phased construction projects. We also clarified, albeit without
proposing specific rule language, that the provisions of 40 CFR
52.21(r)(4), 51.166(r)(2), and 51.165(a)(5)(ii), which subject a source
to major NSR upon the relaxation of certain permit terms that had
previously allowed the source to avoid major NSR, are met during any
major NSR process like one that would establish a Green Group. Finally,
we noted that, under the

current NSR regulations, an emissions change is only creditable for
netting purposes to the extent that the permitting authority has not
previously relied on it in issuing a major NSR permit. See 40 CFR
52.21(b)(3)(iii). Accordingly, emissions increases and decreases that
occur at the emission activities of a source subject to a current major
NSR permit, like those in a Green Group during its effective period,
are not to be included in future netting calculations at the same
source.
    In our proposal, we based the legal rationale for Green Groups on
the premise that the changes and emissions activities within a Green
Group are specifically authorized to occur as a result of undergoing,
not avoiding, major NSR. Conversely, other changes that a source seeks
to implement, but that are not authorized in the Green Group, cannot
occur without first obtaining all necessary preconstruction approvals
that would apply to such changes. The determination of whether the
newly proposed, but unauthorized changes trigger NSR would be made
using the ``actual-to-projected-actual test'' under, for example, 40
CFR 52.21(a)(2)(iv). The Agency noted that this legal rationale for
Green Groups differs from the legal rationale for Clean Units, a
provision in the 2002 NSR reform rules that employed an allowable
emissions test for netting purposes which the U.S. Court of Appeals for
the DC Circuit vacated. New York v. EPA, 413 F.3d at 40 (DC Cir. 2005).
    Finally, as discussed in the proposal preamble, we believe that the
environment and the public would potentially benefit from Green Groups
for several reasons. First, we believe that substantial environmental
benefits could occur because a Green Group would require all included
emissions activities to be controlled to the level of BACT or LAER. The
BACT or LAER limits would apply to existing emissions activities (which
otherwise would remain uncontrolled or be subject to less stringent
control requirements), as well as to emissions activities that are
modified or added pursuant to the Green Group authorization. In
addition, absent a Green Group, some modifications and new emissions
activities might not be subject to major NSR because their emissions
would be below applicability thresholds or because they would ``net
out'' of review. Even when individual changes would prove to be subject
to major NSR, the resulting BACT might in some cases be less stringent
than that required for a Green Group, given the economies of scale in
evaluating BACT at the same time for all the activities and authorized
changes making up a Green Group. Moreover, we expect that environmental
benefits would accrue from the better and more frequent type and amount
of monitoring proposed to be required for Green Groups. Finally, we
believe that Green Groups would also promote greater administrative
efficiency for permitting authorities and sources, because a Green
Group would eliminate iterations of permitting processes that produce
little or no environmental benefit.
    The commenters, while mixed in their overall reaction to the Green
Group concept, generally did not support the specifics of the Green
Group proposal. State commenters indicated that the proposed 10-to-15-
year term of the Green Group is inappropriate because the Act and good
environmental stewardship require BACT/LAER reviews and air quality
analyses to be conducted contemporaneously with the time of each change
at a facility. These commenters disagreed with our assertion that BACT
and LAER typically do not advance significantly over the proposed 10-
or 15-year period. They added that such permits would unfairly reserve
PSD increments for projects that might never be built and that the air
quality status in the area of a Green Group could also change due to,
for example, transported pollution, revisions to the NAAQS, and natural
events. State commenters also questioned the environmental benefits of
Green Groups and did not believe that the pilot permits contained in
the docket supported the Green Group approach. They also asserted that
Green Groups share the legal flaws of Clean Units. State commenters
further conveyed that many permitting authorities already offer
considerable flexibility and that it is the permitting authorities who
can best decide the structure of their own programs in this regard. The
State commenters generally believe that the Green Group proposal should
be abandoned, but if it is finalized it should be a voluntary element
of the major NSR program, rather than mandatory as proposed.
    The environmental group that commented on the proposal asserted
that the proposed 10-to-15-year term of the Green Group is inconsistent
with the Act's requirements for contemporaneous BACT/LAER and air
quality reviews. The environmental group also indicated that Green
Groups suffer from the same legal flaws as Clean Units. Like most State
commenters, the environmental group believes that the Green Group
proposal should be abandoned, but if it is finalized it should be
voluntary for the States.
    Industry commenters, on the other hand, typically favored some
aspects of the proposal and believe the Green Group to be a real
incentive for sources to control beyond their legal requirements in
exchange for greater regulatory certainty and operational flexibility.
These commenters often argued that a term of 10 to 15 years would be
necessary to justify the expenditure for state-of-the-art controls for
a Green Group. They agreed with the proposal that Green Groups should
be a mandatory element of the major NSR program and attributed real
benefits such as those associated with lower administrative costs. They
believe that Green Groups are legally defensible and clearly different
from Clean Units. However, industry commenters asserted that the
proposal did not reflect how manufacturing facilities are constructed
and operated. In particular, they stated Green Groups should not be
limited to a single control device and that pollution prevention should
be allowed as the primary Green Group control approach. In addition,
they indicated that the proposed monitoring, recordkeeping, and
reporting requirements are unnecessarily detailed and prescriptive.

B. Final Action

    Primarily for certain policy reasons raised by commenters and on
our belief that the current major NSR regulations already provide
considerable flexibility to States, EPA has decided to withdraw our
proposal on Green Groups. As described below, the Agency will consider
initiating another rulemaking related to flexibility under the major
NSR regulations if new data becomes available after additional field
experience that supports such an approach. Any such rulemaking would be
an entirely new rulemaking separate and distinct from the Green Group
proposal being withdrawn in this action.
    Notwithstanding our withdrawal of the Green Group proposal, we wish
to note that certain statements we made in support of the proposal are
not affected by the Green Group withdrawal. First, the requirements of
40 CFR 51.165(a)(5)(ii), 51.166(r)(2), and 52.21(r)(4) are met when an
emissions unit with emissions limits previously taken to avoid major
NSR subsequently undergoes major NSR review.\28\ Next, we continue to
believe that a longer-

term major NSR project is clearly different from a Clean Unit and may
be defended on that basis. Construction of the later portions of an
approved major NSR project is simply ``building out'' the permit as
authorized and does not rely on an allowables emissions test. Finally,
pursuant to 40 CFR 52.21(b)(3)(iii), and to analogous provisions in 40
CFR 51.166(b)(3)(iii) and 51.165(a)(1)(vi)(C)(2), emissions increases
and decreases that occur as authorized in a major NSR permit qualify as
having been ``relied upon by the permitting authority'' in issuing a
major NSR permit. As such, these emissions changes are not to be
included in the future netting calculations at the same source during
the time that the NSR permit would be effective.
---------------------------------------------------------------------------

    \28\ Sections 51.165(a)(5)(ii), 51.166(r)(2), and 52.21(r)(4)
provide that when a source or modification that took an emissions
limit to avoid major NSR review wishes to relax that limitation, it
must undergo major NSR as if construction had not yet commenced.
---------------------------------------------------------------------------

    Our decision to withdraw the Green Group proposal is in large part
based on the significant new information and policy perspectives
conveyed in certain comments received on this proposal. Based on the
varying types of concerns raised by commenters, EPA no longer believes
that promulgation of the Green Group approach--which was EPA's effort
to develop a single, nationally uniform approach for Green Groups to
achieving advance approval under major NSR--is appropriate. While an
approach like that proposed for Green Groups might be effective in
certain situations, several commenters pointed out serious reservations
about initial air quality and technology reviews becoming stale over
the 10-year life of a Green Group. Others were concerned that the
proposed Green Group approach was not flexible enough to encompass
already tested approaches involving emissions units serviced by
multiple control approaches. These commenters also persuaded the Agency
that a mandatory, one-size-fits-all approach under the major NSR rules
could be counterproductive as well as too inflexible. Many of the same
commenters believed that national rules requiring a specific template
for Green Groups across all States could instead stifle future
innovation and flexibility while adding complexity and unnecessary
administrative burden.
    The Agency is also not finalizing our proposal on Green Groups
because we believe that the current major NSR regulations already
provide States considerable ability to design and implement their SIPs
in ways that provide operational flexibility while addressing the types
of concerns raised by commenters. The major NSR regulations, in
general, are quite detailed and prescriptive as to what changes are
subject to review, but afford considerable flexibility to determine
specifically how subject NSR projects must be permitted. The inherent
flexibility for States to design and implement their SIP provisions
with respect to NSR projects arises from the structure and content of
the part 51 PSD and the nonattainment (``NA'') NSR regulations.
    First, the definition of ``project'' can accommodate a wide
spectrum of physical and operational changes, provided such changes are
authorized by the permitting authority.\29\ Similarly, the definition
of ``emissions unit'' is elastic in its ability to include several
types of situations, ranging from a simple piece of equipment to a
collection of them at the same site.\30\ A ``project'' involves changes
to or addition of one or more emissions units. Thus, the permitting
authority may define these terms in its SIP broadly or narrowly, for a
particular case, provided that the physical and operational changes
included in the project are covered by the major NSR requirements, as
appropriate.
---------------------------------------------------------------------------

    \29\ ``Project'' is defined in the major NSR regulations as ``a
physical change in, or change in the method of operation of, an
existing major stationary source.'' See, for example, 40 CFR
52.21(b)(52).
    \30\ ``Emissions unit'' is defined in the major NSR regulations
as ``any part of a stationary source that emits or would have the
potential to emit any regulated NSR pollutant. * * *'' See, for
example, 40 CFR 52.21(b)(7).
---------------------------------------------------------------------------

    Moreover, the other provisions of the part 51 PSD and NA NSR
regulations do not impose limitations on the scope or implementation of
NSR projects once they are defined by the permitting authority. The NA
NSR regulations do not contain any specific provisions that restrict
how the permitting authority might define the scope, duration, and
timeliness of an NSR project. The part 51 PSD regulations only
indirectly affect the acceptable scope of an NSR project in their
requirements and the BACT reevaluations of certain phases of phased
construction projects.\31\
---------------------------------------------------------------------------

    \31\ The part 51 PSD requirement related to the permitting of
subject projects only mandates that States in their SIPs require
reevaluations of certain BACT determinations for the later
independent phases of an approved phased construction project at the
latest reasonable time prior to their commencement of construction
(see 40 CFR 51.166(j)(4)). This longstanding safeguard was
established in order to prevent inappropriate reserving of the
available PSD increment by an individual source (see 43 FR 26396).
---------------------------------------------------------------------------

    As a result, under the current major NSR regulations, with the
exception of the relatively narrow class of construction projects with
independent phases for PSD purposes,\32\ States are free to design and
implement their major NSR SIPs to address contemporaneity of
construction, project scope and duration, number and types of emissions
units comprising the project which are subject to emissions tracking,
timely construction of authorized changes, and reevaluation of initial
control technology and/or air quality impact reviews as they judge to
be reasonable. For example, a SIP may be structured to allow the
permitting authority to determine these aspects of a major NSR permit
on a case-by-case basis after balancing appropriately the benefits of
operational flexibility with the types of concerns raised by commenters
on the Green Group proposal.
---------------------------------------------------------------------------

    \32\ See footnote 30.
---------------------------------------------------------------------------

    The same part 51 flexibility has allowed states to adopt
voluntarily some additional PSD regulatory constraints into their SIPs
similar to those contained in paragraphs (r)(2) and (n)(1) of the 40
CFR part 52 regulations, which regulate the timeliness of construction
and the required level of information for reviewing proposed NSR
projects.\33\ The part 52 regulations, which apply to interim EPA
implementation of the PSD program in the absence of an approved SIP,
contain these additional requirements in paragraphs (r)(2) and (n)(1)
to help preserve the available PSD air quality increments until the
State can assume full responsibility for the program under an approved
SIP.
---------------------------------------------------------------------------

    \33\ Section 52.21(n)(1) requires more specific detailed
information about construction schedules and plans to be submitted
by sources than do the analogous requirements of part 51 (see 40 CFR
51.166(n)(1)). Section 52.21(r)(2), which has no counterpart in 40
CFR 51.166, ensures the timely construction of non-phased projects
and provides, without specification, the opportunity for the
permitting authority to extend these deadlines.
---------------------------------------------------------------------------

    The EPA believes that States which have opted to include these
additional regulatory constraints in their SIPs retain considerable
discretion to interpret and implement them within the meaning of their
SIP approved language. Affected States may choose to implement their
programs consistent with policies that EPA has developed in our
implementation of these provisions or to explore the adoption of
different policies through their own administrative procedures. In
addition, in accordance with their plans for preserving PSD increments
and for protecting the NAAQS, States may maintain their current SIPs or
opt to revise them as appropriate consistent with the applicable part
51 and/or part D requirements in order to allow greater flexibility to
the permitting authority in reasonably determining how NSR projects can
be approved on a case-by-case basis. The Agency is willing to work with
States to evaluate their

current SIPs and to assist them in discussing possible revisions where
requested to do so.
    The EPA is interested in learning more as to whether the
flexibility under existing major NSR regulations to sources and
permitting authorities is sufficient and appropriate. In order to gain
additional perspectives about the currently available level of
flexibility--including the need for it; the benefits, costs, and/or
impediments associated with its use; and any lack of safeguards to
assure its effectiveness--the Agency is encouraging States and sources
to explore how projects subject to major NSR might be more flexibly
permitted and administratively managed. Where a State would agree to
investigate such possibilities with a requesting source, we ask that
the State give us an advance notice of the project before any permit is
released for comment. In addition, EPA requests that the State make
available relevant information about both the development of the permit
and its subsequent implementation so as to facilitate any future
analysis on our part. We also intend to collect other information that
would be useful to informing us as to whether a new rulemaking should
be initiated in the future.
    In summary, the concerns of commenters on the potential
inflexibility of the proposed Green Group affirms the need, at least
for now, to maintain the relative openness of the current major NSR
rules. These rules essentially defer to the States as to whether to
adopt more specific requirements or to resolve flexibility needs on a
case-by-case basis. This outcome is entirely consistent with the stated
preference contained in State comments received on the proposal that
States be allowed to structure their own SIP programs with respect to
NSR flexibility.

IX. Statutory and Executive Order Reviews

A. Executive Order 12866--Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the
terms of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and
is therefore not subject to review under the EO.

B. Paperwork Reduction Act

    The information collection requirements in this rule have been
submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The
information collection requirements are not enforceable until OMB
approves them.
    The information collection requirements resulting from this final
rule are associated with obtaining FAPs under minor or major NSR
(pursuant to the requirements of title I of the Act and the
implementing regulations at 40 CFR 51.160 through 51.166, appendix S to
40 CFR part 51, and 40 CFR 52.21) and/or under the title V operating
permit program (pursuant to the requirements of title V of the Act and
the implementing regulations at 40 CFR parts 70 and 71). The NSR and
title V programs are established programs with approved information
collection requests (ICRs). This final rule will encourage permitting
authorities and sources to work together to create FAPs, which will
eliminate the need for some subsequent permits and permit revisions and
thereby reduce the burden on both the permitting authorities and
sources.
    The NSR program requires a permit to be obtained by the owner or
operator prior to constructing a new stationary source of air
pollutants or modifying an existing source in such a way that air
pollution emissions increase or a new air pollutant is emitted. The
minor NSR program applies to minor sources and minor modifications,
while the major NSR program applies to major sources and major
modifications. The information collection for sources under NSR results
from the requirement for owners or operators to submit applications for
NSR permits. In some cases, sources must conduct preconstruction
monitoring to determine the existing ambient air quality. For
permitting authorities, the information collection results from the
requirement to process permit applications and issue permits, and to
transmit associated information to EPA. The EPA oversees the NSR
program, and the information collected by sources and permitting
authorities is used to ensure that the program is properly implemented.
    The title V program requires major sources and certain other
sources of air pollutants to obtain an operating permit that contains
all the requirements that apply to the source under the Act. The
information collection for sources under the title V program results
from the requirement for owners or operators to submit applications for
title V permits and to submit deviation reports, semi-annual monitoring
reports, and annual compliance certifications. For permitting
authorities, the information collection results from the requirement to
process permit applications and issue permits, to review the reports
submitted by sources, and to transmit associated information to EPA.
The EPA oversees the title V program, and the information collected by
sources and permitting authorities is used to ensure that the program
is properly implemented.
    Flexible air permits are innovative permits that authorize sources
to make certain anticipated changes to their operations without being
required to obtain new or revised permits at the times these changes
are implemented, while assuring that all applicable requirements of the
Act are met and that the environment is protected at least as well as
it would have been under conventional permitting procedures. The
initial burden to apply for and issue a FAP is greater than for a
conventional permit, but this increase in burden is more than
compensated for by the subsequent burden reduction for foregone new
permits and permit revisions. Thus, the net effect of this final FAP
rule is a reduction in the burden the approved ICRs for the NSR and
title V programs.
    As a result of this final rule, we estimate that 845 sources will
obtain FAPs each year over the 3-year period of this ICR, with a total
annual burden reduction averaging approximately 251,000 hours, or
almost 300 hours per source. We do not expect a burden increase or
reduction in capital costs, operation and maintenance costs, or
purchase-of-services costs. For the 112 permitting authorities over the
3-year period of this ICR, we estimate a total annual burden reduction
averaging about 197,000 hours, or nearly 1,800 hours per permitting
authority and 234 hours per permit. Burden is defined at 5 CFR
1320.3(b).
    An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is
approved by OMB, the Agency will publish a technical amendment to 40
CFR part 9 in the Federal Register to display the OMB control number
for the approved information collection requirements contained in this
final rule.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the Agency certifies that the
rule will not have a significant economic impact on a substantial

number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this rule on small
entities, ``small entity'' is defined as: (1) A small business as
defined by the Small Business Administration's regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of
a city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is
any not-for-profit enterprise which is independently owned and operated
and is not dominant in its field.
    After considering the economic impacts of this final rule on small
entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. In
determining whether a rule has a significant economic impact on a
substantial number of small entities, the impact of concern is any
significant adverse economic impact on small entities, since the
primary purpose of the regulatory flexibility analyses is to identify
and address regulatory alternatives ``which minimize any significant
economic impact of the rule on small entities.'' 5 U.S.C. 603 and 604.
Thus, an agency may certify that a rule will not have a significant
economic impact on a substantial number of small entities if the rule
relieves regulatory burden, or otherwise has a positive economic effect
on all of the small entities subject to the rule.
    This final rule merely clarifies existing requirements and allows
regulated entities to seek additional flexibility for their Clean Air
Act permits. It does not create a new burden for regulated entities.
Because FAPs are voluntary on the part of all permittees, including any
small entities that are subject to permitting requirements, only those
permittees who expect to reduce their permitting burden will seek FAPs.
We have determined there will be cost savings for small entities
associated with this final rule. We have therefore concluded that this
final rule will relieve regulatory burden for all affected small
entities.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandate under the provisions of
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C.,
1531-1538 State, local, and Tribal governments, in the aggregate, or
the private sector. This action imposes no enforceable duty on any
State, local or Tribal governments or the private sector. As discussed
previously, we estimate that this rule will save State, local, and
Tribal permitting authorities an average of $11.5 million per year over
the first 3 years of implementation and result in an administrative
burden reduction averaging 197,000 hours per year over that period.
Similarly, we estimate that this rule will save permittees an average
of $20.6 million per year and reduce their administrative burden by an
average of 251,000 hours per year over the first 3 years. Therefore,
this action is not subject to the requirements of sections 202 or 205
of UMRA.
    This rule is also not subject to the requirements of section 203 of
UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments. As discussed
earlier, this rule is expected to result in cost savings and an
administrative burden reduction for all permitting authorities and
permittees, including small governments to the extent that they fall in
either category.

E. Executive Order 13132--Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
    This final rule does not have federalism implications. It will not
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. This rule is projected to result
in cost savings and administrative burden reductions for States and
will not alter the overall relationship or distribution of powers
between governments for the part 70 and part 71 operating permits
programs or for the part 51 and part 52 NSR programs. Thus, Executive
Order 13132 does not apply to this rule.
    In spirit of Executive Order 13132 and consistent with EPA policy
to promote communications between EPA and State and local governments,
EPA solicited comment on the proposed rule from State and local
officials. We believe that this final rule is generally responsive to
the comments received from these and other groups.

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

    This action does not have Tribal implications, as specified in
Executive Order 13175 (65 FR 67249, November 9, 2000). This action
merely clarifies existing requirements and allows regulated entities to
seek additional flexibility for their CAA permits. Thus, Executive
Order 13175 does not apply to this action.

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

    The EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as
applying only to those regulatory actions that concern health or safety
risks, such that the analysis required under section 5-501 of the
Executive Order has the potential to influence the regulation. This
action is not subject to Executive Order 13045 because it does not
establish an environmental standard intended to mitigate health or
safety risks.

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

    This action is not a ``significant energy action'' as defined in
Executive Order 13211 ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR
28355, May 22, 2001) because it is not likely to have a significant
adverse effect on the supply, distribution, or use of energy. This
action merely clarifies existing requirements and allows regulated
entities to seek additional flexibility for their CAA permits.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. The NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.

    This action does not involve technical standards. Therefore, EPA
did not consider the use of any voluntary consensus standards.

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

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
Federal executive policy on environmental justice. Its main provision
directs Federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
    The EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it does not
affect the level of protection provided to human health or the
environment. This final rule merely clarifies existing requirements and
allows regulated entities to seek additional flexibility for their CAA
permits. Such FAPs achieve equal or better environmental protection
than that achieved using more conventional permits.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. The EPA will submit a report containing this rule and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2). This rule will be effective November 5, 2009.

X. Judicial Review

    Under section 307(b)(1) of the Act, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the District of Columbia Circuit by December 7, 2009. Any such judicial
review is limited to only those objections that are raised with
reasonable specificity in timely comments. Filing a petition for
reconsideration by the Administrator of this final rule does not affect
the finality of this rule for the purposes of judicial review nor does
it extend the time within which a petition for judicial review may be
filed, and shall not postpone the effectiveness of such rule or action.
Under section 307(b)(2) of the Act, the requirements of this final
action may not be challenged later in civil or criminal proceedings
brought by us to enforce these requirements.
    Pursuant to section 307(d)(1)(V) of the Act, the Administrator
determines that this action is subject to the provisions of section
307(d). Section 307(d)(1)(V) provides that the provisions of section
307(d) apply to ``such other actions as the Administrator may
determine.'' This action finalizes some, but not all, elements of a
previous proposed action--the Flexible Air Permitting Rule proposed on
September 12, 2007 (72 FR 52206). That action included proposed
revisions to the PSD regulations under part C of title I of the Act and
was, therefore, subject to section 307(d) pursuant to section
307(d)(J). Consequently, although the proposed PSD revisions are not
being finalized in this action, the procedural requirements of section
307(d) have been complied with for purposes of this action.

List of Subjects

40 CFR Part 70

    Environmental protection, Administrative practice and procedures,
Air pollution control, Intergovernmental relations, Reporting and
recordkeeping requirements.

40 CFR Part 71

    Environmental protection, Administrative practice and procedures,
Air pollution control, Intergovernmental relations, Reporting and
recordkeeping requirements.

    Dated: September 25, 2009.
Lisa P. Jackson,
Administrator.

0
For the reasons set out in the preamble, title 40, chapter I of the
Code of Federal Regulations is amended as set forth below.

PART 70--[AMENDED]

0
1. The authority citation for part 70 continues to read as follows:

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

0
2. Section 70.2 is amended by adding definitions of ``Alternative
operating scenario (AOS)'' and ``Approved replicable methodology
(ARM)'' in alphabetical order, to read as follows:

Sec.  70.2  Definitions.

* * * * *
    Alternative operating scenario (AOS) means a scenario authorized in
a part 70 permit that involves a change at the part 70 source for a
particular emissions unit, and that either results in the unit being
subject to one or more applicable requirements which differ from those
applicable to the emissions unit prior to implementation of the change
or renders inapplicable one or more requirements previously applicable
to the emissions unit prior to implementation of the change.
* * * * *
    Approved replicable methodology (ARM) means part 70 permit terms
that:
    (1) Specify a protocol which is consistent with and implements an
applicable requirement, or requirement of this part, such that the
protocol is based on sound scientific and/or mathematical principles
and provides reproducible results using the same inputs; and
    (2) Require the results of that protocol to be recorded and used
for assuring compliance with such applicable requirement, any other
applicable requirement implicated by implementation of the ARM, or
requirement of this part, including where an ARM is used for
determining applicability of a specific requirement to a particular
change.
* * * * *

0
3. Section 70.4 is amended by revising paragraph (d)(3)(xi) to read as
follows:

Sec.  70.4  State program submittals and transition.

* * * * *
    (d) * * *
    (3) * * *
    (xi) Approval of AOSs. The program submittal must include
provisions to insure that AOSs requested by the source as approved by
the permitting authority are included in the part 70 permit pursuant to
Sec.  70.6(a)(9).
* * * * *

0
4. Section 70.5 is amended as follows:
0
a. By revising paragraph (c)(2);
0
b. By revising paragraph (c)(3)(iii);
0
c. By revising paragraph (c)(7);
0
d. By adding paragraph (c)(8)(ii)(D); and
0
e. By adding paragraph (c)(8)(iii)(D).
    The additions and revisions read as follows:

Sec.  70.5  Permit applications.

* * * * *

    (c) * * *
    (2) A description of the source's processes and products (by
Standard Industrial Classification (SIC) Code) including those
associated with any proposed AOS identified by the source.
    (3) * * *
    (iii) Emissions rate in tpy and in such terms as are necessary to
establish compliance consistent with the applicable standard reference
test method. For emissions units subject to an annual emissions cap,
tpy can be reported as part of the aggregate emissions associated with
the cap, except where more specific information is needed, including
where necessary to determine and/or assure compliance with an
applicable requirement.
* * * * *
    (7) Additional information as determined to be necessary by the
permitting authority to define proposed AOSs identified by the source
pursuant to Sec.  70.6(a)(9) of this part or to define permit terms and
conditions implementing any AOS under Sec.  70.6(a)(9) or implementing
Sec.  70.4(b)(12) or Sec.  70.6(a)(10) of this part. The permit
application shall include documentation demonstrating that the source
has obtained all authorization(s) required under the applicable
requirements relevant to any proposed AOSs, or a certification that the
source has submitted all relevant materials to the appropriate
permitting authority for obtaining such authorization(s).
    (8) * * *
    (ii) * * *
    (D) For applicable requirements associated with a proposed AOS, a
statement that the source will meet such requirements upon
implementation of the AOS. If a proposed AOS would implicate an
applicable requirement that will become effective during the permit
term, a statement that the source will meet such requirements on a
timely basis.
    (iii) * * *
    (D) For applicable requirements associated with a proposed AOS, a
statement that the source will meet such requirements upon
implementation of the AOS. If a proposed AOS would implicate an
applicable requirement that will become effective during the permit
term, a statement that the source will meet such requirements on a
timely basis. A statement that the source will meet in a timely manner
applicable requirements that become effective during the permit term
will satisfy this provision, unless a more detailed schedule is
expressly required by the applicable requirement.
* * * * *

0
5. Section 70.6 is amended by revising paragraphs (a)(1) introductory
text and (a)(9) to read as follows:

Sec.  70.6  Permit content.

    (a) * * *
    (1) Emissions limitations and standards, including those
operational requirements and limitations that assure compliance with
all applicable requirements at the time of permit issuance. Such
requirements and limitations may include ARMs identified by the source
in its part 70 permit application as approved by the permitting
authority, provided that no ARM shall contravene any terms needed to
comply with any otherwise applicable requirement or requirement of this
part or circumvent any applicable requirement that would apply as a
result of implementing the ARM.
* * * * *
    (9) Terms and conditions for reasonably anticipated AOSs identified
by the source in its application as approved by the permitting
authority. Such terms and conditions:
    (i) Shall require the source, contemporaneously with making a
change from one operating scenario to another, to record in a log at
the permitted facility a record of the AOS under which it is operating;
    (ii) May extend the permit shield described in paragraph (f) of
this section to all terms and conditions under each such AOS; and
    (iii) Must ensure that the terms and conditions of each AOS meet
all applicable requirements and the requirements of this part. The
permitting authority shall not approve a proposed AOS into the part 70
permit until the source has obtained all authorizations required under
any applicable requirement relevant to that AOS.
* * * * *

PART 71--[AMENDED]

0
6. The authority citation for part 71 continues to read as follows:

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

0
7. Section 71.2 is amended by adding definitions of ``Alternative
operating scenario (AOS)'' and ``Approved replicable methodology
(ARM)'' in alphabetical order, to read as follows:

Sec.  71.2  Definitions.

* * * * *
    Alternative operating scenario (AOS) means a scenario authorized in
a part 71 permit that involves a change at the part 71 source for a
particular emissions unit, and that either results in the unit being
subject to one or more applicable requirements which differ from those
applicable to the emissions unit prior to implementation of the change
or renders inapplicable one or more requirements previously applicable
to the emissions unit prior to implementation of the change.
* * * * *
    Approved replicable methodology (ARM) means part 71 permit terms
that:
    (1) Specify a protocol which is consistent with and implements an
applicable requirement, or requirement of this part, such that the
protocol is based on sound scientific and/or mathematical principles
and provides reproducible results using the same inputs; and
    (2) Require the results of that protocol to be recorded and used
for assuring compliance with such applicable requirement, any other
applicable requirement implicated by implementation of the ARM, or
requirement of this part, including where an ARM is used for
determining applicability of a specific requirement to a particular
change.
* * * * *r

0
8. Section 71.5 is amended as follows:
0
a. By revising paragraph (c)(2);
0
b. By revising paragraph (c)(3)(iii);
0
c. By revising paragraph (c)(7);
0
d. By adding paragraph (c)(8)(ii)(D); and
0
e. By adding paragraph (c)(8)(iii)(D).
    The additions and revisions read as follows:

Sec.  71.5  Permit applications.

* * * * *
    (c) * * *
    (2) A description of the source's processes and products (by SIC
Code) including those associated with any proposed AOS identified by
the source.
    (3) * * *
    (iii) Emissions rates in tpy and in such terms as are necessary to
establish compliance consistent with the applicable standard reference
test method. For emissions units subject to an annual emissions cap,
tpy can be reported as part of the aggregate emissions associated with
the cap, except where more specific information is needed, including
where necessary to determine and/or assure compliance with an
applicable requirement.
* * * * *
    (7) Additional information as determined to be necessary by the
permitting authority to define proposed AOSs identified by the source
pursuant to Sec.  71.6(a)(9) or to define permit terms and conditions
implementing any AOS

under Sec.  71.6(a)(9) or implementing Sec.  71.6(a)(10) or Sec.
71.6(a)(13). The permit application shall include documentation
demonstrating that the source has obtained all authorization(s)
required under the applicable requirements relevant to any proposed
AOSs, or a certification that the source has submitted all relevant
materials to the appropriate permitting authority for obtaining such
authorization(s).
    (8) * * *
    (ii) * * *
    (D) For applicable requirements associated with a proposed AOS, a
statement that the source will meet such requirements upon
implementation of the AOS. If a proposed AOS would implicate an
applicable requirement that will become effective during the permit
term, a statement that the source will meet such requirements on a
timely basis.
    (iii) * * *
    (D) For applicable requirements associated with a proposed AOS, a
statement that the source will meet such requirements upon
implementation of the AOS. If a proposed AOS would implicate an
applicable requirement that will become effective during the permit
term, a statement that the source will meet such requirements on a
timely basis. A statement that the source will meet in a timely manner
applicable requirements that become effective during the permit term
will satisfy this provision, unless a more detailed schedule is
expressly required by the applicable requirement.
* * * * *

0
9. Section 71.6 is amended by revising paragraphs (a)(1) introductory
text and (a)(9) to read as follows:

Sec.  71.6  Permit content.

    (a) * * *
    (1) Emissions limitations and standards, including those
operational requirements and limitations that assure compliance with
all applicable requirements at the time of permit issuance. Such
requirements and limitations may include ARMs identified by the source
in its part 71 permit application as approved by the permitting
authority, provided that no ARM shall contravene any terms needed to
comply with any otherwise applicable requirement or requirement of this
part or circumvent any applicable requirement that would apply as a
result of implementing the ARM.
* * * * *
    (9) Terms and conditions for reasonably anticipated AOSs identified
by the source in its application as approved by the permitting
authority. Such terms and conditions:
    (i) Shall require the source, contemporaneously with making a
change from one operating scenario to another, to record in a log at
the permitted facility a record of the AOS under which it is operating;
    (ii) May extend the permit shield described in paragraph (f) of
this section to all terms and conditions under each such AOS; and
    (iii) Must ensure that the terms and conditions of each AOS meet
all applicable requirements and the requirements of this part. The
permitting authority shall not approve a proposed AOS into the part 71
permit until the source has obtained all authorizations required under
any applicable requirement relevant to that AOS.
* * * * *
[FR Doc. E9-23794 Filed 10-5-09; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register: October 3, 2007 (Volume 72, Number 191)]
[Notices]
[Page 56422-56425]
[DOCID:fr03oc07-115]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56568; File No. SR-NYSEArca-2007-88]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval to a Proposed Rule Change Relating to an Extension and
Expansion of the Penny Pilot Program

September 27, 2007.

I. Introduction

    On August 16, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
extend and expand a pilot program to quote certain options in smaller
increments (``Pilot Program'' or ``Pilot''). The proposed rule change
was published for comment in the Federal Register on August 24,
2007.\3\ The Commission received one comment letter on the proposed
rule change.\4\ This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 56280 (August 17,
2007), 72 FR 48717.
    \4\ See letter to Nancy Morris, Secretary, Commission, from John
C. Nagel, Director & Associate General Counsel, Citadel, dated
September 12, 2007 (``Citadel Letter'').
---------------------------------------------------------------------------

II. Description of the Proposal

    Currently, the six options exchanges, including NYSE Arca,
participate in the thirteen class Pilot Program,\5\ which is scheduled
to expire on September 27, 2007.\6\ The Exchange proposes to extend and
expand the Pilot Program to include fifty additional classes, in two
phases.
---------------------------------------------------------------------------

    \5\ The thirteen option classes currently in the Pilot are:
Ishares Russell 2000 (IWM); NASDAQ-100 Index Tracking Stock (QQQQ);
SemiConductor Holders Trust (SMH); General Electric Company (GE);
Advanced Micro Devices, Inc. (AMD), Microsoft Corporation (MSFT);
Intel Corporation (INTC); Caterpillar, Inc. (CAT); Whole Foods
Market, Inc. (WFMI); Texas Instruments, Inc. (TXN); Flextronics
International Ltd. (FLEX); Sun Microsystems, Inc. (JAVA); and
Agilent Technologies, Inc. (A).
    \6\ The Pilot Program began on January 26, 2007 and is currently
set to expire on September 27, 2007. See Securities Exchange Act
Release No. 56150 (July 26, 2007), 72 FR 42460 (August 2, 2007) (SR-
NYSEArca-2007-56). See also Securities Exchange Act Release No.
55156 (January 23, 2007), 72 FR 4759 (February 1, 2007) (SR-
NYSEArca-2006-73) (``Original Pilot Program Approval Order'').
---------------------------------------------------------------------------

    Phase One will begin on September 28, 2007 and will continue for
six months, until March 27, 2008. Phase One will add the following
twenty-two options classes to the Pilot: SPDRs

(SPY); Apple, Inc. (AAPL); Altria Group Inc. (MO); Dendreon Corp.
(DNDN); Amgen Inc. (AMGN); Yahoo! Inc. (YHOO); QUALCOMM Inc. (QCOM);
General Motors Corporation (GM); Energy Select Sector (XLE); DIAMONDS
Trust, Series 1 (DIA); Oil Services HOLDRs (OIH); NYSE Euronext, Inc.
(NYX); Cisco Systems, Inc. (CSCO); Financial Select Sector SPDR (XLF);
AT&T Inc. (T); Citigroup Inc. (C); Amazon.com Inc. (AMZN); Motorola
Inc. (MOT); Research in Motion Ltd. (RIMM); Freeport-McMoRan Copper &
Gold Inc. (FCX); ConocoPhillips (COP); and Bristol-Myers Squibb Co.
(BMY). These twenty-two options classes are among the most actively-
traded, multiply-listed options classes, and account, together with the
current thirteen Pilot classes, for approximately 35% of total industry
trading volume.\7\
---------------------------------------------------------------------------

    \7\ This volume is based on the Options Clearing Corporation
(``OCC'') year-to-date trading volume data through July 16, 2007.
---------------------------------------------------------------------------

    Phase Two will begin on March 28, 2008, and will continue for one
year, until March 27, 2009. During the second phase, the number of
options classes trading in pennies will again increase. The Exchange
proposes to add twenty-eight more classes from among the most actively-
traded, multiply-listed options classes.\8\
---------------------------------------------------------------------------

    \8\ The Exchange has committed to file a proposed rule change
under Section 19(b)(3)(A) of the Act to identify the options classes
to be included in the second expansion.
---------------------------------------------------------------------------

    The minimum price variation for all classes to be included in the
Pilot Program, except for the QQQQs, will continue to be $0.01 for all
quotations in option series that are quoted at less than $3 per
contract and $0.05 for all quotations in option series that are quoted
at $3 per contract or greater. The QQQQs will continue to be quoted in
$0.01 increments for all options series.
    During the extended and expanded Pilot Program, NYSE Arca commits
to deliver four reports to the Commission. Each report will analyze the
impact of penny pricing on market quality and options system capacity.
The first report will analyze the penny pilot results from May 1, 2007
through September 27, 2007; the second will analyze the results from
September 28, 2007 through January 31, 2008; the third will analyze the
results from February 1, 2008 through July 31, 2008; and the fourth and
final report will examine the results from August 1, 2008 through
January 31, 2009. These reports will be provided to the Commission
within thirty days of the conclusion of the reporting period.

III. Discussion

    After careful review of the proposal and the comment letter, the
Commission finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\9\ In particular, the
Commission finds that the proposal is consistent with Section 6(b)(5)
of the Act,\10\ which requires, among other things, that the rules of
an exchange be designed to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------

    \9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    On June 28, 2005, the Pacific Exchange (now known as NYSE Arca)
announced its intention to begin quoting and trading all listed options
in penny increments.\11\ In June 2006, to facilitate the orderly
transition to quoting a limited number of options in penny increments,
Chairman Cox sent a letter to the six options exchanges urging the
exchanges that chose to begin quoting in smaller increments to plan for
the implementation of a limited penny pilot program to commence in
January 2007.\12\ All six of the options exchanges submitted proposals
to permit quoting a limited number of classes in smaller increments,
and, in January 2007, the Commission approved those proposals to
implement the current Pilot Program.\13\ The exchanges have now
submitted proposals to extend and further expand the Pilot.
---------------------------------------------------------------------------

    \11\ PCX News Release, ``Pacific Exchange to Trade Options in
Pennies,'' June 28, 2005.
    \12\ Commission Press Release 2006-91, ``SEC Chairman Cox Urges
Options Exchanges to Start Limited Penny Quoting,'' June 7, 2006.
    \13\ See Securities Exchange Act Release Nos. 55156 (January 23,
2007), 72 FR 4759 (February 1, 2007) (SR-NYSEArca-2006-73); 55162
(January 24, 2007), 72 FR 4738 (February 1, 2007) (Amex-2006-106);
55155 (January 23, 2007), 72 FR 4741 (February 1, 2007) (SR-BSE-
2006-49); 55154 (January 23, 2007), 72 FR 4743 (February 1, 2007)
(SR-CBOE-2006-92); 55161 (January 24, 2007), 72 FR 4754 (February 1,
2007) (SR-ISE-2006-62); and 55153 (January 23, 2007), 72 FR 4553
(January 31, 2007) (SR-Phlx-2006-74). As noted above, supra note 6
and accompanying text, the current Pilot is scheduled to expire on
September 27, 2007.
---------------------------------------------------------------------------

    The continued operation and phased expansion of the Pilot Program
will provide further valuable information to the exchanges, the
Commission, and others about the impact of penny quoting in the options
market. In particular, extending and expanding the Pilot Program as
proposed by NYSE Arca will allow further analysis of the impact of
penny quoting in the Pilot classes over a longer period of time on,
among other things: (1) Spreads; (2) peak quote rates; (3) quote
message traffic; (4) displayed size; (5) ``depth of book'' liquidity;
and (6) market structure. NYSE Arca has committed to provide the
Commission with periodic reports, which will analyze the impact of the
expanded Pilot Program. The Commission expects the Exchange to include
statistical information relating to these factors in its periodic
reports.
    An analysis of the current Pilot shows that the reduction in the
minimum quoting increment has resulted in narrowing the average quoted
spreads in all classes in the Pilot.\14\ A reduction in quoted spreads
means that customers and other market participants may be able to trade
options at better prices. The reduction in spreads also has led the
exchanges to reduce or eliminate their exchange-sponsored payment-for-
order-flow programs.\15\ The Commission believes that the proposed rule
change is designed to continue the narrowing of spreads.
---------------------------------------------------------------------------

    \14\ See NYSE Arca Options, Understanding Economic and Capacity
Impacts of the Penny Pilot, May 31, 2007 (``NYSE Arca Report''). See
also Amex, Penny Quoting Pilot Program Report, June 8, 2007 (``Amex
Report''); Box, Penny Pilot Data Review, June 18, 2007 (``Box
Report''); CBOE, Penny Pilot Report, June 1, 2007 (``CBOE Report'');
ISE, Penny Pilot Analysis, May 23, 2007 (``ISE Report''); and Phlx,
Options Penny Pricing Pilot Report, May 31, 2007 (``Phlx Report'').
    \15\ See Securities Exchange Act Release Nos. 55328 (February
21, 2007), 72 FR 9050 (February 28, 2007) (SR-Amex-2007-16); 55197
(January 30, 2007), 72 FR 5772 (February 7, 2007) (SR-BSE-2007-02);
55265 (February 9, 2007), 72 FR 7697 (February 16, 2007) (SR-CBOE-
2007-11); 55271 (February 12, 2007), 72 FR 7699 (February 16, 2007)
(SR-ISE-2007-08); 55223 (February 1, 2007) 72 FR 6306 (February 9,
2007) (SR-NYSEArca-2007-07); and 55290 (February 13, 2007), 72 FR
8051 (February 22, 2007) (SR-Phlx-2007-05).
---------------------------------------------------------------------------

    The Commission notes that, as anticipated, the Pilot has
contributed to the increase in quotation message traffic from the
options markets. However, while the increase in quotation message
traffic is appreciable, it has been manageable by the exchanges and the
Options Price Reporting Authority, and the Commission did not receive
any reports of disruptions in the dissemination of pricing information
as a result of quote capacity restraints. Although the Commission
anticipates that the proposed expansion of the Pilot Program may
contribute to further increases in quote message traffic, the
Commission believes that NYSE Arca's proposal is sufficiently limited
such that it is unlikely to increase quote message traffic beyond the
capacity of market participants' systems and disrupt the

timely receipt of quote information. The Commission also notes that
NYSE Arca has adopted and will continue to utilize quote mitigation
strategies that should mitigate the expected increase in quote
traffic.\16 \
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 56157 (July 27,
2007), 72 FR 42459 (August 2, 2007) (SR-NYSEArca-2007-71). Further,
the Commission notes that the other options exchanges participating
in the Pilot also have adopted and will continue to utilize quote
mitigation strategies.
---------------------------------------------------------------------------

    Overall trading activity in the options markets is very
concentrated, with a relatively few options classes accounting for a
significant share of total options volume. NYSE Arca's proposal, which
will expand the Pilot to include a limited number of options from among
the most actively-traded classes (based on average trading volume),
will provide an opportunity for reduced spreads where the greatest
amount of trading occurs, thus maximizing the economic benefit of the
Pilot while minimizing the impact of increased quote traffic.
    The commenter suggests that relative trading volume is the measure
that should be used to assess the success of quoting in smaller
increments.\17\ The commenter reported the percentage change in the
relative trading volume before and after the Pilot for each of the
thirteen classes.\18\ The commenter's data shows an increase in
relative trading volume for QQQQ, IWM, SHM, AMD, and SUNW, and a
decrease in relative trading volume for MSFT, INTC, GE, TXN, A, CAT,
WFMI and FLEX. The commenter believes the data shows that the Pilot
works well for index and sector products, but smaller increments caused
a decline in the relative trading volume for single stock options. The
commenter argues that much of the decrease in relative trading volume
in Pilot classes is a symptom of the decrease in displayed size
available for those classes. On the basis of a decline in the relative
trading volume, the commenter argues that single stock option classes
should be removed from the Pilot and replaced with liquid index or
sector option classes.
---------------------------------------------------------------------------

    \17\ See Citadel Letter, supra note 4.
    \18\ The commenter measures the relative trading volume of a
class as that class' trading volume as a percentage of total OCC
volume. The change in relative trading volume is the relative
trading volume from date of entrance into the Pilot to August 27,
2007 divided by the relative trading volume from November 1, 2006
through entrance in the Pilot.
---------------------------------------------------------------------------

    Much of the recent growth in options volume has been in the large
index and ETF products, such as the SPX, SPY, and the QQQQ. As their
relative trading volume increases, the aggregate relative trading
volume of other products necessarily declines (although actual volume
levels may increase). For example, the SPX, SPY, QQQQ, and IWM
accounted for 16.1% of total options volume in the four months before
the pilot and rose to 21.7% of volume in the five months after the
pilot.\19\ By definition, the relative trading volume of all other
classes (Pilot and non-Pilot) falls from 83.9% in the pre-Pilot period
to 78.3% in the post-Pilot period. Using the commenter's numerical
approach, the relative market share of SPX, SPY, QQQ, and IWM increased
by 34.8% ((21.7%/16.1%)-1). In contrast, the relative trading volume of
all other classes fell by 6.7% (78.3/83.9%)-1) in the post-Pilot period
compared to the pre-Pilot period. Thus, in addition to the random
variation in market shares that occur over time, there was an overall
decline in the relative trading volume of issues outside the four
largest index and ETF options although their actual aggregate volume
levels increased.
---------------------------------------------------------------------------

    \19\ The pre-Pilot period consists of the four months before the
Pilot commenced (October 1-January 25, 2007) and the post-Pilot
period consists of the five months after the Pilot commenced
(February 9, 2007-June 30, 2007). The two week period when the Pilot
classes were introduced are excluded from the analysis.
---------------------------------------------------------------------------

    More specifically, for the 100 and 500 most active classes,\20\
relative trading volume fell for 63% and 56%, respectively, of non-
Pilot classes. In the Pilot classes, seven, or 54%, of the thirteen
Pilot classes had a decline in market share and seven, or 70%, of the
ten single stock option classes had a decline in relative trading
volume.\21\
---------------------------------------------------------------------------

    \20\ All of the thirteen Pilot classes fall into the 500 most
actively-traded, and nine are within the 100 most actively-traded
group.
    \21\ The change in relative trading volume for the median stock
for the top 500 (100) classes is -8% (-13%), compared to a change of
-3% for the thirteen Pilot stocks and a change of -24% for the ten
single stock options. The Commission notes that, with a Pilot sample
size of thirteen or ten, these statistics will be highly sensitive
to the performance of one or two classes.
---------------------------------------------------------------------------

    The Commission does not believe that the data at this time supports
the conclusion that a decrease in relative trading volume in the Pilot
classes is due to a reduction of the minimum quoting variation. In
fact, the data demonstrates that declines in relative trading volume
were not limited to stocks included in the Pilot, and substantial
declines in relative trading volume, as defined by the commenter,
describe a large portion of classes that were not in the Pilot.
Therefore, based on the data reviewed to date, the Commission cannot
conclude that the Pilot has had an adverse impact on volume in the
Pilot securities. Therefore, the Commission believes that NYSE Arca's
proposal to select additional classes from among the most actively-
traded options has a reasonable basis and is consistent with the
Act.\22\
---------------------------------------------------------------------------

    \22\ The Commission notes that the classes the commenter
specifically recommends for inclusion in the expanded Pilot--SPY,
DIA OIH, XLF, and XLE--are among classes proposed by NYSE Arca to be
included in the Pilot Program beginning September 28, 2007.
---------------------------------------------------------------------------

    The Commission believes that the impact of smaller increments on
trading volume is one of the more difficult aspects of the Pilot to
assess, and notes that the exchange reports did not show a clear change
in trading volume.\23\ While some industry participants expressed
disappointment that volume had not increased, the bid-ask spread is
only one factor that influences volume. Other factors that impact
option volume are trading activity in the underlying security and in
related products, volatility in the market and in the underlying
security, as well as firm and market specific information and events.
The Commission believes that the addition of more securities in the
next phase will increase the sample size and should help in further
analysis of such issues.
---------------------------------------------------------------------------

    \23\ See Amex Report, supra note 14, at 6-7; CBOE Report, supra
note 14, Attachment at pages 5-6; ISE Report, supra note 14, at 17-
20; and NYSE Arca Report, supra note 14, at 15.
---------------------------------------------------------------------------

    The commenter also expressed concern that the quoted size in the
Pilot classes is dropping to levels that are ``sub-optimal'' or
``inadequate'' for institutional size orders, and recommended that the
Commission carefully evaluate the impact of penny quoting on liquidity
before allowing the exchanges to expand the Pilot. The Commission fully
agrees that the impact of the Pilot on displayed size, as well as non-
displayed ``depth of book,'' and the impact of any decreased size on
market and execution quality, is an area that should be carefully
analyzed as the Pilot continues. The Commission also recognizes that
the exchange reports show there has, in fact, been a reduction in the
displayed size available in the Pilot classes.\24\ The Commission is
not at this time, however, able to conclude that this decrease has
caused a decrease in trading volume or relative trading volume, or
other harm to the market, as a result of the Pilot Program. The
Commission does, however, expect NYSE Arca to include in its reports an
analysis of the market impact of reducing the minimum price increment,
particularly on the ability of market

participants to effectively execute large-sized orders. The Commission
will analyze the information provided in the Exchange's reports, in
conjunction with the information provided by other exchanges and market
participants, to inform its evaluation and consideration of any
exchange's proposed further expansion of the Pilot.
---------------------------------------------------------------------------

    \24\ See Amex Report, supra note 14, at 6; BOX Report, supra
note 14, at 2; CBOE Report, supra note 14, at Attachment page 2; ISE
Report, supra note 14, at 7-8; NYSE Arca Report, supra note 14, at
9-10; and Phlx Report, supra note 14, at 3-4 and 6-7.
---------------------------------------------------------------------------

    The commenter further noted, to the extent that additional size may
be available below the best bid or offer,\25\ options market
participants discount the value of such liquidity because it is
generally not transparent to the market and is not easily accessible
even if displayed.\26\ The commenter noted that, unlike in the equities
markets, market participants cannot quickly sweep multiple markets
through multiple price levels to reach such additional liquidity. The
Commission encourages the exchanges to consider measures that would
facilitate access to depth of book quotes.
---------------------------------------------------------------------------

    \25\ Only two exchanges provided information on ``depth of
book'' on their markets in the Pilot classes. See NYSE Arca Report
at 8-10, supra note 14, and ISE Report, supra note 14, at 9. ISE
reported that the average total size of all quotes on its book at
all price levels, weighted for volume, for all thirteen Pilot
classes was reduced by 61%. See ISE Report, supra note 14, at 9.
NYSE Arca compared liquidity resident in its book within the legacy
minimum price variation to pre-Pilot top of book liquidity and
reported that volume weighted liquidity across all thirteen Pilot
classes decreased 1%. See NYSE Arca Report, supra note 14, at 8.
    \26\ The Commission notes that currently only NYSE Arca makes
available quotes and orders on its book below the NBBO. See http://www.nysedata.com/nysedata/InformationProducts/ArcaBook/tabid/293/Default.aspx.
 The Commission anticipates that to the extent this

display of information proves to be valuable to the options market
as a whole, other exchanges may choose to make this information
available as well.
---------------------------------------------------------------------------

    Finally, the commenter recommends removing the poorest performing
single stock names from the Pilot and replacing them with liquid index
or sector products.\27\ The Commission agrees that there should be a
mechanism for removing option classes from the Pilot. The Commission
specifically requested comment in the notice of NYSE Arca's proposal
on: (1) Whether there are circumstances under which classes included in
the Pilot should be removed; (2) if so, what factors should be
considered in making the determination to remove a class from the
Pilot, specifically whether an objective standard should be used or
whether a more subjective analysis should be allowed; (3) what concerns
might arise by removing a class from the Pilot, and how could such
concerns be ameliorated; (4) how frequently should such an analysis be
undertaken, or should the evaluation be automated; and (5) if a class
is to be removed from the Pilot, how much notice should be given to
market participants that the quoting increment will change, but did not
receive any comments. The Commission will continue to consider comments
on how to fairly and objectively determine if a class should be removed
from the Pilot. Finally, to the extent that the Exchange files a
proposed rule change to further expand the Pilot, the Commission urges
it to include in any such proposal a methodology for removing classes
from the Pilot.
---------------------------------------------------------------------------

    \27\ See supra, note 22.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission believes that the
proposed rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\28\ that the proposed rule change (SR-NYSEArca-2007-88) be, and
hereby is, approved on a pilot basis, which will end on March 27, 2009.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-19498 Filed 10-2-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 84, Number 127 (Tuesday, July 2, 2019)]
[Rules and Regulations]
[Pages 31684-31686]
[FR Doc No: 2019-13498]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2018-0802; FRL-9994-20-Region 9]

Air Plan Approval; California; Antelope Valley Air Quality
Management District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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

SUMMARY: The Environmental Protection Agency (EPA) is taking final
action to approve a revision to the Antelope Valley Air Quality
Management District (AVAQMD) portion of the California State
Implementation Plan (SIP). This revision concerns emissions of volatile
organic compounds (VOCs) from solvent cleaning operations. We are
approving a local rule that regulates these emission sources under the
Clean Air Act (CAA or the Act).

DATES: This rule will be effective on August 1, 2019.

ADDRESSES: The EPA has established a docket for this action under
Docket ID No. EPA-R09-OAR-2018-0802. All documents in the docket are
listed on the https://www.regulations.gov website. Although listed in
the index, some information is not publicly available, e.g.,
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Certain other material, such as
copyrighted material, is not placed on the internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available through https://www.regulations.gov, or please
contact the person identified in the FOR FURTHER INFORMATION CONTACT
section for additional availability information.

FOR FURTHER INFORMATION CONTACT: Robert Schwartz, EPA Region IX, 75
Hawthorne Street, San Francisco, CA 94105,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and
``our'' refer to the EPA.

Table of Contents

I. Proposed Action

II. Public Comments and EPA Responses
III. EPA Action
IV. Incorporation by Reference
V. Statutory and Executive Order Reviews

I. Proposed Action

    On March 22, 2019 (84 FR 10748), the EPA proposed to approve the
following rule into the California SIP.

----------------------------------------------------------------------------------------------------------------
           Local agency                 Rule No.             Rule title             Amended         Submitted
----------------------------------------------------------------------------------------------------------------
AVAQMD............................            1171   Solvent Cleaning                8/21/2018       10/30/2018
                                                      Operations.
----------------------------------------------------------------------------------------------------------------

    We proposed to approve this rule because we determined that it
complies with the relevant CAA requirements. Our proposed action
contains more information on the rule and our evaluation.

II. Public Comments and EPA Responses

    The EPA's proposed action provided a 30-day public comment period.
During this period, we received no comments.

III. EPA Action

    No comments were submitted. Therefore, as authorized in section
110(k)(3) of the Act, the EPA is fully approving this rule into the
California SIP. The EPA is also converting the conditional approval of
the AVAQMD reasonably available control technology (RACT) SIPs for the
1997 and 2008 ozone standards with respect to Rule 1171 into a full
approval. In this final action, the EPA is also making a non-
substantive revision to Sec.  52.248(b) of title 40 of the Code of
Federal Regulations. Due to a previous drafting error, the text stating
that ``[i]f the State fails to meet its commitment by November 9, 2018,
the conditional approval is treated as a disapproval'' was included in
paragraph (b)(4) as opposed to in paragraph (b) introductory text. The
EPA's rephrasing of paragraph (b) moves this provision up to paragraph
(b) introductory, allowing the text of paragraph (b)(4), referring to
Rule 1171, to be removed and reserved because the District has now met
its commitment for Rule 1171.

IV. Incorporation by Reference

    In this rule, the EPA is finalizing regulatory text that includes
incorporation by reference. In accordance with requirements of 1 CFR
51.5, the EPA is finalizing the incorporation by reference of the
AVAQMD rules described in the amendments to 40 CFR part 52 set forth
below. The EPA has made, and will continue to make, these documents
available through www.regulations.gov and at the EPA Region IX Office
(please contact the person identified in the FOR FURTHER INFORMATION
CONTACT section of this preamble for more information).

V. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a
SIP submission that complies with the provisions of the Act and
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a).
Thus, in reviewing SIP submissions, the EPA's role is to approve state
choices, provided that they meet the criteria of the Clean Air Act.
Accordingly, this action merely approves state law as meeting Federal
requirements and does not impose additional requirements beyond those
imposed by state law. For that reason, this action:
     Is not a significant regulatory action subject to review
by the Office of Management and Budget under Executive Orders 12866 (58
FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
     Is not an Executive Order 13771 (82 FR 9339, February 2,
2017) regulatory action because SIP approvals are exempted under
Executive Order 12866;
     Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the Clean Air Act; and
     Does not provide the EPA with the discretionary authority
to address, as appropriate, disproportionate human health or
environmental effects, using practicable and legally permissible
methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, the SIP is not approved to apply on any Indian
reservation land or in any other area where the EPA or an Indian tribe
has demonstrated that a tribe has jurisdiction. In those areas of
Indian country, the rule does not have tribal implications and will not
impose substantial direct costs on tribal governments or preempt tribal
law as specified by Executive Order 13175 (65 FR 67249, November 9,
2000).
    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. The EPA will submit a report containing this action and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).
    Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by September 3, 2019. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this action for the purposes of
judicial review nor does it extend the time within which a petition for
judicial review may be filed, and shall not postpone the effectiveness
of such rule or action. This action may not be challenged later in
proceedings to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

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

    Dated: May 14, 2019.
Deborah Jordan,
Acting Regional Administrator, Region IX.

    Part 52, chapter I, title 40 of the Code of Federal Regulations is
amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

Subpart F--California

0
2. Section 52.220 is amended by adding paragraphs (c)(262)(i)(E)(4) and
(c)(521) to read as follows:

Sec.  52.220  Identification of plan-in part.

* * * * *
    (c) * * *
    (262) * * *
    (i) * * *
    (E) * * *
    (4) Previously approved on May 24, 2001 in paragraph
(c)(262)(i)(E)(1) of this section and now deleted with replacement in
(c)(521)(i)(A)(1) of this section, Rule 1171, adopted on November 17,
1998.
* * * * *
    (521) New and amended regulations for the following APCDs were
submitted on October 30, 2018 by the Governor's designee.
    (i) Incorporation by reference. (A) Antelope Valley Air Quality
Management District.
    (1) Rule 1171, ``Solvent Cleaning Operations,'' amended on August
21, 2018.
    (2) [Reserved]
    (B) [Reserved]
    (ii) [Reserved]

0
3. Section 52.248 is amended by revising paragraph (b) to read as
follows:

Sec.  52.248  Identification of plan--conditional approval.

* * * * *
    (b) The EPA is conditionally approving portions of the California
SIP revisions submitted on January 31, 2007 and October 23, 2015,
demonstrating control measures in the Antelope Valley portion of the
Los Angeles-San Bernardino Counties (West Mojave Desert) nonattainment
area implement RACT for the 1997 and 2008 ozone standards. The
conditional approval is based on a commitment from the state to submit
new or revised rules that will correct deficiencies in the rules listed
in paragraphs (b)(1) through (4) of this section by November 9, 2018.
If the State fails to meet its commitment by November 9, 2018, the
conditional approval is treated as a disapproval.
    (1) [Reserved]
    (2) Rule 1110.2, Emissions from Stationary, Non-road & Portable
Internal Combustion Engines;
    (3) Rule 1151, Motor Vehicle and Mobile Equipment Coating
Operations; and
    (4) [Reserved]
* * * * *
[FR Doc. 2019-13498 Filed 7-1-19; 8:45 am]
BILLING CODE 6560-50-P