment. Once this goal has been achieved, it is appropriate to suspend the obligation that States submit plans to meet these goals, so long as the area continues to attain the relevant standard.

One cThe Tenth Circuit court has already upheld the use of this policy. See Sierra Club v. EPA, 99 F. 3d 1551 ( 10th Cir. 1996).

Comment: AnotherCircuit, 1996). See also Sierra Club v.

EPA, 375 F. 3d 537 ( 7th Circuit, 2004) ( rejecting a challenge to the policy).

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

Sierra Club v. EPA, 99 F. 3d 1551 ( 10th Cir. Circuit 1996), as supporting the Clean Data Policy. The commenter contended that case was wrongly decided and has been superseded by the Supreme Court decision in Whitman v. American Trucking Assoc., Inc., 531 U. S. 457 ( 2001). There, the Court held that Ssubpart 2 eliminates regulatory discretion previously PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 228 allowed to EPA under Ssubpart 1, and noted that Ssubpart 2 prescribes large parts of nonattainment programs, for example, section 182. The requirements for RFP and attainment demonstrations are among those Ssubpart 2 nonattainment programs that Congress prescribed by law,

thereby eliminating EPA discretion to accept something less.

See also Sierra Club v. EPA, 293 F. 3d 155 ( D. C. Cir. Circuit 2002) ( holding that EPA is without authority to infer exceptions to attainment deadlines and to explicit Ssubpart 2 requirements for RFP plans).

Response: EPA believes The EPA believes that the Tenth Circuit correctly decided Sierra Club v. EPA and that the comments misconstrue both Whitman and Sierra Club v. EPA, 293 ( Sierra Club 2002) F. 3d 155 ( D. C. CirCircuit. 2002). At issue in tThe Sierra Club 2002 case was whether: ( 1) EPA could extend an area'saddressed the statutory requirements applicable to an area not attaining the standard. The issue of the requirements of part D of Title I of the CAA that are applicable to areas monitoring attainment of the standard was not before the court. As discussed below, the Sierra Club 2002 decision upheld EPA's determination that the RACM provision under section 172( c)( 1) requires only additional measures that could contribute to reasonable further progress PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 229 or attainment, which is an element of EPA's application of the Clean Data Policy. To this limited extent, Sierra Club 2002 is relevant to EPA's interpretation that the policy will apply for the 8 hour ozone standard, and the decision supports EPA's interpretation. However, the other issues addressed in the decision ( extension of the statutory attainment date through a means other than reclassification ( which is not associated with the waiver of the obligation to submit thefor areas affected by ozone transport, the content of a demonstration of reasonable further progress toward attainment, and whether contingency measures must be submitted as part of an attainment demonstration or any other planning requirement through some method other than a bump up or 1 year extension pursuant to section 181; ( 2) whether EPA could approve the RFP plan for an area with an attainment date of 2005 with only a demonstration that the plan contained RFP of 3 percent per year through 1999; and ( 3)

other issues which are also not germane to this issue. The issue of whether an area was required to submit an attainment demonstration and/ or an RFP plan was not raised or decided Sierra Club 2002. Rather the issues under consideration were the content of the RFP demonstration and the legality of extending the statutorily prescribed maximum attainment date. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 230 plan for RFP) did not relate to the Clean Data Policy or the requirements applicable to areas attaining the standard.

The issue addressed by the Clean Data Policy is whether an area that has attained the standard ( as evinced by air quality monitoring data) still needs to submit a demonstration of how the area will achieve enough reductions to demonstrate that air quality goalsit will be met ( i. e.,

" attain the NAAQS") and, a plan to obtain reasonable periodic reductions towards attaining that air qualitythe goal of attainment and other related requirements. goal.

The EPA continues to believe that the needstatutory requirement for an attainment demonstration   a SIP revision which identifies the level of future reductions needed to achieve the NAAQS and any additional adopted measures needed to achieve these future reductions   is unnecessarywritten so as to be inapplicable once the NAAQS is attained.

In addition, EPA believes that the RACM requirements are a " component" of an area's attainment demonstration under section 172( c)( 1). General Preamble 57 FR 13560 ( April 16,

1992). Thus, since the attainment demonstration is no longer an applicable requirement, RACM is also no longer an applicable requirement. The EPA has consistently interpreted this provision to require only implementation of potential PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 231 RACM measures that could contribute to reasonable progress or attainment General Preamble 57 FR 13498 ( April 16, 1992).

Thus, where an area has already attained the standard, no additional RACM measures are required. The EPA's interpretation that the statute requires only implementation of RACM measures that would advance attainment was upheld by the United States Court of Appeals for the Fifth Circuit ( Sierra Club v. EPA, 314 F. 3d 735, 743 745 ( 5th Cir. 2002)

and by the United States Court of Appeals for the D. C.

Circuit ( Sierra Club v. EPA, 294 F. 3d 155, 162 163 ( D. C.

Cir. 2002). See also the final rulemakings for Pittsburgh

Beaver Valley, Pennsylvania, 66 FR 53096 ( October 19, 2001)

and St. Louis, 68 FR 25428 ( May 12, 2003).

Likewise, EPA concludes that the provision for RFP   a plan for annual incremental reductions leading to attainment   is also expressed in terms that show that RFP is unnecessary once attainment is reached. If the goal of attainment has been met, there is no longer a need to plan for measures to meet that goal.

EPA believes that Whitman does not provide basis to reconsider our position on the Clean Data Policy. In Whitman, the Court was addressing EPA's stated approach that subpart 2 did not apply for purposes of implementing the 8 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 232 hour NAAQS. In the Phase 1 rule, EPA addressed the Court's decision and concluded that subpart 2 does apply. The issue here is not whether it applies, but how those requirements apply under a specific situation where Similarly, EPA continues to believe that the contingency measure requirements of section 172( c)( 9) are no longer applicable once an area has attained the standard since those " contingency measures are directed at ensuring RFP and attainment by the applicable date." ( See 57 FR 13564; April 16, 1992). The section 182( c)( 9) contingency measure requirement also no longer applies once an area has attained the standard. The EPA's interpretation of the statute is consistent with the statute's plain language. To the extent that the statutory language is ambiguous, the interpretation is reasonable and must be upheld under Chevron, USA Inc v.

NRDC , 467 US 837, 842 45 ( 1984). CAA section 172( c)( 2) and the related provisions of Subpart 2 provide that reasonable further progress is required only where an area continues to violate the standard. By definition, the " reasonable further progress" provision requires only such reductions in emissions as are necessary to attain the NAAQS by the attainment date. If an area has attained the standard, the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 233 stated purpose of the reasonable further progress provision has been fulfilled.

Section 172( c)( 1) and the related provisions of Subpart 2 provide that SIPS shall provide for attainment of the NAAQS. See also section 182( b)( 1)( A)( i) which requires that SIPS for moderate ozone nonattainment areas must " provide for such specific annual reductions in emissions of [ VOCs] and [ NOx] as necessary to attain the [ ozone NAAQS]" by the applicable attainment date When an area has attained the NAAQS, there is no need for a plan demonstrating how it will reach attainment, and thus the attainment demonstration provision is no longer applicable. Similarly section 172( c)( 9) and the related provisions of Subpart 2 provide that SIPs in nonattainment areas shall provide for contingency measures to be undertaken if the area fails to make reasonable further progress or to attain the NAAQS by the applicable attainment date. Since contingency measures are required only if reasonable further progress or attainment is not achieved, there is no need for them were the area has attained the standard. The language of these statutory provisions indicates that Congress intended that when an area has attained the standard the requirements PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 234 designed to attain the standard are no longer applicable to it.

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

hour NAAQS. In the Phase 1 rule, EPA addressed the Court's decision and concluded that subpart 2 does apply. The issue here is not whether it applies, but how those requirements apply under a specific situation where an area has attained the NAAQS. That issue was not addressed by the Court in Whitman. In Whitman the Supreme Court was considering which subpart of part D of the CAA should be used for implementation of the newly promulgated 8 hour NAAQS. The decision in Whitman has no bearing on the question of whether an area that has demonstrated attainment must nonetheless submit an attainment demonstration plan and related requirements. Thus, Whitman does not undermine the Tenth Circuit's reasoning in Sierra Club v. EPA, 99 F. 3d 1551 (

10th Circuit, 1996). See also the post Whitman decision in Sierra Club v. EPA, 375 F. 3d 637 ( 7th Circuit, 2004),

rejecting a challenge to the Clean Data Policy and upholding a redesignation action based on the policy. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 235 10. How will RFP be addressed in Tribal areas?

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

a. Background.

The TAR provides flexibility for Tribes in the preparation of a TIP to address the NAAQS. As mentioned in the proposed rulemaking, the TAR provides the Tribes with the ability to develop Tribal implementation plans ( TIPs) to address and implement the NAAQS in Indian country. It further provides the Tribes with flexibility to develop these plans in a modular way, as long as the elements of their TIPs are reasonably " severable." For example, each TIP submission must include a demonstration that the Tribe has authority to develop and run its program, the ability to enforce its rules, and the capacity and resources to implement the program it adopts. Therefore, it may include one or two source specific requirements but may not include provisions for RFP and other SIP requirements. The proposal noted that these TIPs can be an important step in addressing an overall air quality plan to achieve health and environmental goals on tTribal lands. Where a Tribe chooses not to address a specific planning element, EPA may be obligated to step in. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 236 Such action would not preclude a Tribe from addressing those elements at a later time.

b. Summary of Ppolicy.

We intend to take the approach noted in the proposal.

There is no regulatory text for this intention.

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

11. How will RFP targets be calculated?

[ Section VI. I. 12. of June 2, 2003 proposed rule ( 68 FR 32836); section 51 § 51.910( c) of the draft and final regulatory text.]

a. Background.

We proposed a methodology for the calculation of RFP target levels of emissions that is based on the method we developed for the 1 hour standard, while taking into account our interpretation of CAA restrictions on creditable emissions and our proposal to use the 2002 inventory as the baseline inventory for the RFP requirement. The CAA specifies four types of measures that were not creditable toward the 15 percent RFP requirement. These are: PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 237 ( 1) Any measure relating to motor vehicle exhaust or evaporative emissions promulgated by the Administrator by January 1, 1990.

( 2) Regulations concerning Reid Vapor Pressure ( RVP)

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

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

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

These four types of measures were all expected to result in a decrease in emissions between 1990 and 1996. Of these four types of measures, RACT and I/ M program corrections and the 1992 RVP requirements were completely in place by 1996 and therefore are already accounted for in the 2002 baseline. As a result, they would produce no additional reductions between 2002 and 2008 or later milestone years.

However, the pre 1990 Federal Motor Vehicle Control Program ( FMVCP) will continue to provide additional benefits during the first two decades of the 21st century as remaining vehicles meeting pre 1990 standards are removed from the vehicle fleet. Because these benefits are not creditable for RFP purposes, in order to calculate the target level of PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 238 emissions for future RFP milestone years ( i. e., 2008, 2011,

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

b. Summary of Ffinal Rrule.

The calculation methods have been revised to account for NOx and for other emissions models. They appear as Aappendix A of this preamble. These methods are consistent with the requirements of sections 182( b)( 1)( C) and ( D) and 182( c)( 2)( B) of the ActCAA.

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

The commenter claimed an advantage of the recommended change is that it removes from the non creditable pre 1990 FMVCP reductions, creditable reductions from controls PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 239 implemented prior to 2003 ( such as improvements to the I/ M program or cleaner gasoline).

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

Response: The EPA does not agree with the commenter that the non creditable pre 1990 FMVCP reductions should be calculated using the I/ M program and fuel properties in effect during the new baseline year of 2002. Including the I/ M program and fuel properties in effect in 2002 in the calculation of non creditable reductions would not accurately account for reductions that are the result of pre 1990 fFederal motor vehicle control measures. The EPA believes that the methods provided in the final rule accurately identify the non creditable reductions from pre 1990 motor vehicle standards and provide appropriate credit for all post 1990 control measures. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 37The final interim implementation guidance of 1997 referenced the proposed interim implementation policy of December 13, 1996, which said, " The EPA believes that this additional flexibility for States in their ROP SIP's is 240 12. Should EPA continue the policy of allowing substitution of controls from outside the nonattainment area within 100 kilometers for VOC and 200 kilometers for NOx?

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

a. Background.

The proposal noted that EPA currently has a policy that allows States to take credit for RFP for NOx and VOC controls that occur outside the nonattainment areas [" Guidance for Implementing the 1 Hour Ozone and Pre Existing PM10 NAAQS,

December 29, 1997, 68 FR 32833]. Specifically, the guidance generally allows credit for VOC reductions occurring upt to 100 km outside the area and for NOx reductions occurring up to 200 km outside the area for ( Statewide where a regional NOx control strategy is being implemented). The policy indicates that credit may be taken only for the emissions reductions from measures not otherwise mandated by the ActCAA. As explained in the policy, EPA believes that this additional flexibility for crediting reductions outside nonattainment areas is consistent with the ActCAA. 37 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 consistent with the ActCAA, since reductions from outside a nonattainment area within these limits contribute to progress toward attainment within the area. The 3 percent per year ROP requirement is a general rate of progress requirement, not a requirement for specific programs or measures such as vehicle inspection and maintenance. Allowing this flexibility would continue to provide the same rate of progress in terms of reducing emissions." ( 61 FrR 65758).

241 Under this approach, the geographic area for substitution of VOC emission reductions is 100 km from the nonattainment area and the geographic area for substitution of NOx reductions is 200 km from the nonattainment area with the possibility for additional expansion of the NOx substitution area as follows. NOxNitrogen oxides emissions reductions from anywhere within the State may be credited for those States that participate in a regional NOx control strategy such as the NOx SIP Call. All other States implementing a NOx substitution strategy for RFP would be restricted to a distance of 200 km from the nonattainment area, unless a substitution for a greater distance is accompanied by adequate technical justification.

Substitutions are restricted to intrastate areas unless two or more States involved reach mutual agreement. There are some cases in the western portions of the United States where 100 km for VOC substitution or 200 km for NOx substitution PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 38U. S. EPA Office of the Inspector General. Evaluation Report: EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions In Some Major Metropolitan Areas. Report No. 2004 P 00033. September 29, 2004.

242 from the nonattainment areas are not appropriate for RFP credit. In those cases, States should obtain approval from the appropriate Regional Office to verify credit and applicability prior to implementing such a substitution. The EPA notes that in all cases the distances in the policy provide only a general policy presumption that, if used,

would need data resources in the record showing that reductions from sources in the specific locations in attainment areas benefit the nonattainment area. See LEAN v.

EPA, 382 F. 3d 575 5th Cir. Circuit, 2004.

b. Summary of Ffinal Rrule.

We believe that States should continue to be able to rely on emissions reductions from outside the nonattainment area for credit toward their RFP obligations. However, we are reassessing the current policy in light of concerns and recommendations raised outside the rulemaking process by the EPA Office of Inspector General that indicated a potential for double counting of emissions reductions and problematic equity issues. 38 We responded to that report that we are PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 39Memorandum from Jeffery R. Holmstead to J. Rick Beusse, " Response to the Office of the Inspector General ( OIG) Evaluation Report, EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions in Some Major Metropolitan Areas, Report No. 2004 P 00033 ( December 29, 2004). March 24, 2005.

243 considering the various components of the recommendations as we assess existing policies and guidance in parallel to the rulemaking for implementing the 8 hour ozone standard. 39 We fully expect that any revisions to the policy will continue to allow States to take credit toward their RFP obligation from emission reductions outside the nonattainment area, but will ensure that the reductions meet the standard tests of creditability ( permanent, enforceable, surplus, and quantifiable) and are shown to be beneficial toward reducing ozone in the nonattainment area.

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

The commenters supported codification ( 68 FR 32833,

col. column 1) in the final rule of the December 29, 1997,

guidance memo (" Guidance for Implementing the 1 Hour Ozone and Pre Existing PM10 NAAQS") that allows emissions reductions PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 244 from outside the nonattainment area to be creditable toward RFP.

One commenter agreed that States ought to be able to account for regional emissions in their attainment demonstrations. On the other hand, the commenter was concerned that the Agency might allow jurisdictions to " credit" emissions reductions from sources up to 100 km for VOC and 200 km for NOx toward 15 percent RFP plans, and this in turn could encourage jurisdictions in need of these tonnage reductions to regulate without a sound basis. The commenter contended that while ozone is known to be a " regional pollutant", EPA has failed to establish in this rulemaking any technical basis for allowing States to impose regulations on sources outside the nonattainment area boundaries without independent justification of the impact of such sources on an area's failure to attain the standard.

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

April 21, 2004). These modeling analyses demonstrate that significant contribution to nonattainment resulted not only from source emissions within a nonattainment area but also from source emissions over a much broader area. Not only do PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 40The EPA notes that paragraph ( 1) of subsection 182( b) is entitled " Plan Provisions for Reasonable Further 245 these emissions from outside the nonattainment area affect air quality within the nonattainment area, in some cases it might be necessary to include and control emission sources located in the nearby areas in order to attain the standard.

We believe it is appropriate to allow States to take credit for reductions from sources outside their nonattainment areas where data indicate that those emissions affect air quality in the nonattainment areas.

We note that section 182( c)( 2)( C), which provides for the substitution of NOx controls for VOC, speaks in terms of reductions of ozone concentrations rather than strictly reductions in emissions. This provision led us to conclude that Congress's intent for the ROP requirement is to lower ozone concentrations within the nonattainment area. It is consistent with that intent that emissions reductions from outside the nonattainment area that will reduce ozone concentrations in the nonattainment area should be creditable in RFP demonstrations. We also believe that the ActCAA is clear that both the 15 percent plan requirement of section 182( b)( 1) and the 3 percent per year requirement of section 182( c)( 2) are specific varieties of RFP requirements. 40 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 Progress" and that subparagraph ( B) of paragraph 182( c)( 2) is entitled " Reasonable Further Progress Demonstration," thereby making it clear that both the 15 percent plan requirement of section 182( b)( 1) and the 3 percent per year requirement of section 182( c)( 2) are specific varieties of RFP requirements.

246 Section 171( 1) of the ActCAA states that, for purposes of part D of title I, RFP " means such annual incremental reductions in emissions of the relevant air pollutant as are required by this part or may reasonably be required by the Administrator for the purpose of ensuring attainment of the applicable NAAQS by the applicable date." Thus, whether dealing with the general RFP requirement of section 172( c)( 2), or the more specific RFP requirements of subpart 2 for classified ozone nonattainment areas ( the 15 percent plan requirement of section 182( b)( 1) and the 3 percent per year requirement of section 182( c)( 2)), the purpose of RFP is to ensure attainment by the applicable attainment date.

Emissions reductions strategies applied to sources outside the nonattainment area may have a beneficial effect on the nonattainment problem within the designated area. Since RFP/ ROP is progress towards attainment, specific, annual emissions reductions from geographic areas outside the nonattainment area boundaries that contribute to attainment in the nonattainment area would fall within the scope of PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 41U. S. EPA Office of the Inspector General. Evaluation Report: EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions In Some Major Metropolitan Areas. Report No. 2004 P 00033. September 29, 2004.

247 " such annual incremental reductions in emissions of the relevant air pollutant as are required . . . for the purpose of ensuring attainment of the applicable NAAQS by the applicable date."

However, as noted above in the Background portion, we intend to reassess whether the policy should be revised in light of concerns brought to our attention outside the rulemaking process pertaining to its technical feasibility. 41 Comment: One commenter requested clarification that if the 100 km/ 200 km area extends into adjacent States that reductions in those States should also be creditable,

especially with regard to the implementation of federal measures.

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

Comment: Another commenter expressed confusion by the provision to allow creditable reductions be made outside nonattainment areas. They asked if reductions made outside a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 248 nonattainment area actually bring that nonattainment area into compliance with the standard, then shouldn't those outside areas be designated nonattainment by definition? The commenter contended that this contradiction is unacceptable,

and a fatal flaw of current designation efforts and this implementation proposal.

Response: The EPA disagrees with the comment that the area in which creditable ROP/ RFP reductions are obtained must be part of the nonattainment area. Emissions are only one of many factors to determine if an area should be part of the nonattainment area built around a violating monitor. Once we determine that a monitor is recording a violation, the next step is to determine if there are any nearby areas that are contributing to the violation and include them in the designated nonattainment area. For guidance on determining the nonattainment boundary for the 8 hour ozone standard, we look to CAA section 107( d)( 4) that established the Consolidated Metropolitan Statistical Area ( CMSA) or Metropolitan Statistical Area ( MSA) presumptive boundary for more polluted areas when we promulgated our designation actions in 1991 for the 1 hour ozone standard. We generally started with counties in the CMSA or MSA because that area,

defined by the Office of Management and Budget ( OMB), PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 42Memorandum from John Seitz, " Boundary Guidance on Air Quality Designations for the 8 Hour Ozone National Ambient Air Quality Standards ( NAAQS or Standard)." March 28, 2000. Found at: http:// www. epa. gov/ ozonedesignations/ guidance. htm .

43 Generally counties ( in the case of parts of New England, the township) were used as the basic jurisdictional unit for defining nonattainment area boundaries. But consideration of topographical/ geographical factors could lead to splitting counties. ( See, 69 FR at 23861, April 30, 2004).

249 generally shares economic, transportation, population and other linkages that are similar to air quality related factors that produce ozone pollution. The actual size of the nonattainment area may be larger or smaller than the CMSA or the MSA boundaries, or, than the single county with a violating monitor ( in the case of a single county not in any MSA/ CMSA area) and depends on a number of air quality related technical factors contained in our designation guidance. 42 After identifying such areas   MSAs/ CMSAs/ single counties   with violating monitors, we then determined which nearby jurisdictional units 43 were contributing to the nearby violation even those not monitoring violations. We considered each of 11 applicable factors indentified in our designation guidance in making our assessment of whether a jurisdictional unit was a nearby area contributing to the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 250 violation that should be included in the designated nonattainment area. These factors include emissions, traffic patterns, population density, and area growth. Only after consideration of all 11 factors did we add a jurisdictional unit to a nonattainment area. In sum, for purposes of designating an area, we are required to designate the area violating the standard and any " nearby" area that is contributing to the violation. We complied with that statutory obligation in the designation process. However,

there may be emissions from areas that were not designated as part of the NAAnonattainment area that contribute to violations of the standard. Our approach to allowing credit for reductions in these emissions is not inconsistent with the designation process.

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

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

that any VOC emissions reductions within 100 km and any NOx emissions reductions within 200 km of the nonattainment boundary, including reductions in adjacent States, are creditable for RFP plan purposes. They also suggested that EPA address voluntary reductions for RFP purposes to state that reductions from voluntary measures should be PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 251 incorporated into the baseline emissions inventory calculation.

Another commenter stated that EPA does not specify in section 51 § 51.910( a)( 4) that in areas where the 3 percent annual reduction is required, those reductions must be achieved within the statutorily defined baseline " area."

( CAA section 182( b)( 1)( B)). The commenter stated that we issued initial NOx substitution guidance in 1993 that required RFP reductions to be achieved from sources within the designated nonattainment area. The commenter noted that subsequently, we attempted to unlawfully allow RFP reductions to be obtained from sources within the modeling domain. The commenter advocated that we clarify that the ActCAA requires creditable reductions to be obtained only from sources within the designated nonattainment areas.

Response: We believe that the policy does not need to be incorporated into a rule. Since areas must include record support for application of the policy in an area demonstrating that such reductions will have a positive impact on the specific nonattainment area, individual rulemaking in the context of an area's SIP must be conducted in any event to implement the policy. The EPA believes that any reductions that in fact result in improved air quality PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 252 within the nonattainment area can be credited to RFP demonstrations. Voluntary emissions reductions that are used to satisfy RFP requirements   or any requirements under the ActCAA   must meet EPA's criteria for creditability of such reductions, including inclusion of the emissions reductions in the baseline. As explained elsewhere in response to another comment on the policy of allowing substitution of controls from outside the nonattainment area within 100 km for VOC and 200 km for NOx, EPA disagrees with the comment that the ActCAA limits the scope of creditable emissions reductions to only those reductions in emissions emanating from within the nonattainment area boundaries. Our full rationale is set forth in a previous response. We also address elsewhere the comment relating to allowance of RFP credit from emissions reductions outside the State in which the nonattainment area is located.

13. When must RFP emissions reductions be achieved?

[ Section VI. I. of June 2, 2003 proposed rule ( several locations starting at 68 FR 32832); several locations including section 51 § 51.910( a)( 1) of the draft and final regulatory text.]

a. Background. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 253 Section 51.910( a)( 1) of the draft regulatory text that was made available for public comment provided that for areas initially designated nonattainment for the 8 hour NAAQS, the initial 6 year period for RFP shall run from January 1, 2003 to December 31, 2008. Section 182( c)( 2)( B), applicable to serious and above areas, requires that RFP be continued out to the attainment date. Therefore, section 51 § 51.910( a)( 2)

of the draft regulatory text provided, " For each area classified as serious or higher under section 51 § 51.903, the State must submit no later than 3 years after the effective date of the area's nonattainment designation a SIP revision consistent with section 182( c)( 2)( B) of the ActCAA for each 3 year period following the initial 6 year period addressed under paragraph ( a)( 1)( ii)( B) of this section until the area's attainment date. For areas initially designated nonattainment for the 8 hour NAAQS the 3 year periods referenced in section 182( c)( 2)( B) of the Act shall begin January 1, 2009."

In applying the requirement of section 182( c)( 2)( B), it is necessary to know the attainment date for the area. The attainment date is not necessarily the maximum allowed under part D of the ActCAA, but must be " as expeditious as practicable" but no later than the outermost date provided in PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 44With this rulemaking, this provision is codified as 40 CFR 51.908( d).

254 the ActCAA ( e. g., 9 years after designation for a serious area). Thus, the State must theoretically have completed an attainment demonstration and RACM analysis ( discussed elsewhere in this preamble) to demonstrate that the attainment date selected is as expeditious as practicable.

The Phase 1 rule, section 51 § 51.900( g) sets forth the following definition: " Attainment year ozone season shall mean the ozone season immediately preceding a nonattainment area's attainment date." Also, section section 51 § 51.90844 ( What is the required time frame for obtaining emission reductions to ensure attainment by the attainment date?)

provides: " For each nonattainment area, the State must provide for implementation of all control measures needed for attainment no later than the beginning of the attainment year ozone season." Thus, if the latest attainment date allowed by the ActCAA for a serious area designated in 2004 is June 15, 2013, the ( complete) ozone season preceding that date would occur in 2012. However, if all of the reductions necessary to achieve attainment are in place prior to that ozone season, then the most expeditious attainment date would in fact be just after the end of that ozone season in 2012 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 45With the exception of areas with year round ozone seasons, in which case the latest attainment date may be earlier in the year of the outside attainment date identified in the statute.

46Note that 40 CFR 51.900( g) defines " Attainment year ozone season" as the ozone season immediately preceding a nonattainment area's attainment date.

255 ( assuming the RACM analysis did not compel a more expeditious attainment year). Thus, in light of the Phase I R1 rule, the latest possible attainment date for all areas will be just after the end of the ozone season in the year prior to the outside attainment date identified in the statute for the area's classification. 45 Consistent with the manner in which ROP plans under the 1 hour ozone standard were developed, the RFP baseline for 2002 will have a typical summer day tons/ day basis. As such,

the attainment year target will also be a typical summer day target. Thus, the target level of emissions must be met by the attainment date of the attainment year. 46 As noted above, section 182( c)( 2)( B) requires that RFP be continued out to the attainment date.

Therefore, if the area's last increment of progress ( out to the area's attainment date) would result in emissions reductions greater than needed for attainment, then that final increment of progress still needs to be implemented by PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 256 the area's attainment date. However, we do not believe that there will likely be a situation where RFP requirements will result in emission reductions that will be greater than the reductions needed for attainment. The reason is that the RFP requirement is based on reducing typical summer day emissions. The last increment of progress would be in the attainment year, and would be achieved for the ozone season prior to the attainment date. We do not consider partial years in the calculation of the RFP requirement ( thus, there would not be an " extra increment" between the beginning of the ozone season and the attainment date that would occur after the ozone season). The emission reductions needed for attainment must also be achieved prior to the ozone season prior to the attainment date; therefore the emission reductions needed by the attainment date would satisfy the last RFP increment out to the attainment date. An example of how this might play out appears in Appendix C of this preamble.

b. Summary of Ffinal Rrule.

For each area classified as moderate or higher, the State's 15 percent VOC emission reduction plan must provide for the emissions reductions to be achieved by the end of the 6 year period after the baseline year. The 6 year period PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 257 referenced in section 182( b)( 1) of the ActCAA shall begin January 1 of the year following the year used for the baseline emissions inventory. For areas initially designated nonattainment for the 8 hour NAAQS, the six year6 year period runs from January 1, 2003 to December 31, 2008.

For each area classified as serious or higher, the State's RFP plan must provide a 3 percent annual emission reduction requirement averaged over every 3  year period after the initial 6  year period. For areas initially designated nonattainment for the 8 hour NAAQS, the first 3

year period shall run from January 1, 2009 and end December 31, 2011. The final increment of progress must be achieved no later than the attainment date for the area. An example of the recommended approach is shown in Table 1 for serious and above areas; assume the area has already completed its 15 percent VOC reduction under the 1 hour ozone standard. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 258 To summarize, for areas designated nonattainment for the 8 hour NAAQS with an effective date of June 15, 2004, the rule would establish the following:

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

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

would run from January 1, 2009 and end December 31,

2011.

° The baseline emissions inventory in section 51.910( d)

would be for calendar year 2002.. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 259 Table 1 Reduction Requirements for Periods for Areas Classified as Serious and above with an approved 1 hour 15 percent Plan in the SIP ( assumes spring to fall ozone season)

RFP Requirement  As a Percentage of Baseline VOC and/ or NOx Emissions NOTE 2 Classification Row Time Period / Terminal Period NOTE 1 Serious Severe 15 Severe 17 Extreme 1 First 6 years after the Baseline Year ( Typical summer day, 2002 to December 31, 2008) 18 percent 18 percent 18 percent 18 percent PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 Table 1 Reduction Requirements for Periods for Areas Classified as Serious and above with an approved 1 hour 15 percent Plan in the SIP ( assumes spring to fall ozone season)

RFP Requirement  As a Percentage of Baseline VOC and/ or NOx Emissions NOTE 2 Classification Row Time Period / Terminal Period NOTE 1 Serious Severe 15 Severe 17 Extreme 260 2 Next Full 3  year Period ( January 1, 2009 to December 31, 2011) 9 percent 9 percent 9 percent 9 percent PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 Table 1 Reduction Requirements for Periods for Areas Classified as Serious and above with an approved 1 hour 15 percent Plan in the SIP ( assumes spring to fall ozone season)

RFP Requirement  As a Percentage of Baseline VOC and/ or NOx Emissions NOTE 2 Classification Row Time Period / Terminal Period NOTE 1 Serious Severe 15 Severe 17 Extreme 261 3 Next Full 3  year Period ( January 1, 2012 to December 31, 2014) 3 percent in the 2012 attainment year 9 percent 9 percent 9 percent PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 Table 1 Reduction Requirements for Periods for Areas Classified as S with an approved 1 hour 15 percent Plan in the SIP ( assumes ozone season)

RFP Requirement  As a Percent VOC and/ or NOx Emissio Classification Row Time Period / Terminal Period NOTE 1 Serious Severe 15 Severe 262 4 Next Full 3  year Period ( January 1, 2015 to December 31, 2017) 9 percent 9 perc 5 Next Full 3  year Period ( January 1, 2017 to December 31, 2019) 96 percent throughin 20198 attainment year 9 perc PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 263 6 Next Full 3  year Period ( January 1,

2020 to December 31, 20232) 63 percent through in 20210 attainm ent year 9 percent 7 The period terminating in extreme area attainment date ( January 1, 20232 to attainment date at end of 20243) 6 percent in 2023 attainm ent year NOTES:

1. Time periods in parentheses are for areas designated and classified effective June 15, 2004.

2. RFP credit allowed for NOx reductions using substitution under section 182( c)( 2)( C). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 264 c. Comments and Rresponses.

No comments were received on the proposal concerning the timing of emission reductions needed for RFP.

14. Banked Eemission Rreduction Ccredits ( Iincluding Sshutdown Ccredits).

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

a. Background This topic was not discussed in the proposed rulemaking,

but we believe that questions that have arisen on this topic bear some discussion here.

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

Baseline emissions. For purposes of subparagraph ( A),

the term " baseline emissions" means the total amount of actual VOC or NOx emissions from all anthropogenic sources in the area during the calendar year of the enactment of the Clean Air Act Amendments of 1990,

excluding . . . [ emphasis added.]

The April 1992 General Preamble provides: PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 265 The adjusted base year inventory ( i. e., baseline emissions) must contain only actual emissions occurring in the base year, 1990, within the designated nonattainment area boundaries. The baseline emissions should not include pre enactment banked emission credits since they were not actual emissions during the calendar year of enactment. [ 57 Fed. Reg ofR 13507; April 16,

1992; 57 FR 13507; emphasis added].

and Pre enactment banked emissions reductions credits are not creditable toward the 15 percent progress requirement. However, for purposes of equity, EPA encourages States to allow sources to use such banked emissions credits for offsets and netting. When States use such banked credits for offsets and netting to the extent otherwise creditable under the Part D NSR regulations, these pre enactment emissions credits must be treated as growth. Consequently, this " growth" must be accounted for, as is the case with all other anticipated growth, in order to ensure that it does not interfere with the 15 percent rate of progress requirement ( which is " net" of growth). In addition, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 47Guidance on the Adjusted Base Year Emissions Inventory and the 1996 Target for the 15 Percent Rate of Progress Plans. Ozone/ Carbon Monoxide Programs Branch, U. S. Environmental Protection Agency, Office of Air Quality Planning and Standards , Research Triangle Park, NC 27711. EPA 452/ R 92 005. October 1992.

4851 FR 233 " Emissions Trading Policy Statement; General Principles for Creation, Banking and Use of Emission 266 when such growth emissions are used as offsets, they must be applied in accordance with the offset ratio prescribed for the area of concern ( e. g., 1.3 to 1 for severe areas, etc.). All pre enactment banked credits must be included in the nonattainment area's attainment demonstration for ozone to the extent that the State expects that such credits will be used for offsets or netting prior to attainment of the ambient standards.

Credits used after that date will need to be consistent with the area's plan for maintenance of the ambient standard. [ 57 FR 13508].

The EPA's 1992 guidance on calculating the 15 percent emission target47 contained the following:

4.3 Pre enactment Banked Emissions Reduction Credits.

If the State has an emissions credit bank that meets the EPA's requirements under an earlier policy statement[ 48], PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 Reduction Credits; Final Policy Statement and Technical Issues Document." December 4, 1986. This document has been replaced by Improving Air Quality with Economic Incentive Programs, January 2001, available at http:// www. epa. gov/ region07/ programs/ artd/ air/ policy/ search. htm.

267 the State is allowed to use its pre enactment banked emissions reduction credits to facilitate the location of new sources in nonattainment areas during the 1990 1996 period. However, because these reduction credits represent emissions that are not included in the 1990 base year inventory, any additional emissions that result from the use of banked credits must be treated as growth in order to ensure that the 15 percent VOC emissions reduction requirement is achieved. Also, it is important to note that the use of pre enactment banked emissions credits must be in accordance with the offset ratios prescribed in the CAAACAA Amendments ( e. g., 1.3 to 1 in severe areas.)

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

b. Interpretation for 8 hour Oozone NAAQS The guidance provided above is still relevant for banked emission reduction credits in relation to the RFP requirement PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 for the 8 hour ozone standard. However, because the rule for implementing the 8 hour ozone standard uses a 2002 baseline year, the above guidance should be read   for purposes of implementing the 8 hour ozone RFP requirement   by substituting " pre enactment banked emission credits" with " pre 2002 banked emission credits." A pre 2002 banked emission credit is one that was generated before January 1,

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

see Ssection V. D. 5 of this preamble.

F. Are contingency measures required in the event of failure to meet a milestone or attain the 8 hour ozone NAAQS?

[ Section VI. J. of June 2, 2003 proposed rule ( 68 FR 32837); no draft or final regulatory text.]

1. Background Under the CAA, nonattainment areas subject only to subpart 1, as well as those classified under subpart 2 as moderate, serious, severe, and extreme must include in their SIPs contingency measures consistent with sections 172( c)( 9)

and 182( c)( 9), as applicable. Contingency measures are additional controls to be implemented in the event the area PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 269 fails to meet a RFP milestone or fails to attain by its attainment date. These contingency measures must be fully adopted rules or measures which are ready for implementation quickly upon failure to meet milestones or attainment.

For additional background information, see the Proposal ( 68 FR 105, June 2, 2003). Other related information can be found in the following applicable guidance documents:

° " Contingency Measures for Ozone and Carbon Monoxide ( CO)

Redesignations," Memorandum from G. T. Helms, Chief,

Ozone/ Carbon Monoxide Programs Branch, June 1, 1992,

° " Procedures for Processing Requests to Redesignate Areas to Attainment," Memorandum from John Calcagni, Director,

Air Quality Management Division, September 4, 1992,

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

( EPA 452/ R 93 002), March 1993 ° " Early Implementation of Contingency Measures for Ozone and Carbon Monoxide ( C) O) Nonattainment Areas,"

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

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

Progress Plans," Memorandum from Michael H. Shapiro, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 270 Acting Assistant Administrator for Air and Radiation to the Regional Division Directors, August 23, 1993,

° " Clarification of Issues Regarding the Contingency Measures that are due on November 15, 1993 for Moderate and Above Ozone Nonattainment Areas," Memorandum from D.

Kent Berry, Acting Director, Air Quality Management Division, November 8, 1993, and ° " Guidance on the Post 1996 Rate of Progress Plan ( ROP)

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

January 1994 .

2. Summary of final rule Contingency measures are required to be implemented in the event of failure to meet a milestone or attain the 8 hour ozone NAAQS. We are adopting the approach taken in our proposal. All subpart 1 and subpart 2 areas other than marginal areas need contingency measures. The contingency measures SIP should accompany the attainment demonstration SIP required for submission by June 15, 2007.

It should be noted that the ActCAA requires States to identify contingency measures that will go into effect without further action on the part of the fFederal government. We have recognized, however, that some PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 271 additional State or local action may be necessary ( such as notification of sources) before implementation.

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

For Ssubpart 1, States should follow the same guidance used for Ssubpart 2 areas. We intend to provide any additional guidance if needed.

3. Comments and Rresponses Comment: Two commenters raised concerns about the difficulty some areas may have in identifying what they referred to as " reserve" or " unused" measures for the 1 hour standard that could be used as contingency measures for the 8 hour standard for subpart 2 areas. These commenters requested protection for areas that have no " leftover"

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

Response: The commenters appear to be asking EPA to drop the requirement for a nonattainment area SIP to contain PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 272 contingency measures. The commenters have not provided a legal rationale why they believe it is possible to do this.

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

A list of example contingency measures has been provided. See section 9.5 of " Guidance for Growth Factor,

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

To allow nonattaining areas with seemingly few potential contingency measures to opt out of the contingency measure requirement is counter to the contingency measure provision in the CAA. The EPA does not see any way to interpret the clear language of the statute other than as requiring contingency measures in all nonattainment areas other than PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 273 marginal subpart 2 areas. It should also be noted that the Act'sCAA's requirement for an area's SIP to demonstrate attainment by the attainment date is not limited to " feasible" or reasonably available control measuresRACM.

Comment: One commenter alleged EPA's proposal to allow Federal measures that result in additional emission reductions beyond RFP or attainment to qualify as contingency measures is legally invalid. The commenter further stated that contingency measures must consist of control requirements that will be taken off the shelf and undertaken if and when an RFP or attainment failure occurs; i. In other words, new measures not fFederal or local measures that already exist.

Response: The CAA states that contingency measures are to be " specific measures to be undertaken if the area fails to make reasonable further progress, or to attain . . . by the attainment date." In guidance, EPA interprets this provision to mean thatThe April 16, 1992 General Preamble provided the following guidance: " States must show that their contingency measures must be fully adopted rules or measures which are ready forcan be implemented with minimal further action on their part and with no additional rulemaking actions such as public hearings or legislative PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 274 review. In general, EPA will expect all actions needed to affect full implementation quickly upon failure to meet milestones or attainment. of the measures to occur within 60 days after EPA notifies the State of its failure." ( 57 FR at 13512.) This could include fFederal measures and local measures already scheduled for implementation.

The EPA has approved numerous SIPs under this interpretation   i. e., that use as contingency measures one or more fFederal or local measures that are in place and provide reductions that are in excess to the attainment demonstration or RFP plan. ( 62 FR 15844, April 3, 1997; 62 FR 66279, December 18, 1997; 66 FR 30811, June 8, 2001; 66 FR 586 and 66 FR 634, January 3, 2001.) The key is that the statute requires extra reductions that are not relied on for RFP or attainment and that are in the demonstration to provide a cushion while the plan is revised to meet the missed milestone. In other words, contingency measures are intended to achieve reductions over and beyond those relied on in the attainment and RFP demonstrations. Nothing in the statute precludes a State from implementing such measures before they are triggered. In fact, a recent court ruling upheld contingency measures that were previously required and implemented where they were in excess of the attainment PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 275 demonstration and RFP SIP. See LEAN v. EPA, 382 F. 3d 575 5th Cir. Circuit, 2004.

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

Response: The EPA acknowledges the commenter's support of our proposal regarding contingency measures. As to the commenter's anticipation of how additional guidance will be patterned, as stated in both our proposed and final rule regarding subpart 1, we intend to develop guidance as needed.

G. What requirements should apply for RACM and RACT for 8

hour ozone nonattainment areas?

[ Section VI. K. of June 2, 2003 proposed rule ( 68 FR 32837); section 51 § 51.912 in draft and final regulatory text.]

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

1. Reasonably Available Control Technology ( RACT) PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 276 a. Background As described in more detail in the June 2 proposal,

subpart 1 of part D includes a requirement that an attainment plan provide for the implementation of all RACM as expeditiously as practicable, including such reductions that may be obtained through RACT. Under subpart 2, marginal areas are required to correct pre 1990 RACT requirements and new RACT requirements are specified for moderate and above ozone nonattainment areas. Additionally, States must adopt RACT for all areas in an ozone transport region ( OTR). The RACT requirement applies to both ozone precursors   NOx and VOC. Since 1990, we have issued guidance documents on the RACT requirements in subpart 2. Prior to enactment of the CAA Amendments of 1990, EPA also issued detailed guidance documents on RACT for ozone nonattainment area SIPs.

In the period prior to enactment of the 1990 CAA Amendments, only the general requirements for RACM and RACT existed. Also, prior to the 1990 Amendments, EPA had issued control technique guideline ( CTG) documents to provide presumptive norms for RACT for VOC controls for States to follow in adopting RACT for ozone nonattainment areas. In 1990, Congress specified more detailed RACT provisions and explicitly required RACT for NOx as well as for VOC. Also in PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 277 1990, section 183( c) required EPA to issue technical documents which identify alternative control techniques ( ACT documents) for large stationary sources of NOx and VOC. The EPA completed 12 ACT documents for VOC source categories.

Over a five year5 year period, 1991 94, EPA issued nine ACT guideline documents for large stationary sources of NOx. In 2000, updates to the NOx ACT documents were completed for stationary internal combustion engines and cement kilns.

Although the ACT documents do not set a presumptive RACT level as do CTGs, they are intended to help States in making RACT determinations.

Section 183( c) of the CAA also requires EPA to " revise and update such documents [ i. e., CTGs and ACTs] as the Administrator determines necessary." The EPA intends in the future to develop updated technology guidance, especially with respect to source categories emitting multiple pollutants in large amounts. In addition, EPA will beis considering related recommendations from the Clean Air Act Advisory Committee that are expectedwere sent to EPA in January 2005 in response to the recent National Research Council report on Air Quality Management in the United States ( January 2004). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 278 One of the CAAAC recommendations is that " for the SIPs States are required to submit over the next several years, EPA and States, locals, and Tribes should promote the consideration of multipollutant impacts, including the impacts of air toxics, and where there is discretion, select regulatory approaches that maximize benefits from controlling key air toxics, as well as ozone, PM2.5 and regional haze." As part of this effort, EPA intends in the future to develop updated technology guidance with respect to source categories emitting multiple pollutants in large amounts.

As new or updated EPA RACT guidance becomes available States should consider the new information in their RACT determinations. States should consider the updated guidance in any RACT determinations or certifications that have not been issued as of the time such an update becomes available.

In addition to the ACTs and CTGs, information developed as part of the process of determining BACT, BART, LAER, and MACT, can be very useful in supplementing or, in some cases,

substituting for information to support a RACT determination.

In the June 2, 2003 proposal, we proposed several requirements with respect to RACT. For subpart 1 areas, we proposed several options. We proposed in one option to interpret the CAA in a manner similar to that under subpart 2 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 279 by requiring areas covered under subpart 1 to face different RACT requirements based on the magnitude of the ozone problem in the area ( i. e., the area's design value). In another option, we proposed that RACT would be met if the area were able to demonstrate attainment of the standard as expeditiously as practicable with emission control measures in the SIP. We also proposed as an early attainment incentive that RACT would be met in an area which demonstrates attainment within 3 years and submits the demonstration within 1 year.

For subpart 2 areas, we proposed to apply RACT as specified in subpart 2. We proposed the RACT submittal dates for subpart 1 areas would be either the same as the submittal date for the attainment plan ( within 3 years) or the same as the deadline for subpart 2 areas ( within 2 years). In addition, we proposed the date for affected sources to implement RACT in subpart 2 areas would be thirty30 months after the required submittal date. We also proposed that States may use current EPA guidance in making RACT determinations; consequently, in some cases, sources previously evaluated under the 1 hour ozone RACT requirement and sources subject to the NOx SIP Call cap and trade program PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 280 could be determined to meet the 8 hour ozone RACT requirement.

b. Summary of Ffinal Rrule.

For subpart 1 areas that do not request an attainment date extension ( beyond 5 years after designation), RACT will be met with control requirements sufficient to demonstrate that the NAAQS is attained as expeditiously as practicable.

The RACT submittal date for these areas is the same as the submittal date for the attainment plan. This submission date is no later than three3 years after designation.

For subpart 1 areas that request an attainment date extension ( beyond 5 years after designation), subpart 2 moderate and above areas, and areas within an Ozone Transport RegionOTR, RACT is required under subpart 2 andwith the RACT submittal dateand is two yearsdue 27 months after designation, except a subpart 1 area shall submit the RACT SIP with its attainment date extension request. States must require sources to implement RACT no later than the first ozone season or portion thereof which occurs 30 months after the required submittal date.

Where RACT applies ( except certain subpart 1 areas, as described above, and except certain sources subject to the NOx SIP Call or CAIR, as described below), State SIPs PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 281 implementing the 8 hour standard must assure that RACT is met, either through a certification that previously required RACT controls represent RACT for 8 hour implementation purposes or through a new RACT determination. States may use existing EPA guidance in making RACT determinations. Where a State has adopted and EPA has approved a control measure as RACT for a specific major stationary source or source category for the 1 hour ozone NAAQS, and absent data indicating that the previous RACT determination is no longer appropriate in lieu of a RACT rule, the State may submit a certification that the source is subject to RACT. Such certification shall be accompanied by appropriate supporting information, such as consideration of updated EPA guidance and other relevant information such as information received from public commenters.

For purposes of meeting the NOx RACT requirement in areas located in a State subject to the NOx SIP Call or CAIR for NOx, the State may conduct case by case RACT determinations or consider the RACT SIP requirements met for sources subject to the State's emission cap and trade program where the cap and trade program has been approved by EPA as part of a SIP meeting the NOx SIP Call or CAIR NOx requirements. Additionally, RACT is considered met for PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 282 cement kilns and stationary internal combustion engines that are subject to a SIP approved obligation to install and operate controls that are expected to achieve at least a 30 percent and 82 percent reduction, respectively, from uncontrolled levels. As new or updated EPA RACT guidance becomes available, States should consider the new information in their RACT determinations.

States are free to conduct case by case RACT determinations   or RACT determinations or certifications for groups of sources,   at their discretion. A State may meet the NOx RACT requirement by showing that the weighted average emission rate from sources in the nonattainment area subject to RACT   includingRACT   including sources subject to the NOx SIP Call requirements   meetor CAIR NOx requirements   meet RACT requirements.

It should be noted thatAs described in the proposed regulatory text for this rule [ section 51.912( b)( 1)], for purposes of meeting the RACT obligations under section 182( b)( 2)( C) of the ActCAA for major stationary sources of VOCs and under section 182( f) of the ActCAA for major stationary sources of NOx, the definition of major stationary source in section 302 of the ActCAA, as modified by the major source definition in either section 182( b), ( c), ( d) or ( e) PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 283 of the ActCAA as applicable to the area's classification,

applies.

Although we drafted regulatory language for several aspects of the RACT program, we believe it is sufficient to describe EPA's views on the details of the RACT program in today's preamble and in other guidance ( e. g., the NOx Supplement to the General Preamble, 11 25 92). Thus, some detailed portions of the proposed regulatory text regarding RACT were not retained in the final rule.

A Note About Recommended Consultation. Based on our experience developing the NOx SIP call, CAIR, and the proposed Clear Skies legislation, we believe that many power companies will develop their strategies for complying with CAIR based, in part, on consultations with air quality officials in the areas in which their plants are located.

Because power plants are generally major emission sources,

the operators of those plants typically have ongoing relationships with state and local officials that will be involved in developing air quality plans. We are aware that,

in the past, companies have worked with air quality officials to meet their emission control obligations under a cap

andtrade approach such as the NOx SIP call while also addressing the concerns of air quality officials about the air quality PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 284 impacts of specific plants. This has led to controlling emissions from power plants located in or near specific ozone nonattainment areas. A number of companies have indicated that such collaboration will be even more important as the States where they are located address multiple air quality goals ( e. g., visibility, interstate air pollution, local attainment).

EPA encourages similar consultations between States and power sector companies on the location of plants to be controlled under CAIR, considering local attainment needs in planning for CAIR compliance. This consultation might reveal opportunities to provide improved air quality for large numbers of people in a nonattainment area, or to promote more expeditious attainment for the area. Power companies may identify economic advantages in situating CAIR controls to help the local area attain; for example, it might need to control fewer facilities for the area to reach attainment.

These benefits may outweigh any additional marginal costs the company might incur by forgoing controls on another more distant plant.

In this regard, EPA notes that CAIR SIPs will be due in 2006, while local 8 hour ozone attainment plans will be due in 2007. EPA suggests that consultations on location of CAIR PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 285 controls would be timely during state development of the CAIR SIP.

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

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

Response: The EPA agrees with these comments.

Comments: For subpart 1 ozone nonattainment areas, EPA received several comments for and against the options proposed for addressing RACT.

Several State and industry commenters supported EPA's proposed approach that RACT would be met if the area is able to demonstrate attainment of the standard as expeditiously as practicable with emission control measures in the SIP. The reasons provided by these commenters were generally as follows: States should be able to use their discretion in determining which control strategies are the most effective in addressing a particular area's air quality problem;

flexibility is needed as areas differ in sensitivity to NOx and VOC reductions; EPA's regional modeling shows these requirements are unnecessary in many areas; and many of these PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 286 areas violate the ozone standard primarily or entirely due to transport.

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

since section 172( c)( 1) of the ActCAA explicitly mandates RACT " at a minimum" in all nonattainment areas, Congress plainly intended to require RACT as a floor level of control technology in addition to any measures needed to demonstrate timely attainment; even where RACT does not advance attainment, it is needed in order to reduce the severity and number of violations; under this approach, the statutory RACT provisions add nothing to the statutory attainment mandate   which violates basic canons of statutory interpretation; RACT in nonattainment areas will substantially reduce transport of ozone and ozone precursors;

for equity reasons, sources in similar areas should be subject to the same control; and RACT is a useful tool that should not be abandoned through flexibility mechanisms.

Response: The general RACT provision under subpart 1 in the statute, is found in section 172( c)( 1). It is a portion PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 287 of the RACM provision found in that same section. Our longstanding interpretation of the RACM provision is that areas need only submit such RACM as will contribute to timely attainment and meet RFP, and that measures which might be available but would not advance attainment or contribute to RFP need not be considered RACM. This interpretation has been upheld in several recent court cases. See Sierra Club v. EPA, 294 F. 39 155, 162 ( DC Cir. Circuit, 2002) ( concerning the Metropolitan Washington, D. C., attainment demonstration)

and Sierra Club v. EPA, No. 01 60537 ( 5th Cir. Circuit, 2002)

( concerning the Beaumont attainment demonstration). Since subpart 1 RACT is a portion of RACM, these cases also support a conclusion that, where we are dealing only with section 172 RACT, it is reasonable to require only such RACT as will meet RFP and advance attainment. In view of these court cases,

EPA disagrees with the comments listed above opposing the approach that, in subpart 1 areas, RACT would be met by control measures in a SIP demonstrating attainment of the standard as expeditiously as practicable and meeting RFP.

The EPA generally agrees with comments that States should have flexibility to determine which control strategies are the most effective in reaching attainment as expeditiously as practicable and providing for RFP, and the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 288 CAA gives primary authority to States and local governments to select the mix of controls necessary to meet the NAAQS.

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

Finally, EPA agrees withsome commenters who suggested,

for equity reasons, that sources in similar areas should be subject to the same control. In the proposal, EPA suggested subpart 1 and 2 areas with the 8 hour ozone design values above 91 ppb should all be required to meet RACT. The EPA also proposed that RACT would be met in an area which demonstrates attainment within 3 years and submits the demonstration within 1 year. In the final rule, EPA has addressed equity concerns by taking portions of these two proposals, such that subpart 1 and 2 areas with attainment deadlines longer than 5 years after designation must meet the same RACT requirements. We believe ( longer than) 5 years is more appropriate than the 3 years proposed for this requirement since this approximates the maximum attainment date for subpart 2 ( moderate) areas subject to RACT and since PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 289 this approach is consistent with the manner in which ROP/ RFP requirements are treated in the final rule.

Therefore, in subpart 1 areas that do not request an extension beyond the initial 5 years after designation, the final rule indicates that RACT would be met by the emission control measures in a SIP that demonstrates attainment of the standard as expeditiously as practicable and meets RFP. In addition, the final rule requires subpart 1 areas with maximum attainment deadlines longer than 5 years after designation to meet the same RACT requirements as subpart 2 areas. This approach minimizes the RACT inequity with subpart 2 areas and provides flexibility for subpart 1 areas demonstrating attainment within 5 years.

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

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

Response: Section 182( a) provides that marginal and higher classified areas for the 1 hour standard with pre 1990 RACT obligations had to submit corrections to their RACT rules within 6 months after classification under the 1990 CAAACAA Amendments. To the extent that any 8 hour ozone nonattainment areas did have this obligation, they already PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 290 met it. See footnote 60 in the June 2, 2003 proposal. The CAA does not require RACT for marginal areas other than the obligation to " correct" pre 1990 RACT requirements.

Comments: The EPA received several comments for and against the proposal that States may use a prior RACT determination with respect to the 1 hour ozone standard for purposes of meeting the RACT requirements for the 8 hour ozone standard. Further, EPA received comments on the proposal that a new RACT determination is required in cases where the initial RACT analysis under the 1 hour standard for a specific source or source category concluded that no additional controls were necessary.

Several State and industry commenters supported EPA's proposed approach that a prior RACT analysis under the 1 hour ozone standard should meet RACT requirements under the 8 hour standard where major sources or source categories were previously reviewed and controls applied to meet RACT. These commenters stated that RACT is not specific to any particular ozone standard, such that once a source has met RACT, it has met RACT, whether or not the ozone standard is revised to become more ( or less) stringent; just as with the 15 percent VOC requirement, the statute provides no basis for duplicative imposition of RACT; and there is no basis in the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 291 statute to read in a new requirement for RACT. In addition,

some industry commenters stated that electric generating units which meet Ttitle IV NOx control requirements would also meet the NOx RACT requirement.