ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[EPA-HQ-OAR-2009-0897; FRL-   ]

2060-AQ07

Withdrawal of the Prior Determination or Presumption that Compliance
with the CAIR or the NOx SIP Call Constitutes RACT or RACM for the 1997
8-Hour Ozone and 1997 Fine Particle NAAQS; and Revision to RACT Guidance
and RFP Requirements for the 1997 Fine Particle NAAQS

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Proposed rule.

SUMMARY:  The EPA is proposing to withdraw any prior determination or
presumption that compliance with the Clean Air Interstate Rule (CAIR) or
the NOx SIP Call constitutes reasonably available control technology
(RACT) or reasonably available control measures (RACM) for oxides of
nitrogen (NOx) or sulfur dioxide (SO2) emissions from electric
generating unit (EGU) sources participating in these regional
cap-and-trade programs. The EPA is proposing revisions to preamble
guidance in the final Implementation Rule for the 1997 PM2.5 national
ambient air quality standard (NAAQS) concerning the economic feasibility
criteria for determining RACT for sources located within nonattainment
areas. The EPA is also proposing not to allow emission reductions from
outside of a nonattainment area to be credited toward meeting the
Reasonable Further Progress (RFP) requirements for the 1997 PM2.5 NAAQS.

DATES: Comments. Comments must be received on or before [INSERT DATE 30
DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER].

Public Hearings. If anyone contacts us requesting a public hearing on or
before [INSERT DATE 15 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL
REGISTER], we will hold a public hearing. Please refer to SUPPLEMENTARY
INFORMATION for additional information on the comment period and the
public hearing.

ADDRESSES:  Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2009-0897, by one of the following methods:

 HYPERLINK "http://www.regulations.gov/" www.regulations.gov . Follow
the online instructions for submitting comments. Attention Docket ID No.
EPA-HQ-OAR-2009-0897.

Email:  HYPERLINK<EMAIL_ADDRESS><EMAIL_ADDRESS>. Attention Docket ID No. EPA-HQ-OAR-2009-0897.

Fax:<PHONE_NUMBER>. Attention Docket ID No. EPA-HQ-OAR-2009-0897.

Mail:  EPA Docket Center, EPA West (Air Docket), Attention Docket ID No.
EPA-HQ-OAR-2009-0897, U.S. Environmental Protection Agency, Mailcode:
2822T, 1200 Pennsylvania Avenue, NW, Washington, DC 20460. Please
include a total of two copies.

Hand Delivery:  U.S. Environmental Protection Agency, EPA West (Air
Docket), 1301 Constitution Avenue, Northwest, Room 3334, Washington, DC
20004, Attention Docket ID No. EPA-HQ-OAR-2009-0897. Such deliveries are
only accepted during the Docket's normal hours of operation, and special
arrangements should be made for deliveries of boxed information.

Instructions. Direct your comments to Docket ID No.
EPA-HQ-OAR-2009-0897. The EPA's policy is that all comments received
will be included in the public docket without change and may be made
available online at  HYPERLINK "http://www.regulations.gov"
www.regulations.gov , including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to be
CBI or otherwise protected through  HYPERLINK
"http://www.regulations.gov/" www.regulations.gov  or email. The
HYPERLINK "http://www.regulations.gov/" www.regulations.gov  website is
an “anonymous access” system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an email comment directly to EPA without going
through  HYPERLINK "http://www.regulations.gov/" www.regulations.gov ,
your email address will be automatically captured and included as part
of the comment that is placed in the public docket and made available on
the Internet. If you submit an electronic comment, the EPA recommends
that you include your name and other contact information in the body of
your comment and with any disk or CD-ROM you submit. If the EPA cannot
read your comment due to technical difficulties and cannot contact you
for clarification, the EPA may not be able to consider your comment.
Electronic files should avoid the use of special characters, avoid any
form of encryption, and be free of any defects or viruses. For
additional information about EPA's public docket, visit the EPA Docket
Center homepage at  HYPERLINK "http://www.epa.gov/epahome/dockets.htm"
www.epa.gov/epahome/dockets.htm .

Docket. All documents in the docket are listed in the  HYPERLINK
"http://www.regulations.gov/" www.regulations.gov  index. Although
listed in the index, some information is not publicly available, e.g.,
CBI or other information whose disclosure is restricted by statute.
Certain other material, such as copyrighted material, will be publicly
available only in hard copy. Publicly available docket materials are
available either electronically in  HYPERLINK
"http://www.regulations.gov/" www.regulations.gov  or in hard copy at
the Air and Radiation Docket and Information Center, EPA/DC, EPA West
Building, Room 3334, 1301 Constitution Ave., NW, Washington, DC. The
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through
Friday, excluding legal holidays. The telephone number for the Public
Reading Room is<PHONE_NUMBER>, and the telephone number for the Air
Docket is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT:  Ms. Kristin Riha, Office of Air
Quality Planning and Standards, Air Quality Policy Division, Mail code
C539-01, Research Triangle Park, NC 27711, telephone<PHONE_NUMBER>; fax
number:<PHONE_NUMBER>; email address<EMAIL_ADDRESS>

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

	Entities potentially affected by this action include states (typically
state air pollution control agencies), tribes, and, in some cases, local
governments that are responsible for air quality management and
planning. In particular, states with areas designated nonattainment for
the 1997 8-hour ozone NAAQS and/or the 1997 PM2.5 NAAQS and that are
located within the geographic areas covered by the NOx SIP Call and/or
the CAIR may be affected by this action. EGUs located in such geographic
regions may also be affected by any new RACT or RACM reviews that may
result from final rulemaking on this action. These sources are in the
following groups:

Industry group	SICa	NAICSb

Electric Services	492	221111, 221112, 221113, 221119, 221121, 221122

a Standard Industrial Classification.

b North American Industry Classification System.

B. What should I consider as I prepare my comments for EPA?

	1. Submitting CBI. Do not submit this information to EPA through
www.regulations.gov or email. Clearly mark the part or all of the
information that you claim to be CBI. For CBI information in a disk or
CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as
CBI and then identify electronically within the disk or CD ROM the
specific information that is claimed as CBI. In addition to one complete
version of the comment that includes information claimed as CBI, a copy
of the comment that does not contain the information claimed to be CBI
must be submitted for inclusion in the public docket. Information so
marked will not be disclosed except in accordance with procedures set
forth in 40 CFR Part 2.

2. Tips for Preparing Your Comments. When submitting comments, remember
to:

Identify the rulemaking by docket number and other identifying
information (subject heading, Federal Register date and page number).

Follow directions - The agency may ask you to respond to specific
questions or organize comments by referencing a Code of Federal
Regulations (CFR) part or section number.

Explain why you agree or disagree; suggest alternatives and substitute
language for your requested changes.

Describe any assumptions and provide any technical information and/or
data that you used.

If you estimate potential costs or burdens, explain how you arrived at
your estimate in sufficient detail to allow for it to be reproduced.

Provide specific examples to illustrate your concerns, and suggest
alternatives.

Explain your views as clearly as possible, avoiding the use of profanity
or personal threats.

Make sure to submit your comments by the comment period deadline
identified.

C. Where can I get a copy of this document and other related
information?

	In addition to being available in the docket, an electronic copy of
this notice will be posted at http://www.epa.gov/ttn/oarpg/new.html
under “Recent Actions.”

D. What information should I know about a possible public hearing?

	To request a public hearing or information pertaining to a public
hearing on this document, contact Ms. Pamela Long at<PHONE_NUMBER>
before 5 p.m. on [INSERT DATE 15 DAYS AFTER DATE OF PUBLICATION IN THE
FEDERAL REGISTER]. If requested, further details concerning a public
hearing for this proposed rule will be published in a separate Federal
Register notice. For updates and additional information on a public
hearing, please check EPA’s website for this rulemaking at
http://www.epa.gov/ttn/oarpg/new.html under “recent actions.”

E. How is this notice organized?

The information presented in this notice is organized as follows:

I.  General Information

     A. Does this action apply to me?

     B. What should I consider as I prepare my comments for EPA?

	1. Submitting CBI

	2. Tips for Preparing Your Comments

     C. Where can I get a copy of this document and other related

        information?

     D. What information should I know about a possible public

        hearing?

     E. How is this notice organized?

II. Background

     A. RACT or RACM Requirements for EGUs Participating in the NOx

        SIP Call and the CAIR

     1. CAA Requirements and the Definition of RACT and RACM

	2. The NOx SIP Call

	3. The CAIR

     4. The Phase 2 Ozone Implementation Rule

     5. The PM2.5 Implementation Rule

     6. Impact of the NRDC v. EPA Court Decision on Determinations

        and Presumptions

     7. Impact of the North Carolina v. EPA Court Decision on

        Determinations and Presumptions

     B. Analysis of the Economic Feasibility of Reasonably Available

        Controls in the PM2.5 Implementation Rule

     C. RFP Requirements for the 1997 PM2.5 NAAQS

     1. Linkage between the RFP Policy in the Phase 2 Ozone

        Implementation Rule and the PM2.5 Implementation Rule

     2. Rulemaking and Litigation Chronology of RFP Requirements for

        the 1997 Ozone NAAQS and the 1997 PM2.5 NAAQS

III. Proposed Action

	A. RACT or RACM Requirements for EGUs Participating in the NOx

        SIP Call and the CAIR

	B. Analysis of the Economic Feasibility of Reasonably Available

        Controls in the PM2.5 Implementation Rule

	C. RFP Requirements for the 1997 PM2.5 NAAQS

IV.	Statutory and Executive Order Review

	A. Executive Order 12866: Regulatory Planning and Review and

        Executive Order 13563: Improving Regulation and Regulatory

        Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Act

D. Unfunded Mandates Reform Act

E. Executive Order 13132: Federalism

F. Executive Order 13175: Consultation and Coordination with

   Indian Tribal Governments

G. Executive Order 13045: Protection of Children from

   Environmental Health and Safety Risks

H. Executive Order 13211: Actions Concerning Regulations That

   Significantly Affect Energy Supply, Distribution, or Use

I. National Technology Transfer and Advancement Act

J. Executive Order 12898: Federal Actions to Address

   Environmental Justice in Minority Populations and

   Low-Income Populations

II. Background

A. RACT or RACM Requirements for EGUs Participating in the NOx SIP Call
and the CAIR

1. CAA Requirements and the Definition of RACT and RACM

	The Clean Air Act (CAA) requires the EPA to designate areas as either
attainment, nonattainment, or unclassifiable for each NAAQS. States have
primary responsibility for implementing the NAAQS within their borders,
and each state must develop a State Implementation Plan (SIP) that
contains adequate provisions for attainment and maintenance of the
NAAQS. The SIPs developed by states must meet the applicable statutory
requirements. For areas designated nonattainment, Part D of the CAA
requires that SIPs must include certain control measures. Subpart 1 of
Part D contains generally applicable requirements for all nonattainment
areas. Subpart 2 of Part D contains additional requirements applicable
to certain ozone nonattainment areas.

	Among the general statutory requirements for all nonattainment areas is
the requirement in section 172(c)(1) that SIPs:  “provide for the
implementation of all reasonably available control measures as
expeditiously as practicable (including such reductions in emissions
from existing sources in the area as may be obtained through the
adoption, at a minimum, of reasonably available control technology).”
Ozone nonattainment areas that are subject to the requirements of
Subpart 2 must meet more specific RACT requirements in accordance with
section 182(b)(2)(C). States located within the Ozone Transport Region
(OTR) have additional requirements to impose RACT on sources statewide,
rather than only in nonattainment areas, in accordance with section 184.

	EPA refers to the requirement for “reasonably available control
measures” as RACM, and refers to the subset of RACM in the
parenthetical for “reasonably available control technology” as RACT.
RACM and RACT measures apply broadly to a range of source categories
located in designated nonattainment areas, including large stationary
sources such as EGUs. The EPA has interpreted RACT to mean the lowest
emissions limitation that a particular source is capable of meeting by
the application of control technology that is reasonably available
considering technological and economic feasibility as well as other
considerations.  Economic feasibility encompasses considerations such as
whether the cost of a potential measure is reasonable considering
attainment needs of the area and the costs of other measures, and
whether the cost of a measure is reasonable for the regulated entity to
bear, in light of the benefits.

	RACT requirements are specifically intended to impose emission controls
for purposes of attainment and maintenance of the NAAQS within a
specific local nonattainment area. The EPA has interpreted the terms
RACT and RACM for purposes of Subpart 1 requirements as being the level
of emissions control that is necessary to provide for expeditious
attainment of the NAAQS within a nonattainment area. Courts have upheld
this interpretation of the statute with respect to nonattainment SIPs.

	In contrast to nonattainment plan requirements, section 110(a)(2)(D)(i)
requires each state’s SIP to contain provisions that will prevent
emissions from sources in the state from having certain prohibited
impacts on the air quality of other states, via interstate transport. In
particular, section 110(a)(2)(D)(i)(I) requires that a state’s SIP
must contain provisions to prevent emissions in amounts that would
“contribute significantly to nonattainment in, or interfere with
maintenance by, any other state” with respect to a NAAQS. The EPA has
initiated several programs pursuant to section 110(a)(2)(D)(i)(I) in
order to address interstate transport of emissions that have such
prohibited impacts on attainment of the ozone and PM2.5 NAAQS on a
regional basis.

2. The NOx SIP Call

	In October 1998, EPA published a rule under section 110(a)(2)(D)(i) of
the CAA, commonly referred to as the “NOx SIP Call.”  This rule was
intended to reduce NOx emissions (a precursor for ozone formation) from
sources that significantly contribute to nonattainment or interfere with
maintenance of the ozone NAAQS in one or more downwind states. To
implement these reductions, the NOx SIP Call required 22 states and the
District of Columbia to submit SIP revisions prohibiting those NOx
emissions that EPA determined to be adversely impacting downwind air
quality problems. The NOx SIP Call provided a regional cap-and-trade
program as one mechanism for states to meet their interstate transport
requirements under section 110 (a)(2)(D)(i). Through this mechanism,
affected sources could meet emissions reductions requirements either by
installing NOx emissions controls or by purchasing allowances from other
sources located within the geographic region covered by the NOx SIP
Call.

3. The CAIR

	In May 2005, EPA published another rule under section 110(a)(2)(D)(i)
of the CAA, referred to as the “Clean Air Interstate Rule” (or the
CAIR). The CAIR required reductions of NOx and/or SO2 emissions across
28 states and the District of Columbia needed to eliminate significant
contribution to nonattainment, or interference with maintenance of, the
1997 8-hour ozone NAAQS and/or the 1997 PM2.5 NAAQS in one or more
downwind states.  Similar to the NOx SIP Call, EPA provided a regional
cap-and-trade mechanism as one means for upwind states to meet the
interstate transport requirements of section 110(a)(2)(D)(i). By this
mechanism, affected sources could meet their emission reduction
requirements either by installing controls for NOx and/or SO2 emissions,
or by purchasing allowances from other sources located in the geographic
region covered by the CAIR. On April 28, 2006 (71 FR 25328), EPA also
promulgated Federal Implementation Plans (FIPs) for all jurisdictions
covered by the CAIR to address the section 110(a)(2)(D)(i) requirements
in the event that states were unable to make a SIP submission containing
state measures necessary to alleviate interstate transport.

	A number of parties filed petitions for review in 2008 to challenge the
CAIR on various grounds. As a result of this litigation, the United
States Court of Appeals for the District of Columbia Circuit (the Court)
remanded the CAIR to EPA, but later decided not to vacate the rule.  In
the process of remanding the CAIR, however, the Court identified serious
concerns with EPA’s reading of the statute and analytical approach,
including such core issues as the Agency’s method of evaluating
significant contribution to nonattainment and interference with
maintenance of the NAAQS. In response to the remand of the CAIR, EPA
finalized another rule, the

“Cross-State Air Pollution Rule” (CSAPR) on July 6, 2011.

	Both the NOx SIP Call and the CAIR were intended and designed to
eliminate interstate transport of pollutants that have impacts on
attainment and maintenance of the ozone and PM2.5 NAAQS in downwind
areas. Thus, they provide significant emissions reductions that assist
downwind areas with attainment or maintenance of the NAAQS, and allow
downwind states to develop SIPs in reliance on regional emissions
reductions. However, EPA did not intend that either the NOx SIP Call or
the CAIR would completely obviate the potential need for additional
local pollution controls in downwind nonattainment areas, nor did EPA
intend either action to override the statutory

requirements for SIPs for nonattainment areas.

	In order to help states address the specific statutory requirement for
SIPs for nonattainment areas for the 1997 8-hour ozone NAAQS and 1997
PM2.5 NAAQS, EPA promulgated both regulations and guidance applicable to
each NAAQS in separate implementation rules. Within those actions, EPA
addressed questions concerning the intersection of the requirements for
regional control strategies and the requirements for local control
strategies to reduce interstate transport in individual nonattainment
areas needed for local attainment purposes. In particular, EPA focused
on the issue of whether, or to what extent, compliance by EGUs with the
requirements of the NOx SIP Call and/or the CAIR could also be construed
as compliance with the RACT requirements for local nonattainment SIPs
for the 1997 8-hour ozone and 1997 PM2.5 NAAQS. The EPA’s approach to
this issue for each NAAQS is described in more detail later.

4. The Phase 2 Ozone Implementation Rule

	On November 29, 2005 (70 FR 71612), EPA published an ozone
implementation rule to address nonattainment SIP requirements for the
1997 8-hour ozone NAAQS (the Phase 2 Ozone Implementation Rule). The
Phase 2 Ozone Implementation Rule addressed various statutory
requirements, including the requirement for RACT level controls for
sources located within nonattainment areas generally, and controls for
NOx emissions from EGUs in particular. After explaining its analysis of
the issue, EPA indicated its determination that the regional NOx
emissions reductions that result from either the NOx SIP Call or the
CAIR would meet the NOx RACT requirement for EGUs located in states
included within the respective NOx SIP Call or the CAIR geographic
regions. Thus, EPA concluded that:  “[t]he State need not perform a
NOx RACT analysis for sources subject to the State’s emission
cap-and-trade program where the cap-and-trade program has been adopted
by the State and approved by EPA as meeting the NOx SIP Call
requirements or, in States achieving the CAIR reductions solely from
electric generating units (EGUs), the CAIR NOx requirements.”

	In January 2006, Earthjustice, on behalf of the Natural Resources
Defense Council (NRDC), filed a petition for reconsideration of the
Phase 2 Ozone Implementation Rule, objecting to EPA’s determination
that, in certain circumstances, compliance with the requirements of the
CAIR would constitute RACT for NOx emissions for EGUs located in states
within the CAIR region.  The petition raised objections to an alleged
failure to seek public comment on the determination and to the
Agency’s interpretation of the CAA to allow a regional emissions
reduction program to constitute RACT for sources located within
nonattainment areas, as well as other related issues. The EPA granted
the petition for reconsideration of the Phase 2 Ozone Implementation
Rule and subsequently conducted a Supplemental Technical Analysis to
assess whether compliance with the CAIR could satisfy the NOx RACT
requirement for EGUs in certain geographic areas.  A proposed rule,
which presented this analysis and solicited comments regarding the
reconsideration of whether the CAIR would constitute RACT for NOx
emissions for EGUs located in states within the CAIR region, was
published in December 2006. The EPA did not reconsider or request
comments on its prior determination that the NOx SIP Call constitutes
RACT for those sources covered by the NOx SIP Call.

EPA then published a final notice of reconsideration on June 8, 2007 (72
FR 31727), reflecting the Agency’s additional evaluation of whether
compliance with the CAIR could constitute RACT for NOx emissions for
certain EGUs. In that action, EPA modified its conclusion regarding when
compliance with the CAIR may satisfy NOx RACT requirements for EGUs in
areas within the CAIR region. The EPA reaffirmed its determination that,
in many ozone nonattainment areas, compliance with the CAIR would
satisfy NOx RACT requirements for EGUs in such areas.  However, EPA
stated that this determination would only apply to specific areas for
which EPA’s Supplemental Technical Analysis showed that the CAIR was
projected to achieve equal or greater NOx emissions reductions than
application of source-by-source application of RACT to the EGUs within
the nonattainment area. Even in those nonattainment areas where EPA did
not make a formal determination, however, EPA also established a
separate presumption that compliance with the CAIR, in certain
circumstances, could satisfy NOx RACT requirements for EGUs in any area
within the CAIR region.  EPA thus announced that states could rely
initially on this presumption, even in areas where the Agency had made
no formal determination, assuming certain conditions. Finally, EPA
reiterated in the final notice of reconsideration that EGU sources
complying with the requirements of the NOx SIP Call would also be
considered to have met their ozone NOx RACT obligations, assuming
certain conditions.

In addition to the Supplemental Technical Analysis, EPA provided various
legal and policy bases for its determinations and presumptions in the
final notice of reconsideration of the Phase 2 Ozone Implementation
Rule. For example, EPA argued that its interpretation of section 172(c)
to allow RACT to include consideration of regionwide emissions
reductions, rather than nonattainment area specific reductions only, was
permissible because of the use of the term “reasonable” as part of
the definition of RACT.  As a policy matter, EPA also argued that
emissions reductions that result from regional scale programs like the
CAIR often “will achieve a more effective and economically efficient
air quality improvement in nonattainment areas than application of
source-by-source RACT.”

In November 2008, several parties (including NRDC) further challenged
EPA’s Phase 2 Ozone Implementation Rule and the Notice of
Reconsideration. In particular, they challenged EPA’s determination
that compliance with the NOx SIP Call and/or the CAIR could satisfy NOx
RACT requirements for EGUs in nonattainment areas, and EPA’s specific
determinations for some areas and general presumption for other areas,
that compliance with the CAIR could satisfy NOx RACT for EGUs in ozone
nonattainment areas. In view of its decision in North Carolina v. EPA,
in which the Court had previously remanded the CAIR, the Court deferred
consideration of the litigant’s challenge to the Phase 2 Ozone
Implementation Rule and Reconsideration Notice insofar as they related
to the CAIR program.

As a result of this litigation, the Court decided that the provisions in
the Phase 2 Ozone Implementation Rule indicating that a state need not
perform (or submit) a NOx RACT analysis for EGU sources subject to a
cap-and-trade program that meets the requirements of the NOx SIP Call
are inconsistent with the statutory requirements of section 172(c)(1).
The Court specifically held that the Phase 2 Ozone Implementation Rule
allowing use of the NOx SIP call to constitute RACT without any locally
applicable analysis regarding the equivalence of NOx SIP Call and RACT
reductions: “is inconsistent with the Clean Air Act . . . in allowing
participation in a regional cap-and-trade program to satisfy an
area-specific statutory mandate.”  The Court emphasized that: “the
RACT requirement calls for reductions in emissions from sources in the
area; reductions from sources outside the nonattainment area do not
satisfy the requirement . . . Accordingly, participation in the NOx SIP
call would constitute RACT only if participation entailed at least
RACT-level reductions in emissions from sources within the nonattainment
area.”

The Court rejected EPA’s arguments that a regional emissions
reductions program like the NOx SIP Call would result in greater
emissions reductions in nonattainment areas as unsupported by any
adequate technical analysis.  The Court likewise rejected EPA’s
argument that regionwide emissions reductions would collectively achieve
better emissions reductions because this argument did not comport with
the explicit “in the area” language of section 172(c)(1).  With
respect to EPA’s argument that the statute is ambiguous as to whether
each individual source within a nonattainment area must install RACT,
the Court concluded that even if that were correct, EPA had failed to
evaluate the impact of the NOx SIP Call on the air quality within
specific nonattainment areas, and thus EPA “has failed to establish
that NOx SIP Call compliance can be equated to RACT compliance.”  The
Court disagreed with EPA’s theory that section 172(c)(6), which
authorizes auctions as a permissible form of control measure, could
allow reliance on a regional cap-and-trade type program in lieu of the
RACT requirement for sources “in the area.”  Finally, the Court
rejected the argument that EPA’s interpretation should be upheld
because a state could still elect to define RACT to require greater
emissions reductions from EGUs in a given area for local attainment
needs, concluding that: “[a] state’s decision to require stricter
controls cannot eliminate the defect in EPA’s approach – failing to
implement the requirement of at least RACT-level reductions in emissions
from sources in the nonattainment area.”

Based on the foregoing reasoning, the Court remanded the provision of
the Phase 2 Ozone Implementation Rule determining that the NOx SIP Call
satisfies NOx RACT for EGUs because EPA had failed to show that
compliance with the NOx SIP Call would achieve at least RACT-level
reductions in each nonattainment area. In deciding not to vacate the
provision, however, the Court noted that a determination that RACT was
satisfied by compliance with the NOx SIP Call might be permissible for
an area if accompanied by a technical analysis demonstrating that the
program in fact “results in greater emissions reductions in a
nonattainment area than would be achieved if RACT-level controls were
installed in that area.”  In other words, the Court rejected the
notion that a regional cap-and-trade program intended to eliminate
interstate transport of emissions consistent with section
110(a)(2)(D)(i) could automatically constitute RACT-level control as
required by section 172(c)(1), but held open the possibility that such a
program might in fact result in the same, or higher, level of emissions
reductions in individual nonattainment areas. The Court did not,
however, explain how the key feature of such cap-and-trade programs,
i.e., the ability of sources to purchase allowances in lieu of
installation of emissions controls, could meet the parameters envisioned
by the Court. Nor did the Court speak to the issue of sources that might
wish to switch their method of compliance in the future, taking
advantage of the flexibility to control emissions or purchase allowances
as market conditions evolve.

Significantly, the Court did not address at all EPA’s comparable
determinations and presumption that compliance with the CAIR would
constitute NOx RACT for EGUs in ozone nonattainment areas under certain
circumstances. As mentioned earlier, the Court deferred consideration of
the CAIR-related challenges to EPA’s determinations and presumption
because at the time of this decision, the Court had already remanded the
CAIR.  Nevertheless, EPA believes that the concerns expressed by the
Court about the Agency’s approach to the NOx RACT requirement for EGUs
and the emissions reductions required by the NOx SIP Call raise
significant questions about EPA’s approach to the comparable issues
related to compliance with the CAIR, for both the Phase 2 Ozone
Implementation Rule and the 1997 PM2.5 NAAQS Implementation Rule
described later. The EPA has therefore decided to consider the decision
and the reasoning of the Court with respect to both the NOx SIP Call and
the CAIR as it responds to the remand of the Phase 2 Ozone
Implementation Rule, and to evaluate the implications of the decision
for other related rulemakings, including the responses to related
petitions for reconsideration.

5. The PM2.5 Implementation Rule

	On April 25, 2007 (72 FR 20586), EPA published the “Clean Air Fine
Particle Implementation Rule” to address nonattainment SIP
requirements for the 1997 PM2.5 NAAQS (the PM2.5 Implementation Rule).
That action provided regulations and additional guidance in the preamble
for state plans required to implement the 1997 PM2.5 NAAQS. The PM2.5
Implementation Rule provided a framework for developing SIP submissions
for nonattainment areas based on the Subpart 1 requirements for
nonattainment areas found in section 172 of the CAA.

With respect to the requirements of section 172 (c)(1), the PM2.5
Implementation Rule utilized a combined RACT/RACM approach, where an
area’s obligation to implement RACT was considered as part of an
area’s overall RACM obligation for EGU sources. RACT/RACM was defined
in the Rule as the set of emission reduction measures needed to attain
the standards as expeditiously as practicable in the nonattainment area
at issue. Through guidance in the preamble to the final PM2.5
Implementation Rule, EPA also established a presumption that compliance
with the CAIR would satisfy RACT/RACM requirements for SO2 and NOx
emissions from EGUs in states participating in the CAIR cap-and-trade
program for such emissions.

For SO2, EPA’s guidance recommended that states that obtained all SO2
reductions required by the CAIR from EGUs could presume that such
sources located within a designated nonattainment area were meeting SO2
RACT/RACM requirements because of overall regional SO2 reductions from
EGUs. The guidance indicated that this presumption could be utilized
without conducting a technical analysis comparing the CAIR and RACT/RACM
reductions for the specific nonattainment area. For NOx, EPA similarly
recommended that so long as the EGU sources in the state were required
to operate NOx emissions controls on a year-round basis to comply with
the CAIR, then that state could presume that those EGUs were meeting NOx
RACT/RACM requirements because of overall regional NOx reductions from
EGUs. The EPA made no decision with respect to what might constitute
RACT/RACM level controls for direct PM2.5 emissions from EGUs in
relation to the CAIR because the CAIR only addressed the NOx and SO2
emissions from such sources.

Based on this presumption that compliance with the CAIR would constitute
RACT/RACM level controls for SO2 and NOx emissions from EGUs within the
CAIR region, EPA concluded that: “states may define RACT/RACM as the
CAIR level of control on the collective group of sources in the region
rather than impose a specific level of control on individual sources.”
 In other words, EPA indicated that states could presume that EGUs
located within a given nonattainment area were meeting the RACT/RACM
requirement, based solely upon a regional program that imposed controls
on sources both within and outside designated nonattainment areas. The
EPA acknowledged that reliance on the presumption could result in
situations where specific EGUs located within nonattainment areas might
elect to comply with the CAIR through the acquisition of allowances,
rather than the reduction of emissions. Although EPA articulated a
series of policy and technical reasons for the appropriateness of
considering a regional control program like the CAIR to be a preferable
approach, the Agency also acknowledged that a state might “conclude
that establishing additional ‘beyond CAIR’ emissions control
requirements on specific sources in nonattainment areas is warranted to
provide for attainment as expeditiously as practicable.”  These policy
and technical arguments are very similar to those made by EPA in
connection with challenges to the Phase 2 Ozone Implementation Rule, and
rejected by the Court decision discussed in further detail previously in
this notice.

In June 2007, EPA received a petition for reconsideration filed by
Earthjustice on behalf of several petitioners (including NRDC)

that raised several objections to the PM2.5 Implementation Rule.  One of
the principle objections raised by the petition is that under the CAA,
compliance with a regional trading program, such as the CAIR, should not
be presumed to satisfy RACT/RACM requirements for individual EGU sources
located in nonattainment areas. The petitioner argued that the effect of
the “CAIR-RACT presumption” was to waive the CAA RACT requirements
for individual EGU sources located within PM2.5 nonattainment areas. The
petition also asserts that the presumption and its accompanying
rationale were added to the rule after the close of the public comment
period, and that EPA therefore failed to seek public comment on the
final rule’s determination that the CAIR presumptively satisfies SO2
and NOx RACT requirements for EGUs located in nonattainment areas. The
petition further maintains that EPA lacks authority to establish a
presumption on what satisfies RACT in this fashion, and that EPA’s
conclusion that the CAIR can be presumed to satisfy RACT is arbitrary
and capricious because it lacked a factual basis. Lastly, the petition
also maintained that even if an initial presumption that compliance with
the CAIR constituted compliance with the RACT requirements of section
172(c)(1) were otherwise permissible, the final rule would be arbitrary
and unlawful because it failed to explain if or how the presumption can
be rebutted.

Significantly, Earthjustice filed the petition for reconsideration of
the PM2.5 Implementation Rule well before the Court in the NRDC v. EPA
case addressed the comparable issue with respect to the NOx SIP Call in
the context of the Phase 2 Ozone Implementation Rule. Nevertheless, the
petitioner made essentially the same points as the Court in the NRDC v.
EPA case that to allow compliance with a regional cap-and-trade program
to constitute RACT for sources located within a nonattainment area
automatically, or pursuant to an unsupported presumption, would be
contrary to the explicit requirements of section 172(c)(1). Moreover,
EPA notes that multiple parties have indicated that they intend to
challenge the PM2.5 Implementation Rule on this same issue through
petitions for review currently pending in the Court.

In light of the arguments raised in the petition for reconsideration,
and in light of the Court’s decision in NRDC v. EPA, EPA decided to
grant the petition for reconsideration on this issue and initiate this
rulemaking.  Accordingly, after reconsideration and for the reasons
further described later in this notice, EPA is proposing in this action
to withdraw our prior presumption in the PM2.5 Implementation Rule that
compliance with the CAIR would automatically constitute RACT/RACM level
controls for EGUs located in areas designated nonattainment for the 1997
PM2.5 NAAQS.

6. Impact of the NRDC v. EPA Court Decision on Determinations and
Presumptions

EPA has reevaluated whether compliance with the NOx SIP Call could
constitute NOx RACT for EGUs in light of the Court’s opinion in the
NRDC v. EPA case. Given the explicit wording of section 172(c)(1) that
sources “in the area” must at a minimum adopt RACT controls for that
area, EPA believes that it is no longer appropriate to address this
requirement merely based upon the participation of the source in a
regional cap-and-trade program. Implicit in a regional cap-and-trade
program is that some sources may elect to utilize allowances in lieu of
emissions controls in order to meet the regional emissions reductions
requirements, and that those elections could change.

	In response to the remand of the CAIR, EPA finalized the CSAPR on July
6, 2011, which requires 27 states in the eastern half of the United
States to significantly improve air quality by reducing EGU emissions
that cross state lines and contribute to ground-level ozone and fine
particle pollution in other states. At the same time, the Agency also
issued a supplemental proposal that would require six states — Iowa,
Kansas, Michigan, Missouri, Oklahoma, and Wisconsin — to make
summertime NOX reductions under the CSAPR ozone-season control program.
Finalizing this supplemental proposal would bring the total number of
covered states under the CSAPR to 28.

Based on the logic of the NRDC v. EPA Court decision, and the concerns
raised in the petition for reconsideration on the PM2.5 Implementation
Rule, EPA believes that it would be inappropriate for EPA to pre-judge
that other regional cap-and-trade programs, such as the CSAPR, would
constitute RACT for covered sources. Therefore, states should not rely
merely on the fact that sources are complying with a regional
cap-and-trade program as a basis for RACT or RACM level emissions
controls for the 1997 8-hour ozone NAAQS, the 1997 PM2.5 NAAQS, or any
other NAAQS. States must comply with the provisions of the CAA, which
require an evaluation of EGUs located within designated nonattainment
areas for potential RACT controls, and imposition of such controls as
may be necessary for expeditious attainment of the NAAQS within the
area.

States may, however, elect to conduct a technical analysis for the
specific nonattainment area considering the emissions controls required
by the regional cap-and-trade program at issue, and demonstrate that
this program results in equal to or greater than actual emission
reductions from the EGUs within the nonattainment area than would
application of RACT on all subject EGUs within the nonattainment area.
States could conduct this analysis for the EGUs in the nonattainment
area, either individually or in the aggregate. The EPA anticipates that
in many areas, such an evaluation will likely indicate that EGUs within
the nonattainment area at issue are already adequately controlled for
NOx and SO2 emissions, whether by virtue of the NOx SIP Call, the
controls required by the CSAPR, or by other means. However, based on the
logic of the NRDC v. EPA Court decision, and the concerns raised in the
petition for reconsideration on the PM2.5 Implementation Rule, EPA
believes that it would be inappropriate for EPA to pre-judge that
outcome prior to state development of locally applicable demonstrations
showing equivalent reductions.

7. Impact of the North Carolina v. EPA Decision on Determinations and
Presumptions

As mentioned earlier, the Court remanded the CAIR to EPA and later
decided not to vacate the rule. In the process of remanding the CAIR,
the Court identified serious concerns with EPA’s reading of the
statute and analytical approach, including such core issues as the
Agency’s method of evaluating significant contribution to
nonattainment and interference with maintenance of the NAAQS. The EPA
notes that the Court also reiterated some of its concerns in the NRDC v.
EPA decision with the CAIR and EPA’s use of a regional cap-and-trade
program to address interstate transport of emissions between states.

Given that the Court has remanded the CAIR, the Agency believes that any
prior determination that compliance with the CAIR would constitute RACT
for NOx for EGUs for purposes of the Phase 2 Ozone Implementation Rule
can no longer be considered reliable. Those determinations were
implicitly based upon the continued existence of the CAIR and its
specific requirements. In making the determinations, EPA evaluated the
controls that EGUs in those areas would be likely to install given the
specific requirements of the CAIR, and the choices that such sources
would make given the specific cap-and-trade features of the CAIR.
Further, in NRDC v. EPA, the Court explicitly rejected the Agency’s
conclusion that compliance with the NOx SIP Call would constitute RACT
for EGUs in nonattainment areas because there was inadequate technical
basis or justification for such a conclusion.  EPA believes that after
the remand of the CAIR, the prior EPA determinations that compliance
with the CAIR would automatically constitute RACT for EGUs in
nonattainment areas suffers from a comparable lack of an adequate
technical basis or justification. Moreover, because other rules such as
the CSAPR will by necessity differ from the CAIR as a result of the
Court’s remand of the CAIR, EPA concludes that any reliance on the
prior determinations at this time would be inappropriate. Therefore, in
this action EPA is proposing to withdraw the prior area-specific
determinations that EPA made in connection with the Phase 2 Ozone
Implementation Rule.

EPA’s prior conclusion that a state could presume that the CAIR would
constitute NOx RACT for EGUs for purposes of the ozone NAAQS, even in
areas where EPA did not make a formal determination, is also no longer
reliable for the same reasons. That presumption also assumed continued
existence of the CAIR and its specific requirements. Similarly, EPA’s
prior conclusion that a state could presume that compliance with the
CAIR would constitute both NOx RACT/RACM and SO2 RACT/RACM for EGUs for
purposes of the PM2.5 NAAQS is also no longer reliable. Therefore, in
this action EPA is proposing to withdraw our prior presumption that EPA
announced for purposes of the ozone NAAQS in the Phase 2 Ozone
Implementation Rule and our prior presumption that EPA announced for
purposes of the PM2.5 NAAQS in the PM2.5 Implementation Rule.

B. Analysis of the Economic Feasibility of Reasonably Available Controls
in the PM2.5 Implementation Rule

	Section 172(c)(1) requires that sources located in nonattainment areas
meet RACM and RACT level control requirements. In the PM2.5
Implementation Rule, EPA promulgated regulations to implement this
requirement, among others, for the 1997 PM2.5 NAAQS.  In addition, in
the preamble to the final PM2.5 Implementation Rule, EPA provided
extensive guidance for states about how to evaluate sources for RACM and
RACT level controls.  Although section 172(c)(1) does not itself specify
how to determine what constitutes RACM or RACT level controls, EPA has a
long history of interpreting those terms both in prior guidance and as
applied in many SIP actions.

The petition for reconsideration of the final PM2.5 Implementation Rule
filed by Earthjustice asserts that EPA unlawfully and arbitrarily
revised well-established criteria used to determine the economic
feasibility of controls being considered for RACT, without any
explanation of the legal or policy arguments in support of the new
interpretation of the statute.  The petition further claims that the new
approach directly contradicts the approach included in the proposed
PM2.5 Implementation Rule and that these new interpretations were added
to the final rule after the close of the public comment period. For this
reason, the petition argues that EPA unlawfully failed to present the
new criteria for economic feasibility of RACT to the public for comment.

 The petition maintains that the final PM2.5 Implementation Rule
includes the following new policies which were not subject to an
opportunity for public comment: (1) consideration of economic
feasibility encompasses whether the cost of a measure is reasonable to
bear in light of the benefits; (2) there is no presumption that a given
source must bear a similar cost to other similar sources; and (3) states
may evaluate equity considerations in weighing economic feasibility.
The petition states that these are significant changes in longstanding
EPA policy and interpretation of the RACT requirement for nonattainment
areas. In particular, the petitioner argues that “[e]conomic
feasibility is not a cost-benefit analysis.”  The petitioner also
argues that EPA’s longstanding policy, which was reiterated in the
preamble to the proposal for the PM2.5 Implementation Rule, maintained
that absent other indications, it is reasonable for a source to bear
similar costs of emission reduction as are borne by similar sources in
the same source category.

In light of the arguments raised in the petition, EPA decided to grant
the petition for reconsideration on this issue.  Accordingly, after
reconsideration and for the reasons explained further, EPA is proposing
in this action to remove the section of guidance in the preamble to the
final PM2.5 Implementation Rule that included the new interpretations of
RACT objected to by the petitioner. The EPA is also proposing to replace
this section of the guidance with EPA’s long-standing policy on
economic feasibility for RACT as described in the proposed PM2.5
Implementation Rule.  A basic element of this policy is the presumption
that a source in a given category should be able to bear a cost of
control similar to the cost of control of other sources in that
category.  The original policy did not include factors such as
“equity” and “profit margins” in determining whether a given
level of control is appropriate.

C. RFP Requirements for the 1997 PM2.5 NAAQS

1. Linkage between the RFP Policy in the Phase 2 Ozone Implementation
Rule and the PM2.5 Implementation Rule

	The Phase 2 Ozone Implementation Rule and the PM2.5 Implementation Rule
each included a policy allowing emission reductions from certain sources
located outside of a nonattainment area to be credited toward meeting
the RFP requirement for the 1997 8-hour ozone NAAQS and the 1997 PM2.5
NAAQS within such a nonattainment area. In these actions, EPA used
somewhat different approaches with respect to how states could take
credit for emission reductions from outside the nonattainment area. In
response to a petition for reconsideration of the Phase 2 Ozone
Implementation Rule concerning this policy and other issues, EPA
proposed to revise the policy for the 1997 8-hour ozone NAAQS on
December 22, 2010 (75 FR 80420). This action is being proposed in
response to a petition for reconsideration concerning the RFP policy in
the PM2.5 Implementation Rule. However, to understand this proposed
change in RFP policy with respect to the PM2.5 Implementation Rule, it
is important to also understand related actions and court decisions with
respect to this issue in the Phase 2 Ozone Implementation Rule. A
chronology of rulemaking and litigation with respect to the RFP policy
is described in detail in the next subsection.

2. Rulemaking and Litigation Chronology of RFP Requirements for the 1997
Ozone NAAQS and the 1997 PM2.5 NAAQS

Under EPA’s Phase 2 Ozone Implementation Rule, certain emission
reductions from sources located outside a nonattainment area could be
credited toward meeting the 1997 8-hour ozone NAAQS RFP requirement. In
the preamble to that Rule, EPA stated that credit could be taken for
volatile organic compounds (VOC) and NOx emission reductions within 100
kilometers (km) and 200 km, respectively, from outside the nonattainment
area under certain circumstances. In addition, if a regional NOx control
strategy was in place in a state, NOx reductions within that state
beyond 200 km could be credited toward meeting the RFP target. In all
cases, however, states had to include a demonstration that the emissions
from outside the nonattainment area had an impact on ambient ozone air
quality levels within the nonattainment area and emissions from the
sources outside the area providing the reductions would have to be added
to the baseline inventory for the nonattainment area. The EPA explained
that where data indicated that emission reductions from sources outside
a nonattainment area improved ozone air quality within the nonattainment
area, it was appropriate to allow states to take RFP credit for such
reductions from outside the nonattainment area. This interpretation was
consistent with the policy EPA had established under the l-hour ozone
standard "Guidance for Implementing the l-Hour Ozone and Pre-Existing
PM10 NAAQS.”

Earthjustice filed a petition for reconsideration in January 2006 on
behalf of NRDC challenging EPA’s interpretation that formed the basis
of its policy for allowing credit for emission reductions outside the
nonattainment area, namely the interpretation that the intent of section
182(c)(2)(C) is to reduce ambient ozone concentrations within an area
rather than to reduce emissions within the nonattainment area.  The
petitioner claimed that EPA’s interpretation and implementation of
these provisions were both unlawful and arbitrary. The petitioner also
argued that the rule was arbitrary because it allowed the state to claim
credit for emission reductions from selected
outside-the-nonattainment-area sources without also adding emissions
from other outside sources to the RFP baseline, even where those other
sources impact air quality in the nonattainment area.

EPA subsequently published the PM2.5 Implementation Rule, where the
Agency adopted a somewhat different approach for crediting emission
reductions from outside nonattainment areas.  Section G.5.b of the
preamble to the PM2.5 Implementation Rule allowed states to take credit
for reductions of NOx and SO2 emissions up to 200 km from outside the
nonattainment area (and potentially for reductions of VOC or ammonia as
well) only when certain conditions are met, including that when taking
RFP credit for emissions reductions achieved outside of a nonattainment
area, the baseline emissions inventory for the nonattainment area
contain all, rather than a select few, sources in the outside area.  The
primary objective of this policy was to reflect the net emission
reductions in the area outside of a nonattainment area that could affect
the nonattainment area rather than crediting only reductions from
selected sources.

In June 2007, EPA received a petition for reconsideration filed by
Earthjustice on behalf of several petitioners (including NRDC) that
raised objections to the PM2.5 Implementation Rule on several issues,
including the RFP policy allowing credit for emission reductions from
outside the nonattainment area.

Shortly thereafter, EPA requested from the Court in July 2007, a partial
voluntary remand of the Phase 2 Ozone Implementation Rule to reevaluate
and reconsider whether to revise the RFP interpretation for ozone to
assure consistency with the provisions in the PM2.5 Implementation Rule.
In response to EPA's motion for a partial voluntary remand of the ozone
RFP policy, NRDC asked the Court to also to vacate this provision. In
November 2007, the Court issued an order that vacated and remanded the
portion of the Phase 2 Ozone Implementation Rule that allowed RFP credit
for emission reductions of VOC and NOx from outside nonattainment areas.
On August 11, 2009 (74 FR 40074), EPA issued a final rule to revise the
RFP policy in the Phase 2 Ozone Implementation Rule to be consistent
with the interpretation in the PM2.5 Implementation rule.

In July 2009, the Court issued its decision on the other issues in the
Phase 2 Ozone Implementation Rule case.  The Court examined the phrase
“in the area” included in separate provisions relating to reductions
from the application of RACT. As described previously in this notice, in
the Phase 2 Ozone Implementation Rule, EPA had explained that because an
interstate emissions trading program would achieve beyond RACT-level NOx
reductions regionally, areas did not have to meet the RACT-level
reductions required under CAA section 172(c)(1) solely from within the
nonattainment area. The Court, however, concluded that the phrase “in
the area” means that reductions must occur from sources within the
area and “reductions from outside the nonattainment area do not
satisfy the requirement.”

In October 2009, Earthjustice filed a petition on behalf of NRDC for
reconsideration of the August 2009 final rule revising EPA’s
interpretation in the Phase 2 Ozone Implementation Rule allowing credit
toward meeting the RFP requirement using emissions reductions from
outside of ozone nonattainment areas. In its petition, the petitioner
based its objections to the rule on the following grounds: 1) the
Court’s decision on the RACT provisions in the Phase 2 Ozone
Implementation Rule and its interpretation of the phrase “sources in
the area” requires that RFP emission reductions also be achieved only
from sources within the nonattainment area; 2) EPA had presented a new
rationale in the August 2009 final rule, i.e., there is some ambiguity
in the statutory provisions because they do not prohibit credits for
reductions from outside the nonattainment area, for which it did not
provide an opportunity for comment; 3) EPA offered a new and arbitrary
rationale for its choice of the 100 and 200 km distances for reductions
outside the nonattainment area; 4) EPA stated a new and arbitrary
rationale, i.e., creditable reductions outside a nonattainment area must
be reasonably expected to provide ozone air quality benefits comparable
to those from reductions in the area, for evaluating emissions
reductions outside a nonattainment area; and 5) EPA relied on a new
rationale when it explained that sources that are outside the
nonattainment area are not necessarily “nearby” for designations
purposes and certain factors would need to be considered for judging
whether an area is “nearby” for those purposes.

	In May 2010, based on Earthjustice’s October 2009 petition for
reconsideration, EPA granted reconsideration of the August 2009 final
rule to revise the RFP policy in the Phase 2 Ozone Implementation Rule,
and stated it would initiate a rulemaking to address the issue.  EPA
issued this proposed rulemaking on December 22, 2010 (75 FR 80420). In
this proposed rulemaking, EPA is addressing the petitioner’s first
objection and EPA believes that the proposed action makes the other
objections moot. Therefore, EPA did not address any of those subsequent
points in the proposed reconsideration rulemaking.

	These developments with respect to the RFP issue in the context of the
1997 8-hour ozone NAAQS necessitate a reexamination of the comparable
issue for purposes of the 1997 PM2.5 NAAQS. The petition for
reconsideration of the PM2.5 Implementation Rule filed in June 2007 by
Earthjustice raised two main objections to the policy allowing certain
emissions reductions from outside the nonattainment area to be credited
toward meeting the RFP requirements for the 1997 PM2.5 NAAQS. First,
Earthjustice argued that EPA committed a procedural violation by failing
to solicit public comments on the policy. Second, the petitioner argued
that the policy lacks any standard for defining the geographic boundary
of the area outside the nonattainment area from which emission
reductions could be credited. The petitioner noted that the policy
“limits the surrounding area that can be included to a doughnut around
the nonattainment area of up to 200 kilometers.”  However, the
petitioner objected to the approach in the PM2.5 Implementation Rule
because it could allow a state to choose any portion of that surrounding
area for purposes of the RFP calculation; i.e., a state need only show
that emissions in the area selected substantially impact ambient
concentrations in the nonattainment area. The petitioner argued that
there is no stated requirement that all areas substantially impacting
the nonattainment area be included. For these reasons, the petitioner
claimed that the RFP policy was unlawful and arbitrary.

	In light of the arguments raised by Earthjustice’s June 2007
petition, EPA decided to grant the petition for reconsideration on this
issue.  Due to EPA’s proposed action to revise the RFP policy for the
1997 8-hour ozone NAAQS, and upon reconsideration of the policy for the
1997 PM2.5 NAAQS, EPA is proposing in this action to set aside its
earlier interpretation of the RFP provisions described in Section
II.G.5.b of the preamble to the final PM2.5 Implementation Rule and to
no longer permit states to rely on credit for emission reductions from
outside the PM2.5 nonattainment area to meet such an area’s RFP
obligations.

  SEQ CHAPTER \h \r 1 III. Proposed Action

A. RACT or RACM Requirements for EGUs Participating in the NOx SIP Call
and the CAIR

In this notice, EPA is proposing to revise the Phase 2 Ozone
Implementation Rule in order to:  (1) withdraw the determination that
compliance with the NOx SIP Call satisfies NOx RACT for EGUs located in
certain ozone nonattainment areas or in states within the OTR; and (2)
withdraw the separate determination that compliance with the CAIR
satisfies NOx RACT for EGUs located in certain specific ozone
nonattainment areas and the presumption that compliance with the CAIR
can satisfy NOx RACT for EGUs located in other ozone nonattainment areas
or in states within the OTR. The EPA is also proposing to withdraw from
the PM2.5 Implementation Rule any presumption that compliance with the
CAIR automatically satisfies RACT/RACM requirements for SO2 and NOx
emissions from EGUs located in PM2.5 nonattainment areas.

EPA has reevaluated whether compliance with the NOx SIP Call could
constitute NOx RACT for EGUs in light of the Courts’ opinion in the
NRDC v. EPA case. Given the explicit wording of section 172(c) (1) that
sources “in the area” must at a minimum adopt RACT controls for that
area, EPA believes that it is no longer appropriate to address this
requirement merely based upon the participation of the source in a
regional cap-and-trade program. Implicit in a regional cap-and-trade
program is that some sources may elect to utilize allowances in lieu of
emissions controls in order to meet the regional emissions reductions
requirements, and that those elections could change. After
reconsideration, EPA believes that it would be more consistent with the
statutory provision, with the overall structure of the CAA with respect
to nonattainment plans, and with the overarching objective to provide
for expeditious attainment of the NAAQS in each nonattainment area, that
states should evaluate the EGUs located within designated nonattainment
areas for any necessary controls.

In addition, to the extent that the Court in the NRDC v. EPA decision
left open the possibility that an area-specific analysis might establish
that compliance with a regional cap-and-trade program like the NOx SIP
Call could simultaneously result in factual compliance with the RACT
requirement for sources located within nonattainment areas, EPA believes
that eliminating the prior determinations and presumptions will result
in such an analysis should states elect to consider it. Only where
states conduct a technical analysis for the specific nonattainment area
considering the emissions controls required by the regional
cap-and-trade program at issue, and demonstrating such a program results
in equal to or greater than actual emissions reductions from the EGUs
within the nonattainment area than would application of RACT on all
subject EGUs within the nonattainment area, could EPA approve a SIP
adopting such an approach.

EPA believes that although the NRDC v. EPA decision explicitly deferred
consideration of whether compliance with the CAIR could automatically
satisfy a source’s obligation to install RACT for NOx or SO2, it is
both consistent with the decision and appropriate for the Agency to
reconsider this issue in the same manner that the Court addressed
whether compliance with the NOx SIP Call could satisfy a EGU’s
obligation to meet RACT within a nonattainment area. We believe that the
Court deferred action with respect to the CAIR, not because the issue
could be decided differently, but rather because the Court had already
remanded the CAIR to EPA for other reasons. The EPA believes that the
logic of the NRDC v. EPA decision extends to any presumption that
sources subject to a regional trading program such as the CAIR
automatically comply with RACT requirements for NOx or SO2. Moreover,
EPA believes that the remanded status of the CAIR, and the fact that it
will be replaced with a different regional program, renders the prior
determinations and presumptions unreliable.

	EPA is also proposing to withdraw the determination made in the Phase 2
Ozone Implementation Rule, final notice of reconsideration, that EPA’s
Supplemental Technical Analysis gives an adequate demonstration that
participation in the CAIR is projected to achieve equal or greater
annual emissions reductions from EGUs than source-by-source RACT for
certain specific areas.

	EPA is proposing this action because it no longer believes that the
assumptions held within the Supplemental Technical Analysis are adequate
to make such a showing. First, the analysis was premised upon the
continued existence of the CAIR, and implicitly upon the predicted
action of sources subject to the CAIR. Second, after reconsideration,
EPA now concludes that the analysis’s across-the-board assumptions
regarding what constitutes RACT for all sources in all nonattainment
areas were inadequate, and did not consider whether more advanced
control technologies, such as post-combustion controls (e.g., selective
catalytic reduction or selective non-catalytic reduction), might at some
time be technically and economically feasible for specific sources in
some areas. Therefore, states with nonattainment areas for which EPA
previously made this determination must now individually comply with the
provisions of the CAA, which require an evaluation of EGUs located
within designated nonattainment areas for RACT controls, and imposition
of such controls as may be necessary for expeditious attainment of the
NAAQS within the area. In addition, should they elect to do so, they
must conduct a technical analysis for the specific nonattainment area
considering the emissions controls required by the regional
cap-and-trade program at issue, and demonstrating that this program
results in equal to or greater than actual emissions reductions from the
EGUs within the nonattainment area than would application of RACT on all
subject EGUs within the nonattainment area before they include such a
determination in a SIP.

 	EPA is consequently proposing to amend Section 51.912 to state
explicitly that each individual major source, or major source category,
in a nonattainment area must undergo a RACT analysis for purposes of
1997 8-hour ozone NAAQS SIPs.

As a result of this action, states should not merely presume that for
EGUs located in a nonattainment area that compliance with a
cap-and-trade program, including the NOx SIP Call, the CAIR, or other
programs, such as the CSAPR, could satisfy their obligation to implement
NOx or SO2 RACT. As required by the CAA, states are required to analyze
what constitutes RACT for EGUs in each nonattainment area. However, a
state may be able to show through appropriate technical analysis that
EGU participation in a regional cap-and-trade program, such as the
CSAPR, in a particular nonattainment area would meet NOx and/or SO2 RACT
requirements for the area. Such an analysis must show that compliance by
EGUs participating in the program results in actual emissions reductions
in the particular nonattainment area that are equal to or greater than
the emissions reductions that would result if RACT were applied to each
individual EGU source or the EGU source category in the area. In
addition, the state would have to establish that these emissions levels
are required by the SIP by some means independent of the regional
program so that they would not change based upon a source’s subsequent
decision to comply via the purchase of allowances rather than by the
installation and operation of emissions controls. The EPA is soliciting
comments on the withdrawal of the determinations and presumptions as
explained previously in this notice.

B. Analysis of the Economic Feasibility of Reasonably Available Controls
in the PM2.5 Implementation Rule

EPA has granted the petitioner’s request for reconsideration of the
guidance in the preamble for the final PM2.5 Implementation Rule
regarding criteria for determining economic feasibility of RACT
controls. Upon reconsideration, EPA agrees that the specific objections
raised by the petition do reflect departures from prior EPA guidance on
how to evaluate RACT. Given the specific statutory language of section
172(c)(1), and EPA’s long-standing interpretation of what factors are
appropriate for consideration of economic feasibility in a RACT
analysis, EPA concludes that the final guidance that the Agency provided
for the PM2.5 Implementation Rule was inappropriate in certain respects.
The EPA also concludes that there was inadequate notice and opportunity
for public comment for all of the departures from past guidance, and the
departures from the guidance as presented in the preamble for the
proposed PM2.5 Implementation Rule.

Accordingly, EPA proposes to remove the guidance in question from the
preamble to the final PM2.5 Implementation Rule, and to replace it with
guidance very similar to what was included in the preamble to the
proposed PM2.5 Implementation Rule concerning the economic feasibility
analysis component for determining what constitutes RACT. The EPA
believes that reverting to the guidance as proposed will be the most
effective and efficient means to address the concerns related to
inappropriate considerations that were set forth in the preamble to the
final PM2.5 Implementation Rule.

In particular, this approach will remove what EPA now concludes was
incorrect guidance language in the final rule that suggested that the
“economic feasibility” element of a RACT determination should
include consideration of “whether the cost of a [control] measure is
reasonable for the regulated entity to bear, in light of the
benefits,” as the costs of control relative to the health benefits of
a particular control technology should not be relevant to the technical
determination of RACT. This language suggested that the economic
feasibility analysis should be a “cost/benefit” analysis, instead of
the “cost effectiveness” type of analysis that it has historically
been.

Similarly, this change will remove the prior statement in the final rule
that there is “no presumption that a given source must bear costs
similar to any other source,” because of source specific
considerations such as “marginal costs, profit margin, and abilities
to pass costs through to the consumer.”  Upon reconsideration, EPA
does not believe that such considerations should override the
longstanding presumption that similar sources should be able to bear
similar costs, unless adequately and appropriately demonstrated
otherwise. A source’s ability to “afford” a control can be a
consideration. However, the intent of the policy is not to reward less
efficient sources by allowing them to bear lower emission control costs
than more efficient sources.

Finally, re-establishment of the prior guidance referenced in the
preamble to the proposed rule will remove the ambiguous references to
“equity considerations” as part of the RACT analysis, which in
addition to deviating from prior guidance merely introduced uncertainty
as to what this factor might mean, e.g., equity between regulated
entities or equity between sources and the health concerns of the public
in the nonattainment area, or how such competing equities might be
balanced.

In order to accomplish this revision to the guidance, we propose in this
action to remove the language in section II.F.5.b of the preamble to the
final PM2.5 Implementation Rule (the section heading is:  “What
factors should states consider in determining whether an available
control technology or measure is economically feasible?”), and to
replace it with the following language:

What factors should states consider in determining whether an available
control technology is economically feasible?

Economic feasibility considers the cost of reducing emissions and the
difference between the cost of the emissions reductions approach at the
particular source and the costs of emissions reductions approaches that
have been implemented at other similar sources. Absent other
indications, EPA presumes that it is reasonable for similar sources to
bear similar costs of emission reduction. Economic feasibility for RACT
purposes is largely determined by evidence that other sources in a
source category have in fact applied the control technology or process
change in question.

The capital costs, annualized costs, and cost effectiveness of an
emission reduction technology should be considered in determining its
economic feasibility.

The EPA Air Pollution Control Cost Manual describes procedures for
determining these costs for stationary sources. A number of other
sources of information are available which provide updated information
on control technologies and associated costs of installation and
operation.  The above costs should be determined for all technologically
feasible emission reduction options.

States may give substantial weight to cost effectiveness in evaluating
the reduction feasibility of an emission reduction technology. The cost
effectiveness of a technology is its annualized cost ($/year) divided by
the emissions reduced (i.e., tons/year) which yields a cost per amount
of emission reduction ($/ton). Cost effectiveness provides a value for
each emission reduction option that is comparable with other options and
other facilities.

Areas with more serious air quality problems typically will need to
obtain greater levels of emissions reductions from local sources than
areas with less serious problems, and it would be expected that their
residents could realize greater health benefits. For this reason, we
believe that it will be reasonable and appropriate for areas with more
serious air quality problems and higher design values to impose emission
reduction requirements with generally higher costs per ton of reduced
emissions that the cost of emissions reductions in areas with lower
design values.

If a source contends that it cannot afford to implement the control
technology that is considered to be RACT for certain other sources in
its source category, the source should support its claim with
information describing the impact of imposing RACT on its:

Fixed and variable production costs ($/unit),

Product supply and demand elasticity,

Product prices (cost absorption vs. cost pass–through),

Expected costs incurred by competitors,

Company profits, and

Employment costs.

	EPA is soliciting comments on replacing the previous section of the
guidance for RACT determinations with this language. To our knowledge,
states did not utilize the specific guidance in the preamble to the
PM2.5 Implementation Rule that we are proposing to remove to alter any
RACT determinations in nonattainment SIPs developed for the 1997 PM2.5
NAAQS, so we anticipate that this change in the guidance will have no
practical impact on SIPs already submitted to EPA for approval.

C. RFP Requirements for the 1997 PM2.5 NAAQS

	After reconsideration of the RFP policy raised by the petitioner in the
petition for reconsideration, and in light of the Court’s decision in
the NRDC v. EPA case, EPA is proposing in this action to set aside the
Agency’s earlier interpretation of its RFP policy described in Section
II.G.5.b of the preamble to the final PM2.5 Implementation Rule and to
interpret the CAA as not allowing states to rely on credit for emission
reductions from outside the nonattainment area to meet such an area’s
RFP requirements for the 1997 PM2.5 NAAQS. Specifically, EPA is
proposing that states may not take credit for emission reductions from
outside the nonattainment area to meet the area’s section 172(c)(3)
RFP requirements for reductions within the nonattainment area. This
revised policy would apply to implementation plans for the 1997 PM2.5
NAAQS, and would apply to all areas with an approved attainment date
beyond 5 years from the effective date of designations that are required
to submit an RFP plan per section 51.1009(c) of the PM2.5 Implementation
Rule.

 	There may, however, remain valid policy reasons for giving states
incentive to focus on obtaining emission reductions that are the most
beneficial and cost effective for attaining the PM2.5 NAAQS. Also, there
may be cases where the most beneficial and cost-effective reductions are
from sources located outside the designated nonattainment area
boundaries. In these cases, there may be good policy reason to credit
the emission reductions toward meeting RFP requirements. To this end,
EPA is also taking comment on whether it would be appropriate for states
to rely on emission reductions credit from outside the nonattainment
area for RFP obligations, and under what legal rationale consistent with
the CAA would allow EPA to adopt such an approach.

I  SEQ CHAPTER \h \r 1 V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

	Under Executive Order 12866   SEQ CHAPTER \h \r 1 (58 FR 51735, October
4, 1993), this action is a "significant regulatory action”  SEQ
CHAPTER \h \r 1  because it is likely to raise novel legal or policy
issues arising out of legal mandates, the President’s priorities, or
the principles set forth in the Executive Order. Accordingly, EPA
submitted this action to the Office of Management and Budget (OMB) for
review under Executive Orders 12866 and 13563 (76 FR 3821, January 21,
2011) and any changes made in response to OMB recommendations have been
documented in the docket for this action.

B. Paperwork Reduction Act

This action does not impose an information collection burden under the
provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. Burden
is defined at 5 CFR 1320.3(b). This action merely interprets the
statutory requirements that apply to states in preparing their SIPs.

C. Regulatory Flexibility Act

	The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statute unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. Small entities include small businesses, small organizations,
and small governmental jurisdictions.

For purposes of assessing the impacts of this proposed rule on small
entities, small entity is defined as:  (1) A small business that is a
small industrial entity as defined in the U.S. Small Business
Administration (SBA) size standards. (See 13 CFR 121.); (2) A
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 this proposed rule on small
entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. This rule
will not directly impose any requirements on small entities. Rather,
this rule interprets the obligations of the CAA for states to submit
implementation plans in order to attain the 1997 8-hour ozone and 1997
PM2.5 NAAQS. We continue to be interested in the potential impacts of
the proposed rule on small entities and welcome comments on issues
related to such impacts.

D. Unfunded Mandates Reform Act

	This action contains no federal mandates under the provisions of Title
II of the Unfunded Mandates Reform Act of 1995 (UMRA, 2 U.S.C. 1531 –
1538) for state, local, or tribal governments or the private sector. The
action imposes no enforceable duty on any state, local, or tribal
governments or the private sector. Therefore, this action is not subject
to the requirements of sections 202 or 205 of the UMRA.

This action is also not subject to the requirements of section 203 of
UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments. This action merely
interprets the statutory requirements that apply to states in preparing
their SIPs.

E. Executive Order 13132: Federalism

	This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. This action does not impose any new
mandates on state or local governments.

Thus, Executive Order 13132 does not apply to this rule.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and state and local governments,
EPA is specifically soliciting comments on this proposed rule from state
and local officials.

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

	This rule does not have tribal implications, as specified in Executive
Order 13175 (65 FR 67249, November 9, 2000). The rule does not have a
substantial direct effect on one or more Indian tribes, since no tribe
has to develop a SIP under this regulation. 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 Tribal Air Rule establish the relationship of the federal
government and tribes in developing plans to attain the NAAQS, and this
rule does nothing to modify that relationship. This rule does not have
Tribal implications. Thus, Executive Order 13175 does not apply to this
action. The EPA specifically solicits additional comment on this
proposed action from tribal officials.

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

	This action is not subject to EO 13045 (62 FR 19885, April 23, 1997)
because it is not economically significant as defined in Executive Order
12866. However, EPA has reason to believe that ozone has a
disproportionate effect on children who play outdoors (62 FR 38856;
38859, July 18, 1997). Likewise, EPA believes that PM2.5 has a
disproportionate effect on children. (See 62 FR 38652-38760, National
Ambient Air Quality Standards for Particulate Matter, Final Rule; also
40 CFR Part 50.)  The EPA invites the public to submit or identify
peer-reviewed studies and data, of which EPA may not be aware, that
assess how changes in RACT may affect ozone or PM2.5 formation. This
rule may lead to lower levels of ozone and PM2.5 in particular
geographical areas, which will be beneficial to the health of children
who live in those particular areas.

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

 	This action is not a “significant energy action” as defined in
Executive Order 13211 (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 because it does not establish requirements that
directly affect the general public and the public and private sectors,
but, rather interprets the statutory requirements that apply to states
in preparing their SIPs. The SIPs themselves will likely establish
requirements that directly affect the general public, and the public and
private sectors.

I. National Technology Transfer and Advancement Act

	Section 12(d) of the National Technology Transfer and Advancement Act
of 1995 ("NTTAA"), Public Law 104-113, section 12(d), (15 U.S.C. 272
note) directs EPA to use voluntary consensus standards 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
voluntary consensus standards bodies. The NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards. This rulemaking
does not involve technical standards. Therefore, EPA is not considering
the use of any voluntary consensus standards.

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

	Executive Order 12898 (59 FR 7629, Feb. 16, 1994) establishes federal
executive policy on environmental justice. Its main provision directs
federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental

effects of their programs, policies, and activities on minority
populations and low-income populations in the United States.

	EPA has determined that this proposed rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because if it has any
effect on the level of protection provided to human health or the
environment, the effect will be to increase the level of protection by
resulting in more stringent emission controls on EGUs in affected
nonattainment areas.

Page 63 of 64 - Withdrawal of the Prior Determination or Presumption
that Compliance with the CAIR or the NOx SIP Call Constitutes RACT or
RACM for the 1997 8-Hour Ozone and 1997 Fine Particle NAAQS; and
Revision to RFP Requirements and RACT Guidance for the 1997 Fine
Particle NAAQS

List of Subjects in 40 CFR Part 51

	Environmental protection, Administrative practice and procedure, Air
pollution control, Ozone, Reporting and recordkeeping requirements,
Particulate matter, Volatile organic compounds.

___________________________________

Dated:

___________________________________

Lisa P. Jackson,

Administrator.

  SEQ CHAPTER \h \r 1 For reasons set forth in the preamble, part 51 of
chapter I of title 40 of the Code of Federal Regulations is proposed to
be amended as follows:

Part 51-REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF
IMPLEMENTATION PLANS.

  1. The authority citation for part 51 continues to read as follows:

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

  2. Section 51.912 is amended by adding paragraph (a)(4) to read as
follows:

            §51.912 What requirements apply for reasonably available
control technology (RACT) and reasonably available control measures
(RACM) under the 8-hour NAAQS?

  (a) * * *

  (4)  An individual RACT determination must be made for each major
source or major source category meeting the applicable major source size
within a nonattainment area.

		*		*		*		*		*

 See Finding of Significant Contribution and Rulemaking for Certain
States in the Ozone Transport Assessment Group Region for Purposes of
Reducing Regional Transport of Ozone; Final Rule, 63 FR 57356 (October
27, 1998).

 See Rule to Reduce Interstate Transport of Fine Particulate Matter and
Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program;
Revisions to the NOx SIP Call; Final Rule, 70 FR 25162 (May 12, 2005).

 See Clean Air Fine Particle Implementation Rule; Final Rule, 72 FR
20586 (April 25, 2007). The interpretation of RACT occurs at 20610.

 See Clean Air Fine Particle Implementation Rule, 72 FR 20619.

 See NRDC v. EPA, 571 F.3d 1245, at 1252-53 (D.C. Cir. 2009).

 NOx is a precursor for ozone formation, while both NOx and SO2 are
precursors for PM2.5 formation.

 See North Carolina v. EPA, 531 F.3d 896; modified by 550 F.3d 1176
(D.C. Cir. 2008).

 See   HYPERLINK
"http://www.epa.gov/airtransport/pdfs/TR_070611_WEB.pdf"
http://www.epa.gov/airtransport/pdfs/TR_070611_WEB.pdf  for the
prepublication version of this rule. Once published in the Federal
Register, the rule will appear at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  under Docket Number
HQ-OAR-2009-0491.

 See the CAIR, 70 FR 25184 (discussing the need for both regional and
local emission reductions to bring all areas into attainment); See also
Clean Air Fine Particle Implementation Rule, 72 FR 20587-89 (discussing
the need for regional and national emission reduction programs in
conjunction with local controls in SIPs for nonattainment areas to bring
all areas into attainment).

 See Phase 2 Ozone Implementation Rule, 70 FR 71617.

 See “Petition for Reconsideration,” filed by David Baron,
Earthjustice, on behalf of NRDC (January 30, 2006). A copy of the
petition is located in the docket for this action.

 See “Technical Support Document for Phase 2 of the Final Rule to
Implement the 8-Hour Ozone National Ambient Air Quality Standard-Notice
of Reconsideration; NOx RACT for EGUs in CAIR States – Supplemental
Technical Analysis,” December 2006.(Docket ID no.
EPA-HQ-OAR-2003-0079, item number EPA-HQ-OAR-2003-0079-1044.2)
(Supplemental Technical Analysis).

 Specifically, EPA determined that compliance with the CAIR would meet
the NOx RACT requirements for ozone nonattainment areas in sections
172(c)(1) and 182(f), and the statewide NOx RACT requirements for SIPs
for states located within the Ozone Transport Region pursuant to
sections 184(b) and 182(f). See Phase 2 Ozone Implementation Rule-Notice
of Reconsideration, 72 FR 31730.

 See Phase 2 Ozone Implementation Rule-Notice of Reconsideration, 72 FR
31730-31.

 Id., 72 FR 31731.

 Id., 72 FR 31730.

 Id.

 See NRDC v. EPA, 571 F.3d 1245 (D.C. Cir. 2009).

 Id. 571 F.3d at 1257.

 Id.

 Id.

 Id. 571 F.3d at 1258.

 Id.

 Id.

 Id. at 1250.

 The PM2.5 Implementation Rule is now codified at 40 CFR Section 51.1000
– 1012. Section 51.1010 addresses the RACT and RACM requirement.

 See PM2.5 Implementation Rule, 72 FR 20623–5.

 Id. at 72 FR 20624.

 Id. at 72 FR 20625.

 See “Petition for Reconsideration,” filed by Paul Cort,
Earthjustice, on behalf of the American Lung Association, Medical
Advocates for Healthy Air, Natural Resources Defense Council, and the
Sierra Club (June 25, 2007). A copy of the petition is in the docket for
this action.

 See letter dated April 25, 2011, from Lisa Jackson to Paul Cort,
Earthjustice. A copy of this letter is located in the docket for this
action.

 See NRDC v. EPA, 571 F.3d 1245 at 1256-57.

 EPA notes that the Court also considered the issue of potentially
outdated RACT determinations in the context of “RACT certifications”
in the Phase 2 Ozone Implementation Rule. The Court approved of EPA’s
case-by-case approach to evaluate the continued viability of past RACT
determinations, in part because “[i]f a state is presented with
information indicating that a previous RACT determination is
inappropriate, the state must consider that information and modify its
RACT determinations accordingly.”  NRDC v. EPA, 571 F.3d 1245 at
1254-55. The EPA concludes that the same logic would extend to prior
determinations that the CAIR constituted RACT, in light of subsequent
events.

 See 40 CFR 51.1010.

 See PM2.5 Implementation Rule, 72 FR 20609 – 33.

 See “Petition for Reconsideration,” filed by Paul Cort,
Earthjustice, on behalf of the American Lung Association, Medical
Advocates for Healthy Air, Natural Resources Defense Council, and the
Sierra Club (June 25, 2007). A copy of the petition is in the docket for
this action.

 The new guidance objected to by the petitioner appears in section
II.F.5.b of the preamble to the final PM2.5 Implementation Rule. See 72
FR 20619-20.

 See letter dated April 25, 2011 from Lisa Jackson to Paul Cort,
Earthjustice. A copy of this letter is located in the docket for this
action.

  See Proposed Rule To Implement the Fine Particle National Ambient Air
Quality Standards, 70 FR 65984 (November 1, 2005). The section of the
preamble appears at 70 FR 66021-22.

 See Title I General Preamble, 57 FR 13498 (April 16, 1992) for the
basis of this policy.

 The memorandum is available on the EPA Technology and Transfer Network
(TTN) Policy and Guidance page for Title I at this website:  HYPERLINK
"http://www.epa.gov/ttn/oarpg/t1pgm.html"
http://www.epa.gov/ttn/oarpg/t1pgm.html . For a more complete discussion
of EPA’s rationale for applying this interpretation in the Phase 2
Ozone Implementation Rule, see 70 FR 71647-49.

 This same petition also challenged EPA’s determination within the
Phase 2 Ozone Implementation Rule that, under certain circumstances,
compliance with the requirements of the CAIR would constitute RACT for
NOx emissions from EGUs located in states within the CAIR region.

 See PM2.5 Implementation Rule, 72 FR 20586.

 In addition, where state RFP plans rely on emission reductions outside
of a nonattainment area to meet the RFP obligations, such plans must
include a technical demonstration showing that such outside emissions
significantly affected the PM2.5 concentrations within the nonattainment
area. In addition, the area outside the nonattainment area from which
creditable reductions are taken must be within the state; areas outside
the state but within 200 km would not be eligible for credit for RFP
purposes.

 This same petition raised concerns regarding the criteria used to
determine the economic feasibility of controls being considered for RACT
for the 1997 PM2.5 NAAQS. See “Petition for Reconsideration,” filed
by Paul Cort, Earthjustice, on behalf of the American Lung Association,
Medical Advocates for Healthy Air, Natural Resources Defense Council,
and the Sierra Club (June 25, 2007). A copy of the petition is in the
docket for this action.

 See NRDC v. EPA, 571 F.3d 1245 (D.C. Cir. 2009).

 Id., 571 F.3d at 1256.

 See letter dated May 13, 2010, from Gina McCarthy to David S. Baron and
Paul Cort, Earthjustice. A copy of the letter is located in the docket
for this action.

 See PM2.5 Implementation Rule, 70 FR 20636.

 See letter dated May 13, 2010 from Gina McCarthy to David S. Baron and
Paul Cort, Earthjustice. A copy of the letter is located in the docket
for this action.

 This section of the preamble to the final PM2.5 Implementation Rule
appears at 72 FR 20619-20.

 See “EPA Air Pollution Control Cost Manual-Sixth Edition,” EPA
Office of Air Quality Planning and Standards, Research Triangle Park,
NC, January 2002. (EPA/452/B-02-001).

 See STAPPA/ALAPCO, “Controlling Fine Particulate Matter Under the
Clean Air Act:  A Menu of Options,” March 2006; EPA’s RACT/BACT/LAER
Clearinghouse; regional air quality planning organizations; state air
agencies; add others.

 See “The Clear Skies Act: Technical Support Package,” U.S. EPA,
July 2003. See also: “Draft Regulatory Impact Analysis: Control of
Emissions from Non-road Diesel Engines,” United States Environmental
Protection Agency Office of Air and Radiation EPA420-R-03-008, April
2003.

 PAGE

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