[Federal Register Volume 84, Number 21 (Thursday, January 31, 2019)]
[Notices]
[Pages 833-836]
[FR Doc No: 2019-00481]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84976; File No. SR-NYSEARCA-2018-77]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change To Amend Rule 7.44-E To Expand and Modify the Exchange's
Retail Liquidity Program

December 26, 2018.

I. Introduction

    On October 26, 2018, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``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 amend Rule 7.44-E to expand the Exchange's
Retail Liquidity Program (``RLP'') to all securities traded on NYSE
Arca and make certain other modifications.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal
Register on November 14, 2018.\3\ On December 10, 2018, the Commission
extended to February 12, 2019, the time period in which to approve,
disapprove, or institute proceedings to determine whether to approve or
disapprove, the proposed rule change.\4\ The Commission received no
comments on the proposed rule change. This order institutes proceedings
under Section 19(b)(2)(B) of the Act \5\ to determine whether to
approve or disapprove the proposed rule change.
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    \3\ See Securities Exchange Act Release No. 84547 (November 7,
2018), 83 FR 56890 (``Notice'').
    \4\ See Securities Exchange Act Release No. 84772, 83 FR 64381
(December 14, 2018).
    \5\ 15 U.S.C. 78(s)(b)(2)(B).
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II. Summary of the Proposed Rule Change

    The Exchange proposes to amend Rule 7.44-E, which sets forth the
Exchange's Retail Liquidity Program (the ``Program''), to: (i) Expand
the Program's availability to all securities traded on the Exchange;
(ii) remove

unused functionality by eliminating the Type 2--Retail Order and no
longer permit Retail Price Improvement Orders (``RPI'') to be
designated as a Mid-Point Liquidity (``MPL'') Order; \6\ and (iii)
offer additional functionality to RPI Orders by allowing them to
include an optional offset.
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    \6\ Rule 7.31-E(d)(3).
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    The Program is intended to attract retail order flow to the
Exchange, and allow such order flow to receive potential price
improvement.\7\ The Program is currently limited to trades occurring at
prices equal to and greater than $1.00 a share. The program currently
operates on a pilot basis and was set to expire on December 31, 2018,
but was recently extended to expire on June 30, 2019.\8\
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    \7\ See Securities Exchange Act Release No. 71176 (December 23,
2013), 78 FR 79524 (December 30, 2013) (SR-NYSEArca-2013-107) (``RLP
Approval Order'').
    \8\ See Securities Exchange Act Release No. 84773 (December 10,
2018), 83 FR 64419 (December 14, 2018).
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    Under Exchange Rule 7.44-E, a class of market participant called
Retail Liquidity Providers (``RLPs'') \9\ and non-RLP member
organizations are able to provide potential price improvement to retail
investor orders in the form of a non-displayed order that is priced
better than the best protected bid or offer (``PBBO''), called an RPI.
When there is an RPI in a particular security priced at least $0.001
better than the PBB or PBO, the Exchange disseminates an indicator,
known as the Retail Liquidity Identifier (``RLI''), that such interest
exists. Retail Member Organizations (``RMOs'') can submit a Retail
Order to the Exchange, which interacts, to the extent possible, with
available contra-side RPIs and orders with a working price between the
PBBO. The segmentation in the Program allows retail order flow to
receive potential price improvement as a result of their order flow
being deemed more desirable by liquidity providers.\10\
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    \9\ The Program also allows for RLPs to register with the
Exchange. However, any firm can enter RPI orders into the system.
    \10\ RLP Approval Order, 77 FR at 79528.
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Expansion of Program's Scope

    The Exchange proposes to expand the Program's availability to all
securities traded on the Exchange. As more fully set forth in the
Notice, the Exchange proposed that in addition to NYSE Arca-listed
securities and UTP Securities, the Program would cover securities
listed on the New York Stock Exchange LLC (``NYSE''), which are
currently excluded from the Program would be covered by the Program.
The Exchange states that this expansion would make the Program more
similar to the retail price improvement program offered by Cboe BYX
Exchange, Inc. (``BYX''), that is available to all securities trading
on BYX.\11\
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    \11\ See Notice at supra note 3 at 56891.
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Elimination of Type 2--Retail Orders

    Also as more fully set forth in the Notice, the Exchange proposes
to amend Rule 7.44-E(k) to remove unused functionality by eliminating
the Type 2--Retail Order.\12\ As a result, the Exchange would offer a
single category of Retail Orders. The Exchange states that it has not
received a Retail Order designated as Type 2 and, therefore, proposes
to no longer support this functionality.\13\
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    \12\ See Id.
    \13\ See Id.
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RPI Orders

    In addition, as more fully set forth in the Notice, the Exchange
proposes to remove unused functionality by no longer permitting RPI
Orders to be designated as MPL Orders, and also proposes to offer
additional functionality to RPI Orders by allowing them to include an
optional offset.\14\
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    \14\ See id. at 56892.
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    RPIs are non-displayed and only execute against Retail Orders. RPIs
are generally entered at a single limit price, rather than being pegged
to the PBBO. One exception is that a RPI Order could also be designated
as an MPL Order, in which case the order would be pegged to the
midpoint of the PBBO and re-priced as the PBBO changes.
    Designation as MPL Orders. The Exchange proposes to remove unused
functionality that permits RPI Orders to be designated as MPL Orders.
Rule 7.44-E(a)(4)(D) currently states that ``[a]n RPI must be
designated as either a Limit Non-Displayed Order or MPL Order, and an
order so designated will interact with incoming Retail Orders only and
will not interact with either a Type 2--Retail Order Day or Type 2--
Retail Order Market that is resting on the NYSE Arca Book.'' The
Exchange notes that to date all RPI Orders have been designated as Non-
Displayed Limit Orders, not MPL Orders.
    As proposed, RPI Orders could no longer be designated as MPL
Orders. To effect this change, the Exchange proposes to revise the
above-referenced sentence from Rule 7.44-E(a)(4)(D) to provide instead
that ``[a]n RPI . . . will interact with incoming Retail Orders only.''
The remaining text of the current rule is no longer necessary because
the reference to Non-Displayed Limit Orders is superfluous as RPI
Orders by definition are non-displayed and must include a limit
price.\15\ Further, references to Type 2--Retail Orders are unnecessary
because they would no longer be offered by the Exchange, as proposed
above.
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    \15\ Under Rule 7.44-E(a).
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    Optional Offset Functionality. The Exchange proposes to allow RPIs
to include an optional offset. Rule 7.44-E(a)(4) would be amended to
include new paragraph (a)(4)(C) \16\ that would provide that an RPI may
include an optional offset, which may be specified up to three
decimals. The working price of an RPI to buy (sell) with an offset
would be the lower (higher) of the PBB (PBO) plus (minus) the offset or
the limit price of the RPI. An RPI with an offset would not be eligible
to trade if the working price is below $1.00. If an RPI to buy (sell)
with an offset would have a working price that is more than three
decimals, the working price would be truncated to three decimals.
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    \16\ The Exchange proposes to renumber the remaining paragraphs
under Rule 7.44-E(a)(4) accordingly.
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    RPIs that include an offset would interact with Retail Orders as
follows. Assume an RLP enters RPI sell interest with an offset of
$0.001 and a limit price of $10.10 while the PBO is $10.11. The RPI
could interact with an incoming buy Retail Order at $10.109. If the PBO
changes to $10.12, the RPI could interact with an incoming buy Retail
Order at $10.119. If, however, the PBO changes again to $10.10, the RPI
could not interact with the Retail Order because the price required to
deliver the minimum $0.001 price improvement ($10.099) would violate
the RLP's limit price of $10.10.
    If an RLP otherwise enters an offset greater than the minimum
required price improvement and the offset would produce a price that
would violate the RLP's limit price, the offset would be applied only
to the extent that it respects the RLP's limit price. By way of
illustration, assume RPI buy interest is entered with an offset of
$0.005 and a limit price of $10.112 while the PBB is at $10.11. The RPI
could interact with an incoming sell Retail Order at $10.112, because
it would produce the required price improvement without violating the
RLP's limit price, but it could not interact above the $10.112 limit
price.
    The Exchange proposes to make a related change to Rule 7.16-
E(f)(5)(C) to specify that, like Pegged Orders and MPL Orders, RPIs
with an offset would use the National Best Bid (``NBB'') instead of the
PBB as the reference price when a Short Sale Price Test is triggered

pursuant to Rule 201 of Regulation SHO.\17\
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    \17\ 17 CFR 242.201.
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III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \18\ to determine whether the proposal should be
approved or disapproved. Institution of proceedings is appropriate at
this time in view of the legal and policy issues raised by the
proposal. Institution of disapproval proceedings does not indicate that
the Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described in greater detail below, the
Commission seeks and encourages interested persons to provide
additional comment on the proposal.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\19\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act,\20\ which requires that the rules of an exchange be
designed, among other things, to prevent fraudulent and manipulative
acts and practices, 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, and which prohibits the rules of an
exchange from being designed to permit unfair discrimination between
customers, issuers, brokers, or dealers, and with Section 6(b)(8) of
the Act, which requires that the rules of an exchange not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\21\
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    \19\ Id.
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(b)(8).
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    The Exchange notes that the Program was intended to create
additional price improvement opportunities for retail investors by
segmenting retail order flow on the Exchange.\22\ When the Commission
initially approved the Program on a pilot basis, it explained that it
would monitor the Program throughout the pilot period for its potential
effects on public price discovery and on the broader market
structure.\23\ The Exchange seeks to modify and expand the Program as
the pilot is approaching expiration, prior to providing an analysis of
what it considers to be the economic benefits for retail investors and
the marketplace flowing from operation of the Program. Under the
Commission's Rules of Practice, the ``burden to demonstrate that a
proposed rule change is consistent with the [Act] and the rules and
regulations issued thereunder . . . is on the [SRO] that proposed the
rule change.'' \24\ The description of a proposed rule change, its
purpose and operation, its effect, and a legal analysis of its
consistency with applicable requirements must all be sufficiently
detailed and specific to support an affirmative Commission finding,\25\
and any failure of an SRO to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\26\ The Commission questions whether
the proposal to expand and modify the Program prior to Commission
consideration of whether to approve the Program, as it has been
operating, on a permanent basis is consistent with the Act,
particularly given that the Commission has questioned whether similar
programs have achieved their stated goals.\27\ The Commission believes
it is appropriate to institute proceedings to allow for additional
consideration and comment on the issues raised herein, any potential
response to comments or supplemental information provided by the
Exchange, and any additional independent analysis by the Commission.
The Commission believes that these issues raise questions as to whether
the Exchange has met its burden to demonstrate that the Program, as
proposed to be expanded and amended, is consistent with the Act, and
specifically, with its requirements that the Program be designed to
perfect the mechanism of a free and open market and the national market
system, protect investors and the public interest, and not be unfairly
discriminatory; or not impose an unnecessary or inappropriate burden on
competition.\28\
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    \22\ See Notice, supra note 3 at 56891.
    \23\ See RLP Approval Order, supra note 7.
    \24\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
    \25\ See id.
    \26\ See id.
    \27\ See Securities Exchange Act Release Nos. 84600 (November
15, 2018), 83 FR 58802 (November 21, 2018), 84472 (October 23,
2018), 83 FR 54411 (October 29, 2018), and 84183 (September 18,
2018), 83 FR 48350 (September 24, 2018) (orders instituting
proceedings to determine whether to approve or disapprove Pilot
Retail Price Improvement Programs of CboeBYX, Nasdaq BX, and NYSE,
respectively).
    \28\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Sections 6(b)(5) and 6(b)(8), or any other provision of
the Exchange Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral presentation.\29\
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    \29\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by February 21, 2019. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
March 7, 2019.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSE ARCA-2018-77 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEARCA-2018-77. The
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will

post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549, on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
such filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
publicly available. All submissions should refer to File Number SR-
NYSEARCA-2018-77 and should be submitted on or before February 21,
2019. Rebuttal comments should be submitted by March 7, 2019.
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    \30\ 17 CFR 200.30-3(a)(57) and (58).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-00481 Filed 1-30-19; 8:45 am]
BILLING CODE P


[Federal Register: May 8, 2007 (Volume 72, Number 88)]
[Proposed Rules]
[Page 26057-26068]
[DOCID:fr08my07-33]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 81

[EPA-R05-OAR-2006-0715; FRL-8310-9]

Determination of Attainment, Approval and Promulgation of
Implementation Plans and Designation of Areas for Air Quality Planning
Purposes; Indiana; Redesignation of the Clark and Floyd Counties 8-Hour
Nonattainment Area to Attainment for Ozone

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: On November 15, 2006, the Indiana Department of Environmental
Management (IDEM) submitted a request to redesignate the Indiana
portion of the Louisville 8-hour ozone National Ambient Air Quality
Standard (NAAQS) nonattainment area (Clark and Floyd Counties) to
attainment for the 8-hour ozone NAAQS, and a request for EPA approval
of a 14-year maintenance plan for Clark and Floyd Counties. Today, EPA
is making a determination that the Indiana portion of the Louisville 8-
hour ozone nonattainment area has attained the 8-hour ozone NAAQS. This
determination is based on three years of complete, quality-assured
ambient air quality monitoring data for the 2003-2005 ozone seasons
that demonstrate that the 8-hour ozone NAAQS has been attained in the
area. EPA is proposing to approve the request to redesignate Clark and
Floyd Counties to attainment of the 8-hour ozone standard based on its
determination that the Louisville 8-hour ozone nonattainment area has
met the criteria for redesignation to attainment specified in the Clean
Air Act (CAA). EPA is also proposing to approve Indiana's maintenance
plan which adequately supports continued attainment through 2020 and,
for purposes of transportation conformity, the Volatile Organic
Compounds (VOC) and Nitrogen Oxides (NOX) Motor Vehicle
Emission Budgets (MVEBs) for the year 2003 and 2020.

DATES: Comments must be received on or before June 7, 2007.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R05-
OAR-2006-0715, by one of the following methods:
     http://www.regulations.gov: Follow the on-line

instructions for submitting comments.
     E-mail<EMAIL_ADDRESS>     Fax:<PHONE_NUMBER>.
     Mail: John M. Mooney, Chief, Criteria Pollutant Section,
Air Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77
West Jackson Boulevard, Chicago, Illinois 60604.
     Hand Delivery: John M. Mooney, Chief, Criteria Pollutant
Section, Air Programs Branch (AR-18J), U.S. Environmental Protection
Agency, 77 West Jackson Boulevard, Chicago, Illinois. Such deliveries
are only accepted during the Regional Office's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information. The Regional Office's official hours of operation
are Monday through Friday, 8:30 a.m. to 4:30 p.m. excluding Federal
holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R05-OAR-
2006-

0715. EPA's policy is that all comments received will be included in
the public docket without change and may be made available online at
http://www.regulations.gov, including any personal information

provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI, or otherwise protected, through http://www.regulations.gov or e-mail. The http://www.regulations.gov website

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

automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters and any form of encryption, and should be
free of any defects or viruses.
    Docket: All documents in the docket are listed in the http://www.regulations.gov
 index. Although listed in the index, some

information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hardcopy.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hardcopy at the Environmental

Protection Agency, Region 5, Air and Radiation Division, 77 West
Jackson Boulevard, Chicago, Illinois 60604. This facility is open from
8:30 a.m. to 4:30 p.m., Monday through Friday, excluding Federal
holidays. It is recommended that you telephone Steven Rosenthal,
Environmental Engineer, at<PHONE_NUMBER>, before visiting the Region 5
office.

FOR FURTHER INFORMATION CONTACT: Steven Rosenthal, Environmental
Engineer, Criteria Pollutant Section, Air Programs Branch (AR-18),
Environmental Protection Agency, Region 5, 77 West Jackson Boulevard,
Chicago, Illinois 60604,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we,''
``us,'' or ``our'' is used, we mean the EPA. This supplementary
information section is arranged as follow:

I. What Action Is EPA Proposing to Take?
II. What Is the Background for This Action?
III. What Are the Criteria for Redesignation to Attainment?
IV. What Are EPA's Analyses of the State's Redesignation Request and
What Are the Bases for EPA's Proposed Action?
V. Has Indiana Adopted Acceptable Motor Vehicle Emissions Budgets
for the End of the 14-Year Maintenance Plan Which Can Be Used To
Support Conformity Determinations?
VI. What Is the Effect of EPA's Proposed Action?
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing to Take?

    We are proposing to take several related actions for the Indiana
portion of the Louisville 8-hour nonattainment area (Clark and Floyd
Counties). First, we are proposing to determine that Clark and Floyd
Counties have attained the 8-hour ozone NAAQS based on air quality for
the period of 2003 through 2005. Second, we are proposing to approve
Indiana's ozone maintenance plan for Clark and Floyd Counties as a
revision of the Indiana SIP. The maintenance plan is designed to keep
Clark and Floyd Counties in attainment of the 8-hour ozone standard
through 2020 by ensuring that the VOC and NOX emissions in
both Clark and Floyd Counties and the entire Louisville area will be
lower in 2020 than in 2003, an attainment year. As supported by and
consistent with the ozone maintenance plan, we are also proposing to
approve the 2003 and the 2020 VOC and NOX MVEBs for the
Louisville area for transportation conformity purposes. We are also
proposing to approve the request from the State of Indiana to change
the designation of Clark and Floyd Counties from nonattainment to
attainment of the 8-hour ozone NAAQS. We have determined that Indiana
and Clark and Floyd Counties have met the requirements for
redesignation to attainment under section 107(d)(3)(E) of the Clean Air
Act (CAA).

II. What Is the Background for This Action?

A. General Background Information

    EPA has determined that ground-level ozone is detrimental to human
health. On July 18, 1997, EPA promulgated an 8-hour ozone NAAQS of 0.08
parts per million parts of air (0.08 ppm) (80 parts per billion (ppb))
(62 FR 38856).\1\ This 8-hour ozone standard replaced a prior 1-hour
ozone NAAQS, which had been promulgated on February 8, 1979 (44 FR
8202), and which was revoked on June 15, 2005 (69 FR 23858).
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    \1\ This standard is violated in an area when any ozone monitor
in the area (or in its impacted downwind environs) records 8-hour
ozone concentrations with an average of the annual fourth-highest
daily maximum 8-hour ozone concentrations over a three-year period
equaling or exceeding 85 ppb. 40 CFR 50.10.
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    Ground-level ozone is not emitted directly by sources. Rather,
emitted NOX and VOC react in the presence of sunlight to
form ground-level ozone along with other secondary compounds.
NOX and VOC are referred to as ``ozone precursors.'' Control
of ground-level ozone concentrations is achieved through controlling
VOC and NOX emissions.
    The CAA required EPA to designate as nonattainment any area that
violated the 8-hour ozone NAAQS. The Federal Register notice
promulgating these designations and classifications was published on
April 30, 2004 (69 FR 23857).
    The CAA contains two sets of provisions--subpart 1 and subpart 2--
that address planning and emission control requirements for
nonattainment areas. Both are found in title I, part D of the CAA.
Subpart 1 contains general, less prescriptive requirements for all
nonattainment areas for any pollutant governed by a NAAQS. Subpart 2
contains more specific requirements for certain ozone nonattainment
areas, and applies to ozone nonattainment areas classified under
section 181 of the CAA.
    In the April 30, 2004, designation rulemaking, EPA divided 8-hour
ozone nonattainment areas into the categories of subpart 1
nonattainment (``basic'' nonattainment) and subpart 2 nonattainment
(``classified'' nonattainment). EPA based this division on the area's
8-hour ozone design values (i.e., on the three-year averages of the
annual fourth-highest daily maximum 8-hour ozone concentrations at the
worst-case monitoring sites in the areas) and on their 1-hour ozone
design values (i.e., on the fourth-highest daily maximum 1-hour ozone
concentrations over the three-year period at the worst-case monitoring
sites in the areas).\2\ EPA classified 8-hour ozone nonattainment areas
with 1-hour ozone design values equaling or exceeding 121 ppb as

subpart 2, classified nonattainment areas. EPA classified all other 8-
hour nonattainment areas as subpart 1, basic nonattainment areas. The
basis for area classification was explained in a separate April 30,
2004 final rule (the Phase 1 implementation rule) (69 FR 23951).
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    \2\ The 8-hour ozone design value and the 1-hour ozone design
value for each area were not necessarily recorded at the same
monitoring site. The worst-case monitoring site for each ozone
concentration averaging time was considered for each area.
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    Emission control requirements for classified nonattainment areas
are linked to area classifications. Areas with more serious ozone
pollution problems are subject to more prescribed requirements and
later attainment dates. The prescribed emission control requirements
are designed to bring areas into attainment by their specified
attainment dates.
    In the April 30, 2004 ozone designation/classification rulemaking,
EPA designated the Louisville nonattainment area, including Clark and
Floyd Counties as a subpart 1 basic nonattainment area for the 8-hour
ozone NAAQS. EPA based the designation on ozone data collected during
the 2001-2003 period.
    On November 15, 2006, the State of Indiana requested redesignation
of Clark and Floyd Counties to attainment of the 8-hour ozone NAAQS
based on ozone data collected in these counties from 2003-2005.

B. What Is the Impact of the December 22, 2006 United States Court of
Appeals Decision Regarding EPA's Phase 1 Implementation Rule?

1. Summary of Court Decision
    On December 22, 2006, the U.S. Court of Appeals for the District of
Columbia Circuit vacated EPA's Phase 1 Implementation Rule for the 8-
hour Ozone Standard. (69 FR 23951, April 30, 2004). South Coast Air
Quality Management Dist. v. EPA, 472 F.3d 882 (D.C. Cir. 2006). The
Court held that certain provisions of EPA's Phase 1 Rule were
inconsistent with the requirements of the Clean Air Act. The Court
rejected EPA's reasons for implementing the 8-hour standard in
nonattainment areas under Subpart 1 in lieu of subpart 2 of Title I,
part D of the Act. The Court also held that EPA improperly failed to
retain four measures required for 1-hour nonattainment areas under the
anti-backsliding provisions of the regulations: (1) Nonattainment area
New Source Review (NSR) requirements based on an area's 1-hour
nonattainment classification; (2) Section 185 penalty fees for 1-hour
severe or extreme nonattainment areas; (3) measures to be implemented
pursuant to section 172(c)(9) or 182(c)(9)of the Act, on the
contingency of an area not making reasonable further progress toward
attainment of the 1-hour NAAQS, or for failure to attain that NAAQS;
and (4) certain conformity requirements for certain types of Federal
actions. The Court upheld EPA's authority to revoke the 1-hour standard
provided there were adequate anti-backsliding provisions.
    This section sets forth EPA's views on the potential effect of the
Court's ruling on this redesignation action. For the reasons set forth
below, EPA does not believe that the Court's ruling alters any
requirements relevant to this redesignation action so as to preclude
redesignation, and does not prevent EPA from finalizing this
redesignation. EPA believes that the Court's decision, as it currently
stands or as it may be modified based upon any petition for rehearing
that has been filed, imposes no impediment to moving forward with
redesignation of this area to attainment, because in either
circumstance redesignation is appropriate under the relevant
redesignation provisions of the Act and longstanding policies regarding
redesignation requests.
2. Requirements Under the 8-Hour Standard
    With respect to the 8-hour standard, the Court's ruling rejected
EPA's reasons for classifying areas under Subpart 1 for the 8-hour
standard, and remanded that matter to the Agency. Consequently, it is
possible that this area could, during a remand to EPA, be reclassified
under Subpart 2. Although any future decision by EPA to classify this
area under Subpart 2 might trigger additional future requirements for
the area, EPA believes that this does not mean that redesignation
cannot now go forward. This belief is based upon (1) EPA's longstanding
policy of evaluating State submissions in accordance with the
requirements due at the time the request is submitted; and, (2)
consideration of the inequity of applying retroactively any future
requirements.
    First, at the time the redesignation request was submitted, Clark
and Floyd Counties (and the entire Louisville area) were classified
under Subpart 1 and were obligated to meet Subpart 1 requirements.
Under EPA's longstanding interpretation of section 107(d)(3)(E) of the
Clean Air Act, to qualify for redesignation, states requesting
redesignation to attainment must meet only the relevant SIP
requirements that came due prior to the submittal of a complete
redesignation request. September 4, 1992, Calcagni memorandum
(``Procedures for Processing Requests to Redesignate Areas to
Attainment,'' Memorandum from John Calcagni, Director, Air Quality
Management Division) See also Michael Shapiro Memorandum, September 17,
1993, and 60 FR 12459, 12465-66 (March 7, 1995) (Redesignation of
Detroit-Ann Arbor). See Sierra Club v. EPA, 375 F.3d 537 (7th Cir.
2004), which upheld this interpretation. See, e.g. also 68 FR 25418,
25424, 25427 (May 12, 2003) (redesignation of St. Louis).
    Moreover, it would be inequitable to retroactively apply any new
SIP requirements that were not applicable at the time the request was
submitted. The DC Circuit has recognized the inequity in such
retroactive rulemaking, See Sierra Club v. Whitman, 285 F.3d 63 (DC
Cir. 2002), in which the DC Circuit upheld a District Court's ruling
refusing to make retroactive an EPA determination of nonattainment that
was past the statutory due date. Such a determination would have
resulted in the imposition of additional requirements on the area. The
Court stated: ``Although EPA failed to make the nonattainment
determination within the statutory time frame, Sierra Club's proposed
solution only makes the situation worse. Retroactive relief would
likely impose large costs on the States, which would face fines and
suits for not implementing air pollution prevention plans in 1997, even
though they were not on notice at the time.'' Id. at 68. Similarly here
it would be unfair to penalize the area by applying to it for purposes
of redesignation additional SIP requirements under Subpart 2 that were
not in effect at the time it submitted its redesignation request.
3. Requirements Under the 1-Hour Standard
    With respect to the requirements under the 1-hour standard, Clark
and Floyd Counties were attainment areas subject to a Clean Air Act
section 175A maintenance plan under the 1-hour standard. The Court's
ruling does not impact redesignation requests for these types of areas.
    First, there are no conformity requirements that are relevant for
redesignation requests for any standard, including the requirement to
submit a transportation conformity SIP \3\. Under longstanding EPA
policy, EPA believes that it is reasonable to interpret the conformity
SIP requirement as not applying for purposes of evaluating a
redesignation request under section

107(d) because state conformity rules are still required after
redesignation and Federal conformity rules apply where state rules have
not been approved. 40 CFR 51.390. See Wall v. EPA, 265 F.3d 426 (6th
Cir. 2001), upholding this interpretation. See also 60 FR 62748 (Dec.
7, 1995) (Tampa, FL redesignation). Federal transportation conformity
regulations apply in all States prior to approval of transportation
conformity SIPs. The 1-hour ozone areas in Indiana were redesignated to
attainment without approved State transportation conformity regulations
because the Federal regulations were in effect in Indiana. When
challenged, these 1-hour ozone redesignations, which were approved
without State regulations, were upheld by the courts. See Wall v. EPA,
265 F.3d 426 (6th Cir. 2001). See also 60 FR 62748 (December 7, 1995)
(Tampa, Florida). Although Indiana does not have approved State
transportation conformity regulations, it has developed memoranda of
understanding, signed by all parties involved in conformity, to address
conformity consultation procedures. The Federal transportation
conformity regulations, which apply in Indiana, require the approved 1-
hour ozone budgets to be used for transportation conformity purposes
prior to 8-hour ozone budgets being approved.
---------------------------------------------------------------------------

    \3\ Clean Air Act section 176(c)(4)(E) currently requires States
to submit revisions to their SIPs to reflect certain Federal
criteria and procedures for determining transportation conformity.
Transportation conformity SIPs are different from the motor vehicle
emissions budgets that are established in control strategy SIPs and
maintenance plans.
---------------------------------------------------------------------------

    Second, with respect to the three other anti-backsliding provisions
for the 1-hour standard that the Court found were not properly
retained, Clark and Floyd Counties are attainment areas subject to a
maintenance plan for the 1-hour standard, and the NSR, contingency
measure (pursuant to section 172(c)(9) or 182(c)(9)) and fee provision
requirements no longer apply to an area that has been redesignated to
attainment of the 1-hour standard.
    Thus, the decision in South Coast should not alter requirements
that would preclude EPA from finalizing the redesignation of this area.

III. What Are the Criteria for Redesignation to Attainment?

    The CAA provides the requirements for redesignating a nonattainment
area to attainment. Specifically, section 107(d)(3)(E) of the CAA
allows for redesignation provided that: (1) The Administrator
determines that the area has attained the applicable NAAQS; (2) the
Administrator has fully approved an applicable state implementation
plan for the area under section 110(k) of the CAA; (3) the
Administrator determines that the improvement in air quality is due to
permanent and enforceable emission reductions resulting from
implementation of the applicable SIP, Federal air pollution control
regulations, and other permanent and enforceable emission reductions;
(4) the Administrator has fully approved a maintenance plan for the
area meeting the requirements of section 175A of the CAA; and (5) the
state containing the area has met all requirements applicable to the
area under section 110 and part D of the CAA.
    EPA provided guidance on redesignations in the General Preamble for
the Implementation of Title I of the CAA Amendments of 1990 on April
16, 1992 (57 FR 13498), and supplemented this guidance on April 28,
1992 (57 FR 18070). The two main policy guidelines affecting the review
of ozone redesignation requests are the following: ``Procedures for
Processing Requests to Redesignate Areas to Attainment,'' Memorandum
from John Calcagni, Director, Air Quality Management Division,
September 4, 1992 (September 4, 1992 Calcagni memorandum); and,
``Reasonable Further Progress, Attainment Demonstration, and Related
Requirements for Ozone Nonattainment Areas Meeting the Ozone National
Ambient Air Quality Standard,'' Memorandum from John S. Seitz,
Director, Office of Air Quality Planning and Standards, May 10, 1995.
For additional policy guidelines used in the review of ozone
redesignation requests, see our proposed rule for the redesignation of
the Evansville, Indiana ozone nonattainment area at 70 FR 53606
(September 9, 2005).

IV. What Are EPA's Analyses of the State's Redesignation Request and
What Are the Bases for EPA's Proposed Action?

    EPA is proposing to: (1) Determine that Clark and Floyd Counties
have attained the 8-hour ozone standard; (2) approve the ozone
maintenance plan for Clark and Floyd Counties and the VOC and
NOX MVEBs supported by this maintenance plan; and (3)
approve the redesignation of Clark and Floyd to attainment of the 8-
hour ozone NAAQS. The bases for our proposed determination and
approvals follow.

A. Louisville Has Attained the 8-Hour Ozone NAAQS

    For ozone, an area may be considered to be attaining the 8-hour
ozone NAAQS if there are no violations of the NAAQS, as determined in
accordance with 40 CFR 50.10 and appendix I, based on the most recent
three complete, consecutive calendar years of quality-assured air
quality monitoring data at all ozone monitoring sites in the area and
in its nearby downwind environs. To attain this standard, the average
of the annual fourth-high daily maximum 8-hour average ozone
concentrations measured and recorded at each monitor (the monitoring
site's ozone design value) within the area and in its nearby downwind
environs over the three-year period must not exceed the ozone standard.
Based on an ozone data rounding convention described in 40 CFR part 50,
appendix I, the 8-hour standard is attained if the area's ozone design
value \4\ is 0.084 ppm (84 ppb) or lower. The data must be collected
and quality-assured in accordance with 40 CFR part 58, and must be
recorded in EPA's Air Quality System (AQS). The ozone monitors
generally should have remained at the same locations for the duration
of the monitoring period required to demonstrate attainment (for three
years or more). The data supporting attainment of the standard must be
complete in accordance with 40 CFR part 50, appendix I.
---------------------------------------------------------------------------

    \4\ The worst-case monitoring site-specific ozone design value
in the area or in its affected downwind environs.
---------------------------------------------------------------------------

    Indiana submitted ozone monitoring data for the April through
September ozone seasons from 2003 to 2005 for the Indiana and Kentucky
portions of the Louisville nonattainment area. This data has been
quality assured by Indiana and Kentucky and is recorded in AQS. The 4th
high averages are summarized in Table 1, in which the values are in ppm
ozone.

                                     Table 1.--4th high values in ppm ozone.
----------------------------------------------------------------------------------------------------------------
              Monitor                       County         2003-2005     2003       2004       2005       2006
----------------------------------------------------------------------------------------------------------------
Charlestown, IN...................  Clark................      0.081      0.090      0.074      0.080      0.079

New Albany, IN....................  Floyd................      0.079      0.086      0.071      0.079      0.076
WLKY, KY..........................  Jefferson............      0.071      0.073      0.068      0.074      0.067
Watson, KY........................  Jefferson............      0.076      0.075      0.070      0.085      0.077
Bates, KY.........................  Jefferson............      0.073      0.072      0.070      0.079      0.074
Shepherdsville, KY................  Bulitt...............      0.073      0.072      0.068      0.080      0.071
Buckner, KY.......................  Oldham...............      0.082      0.082      0.076      0.089      0.083
----------------------------------------------------------------------------------------------------------------

    These data show that the average fourth-high daily maximum 8-hour
ozone concentrations for the monitoring sites in the Louisville area
are all below the 85 ppb ozone standard violation cut-off. The data
support the conclusion that the Louisville 8-hour ozone nonattainment
area (including Clark and Floyd Counties) did not experience a
monitored violation of the 8-hour ozone standard from 2003-2005. In
addition, the surrounding counties in Indiana and Kentucky did not
monitor nonattainment during the 2003-2005 period. As also noted in
Table 1, the 8-hour ozone NAAQS continued to be attained in the
Louisville area through 2006.
    Indiana has committed to continue ozone monitoring at the sites in
Clark and Floyd Counties. IDEM also commits to consult with the EPA
prior to making any changes in the existing monitoring network. In
summary, EPA believes that the data submitted by Indiana provide an
adequate demonstration that the Louisville area attains the 8-hour
ozone NAAQS.

B. Clark and Floyd Counties Have Met All Applicable Requirements Under
Section 110 and Part D of the CAA and the Area Has a Fully Approved SIP
Under Section 110(k) of the CAA

    EPA has determined that Indiana has met all currently applicable
SIP requirements for Clark and Floyd Counties under section 110 of the
CAA (general SIP requirements). EPA has determined that the Indiana SIP
meets currently applicable SIP requirements under part D of title I of
the CAA (requirements specific to subpart 1 and subpart 2 ozone
nonattainment areas). See section 107(d)(3)(E)(v) of the CAA. In
addition, EPA has determined that the Indiana SIP is fully approved
with respect to all applicable requirements. See section
107(d)(3)(E)(ii) of the CAA. In making these determinations, EPA
ascertained what requirements are applicable to the area, and
determined that the applicable portions of the SIP meeting these
requirements are fully approved under section 110(k) of the CAA. We
note that SIPs must be fully approved only with respect to currently
applicable requirements of the CAA, those CAA requirements applicable
to Clark and Floyd Counties at the time the State submitted the final,
complete ozone redesignation request for this area.
1. Clark and Floyd Counties Have Met All Applicable Requirements Under
Section 110 and Part D of the CAA
    The September 4, 1992 Calcagni memorandum describes EPA's
interpretation of section 107(D)(3)(E) of the CAA. Under this
interpretation, to qualify for redesignation of an area to attainment,
the State and the area must meet the relevant CAA requirements that
come due prior to the State's submittal of a complete redesignation
request for the area. See also a September 17, 1993, memorandum from
Michael Shapiro, Acting Assistant Administrator for Air and Radiation,
``State Implementation Plan (SIP) Requirements for Areas Submitting
Requests for Redesignation to Attainment of the Ozone and Carbon
Monoxide (CO) National Ambient Air Quality Standards (NAAQS) On or
After November 15, 1992'' and 66 FR 12459, 12465-12466 (March 7, 1995)
(redesignation of Detroit-Ann Arbor, Michigan to attainment of the 1-
hour ozone NAAQS). Applicable requirements of the CAA that come due
subsequent to the State's submittal of a complete redesignation request
remain applicable until a redesignation to attainment of the standard
is approved, but are not required as a prerequisite to redesignation.
See section 175A(c) of the CAA. Sierra Club v. EPA, 375 F.3d 537 (7th
Cir. 2004). See also 68 FR 25424, 25427 (May 12, 2003) (redesignation
of the St. Louis/East St. Louis area to attainment of the 1-hour ozone
NAAQS).
    General SIP requirements: Section 110(a) of title I of the CAA
contains the general requirements for a SIP, which include: enforceable
emission limitations and other control measures, means, or techniques;
provisions for the establishment and operation of appropriate devices
necessary to collect data on ambient air quality; and programs to
enforce the emission limitations. SIP elements and requirements are
specified in section 110(a)(2) of title I, part A of the CAA. These
requirements and SIP elements include, but are not limited to, the
following: (a) Submittal of a SIP that has been adopted by the State
after reasonable public notice and a hearing; (b) provisions for
establishment and operation of appropriate procedures needed to monitor
ambient air quality; (c) implementation of a source permit program; (d)
provisions for the implementation of new source part C requirements
(Prevention of Significant Deterioration (PSD)) and new source part D
requirements (New Source Review (NSR)); (e) criteria for stationary
source emission control measures, monitoring, and reporting; (f)
provisions for air quality modeling; and (g) provisions for public and
local agency participation.
    SIP requirements and elements are discussed in the following EPA
documents: ``Procedures for Processing Requests to Redesignate Areas to
Attainment,'' Memorandum from John Calcagni, Director, Air Quality
Management Division, September 4, 1992; ``State Implementation Plan
(SIP) Actions Submitted in Response to Clean Air Act (CAA) Deadlines,''
Memorandum from John Calcagni, Director, Air Quality Management
Division, October 28, 1992; and ``State Implementation Plan (SIP)
Requirements for Areas Submitting Requests for Redesignation to
Attainment of the Ozone and Carbon Monoxide (CO) National Ambient Air
Quality Standards (NAAQS) on or After November 15, 1992,'' Memorandum
from Michael H. Shapiro, Acting Assistant Administrator, September 17,
1993.
    Section 110(a)(2)(D) of the CAA requires SIPs to contain certain
measures to prevent sources in one State from significantly
contributing to air quality problems in another State. To implement
this provision, EPA required States to establish programs to address
transport of air pollutants (NOX SIP call,

Clean Air Interstate Rule (CAIR)). EPA has also found, generally, that
states have not submitted SIPs under section 110(a)(1) of the CAA to
meet the interstate transport requirements of section 110(a)(2)(D)(i)
of the CAA (70 FR 21147, April 25, 2005). However, the section
110(a)(2)(D) requirements for a State are not linked with a particular
nonattainment area's classification. EPA believes that the requirements
linked with a particular nonattainment area's classification are the
relevant measures to evaluate in reviewing a redesignation request. The
transport SIP submittal requirements, where applicable, continue to
apply to a State regardless of the designation of any one particular
area in the State.
    These requirements should not be construed to be applicable
requirements for purposes of redesignation. In addition, the other
section 110 elements described above that are not connected with
nonattainment plan submissions and that are not linked with an area's
attainment status are also not applicable requirements for purposes of
redesignation. A State remains subject to these requirements after an
area is redesignated to attainment. We conclude that only the section
110 and part D requirements which are linked with an area's designation
and classification are the relevant measures in evaluating this aspect
of a redesignation request. This approach is consistent with EPA's
existing policy on applicability of conformity and oxygenated fuels
requirements for redesignation purposes, as well as with section 184
ozone transport requirements. See: Reading, Pennsylvania proposed and
final rulemakings (61 FR 53174-53176, October 10, 1996 and 62 FR 24826,
May 7, 1997); Cleveland-Akron-Loraine, Ohio final rulemaking (61 FR
20458, May 7, 1996); and Tampa, Florida final rulemaking (60 FR 62748,
December 7, 1995). See also the discussion on this issue in the
Cincinnati, Ohio ozone redesignation (65 FR 37890, June 19, 2000), and
the Pittsburgh, Pennsylvania ozone redesignation (66 FR 50399, October
19, 2001). In addition, Indiana's response to the CAIR rule was due in
September 2006. Because this deadline had not yet passed when the State
submitted the final, complete redesignation request, the State's CAIR
submittal is also not an applicable requirement for redesignation
purposes.
    It should be noted that section 110 elements not linked to the
area's nonattainment status are not applicable for purposes of
redesignation. Nonetheless, we also note that EPA has previously
approved provisions in the Indiana SIP addressing section 110 elements
under the 1-hour ozone standard. We have analyzed the Indiana SIP as
codified in 40 CFR part 52, subpart P, and have determined that it is
consistent with the requirements of section 110(a)(2) of the CAA. The
SIP, which has been adopted after reasonable public notice and hearing,
contains enforceable emission limitations; requires monitoring,
compiling, and analyzing ambient air quality data; requires
preconstruction review of new major stationary sources and major
modifications of existing sources; provides for adequate funding,
staff, and associated resources necessary to implement its
requirements; and requires stationary source emissions monitoring and
reporting, and otherwise satisfies the applicable requirements of
section 110(a)(2).
    Part D SIP requirements: EPA has determined that the Indiana SIP
meets applicable SIP requirements under part D of the CAA. Under part
D, an area's classification (marginal, moderate, serious, severe, and
extreme) indicates the requirements to which it will be subject.
Subpart 1 of part D, found in sections 172-176 of the CAA, sets forth
the basic nonattainment area plan requirements applicable to all
nonattainment areas. Subpart 2 of part D, found in section 182 of the
CAA, establishes additional specific requirements depending on the
area's nonattainment classification.
    Part D, subpart 1 requirements: For purposes of evaluating this
redesignation request, the applicable subpart 1 part D requirements for
all nonattainment areas are contained in sections 172(c)(1)-(9) and
176. A thorough discussion of the requirements of section 172 can be
found in the General Preamble for Implementation of Title I (57 FR
13498). (see also 68 FR 4852-4853 regarding a St. Louis ozone
redesignation notice of proposed rulemaking for a discussion of section
172 requirements.)
    No requirements under part D of the CAA came due for Clark and
Floyd Counties prior to the State's November 15, 2006, submittal of a
complete redesignation request. For example, the requirement for an
ozone attainment demonstration, as contained in section 172(c)(1), was
not yet applicable, nor were the requirements for Reasonably Available
Control Measures (RACM) and Reasonably Available Control Technology
(RACT) (section 172(c)(1)), Reasonable Further Progress (RFP) (section
172(c)(2)), and attainment plan and RFP contingency measures (section
172(c)(9)). All of these required SIP elements are required for
submittal after November 15, 2006. Therefore, none of the part D
requirements are applicable to Clark and Floyd Counties for purposes of
redesignation.
    Section 176 conformity requirements: Section 176(c) of the CAA
requires states to establish criteria and procedures to ensure that
Federally-supported or funded activities, including highway projects,
conform to the air planning goals in the applicable SIP. The
requirement to determine conformity applies to transportation plans,
programs, and projects developed, funded, or approved under Title 23
U.S.C. and the Federal Transit Act (transportation conformity) as well
as to all other Federally-supported or funded projects (general
conformity). State conformity SIP revisions must be consistent with
Federal conformity regulations that the CAA required the EPA to
promulgate.
    In addition to the fact that part D requirements did not become due
prior to Indiana's submission of the complete ozone redesignation
request for Clark and Floyd Counties, and, therefore, are not
applicable for redesignation purposes, EPA has similarly concluded that
the conformity requirements do not apply for purposes of evaluating the
ozone redesignation request under section 107(d) of the CAA. In
addition, it is reasonable to interpret the conformity requirements as
not applying for purposes of evaluating the ozone redesignation request
under section 107(d) of the CAA because state conformity rules are
still required after redesignation of an area to attainment of a NAAQS
and Federal conformity rules apply where state rules have not been
approved. See Wall v. EPA, 265 F.3d 426 (6th Cir. 2001). See also 60 FR
62748 (December 7, 1995) (Tampa, Florida).
    We conclude that the State and Clark and Floyd Counties have
satisfied all applicable requirements under section 110 and part D of
the CAA to the extent that the requirements apply for the purposes of
reviewing the State's ozone redesignation request.
2. Clark and Floyd Counties Have a Fully Approved Applicable SIP Under
Section 110(k) of the CAA
    EPA has fully approved the Indiana SIP for Clark and Floyd Counties
under section 110(k) of the CAA for all applicable requirements. EPA
may rely on prior SIP approvals in approving a redesignation request
(see the September 4, 1992 John Calcagni memorandum, page 3,
Southwestern Pennsylvania Growth Alliance v. Browner, 144 F.3d 984,
989-990 (6th Cir. 1998), Wall v. EPA, 265 F.3d 426

(6th Cir. 2001)), plus any additional measures it may approve in
conjunction with a redesignation action. See 68 FR 25426 (May 12,
2003). Since the passage of the CAA of 1970, Indiana has adopted and
submitted, and EPA has fully approved, provisions addressing the
various required SIP elements applicable to Clark and Floyd Counties
for purposes of redesignation. No Clark and Floyd County SIP provisions
are currently disapproved, conditionally approved, or partially
approved. As indicated above, EPA believes that the section 110
elements not connected with nonattainment plan submissions and not
linked to the area's nonattainment status are not applicable
requirements for purposes of review of the State's redesignation
request. EPA has concluded that the section 110 SIP submission approved
under the 1-hour standard will be adequate for purposes of attaining
and maintaining the 8-hour standard. EPA also believes that since the
part D requirements did not become due prior to Indiana's submission of
a final, complete redesignation request, they also are not applicable
requirements for purposes of redesignation.

C. The Air Quality Improvement in Clark and Floyd Counties Is Due to
Permanent and Enforceable Reductions in Emissions From Implementation
of the SIP and Applicable Federal Air Pollution Control Regulations and
Other Permanent and Enforceable Emission Reductions

    EPA believes that the State of Indiana has demonstrated that
implementation of the SIP, Federal measures, and other State-adopted
measures have contributed to the observed air quality improvement in
Clark and Floyd Counties.
    In making this demonstration, the State has documented the changes
in VOC and NOX emissions from anthropogenic (man-made or
man-based) sources in Clark and Floyd, as well as the entire Louisville
nonattainment area, between 1996 and 2004 and the statewide
NOX emissions from Electric Generating Units (EGUs) from
1999 to 2005. The Louisville area was monitored in violation of the 8-
hour ozone NAAQS during the period of 2001-2003 and in attainment with
the NAAQS during the period of 2003-2005. The total VOC and
NOX emissions for both Clark and Floyd Counties and the
entire Louisville nonattainment area (Louisville NA in the table) for
2002, an attainment year, and 2003, a nonattainment year, are given in
Table 2.

      Table 2.--VOC and NOX Emissions in Clark & Floyd Counties and
          Louisville, All Sources--Emissions in Tons/Summer Day
------------------------------------------------------------------------
                   Pollutant                        2002         2003
------------------------------------------------------------------------
VOC--Clark & Floyd............................        32.69        29.26
NOX--Clark & Floyd............................        57.59        51.76
VOC--Louisville NA............................       138.24       133.83
NOX--Louisville NA............................       247.46       238.76
------------------------------------------------------------------------

    The statewide NOX emissions for EGUs from 1999-2005 are
given in Table 3 below.

 Table 3.--NOX Emissions From Electric Generating Units in Indiana Statewide--Emissions in Thousands of Tons per
                                                  Ozone Season
                                                 [April-October]
----------------------------------------------------------------------------------------------------------------
                   Area                       1999      2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
Statewide.................................    149.8     133.9     136.1     114.0      99.3      66.6      55.5
----------------------------------------------------------------------------------------------------------------

    The NOX and VOC emissions for Clark and Floyd Counties
and the entire Louisville nonattainment area have decreased from 2002,
an 8-hour standard violation year, to 2003, an 8-hour standard
attainment year. In addition, the Indiana Statewide EGU NOX
emissions have continued to decline from 1999 to 2005. This is a result
of the implementation of the Indiana NOX SIP (in response to
EPA's NOX SIP call) and acid rain control regulations, both
of which led to permanent, enforceable emission reductions.
    VOC and NOX emissions have declined as a result of
enforceable emission reductions. As required by Section 172 of the CAA,
Indiana in the mid-1990s promulgated rules requiring RACT for emissions
of VOCs. Statewide RACT rules have applied to all new sources locating
in Indiana since that time and include the following VOC rules: 326
Indiana Administrative Code (IAC) 8-1-6 (Best Available Control
Technology (BACT) for non-specific sources); 326 IAC 8-2 (surface
coating emission limitations); 326 IAC 8-3 (organic solvent degreasing
operations); 326 IAC 8-4 (petroleum sources); and 326 IAC 8-5
(miscellaneous sources). The VOC emission reductions resulting from the
implementation of these VOC emission control rules are permanent and
enforceable.
    Besides the statewide VOC RACT rules and NOX emission
control requirements, other Federal emission reduction requirements
have resulted in decreased ozone precursor emissions in Clark and Floyd
Counties (a similar set of control measures have been implemented for
the Kentucky portion of the Louisville area) and will produce future
emission reductions that will support maintenance of the ozone standard
in these Counties. These emission reduction requirements include the
following:
    Tier 2 Emission Standards for Vehicles and Gasoline Sulfur
Standards. These emission control requirements result in lower
emissions from new cars and light duty trucks, including sport utility
vehicles. The Federal rules are being phased in between 2004 and 2009.
The EPA has estimated that, by the end of the phase-in period, the
following vehicle NOX emission reductions will

occur: Passenger cars (light duty vehicles) (77 percent); light duty
trucks, minivans, and sports utility vehicles (86 percent; and larger
sports utility vehicles, vans, and heavier trucks (69 to 95 percent).
VOC emission reductions are also expected to range from 12 to 18
percent, depending on vehicle class, over the same period. Although
some of these emission reductions have already occurred by the 2004
attainment year, most of these emission reductions will occur during
the maintenance period for Clark and Floyd Counties.
    Heavy-Duty Diesel Engines. In July 2000, EPA issued a final rule to
control the emissions from highway heavy duty diesel engines, including
low-sulfur diesel fuel standards. These emission reductions are being
phased in between 2004 and 2007. This rule is expected to result in a
40 percent decrease in NOX emissions from heavy duty diesel
vehicle.
    Non-Road Diesel Rule. Issued in May, 2004, this rule generally
applies to new stationary diesel engines used in certain industries,
including construction, agriculture, and mining. In addition to
affecting engine design, this rule includes requirements for cleaner
fuels. It is expected to reduce NOX emissions from these
engines by up to 90 percent, and to significantly reduce particulate
matter and sulfur emissions from these engines in addition to the
NOX emission reduction. This rule did not affect 2004
emissions from these sources, but will limit emissions from new engines
beginning in 2008.
    Indiana commits to maintain all existing emission control measures
that affect Clark and Floyd Counties after this area is redesignated to
attainment of the 8-hour ozone NAAQS. All changes in existing rules
affecting Clark and Floyd Counties and new rules subsequently needed to
provide for the maintenance of the 8-hour ozone NAAQS in Clark and
Floyd Counties will be submitted to the EPA for approval as SIP
revisions.

D. Clark and Floyd Counties Have a Fully Approvable Ozone Maintenance
Plan Pursuant to Section 175A of the CAA

    In conjunction with its request to redesignate Clark and Floyd
Counties to attainment of the ozone NAAQS, Indiana submitted a SIP
revision request to provide for maintenance of the 8-hour ozone NAAQS
in Clark and Floyd Counties for at least 10 years after the
redesignation of this area to attainment of the 8-hour ozone NAAQS.
1. What Is Required in an Ozone Maintenance Plan?
    Section 175A of the CAA sets forth the required elements of air
quality maintenance plans for areas seeking redesignation from
nonattainment to attainment of a NAAQS. Under section 175A, a
maintenance plan must demonstrate continued attainment of the
applicable NAAQS for at least 10 years after the Administrator approves
the redesignation to attainment. Eight years after the redesignation,
the State must submit a revised maintenance plan which demonstrates
maintenance of the standard for 10 years following the initial 10 year
maintenance period. To address the possibility of future NAAQS
violations, the maintenance plan must contain such contingency
measures, with a schedule for implementation, as EPA deems necessary,
to assure prompt correction of any future NAAQS violations. The
September 4, 1992, John Calcagni memorandum provides additional
guidance on the content of maintenance plans. An ozone maintenance plan
should, at minimum, address the following items: (1) The attainment of
VOC and NOX emissions inventories; (2) a maintenance
demonstration showing maintenance for the 10 years of the maintenance
period; (3) a commitment to maintain the existing monitoring network;
(4) factors and procedures to be used for verification of continued
attainment; and (5) a contingency plan to prevent and/or correct a
future violation of the NAAQS.
2. Demonstration of Maintenance
    IDEM prepared comprehensive VOC and NOX emission
inventories for Clark and Floyd Counties, including point (significant
stationary sources), area (smaller and widely-distributed stationary
sources), mobile on-road, and mobile non-road sources for 2003 (the
base year/attainment year).
    As part of the November 15, 2006, redesignation request submittal,
IDEM included a requested revision to the SIP to incorporate a 14-year
ozone maintenance plan which is consistent with the requirements under
section 175A of the CAA. Included in the maintenance plan is a
maintenance demonstration. This demonstration shows maintenance of the
8-hour ozone NAAQS by documenting current and projected VOC and
NOX emissions for both Clark and Floyd Counties and the
entire Louisville nonattainment area and by documenting photochemical
modeling results that support maintenance of the standard in this
area.\5\
---------------------------------------------------------------------------

    \5\ The attainment year can be any of the three consecutive
years in which the area has clean (below violation level) air
quality data (2003, 2004, or 2005 for the Louisville area).
---------------------------------------------------------------------------

    Table 4 specifies the VOC emissions in Clark and Floyd Counties and
the entire nonattainment area for 2003, 2011 and 2020. IDEM chose 2020
as a projection year to meet the 10-year minimum maintenance projection
requirement, allowing several years for the State to complete its
adoption of the ozone redesignation request and ozone maintenance plan
and for the EPA to approve the redesignation request and maintenance
plan. IDEM also chose 2011 as an interim year to demonstrate that VOC
and NOX emissions will remain below the attainment levels
throughout the 14-year maintenance period. The mobile source emission
projections for 2011 and 2020 exclude VOC reductions associated with
Indiana's Clark and Floyd vehicle inspection and maintenance program
that was discontinued at the end of 2006. Indiana's termination of its
inspection and maintenance program in Clark and Floyd Counties will be
the subject of a subsequent Federal Register notice.
    Table 5, similar to Table 4, specifies the NOX emissions
in Clark and Floyd Counties and the entire nonattainment area for 2003,
2011 and 2020. Together, the information contained in Tables 4 and 5
and the photochemical modeling results demonstrate that Clark and Floyd
Counties, and the Louisville nonattainment area, should remain in
attainment of the 8-hour ozone NAAQS between 2003 and 2020, which is
more than 10 years after EPA is expected to approve the redesignation
of these counties to attainment of the 8-hour ozone NAAQS. The mobile
source emission projections for 2011 and 2020 exclude NOX
reductions associated with Indiana's Clark and Floyd vehicle inspection
and maintenance program that was discontinued at the end of 2006.

  Table 4.--Attainment Year (2003) and Projected VOC Emissions in Clark
            and Floyd Counties and Entire Nonattainment Area
                          [Tons per summer day]
------------------------------------------------------------------------
                                                       Year
             Source sector              --------------------------------
                                            2003       2011       2020
------------------------------------------------------------------------
 Point:
    Clark and Floyd....................       4.17       6.61       7.14
    Louisville NA......................      36.62      39.28      39.85
 Area:
    Clark and Floyd....................      11.94      12.77      14.59
    Louisville NA......................      35.07      36.93      40.02
 On-Road Mobile:
    Clark and Floyd....................       9.60       6.12       3.98
    Louisville NA......................      40.97      25.69      16.89
 Off-Road Mobile:
    Clark and Floyd....................       3.55       2.35       2.20
    Louisville NA......................      21.17      15.87      15.28
 Total:
    Clark and Floyd....................      29.26      27.85      27.91
    Louisville NA......................     133.83     117.77     112.04
------------------------------------------------------------------------

Table 5.--Attainment Year and Projected NOX Emissions in Clark and Floyd
                 Counties and Entire Nonattainment Area
                          [Tons per summer day]
------------------------------------------------------------------------
                                                       Year
             Source sector              --------------------------------
                                            2003       2011       2020
------------------------------------------------------------------------
 Point:
    Clark and Floyd....................      24.26      27.29      28.66
    Louisville NA......................      99.73      78.95      75.97
 Area:
    Clark and Floyd....................       1.60       1.71       1.80
    Louisville NA......................       2.53       2.67       2.79
 On-Road Mobile:
    Clark and Floyd....................      20.27      10.20       4.15
    Louisville NA......................      95.51      47.53      19.62
 Off-Road Mobile:
    Clark and Floyd....................       5.63       4.43       3.49
    Louisville NA......................      41.01      34.77      27.88
 Total:
    Clark and Floyd....................      51.77      43.63      38.10
    Louisville NA......................     238.79     163.92     126.26
------------------------------------------------------------------------

    IDEM also notes that the State's EGU NOX emission
control rules stemming from EPA's NOX SIP call, implemented
beginning in 2004, and CAIR, which is to be implemented beginning in
2009 will further lower NOX emissions in upwind areas. This
should result in decreased ozone and ozone precursor transport into
Clark and Floyd Counties. It will also support maintenance of the ozone
standard in Clark and Floyd Counties.
    Based upon the data in Table 4, VOC emissions in Clark and Floyd
Counties are projected to decline by about 5% between 2003 and 2020 and
VOC emissions in the entire nonattainment area are projected to decline
by 16%. Based upon the data in Table 5, NOX emissions in
Clark and Floyd Counties are projected to decline by over 26% between
2003 and 2020, and NOX emissions in the entire nonattainment
area are projected to decline by 47%.
    Based on the projected VOC and NOX emission reductions
between the attainment year in 2003 and the maintenance year of 2020,
for both Clark and Floyd Counties and the entire Louisville
nonattainment area, we conclude that IDEM has successfully demonstrated
that the 8-hour ozone standard should be maintained in Clark and Floyd
Counties, as well as the entire Louisville nonattainment area through
2020. This is reinforced by photochemical modeling done for Clark and
Floyd Counties. We believe that this is especially likely given the
expected impacts of the NOX SIP call and CAIR. This
conclusion is further supported by the fact that other states in the
eastern portion of the United States are expected to further reduce
regional NOX emissions through implementation of their own
NOX emission control rules for EGUs and other NOX
sources and through implementation of CAIR, reducing ozone and
NOX transport into Clark and Floyd Counties and the entire
Louisville nonattainment area.
3. Monitoring Network
    IDEM commits to continue operating and maintaining an approved
ozone monitoring network in Clark and Floyd Counties in accordance with
40 CFR part 58 through the 14-year maintenance period. This will allow
the confirmation of the maintenance of the 8-hour ozone standard in
this area and the triggering of contingency measures if needed.
4. Verification of Continued Attainment
    Continued attainment of the 8-hour ozone NAAQS in Clark and Floyd

Counties depends on the State's efforts toward tracking applicable
indicators during the maintenance period. The State's plan for
verifying continued attainment of the 8-hour ozone standard in Clark
and Floyd Counties consists, in part, of a plan to continue ambient
ozone monitoring in accordance with the requirements of 40 CFR part 58.
In addition, IDEM will periodically revise and review the VOC and
NOX emissions inventories for these counties to assure that
emissions growth is not threatening the continued attainment of the 8-
hour ozone standard in this area. Revised emission inventories for this
area will be prepared for 2005, 2008, and 2011 as necessary to comply
with the emission inventory reporting requirements established in the
CAA. The revised emissions will be compared with the 2003 attainment
emissions and the 2020 projected maintenance year emissions to assure
continued maintenance of the ozone standard.
5. Contingency Plan
    The contingency plan provisions of the CAA are designed to result
in prompt correction or prevention of violations of the NAAQS that
might occur after redesignation of an area to attainment of the NAAQS.
Section 175A of the CAA requires that a maintenance plan include such
contingency measures as EPA deems necessary to assure that the State
will promptly correct a violation of the NAAQS that might occur after
redesignation. The maintenance plan must identify the contingency
measures to be considered for possible adoption, a schedule and
procedure for adoption and implementation of the selected contingency
measures, and a time limit for action by the State. The State should
also identify specific indicators to be used to determine when the
contingency measures need to be adopted and implemented. The
maintenance plan must include a requirement that the State will
implement all measures with respect to control of the pollutant(s) that
were controlled in the SIP before the redesignation of the area to
attainment. See section 175A(d) of the CAA.
    As required by section 175A of the CAA, Indiana commits to review
its maintenance plan eight years after redesignation and to adopt and
expeditiously implement any necessary corrective actions (or
contingency measures). Contingency measures to be considered will be
selected from a comprehensive list of measures deemed appropriate and
effective at the time the selection is made. The contingency plan has
two levels of actions/responses depending on whether a violation of the
8-hour ozone standard is only threatened (Warning Level Response) or
has actually occurred (Action Level Response).
    A Warning Level Response will be prompted whenever an annual (1-
year) fourth-high monitored daily peak 8-hour ozone concentration of 89
ppb (or greater) occurs at any monitor in Clark and Floyd Counties, or
a 2-year averaged annual fourth-high daily peak 8-hour ozone
concentration of 85 ppb or greater occurs at any monitor in Clark or
Floyd Counties. A Warning Level Response will consist of a study to
determine whether the monitored ozone level indicates a trend toward
higher ozone levels or whether emissions are increasing, threatening a
future violation of the ozone NAAQS. The study will evaluate whether
the trend, if any, is likely to continue, and, if so, the emission
control measures necessary to reverse the trend, taking into
consideration the ease and timing of implementation, as well as
economic and social considerations. Implementation of necessary
controls will take place as expeditiously as possible, but in no event
later than 12 months from the conclusion of the most recent ozone
season. If new emission controls are needed to reverse the adverse
ozone trend, the procedures for emission control selection under the
Action Level Response will be followed.
    An Action Level Response will be triggered when a violation of the
8-hour ozone standard is monitored at any of the monitors in the
maintenance area (when a 3-year average annual fourth-high monitored
daily peak 8-hour ozone concentration of 85 ppb or higher is recorded
at any such monitor). In this situation, IDEM will determine the
additional emission control measures needed to assure future attainment
of the 8-hour ozone NAAQS. IDEM will focus on emission control measures
that can be implemented within 18 months from the close of the ozone
season in which the ozone standard violation is monitored.
    Adoption of any additional emission control measures prompted by
either of the two response levels will be subject to the necessary
administrative and legal processes dictated by State law. This process
will include publication of public notices, providing the opportunity
for a public hearing, and other measures required by Indiana law for
rulemaking by State environmental boards. If a new emission control
measure is already promulgated and scheduled for implementation at the
Federal or State level, and that emission control measure is determined
to be sufficient to address the air quality problem or adverse trend,
additional local emission control measures may be determined to be
unnecessary. IDEM will submit to the EPA an analysis to demonstrate
that the proposed emission control measures are adequate to return the
area to attainment.
    Contingency measures contained in the maintenance plan are those
emission controls or other measures that the State may choose to adopt
and implement to correct existing or possible air quality problems in
Clark and Floyd Counties. These include, but are not limited to, the
following:
    i. Lower Reid vapor pressure gasoline requirements;
    ii. Broader geographic applicability of existing emission control
measures;
    iii. Tightened RACT requirements on existing sources covered by EPA
Control Technique Guidelines (CTGs) issued in response to the 1990 CAA
amendments;
    iv. Application of RACT to smaller existing sources;
    v. Vehicle Inspection and Maintenance;
    vi. One or more Transportation Control Measures sufficient to
achieve at least a 0.5 percent reduction in actual area-wide VOC
emissions, to be selected from the following:
    A. Trip reduction programs, including, but not limited to,
employer-based transportation management plans, area-wide rideshare
programs, work schedule programs, and telecommuting;
    B. Transit improvement;
    C. Traffic flow improvements; and,
    D. Other new or innovative transportation measures not yet in
widespread use that affect State and local governments as deemed
appropriate;
    vii. Alternative fuel and diesel retrofit programs for fleet
vehicle operations;
    viii. Controls on consumer products consistent with those adopted
elsewhere in the United States;
    ix. VOC or NOX emission offsets for new or modified
major sources;
    x. VOC or NOX emission offsets for new or modified minor
sources;
    xi. Increased ratio of emission offsets required for new sources;
and,
    xii. VOC or NOX emission controls on new minor sources
(with VOC or NOX emissions less than 100 tons per year).
6. Provisions for a Future Update of the Ozone Maintenance Plan
    As required by section 175A(b) of the CAA, the State commits to
submit to the EPA an update of the ozone maintenance plan eight years
after redesignation of the County to attainment of the 8-hour ozone
NAAQS. The revision will contain Indiana's plan

for maintaining the 8-hour ozone standard for 10 years beyond the first
10-year period after redesignation.

V. Has Indiana Adopted Acceptable Motor Vehicle Emissions Budgets for
the End of the 14-Year Maintenance Plan Which Can Be Used to Support
Conformity Determinations?

A. How Are the Motor Vehicle Emission Budgets Developed and What Are
the Motor Vehicle Emission Budgets for Clark and Floyd Counties?

    Under the CAA, States are required to submit, at various times, SIP
revisions and ozone maintenance plans for applicable areas (for ozone
nonattainment areas and for areas seeking redesignations to attainment
of the ozone standard or revising existing ozone maintenance plans).
These emission control SIP revisions (e.g., reasonable further progress
and attainment demonstration SIP revisions), including ozone
maintenance plans, must create MVEBs based on on-road mobile source
emissions allocated to highway and transit vehicle use that, together
with emissions from other sources in the area, will provide for
attainment or maintenance of the ozone NAAQS.
    Under 40 CFR part 93, MVEBs for an area seeking a redesignation to
attainment of the NAAQS are established for the last year of the
maintenance plan and the State has the option of setting budgets for
other years in the maintenance plan. The MVEBs serve as ceilings on
emissions from an area's planned transportation system. The MVEB
concept is further explained in the preamble to the November 24, 1993
transportation conformity rule (58 FR 62188). The preamble also
describes how to establish the MVEBs in the SIP and how to revise the
MVEBs if needed.
    Under section 176(c) of the CAA, new transportation projects, such
as the construction of new highways, must ``conform'' to (i.e., be
consistent with) the part of the SIP that addresses emissions from cars
and trucks. Conformity to the SIP means that transportation activities
will not cause new air quality standard violations, or delay timely
attainment of the NAAQS. If a transportation plan does not conform,
most new transportation projects that would expand the capacity of
roadways cannot go forward. Regulations at 40 CFR part 93 set forth
EPA's policy, criteria, and procedures for demonstrating and assuring
conformity of transportation activities to a SIP.
    When reviewing SIP revisions containing MVEBs, including attainment
strategies, rate-of-progress plans, and maintenance plans, EPA must
affirmatively find that the MVEBs are ``adequate'' for use in
determining transportation conformity. Once EPA affirmatively finds the
submitted MVEBs to be adequate for transportation conformity purposes,
the MVEBs are used by state and Federal agencies in determining whether
proposed transportation projects conform to the SIPs as required by
section 176(c) of the CAA. EPA's substantive criteria for determining
the adequacy of MVEBs are specified in 40 CFR 93.118(e)(4).
    EPA's process for determining the adequacy of MVEBs consists of
three basic steps: (1) Providing public notification of a SIP
submission; (2) providing the public the opportunity to comment on the
MVEBs during a public comment period; and (3) making a finding of
adequacy. The process of determining the adequacy of submitted SIP
MVEBs was initially outlined in EPA's May 14, 1999, guidance,
``Conformity Guidance on Implementation of March 2, 1999, Conformity
Court Decision.'' This guidance was finalized in the Transportation
Conformity Rule Amendments for the ``New 8-Hour Ozone and
PM2.5 National Ambient Air Quality Standards and
Miscellaneous Revisions for Existing Areas: Transportation Conformity
Rule Amendments--Response to Court Decision and Additional Rule
Change'' published on July 1, 2004 (69 FR 40004). EPA follows this
guidance and rulemaking in making its adequacy determinations.
    The Transportation Conformity Rule, in 40 CFR section 93.118(f),
provides for MVEB adequacy findings through two mechanisms. First, 40
CFR 93.118(f)(1) provides for posting a notice to the EPA conformity
Web site at: http://www.epa.gov/otaq/stateresources/transconf/adequacy.htm
 and providing a 30-day public comment period. Second, a

mechanism is described in 40 CFR 93.118(f)(2) which provides that EPA
can review the adequacy of an implementation plan MVEB simultaneously
with its review of the implementation plan itself.
    EPA, through this rulemaking, is proposing to approve the MVEBs for
use to determine transportation conformity in the Louisville 8-hour
ozone area because EPA has determined that the budgets are consistent
with the control measures in the SIP and that Louisville can maintain
attainment of the 8-hour ozone NAAQS for the relevant required 14-year
period with mobile source emissions at the levels of the MVEBs.
    The MVEBs in the maintenance plan are for the entire Louisville
area, which includes the Kentucky areas (Bullitt, Jefferson and Oldham
Counties), in addition to Clark and Floyd Counties in Indiana. Through
the transportation consultation process, it was decided that the best
way to maintain the mobile source emissions for the area would be to
set budgets for the entire area rather than each individual State.
There is one Metropolitan Planning Organization for the entire area
(the Kentuckiana Regional Planning and Development Agency). The
transportation network modeling and transportation conformity
determinations are conducted for the entire Louisville area. The
transportation conformity regulations allow States to decide in
consultation with the transportation partners, to determine budgets for
the entire area or for each state. The transportation conformity
budgets are listed in the Table below. MVEBs are proposed for both the
2020 year or last year of the maintenance plan and also for the 2003
year which is an attainment year.

 Louisville KY-IN 8-Hour Ozone Regional Motor Vehicle Emissions Budgets
                             (Tons per day)
------------------------------------------------------------------------
                                                          2003     2020
------------------------------------------------------------------------
VOC...................................................    40.97    22.92
NOX...................................................    95.51    29.46
------------------------------------------------------------------------

    Kentucky and Indiana have jointly chosen to allocate a portion of
the available safety margin to the 2020 MVEBs. This allocation is 6.03
tpd for VOC and 9.84 tpd for NOX. The 2020 regional MVEBs
are derived as follows for VOC: [16.89 tpd for total mobile emissions]
+ [6.03 tpd from available safety margin] = 22.92 tpd; and for
NOX: [19.62 tpd for total mobile emissions] + [9.84 tpd from
available safety margin] = 29.46 tpd. Thus, the remaining safety margin
for the interstate Louisville area is 15.76 tpd for VOC and 102.69 tpd
for NOX.
    These budgets are the same as the budgets that have been submitted
by the State of Kentucky for the entire Louisville area and have been
discussed by the transportation partners for the Louisville area.
    Through this rulemaking, EPA is proposing to approve the 2003 and
2020 MVEBs for the interstate Louisville 8-hour ozone area for use to
determine transportation conformity because EPA has determined that the
interstate Louisville area maintains the standard with emissions at the
levels of the budgets. If EPA approves the 2003 and

2020 MVEBs in the final rulemaking action, the new MVEBs must be used
for future transportation conformity determinations. The new regional
2003 and 2020 MVEBs, if found adequate or if approved in the final
rulemaking, will be effective with the publication of EPA's adequacy
finding or final rulemaking in the Federal Register, whichever is done
first. For required regional emissions analysis years that involve the
year 2020 or beyond, the applicable budgets for the purposes of
conducting transportation conformity will be the 2020 MVEBs for the
interstate Louisville area. For required analysis years prior to 2020,
the applicable budgets will be the 2003 MVEBs.

B. Are the MVEBs Approvable?

    The VOC and NOX MVEBs for Louisville are approvable
because they provide for continued maintenance of the 8-hour ozone
standard through 2020 and provide a 6.03 tons-per-day safety margin for
VOC and 9.84 tons-per-day safety margin for NOX.
    EPA is proposing to approve the 2003 and 2020 MVEBs for the
interstate Louisville area because the maintenance plans demonstrate
that expected emissions for the area, including the MVEBs plus the
estimated emissions for all other source categories, will continue to
maintain the 8-hour ozone standard.

VII. What is the Effect of EPA's Proposed Action?

    Approval of the redesignation request would change the official
designation of Clark and Floyd Counties from nonattainment to
attainment of the 8-hour ozone NAAQS. It would also incorporate into
the Indiana SIP a plan for maintaining the ozone NAAQS through 2020.
The maintenance plan includes contingency measures to remedy possible
future violations of the 8-hour ozone NAAQS, and establishes MVEBs (for
the entire Louisville area) for the years 2003 and 2020.

VII. Statutory and Executive Order Reviews

Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735, September 30, 1993), this
action is not a ``significant regulatory action'' and, therefore, is
not subject to review by the Office of Management and Budget.

Paperwork Reduction Act

    This proposed rule does not impose an information collection burden
under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C.
3501 et seq.).

Regulatory Flexibility Act

    This proposed action merely proposes to approve state law as
meeting Federal requirements and imposes no additional requirements
beyond those imposed by state law. Accordingly, the Administrator
certifies that this proposed rule will not have a significant economic
impact on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.).

Unfunded Mandates Reform Act

    Because this rule proposes to approve pre-existing requirements
under state law and does not impose any additional enforceable duty
beyond that required by state law, it 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).

Executive Order 13132: Federalism

    This action also does not have Federalism implications because it
does 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 (64 FR 43255, August
10, 1999). This action merely proposes to approve a state rule
implementing a federal standard, and does not alter the relationship or
the distribution of power and responsibilities established in the Clean
Air Act.

Executive Order 13175: Consultation and Coordination with Indian Tribal
Governments

    This proposed rule also does not have tribal implications because
it will not have a substantial direct effect on one or more Indian
tribes, on the relationship between the Federal Government and Indian
tribes, or on the distribution of power and responsibilities between
the Federal Government and Indian tribes, as specified by Executive
Order 13175 (65 FR 67249, November 9, 2000).

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

    This proposed rule also is not subject to Executive Order 13045
``Protection of Children from Environmental Health Risks and Safety
Risks'' (62 FR 19885, April 23, 1997), because it proposes approval of
a state rule implementing a Federal Standard.

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

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

National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), 15 U.S.C. 272, requires Federal agencies to use
technical standards that are developed or adopted by voluntary
consensus to carry out policy objectives, so long as such standards are
not inconsistent with applicable law or otherwise impractical. In
reviewing SIP submissions, EPA's role is to approve state choices,
provided that they meet the criteria of the Clean Air Act. Absent a
prior existing requirement for the state to use voluntary consensus
standards, EPA has no authority to disapprove a SIP submission for
failure to use such standards, and it would thus be inconsistent with
applicable law for EPA to use voluntary consensus standards in place of
a program submission that otherwise satisfies the provisions of the
Clean Air Act. Therefore, the requirements of section 12(d) of the
NTTAA do not apply.

List of Subjects

40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental
relations, Nitrogen dioxide, Ozone, Volatile organic compounds.

40 CFR Part 81

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

    Dated: April 30, 2007.
Bharat Mathur,
Acting Regional Administrator, Region 5.
 [FR Doc. E7-8772 Filed 5-7-07; 8:45 am]

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