Sierra Club v. EPA, et al., 294 F. 3d 155 ( D. C. Circuit,

2002).

Comment: Several commenters agreed with our proposal to require that the RACM analysis and measures be submitted within 3 years after the effective date of designation for the 8 hour NAAQS.

Response: We acknowledge the support of the comments on the submission timing of the RACM requirements.

H. How will the section 182( f) NOx provisions be handled under the 8 hour ozone standard?

[ Section VI. L. of June 2, 2003 proposed rule ( 68 FR 32840); § 51.913 in draft and final regulatory text.]

1. Background While NOx emissions are necessary for the formation of ozone in the lower atmosphere, a local decrease in NOx PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 60See 57 FR 55622 (" Nitrogen Oxides Supplement to the General Preamble," published November 25, 1992).

61As stated in EPA's I/ M ( November 5, 1992, 57 FR 52950) and conformity rules ( 60 FR 57179 for transportation rules and 58 FR 63214 for general rules), certain NOx requirements in those rules do not apply where EPA granted an areawide exemption under section 182( f).

285 emissions can, in some cases, increase local ozone concentrations. This potential " NOx disbenefit" resulted in Congress including the NOx exemption provisions in section 182( f) of the CAA for areas classified under subpart 2.

Section 182( f) requires States to apply the same requirements to major stationary sources of NOx as are applied to major stationary sources of VOC under subpart 2. The applicable requirements are RACT and nonattainment major NSR for major stationary sources of NOx in certain ozone nonattainment areas and throughout States in the OTR. 60 In addition,

section 182( f) specifies circumstances under which these NOx requirements would be limited or would not apply (" NOx exemption"). Further, areas granted a NOx exemption under section 182( f) may be exempt from motor vehicle I/ M and certain Federal requirements of general and transportation conformity. 61 In the June 2, 2003 action, we proposed to apply the NOx requirements and exemption provisions in section 182( f) for PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 62See 57 FR 55620, " Nitrogen Oxides Supplement to the General Preamble," published November 25, 1992.

63September 1, 2004 at 69 FR 53378.

64The EPA's primary guidance regarding section 182( f) is contained in the " Guideline for Determining the Applicability of Nitrogen Oxide Requirements under Section 182( f)," issued by John S. Seitz, Director, Office of Air Quality Planning and Standards, to the Regional Division Directors, December 16, 1993.

65Memorandum dated January 14, 2005, " Guidance on Limiting Nitrogen Oxides ( NOx) Requirements Related to 8 Hour Ozone Implementation" from Stephen D. Page, Director, Office of Air Quality Planning and Standards, to Air Directors, Regions I X.

286 subpart 2 nonattainment areas and in OTRs. 62 In addition, we proposed to allow subpart 1 nonattainment areas to seek a NOx exemption, where appropriate. Further, we proposed that areas previously granted a NOx exemption under the 1 hour ozone standard would need to request an exemption for purposes of the 8 hour standard in order to account for any new information that may point to a different conclusion with respect to the 8 hour standard. Recently, we invited comment63 on draft guidance intended to update the existing 1

hour ozone guidance64 regarding section 182( f) for application to the 8 hour ozone program. We issued the updated guidance regarding section 182( f) on January 14, 2005.65 2. Summary of final rule PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 66Memorandum dated January 14, 2005, " Guidance on Limiting Nitrogen Oxides ( NOx) Requirements Related to 8 Hour Ozone Implementation" from Stephen D. Page, Director, Office of Air Quality Planning and Standards, to Air Directors, Regions I X.

287 As proposed, the final rule allows a person to petition the Administrator for a NOx exemption under either section 182( f) or our regulations for any area designated nonattainment for the 8 hour ozone NAAQS and for any area in a section 184 OTR. As with the 1 hour ozone standard, the NOx exemption provision applies to subpart 2 ozone nonattainment areas and in a section 184 OTR. In addition,

the final rule extends to subpart 1 ozone nonattainment areas the opportunity to petition the Administrator for an exemption from nonattainment major NSR and/ or RACT requirements in a manner consistent with section 182( f)

provisions. The petition must contain adequate documentation that the provisions of section 182( f) and/ or our regulations are met. We recently issued66 updated guidance on appropriate documentation regarding section 182( f) for application to the 8 hour ozone program. In addition, the final rule states that a section 182( f) NOx exemption granted under the 1 hour ozone standard does not relieve the area from any requirements under the 8 hour ozone standard. That is, a new PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 288 petition with respect to 8 hour ozone must be submitted to EPA and must be approved by EPA before an area is exempt from any 8 hour ozone standard NOx requirements.

3. Comments and responses Comments: Several commenters supported EPA's proposal to make NOx waivers available to 8 hour nonattainment areas and States in an OTR under either subpart 1 or subpart 2,

pursuant to the provisions of section 182( f) of the CAA.

Some commenters stated that requiring a re approval of existing NOx waivers amounts to rescinding the existing waivers. Another commenter asked what is needed to maintain an exemption. One commenter stated that EPA should make it clear that there is no presumption that a NOx waiver granted under section 182( f) of the CAA for the 1 hour ozone standard is continued for the 8 hour standard. Other commenters recommended that the NOx waiver should automatically apply for the 8 hour ozone standard in areas where EPA previously granted a NOx waiver under the 1 hour ozone standard. One commenter stated that the technical basis for granting waivers under the l hour NAAQS remains valid.

Response: We agree with comments supporting the proposal to apply the section 182( f) exemption provisions to subpart 2 nonattainment areas and OTRs and to extend these PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 67E. g: Recision of NOx waiver for the Dallas Fort Worth area on April 20, 1999 ( 64 FR 19283). Also, the temporary waiver for Houston and Beaumont ( originally granted April 19, 1995) expired December 31, 1997). ( 60 FR 19515)

289 protections to subpart 1 areas through regulation.

Since a NOx exemption granted for the 1 hour ozone standard was completed through notice and comment rulemaking,

the exemption remains effective for the 1 hour standard unless and until EPA completes rulemaking to remove or revise the waiver for a specific area. This rulemaking on the 8

hour ozone implementation program does not rescind any existing 1 hour NOx waiver provision.

However, for areas previously granted a NOx waiver under the 1 hour ozone standard, a petitioner would need to seek a new waiver for purposes of the 8 hour ozone standard.

The EPA does not believe NOx waivers granted under the 1 hour ozone standard should always be permanent. As sources are regulated and the mix of pollutants is altered, circumstances could show that NOx reductions will begin to provide a benefit. In several cases, the 1 hour NOx waiver has been removed in subsequent rulemaking actions. 67 Indeed, when EPA issued waivers under the 1 hour ozone standard, we stated that the NOx waivers would be removed where new information became available and the rationale for the initial NOx waiver PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 290 no longer was supported. For example, the waiver may be removed through rulemaking if subsequent modeling data demonstrated an ozone attainment benefit from NOx emission controls.

Given that many NOx waiver actions were based on air quality and dispersion modeling analyses made in the mid

1990s, EPA believes that newer data and analyses should be used to determine if a NOx waiver under the 8 hour ozone standard is warranted. Many NOx waivers were simply based on whether an area had ambient air quality showing attainment of the 1 hour ozone standard; this is not an appropriate basis for a waiver under the 8 hour ozone standard since areas may be attaining the 1 hour standard but exceeding the 8 hour standard. Some NOx waivers were based on dispersion modeling. In some cases, the modeling later proved inadequate as attainment was not met in the forecast year.

In other cases, those modeling analyses have been replaced with more recent analyses. The EPA believes that NOx waivers under the 8 hour ozone standard should be supported by analyses specific to the 8 hour ozone standard and should consider relevant information developed after the 1 hour waivers were granted.

The EPA believes the NOx waivers may not be granted PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 291 except through notice and comment rulemaking action. That is, since EPA approval of a waiver request would change SIP requirements, EPA must conduct notice and comment rulemaking on that request. The EPA believes this requirement precludes automatic approval of 8 hour NOx waiver requests based on previously issued 1 hour NOx waivers.

Comment: Some commenters urged EPA to expand the section 182( f) waiver to VOC RACT as well as NOx RACT. One commenter states that EPA has substantially more discretion under subpart 1 than it does under subpart 2, and to fail to exercise that discretion to avoid ineffective and inefficient requirements ( through NOx and VOC waivers) would be irresponsible, and an abuse of its discretion.

Response: The EPA disagrees with these comments. We do not see any provision in the CAA that would give us the authority to create such an exemption. While Congress could have created a VOC waiver at the same time the section 182( f)

NOx waiver provisions were enacted, Congress chose not to do so. The Congress further provided for additional review and study under section 185B " to serve as the basis for the various findings contemplated in the NOx provisions" ( H. R.

Rep. 490 at 257). Under section 185B, EPA, in conjunction with the National Academy of Sciences ( NAS), conducted a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 68December 1991 NAS report, Rethinking the Ozone Problem in Urban and Regional Air Pollution, page 377.

292 study on the role of ozone precursors in tropospheric ozone formation. The final section 185B report incorporates this NAS report along with an EPA report addressing the availability and extent of NOx controls. With respect to VOC, the NAS report states that " control of VOCs never leads to a significant increase in ozone." 68 Thus, the section 185B report does not support a waiver provision for VOC. Thus,

while dispersion modeling analyses show that NOx emissions reductions can be counterproductive under certain circumstances ( the reason for the NOx waiver provision), we do not see a similar case for VOC. Therefore, we are not expanding the section 182( f) exemption concept to VOC.

Comment: One commenter stated that the draft guidance does not contain a discussion of the linkages between 182( f)

NOx exemptions and certain other regional NOx reduction requirements such as the NOx SIP Call and the proposed " Clean Air Interstate Rule." The commenter believed EPA has an obligation to assess the impact of any section 182( f)

exemption request under the provisions of section 110( a)( 2)( D), including the potential for emissions exempted from controls to contribute to downwind nonattainment or to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 293 interfere with the maintenance of any NAAQS.

Response: As discussed in section 4.2 of the draft 8

hour exemption guidance, EPA encourages States/ petitioners to include consideration of air quality effects that may extend beyond the designated nonattainment area. States should consider such impacts since they are ultimately responsible for achieving attainment in all portions of their State and for ensuring that emissions originating in their State do not contribute significantly to nonattainment in, or interfere with maintenance by, any other State. However, EPA believes NOx exemptions under section 182( f) of the CAA and interstate transport of emissions under section 110( a)( 2)( D) of the CAA can be considered independently. The EPA has separate authority under section 110( a)( 2)( D) to require a State to reduce emissions from stationary and/ or mobile sources where there is evidence showing that such emissions would contribute significantly to nonattainment or interfere with maintenance in other States. In some cases, then, EPA may grant an exemption from certain NOx requirements and, in a separate action, require NOx emission decreases under section 110( a)( 2)( D). Thus, a NOx exemption doesn't affect an obligation of a State to meet a NOx budget established under a SIP call or other transport rule. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 294 I. Should EPA promulgate a NSR provision to encourage development patterns that reduce overall emissions?

[ Section O. 9. of the June 2, 2003 proposed rule ( 68 FR 32849). No draft or final regulatory text.]

Note: Section V of this preamble below addresses rules for NSR for the 8 hour ozone standard. This section addresses only the June 2, 2003 proposal related to Clean Air Development Communities ( CADC).

1. Background In the June 2, 2003 proposal, we considered two options designed to recognize the air quality benefits which can accrue when areas site new sources and plan development in a manner that results in overall reduced emissions. We proposed to define a community that changes its development patterns in such a way that air emissions within the nonattainment area are demonstrably reduced as a CADC. As a result of becoming a CADC, an area would obtain a certain amount of flexibility in its NSR program.

In the first option, we proposed that a CADC would have a more flexible NSR program by: 1) being subject to subpart 1 NSR as opposed to subpart 2 NSR; 2) lowering NSR major source thresholds for these areas to make them similar to the thresholds for PSD areas; and 3) allowing areas that meet PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 295 certain development criteria ( development zones) to receive NSR offsets from State offset pools. In the second option,

we proposed that a CADC would be able to receive a pool of NSR offset credits equal to the reduced emissions from new development patterns. Credits from the pool could be provided to any new or modified source in a " development zone" as offsets.

We also requested comments on the options and encouraged comments suggesting other ways of encouraging development patterns that would result in lower emissions.

2. Summary of final rule The EPA is not at this time issuing any rule related to CADCs.

3. Comments and Responses Comments: The EPA received numerous comments on the proposal, some supporting and others opposing the CADC provision. A number of the commenters noted that the proposal did not appear to have enough detail. A summary of the comments appears in the response to comment document.

Response: The EPA appreciates the many comments it has received on this section. The EPA agrees with a number of commenters that while the ideas in this section are interesting and designed to achieve useful goals, much more PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 296 work is needed in a separate effort to work through the many issues involved. Therefore, EPA will not move forward with this particular effort at this time.

However, EPA does not plan to ignore the issue. The EPA will be looking to bring a group of stakeholders together to see if the group can come up with and support one or more ways that we can use existing programs and authorities to create positive incentives and tools for communities to reduce sprawl. The process will not be designed to work only through the specific issues in establishing a program to encourage CADCs as outlined in the proposal, but will be open to all ideas.

J. How will EPA ensure that the 8 hour ozone standard will be implemented in a way which allows an optimal mix of controls for ozone, PM2.5, and regional haze?

[ Section VI. P. of June 2, 2003 proposed rule ( 68 FR 32852); no draft or final regulatory text.]

1. Background As noted in the proposal, in many cases, States will be developing strategies to attain both the 8 hour ozone and PM2.5 NAAQS in the same nonattainment area or in nonattainment areas that have some area or areas in common. Requirements for regional haze apply to all areas. Certain ozone control PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 297 measures may also be helpful as part of a PM2.5 control strategy or a regional haze plan. Similarly, controls for PM2.5 may lead to reductions in ozone or regional haze.

Because the precursors for ozone and PM2.5 may be transported hundreds of kilometers, regional scale impacts may also be relevant to consider. The EPA expects that strategies to decrease ozone concentrations will not adversely affect strategies to attain the PM2.5 NAAQS. We believe integration of ozone, PM2.5, and regional haze planning will reduce overall costs of meeting multiple air quality goals.

2. Summary of final rule We are encouraging each State with an ozone nonattainment area which overlaps or is nearby a PM2.5 nonattainment area to take all reasonable steps to coordinate the required revisions for these nonattainment areas and meet reasonable progress goals for regional haze. Specifically,

EPA encourages States conducting modeling analyses for ozone to separately estimate effects of a strategy on the following: mass associated with sulfates, nitrates, organic carbon, elemental carbon, and all other species. However,

the final rule does not contain any requirements/ regulatory text on this subject.

3. Comments and responses PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 298 Comments: Several commenters supported EPA's recommendation for States to integrate planning for 8 hour ozone, PM2.5, and regional haze. These commenters agreed that the integration of ozone, PM2.5 and regional haze controls will reduce the overall costs of meeting multiple air quality goals and that EPA should continue to synchronize the SIP planning requirements for these pollutants to aid in this integration. One commenter asked EPA to clarify that this analysis is not an approvability issue associated with an 8

hour attainment demonstration. Other commenters recommended that EPA require nonattainment areas to perform an integrated control strategy assessment to ensure ozone controls will not preclude optimal controls for secondary fine particles and visibility impairment.

Response: We recognize the importance of integrating planning for 8 hour ozone, PM2.5, and regional haze as much as possible, given the overlap in technical work and likely control strategies. None of the commenters, however, has identified legal authority that allows EPA to require nonattainment areas to perform an integrated control strategy assessment to ensure ozone controls will not preclude optimal controls for secondary fine particles and visibility impairment. Therefore, we will continue to encourage States PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 299 to coordinate their work, but it is not a requirement and,

thus, not an approvability issue.

Comments: Other commenters encouraged EPA to identify flexibility so that areas may be provided more time if they are developing a multi pollutant strategy. Commenters stated that it is imperative that SIP obligations and attainment dates with respect to these regulated air pollutants be harmonized and that regulatory requirements and deadlines be closely coordinated. One commenter stated this may require certain deadlines be extended and that they believe Congress would not be opposed to extending deadlines in the name of efficiency.

Response: To the extent our legal authority allows, we are working to harmonize SIP timelines for ozone, PM2.5, and regional haze. This 8 hour ozone implementation rule is necessarily based on the existing CAA and does not assume any changes to the CAA that may occur in the future. Thus, we cannot fully harmonize the deadlines. However, the substantial overlap in planning periods will allow States to coordinate planning efforts among programs, without postponing implementation.

K. What emissions inventory requirements should apply under the 8 hour ozone NAAQS? PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 300 [ Section VI. Q. of June 2, 2003 proposed rule ( 68 FR 32853); § 51.915 in draft and final regulatory text.]

1. Background As noted in the June 2, 2003 proposed rule, we are relying on existing emissions reporting requirements in 40 CFR part 51, subpart A to satisfy the emissions inventory data requirements under the 8 hour ozone NAAQS. Section 182( a)( 1) requires that marginal and above ozone nonattainment areas submit an emission inventory 2 years after designation as nonattainment in 1990. For nonattainment areas classified under subpart 2 for the 8 hour ozone standard, we proposed to interpret this to mean that an emission inventory would be required 2 years after designation ( i. e., in 2006 if EPA designates areas in 2004).

The Consolidated Emission Reporting Rule ( CERR) in 40 CFR part 51, subpart A, requires comprehensive triennial emission inventories, beginning with the 2002 inventory year,

regardless of an area's attainment status. Because these emission inventories will be available, we proposed that the emission inventories required by the CERR are sufficient to meet the provisions of section 182( a)( 1). The draft regulatory text, however, did not contain a specific requirement that the emission inventory be submitted as a SIP PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 301 revision within 2 years after designation.

For subpart 1 areas, section 172( c) requires submission of the nonattainment area SIP within 3 years after designation as a nonattainment area. However, the June 2,

2003 proposal did not specify a deadline for submission of the emission inventory for subpart 1 areas.

2. Summary of final rule Section 51.915 of the final rule reflects our June 2,

2003 proposal but is different from the draft regulatory text. To ensure comprehensive treatment of emission inventory requirements, the final rule contains language addressing the deadlines for submission of emission inventories for both subpart 1 and subpart 2 areas. The deadlines reflect the statutory requirements of no later than 3 years after designation for a subpart 1 area, and no later than 2 years after designation for subpart 2 areas. Existing emissions reporting requirements in 40 CFR part 51, subpart A are sufficient to satisfy the emissions inventory data requirements under the 8 hour ozone NAAQS. The final regulatory text in section 51.915 requires submission of an emission inventory no later than 2 years after designation as part of a subpart 2 SIP and no later than 3 years after designation as part of a subpart 1 SIP. The State may use PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 302 the emission inventory developed under part 51, subpart A.

3. Comments and responses Comment: Several commenters said that the proposal does not discuss specific requirements above and beyond those in the Consolidated Emissions Reporting Rule ( CERR). However,

the proposal does mention one EPA guidance document,

Emissions Inventory Guidance for Implementation of Ozone and Particulate Matter National Ambient Air Quality Standards ( NAAQS) and Regional Haze Regulations. This document states that " The EPA developed this guidance document to complement the CERR and to provide specific guidance to State and local agencies and Tribes on how to develop emissions inventories for 8 hour ozone, PM2.5, and regional haze SIPs." Since the 8 hour emissions inventory requirements are the same for the CERR, there should be no additional, special requirements needed in emissions inventory development for the proposed 8

hour rule.

Response: The 2002 emission inventory submitted as a SIP element under the 8 hour ozone SIP process is not necessarily the same as the 2002 emission inventory submitted under the CERR. We agree that the CERR requirements should satisfy the 8 hour ozone SIP emissions inventory data requirements. However, the two inventories differ in some PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 69EPA 454/ R 05 001, July 2005 ( available at: http:// www. epa. gov/ ttn/ chief/ eidocs/ eiguid/ index. html).

303 important ways. The CERR inventory was due June 1, 2004, the SIP inventory due date is later. The State may choose to change some of the data from the CERR to the SIP inventory because of improvements in emission estimates. The SIP inventory needs to be approved by EPA as a SIP element and is subject to public hearing requirements where the CERR is not.

Because of the regulatory significance of the SIP inventory,

EPA will need more documentation on how the SIP inventory was developed by the State as opposed to the documentation required for the CERR inventory. The guidance document " Emissions Inventory Guidance for Implementation of Ozone and Particulate Matter National Ambient Air Quality Standards ( NAAQS) and Regional Haze Regulations" 69 provides details on how States should prepare their emission inventory SIP submittals and discusses these and other relevant topics. If a State's 2005 emission inventory ( or a later one) becomes available in time to use for an area subsequently redesignated nonattainment, then that inventory should be used. We also encourage the cooperation of the Tribes and the State and local agencies in preparing their emissions inventories. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 304 Comment: One commenter was concerned with the timing of the release of the final version of the NONROAD model ( used to estimate mobile source emissions from nonroad sources).

The commenter agreed that the draft version out for comment during the comment period was superior to previous calculation methodology and should be used for planning purposes, however EPA needs to be cognizant of how disruptive to the planning process it is for new versions of emissions models to be released and incorporated in the middle of the development of a SIP. The commenter strongly encourages EPA to expedite the review and approval of any new models that will ultimately be used by States.

Response: We acknowledge that the timing of the release of new models can sometimes complicate the SIP planning process. In this case, the timing of the final release of the NONROAD is dependent on the timing of the new nonroad standards final rule. We will do what we can to expedite the release of a new version of NONROAD that reflects the emissions benefits of the nonroad rule as soon as possible.

In addition, we intend to provide guidance on the use of NONROAD that allows for completion of ongoing work with the current version of NONROAD if switching to the new version would cause significant delay. The EPA has included similar PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 305 language in previous SIP policy guidance for the MOBILE model.

Comment: One commenter urged EPA to improve the quality of PM2.5 rates in MOBILE6.2 so that areas will have a more reliable tool for creating a 2002 base year inventory and SIP planning. The commenter was concerned about developing PM2.5 emissions inventories because PM2.5 emissions factors in MOBILE6.2 are based largely on the old Part # 5 emission model and are not as sophisticated as the rates for CO, NOx, and VOC. The commenter also expressed concern about the lack of knowledge and techniques available for performing on road mobile source fine particulate emissions inventories.

Metropolitan Planning Organizations ( MPOs) and air quality agency staff need to have a more reliable tool and acceptable methods for creating base year PM2.5 inventories and for SIP planning.

Response: Particulate emission factors in MOBILE6.2 are based on the best technical information available at the time the model was developed and we believe that it is the best available tool for estimating on road emission factors for PM2.5. We are currently developing a project to collect additional PM data which will be incorporated in future versions of the EPA mobile source emission factor model. We PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 306 continue to work to improve models and inventory methods for all pollutants. We will facilitate the development of workshops and training opportunities to assist MPOs and air quality staff who are working on PM2.5 inventories.

Comment: One commenter stated that since the CERR requires inventories every 3 years, that the CERR should replace the Emission Statement Reporting Program ( ESRP)

requirement, which was required before the CERR was adopted.

Response: The ESRP is statutorily prescribed in section 182 ( a)( 3)( B) of the CAA and cannot be replaced by rulemaking. In addition, the emission statement requirement satisfies a different need from the periodic emissions inventory requirement, namely that affected sources themselves have to report to the State their updated emissions information, whereas the emissions inventory requirement is a requirement on States to compile and make available to EPA an emissions inventory. We believe that the ESRP is a complementary program to the CERR and makes it easier for States to satisfy their CERR reporting requirements by providing data to the States from the sources.

Comment: One commenter said that persistent inaccuracies in official emissions inventories have hindered PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 307 regulatory acknowledgment and mitigation of the automobile VOC and CO gross polluter problem. The EPA should develop realistic emissions inventories and require States to do the same. Known errors in these inventories continue to misdirect emission reduction efforts. In particular, too little focus has been placed on the potential for rapid,

substantial VOC and CO reductions from the in use automobile fleet.

Response: We agree that realistic emissions inventories are important to properly direct emission reduction efforts.

Current emission factor models and inventory methods are far superior to previous models and methods and we are working to continually improve models and methods for developing emissions inventories for on road and nonroad vehicles and equipment.

Comment: One commenter stated that the official emissions inventories generated and used by EPA and State regulatory agencies for SIP planning and implementation have been shown repeatedly to suffer from serious inaccuracies and biases. Problems with inventories include errors in the total amount of emissions, as well as errors in the apportionment of emissions among various source categories.

The most serious inventory problems center on VOC and CO, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 308 while problems with NOx inventories appear to be more modest.

Since emissions inventories are a fundamental input to the process of choosing pollution reduction measures and to the modeling used to demonstrate future attainment of NAAQS, an inaccurate inventory is likely to lead to poor policy choices in terms of cost, effectiveness, or both.

Response: We agree that emissions inventories are fundamental inputs to the air quality management process. We continue to strive to work with State and local agency partners to develop emissions inventories that best reflect the real world and will thus assist in identifying control strategies to make RFP and attain the NAAQS. One should be aware, however, that it is impossible to develop an emissions inventory for an area that is 100 percent accurate. Part of the problem is that most sources   including mobile sources   don't monitor and report emissions continuously, and therefore we and the States must use other methods to estimate emissions from them. Thus, emission inventories are by nature estimates of actual releases to the atmosphere.

The EPA believes that current emission inventories are sufficiently accurate to support the air quality management decisions that are derived from the application of emission inventories and air quality models. The emissions data PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 309 generated and used by EPA and State regulatory agencies for SIP planning and implementation is the best available.

Although inventories are often criticized as lacking accuracy, seldom do critics supply better information.

Comment: One commenter stated that the Agency proposes that the latest approved version of the MOBILE model should be used to estimate emissions from on road transportation systems. The commenter recommended that if there are other models, which meet EPA performance criteria and are scientifically peer reviewed, they should also be acceptable ( e. g., the California mobile model, " EMission FACtor"

( EMFAC)).

Response: We believe that MOBILE is the best available tool for estimating emissions from on road transportation systems outside of California. We are working to continually improve emission factor models and inventory methods for onroad vehicles. The EMFAC is not designed to be able to estimate fleet, activity, fuel, and environmental characteristics outside of California and is not a reasonable substitute for MOBILE in States other than California.

Comment: One commenter supported the use of MOBILE6 in the 8 hour emissions inventory analyses and believed that EPA should change the guidance with respect to the use of MOBILE6 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 310 from " should be used" to " must be used." The commenter cautioned that MOBILE6 still significantly over predicts emissions from passenger cars and light duty trucks for many reasons including the following: 1) the model does not adequately account for the benefits of onboard diagnostic regulation in non IM areas; and 2) the model does not reflect the decline in trips per day versus vehicle age.

Response: We cannot use the word " must" in guidance unless the guidance refers to a requirement mandated by the statute or our regulations. In this case, neither the statute nor our regulations specifically requires the use of the latest approved version of MOBILE ( currently MOBILE6.2)

in SIPs. MOBILE6.2 is based on the best information available at the time of its development and release and,

therefore, EPA has indicated that it should be used. We do not believe that more on board diagnostic benefits in non I/ M areas was justified based on available data at the time of the release of MOBILE6.2. Likewise, we did not have sufficient data to develop alternative assumptions about the relationship between trips per day and vehicle age. We are working to continually improve emission factor models and inventory methods for on road vehicles and will review these issues during the development of the next emission factor PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 70See 40 CFR part 49.4( a). In addition, EPA determined it was not appropriate to treat Tribes similarly to States with respect to provisions of the CAA requiring as a condition of program approval the demonstration of criminal enforcement authority or providing for the delegation of such criminal enforcement authority. See 40 CFR part 49.4( g). To the extent a Tribe is precluded from asserting criminal enforcement authority, the Federal government will exercise primary criminal enforcement responsibility. See 40 CFR part 49.8. In such circumstances, Tribes seeking approval for CAA programs provide potential investigative leads to an appropriate Federal enforcement agency.

311 model.

L. What guidance should be provided that is specific to Tribes?

[ Section VI. R. of June 2, 2003 proposed rule ( 68 FR 32854); no draft or final regulatory text.]

1. Background As noted in the preamble to the proposal, the TAR( 40 CFR, part 49), which implements section 301( d) of the CAA,

gives Tribes the option of developing TIPs which can then be submitted to EPA for approval. Unlike States, Tribes are not required to develop implementation plans. Under the TAR,

eligible Tribes are treated in the same manner as a State when implementing the CAA; however, EPA has determined that Tribes are not required to meet plan submittal and implementation deadlines in the CAA, e. g., 110( a)( 1),

172( a)( 2), 182, 187, and 191.70 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 312 The TAR provides flexibility for Tribes in the preparation of a TIP to address the NAAQS. The " modular approach" was described in the June 2, 2003 proposal of this rule. The TAR indicates that EPA ultimately has the responsibility for implementing CAA programs in Indian country, as necessary or appropriate, if Tribes choose not to implement those provisions. The EPA may find it necessary to develop a Federal Implementation Plan ( FIP) to reduce emissions from sources in Indian country where the Tribe has not developed a TIP to address an air quality problem.

Finally, as discussed in the June 2, 2003 proposal, it is important for both States and Tribes to work together to coordinate planning efforts since many nonattainment areas may include both Tribal land and non Tribal land.

Coordinated planning will help ensure that the planning decisions made by the States and Tribes complement each other and that the nonattainment area makes reasonable progress toward attainment and ultimately attains the NAAQS. In reviewing and approving the individual TIPs and SIPs, we will make certain they do not conflict with the overall air quality plan for an area, when Indian country lands are part of a multi jurisdictional area.

2. Summary of policy PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 313 Section 301 ( d) of the CAA recognizes that eligible Indian Tribes are generally the appropriate non Federal authority to implement the CAA in Indian country. As stated in the TAR, it is appropriate to treat eligible Tribes in the same manner as States, except for certain identified provisions, including provisions relating to plan submittal and implementation deadlines, 40 CFR section 49.3, 49.4.

Therefore, when we discuss the role of the State in implementing this rule, we are also generally referring to eligible Tribes, with the above exception.

As we noted in the June 2, 2003 proposal, States have an obligation to notify Tribes as well as other States in advance of any public hearing( s) on their State plans that will significantly impact such jurisdictions. Under 40 CFR 51.102( d)( 5), States must notify the affected States of hearings on their SIPs; this requirement extends to Tribes under 301( d) of the CAA and the TAR. ( 40 CFR part 49).

Therefore, affected Tribes that have achieved " treatment in the same manner as States" status must be informed of the contents of such plans and the extent of documentation to support the plans. In addition to this mandated process, we encourage States to extend the same notice to all Tribes for the reasons noted in the comment and response below. As a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 314 matter of policy, EPA intends to consult with and assist all Tribes, regardless of whether a Tribe has received Treatment in a similar manner as a State ( TAS) approval for the purpose of implementing its own TIP, and we encourage States to do the same.

Understanding the content of a SIP will be important to Tribes located next to areas where SIPs apply, particularly to Tribes who do not choose or have the capacity to develop a TIP. Therefore, EPA intends to offer Tribes the opportunity for consultation on activities potentially affecting the achievement and maintenance of the NAAQS in Indian country.

In addition, we expect States to work with Tribes with land that is part of the same air quality area during the SIP development process and to coordinate with Tribes as they develop the SIPs. In the case where the State models projected emissions and air quality under the SIP, the Tribes should be made aware of these modeling analyses. Tribes may wish to determine if the Tribal area has been affected by upwind pollution and whether projected emissions from the Tribal area have been considered in the modeling analysis.

Generally, Tribal lands have few major sources, but in many cases, air quality in Indian country is affected by the transport  both long range and shorter distance transport  PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 315 of pollutants. In many cases, Tribal nonattainment problems caused by upwind sources will not be solved by long range transport policies, as the Tribes' geographic areas are small. Tribes are sovereign entities, and not political subdivisions of States. Strategies used for intrastate transport are not always available. Most of the strategies and policies used by States in dealing with short range transport are not available to Tribes, e. g., requiring local governments to work together and expanding the area to include the upwind sources. Unlike Tribes, States can generally require local governments to work together, or make the nonattainment area big enough to cover contributing and affected areas. We believe that it is also unfair to Tribes to require disproportionate local regulatory efforts to compensate for upwind emissions. In many cases, attainment could not be reached even if emissions from the Tribe were zero.

To address these concerns, in the June 2, 2003 proposal,

we took comment on the following: EPA will review SIPs for their effectiveness in preventing significant contributions to nonattainment in downwind Tribal areas with the same scrutiny it applies to reviewing SIPs with respect to impacts on downwind States. Where a Tribe has " treatment in the same PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 316 manner as States," EPA will support the Tribes in reviewing upwind area SIPS during the State public comment period. We intend to take the approach noted in the proposal. There is no regulatory text for this intention.

3. Comments and responses Comment: One commenter stated a concern about the transport of pollutants, including ozone precursors from urbanized areas into areas of Indian country. The commenter expressed strong support for the proposed 8 hour implementation rule language which addresses these transport concerns. He supported the EPA proposal language: " EPA will review SIPS for their effectiveness in preventing significant contributions to nonattainment in downwind Tribal areas with the same scrutiny it applies to impacts on downwind States.

Where a Tribe has ` treatment in the same manner as States,'

EPA will support the Tribe in reviewing upwind area SIPs during the State public comment period." This commenter asked for clarification on the nature of EPA's support for Tribes without TAS status. The commenter also asked if EPA would support Tribes without TAS approval in reviewing upwind area SIPs and provide technical assistance in interpreting SIP documentation.

Response: In the TAR, we stated that the CAA PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 317 protections against interstate pollutant transport apply with equal force to States and eligible Tribes. We stated that the prohibitions and authority contained in sections 110( a)( 2)( D) and 126 of the CAA apply to eligible Tribes in the same manner as States. ( See 63 FR 7254, 7260; February 12, 1998). Section 110( a)( 2)( D) requires, among other things, that States include provisions in their SIPs that prohibit any emissions activity within the State from significantly contributing to nonattainment, interfering with maintenance of the NAAQS or PSD or visibility protection programs in another State. In addition, section 126 authorizes any State or eligible Tribe to petition EPA to enforce these prohibitions against a State containing an allegedly offending source or group of sources.

We intend to consult with and assist Tribes during the TIP and SIP development process, regardless of whether a Tribe has received TAS approval for the purpose of implementing its own TIP. Executive Orders and EPA Indian policy generally call for EPA to be proactive with the Tribes. Executive Order 13175, entitled " Consultation and Coordination with Indian Tribal Governments" requires EPA to develop an accountable process to ensure " meaningful and timely input by Tribal officials in the development of PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 318 regulatory policies that have Tribal implications." As part of EPA's ongoing efforts to actively involve tribal officials in the development of programs which have Tribal implications, EPA in the July 18, 2000 " Guidance on 8 hour Ozone Designations for Indian Tribes" established a consultation process with each Tribe that EPA used throughout the designations process regardless of whether a particular Tribe has received an eligibility determination to implement section 107 of the CAA. In summary, EPA intends, as a matter of policy, to consult with and assist interested Tribal governments, regardless of their TAS status, in ensuring that the NAAQS are achieved in Indian country, including working with those Tribes located downwind from a polluting area.

Comment: One commenter also asked us to explain how we envision our role in maintaining continued consultation with Tribes throughout the SIP development process.

Response: We intend to continue to offer Tribes the opportunity for consultation on activities potentially affecting the achievement and maintenance of the NAAQS in Indian country. In addition, we expect States to work with Tribes with land that is part of a nonattainment area in the SIP development process and to inform Tribes of the content of these SIPs as they develop them. States should coordinate PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 319 with Tribes when projecting emissions from counties or other areas which include areas of Indian country to ensure that assumptions regarding demographics, economic activity,

commuting patterns, etc. are accurate for the Tribal portions. Where the State models project future emissions under the SIP and their effect on air quality, then Tribes should be made aware of these modeling analyses in order to determine if their Indian country has been affected by upwind pollution and whether this impact has been considered in the modeling analyses.

States have an obligation under 40 CFR 51.102( d)( 5) to notify other States in advance of any public hearing( s) of their State plans which will significantly impact those other entities. This CAA requirement for States to notify other parties extends to Tribes under section 301( d) and the TAR.

Historically, States have not always understood their responsibility to coordinate with other affected entities,

including, where appropriate, Tribes. States may not know how to contact Tribes, particularly when Tribal air programs are not well developed. It may be difficult for a State to obtain a copy of the control requirements for Indian country.

We can assist States in identifying and contacting Tribes that they should be consulting. When developing control PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 320 strategies and making policy decisions, States should as appropriate, coordinate with Tribes at the earliest opportunity. Where States utilize stakeholder based consensus processes to develop SIP strategies, we recommend that Tribes be provided the opportunity to participate in the process to the extent they can.

We are considering providing Tribes with guidance describing how to include Tribes in SIP development and implementation. Many Tribes may not possess the resources to develop a TIP or may decide not to develop a TIP, while others will develop robust air quality programs, which may or may not include a TIP. We intend to work with Tribes with all levels of air management programs. In general, where areas of Indian country have poor air quality, it is most likely as a result of transported pollution sources. We recognize that the manner in which States construct the SIP and what sources the SIP controls may impact Indian country located in downwind areas. We intend to develop guidance,

tools and training sessions for interested Tribal communities to understand the SIP development process and to become active participants if they wish.

Comment: One commenter representing a Tribal organization raised concerns about the practical impacts of PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 321 the NSR program on Indian Tribes. The commenter noted that Tribes have long traditions of environmental stewardship and recognize their responsibility to protect the health of their citizens. However, he notes Tribes have the right to pursue industrial and economic development. While that development must comply with all current environmental standards, the Tribes should not be burdened with requirements that in effect subsidize non Tribal sources of pollution.

Under the nonattainment NSR program, new major sources locating in a nonattainment area are required to obtain emission reductions, referred to as offsets. The commenter states that this requirement poses a hardship on an Indian reservation located in a larger nonattainment area. The new source wishing to locate on the reservation must obtain offsets from elsewhere in the nonattainment area; there are not usually enough sources on the reservation to supply the needed emissions reductions. When a Tribe is located in such a nonattainment area, efforts to increase economic development may be stalled by an inability to obtain offsets.

The commenter concludes that this requirement is unfair to Tribes because of past barriers to economic development in Indian country. The commenter also states that in many cases air pollution is transported onto the reservation. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 322 Response: The EPA acknowledges that offsets are a concern for Tribes. We are currently evaluating potential options for addressing this concern.

M. What are the requirements for OTRs under the 8 hour ozone standard?

[ Section VI. S. of June 2, 2003 proposed rule ( 68 FR 32855); § 51.916 in draft and final regulatory text.]

1. Background Section 176A of subpart 1 provides EPA with authority to establish interstate transport regions where transport of air pollutants from one or more States contributes significantly to a violation of a NAAQS in one or more other States.

Section 184 of subpart 2 establishes additional provisions for OTRs. Section 184( a) specifically established an OTR comprising 12 Northeast and Mid Atlantic States and the District of Columbia in order to address the longstanding problem of interstate ozone pollution in that region. To date, the existing OTR is the only transport region for any pollutant that has been established. The general provisions of section 176A apply to any OTR established under section 184.

Section 184( b) sets forth specific VOC and NOx control requirements to be applied throughout the entire OTR, in both PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 323 attainment and nonattainment areas, to reduce interstate pollution. These additional regional control requirements are part D NSR ( for VOC and NOx), RACT ( for VOC and NOx),

enhanced vehicle I/ M, and Stage II vapor recovery ( for vehicle refueling) or a comparable measure. In general,

these requirements duplicate requirements for certain ozone nonattainment areas that are classified under subpart 2. In the proposal, we indicated that we believed that under section 184 the current OTR will remain in place and remain subject to the section 184 control requirements for purposes of the 8 hour standard.

2. Summary of final rule In today's rule we are determining that section 184 continues to apply for purposes of the 8 hour standard.

Therefore, the current OTR remains in place and the section 184 control requirements continue to apply for purposes of the 8 hour standard.

Today's rule also describes RACT requirements for portions of an OTR that are not classified moderate or above.

The State must submit a SIP revision that meets the RACT requirements of section 184 of the CAA for each area designated as attainment or unclassifiable or that may be classified marginal or under § 51.904 of this subpart, but PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 324 which is located in an OTR. A major stationary source for these areas is defined as a source which directly emits, or has the potential to emit, 100 tpy or more of NOx or 50 tpy or more of VOC. The State is required to submit the RACT revision no later than 2 years after the effective date of the nonattainment designation of any area in the OTR for the 8 hour NAAQS and must provide for implementation of RACT as expeditiously as practicable but no later than 30 months after the RACT SIP is due.

We believe that this does not result in any new control requirements for any area in the OTR because these control requirements are not associated with an area's designation or classification and already apply regionwide under the 1 hour ozone standard. If a new OTR is established for purposes of the 8 hour standard pursuant to section 176A, that area would also be subject to the provisions and control requirements of section 184.

3. Comments and responses Comments: The EPA received two comments supporting our interpretation of section 184 with regard to the 8 hour standard. One commenter further asserted that for any areas that might be added to the OTR, or for any new OTR, if modeling shows that the control requirements from section 184 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 325 are not appropriate and should not be required, then EPA has the discretion to exempt such areas from those requirements.

The commenter pointed to a portion of the decision in Alabama Power v. Costle, 636 F. 2d. 323 ( DC Circuit, 1979).

Response: Regarding the comment about modeling, we are not prepared to determine whether the de minimis doctrine established by the court in Alabama Power would be available in the situation the commenter describes. As the court in that case explained, such a determination would first require EPA to assess whether Congress, in enacting section 184 of the CAA, was so prescriptive as to foreclose granting such waivers. Since that issue of statutory interpretation for the described situation is not presently before the Agency,

EPA is not addressing whether de minimis authority exists under section 184.

N. Are there any additional requirements related to enforcement and compliance?

[ Section VI. T. of June 2, 2003 proposed rule ( 68 FR 32855); no draft or final regulatory text.]

1. Background In the proposal, we noted that section 172( c)( 6)

requires nonattainment SIPs to " include enforceable emission limitations, and such other control measures, means or PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 326 techniques . . . as well as schedules and timetables for compliance , as may be necessary or appropriate to provide for attainment . . ." We also noted that the current guidance, " Guidance on Preparing Enforceable Regulations and Compliance Programs for the 15 Percent Rate of Progress Plans ( EPA 452/ R 93 005, June 1993)" is relevant to rules adopted for SIPs under the 8 hour ozone NAAQS and should be consulted for purposes of developing appropriate nonattainment plan provisions under section 172( c)( 6). We proposed no specific regulatory provisions related to compliance and enforcement.

2. Summary of final rule As in the proposal, we are not setting forth any additional rule related to compliance and enforcement.

3. Comments and responses We received no comments on the proposed approach of handling enforcement and compliance provisions related to SIPs for the 8 hour ozone standard.

O. What requirements should apply to emergency episodes?

[ Section VI. U. of June 2, 2003 proposed rule ( 68 FR 32856); no draft or final regulatory text.]

1. Background In the June 2, 2003 proposal, we noted that subpart H of 40 CFR part 51 specifies requirements for SIPs to address PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 327 emergency air pollution episodes and for preventing air pollutant levels from reaching levels determined to cause significant harm to the health of persons. We noted that we anticipate proposing a separate rulemaking in the future to update portions of that rule.

2. Summary of final rule We have not yet proposed any rule revision related to emergency episodes, and the final rule below does not contain any such rule revision.

3. Comments and responses We received no comments on our proposed approach.

P. What ambient monitoring requirements will apply under the 8 hour ozone NAAQS?

[ Section VI. V. of June 2, 2003 proposed rule ( 68 FR 32856); no draft or final regulatory text.]

1. Background Ozone monitoring data play an important role in designations, control strategy development, and related implementation activities. We did not propose any revisions to current ambient monitoring requirements listed in 40 CFR part 58.

We indicated in the proposal that we do plan to modify the existing ozone monitoring requirements in a separate PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 328 rulemaking as part of implementation of the National Ambient Air Monitoring Strategy ( NAAMS), including adoption of a national strategy introducing national core monitoring sites ( NCore) as a replacement for traditional national air monitoring stations/ State and local air monitoring stations ( NAMS/ SLAMS) monitoring currently codified at 40 CFR part 58.

Part of the NCore network would include the existing ozone monitoring sites that currently support the NAAQS related activities. The regulatory modifications are expected to include ozone monitoring requirements based upon the population of an area and its historical/ forecasted ozone air quality values.

We indicated in the proposal that as part of ongoing air quality monitoring network assessments ( outside the scope of this present rulemaking), each State, local, and Tribal air monitoring agency is being asked to assess the adequacy of its air pollution monitoring networks, including those sites that measure ozone. We will work with these agencies to develop network plans to ensure approval of all network designs. It is expected that the number and location of the original sites will be very similar to the current network.

However, on a local basis, there will be some relocation,

addition, and removal of ozone sites as a result of regional PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 329 network assessments.

In addition, we stated that we anticipate that we will include a requirement for measuring multiple air pollutants,

including ozone precursors at select locations. The NCore sites are expected to include high sensitivity nitrogen oxide ( NO) and total reactive oxides of nitrogen ( NOy) measurements at locations across the nation to support the tracking of emission reduction strategy efforts such as the NOx SIP Call,

the CAIR if promulgated, and, if created, a statute codifying the Administration's Clear Skies Act, which addresses NOx reductions across the nation.

The CAA requires that ozone precursor monitoring be conducted in any ozone nonattainment area classified as serious, severe, or extreme. We adopted regulations reflecting the statutory requirements in 40 CFR part 58 in 1994 as the Photochemical Assessment Monitoring Stations ( PAMS) program.

The PAMS monitoring requirements (" enhanced monitoring"

of ambient air under section 182( c)( 1) of the CAA) are retained in areas currently designated as 1 hour ozone serious, severe, and extreme nonattainment areas. Areas that are designated serious or above under the 8 hour ozone NAAQS are not currently addressed in 40 CFR part 58 for ozone PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 330 precursor monitoring. The revisions to the monitoring regulations will also cover all areas that are classified as serious or above for the 8 hour NAAQS. If an area is bumped up to serious or above for the 8 hour NAAQS, it would be subject to the enhanced monitoring rule and would be required to conduct the appropriate PAMS monitoring.

2. Summary of final rule There is no change from the proposal. No monitoring requirements are being promulgated as part of this rulemaking.

3. Comments and responses Comment: One commenter noted that the NAAMS, which will likely influence the future of the ozone monitoring network,

is based on the presumption that less criteria pollutant monitoring is needed and that resources must be shifted into measures that support other analyses. The commenter pointed out that many States have already curtailed their criteria pollutant monitoring networks in order to meet program requirements. The commenter argued that we should support and maintain the ozone monitoring network since the data is used as the basis of attainment determinations and the tracking of progress.

Response: While we did discuss some aspects of the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 331 NAAMS in the proposed rule, this rulemaking effort does not affect the ambient monitoring requirements listed in 40 CFR part 58. As such, comments on the NAAMS are not germane to this action. As noted above, we are working on a separate rulemaking effort to amend the ambient monitoring requirements. We will address comments on the NAAMS under that action.

We recognize that ozone continues to pose a significant environmental threat, and agree that the current ozone network should be maintained. The NAAMS does not recommend curtailing ozone monitoring, but rather recommends that State and local agencies perform assessments of their ozone networks to assure that the available resources are used to maximum benefit. We do not foresee significant changes to the existing ozone network as a result of these assessments.

The NAAMS does recommend that resources be shifted from criteria pollutant monitoring to other monitoring initiatives ( e. g., air toxics) for those criteria pollutants whose ambient concentrations are well below their respective NAAQS.

Specifically, the strategy recommends significant reductions in total suspended particulate ( TSP), PM10, SO2, CO and NO2 monitoring.

Comment: Two commenters questioned the appropriateness PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 332 of making high sensitivity NOx and CO measurements at NCore Level 2 sites which may be in urban areas.

Response: This rulemaking effort does not affect the ambient monitoring requirements listed in 40 CFR part 58. As such, comments on the appropriateness of making high sensitivity NOx and CO measurements in urban areas are not germane to this action.

Comment: One commenter urged the continued support of the PAMS program. The commenter points out that the PAMS'

data has been used to evaluate ( and improve) emissions inventories, apply observation based models, evaluate photochemical grid based models, and assess effectiveness of control programs. The commenter argues that while fine tuning the PAMS requirements may be appropriate, the program should be maintained.

Response: As part of the anti backsliding provisions of the Phase 1 rule, the PAMS monitoring requirements are retained in areas currently designated as 1 hour ozone serious, severe, and extreme nonattainment areas. ( See 40 CFR 51.900( f)( 9).) In addition, areas that are designated serious or above under the 8 hour ozone NAAQS will also be required to comply with the PAMS monitoring requirements.

Also, if an area is bumped up to serious or above for the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 333 8 hour NAAQS, it would be subject to the enhanced monitoring rule ( section 182( c)( 5) of the CAA) and would be required to conduct the appropriate PAMS monitoring.

Currently, areas that are designated serious or above under the 8 hour ozone NAAQS are not addressed in 40 CFR part 58 for ozone precursor monitoring. As discussed above, we are working on a separate rulemaking effort to amend the ambient monitoring requirements. We expect these revisions to ensure that all areas that are classified as serious or above for the 8 hour NAAQS are covered by the PAMS requirements.

Q. When will EPA require 8 hour attainment demonstration SIP submissions?

[ Section VI. W. of June 2, 2003 proposed rule ( 68 FR 32856); § 51.908( e) in draft regulatory text and § 51.908( d) of final regulatory text.]

1. Background In the June 2, 2003 action, we proposed that required attainment demonstrations, which will be based on photochemical grid modeling for all areas must be submitted within 3 years after designation. However, we proposed that a subpart 1 area that desires an attainment date within 3 years after designation would have to provide a demonstration PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 334 within 1 year after designation that it would attain by that date.

We noted that the proposed time of submission is expected to result in a closer synchronization of the 8 hour ozone and PM2.5 attainment demonstration SIP submittal dates.

2. Summary of final rule The final rule states that attainment demonstrations   where required   must be submitted within 3 years after the effective date of the area's nonattainment designation.

On June 18, 2004 ( 69 FR 34076), EPA announced it was reconsidering the boundaries of the Las Vegas, NV, 8 hour ozone nonattainment area. The EPA deferred the effective date of the designation until September 13, 2004, and that this reconsideration would not affect the time SIPs would be due for the Clark County nonattainment area.

3. Comments and responses Comment: Several commenters noted that they believed some areas would need longer than 3 years to submit their attainment demonstration. At least one of these commenters noted that section 182( c)( 2) allows up to 4 years ( rather than 3 years) for submission of a modeled attainment demonstration for serious and above areas. One commenter recommended that for areas that are violating the 8 hour PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 335 standard and that are currently not contained within the 1

hour boundary, EPA should consider extending attainmentmodeling deadlines for areas that are not currently contained within the 1 hour boundary, but will now be included in the 8 hour boundary. At least one commenter agreed with the timing we proposed.

Response: For the reasons stated in the proposal, we believe it is appropriate to require that the modeled attainment demonstrations be submitted within 3 years after designation. In the proposal, we noted the following:

° We do not believe it is appropriate or desirable to require States to submit attainment demonstrations for areas designated nonattainment under the 8 hour standard at greatly different times for different areas. We recognize that photochemical grid modeling   required by the CAA for interstate moderate nonattainment areas, as well as serious and higher classified areas   will be performed on large enough scales to address transport and will in most cases encompass a number of nonattainment areas. These numerous nonattainment areas may differ by classification ( some areas may be intrastate moderate areas, some interstate moderate areas, and others serious and above nonattainment PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 336 areas). Some areas that may require attainment demonstrations may be subject to subpart 1 while others may be subject to subpart 2.

° The control strategies that may be modeled for all the areas in the modeling domain will likely be modeled simultaneously, especially if all the areas are located in a single State.

° At the time of enactment of the CAA Amendments of 1990,

Congress allowed areas that used the recently developed and complex photochemical grid model an extra year ( 4 years rather than 3 years) to submit their attainment demonstration. Photochemical grid modeling is now a standardized model for purposes of developing attainment demonstrations, and all areas will be using these models for purposes of their attainment demonstrations. Thus,

there is no distinction between the tools used for attainment modeling that would justify additional time for these areas to submit attainment demonstrations.

In light of these reasons, we do not believe it is reasonable to defer submission of attainment demonstrations beyond 3 years after designation. We also note that an area's RFP plan and the RACM demonstration under section 172( c)( 1) are due within 3 years after designation. For the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 337 reasons stated in sections describing those requirements, it is appropriate that the attainment demonstration, the RFP plan, and the RACM demonstration be submitted at the same time.

Although we proposed that subpart 1 areas requesting an attainment date within 3 years after designation should submit their attainment demonstration within 12 months, we have removed that provision from the final rule because it is unnecessary. That is, a subpart 1 area is free to choose submit its attainment demonstration at any time prior to the 3 year due date.

R. How will the statutory time periods in the CAA be addressed when we redesignate areas to nonattainment following initial designations for the 8 hour NAAQS?

[ Section VI. B. of June 2, 2003 proposed rule ( 68 FR 32816); § 51.906 in draft and final regulatory text.]

1. Background We noted in the proposal that section 181( b) of the CAA provides that for areas designated attainment or unclassifiable for ozone immediately following enactment of the 1990 CAA Amendments and subsequently redesignated to nonattainment, the period to the maximum statutory attainment date would run from the date the area is classified under PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 71Section 181( b) provides that " any absolute, fixed date applicable in connection with any such requirement is extended by operation of law by a period equal to the length of time between the date of enactment of the CAAA of 1990 and the date the area is classified under this paragraph." Under section 181( b), the date of classification is the same as the date of redesignation to nonattainment.

338 subpart 2.71 Thus, if an area designated as attainment for the 1 hour ozone standard in 1990 was redesignated to nonattainment for the 1 hour ozone standard in January 2002 and classified as moderate, the area's 1 hour attainment date would be no later than 6 years following January 2002, i. e.,

January 2008. Section 172( a)( 2) of the CAA provides for attainment dates to be calculated from the time the area is designated nonattainment.

We also noted in the proposal that most of the SIP submittal dates in subpart 2 run for a fixed period from the date of enactment of the 1990 CAA Amendments, which was also the date of designation and classification by operation of law for most subpart 2 areas. Section 181( b)( 1) of the CAA provides that any fixed dates applicable in connection with any such requirements under section 110, subpart 1 and subpart 2 will be extended by operation of law to a period equal to the length of time between the date of enactment of the 1990 CAA Amendments and the date that an area is PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 339 subsequently designated and classified.

2. Final rule We are adopting the approach set forth in the proposed rule. For any area that is initially designated attainment or unclassifiable for the 8 hour NAAQS and subsequently redesignated to nonattainment for the 8 hour ozone NAAQS, the periods for the attainment date and dates for submittal of any applicable requirements under subpart 1 or subpart 2 would run from the date of redesignation to nonattainment of the 8 hour NAAQS. This is consistent with section 181( b),

which gives areas redesignated to nonattainment the same amount of time to submit plans and to attain the standard as areas initially designated nonattainment.

3. Comments and responses Comment: One commenter asked what the reasoning was behind the time period extension and if this is an attempt to provide equity, based on the wording of the draft regulatory text.

Response: As stated above, the CAA provides for extending by operation of law any absolute, fixed date applicable in connection with a nonattainment requirement by a period equal to the length of time between the date of enactment of the CAA Amendments of 1990 and the date the area PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 340 is classified and designated ( or redesignated). Thus, an area redesignated to nonattainment for the 1 hour standard and classified as moderate would have been given 3 years to submit an attainment demonstration and up to 6 years to attain, which are the same time periods given to an area designated nonattainment and classified by operation of law at the time of the 1990 CAA Amendments. Since it does not make sense to run deadlines from the date of the CAA Amendments of 1990, we have adopted an approach consistent with the intent of that section   that the statutory time periods run from the date of designation.

V. EPA's Final Rule for New Source Review A. Background 1. The Major NSR Program The major NSR program contained in parts C and D of title I of the CAA is a preconstruction review and permitting program applicable to new and modified major stationary sources of air pollutants regulated under the CAA. In areas not meeting health based NAAQS and in OTRs, the program is implemented under the requirements of section 110( a)( 2)( C)

and part D of title I of the CAA. We call this program the " nonattainment" major NSR program. Subpart 1 of part D of title I contains general requirements for nonattainment areas PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 72 For a more complete discussion of this decision and its implications, see 69 FR 23956.

341 for any criteria pollutant and subpart 2 contains provisions specifically for ozone nonattainment areas. Subparts 3 and 4 contain provisions specifically for CO monoxide and PM10,

respectively. In Whitman v. American Trucking Associations,

[ 531 U. S. 457, 482 86 ( 2001)], the Supreme Court reviewed EPA's implementation strategy for the revised 8 hour ozone NAAQS, and remanded it to EPA to develop a reasonable resolution of the roles of subparts 1 and 2 in classifying areas for and implementing the revised ozone standard. 72 In areas meeting the NAAQS (" attainment" areas) or for which there is insufficient information to determine whether they meet the NAAQS (" unclassifiable" areas), the NSR requirements under part C of title I of the CAA apply. We call this program the PSD program. Collectively, we also commonly refer to the attainment and nonattainment programs as the major NSR program. These regulations are contained in 40 CFR § § 51.165, 51.166, 52.21, 52.24, and part 51, appendix S. Of these, the nonattainment area regulations are contained in 40 CFR § § 51.165, 52.24, and part 51,

appendix S.

The major NSR provisions of the CAA are implemented PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 73 In some cases, subpart 1 and subpart 2 requirements are inconsistent or overlap. To the extent that subpart 2 addresses a specific obligation, the provisions in subpart 2 control ( 68 FR 32811; June 2, 2003).

342 primarily through SIP approved State preconstruction permitting programs. As provided in section 172( c)( 5) of the CAA, the SIP must require permits for the construction and operation of new or modified major stationary sources in accordance with section 173 of the CAA. Subpart 2 of title I of the CAA sets forth additional SIP requirements for ozone nonattainment areas, including preconstruction permitting requirements. 73 The minimum permitting requirements States must meet before EPA can approve a State's nonattainment major NSR program into a SIP are found in part D of title I and 40 CFR 51.165. However, some States are lacking a SIP approved major NSR program for the 8 hour ozone NAAQS. This may be because the State has never had a nonattainment area in which it needed to apply a nonattainment NSR program or because the approved program does not apply to an 8 hour ozone nonattainment area. As discussed in Section V. D of this preamble, EPA is providing States 3 years to develop and submit an approvable nonattainment major NSR program for the 8 hour NAAQS. The regulations at 40 CFR 52.24( k) specify PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 343 that Appendix S governs permits to construct and operate in a nonattainment area or in any area designated under section 107( d) of the CAA as attainment or unclassifiable for ozone that is located in an ozone transport region that a source applies for during this SIP development period ( the interim period between the effective date of designations and the date that EPA approves a nonattainment major NSR program).

Appendix S is an interpretation of 40 CFR subpart I ( including § 51.165), and has historically reflected substantially the same requirements as those in § 51.165,

subject to a limited exemption in section VI. This includes the requirement that a source comply with LAER and obtain offsetting emissions reductions. Pursuant to section 52.24( k), where necessary, appendix S governs nonattainment major NSR permitting of ozone precursors in 8 hour ozone nonattainment areas and all areas within the OTR, including areas designated attainment/ unclassifiable, during the SIP development period. Thus, consistent with section 110( a)( 2)( C), permitting of new and modified stationary sources in the area will be regulated as necessary to ensure that the NAAQS are achieved.

As we describe further in section V. A. 2 of this preamble, today's final regulations were proposed as part of PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 74 On December 31, 2002, we finalized five actions from that proposal related to the applicability of the NSR regulations. For a summary of the regulatory development process and stakeholder development for that rulemaking, see 67 FR 80188.

344 two different regulatory packages. On July 23, 1996 ( 61 FR 38250), we proposed changes to the major NSR program,

including codification of the requirements of part D of title I of the 1990 CAA Amendments. 74 On June 2, 2003 ( 68 FR 32802), we proposed a rule to implement the 8 hour ozone NAAQS. On April 30, 2004, we promulgated the Phase 1 final rule and you will find a summary of the regulatory development process and stakeholder development for that rulemaking at 69 FR 23951.

2. What we proposed a. Proposed changes to incorporate the 1990 Clean Air Act Amendments On July 23, 1996 ( 61 FR 38250), we proposed changes to § 51.165 and appendix S to incorporate requirements in part D of title I of the 1990 CAA Amendments for ozone, CO, and PM10 nonattainment areas. Concerning ozone, we proposed ( among other things) to codify the following provisions from section 182 of the CAA:

° major stationary source thresholds ( ranging from 10 to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 75 John S. Seitz, " New Source Review ( NSR) Program Transitional Guidance," March 11, 1991. We provided additional transitional guidance for nonattainment areas in our September 3, 1992 memorandum, New Source Review ( NSR) Program Supplemental Transitional Guidance on Applicability of New Part D NSR Permit Requirements, from John S. Seitz, Director, Office of Air Quality Planning and Standards.

345 100 tpy, depending on classification),

° significant emission rates ( ranging from 0 to 25 tpy) m ° offset ratios ( ranging from 1.1: 1 to 1.5: 1), and ° special modification provisions implementing CAA sections 182( c), ( d), and ( e) for serious, severe, and extreme ozone nonattainment areas.

In the 1996 proposal, we proposed that the major stationary source thresholds and offset ratios of CAA section 182 ( subpart 2 of part D) would apply to all major stationary sources of VOC and NOx to implement major NSR under the 1

hour ozone NAAQS. This proposal is consistent with the 1991 and 1992 Transition Policy Memos explaining major NSR requirements under the 1990 CAA Amendments. 75 These memos also explained that permits must comply with the new statutory requirements for major NSR under the 1 hour NAAQS after the deadlines set by Congress, regardless of the delay in incorporating them into SIPs.

Our 1996 proposal predated promulgation of the 8 hour PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 346 ozone NAAQS and thus did not explain the details of implementation of these standards under § 51.165 or appendix S. For a discussion of implementation of the 1 hour and 8

hour ozone NAAQS under § 51.165 and appendix S, see section V. D. of this preamble.

Also, in our 1996 action, and then again in our June 2,

2003 action, we proposed to amend our nonattainment NSR provisions to expressly include NOx as an ozone precursor in nonattainment major NSR programs ( 61 FR 38297,68 FR 32847).

We also proposed that, as provided under CAA section 182( f),

a waiver from nonattainment NSR for NOx as an ozone precursor would be available for both subpart 1 and subpart 2 areas ( 68 FR 32846).

On June 2, 2003, we proposed a rule to identify the statutory requirements that apply for purposes of developing SIPs under the CAA to implement the 8 hour ozone NAAQS ( 68 FR 32802). Specifically, we proposed two options one in which all nonattainment areas would be classified and regulated under subpart 2 of part D of title I, and one in which some nonattainment areas would be regulated under the less restrictive requirements of subpart 1 and some would be classified and regulated under subpart 2. For areas classified under subpart 2   those with a 1 hour ozone design PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 347 value at or above 0.121 ppm   the classifications set forth in subpart 2 ( marginal, moderate, etc.) would govern part D SIPs for the 8 hour ozone standard, with each area's classification determined by a modified version of the subpart 2 classification table containing 1 hour design values and translated 8 hour design values for each classification. The NSR permitting requirements for the 8

hour ozone standard necessarily follow from the classification scheme chosen under the terms of subpart 1 and subpart 2. We did not propose specific regulatory language for implementation of NSR under the 8 hour NAAQS. However,

we indicated that we intended to revise the nonattainment NSR regulations to be consistent with the rule for implementing the 8 hour ozone NAAQS ( 68 FR 32844).

Concerning CO, in 1996 we proposed the following:

° Major stationary source threshold of 50 tpy for serious nonattainment areas in which the Administrator has determined that stationary sources are significant contributors to CO levels,

° Significant emission rate of 50 tpy for serious nonattainment areas in which the Administrator has determined that stationary sources are significant contributors to CO levels. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 348 Concerning PM10, in 1996, we proposed to amend our nonattainment NSR regulations to incorporate requirements of the 1990 CAA Amendments and establish significant emission rates. Specifically, we proposed the following:

53. Major stationary source threshold of 100 tpy PM10 or any specific PM10 precursor in moderate PM10 nonattainment areas,

54. Major stationary source threshold of 70 tpy PM10 or any specific PM10 precursor in serious PM10 nonattainment areas, and 55. Significant emission rate of 15 tpy PM10 and 40 tpy PM10 precursors.

b. Proposed changes to criteria for emission reduction credits from shutdowns and curtailments In 1996 we proposed to revise the regulations limiting offsets from emissions reductions due to shutting down an existing source or curtailing production or operating hours below baseline levels (" shutdowns/ curtailments"). The prior regulations at § 51.165( a)( 3)( ii)( C) provided that such emissions reductions could be used as offsets if the State lacked an approved attainment demonstration, unless the shutdown/ curtailment occurred after the date the new source permit application was filed or the applicant could establish PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 76 For a complete discussion of how the 1990 CAA Amendments attainment planning requirements relate to shutdown/ curtailment credits ( 61 FR 38311; July 23, 1996).

349 that the proposed new source is a replacement for the shutdown/ curtailed source. We proposed to revise the existing provisions for crediting emission reductions by restructuring existing § 51.165( a)( 3)( ii)( C)( 1) and ( 2) for clarity without changing the current requirements therein.

[ See proposed § 51.165 ( a)( 3)( ii)( C)( 1) through ( 4)]. We also proposed substantive revisions in two alternatives that would ease, under certain circumstances, the existing restrictions on the use of emission reduction credits from source shutdowns and curtailments as offsets. We explained that easing the restrictions may be warranted by the 1990 CAA Amendments, in which Congress significantly reworked the attainment planning requirements of part D of title I of the CAA such that an approved attainment demonstration is unnecessary.

The revised CAA emphasizes the emission inventory as the first requirement in planning, includes new provisions keyed to the inventory requirements, and mandates several adverse consequences for States that fail to meet the planning or emissions reductions requirements related to inventories. 76 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 77 Use of Shutdown Credits for Offsets, July 21, 1993, John S. Seitz, Director, Office of Air Quality Planning and Standards.

350 In 1993, we issued a policy memorandum addressing the use of shutdown credits for offsets in ozone nonattainment areas and areas in the OTR in light of the new statutory requirements. 77 According to our longstanding policy, we emphasized that sources may use emission reduction credits generated from shutdowns and curtailments as offsets if the State continues to include the emissions in the emissions inventory for attainment demonstration and RFP milestone purposes. We proposed two alternatives to revise the regulations that limit a source's use of emission reductions as offsets if the reductions were achieved by shutting down an existing emissions unit or curtailing production or operating hours of a unit ( shutdowns/ curtailments).

Under Alternative 1, we proposed to allow emissions reductions from shutdowns and curtailments from sources located in ozone nonattainment areas that lack an EPAapproved attainment demonstration to be used as offsets or netting credits, if the emissions reductions occur after November 15, 1990 and the area is current with part D ozone nonattainment planning requirements. See proposed PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 351 § 51.165( a)( 3)( ii)( C)( 5) and ( 6)[ Alternative 1]. Proposed Alternative 2 generally would have allowed emission reductions from source shutdowns and source curtailments in all nonattainment areas and for all pollutants to be used as offsets or netting credits when such reductions occur after the base year of the emissions inventory for that pollutant.

See proposed § 51.165( a)( 3)( ii)( C)( 5)[ Alternative 2]. The 1996 proposal retained the provision that the permitting authority may consider the shutdown or curtailment to have occurred after the date of its most recent emissions inventory if the inventory explicitly includes as current existing emissions the emissions from such previously shutdown or curtailed sources.

c. Proposed changes to revise the construction ban provisions On July 23, 1996, we proposed to revise § 52.24( a) to incorporate changes made by the 1990 CAA Amendments related to the applicability of construction bans. Under the 1977 Amendments, section 110( a)( 2)( I) of the CAA required EPA to place certain areas under a federally imposed construction moratorium ( ban) that prohibited the construction of new or modified major stationary sources in nonattainment areas where the State failed to have an implementation plan meeting PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 352 all of the requirements of part D. The 1990 CAA Amendments removed these provisions from the CAA. However, in section 110( n)( 3) of the CAA ( Savings Clause), the 1990 CAA Amendments retained the prohibition in cases where it was applied prior to the 1990 CAA Amendments based upon a finding by the Administrator that the area: ( 1) lacked an adequate NSR permitting program ( as required by section 172( b)( 6) of the 1977 CAA); or ( 2) the State plan failed to achieve the timely attainment of the NAAQS for sulfur dioxide by December 31, 1982. All other construction bans pursuant to section 110( a)( 2)( I) are lifted as a result of the new statutory provision. This includes previously imposed construction bans based upon a finding that the plan for the area did not demonstrate timely attainment and maintenance of the ozone or CO NAAQS. In accordance with the amended section 110( n)( 3) of the CAA, any remaining construction ban continues in effect until the Administrator determines that the SIP meets either the amended part D permit requirements,

or the requirements under subpart 5 of part D for attainment of the NAAQS for sulfur dioxide, as applicable.

We note that § 52.24( k) was not retained in our proposed rule text. However, the preamble did not in any manner indicate that EPA believed that NSR permits complying with PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 353 appendix S were not required during the SIP development period where necessary. To clarify our intent, our proposed 8 hour ozone NAAQS implementation rule explained that § 52.24( k) remained in effect and would be retained. In that action, we also proposed that we would revise § 52.24( k) to reflect the changes in the 1990 CAA Amendments ( 68 FR 32846).

The prior language at section 52.24( k) allowed States to issue permits under appendix S for a maximum period of 18 months after designation. After this time, if the nonattainment area did not have an approved part D NSR permit program, the construction ban would apply. However, the 1990 CAA Amendments to the construction ban provisions altered the provisions of the construction ban such that it would not apply when a State lacked an approved part D NSR program in the future. Thus, the 1990 CAA Amendments supersede that portion of prior § 52.24 dealing with the construction ban but leave unaltered the requirement that appendix S continues to apply through § 52.24( k). We explained that we have interpreted this language to allow States or EPA to issue permits under appendix S from designation to approval even if the time period between designation and approval exceeds 18 months, and proposed to revise § 52.24( k) to properly reflect this interpretation. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 354 We also proposed regulatory text to reflect the revisions to CAA section 173( a)( 4). Before the State can issue a nonattainment major NSR permit, the reviewing authority must first find pursuant to section 173( a)( 4) that the " Administrator has not determined that the applicable implementation plan is not being adequately implemented for the nonattainment area" in accordance with the requirements of part D. We stated our intent to make this determination by sending a letter to the permitting authority, and publishing a subsequent action in the Federal Register, but we solicited comment on the need to undertake notice

andcomment procedures before taking final action.

Section 113( a)( 5) of the CAA provides that EPA may issue an order prohibiting the construction or modification of any major stationary source in any area, including an attainment area, where the Administrator finds that the State is not in compliance with the NSR requirements. Specifically, the EPA may issue an order under section 113( a)( 5) banning construction in an area whenever the Administrator finds that a State is not acting in compliance with any requirement or prohibition of the CAA relating to construction of new sources or the modification of existing sources. To codify the requirements of section 113( a)( 5), we proposed new PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 355 language in § 52.24( c).

We proposed to remove the transition provisions under existing § 52.24( c) and ( g). These paragraphs were proposed to be removed because they were originally designed to clarify the applicable requirements for permits issued prior to the initial SIP revisions required by the 1977 CAA Amendments.

In addition to the significant changes already discussed, we proposed several minor changes to § 52.24.

These minor changes included: ( 1) the addition of requirements applicable to transport regions; ( 2) the inclusion of requirements applicable to criteria pollutant precursors; ( 3) incorporation of the definitions proposed in § 51.165( a); ( 4) revisions to the language at § 52.24( h)( 2);

and ( 5) revisions to § 52.24( j).

d. Proposed changes on applicability of appendix S and the transitional NSR program On June 2, 2003 ( 68 FR 32802), we explained implementation of the major NSR program under the 8 hour ozone NAAQS during the SIP development period, and proposed flexible NSR requirements for areas that expected to attain the 8 hour NAAQS within 3 years after designation. We stated that the existing regulation codified at 40 CFR § 52.24( k) PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 356 requires that permits be issued in compliance with appendix S during this time, and that a State would have to continue implementing part D nonattainment requirements under appendix S unless the source was eligible for flexibility under section VI of the appendix ( 68 FR 32846 48).

Our June 2, 2003 proposal would limit the circumstances under which section VI of appendix S applies. ( 68 FR 32844)

Under the existing regulatory structure of section VI, major new sources and major modifications located in nonattainment areas for which the attainment date has not yet passed may avoid the requirement to comply with LAER and obtain sourcespecific offsets if the new emissions will not interfere with an area's ability to reach attainment by its attainment date.

Because we believed that most new emissions in 8 hour nonattainment areas would generally not meet this criteria of non interference, we proposed to apply section VI only in areas that qualify for a " transitional classification" ( 68 FR 32846). Accordingly, we called this revised section VI the Transitional NSR Program. We proposed that the program would apply only in nonattainment areas that: ( 1) are attaining the 1 hour NAAQS; ( 2) are subject to subpart 1 ( rather than subpart 2) of part D of title I; ( 3) for which the State submitted an attainment plan by April 15, 2004 that PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 357 demonstrates attainment within 3 years after designation; ( 4)

and for which the State submitted an attainment plan containing any additional local control measures needed for attainment of the 8 hour standard ( 68 FR 32847). We also proposed that the sources using Section VI would be required to comply with BACT.

On August 6, 2003 ( 68 FR 46536), we solicited comment on additional options for implementing major NSR under the 8

hour NAAQS, including a major rewrite of appendix S that would include the proposed changes to section VI. We also solicited comment on two alternatives to appendix S for implementing NSR in newly designated nonattainment areas during the transitional SIP development period. One alternative was a Federal part D NSR regulatory program for major new and modified sources, to be codified at 40 CFR § 52.10, under which EPA would be responsible for permitting unless a State took delegation of the program. The other alternative was application of the Federal PSD program at 40 CFR § 52.21 in such newly designated nonattainment areas.

Commenters stated that neither of those alternatives was sufficiently developed for public comment, and we have not pursued them further.

One other proposal affects appendix S applicability. In PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 358 1978 ( 43 FR 26408; June 19, 1978) and 1979 ( 44 FR 3276;

January 16, 1979), we proposed that applicability under PSD and appendix S respectively be based on uncontrolled emissions, but sources would be exempt from control requirements unless the increase in allowable emissions was at least 50 tpy, 1,000 pounds per day, or 100 pounds per hour. The U. S. Court of Appeals for the District of Columbia Circuit, however, ruled that major source applicability should be based on potential to emit, rather than uncontrolled emissions. Alabama Power Co. v. Costle, 606 F. 2d 1068 ( D. C. Circuit, 1979), amended 636 F. 3d 323, 356 57 ( D. C. Circuit, 1980). The court also ruled that EPA had exceeded its authority in establishing the 50 tpy exemption and remanded the exemption for reconsideration. In response,

we proposed removing the 50 tpy exemption from the PSD rules and appendix S in the 1979 Notice of Proposed Rulemaking ( NPRM) ( 44 FR 51930). We finalized these changes in 1980,

but we inadvertently did not remove the change in all the places in appendix S where it was located, specifically footnotes 5 and 8 to IV. D.

e. Proposed changes to identify NOx as an ozone precursor in attainment and unclassifiable areas Currently, only VOCs are expressly regulated as ozone PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 359 precursors under the PSD regulations. Recognizing the role of NOx in ozone formation and transport, we proposed to amend our PSD regulations to expressly include NOx as an ozone precursor in attainment and unclassifiable areas. Moreover,

we proposed to require States to modify their existing programs to include NOx as an ozone precursor in these areas ( 68 FR 32846).

B. Summary of final rule and legal basis 1. Final action and legal basis for changes to incorporate the 1990 CAA Amendments a. Final changes to incorporate the 1990 CAA Amendments In today's final action, we revised § 51.165 and appendix S to incorporate the major stationary source thresholds,

significant emission rates, and offset ratios for sources of ozone precursors pursuant to part D, subpart 1 and subpart 2 of title I of the 1990 CAA Amendments. [ See § 51.165( a)( 1)( iv), ( a)( 1)( v), ( a)( 1)( x), ( a)( 8), ( a)( 9) and section II. A. 4, 5, and 10 and section IV. G and H of appendix S.] Accordingly, consistent with statutory requirements and the final rules in 40 CFR part 51, subpart X ( Provisions for Implementation of 8 hour Ozone NAAQS),

today's final rules in § 51.165 require States' part D NSR SIPs implementing the 8 hour ozone standard to include PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 360 provisions meeting subpart 1 of part D of the CAA, and subpart 2 as applicable, based on the area's classification.

( We note 40 CFR part 51, subpart X includes the specific provisions for determining whether an area is designated and classified under subpart 1 or subpart 2 and these rules are explained in the preamble to those final rules at 69 FR 23954.) Also, Appendix S requires States or EPA to issue permits during the SIP development period consistent with these requirements. Specifically, under subpart 1, the major stationary source threshold is 100 tpy, and an offset ratio of at least 1: 1 applies. Under subpart 2, the major stationary source threshold ranges from 10 to 100 tpy,

depending on the classification of the nonattainment area in which the source is located. The applicable offset ratios range from 1: 1 to 1: 5, also depending on the classification of the nonattainment area in which the source is located.

We also finalized as proposed in 1996 and 2003 that the NSR requirements applicable to major stationary sources of VOC ( including provisions regarding major modifications,

significant emission rates, and offsets) apply to NOx emissions. These requirements apply in all 8 hour ozone nonattainment areas, including subpart 1 and subpart 2 areas.

These requirements apply except where the Administrator PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 361 determines, according to the standards set forth in section 182( f), that NOx requirements for major stationary sources,

including nonattainment major NSR requirements, would not apply or would be limited (" NOx waiver"). [ See § 51.165( a)( 8)

and appendix S.] According to § 51.913( c), a section 182( f)

NOx exemption granted under the 1 hour ozone standard does not relieve the area from any requirements under the 8 hour ozone standard, including nonattainment major NSR for major stationary sources of NOx. We discuss whether a NOx waiver under section 182( f) applies in a particular area and the effects of NOx waivers on RACT in section IV. H. of this preamble.

We are not taking final action to implement the special modification provisions at CAA sections 182( c), ( d), and ( e)

for serious, severe, and extreme ozone nonattainment areas at this time. We are evaluating additional issues related to implementation of these requirements and anticipate taking final action in the future.

As proposed on July 23, 1996 ( 61 FR 38250), we have incorporated requirements in part D of title I of the 1990 CAA Amendments for CO. [ See § 51.165( a)( 1)( iv)( A)( 1)( v) and ( a)( 1)( x)( D) and appendix S.]

We have also made final changes to incorporate the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 362 requirements of the 1990 CAA Amendments concerning PM10 nonattainment areas. Specifically, we have promulgated as proposed in 1996 the major stationary source thresholds and significant emission rates for PM10 in PM10 nonattainment areas. [ See § 51.165( a)( 1)( iv)( A)( 1)( vi) and ( a)( 1)( x). See also appendix S at II. A. 4.( i)( a)( 6) and II. A. 4.( i).] We have not taken final action on our 1996 proposed rules for PM10 precursors. Instead, we plan to propose regulations concerning PM precursors as part of the PM2.5 NAAQS implementation rule. We also plan to address requirements for stationary sources of PM in that action.

b. Legal basis for changes to incorporate the 1990 CAA Amendments In areas not meeting health based NAAQS and in the OTR,

the major NSR program is implemented under the requirements of section 110( a)( 2)( C) and part D of title I of the CAA.

Subpart 1 of part D of title I contains general requirements for nonattainment areas for any criteria pollutant. Subpart 2 contains provisions specifically for ozone nonattainment areas. Subpart 3 contains provisions specifically for CO nonattainment areas. Subpart 4 contains provisions specifically for PM10 nonattainment areas. On July 23, 1996 ( 61 FR 38250), we proposed changes to § 51.165 and appendix S PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 363 to incorporate requirements in part D of title I of the 1990 CAA Amendments for ozone, CO, and PM10 nonattainment areas.

We promulgated a new 8 hour ozone NAAQS on July 18,

1997. We indicated that we anticipated that States would implement the 8 hour ozone NAAQS under the less prescriptive subpart 1 requirements. In February 2001, the Supreme Court ruled that the statute was ambiguous as to the relationship of subparts 1 and 2 for purposes of implementing the 8 hour ozone NAAQS. In Whitman v. American Trucking Associations,

[ 531 U. S. 457, 482 86 ( 2001)], the Supreme Court reviewed EPA's implementation strategy for the revised 8 hour ozone NAAQS, and remanded it to EPA to develop a reasonable resolution of the roles of subparts 1 and 2 in classifying areas for and implementing the revised ozone standard. On April 30, 2004, we promulgated a final rule to implement the 8 hour ozone NAAQS ( 69 FR 23951), in which some nonattainment areas would be regulated under the less restrictive requirements of subpart 1 and some would be classified and regulated under subpart 2. All ozone nonattainment areas have now been categorized subpart 1 or subpart 2 areas in 40 CFR part 81. Now that we have designated and classified nonattainment areas, the NSR program requirements ( including the specific major stationary source thresholds, significant PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 364 emission rates, and offset ratios associated with each classification) are determined by reference to subpart 1 and subpart 2, as codified in § 51.165 and appendix S through this rulemaking. Thus, as described in further detail in section V. A. 2 of this preamble, we have incorporated the requirements of the 1990 CAA Amendments for major stationary sources of ozone precursors in ozone nonattainment areas as proposed in 1996, and codified those requirements for the 8 hour standard consistent with the designation and classification scheme finalized in the 8 hour ozone implementation rule ( 69 FR 23951) promulgated in response to Whitman v. American Trucking Associations, 531 U. S. 457 ( 2001).

Concerning CO, section 187( c) of the CAA unambiguously establishes the major stationary source threshold of 50 tpy codified today for serious nonattainment areas where the Administrator has determined that stationary sources contribute significantly. It is also reasonable to set the significant emission rate at 50 tpy in those serious nonattainment areas where 50 tpy is the major stationary source threshold. The regulations at § 51.165( a)( 1)( iv)( A)( 2)

require that if a modification itself would constitute a major stationary source, the modification is subject to major NSR. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 365 Concerning PM10, section 189 of the CAA unambiguously establishes the major stationary source threshold as 70 tpy in serious nonattainment areas. Also, EPA has the authority to exempt de minimis emissions from the reach of a rule. See Alabama Power, 636 F. 2d at 360 61. Previously, EPA has defined the PM10 significant emission rate ( that is, de minimis cut off level) as at or above 15 tpy for purposes of determining which modifications are insignificant and thus exempt from PSD review ( 52 FR 24672, 24694 96; July 1, 1987).

We believe it is reasonable to use the same significant emission rate in the nonattainment NSR program. This is consistent with our past practice of applying the same significant emissions rates for each pollutant in the PSD and nonattainment NSR programs.

We also revised appendix S to incorporate the requirements of the 1990 CAA Amendments to part D of title I of the CAA. These changes are necessary to make appendix S consistent with part D. As we discuss in section V. B. 3. b of this preamble, we have determined that Congress intended for permitting equivalent to the part D NSR provisions to apply during the SIP development period through the use of appendix S ( subject to the limited section VI exemption). In light of this determination, there is no reasonable basis for PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 78The 1991 NSR transitional guidance issued to address implementation of the 1990 CAA Amendments acknowledged that appendix S did not contain at that time the newly enacted part D provisions, and further provided that the new requirements of part D to title I did not apply until November 15, 1992 for the ozone nonattainment areas; June 30, 1992, for the PM10 nonattainment areas; and 3 years from designation for most CO nonattainment areas. NSR Program Transitional Guidance, at A5 ( March 11, 1991). We later clarified that the 1990 CAA Amendments did apply to all permits after those deadlines passed. NSR Supplemental Program Transitional Guidance on Applicability of New Part D NSR Requirements at 3 ( September 3, 1992).

79Thus, EPA has typically conformed appendix S to the part D nonattainment NSR permitting provisions governing SIPs at 40 CFR § 51.165 ( originally codified at § 51.18) whenever those regulations were revised. See, for example, 45 FR 52676 ( August 7, 1980); 47 FR 27554 ( June 25, 1982); 49 FR 43210 ( October 26, 1984); 54 FR 27274 ( June 28, 1989); 57 FR 3941 ( February 3, 1992).

366 declining to implement the NSR requirements in the 1990 CAA Amendments during that period. 78 Additionally, appendix S provides on its face that it is an interpretation of the NSR permitting rules in 40 CFR subpart I, including § 51.165.

Therefore, it is necessary to have appendix S reflect substantially the same requirements as are in § 51.165.79 Thus, we proposed to amend appendix S in this manner in the 1996 NSR proposal. We also are mindful of the Supreme Court's decision in American Trucking Associations. Although the decision did not directly address NSR implementation during the SIP development period, the Court emphasized the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 367 importance of creating a role for subpart 2 in implementation of the 8 hour ozone NAAQS. We believe this suggests the need to create a role for subpart 2 in Appendix S, in contrast to the exclusive subpart 1 scheme currently embodied in Appendix S.

2. Final action and legal basis for changes to criteria for emission reduction credits from shutdowns and curtailments a. Final changes to criteria for emission reduction credits from shutdowns and curtailments The final revisions lift the requirement to have an approved attainment plan before using preapplication credits from shutdowns or curtailments as offsets. They also facilitate the availability of creditable offsets, consistent with the requirements of section 173 of the CAA. We revised the provisions at § 51.165( a)( 3)( ii)( C) and appendix S concerning emission reduction credits generated from shutdowns and curtailments as proposed in Alternative 2 of the 1996 proposal, with one exception. We agree with the commenter who found the regulatory term " most recent emissions inventory" confusing. We have revised § 51.165( a)( 3)( C)( 1) accordingly, specifying that the shutdown or curtailment must have occurred after " the last day of the base year for the SIP planning process." For the 8 hour PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 80 68 FR 32833. See also " 2002 Base Year Emission Inventory SIP Planning: 8 hr Ozone, PM2.5 and Regional Haze Programs," U. S. EPA, pg. 1 ( November 18, 2002).

81 See 57 FR 13553. After the 1990 CAA Amendments were enacted, 1990 was the base year for 1 hour ozone NAAQS attainment planning purposes. See 57 FR 13502. The EPA encouraged States to allow sources to use pre enactment banked emissions reductions credits for offsetting purposes. States have been allowed to do so if the restored credits meet all other offset creditability criteria, and States consider such credits as part of the attainment emissions inventory when developing their post enactment attainment demonstration.

368 ozone NAAQS, the base year is 2002.80 Additionally, today's final provisions allow a reviewing authority to consider a prior shutdown or curtailment to have occurred " after the last day of the base year if the projected emission inventory used to develop the attainment demonstration explicitly includes the emissions from such previously shutdown or curtailed emissions unit." This provision is consistent with the previous regulation which also allowed the reviewing authority to treat prior shutdowns or curtailments as occurring after the date of the most recent emissions inventory, but we have modified the regulatory language to clarify the appropriate emissions inventory. This regulatory language is consistent with our previous guidance on how emission reduction credits from shutdowns and curtailments are used in attainment planning. 81 The base year inventory PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 82 For a discussion of emission inventories for the 8 hour ozone standard, see our draft emission inventory guidance, Emissions Inventory Guidance for Implementation of Ozone and Particulate Matter NAAQS at http:// www. epa. gov/ ttn/ chief/ eidocs/ eiguid/ index. html. For a discussion of emission projections used in attainment demonstrations, see Emission Inventory Improvement Program, Volume X, Emission Projections, December 1999, available at http:// www. epa. gov/ ttn/ chief/ eiip/ techreport/.

369 includes actual emissions from existing sources and would not reflect emissions from units that were shutdown or curtailed before the base year, as these emissions are not " in the air." To the extent that these emission reduction credits are considered available for use as offsets and are thus " in the air" for purposes of demonstrating attainment, they must be included in the projected emissions inventory used in the attainment demonstration along with other growth in emissions over the base year inventory. This step assures that emissions from shutdown and curtailed units are accounted for in attainment planning. 82 As with the prior rules, reviewing authorities thus retain the ability to consider a prior shutdown or curtailment to have occurred after the last day of the base year if emissions from the shutdown or curtailment are accounted for in the attainment demonstration. However, in no event may credit be given for shutdowns that occurred before August 7, 1977, a provision PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 370 carried over from the previous regulation.

The other changes to the proposed rule text also are nonsubstantive and instead clarify the restrictions on credits from shutdowns or curtailments. Specifically, the proposed rule retained the requirement for an approved attainment demonstration, but made that requirement inapplicable where the credits occurred after the last day of the base year for the SIP planning process or where they were included in the most recent emissions inventory. The final rule recognizes there is no requirement for an approved attainment demonstration in those circumstances, and thus deletes the reference to that former requirement.

We note that the requirements for emission reductions used as offsets and for netting differ from those for emission reduction credits used for RFP and ROP. Section IV. E. 14. of this preamble discusses requirements for emission reduction credits used for RFP and ROP. For a more detailed discussion of emission reduction credits for offsets and netting under the 8 hour ozone NAAQS, see section V. D. 5. of this preamble.

b. Legal basis for changes to criteria for emission reduction credits from shutdowns and curtailments The revisions to the rules governing use of emissions PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 371 reductions from shutdowns/ curtailments as offsets are warranted by the more detailed attainment planning and sanction provisions of the 1990 CAA Amendments. These provisions specifically address air quality concerns in nonattainment areas lacking EPA approved attainment demonstrations. As a threshold matter, we note that CAA section 173 does not mandate the prior restrictions on shutdown credits, specifically, the requirement to have an approved attainment demonstration. [ See 48 FR 38742, 38751 ( August 25, 1983).] Rather, in promulgating these restrictions in 1989, EPA recognized that it had a large degree of discretion under the CAA to shape implementing regulations, as well as the need to exercise that discretion such that offsets are consistent with RFP as required in CAA section 173. ( See 54 FR 27286, 27292; June 28, 1989.]

Originally, EPA believed that areas without approved attainment demonstrations lacked adequate safeguards to ensure that shutdown/ curtailment credits would be consistent with RFP. We thus subjected those areas to more restrictive requirements to ensure a link between the new source and the source being shut down/ curtailed ( that is,

shutdown/ curtailment must occur after application for a new or modified major source is filed). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 372 The 1990 CAA Amendments changed the considerations involved. As discussed above, for areas subject to subpart 2, Congress emphasized the emission inventory requirement in section 172( c)( 3) as a fundamental tool in air quality planning. Congress also added new provisions keyed to the inventory requirement, including specific reduction strategies and " milestones" that measure progress toward attainment from the base year emissions inventory or subsequent revised inventories. Where the emission reduction credits pre date the base year, State and local agencies must include the credits from the shutdown/ curtailment in the projected emissions inventory used to develop the attainment demonstration. Subpart 4 sets forth specific reduction strategies and milestones for attainment of the PM10 standards. Additionally, there are now several adverse consequences where States fail to meet the planning or emissions reductions requirements of the CAA. For example,

the CAA contains mandatory increased new source offset sanctions at a 2: 1 ratio where the Administrator finds that a State failed to submit a required attainment demonstration.

In areas that are subject to subpart 2 and subpart 4, failure to attain the air quality standard by the attainment deadline results in the area being bumped up to a higher PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 373 classification. Additional regulatory requirements are imposed as a result of the higher classification. These statutory changes justify shifting the focus of the current regulations from individual offset transactions between a specific new source and shutdown source and towards a systemic approach. Considering the changes to the 1990 CAA Amendments, we now believe that continuing the prohibition on the use of shutdown/ curtailment credits generated where there is no approved attainment demonstration is not warranted. We believe that use of emission reduction credits from shutdowns/ curtailments will be consistent with RFP towards attainment under CAA section 173, even in the absence of an approved attainment demonstration, if they occur after the last day of the base year for the SIP planning process or are included in the projected emissions inventory used to develop the attainment demonstration. From an air quality planning perspective, emissions from the shutdown source actually impacted the measurements of air quality used in determining the nonattainment status of an area. Subsequently, emissions reductions from such source shutdowns/ curtailments are actual emissions reductions, and their use as emission offsets at a ratio of 1: 1 or greater is consistent with RFP towards improved air quality as set forth in CAA section PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 83 We note that we are changing the cross reference in § 52.24( f) to " § 51.165" instead of the definitions section at § 51.165( a), to ensure that all of the provisions of § 51.165 apply in interpreting the terms of § 52.24.

374 173( a)( 1)( A).

3. Final action and legal basis for changes to the construction ban provisions a. Final action for changes to the construction ban provisions We are promulgating final changes to § 52.24 to implement the construction ban provisions and other changes, as proposed in 1996 and 2003.83 We believe these changes are beneficial to conform the regulatory text with the requirements that apply under the 1990 CAA Amendments.

As noted in our June 2003 proposal, we are retaining the provision in § 52.24( k) that specifies that appendix S governs permits to construct and operate applied for during the SIP development period. Although the regulatory text proposed in 1996 omitted § 52.24( k), the 1996 preamble also explained that the changes to § 52.24 were intended only to update and clarify the regulation with regard to the changes to the construction ban made by the 1990 CAA Amendments. ( 61 FR 38250, 38305) The preamble did not in any manner indicate that EPA believed that NSR permits complying with appendix S PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 375 were not required during the SIP development period where necessary. Additionally, it did not contemplate nonattainment major NSR permitting in light of the situation that today's final action addresses, which is the need to permit nonattainment area sources during a transition period in which a substantial number of new nonattainment areas are being created. Therefore, we are retaining § 52.24( k).

As we proposed in the 8 hour ozone NAAQS implementation rule ( 68 FR 32846), we made one change to the regulatory language in § 52.24( k). The previous language at § 52.24( k)

only allowed States to issue permits under appendix S for a maximum period of 18 months after designation. This language was consistent with the previous SIP development period and construction ban under the 1977 CAA, which no longer apply under the 1990 CAA Amendments. We have revised § 52.24( k) to allow States to issue permits under appendix S from designation until the SIP is approved, even if this exceeds 18 months. As we noted in our proposal, this change implements the removal of the construction ban from the 1990 CAA Amendments and is consistent with our 1991 policy memo,

" New Source Review ( NSR) Program Transitional Guidance, John S. Seitz, March 11, 1991.

b. Legal basis for changes to the construction ban PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 376 provisions Section 110( a)( 2)( c) of the CAA establishes a general duty on States to include a program in their SIP that regulates the modification and construction of any stationary source as necessary to assure that the NAAQS are achieved.

This general duty, often referred to as " minor NSR," exists during all periods, including before a State has an approved part D NSR permit program.

Section 110( a)( 2)( c) of the CAA does not define specific requirements States must follow for issuing major source permits during the interim period between nonattainment designation and EPA approval of a part D nonattainment NSR SIP (" interim period"). However, EPA's regulations at § 52.24( k) require States to follow EPA's Emission Offset Interpretative Ruling, 40 CFR part 51, appendix S, during this time.

This approach is consistent with Congressional intent,

as indicated in the 1977 CAA Amendments providing for major NSR permitting during the SIP development period in accordance with appendix S. [ See Public Law No. 95 95,

section 129( a), 91 Statute 685 ( 1977).] Specifically,

Congress enacted a moratorium on construction in any area lacking an approved part D NSR SIP, with a delayed effective PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 377 date of July 1, 1979. Congress also provided that appendix S, as modified by rule of the Administrator, govern permitting of sources constructing in such areas before that date, subject to a limited waiver by the Administrator. Id.

108( b), 129( a). We subsequently codified the use of appendix S as the interim major NSR program in 40 CFR § 52.24( k),

reasoning ( in the context of implementing a delay in the construction ban for then recently designated nonattainment areas) that Congress had provided that appendix S should remain in effect to protect air quality while State plans were being designed ( 45 FR 65209). When Congress removed the construction ban ( except as provided in section 110( n)( 3)),

it left in place 40 CFR § 52.24( k), implementing the interim major NSR program under appendix S.

Accordingly, we have historically recognized that the SIP development period provided for in section 172( b) leaves a gap in part D major NSR permitting and have determined that this gap is to be filled with an interim major NSR program that is substantially similar to the requirements of part D.