[Federal Register: October 16, 2007 (Volume 72, Number 199)]
[Proposed Rules]
[Page 58577-58582]
[DOCID:fr16oc07-34]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 81

[EPA-R04-OAR-2007-0959-200745; FRL-8482-3]

Determination of Nonattainment and Reclassification of the
Memphis, TN/Crittenden County, AR 8-Hour Ozone Nonattainment Area

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to find that the Memphis, Tennessee and
Crittenden County, Arkansas marginal 8-hour ozone nonattainment area
(Memphis TN-AR Nonattainment Area) has failed to attain the 8-hour
ozone national ambient air quality standard (``NAAQS'' or ``standard'')
by June 15, 2007, the attainment deadline set forth in the Clean Air
Act (CAA) and Code of Federal Regulations (CFR) for marginal
nonattainment areas. If EPA finalizes this finding, the Memphis TN-AR
Nonattainment Area will then be reclassified as a moderate 8-hour ozone
nonattainment area. The moderate area attainment date for the
reclassified Memphis TN-AR Nonattainment Area would then be as
expeditiously as practicable, but no later than June 15, 2010. Once
reclassified, Tennessee and Arkansas must submit State Implementation
Plan (SIP) revisions that meet the 8-hour ozone nonattainment
requirements for moderate areas, as required by the CAA. In this
action, EPA is also proposing the schedule for the States' submittal of
the SIP revisions required for moderate areas once the area is
reclassified.

DATES: Comments must be received on or before November 15, 2007.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R04-
OAR-2007-0959, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for

submitting comments.
    2. E-mail<EMAIL_ADDRESS>or<EMAIL_ADDRESS>
    3. Fax:<PHONE_NUMBER> (Region 4) or<PHONE_NUMBER> (Region 6).
    4. Mail: EPA-R04-OAR-2007-0959, Regulatory Development Section, Air
Planning Branch, Air, Pesticides and Toxics Management Division, U.S.
Environmental Protection Agency, Region 4, 61 Forsyth Street, SW.,
Atlanta, Georgia 30303-8960, or Air Planning Section, U.S.
Environmental Protection Agency, Region 6, 1445 Ross Avenue, Dallas,
Texas 75202-2733.
    5. Hand Delivery or Courier: Jane Spann, Regulatory Development
Section, Air Planning Branch, Air, Pesticides and Toxics Management
Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth
Street, SW., Atlanta, Georgia 30303-8960, or Jeffrey Riley, Air
Planning Section, U.S. Environmental Protection Agency, Region 6, 1445
Ross Avenue, Dallas, Texas 75202-2733. Such deliveries are only
accepted during the Regional Offices' normal hours of operation. The
Regional Offices' official hours of business are Monday through Friday,
8:30 a.m. to 4:30 p.m., excluding Federal holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R04-OAR-
2007-0959. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
http://www.regulations.gov, including any personal information provided,

unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit through http://www.regulations.gov or e-

mail, information that you consider to be CBI or otherwise protected.
The http://www.regulations.gov Web site is an ``anonymous access'' system,

which means EPA will not know your identity or contact information
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through http://www.regulations.gov,

your e-mail address will be automatically captured and included as part
of the comment that is placed in the public docket and made available
on the Internet. If you submit an electronic comment, EPA recommends
that you include your name and other contact information in the body of
your comment and with any disk or CD-ROM you submit. If EPA cannot read
your comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses. For additional
information about EPA's public docket visit the EPA Docket Center
homepage at http://www.epa.gov/epahome/dockets.htm.

    Docket: All documents in the electronic docket are listed in the
http://www.regulations.gov index. Although listed in the index, some

information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in http://www.regulations.gov or

in hard copy at the Regulatory Development Section, Air Planning
Branch, Air, Pesticides and Toxics Management Division, U.S.
Environmental Protection Agency, Region 4, 61 Forsyth Street, SW.,
Atlanta, Georgia 30303-8960 or the Air Planning Section, U.S.
Environmental Protection Agency, Region 6, 1445 Ross Avenue, Dallas,
Texas 75202-2733. EPA requests that if at all possible, you contact the
persons 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: (Tennessee issues)--Jane Spann, Air
Planning Branch, Air, Pesticides and Toxics Management Division, U.S.
EPA Region 4, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960.
Phone:<PHONE_NUMBER>. E-mail<EMAIL_ADDRESS>    (Arkansas issues)--Jeffrey Riley, Air Planning Section, U.S. EPA
Region 6, 1445 Ross Avenue, Dallas, Texas 75202-2733. Phone: (214) 665-
8542. E-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

I. What Is the Background for This Proposed Action?
    A. What Are the National Ambient Air Quality Standards?
    B. What Is the Standard for 8-hour Ozone?
    C. What Is a SIP and How Does It Relate to the NAAQS for 8-Hour
Ozone?
    D. What Is the Memphis TN-AR Nonattainment Area, and What Is its
Current 8-Hour Ozone Nonattainment Classification?
    E. What Are the CAA Provisions Regarding Determinations of
Nonattainment and Reclassifications?
II. What Is EPA's Evaluation of the Memphis TN-AR Nonattainment
Area's 8-Hour Ozone Data?
III. What Action Is EPA Proposing?
    A. Determination of Nonattainment, Reclassification of Memphis
TN-AR Nonattainment Area and New Attainment Date.
    B. Proposed Date for Submitting a Revised SIP for the Memphis
TN-AR Nonattainment Area.
IV. Proposed Action.
V. Statutory and Executive Order Reviews.

I. What Is the Background for This Proposed Action?

A. What Are the National Ambient Air Quality Standards?

    The CAA requires EPA to establish a NAAQS for pollutants that ``may
reasonably be anticipated to endanger public health and welfare'' and
to develop a primary and secondary standard for each NAAQS. The primary
standard is designed to protect human health with an adequate margin of
safety and the secondary standard is designed to protect public welfare
and the environment. EPA has set NAAQS for six common air pollutants
referred to as criteria pollutants: Carbon monoxide, lead, nitrogen
dioxide, ozone, particulate matter, and sulfur dioxide. These standards
present state and local governments with the air quality levels they
must meet to comply with the CAA. Also, these standards allow the
American people to assess whether the air quality in their communities
is healthful.

B. What Is the Standard for 8-Hour Ozone?

    On July 18, 1997, EPA promulgated a revised 8-hour ozone standard
of 0.08 parts per million (ppm). This new standard is more stringent
than the previous 1-hour ozone standard. Under EPA regulations at 40
CFR part 50, the 8-hour ozone standard is attained when the 3-year
average of the annual fourth highest daily maximum 8-hour average
ambient air quality ozone concentration is less than or equal to 0.08
ppm (i.e., 0.084 ppm when rounding is considered). (See, 69 FR 23857
(April 30, 2004) for further information.) Ambient air quality
monitoring data for the 3-year period must meet a data completeness
requirement. The ambient air quality monitoring data completeness
requirement is met when the average percent of days with valid ambient
monitoring data is greater than 90 percent, and no single year has less
than 75 percent data completeness as determined in Appendix I of part
50. Specifically, section 2.3 of 40 CFR part 50, Appendix I,
``Comparisons with the Primary and Secondary Ozone Standards'' states:
    ``The primary and secondary ozone ambient air quality standards are
met at an ambient air quality monitoring site when the 3-year average
of the annual fourth-highest daily maximum 8-hour average ozone
concentration is less than or equal to 0.08 ppm. The number of
significant figures in the level of the standard dictates the rounding
convention for comparing the computed 3-year average annual fourth-
highest daily maximum 8-hour average ozone concentration with the level
of the standard. The third decimal place of the computed value is
rounded, with values equal to or greater than 5 rounding up. Thus, a
computed 3-year average ozone concentration of 0.085 ppm is the
smallest value that is greater than 0.08 ppm.''

C. What Is a SIP and How Does It Relate to the NAAQS for 8-Hour Ozone?

    Section 110 of the CAA requires states to develop air pollution
regulations and control strategies to ensure that state air quality
meets the NAAQS established by EPA. Each state must submit these
regulations and control strategies to EPA for approval and
incorporation into the federally-enforceable SIP. Each federally-
approved SIP protects air quality primarily by addressing air pollution
at its point of origin. They may contain state regulations or other
enforceable documents and supporting information such as emission
inventories, monitoring networks, and modeling demonstrations.

D. What Is the Memphis TN-AR Nonattainment Area, and What Is its
Current 8-Hour Ozone Nonattainment Classification?

    The Memphis TN-AR Nonattainment Area is located in both Western
Tennessee and Northeastern Arkansas, and consists of Shelby County,
Tennessee and Crittenden County, Arkansas, respectively. For areas
subject to Subpart 2 of the CAA, such as the Memphis TN-AR
Nonattainment Area, the maximum period for attainment runs from the
effective date of designations and classifications for the 8-hour ozone
NAAQS and will be the same period as provided in Table 1 of CAA Section
181(a): Marginal--3 years; Moderate--6 years; Serious--9 years;
Severe--15 or 17 years; and Extreme--20 years. The Phase I Ozone
Implementation Rule (April 30, 2004, 69 FR 23951) provides the
classification scheme for the 8-hour ozone NAAQS (see, 40 CFR 51.903).
The effective date of designations and classifications for the 8-hour
ozone NAAQS was June 15, 2004 (April 30, 2004, 69 FR 23858).
    The Memphis TN-AR Nonattainment Area was initially designated
nonattainment for the 8-hour ozone standard on April 30, 2004, and
classified as ``moderate'' based on a design value of .092 parts per
million (ppm) with an attainment date of June 15, 2010 (April 30, 2004,
69 FR 23858). The design value of an area, which characterizes the
severity of the air quality concern, is represented by the annual
fourth-highest daily maximum 8-hour average ozone concentration
measured at each monitor averaged over any three-year period. On July
15, 2004, pursuant to section 181(a)(4) of the CAA, the States of
Tennessee and Arkansas submitted a petition to EPA Regions 4 and 6,
requesting a downward reclassification of the Memphis TN-AR
Nonattainment Area from ``moderate'' to ``marginal'' for the 8-hour
ozone standard. The petition was based on the area's ``moderate''
design value of .092 ppm being within five percent of the maximum
``marginal'' design value of 0.091 ppm. Pursuant to Section 181(a)(4),
areas with design values within five percent of the standard may
request a reclassification under specific circumstances. Factors for
EPA to consider as part of such a request are described in Section
181(a)(4) of the CAA. The petition for reclassification to ``marginal''
was approved by EPA, and became effective on November 22, 2004 (see, 69
FR 56697, September 22, 2004).

As a result of the downward classification, the new attainment date for
the Memphis TN-AR ``marginal'' Nonattainment Area was set at June 15,
2007, consistent with the CAA.

E. What Are the CAA Provisions Regarding Determinations of
Nonattainment and Reclassifications?

    Section 181(b)(2) prescribes the process for making determinations
upon failure of an ozone nonattainment area to attain by its attainment
date, and for reclassification of an ozone nonattainment area. Section
181(b)(2)(A) of the Act requires that EPA determine, based on the
area's design value (as of the attainment date), whether the ozone
nonattainment area attained the ozone standard by that date. For
marginal and moderate areas, if EPA finds that the nonattainment area
has failed to attain the ozone standard by the applicable attainment
date, the area must be reclassified to the higher of (1) the next
higher classification for the area, or (2) the classification
applicable to the area's design value as determined at the time of the
required Federal Register notice. Section 181(b)(2)(B) requires EPA to
publish in the Federal Register a notice identifying any area that has
failed to attain by its attainment date and the resulting
reclassification. Different circumstances apply to severe and extreme
areas.

II. What Is EPA's Evaluation of the Memphis TN-AR Nonattainment Area's
8-Hour Ozone Data?

    EPA makes attainment determinations for ozone nonattainment areas
using available quality-assured air quality data. Within the Memphis
TN-AR Nonattainment Area, ground-level ozone is measured at the
Crittenden County monitor, which is located 10 miles northwest of
downtown Memphis in Marion, Arkansas; at two monitors in Shelby County
(Edmund Orgill Park and Frayser Street); and at one monitor located in
the central part of DeSoto County, Mississippi. Although DeSoto County
is not included in the Memphis TN-AR Nonattainment Area, its monitoring
data is regularly considered for potential contributions to the Memphis
TN-AR Nonattainment Area air shed. In recent years, the Marion monitor
has measured some of the highest 8-hour average ozone concentrations in
the Memphis TN-AR Nonattainment Area. For example, the fourth-highest
daily maximum readings for 2004, 2005, and 2006 at the Marion monitor
are .078, .096, and .089 ppm, respectively. The fourth-highest daily
maximum readings for the Shelby County monitors are: .075, .081, and
.084 ppm at the Edmund Orgill Park monitor, and .073, .082, and .083
ppm at the Frayser Street monitor. The fourth-highest daily maximum
readings at the Hernando (DeSoto County) monitor are .080, .084, and
.087 ppm. For the Memphis TN-AR Nonattainment Area, the attainment
determination is based on 2004-2006 air quality data. The Area has a
design value of .087 ppm. Therefore, pursuant to section 181(b)(2) of
the CAA, the Memphis TN-AR Nonattainment Area did not attain the 8-hour
ozone NAAQS by the June 15, 2007, deadline for marginal areas.

  Table 1.--Memphis TN-AR Nonattainment Area Fourth Highest 8-Hour Ozone Concentrations and Design Values (ppm)
                                                       \1\
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                                                      4th highest daily max               Design value
                      Site                       ---------------------------------------------------------------
                                                    2004      2005      2006       3 year average (2004-2006)
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Marion, AR......................................     0.078     0.096     0.089                             0.087
Orgill Park, TN.................................     0.075     0.081     0.084                             0.080
Frayser, TN.....................................     0.073     0.082     0.083                             0.079
Hernando, MS....................................     0.080     0.084     0.087                            0.083
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\1\ Unlike for the 1-hour ozone standard, design value calculations for the 8-hour ozone standard are based on a
  rolling three-year average of the annual fourth highest values (40 CFR part 50, Appendix I).

    Under Sections 172(a)(2)(C) and 181(a)(5) of the CAA, an area can
qualify for up to two 1-year extensions of its attainment date based on
the number of exceedances in the attainment year and whether the state
has complied with all requirements and commitments pertaining to the
area in the applicable SIP. For the 8-hour standard, if an area's
fourth highest daily maximum 8-hour average in the attainment year is
0.084 ppm or less (see, 40 CFR 51.907), the area is eligible for up to
two 1-year attainment date extensions. The attainment year is the year
immediately preceding the nonattainment area's attainment date. For the
Memphis TN-AR Nonattainment Area, the attainment year was 2006. In
2006, the fourth highest daily maximum 8-hour average value was 0.089
ppm. Based on this information, the Memphis TN-AR Nonattainment Area
currently does not qualify for a 1-year extension of the attainment
date.
    Section 181(b)(2)(A) of the CAA provides that, when EPA finds that
an area failed to attain by the applicable date, the area is
reclassified by operation of law to the higher of: the next higher
classification or the classification applicable to the area's ozone
design value at the time of the required notice under Section
181(b)(2)(B). Section 181(b)(2)(B) requires EPA to publish a notice in
the Federal Register identifying the reclassification status of an area
that has failed to attain the standard by its attainment date. The
classification that would be applicable to the Memphis TN-AR
Nonattainment Area's ozone design value at the time of this notice is
``marginal'' because the area's 2006 calculated design value, based on
quality-assured ozone monitoring data from 2004-2006, is 0.087 ppm. By
contrast, the next higher classification for the Memphis TN-AR
Nonattainment Area is ``moderate.'' Because ``moderate'' is a higher
nonattainment classification than ``marginal'' under the CAA statutory
scheme, upon the effective date of a final rulemaking, the Memphis TN-
AR Nonattainment Area will be reclassified by operation of law as
``moderate,'' for failing to attain the standard by the marginal area
applicable attainment date of June 15, 2007.

III. What Action Is EPA Proposing?

A. Determination of Nonattainment, Reclassification of Memphis TN-AR
Nonattainment Area and New Attainment Date

    Pursuant to section 181(b)(2), EPA is proposing to find that the
Memphis TN-AR Nonattainment Area has failed to attain the 8-hour ozone
NAAQS by the June 15, 2007, attainment deadline prescribed under the
CAA for marginal ozone nonattainment areas. If EPA finalizes this
finding and it takes effect, the Memphis TN-AR Nonattainment

Area shall be reclassified by operation of law from marginal
nonattainment to moderate nonattainment. Moderate areas are required to
attain the standard ``as expeditiously as practicable'' but no later
than 6 years after designation or June 15, 2010. The ``as expeditiously
as practicable'' attainment date will be determined as part of the
action on the required SIP submittal demonstrating attainment of the 8-
hour ozone standard. EPA is proposing a schedule by which Tennessee and
Arkansas will submit the SIP revisions necessary for the proposed
reclassification to moderate nonattainment of the 8-hour ozone
standard.

B. Proposed Date for Submitting a Revised SIP for the Memphis TN-AR
Nonattainment Area

    EPA must address the schedule by which Tennessee and Arkansas are
required to submit a revised SIP. When an area is reclassified, EPA has
the authority under section 182(i) of the Act to adjust the Act's
submittal deadlines for any new SIP revisions that are required as a
result of the reclassification. Pursuant to 40 CFR 51.908(d), for each
nonattainment area, a state must provide for implementation of all
control measures needed for attainment no later than the beginning of
the attainment year ozone season. The attainment year ozone season is
the ozone season immediately preceding a nonattainment area's
attainment date, in this case 2009 (40 CFR 51.900(g)). The ozone season
is the ozone monitoring season as defined in 40 CFR part 58, Appendix
D, section 4.1, Table D-3 (October 17, 2006, 71 FR 61236). For the
purposes of this reclassification for the Memphis TN-AR Nonattainment
Area, March 1st is the beginning of the ozone monitoring season. As a
result, EPA proposes that the required SIP revision be submitted by
both Tennessee and Arkansas as expeditiously as practicable, but no
later than March 1, 2009.
    A revised SIP must include the following moderate area
requirements: (1) An attainment demonstration (40 CFR 51.908); (2)
provisions for reasonably available control technology and reasonably
available control measures (40 CFR 51.912); (3) reasonable further
progress reductions in volatile organic compound (VOC ) emissions (40
CFR 51.910); (4) contingency measures to be implemented in the event of
failure to meet a milestone or attain the standard (CAA 172(c)(9)); (5)
a vehicle inspection and maintenance program (40 CFR 51.350); and (6)
nitrogen oxide and VOC emission offsets of 1.15 to 1 for major source
permits (40 CFR 51.165(a). (See also, the requirements for moderate
ozone nonattainment areas set forth in CAA section 182(b).)

IV. Proposed Action

    Pursuant to CAA section 181(b)(2), EPA is proposing to find that
the Memphis TN-AR ``marginal'' 8-hour Ozone Nonattainment Area failed
to attain the 8-hour ozone NAAQS by June 15, 2007. If EPA finalizes its
proposal, the Area will by operation of law be reclassified as a
moderate 8-hour ozone nonattainment area. Pursuant to section 182(i) of
the CAA, EPA is also proposing the schedule for submittal of the SIP
revisions required for moderate areas once the area is reclassified.
EPA proposes that the required SIP revisions for Tennessee and Arkansas
be submitted as expeditiously as practicable, but no later than March
1, 2009.

V. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the
terms of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and
is therefore not subject to review under the EO. The Agency has
determined that the finding of nonattainment would result in none of
the effects identified in the Executive Order. Under section 181(b)(2)
of the CAA, determinations of nonattainment are based upon air quality
considerations and the resulting reclassifications must occur by
operation of law.

B. Paperwork Reduction Act

    This rule does not impose an information collection burden under
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
This proposed action to reclassify the Memphis TN-AR Nonattainment Area
as a moderate ozone nonattainment area and to adjust applicable
deadlines does not establish any new information collection burden.
Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency. This includes the time needed
to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information. An agency may not
conduct or sponsor, and a person is not required to respond to a
collection of information unless it displays a currently valid Office
of Management and Budget (OMB) control number. The OMB control numbers
for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedures Act or any other statute unless the agency certifies the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this action on small
entities, small entity is defined as: (1) A small business that is a
small industrial entity as defined in the U.S. Small Business
Administration (SBA) size standards. (See 13 CFR 121.); (2) a small
governmental jurisdiction that is a government of a city, county, town,
school district or special district with a population of less than
50,000; and (3) a small organization that is any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field. Determinations of nonattainment and the
resulting reclassification of nonattainment areas by operation of law
under section 181(b)(2) of the CAA do not in and of themselves create
any new requirements. Instead, this rulemaking only makes a factual
determination, and does not directly regulate any entities. After
considering the economic impacts of today's action on small entities, I
certify that this rule will not have a significant economic impact on a
substantial number of small entities.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules

with ``Federal mandates'' that may result in expenditures to State,
local, and Tribal governments, in the aggregate, or to the private
sector, of $100 million or more in any one year. Before promulgating an
EPA rule for which a written statement is needed, section 205 of the
UMRA generally requires EPA to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, most
cost-effective or least burdensome alternative that achieves the
objectives of the rule. The provisions of section 205 do not apply when
they are inconsistent with applicable law. Moreover, section 205 allows
EPA to adopt an alternative other than the least costly, most cost-
effective or least burdensome alternative if the Administrator
publishes with the final rule an explanation to why that alternative
was not adopted. Before EPA establishes any regulatory requirements
that may significantly or uniquely affect small governments, including
Tribal governments, it must have developed under section 203 of the
UMRA a small government agency plan. The plan must provide for
notifying potentially affected small governments, enabling officials of
affected small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant Federal
intergovernmental mandates, and informing, educating, and advising
small governments on compliance with the regulatory requirements.
    This proposed action does not include a Federal mandate within the
meaning of UMRA that may result in expenditures of $100 million or more
in any one year by either State, local, or Tribal governments in the
aggregate or to the private sector, and therefore, is not subject to
the requirements of sections 202 and 205 of the UMRA. Also, EPA has
determined that this rule contains no regulatory requirements that
might significantly or uniquely affect small governments and therefore,
is not subject to the requirements of section 203. EPA believes, as
discussed previously in this document, that the finding of
nonattainment is a factual determination based upon air quality
considerations and that the resulting reclassification of the area must
occur by operation of law. Thus, EPA believes that the proposed finding
does not constitute a Federal mandate, as defined in section 101 of the
UMRA, because it does not impose an enforceable duty on any entity.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
    This proposed rule does not have federalism implications. It will
not have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132, this action merely proposes to
determine that the Memphis TN-AR Nonattainment Area had not attained by
its applicable attainment date, and to reclassify the Memphis TN-AR
Nonattainment Area as a moderate ozone nonattainment area and to adjust
applicable deadlines. Thus, Executive Order 13132 does not apply to
this rule.

F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' This action does not have
``Tribal implications'' as specified in Executive Order 13175. This
action merely proposes to determine that the Memphis TN-AR
Nonattainment Area has not attained by its applicable attainment date,
and to reclassify the Memphis TN-AR Nonattainment Area as a moderate
ozone nonattainment area and to adjust applicable deadlines. The Clean
Air Act and the Tribal Authority Rule establish the relationship of the
Federal government and Tribes in developing plans to attain the NAAQS,
and this rule does nothing to modify that relationship. Thus, Executive
Order 13175 does not apply to this rule.

G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

    Executive Order 13045: ``Protection of Children From Environmental
Health and Safety Risks'' (62 FR 19885, April 23, 1997) applies to any
rule that (1) is determined to be ``economically significant'' as
defined under Executive Order 12866, and (2) concerns an environmental
health or safety risk that EPA has reason to believe may have
disproportionate effect on children. If the regulatory action meets
both criteria, the Agency must evaluate the environmental health or
safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency. This action
is not subject to Executive Order 13045 because it is not economically
significant as defined in Executive Order 12866, and because the Agency
does not have reason to believe the environmental health risks or
safety risks addressed by this rule present a disproportionate risk to
children. This action merely proposes to determine that the Memphis TN-
AR Nonattainment Area has not attained by its applicable attainment
date, and to reclassify the Memphis TN-AR Nonattainment Area as a
moderate ozone nonattainment area and to adjust applicable deadlines.

H. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

    This action is not subject to Executive Order 13211, ``Actions That
Significantly Affect Energy Supply, Distribution, or Use,'' (66 FR
28355, May 22, 2001) because it is not a significant regulatory action
under Executive Order 12866.

I. National Technology Transfer Advancement Act

    As noted in the proposed rule, Section 12(d) of the National
Technology Transfer Advancement Act of 1995 (NTTAA), Public Law 104-
113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary
consensus standards (VCS) in its regulatory activities unless to do so
would be inconsistent with applicable law or otherwise impractical.
Voluntary consensus standards are technical standards (e.g., materials
specifications, test methods, sampling procedures, and business
practices) that are developed or adopted by VCS bodies. The NTTAA
directs EPA to provide Congress, through OMB, explanations when the
Agency decides not to use available and applicable VCS. This action
merely proposes to determine that the Memphis TN-AR Nonattainment Area
has not attained by its applicable attainment date, and to reclassify
the Memphis TN-AR ``marginal'' Nonattainment Area as a ``moderate''
ozone nonattainment area

and to adjust applicable deadlines. Therefore, EPA did not consider the
use of any voluntary consensus standards.

J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 (59 FR 7629, February 16, 1994) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
    EPA has determined that this proposed rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it does not
affect the level of protection provided to human health or the
environment. This action merely proposes to determine that the Memphis
TN-AR Nonattainment Area has not attained by its applicable attainment
date, and to reclassify the Memphis TN-AR Nonattainment Area as a
moderate ozone nonattainment area and to adjust applicable deadlines.

List of Subjects in 40 CFR Part 81

    Environmental protection, Air pollution control, National parks,
Wilderness areas.

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

    Dated: October 9, 2007.
Russell L. Wright, Jr.,
Acting Regional Administrator, Region 4.

    Dated: September 24, 2007.
Richard E. Greene,
Regional Administrator, Region 6.
 [FR Doc. E7-20390 Filed 10-15-07; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register Volume 78, Number 179 (Monday, September 16, 2013)]
[Notices]
[Pages 56953-56955]
[FR Doc No: 2013-22405]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70366; File No. SR-OCC-2013-805]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of an Advance Notice To Amend an Existing
Interpretation and Policy To Give OCC Discretion Not To Grant a
Particular Clearing Member Margin Credit for an Otherwise Eligible
Security

September 10, 2013.
    Pursuant to Section 806(e)(1) of the Payment, Clearing, and
Settlement Supervision Act of 2010 (``Clearing Supervision Act'') \1\
and Rule 19b-4(n)(1)(i) \2\ of the Securities Exchange Act of 1934
(``Act''), notice is hereby given that on August 15, 2013, The Options
Clearing Corporation (``OCC'') filed with the Securities and Exchange
Commission (``Commission'') the advance notice as described in Items I,
II and III below, which Items have been prepared by OCC.\3\ The
Commission is publishing this notice to solicit comments on the advance
notice from interested persons.

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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ OCC is a designated financial market utility and is required
to file advance notices with the Commission. See 12 U.S.C. 5465(e).
OCC also filed the proposal contained in this advance notice as a
proposed rule change under Section 19(b)(1) of the Exchange Act and
Rule 19b-4 thereunder. 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b-4,
respectively. See SR-OCC-2013-14.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Advance Notice

    OCC proposes to amend an existing Interpretation and Policy so that
OCC has discretion to disapprove as margin collateral for a particular
clearing member, shares of an otherwise eligible security held as
margin.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Advance Notice

    In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the proposed advance notice and
discussed any comments it received on the proposed advance notice. The
text of these statements may be examined at the places specified in
Item IV below. OCC has prepared summaries, set forth in sections (A)
and (B) below, of the most significant aspects of these statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Advance Notice

    The purpose of the proposed advance notice is to provide OCC with
discretion with regard to granting or not granting margin credit to a
clearing member. OCC currently may withhold margin credit from all
clearing members with respect to a specific security. OCC proposes to
address the risk presented by concentrated positions of securities
posted as margin by particular clearing members by withholding margin
credit from such clearing member's accounts. OCC proposes to enhance
its ability to limit its risk exposure to a concentrated position of
equity securities posted as margin by a specific clearing member by
providing OCC with the discretion to disregard, for the purposes of
granting margin credit, some or all of the otherwise eligible equity
securities posted as margin. In addition, the proposed advance notice
is designed to provide OCC with discretion to make exceptions to
proposed Interpretation and Policy .14 with respect to a specific
clearing member. Accordingly, OCC may allow margin credit for an
otherwise ineligible security for a specific clearing member in
situations in which OCC determines that such security serves as a hedge
to positions in cleared contracts in the same account of such clearing
member.
    Rule 604 lists the acceptable types of assets that clearing members
may post with OCC to satisfy their margin requirements under Rule 601,
including equity securities, and establishes the eligibility criteria
for such assets. Equity securities are the most common form of margin
assets posted by clearing members and, under Rule 601, are included in
OCC's STANS margining system for the purposes of valuing such equity
securities and determining on a portfolio basis a clearing member's
margin obligation to OCC. Interpretation and Policy .14 to Rule 604
allows OCC to disapprove a security as margin collateral for all
clearing members based on a consideration of the factors set forth in
the interpretation, including number of outstanding shares, number of
outstanding shareholders and overall trading volume. The STANS system
currently takes into account the risk to a portfolio presented by
fluctuations in the market price of concentrated security positions by
identifying the two

individual securities whose adverse price movements would result in the
largest losses in each account and applying additional margin
requirements to an account based on those losses if appropriate.
However, this test does not evaluate a large equity securities position
in relation to the securities position's average daily trade volume,
which would be relevant if OCC were required to liquidate the position.
OCC has determined that in the event of a clearing member liquidation,
OCC may be exposed to concentration risk arising from a large equity
security position deposited or pledged as margin by a particular
clearing member. Depending on the relationship between the average
daily trading volume of a particular security and the number of
outstanding shares of such security deposited by a clearing member as
margin, it is possible that the listed equities markets may not be able
to quickly absorb the equity securities OCC seeks to sell, or without
an appreciable negative price impact, in the event OCC needs to
liquidate the clearing member's accounts. This risk is greatest when
the number of shares being sold is large and the average daily trading
volume is low. Neither the STANS system nor Rule 604 explicitly
addresses this type of concentration risk.
    To address concentration risk arising from the potential need to
liquidate a particular clearing member's margin collateral, OCC
proposes to expand its discretion under Interpretation and Policy .14
to limit, in OCC's discretion, the margin credit granted to an
individual clearing member account which maintains a concentrated
equity securities position by disregarding some or all of the otherwise
eligible equity securities posted as margin based on an assessment of
specific factors listed in Interpretation and Policy .14. OCC considers
an equity security's average daily trading volume and the number of
shares a clearing member deposited as margin to be the two most
significant factors when making a decision to limit margin credit due
to concentration risk.\4\ In addition, OCC proposes to amend
Interpretation and Policy .14 so that it may grant margin credit when
otherwise ineligible securities are deposited as margin collateral if
such ineligible securities act as a hedge against cleared contracts
held in the same account. For example, if a clearing member deposits
otherwise ineligible equity securities as margin, OCC may nevertheless
deem such ineligible securities to be acceptable margin collateral to
the extent that the position is a hedge against a short position in its
cleared contracts, because a decline in the value of the securities
that serve as a hedge would be wholly or partially offset by an
increase in value in the hedged position thereby reducing or
eliminating the concentration risk. In such a situation, OCC will limit
the margin credit granted to the lesser of a multiple of the daily
trading volume or the ``delta equivalent position'' \5\ for the
particular equity security, taking into account the hedging
position.\6\
---------------------------------------------------------------------------

    \4\ The limit is currently two times the equity security's
average daily trading volume.
    \5\ The ``delta equivalent position'' is the value of a
securities position that takes into account the position's use as a
hedge against cleared option or futures positions. This value is
calculated using the ``delta'' of the option or futures contract,
which is the ratio between the theoretical change in the price of an
underlying asset to the corresponding change in the price of the
options or futures contract. Thus, delta measures the sensitivity of
an options or futures contract price to changes in the price of the
underlying asset. For example, a delta of +0.7 means that for every
$1 increase in the price of the underlying stock, the price of a
call option will increase by $0.70. Delta for an option or future
can be expressed in shares of the underlying asset. For example, a
standard put option with a delta of -.45 would have a delta of -45
shares, because the unit of trading is 100 shares.
    \6\ Assume, for example, an average daily trade volume of 250
shares, a threshold of 2 times the average daily trade volume, and a
delta of -300 shares for the options on a particular security in a
particular account. A position of 700 shares that did not hedge any
short options or futures would receive credit for only 500 shares
(i.e., 2 times the average daily trade volume). If the net long
position in the account, as adjusted for the delta of short option
and futures positions, were only 400, credit would be given for the
entire 700 shares since the delta equivalent position is below the
500 share threshold. However, if the option delta were +300, the net
long position would be 1000, and credit would only be given for 500
shares because the delta equivalent position would exceed the 500
share threshold.
---------------------------------------------------------------------------

    OCC staff has been monitoring concentrated securities positions and
assessing the impact of the proposed change described in this advance
notice filing. OCC believes that, with OCC's assistance by supplying
additional information to clearing members, clearing members will be
able to accommodate the proposed changes without undue hardship.
Accordingly, after receiving regulatory approval for the proposed
advance notice, OCC will implement the change and work on an ``as
needed'' manual basis with clearing members that are impacted until the
limits are imposed systematically and the distribution of the
applicable files and reports to clearing members is automated.
    The proposed advance notice is consistent with Section 806(e)(1)(A)
\7\ of the Payment, Clearing, and Settlement Supervision Act of 2010
because the proposed change could be deemed to materially affect the
nature or level of risks presented by OCC. The proposed advance notice
enhances OCC's ability to limit its risk exposure to potential losses
from defaults by clearing members under normal market conditions
through the use of risk-based parameters and encourages clearing
members to have sufficient financial resources to meet their
obligations to OCC. The proposed advance notice is not inconsistent
with any existing OCC By-Laws or Rules, including those proposed to be
amended.
---------------------------------------------------------------------------

    \7\ 12 U.S.C. 5465(e)(l)(A).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Comments on the Proposed Advance
Notice Received From Members, Participants, or Others

    Written comments on the proposed advance notice were not and are
not intended to be solicited with respect to the proposed advance
notice and none have been received.

III. Date of Effectiveness of the Advance Notice and Timing for
Commission Action

    The clearing agency may implement the proposed change pursuant to
Section 806(e)(1)(G) of the Clearing Supervision Act \8\ if it has not
received an objection to the proposed change within 60 days of the
later of (i) the date that the Commission received the advance notice
or (ii) the date the Commission receives any further information it
requested for consideration of the notice. The clearing agency shall
not implement the proposed change if the Commission objects to the
proposed change within the required time period.
---------------------------------------------------------------------------

    \8\ 12 U.S.C. 5465(e)(1)(G).
---------------------------------------------------------------------------

    The Commission may extend the period for review by an additional 60
days if the proposed change raises novel or complex issues, subject to
the Commission providing the clearing agency with prompt written notice
of the extension. A proposed change may be implemented in less than 60
days from the date of receipt of the advance notice, or the date the
Commission receives any further information it requested, if the
Commission notifies the clearing agency in writing that it does not
object to the proposed change and authorizes the clearing agency to
implement the proposed change on an earlier date, subject to any
conditions imposed by the Commission.
    The clearing agency shall post notice on its Web site of proposed
changes that are implemented.
    The proposal shall not take effect until all regulatory actions
required

with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-OCC-2013-805 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2013-805. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the advance notice that are
filed with the Commission, and all written communications relating to
the advance notice between the Commission and any person, other than
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of OCC and on OCC's
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_13_805.pdf. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-OCC-2013-805 and should be submitted on or before
October 7, 2013.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22405 Filed 9-13-13; 8:45 am]
BILLING CODE 8011-01-P