OFFICE OF INSPECTOR GENERAL Catalyst for Improving the Environment Evaluation Report EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions In Some Major Metropolitan Areas Report No. 2004 P 00033 September 29, 2004 Report Contributors: John Price Lauretta Ansah Jamie Huber Abbreviations CAA Clean Air Act CAAA 1990 Clean Air Act Amendments DQO Data Quality Objective EPA Environmental Protection Agency I& M Inspection and Maintenance MCD Milestone Compliance Demonstration NEI National Emissions Inventory NOx Nitrogen Oxide OAQPS Office of Air Quality Planning and Standards OIG Office of Inspector General PAMS Photochemical Assessment Monitoring Station PEI Periodic Emissions Inventory ppm parts per million QAPP Quality Assurance Project Plan ROP Rate of Progress Plan SIP State Implementation Plan tpd tons per day VOC Volatile Organic Compound Cover photo: Photographs of Houston from a 68th floor monitoring location under clear and smoggy conditions. Source: EPA Air Quality Trends Site. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D. C. 20460 OFFICE OF INSPECTOR GENERAL September 29, 2004 MEMORANDUM SUBJECT: EPA and States Not Making Sufficient Progress in Reducing Ozone Precursor Emissions In Some Major Metropolitan Areas Report No. 2004 P 00033 FROM: J. Rick Beusse / s/ Director, Air Issues Office of Program Evaluation TO: Jeffrey R. Holmstead Assistant Administrator for Air and Radiation ( 6101A)

Attached is our final report regarding Environmental Protection Agency and State efforts to progressively reduce ozone precursor emissions and measure actual precursor emission reductions as required by the Clean Air Act. This report contains findings that should help EPA in its efforts to ensure that the most polluted metropolitan areas expeditiously attain the 1 hour ozone standard, as well as help the Agency implement and oversee the more stringent 8 hour standard. Also, the report contains corrective actions the Office of Inspector General ( OIG) recommends. This report represents the opinion of the OIG and the findings contained in this report do not necessarily represent the final EPA position. Final determination on matters in this report will be made by EPA managers in accordance with established procedures.

Action Required In accordance with EPA Manual 2750, as action official, you are required to provide a written response within 90 days of the final report date. The response should address all recommendations. For the corrective actions planned but not completed by the response date, please describe the actions that are ongoing and provide a timetable for completion. If you do not concur with a recommendation, please provide alternative actions addressing the findings reported. We appreciate the efforts of EPA officials and staff, as well as external stakeholders, in working with us to develop this report. For your convenience, this report will be available at http:// www. epa. gov/ oig.

If you or your staff have any questions regarding this report, please contact me at ( 919) 541 5747 or John Price, Assignment Manager, at ( 404) 562 9837. Executive Summary Purpose Ground level ozone, the most pervasive urban air pollutant, has been linked to respiratory illnesses and other serious public health concerns, such as asthma and heart disease. Over 159 million Americans live in areas that do not meet the Environmental Protection Agency's ( EPA) current 8 hour ozone standard. Ozone also damages sensitive ecosystems and is responsible for more than one billion dollars in agricultural crop losses in the United States each year. Many of the most polluted metropolitan areas are still struggling to attain EPA's 1 hour ozone standard established over 25 years ago. The more stringent 8 hour standard that EPA and States began implementing in 2004 presents even greater challenges. The 1990 Clean Air Act Amendments recognized that reducing the precursor emissions that cause ozone   nitrogen oxides ( NOx) and volatile organic compounds ( VOC)   was the primary method for assuring permanent ozone reductions and, as such, mandated increasing levels of emissions reductions until attainment was achieved. Accordingly, our objectives were to answer the following:

° Have emission reduction controls been as effective as originally projected in reducing ozone precursor emissions ( NOx and VOC)?

° Have emission reduction plans and related controls been properly completed and implemented to reduce precursor emissions by 3 percent annually within the timeframes established by the Act?

° Have EPA and States adequately measured the effectiveness of emission controls in reducing ( 1) overall precursor emissions as required by the Act, and ( 2) ambient ozone concentrations?

Results in Brief Despite national and regional progress, some major metropolitan areas have not achieved the ozone precursor emission reductions required by the 1990 Act. Our analysis of EPA emissions data for " serious," " severe," and " extreme" ozone nonattainment areas indicates that some major metropolitan areas may not have achieved the required 3 percent annual emission reductions in ozone precursor emissions. For example, 23 of 28 emissions reduction plans submitted since 1990 by 10 serious to extreme nonattainment areas raised questions as to whether required precursor emissions reductions were achieved by the dates specified in the Act. Further, precursor emissions in some areas may actually have increased. While EPA air trends reports have emphasized that ozone levels are declining nationally and regionally, only 5 of 25 nonattainment areas designated serious to extreme have experienced substantial downward trends in ozone levels. For some areas, EPA data indicate emission controls for the last 10 years have generally offset growth but have ii not significantly reduced ozone levels. Also, analyses by EPA and other researchers indicate that recent downward trends in ozone may be more related to changes in weather patterns than emission reductions. Delays in reducing ozone levels can have serious health implications for persons in nonattainment areas.

EPA and States encountered numerous difficulties in developing and implementing adequate emission control plans for reducing ozone precursor emissions by 3 percent annually by the dates mandated in the Act. In addition, States may have used inaccurate data, assumptions, and projections of emission growth, resulting in fewer reductions planned than appropriate. For example, the ozone emissions reduction plan for the Atlanta metropolitan area assumed a growth rate that was about half of the population growth rate that the Atlanta metropolitan area experienced from 1980 to 2000, and about one third of Atlanta's growth rate for employment. The Act requires emission reductions of at least 3 percent annually over and above an area's growth. Limited EPA oversight of the development and implementation of emission control plans contributed to the difficulties States encountered in reducing emissions by the required 3 percent annually. Additionally, a 1997 EPA policy allowing nonattainment areas to claim emission reductions from selected sources outside of the nonattainment areas allows for potential double counting and does not ensure that reductions do more than just offset growth.

EPA and States have not adequately measured whether the Nation's worst ozone nonattainment areas have made acceptable progress in reducing ozone precursor emissions. In the 14 years since passage of the 1990 Amendments, EPA has not issued rules requiring States to demonstrate progress in reducing precursor emissions, nor guidance on how such demonstrations should be conducted, despite the Act's requirement to do so. Consequently, there is no approved, consistent, or reliable method to measure the success of ozone precursor emission reduction efforts. EPA still needs to develop specific, quantifiable goals and measures for ozone precursor emission reductions in nonattainment areas, and improve quality assurance processes and plans for emissions data reporting.

Recommendations This report contains information that should help EPA in its efforts to ensure that the most polluted metropolitan areas expeditiously attain the 1 hour ozone standard, as well as help the Agency implement and oversee the more stringent 8 hour standard.

We are making multiple recommendations to the Assistant Administrator for Air and Radiation to promulgate new ozone rules, issue guidance, and take other actions necessary to: ( a) provide consistent and reliable methods to demonstrate that precursor emissions have been reduced; ( b) ensure that States perform such demonstrations and implement needed controls where necessary; ( c) expand the use of meteorologically adjusted ozone trends; ( d) strengthen EPA oversight of planning; ( e) ensure that control measures are timely developed, approved, and implemented; iii and ( f) develop data quality objectives and proper quality assurance plans and processes.

Agency Comments and OIG Evaluation In his September 17, 2004, response to the draft report, the Assistant Administrator noted that the report provides insightful recommendations for EPA's consideration. He also noted that some of the recommendations, such as those concerning the draft rule for milestone compliance demonstrations, seemed reasonable and would be explored as to how they can be implemented. However, he said other recommendations were " good in theory" but practical considerations constrain EPA from implementing them.

The Agency's response generally agreed with the report's findings except for the use of National Emissions Inventory ( NEI) data as an indicator as to whether selected nonattainment areas had achieved ozone precursor emission reductions required by the Act. EPA's response indicated that NEI emissions data was not of sufficient quality and did not contain emission data in the proper units of measure needed to adequately determine the amount of emission reductions achieved by individual nonattainment areas. However, EPA has promoted the NEI as the highest quality emissions data available, has used the data for regulatory planning and support, and continues to use the data for national, regional, and State emission trends in publically released reports. Further, during our evaluation, senior EPA experts told the OIG that updated NEI emissions data could provide a reliable indicator of emissions reductions achieved by individual nonattainment areas. Additionally, the Agency provides NEI developed emissions data to States for use in their periodic emissions inventories. As such, we continue to believe that NEI data is the best available indicator of whether individual nonattainment areas have met the precursor emission reductions required by the Act, and that analysis of the precursor emissions data in NEI will help EPA ensure that permanent ozone reductions have been achieved as required by the Act. The use of NEI data is further discussed in the OIG's evaluation of the Agency's response at the end of Chapter 2.

The Agency's response also indicated that EPA preferred to focus its limited resources on current and future implementation of the 8 hour standard rather than assess the effectiveness of its planning, controls, and emission reductions under the 1 hour standard since enactment of the 1990 Clean Air Act Amendments, over 14 years ago. We do not disagree that the Agency should utilize available resources on effective implementation of 8 hour policies, plans, and related emission controls. However, we believe that the Agency first needs to assess the effectiveness of its ozone policies, plans, and controls under the 1 hour standard before it can determine the most efficient and effective methods and controls for implementing the 8 hour standard. The Agency also provided technical comments on the draft report, and we have made changes in the final report as deemed appropriate. iv The Agency's responses to individual recommendations and our evaluation are summarized at the end of each chapter. The Agency's response is included in its entirety as Appendix H, and that appendix includes a detailed OIG evaluation of the Agency response. v Table of Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Chapters 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Effectiveness of Controls 2 Despite National and Regional Progress, Some Major Metropolitan Areas Have Not Achieved Required Emission Reductions . . . . . . . . . . . . 6 Emission Reduction Plans 3 Rate of Progress Plans Delayed or in Error . . . . . . . . . . . . . . . . . . . . . . . . 18 4 EPA Policy Allowing Outside Emission Reduction Credits Creates Inequities and Hampers Attainment . . . . . . . . . . . . . . . . . . . . . . . 31 Measurement 5 Reliable Processes Needed to Measure Overall Emission Reductions and Related Impacts . . . . . . . . . . . . . . . . . . . . . . . . 39 6 Opportunities Exist to Enhance Measurement of Emission Reductions and Ozone Trends . . . . . . . . . . . . . . . . . . . . . . . . . . 46 7 Specific Performance Goals and Measures Not Developed . . . . . . . . . . . 50 8 Quality Assurance Reviews and Plans Need Improvement . . . . . . . . . . . 54 vi Appendices A Details on Scope and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 B Timeline of Clean Air Act Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 C Details on EPA Analyses of Meteorologically Adjusted Ozone Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 D Details on State Delays in Submitting ROP Plans . . . . . . . . . . . . . . . . . . . 67 E Growth Factors Used In Projecting ROP Emissions for Atlanta Area . . . 72 F Outside NOx Reductions Claimed in Post 1996 Chicago Gary Lake County Nonattainment Area ROP Plan . . . . . . . . . . . 74 G Examples on Use of Outside Emission Credits . . . . . . . . . . . . . . . . . . . . . 76 H Agency Response to Draft Report and OIG Evaluation . . . . . . . . . . . . . . . 78 I Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Tables 1.1: Sources of Precursor Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2: Designation Status of 50 Areas in Nonattainment, May 2004 . . . . . . . . . . . . . . . . . 3 2.1: Percent Reduction in Precursor Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.2: Nonattainment Areas With Increasing NOx and/ or VOC Emissions . . . . . . . . . . . . 9 2.3: Summary for Trend Report With Nonattainment Area Totals . . . . . . . . . . . . . . . . . 11 3.1: Differences in VOC Targets and VOC Emissions in PEIs . . . . . . . . . . . . . . . . . . . 23 3.2: Differences in NOx Targets and NOx Emissions in PEIs . . . . . . . . . . . . . . . . . . . . 24 3.3: Outside Emission Reduction Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.4: Attainment Date Extensions and Suspension of ROPs . . . . . . . . . . . . . . . . . . . . . 27 8.1: Regional Receipt and Review of Nonattainment Area PEIs . . . . . . . . . . . . . . . . . . 56 A. 1: 12 Nonattainment Areas Reviewed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 D. 1: 15 Percent ROP Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 D. 2: Post 1996 ( 9%) ROP Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 F. 1: NEI NOx Data for Illinois Power Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Illustrations 1.1: Map of Ozone Nonattainment Areas for the New 8 hour Standard . . . . . . . . . . . . . 4 2.1: Comparison of Actual and Meteorological Adjusted 8 Hour O 3 Trends, 1993 2002 10 B. 1: Timeline of Clean Air Act Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 C. 1: Baltimore 8 hour Ozone Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 1 Chapter 1 Introduction Purpose The most complex, difficult to control, and pervasive urban air pollutant is tropospheric, or ground level, ozone. Tropospheric ozone has been linked to respiratory illnesses and other serious health concerns, such as asthma and heart disease. About 109 million Americans live in areas that do not meet EPA's 1 hour ozone standard   issued over 25 years ago   that requires ozone levels not exceed an average of .12 parts per million ( ppm) over a 1 hour period.

Concerned with the lack of progress in controlling ozone, Congress enacted the Clean Air Act Amendments of 1990 ( Act), in part, to ensure attainment of EPA's 1 hour ozone standard by specific dates. The 1990 Act recognized that reducing the precursor emissions that cause ozone   nitrogen oxides ( NOx) and volatile organic compounds ( VOC)   was key to ensuring permanent ozone reductions and, as such, mandated increasing levels of emissions reductions until attainment was achieved. Since then, research has found that ozone causes adverse health effects at lower levels and over longer periods of time than once thought. As a result, EPA issued a more stringent ozone standard that took effect in April 2004 requiring ozone levels not to exceed an average of .08 ppm over an 8 hour period. Because of difficulties in bringing areas into compliance with the 1 hour standard and the even greater challenges associated with the new 8 hour standard, our objectives were to answer the following:

° Have emission reduction controls in place been as effective as originally projected in reducing ozone precursor emissions ( NOx and VOC)?

° Have emission reduction plans and related controls been properly completed and implemented to reduce precursor emissions by 3 percent annually within the timeframes established by the Act?

° Have EPA and States adequately measured the effectiveness of emission controls in reducing ( 1) overall precursor emissions as required by the Act, and ( 2) ambient ozone concentrations?

Background Ozone ( O 3), a gas composed of three oxygen atoms, occurs naturally in the stratosphere approximately 10 to 30 miles above the earth's surface and forms a layer that protects life on earth from the sun's harmful rays. This is stratospheric ozone. Ozone is also formed at ground level by a complex, atmospheric chemical 2 VOC + NOx + Sunlight/ Heat = Ozone reaction of oxides of nitrogen and volatile organic compounds in the presence of sunlight and heat. In addition to serious adverse health effects, this ground level, or tropospheric, ozone also damages sensitive ecosystems and is responsible for more than one billion dollars in agricultural crop losses in the United States each year.

Known as precursor emissions, sources of NOx and VOCs include a wide range of stationary, area, and mobile sources, including:

Table 1.1: Sources of Precursor Emissions Source Examples of Sources Stationary Utilities, refineries, chemical manufacturers, automobile manufacturers, most other industrial activities Area Dry cleaners, service stations, wood burning stoves Mobile On road: Cars, trucks, locomotives Off road: Heavy construction machinery, generators, off road vehicles Clean Air Act Mandate for Precursor Emission Reductions In accordance with the Act, EPA and States are required to obtain increasing levels of VOC and NOx emission reductions until attainment is achieved. For example, nonattainment areas were to have reduced ozone precursor emissions 15 percent by 1996 and 24 percent by 1999 from a 1990 baseline.

The 1990 Act requires that ozone nonattainment areas reach attainment by specific dates based on their nonattainment classification. These requirements came about, in part, because States did not always fulfill State Implementation Plan ( SIP) requirements during the 1980s to implement controls and reduce ozone precursor emissions. The 1990 Act established five nonattainment classifications ( marginal, moderate, serious, severe, extreme), with varying compliance dates depending on the severity of an area's nonattainment in 1990, or at time of nonattainment designation. In accordance with Sections 110 and 185 of the Act, sanctions may be imposed against areas that fail to submit and implement adequate plans. Attainment status is determined from ambient air monitor readings from over 1,100 air monitors located throughout the United States.

Ozone Attainment Status As of May 2004, 47 areas initially classified " marginal" or " moderate" for ozone nonattainment had subsequently achieved the 1 hour ozone standard and been redesignated to attainment. However, 50 areas initially classified " marginal" to " extreme" under the 1990 Act still have not attained the 1 hour standard. 3 Table 1: 2: Designation Status of 50 Areas in Nonattainment, May 2004 Nonattainment Designation Population Affected by Nonattainment Clean Air Act Mandated Attainment Date Areas Still Nonattainment as of April 2004 Extreme 17,784,000 2010 2 Severe 55,853,000 2005 2007 12 Serious 19,265,000 1999 10 Moderate 3,251,000 1996 6 Marginal 6,944,000 1993 19 Othera 6,542,000 2005 1 Totals 109,639,000 50 a San Francisco, California, was designated nonattainment and classified as a moderate nonattainment area in 1999 with a 2005 attainment deadline.

Twenty one of the 25 areas classified " serious," " severe," or " extreme" were metropolitan areas. Only 4 of 25 areas classified serious or above have been redesignated to attainment since the 1990 Act was passed; 5 areas classified serious or above have been reclassified to a lower nonattainment classification.

As shown in Table 1.2, the attainment date specified in the Act has already passed for 35 of the 50 areas. Additionally, three areas ( Atlanta, Georgia; Baton Rouge, Louisiana; and Washington, DC) were recently elevated from serious to severe nonattainment because of their failure to attain the 1 hour standard by 1999. The San Joaquin Valley, California, nonattainment area was elevated from severe to extreme nonattainment in 2004.

In April 2004, EPA designated 126 areas containing 474 counties as nonattainment for the more stringent 8 hour health based ozone standard. The 219 counties that still have not achieved the 1 hour standard, as of May 17, 2004, are included in these 474 counties. The map below shows the location of the 474 counties; most lie within the largest metropolitan areas. 1It should be noted that a 1997 change in the survey form used may have had some impact on the different numbers.

4 Illustration 1.1: Map of Ozone Nonattainment Areas for the New 8 hour Standard Source: The Ozone Report: Measuring Progress Through 2003, EPA report published April 2004 Responsibility for national ozone policies, guidance, and program management is principally vested in the Office of Air Quality Planning and Standards ( OAQPS), Research Triangle Park, North Carolina, which is within EPA's Office of Air and Radiation. Oversight of State and local ozone reduction programs is the responsibility of EPA's 10 regional offices.

Health Concerns Associated With Prolonged Ozone Exposure Health researchers have frequently associated ozone pollution with a variety of human respiratory problems, including asthma attacks, respiratory related hospitalizations, reductions in lung function, respiratory symptoms ( such as coughing, shortness of breath, and nausea), increased susceptibility to respiratory infection, and pulmonary inflammation. The health care costs of human exposure to outdoor air pollutants range from $ 40 to $ 50 billion annually. In addition, an estimated 50,000 to 120,000 premature deaths are associated with exposure to air pollutants. People with asthma experience more than 100 million days of restricted activity with an economic cost exceeding $ 4 billion.

Health effects can result from exposure to high levels of ozone over short time periods, but also from longer exposure to lower levels of ozone. One of the most common health problems attributed to unhealthy ozone levels is asthma. The prevalence of asthma in the United States has been increasing steadily. In 1980, an estimated 7 million people in the United States were diagnosed as having asthma, while in 2000 there were an estimated 29.5 million cases. 1 Recent studies have linked elevated ozone levels to school absences due to asthma and other 5 respiratory ailments, and scientists have found that ozone may not only trigger asthma but also could contribute to the development of the disease in children. According to several public health organizations, including the American Public Health Association and Harvard Medical School, cases of asthma are rising so fast it is now widely viewed as an epidemic   one that is hitting hardest at the very young, minorities, elderly, and the poor.

Scope and Methodology To assess the effectiveness of ozone emission control efforts by EPA and States, we reviewed documentation, regulations, and guidance, and EPA and external analyses/ studies of air monitoring data for individual ozone nonattainment areas. We also performed analyses of data from EPA's National Emissions Inventory ( NEI) and Air Quality System, and interviewed officials from OAQPS, six EPA regions, and two States. Additional interviews were conducted with external atmospheric modeling scientists/ engineers and other external stakeholder organizations. Budget and staffing information related to EPA's ozone program were obtained from OAQPS and the EPA's Office of the Chief Financial Officer. We also reviewed pertinent sections of the Clean Air Act, as amended.

Our field work was generally conducted from February 2003 to May 2004. We conducted this evaluation in accordance with Government Auditing Standards, issued by the Comptroller General of the United States. Additional details on our scope and methodology are in Appendix A. 6 Effectiveness of Controls Chapter 2 Despite National and Regional Progress, Some Major Metropolitan Areas Have Not Achieved Required Emission Reductions Our analysis of EPA emissions data for serious, severe, and extreme ozone nonattainment areas indicated that some areas may not have achieved the emission reductions mandated by the CAA, and precursor emissions of NOx and VOCs in some areas may actually be increasing. While EPA air trend reports have emphasized that ozone levels are declining nationally and regionally, only 5 of 25 serious to extreme nonattainment areas have experienced significant downward trends in ozone levels. Also, recent downward trends may be more related to changes in weather patterns than emission reductions. For individual serious to extreme nonattainment areas, EPA data indicate emission controls for the last 10 years have generally offset ozone growth but have not significantly reduced ozone levels. Factors that contributed to these conditions included delays in developing Rate of Progress Plans and controls ( see Chapters 3 4), insufficient measurement of emission reductions ( see Chapters 5 7), and inadequate EPA guidance and oversight.

Act Required Specific Emission Reductions Section 182 of the Act required that ozone nonattainment areas develop and implement specific emission reduction plans within certain time frames to reduce precursor emissions until attainment was achieved. The Act also required that precursor emissions be reduced an average of 3 percent annually " net of growth" ( the minimum percentage reduction plus any projected growth in emissions) for each 3 year period subsequent to the enactment of the 1990 Clean Air Act Amendments ( CAAA). Further, the Act required that plans include contingency control measures in case the primary controls did not achieve the required reductions in precursor emissions or the area failed to attain the ozone standard by the statutory attainment date. The following emission reduction plans were required:

° The first emission reduction plan, referred to by EPA as the 15 percent Rate of Progress ( ROP) Plan, was to be submitted by State and local agencies within 3 years of enactment of the 1990 Act ( November 15, 1993), and achieve a minimum 15 percent reduction in VOCs within 6 years ( November 15, 1996). 7 ° Additional ROP Plans to reduce precursor emissions at a rate of at least 3 percent annually " net of growth" were required for each 3 year period after 1996 until an area attains the 1 hour standard. These additional plans, referred to by EPA as " post 1996 ROP Plans," or 9 percent ROP Plans, were required to be submitted by States within 4 years of enactment ( November 15, 1994). The first post 1996 ROP Plan had a November 15, 1999, milestone date.

In addition to ROP Plans, Section182( g)( 2) of the Act required States to demonstrate that these emission reductions had actually been achieved. States with serious and above nonattainment areas were to submit milestone compliance demonstrations within 90 days after the milestone date for achieving emission reductions. The Act also required States to submit 1990 baseline VOC and NOx emission inventories for each nonattainment area and, thereafter, develop periodic emission inventories for every 3 year period, until attainment of the ozone standard. According to OAQPS, their interpretation of the Act is that the demonstrations should include a comparison of baseline inventories to the applicable periodic emission inventories as a measure of emission reductions.

A timeline of the Act's requirements is provided in Appendix B.

Required Emission Reductions Not Achieved The NEI, maintained by OAQPS, is a continuously updated national database of air emissions information based on input from numerous State and local air agencies, tribes, and industry. This database contains information on stationary and mobile sources that emit criteria air pollutants and their precursors, such as VOCs and NOx, as well as hazardous air pollutants. The inventory is continuously updated, focusing on every third, periodic inventory year ( 1990, 1993, 1996, 1999, etc.). Starting in 2003, OAQPS initiated a major effort to update the inventory's VOC and NOx data back to 1990 based on the EPA's latest models, methodologies, and emission factors. As of January 2004, inventory data had been updated from 1990 through 1999. According to Agency officials, the NEI is EPA's best available data on facility emissions at the present time.

Our analysis of 1990 1999 VOC and NOx data in EPA's NEI database for 12 serious or severe nonattainment areas indicated that some areas may not have achieved the emissions reductions required. For example:

° Seven areas did not achieve a 15 percent reduction in VOCs by the November 15, 1996 deadline, and six of the seven areas still had not achieved a 15 percent reduction by the next deadline   November 15, 1999.

° Eight areas did not achieve the combined 24 percent reduction in precursor emissions by the November 15, 1999, deadline; however, two of the eight 2The Clean Air Act prohibits nonttainment areas from receiving credit for emission reductions from certain pre 1990 emission controls, primarily Federal emission control programs. Nonattainment area baseline emissions must be adjusted for projected reductions from these controls between 1990 and the applicable ROP milestone date.

8 areas ( Sacramento, California, and Washington, DC) were within 1 percent of the required 24 percent reduction.

Table 2.1 shows the emission reductions achieved by the 12 nonattainment areas between 1990 1996 and 1990 1999. Nonattainment area reductions that did not meet the Act's required 15 percent VOC reductions by 1996 are shown in bold blue text; similarly, combined VOC and/ or NOx reductions that did not meet the 24 percent reduction requirement by 1999 are shown in bold red text. A negative number indicates an increase in emissions. Also, 1990 NEI emissions for each nonattainment area were adjusted for noncreditable emissions as required by the Act. 2 Table 2.1: Percent Reduction In Precursor Emissions Nonattainment Area % Reductions by 11/ 15/ 1996 % Reductions by 11/ 15/ 1999 VOC VOC NOx Combined Atlanta ( GA)  10.92 a  14.04  17.68  31.72 b Baltimore ( MD) 28.73 23.90 6.97 30.87 Boston Lawrence Worcester ( MA, NH) c 5.39 10.11 17.68 27.79 Chicago Gary Lake County ( IL, IN) c  13.33 0.81  1,72  0.91 Dallas Fort Worth ( TX) 11.73 17.25 d  12.11 17.25 Milwaukee Racine ( WI) c  26.44 12.68 d  17.80 12.68 Portsmouth Dover Rochester ( NH)  2.10  18.67 17.61  1.06 Providence ( RI) 19.38 8.19 6.50 14.69 Sacramento Metro ( CA) 20.28 15.88 7.75 23.63 San Joaquin Valley ( CA) 42.78 35.53  0.85 34.68 Springfield ( MA) 18.48 16.51 15.23 31.74 Washington DC Area ( DC, MD, VA) 3.82 9.25 14.38 23.63 a Blue text indicates nonattainment area reductions that did not meet the required 15 percent reduction in VOCs by 1996. The negative sign in front of the numbers means that there was an increase in precursor emissions. b Red text indicates nonattainment area combined reductions that did not meet the required 24 percent reduction in VOC and/ or NOx emissions by 1999. c States claimed either NOx or VOC emission reductions outside of nonattainment areas in post 1996 ROPs for Illinois portion of Chicago Gary Lake County, New Hampshire portion of Boston Lawrence Worcester, and Milwaukee Racine. The emission sources outside of these areas, for which emission credit was claimed, were added to analysis of overall reductions. d Dallas Fort Worth and Milwaukee Racine 15 percent and post 1996 ROPs included only VOC controls; therefore, only VOC reductions were included in combined reduction total for each.

EPA's NEI data indicate that precursor emissions actually increased between 1996 and 1999 for eight areas. For many of these areas, the increase could indicate that, 9 although the minimum 9 percent in required emission reductions may have been achieved, the reductions attained between 1996 and 1999 were not " net of growth." Similarly, one area ( Providence) that achieved a 15 percent VOC reduction by November 15, 1996, had significantly less than 15 percent by November 15, 1999, potentially due to growth in VOC emissions. According to the 1990 Act, required reductions should be the minimum specified percentage plus any projected growth in emissions.

Table 2.2 shows those areas where VOC and/ or NOx emissions increased between 1996 and 1999.

Table 2.2: Nonattainment Areas With Increasing NOx and/ or VOC Emissions Nonattainment Area Precursor % Change in Emissions 1990 1996 % Change In Emissions 1990 1999 % Change In Emissions 1996 1999 a Atlanta VOC 12.6 14.04 1.44 Baltimore VOC  28.73  23.9 4.83 Dallas Fort Worth NOx 0.76 12.11 11.35 b Portsmouth Dover Rochester VOC 2.1 18.97 16.87 Providence NOx  18.55  6.5 12.05 VOC  19.38  8.19 11.19 Sacramento Metro NOx  20.28  7.75 12.53 b San Joaquin Valley NOx  13.87 0.85 14.72 b VOC  42.78  35.53 7.25 Springfield NOx  22.96  15.23 7.73 VOC  18.48  16.51 1.97 a Red text indicates those areas that experienced an increase in VOC or NOx emissions between 1996 and 1999. The negative sign in front of the numbers means that there was a reduction in emissions. b These areas did not include NOx controls in their post 1996 ROPs.

EPA Analyses and Reports Indicate No Significant Improvements in Ozone Levels for Many Nonattainment Areas Despite the decreases in ambient ozone concentrations nationwide and regionally, recent EPA analyses and long term trend reports show that there have been no significant improvements in ozone levels for individual nonattainment areas, especially metropolitan areas. As discussed below, decreases in ambient ozone observations may be more related to temporary factors such as changes in weather and wind patterns than in reduction of precursor emissions.

EPA Analyses of Meteorologically Adjusted Ozone Observations In 2003, OAQPS developed and analyzed 1990 through 2002 meteorologically adjusted ambient 8 hour ozone observations for 53 metropolitan areas, which included 19 serious, severe, and extreme ozone nonattainment areas. Our analysis 10 E m i s s i o n s i m p a c t o n O 3 c o n c e n t r a t i o n s ( 8  h o u r O z o n e d a t a f r o m S o u t h D e k a l b a n d C o n y e r s )

eteorology 0 . 0 1 2 3 4 of the ozone levels and charts developed by OAQPS for the 19 nonattainment areas indicated that, once weather had been excluded as a factor in ozone formation, 12 areas had achieved little or no improvements in ozone levels over the 13 year period. Ten of the 12 areas had approximately 5 percent or less decrease in ozone levels, while two actually had increases in ozone levels of up to 9 percent since 1990. Three of the 12 areas had also exhibited upward trends in ozone levels between 1999 and 2002. The remaining seven areas had downward trends in ozone, ranging from reductions of about 7 percent to almost 15 percent ( Los Angeles area). Further details are in Appendix C.

EPA included an analysis of the 1993 through 2002 meteorologically adjusted ozone data for the 53 metropolitan areas in the publically released report, Latest Findings on National Air Quality, 2002 Status and Trends, dated August 2003. EPA's conclusions generally confirmed the results of our analysis of the same data, stating ". . . the meteorologically adjusted trend for this 10 year period can be seen as relatively flat." This trend indicates that emission controls have effectively eliminated growth in ozone pollution but have not significantly reduced ozone levels since 1993, as shown in Illustration 2.1.

Illustration 2.1:

Ozone Trends from EPA's Air Quality System At our request, OAQPS performed a special trend analysis of 1 hour and 8 hour ozone exceedance days and maximum observed ozone levels for the period 1992 through 2003 using EPA's Air Quality System. The study included 25 serious to 3The report, Analysis of Ambient Air Quality Trends in the Chicago and Atlanta Ozone Nonattainment Areas, was issued on September 30, 2002.

11 extreme nonattainment areas covering 21 metropolitan and 4 non metropolitan areas. For the 25 serious to extreme nonattainment areas:

° Four experienced statistically significant downward trends in the number of ozone exceedance days for the 1 hour standard;

° Five experienced downward trends under the 8 hour standard; and ° The remaining areas showed no statistically significant upward or downward trends.

In terms of maximum ozone level observations between 1992 and 2003 for the 25 serious to extreme areas,

° Five experienced statistically significant downward trends under the 1 hour standard;

° Five experienced statistically significant downward trends under the 8 hour standard; and ° All but one of the remaining areas showed no statistically significant upward or downward trends ( El Paso area showed statistically significant upward trend).

Details are in Table 2.3. Table 2.3: Summary for Trend Report With Nonattainment Area Totals Standard Ozone Exceedance Days 1992 2003 Maximum Ozone Observations 1992 2003 Down Trenda No Trend a Up Trenda Down Trenda No Trend a Up Trenda Sig. Not Sig. Sig. Not Sig. Sig. Not Sig. Sig. Not Sig.

1 hour 4 13 3 0 5 5 16 0 0 4 8 hour 5 10 0 0 10 5 13 0 1 6 a EPA determined the up and down trends through a linear regression analysis of the actual ozone exceedance days and observed maximum ozone levels for each nonattainment area.

Analysis of Two Major Metropolitan Areas Shows Little Change in Precursor Emissions The Photochemical Assessment Monitoring Station ( PAMS), established within most metropolitan nonattainment areas in 1994, measures ambient concentrations of NOx and many VOCs. In 2002 EPA performed a limited analysis of PAMS data for two severe nonattainment areas   Atlanta and Chicago Gary Lake County. According to the EPA study, 3 composite NOx trends for the 1995 2001 4Ozone design values generally represent the 4th highest daily maximum value ( reading) over a 3 year period; however, if only 2 years of data are available, the design value is the 3rd highest daily maximum value; if only 1 year, the 2nd highest daily maximum value is the design value.

5Latest Findings on National Air Quality, August 2003, and National Air Quality and Emission Trends Report, 2003, September 2003.

6The Ozone Report: Measuring Progress Through 2003, April 2004 12 period were generally flat for the Chicago area, and showed a slight upward trend for the Atlanta area. None were statistically significant, indicating little change in NOx emissions. However, 1995 2001 VOC concentrations did decline during the morning precursor buildup period, although this decline was not consistent and needed further study.

The EPA report further stated that decreases in ambient peak ozone concentrations in the Chicago area from 1991 2001 ( 1 hour) and 1996 2001 ( 8 hour) were fairly modest, and none of the composite trends were found to be statistically significant. For the Atlanta area, annual 1 hour ozone design values4 showed a slight upward trend for the 1991 2001 period, while annual 8 hour design values decreased between 1996 2001, primarily because of a relatively large drop in 2001 ozone levels.

Despite National and Regional Progress, Many Metropolitan Areas Show Little Change EPA air quality trend reports for 2001 through 2003 generally documented downward trends in ozone levels and in precursor emissions, especially VOCs, at the national and regional level over the last 10 and 20 year periods. Recently, however, EPA reports5 have noted that NOx emissions have only been reduced 12 percent in the last 10 years and only 15 percent over the last 20 years, and that more NOx reductions will be necessary before more substantial ozone air quality improvements are realized. For example, in its September 2003 report on ozone trends, EPA noted there were increases in certain key areas:

Ozone concentrations are on the increase in several cities in the southeastern and midwestern United States, while urban areas on the West Coast and in New England generally show decreasing trends. The 1 hour trends show an increasing number of cities with upward ozone trends in the western and mid Atlantic urban areas and a decreasing number of cities with upward ozone trends in the Southeast.

Similarly, in April 2004, EPA reported6 that the 2003 ozone season had exhibited the lowest observed ozone levels since 1980, yet some areas   especially metropolitan areas   had not experienced a significant downward trend in ozone levels. EPA also noted that favorable weather conditions assisted in the lower 13 ozone concentrations, and EPA cites a study of meteorologically adjusted ozone trends for individual regions and 35 metropolitan areas, which found that:

... The influence of weather makes it difficult to isolate the specific changes in ozone concentrations that result from VOC and NOx reductions. In addition... assessing trends in ozone levels nationally or by EPA Region may mask important local differences that make it difficult to determine direct influence of emission reductions....

Before adjusting for weather, EPA Regions 3, 4, and 6 show improving air quality, with average reductions in ozone levels of 9% to 21%. After adjusting for weather, however, each Region demonstrates a more moderate decline. The most dramatic effect of the meteorological adjustment is in Region 4, where the adjusted trend shows a 4% decrease, compared with a 21% decrease for the unadjusted trend. Region 6 shows the largest improvement, 9%, after adjusting for meteorology. Ozone levels in the midwest and central regions of the country show the same percent increase in ozone both with and without the meteorological adjustment. EPA Region 2 shows a larger increase in ozone levels after the meteorological adjustment is applied.

Reports By Others Also Find Little Change in Some Areas EPA analyses indicating little improvements in ozone levels for many nonattainment levels are supported by an independent analysis for the Atlanta nonattainment area and reports issued by the American Lung Association.

Atlanta Report Notes 2001 Ozone Levels Same as 1981 A 2002 independent study of Atlanta's meteorologically adjusted 8 hour ozone levels for the period 1981 through 2001 was performed by an atmospheric research scientist with the Georgia Institute of Technology. He used the EPA method of statistically adjusting out weather variations for the 20 year period. The study concluded that, between 1981 and 2001, there had been no statistically significant changes in ozone levels for the Atlanta area due to reductions of precursor emissions, once weather was eliminated as a factor. In essence, reductions in precursor emissions had only offset emissions growth during the period.

American Lung Association Reports Indicate Ozone Decreases May Be Weather Related State of the Air reports published by the American Lung Association for 2003 and 2004 indicated that ambient ozone levels have decreased, but the reports also suggest that reductions may be primarily attributable to cooler summers and more 14 rain than usual in some areas. For example, one American Lung Association news release stated that analysis of ozone data since the mid 1990s showed no significant ozone improvements except where there were changes in weather patterns. Additionally, another American Lung Association report was quoted as stating that the air quality improvements for the Atlanta nonattainment area were largely attributed to rain and cooler temperatures during the past three summers.

Conclusions Our analysis of EPA emissions data indicate that some serious to extreme major metropolitan nonattainment areas have not reduced emissions as required by the Act. Also, EPA air quality data and trend reports show that although ozone levels have improved nationally, some areas have not experienced these improvements, especially metropolitan areas. At least 21 of the 25 serious to extreme ozone nonattainment areas represent some of the largest metropolitan areas in the country, and a majority of the nonattainment areas are still struggling to achieve the 1 hour standard.

Given the health consequences of ozone and the repeated delays in achieving meaningful reductions over and above emissions growth, EPA needs to fully utilize all available methods to measure the effectiveness of emission controls implemented by individual nonattainment areas, especially metropolitan areas, in reducing ozone and determining whether nonattainment areas have achieved reductions in emissions required by the Act. EPA should consider using the NEI or other available methods to analyze whether all serious and above 1 hour nonattainment areas met emission reduction requirements, and require implementation of contingency measures where reductions may not have been achieved. If areas have failed to properly implement required emission controls, enforcement actions or sanctions as authorized under Section 185 of the Act may be necessary.

Delays in developing ROP Plans and implementing emission controls ( see Chapters 3 4), and insufficient evaluating and measuring of emission reductions ( see Chapters 5 7) contributed to these conditions. Recommendations that address correcting these specific problems are also in those chapters. Delays in reducing emissions and related ozone levels have serious health implications for persons in nonattainment areas, particularly persons with chronic respiratory illnesses and vulnerable populations such as children and older adults. Therefore, it is necessary to address these problems as expeditiously as possible.

Recommendations We recommend that the Assistant Administrator for Air and Radiation: 15 2 1 Perform an in depth evaluation of the compliance of all serious to extreme nonattainment areas with emission reduction requirements using, at a minimum, precursor emissions data contained in the Agency's NEI database.

2 2 Implement contingency measures and additional controls, where appropriate, as required under Section 182( g)( 3) of the Act, if nonattainment areas have not met the Act's emission reduction requirements, including the use of any enforcement and/ or sanctions available under Section 179 of the Act for failure of a State to submit adequate plans and/ or failure to timely and adequately implement planned controls to achieve required emission reductions by the statutory milestone dates.

Agency Comments and OIG Evaluation The Agency did not agree with our use of NEI data to measure emission reductions by individual nonattainment areas. EPA's response stated that the use of NEI data to measure emission reductions would produce " dubious results" because: ( 1) the Act requires that States demonstrate reductions on a tons per summer day basis  using the NEI only allows an analysis of reductions using annual emissions data, a significant difference; ( 2) the NEI database simply does not have the same quality of data as emission inventories developed by States  the OIG's draft report provides that a major failing of the NEI is its lack of documentation of methods used by the States to prepare emission estimates; and ( 3) EPA efforts to update the NEI emissions data efforts did not produce emission estimates that match State SIP emission inventories for all years, and, again, represent annual, not daily emission values.

As stated in our report, the Act requires that States demonstrate that precursor emissions have been reduced an average of 3 percent annually " net of growth" for each 3 year period subsequent to the enactment of the 1990 Act. The Act does not require that States demonstrate attainment of emission reductions in " tons per summer day." Also, EPA adjusts the NEI every 3 years based on State emissions data that is expressed in tons per day or tons per summer day to a tons per year expression.

EPA has indicated that the NEI is the highest quality emissions data maintained by the Agency and has used this data for regulatory planning and support; national, regional, and State emission trends; and public information reports. However, the Agency now states that the NEI is not of sufficient quality to indicate whether nonattainment areas met emission reduction requirements in the Act, and asserts that State SIP inventories are best for such measurements. According to EPA documentation and our analysis, State inventory data is used every 3 years to update NEI; therefore, NEI and State emissions data should reflect the same level 16 of quality. The Agency further asserts that state inventories cannot be used to measure nonattainment area accomplishments in reducing precursor emissions because baseline and subsequent periodic inventories were produced using different models and factors. EPA has stated that requiring updates to baseline and periodic inventories would be too burdensome on States. These contentions by EPA would leave no actual, comparable emissions data available, State or national, to assess nonattainment progress as required by the Act. However, the OIG looked for emissions data that could provide a reliable indicator as to whether nonattainment areas had achieved precursor emission reductions required by the Act. Noting that the NEI was being updated for the 1990 to 1999 period based on the latest models and emissions factors, EPA senior officials   including some regional officials   said that this updated NEI data would provide a reliable indicator of whether nonattainment areas met emission reduction mandates. This is the data we used in our analysis.

In response to recommendations presented in Chapter 2, the Agency indicated that it preferred to focus its efforts and resources on developing plans and strategies that will implement the more health protective 8 hour standard rather than evaluate progress toward the 1 hour standard. We agree that the Agency should focus resources on implementation of the 8 hour standard. However, the Agency and States need to measure and assess the actual effectiveness of controls implemented under the 1 hour standard before developing controls for the 8 hour standard. This assessment could be a valuable tool in identifying 1 hour controls that were not effective, overestimates of emission reductions from 1 hour controls, and methods for increasing the effectiveness of controls to be included in 8 hour Rate of Progress Plans. Many new nonattainment areas were designated under the 8 hour standard. These areas will be implementing many of the emission controls already implemented by 1 hour nonattainment areas. EPA needs to know how effective these 1 hour controls were in reducing emissions and identify where improvements may be needed before developing 8 hour emission control plans for these areas. An assessment of actual reductions achieved by 1 hour controls could identify the need for EPA to adjust the expected emission reductions from these controls and/ or develop alternative controls to meet 8 hour milestones. A viable method for assessing control effectiveness is to measure emission reductions that actually occurred from implementation and compare reductions achieved to the projected or expected reductions included in 1 hour plans. Finally, EPA needs to identify 1 hour areas that did not achieve required emission reductions for the 1 hour standard and implement the available contingency measures. For areas that have struggled for years to meet the less stringent 1 hour standard, implementation of contingency measures should further reduce emissions in these areas and better facilitate the achievement of the more stringent 8 hour standard. Therefore, we continue to believe that the recommendations in Chapter 2 are valid and realistic actions that EPA needs to take to ensure more effective implementation of the 8 hour standard. 17 18 Emission Reduction Plans Chapter 3 Rate of Progress Plans Delayed or in Error EPA and States encountered numerous difficulties with the timely development and implementation of Rate of Progress ( ROP) Plans for nonattainment areas, and often did not approve and begin implementing those plans until deadlines in the 1990 Act for achieving the emission reductions had passed. Furthermore, States may have used inaccurate assumptions and projections of emission growth in ROPs, resulting in unmet emission reduction goals. There were numerous reasons for these conditions, including inadequate EPA oversight and insufficient policies and guidance related to ROP development and technical support.

Because the number of ozone nonattainment areas has greatly increased with implementation of the new 8 hour standard, States will be required to develop many more ROPs and related SIP revisions than were required under the 1 hour standard. To facilitate the timely development and implementation of State ROPs and emission controls for those areas struggling to meet the 1 hour standard, as well as those areas required to implement the new 8 hour standard, EPA must improve its ozone guidance and oversight.

States Encountered Problems in Submitting Acceptable ROPs As noted in Chapter 2, each ozone nonattainment area is required to develop emission reduction plans ( in the form of ROP Plans) that articulate how precursor emissions will be reduced to achieve required ozone levels. The 1990 CAAA sets specific deadlines for submission of ROP Plans. For example, States were required to submit the initial ROP Plan for 15 percent VOC reductions by November 15, 1993, with implementation of controls and achievement of emission reductions by November 15, 1996. However, our evaluation of the first ROP Plans developed by States under the 1990 CAAA for 10 serious or severe nonattainment areas, involving a total of 14 ROP Plans, found that only 5 of 14 ROP Plans were submitted on time, and these often required revisions. Some were submitted nearly 2 years late.

Many States were also late in developing acceptable ROP Plans for the subsequent 9 percent reduction of VOCs and NOx that were to be submitted by November 15, 1994, with emission reductions achieved by November 15, 1999. EPA allowed States until mid 1997 to submit these plans, but only 3 of the 14 ROP Plans were submitted by the revised 1997 deadline. 19 According to EPA, many of the proposed plans were deficient and had to be revised several times before final approval. Also, States took extensive periods of time to make revisions ( often more than a year and as much as 6 years), and EPA took a great deal of time to review and approve the revised and final ROP Plans. These conditions contributed to a substantial delay in EPA's proposed and final ROP Plan approvals, as well as delays in the implementation of related emission controls. Section 110( k)( 3) of the Act requires that ROP Plans be approved or disapproved within 18 months of State submission unless EPA grants a conditional approval ( which only provides at most a 1 year extension). However, none of the plans received final approval within 18 months of initial State submission. ROP Plans in many cases were not approved until years after the milestone dates for achieving required emission reductions. Appendix D provides details for each of the 10 nonattainment areas.

Officials in five EPA regions stated that major changes in Inspection and Maintenance ( I& M) guidance and State delays in implementing I& M programs were two primary reasons for delays in developing acceptable ROP plans. In one region, several nonattainment areas had temporarily attained the ozone standard and the region suspended ROP Plan development until the areas again violated the standard. Regional officials also noted the following additional problems:

° Lack of definitive EPA guidance for the States on how to prepare and document ROP Plans.

° Lack of EPA guidance concerning emission reduction crediting for various local and regional control measures.

° The transitory nature of some EPA guidance, which created uncertainty among States as to how to revise and finalize ROP Plans.

° Delays in development of final, acceptable 15 percent ROP Plans led to delays in the subsequent 9 percent plans because one was dependent on the other.

° Timing of controls not yet implemented by the States, and the State's ability to support likelihood of expected emission reductions.

As will be discussed below, we also found that, in order to reasonably ensure permanent ozone attainment before suspending ROP development, improvements are needed in EPA's " Clean Data Policy."

Criteria in Clean Data Policy Needs Updating A May 1995 EPA policy, referred to as the " Clean Data Policy," provides that certain SIP requirements, including ROP Plan development, may be suspended once ambient air monitoring data indicate attainment of the 1 hour standard. Generally, this means an area has gone for 3 years with a total of three or less 1 20 hour exceedances. Using this policy, four nonattainment areas suspended their development of post 1996 ROP Plans when ambient air monitoring data showed that they had achieved the 1 hour standard in either 1998, 1999, or 2000. However, all four subsequently violated the standard again. ROP development then had to be re started and, as a result, emissions control plans for these areas were delayed. According to EPA officials, changes in meteorological conditions caused these areas to again violate the 1 hour standard, indicating that the standard had not been achieved by permanent and enforceable emission reductions within the nonattainment area or by upwind contributing sources.

Today methodologies and data exist that were not available in 1995 that allow regulators to better assess the permanence of attainment. In our view, the Clean Data Policy should be revised to require meteorologically adjusted ozone trend analyses along with a trend analyses of ambient VOC and NOx concentrations for nonattainment areas that subsequently reach attainment based on ambient ozone monitoring data. These changes would better ensure the permanence of such attainments. EPA should also consider whether upwind contributing sources have been sufficiently controlled to allow attainment to continue before suspending ROP requirements.

Planned Emission Reductions Not Always Achieved by Required Milestone Date Twenty three of the 28 ROP Plans we reviewed for 10 serious and severe nonattainment areas indicated that the emission reductions projected in these plans were not achieved by the dates specified in the Act. While there were multiple reasons for delayed ROP implementation, delays in implementing vehicle I& M programs and promulgating Federal rules for VOC reductions were the primary reasons that statutory deadlines were missed.

Delayed I& M Programs ROP Plans for 9 of the 10 nonattainment areas projected significant emission reductions from implementation of vehicle I& M programs, but 7 of these experienced delays in implementing their I& M programs. Approved ROPs and related documentation for five of the nine areas indicated that the I& M programs were not fully implemented until 2000 or 2001, several years later than needed to meet the Act's deadlines. Also, we found that one I& M program ( Georgia) had projected VOC emissions reductions based on an assumption of 100 percent effectiveness, whereas program records showed that their I& M program was only 81 percent effective. As a result of these conditions, estimated emission reductions in both the 15 percent and 9 percent ROP Plans were not achieved by November 15, 1999. 7" Credit for the 15 Percent Rate of Progress Plans for Reductions from the Architectural and Industrial Maintenance ( AIM) Coating Rule and the Autobody Refinishing Rule," November 29, 1994; " Regulatory Schedule for Consumer and Commercial Products under Section 183( e) of the Clean Air Act,'' June 22, 1995; and " Guidance on Projection of Nonroad Inventories to Future Years,'' February 4, 1994.

21 While some delay in State implementation of vehicle I& M programs can be attributed to statutory and EPA guidance changes in 1995 and 1996, this does not explain why I& M programs were still not fully implemented by 2000 and 2001. For example, the Texas I& M program represented 51 percent of the VOC emissions reductions in the Dallas Fort Worth 15 percent ROP Plan. However, neither the 15 percent nor the subsequent 9 percent ROP Plans for the Dallas Fort Worth area were proposed for final approval until January 18, 2001. An August 1997 Federal Register notice for a proposed conditional interim approval of Texas' 15 percent ROP noted that the State had discontinued implementation of its I& M program after initial submission of the 15 percent ROP plan, and that emission reductions related to the I& M program had not been achieved by November 15, 1996. EPA Region 6 granted Texas' request for conditional interim approval based on the premise that the reductions would be achieved " as soon as practicable." Subsequently, full conditional interim approval of the 15 percent ROP Plan was granted in November 1998, with the condition that final approval would not be granted until actions related to the I& M program were complete. However, the January 18, 2001, proposed approval of the 15 percent and 9 percent ROP Plans indicated that the Texas I& M program had still not received final EPA approval.

Delayed Promulgation of Federal VOC Rules Initial 15 percent ROP Plans for the 10 nonattainment areas included emission reductions for Federal VOC rules that were not promulgated until September 1998 and not effective until 1998 or 1999. These projected reductions ranged from 4 to 20 percent of total projected emission reductions in 15 percent ROP Plans. However, two States ( Massachusetts and Wisconsin) subsequently issued State VOC rules to ensure that the emission reductions occurred before November 15, 1996. In addition, 15 percent ROPs for three areas included VOC reductions for a Federal rule on off road/ small engine standards that had compliance dates of May 1997 and January 1998, 6 to 14 months after the Act's milestone date of November 15, 1996.

EPA guidance7 allowed States to claim VOC reductions for these delayed Federal rules even though the emission reductions would not be accomplished until after the milestone date for the 15 percent ROP Plan. EPA indicated that because States had counted on these Federal rules for their 15 percent plans, they should not be penalized because EPA was unable to promulgate the rules on time. As a result, significant amounts of VOC emission reductions were not achieved until almost 3 years after the Act's required milestone date of November 15, 1996. For example, the Washington, DC, nonattainment area claimed a total of 25.81 tons per 22 day, or 20.81 percent of total emission reductions in its 1996 15 percent ROP Plan based on Federal VOC rules that were not issued until September 1998. These VOC rules included architectural and industrial maintenance coatings, auto refinishing, and commercial/ consumer products.

Extended Dates for Achieving Emission Reductions ROP Plans for six nonattainment areas stated that projected VOC emission reductions had not been accomplished by the milestone date of November 15, 1996. For two areas, ROP Plans further indicated that the 15 percent in VOCs and 9 percent reductions in VOCs and NOx would not occur until 2001, almost 2 years after the post 1996 ROP Plan milestone of November 15, 1999. EPA approved the ROP Plans based on achievement of the reductions as expeditiously as practicable. These approvals were primarily based on general nonattainment area plan provisions in Section 172( c)( 1) of the Act, which provides for implementation of all reasonably available control technology " as expeditiously as practicable."

Emission Reductions Underestimated Due to Inaccurate Growth Projections and Other Factors For 15 of 28 ROP Plans, the projected VOC and/ or NOx target levels for the applicable milestone date were significantly less than the actual Periodic Emissions Inventory ( PEI) for the same date. These differences potentially represent an under estimation of required emission reductions needed by 1996 and 1999, respectively. Differences between PEIs and VOC and/ or NOx target levels exceeded 10 percent for 15 of 28 ROPs. The potential under projection of required emission reductions in these cases ranged from about 7 tons to over 175 tons per day.

To ensure that actual emission reductions will be " net of growth," ROP Plans usually include two primary calculations of VOC and NOx emissions as of the plan milestone date: ( 1) a projection of emissions growth to include an estimate of uncontrolled emissions as of the milestone date, and ( 2) an emission target level calculated by subtracting an amount equal to a 9 or 15 percent reduction in the area's 1990 anthropogenic baseline emissions plus any noncreditable emission reductions from the 1990 anthropogenic baseline or the previous ROP target level. The difference between the projected uncontrolled emissions and target level emissions represents the required ROP emission reductions, net of growth.

VOC Target Levels Not Met Table 3.1 shows projected target levels for VOCs in 15 and 9 percent ROP Plans as compared to VOC emissions per 1996 and 1999 PEIs. Negative differences between the target levels and PEIs for seven nonattainment areas indicate that the growth of projected emissions may have been underestimated and the implemented ROP emission controls and related reductions ( to include emissions growth) were 23 inadequate to achieve the subject target levels. Since the differences between projected uncontrolled VOC emissions and target emission levels for 1996 and 1999 were usually greater than 9 or 15 percent of the ROP baseline inventories, the differences between PEIs and target levels shown in Tables 3.1 and 3.2 may represent an under projection of emissions growth and, therefore, the emission reductions needed by 1996 and 1999 to assure emission reductions of 9 to 15 percent ( net of growth). The potential under projections of required VOC reductions ranged from 0.57 to over 104 tons per day ( tpd).

Table 3.1: Differences In VOC Targets and VOC Emissions in PEIs Nonattainment Area 1996 Target VOC ( tpd) 1996 PEI VOC ( tpd) Difference 1996 Target Less 1996 PEI 1999 Target VOC ( tpd) 1999 PEI VOC ( tpd) Difference 1999 Target Less 1999 PEI Atlanta 444.21 548.32  104.11 NA a 433.61 NA a Baltimore 253.3 274.03  20.73 252.85 237.1 15.75 Boston Lawrence Worcester  Massachusetts  New Hampshire 658 40.8 738 41.37  80  0.57 588 38.4 631.74 41.98  43.74  3.58 Chicago Gary Lake County  Illinois  Indiana 857.02 137.28 770.46 164.51 86.56  27.23 807.82 146.01 685.27 Unknownb 122.05 Unknownb Dallas Fort Worth 465.52 528.46  62.94 405.54 390.74 14.8 Washington DC Area 384.6 423.5  38.9 380.2 361.6 18.6 Milwaukee Racine 288.4 Unknownc Unknownc 237.57 210.6 26.97 Portsmouth Dover Rochester 30.3 22.25 8.05 27.9 25.65 2.25 Providence 141.5 Unknownd Unknownd 137.3 Unknownd Unknownd Springfield 118 115 3 115 99.65 15.35 a Post 1996 ROP Plan did not include VOC reductions. Therefore, no VOC target level was calculated for 11/ 1999. b Indiana did not develop a complete 1999 PEI its portion of the Chicago Gary Lake County area. c Wisconsin did not develop a 1996 PEI for the Milwaukee Racine area. d Rhode Island did not document/ publish 1996 and 1999 PEIs for Providence area; State transmitted data directly to OAQPS.

NOx Target Levels Not Met For the 10 nonattainment areas, 9 post 1996 ROP ( 9 percent) Plans included NOx emission controls and related projected emission reductions to be achieved by November 15, 1999. A comparison of 1999 NOx target levels to the relevant 1999 PEI disclosed that for eight ROPs, the ROP NOx target levels were significantly less than the actual NOx inventory reflected in the 1999 PEI. As reflected in Table 3.2, these differences, ranging from 7.08 to over 175 tons per day, may represent under projections of required NOx reductions. 24 Table 3.2: Differences In NOx Targets and NOx Emissions in PEIs Nonattainment Area 1999 NOx Target Level ( tpd) 1999 PEI NOx ( tpd) Difference 1999 Target Less 1999 PEI ( tpd)

Atlanta 439.64 614.7  175.06 Baltimore 397.05 467.35  70.3 Boston Lawrence Worcester Massachusetts New Hampshire 828 48.2 914.89 41.12  86.89  7.08 Chicago Gary Lake Cty Illinois Indiana 1820.5a NAb 1963.49a Unknownc  142.99 NAb Dallas Fort Worth NAb 523.84 NAb Washington, DC 614.7 626.4  11.7 Milwaukee Racine NA 306.5 NA Portsmouth Dover Rochester 38.7 48.18  9.48 Providence 85.5 Unknownc Unknownc Springfield 97 136.33  39.33 a Illinois claimed NOx emission reductions for sources outside of the Chicago and East St. Louis nonattainment areas. The " Illinois Attainment Area" 1990 NOx baseline emissions inventory was used as ROP baseline for computing 1999 NOx target level, projected 1999 uncontrolled NOx emissions and required NOx reductions. Therefore, Illinois' 1999 PEI for the Illinois Attainment Area was used to compare to the 1999 NOx target level. b Indiana and Wisconsin did not include any NOx controls in their post 1996 ROP Plans for the Chicago Gary Lake County and Milwaukee Racine nonattainment areas. Therefore, there were no NOx target levels projected for 1999 in the respective ROP Plans. c Indiana and Rhode Island did not develop or publish 1999 PEIs for the Chicago Gary Lake County and Providence nonattainment areas, respectively; thus, a comparison was not possible for these nonattainment areas.

EPA officials and the staff for Georgia indicated that this condition could have resulted from the use of inaccurate growth rates and factors ( such as Vehicle Miles Traveled) in projecting target year emission inventories. A Georgia official indicated that, in addition to incorrect growth factors, the difference between its nonattainment area 1996 VOC target level and the 1996 VOC PEI may be caused by the delayed implementation of ROP Plan controls after the date that such reductions were supposed to have been achieved or differences in models used to estimate emission levels. In one case, a region accepted growth factors used to project ROP target levels that were not supported by past actual growth rates for the area, indicating an inadequate review. In addition, a local planning commission commented that the ROP projections used an outdated estimate of Vehicle Miles Traveled but EPA allowed its use, stating that any under projections could be resolved in subsequent attainment plans. Use of inaccurate growth projections can result in underestimating uncontrolled emission inventories and the amount reductions needed to the meet the Act's requirements. None of the five EPA regions we contacted had performed a comparative analysis of ROP projections and PEIs; thus, they were not aware of the need to implement contingency measures to resolve any under projections of required reductions. Appendix E provides additional information on the growth factors used for the Atlanta area ROP. 25 Table 3.3: Outside Emission Reduction Credits Nonattainment Area Outside Credits Chicago Gary Lake County 261.97 tons per day NOx Boston Lawrence Worcester 6.0 tons per day NOx EPA did not grant final approval for many of the ROP Plans until after the date that relevant PEIs should have been developed. Under the Act, the 1996 and 1999 PEIs for each nonattainment area were due to be completed by September 1998 and September 2001, respectively. EPA final approvals of the 15 percent ROPs for 8 of 10 nonattainment areas did not occur until after the 1996 PEIs were due. Five of 10 areas received final approval for the 9 percent ROP Plans subsequent to the September 2001 due date. In these instances, there should have been sufficient emissions inventory data developed prior to ROP Plan final approval for EPA regions and States to validate the ROP emission target levels.

EPA Regions Did Not Always Obtain Adequate Technical Data to Support State Claims for Emission Reductions Post 1996 ROPs for 3 of 10 nonattainment areas included emission reductions from outside nonattainment area boundaries ( see Table 3.3). Such emission reduction credits were permitted under a December 1997 EPA policy memorandum. However, this policy does not preclude double counting of emission reductions and raises other concerns that are discussed further in Chapter 4. Our contacts with EPA regional officials indicated that the regions had not obtained sufficient technical support or researched available data to ensure that these reductions had actually occurred by November 1999. Our subsequent analysis of 1990 to 1999 NEI data indicated that these emission reductions may not have been obtained for two of the three nonattainment areas. Details follow.

Two States claimed outside power plant NOx reductions from the Federal Acid Rain program in post 1996 ROPs for two severe nonattainment areas ( Chicago Gary Lake County and New Hampshire portion of Boston Lawrence Worcester). The post 1996 ROP Plans for these two areas received final approval from 1 to almost 3 years after November 1999. Since EPA receives power plant NOx emissions directly from these sources as part of the Acid Rain program, these emissions should have been available for EPA regions to use to verify ROP emission reduction claims prior to ROP final approval. However, one region relied primarily on the State's claims of 40 to 60 percent emissions reductions at specific power plants without verifying the reductions with NEI or other sources of NOx emissions data for these plants. Our analysis of NEI data for 1990 through 1999 NOx emissions for these power plants indicated that the combined NOx emissions had been reduced by only 12.5 percent. Further details on Chicago Gary Lake County are in Appendix F. 8Estimated percent emissions reductions ranged from 20 to 37 percent depending on the category involved ( autobody refinishing, degreasing operations, or organic solvents).

9Federal Register Volume 64, pages 14441 14444, dated March 25, 1999, titled Extension of Attainment Dates for Downwind Transport Areas.

26 Only one State ( Wisconsin) claimed VOC emission reductions outside of the nonattainment area boundaries. In the post 1996 ROP for the Milwaukee Racine nonattainment area, Wisconsin claimed a 20 to 37 percent8 ( 6.5 tons per day) reduction in VOC emissions for specific VOC source categories between 1990 and 1999 related to State rules for autobody refinishing, degreasing, and organic solvent use in 14 counties outside the nonattainment area. However, our analysis of NEI data for 1990 through 1999 VOC emissions ( overall and category specific) indicated that the VOC reductions claimed by the State for the 14 counties were not achieved because the NEI data showed only an 8.2 percent decrease in total VOC emissions between 1990 and 1999 for the 14 county area. Further, a comparison of 1990 and 1999 NEI data for VOC emissions from solvent utilization within the 14 county area indicated that solvent VOC emissions increased from 42,252.81 to 43,053.01 tons per year, a 1.17 percent increase.

EPA Suspended Requirement for Post 1996 ROP Plans and Related 3 Percent Reduction for Six Serious Non Attainment Areas In March 1999, EPA promulgated a policy9 that allowed extension of the November 1999 attainment date for serious nonattainment areas under post 1996 ROP Plans, without elevating these areas to the next higher nonattainment classification, if the nonattainment areas were impacted by ozone transport. This policy was contrary to the Act, which requires that nonattainment areas be elevated to the next level if they do not attain the ozone standard by the statutory attainment date. Such an elevation requires more stringent emission control measures.

Six of 14 areas classified serious prior to 2003 had not attained the 1 hour ozone standard by November 1999, and had been either proposed for approval or received final approval for attainment date extensions under this policy. Even though the attainment dates for the six areas were extended to between 2003 and 2007, EPA regions did not require that the SIP revisions related to the attainment date extensions include requirements for ROPs or for demonstrations of the annual 3 percent reductions of precursor emissions after 1999. These areas were already struggling to achieve the 1 hour standard when EPA suspended the requirement for ROPs and minimum annual emission reductions.

Such extensions may have precluded or prolonged the planning and implementation of additional emission controls needed to facilitate attainment and improve air quality in these areas. Additional 9 percent reductions ( 3 percent per 27 year) in precursor emissions would have been required by November 15, 2002, and November 15, 2005, if these areas had been reclassified to severe nonattainment.

Attainment date extensions for three serious areas were legally challenged. These extensions were either reversed by Federal court decisions or EPA voluntarily reclassified these areas to severe before an adverse court ruling could be issued. In each case, Federal courts ruled or indicated that such attainment date extensions without elevation to the next higher level of nonattainment were not authorized by the Act. The courts also ruled that suspension of ROP requirements and related 3 percent annual precursor emission reductions were also not within the intent or authorization of the Act.

Table 3.4 includes the serious nonattainment areas that received proposed or final approval of attainment date extensions under the March 1999 policy. None of the areas promulgated ROP Plans for periods subsequent to 1999 despite the attainment date extensions.

Table 3.4: Attainment Date Extensions and Suspension of ROPs Serious Nonattainment Area Extended Attainment Date Date Extension Approved/ Proposed Current Status Atlanta 11/ 15/ 2004 05/ 07/ 2002 Remanded to EPA by Federal court. Elevated to severe in 2003.

Baton Rouge 11/ 15/ 2005 10/ 02/ 2002 Extension overturned by Federal court. Elevated to severe in 2003.

Dallas Fort Worth a 11/ 15/ 2007 01/ 16/ 2001 Proposed approval. No final approval. Still classified serious.

Greater Connecticut 11/ 15/ 2007 01/ 03/ 2001 No legal challenge. Still classified serious.

Springfield 11/ 15/ 2003 01/ 03/ 2001 No legal challenge. Did not attain by 2003 but still classified serious.

Washington DC 11/ 15/ 2005 01/ 03/ 2001 Extension overturned by Federal court. Elevated to severe in 2003.

a Because of adverse court rulings related to attainment date extensions under the March 1999 policy, Region 6 did not issue a final approval of the extension for the Dallas Fort Worth area, since a final approval would permit the extension to be legally challenged. However, Region 6 has not elevated Dallas Fort Worth to severe nonattainment as required by the Act. The Dallas Fort Worth area has been in " limbo" since January 2001, when approval of the extension was proposed and, thus, has received a " defacto" attainment date extension for over 3 years that cannot be legally challenged.

Insufficient EPA Oversight Contributed to Delays in ROP Plans and Implementation of Controls As noted above, delays in ROP Plans and implementation of required emission controls can be attributed to a variety of reasons, including insufficient EPA oversight of ROP Plan development; changes in EPA guidance on major emission 28 controls, especially the vehicle I& M program; and extended ROP milestone dates for achievement of emission reductions required in the Act ( see Appendix D). Other reasons for delays include the fact that EPA headquarters and regional officials:

° Allowed States extensive periods of time ( up to 8 years) to develop acceptable ROP Plans and make changes to draft plans. EPA took extensive time to review and/ or approve ROP Plans or ROP changes by States.

° Did not consistently review assumptions/ projections used in ROP Plans and challenge questionable projections of future inventory levels.

° Did not compare projected emission levels in ROPs with actual inventories subsequently developed to ensure that adequate emission controls were implemented.

° Did not obtain sufficient supporting documentation for emission reductions claimed by States in ROP Plans.

° Allowed emission reductions in ROP Plans for Federal VOC rules that were not promulgated or effective until 3 or more years after the ROP milestone date for achieving these VOC reductions.

° Suspended ROP development when areas temporarily attained the 1 hour standard before again violating the standard ( see also Appendix D).

° Suspended requirement for post 1996 ROPs related to six serious nonattainment areas whose attainment dates were either extended or proposed to be extended beyond November 1999.

Conclusions EPA did not effectively oversee the development of ROP Plans under the 1 hour standard to ensure that ( 1) ROPs were developed and implemented within the time frames required by the Act, ( 2) required emission reductions were achieved by the milestone dates specified in the Act, and ( 3) projected emission levels and emission reductions were correct and properly supported. EPA should not suspend requirements for ROPs and related minimum annual emission reductions. Once air quality data indicate that an area has achieved the standard, the permanence of the achievement should be supported with meteorologically adjusted trend analysis of ambient ozone observations and analyses of trends in ambient concentrations of VOCs and NOx for the nonattainment area.

Implementation of the 8 hour standard effectively doubled the number of ozone nonattainment counties. EPA needs to improve its oversight of the 8 hour SIPs to 29 include the development and approval of ROP Plans and subsequent State implementation of emission controls to ensure that the 8 hour ROPs are accurate, developed and approved in a timely manner, and implemented within the ROP milestone dates established in the Act and EPA regulations. EPA should require States to provide adequate documentation of emission projections claimed, including projected VOC and NOx target levels.

Recommendations We recommend that the Assistant Administrator for Air and Radiation:

3 1 Develop oversight procedures and guidance that will expedite development, approval, and implementation of ROP Plans and related emission controls.

3 2 Require evaluation of proposed ROP Plans by EPA regional air programs to assure the propriety of ROP assumptions, projections, and related emission reductions in comparison to available emission databases and historical data.

3 3 Develop guidance for analyzing and comparing periodic emission inventories to projected emission target levels and evaluating assumptions used in applicable ROP Plans, in order to: ( 1) reconcile differences between projected and actual inventories; ( 2) identify any incorrect assumptions or projections and understatement of needed emission reductions; and ( 3) establish improvements that may be needed in the ROP development process, and ensure training of staff in conducting these analyses.

3 4 When EPA staff determine that an underestimation of emission reductions needed to meet the ROP target level has occurred, require States to implement contingency or other measures needed in a timely manner to ensure that required emission reductions are achieved.

3 5 Revise EPA's " Clean Data" policy to require meteorologically adjusted ozone trend analyses and trend analyses of ambient VOC and NOx concentrations for nonattainment areas that attain the ozone standard based on ambient ozone monitoring data, to better assure the permanence of such attainments before suspending ROP Plan development and approval.

3 6 Require that EPA make and publish a determination that the ozone standard has been achieved through permanent and enforceable emission reductions before suspending ROP Plans and related emission reductions required by the Act. 30 Agency Comments and OIG Evaluation For Chapter 3, the Agency's response generally addressed the recommendations presented in the chapter. The Agency indicated actions were being contemplated or planned in regard to Recommendations 3 1, 3 3, 3 5, and 3 6. The Agency's comments regarding Recommendation 3 2 generally were non responsive and provided no actual planned corrective actions. Comments on Recommendation 3 4 did not address the content of this recommendation and provided no planned or contemplated corrective actions. EPA's response also suggested several technical corrections to certain statements in the section related to differences between ROP target levels and PEIs. Changes were made to clarify these statements. The Agency's responses regarding Chapter 3 and our detailed evaluation of these responses are included in Appendix H. 10Memorandum from Acting Assistant Administrator for Air and Radiation to Regional Administrators, " Guidance for Implementing the 1 Hour Ozone and Pre Existing PM10 NAAQS," issued in December 1997.

31 Chapter 4 EPA Policy Allowing Outside Emission Reduction Credits Creates Inequities and Hampers Attainment In 1997, EPA issued an ozone policy10 intended to grant States greater flexibility in obtaining precursor emission reductions by allowing them to claim emission reductions from sources outside of their nonattainment areas for post 1996 ROP Plans. However, as designed, the policy creates potential inequities between nonattainment areas, allows for double counting of the same facility's emissions, and is not based on scientific modeling of emissions impact. Additionally, the statutory basis for the policy is unclear, EPA has expressed differing positions regarding the legal basis for the policy, and the policy was not subjected to rulemaking and public comment. Of most concern is that the policy can lead to fewer emissions reductions for areas that use the policy to claim outside emission reductions. Our review of post 1996 ROP Plans for the 10 serious nonattainment areas showed that three areas included credit for emission reductions outside of the nonattainment areas, but it is not clear that the claimed emission reductions for two areas were actually achieved.

Policy Creates Inequities, Allows Double Counting, and May Not Achieve Emission Reductions Net of Growth The policy allowing nonattainment areas to " pick" outside sources for credit in ROP Plans allows these areas to ignore other sources from outside areas that may produce emissions that offset reductions. For example, one outside electric utility that had reduced emissions may be included in the ROP baseline, but another outside utility within the same specified area that had increased emissions may, under EPA's 1997 policy, be ignored. In addition, not including all outside source baselines in the ROP calculations can result in emission reductions that are less than needed to meet the Act's " net of growth" requirement.

To ensure that emission reductions are net of growth, the Act specifies that the calculation of required reductions is to include the anthropogenic VOC ( or NOx) baseline emissions for all sources within the nonattainment area, once adjustments for noncreditable reductions are accounted for ( generally involving reductions from certain pre 1990 emission controls). EPA often refers to this adjusted nonattainment baseline as the adjusted " ROP baseline." 32 The 1997 policy allows nonattainment areas to include in ROP baseline emissions only the baseline emissions for the specific sources or source categories for which outside emission reduction credit is being claimed. Exclusion of baseline emissions for the entire outside area from the ROP calculation does not ensure that emissions within and outside the nonattainment area are being reduced net of growth as required by the Act. Under the policy, there is no assurance that excluded outside sources have not increased their emissions to an extent that offsets or exceeds the emission reductions of the selected sources or source categories. In addition, allowing States to " pick and choose" specific outside sources and only include the baseline emissions for these selected sources in calculating required reductions creates an inequity between nonattainment areas that reduce emissions within the nonattainment area and nonattainment areas that include selected outside sources.

Nonattainment areas that limit emission controls to the nonattainment area are required to calculate the required reductions based on the entire nonattainment area baseline of VOC and/ or NOx emissions. However, nonattainment areas that choose specific outside sources for emission credit only have to calculate reductions against the baseline for these specific sources and not the baseline for the entire outside area. Since the required reduction of 9 percent is applied to the baseline used, this condition may result in less emission reductions for those areas that choose to calculate reductions based on the baselines of specific outside sources.

The Act specifies that the 9 percent emission reduction is the minimum requirement. Required reductions are supposed to eliminate emission growth plus an additional 9 percent reduction from the baseline emissions. As a result, most ROPs include emission reductions substantially more than the 9 percent minimum requirement in the Act. Including only the baseline emissions for selected outside sources in ROP calculations may result in a 9 percent reduction   net of growth   for these particular sources, but not a reduction net of growth for the nonattainment area or the outside areas as a whole.

Post 1996 ROP Plans for two of the three nonattainment areas claiming outside emission reductions included only the baseline emissions for the selected sources in calculating required emission reductions. The ROP for the third nonattainment area included emission baselines for the entire outside area where emission reductions were claimed. Details on the three areas are in Appendix G.

Policy Does Not Preclude Double Counting Currently, a number of States have multiple nonattainment areas under the 1 hour standard, and the number of nonattainment counties more than doubled with implementation of the 8 hour standard in April 2004. However, EPA's 1997 policy does not safeguard against two or more nonattainment areas improperly claiming the same outside emission reduction credits in their individual ROP Plans. If two or more nonattainment areas claim benefit from emission reductions by the 11Alabama, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin.

33 same outside source, the State needs to prove that all of the areas received an emissions benefit and the estimated extent of benefit received. In our opinion, areas should not be allowed to claim the total emissions reduced but only receive the extent of emissions benefit on its ozone levels. To show the benefit and impact of outside emission reductions on individual nonattainment areas would require atmospheric modeling; however, the current policy does not require such modeling as a condition of this claim.

Policy Inhibits Ability to Use Periodic Emissions Inventory Data to Assess Control Strategy Effectiveness The 1990 Amendments to the Act required that a 1990 baseline emissions inventory for each nonattainment area be developed and updated for every 3 years thereafter. Although the Act did not require that the PEI be used to assess control effectiveness, OAQPS and State officials said they believed that the PEIs were to be used to measure emission reductions achieved by nonattainment areas. A PEI for all nonattainment areas was required for 1999. However, EPA staff and our comparison of 1999 PEIs to post 1996 ROP baseline emissions for the three nonattainment areas that claimed outside emission reductions indicated that the outside sources or areas for which emission reductions were taken were not included in the 1999 PEIs. In these three cases the PEIs were limited to VOC and NOx emissions within the nonattainment areas. As a result, there was no correlation between the post 1996 ROP baseline emissions ( used to determine the emission reductions to be accomplished by November 1999) and the 1999 PEI.

This occurred because EPA's policy allows nonattainment area credit for outside emission reductions without requiring that outside areas or sources claimed in post 1996 ROPs be included in subsequent PEIs. This requirement would facilitate comparison of PEIs to ROP emission target levels as a measure of the effectiveness of ROP controls in reducing emissions.

Selection of Outside Emission Sources Not Based On Modeling Selection of outside emission sources for emission reduction credit is not based on a scientific method, such as atmospheric modeling of emission transport. Instead, the policy is based on distance from the nonattainment area boundary. For example, the distance limit for VOC reductions is 100 kilometers outside the nonattainment area boundary. For NOx, it is 200 kilometers, unless the State was a core State11 in the Ozone Transport Advisory Group study, in which case NOx reduction credit may be expanded to the whole State. 34 When the policy was issued in 1997, atmospheric modeling was expensive and resource intensive. The policy was originally based on a Federal Advisory Committee Act committee recommendation to EPA. According to committee members, States wanted an alternative to modeling, so EPA had an environmental engineer and modeling expert judgmentally set distances that States could use in lieu of modeling. Atmospheric modeling experts on the FACA committee said the distance limits are not strictly supported by science, and that modeling is the only scientific method to identify emission sources that contribute to a nonattainment area's zone levels. One of the modeling experts said the distance limits are arbitrary limits that may or may not include sources that most impact an area's attainment of the ozone standard. The expert further stated that atmospheric modeling is no longer costly and resource intensive, and can be run on laptop computers.

Legal Basis of Policy Not Clear Section 182( c)( 2)( B) of the Act states that the post 1996 ROP Plans shall reduce by 9 percent " baseline emissions," and defines " baseline emissions"' to mean the total amount of actual VOC emissions from anthropogenic sources within the nonattainment area. Section 182( c)( 2)( C) also provides that NOx reductions can be substituted for or combined with VOC reductions, since both contribute to ozone, a requirement that EPA lawyers said was clear and legally supportable. During our interview with EPA Office of General Counsel Air and Radiation attorneys, the attorneys could not find any language in Section 182 ( c)( 2)( 1)( B) restricting NOx substitution to the nonattainment area baseline emissions or any reference to Section 182( b)( 1)( B) that contains that limitation.

The legal basis is more ambiguous, however, when it comes to non attainment areas counting VOC emission reductions occurring in areas outside of their boundaries toward ozone attainment goals. EPA attorneys told us that the statute allowing NOx substitution for VOCs allows reasonable further progress plans to include a combination of NOx and VOCs reductions. They also said that the Act does not state that the VOCs combined with NOx are subject to the same restrictions as the 9 percent VOC reductions specified in Section 182( c)( 2)( B). However, the one nonattainment area ROP Plan that claimed outside VOC reductions ( Milwaukee Racine area) did not include NOx substitution. The post 1996 ROP plan contained only VOC control measures. One attorney also referred us to the general reasonable further planning requirements in Section 172 that do not refer to restricting VOC reductions to nonattainment area baseline emissions. However, the Section 172 contains no specific VOC reduction requirements. The basis of both VOC and NOx reductions required in post 1996 ROPs is contained in Section 182( c)( 2)( B). This section requires that post 1996 ROPs contain a minimum 9 percent reduction in VOC baseline emissions. As previously stated, the 9 percent reduction is further referenced to Section 182( b)( 1)( B), which restricts such emission reductions to nonattainment area baseline emissions. 35 In each post 1996 ROP Federal Register notice we reviewed, Section 182( c)( 2)( B) was cited as the basis of the required amount of either VOC or NOx reductions included in the plans. For example, the Illinois post 1996 ROP for the Chicago Gary Lake County severe nonattainment area, which claimed 261.97 tons per day in NOx reductions for sources outside the nonattainment area, cited the ROP Plan Section 182( c)( 2)( B) as the basis of the required amount of precursor reductions:

The plan was submitted to meet the Act's requirement, in section 182( c)( 2)( B), that the State demonstrate a 9 percent reduction of VOC emissions in the Chicago ozone nonattainment area for the 3 year period between 1996 and 1999.

Whether an ROP includes only VOC reductions, NOx reductions, or a combination of VOC and NOx reductions, the minimum amount of required reductions is determined under Section 182( c)( 2)( B), which requires that VOC reductions be within the nonattainment area baseline emissions.

The EPA attorneys we contacted said that a person could reasonably interpret the " substitution" of NOx for VOCs as carrying the same restrictions. Also, they said that a person could reasonably interpret that the VOC reductions used in combination with NOx reductions in a reasonable further progress plan are the same VOC reductions cited in Section 182( c)( 2)( B), and these reductions would, therefore, be limited to reductions in the nonattainment area baseline emissions. EPA's response to the OIG's draft report, included as Appendix H to this report, stated that Office of General Counsel attorneys are responsible for advising program offices on the legalities of various issues, such as the policy for outside emission reduction credit, and providing their opinion on whether the policy or guidance in question could be successfully challenged in court. A senior OAQPS official said the policy was probably not explicitly authorized by the Act but that EPA has to make policy decisions in such gray areas to provide flexibility to State and local programs.

Policy Not Subjected to Rulemaking or Public Comment EPA's " Substitution of Credits for ROP Emission Reductions" was never subjected to rulemaking procedures or public comment, nor was it issued as more formal policy guidance. The outside emission credit policy was included in an attachment to a policy guidance memorandum issued in December 1997. EPA subsequently issued a Notice of Availability in the Federal Register ( Vol. 63, page 8196, February 18, 1998), but the Notice did not include the specific guidance involved and did not seek stakeholder opinions or public comments.

Policy May Be Inconsistent With Original Purpose As previously stated, this policy was based on a Federal Advisory Committee Act committee recommendation to EPA. Two committee members told us that the 36 original intent of the recommendation was to broaden emission controls to areas outside of nonattainment area boundaries in order to address sources that impacted a nonattainment area. However, the subsequent policy allows nonattainment areas to claim emission reductions that have already occurred under other Federal and State regulations. Because the reductions in these areas have already occurred, they do not represent a broadening of nonattainment area controls and neither facilitate nor accelerate attainment. One of the committee members interviewed told us that the policy, as written, appears to be a mechanism to allow States " cheap" emission reduction credits for meeting the required reductions in post 1996 ROP Plans. A senior OAQPS official also recalled that the purpose of the policy was to broaden controls, but he said it was not EPA's intention that the policy be limited to new controls or the broadening of current controls, or that outside reductions should accelerate attainment.

Conclusions The legal basis of the policy allowing States to claim outside emission reductions in post ROP Plans is ambiguous, and appears to conflict with the emission reduction requirements for post 1996 ROP Plans. Because of its potentially harmful impact on ozone precursor emissions, the policy   if continued   should be subjected to the notice and comment rulemaking process to provide the public with an opportunity to comment on the merits of the policy. In our view, if this policy is to continue, revisions are needed. At a minimum, a revised policy should: ( 1) encourage the broadening of emission controls to outside sources; ( 2) require atmospheric modeling rather than arbitrary distances; ( 3) ensure that outside emission reductions represent appropriate reductions, net of growth; and ( 4) require that the baseline emissions from all outside areas ( from which credits are claimed) be used to calculate the required emission reduction amount for post 1996 ROPs. Also, the policy should specify how outside emission reductions would be apportioned among multiple nonattainment areas to preclude doublecounting and that outside areas/ sources be included in subsequent PEIs.

Recommendations We recommend that the Assistant Administrator for Air and Radiation:

4 1 Subject the policy claiming outside emissions to the notice and comment rulemaking process, which will allow broad public comment and feedback. 37 4 2 Revise policy for nonattainment area outside emission reduction credit to:

a. Encourage broadening of controls for sources in outside areas in order for a nonattainment area to claim emission reduction credits.

b. Require atmospheric modeling to support the impact of outside emissions and sources on nonattainment area ozone levels.

c. Require that the emission baselines from all selected outside areas be included in ROP baseline emissions for calculating required emission reductions and measuring achievement of reductions.

d. Establish a methodology, such as atmospheric modeling, to document the extent of benefits that NOx and VOC emissions reductions from outside the area have on individual nonattainment areas to prevent improper double counting of emission reductions when a State has multiple nonattainment areas.

e. Require that outside sources or areas included in post 1996 ROPs also be included in subsequent PEIs for each applicable nonattainment area.

Agency Comments and OIG Evaluation The Agency's response generally addressed recommendations presented in Chapter 4.

In regard to Recommendation 4 1, the Agency contends that each Federal Register Notice for ROPs that include credit for outside emission reductions allows public comment on the policy that allows these credits. We agree that ROP notices could provide a forum for public comment; however, this has not been the case for prior notices that included credit for outside emission reductions. These notices only referenced the policy and provided little or no details regarding the policy and the statutory basis for the policy under the Act. Additionally, ROP notices were normally long, complex documents, and the use of outside emission reductions and the references to the policy were difficult to ascertain within this document. While we acknowledge that it is possible, we do not believe that past ROP notices appropriately highlighted nor presented sufficient information for a meaningful public discourse on the subject policy and its ramifications. Therefore, the OIG continues to believe that the policy should be subjected to public comment in an open, transparent, and equitable manner.

The Agency indicated that it would consider the various components of Recommendation 4 2 during its assessment of existing policies and guidance as 38 part of the rulemaking process for implementation of the 8 hour standard. EPA's response also requested an editorial change related to certain statements attributed to EPA's Office of General Counsel attorneys as shown in the draft report. The statements were changed as requested. Details of changes requested by EPA and OIG's related changes to the final report are shown in Appendix H. 39 Measurement Chapter 5 Reliable Processes Needed to Measure Overall Emission Reductions and Related Impacts In the 14 years since passage of the 1990 Amendments to the Act, EPA has not issued rules requiring States to demonstrate their progress toward reducing precursor emissions, nor has EPA issued guidance on how such demonstrations should be conducted, despite the Act's mandate to do so. Review of 10 serious and severe ozone nonattainment areas indicated that EPA and States had no reliable methods to assess the overall success of State emission reduction programs. EPA regions and States either did not measure reductions by individual nonattainment areas, or used methods that were unreliable, erroneous, or did not demonstrate achievement of reductions. According to OAQPS officials, guidance that would incorporate the Act's timeframes could not be developed, so no guidance was issued. Also, due to the lack of goals and performance measures ( see Chapter 7), there was little incentive for EPA to promulgate the guidance or ensure that States measured their progress. Consequently, EPA and States have not adequately measured the effectiveness of nonattainment area emission controls and whether emissions have been progressively reduced as required by the 1990 Act. More importantly, EPA is unsure whether recent changes in ozone levels are the result of permanent reductions in precursor emissions or the result of other factors, such as changes in weather or economic trends.

1990 Act Required Measurement of Emission Reductions The 1990 Act requires each State to submit a Compliance Demonstration within 90 days after each ROP Plan milestone date that demonstrates that the required emission reductions have been achieved. According to the compliance demonstration provisions of Section 182( g)( 2),

For each nonattainment area referred to in paragraph ( 1), not later than 90 days after the date on which an applicable milestone occurs ( not including an attainment date on which a milestone occurs in cases where the standard has been attained), each State in which all or part of such area is located shall submit to the Administrator a demonstration that the milestone has been met.... The Administrator shall determine whether or not a State's demonstration is adequate within 90 days after the Administrator's receipt of a demonstration which contains the information and analysis required by the Administrator. 40 The Act further provided that if a State could not adequately demonstrate that the required emission reductions were achieved, the State could be subject to enforcement actions or sanctions.

EPA Did Not Issue Rules or Guidance for Compliance Demonstrations EPA refers to the compliance demonstrations required by the Act as " milestone compliance demonstrations." However, according to interviews of air program officials at OAQPS, five EPA regions, and two States, EPA never issued rules requiring States to perform milestone compliance demonstrations, and has never issued guidance as to what information and analyses these demonstrations should contain. As a result, milestone compliance demonstrations have not been completed for most nonattainment areas. For the 10 nonattainment areas included in our review, only 3 milestone compliance demonstrations had been submitted by 2 States ( Georgia and Illinois) for 2 nonattainment areas ( Atlanta and Chicago Gary Lake County). Further, these three compliance demonstrations generally contained only a listing of emission controls, the dates that controls were implemented, and the assumption that projected emission reductions were equivalent to actual reductions. The three milestone compliance demonstrations we reviewed did not contain any measurements of actual emission reductions. EPA regional staff indicated that the regions did not review these milestone compliance demonstrations because EPA had not issued any guidance on what they should contain.

OAQPS staff explained that milestone compliance demonstration rules and guidance had initially been drafted around 1994, but   because of a " disconnect" in the Act's requirements   OAQPS could not develop guidance that met the Act's requirements, so the guidance was never issued. According to OAQPS officials, their interpretation of the 1990 Act is that a comparison between the 1990 baseline emission inventory and subsequent periodic emissions inventories should be used in State compliance demonstrations to demonstrate actual emission reductions achieved. Milestone compliance demonstrations are required from States 90 days after each milestone date, but periodic emission inventories are not due until 22 months after the milestone dates. Thus, updated emissions inventories are not available when States need them to create their milestone compliance demonstrations.

According to OAQPS officials, EPA attorneys would not approve a milestone compliance demonstrations policy that did not meet the Act's 90 day time frame. OAQPS developed some alternative indicators States could use to demonstrate that emission reductions were probably achieved, but this did not satisfy EPA managers who wanted actual measures of reductions. OAQPS officials were asked if statutory changes in the Act's requirements were sought to remedy the timeframe inconsistencies, to which they replied recommendations on statutory 41 changes could only come from the Assistant Administrator level and no such recommendations had been made.

Baseline and Periodic Inventories Needed Updating While EPA's periodic updates to emissions models, methodologies, and factors since 1990 have helped improve the quality of more recent emissions inventories, substantial effort is required to update older baseline inventories. This will require EPA to revisit early assumptions and retrofit newer methodologies to old activity profiles. As a result, it becomes more and more difficult, costly, and resource intensive to maintain early baseline inventories and, as such, more difficult to use them to measure emission reductions. OAQPS staff stated that the intent of the Act was that baseline and PEI inventories be used by nonattainment areas to gauge their emission reduction progress. However, the Act does not specifically require that emission inventories be used for this purpose. Our interviews with OAQPS, regional, and State officials disclosed that, due to changes in models, methodologies, and emissions factors over the years, a reliable comparison between baseline and periodic emission inventories could not be conducted unless both inventories were updated.

Five EPA regions we contacted said they had not required States to update their nonattainment area baseline or periodic emission inventories. OAQPS staff indicated that EPA had not required the updating of baseline inventories because such updating required modeling, which proved expensive and resource intensive in past years. However, some States voluntarily updated their baseline inventories in 2003 using the latest mobile emission model ( MOBILE6), and one State ( Wisconsin) had updated the 1990 baseline inventories and the periodic emission inventories for its one nonattainment area. Also, one State ( Maryland) had attempted to measure actual emission reductions in its 1996 and 1999 PEIs by comparing the current PEI to the 1990 baselines for its nonattainment areas, but the baseline inventories had not been updated or adjusted for noncreditable emission reductions as required by the Act. Maryland did not submit this attempted emission reduction measurement as a milestone compliance demonstration.

EPA Regions and States Primarily Used Ambient Trends and Implementation of Controls to Demonstrate Progress Our interviews at six EPA regions and two States indicated that they used a combination of ambient ozone trends, ozone exceedance days, and implementation of ROP emission controls to gauge reduction of ozone precursor emissions. EPA regions and States generally used the projected emissions reductions from implemented controls as a measure of progress in reducing precursor emissions. 12 " Assessment of Interannual Ozone Variation in Urban Areas From A Climatological Perspective," published in the Atmospheric Environment, Vol. 30, No. 14, pp 2615 2625, 1996.

42 EPA established " observed ozone levels" as an outcome measure for its ozone precursor emission reduction program. However, because ozone is not emitted, but formed in a complex, atmospheric chemical reaction of other emitted pollutants, no direct correlation exists between ozone levels and the reduction of precursor emissions. The impact of emission reductions on ozone levels is generally estimated through use of atmospheric models that include additional factors that affect ozone levels, such as meteorological conditions, temperature, and wind velocity.

For example, EPA and external studies of recent downward trends in nonattainment ozone levels pointed to weather conditions ( cooler summers and more rain than usual), in addition to emission reductions, as the primary reasons for reduced ambient ozone levels. In addition, an EPA study and one Georgia study of meteorologically adjusted ozone levels for major metropolitan areas found no statistically significant downward trends in ozone concentrations in the periods 1990 2002 and 1981 2001, respectively. Further, an OAQPS analysis of 1991 2001 ambient VOC and NOx concentrations for two ozone nonattainment areas found no statistically significant downward trends in ozone or VOC and NOx concentrations resulting from emission reductions. Further, a 1996 study12 by two OAQPS ozone experts stated the following:

Tracking progress in attaining the ozone NAAQS ( National Ambient Air Quality Standards) is often confounded by the effect of interannual variations in meteorological conditions, which, in turn, affect the annual ( seasonal) distribution of ozone. Large interannual variations in meteorology can thus mask the underlying trends in ozone levels and may suggest changes in air quality that are not actually related to emission reductions.

However, changes in meteorological conditions and wind patterns can be temporary and generally cannot be controlled; reduction of precursor emissions is the only known method for permanently reducing ozone pollution.

Guidance and Rules for Compliance Demonstrations May Be Issued for 8 Hour Standard Although the 1994 initial draft guidance has never been issued, EPA has begun updating the guidance as part of the implementation guidance for the new 8 hour ozone standard. In April 2004, an OAQPS official told us that the guidance might be issued in 2004, but could be delayed because of other priorities related to 8 hour implementation. 43 The draft milestone compliance demonstration guidance indicates that comprehensive emission inventories are the most effective method for assessing emission reductions, but acknowledges that this method may not be accomplished within the Act's 90 day deadline. As a result, EPA proposed an alternative method that uses a " weight of evidence" approach whereby States must provide evidence that control measures specified in their ROPs have been properly implemented, and a best estimate of emission reductions achieved based on growth rates, air quality trends, and other factors. This approach allows ambient air monitoring and emission/ air quality modeling as support for emissions reductions. However, as previously discussed, ambient ozone levels alone are not an accurate measure of emission reductions. The draft milestone compliance demonstration guidance does not require the use of relevant factors, such as meteorologyadjusted ozone trends, or trends in ambient concentrations of VOCs and NOx, as indicators of emission reductions. Including these would be beneficial.

Conclusions EPA and States need reliable methods for measuring emission reductions of nonattainment areas and the impact of such reductions, excluding other factors, on ambient ozone levels. Without reliable measurement methods, EPA is unable to determine the effectiveness of implemented controls and has no assurance that the progressive emission reductions occurred.

Demonstrations of emission reductions have become increasingly important since implementation of the stricter 8 hour standard and the lack of reasonably available, proven control techniques for some areas. Most 1 hour nonattainment areas, which are now 8 hour nonattainment areas, have already implemented most of the readily available, least expensive emission controls. These areas will need to be innovative in developing and promulgating future control measures. Accordingly, EPA needs to know whether these controls are effective in achieving required reductions and, thereby, facilitate attainment of the 8 hour standard within the time frames established for each area.

Recommendations We recommend that the Assistant Administrator for Air and Radiation:

5 1 Expedite issuance of the milestone compliance guidance, but restrict the use of observed ambient zone levels as a stand alone indicator of emission reductions. The guidance should also require the use of meteorologically adjusted ozone trends and trends in ambient concentrations of VOC and NOx in the weight of evidence approach.

5 2 Instruct States to utilize indicators, as reflected in the draft milestone compliance demonstration guidance, and/ or provide annual updates to 44 emissions inventories ( one third of sources per year or one third of States per year) to determine potential or actual emission reductions within the Act's 90 day time frame for milestone compliance demonstrations.

5 3 Require that nonattainment areas update baseline inventories and, subsequently, perform more in depth assessments of actual emission reductions, once the applicable PEIs are completed. This subsequent determination of actual emission reductions may not meet the milestone compliance demonstration 90 day time frame but will provide a measure of progress that is not currently available.

5 4 Incorporate the use of updated NEI data and other available measures, where appropriate, into milestone compliance demonstration guidance as top down indicators or measures of nonattainment area progress in reducing precursor emissions.

5 5 Require State and local agencies to update past baseline and periodic emission inventories based on the latest models, emission factor, and methodologies, and complete milestone compliance demonstrations for 1990 through 1999 ( or later milestone year) for nonattainment areas based on the issued milestone compliance guidance. Further, for future inventories, require States to continuously update inventories as new emissions data and methods are developed, to provide timely assessments of nonattainment area progress in reducing precursor emissions.

Agency Comments and OIG Evaluation The Agency indicated that it would evaluate the current draft milestone compliance guidance and determine the feasibility of incorporating the changes recommended in Recommendations 5 1, 5 2, and 5 4. Regarding Recommendations 5 3 and 5 5, the Agency questioned whether the updating of baseline inventories for comparison with future PEIs ( Recommendation 5 3), and the updating of baseline and periodic inventories to measure emission reductions achieved by nonattainment areas between 1990 and 1999 ( Recommendation 5 5), represent an effective use of Agency resources. The Agency stated that the current focus of ozone program resources is on implementation of the more protective 8 hour ozone standard. The Agency response further noted that EPA and States will rely on indicators included in the draft milestone compliance guidance to determine whether emission reductions were achieved without any requirement for measurement of actual reductions through the use of NEI or State emission inventories for each nonattainment area.

We agree that the Agency should focus resources on implementation of the 8 hour standard. However, as noted here and in Chapter 2, EPA's efforts to implement the 8 hour standard will be significantly enhanced if the Agency better understands 45 the effectiveness of prior precursor emissions reductions strategies. This should help the Agency properly design and effectively implement emission controls under the 8 hour standard. These efforts may be especially important for those major metropolitan areas that have made so little progress in reducing ozone precursor emissions since 1990. In our view, determining how to implement the 8 hour standard more effectively than occurred under the 1 hour standard represents an effective use of Agency resources. Also, the additional milestone requirement for States to update past baseline and/ or periodic inventories for comparison to the most recent PEI would provide a realistic measure of emission reduction achievements under the 8 hour standard and, as such, would also represent an effective use of Agency resources to achieve the 8 hour standard. The use of indicators alone will not fully meet the Act's requirement that States demonstrate the attainment of specific, mandated precursor emission reductions for each nonattainment area. The Agency's specific responses to each recommendation in this chapter and a detailed OIG evaluation are included in Appendix H. 13See Chapter 2 for discussion of State adjustments to NEI.

46 Chapter 6 Opportunities Exist to Enhance Measurement of Emission Reductions and Ozone Trends EPA could make better use of available data and methodologies to more accurately assess the effectiveness of emission controls and their impact on ozone levels. Our interviews with OAQPS staff and EPA officials in five regions disclosed that relatively little use has been made of available emissions data, meteorologically adjusted ozone methodologies, and ambient precursor monitoring data to develop long term trends and assess the actual emission and related ozone reductions for individual nonattainment areas. Greater use of these data and techniques would enable EPA and States to more readily recognize shortcomings of current control mechanisms and help them to develop and implement contingency plans when necessary, and better protect the public from unhealthy ozone. OAQPS officials agreed that this would be a valuable tool, but said that resource constraints had prevented more extensive trend analyses of ozone precursor ( VOC and NOx) monitoring data.