[Federal Register Volume 86, Number 229 (Thursday, December 2, 2021)]
[Rules and Regulations]
[Pages 68413-68421]
[FR Doc No: 2021-26144]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R04-OAR-2019-0156; FRL-8697-02-R4]

Air Plan Approval; FL, GA, NC, SC; Interstate Transport (Prongs 1
and 2) for the 2015 8-Hour Ozone Standard

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA or Agency) is
approving State Implementation Plan (SIP) submissions from Florida,
Georgia, North Carolina, and South Carolina, addressing the Clean Air
Act (CAA or Act) Good Neighbor interstate transport infrastructure SIP
requirements for the 2015 8-hour ozone National Ambient Air Quality
Standard (NAAQS or standards). EPA has determined that each state's SIP
contains adequate provisions to prohibit emissions that will
significantly contribute to nonattainment or interfere with maintenance
of the 2015 ozone NAAQS in any other state. This action is being taken
in accordance with the CAA.

DATES: This rule is effective January 3, 2022.

ADDRESSES: EPA has established a docket for this action under Docket
Identification No. EPA-R04-OAR-2019-0156. All documents in the docket
are listed on the www.regulations.gov website. Although listed in the
index, some information may not be publicly available, i.e.,
Confidential Business Information or other information whose disclosure
is restricted by statute. Certain other material, such as copyrighted
material, is not placed on the internet and will be publicly available
only in hard copy form. Publicly available docket materials are
available either electronically through www.regulations.gov or in hard
copy at the Air Regulatory Management Section, Air Planning and
Implementation Branch, Air and Radiation Division, U.S. Environmental
Protection Agency, Region 4, 61 Forsyth Street SW, Atlanta, Georgia
30303-8960. EPA requests that if at all possible, you contact the
person listed in the FOR FURTHER INFORMATION CONTACT section to
schedule your inspection. The Regional Office's

official hours of business are Monday through Friday 8:30 a.m. to 4:30
p.m., excluding Federal holidays.

FOR FURTHER INFORMATION CONTACT: Evan Adams of the Air Regulatory
Management Section, Air Planning and Implementation Branch, Air and
Radiation Division, U.S. Environmental Protection Agency, Region 4, 61
Forsyth Street SW, Atlanta, Georgia 30303-8960. Mr. Adams can be
reached by telephone at<PHONE_NUMBER>, or via electronic mail at
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On December 30, 2019, EPA proposed to approve SIP submissions from
Alabama, Florida, Georgia, North Carolina, South Carolina, and
Tennessee \1\ as meeting the interstate transport requirements of CAA
section 110(a)(2)(D)(i)(I), or the Good Neighbor provision, for the
2015 8-hour ozone NAAQS. See 84 FR 71854. Specifically, the 2019 notice
of proposed rulemaking (NPRM) originally proposed to find that
emissions from sources in these states will not significantly
contribute to nonattainment or interfere with maintenance of the 2015
8-hour ozone NAAQS in any other state based on information for the
analytic year 2023, consistent with the 2024 Moderate area attainment
date. Refer to the December 30, 2019 NPRM for an explanation of the CAA
requirements, the four-step framework that EPA applies under the Good
Neighbor provision for ozone NAAQS, a detailed summary of the state
submissions, and EPA's proposed rationale for approval. See 84 FR
71854. The public comment period for the December 30, 2019, NPRM closed
on January 29, 2020.\2\
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    \1\ The submittals from these six southeastern states were
submitted separately under the following cover letters: Alabama
Department of Environmental Management dated August 20, 2018
(received by EPA on August 27, 2018); Florida Department of
Environmental Protection dated September 18, 2018 (received by EPA
on September 26, 2018); Georgia Environmental Protection Division
dated September 19, 2018 (received by EPA on September 24, 2018);
North Carolina Department of Environmental Quality dated September
27, 2018 (received by EPA October 10, 2018); South Carolina
Department of Health and Environmental Control dated and received by
EPA on September 7, 2018; and Tennessee Department of Environment
and Conservation dated September 13, 2018 (received by EPA on
September 17, 2018).
    \2\ On March 24, 2020, former EPA Region 4 Administrator Mary
Walker signed a document (hereinafter referred to as the March 24,
2020 document) that EPA had intended to become a final rule upon
publication in the Federal Register. However, the March 24, 2020
document was never published in the Federal Register. Further, on
January 19, 2021, former EPA Region 4 Administrator Mary Walker
signed a second document (hereinafter referred to as the January 19,
2021 document) that EPA had intended to become a final rule, which
EPA posted to its website at https://www.epa.gov/air-quality-implementation-plans/epas-approval-2015-8-hour-ozone-interstate-transport-requirements. EPA noted in that posting ``Notwithstanding
the fact that the EPA is posting a pre-publication version, the
final rule will not be promulgated until published in the Federal
Register.'' EPA will not publish either the March 24, 2020 document
or the January 19, 2021 document in the Federal Register, and now
intends that this notice constitutes final action with respect to
the 2019 proposal, superseding all versions of previous draft final
action documents.
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    Subsequent to the publication of the NPRM on December 30, 2019, two
events caused EPA to adjust its analysis of the aforementioned SIP
submissions. First, the United States Court of Appeals for the District
of Columbia Circuit (D.C. Circuit) issued its ruling in Maryland v.
EPA, 958 F.3d 1185 (D.C. Cir. 2020) (Maryland), which held that EPA
must address Good Neighbor obligations consistent with the 2021
attainment date for downwind areas classified as being in Marginal
nonattainment under the 2015 8-hour ozone NAAQS, ``not at some later
date.'' 958 F.3d at 1203-04 (citing Wisconsin v. EPA, 938 F.3d 303, 314
(D.C. Cir. 2019) (Wisconsin)).\3\ Second, on October 30, 2020, EPA
released and accepted public comment on updated 2023 modeling that used
the 2016 emissions platform developed under the EPA/Multi-
Jurisdictional Organization (MJO)/state collaborative project as the
primary source for the base year and future year emissions data. On
April 30, 2021, EPA published the final Revised Cross-State Air
Pollution Rule (CSAPR) Update for the 2008 ozone NAAQS (Revised CSAPR
Update) using the same modeling that was made publicly available in the
proposed rulemaking for the Revised CSAPR Update.\4\ Although that
modeling focused on the year 2023, EPA conducted an interpolation
analysis of these modeling results to generate air quality and
contribution values for the 2021 analytic year, consistent with the
Maryland holding, as the relevant analytic year for the 2015 8-hour
ozone NAAQS.
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    \3\ Maryland involved EPA's denial of administrative petitions
filed by the states of Maryland and Delaware under CAA section
126(b), seeking to have EPA impose emissions limits on sources in
upwind states alleged to be emitting in violation of the Good
Neighbor Provision. The court disagreed with EPA that use of a 2023
analytic year, consistent with the 2024 attainment date for areas
classified as being in Moderate nonattainment, was a proper reading
of the court's earlier decision in Wisconsin. Id. at 1204.
    \4\ Revised Cross-State Air Pollution Rule Update for the 2008
Ozone NAAQS, 86 FR 23054; see also Emissions Modeling TSD titled
``Preparation of Emissions Inventories for the 2016v1 North American
Emissions Modeling Platform.'' This TSD is available in the docket
for this action and at https://www.epa.gov/air-emissionsmodeling/2016v1-platform. The underlying modeling files are available on data
drives in the Docket office for public review. See the docket for
the Revised CSAPR Update (EPA-HQ-OAR-2020-0272). See also Air
Quality Modeling Data Drives_Final RCU.pdf, available in the docket
for this action for a file inventory and instructions on how to
access the modeling files.
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    As a result, EPA issued a supplemental notice of proposed
rulemaking (SNPRM) on July 19, 2021, which relied on the new modeling
and analysis to supplement EPA's proposed finding in the December 30,
2019 NPRM that emissions from sources in Florida, Georgia, North
Carolina, and South Carolina will not significantly contribute to
nonattainment or interfere with maintenance of the 2015 8-hour ozone
NAAQS in any other state.\5\ See 86 FR 37942. The new modeling and
analysis indicated that Florida, Georgia, North Carolina, and South
Carolina, individually, will not contribute greater than one percent of
the 2015 8-hour ozone NAAQS to any potential nonattainment or
maintenance receptors in 2021. In addition, EPA analyzed past and
projected emissions of ozone precursors (nitrogen oxides
(NOX) and volatile organic compounds (VOCs)), finding a
downward trend in emissions to support the modeling analysis and
indicate that the contributions from emissions from sources in Florida,
Georgia, North Carolina, and South Carolina to ozone receptors in
downwind states will continue to decline and remain below one percent
of the 2015 8-hour ozone NAAQS. Thus, the July 19, 2021 SNPRM provided
that ``EPA continues to propose to approve the interstate transport
portions of the infrastructure SIP submissions from Florida, Georgia,
North Carolina, and South Carolina as meeting CAA section
110(a)(2)(D)(i)(I) requirements for the 2015 8-hour ozone NAAQS.'' See
86 FR 37942.
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    \5\ EPA previously proposed to approve infrastructure SIP
elements submitted to fulfill the interstate transport requirements
of CAA section 110(a)(2)(D)(i)(I) for the states of Alabama and
Tennessee for the 2015 8-hour ozone NAAQS in the December 30, 2019,
NPRM referenced previously in this rule. However, the July 19, 2021
SNPRM did not address these submissions, and EPA is deferring action
on the referenced SIP submissions from Alabama and Tennessee at this
time.
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    The technical rationale for EPA's proposed action is given in the
July 19, 2021 SNPRM and in supportive materials contained in the docket
for this action. The comment period for the July 19, 2021 SNPRM closed
on August 18, 2021, and EPA received no additional comments. However,
EPA did receive comments on the original December 30, 2019 NPRM, and
relevant responses are provided in section II. EPA is finalizing the
approval of this action based on the technical rationale

presented in the July 19, 2021 SNPRM and in accordance with the CAA.

II. Response to Comments

    EPA received four sets of adverse comments and one set of
supportive comments on the December 30, 2019, NPRM. The comments were
submitted by the Midwest Ozone Group, Sierra Club, New Jersey
Department of Environmental Protection, New York State Department of
Environmental Conservation, and one anonymous commenter. The full set
of comments is provided in the docket for this final rule. This section
contains summaries of the comments and EPA's responses.
    Comment 1: Several commenters asserted that EPA's December 30, 2019
NPRM improperly focused on the analytic year of 2023, which the
commenters argue ignores the August 2021 attainment date faced by
Marginal 2015 ozone nonattainment areas. These commenters asserted that
EPA's decision focused on 2023 (consistent with the August 2024
attainment date for Moderate nonattainment areas under the 2015 8-hour
ozone NAAQS, rather than the August 2021 attainment date for Marginal
nonattainment areas), which contravenes the statutory text and the
Wisconsin decision, and is arbitrary and capricious. The commenters
specifically mention that the distinction EPA has drawn between
Marginal and Moderate areas is misleading, that it is unreasonable for
EPA to expect downwind areas to voluntarily request reclassifications
to Moderate, and that EPA has not provided adequate support for its
assumption that Marginal areas will achieve attainment by 2021. A
commenter also contended that the CSAPR Update is insufficient to bring
all downwind states into attainment with the 2015 8-hour ozone NAAQS,
citing a conclusion made in the December 30, 2019, NPRM in support of a
2023 analytic year and monitoring data from the 2017 ozone season
indicating certain 8-hour daily maximum concentrations at air quality
monitors in Delaware were above the level of the NAAQS. In addition, a
commenter asserted that recent monitoring data at other monitoring
sites suggests that these areas will continue to have difficulty
attaining the NAAQS in 2021.
    Response 1: The comments related to the 2023 analytic year refer to
a D.C. Circuit court decision addressing, in part, the issue of the
relevant analytic year for the purposes of evaluating interstate ozone
transport under the Good Neighbor provision. On September 13, 2019, the
D.C. Circuit issued the Wisconsin decision, remanding the CSAPR Update
(81 FR 74504, October 26, 2016) to the extent that it failed to require
upwind states to eliminate their significant contribution no later than
the next applicable attainment date by which downwind states must come
into compliance with the NAAQS, as established under CAA section
181(a). See 938 F.3d 303, 313. In the December 30, 2019 NPRM, EPA had
interpreted that holding as limited to the attainment dates for
Moderate nonattainment area or higher classifications under CAA section
181 on the basis that Marginal nonattainment areas have reduced
planning requirements and other considerations. See 84 FR 71854, 71856-
58.
    On May 19, 2020, however, the D.C. Circuit issued the Maryland
decision that cited the Wisconsin decision in holding that EPA must
assess the impact of interstate transport on air quality at the next
downwind attainment date, including Marginal area attainment dates, in
evaluating the basis for EPA's denial of a petition under CAA section
126(b). See 958 F.3d 1185, 1203-04. The court noted that ``section
126(b) incorporates the Good Neighbor Provision,'' and therefore ``the
EPA must find a violation [of section 126] if an upwind source will
significantly contribute to downwind nonattainment at the next downwind
attainment deadline. Therefore, the EPA must evaluate downwind air
quality at that deadline, not at some later date.'' Id. at 1204
(emphasis added). EPA interprets the court's holding in Maryland as
requiring the Agency, under the Good Neighbor provision, to address
Good Neighbor obligations by no later than the next applicable
attainment date for downwind areas, including a Marginal area
attainment date under section 181 for ozone nonattainment.\6\
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    \6\ EPA notes that the court in Maryland did not have occasion
to evaluate circumstances in which EPA may determine that an upwind
linkage to a downwind air quality problem exists at steps 1 and 2 of
the four-step interstate transport framework by a particular
attainment date, but for reasons of impossibility or profound
uncertainty the Agency is unable to mandate upwind pollution
controls by that date. See Wisconsin, 938 F.3d at 320. The D.C.
Circuit noted in Wisconsin that upon a sufficient showing, these
circumstances may warrant a certain degree of flexibility in
effectuating the implementation of the Good Neighbor provision. Such
circumstances are not at issue in the present action.
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    The December 30, 2019 NPRM proposing approval of the 2015 8-hour
ozone Good Neighbor SIPs for Florida, Georgia, North Carolina, and
South Carolina on the basis of a 2023 analytic year analysis predates
the D.C. Circuit's decisions in Wisconsin and Maryland. In the July 19,
2021 SNPRM, EPA explained why it now considers 2021 to be the relevant
analytic year for the purposes of determining whether sources in
Florida, Georgia, North Carolina, and South Carolina will significantly
contribute to downwind nonattainment or interfere with maintenance of
the 2015 8-hour ozone NAAQS in any other state. See 86 FR 37944. Also
in the July 19, 2021 SNPRM, EPA conducted an additional analysis for
the year 2021, and provided additional notice and opportunity for
public comment. Id. Thus, comments regarding the improper use of 2023
as a model year are now moot.\7\
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    \7\ EPA recognizes that this action is now being finalized after
the Marginal area attainment date has passed and after the close of
the 2021 ozone season. However, this does not change EPA's analysis
or its conclusion. The modeling information available in the record
and included in the supplemental proposal also indicates that these
four states will not be linked to any downwind nonattainment or
maintenance receptors in 2023 and 2028, confirming that no new
linkages to downwind receptors are projected in later years.
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    Multiple commenters stated that the approach for identifying
nonattainment and maintenance receptors in the original December 30,
2019 NPRM failed to identify all of the potential receptors relevant in
a 2021 analytic year. In addition to their objections to EPA's
selection of the 2023 analytic year, these commenters argued that
measured design values at certain monitoring sites made clear that
certain areas would not be able to attain the 2015 8-hour ozone NAAQS
by the 2021 Marginal area attainment date. The shift in the July 19,
2021 SNPRM and this final action to a 2021 analytic year partially
addresses the concerns raised by these commenters. To the extent
commenters are arguing that EPA's method of defining nonattainment and
maintenance receptors for Good Neighbor purposes ignores certain areas
that may have air quality problems in 2021 based solely on historical
measured data, EPA disagrees with these comments. EPA's method of
defining these receptors, as described in section II of the SNPRM takes
into account both measured data and reasonable projections based on
modeling analysis.\8\
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    \8\ Further, as recognized by the court in Wisconsin, 938 F.3d
at 320, nonattainment areas that measure clean data in a given year,
even if not sufficient to be redesignated to attainment based on the
three-year design value, may qualify for up to two one-year
extensions of their attainment dates, as provided at CAA section
181(a)(5). Thus, simply providing the value that would be needed in
2020 in order for an area to be designated to attainment using the
three-year average, as some commenters did, does not present a
complete picture of the likelihood that an area will be
``reclassified'' or ``bumped-up.''

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    Regarding the contention that the CSAPR Update, which covered the
2008 8-hour ozone NAAQS, will not be sufficient to bring areas into
attainment of the 2008 or 2015 8-hour ozone NAAQS, this is not relevant
to the analysis in support of this action. Whether downwind states may
or may not reach attainment of the 2015 8-hour ozone NAAQS with the
assistance of the upwind state emissions reductions resulting from the
CSAPR Update is not determinative of whether Florida, Georgia, North
Carolina, and South Carolina have Good Neighbor obligations for the
2015 8-hour ozone NAAQS pursuant to the CAA. At issue is whether
Florida, Georgia, North Carolina, and South Carolina will significantly
contribute to downwind nonattainment or interfere with maintenance of
the 2015 8-hour ozone NAAQS in any other state. The updated information
presented in the SNPRM made clear that they will not, and no party
commented on that updated information.
    Comment 2: Several commenters call into question certain
assumptions used in EPA's 2023 air quality modeling described in the
March 2018 memorandum. A number of commenters contend that EPA's
modeling was flawed because it relied on ``unenforceable emissions
limitations,'' including assumptions that power plants equipped with
selective catalytic reduction (SCR) controls would emit at or below
0.10 pounds per one million British Thermal Units (lb/mmBtu) beginning
in 2017. One commenter contended that many plants emit above that rate.
Another commenter asserts that EPA should not approve any prong 1 and 2
SIPs \9\ that reflect ``EPA's flawed data showing attainment by 2023.''
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    \9\ Section 110(a)(2)(D)(i)(I) requires SIPs to contain adequate
provisions that prohibit any source or other types of emissions
activity in one state from contributing significantly to
nonattainment of the NAAQS in another state (prong 1) and from
interfering with maintenance of the NAAQS in another state (prong
2).
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    Response 2: As discussed previously and in the SNPRM, EPA is
relying on updated modeling and analysis based on the 2021 analytic
year and not the 2023 air quality modeling described in the March 2018
memorandum. However, EPA disagrees that its assessment of air quality
and contributions at step 1 and 2 of the four-step interstate transport
framework is flawed because it relies on unenforceable emission
assumptions for electric generating units (EGUs) or that those
assumptions are otherwise unrealistic. As an initial matter, in this
context it is appropriate for EPA to focus on actual EGU emission
projections, rather than modeling only enforceable limits (sometimes
referred to as ``allowable'' emissions). EPA has previously explained
that its analysis at steps 1 and 2 of the four-step interstate
transport framework is appropriately focused on a projection of actual
air quality concentrations and upwind-state contributions. As EPA
explained in the final CSAPR Close-out, this approach to conducting
future-year modeling in the Good Neighbor analysis to identify downwind
air quality problems and linked states is consistent with the use of
current measured data in the designations process under section 107 of
the CAA. See 83 FR 65878, 65887-88 (December 21, 2018).\10\ In both
cases, the purpose is to determine whether there is an actual air
quality problem that needs to be further addressed (in the designations
context, whether an area is in nonattainment of a NAAQS; in the Good
Neighbor context, whether there are expected future air quality
problems (i.e., downwind nonattainment or maintenance receptors) and
upwind state contribution to these downwind nonattainment or
maintenance receptors that require further analysis at steps 3 and 4).
EPA's future-year air quality projections reflect a variety of factors,
including current emissions data, on-the-books control measures,
economic market influences, and meteorology. Like the factors that
affect measured ozone concentrations used in the designations process,
not all of the factors influencing EPA's modeling projections are or
can be subject to enforceable limitations on emissions or ozone
concentrations. However, EPA believes that consideration of these
factors contributes to a reasonable estimate of anticipated future
ozone concentrations and contributions at steps 1 and 2 of the four-
step interstate transport framework. In short, EPA's consideration of
these factors--even when not based on or amendable to enforceable
limits or controls--in its future-year modeling projections used at
steps 1 and 2 of the Good Neighbor analysis is reasonable. See 83 FR at
65888 (December 21, 2018). Only where such analysis indicates an
upwind-state linkage under projected conditions does further analysis
proceed at steps 3 and 4 of the four-step interstate transport
framework to determine what enforceable emissions limits should be
required in the linked upwind state. EPA's air quality modeling and
analysis is designed to reflect what downwind air quality problems will
exist in the relevant analytic year, and the assumptions used are based
on realistic projections of source emissions.
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    \10\ The CSAPR Close-out was vacated on grounds unrelated to
this issue. See New York v. EPA, 781 F. App'x. 4 (D.C. Cir. 2019).
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    In response to the commenters' contention that EPA should not model
using the 0.1 lb/mmBtu emission rate assumption for EGUs because it is
not enforceable and some units emit higher than this rate, this concern
is addressed by the updates contained in the updated 2023 modeling used
to derive EPA's 2021 air quality analysis for this final action.
Specifically, as noted in the SNPRM, EPA is relying on updated
Integrated Planning Model (IPM) modeling for its EGU projection in the
updated analysis for this final action. Additionally, EPA has modeled a
range of scenarios reflecting alternative EGU assumptions--each
resulting in the same finding made in this action.\11\
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    \11\ See the Ozone Air Quality Assessment Tool (AQAT)
spreadsheet and the Ozone Policy Analysis TSD located in the docket
for this action for details about these scenarios, emissions, and
air quality estimates.
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    Although EPA disagrees with these comments regarding the modeling
approach it took at the original proposal with respect to projecting
EGU emissions,\12\ the Agency made updates to incorporate the latest
modeling and data, which address the concerns expressed by the
commenters. The December 30, 2019 NPRM rule relied on air quality
modeling analysis and data released in 2018 that showed results from
analytic work completed in 2017 (prior to the completion of the first
year of CSAPR Update compliance).\13\ As explained in the modeling TSD
referenced in the July 19, 2021 SNPRM, EPA started with the latest
historical data at that time (2016) and assumed that, on average, SCR-
controlled coal units would operate at 0.1 lb/mmBtu if not already
doing so (reflecting the fleet's response (on average) to the CSAPR
Update that would begin in 2017).\14\ In this final action, EPA's
future year air quality projections are informed by actual compliance
data from 2019, which allows EPA to rely less on compliance assumptions
and more on actual data from the past three years in evaluating likely
EGU emissions in 2021. EPA estimated future

year emissions using the January 2020 IPM Reference Case, which was
informed by actual 2018 compliance rates rather than anticipated
compliance rates (i.e., 2018 reported emission rates (not a 0.1 lb/
mmBtu assumption)). This largely obviates the commenters' concern
regarding the 0.1 lb/mmBtu assumption at proposal. Moreover, the IPM
modeling explicitly includes the CSAPR Update enforceable limits (i.e.,
the states' trading allowance budgets) at both the regional and state
level. With these enforceable limits included, the model allowed
covered sources to emit up to those limits if it would be economically
advantageous to do so, but this did not occur in the modeling.
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    \12\ As explained further in this rule, the analysis supporting
the December 30, 2019 proposal over-estimated EGU emissions.
    \13\ See March 2018 memorandum, located in the docket for this
action.
    \14\ Technical Support Document (TSD) Additional Updates to
Emissions Inventories for the Version 6.3, 2011 Emissions Modeling
Platform for the Year 2023, available at https://www.epa.gov/sites/production/files/2017-11/documents/2011v6.3_2023en_update_emismod_tsd_oct2017.pdf.
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    EPA projected future 2021 and 2023 baseline EGU emissions using the
version 6--January 2020 reference case of the IPM.15 16 IPM,
developed by ICF Consulting, is a state-of-the-art, peer-reviewed,
multi-regional, dynamic, deterministic linear programming model of the
contiguous U.S. electric power sector. It provides forecasts of least
cost capacity expansion, electricity dispatch, and emission control
strategies while meeting energy demand and environmental, transmission,
dispatch, and reliability constraints. EPA has used IPM for over two
decades to better understand power sector behavior under future
business-as-usual conditions and to evaluate the economic and emission
impacts of prospective environmental policies. The model is designed to
reflect electricity markets as accurately as possible. EPA uses the
best available information from utilities, industry experts, gas and
coal market experts, financial institutions, and government statistics
as the basis for the detailed power sector modeling in IPM. The model
documentation provides additional information on the assumptions
discussed here as well as all other model assumptions and inputs. The
IPM version 6--January 2020 reference base case accounts for updated
federal and state environmental regulations, committed EGU retirements
and new builds, and technology cost and performance assumptions as of
late 2019. This projected base case accounts for the effects of the
finalized Mercury and Air Toxics Standards rule, the CSAPR and the
CSAPR Update, New Source Review settlements, final actions EPA has
taken to implement the Regional Haze Rule, and other on-the-books
federal and state rules through 2019 impacting sulfur dioxide,
NOX, directly emitted particulate matter, and
CO2. For the new 2023 air quality modeling used to
interpolate air quality projections in 2021, EPA relied on these 2023
EGU emissions to inform the broader emissions inventory.
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    \15\ See https://www.epa.gov/airmarkets/analysis-revised-cross-state-air-pollution-rule-update (last accessed November 8, 2021).
    \16\ The January 2020 IPM reference case is a later version than
what was released with 2016v1.
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    The EGU emissions data--both historical and projected--are shown in
Table 1, and compared with the CSAPR Update enforceable budget,
demonstrate: (1) The reasonableness of EPA's practice of not solely
using enforceable levels in deriving projections of actual conditions
and contribution at steps 1 and 2 of the interstate-transport framework
for ozone, and (2) the robustness of its examination.

             Table 1--Reported Ozone Season NOX Emissions From EGUs in the CSAPR Update Region \17\
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                     Reported ozone season NOX emissions (tons)                            IPM      CSAPR Update
-------------------------------------------------------------------------------------  projection      budget
                                                                                (tons) \18\  (enforceable
                                                                                --------------     tons)
     2015           2016          2017          2018          2019          2020                   -------------
                                                                                2021          2021
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     398,831        371,994       294,483       289,988       251,763       227,325       222,900       313,626
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    In sum, EPA's EGUs assumptions show that its projected ozone-season
EGU emissions levels from proposal of 283,164 tons in 2023 was, if
anything, conservative--that is, it is likely that emissions levels
from EGUs will be lower than what was projected in the proposal, not
higher as suggested by the commenter. The 2019 ozone-season data
reflected emissions that were already 20 percent below the CSAPR Update
budgets, reflecting a 13 percent drop from the prior year, and at a
pace of reduction that strongly suggests actual emissions from EGUs in
2021 will be well below the CSAPR Update budget levels. In other words,
the emissions levels that the commenter claimed were not reasonable to
expect in 2023 have already been achieved--four years ahead of that
analytic year. The EGU projections EPA used in its analysis for 2021,
as discussed previously, are reasonable and properly inform its
analysis of ozone levels and contribution in that analytic year. In
order for emissions in 2021 to rise to total budget levels (e.g.,
313,626 tons, representing the aggregate budgets for the covered
states), a decade-long decline in ozone-season NOX emissions
would have to not only cease but reverse sharply.
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    \17\ This data analysis relies on 40 CFR part 75 emissions
reporting data as available in EPA Air Markets Program Data
available at http://ampd.epa.gov/ampd/.
    \18\ These values are available in the Air Quality Modeling Base
Case State Emissions file (fossil >25 MW worksheet) available at
https://www.epa.gov/airmarkets/analysis-revised-cross-state-air-pollution-rule-update. Additionally, as noted in the Revised CSAPR
proposal, EPA's earlier engineering analytics used a more
conservative 283,164 tons for 2023. As a sensitivity analysis for
the proposed Revised CSAPR Update Modeling using IPM, EPA also used
an updated engineering analytics EGU estimate (relying on 2019 data)
that resulted in a 2021 estimate of 238,798 tons.
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    Supported by the most recent reported emissions data, EPA concludes
that its EGU projections used in the most recent modeling and in the
interpolation of that modeling to 2021 are reasonable and conservative.
Thus, EPA believes it is reasonable and appropriate to rely on these
emissions projections in its air quality analysis for 2021 to approve
the 2015 8-hour ozone transport SIP submissions for Florida, Georgia,
North Carolina, and South Carolina.
    Comment 3: A commenter states that EPA's 2023 modeling described in
the March 2018 memorandum is also flawed given the modeling's reliance
on certain federal emissions reduction programs, which the commenter
argues EPA is ``actively working to undermine.'' For example, the
commenter points to EPA's proposed repeal of its rule regulating
emissions from glider vehicles, glider engines, and glider kits, 82 FR
53442 (November 16, 2017) (Proposed Repeal of the Glider Rule), noting
that EPA has estimated unregulated glider vehicles would increase
emissions by approximately 300,000 tons annually in 2025. The

commenter notes that even though EPA never finalized the Proposed
Repeal of the Glider Rule, EPA's enforcement office issued a memorandum
on July 6, 2018, stating that it would not enforce the Glider Rule. The
commenter states that although this ``no action assurance'' is being
challenged in court and has been temporarily stayed, ``EPA's non-
enforcement efforts underline the unreasonableness of relying on the
emissions reductions from this rule as a basis for concluding that
Marginal nonattainment areas will attain the 2015 NAAQS by 2021.'' The
commenter also asserts that EPA's recent actions ``weakening'' the
Corporate Average Fuel Economy (CAFE) standards for light-duty vehicles
and EPA's recent proposal to withdraw the Control Techniques Guidelines
(CTGs) for the Oil and Natural Gas Industry call into question the
accuracy of EPA's 2023 modeling, and that ``each deregulatory action .
. . demonstrates the arbitrariness of EPA's assumption that Marginal
nonattainment areas will comply with the 2015 NAAQS by 2021 without
additional ozone-precursor pollution reductions from southeastern
upwind states.''
    Response 3: As an initial matter, the updated 2023 modeling used to
interpolate 2021 contributions that was relied on did not make
different regulatory assumptions than the previous 2023 modeling
released with the March 2018 memorandum regarding the Glider Rule and
the light-duty CAFE standards, so the comment is relevant to the
updated modeling as presented in the SNPRM. However, EPA disagrees that
EPA's updated air quality modeling did not properly account for
expected changes in projected emissions that would result from changes
to federal programs. The mobile source and non-EGU emissions
inventories in both the previous and updated modeling do not reflect
changes in emissions resulting from rulemakings finalized in calendar
year 2016 or later, nor do they reflect any rules proposed but not yet
finalized since 2016, as only finalized rules are reflected in modeling
inventories. This reflects EPA's normal practice to only include
changes in emissions from final regulatory actions in its modeling
because, until such rules are finalized, any potential changes in
NOX or VOC emissions are speculative.
    EPA did not finalize the Proposed Repeal of the Glider Rule. EPA
announced in the U.S. Office of Management and Budget's Spring 2020
Unified Agenda and Regulatory Plan that ``EPA is no longer pursuing
this action, and the emission standards and other requirements for
heavy-duty glider vehicles, glider engines, and glider kits will remain
in place as published in the `Greenhouse Gas Emissions and Fuel
Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles
Phase 2' final rule on October 26, 2016 (81 FR 73478).'' \19\
Additionally, EPA withdrew the conditional no action assurance for
small manufacturers of glider vehicles in a memorandum dated July 26,
2018.\20\
---------------------------------------------------------------------------

    \19\ See also https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202004&RIN=2060-AT79 (last accessed October
10, 2021).
    \20\ See https://www.epa.gov/sites/production/files/2018-07/documents/memo_re_withdrawal_of_conditional_naa_regarding_small_manufacturers_of_glider_vehicles_07-26-2018.pdf (last accessed October 10, 2021).
---------------------------------------------------------------------------

    EPA did not finalize the proposed withdrawal of the CTGs for oil
and natural gas sources. On March 9, 2018, for reasons explained in the
Federal Register (83 FR 10478), EPA proposed to withdraw the 2016 CTG
for the oil and natural gas industry. However, EPA did not finalize the
proposal to withdraw the CTG. EPA announced in the U.S. Office of
Management and Budget's Spring 2020 Unified Agenda and Regulatory Plan
that ``the CTG will remain in place as published on October 27, 2016
(81 FR 74798).'' \21\
---------------------------------------------------------------------------

    \21\ See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202004&RIN=2060-AT76 (last accessed October
10, 2021).
---------------------------------------------------------------------------

    EPA and the National Highway Traffic Safety Administration have
finalized the revisions to the greenhouse gas (GHG) and CAFE standards
for light duty vehicles.\22\ However, that final action is not expected
to have a meaningful impact on 2021 ozone-precursor emissions. Because
the vehicles affected by the 2017-2025 GHG standards would still need
to meet applicable criteria pollutant emissions standards (e.g., the
Tier 3 emissions standards; see 79 FR 23414), the SAFE Vehicles Rule
anticipated that any impacts of the SAFE Vehicles Rule on ozone
precursor emissions ``would most likely be far too small to observe.''
See 85 FR 25041.
---------------------------------------------------------------------------

    \22\ ``The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule
for Model Years 2021-2026 Passenger Cars and Light Trucks,'' 85 FR
24174 (April 30, 2020) (SAFE Vehicles Rule).
---------------------------------------------------------------------------

    Comment 4: Two commenters disagree with EPA guidance that a 1 ppb
contribution threshold is acceptable to determine whether an upwind
contribution is significant, stating it is arbitrary and capricious.
One commenter also asserts that allowing different states contributing
to a collective problem to use different air quality threshold rates to
avoid regulation is inequitable. The commenters refer to EPA's August
31, 2018 memorandum from Peter Tsirigotis, titled ``Analysis of
Contribution Thresholds for Use in Clean Air At Section
110(a)(2)(D)(i)(I) Interstate Transport State Implementation Plan
Submissions for the 2015 Ozone National Ambient Air Quality Standards''
(``August 2018 memorandum''),\23\ and generally contend that the August
2018 memorandum provides an insufficient evaluation regarding the
result of such approach on downwind states' ability to attain and
maintain the relevant NAAQS and shifts the responsibility for upwind
pollution from upwind to downwind states.
---------------------------------------------------------------------------

    \23\ Available at https://www.epa.gov/sites/production/files/2018-09/documents/contrib_thresholds_transport_sip_subm_2015_ozone_memo_08_31_18.pdf.
---------------------------------------------------------------------------

    Response 4: As the commenters correctly note, the August 2018
memorandum suggested that states could potentially justify the use of
an alternative contribution threshold of 1 ppb with respect to the 2015
8-hour ozone NAAQS in step 2 of EPA's four-step interstate framework
under the Good Neighbor provision. However, EPA is not making a
determination in this final action to approve a state's use of an
alternative 1 ppb threshold. Neither EPA's NPRM, SNRPM, nor this final
action rely on a 1 ppb threshold and are instead based on a finding
that Florida, Georgia, North Carolina, and South Carolina will not
contribute at or above one percent of the level of the NAAQS at any
projected nonattainment or maintenance receptor based on EPA modeling.
The use of the one percent threshold is consistent with all of EPA's
ozone transport actions since the promulgation of the original CSAPR in
2011. For the 2015 8-hour ozone NAAQS, where the impacts of a state's
emissions on all out of state receptors are below a one percent of the
NAAQS threshold, no further analysis is required to determine that that
state is not contributing to an out of state air quality problem under
the Good Neighbor provision. Therefore, there is no need to evaluate
any potential higher contribution threshold, as discussed in the August
2018 memorandum, in the present final action.
    Comment 5: A commenter states that ozone exposure has significant
health impacts, particularly for the respiratory system. The commenter
cites the 2013 EPA Integrated Science Assessment for Ozone and Related
Photochemical Oxidants (Final Report) and several other health studies
in order to describe numerous health impacts associated with ozone
exposure in detail.
    Response 5: EPA agrees that ozone has a number of adverse health
impacts.

See National Ambient Air Quality Standards for Ozone, Final Rule, 80 FR
65292 (October 26, 2015).\24\ EPA evaluates air quality criteria and
impacts to public health and welfare as part of the comprehensive
standard setting process. Id. EPA's final rule revising the primary and
secondary ozone NAAQS includes a thorough explanation of human exposure
and health risk assessments conducted in support of the Agency's review
of evidence of ambient ozone exposures on human health effects, as well
as detailed rationales for the Administrator's decisions on both
standards. See 80 FR 65292.
---------------------------------------------------------------------------

    \24\ See also National Ambient Air Quality Standards for Ozone,
Final Rule for the 2008 NAAQS, 73 FR 16436 (March 27, 2008), 16440,
16450-51, 16470-71 & n.20.
---------------------------------------------------------------------------

    The commenter does not explain how the information they provided
regarding health impacts from ambient ozone exposure should influence
EPA's action on the Florida, Georgia, North Carolina, and South
Carolina Good Neighbor SIP submissions for the 2015 8-hour ozone NAAQS,
and EPA considers such comments to be outside of the scope of this
action. As stated previously, EPA's evaluation of air quality criteria
and impacts to public health and welfare are part of the standard
setting process, rather than a step completed through actions on
individual SIP submissions that address Good Neighbor interstate
transport infrastructure SIP requirements pursuant to CAA section
110(a)(2)(D)(i)(I). EPA's evaluation of individual SIP revisions is
limited to determining whether the statutory criteria for
implementation and attainment of the NAAQS and other CAA requirements,
as applicable, have been satisfied. See CAA section 110(k)(2), (3).
    Comment 6: EPA received one supportive set of comments on the
December 30, 2019, NPRM. The comments support EPA's application of the
4-step process, and state that EPA correctly concluded that none of the
states in EPA's December 30, 2019, NPRM contributed above 1 percent to
downwind receptors. Commenters also expressed support for flexibility
in addressing the Good Neighbor SIPs.
    Response 6: EPA agrees with commenter that it appropriately applied
steps 1 and 2 of the four-step interstate transport framework (which
the commenter refers to as the 4-step process), and that, according to
EPA's analysis, neither Florida, Georgia, North Carolina nor South
Carolina contribute above one percent of the 2015 8-hour ozone NAAQS to
any downwind state. With respect to the portion of the comment
regarding retaining the ability for states to take different approaches
to analyzing and addressing their Good Neighbor obligations, EPA's use
of certain analytic methods in this action (such as the use of a one
percent of NAAQS contribution threshold or the definition of
nonattainment and maintenance receptors) does not in itself necessarily
preclude different approaches to Good Neighbor analysis in other
contexts, where EPA determines to be appropriate and consistent with
legal requirements and governing case law.

III. Final Action

    EPA is finalizing approval of revisions to the Florida, Georgia,
North Carolina, and South Carolina SIPs. EPA finds that emissions from
sources in Florida, Georgia, North Carolina, and South Carolina will
not significantly contribute to nonattainment or interfere with
maintenance of the 2015 8-hour ozone NAAQS in any other state. Thus,
EPA is approving the interstate transport portions of the
infrastructure SIP submissions from Florida, Georgia, North Carolina,
and South Carolina, separately, as meeting CAA section
110(a)(2)(D)(i)(I) requirements for the 2015 8-hour ozone NAAQS.

IV. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the Act and applicable
Federal regulations. See 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in
reviewing SIP submissions, EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. These actions merely
approve state law as meeting Federal requirements and do not impose
additional requirements beyond those imposed by state law. For that
reason, these actions:
     Are not significant regulatory actions subject to review
by the Office of Management and Budget under Executive Orders 12866 (58
FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
     Do not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Are certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     Do not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Do not have Federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Are not economically significant regulatory actions based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Are not significant regulatory actions subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Are not subject to requirements of section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and
     Do not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, for Florida, Georgia, and North Carolina, the Good
Neighbor SIPs are not approved to apply on any Indian reservation land
or in any other area where EPA or an Indian tribe has demonstrated that
a tribe has jurisdiction. In those areas of Indian country, the rule
does not have tribal implications as specified by Executive Order 13175
(65 FR 67249, November 9, 2000), nor will it impose substantial direct
costs on tribal governments or preempt tribal law.
    For South Carolina, because this final action merely approves state
law as meeting Federal requirements and does not impose additional
requirements beyond those imposed by state law, this action for the
state of South Carolina does not have Tribal implications as specified
by Executive Order 13175 (65 FR 67249, November 9, 2000). Therefore,
this final action will not impose substantial direct costs on Tribal
governments or preempt Tribal law. The Catawba Indian Nation
Reservation is located within the boundary of York County, South
Carolina. Pursuant to the Catawba Indian Claims Settlement Act, S.C.
Code Ann. 27-16-120 (Settlement Act), ``[a]ll state and local
environmental laws and regulations apply to the [Catawba Indian Nation
and] Reservation and are fully enforceable by all relevant state and
local agencies and authorities.'' The Catawba Indian Nation also
retains authority to impose regulations applying higher environmental
standards to the Reservation than those imposed by state law or local
governing bodies, in accordance with the Settlement Act.

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this action and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).
    Under section 307(b)(1) of the CAA, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the appropriate circuit by January 31, 2022. Filing a petition for
reconsideration by the Administrator of this final rule does not affect
the finality of this action for the purposes of judicial review nor
does it extend the time within which a petition for judicial review may
be filed, and shall not postpone the effectiveness of such rule or
action. This action may not be challenged later in proceedings to
enforce its requirements. See CAA section 307(b)(2).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Nitrogen dioxide, Ozone,
Reporting and recordkeeping requirements, Volatile organic compounds.

    Dated: November 26, 2021.
John Blevins,
Acting Regional Administrator, Region 4.

    For the reasons stated in the preamble, the Environmental
Protection Agency amends 40 CFR part 52 as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
1. The authority citation for part 52 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.

Subpart K--Florida

0
2. In Sec.  52.520(e), amend the table by adding a new entry for
``110(a)(1) and (2) Infrastructure Requirements for the 2015 8-Hour
Ozone NAAQS'' at the end of the table to read as follows:

Sec.  52.520  Identification of plan.

* * * * *
    (e) * * *

                                 EPA-Approved Florida Non-Regulatory Provisions
----------------------------------------------------------------------------------------------------------------
                                         State       EPA approval      Federal Register
             Provision              effective date       date               notice              Explanation
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
110(a)(1) and (2) Infrastructure         9/18/2018       12/2/2021  [Insert citation of    Addressing Prongs 1
 Requirements for the 2015 8-Hour                                    publication].          and 2 of section
 Ozone NAAQS.                                                                               110(a)(2)(D)(i)(I)
                                                                                only.
----------------------------------------------------------------------------------------------------------------

Subpart L--Georgia

0
3. In Sec.  52.570(e) amend the table by adding a new entry for
``110(a)(1) and (2) Infrastructure Requirements for the 2015 8-Hour
Ozone NAAQS'' at the end of the table to read as follows:

Sec.  52.570   Identification of plan.

* * * * *
    (e) * * *

                                 EPA-Approved Georgia Non-Regulatory Provisions
----------------------------------------------------------------------------------------------------------------
                                                               State
   Name of nonregulatory SIP      Applicable geographic   submittal date/  EPA approval date      Explanation
           provision              or nonattainment area   effective date
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
110(a)(1) and (2)                Georgia................       9/24/2018  12/2/2021, [Insert  Addressing Prongs
 Infrastructure Requirements                                               citation of         1 and 2 of
 for the 2015 8-Hour Ozone                                                 publication].       section
 NAAQS.                                                                                110(a)(2)(D)(i)(I
                                                                                ) only.
----------------------------------------------------------------------------------------------------------------

Subpart II--North Carolina

0
4. In Sec.  52.1770(e), amend the table by adding a new entry for
``110(a)(1) and (2) Infrastructure Requirements for the 2015 8-Hour
Ozone NAAQS'' at the end of the table to read as follows:

Sec.  52.1770  Identification of plan.

* * * * *
    (e) * * *

                              EPA-Approved North Carolina Non-Regulatory Provisions
----------------------------------------------------------------------------------------------------------------
                                         State       EPA approval      Federal Register
             Provision              effective date       date              citation             Explanation
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
110(a)(1) and (2) Infrastructure         9/27/2018       12/2/2021  [Insert citation of    Addressing Prongs 1
 Requirements for the 2015 8-Hour                                    publication].          and 2 of section
 Ozone NAAQS.                                                                               110(a)(2)(D)(i)(I)
                                                                                only.
----------------------------------------------------------------------------------------------------------------

Subpart PP--South Carolina

0
5. In Sec.  52.2120(e), amend the table by adding a new entry for
``110(a)(1) and (2) Infrastructure Requirements for the 2015 8-Hour
Ozone NAAQS'' at the end of the table to read as follows:

Sec.  52.2120  Identification of plan.

* * * * *
    (e) * * *

----------------------------------------------------------------------------------------------------------------
                                               State
                Provision                 effective date       EPA approval date              Explanation
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
110(a)(1) and (2) Infrastructure                9/7/2018  12/2/2021, [Insert          Addressing Prongs 1 and 2
 Requirements for the 2015 8-Hour Ozone                    citation of publication].   of section
 NAAQS.                                                                                110(a)(2)(D)(i)(I) only.
----------------------------------------------------------------------------------------------------------------

[FR Doc. 2021-26144 Filed 12-1-21; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register: February 11, 2009 (Volume 74, Number 27)]
[Notices]
[Page 6928-6931]
[DOCID:fr11fe09-97]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59358; File No. SR-FINRA-2008-051]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change Relating to
Amendments to the Codes of Arbitration Procedure To Require Arbitrators
To Provide an Explained Decision Upon the Joint Request of the Parties

 February 4, 2009.

I. Introduction

    The Financial Industry Regulatory Authority, Inc. (``FINRA'') (f/k/
a National Association of Securities Dealers, Inc. (``NASD'')) filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
on October 14, 2008 pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Rules 12214, 12514 and 12904 of the Code
of Arbitration Procedure for Customer Disputes (``Customer Code'') and
Rules 13214, 13514 and 13904 of the Code of Arbitration Procedure for
Industry Disputes (``Industry Code,'' and together with the Customer
Code, the ``Codes'') \3\ to require arbitrators to provide an explained
decision upon the joint request of the parties. The proposed rule
change was published for comment in the Federal Register on October 31,
2008.\4\ The Commission received five comments in response to the
proposed rule change.\5\ This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The former NASD Rule 12000 Series (Customer Code) and 13000
Series (Industry Code) have been adopted as the FINRA 12000 Series
(Customer Code) and 13000 Series (Industry Code) in the new
consolidated rulebook pursuant to SR-FINRA-2008-021, which was
approved by the Commission. See Securities Exchange Act Release No.
58643 (September 25, 2008), 73 FR 57174 (October 1, 2008) (SR-FINRA-
2008-021) (approval order). The FINRA Rule 12000 Series (Customer
Code) and 13000 Series (Industry Code), as set forth in SR-FINRA-
2008-021, became effective on December 15, 2008. See FINRA
Regulatory Notice 08-57 (SEC Approves New Consolidated FINRA Rules)
(October 2008).
    \4\ See Securities Exchange Act Release No. 58862 (October 27,
2008), 73 FR 64995 (October 31, 2008), (SR-FINRA-2008-051) (notice).
    \5\ See letter from Kevin Thomas Hoffman, dated November 10,
2008 (``Hoffman letter''); letter from Barbara Black, Director,
Corporate Law Center, University of Cincinnati College of Law, Jill
I. Gross, Director, Pace Investor Rights Clinic, Pace University
School of Law, and Deborah Sommers, Student Intern, submitted
November 20, 2008 (``Black and Gross letter''); letter from Barry D.
Estell, dated November 20, 2008 (``Estell letter''); letter from
Scott R. Shewan, Vice-President, Public Investors Arbitration Bar
Association, dated November 21, 2008 (``PIABA letter''); and letter
from Theodore M. Davis, submitted November 21, 2008 (``Davis
letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    FINRA proposed to amend its Customer Code and Industry Code to
require arbitrators to provide an explained decision upon the joint
request of the parties. The explained decision would be a fact-based
award stating the general reason(s) for the arbitrators' decision; it
would not be required to include legal authorities and/or damage
calculations. Under the proposed rule change, parties would be required
to submit any joint request for an explained decision at least 20 days
before the first scheduled hearing date.\6\ The chairperson would: (1)
Be required to write the explained decision; and (2) receive an
additional honorarium of $400 for writing the decision. The panel would
allocate the cost of the additional honorarium to the parties as part
of the final award.
---------------------------------------------------------------------------

    \6\ The term ``hearing'' means the hearing of an arbitration
under Rules 12600 and 13600 (see Rules 12100(m) and 13100(m)).
---------------------------------------------------------------------------

    The arbitrators would not be required to provide an explained
decision in cases resolved without a hearing under simplified
arbitration Rules 12800 and 13800 or in default cases conducted under
Rules 12801 and 13801.
    FINRA did not propose to amend Rules 12904(f) and 13904(f), which
provide that an award may contain an underlying rationale. This means
that arbitrators would continue to be permitted to decide, on their
own, to write an explained decision. Thus, as is currently the case, if
the panel decides on its own to write an explained decision, FINRA
would not pay an additional honorarium to any panel member.

Background

    The absence of explanations in awards is a common complaint of non-
prevailing parties in the FINRA forum, especially customers and
associated persons. In order to address these complaints and increase
investor confidence in the fairness of the arbitration process, in
March 2005, FINRA filed a proposed rule change with the SEC that would
have required arbitrators to provide explained decisions upon the
request of customers, or of associated persons in industry
controversies. The SEC published the original proposed rule

change for comment in July 2005.\7\ The SEC received almost two hundred
comment letters in response to the original proposed rule change, many
of which were critical.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 52009 (July 11,
2005); 70 FR 41065 (July 15, 2005) (SR-NASD-2005-032) (notice).
---------------------------------------------------------------------------

    While FINRA was considering its next steps, there were several new
developments related to explained decisions in other contexts. FINRA
filed with the Commission dispositive motions \8\ and expungement
procedures \9\ proposals, both of which require arbitrators to write an
explanation for granting relief. In addition, the Securities Industry
Conference on Arbitration (SICA) conducted a ``Perceptions of
Fairness'' survey of participants in securities arbitration
proceedings.\10\ The survey results, released in February 2008,
indicate that 55.5% of customers who responded to the survey would be
``more satisfied if they had an explanation in the award.'' In light of
the comments, and these later developments, FINRA withdrew the original
proposed rule change as filed in SR-NASD-2005-032 and filed a new
proposed rule change. Key provisions of the proposed rule change are
discussed in more detail below, together with related comments from the
original proposed rule change.
---------------------------------------------------------------------------

    \8\ FINRA filed the proposed dispositive motion rule on November
2, 2007 (SR-FINRA-2007-021). The proposal was published for comment
on March 20, 2008 (see Securities Exchange Act Release No. 57497
(March 14, 2008); 73 FR 15019). The Commission approved the proposal
on December 31, 2008 (see Securities Exchange Act Release No. 59189
(December 31, 2008); 74 FR 731 (January 7, 2009)).
    \9\ FINRA filed an expungement procedures proposal on March 13,
2008 (SR-FINRA-2008-010). The proposal was published for comment on
April 3, 2008 (see Securities Exchange Act Release No. 57572 (March
27, 2008); 73 FR 18308). The Commission approved the proposal on
October 30, 2008 (see Securities Exchange Act Release No. 58886
(October 30, 2008); 73 FR 66086 (November 6, 2008)).
    \10\ Jill I. Gross and Barbara Black, Perceptions of Fairness of
Securities Arbitration: An Empirical Study, (February 6, 2008). The
report can be downloaded at http://digitalcommons.pace.edu/cgi/
viewcontent.cgi?article=1477&context=lawfaculty.
---------------------------------------------------------------------------

Parties Must Jointly Request an Explained Decision

    The original proposed rule change would have permitted a customer,
or an associated person in an intra-industry controversy, to require an
explained decision. Many commenters objected to the one-sided nature of
that provision. Under the new proposed rule change, all parties to a
case would have to agree to an explained decision. Moreover, while the
arbitrators will be resolving the entire matter and the explained
decision would normally address all the claims asserted by the parties,
the parties may request that an explained decision address only certain
claims. According to FINRA, requiring the parties' joint agreement to
an explained decision is consistent with FINRA's general policy to
accommodate a joint request of the parties.

Parties Must Submit Any Request for an Explained Decision 20 Days
Before the First Scheduled Hearing Date

    The new proposed rule change would provide that parties must submit
any joint request for an explained decision no later than 20 days prior
to the first scheduled hearing date. This deadline coincides with the
time that parties must exchange documents and identify witnesses they
intend to present at the hearing. In FINRA's view, this approach would
establish a clear deadline, give the parties sufficient time to request
an explained decision, and provide notice to the arbitrators that an
explained decision will be required before the hearing begins.

The Chairperson Must Write the Explained Decision

    The new proposed rule change would require that the chairperson
write the explained decision. The original proposed rule change
contemplated that any of the arbitrators, or all of them, might draft
the decision. Many commenters on the original proposed rule change were
concerned that poorly written decisions might harm the public's
perception of arbitration, or increase the likelihood of a party
successfully vacating an award. To address these concerns, the rule
would require that the chairperson write the decision.
    Under the Codes, arbitrators must meet specific experience and
training criteria to serve as chairpersons in arbitrations.\11\
Therefore, chairpersons may be more experienced than non-chairpersons
and should be better able to produce higher quality explained
decisions. Further, assigning this responsibility to the chairperson
would eliminate any confusion over who would be responsible for
drafting the decision and would streamline the decision writing
process. Having one arbitrator draft the decision after all the
arbitrators have been consulted would reduce the time required to
complete the decision. Once the decision was drafted, the arbitrators
still would be required to sign the decision as provided in Rules
12904(a) and 13904(a).\12\
---------------------------------------------------------------------------

    \11\ Pursuant to Rules 12400 and 13400, arbitrators are eligible
for the chairperson roster if they have completed FINRA chairperson
training and:
     Have a law degree and are a member of a bar of at least
one jurisdiction and have served as an arbitrator through award on
at least two arbitrations administered by a self-regulatory
organization in which hearings were held; or
     Have served as an arbitrator through award on at least
three arbitrations administered by a self-regulatory organization in
which hearings were held.
    On June 23, 2008, the SEC approved a proposal to eliminate the
Code provision allowing arbitrators to serve as Chairpersons
provided they have ``substantially equivalent training or
experience'' in lieu of completing FINRA Dispute Resolution's
Chairperson training course (see Securities Exchange Act Release No.
58004 (June 23, 2008); 73 FR 36579 (June 27, 2008) (SR-FINRA-2008-
009) (approval order). This rule became effective on September 22,
2008.
    \12\ Rules 12904(a) and 13904(a) require all awards to be in
writing and signed by a majority of the arbitrators or as required
by applicable law.
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The Explained Decision Must Be Fact-Based

    Under the new proposed rule change, the explained decision would be
a fact-based award stating the general reason(s) for the arbitrators'
decision.\13\ The award would not be required to include legal
authorities and damage calculations. FINRA believes that requiring only
fact-based reasons in explained decisions will reduce the potential for
misstatements in an award, thereby decreasing the possibility of a
subsequent vacatur, modification or remand of an award and ensuring the
continued finality of a FINRA award. FINRA believes the proposed rule
change would provide the parties with the information they want while
simultaneously maintaining the expediency, flexibility, and finality of
arbitration.
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    \13\ While Rules 12604 and 13604 provide that the panel decides
what evidence to admit and is not required to follow state or
federal rules of evidence, FINRA intends that, as with current
arbitration awards, explained decisions will have no precedential
value in other cases. Thus, arbitrators will not be required to
follow any findings or determinations that are set forth in prior
explained decisions. In order to ensure that users of the forum are
aware of the non-precedential nature of explained awards, FINRA
plans to revise the template for all awards to include the following
sentence: ``If the arbitrators have provided an explanation of their
decision in this award, the explanation is for the information of
the parties only and is not precedential in nature.''
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Only the Chairperson Will Be Compensated for an Explained Decision

    The original proposed rule change did not address who would have
been responsible for preparing the explained decision and provided that
each arbitrator would be paid an additional $200 honorarium for cases
in which an explained decision was required. Under the new proposed
rule change, only the chairperson would write the decision,

and only the chairperson would be paid an additional honorarium. The
additional honorarium paid to the chairperson would reflect the
increased effort involved in drafting an explained decision. Under the
new proposed rule change, the panel may allocate the cost of the
honorarium to one party, or may allocate it between or among all
parties.\14\
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    \14\ Under the Customer and Industry Codes, the panel has the
authority to assess fees in connection with discovery-related
motions, contested subpoena requests, and hearing session fees to
one party, or may split the fees between or among all parties.
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Parties May Not Require Explained Decisions in Some Cases

    Under the new proposed rule change, parties would not be able to
require explained decisions in two types of arbitration proceedings.
The first is simplified arbitrations that are decided solely upon the
pleadings and evidence filed by the parties, as described in Rules
12800 and 13800. The second is arbitrations that are conducted under
the default procedures provided for in Rules 12801 and 13801. According
to FINRA, explained decisions would not be appropriate in either of
these situations because of the abbreviated nature of these arbitration
proceedings.

Arbitrators May Choose To Write Explained Decisions in Other
Circumstances

    Under the new proposed rule change, arbitrators would continue to
be permitted to decide, on their own or upon the motion of one party,
to write an explained decision. Arbitrators would not receive an
additional honorarium if the panel issues an explained decision that is
not required under the proposed rules. The new proposed rule change
would not affect the current rule that permits arbitrators to include a
rationale in an award, even if the parties have not requested it, and
would not encourage arbitrators to write an explained decision when
they are not asked to do so by all the parties.

III. Comment Letters

    The SEC received five comment letters.\15\ Three commenters
essentially supported the proposal \16\ and two opposed it.\17\ The
Commission also received FINRA's response to comments, which is
discussed below.\18\
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    \15\ See note 5, supra.
    \16\ See Hoffman, Black and Gross, and Davis letters. The
Hoffman letter supported the proposal with reservations. The Davis
letter supported the proposed rule change with the caveat that the
SEC re-visit FINRA's chair eligibility rules. FINRA did not propose
to amend the chair eligibility rules in this proposal (see Rules
12400(c) and 13400(c)). Therefore, FINRA determined that the chair
eligibility issue is outside the scope of the rule proposal and
FINRA did not address it in its response to comments.
    \17\ See Estell and PIABA letters. FINRA did not address the
concerns raised by the Estell letter, as it viewed those concerns as
outside the scope of the rule proposal.
    \18\ Letter from Margo A. Hassan, FINRA, dated December 15, 2008
(``FINRA Letter'').
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    One commenter supported the proposal, but asserted that every panel
should provide a brief explanation for each award.\19\ Another
commenter supported the proposal but expressed concerns that investors'
perceptions concerning the unfairness of the arbitration process would
increase in circumstances in which an industry party blocks an
investor's request for an explained decision.\20\ One commenter argued
that only the investor should be able to request an explained
decision.\21\
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    \19\ See Hoffman letter.
    \20\ See Black and Gross letter.
    \21\ See PIABA letter.
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    FINRA responded to these comments by stating that under FINRA's
original proposal (which has since been withdrawn), arbitrators would
have been required to provide explained decisions upon the request of
customers, or of associated persons in industry disputes.\22\ FINRA
stated that many commenters on that proposal objected to the one-sided
nature of the proposal.\23\ In addition, FINRA noted that a number of
commenters were concerned that the proposal would lead to an increase
in motions to vacate based on the arbitrators' explanations.\24\
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    \22\ See FINRA letter. See also note 7, supra.
    \23\ See FINRA letter.
    \24\ Id.
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    FINRA further asserted that one of the benefits of arbitration is
that it is final and binding, and courts rarely vacate awards.\25\ In
light of this, FINRA stated that any risks that may be associated with
explained decisions should be borne by the parties only after they have
agreed jointly to request an explained decision.\26\ For these reasons,
FINRA declined to amend the provision that requires joint agreement of
the parties.\27\
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    \25\ Id.
    \26\ Id.
    \27\ Id.
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    One commenter stated that the proposal does not provide sufficient
guidance to arbitrators.\28\ The commenter asserted that the rule is
ambiguous concerning the extent of the fact-based detail sufficient to
constitute an explanation, and that the proposal is silent on whether
the explanation would have to address every legal theory presented.\29\
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    \28\ See Black and Gross letter.
    \29\ Id.
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    FINRA responded by stating that the proposed rule specifies that a
fact-based decision includes the general reasons for the arbitrators'
decision, and that arbitrators do not have to include legal authorities
or damage calculations.\30\ FINRA stated that the proposal, as filed,
gives the arbitrators the flexibility they need to tailor each award to
the specific case being decided.\31\ FINRA further responded by stating
that the proposal requires the chairperson of the panel to write the
explained decision.\32\ Because chairpersons have completed chairperson
training and have served as arbitrators through award on at least two
arbitrations,\33\ FINRA stated that requiring the chairperson to write
the explained decision will ensure that parties are provided with the
information called for in the proposed rule change.\34\ Therefore,
FINRA declined to amend the proposal to add further explanation
regarding the content of the fact-based decision.\35\
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    \30\ See FINRA letter.
    \31\ Id.
    \32\ Id.
    \33\ Rules 12400 and 13400 state that an arbitrator is eligible
to serve as chairperson if the arbitrator has completed chairperson
training and: 1) has a law degree and is a member of a bar of at
least one jurisdiction and has served as an arbitrator through award
on at least two arbitrations in which hearings were held; or 2) has
served as an arbitrator through award on at least three arbitrations
in which hearings were held.
    \34\ See FINRA letter.
    \35\ Id.
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    One commenter argued that requiring a joint request for an
explained decision eliminates the need for the proposal.\36\ The
commenter noted that FINRA already fosters a policy of accommodating
parties' joint requests. Another commenter asked whether, under the
current Codes, a panel would be required to write a reasoned decision
if the parties made a joint request.\37\ FINRA responded by stating
that the panel currently is not required to accede to a joint request
for an explained decision.\38\ FINRA explained that under current
practice, FINRA would forward the parties' joint request for an
explained decision to the arbitrators, but that the arbitrators could
decline the parties' request.\39\ FINRA further stated that the
proposed rule change would make it clear that arbitrators must provide
an explained decision upon the joint request of the parties, set a
timetable for such requests and provide for compensation for the
chairperson's efforts in writing the explained

decision.\40\ Finally, FINRA noted that the proposed rule change also
specifies that arbitrators would not be required to provide an
explained decision in cases resolved under the simplified or default
arbitration rules.\41\
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    \36\ See PIABA letter.
    \37\ See Davis letter.
    \38\ See FINRA letter.
    \39\ Id.
    \40\ Id.
    \41\ Id.
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    FINRA concluded by stating that the proposal will increase investor
confidence in the fairness of the arbitration process, and should be
approved.\42\
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    \42\ Id.
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IV. Discussion and Findings

    After careful review of the proposed rule change, the comments, and
FINRA's response to the comments, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and the rules and regulations thereunder that are applicable to a
national securities association.\43\ In particular, the Commission
believes the proposed rule change is consistent with the provisions of
Section 15A(b)(6) of the Act,\44\ which requires among other things,
that FINRA rules must be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. The proposed rule change should address complaints
that FINRA has received from non-prevailing parties regarding the
absence of explanations in arbitration awards, by providing a framework
through which parties could jointly require arbitrators to write an
explained decision.
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    \43\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 17c(f).
    \44\ 15 U.S.C. 78o-3(b)(6).
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    In general, the Commission believes that FINRA has responded to the
comments adequately and appropriately, and has explained how the
proposed rule change is consistent with the requirements of the Act,
and the rules and regulations thereunder that are applicable to a
national securities association.
    The Commission's oversight of the securities arbitration process is
directed at ensuring that it is fair and efficient. The Commission
shares the concerns expressed by a commenter that the proposal may not
increase investors' perceptions of fairness in circumstances in which
an industry party does not agree to an investor's request for an
explained decision. Nevertheless, the Commission believes that the
even-handed approach of providing parties a means of jointly requesting
a decision represents a reasonable compromise between the status quo,
whereby the Codes offer parties no formal means of requesting an
explained decision, and the original proposal, whereby claimants alone
would have the right to request an explained decision. Further, the
Commission believes that the procedures set forth in FINRA's proposed
rule (including, procedures related to: Deadlines for submitting a
request; designating the chairperson as the writer of explained
decisions; compensation for writing explained decisions; substance of
the explained decision; and eligibility of cases for explained
decisions) will contribute to the efficiency of the securities
arbitration process by setting forth clear guidelines for parties and
arbitrators in instances where parties have jointly requested an
explained decision.
    At the same time, the Commission is concerned that it may be
difficult for parties to mutually agree to request an explained
decision, because the decision of whether to request an explained
decision (or whether to refuse to request an explained decision) may
ultimately be a strategic decision. In order to gauge the effectiveness
of the proposal, the Commission has requested that FINRA gather
statistics for a period of one year from the effective date of this
proposal, on the number of joint requests for explained decisions made
in arbitration. Further, the Commission has asked FINRA to report on
any anecdotal evidence it receives during this one-year period that may
shed light on how often parties are unable to agree to request an
explained decision.

V. Conclusions

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\45\ that the proposed rule change (SR-FINRA-2008-051) be, and
hereby is, approved.
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    \45\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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    \46\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-2775 Filed 2-10-09; 8:45 am]

BILLING CODE 8011-01-P