2. RFG opt in areas Under section 211( k)( 6) of the CAA, certain ozone nonattainment areas may opt in to the RFG program. That provision limits opt ins to areas " classified under subpart 2 of part D of title I as a marginal, moderate, serious, or severe Area." EPA's regulation implementing this provision is at 40 CFR 80.70( j), which states that "[ a] ny ... area classified under 40 CFR part 81, subpart C as a marginal,

moderate, serious, or severe ozone nonattainment area may be included as a covered area on petition of the Governor of the State in which the area is located."

Some areas designated nonattainment for the 8 hour NAAQS are subject only to the planning requirements of subpart 1,

while others are also subject to the planning requirements of subpart 2 of Part D of title I. The 8 hour nonattainment areas subject to the planning requirements of subpart 2 were PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 479 all classified as marginal, moderate, serious, or severe. 69 FR 23951, 23954 ( April 30, 2004). The 8 hour nonattainment areas subject only to subpart 1 are not subject to those classifications. Thus the only 8 hour nonattainment areas that would be able to opt in under the terms of section 80.70( j) are areas classified under subpart 2 as marginal,

moderate, serious, or severe, consistent with the terms of section 211( k)( 6).

In a prior rulemaking, EPA initially expanded the scope of this opt in provision, interpreting section 211( k)( 6) as authorizing opt in for any current or prior 1 hour ozone nonattainment area, including areas that were not classified marginal or above. In that rulemaking, EPA reserved judgment on whether it would apply the same expanded interpretation to areas designated as nonattainment for the then recently adopted 8 hour NAAQS. 63 FR 52094, 52101 ( September 29,

1998). The EPA's expanded view of the scope of section 211( k)( 6) was subject to judicial review and was rejected as inconsistent with the terms of section 211( k)( 6), as " Congress provided for opt in only for areas classified as marginal, moderate, serious, or severe." API and NPRA v.

EPA, 198 F. 3d 275, 281 ( D. C. Cir. 2000). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 480 The text of EPA's current opt in regulation is limited as a result, is consistent with the limitation in section 211( k)( 6), and only allows opt in for areas classified under subpart 2 as marginal or above. The EPA interprets the current opt in regulation as allowing opt in for those 8 hour nonattainment areas that are classified as marginal or above under subpart 2. The EPA believes this is consistent with section 211( k)( 6) and with the API and NPRA case, and therefore sees no need to revise the current regulation.

E. Future Proceedings EPA is today reserving for future consideration what RFG requirements, if any, should apply to the nine mandatory areas and the bump up areas covered by this final rule when they are redesignated to attainment for the 8 hour NAAQS.

The Phase 1 Rule provides that upon redesignation to attainment for the 8 hour NAAQS SIP measures may be moved to the contingency measure portion of the SIP if the State demonstrates in accordance with section 110( l) that doing so will not interfere with maintenance of the 8 hour NAAQS or any other applicable requirement of the CAA. 69 Fed. Reg.

23951, 23998 ( April 30, 1994)( 40 CFR Section 51.905( b)).

This SIP process does not apply to RFG, since it is not a SIP measure. However, EPA will need in the future to consider PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 481 whether it should develop a similar scheme for RFG.

Specifically, EPA will consider the following issues. Should a State be allowed to drop the RFG requirement when a covered area is redesignated to attainment for the ozone NAAQS, or should the requirement remain in place? If it can be dropped, under what conditions? Once dropped, would the requirement to use it spring back if a State backslides into nonattainment? If it springs back, what lead time should be provided? If it does not spring back automatically, should EPA nevertheless reserve the discretion to require a former covered area to use RFG if it slips back into nonattainment?

EPA anticipates considering these and related issues in a future notice and comment proceeding. The EPA is not soliciting comment on these issues at this time.

As noted above, EPA is not deciding at this time what RFG requirements apply for any bump up areas that are redesignated to attainment for the 1 hour NAAQS before the 1

hour NAAQS is revoked. The only such area that was redesignated to attainment prior to revocation of the 1 hour NAAQS is Atlanta, Georgia. That issue will be addressed in an action separate from this final rule.

F. Miscellaneous Administrative Changes to the RFG Regulations PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 482 EPA is today making a non substantive formatting change to its RFG regulations. The regulations are currently structured to envision a complete list of all bump up areas required to use RFG. However, EPA has not made timely amendments to these regulations to keep the list of bump up areas up to date, so the regulations may appear to be misleading. Although EPA could take the opportunity to revise the list at this time to include all current bump up areas, EPA believes that it would be best to amend the regulations to omit the list. EPA will maintain a list of bump up areas on its RFG web site:

http:// www. epa. gov/ otaq/ rfg/ whereyoulive. htm. This list can more quickly and easily be amended in the future to be kept up to date.

G. Comments and Responses.

Comment: One commenter noted EPA has proposed that all areas designated 8 hour nonattainment remain subject to control measures that apply by virtue of the area's classification for the 1 hour standard. For control measures that the State has not adopted, the State remains obligated to adopt and submit such controls. The commenter believes that such a policy may have unintended negative consequences for the few areas that recently bumped up as the result of EPA's failed PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 483 transport policy. Specifically, most of these areas will bump up to either the Serious or Severe Subpart 2 classification triggering higher classification controls.

Some of these controls, and in particular VOC controls and Reformulated Gasoline ( RFG), may not benefit and/ or may even be counterproductive to attaining the 8 hour standard. The commenter believes that for these few areas that recently bumped up as the result of the failed transport policy, EPA should allow those states to evaluate the relative ozone reduction benefits of the higher classification controls and,

where appropriate, substitute for more effective ozone controls. The commenter believes this is important to ensure continued progress towards attainment in the most costeffective manner.

Response: Congress specified use of RFG for areas bumped up to severe nonattainment status without providing an opportunity for such areas to substitute other controls that may be more effective. Specifying mandated controls for areas that have failed to achieve timely attainment is one of the specific provisions added by Congress in the 1990 CAA amendments. EPA does not believe that the transition to a more protective 8 hour standard should result in less restrictive requirements for RFG, such as allowing PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 484 substitution of other control measures for RFG, than would apply if EPA had never revised the 1 hour standard.

Substitution was not allowed under the 1 hour standard.

EPA notes, however that Congress established a mechanism to address adverse impacts of the RFG program on attainment of the NAAQS by authorizing EPA to waive the RFG oxygen content requirement where it is clearly demonstrated that the oxygen content requirement prevents or interferes with NAAQS attainment. Section 211( k)( 2)( B). This provides additional support for the view that the transition to the 8 hour standard should not establish a right to substitute other measures for RFG as the statute provides a different way to address potential concerns over the effectiveness of RFG in addressing ozone attainment.

Comment: The Local experts have estimated that RFG will cost consumers in the 5 parish nonattainment area an additional $ 48 to $ 72 million annually. DEQ, using Mobile 6 modeling has projected that RFG will provide no measurable benefits for NOx and less than 2 tons per day ( tpd) of VOC reductions.

Recent UAM V modeling for the Baton Rouge area shows an ozone benefit for RFG of around 0.26 ppb. Earlier UAM V sensitivity modeling showed only a 1 ppb reduction in ozone with a 30%

reduction in local anthropogenic VOC emissions from all PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 485 sources. Thus, for an expenditure of up to $ 72 million annually, we can expect a negligible ozone benefit. Employing the usual cost benefit analysis for cost per ton of pollutant removed, we arrive at a cost of around $ 36 million per daily ton removed or around $ 100,000 per annual ton removed. Since the reduction would be expected to produce no measurable ozone benefit anyway, wouldn't this qualify as an " absurd result'' and be subject to consideration for waiver as discussed in the proposed 8 hour implementation rules? ( Pp. 3

4)

Response: Baton Rouge has submitted requests for an RFG waiver and for a waiver of the RFG oxygen content requirement, which are currently before the agency. With respect to EPA's authority to grant a waiver of the entire RFG requirement for bump up areas on the basis of claims of " absurd results" allegedly caused by the oxygen content requirement of RFG, please see EPA's September 30, 2004,

response to Georgia's request for an RFG waiver, which is available at: www. epa. gov/ otaq/ regs/ fuels/ rfg/ 420s04006. pdf.

As noted above, EPA does not believe that the transition to the more protective 8 hour standard should result in less restrictive requirements for RFG than would apply if EPA had never revised the 1 hour standard. The appropriate mechanism PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 486 to address Baton Rouge's concerns is therefore in the context of Baton Rouge's petitions for relief under the RFG program,

and not by establishing different, less restrictive RFG requirements as part of the transition to the 8 hour standard.

Comment: Several commenters oppose any attempts to liberalize procedures allowing for voluntary opt ins to the federal RFG program. Simply stated, further fuels restrictions are not an appropriate local control strategy.

There is little justification for automatic proliferation of RFG. The industry is currently working hard to implement farreaching fuels regulations that will result in significant environmental improvement. It does not need additional fuel reformulation requirements while this implementation work is going forward.

The commenter notes under section 211( k)( 6)( A) of the CAA, only areas classified under subpart 2 of Part D of Title I as a Marginal, Moderate, Serious or Severe Area ( without regard to whether or not the 1980 population of the area exceeds 250,000) can opt in to RFG. Therefore, " Gap"

Areasthose attaining the 1 hour, but not the 8 hour standardwould be subject to implementation under Subpart 1 of the CAA. Those areas not attaining the 1 hour standard and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 487 reclassified as 8 hour nonattainment areas would be subject to implementation procedures under Subpart 2.

Response: Section 211( k)( 6)( A) specifies which ozone nonattainment areas may opt in to the RFG program. EPA's implementation plan for the 8 hour standard does not change or liberalize this statutory provision or EPA's regulations implementing it, but rather provides for continued availability of opt ins consistent with the statutory scheme.

After revocation of the 1 hour standard, opt ins will be possible for areas classified under subpart 2 as marginal,

moderate, serious or severe ozone nonattainment areas under the 8 hour standard. EPA will continue after transition to the 8 hour standard to use its existing regulations at 40 CFR 80.70( j) and 80.72 regarding procedures for opt ins and optouts

Comment: ARTBA believes states should be able to choose their own devices for improving air quality. As a result,

ARTBA would like EPA to liberalize its procedures for allowing a voluntary opt in for the federal RFG program.

While ARTBA understands new national fuel standards are in the developmental process, the transportation conformity requirement often mandates short term solutions with a PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 488 limited number of options. We believe the RFG opt in should be one of the tools available for states.

Response: CAA section 211( k)( 6) specifies which ozone nonattainment areas are eligible to opt in to the RFG program and the procedures ( petition by governor of the State) for opting in. Opt in is limited to areas classified under subpart 2 as marginal, moderate, serious or severe ozone nonattainment areas. EPA does not have the authority to " liberalize" these provisions in a manner inconsistent with the statute. See American Petroleum Institute v. EPA, 198 F. 3d 275 ( D. C. Cir. 2000)( RFG opt ins limited to areas classified under subpart 2 as marginal, moderate, serious or severe nonattainment areas).

Comment: One commenter believes EPA's proposed incentive feature undercuts controls aimed at reducing ozone precursor emissions from mobile sources. For example, areas that are bumped down from severe to serious will no longer need to sell less polluting reformulated gas.

Response: EPA's final rule does not provide for areas to be " bumped down" after final designation and thereby drop the requirement to use reformulated gasoline. On the contrary,

the original nine mandated RFG covered areas, and any other nonattainment area bumped up to a Severe classification, will PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 489 be required to use RFG at least until redesignated to attainment of the 8 hour ozone NAAQS.

Comment: One commenter notes that, in the proposed rule, EPA includes the requirement for reformulated gasoline in severe areas in its list of applicable requirements that will remain in effect after full revocation of the 1 hour standard. 68 Fed. Reg. 32802, Appendix B. This commenter requests that EPA remove the reformulated gas requirement from Appendix B before promulgation of the final implementation plan.

The commenter notes that within one year of reclassification as a " severe" nonattainment area under the 1 hour standard, gasoline distributors in the 13 county Metro Atlanta nonattainment area will be required to distribute reformulated gasoline. 42 U. S. C. § 7545( k)( 10)( D).

Reformulated gasoline, however, will not be as beneficial to the air quality in Atlanta as other types of fuel. After significant study, GA EPD has implemented a fuel program tailored to the atmospheric conditions and air quality problems in the metro area that are primarily related to nitrogen oxide (" NOx") emissions and not emissions of volatile organic compounds (" VOCs"). House Hearing ( July 22,

2003). Reformulated gasoline, however, is designed to reduce VOC emissions rather than NOx emissions. Therefore, EPD's PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 490 fuel program that requires the distribution of fuel that is specifically designed to reduce NOx will do more to clean the air in Atlanta than reformulated gasoline. If Atlanta is " bumped up" to a " severe" nonattainment area, it will lose the benefits of its beneficial fuel program in place of the less effective reformulated gasoline.

The commenter requests EPA to remove reformulated gasoline as an applicable requirement that will remain in effect after implementation of the 8 hour standard. The requirement for reformulated gasoline under the 1 hour standard is flawed in that it does not address the specific ozone nonattainment issues of areas such as Atlanta in which NOx rather than VOCs is the pollutant of concern. Therefore,

the commenter urges EPA to allow the revocation of the reformulated gasoline requirement associated with areas classified as severe and higher under the 1 hour standard to allow areas that will be classified as a lower designation under the new, more stringent 8 hour standard the flexibility to utilize a gasoline formulated specifically to address the air quality issues in those particular areas.

Response: The final rule adopted today specifies that areas bumped up to a severe classification under the 1 hour standard that are designated nonattainment for the 8 hour PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 standard must continue to use RFG at least until redesignated as attainment for the 8 hour standard. The reasons for this approach are described in the preamble. EPA did remove RFG from the list of applicable requirements identified in the Phase 1 rule, because the applicable requirements provision in the Phase 1 rule addresses state controls and SIP requirements. The final rule adopted today treats RFG, a federal control, in basically the same manner as applicable requirements are treated in the Phase 1 rule.

With respect to the specific comments regarding the impact of using reformulated gasoline in the Atlanta area,

please see EPA's analysis of these issues in its September 30, 2004, response to Georgia's request for an RFG waiver for Atlanta.

VII. OTHER CONSIDERATIONS A. How will EPA's actionimplementation of the 8 hour ozone NAAQS affect funding under the Congestion Mitigation and Air Quality Improvement ( CMAQ) Program?

1. Background In the proposal, we noted that the Transportation Equity Act for the 21st Century ( TEA 21) establishes eligibility for the use of CMAQ program funds in certain nonattainment and maintenance areas, designated under section 107( d) of the CAA PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 492 ( 42 U. S. C. 7407( d)), provided the area is, or was, also classified in accordance with CAA sections 181, 186, and 188.

All areas designated nonattainment after December 31, 1997 are also eligible, but without regard to classification.

The amount of CMAQ funds available to States for use in nonattainment and maintenance areas is also set at levels authorized by TEA 21. The funds are apportioned to States through the statutory formula contained in section 104( b) of title 23. The formula is based primarily on the classifications of ozone and CO nonattainment and maintenance areas, and the population in such areas. The formula does not account for 8 hour ozone nonattainment areas not classified under subpart 2 or particulate matter nonattainment areas.

2. Current Pposition Depending on the specific characteristics of a nonattainment area, as described above, implementation of the 8 hour ozone standard will have varying effects.

Nonattainment areas designated under the 8 hour ozone standard are eligible for CMAQ funding as described above.

However, the formula for determining the amount of funds apportioned to the States only takes into account the areas that are classified pursuant to CAA sections 181, 186, and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 493 188. Hence, under the transportation statute, CMAQ funds cannot be apportioned to the States on the basis of the designations for the 8 hour ozone standard that are not also classified under subpart 2.

The impact of the implementation of the 8 hour standard will takes place in two primary stages. First, the newly designated 8 hour nonattainment areas becoame eligible for the use of CMAQ funds at the time of designation. However,

since CMAQ funds are apportioned at the beginning of each fiscal year, the amount of CMAQ funds apportioned to the State will not be affected until the fiscal year following designation. It is also important to note that there is a net increase in eligible nonattainment areas and covered populations, but the overall funds authorized for the CMAQ program at the national level is fixed. The second impact will occuroccurred when EPA revokes the 1 hour ozone standard was revoked for most areas on June 15, 2005. When this happensAs a result, some areas will retain CMAQ eligibility because they were previously designated nonattainment for the 8 hour ozone standard. Other 1 hour ozone nonattainment or maintenance areas will lose eligibility because they are attaining the 8 hour ozone standard. Since 1 hour ozone designations willare no longer be in force, the authorized PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 494 eligibility to use CMAQ funds under 23 USCU. S. C. 149( b) will beis limited to existing CO and PM 10PM10 nonattainment and maintenance areas and areas designated after December 31,

1997, such as those designated under the 8 hour standard.

The amount of CMAQ funds apportioned to each State, and thus available to nonattainment and maintenance areas, will also change under the current apportionment formula and 8

hour ozone designations and classifications. How a State's individual apportionment of CMAQ funds changes depends on how a State's nonattainment and maintenance area population changes because of designation and classification under the 8 hour ozone standard and revocation of the 1 hour ozone standard.

3. Comments and Rresponses Comments: The EPA received several comments expressing concern that implementation of the 8 hour ozone standard may negatively impact an area's eligibility for CMAQ Program funds and/ or the amount of CMAQ funding the State would receive. The comments indicated that projects and programs to reduce air pollution in their area was supported thru CMAQ funding. Some commenters stated that their area was attaining the 8 hour ozone standard, and thus would become ineligible for CMAQ funding when the 1 hour ozone standard is PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 495 revoked. Other commenters expressed concern that any increases to the number of nonattainment areas or changes to classifications of nonattainment areas could reduce the amount of CMAQ funds available to the area.

Response: The EPA is aware that eligibility for use of CMAQ funds is dependent on designation as a nonattainment or maintenance area, and apportionment of CMAQ funds is calculated yearly and varies according to changing nonattainment and maintenance area population, and the severity of air pollution as classified in accordance with CAA sections 181, 186, and 188. The EPA is only taking action to implement the 8 hour ozone standard and has no authority to make changes to the eligibility criteria or apportionment formula contained in TEA 21. Reauthorization of TEA 21 is being discussed in Congress, and adjustments to the eligibility criteria and apportionment formula may be possible. We understand the importance of CMAQ funding to States and nonattainment areas and are prepared to work with the U. S. Department of Transportation ( DOT) and Congress to minimize the unintended impact of the 8 hour ozone NAAQS, on those funds. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 96EPA will revokeThe the 1 hour standard in full was revoked for most areas, including the associated area designations and classifications, on June 15, 2005, one year1 year following June 15, 2004, the effective date of designations for the new 8 hour standard. 496 B. What is the relationship between implementation of the 8

hour standard and the Clean Air Act'sCAA's title V permit program?

1. Background.

The interrelationship between implementation of the 8

hour ozone standard and the Ttitle V permit program was not discussed in the proposed rule. Various questions have been raised about the interface between the implementation of the 8 hour ozone standard and the title V operating permits program. The following questions and answers address these questions.

Question 1: How is title V applicability affected by the new 8 hr ozone standard and the revocation of the 1 hr ozone standard? 96?

Response: Section 502( a) of the Clean Air ActCAA and 40 CFR 70.3 and 71.3 establish specific criteria for determining whether a source is subject to the title V operating permits program. A source that meets one or more of these criteria is subject to title V: title IV affected sources, major sources, sources subject to standards or regulations under PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 9740 CFR 70.3( b) and 71.3( b) provide for certain area source deferrals and exemptions, which are not detailed here. 497 section 111 or 112,97, sources required to have a permit under part C or D of title I, or any other stationary source in a category designated by the Administrator. Although a source is required to obtain a title V permit if it meets one or more of these criteria, only sources which are brought into title V as a result of their major source status and/ or the requirement to obtain a part C or D permit may be directly affected by the transition from the 1 hour ozone standard to the 8 hour ozone standard.

For example, a source currently subject to title V solely because it is major for VOCs under a 1 hour ozone classification would no longer be subject to title V after the revocation of the 1 hour ozone standard ( on June 15,

2005) if its actual and potential emissions of VOCs under an 8 hour ozone classification are minor. However, if the same source was also subject to title V for other reasons, the source would remain subject to title V. See question 4 for further information. In addition, the source's title V applicability could also be affected by future changes, such as becoming subject to PSD or major nonattainment NSR under the 8 hour ozone classification. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 498 Question 2: When do the 8 hour major source thresholds apply for determining major source status under title V?

Response: For purposes of title V, section 501( 2) of the ActCAA defines " major source" in part as " a major stationary source as defined in section 302 or part D of title I." The part 70 and part 71 regulations incorporate this definition and the part D major source thresholds.

" Major source" for ozone nonattainment areas include sources which emit or which have the potential to emit 100 tons per yeartpy or more of volatile organic compoundsVOCs or oxides of nitrogen in areas classified as " marginal" or " moderate,"

50 tons per yeartpy or more of these ozone precursors in areas classified as " serious," 25 tons per yeartyp or more of these ozone precursors in areas classified as " severe," and 10 tons per yeartpy or more of these ozone precursors in areas classified as " extreme."

Currently, the major source thresholds for the 1 hour ozone classifications and the 8 hour ozone classifications are in effect under part D of title I, and therefore under title V as well. After revocation of the 1 hour ozone standard and the corresponding area classifications on June 15, 2005, only the major source thresholds for the 8 hour ozone classifications will determine whether a source is PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 499 major for ozone precursors under title V. Our review of the 1 hour and 8 hour nonattainment classifications indicates that no additional sources became subject to title V on April 30, 2004 ( the promulgation date of 40 CFR part 81, subpart C)

based solely on the 8 hour classifications and corresponding major source thresholds. This is because the current 8 hour classifications do not result in a lowering of the title V major source threshold for any area.

Question 3: Are title V permits required for sources that trigger the major source applicability cut offs for reasonably available control technology ( RACT) in 40 CFR 51.900( f)( 3) due to the 8 hour ozone anti backsliding provisions in 40 CFR part 51, subpart X?

Example: An area is classified as extreme under the 1

hour ozone standard. In an extreme area, the major source threshold for ozone precursors is 10 tons per yeartpy. Under the 8 hour standard in this example, this same area is classified as a severe 17 area. In a severe 17 area, the major source threshold for ozone precursors is 25 tons per yeartpy. Under the anti backsliding provisions, this area would be required to continue its application of RACT to sources with potential emissions of 10 or more tons per yeartpy of ozone precursors. However, would the title V PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 500 major source threshold for ozone precursors in this area be 10 tons per yeartpy or 25 tons per yeartpy on or after June 15, 2005?

Response: After revocation of the 1 hour ozone standard, the title V major source thresholds for ozone will be based solely on the 8 hour classifications and thus in the above example will be 25 tons per yeartpy for ozone precursors. As discussed in Question 1 above, section 502( a)

and 40 CFR 70 § § 70.3 and 71.3 include criteria for determining title V applicability. These criteria do not specifically include sources subject to RACT, but do include major sources. And asAs discussed in Question 2 above, section 501( 2) defines a title V " major source" in part as " a major stationary source as defined in section 302 or part D of title I" and 40 CFR 70.2 and 71.2 incorporate this definition.

In terms of the language in 40 CFR 51.900( f)( 3)

regarding " major source applicability cut offs for purposes of RACT," this provision does not apply for purposes of defining a " major source" under title V ( nor could it, since major source is statutorily defined and cannot be revised by regulation). Rather, the cut offs referenced in this antibacksliding provision apply in determining which 1 hour PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 501 nonattainment requirements are " applicable requirements" for an area  requirements which will be continued in implementing the 8 hour standard. Additionally, 40 CFR 51.900 specifies that the definition of " applicable requirements" and other definitions in this section only " apply for purposes of this subpart [ subpart X]." Thus, in short, the major source applicability cut offs for purposes of RACT referenced in 40 CFR 51.900( f)( 3) are not relevant in determining whether a source is a major source under title V.

Question 4: In many nonattainment areas, the major stationary source threshold under the 8 hour ozone standard is currently higher than the major stationary source threshold for the same area under the 1 hour ozone standard.

Example: Under the 1 hour ozone standard, an area is classified as serious with a 50 tpy major stationary source threshold for ozone precursors. Under the 8 hour standard,

this same area is classified as moderate with a 100 tpy major stationary source threshold for ozone precursors. If a source in this area has a potential to emit VOCs at 75 tpy,

but also has a part D permit obtained under the 1 hour PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 98 A source with a part D permit obtained under the 1 hour standard must retain its part D permit under the 8 hour standard even though it is now in an area with a higher major stationary source threshold. 502 standard, is this source subject to title V after revocation of the 1 hour ozone standard on June 15, 2005? 98?

Response: Yes. Under the 1 hour standard, this source was subject to title V both because it was a major source and also because it was required to have a part D permit. Under the 8 hour standard, this source remains subject to title V because it was required to have a part D permit under the 1

hour standard even though it is no longer subject to title V due to its major source status.

Sources that are, at any time, required to have a permit under parts C or D of title I must obtain a title V permit.

This interpretation is consistent with the ActCAA and EPA's implementation policy history. See the Vastar letter discussed below. Section 502( a) states in part that " any other source required to have a permit under part C or D of title I" is required to have a title V permit. We interpret the phrase " required to have a permit under part C or D of title I" to include any source required to obtain a permit under part C or D of title I regardless of whether the permit was actually obtained by the source. This interpretation is PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 503 consistent with the legislative history which indicates Congress intended that sources " subject to... requirements"

from PSD and NSR be required to have a title V permit. H. R.

Rep. No. 101 490, 101st Congress, 2d Session, at 344 ( May 17,

1990); see also S. Rep. 101 228, 101st Congress, 1st Session,

at 349 ( Dec. December 20, 1989).

Note that the exemption in 40 CFR 70.3( b)( 1) and 71.3( b)( 1) for nonmajor sources does not apply to sources required to have a part C or D permit. As EPA has previously stated: "... section 70.3( b)( 1) cannot be appropriately interpreted as allowing title V permitting authorities to exempt nonmajor part C or D sources from title V, especially in light of the explicit requirement in sections 71.5( a)( 1)( ii) and 70.5( a)( 1)( ii) that these sources obtain title V permits." See letter from R. Long, EPA Region 8, to M. Tarrillion, Vastar Resources, Inc., September 10, 1999.

See also 66 FR 59161, 59163 ( Nov.; November 27, 2001) (" A source required to have a part C or D permit but considered nonmajor for part 70 would be subject to part 70.")

Title V permit content may be affected for sources in the above noted situation because, pursuant to 40 CFR 70.3( c)( 2) and 71.3( c)( 2), for any nonmajor source subject to title V, the permit is required at a minimum to include the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 504 applicable requirements for the emissions units that cause the source to be subject to the part 70 or part 71 program.

If an emissions unit at the nonmajor source did not trigger the requirement to apply for a title V permit, then none of that unit's applicable requirements are required to be included in the source's title V permit. See 66 FR at 59163 and footnote 2. However, nothing in 40 CFR 70.3( c)( 2) or 71.3( c)( 2) precludes States from including fFederal applicable requirements for other emissions units at a nonmajor source in the source's title V permit if States choose to do so.

2. Summary of final rule There has been no change in the final rule as a result of the above clarifications regarding the interface between the 8 hour ozone standard and the title V operating permits program.

3. Comments and Rresponses Comment: One commenter stated support of the antibacksliding regulations to maintain the requirements established under the 1 hour standard nonattainment area classifications when 8 hour classification requirements would be less stringent. However, the commenter requested that EPA consider using the major source thresholds as defined by the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 505 8 hour standard classifications for title V permitting purposes. The commenter further suggested that EPA evaluate whether a lower title V major source threshold provides sufficient protections to justify the added costs involved,

especially in areas such as that of the commenter's where 75% 75 percent of the reactive organic gases ( ROG) and NOx emissions are from mobile sources, which are not subject to control under title V. ( P. 2)

Response: We agree that, after revocation of the 1 hour ozone standard, the major stationary source thresholds will only be determined by the 8 hour classifications, rather than the 1 hour classifications. Additionally, as stated in response to question 3 in the above questions and answers,

the language in 40 CFR 51.900( f)( 3) regarding " major source applicability cut offs for purposes of RACT" does not apply for purposes of defining a " major source" under title V ( nor could it, since major source is statutorily defined and cannot be revised by regulation).

Rather, the cut offs referenced in this anti backsliding provision apply in determining which 1 hour nonattainment requirements are " applicable requirements" for an area

requirements which will be continued in implementing the 8 hour standard. Additionally, 40 CFR 51.900 specifies that PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 99Filed June 29, 2004 by EarthJjustice. Petitioners are: American Lung Association, Environmental Defense, Natural Resources Defense Council, Sierra Club, Clean Air Task Force, Conservation Law Foundation, and Southern Alliance for Clean Energy. 506 the definition of " applicable requirements" and other definitions in this section only " apply for purposes of this subpart [ subpart X]." Thus, in short, the major source applicability cut offs for purposes of RACT referenced in 40 CFR 51.900( f)( 3) are not relevant in determining whether a source is a major source under title V.

C. What action is EPA taking on the Overwhelming Transport Classification for subpart 1 areas?

The pPhase 1 rule created an overwhelming transport classification that would be available to subpart 1 areas that demonstrate they are affected by overwhelming transport of ozone and its precursors and demonstrate they meet the definition of a rural transport area in section 182( h) of the Clean Air Act. CAA ( 40 CFR 51.904( a)). We received a petition for reconsideration of the overwhelming transport classification from Earth Jjustice, 99 who claimed that our final rule of April 30, 2004, relied on guidance that was not publicly available during the comment period and was still unavailable at the time of final rulemaking. In addition, we noted in the pPhase 1 rule that we were considering the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 507 comments we received on the issue of applicable requirements for these subpart 1 areas and that we would address this issue after we issue guidance on assessment of overwhelming transport. We recently drafted the overwhelming transport guidance. As a result, we are granting that portion of the Earth Jjustice petition concerning the overwhelming transport classification and, in a separate rulemaking action, are inviting comment on the overwhelming transport classification, the draft overwhelming transport guidance,

and the requirements that would apply to such areas.

We noted in the pPhase 1 rule that we were considering the comments we received on the issue of applicable requirements for these subpart 1 areas and that we would address this issue after we issue guidance on assessment of overwhelming transport. We now intend to address the applicable control requirements for these areas in the context of the proposed reconsideration noticeaction.

The pPhase 1 rule ( section 51 § 51.904( a)) provided for a subpart 1 area to be classified as an overwhelming transport area if it meets the criteria as specified for rural transport areas under section 182( h) of the CAA and revised overwhelming transport guidance that we indicated that we would issue in the future. We are making the draft PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 overwhelming transport guidance available for public review and entertaining comment on it in the context of the notice of reconsideration of the overwhelming transport rule.

VII7/ 8/ 05 SECTION VIII AND APPENDICES EXCERPT FROM 8 HR O3 NAAQS IMPLEMENTATION RULE PHASE 2 VIII. STATUTORY AND EXECUTIVE ORDER REVIEWS[[ xxx This section likely needs revision. The tribal section was updated, and the paperwork reduction act and regulatory flexibility act sections, has had material added on NSR.

Otherwise currently contains the language from the phase 1 rule published April 30, 2004.]

A. Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866 ( 58 FR 51735, October 4,

1993), the Agency must determine whether the regulatory action is " significant" and, therefore, subject to Office of Management and Budget ( OMB) review and the requirements of the Executive Order. The Order defines " significant regulatory action" as one that is likely to result in a rule that may:

( 1) have an annual effect on the economy of $ 100 million or more or adversely affect in a material way the PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 509 economy, a sector of the economy, productivity, competition,

jobs, the environment, public health or safety, or State,

local, or Tribal governments or communities;

( 2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

( 3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or ( 4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order."

Pursuant to the terms of Executive Order 12866, it has been determined that this rule is a " significant regulatory action" because it raises novel legal or policy issues arising out of legal mandates. As such, this action was submitted to OMB for review. Changes made in response to OMB suggestions or recommendations will beare documented in the public record. As noted above, on April 30, 2004, EPA designated and classified 126 8 hour NAAQS nonattainment areas and also published the Phase 1 final rule. An assessment of the present reasonable available control technology and the projected net reasonable further progress requirements, and future air quality design values, adoption PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 510 of the less flexible versus the more flexible final Phase 2 rule could result $ 20 million dollars ( 1997 year $' s) in estimated additional costs for 20 areas. However, the Phase 2 final rule adopts the more flexible option thus averting these costs while providing for attainment and maintenance of the NAAQS as prescribed in the Act.

B. Paperwork Reduction Act 1. For portion of rulemaking other than new source review.

This action does not impose anThe information collection burden under the provisions ofrequirements in this rule will be submitted for approval to the Office of Management and Budget ( OMB) under the Paperwork Reduction Act, 44 U. S. C.

3501 et seq. This rule merely interprets the requirement The information collection requirements are not enforceable until OMB approves them other than to the extent required by statute.

This rule provides the framework for the States to develop SIPs to achieve a new or revised NAAQS. This requirement isframework reflects the requirements prescribed in the CAA sections 110 and part D, subparts 1 and 2 of Ttitle 1I. TIn that sense, the present final rule does not establish any new information collection burden on States PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 511 apart from any that required by law. Had this rule not been developed, States would still have the legal obligation under law to submit nonattainment area SIPs under part D of title I of the CAA within specified periods after their nonattainment designation for the 8 hour ozone standard, and the SIPs would have to meet the requirements of part D.

A SIP contains rules and other requirements designed to achieve the NAAQS by the deadlines established under the CAA,

and also contains a demonstration that the State's requirements will in fact result in attainment. Such a document is not considered information collection. The SIP must meet the CAA requirements in subparts 1 and 2 to adopt reasonably available control measures ( RACM), reasonably available control techniques ( RACT), and provide for reasonable further progress toward attainment for the period prior to the area's attainment date. After a State submits a SIP, the CAA requires EPA to approve or disapprove the SIP.

If EPA approves the SIP, the rules in the SIP become federally enforceable if the State is unable to enforce the rules itself. If EPA disapproves the SIP ( or if EPA finds that a State fails to submit a SIP), the CAA requires EPA to impose sanctions ( 2: 1 offsets for major new or modified sources and withheld federal highway funding) within PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 512 specified timeframes; in these circumstances, the CAA requires EPA to prepare and publish a federal implementation plan within 2 years after a disapproval or finding of failure to submit. The content of the SIP must be publicly available. States must maintain confidentiality of confidential business information, however, if used to support SIP analyses. The SIP is a one time submission,

although the CAA requires States to revise their SIPs if EPA requests a revision upon a finding that the SIP is inadequate to attain or maintain the NAAQS. The State may revise its SIP voluntarily as needed, but in doing so must demonstrate that any revision will not interfere with attainment or reasonable further progress or any other applicable requirement under the CAA ( see section 110( l)).

This rule does not establish requirements that directly affect the general public and the public and private sectors,

but, rather, sets forth requirements for States in preparing their SIPs. The SIPs themselves will likely establish requirements that directly affect the general public, and the public and private sectors.

EPA has not yet projected cost and hour burden for this rule but has started that effort and will shortly prepare a ICR request. However, EPA did estimate administrative costs PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 513 at the time of promulgation of the 8 hour ozone standard in 1997. See Chapter 10 of U. S. EPA 1997, Regulatory Impact Analyses for the Particulate Matter and Ozone National Ambient Air Quality Standards, Innovative Strategies and Economics Group, Office of Air Quality Planning and Standards, Research Triangle Park, N. C., July 16, 1997. Some of the administrative cost categories identified there as a part of the SIP for an 8 hour standard are already conducted as a result of other provisions of the Act and associated ICRs ( e. g. emission inventory preparation, air quality monitoring program, conformity assessments, new source review, I/ M program).

The burden estimates in the ICR for this rule are incremental to what is required under other provisions and what would be required under a 1 hour standard. 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 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 514 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 OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is approved by OMB, the Agency will publish a technical amendment to 40 CFR part 9 in the Federal Register to display the OMB control number for the approved information collection requirements contained in this final rule.

2. For portion of rulemaking on new source review ( NSR)

The Paperwork Reduction Act, 44 U. S. C. § § 3501 et seq.,

does not apply to the sections of this action related to the standards governing SIPs.

The information collection requirements associated with NSR permitting for ozone are covered by EPA's request to renew the approval of the information collection request ( ICR) for the NSR program, ICR 1230.17, which was submitted toapproved by OMB on OctoberJanuary 265, 20045. The PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 515 information collection requirements associated with NSR permitting were previously covered by ICR 1230.10 and 1230.11. The Office of Management and Budget ( OMB)

previously approved the information collection requirements contained in the existing NSR regulations at 40 CFR parts 51 and 52 under the provisions of the Paperwork Reduction Act,

and assigned OMB control number 2060 0003. Although the OMB approval was scheduled to expire on October 31, 2004, under OMB regulations, the Agency may continue to conduct or sponsor the collection of information while a renewal request is pending at OMB. A copy of EPA's renewal requestthe approved ICR may be obtained from Susan Auby, Collection Strategies Division; U. S. Environmental Protection Agency ( 2822T); 1200 Pennsylvania Ave., NW, Washington, DC 20460 or by calling ( 202) 566 1672.

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 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 516 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 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 1. For portion of rulemaking other than new source review.

The C. Regulatory Flexibility Act generally requires an Agency EPA has determined that it is not necessary 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. in connection with this final rule. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 517 For purposes of assessing the impacts of today'' s rule on small entities, small entity is defined as: ( 1) a small business that is a small industrial entity as defined inby the U. S. Small Business Administration ( SBA) size standards.

( Sees' regulations at 13 CFR 121.) 201; ( 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.

After considering the economic impacts of today's final rule on small entities, I certifyEPA has concluded that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any requirements on small entities. Rather, this rule interprets the obligations established in the CAA for States to submit implementation plans in order to attain the 8 hour ozone NAAQS. We are issuing this rule so thatPhase 1 of the rule ( published April 30, 2004) set forth ( a) whether 8 hour ozone nonattainment areas were covered by Subpart 1 or Subpart 2 ( and if under subpart 2, how they would be classified); ( b) provisions to revoke the 1 hour standard and provisions for anti backsliding from the requirements under PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 518 the 1 hour standard; ( c) provisions relate to attainment dates and attainment date extensions; and ( d) timing for implementation of emission reductions needed for attainment.

This final rulemaking action, Phase 2, is issued so the States and Tribes will know how we plan to classify areas and transition fromand can address requirements for 8 hour nonattainment areas, including the reasonably available control technology, reasonable further progress requirements in their implementation of the 1 hour NAAQS to implementation of the 8 hour NAAQS.

2. plans, attainment demonstrations, and new source review.

By adopting the more flexible as opposed to less flexible approach to the mandatory requirements in the Phase 2 final rule, reduced cost and economic impacts are anticipated while attaining and maintaining the standard as prescribed in the Act.

2. For portion of rulemaking on new source review ( NSR)

We determined it is not necessary to prepare a regulatory flexibility analysis in connection with this final rule. We have also determined that this rule will not have a significant economic impact on a substantial number of small entities. For purposes of assessing the impacts of today' PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 519 stoday's rule on small entities, small entity is defined as:

( 1) any small business employing fewer than 500 employees;

( 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.

After considering the economic impacts of today's rule on small entities, EPA has concluded that this action will not have a significant economic impact on a substantial number of small entities. A Regulatory Flexibility Act Screening Analysis ( RFASA,) developed as part of a 1994 draft Regulatory Impact Analysis ( RIA) and incorporated into the September 1995 ICR renewal analysis showed that the changes to the NSR program due to the 1990 CAA Amendments would not have an adverse impact on small entities. This analysis encompassed the entire universe of applicable major sources that were likely to also be small businesses ( approximately 50 " small business" major sources). Because the administrative burden of the NSR program is the primary source of the NSR program's regulatory costs, the analysis estimated a negligible " cost to sales" ( regulatory cost PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 520 divided by the business category mean revenue) ratio for this source group. The incorporation of the major source thresholds and offset ratios from the CAA 1990 CAA Amendments in § 51.165 and Aappendix S for the purpose of implementing NSR for the 8 hour standard does not change this conclusion.

Under Section 110( a)( 2)( C), all States must implement a preconstruction permitting program " as necessary to assure that the [ NAAQS] are achieved," regardless of changes to today's regulations. Thus, small businesses continue to be subject to regulations for construction and modification of stationary sources, whether under State and local agency minor NSR programs, SIPs to implement § 51.165, or appendix S,

to ensure that the 8 hour standard is achieved. We have therefore concluded that today's 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 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 521 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 1 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 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 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 522 intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements.

The EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $ 100 million or more for State, local, and Tribal governments, in the aggregate, or the private sector in any 1 year. The estimated administrative burden hour and costs associated with implementing the 8 hour, 0.08 ppm NAAQS were developed upon promulgation of the NAAQS and presented in Chapter 10 of U. S. EPA 1997, Regulatory Impact Analyses for the Particulate Matter and Ozone National Ambient Air Quality Standards,

Innovative Strategies and Economics Group, Office of Air Quality Planning and Standards, Research Triangle Park, N. C.,

July 16, 1997. The estimated costs presented there for States in 1990 dollars totaled $ 0.9 million. The corresponding estimate in 1997 dollars is $ 1.1 million. SAt proposal, EPA noted that should the more traditional classification option be adopted as the implementation framework, these costs may increase modestly, but would not reach $ 100 million. However, in promulgating Phase 1, EPA adopted the more flexible Subpart 1 Classification were feasible. And, here in the final Phase 2 rulemaking, EPA PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 523 provides a more flexible approach regarding reasonably available control technology and reasonable further progress requirements. Hence, those modest increases in those costs with the less flexible approach will be averted. Thus,

today's rule is not subject to the requirements of sections 202 and 205 of the UMRA.

The CAA imposes the obligation for States to submit SIPs to implement the 8 hour ozone NAAQS; in this rule, EPA is merely fleshing out those requirements. However, even if this rule did establish a requirement for States to submit SIPs, it is questionable whether a requirement to submit a SIP revision would constitute a Federal mandate in any case.

The obligation for a State to submit a SIP that arises out of section 110 and part D of the CAA is not legally enforceable by a court of law, and at most is a condition for continued receipt of highway funds. Therefore, it is possible to view an action requiring such a submittal as not creating any enforceable duty within the meaning of section 421( 5)( 9a)( I)

of UMRA ( 2 U. S. C. 658( a)( I)). Even if it did, the duty could be viewed as falling within the exception for a condition of Federal assistance under section 421( 5)( a)( i)( I) of UMRA ( 2 U. S. C. 658( 5)( a)( i)( I)). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 524 In this rule, The EPA has determined that this rule contains no regulatory requirements that may significantly or uniquely affect small governments, including Tribal governments. Nonetheless, EPA carried out consultations with governmental entities affected by this rule.

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 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. As described in section D, above ( on PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 525 UMRA), EPA previously determined the costs to States to implement the 8 hour ozone NAAQS to be approximately $ 1 million. WhileAt proposal, EPA noted that this rule ( now Phases 1 and 2) considers options not addressed at the time the NAAQS were promulgated, and therefore the costs for implementation under these options may rise modestly.

ThisHowever, in finalizing Phases 1 and 2 of the 8 hour NAAQS implementation rule, EPA adopted the more flexible options while providing for rules for States to demonstrate attainment and maintenance of the 8 hour NAAQS as prescribed in the Act. These final rule making actions resulted in mitigating the cost increase. Phase 2 of the 8 hour implementation rule fleshes out the statutory obligations of States in implementing the 8 hour ozone NAAQS. Finally, the CAA establishes the scheme whereby States take the lead in developing plans to meet the NAAQS. This rule would not modify the relationship of the States and EPA for purposes of developing programs to implement the NAAQS. Thus, Executive Order 13132 does not apply to this rule.

Although section 6 of Executive Order 13132 does not apply to this rule, EPA actively engaged the States in the development of this rule. The EPA held regular calls with representatives of State and local air pollution control PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 526 agencies. Also, EPA also held three public meetings at which it described the approaches it was considering and provided an opportunity for States and various other governmental officials to comment on the options being considered.

Finally, EPA held three public hearings after the proposed rule was published to obtain public comments.

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 determination is stated below.

This rule concerns the implementation of the 8 hour ozone NAAQS in areas designated nonattainment for that NAAQS.

The CAA provides for States and Tribes to develop plans to regulate emissions of air pollutants within their jurisdictions. The regulations flesh out the statutory obligations of States and Tribes that develop plans to implement the 8 hour ozone NAAQS. The Tribal authority Rule ( TAR) and the CAA give Tribes the opportunity to develop and implement CAA programs such as the 8 hour ozone NAAQS, but PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 527 it leaves to the discretion of the Tribe whether to develop these programs and which programs, or appropriate elements of a program, they will adopt.

This rule does not have Tribal implications as defined by Executive Order 13175. It does not have a substantial direct effect on one or more Indian Tribes, since no Tribe has implemented a CAA program to attain the 8 hour ozone NAAQS at this time. Furthermore, this rule does not affect the relationship or distribution of power and responsibilities between the Federal government and Indian Tribes. The CAA and the TAR 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. Because this rule does not have Tribal implications, Executive Order 13175 does not apply.

The EPA also notes that even if Tribes choose to develop plans to implement the 8 hour ozone NAAQS in the future,

these regulations would not impose substantial direct compliance costs on such Tribes, nor would they preempt Tribal law. As provided above, EPA has determined that the total costs for implementing the 8 hour ozone NAAQS by State,

local, and Tribal governments is approximately $ 1 million in all areas designated nonattainment for the NAAQS. The PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 528 percentage of Indian country that will be designated nonattainment for the 8 hour ozone NAAQS is very small. For Tribes that choose to regulate sources under their jurisdiction, the costs would be attributed to inspecting regulated facilities and enforcing adopted regulationsThere are 126 designated non attainment areas. And, there are 61 tribes estimated to be in one or more of those non attainment areas. See:

http:// www. epa. gov/ oar/ oaqps/ glo/ designations/ tribaldesig. htm As noted elsewhere, EPA intends to develop an Information Collection Request under the Paperwork Reduction Act.

Although Executive Order 13175 does not apply to this rule, EPA did consult with Tribal leaders and environmental staff in developing this rule and encouraged Tribal input at an early stage. The EPA supports the national " Tribal Designations and Implementation Work Group" which provided an open forum for all Tribes to voice concerns to EPA about the designation and implementation process for the 8 hour ozone NAAQS. These discussions have given EPA valuable information about Tribal concerns regarding implementation of the 8 hour ozone NAAQS. The work group sent issue summaries and suggestions for addressing them to the newly formed National Tribal Air Association ( NTAA), which in turn sent them to PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 529 Tribal leaders. The project lead for this rule informed interested Tribal leaders about progress on the rule and invited input. The EPA encouraged Tribes to participate in the national public meetings held to take comment on early approaches to the rule. Several Tribes made public comments at the April 2002 public meeting in Tempe, Arizona.

Furthermore, EPA sent individualized letters to all federally recognized Tribes about the proposal inviting Tribal leaders to consult with EPA. The EPA received comment from the NTAA on several questions: ( 1) the NTAA asked for clarification on the nature of EPA's support for Tribes without TAS status and asked if EPA would provide technical assistance in interpreting SIP documentation to a Tribe without TAS approval; ( 2) the NTAA asked EPA to explain how it envisions its role in continuing consultation with Tribes throughout the execution of SIPs. These comments will be addressed in the technical support document. The NTAA's final comment cited concerns with the impact of NSR requirements on the Tribes. The EPA acknowledges that Ooffsets are a concern for Tribes. We are currently evaluating potential options for addressing this concern.

G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 530 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 a 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.

The rule is not subject to Executive Order 13045 because it implements a previously promulgated health  based Federal standard ( this rule implements the 8 hour ozone NAAQS).

Nonetheless, we have evaluated the environmental health and safety effects of the 8 hour ozone NAAQS on children as part of this previously promulgated Federal standard. The results of this evaluation are contained in 40 CFR part 50, National Ambient Air Quality Standards for Ozone, Final Rule ( 62 FR 38855 38896, July 18, 1997; specifically, 62 FR 38855, 62 FR 38860 and 62 FR 38865). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 531 H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use This rule is not a " significant energy action" as defined in Executive Order 13211, " Actions That Significantly Affect Energy Supply, Distribution, or Use," ( 66 FR 28355,

May 22, 2001) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

IAt the time of proposal, information on the methodology and data regarding the assessment of potential energy impacts is foundwas addressed in Chapter 6 of U. S. EPA 2003, Cost,

Emission Reduction, Energy, and Economic Impact Assessment of the Proposed Rule Establishing the Implementation Framework for the 8 Hour, 0.08 ppm Ozone National Ambient Air Quality Standard, prepared by the Innovative Strategies and Economics Group, Office of Air Quality Planning and Standards, Research Triangle Park, N. C. April 24, 2003.

I. NC, April 24, 2003. Since then, EPA has issued an Addendum 1 to that analysis for the Phase 1 final rule,

designated non attainment areas, and completed Addendum 2,

corresponding to the Phase 2 final rule making. By adopting the more flexible approaches while providing for attainment and maintenance of the 8 hour NAAQS as required by the Act, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 532 EPA has averted the greater energy cost associated with more extensive use of less flexible approaches.

I. National Technology Transfer Advancement Act Section 12( d) of the National Technology Transfer Advancement Act of 1995 ( NTTAA), Public Law No. 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 rulemaking does not involve technical standards.

Therefore, EPA is not considering the use of any VCS.

The EPA will encourage the States and Tribes to consider the use of such standards, where appropriate, in the development of the implementation plans.

J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low Income Populations PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 533 Executive Order 12898 requires that each Federal agency make achieving environmental justice part of its mission by identifying and addressing, as appropriate, disproportionate high and adverse human health or environmental effects of its programs, policies, and activities on minorities and lowincome populations.

The EPA believes that this rule shoulddoes not raise any environmental justice issuesconcerns. Today's rule helps establish a framework for bringing all areas of the country into attainment with the 8 hour ozone standards, an important environmental justice goal. The health and environmental risks associated with ozone were considered in the establishment of the 8 hour, 0.08 ppm ozone NAAQS. T, and the standard was set at a level is designedrequisite to be protective protect public health with an adequate margin of safety. The rule provides a framework for improving environmental quality and reducing health risks for areas that may be designated nonattainment.

K. of safety. In setting this standard, EPA considered the effects on sensitive subpopulations, such as those with respiratory problems.

The EPA and the States have identified which areas of the country are not meeting the 8 hour ozone standard and are PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 534 in the process of setting up plans to bring these nonattainment areas into attainment in accordance with the Clean Air Act schedule. Both the Phase 1 and 2 rules set up guidelines for what must be in those plans. By establishing guidelines for bringing these areas into attainment with the 8 hour ozone standard, the Phase 2 rule advances an important environmental justice goal ane will help make significant progress in providing for the fair treatment of all people with respect to air pollution. EPA did not identify any elements that are being finalized as part of the Phase 2 Rule that raise environmental justice concerns, nor did any public commenters.

In the preamble to the proposed rule, EPA took comment on the Clean Air Development Communities ( CADC) concept ( regarding possible state adoption of land use planning as a pollution reduction strategy) and noted that it might raise environmental justice concerns. Public comments were submitted that raised environmental justice concerns with this concept. As noted earlier in the preamble to this phase 2 rule, EPA is not finalizing the CADC concept and has therefore not responded to these ( or any other) comments on the CADC concept.

K. Congressional Review Act PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 535 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. The EPA will submit a report containing this rule 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 Mmajor 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). This rule will be effective June 15, 2004[ XXX ADD CORRECT DATE].

L. Petitions for Judicial Review 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 District of Columbia Circuit by June 29, 2004. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule 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 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE draft 7/ 8/ 05 536 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).

M. Determination Under Section 307( d)

Pursuant to section 307( d)( 1)( U) of the CAA, the Administrator determines that this action is subject to the provisions of section 307( d). Section 307( d)( 1)( U) provides that the provisions of section 307( d) apply to " such other actions as the Administrator may determine." While the Administrator did not make this determination earlier, the Administrator believes that all of the procedural requirements, e. g., docketing, hearing and comment periods,

of section 307( d) have been complied with during the course of this rulemaking. Rule to Implement the 8 Hour Ozone Standard Page ___ of ___

537 LIST OF SUBJECTS IN 40 CFR Part 50 Environmental protection, Air pollution control, Carbon monoxide, Lead, Nitrogen dioxide, Ozone, Particulate Matter,

Sulfur oxides.

LIST OF SUBJECTS in 40 CFR Part 51 Air pollution control, Intergovernmental relations, Ozone,

Particulate matter, Transportation, Volatile organic compounds.

LIST OF SUBJECTS in 40 CFR Part 81 Environmental protection, Air pollution control, National parks, Wilderness areas.

AUTHORITY 42 U. S. C. 7408; 42 U. S. C. 7410; 42 U. S. C. 7501 7511f; 42 U. S. C. 7601( a)( 1); 42 U. S. C. 7401.

________________________________

Dated:

________________________________

Stephen L. Johnson,

Acting Administrator. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 100These methods assume the use of EPA's on road motor vehicle emissions model in all sStates other than California. All of the methods given here require the user to turn off all post 1990 Clean Air ActCAA measures as part of the calculation. In EPA's current motor vehicle emissions model, MOBILE6.2, this is accomplished using the NO CLEAN AIR ACT command as described in the MOBILE6.2 User's Guide ( found at http:// www. epa. gov/ otaq/ m6. htm). Users of future versions of EPA's motor vehicle emissions model should consult the appropriate User's Guide for the version of the model they are using for instructions on what model command to use. For California nonattainment areas, the current motor vehicle emissions model is EMFAC2002. Users modeling California nonattainment areas should consult with the EPA Regional Office for information on doing equivalent calculations in that model and in future versions. 538 APPENDIX A TO PREAMBLE Methods to Account for Non Creditable Reductions when Calculating ROP Targets for the 2008 and Later ROP Milestone Years The following methods properly account for the noncreditable emissions reductions when calculating ROP targets for the 2008 and later ROP milestone years. 100 They are consistent with requirements of sections 182( b)( 1)( C) and ( D)

and 182( c)( 2)( B) of the ActCAA.

( 1) Method 1: For areas that must meet a 15 percent VOC reduction requirement by 2008:

( A) Estimate the actual anthropogenic base year VOC inventory in 2002 with all 2002 control programs in place for all sources. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 539 ( B) Using the same highway vehicle activity inputs used to calculate the actual 2002 inventory, run the appropriate motor vehicle emissions model for 2002 and for 2008 with all post 1990 CAA measures turned off.

Any other local inputs for vehicle inspection and maintenance ( I/ M) programs should be set according to the program that was required to be in place in 1990.

Fuel Reid Vapor Pressure ( RVP) should be set at 9.0 or 7.8 depending on the RVP required in the local area as a result of fuel RVP regulations promulgated in June,

1990.

( C) Calculate the difference between the 2002 and 2008 VOC emission factors calculated in Step B and multiply by 2002 vehicle miles traveled ( VMT). The result is the VOC emissions reductions that will occur between 2002 and 2008 without the benefits of any post 1990 CAA measures. These are the non creditable reductions that occur over this period.

( D) Subtract the non creditable reductions calculated in Step C from the actual anthropogenic 2002 inventory estimated in sStep A. This adjusted VOC inventory is the basis for calculating the target level of emissions in 2008. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 540 ( E) Reduce the adjusted VOC inventory calculated in sStep D by 15 percent. The result is the target level of VOC emissions in 2008 in order to meet the 2008 ROP requirement. The actual projected 2008 inventory for all sources with all control measures in place and including projected 2008 growth in activity must be at or lower than this target level of emissions.

( 2) Method 2: For areas covered under 40 CFR 51.910( a)( 1)( ii)( C) and must meet an 18 percent VOC emission reduction requirement by 2008 with NOx substitution allowed,

following EPA's NOx Substitution Guidance:

( A) Estimate the actual anthropogenic base year inventory for both VOC and NOx in 2002 with all 2002 control programs in place.

( B) Using the same highway vehicle activity inputs used to calculate the actual 2002 inventory, run the appropriate motor vehicle emissions model for 2002 and for 2008 with all post 1990 CAA measures turned off. Any other local inputs for I/ M programs should be set according to the program that was required to be in place in 1990. Fuel RVP should be set at 9.0 or 7.8 depending on the RVP required in the local area as a result of fuel RVP regulations promulgated in June,

1990. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 541 ( C) Calculate the difference between 2002 and 2008 VOC emissions factors calculated in Step B and multiply by 2002 VMT. The result is the VOC emissions reductions that will occur between 2002 and 2008 without the benefits of any post 1990 CAA measures. These are the non creditable VOC reductions that occur over this period. Calculate the difference between 2002 and 2008 NOx emissions factors calculated in Step B and multiply by 2002 VMT. This result is the NOx emissions reductions that will occur between 2002 and 2008 without the benefits of any post 1990 CAA measures. These are the non creditable NOx reductions that occur over this period.

( D) Subtract the non creditable VOC reductions calculated in Step C from the actual anthropogenic 2002 VOC inventory estimated in Step A. Subtract the non creditable NOx reductions calculated in Step C from the actual anthropogenic 2002 NOx inventory estimated in Step A. These adjusted VOC and NOx inventories are the basis for calculating the target level of emissions in 2008.

( E) The target level of VOC and NOx emissions in 2008 needed to meet the 2008 ROP requirement is any combination of VOC and NOx reductions from the adjusted PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 542 inventories calculated in Step D that total 18 percent.

For example, the target level of VOC emissions in 2008 could be a 10 percent reduction from the adjusted VOC inventory in Step D and an 8 percent reduction from the adjusted NOx inventory in Step D. The actual projected 2008 VOC and NOx inventories for all sources with all control measures in place and including projected 2008 growth in activity must be at or lower than the target levels of VOC and NOx emissions.

( 3) Method 3: For all areas that have used Method 1 above ( and therefore do not have a NOx target level of emissions for 2008) and must meet an additional reduction VOC requirement of 9 percent every 3 years after 2008 with NOx substitution allowed, following EPA's NOx Substitution Guidance. Each subsequent target level of emissions should be calculated as an emissions reduction from the previous target.

( A) Estimate the actual anthropogenic base year NOx inventory in 2002 with all 2002 control programs in place for all sources.

( B) Using the same highway vehicle activity inputs used to calculate the actual 2002 inventory, run the appropriate emissions model for VOC and NOx in 2002 and 2008 ( previously done in Step B in Method 1 for VOC but PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 543 not necessarily for NOx) and 2011 with all post 1990 CAA measures turned off. Any other local inputs for I/ M programs should be set according to the program that was required to be in place in 1990. Fuel RVP should be set at 9.0 or 7.8 depending on the RVP required in the local area as a result of fuel RVP regulations promulgated in June, 1990.

( C) Calculate the difference between 2008 and 2011 VOC emission factors calculated in Step B and multiply by 2002 VMT. The result is the VOC emissions reductions that will occur between 2008 and 2011 without the benefits of any post 1990 CAA measures. These are the non creditable VOC reductions that occur over this period. Calculate the difference between 2002 and 2011 NOx emission factors calculated in Step B and multiply by 2002 VMT. The result is the NOx emissions reductions that will occur between 2002 and 2011 without the benefits of any post 1990 CAA measures. These are the non creditable NOx reductions that occur over this period.

( C) Subtract the non creditable VOC reductions calculated in Step C from the 2008 VOC target level of emissions calculated previously. Subtract the non creditable NOx reductions calculated in Step C from PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 544 the actual 2002 NOx inventory of emissions calculated in Step A. These adjusted VOC and NOx inventories are the basis for calculating the target level of emissions in 2011.

( D) The target level of VOC and NOx emissions in 2011 needed to meet the 2011 ROP requirement is any combination of VOC and NOx reductions from the adjusted inventories calculated in Step E that total 9 percent.

For example, the target level of VOC emissions in 2011 could be a 4 percent reduction from the adjusted VOC inventory in Step C and an 5 percent reduction from the adjusted NOx inventory in Step C. The actual projected 2011 VOC and NOx inventories for all sources with all control measures in place and including projected 2011 growth in activity must be at or lower than the target levels of VOC and NOx emissions.

( E) For subsequent 3 year periods until the attainment date, repeat the process for VOC. For subsequent 3 year periods, the adjusted NOx inventory should be based on the difference in NOx emissions during that 3 year period when all post 1990 CAA measures are turned off,

subtracted from the previous NOx target level of emissions. For example, for 2014, take the difference in NOx emissions reductions that will occur between 2011 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 545 and 2014 without the benefits of any post 1990 CAA measures. This value is subtracted from the 2011 target level of NOx emissions calculated in Step D to get the adjusted NOx inventory to be used as the basis for calculating the target level of NOx emissions in 2014.

( 3) Method 4: For all areas that have used Method 2 above ( and therefore do have a NOx target level of emissions for 2008) and must meet an additional reduction VOC requirement of 9 percent every 3 years after 2008 with NOx substitution allowed, following EPA's NOx Substitution Guidance. Each subsequent target level of emissions should be calculated as an emissions reductions from the previous target.

( A) Using the same highway vehicle activity inputs used to calculate the actual 2002 inventory, run the appropriate emissions model for VOC and NOx in 2008 ( previously done in Step B in Method 2) and 2011 with all post 1990 CAA measures turned off. Any other local inputs for I/ M programs should be set according to the program that was required to be in place in 1990. Fuel RVP should be set at 9.0 or 7.8 depending on the RVP required in the local area as a result of fuel RVP regulations promulgated in June, 1990.

( B) Calculate the difference between 2008 and 2011 VOC emission factors calculated in Step A and multiply by PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 546 2002 VMT. The result is the VOC emissions reductions that will occur between 2008 and 2011 without the benefits of any post 1990 CAA measures. These are the non creditable VOC reductions that occur over this period. Calculate the difference between 2008 and 2011 NOx emission factors calculated in Step A and multiply by 2002 VMT. The result is the NOx emissions reductions that will occur between 2008 and 2011 without the benefits of any post 1990 CAA measures. These are the non creditable NOx reductions that occur over this period.

( C) Subtract the non creditable VOC reductions calculated in Step B from the 2008 VOC target level of emissions calculated previously. Subtract the non creditable NOx reductions calculated in Step B from the 2008 NOx target level of emissions calculated previously. These adjusted VOC and NOx inventories are the basis for calculating the target level of emissions in 2011.

( D) The target level of VOC and NOx emissions in 2011 needed to meet the 2011 ROP requirement is any combination of VOC and NOx reductions from the adjusted inventories calculated in Step E that total 9 percent.

For example, the target level of VOC emissions in 2011 PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 547 could be a 4 percent reduction from the adjusted VOC inventory in Step C and an 5 percent reduction from the adjusted NOx inventory in Step C. The actual projected 2011 VOC and NOx inventories for all sources with all control measures in place and including projected 2011 growth in activity must be at or lower than the target levels of VOC and NOx emissions.

( E) Repeat entire process for subsequent 3 year periods until the attainment date. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 548 APPENDIX B TO PREAMBLE GLOSSARY OF TERMS AND ACRONYMS ACT Alternative Control Techniques BACT Best Available Control Technology CAA Clean Air Act ( Act)

CAAA 1990 Clean Air Act Amendments CADCs Clean Air Development Communities CAIR Clean Air Interstate Rule CERR ConoslidatedConsolidated Emissions Reporting Rule CFR Code of Federal Regulations CMAQ Congestion Mitigation and Air Quality CMSA Consolidated Metropolitan Statistical Area CO Carbon Monoxide CTG Control Technique Guideline DOT Department of Transportation EMFAC EMissions FACtors ( a mobile emissions model)

ESRP Emissions Statement Reporting Program CTG Control Technique Guidelines EGUs Electricity Generating Units EPA Environmental Protection Agency FIP Federal Implementation Plan FMVCP Federal Motor Vehicle Control Program I/ M Inspection and Maintenance Area km Kilometers PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 549 LADCO Lake Michigan Air Directors Consortium LAER Lowest aAchievable eEmission rRate MACT Maximum Achievable Control Technology MCR Mid course rReview MPO Metropolitan Planning Organization MSA Metropolitan Statistical Area NAA Nonattainment Area NAAMS National Ambient Air Modeling Strategy NAAQS National Ambient Air Quality Standards NAMS/ SLAMS National Air Monitoring Stations/ State and Local Air Monitoring Stations NAS National Academy of Sciences NCore National Core Monitoring Stations NOx Nitrogen oOxides NOy Reactive Oxides of Nitrogen NPRM Notice of Proposed Rulemaking NSR New sSource rReview NTAA National Tribal Air Association NTTAA National Technology Transfer Advancement Act of 1995 OMB Office of Management and Budget OTAG Ozone Transport Assessment Group OTC Ozone Transport Commission OTR Ozone Transport Region PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 550 PAMS Photochemical Assessment Monitoring Stations PM Particulate Matter ppm b Parts per millionBillion ppm Parts per Million PSD Prevention of sSignificant dDeterioration psi Pounds pPer sSquare iInch RACM Reasonably aAvailable cControl mMeasures RACT Reasonably aAvailable cControl tTechnology RFP Reasonable fFurther pProgress ROG Reactive Organic Gases ROP Rate of pProgress PROsRPOs Regional Planning Organizations RVP Reid Vapor Pressure SBA Small Business Administration SCR Selective Catalytic Reduction SIPs State iImplementation pPlans TAR Tribal Authority Rule TAS Treatment in the sSame mManner as a State (" Treatment as State")

TEA 21 Transportation Equity Act for the Twenty first Century TIPs Tribal Implementation Plans tpy Tons Per Year TSP Total Suspended Particulates PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 551 TTN/ SCRAM Technical Transfer Network/ Support Center for Regulatory Air Models UMRA Unfunded Mandates Reform Act of 1995 VCS Voluntary cConsensus sStandards VMT vVehicle mMiles tTraveled VOC Volatile oOrganic cCompound PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 552 APPENDIX C EXAMPLE OF RFP REDUCTIONS THAT MIGHT BE GREATER THAN NEEDED FOR ATTAINMENT This example is intended to show how the RFP requirement may result in emission reductions greater than those needed for attainment and how States may adjust their SIP to avoid this situation. This is a simplified example that is intended to show this aspect of RFP and should not be interpreted as the exact procedure of how a State should prepare its RFP plan.

GIVEN:

° Area is classified serious for the 8 hour standard and had already met the 15% VOC RFP requirement under the 1

hour standard. ( Maximum statutory attainment date 6/ 15/ 2013).

° Base year 2002 inventory of 100 tpd NOx emissions.

° No growth assumed from 2002 to attainment date.

° Area is shown in attainment demonstration to need to reduce emissions to 80 tpd NOx to reach attainment.

ANALYSIS:

° RFP reductions for first 6 years after baseline ( 2003

2008) for serious area that already met 15% VOC PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 reduction requirement under 1 hour standard is 18%

reduction. 100 TPD  18 TPD = 82 TPD.

° Thus, area only needs 2 TPD additional to reach attainment.

° If attainment date is kept at 2012, area would need to get 12 TPD reductions by the attainment date in 2012 ( 3%

per year for 4 years) to meet the RFP requirement.

However, since only 2 additional 2 TPD reductions are needed for attainment, if the area could achieve those 2 TPD in 2009, they could have a 2009 attainment date and avoid additional RFP reductions. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 554 For the reasons stated in the preamble, Title 40, Chapter I of the Code of Federal Regulations is amended as follows:

Part 51   Requirements for Preparation, Adoption, and Submittal of Implementation Plans 1. The authority citation for Ppart 51 continues to read as follows:

Authority: 23 U. S. C. 101; 42 U. S. C. 7401 7671q.

Subpart I  [ Amended]

2. Section 51.165 is amended:

a. By revising paragraphs ( a)( 1)( iv)( A)( 1) and ( 2).

b. By adding paragraph ( a)( 1)( iv)( A)( 3).

c. By adding paragraphs ( a)( 1)( v)( E) and ( F).

d. By revising paragraph ( a)( 1)( x).

e. By revising paragraph ( a)( 3)( ii)( C).

f. By adding paragraphs ( a)( 8) and ( a)( 9).

The revisions and additions read as follows:

§ 51.165 Permit requirements.

( a) * * *

( 1) * * *

( iv) * * *

( A) * * *

( 1) Any stationary source of air pollutants that emits,

or has the potential to emit, 100 tons per year or more of any regulated NSR pollutant, except that lower emissions PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 555 thresholds shall apply in areas subject to subpart 2, subpart 3, or subpart 4 of part D, title I of the Act, according to paragraphs ( a)( 1)( iv)( A)( 1)( i) through ( vi) of this section.

( i) 50 tons per year of volatile organic compounds in any serious ozone nonattainment area.

( ii) 50 tons per year of volatile organic compounds in an area within an ozone transport region, except for any severe or extreme ozone nonattainment area.

( iii) 25 tons per year of volatile organic compounds in any severe ozone nonattainment area.

( iv) 10 tons per year of volatile organic compounds in any extreme ozone nonattainment area.

( v) 50 tons per year of carbon monoxide in any serious nonattainment area for carbon monoxide, where stationary sources contribute significantly to carbon monoxide levels in the area ( as determined under rules issued by the Administrator)

( vi) 70 tons per year of PM 10 or, where applicable, 70 tons per year of a specific PM 10 precursor, in any serious nonattainment area for PM 10;

( 2) For the purposes of applying the requirements of paragraph ( a)( 8) of this section to stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, any stationary source which emits, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 556 or has the potential to emit, 100 tons per year or more of nitrogen oxides emissions, except that the emission thresholds in paragraphs ( a)( 1)( iv)( A)( 2)( i) through ( vi) of this section shall apply in areas subject to subpart 2 of part D, title I of the Act.

( i) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as marginal or moderate.

( ii) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as a transitional,

submarginal, or incomplete or no data area, when such area is located in an ozone transport region.

( iii) 100 tons per year or more of nitrogen oxides in any area designated under section 107( d) of the Act as attainment or unclassifiable for ozone that is located in an ozone transport region.

( iv) 50 tons per year or more of nitrogen oxides in any serious nonattainment area for ozone.

( v) 25 tons per year or more of nitrogen oxides in any severe nonattainment area for ozone.

( vi) 10 tons per year or more of nitrogen oxides in any extreme nonattainment area for ozone; or ( 3) Any physical change that would occur at a stationary source not qualifying under paragraphs ( a)( 1)( iv)( A)( 1) or ( 2) of this section as a major stationary PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 557 source, if the change would constitute a major stationary source by itself.

* * * * *

( v) * * *

( E) For the purpose of applying the requirements of ( a)( 8) of this section to modifications at major stationary sources of nitrogen oxides located in ozone nonattainment areas or in ozone transport regions, whether or not subject to subpart 2, part D, title I of the Act, any significant net emissions increase of nitrogen oxides is considered significant for ozone.

( F) Any physical change in, or change in the method of operation of, a major stationary source of volatile organic compounds that results in any increase in emissions of volatile organic compounds from any discrete operation,

emissions unit, or other pollutant emitting activity at the source shall be considered a significant net emissions increase and a major modification for ozone, if the major stationary source is located in an extreme ozone nonattainment area that is subject to subpart 2, part D,

title I of the Act.

* * * * *

( x)( A) Significant means, in reference to a net emissions increase or the potential of a source to emit any PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 558 of the following pollutants, a rate of emissions that would equal or exceed any of the following rates:

POLLUTANT EMISSION RATE Carbon monoxide: 100 tons per year ( tpy)

Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Ozone: 40 tpy of volatile organic compounds or NOxNOx Lead: 0.6 tpy PM 10: 15 tpy PM 10 PM 10: 40 tpy PM 10 of a specific PM 10 precursor, except where the Administrator has determined that stationary sources of PM 10 precursors do not contribute significantly to PM 10 levels that exceed the PM 10 ambient standards ( B) Notwithstanding the significant emissions rate for ozone in paragraph ( a)( 1)( x)( A) of this section, significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of volatile organic compounds that would result from any physical change in, or change in the method of operation of,

a major stationary source locating in a serious or severe ozone nonattainment area that is subject to subpart 2, part D, title I of the Act, if such emissions increase of volatile organic compounds exceeds 25 tons per year. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 559 ( C) For the purposes of applying the requirements of paragraph ( a)( 8) of this section to modifications at major stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, the significant emission rates and other requirements for volatile organic compounds in paragraphs ( a)( 1)( x)( A), ( B),

and ( E) of this section shall apply to nitrogen oxides emissions.

( D) Notwithstanding the significant emissions rate for carbon monoxide under paragraph ( a)( 1)( x)( A) of this section,

significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of carbon monoxide that would result from any physical change in, or change in the method of operation of, a major stationary source in a serious nonattainment area for carbon monoxide if such increase equals or exceeds 50 tons per year,

provided the Administrator has determined that stationary sources contribute significantly to carbon monoxide levels in that area.

( E) Notwithstanding the significant emissions rates for ozone under paragraphs ( a)( 1)( x)( A) and ( B) of this section,

any increase in actual emissions of volatile organic compounds from any emissions unit at a major stationary source of volatile organic compounds located in an extreme PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 560 ozone nonattainment area that is subject to subpart 2, part D, title I of the Act shall be considered a significant net emissions increase.

* * * * *

( 3) * * *

( i) * * *

( ii) * * *

( C) Emission Reduction Credits from Shutdowns and Curtailments.

( 1) Emissions reductions achieved by shutting down an existing emission unit or curtailing production or operating hours may be generally credited for offsets if they meet the requirements in paragraphs ( a)( 3)( ii)( C)( 1)( i) through ( ii)

of this section.

( i) Such reductions are surplus, permanent,

quantifiable, and federally enforceable.

( ii) The shutdown or curtailment occurred after the last day of the base year for the SIP planning process. For purposes of this paragraph, a reviewing authority may choose to consider a prior shutdown or curtailment to have occurred after the last day of the base year if the projected emissions inventory used to develop the attainment demonstration explicitly includes the emissions from such previously shutdown or curtailed emission units. However, in PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 561 no event may credit be given for shutdowns that occurred before August 7, 1977.

( 2) Emissions reductions achieved by shutting down an existing emissions unit or curtailing production or operating hours and that do not meet the requirements in paragraph ( a)( 3)( ii)( C)( 1)( ii) of this section may be generally credited only if:

( i) The shutdown or curtailment occurred on or after the date the construction permit application is filed; or ( ii) The applicant can establish that the proposed new emissions unit is a replacement for the shutdown or curtailed emissions unit, and the emissions reductions achieved by the shutdown or curtailment met the requirements of paragraph ( a)( 3)( ii)( C)( 1)( i) of this section.

* * * * *

( 8) The plan shall provide that the requirements of this section applicable to major stationary sources and major modifications of volatile organic compounds shall apply to nitrogen oxides emissions from major stationary sources and major modifications of nitrogen oxides in an ozone transport region or in any ozone nonattainment area, except in ozone nonattainment areas or in portions of an ozone transport region where the Administrator has granted a NOx waiver PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 562 applying the standards set forth under section 182( f) of the Act and the waiver continues to apply.

( 9)( i) The plan shall require that in meeting the emissions offset requirements of paragraph ( a)( 3) of this section for ozone nonattainment areas that are subject to subpart 2, part D, title I of the Act, the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be as follows:

( A) In any marginal nonattainment area for ozone   at least 1.1: 1;

( B) In any moderate nonattainment area for ozone   at least 1.15: 1;

( C) In any serious nonattainment area for ozone   at least 1.2: 1;

( D) In any severe nonattainment area for ozone   at least 1.3: 1 ( except that the ratio may be at least 1.2: 1 if the approved plan also requires all existing major sources in such nonattainment area to use BACT for the control of VOC);

and ( E) In any extreme nonattainment area for ozone   at least 1.5: 1 ( except that the ratio may be at least 1.2: 1 if the approved plan also requires all existing major sources in such nonattainment area to use BACT for the control of VOC);

and PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 563 ( ii) Notwithstanding the requirements of paragraph ( a)( 9)( i) of this section for meeting the requirements of paragraph ( a)( 3) of this section, the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be at least 1.15: 1 for all areas within an ozone transport region that is subject to subpart 2, part D, title I of the Act, except for serious, severe, and extreme ozone nonattainment areas that are subject to subpart 2, part D,

title I of the Act.

( iii) The plan shall require that in meeting the emissions offset requirements of paragraph ( a)( 3) of this section for ozone nonattainment areas that are subject to subpart 1, part D, title I of the Act ( but are not subject to subpart 2, part D, title I of the Act, including 8 hour ozone nonattainment areas subject to 40 CFR 51.902( b)), the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be at least 1: 1.

( 10) The plan shall require that the requirements of this section applicable to major stationary sources and major modifications of PM 10 shall also apply to major stationary sources and major modifications of of PM 10 precursors,

except where the Administrator determines that such sources do not contribute significantly to PM 10 levels that exceed the PM 10 ambient standards in the area. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 564 * * * * *

3. Section 51.166 is amended:

a. By revising paragraph ( b)( 1)( ii).

b. By revising paragraph ( b)( 2)( ii).

c. By revising paragraph ( b)( 23).

d. By revising paragraph ( b)( 49).

e. By revising the second sentence of footnote 1 to paragraph ( i)( 5)( i)( e) to state: However, any net emissions increase of 100 tons per year or more of volatile organic compounds or nitrogen oxides subject to PSD would be required to perform an ambient impact analysis, including the gathering of ambient air quality data.

The revisions read as follows:

§ 51.166 Prevention of significant deterioration of air quality.

( b) * * *

( 1) * * *

( ii) A major source that is major for volatile organic compounds or NOxNOx shall be considered major for ozone.

( 2) * * *

( ii) Any significant emissions increase ( as defined at paragraph ( b)( 39) of this section) from any emissions units or net emissions increase ( as defined in paragraph ( b)( 3) of this section) at a major stationary source that is PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 565 significant for volatile organic compounds or NOxNOx shall be considered significant for ozone.

* * * * *

( 23) * * *

POLLUTANT AND EMISSIONS RATE * * *

Ozone: 40 tpy of volatile organic compounds or NOxNOx * * * * *

( 49) * * *

( i) Any pollutant for which a national ambient air quality standard has been promulgated and any constituents or precursors for such pollutants identified by the Administrator ( e. g., volatile organic compounds and NOxNOx are precursors for ozone);

Appendix S to Ppart 51  [ Amended]

4. Appendix S to Ppart 51 is amended as follows:

a. By revising the second sentence of paragraph I and the beginning of the fourth sentence of paragraph I up to the words " this Interpretive Ruling".

ab. By revising paragraph II. A. 4( i)( a) and ( b).

bc. By adding paragraph II. A. 4( i)( c).

cd. By revising paragraph II. A. 4( ii).

de. By revising paragraph II. A. 5 ( ii).

ef. By adding paragraphs II. A. 5( iv) through ( v). PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 566 fg. By revising paragraph II. A. 6( v)( c).

gh. By adding paragraphs II. A. 10( ii) through ( v).

hi. By amending paragraph IV. A Condition 1 by removing footnote 5.

ij. By amending paragraph IV. A Condition 3 by redesignating footnote 6 as footnote 5 and by redesignating footnote 7 as footnote 6.

jk. By amending paragraph IV. A Condition 4 by removing footnote 8.

kl. By revising paragraph IV. C. 3.

lm. By revising paragraph IV. D.

mn. By revising paragraph IV. E.

no. By adding paragraphs IV. G through H.

op. By amending paragraph V. A by redesignating footnote 10 as footnote 7.

pq. By revising paragraph VI.

The revisions and additions read as follows:

Appendix S to Ppart 51   Emission Offset Interpretative Ruling I.

* * * A major new source or major modification which would locate in any area designated under section 107( d) of the Act as attainment or unclassificable for ozone that is located in an ozone transport region or which would locate in an area designated in 40 CFR Part 81, Subpart C, as PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 567 nonattainment for a pollutant for which the source or modification would be major may be allowed to construct only if the stringent conditions set forth below are met. * * *

For each area designated as exceeding a NAAQS ( nonattainment area) under 40 CFR Part 81, Subpart C, or for any area designated under section 107( d) of the Act as attainment or unclassifiable for ozone that is located in an ozone transport region,* * *

II. * * *

A. * * *

4.( i) * * *

( a) Any stationary source of air pollutants which emits, or has the potential to emit, 100 tons per year or more of any pollutant subject to regulation under the Act,

except that lower emissions thresholds shall apply in areas subject to subpart 2, subpart 3, or subpart 4 of part D,

title I of the Act, according to paragraphs II. A. 4( i)( a)( 1)

through ( 56) of this Ruling.

( 1) 50 tons per year of volatile organic compounds in any serious ozone nonattainment area.

( 2) 50 tons per year of volatile organic compounds in an area within an ozone transport region, except for any severe or extreme ozone nonattainment area. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 568 ( 3) 25 tons per year of volatile organic compounds in any severe ozone nonattainment area.

( 4) 10 tons per year of volatile organic compounds in any extreme ozone nonattainment area.

( 5) 50 tons per year of carbon monoxide in any serious nonattainment area for carbon monoxide, where stationary sources contribute significantly to carbon monoxide levels in the area ( as determined under rules issued by the Administrator)

( 6) 70 tons per year of PM 10 or, where applicable, 70 tons per year of a specific PM 10 precursor, in any serious nonattainment area for PM 10;

( b) For the purposes of applying the requirements of paragraph IV. H of this Ruling to stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, any stationary source which emits,

or has the potential to emit, 100 tons per year or more of nitrogen oxides emissions, except that the emission thresholds in paragraphs II. A. 4( i)( b)( 1) through ( 6) of this Ruling apply in areas subject to subpart 2 of part D, title I of the Act.

( 1) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as marginal or moderate. PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 569 ( 2) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as a transitional,

submarginal, or incomplete or no data area, when such area is located in an ozone transport region.

( 3) 100 tons per year or more of nitrogen oxides in any area designated under section 107( d) of the Act as attainment or unclassifiable for ozone that is located in an ozone transport region.

( 4) 50 tons per year or more of nitrogen oxides in any serious nonattainment area for ozone.

( 5) 25 tons per year or more of nitrogen oxides in any severe nonattainment area for ozone.

( 6) 10 tons per year or more of nitrogen oxides in any extreme nonattainment area for ozone; or ( c) Any physical change that would occur at a stationary source not qualifying under paragraph II. A. 4( i)( a)

or ( b) of this Ruling as a major stationary source, if the change would constitute a major stationary source by itself.

( ii) A major stationary source that is major for volatile organic compounds or nitrogen oxides is major for ozone.

* * * * *

5. * * * PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 570 ( ii) Any net emission increase that is considered significant for volatile organic compounds shall be considered significant for ozone.

* * *

( iv) For the purpose of applying the requirements of paragraph IV. H of this Ruling to modifications at major stationary sources of nitrogen oxides located in ozone nonattainment areas or in ozone transport regions, whether or not subject with respect to ozone to subpart 2, part D, title I of the Act, any significant net emissions increase of nitrogen oxides is considered significant for ozone.

( v) Any physical change in, or change in the method of operation of, a major stationary source of volatile organic compounds that results in any increase in emissions of volatile organic compounds from any discrete operation,

emissions unit, or other pollutant emitting activity at the source shall be considered a significant net emissions increase and a major modification for ozone, if the major stationary source is located in an extreme ozone nonattainment area that is subject to subpart 2, part D,

title I of the Act.

6. * * *

( v) * * * PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 571 ( c) The reviewing authority has not relied on it in issuing any permit under regulations approved pursuant to 40 CFR 51.165;

* * * * *

10. ( i) * * *

Pollutant And Emissions Rate Carbon monoxide: 100 tons per year ( tpy)

Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Ozone: 40 tpy of volatile organic compounds or NOxNOx Lead: 0.6 tpy Particulate matter: 25 tpy of particulate matter emissions PM 10: 15 tpy PM 10 PM 10: 40 tpy of a specific PM 10 precursor, except where the Administrator has determined that stationary sources of PM 10 precursors do not contribute significantly to PM 10 levels that exceed the PM 10 ambient standards ( ii) Notwithstanding the significant emissions rate for ozone in paragraph II. A. 10( i) of this Ruling, significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of volatile organic compounds that would result from any physical change in, or change in the method of operation of,

a major stationary source locating in a serious or severe PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 572 ozone nonattainment area that is subject to subpart 2, part D, title I of the Act, if such emissions increase of volatile organic compounds exceeds 25 tons per year.

( iii) For the purposes of applying the requirements of paragraph IV. H of this Ruling to modifications at major stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, the significant emission rates and other requirements for volatile organic compounds in paragraphs II. A. 10( i), ( ii),

and ( v) of this Ruling shall apply to nitrogen oxides emissions.

( iv) Notwithstanding the significant emissions rate for carbon monoxide under paragraph II. A. 10( i) of this Ruling,

significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of carbon monoxide that would result from any physical change in, or change in the method of operation of, a major stationary source in a serious nonattainment area for carbon monoxide if such increase equals or exceeds 50 tons per year,

provided the Administrator has determined that stationary sources contribute significantly to carbon monoxide levels in that area.

( v) Notwithstanding the significant emissions rates for ozone under paragraphs II. A. 10( i) and ( ii) of this Ruling, PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 573 any increase in actual emissions of volatile organic compounds from any emissions unit at a major stationary source of volatile organic compounds located in an extreme ozone nonattainment area that is subject to subpart 2, part D, title I of the Act shall be considered a significant net emissions increase.

* * * * *

IV. * * *

C. * * *

3. Emission Reduction Credits from Shutdowns and Curtailments.

( i) Emissions reductions achieved by shutting down an existing source or curtailing production or operating hours may be generally credited for offsets if they meet the requirements in paragraphs IV. C. 3. i. 1. through 2 of this section.

( 1) Such reductions are surplus, permanent,

quantifiable, and federally enforceable.

( 2) The shutdown or curtailment occurred after the last day of the base year for the SIP planning process. For purposes of this paragraph, a reviewing authority may choose to consider a prior shutdown or curtailment to have occurred after the last day of the base year if the projected emissions inventory used to develop the attainment PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 574 demonstration explicitly includes the emissions from such previously shutdown or curtailed emission units. However, in no event may credit be given for shutdowns that occurred before August 7, 1977.

( ii) Emissions reductions achieved by shutting down an existing source or curtailing production or operating hours and that do not meet the requirements in paragraphs IV. C. 3. i. 1. through 2 of this section may be generally credited only if:

( 1) The shutdown or curtailment occurred on or after the date the new source permit application is filed; or ( 2) The applicant can establish that the proposed new source is a replacement for the shutdown or curtailed source,

and the emissions reductions achieved by the shutdown or curtailment met the requirements of paragraphs IV. C. 3. i. 1.

through 2 of this section.

D. Location of offsetting emissions. The owner or operator of a new or modified major stationary source may comply with any offset requirement in effect under this Ruling for increased emissions of any air pollutant only by obtaining emission reductions of such air pollutant from the same source or other sources in the same nonattainment area,

except that the reviewing authority may allow the owner or operator of a source to obtain such emissions reductions in PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 575 another nonattainment area if the conditions in IV. D. 1 and 2 are met.

1. The other area has an equal or higher nonattainment classification than the area in which the source is located.

2. Emissions from such other area contribute to a violation of the national ambient air quality standard in the nonattainment area in which the source is located.

E. Reasonable further progress. Permits to construct and operate may be issued if the reviewing authority determines that, by the time the source is to commence operation, sufficient offsetting emissions reductions have been obtained, such that total allowable emissions from existing sources in the region, from new or modified sources which are not major emitting facilities, and from the proposed source will be sufficiently less than total emissions from existing sources prior to the application for such permit to construct or modify so as to represent ( when considered together with the plan provisions required under CAA section 172) reasonable further progress ( as defined in CAA section 171).

* * * * *

G. Offset Ratios.

1. In meeting the emissions offset requirements of paragraph IV. A, Condition 3 of this Ruling for ozone PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 576 nonattainment areas that are subject to subpart 2, part D,

title I of the Act, the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be as follows:

( i) In any marginal nonattainment area for ozone   at least 1.1: 1;

( ii) In any moderate nonattainment area for ozone   at least 1.15: 1;

( iii) In any serious nonattainment area for ozone   at least 1.2: 1;

( iv) In any severe nonattainment area for ozone   at least 1.3: 1 ( except that the ratio may be at least 1.2: 1 if the State also requires all existing major sources in such nonattainment area to use BACT for the control of VOC); and ( v) In any extreme nonattainment area for ozone   at least 1.5: 1 ( except that the ratio may be at least 1.2: 1 if the State also requires all existing major sources in such nonattainment area to use BACT for the control of VOC); and 2. Notwithstanding the requirements of paragraph IV. G. 1 of this Ruling for meeting the requirements of paragraph IV. A, Condition 3 of this Ruling, the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be at least 1.15: 1 for all areas within an ozone transport region that is subject to subpart 2, part D, title PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 577 I of the Act, except for serious, severe, and extreme ozone nonattainment areas that are subject to subpart 2, part D,

title I of the Act.

( 3) In meeting the emissions offset requirements of paragraph IV. A, Condition 3 of this Ruling for ozone nonattainment areas that are subject to subpart 1, part D,

title I of the Act ( but are not subject to subpart 2, part D,

title I of the Act, including 8 hour ozone nonattainment areas subject to 40 CFR 51.902( b)), the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be at least 1: 1.

H. Additional provisions for emissions of nitrogen oxides in ozone transport regions and nonattainment areas.

The requirements of this Ruling applicable to major stationary sources and major modifications of volatile organic compounds shall apply to nitrogen oxides emissions from major stationary sources and major modifications of nitrogen oxides in an ozone transport region or in any ozone nonattainment area, except in ozone nonattainment areas where the Administrator has granted a NOx waiver applying the standards set forth under 182( f) and the waiver continues to apply.

* * * * *

VI. POLICY WHERE ATTAINMENT DATES HAVE NOT PASSED PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 578 * * * In such cases, a new source locating in an area designated in 40 CFR 81.300 et seq. as nonattainment ( or,

where Ssection III of this Ruling is applicable, a new source that would cause or contribute to an NAAQS violation) may be exempt from the Conditions of Ssection IV. A if the conditions in paragraphs VI. A through C are met.

A. The new source meets the applicable SIP emission limitations.

B. The new source will not interfere with the attainment date specified in the SIP under section 110 of the Act.

C. The Administrator has determined that conditions A and B of this section are satisfied and such determination is published in the Federal Register.

5. Subpart X of Part 51 is amended byas follows:

( a) By redesignating section 51.908 as section 51.908( d), and by revising the section heading and adding paragraphs ( a),

( b), and ( c) as follows:

Text Moved Here: 1 51.908 What modeling and attainment demonstration requirements apply for purposes of the 8 hour ozone NAAQS? PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 579 ( a) What is the attainment demonstration requirement for an area classified as moderate or higher under subpart 2 pursuant to section 51.903? An area classified as moderate or higher under section 51.903 shall be subject to the attainment demonstration requirement applicable for that classification under section 182 of the Act, except such demonstration is due no later than 3 years after the area's designation of the area for the 8 hour NAAQS.

( b) What is the attainment demonstration requirement for an area subject only to subpart 1 in accordance with section 51.902( b)?

End Of Moved Text An area subject to section 51.902( b) shall be subject to the attainment demonstration under section 172( c)( 1) of the Act and must submit an attainment demonstration no later than 3 years after the area's designation for the 8 hour NAAQS.

( c) What criteria must the attainment demonstration meet? An attainment demonstration due pursuant to paragraph ( a) or ( b)

of this section must meet the requirements of section 51.112.

* * *

( b) By revising sections 51.906, 51.908, 51.910, 51.912,

51.914, 51.915, and 51.916, and by adding section 51.917 to read as follows: PREDECISIONAL DRAFT   DO NOT QUOTE, CITE OR DISTRIBUTE 7/ 8/ 05 580 Subpart X   Provisions for Implementation of 8 hour Ozone National Ambient Air Quality Standard.

* * * * *